Aclaris Therapeutics Inc (ACRS) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Aclaris Therapeutics Fourth Quarter 2018 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Kamil Ali-Jackson, Chief Legal Officer.

Ma'am, you may begin.

Thank you.

I'm Kamil Ali-Jackson, Chief Legal Officer for Aclaris.

Please note that earlier today, Aclaris issued its press release announcing fourth quarter and full year 2018 results.

For those of you who have not yet seen it, you will find the release posted in the Investors section of our website at www.aclaristx.com.

Joining me today for the call are Dr. Neal Walker, President and Chief Executive Officer; Dr. Stuart Shanler, our Chief Scientific Officer; Frank Ruffo, our Chief Financial Officer; David Gordon, our Chief Medical Officer; and Jeff Wayne, our interim Head of Commercial.

Before we begin our prepared remarks, I would like to remind you that various statements we make during this call about the company's future results of operations and financial position, business strategy and plans and objectives for Aclaris' future operations are considered forward-looking statements within the meaning of the federal securities laws.

Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties that could cause actual results to differ materially from those reflected in such statements.

These risks are described in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations section of Aclaris' Form 10-K for the year ended December 31, 2018 and other filings Aclaris makes with the SEC from time to time.

These documents are available under the SEC filings section of the Investors page of Aclaris' website at www.aclaristx.com.

All the information we provide on this conference call is provided as of today and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise.

Please be advised that today's call is being recorded and webcast.

A link to the webcast and slide deck is posted in the Investors section of our website.

I'll now turn the call over to Dr. Neal Walker, President and CEO of Aclaris.

Neal?

Thank you, Kamil.

Good morning, everyone, and thank you for joining us.

I'll start with a brief update of our business highlights and then touch on a few of our clinical development programs, then I'll hand it off to Stuart Shanler, our Chief Scientific Officer, who will review our clinical development plans and time lines.

Jeff Wayne, our interim Head of Commercial, will then address our commercial business, after which Frank Ruffo, our CFO, will review our financial results.

Following our prepared remarks, we will open up the line to take your questions.

Dr. David Gordon, our Chief Medical Officer, will also be available during the Q&A portion of the call.

We're really excited to enter 2019, a year in which we are launching RHOFADE and also reporting on a number of important data catalysts across our clinical pipeline.

Starting with commercial.

In October, we acquired worldwide rights to RHOFADE cream.

We closed the deal at the end of last November and in December, our sales team began promoting RHOFADE.

I'll start with a few updates on this transaction.

First, the transition and integration from Allergan to Aclaris has proceeded smoothly, and they have been a good partner.

Second, we recently changed leadership on the commercial side of the business with the appointment of Jeff Wayne as our new interim Head of Commercial.

Jeff brings over 30 years of pharmaceutical experience with the majority spent in dermatology.

During his career, he has held positions of increasing responsibility in sales, marketing and general management with Galderma, Intendis, Promius, Onset and LEO Pharma.

He launched METROGEL in both the United States and Canada and was responsible for the marketing of FINACEA in the United States as well.

These are 2 medications for the treatment of rosacea.

In addition, in his role as Vice President of Business Development, he managed the RHOFADE transaction from the beginning, providing a seamless transition of leadership for us.

Third, as a result of the RHOFADE acquisition, we have realigned our field force with an emphasis on targeting existing and potential RHOFADE prescribers.

And finally, after a successful National Sales Meeting and AAD meeting in February, we are pleased to announce our sales force is now focused on officially relaunching RHOFADE in the primary detailed position.

Thus far, in the first quarter of 2019, we are encouraged by the early prescription trends as the 4-week IQVIA data for the period ending March 8 indicates that we experienced an 8.4% increase in TRXs, or total prescriptions, as compared to the prior 4 weeks.

NRXs, or new prescriptions, for the 8 weeks ending March 8 are 16% higher than the NRXs for the 8 weeks immediately before we began promoting RHOFADE.

Moving to the fourth quarter results.

During the fourth quarter, total net revenue was $3.7 million, which consisted of net sales of ESKATA $760,000, net sales of RHOFADE of $1.1 million, which was for December only and contract research revenue of $1.3 million.

