TherapeuticsMD, Inc.
Q4 2014 Earnings Call Transcript

Published: 11 Mar 2015

[Operator:]

Thank you for joining us for the TherapeuticsMD 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the remarks from the company, we will be opening the call for Q&A. [Operator Instructions] As a reminder, this call maybe recorded. I would now like to turn the call over to Ami Knoefler from Spark Biocomm representing Investor Relations for the company. Ami?

[Ami Knoefler:]

Thank you, operator and welcome to TherapeuticsMD's year end 2014 financial results conference call. Please note that a copy of the company's 2014 financial results press release was issued today after the close of market. It is available on the company's Web site, ThepeuticsMD.com, in the Investor section. On today's call from the company are Chief Executive Officer, Robert G. Finizio; Chief Financial Officer, Daniel A. Cartwright; Chief Medical Officer, Dr. Sebastian Mirkin; and Chief Product Officer, Julia M. Amadio. Before turning over the call to the company, we would like to remind everyone that certain statements made during this conference call may be deemed to be forward-looking statements. Such forward-looking statements are based upon current expectations and there can be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual, quarterly and other reports filed with the SEC. These forward-looking statements are based on information available to TherapeuticsMD today, and the company assumes no obligation to update statements as circumstances change. An audio recording and webcast replay for today's conference call will also be available online in the Investor section of the company's Web site. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on March 10, 2015. With that, I'll turn the call over to TherapeuticsMD CEO, Rob Finizio.

[Rob Finizio:]

Thanks Ami. And thank you everyone for joining our call today. TherapeuticsMD had a fantastic year in 2014 with significant progress in our development pipeline and growth in our commercial business that paves the way for long-term shareholder value. We expanded our pipeline to now include eight novel hormone therapy programs, two of which are late stage Phase 3 product candidates. And six are in earlier stages of development. We advanced two of our Phase 3 clinical trials, which are nearing completion of patient enrollment. To protect these assets, we filed a total of 93 patent applications, 55 of which are in international jurisdictions and 11 patents have been issued or allowed in the U.S., two of which are new issuances since January. We strengthened our cash position ending the year with a cash balance of approximately $51.4 million, which was recently supplemented by an equity offering in February that generated approximately $59.1 million in net proceeds. We expanded our shareholder base and welcome new institutional investors and analysts. We have grown our current prescription in prenatal vitamin business significantly increasing revenues by 71% year-over-year without materially changing the size of our sales force. We increased our presence among Ob/Gyn prescribers growing our call base to over 4000 physicians a month, which demonstrates our ability to execute commercially in the competitive prescription prenatal vitamin market. Looking ahead, the opportunity for our pipeline has never been stronger and we are very excited about the market potential. During today's call, we will describe some recent developments as regulatory and competitive environments for our pipeline remain attractive and macro economics and regulatory trends are evolving in our favor. We are also well-prepared to execute on our goals for 2015. And now let me turn the call over to Dan for a review of our 2014 financial results.

[Dan Cartwright:]

