Otonomy, Inc.
Q2 2017 Earnings Call Transcript

Published: 4 Aug 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Second Quarter Otonomy, Increase Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. [Operator Instructions]. I would now like to introduce your host for today's conference Robert Uhl with Westwicke Partners. Sir, please began. [Technical Difficulty] Ladies and gentleman please stand by. Your conference will begin momentarily. Ladies and gentleman please stand by. [Technical Difficulty].

[Robert Uhl:]

Great, thank you, everyone and our apologies for the delay in getting the call started, we had just a couple little technical glitches there. But good afternoon and welcome to Otonomy's second quarter 2017 financial results and business update conference call. Joining me on the call from Otonomy are Dr. David Weber, President and Chief Executive Officer; and Paul Cayer, Chief Financial and Business Officer. Before I turn the call over to Dr. Weber, I would like to remind you that today's call will include forward-looking statements based on current expectations. Such statements represent management's judgment as of today and may involve risks and uncertainties that could cause actual results to differ materially from expected results. Such statements include but are not limited to Otonomy's expectations regarding the commercial success of OTIPRIO, the success of the organizational changes and the commercial team, potential coverage and reimbursement relating to OTIPRIO for current and future expansion indications, the approval of OTIPRIO for acute otitis externa, and acute otitis media with tubes, the timing of the launch of OTIPRIO for acute otitis externa if approved, the timing of the OTIVIDEX Phase 3 clinical trials in Ménière's disease, the timing of the OTO-311 Phase 2 clinical trial and the financial guidance for 2017. Please refer to Otonomy's filings with the SEC, which are available from the SEC or on the Otonomy website for information concerning the risk factors that could affect the company. I will now turn the call over to Dave Weber, President and CEO of Otonomy.

[David Weber:]