While fourth quarter and full year ESKATA sales were below our expectations, we continue to believe in the long-term potential for the product.

Now turning to our pipeline.

A few items to note.

We have a very busy and exciting year ahead of us, and we expect to report results from multiple studies regarding the efficacy and safety of our portfolio of clinical drug candidates for the treatment of common warts, alopecia areata, androgenetic alopecia, atopic dermatitis and vitiligo.

Before handing it off to Stu to review regular clinical reporting, I would like to provide a brief update on our eyebrow study that was conducted in Australia as well as our review of our next clinical candidate, an MK2 inhibitor, known as ATI-450, which is the first compound that is coming out of our Confluence acquisition in late 2017.

At this time, I would ask you to turn to the slide presentation that we provided.

If we turn to Slide 3, this is just the pipeline overview of what we have coming down the pike in 2019.

We have a common wart program in Phase III that will read out in the third quarter of this year.

We have 2 alopecia areata trials that will read out in the second and third quarter, respectively, this year, and then we have 3 open-label studies, androgenetic alopecia, vitiligo and atopic dermatitis that will read out in the second quarter of this year.

Next in line will be the MK2 inhibitor, where we'll be filing an IND in the second quarter of this year and then moving into a series of SAD, MAD studies on route to proving out the concepts in a cohort of RA patients in 2020.

First, an update on the Australian eyebrow study.

Now I would ask that you turn to Slides 5 through 8.

As you may recall, we previously showed pictures and presented data in December of last year.

12 patients were initially recruited in the study and 5 have continued past 6 months on study drug.

I'm pleased to provide an update from the ongoing extension phase of the study.

Hairy growth continues in 3 of the 5 patients, and as you can clearly see from the photos, there has been further improvement over the last 3 months.

The first subject is a 33-year-old male, who has had alopecia areata since 2009, with the current episode of eyebrow loss being approximately 8 years in duration.

As of the end of February, this subject has had a little over 8 months of exposure to study drug.

In this close-up, we can see nice regrowth in the frontal view, and also, the ensuing side views in the subsequent slides.

It is important to note that the brow arches have been reestablished and sustained.

Turning to Slides 9 through 12.

This subject is a 23-year-old female that has been on study drug for approximately 9 months.

The 6 months photos for this subject were already presented in December.

Again, we see nice regrowth in this frontal view and also in the side view on each of the subsequent slides.

Now turning to Slides 13 through 16.

This is a 45-year-old female with alopecia areata since 1986 with current duration of eyebrow loss of approximately 5 years prior to entering the study.

She has had prior therapy in the past and has been on study drug for approximately 9 months.

Here is the frontal view showing nice hair regrowth and reestablishment of the brow arch.

Again, looking at the side view close-up, we can see vellus and terminal hair regrowth and many white terminal hairs.

This subject had demonstrated hair growth at 6 months, but has since continued to improve with ongoing therapy in the extension study.

This is particularly impressive in our opinion, given the long-standing recalcitrant nature of her disease.

We believe these results demonstrate what we have maintained since the beginning of our work in this area, that the topical approach with this mechanism is viable.

Now why is this important?

If you turn to Slide 17.

As you may recall, we presented a few slides in December that I would like to briefly touch on, again.

This is a slide depicting the phenotypic spectrum of hair loss that we tend to see in clinical practice.

This is a relatively broad spectrum of hair loss within the overall category of alopecia areata.

Severe disease involves complete loss of scalp hair, and this is what the oral JAK inhibitor programs, including our own, are targeting, which you can see in the picture on the bottom of the slide.

However, there continues to be an unmet medical need in patients who have lower degrees of hair loss or SALT scores, and many of these patients don't even qualify for the ongoing oral JAK inhibitor trials.

We simply can't forget about these patients.

It is these patients who represent the majority of those suffering from alopecia areata.

It is this phenotypic spectrum that drives the need to be thinking about both oral and topical treatment.

Moving to Slide 18, and further to the point about the importance of topical therapy, this is the current treatment paradigm as listed on the National Alopecia Areata Foundation's website.

Treatment decisions are often made on the basis of age of the patient and extent of disease.

If you're younger, you typically receive various topical options as first-line treatment, as indicated on the left-hand portion of the slide.