Thanks Rob. And thanks everyone for joining us on the call today. 2014 was a year of progress on many fronts. Focusing on the current women's health operation revenue from our prescription prenatal vitamins grew to approximately $15 million in 2014 from approximately $8.8 million in 2013. Fourth quarter revenue was also strong increasing 49% to approximately $4.3 million in 2014 compared with approximately $2.9 million in 2013. This year-over-year growth was driven by increased sales of our prescription prenatal products including launch of new products in 2014. Following the strong year, we are now a profitable sales team that establishes our commercial presence in the women's health space and helps to offset our investment in new product development. Total operating expenses in 2014 were higher than 2013 primarily due to increased R&D. R&D expenses for the full year 2014 were approximately $43.2 million compared with approximately $13.6 million for 2013, reflecting the company's investment in two Phase 3 clinical trials for our novel hormone therapy programs. R&D expenses for the fourth quarter of 2014 were approximately $14.2 million which included not only the continued cost of the Phase 3 clinical trial for our combination estradiol progesterone candidate known as the Replenish trial, but also the launch of our Phase 3 clinical trial for vaginal estradiol candidate known as Rejoice trial. Sales, general and administrative expenses for this full year 2014 increased to approximately $22.1 million compared with approximately $19.0 million for 2013. Cost of goods sold for the full year 2014 increased to approximately $13.7 million compared with approximately $2.0 million for the prior year. Net operating loss for the full year of 2014 was approximately $54.2 million or $0.36 per basic and diluted share compared with approximately $28.4 million or $0.22 per basic and diluted share for 2013. Net operating loss in the fourth quarter of 2014 was approximately $16.3 million or $0.10 per basic and diluted share compared with approximately $8.4 million or $0.06 per basic and diluted share in 2013. Our cash balance as of December 31, 2014 was $51.4 million, this was bolstered by a recent equity offered in February of 2015 that result in an approximately $59.1 million in net proceeds. Our outlook for 2015 is positive on the commercial clinical development and financial fronts. We continue to expect our cash resources to support the completion of our ongoing Phase 3 trials scale-up and manufacturing activities for the anticipated commercial launch of both products. As mentioned in the past, we expect R&D expenses for our two late-stage product candidates to decrease once our last patients are enrolled in the trials. We would expect the associated decrease in R&D expenses to be apparent in the quarter following the completion of patient enrollment. Now, Sebastian will provide an update on the clinical programs.

[Sebastian Mirkin:]

Thanks Dan. I will review the progress of our clinical programs during the past year. At the end of 2013, we were starting to build our clinical team and only recently initiated recruitment in the Phase 3 Replenish trial, [in the middle or side] [ph] scale up. The Phase 3 VVA program was still in the planning stages. Here today, we have one of the most experienced women health clinical teams that you could find in the industry. Both Phase 3 clinical trials are well underway with all sides up and running. I'm also very happy to announce that as of today over 79% of subjects are enrolled in the Replenish trial. And over 35% of the subjects are enrolled in the Rejoice trial. Let's go through some of the details, so you can also see why we are confident in our goal to complete recruitment for both trials in the second quarter of this year. Starting with the Replenish trial, our natural estrogen, natural progesterone candidate for vasomotor symptoms due to menopause. Recruitment in the Phase 3 Replenish trial is going extremely well. We now have over 100 sides active and enrolling in this study. As of today, we have recruited a total of 1,374 subjects out of our target of 1,750. Assuming, we continue with our trend of enrolling about 120 subjects per month, we believe that we are on track to finalize recruitment in the second quarter of this year. As I said before in this 12-month study results are expected approximately 1-year after the last subject is enrolled. And let me remind you that from a clinical standpoint this candidate remains a significant product opportunity. Julia will later summarize new data then reinforce the market signs and recent developments that support what we believe to be our first mover advantage. Turning now to Rejoice, our VVA trial, the trial has been recruiting broadly since initiation. As of today, we have enrolled 236 subjects or 35% of the total target of 700 patients. Our goal is to enroll approximately 125 patients per month in this study. This will result in the last patient to be enrolled by then or the second quarter of this year. For the Rejoice trials, results will be available much earlier than for the combination trials. Since Rejoice is only a 12-week trial. Our current expectation is to release results approximately 2 to 4 weeks after the last subject exits the trial. I'm personally very excited how the clinical progress we have made in recent months and the significant developments we anticipate during 2015. Now, Julia will provide an update on recent news from medical conferences that support our [many products] [ph].