Thank you, Robert. Good afternoon, everyone, and thank you for joining us on this call to discuss Otonomy's second quarter 2017 financial results and business updates. I will start by reviewing the status of our product development activities, including more specific timing for the AVERTS-1 phase 3 trial results, followed by a brief update on the OTIPRIO sales team reorganization. Paul will then review our financials and we will finish with questions from call participants. Starting with OTIVIDEX, I'm pleased to say that we’re on track with OTIVIDEX for 2017 to be the year of Ménière's disease. We expect results of the U.S. phase 3 trial call the AVERTS-1 in September and the identical AVERTS-2 trial in Europe by end of the year, this is an important milestone for Otonomy as this was the program upon which the company was founded. And we believe that the commercial opportunity for an effective treatment is considerable. Moreover, this readout is also significant advance from Meniere's stations around the world who are seeking new treatment options. The high disease burden and unmet unmedical need of patients with Ménière's disease was recently highlighted Dr. Tony during our KOL breakfast event in New York. As he explains a patient with active Ménière's lives a difficult life. They don’t know when the next vertigo attack will hit and when it does they must put their life on hold including work responsibilities and family life. And when they are not dealing with the vertigo then they are worrying about the hearing loss which becomes permanent overtime. This is a debilitating disease for which there are no FDA approved drug treatment. We believe that OTIVIDEX offers hope for these patients as Dr. Paul Lamber reviewed during the KOL event our phase 2 B trail provided good evidence of clinical benefit. A single administration of OTIVIDEX demonstrated a clinically meaningful reduction in the number of severity of vertigo episodes over three months that achieved statistical significance versus placebo for multiple prospective end points. There were three important learnings from the phase 2B, that we carried into the phase 3 program. First, we retained the same basic trial design which was used in both the phase 1b, and the phase 2b, trials. This includes the use of one-month lead, three-month evaluation period, definition of a definitive vertigo day and daily dairy used by the patients which were all kept the same from prior trials. We had a consistent placebo response in the phase 1b, and phase 2b, trials and believe that minimizing variables between trials is key to maintaining this consistency in the phase 3 trial. Second, the phase 2b trial with 154 patients was the largest placebo control trail even conducted in Ménière's patients and as such provided a robust data set to help us refine our patient population. Based on this data we increased the minimum number of days with the definite vertigo episode required during the 28-day lead in period from two to four and added a maximum of 22 days. Increasing the floor enriches for vertigo activity and improves our ability to demonstrate a change versus placebo while adding a filling reduces the variability introduced by a handful of outlier patients. Third we have learnt from the phase 2b that poisson analysis is a better statistical analysis for analyzing vertigo count data. This analysis was a prospectively defined secondary endpoint in our phase 2b trial and achieved statistical significant with the P value of 0.030 in month three and a P value of 0.035 in month two. Poisson regression analysis is a standard statistical method used for count a variable that are not normally distributed and is also ideal for daily count data where there may be missing dairy days. The FDA agreed to our evaluation of poisson regression analysis performed regression analysis to primary or elevation I should say of poisson regression analysis to primary during our inter phase 2 meeting which was not surprising giving its previous issue from registration trials for assessing the number of replaces in EMF and bleeding events in hemophilia. During the KOL event our new Chief Scientific Officer, Doctor Kathy Bishop reviewed these changes and presented results from a reanalysis of the phase 2b data based on the phase 3 patient entry criteria. This post talk analysis demonstrated an increased treatment benefit of OTIVIDEX versus placebo and improved P values across vertical endpoints including counts of definitive vertigo days by poisson regression. Importantly this post talk analysis was conducted with only 97 of the 154 patients from the phase 2b trial who met the phase 3 vertigo entry criteria and we have sized the phase 3 trials to involve 160 patients. This sizing provides greater than 90% power and an alpha of 0.05. And we actually enrolled the total of 165 patients in the AVERTS-1 trial. In summary, we believe that the limited number of changes we made in the phase 3 program that was supported by data from the phase 2b trial increased our probability of success. And we look forward to announcing results of AVERTS-1 trial in September. Additionally, enrollment is nearly complete in the AVERTS-2 trial with greater than 160 patients already enrolled and final patients in lead in. Results are expected by end of year for this study. With regard to other product development activities here is a quick recap of our recent updates and plans. In parallel with the OTIVIDEX Phase 3 trials in Ménière's, we are conducting a Phase 2 trial in pediatric patients at risk for hearing loss due to cisplatin chemotherapy. Patient enrollment in this feasibility trial is ongoing. In July, we announced that the OTIPRIO SNDA for acute otitis externa or AOE was accepted for filing by the FDA and has signed a PDUFA action date of March 2, 2018. The PDUFA date is consistent with our prior guidance and importantly ahead of the peak summer season for treating AOE. In June, we announced the successful end of phase 2 review by FDA of OTIPRIO for acute otitis media with tubes or AOMT. Based on tis feedback we planned to conduct a single phase 3 trial enrolling approximately 200 pediatric patients with AOMT. This one-month trial will evaluate a single 12 milligram dose of OTIPRIO compared to sham with clinical cure a day 15 used as a primary end point. We’ve not yet provided timing for initiation of the trial. With regard to our third program OTO-311 for tinnitus, we're actively preparing for the phase 2 trial which we expect to initiate by end of year, more details on this trial will be provided in our future investor communications. And finally, we continue to be very excited about our fourth program targeting sensorineural hearing loss including age-related hearing loss. This is an area of growing interest in the Ontology field and we believe we are well positioned given our experience in OT drug delivery, experiencing Otology to development from IND filing through registration and extensive patent portfolio. We’re on track for selection of product candidates this year and look forward to sharing more specifics about our development plans in future update. Now I'll provide a brief update on our OTIPRIO commercial activities. In March, we announced that we were implementing changes to our commercial organization that included the hiring of a new Vice-President of Sales and realignment of the sales territory that resulted in a reduction from 40 to 20 sales representatives. During the second quarter, we replaced nearly all of the remaining 20 cells representative with individuals having significant sales experience in the ENT field with products routinely used in the hospital room setting. The newly configured sales team completed training in June and initiated selling efforts in their territories in July. The timing of these changes that were initiated during the first quarter and completed at the end of June meant that there was limited sales support during the second quarter. Despite this limitation and declining two procedure volume due to seasonality, end user demand for OTIPRIO in the second quarter totaled 1,260 valves which continued at roughly the same level as 1,334 valves shipped to end users in the first quarter. The significant reorganization we've made to the sales team has been difficult for those involved but is essential for the commercial success of OTRIPRIO. I believe that we now have the necessary skill set represented in the new sales team and look forward to leveraging both their pre-existing ENT relationship and familiarity with product uptake in the hospital OR setting to drive OTIPRIO utilization. We continue to be confident in OTRIPRIO's clinical performance, the positive appeal that the product has to both physicians and patient and parents and the availability of reimbursement to support use of the product during surgery. Furthermore, we expect that with approval the advancement of our label expansion effort in AOE and AOMT will be important contributors to building a successful OTRIPRIO brand. Finally, I would like to close by tying our commercial efforts with OTRIPRIO back to our overall corporate strategy to establish Otonomy as the leader in developing and commercializing novel therapeutics for the otology field. The physician relationship we’re building through OTRIPRIO promotion and our growing presence at local, regional and national [indiscernible] conferences are key to establishing Otonomy as an innovator in the field and a partner to the ENT. In addition, our active outreach to payers about OTIPRIO, establishment of the third-party reimbursement support service and experience with medical benefit coding are all relevant for OTIVIDEX and our other physician administered products in the future. We've learned important commercial lessons with OTIPRIO that I believe make us a stronger company and better prepare to successfully launch OTIVIDEX for Ménière’s disease assuming positive results from our upcoming AVERTS trials and approval by the FDA. At this time, I'll turn the call over to Paul Cayer, our Chief Financial and Business Officer who will give you a brief update on our financials.