This is also the case when your extent of disease is less than 50% involvement on the scalp, as you can see in the middle.

As the extent of disease increases, you are more likely to employ systemic treatments, along with topical options or possibly steroid injections.

It is interesting to note that this type of treatment algorithm is typical of most dermatology disorders, including acne and psoriasis.

This flowchart is extremely useful in informing how we think about the future potential treatment paradigms with JAK inhibitors, both oral and topical.

So turning to Slide 19.

This is how we think about orals and topicals.

As you can see here, younger patients, or those with less severe disease, would be candidates for topical treatments, and this represents the bulk of the prevalent alopecia areata population.

Those with more severe disease might use a course of topical treatment to decrease the time on oral therapy or potentially step down to topical treatment after a successful course of oral therapy.

As previously announced, patients from our blinded, oral and topical Phase II studies have the opportunity to continue in long-term open-label extension studies.

This program was specifically designed to provide us with the unique data set allowing us to evaluate induction with either an oral or topical formulation and potential maintenance of effect with long-term topical therapy.

Since these 2 studies are blinded, we do not have data to share at this time, but today, we have shared additional data from the previously reported eyebrow study that continued to show the utility of topical therapy with a favorable risk-benefit profile in this disease.

This is very important since AA is chronic and is characterized by the need for longer continuous treatment regimens.

This is, in contrast, to diseases such as atopic dermatitis, which although chronic, tend to be more episodic in nature.

As an example, efficacy in atopic dermatitis trials are typically assessed at 1 to 4 months, while ongoing oral JAK inhibitor trials assess efficacy after 6 to 9 months of treatment on an oral with the recognition that longer-term efficacy needs to be assessed beyond that time point.

These updated photographs show that treatment with our topical JAK inhibitor can lead to hair growth, even in patients with severe and long-lasting disease.

Many alopecia areata patients will require chronic therapy and patients can achieve good hair regrowth with the topical treatment route, which could limit systemic adverse events.

The safety results thus far indicate ATI-502 has been generally well tolerated and no treatment-related serious adverse events have been reported to date.

I would like to finish with a brief mention about our MK2 inhibitor program.

Our Investigational New Drug application, or IND, for ATI-450 is on track for submission to the FDA for rheumatoid arthritis in mid-2019.

And if allowed, we expect to begin a Phase I and Phase II trial in the second half of 2019.

This is the first clinical candidate coming from our Confluence drug discovery team acquired in 2017.

Turning to Slide 21.

ATI-450 is an oral compound that targets the production and activity of TNF alpha, IL-1 alpha and beta and IL-6.

These are all cytokine targets of established biologics, such as the well-known anti-TNFs and anti-IL-1s and anti-IL-6s listed on the slide.

If successful, we believe ATI-450 would be a therapeutic with a broad array of both dermatology and non-dermatology indications.

Turning to Slide 22.

Some of you may be familiar with the p38 pathway.

P38 controls a myriad of housekeeping functions, anti-inflammatory pathways and various other processes.

MK2 sitting downstream, once activated, specifically upregulates key pro-inflammatory signals, such as TNF alpha, IL-1 beta and IL-6 that drive inflammation.

Turning to Slide 23.

ATI-450 works a little differently, it works downstream and does not block activation of anti-inflammatory pathways or affect other housekeeping functions of p38.

It is designed to specifically target the pro-inflammatory pathways.

Slide 24, we have tested this hypothesis in a mouse LPS-induced TNF alpha model.

Here we note that the global p38 inhibitor, CDD-111, exhibited tachyphylaxis, that is lost inhibition over time, which is similar to what was observed in clinical studies in both inflammatory bowel disease and RA studies historically with old global p38

Inhibitors.

In contrast, ATI-450 was observed to have a durable response with no tachyphylaxis over the course of the study in this model.

Turning to Slide 25.

We have also studied ATI-450 in a variety of preclinical models demonstrating joint protection and preservation of bone in a rat arthritis model; anti-inflammatory action and preservation of the crypt architecture in a mouse ulcerative colitis model; decrease of IL-1 beta in a CAPS model; and reduction in bone metastasis in a mouse model, which was affecting the stromal microenvironment.

By targeting MK2, these studies demonstrate it may be possible to maintain efficacy in these models, while avoiding the historic issues with traditional p38 therapeutics.

