Avadel Pharmaceuticals PLC (AVDL) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Avadel Pharmaceuticals' Second Quarter 2018 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference may be recorded.

I would now like to introduce your host for today's conference, Lauren Stival, Head of Investor Relations.

Please begin.

Good morning, I want to welcome you all to Avadel Pharmaceuticals' Second Quarter 2018 Earnings Conference Call.

Before we begin, I will start with some cautionary statements.

The following presentation regarding Avadel Pharmaceuticals includes a number of matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements.

These risks include risks that products in development stage may not achieve scientific objectives, milestones or meet stringent regulatory requirements, uncertainties regarding market acceptance of products and the impact of competitive products and pricing.

These and other risks are described more fully in Avadel's public filings under the Exchange Act, including Form 10-K for the year ended December 31, 2017, which was filed March 16, 2018.

Except as required by law, Avadel undertakes no obligation to update or revise any forward-looking statements contained in this call presentation to reflect new other information, future events or otherwise.

We'll be using a slide presentation for today's call, which can be accessed on the Investors section of our website.

After prepared remarks, we will be opening the call up to a question-and-answer period.

On the call today, we have Mike Anderson, our Chief Executive Officer; Mike Kanan, our Chief Financial Officer; and Greg Divis, our Chief Operating Officer.

At this time, I'll turn the call over to Mike Anderson.

Mike?

Good morning, ladies and gentlemen.

Thank you for joining us this morning to recap the second quarter of 2018 and to discuss the strategic initiatives that we're working on as a company.

Before we begin our formal presentation, I'd like to comment on what we believe is a meaningful overhang to our stock price.

Over the past couple of years, as we have transitioned the company from being a drug delivery and reformulation company to a specialty pharma company, we have, on occasion, not adequately managed expectations.

From being delayed on FT218 to acquiring a pediatric business that didn't perform as we had anticipated and having to reduce our NOCTIVA guidance, we have clearly created frustration for our shareholders, particularly our long-term shareholders.

As we have always said, the original unapproved to approved strategy was never intended to be a long-term strategy.

The intention was to generate cash and the products have produced excellent cash flow, even better than we originally anticipated.

But the revenue streams cannot be sustained, given the entrance of new competition.

We have certainly seen the impact of that.

But these products, over the last few years, have allowed us to transform the company into an entity with 2 very large meaningful opportunities.

While we will always strive to protect our shareholders from divulging too much information that could compromise our competitive position, we recognized that, as we progress as a company, investors have a growing need for information that allows them to make good decisions.

As such, we will provide additional information on today's call not previously disclosed.

So moving into Q2.

We came in above consensus with $29 million in top line revenue, primarily from our 3 hospital products.

We are still planning to file our fourth hospital product, also a sterile injectable, sometime at the end of this year or in the first part of 2019.

As you may recall, we've uncovered a potential safety problem with an existing product, have improved the formulation and are hopeful of gaining a preferred position with the FDA approval process as a result.

Assuming approval, we expect meaningful revenue to begin in 2020.

Mike Kanan will take a deeper dive shortly into the dynamics that we're seeing across our hospital products and resulting revenue expectations.

But overall, these continue to be solid sources of high-margin cash flow for us, albeit not a piece of our long-term growth strategy, like either NOCTIVA or FT218.

I'll dive right into FT218.

We've recognized that clinical trial enrollment has taken longer, and as such, have kept quite a bit close to the vest regarding this product and the study.

On today's call, we're going to provide some additional transparency around where we are in the study and the ongoing initiatives to hopefully inspire some confidence in our ability to complete this study on a timelier basis and to bring this important product to market.

For those of you who may have seen the release this morning, you know that we are approximately 50% enrolled.

About 18 months ago, we began our trial in Europe, where to be frank, very few patients have been enrolled to date.

So the majority of the patients have come from the U.S. and Canada, where for the most part, we've only been operational for a little over a year.

As we previously disclosed, there were some delays in getting the many U.S. sites up and running.

Some were commonplace issues, like delayed IRB approvals, et cetera.

Others were unique to FT218, like having sites engaging with the DEA in the middle of a licensing procedural change.

As a result, we have only had the majority of our initially-planned U.S. sites operational since second quarter of last year, and we will be adding 7 new sites in the U.S. over the next few months.

Some of these sites had been vetted for participation at the outset, but were unable to join at that time for various reasons, such as capacity, competing studies and even DEA licensing issues.

We are pleased they are now able to come on board and open us up to new patient pools, new markets and new investigators.

We have a number of other initiatives underway that should accelerate the enrollment of the second half of our study.