[Paul Cayer:]

Thank you, Dave and good afternoon everyone. In summary, our balance sheet remains strong and our second quarter expenses are consistent with the spending guidance for 2017 that we reaffirm today. Now let me quickly run you through the financial highlights from the quarter. As of June 30, 2017, we hold cash, cash equivalents and short-term investments totaling 150.5 million compared to 168.1 million as of March 31, 2017. Net sales for OTIPRIO totaled 0.3 million for the second quarter and 0.7 million for the first half of 2017. In the second quarter of 2017, we reported total GAAP operating expenses of 23.5 million, compared to 29.6 million for the second quarter of 2016. Non-GAAP operating expenses, which exclude stock-based compensation and rent abatement expense, were 19.3 million for the second quarter of 2017, compared to 26.4 million for the second quarter of 2016. Operating expenses were also lower than in the first quarter of 2017 which totaled 27.3 million on the GAAP basis and 22.9 million non-GAAP. GAAP research and development expenses for the second quarter of 2017 were 12.7 million, compared to 16.7 million in 2016. The decrease was primarily a result of decreased clinical trial activities for OTIPRIO versus the prior year period. GAAP selling, general and administrative expenses for the second quarter of 2017 totaled 10.8 million, compared to 12.9 million for 2016. The decrease was primarily related to reduced personnel costs resulting from the sales team reorganization. Finally, with regard to our financial outlook, we are reaffirming our guidance that GAAP operating expenses for 2017 will be in the range of 103 million to 108 million, while non-GAAP operating expenses are expected to total 80 million to 85 million. With that, I'll turn the call back over to Dave.

[David Weber:]

Thank you, Paul. Operator, we are now ready for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Tyler Van Buren of Cowen and Co. Your line is open.

[Tyler Van Buren:]

I guess with respect to the timing of AVERTS-1, you guys have been pretty granular by saying they will come out in September, but if I could force your hand, is there any way that you could give us a little bit more clarity and whether it's more likely to come out in the beginning or the end of month?

[David Weber:]

Our plan is -- at this time we are not providing further details on the timing more specifically than September. We obviously will announce and plan on hosting our call, once we announce the results for the trial.