We expect to file our IND in the middle of this year and then embark on SAD, MAD work in order to evaluate the efficacy in a small cohort of RA patients and prove out the hypothesis that we have demonstrated preclinically.

I will now turn it over to Dr. Stuart Shanler, our CSO, who will provide an update on our other clinical activities and programs.

Stu?

Thanks, Neal, and good morning, everyone.

I'm pleased to start this section of the call by announcing that by the end of this month, we expect to complete recruitment of all the patients for our ongoing clinical trials.

As such, this means we can be focused on successfully completing the treatment phases of these trials and on the important work needed to analyze and report the data from these studies.

I'll take a few minutes now to talk about some of the specifics.

Leading off with our warts program: in September 2018, we initiated our Phase III clinical development program for A-101 45% Topical Solution for the treatment of common warts or verruca vulgaris.

Our 2 pivotal Phase III trials, named THWART-1 and THWART-2, for the treatment of common warts are progressing as planned.

THWART-2 has completed enrollment, and THWART-1 is expected to complete enrollment by the end of this month.

We will enroll a total of approximately 1,000 patients across both studies and expect to report top line data in the second half of 2019.

Additionally, we have an ongoing open-label safety extension trial, which will complete the clinical requirements for the NDA filing, and we plan to submit an NDA in the first half of 2020.

As a reminder, A-101 45% has the potential to be the first FDA approved prescription treatment for common warts.

Moving to our JAK, or Janus kinase inhibitor trials.

As a reminder, we are developing both oral and topical formulations of our JAK1/3 inhibitors for the treatment of alopecia areata.

Our program will investigate these medicines in the full clinical spectrum of disease inherent in alopecia areata, ranging from patchy disease to alopecia totalis and alopecia universalis.

The clinical JAK program is now fully recruited, and we look forward to the study completions and the analysis of these blinded Phase II topical and oral JAK inhibitor in alopecia areata studies.

AA-201 is a Phase II trial of our ATI-502, our topical JAK1/3 inhibitor for the treatment of AA and it is progressing as planned.

This randomized, double-blinded, parallel group vehicle-controlled trial is evaluating the safety, efficacy and dose response of 2 concentrations of ATI-502 on the regrowth of hair in 129 patients with AA.

Data are expected in the second quarter of 2019.

Moving to our oral program, AUAT-201 Oral is an ongoing Phase II dose-ranging trial of ATI-501, our oral JAK 1/3 inhibitor for the treatment of alopecia areata.

This randomized, double-blinded, parallel group placebo-controlled trial is evaluating the safety, efficacy and dose response of 3 doses of ATI-501 on the regrowth of hair in 87 patients with alopecia areata.

Data from this study are expected in the second half of 2019.

Our topical AGA, androgenetic alopecia study, AGA-201 Topical, is an ongoing Phase II open-label clinical trial of ATI-502 for the topical treatment of AGA, also known as male and female pattern hair loss.

As a reminder, approximately 70% of men and 40% of women in the U.S. will experience this at some point in their lives.

Our AGA-201 Topical trial is evaluating the safety and efficacy of ATI-502 on the regrowth of hair in 31 patients with AGA and 6- and 12-month data are expected in the second quarter and second half of 2019, respectively.

This study has enrolled 21 male and 10 female patients and we will be evaluating metrics, including total hair count, hair width and investigator and subject assessments.

And finally, we have 2 other ongoing open-label clinical trials in vitiligo and atopic dermatitis, that's VITI-201, V-I-T-I-201 Topical, and AD-201 Topical, respectively, which will also read out later this year.

With that, I will now turn the call over to Jeff Wayne, our interim Head of Commercial, who will provide an update on our commercial activities.

Jeff?

Thank you, Stu.

Good morning, everyone.

As a reminder, RHOFADE is approved in the United States for the topical treatment of persistent facial erythema or redness associated with rosacea in adults and can be used in conjunction with other medications which are approved to treat the other manifestations of rosacea, such as papules and pustules.

The National Rosacea Society estimates that approximately 16 million of Americans are affected by rosacea, and persistent facial redness is the most common sign or symptom of rosacea, affecting 71% of rosacea patients according to a survey conducted by the same society.