Recently, we were able to secure a protocol change without compromising our SPA to include patients with limited past use of sodium oxybate.

The parameters around past use are that the patient cannot have taken more than a 4.4 -- 4.5-gram dose for more than 2 weeks and last exposure to the drug has to have been at least 12 months prior to enrollment.

We have initial identified over 100 patients, mostly through our online screening tool, who were previously excluded and are in the process of contacting them to collect their history on sodium oxybate.

We certainly don't expect the majority of these people to necessarily meet these new requirements and they may be ineligible for other reasons.

But we have been asked to provide some sort of context around the change as it relates to previously excluded patients and it should be additive.

Additionally, we have discussed this change with our clinical investigators and a number of them believe they have potential patients that may meet the new past use criteria now and into the future, depending upon when they took last sodium oxybate.

To support this effort, we also expect the database review, currently ongoing across all of our clinical sites to identify some potential patients that may meet the past use criteria, who would now be eligible to screen.

Also, we have a new patient referral program we're implementing to help funnel patients from new sources into the screening process.

In addition to the 7 new sites expected to open in the U.S. over the next 12 weeks, we will have 2 sites opening in Australia, where sodium oxybate is not currently available.

We have a third Australian site that will be coming on board sometime in the next 4 to 6 months and we will have all the key geographies covered there.

After a good deal of research, we think Australia will be very additive.

Having recently received the required regulatory approvals, applications for import and export licenses are underway and site initiations are currently being planned.

We believe we are seeing these -- all of these initiatives taking hold as our randomization in Q2 exceeded those in Q1 by 50%.

We are constantly assessing sites, both new and old.

I know that many investors watch the list of active sites on our website and clinicaltrials.gov, and you will likely see a few site closures over the coming weeks, where we have not seen productivity.

In total, between now and early Q1 2019, we expect to have up to 16 new sites, 9 of which are expected to be active over the next few months, as I said earlier.

These new sites will also benefit from implementing the best practices that we've observed over the last 12 months relating to recruitment, screening and retention.

So we feel positive about their ability to provide patients for randomization.

Many investors have also noticed the new primary completion date of September 2019 on clinicaltrials.gov.

We were required to update this field when we made our protocol amendment.

However, it is simply a placeholder and we are not yet prepared to set an end date.

We understand firsthand the frustration many feel around this, the time this study is taking to enroll, but we're confident it will complete, and reiterate our belief that this product is going to be a game-changer.

This trial and potential product already have an impressive amount of awareness.

Our online screening tool, albeit an extremely high-level form that excludes the bulk of patients, has already been filled out by over 2,000 people.

That's 2,000 people already interested in our investigational onetime-nightly sodium oxybate.

Given recent data suggesting that 27% of patients are noncompliant in some manner with their second dose may provide a large piece of the puzzle as to why almost 50% of the patients who start with the twice-nightly product for a debilitating orphan disease drop out within a year.

In recent qualitative market research, we have come to learn that physician preference for a once-nightly is on average greater than 50%, even when options for low sodium or generics were available.

We believe this is a good early indication of interest and with so few options available to patients, our near-term objective will be to continue raising awareness for FT218 enrolling patients in the trial.

Regarding our second major strategic initiative, NOCTIVA, I want to take a minute to address our revenue expectations here and why they've changed from $10 million to $20 million to $5 million to $10 million.

From a demand base, we've seen positive reception and uptake, albeit a little slower in growth, yet has resulted in over 2,600 dispensed prescriptions from over 1,000 unique prescribers since launch.

While not yet completed, July is tracking to be our largest month yet, with over 1,000 prescriptions.

How that translates to revenue is based on the mix of patients who are Part D and commercial, and the co-pay assistance we've provided to date.

What we've seen is a larger portion of Part D than commercial originally expected, where preferred coverage has been virtually nonexistent.

Furthermore, with the influx of high deductible plans for commercial patients, we have seen out-of-pocket assistance support at higher levels than originally assumed, although they are now decreasing and our gross to net is improving.

This is important, because overall, we've seen over a 70% success rate of getting Part D patients on treatment through our specialty pharmacy cash program, while we are waiting to secure coverage for these patients.

This has turned out to be more than 50% of our patients at the outset of this launch, and this patient mix has resulted in a hit on net revenues.

Barring this, it is still early, and we have every reason to believe in the potential of this product.

This belief has certainly been confirmed by the feedback that we've received from numerous physicians and patients alike, who have benefited directly from NOCTIVA and have seen their nighttime symptoms dramatically improve, many on the first night of treatment.

Because of this, we want to make sure investors aren't just looking at revenue in the first 12 to 18 months, but also on some of the metrics that we think are indicative of positive traction and long-term value creation.