[Tyler Van Buren:]

Would it be possible just to confirm for us when enrollment was completed or when the database was locked?

[David Weber:]

We have not given, our approach to this historically have not been to give very specific timing with regard to last patient enrolled and database lock. Our focus here I think Tyler importantly I want to make sure that the clinical team has the time they need working with our CRO to make sure we deliver very high-quality results because ultimately the goal is obviously successful registration of the product for marketing. And for that reason, we want to make sure that we do everything appropriate to ensure high quality results rather than trying to march to a very strict timeline that might be overly aggressive. We are very happy with the clinical team and their performance of the study in our CRO. As we can tell we have enrolled this trial on time as well as we now have the AVERTS-2 trial that has reached the target enrolment and actually has more patients than lead in. So, I think historically we have shown that we do very good job here but I think it's very important that we ensure the quality of the studies.

[Tyler Van Buren:]

And then just with respect to the phase 2b analysis that was done with respect to the raw data with the dvd days and using new phase 3 criteria with the four to 22 range in vertigo days. If I recall correctly it was on average there was about 8.5 to 9 days at baseline and you saw reduction of about 2.4 days. So, I guess my first question with respect to that is assuming that that data is replicate or I guess first, based upon the powering obviously if I recall correctly that 2.4-day reduction was less than 100 patients and now you have 160 in these trials, so just what delta are you guys using to power this study and what power is that? And then secondarily what threshold in terms of days reductions do physicians view as clinically meaningful? In other words, is it half a day, one day, two days, that would be very helpful.

[David Weber:]

Let me start with your second question first and then go back to the trial and the powering. I think first of all from our KOL event both doctor Lambard and Dr. [indiscernible] were very clear in their view that even saving a patient a day of vertigo a month is important to them, and it impacts their lives because it means another day of work, it means being able to function with the family. They even went so far as to say look even just reducing the severity of episodes is important, even if it's not a reduction in the overall number of definitive vertigo days. And that’s very consistent with what we have heard in our research with patients as well. So, I think from a clinical standpoint even a single day and I would say that that’s very consistent for what we are even seeing as a proxy perhaps in the migraine research area we're in and we’ve shown that data in our KLO event of comparing our sparing of 2.6 days versus placebo versus the 1.5 or so days that migraine data is showing in those treatments. I think importantly overall with our phase 2b, results that we saw based on the criteria for phase 3, we saw an overall six days, slightly more than six days of reduction from a single administration of Otividac in that trail for the treated patients. So clearly, it's not -- we think that while one day is sufficient, we obviously saw much more from OTIVIDEX in the phase 2b, trial. I think importantly as you point out now going to power is we obviously have powered this trial highly as we say greater than 90% power at 0.5 because the results we show from the phase 2b, narrowed to the phase 3 population was only 97 patients and this trial trail enrolls to 165 patients. With regards to our powering calculations, while we've never been given specific numbers out there, what I can tell you is we take a very conservative approach, we do not assume a replication of the phase 2b, exactly. We are conservative across the estimates overall and I think that puts us in a power to show the kind of minimum clinical significance that we're discussing which is at least a day. We would expect to be able to detect that difference.

[Tyler Van Buren:]

Great that’s extremely helpful and just one last question if I may, on placebo rates obviously here you are injecting a patient and seeing fairly high placebo rates. I guess just, as you look across the data sets, what gives you all confidence in the assumed placebo rate in the ongoing trial and again your ability to power the study.

[David Weber:]