Rosacea, like many dermatological conditions, such as acne, can present with multiple symptoms.

And like the acne patients, rosacea patients often require multiple medications to manage all their symptoms.

It's important to note that most of the pharmacologic agents currently approved by the U.S. Food and Drug Administration are approved for treatment of papules and pustules associated with rosacea.

They have little or no effect on persistent facial redness.

As new rosacea treatment algorithms emerge, RHOFADE will be an essential component to treat the persistent facial erythema that is a significant and bothersome symptom in most rosacea sufferers.

The RHOFADE launch campaign was rolled out at our National Sales Meeting in the week of February 18, and RHOFADE is now the primary focus of our commercial efforts.

After comprehensive training program, the team left energized, prepared and armed with the tools needed to execute our RHOFADE strategy.

As part of the RHOFADE relaunch, we completed the sales force realignment, resulting in 50 territories.

The RHOFADE health care practitioner targeting methodology we used utilized advanced analytics, incorporating historical prescribing habits for persistent facial erythema products, such as RHOFADE and Mirvaso, branded rosacea treatments and other related inputs.

The result was a target list of approximately 6,000 health care professionals, which we believe represents the greatest potential for near- and long-term growth.

It should be noted that this is a 97% match with the call file that had been in place prior to the acquisition and represents about 73% of the branded rosacea market.

Our sales force will call on our A targets with the frequency of at least 1 call every 2 weeks and at least once a month for our B targets.

The RHOFADE ACP targeting methodology really was designed to drive 3 major priorities: one, was to increase prescribing by current RHOFADE prescribers; second, was to recapture lost share from health care providers who decreased their prescribing during 2018; and finally, capitalize on untapped potential within rosacea treating health care professionals who aren't yet prescribing a medication to treat persistent facial erythema.

We are continuing the existing patient savings card program initiated by Allergan to ensure consistency and seamless coverage, while we explore ways to maximize the program in the near future.

And we believe that the current program is beneficial for patients, health care professionals and Aclaris.

As far as payers are concerned, 80% of commercial lives are covered for RHOFADE, with roughly 50% of total lives being covered with unrestricted access.

Currently, 92% of RHOFADE cream prescriptions come from commercial coverage.

While we believe that this represents strong coverage for RHOFADE cream, one of our key initiatives in 2019 will be to improve the total lives covered, as well as to improve unrestricted access.

Although we are in the early stages of the RHOFADE relaunch, we are very encouraged by the results to date.

The annual resetting of deductibles on January 1 caused most brands to show a decline of volume early in the year, due to the resulting significant out-of-pocket expenses required of patients.

Despite this pressure, in the most recent weeks of the IQVIA data, we see RHOFADE prescriptions breaking through a somewhat flat period in the early weeks and growing once again.

In fact, the 4-week IQVIA data for the period ending March 8 indicates that total RHOFADE prescriptions increased by 8.4% as compared to the prior 4-week period.

And new prescriptions for the 8 weeks ending March 8 were 16% higher than the new prescriptions for the 8 weeks immediately before we began promoting RHOFADE.

Now moving to ESKATA.

ESKATA sales remained below our expectations, but we continue to believe in the potential of the product.

Given the focus on RHOFADE, ESKATA has been moved to second position in the promotion schedule.

The sales team plans to focus on the top 10 ESKATA accounts in terms of productivity in each territory, with the objective of increasing utilization in these higher volume offices.

We also received recent European approvals for ESKATA or ESKERIELE, which it will be known as in some of the European countries, and are in active discussions with potential commercial partners.

With that, I'll turn the call over to Frank Ruffo, our CFO, who will provide an overview of the financial results for the fourth quarter and full year 2018.

Thanks, Jeff.

Good morning, everyone.

As I walk through our fourth quarter and full year 2018 financial results, please reference the financial tables that can be found in today's press release.

For further detail, please refer to the MD&A section in our Form 10-K that will be filed this morning.

For the quarter ended December 31, 2018, total net revenues were $3.7 million, which consisted of net ESKATA sales of $760,000, net RHOFADE sales of $1.1 million, which represents only the sales made during the month of December.

Contract research revenues are $1.3 million and other revenues of $500,000.