We are first-to-market here in an indication never before approved.

This is a condition suffered by as many as 40 million patients, with less than 10% being diagnosed and treated.

It's equally prevalent in both men and women, is associated with a number of serious comorbidities and greatly increases the likelihood of suffering falls and fractures.

We feel good about the progress that we've made in just a few short months, where we have gone from no team, no product, no coverage and no presence in the market; in just a few short months, our unaided brand awareness has reached over 60%, which is up from less than 15% in March, and is reflective of just 2 months of branded promotion.

We believe this is representative of the high level of interest in NOCTIVA, particularly considering the importance of the education around nocturia and the need to treat to 2 awakenings per night.

The keys to success over the next 12 to 18 months include: increasing the relevance of nocturia as a condition worth treating independently, initiating trial and experience for physicians and patients and improving market access, particularly and especially in Part D. Each day, we are generating more noise in the urology community about nocturia.

We plan to release up to 9 new publications over the coming months that highlight the importance of treating nocturia and the innovation of NOCTIVA as the solution.

Another critical success factor is payer coverage.

Right now, our commercial covered access, despite some typical 6-month new product launch NDC blocks has outperformed many analog products with over 125 million covered lives in the first 90 days.

Even with no contracts, we have secured 2 preferred brand formulary positions with major payers.

Furthermore, without any contracted preferred Part D coverage to date, we have still seen approximately 15% of all retail prescriptions get filled -- or get covered and filled in Part D patients.

As we have now exited our first full launch quarter and as the 6-month NDC block ends in September, we expect coverage only to improve as we look forward to 2019 for our first Part D wins.

These preferred coverage contracts, especially in Part D, are really going to be a critical factor in how much revenue we are ultimately able to recognize over the next 12 to 18 months, given the mix of commercial to Part D that we've been seeing.

To support physician initiation and experience, we have distributed over 7,000 full trade size samples in the market, which we expect to serve as a catalyst for future prescriptions.

In addition to our launch here in the U.S., we have made the decision to seek approval in Canada.

In addition, we have initiated early development in the United States for primary nocturnal enuresis, or bed-wetting, as well as additional new formulations.

These are important opportunities to expand our urology and NOCTIVA franchise, as we have more to share, we will provide those updates.

This leads me to touch briefly on the recently approved, but not yet launched, product that will compete with NOCTIVA.

From a marketing standpoint, we believe we have meaningful advantages, specifically as it relates to the very strict restrictions on fluid intake, both before and after taking the medication.

We don't believe these are reflective of real-world patient experience.

We have no insight into Ferring's launch timing, but our job is to be prepared regardless, and we will be.

Lastly, as you know, we are now party to the legal proceedings between Serenity and Ferring.

We will not comment on litigation matters publicly and will update our investors appropriately.

Overall, our second quarter was one of investment and strategic execution.

We reported $147 million in cash, marketable securities at June 30, and are well capitalized to pursue any strategic acquisition or in-licensing opportunity that might be synergistic within urology.

I want to emphasize that we maintain our peak revenue estimates for NOCTIVA anywhere from $250 million to exceeding $750 million per year, depending upon how much we can create and grow the overall market over the next 12-plus years.

These numbers have always considered competition in the market and the potential to further expand this franchise into other indications, only increases our revenue potential.

We are committed to growing in this area, and we'll keep you apprised of strategic initiatives as they arise.

Before turning the program over to Mike Kanan, also I want to let you know that at our shareholders meeting in July, we certified the election of 2 new board members who have just joined our team.

Geoff Glass, currently CEO of Sancilio & Company and former Patheon executive; and Linda Palczuk, current COO of Verrica Pharmaceuticals, who previously lead -- led a number of AstraZeneca's commercial units.

That concludes my update, and I'll turn the program over to Mike Kanan to review the quarter's financial results, before I wrap up with some final comments and our Q&A session.

Mike?

Thank you, Mike.

And let me also thank you for joining the call this morning.

As you may have seen in this morning's release, our second quarter was a period of continued investment and focus on building the foundation to propel us forward into the future.

As you heard Mike say from a revenue standpoint, we came in above Street consensus with $29 million in revenues, largely from our hospital products, which continues to generate positive cash flow.

These hospital products, while not a long-term driver of the business, continue to provide near-term shareholder value by paying many of our bills.

And we continue to allocate resources to high-growth products that are expected to deliver near-term shareholder value.

This is evidenced by our continued investment in NOCTIVA.

Our bottom line results through the 6 months included about $34 million in NOCTIVA launch spend, and that is in line with our previously stated expectations.