For the first of all just to be clear that the data set for the current trial is the first one ever to fully blinded, these are registration trials, so it's very important they follow a rigorous quality system to ensure quality of that data. So, we've not seen this data from [indiscernible], its fully blinded at this time. What I would say however, what gives us confidence and this is why it was very important enough to us to limit the number of variables introduced from phase 2b to phase 3 in terms of changes that was to ensure that we also maintain consistency of the placebo effect. As we've shown and reported previously we had strong consistency between phase 1b, and phase 2b, with the placebo effects of about 42% to 43%. And so that was as a result we wanted to maintain consistency of the trial designed of everything that the patients and physicians experienced in conducting that trial to keep it the same and I think we've done that by limiting to the variables we have between phase 2b, and phase 3. So, we believe that we've done everything we can to ensure consistency across the placebo. I think the other thing that key here is the 42, 43 I know that some people believe that that seems high, but it is not in our view based on other studies conducted in patient reported outcomes with other diseases as well as been as Cathy Bishop our CFO mentioned the kind of intervention we're doing. You might expect to see a lower placebo effect for something that's given as an oral medication but when you do more interventional such as an intratympanic or an intravitreal injection you would expect to see a bit increase in that placebo effect as well; so, we feel that’s a 42%, 43% is reasonable for this disease area, with this kind of patient reported outcome and population and the key focus has been maintain consistency and ensure we have the power to separate a difference.

[Operator:]

Thank you. Our next question comes from Charles Duncan of Piper Jaffray. Your line is open.

[Charles Duncan:]

Couple of questions on OTIVIDEX and the Phase 3 programs, with regard to AVERTS-1 and 2 I guess, what are some of the secondary endpoints that you're tracking that you think are most meaningful in terms of establishing the clinical profile of OTIVIDEX, what are things that you're really keen on seeing?

[David Weber:]

So, I think there's a number that we believe are very important here, as I mentioned first of all, I will say that patients themselves have told us that look even if you cannot take away a single definitive vertigo day or reduce the number of counts of vertigo that I have in a given day, if you could reduce the severity of those accounts, so I have less of those of episodes, so I have more function. So, several of the secondary criteria that we think a key to track the set of the profile for the product end are not just reductions in the definitive vertigo day but reductions in total vertigo counts, so being able to show that patients have fewer vertigo episodes, even if they're not definitive, can help a patient restore more functional life. If you can reduce the severity of those vertigo episodes that they're having which quite frankly also follows with definitive vertigo because it is the severity scale tied to that definition of definitive vertigo, so we saw good results there in the Phase 2b, we saw that that was one of the areas that was statistically significant in addition to the profound analysis and obviously became more significant with the post op analysis that we did on the Phase 3 entry criteria in the population. And I think the other one, other area that we think is very important is on quality of life measures, so we do look at quality of life influences, we saw again statistically significant prospective outcomes there in Phase 2b on the total population as well as on the refined patient population based on Phase 3 criteria and we think that those are also very important and that they all really track each other that by reducing the number of episodes, the severity of those episodes, it improves quality of life. So, as we look at it, our Phase 2b data shows a very consistent story and that's exactly what we would be expecting to see from our Phase 3.

[Charles Duncan:]

And then when you consider AVERTS-1 versus 2, it's -- our diligence suggests there have been -- there aren't many difference not only in the protocol but the standard of care but as you conducted that trial, have you learnt anything new with regard to talking to investigators that suggest any differences in the way that many years as treated here in the states versus ex-US.

[David Weber:]

Let me first talk about AVERTS-1, AVERTS-2 and just make it very clear that the protocols are identical between AVERTS-1 and AVERTS-2. So, there is no difference in the protocols. They both allow patients who have had prior therapy and if they -- other than if they come in and their arms, have had a [indiscernible] within one month they have to washout for one month before they can enter the study lead in phase. But once they are in the lead in they can remain on anything that they are currently on, so any diuretic, any low soil diet, any other types of medications. There is a difference, one difference between the U.S. and Europe in that there is a drug available in Europe for Ménière called betahistine. Betahistine has been on the market for decades in Europe and used in high levels and I'll let Paul talk more about that. That drug was available in the U.S. many years ago. It was taken off the market by the FDA due to lack of evidence of efficacy and so that would be the one difference that we see. But of course, we are enrolling patients so by nature of treatment failures on the current care, because we are continuing to have definitive vertigo days. So, we feel that the standard of care really is similar across the U.S. and Europe. Importantly we would expect that the European trial is being done as a standalone, so we didn’t cross populations if you will, which will allow us to ensure that if there is a variable that we haven’t identified, it will be consistent and confined within the AVERTS-2 versus the AVERTS-1, and that’s one of the reasons we have ran the trials that way clearly separating them geographically. I think one of the things I'll say before I turn it over to Paul has some comments perhaps about Betahistine, is that for me an important piece that gives me a high level of confidence is that we have met our enrollment targets. We obviously came out of phase 3 -- excuse me the phase 2b the largest Ménière trial ever enrolled, we learned a lot about how to do trial as well how to enroll it and we have exactly hit the timelines that we set force back in the fall of 2015, why do I think that’s important is because it means that we had a very good handle on our assumptions that they were correct. And I think that’s important to me Charles because it gives me a high level of confidence that our expectations in what we would encounter with patients, how we would expect them to qualify through the screening process and enter the study were very correct assumptions. So, I think all of that gives me a high level of confidence with regards to both the AVERTS-1 and AVERTS-2 and the conduct of those trials as well as patient populations. And Paul would you like to add something on betahistine perhaps.