For the year ended December 31, 2018, total net revenues were $10.1 million, which consisted of net ESKATA sales of $2.8 million, net RHOFADE sales of $1.1 million, contract research revenues of $4.7 million and other revenues of $1.5 million, which to remind you, is related to our agreement with Cipher to commercialize ESKATA in Canada.

Cost of revenues were $3.5 million for the fourth quarter of 2018 and was comprised of $1.2 million and $1 million of costs related to ESKATA and RHOFADE, respectively.

These costs included a onetime noncash inventory write-off charge of $1 million related to ESKATA and $700,000 of noncash amortization related to the RHOFADE acquisition, most of which will be a recurring monthly amortization charge for RHOFADE going forward.

We also incurred $1.3 million of costs related to our CRO business.

Cost of revenues was $6.9 million for the full year of 2018 and was comprised of $1.5 million and $1 million of costs related to ESKATA and RHOFADE, respectively, and $4.3 million of costs related to our CRO business.

During the quarter and year ended December 31, 2017, our total net revenue was $1 million and $1.7 million, respectively, which consisted entirely of CRO revenues, with $800,000 and $1.2 million of cost in revenues.

These revenues commenced with our acquisition of Confluence in August of 2017.

Switching to our operating expenses.

For the full year 2018, our total R&D expenses were $63 million, which was within our revised guidance of $62 million to $64 million.

This included noncash stock-based compensation of approximately $7 million.

For the full year of 2018, our SG&A expenses, which combines our sales and marketing, and general and administrative expense line items, were $75.6 million, which compared favorably to our revised guidance of $77 million to $79 million for the year.

This included noncash stock-based compensation expense of approximately $13 million.

Our net loss was $132.7 million for 2018 compared to $68.5 million for 2017, while our operating cash burn for 2018 was $100.8 million compared to $54.7 million for 2017.

In 2018, we incurred $23.2 million in noncash charges and benefited from $9.4 million in cash provided from changes in our working capital.

As of December 31, 2018, we had cash and investments of $168 million and had 41.2 million shares of common outstanding.

We anticipate that our current capital is sufficient to fund our operations into the fourth quarter of 2020, without giving effect to any additional new potential business development transactions or financing activities.

Now turning to our financial outlook for the full year 2019.

Here are our initial operating expense estimates.

We expect full year 2019 GAAP R&D expenses to be in the range of $61 million to $64 million, including estimated stock-based compensation of $7 million.

These expenses will be driven by the completion of our Phase III wart trials, 2 Phase II dose-ranging trials in AA, various open-label JAK trials and the advancement of our preclinical pipeline, including an IND filing for ATI-450.

We expect our 2019 GAAP sales and marketing expenses to be in the range of $37 million to $40 million, including estimated stock-based compensation of $4 million.

And we expect our 2019 GAAP G&A expenses to be in the range of $29 million to $31 million, including estimated stock-based compensation of $10 million.

Assuming no material issuances of equity in 2019, we would expect our full year 2019 weighted average shares outstanding to be about 41.5 million shares.

And with that, I'll turn the call back over to Neal for some closing remarks.

Thank you, Frank.

Again, 2019 will be an exciting year for Aclaris.

In fact, it will be our most catalyst-rich year since forming the company.

We'll be extremely busy.

We are relaunching RHOFADE, as well as reporting on data from a number of clinical studies, with a particular emphasis on hair loss disorders.

We are also moving ATI-450, our first preclinical asset from the Confluence acquisition, into the clinic this year, opening up a whole new area in inflammation and immunology for us.

We look forward to providing updates on our pipeline throughout the second and third quarters this year, and I would ask Shannon, if you could please poll for questions.

(Operator Instructions) Our first question comes from Louise Chen with Cantor Fitzgerald.

This is Jennifer Kim on for Louise.

We have 2 questions here.

The first is, just comparing the 6-month data and the 12-month data for AGA and vitiligo, what should we expect to see at each time point?

And especially at the 6 months data, what would you consider a success going into the 12 months data?

And then my second question is, RHOFADE seems to be doing very well at $1.1 million in December.

I just wanted to get your ideas on what your current expectations are on the launch now and if there is any quarterly bumpiness we should keep in mind going forward?