[Julia Amadio:]

Thanks Sebastian and good afternoon everyone. We are working very hard to build a presence in the medical community and develop an understanding of the market needs that we are addressing with our scientific efforts. Last year, we presented at the two major medical meetings on menopause. In 2015, we intend to significantly increase awareness of our pipeline and our company with presentations at ISSWSH, which is the International Society for the Study of Women's Sexual Health; ENDO. which is the Endocrine Society; NAMS, which is the North American Menopause Society; ACOG, which is the American Congress of Obstetrician and Gynecologists; and EMAS, which is the European Menopause and Andropause Society. In addition to these medical society presentations, we anticipate a number of publications in top medical and professional journals. Now, let me take a minute and go through some recent developments starting with the characterization and articulation of the current hormone market. We are very happy to see that the journal menopause, the official publication of NAMS recently published a study that estimated that there are 1.5 million users of compounded bio-identical hormone therapies in the U.S., which supports our internal estimates of the market size for our combination product TX001HR. Another study presented last week at the annual Endocrine Society meeting confirms that between 26 and 33 million prescriptions of compounded bio-identical hormone therapy filled each year in the U.S. These data were from a pharmacy survey on compounding and illustrated that the numbers for compounded bio-identical hormone therapy are almost the same prescriptions levels as those filter all FDA approved hormone therapy products including estrogen alone progestin's and progesterone alone and combination therapy. We believe that emerging research will continue to shed additional clarity on the bio-identical hormone therapy market size and characterization. We expect those data from independent studies to be released throughout the year. One example is the presentation at the upcoming ACOG meeting in May, where an investigator from Eastern Virginia Medical School will present data on compounding therapy from pharmacy surveys. We believe that these studies will point to the same conclusion. Millions of women are using unapproved compounded bio-identical hormones clearly demonstrating the need for a FDA approved bio-identical product. Importantly, we continue to see new research highlighting the effective use of lower doses of hormone and the knowledge of menopause. We believe that a major pendulum shift is occurring in hormone therapy science, which supports the use of bio-identical hormones in post-menopausal women. New results from the NIH funded ELITE trial demonstrated that bio-identical estradiol and progesterone are cardio protective when given to young post-menopausal women. ELITE which stands for Early versus Late Intervention Trial with Estradiol is the only clinical trial design to specifically test the timing hypothesis of post-menopausal estradiol therapy and cardiovascular effects. These data were first presented at the American Heart Association meeting in November and clearly articulate cardio-protective benefit of bio-identical estradiol in young post-menopausal women. Today, a [indiscernible] analysis and meta-analysis of 19 studies was published by a Group from the Department of cardiovascular medicine at the University of Oxford According to the author evidence provide some support for the so called timing hypothesis. Estrogen was shown to reduce the risk of cardiovascular disease and overall mortality when used by women less than 10 years since menopause. In addition, two recent studies published in menopause and JAMA Internal Medicine showed another significant change in the thought process around hormone usage and the duration of women's treatment for vasomotor symptoms. According to the articles hot flashes and vaginal disorders are lasting longer than originally thought an average of 12 years. And remain problematic for many women aged 60 to 65. These new articles further emphasize the need for an FDA approved bio-identical hormone therapy option. Now let me shift focus and review a few recent clinical publications related to VVA. Last month exciting results were presented at the ISSWSH conference in Texas by a top leader in Sexology Dr. Sheryl Kingsberg from University Hospitals Case Medical Center in Ohio. You will recall patients' satisfaction remains an important development goal for our vaginal estradiol VagiCap program. These data from our Phase 2 study showed that 97% of women found VagiCap easy to use. In addition, 63% of women on active therapy reported an improvement in quality of life, which is a remarkable outcome after only two weeks of use. At the Endocrine Society meeting data presented on our VagiCap Phase 2 study showed that improvements of vaginal epithelium and vaginal mucosa can be identified by a physician's visual assessment after just two weeks. This rapid onset of action for VagiCap on both vaginal epithelium and vaginal mucosa if approved could be a major product differentiator. As previously stated, we will continue to have a strong presence at major U.S. medical society meetings. And this spring, we will begin to develop our presence in Europe. To support this, a scientific symposium on the Replenish trial and on our Symboda technology will be held at the European Menopause and Andropause Society in Madrid, Spain. As you can see, we have a steady stream of activities at medical and industry conferences that raise visibility of our company and our pipeline. We look forward to building more awareness through 2015 and beyond as we prepare for the potential launch in the VVA market. Rob?