[Paul Cayer:]

Yes, so just two quick comments. One is we look at betahistine much the same way that we look at diuretics from the clinical use standpoint here in the states. There is no evidence that either are effective yet they are both widely used, they said betahistine has been on the market in Europe for decades. And it's really on the basis of very weak clinical efficacy and then finally when a robust placebo control trial was conducted and published in the last year the conclusion was that betahistine showed no difference versus placebo. So, I think understanding that that’s what's clinically utilized as sort of first line therapy in the absence of a product like OTIVIDEX that has demonstrated efficacy is why we're comfortable with allowing it to be use. So long as if the patient is on it during the lead in and they qualify for the study meaning they have sufficient number of vertigo episodes that they stay honest through the study, so we're just looking for that continuity. And the other point that I would mentioned with regard to controlling for clinical variability is really more by the types of centers that we select in the countries that we went to, so if you look where we're conducting AVERTS-2 it's in the UK, Germany, France, Belgium, Italy, Poland all countries that have very similar clinical practices, similar training of VNTs and approach Ménière's as much the same way, so I think that’s why we’re comfortable that we'll see similar kinds of effects there as we will see in AVERTS-1 here in the States.

[Charles Duncan:]

It's helpful Paul and one last question regarding the regulatory plans or next steps, I'm assuming if AVERTS-1 works out well, with interpretable data that are supportive of an NDA, what are the timelines that you could anticipate post data REIT to being able to file an NDA and are there any additional studies that are needed prior to the filing of the NDA either non-clinical or otherwise.

[David Weber:]

I think as we completed our end of phase 2 meeting we got good clarity from the FDA, their expectations of what would be required for review of the product for approval and that was two phase 3 trials which now we’ve announced today, result from AVERTS-1 in September and that AVERTS-2 is now has achieved the target enrollment, we will complete the patients that are on lead-in and we would expect data for that study by year end. So, we were on track with our prior guidance of having data and being on track for submission of the NDA in the first half of '18. The other studies that we're running in parallel to support that have also all moved along in the background very well, so those are the safety studies. As you may recall we completed a one-year safety study of approximately 100 patients in the UK, we reported those results, that was a safety only study looking at the safety of administering OTIVIDEX once every three months and that was completed. We also have been enrolling in as patients have rolled out of the phase 3 trials as well as they need phase 1b, or phase 2b patients who were eligible could go into a crossover safety study that consisted of six months therapy in which they received two administrations of OTIVIDEX once again every three months. And what FDA was very clear with us on end of phase 2 meeting was that they would approve the product on single dose efficacy understanding was a significant unmet medical need and understanding the disease that’s it’s a [indiscernible] disease, so it's hard to do long-term efficacy trials there because the patients do come in and out of severe vertigo. But what they would require, recognizing that the product would be used in their view chronically by patients that we would need multiple dose safety, so that consisted, they were very clear in their requirement that it would be a 100 patients on drug for one year, so we received four administrations over one year as well as three intra-patients on drugs for six months for two administrations; so we will have that data as well by the end of the year, so we were on track as we've said for submitting in the first half of '18 for approval.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Edward Nash of SunTrust. Your line is open.