Jennifer, this is Neal.

I'll start and then perhaps I can hand it over to one of the guys for a follow-up on each of these.

So on the 6-month data and 12-month for AGA and vitiligo, we're -- as we said in the call on AGA in particular, we're looking at things like the investigators' assessment, the subjects' assessment, hair width, hair count data and importantly, the pictures.

So what we're looking to show at 6 months, in particular, with AGA, is to show clinical pictorial evidence of hair regrowth, which is what patients care about.

I think it's important to note in the AGA study, we're looking at both males and females, and that's because this is a non-hormonal treatment.

And so we decided to look at both sexes.

So we're looking forward to presenting that data in the second quarter this year.

And the 12-month data is basically just verifying the efficacy that you see at 6 months holds, and in fact, expands.

Typically, with conditions like hair loss as we've seen with alopecia areata and vitiligo, the first signal is at 6 months and then what you'd like to see is just the improvement in result as you get out to 12 months.

And in fact, if I just pull that back to the alopecia areata photos that we just updated, it's just indicative of what you're going to find.

In hair loss conditions, you want -- it's more of a maintenance response, you want to see continued improvement over time.

And then once you get that full result, you want to see it maintained and to maintain it, you have to stay on drug.

So I think that's why we like to look at both 6 and 12 months endpoints, in particular in conditions like this.

On the RHOFADE side, I agree, it's doing very well.

We're very excited about it.

And Frank can maybe talk a little bit about our expectations going forward.

Sure.

Thanks, Neal.

Again, Jennifer, our trailing 12 months revenues for the quarter ended [June 30, 2018] (corrected by company after the call), as evidenced through the Allergan promotion, was about -- just over $17 million.

I think we shared a number similar to that on a prior call.

So that will give you a pretty good idea what the run rate was last year.

We had $1.1 million of revenues in December.

Of course, we expect that to increase, and prescriptions are growing very nicely at this time.

As far as lumpiness and volatility, we probably could expect a little bit on the gross to net bouncing around and through the year as we kind of transition through the Allergan TSA.

But again, I don't think it's anything too significant.

We can hopefully stay on that same run rate as we move along.

As far as seasonality, maybe I'll let Jeff comment a little bit on that or maybe some bumpiness related to that, that we could expect.

Yes, I think rosacea tends to flare during the colder months.

So any ups and downs over the next couple of quarters will be more related to seasonality than anything else.

Our next question comes from Adnan Butt with Guggenheim Securities.

This is Blair Cohen on for Adnan.

Just a couple for me.

For the upcoming alopecia readouts, are you guys planning on releasing either baseline SALT scores or maybe a change from baseline and SALT?

And also, what do you expect for the timing of the -- or actually to the cadence for the 2Q readouts?

Do you think those will all come out at once or will those be released throughout the quarter?

So let me start, and I'll hand it off to David, who can go through it in a little bit more detail.

So in terms of the cadence, what we would expect is that we will report data from our open-label studies with AGA, first with vitiligo in AD, the 6 months' data, and then we will roll into the topical patchy study, the double-blinded placebo-controlled study, for alopecia areata.

Subsequent to that would be the oral program in alopecia areata and then finally, the wart Phase III data in the third quarter.

And then I'll hand it off to David.

Yes.

It's David Gordon here.

Yes, we are looking at the endpoints that you mentioned.

The primary endpoint is the change in SALT score compared to the vehicle.

We'll also, I think it will be important to look at factors like the ones you've mentioned about severity of the disease at baseline.

So you'll look at response rate based on duration of disease, the extent of disease, such as the SALT.

And one of the ways that we designed this program is to help us design the optimal Phase III.

So we'll be -- it will be very important to be able to look at who the responders are and who's best responding to our topical treatment.

Perfect.

And if I can get one more in, just on the gross to net for RHOFADE.

What have you guys seen so far?

And how do you expect that to trend throughout 2019?

So we talked a little bit about the $17 million quarterly run rate that Allergan experienced.

Their gross to net was bouncing around between 60%-70% and that varied quarter-to-quarter.

A lot of factors go into there, including returns in the copay cards and changes to the copay cards.