[Rob Finizio:]

Thanks Julia. I would like to update you on regulatory and IP matters; comment briefly on our commercial progress and provide an outlook for 2015. Starting with regulatory, we continue to see a trend of increasing regulatory enforcement including illegal copies of FDA approved drugs that supports our first to market position for the combination product. A year ago, the Drug Quality and Security Act has just been passed into law with little detail. We have since seen the publication of guidance from the FDA, formation of the advisory committee and its first meeting was held recently in February. The pending implementation of USP800 per the Drug Quality and Security Act calls for similar good manufacturing practices and handling of products specified as hazardous drugs. It's just elimination of the current waiver for small amounts of hazardous drugs as the new requirements protect the pharmacists in cross-contamination. Both estradiol and progesterone are classified as hazardous drugs under USP800, and estradiol and progesterone requires special handling, separate ventilation systems within the compounded pharmacies. This could create additional barriers for compounded pharmacies to meet these standards under the new regulation in 2016. We continue to closely monitor these activities as we plan our longer term strategy very importantly to collaborate with the compounding industry. On the IP front, our patent position is stronger, a total of 93 patent applications have been filed worldwide providing multiple layers to our IP strategy. These filings 55 were in international jurisdictions and 11 patents have been issued or allowed in the U.S., we expect additional issuances in 2015. These new anticipated patents will increase the geographically reach and breadth of our IP and strengthening the value of our pipeline programs. On the commercial side, our prescription prenatal vitamin business continues to perform and supports our ability to commercialize our pipeline products, if approved. Our strong performance including 71% revenue growth during 2014 was largely driven by strong sales execution. Let's review some highlights. We have proven that we can succeed in a highly competitive and generisize prescription prenatal vitamin market. We continue to increase our presence in the Ob/Gyn market by strengthening customer relationships and developing critical infrastructure for the VagiCap in combination products, if approved. In 2014, we grew the number of unique prescribers and we added an average of 400 new prescribers per quarter. Our commercial skill sets, which we continue to hone, will give us many options in the future to market our products. In closing, enrollment in our two Phase 3 trials is tracking very well. Our VVA trial has 246 patients in and is 35% enrolled. The combination trial has 1374 patients randomized and a 79% enrolled. At the current rate, we are on track for last patient in both trials in Q2 of 2015. Research and publications highlighting a significant increase and positive clinical outcomes related to hormone therapy use have been increasing. Both the VVA and combo markets are rapidly growing from a revenue perspective and innovation outside of TXMD's clinical research program is limited. Last and not least, we have a very strong balance sheet with no debt. I will now ask the operator to open up the call for your questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Annabel Samimy of Stifel. Your line is now open.

[UnidentifiedAnalyst:]

Hi. Thank you. This is Andrew in for Annabel. I had a few questions, first, for VVA, if I recall correctly, the primary endpoint for the VVA trial include the histology PH and most bothering symptom, so from the Phase 2 trials you have seen PK data positive impact on histology and now since yesterday your positive data on individual assessments for VVA, which correlate well with histology and taking together, can we infer that there would be a clear impact on the bothering symptom? Second question is, is the remaining question really for VVA whether the 4 microgram will achieve these endpoints as the lowest available dose, would you need that dose have a market viable product?