[Unidentified Analyst:]

Hi, this is Michael for Edward, thanks for taking the questions. Just two quick questions on the EU side, so based on your discussion with the EMA, what's the requirements for approval there? Do we even need [indiscernible] data or just one is enough for approval in Europe?

[David Weber:]

In Europe, we are still in discussions with the regulatory authorities to work through what our regulatory strategy will be for review and submission in that territory and so we at this point have not provided any specifics with regards to when we would plan to submit and how we would submit. Our focus at this point has been on the U.S. but we have been having those discussions with European authorities both on a country basis as well as a centralized basis, and we will refine our strategy from there based on successful data. Part of that strategy is we believe that with positive data it obviously has an influence given that we are dealing with an area of significant unmet medical need where there is no approved therapy, so, we would expect to work to leverage that in discussions with regulatory agencies outside the U.S. for how we would approach approval in those countries. I don't know Paul would you like to add to that?

[Cedric Burgher:]

No, I think that's sufficient. Still TBD in terms of what our path is there Mike.

[Unidentified Analyst:]

And for the commercial side, [indiscernible].

[David Weber:]

Yes, I think in terms of commercialization U.S. will be yes, we obviously now with OTIPRIO while we've had hard lessons to learn, I'm confident that we've now learned lessons that were essential for us to understand the pallet of the proper skills that we needed in our sales force and the type of leadership we needed there and I think we now have that in place and we will advance with OTIPRIO. And as I said in my comments today I believe all of this positions us well for OTIVIDEX as well as the rest of our pipeline in the U.S. When we look outside the U.S. I would say that first of all Asia we will look for partnership; this is we believe that in those geographies such as Japan first we believe that they're very interested potential partners there who have existing relationships with ENTs; have an existing ENT business or franchise where these products could be leveraged and clearly, they have the expertise in those geographies of dealing with the regulatory authorities and their requirements. For Europe, however we think that there is a potential for us to also go into Europe. But of course, we will always consider whether or not that the best approach is to go into a certain territory ourselves or just find a suitable partner. And so again we think that this is something we will look at, we really have been working, looking at OTIVIDEX as leading that way while OTIPRIO we believe can be applied worldwide, we definitely that our OTIVIDEX represents a significant value and need across the world I should say such that it really would lead the way to paving our ex-U.S. strategy in Europe and rest of world.

[Unidentified Analyst:]

And one last question on OTIPRIO's commercial reorganization, so just want to understand a little bit about the timing for the commercial activity for OTIPRIO. Is that reasonable that we can expect to significantly increase the sales maybe during the peak [indiscernible] surgery later this year, with during the winter season?

[David Weber:]

As you know there is seasonality here, so there is the winter season so that is -- they are very much what David Chaplin, our Vice President of Sales and the new team are focused on. I will say that I was very pleased quite frankly to be flat to Q1 because that was during a time of great transition of the organization. And we were able to show that what we had gained was not loss, and I think that’s well first of all, a very important piece. It shows that there is once the product is being used the product will continue to be used. And so, then it becomes a driver of expanding that utilization. And I think that’s clearly where David and I are focused. I believe that the team has to as you know as I said here today, they just touched the ground in July, so they obviously will be working very hard very quickly to increase utilization of OTIPRIO, but most importantly to be ready for that winter season. So, I really am looking for the end of the year the latter months of the year to really start being able to show the trajectory of OTIPRIO and that is the expectation we share across the sales force.

[Operator:]

Thank you. This concludes the Q&A portion of today's conference. I would like to turn the call back over to Dr. David Weber for closing remarks.

[David Weber:]

Thank you for participating in our call today and for your continued support. If you have any additional questions please feel free to contact us. Have a good evening everyone.

[Operator:]

Ladies and gentlemen thank you for your participation in today's conference. You may disconnect. Have a wonderful day.