As we kind of move forward, we hope to operate within that, but just know that there are many levers there that we can pull, and the biggest part are really around gross to net or particularly the part of the program that's related to the copay assistance.

That's the biggest chunk of gross to net, and that's the one that we'll have probably the most control over.

And so as you think about that, you have lots of different ways you can kind of adjust that coupon program.

And so one of the ways is just by increasing copays on the coupon program, but there's always this risk that you need to always think very carefully about that and how that would impact Rx volume going forward.

So that our challenge is to kind of have the right mix, control that gross to net as we move forward and kind of have doctors being able to write RHOFADE and get those prescriptions filled.

So that's the challenge and that's kind of what we'll undertake in the upcoming quarters.

(Operator Instructions) Our next question comes from Tim Lugo with William Blair.

What are your thoughts around using SALT scores less than or equal to 10 in future trials?

It seems like a little unreasonable bar for the topical approach...

(technical difficulty)

Tim, we can't hear you.

Can you repeat the question?

You got a bad connection.

Yes, sorry about that.

What are your thoughts around using SALT scores less than or equal to 10 in future trials?

It seems like that might be a little unreasonable of a bar for the topical approach.

Yes, so we thought very hard about this.

You can see that Lilly and Pfizer have essentially gone forward with that as their endpoints and -- I think what you're getting at is that their populations have SALT scores of more than 50% of baseline.

So it seems to be a reasonable endpoint to using that population.

And I guess, the question is what happens if you go into the rest of your population.

So this goes back to maybe a little bit of the question I answered before, our study is going to allow us to answer that question based on the different populations that we are studying in Phase II.

So we will know how good that endpoint is based on severity of patients coming into the study.

So as an option, we'll know how our drug stacks up against that endpoint, but we're also looking at various other ways to assess the efficacy of our drug.

So I think this is 1 option, and we'll make sure that we select the endpoint which best shows how the drug is working as we go into Phase III.

Okay.

And it continues to look like the earlier you treat patients, the better the outcomes.

Are you going to have a good idea around how you compare versus others developing therapies, given the baselines of your studies?

Yes.

So we're paying a lot of attention to that as well.

And Pfizer presented data at AAD showing that the cutoff in their data seems to be around about 3.5 years.

So if you have disease for more than 3.5 years, you seem to do -- there is less chance of responding to the patients that had disease for less than 3.5 years.

So we will also look at that population in our Phase II and be able to look at where our cutoff is.

We know that the median duration of disease in our Phase II is actually around about 2 years.

So I think that gives us a population who we hope have a good chance of responding to drugs.

Well, just to complete that thought, so that's why we've mentioned a little about if you look at others in the space that are doing oral work, the studies are starting to migrate out to 9 months in some cases and Pfizer's primary is at 6 months in their oral study, but then looking at efficacy, again, at 44 weeks.

So that's 11 months.

And so I think if you just -- if you start putting all these things into context, the reality is, you have to go out a little bit longer with these patients.

Hair growth is a little bit different animal than something like atopic dermatitis.

And some of the pictures we're showing, particularly that last picture today, that female has had really nice response.

She is actually one of the most enthusiastic, finally having eyebrows back after 5 years and she has had disease since 1986.

So she would be considered a very recalcitrant patient.

And so that's all reasons why we just think that topical is vitally important in this disease.

And maybe one last one, can you talk about use of an induction dose for maybe further work or just your thoughts around an induction dosing?

Yes.

So we've constructed the whole Phase II program to answer a number of questions, including that one.

So in our oral JAK program after 6 months, patients then have the option to go on to the topical, and we'll look to see if we can maintain efficacy that we'll be seeing with the oral as we switch patients to the topical.

And I think that's going to be a very important question to answer, where it will be unique in producing that kind of data.

I think the JAK inhibitors look like they're effective.

The challenge that clinicians and patients are going to have is, like can you deliver that efficacy over the long term and avoid some of the systemic adverse events?

And I think that the topical really provides a very viable way to do that, and that's why we're enthusiastic about this as a treatment paradigm.

And I'm showing no further questions at this time.

I'd like to turn the call back over to Neal Walker for closing remarks.

Thanks everybody for attending the call this morning.

Really appreciate it, and we look forward to providing further updates as the year continues.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thanks for your participation, and have a wonderful day.