[Rob Finizio:]

Sure. Thank you. So this is Rob Finizio answering. So a couple of things, so I just want to be clear in what we are trying to do, if you look at our Phase 1 data all of our products would potentially if they approve this way in Phase 3 be new lower effective doses because this systemic exposure for all of our products are lower than anything on the market today. I just want to be very clear on that, right? So the 25, the 10 and the four – the 25 and 10 in the Phase 1 are new lower effective doses. So once you do that, the question is now that you have new lower systemically effective doses, do they work, right? So in our Phase 2, we took the lowest dose of the time which is our 10 microgram dose, which by the way was 2.6x lower than Vagifem product that was head-to-head PK trial that is the lowest product in the market that's approved. So what we did is, we took into the clinic to prove that it is staying in the vagina and we wanted to see in the Phase 2 that is having some clinical impact. And not only was it impactful, but for the first time that we are aware of, physicians could visually see the difference as the two-week endpoint as well as the P values, if you look at our Phase 2 data and this PH as well as the superficial and parabasal cells were very, very powerful and separated significantly against placebo. So the last piece is, with the data that was presented at ISSWSH. So you had a 15% increase in quality of life. That's a very broad, very significant improvement against placebo because it's not just how the vagina is symptomatically behaving, but it is very subjective endpoint that's improving their entire quality of life. And then last but not least to answer your question – both of your question hopefully in one answer, the key here – we feel the most important thing is not only that we potentially that works more faster, but it is an easier product to use for women. And the qualitative data that was produced for ISSWSH had a 97% ease of use in most of the women in the study if not all of them had previous experiences with the other products that are approved on the market today. So we think this is a great, great place for us to be as you know Premarin vaginal cream is approved in the 70s, I believe Estrace cream is approved in the 80s and the Vagifem, I believe was approved in the last 90s. So there has not been much innovation and we think we can offer a very strong product in the market segment that's been growing 20% a year over the past five years that still has no generics in the space.

[Operator:]

Thank you. Our next question comes from Ken Cacciatore of Cowen & Company. Your line is now open.

[Ken Cacciatore:]

Hi. Rob, how are you doing? Thanks for taking the question. Just wondering, you talked about it briefly and kind of split-in about maybe collaborating with compound, so I'm just wondering, if you could maybe flush that out a little bit, how do you make it a little less adversarial when you commercialize? How do you plan on engaging with a more carrot than stick, more stick than carrot, how does this play out so that I don't want to use the co-op them but how do we make this a less adversarial relationship?

[Rob Finizio:]

Hey, Ken. Thanks for joining for the first time and we are really glad to have you on the team. So thank you for that. So great question. We get this question quite often. We are currently working on a relationship with the compounders. The E+P compounded drug today is a very widely used but comes from a very concentrated amount of compounders. Their net margin through our survey data is not very high. And we believe there is enough margin just going with the current FDA approved branded product pricing of about $200 a month to almost double their net margin eliminate their risk of making a little copies. And again, this is assuming we get an approval and still giving them the unique differentiation they need to separate themselves from the big chains. We think we are really on to something here. I think it would be a lot more carrot than stick. But at the end of the day, if we get approval anyone that would compound this drug would be making illegal copy and I don't know if you have seen recently, but there has been enforcement in women's health for legal copies, its spin around McKenna, which is a progesterone product again in women's health it is a great legal precedent in place today.

[Ken Cacciatore:]

Great. Thank you.

[Operator:]

Thank you. Our next question goes to Oren Livnat of JMP Securities. Your line is now open.

[Oren Livnat:]

Hey. Rob, thanks for taking the question. Actually to your last point you mentioned in forfeit of illegal copies and I was just reading through the slog of stuff at the guidance that FDA has put out recently, the memorandum of draft, memorandum of understanding, I was wondering if you have any comments on where that's heading in your mind just regard to the ultimate state driven enforcement of these compounding outsourcing facilities. It seems like there maybe some still ongoing negotiations has to what constitutes and the amount of product to ship interstate or over that are copies of – essential copies of approved drugs. I'm just trying to understand what your experts are telling you with regards to when we are going to get some real material broad action there and maybe what it look like in practice?

[Rob Finizio:]

Sure. Thanks for joining today. So a lot of questions in there, right? So interstate commerce is one set of issues and the outsourcing facilities that are primarily in the sterile environment operate under a different regulation, so the guidance that came out to your point is very clear around the sterile environment. We operate mostly in the non-sterile environment, so we have, I think it was about 12,000 pharmacies were surveyed and we had a pretty good response rate on that. And we are finding the vast majority of E+P are coming from the mom and pops non-sterile, non-outsourcing facilities that really the FDA has not given a lot of clear guidance on. They do a very strict interstate shipment regulations. And I think you will find particular to us the E+P is typically something a doctor will write and women will go specifically to a pharmacy to pick that up and if not something that shipped out of states that we are aware of at this current time. So I wish I have more color on that for you, I know its coming. We are working – we are just at the IACP national meeting last week here in Fort Lauderdale. And they were giving a lot of color on it. But, again, it applies to these large sterile outsourcing facilities not to the non-sterile where we are. So I wish I had more details for you, I just don't have it.

[Oren Livnat:]

You guys think that just 20 million, 30 million prescriptions that are coming through I guess Internet marketed and/or aging clinics – anti-aging clinics, so you are pretty confident that cumulative large volume of scrips is really ultimately being dispensed through the mom and pops?

[Rob Finizio:]

Yes. I can give you some very clear data there that we do have – that's actually a public – and there is more – a lot more color to come on that, which Julia had mentioned. So for that we consider 26 million to 33 million prescriptions just for the call today let's call it 30 million prescriptions a year. They are approximately at about $47 to $50 price point. So with those prescriptions, there is about 13,500 large pharmacies that are doing roughly half of that number. And we also have about 3000 to 3500 smaller mom and pop pharmacies that are doing the other half. So as you can see, the larger facilities are doing a couple of week – it's not even in their wheel-house, their margins aren't high, just stuff that's coming in and that side of the pharmacy equation isn't very interested in the product line. What we are finding is on the other side, it's really not a very high margin center, the 3000 that are doing in the other half of those prescriptions, what it is for them is basically a gateway to get doctors to – because it's a high volume to get doctors to a far more patients and grow their business and the reputation as well as become a reliable compounding source for these physicians. As far as the physicians go, if you look at the most recent data that's come out, it's actually the opposite of what we thought early. So what we are seeing is 2/3rds of the Ob/Gyn's are writing those let's call them 30 million prescriptions. And it is a very broad adoption. And about 1/3rd is coming from the anti-aging doctors that are treating aging obviously vasomotor symptoms for women is an aging symptom that's what kicks it off. But it's only a third. But within those third sheer point, what we are finding is that third population of anti-aging physicians that are writing E+P compounded are very concentrated. So the doctors that write them write them a lot. And just to take one step further, we are not finding a high prevalence and we know it's out there. What our guess is, less than 10% of the market that's over the Internet and interstate commerce, but we are not finding even that much in the surveys that we are doing and we are working with some of the compounding journals on some of this data. So I just want you to know that the data has changed a bit. And we are happy to shot that over to you. It is all public or in our Web site.

[Oren Livnat:]

Obviously, that's a large pie regardless of how its distributed, but have we ever gotten any more color on the oral versus transdermal breakdown of the compounded market obviously you are getting a lot of different data sources now in a lot of surveys and your Analyst Day while back had a lot of information. I don't think that question was answered there, has that the answer since or any meat put on those bones?

[Rob Finizio:]

It has. It has. And it's a great question. I'm glad you brought it off. It's less than 20%. We actually have pharmacy survey data on the specific route of administration that is public. And in our data and that we know again there is more color on this coming. It's less than 20%. It's almost mirror images the FDA approved hormone prescriptions between the orals and the transdermal whether it's a cream or a patch or an oil. So it's less than 20% and almost a mirror image of the FDA approved market, which makes sense.

[Oren Livnat:]

Well, thanks for that. I appreciate it.

[Rob Finizio:]

Thanks for joining. It's great to have you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Nathan Cali of Nobel Life Science Partners. Your line is now open.

[Nathan Cali:]

Hey, guys. Good afternoon. Thanks for taking the questions.

[Rob Finizio:]

Thanks for joining Nathan.

[Nathan Cali:]

As far as the two Phase 3 trial that you have going on, is there any demand or color on enrollment and what that looks like. I know that you provided the percentages but you guys – if you are hearing anything at all?

[Rob Finizio:]

Yes. Thank you for asking that question. What we have seen in the combination trial is, we have been enrolling about 120 a month over the last several months. At that current rate, we should have enrollment completed in Q2. The VVA trials you know has not been up and nearly as long and it very recently got going. So we believe it or not are on target or ahead of target with our enrollment there. And we got all the sides up towards the end of last year. We spent January and February trying or what we call patient media recruitment outreach. So we tried print, tried commercials, tried radio, tried direct dials, tried direct-mailers, social media. You get the idea. We have got that figured out. We have a very affordable effective way and we are launching this month the full recruitment program. So we are very comfortable that even without that we would hit our numbers. So the VVA trial and enrollment, we continue to be very bullish on it.

[Nathan Cali:]

Thanks. Any plans to move additional assets forward into your pipeline?

[Rob Finizio:]

As you know, we have the transdermal programs that we have made public. We have a number that we haven't made public yet and probably will bring those forward at a later day. But as far as the transdermal programs, we recently had – very recently, the few days had a meeting with the FDA. We are very happy to announce that the FDA has given us a very clear guidance for the transdermal progesterone project. And we hope to get a more clear characterized much larger Phase 1 study, which will lead to a Phase 2 study with [indiscernible] endometrium. Later this year to earlier next year, Sebastian is statistically crunching the models that we are giving to decide that the enrollment needs to be. Once that's very clear, we will give clear guidance as to what we expect for the transdermal program to just a little bit early to do that right now. But the good news is, the FDA has given us a clear guidance forward, which is as you know progesterone, there is no FDA approved progesterone transdermally, it's been kind of a white-uniform and we think we have a shot at it and we are very happy that the FDA supported there.

[Nathan Cali:]

Thanks. And then just one more to tie into the recent funding that you guys did in your cash balance now. You mentioned that that would take you to the end of Phase 3 for both of these and then for FDA approval and commercialization. Does that tie-in to any additional development or would that just be for those two Phase 3 programs or would you be able to fit in the topical progesterone as well?

[Rob Finizio:]

So we have budgeted taking the topical progesterone to Phase 2 with the money we have. So I just want – what you bring up is a better point behind just what is budgeted for. So as you know, the current Phase 3 programs, our R&D spend is a lot and once the last patient is in those trials that the following quarter those costs should decrease significantly. So at that point, we can try to take one of the earlier stage programs into Phase 3, if they are ready. We can always start progesterone back up or we can just wait and partner off some of those. And we will make those decisions at a time. But, I think given that we don't start another Phase 3 program. We are very sufficiently funded for a long time.

[Operator:]

Thank you. And our next question comes from Annabel Samimy of Stifel. Your line is now open.

[Unidentified Analyst:]

Hi. Again, this is Andrew in for Annabel. I just wanted to ask a follow-up question to your compound each, regarding the compounding regulations given what you really know about the [indiscernible] market paper that correlates you just shown from compounders and warning from the Web site. What else it would take for the FDA to put bio-identicals under the do not compound list, is this simply getting an approved product or is that a whole process? And second, if you can talk about the R&D expense, last quarter you had a one-time fee that you paid to expedite enrollment of about 4.1 million. But it doesn't seem that the R&D went down to the normal run rate. Is it the new normal run rate or is this just what's going on there?

[Rob Finizio:]

Sure, Andrew. So I will handle the first question around the do not compound and if it's okay, I will pass it to Dan on the one-time bolus expense we had for recruiting in the run rate. The do not compound list is a separate list that is outside of the FDA approval process, right? And it's kept by the Secretary of Health and Human Services, so once the drug is approved by the FDA. It is illegal for the compounders to make it without a medical exception. And that's very clearly defined in the DQSA and it is very clearly measured, right? So if a doctor – you can make – for you to – what I try to do is, I try to sit in your seat and say how do I calculate quantifying qualify what that means? So if you want to say 10% is reasonable for doctors to use or 20% and take that piece of that market away from us that's fine. You can come up with your number. But, if you look at the DQSA, it's very clearly guided as well as, as we very clearly documented per prescription and pure patient in-stored. And what the general thing is, just like the USP has had a lot of expense in headwinds for very high volume, very commoditized, a very low profit product for the compounding industry. We think it will be much easier to go with us and keep them in much better graces with the FDA to answer your question. I will turn it over to Dan on the one-time bullish and I also just would like to refer to our idea of the when the Phase 3 is complete enrollment, in the following quarter, we do expect the R&D burn to be reduced significantly.

[Dan Cartwright:]

Thanks Rob. Yes. I mean direct to your question as far as the fourth quarter and we have a table of course in our 10-K we will file in a couple of days that talks about cost for each trial. But, the combo trial went down in the fourth quarter because of the reason we spoke out as far as the bolus. But at the same time, we brought the VVA trial up to speed. And so it's kind of off those two things working together and so our R&D spend was down for the quarter, but maybe not as much as it would have been if we haven't started up the VVA. So it's a combination of those two things to get to that spend. And do we see that going forward as being current spend, we don't put forecast out there. But, I think the numbers we are spending currently are reasonable to get our trials done in the – by the end of the second quarter.

[Unidentified Analyst:]

Great. Thank you.

[Rob Finizio:]

One last thing just to cap it off. We mentioned when we said that $4 million one-time bolus goes for recruitment, we don't anticipate seeing that again just to be clear.

[Unidentified Analyst:]

Okay. Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Oren Livnat of JMP Securities. Your line is now open.

[Oren Livnat:]

Thanks. The follow-up, just quickly on the transdermal, you mentioned before and again today the possibility of potentially partnering those, what determines whether you – is that liquidity issue, is that a market reach issue, your decision to partner that or not, how are you – how and when do you think you might decide whether to partner that. How much data do you think you need to get good value for money?

[Rob Finizio:]

Oren, I hate to say good question because I won't say that that's a great question. So what we are trying to discern and as you can see in our original PKs is that we are not finding any of the p in the blood, yet lymphatically it's very active, capillary-wise it's very active, right? So to answer your question, the value of the product, right? It's a $600 million, $700 million domestic product segment internationally, it's probably largely than that since transdermals are heavily used in the Europe and some in the South America. So when we have clear large statistically valid Phase 1s that shows either in the blood or still non-deductible on the blood and it's protecting or bonding endometrial tissue then we can discern the value and work on a real deal. As you know this is considered significant science with a lot of mid-cap and large-cap companies where my team has come from and there is a lot of interest in this specific space that's been voiced to us from some of the mid to smaller players that are in the transdermal space in a big way to some of the large multinationals. So the answer to your question [indiscernible] of the data, I don't know the value. When I do the value, I think it would be very clear is to how to put the deal together. And the value for, when it doesn't understand Oren, I know you do of not having detectible blood levels it's a very big barrier for generics. If you can't protect in the blood with the generic pathway being a PK test of 8120, it's very hard to generisize a product with no PK levels. And that might be what we have. Our preliminary data it looks that way but we have to confirm it, right? That's what the Phase – a larger Phase 1 and Phase 2 will do.

[Oren Livnat:]

All right. Thanks.

[Rob Finizio:]

Thank you.

[Operator:]

Thank you. And at this time, I'm not showing any further questions, I would like to turn the call back to Rob Finizio for closing comments.

[Rob Finizio:]

Great. I just want to thank everyone for joining. This is just a fantastic time for our company. And we are really excited to see all of the great news that's going on and we really appreciate your time and joining today. Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone have a wonderful day.