R&D in the quarter was almost $12 million, a record high spend as we accelerate the pace of our FT218 clinical trial, including the initiation of new clinical sites, as you've heard, and recruiting initiatives.

Our NOCTIVA launch spend and R&D spend both demonstrate our commitment to allocating resources to high-value growth products that may provide superior revenue and shareholder return over a sustained period of time.

As you've seen from the release as well, our operating cash flow was negative in the second quarter.

Cash flow generated from our hospital sterile injectables business, however, continues to be positive and an excellent source of cash, which we expect will continue for the foreseeable future.

These products carry gross margins in excess of 70%, with very little sales and marketing costs or other overhead.

As you heard just -- Mike just say, our cash balance was $147 million at June 30, and we are adequately capitalized to complete the full launch of NOCTIVA and complete our FT218 trial.

Now let's talk more specifically how we performed in the second quarter.

Revenue, as I said, for the quarter was $29 million, down from Q1's level and down from $47 million in Q2 last year.

The declines from both periods reflect lower volumes and net selling prices due to more competition to our hospital products.

Our success with these products has been strong and we continue to evaluate other potential products as sources of cash flow that can be developed cost effectively and with a high likelihood of success.

NOCTIVA revenues were just under $1 million through the first 6 months.

Keep in mind, we are very early in the launch.

And as you heard Mike say, we are pleased with several early indicators of positive traction, including demand, numbers of unique prescribers and product awareness levels.

Cost of goods sold was about 12% of product sales in Q2, down from about 20% in Q1 and 10% last year in Q2.

The decline in COGS from Q1 was due to certain nonrecurring charges we took in Q1, including an inventory write-off and costs incurred for certain expedited freight.

These costs did not reoccur in Q2.

Research and development expenses during the second quarter totaled $12 million, up almost 20% from Q1.

This increase is a result of higher spending on our REST-ON clinical trial, including new patient enrollment initiatives, costs associated with the initiation and opening of additional clinical sites and increased spending associated with testing and scale up of contract manufacturing services for FT218.

And as you heard Mike say, we are pleased that this record high spending helped us in Q2 by increasing our enrollment more than 50% higher than in Q1.

SG&A was $28 million in the second quarter, up 14% from Q1.

The quarter-over-quarter increase was primarily due to about $18 million in costs incurred during the quarter associated with the April launch of NOCTIVA compared to $12 million in Q1.

The spend was partially offset by the lack of SG&A attributable to our former pediatrics business, which was divested in February.

Included in our non-GAAP results are about $6 million in related party contingent consideration payments.

Most of these payments are related to the 20% gross profit split we pay on our existing hospital products.

Also included in our non-GAAP results are $1.6 million of accrued cash interest expense on our exchangeable notes.

On a non-GAAP basis, Q2 diluted loss per share was $0.55.

And finally, we recorded a tax benefit of about 3% or about $700,000.

As I've said in the past, a large portion of our NOCTIVA spend will be eligible to offset U.S. taxable income attributable to our hospital products.

As a result, this has eliminated a majority of our cash tax increase, a tax benefit we will be able to utilize in future years.

Moving on to our GAAP results for the quarter.

The primary differences between our non-GAAP and GAAP income statement relates to how we treat the expenses associated with acquisition-related contingent considerations, amortization of the NOCTIVA intangibles and the interest expense on our exchangeable notes.

Please refer to the appendix to today's slide presentation for a reconciliation of our GAAP versus non-GAAP results.

The largest GAAP to non-GAAP difference is related to contingent consideration.

Included in the GAAP net loss for the second quarter were gains of almost $13 million related to changes in the fair value of related party contingent consideration.

These noncash gains were recorded as a result of reducing the fair value of this liability due to changing market conditions across the company's 3 hospital products.

Additionally, we have differences between our cash interest expense and our GAAP interest expense on the exchangeable notes.

For GAAP purposes, we record interest expense on the debt component at an interest rate commensurate with our specific credit profile and tenure for this debt, and that amounted to just under $3 million.

For non-GAAP purposes, however, we report interest expense using the 4.5% coupon and that amounted to $1.6 million.

Our GAAP net loss for the second quarter was $3.4 million or $0.09 per diluted share compared to net income of $28.9 million or $0.68 per diluted share in the same period last year.

Moving on to our cash flow summary.

We ended the quarter at $147 million in cash and marketable securities.

That's up from $94 million at December 31, 2017.

As most of you know, in February, we completed our exchangeable notes offering and received net proceeds after expenses of $138 million.

Simultaneously with the notes offering, we repurchased $18 million of our shares.

And also in 2018, we repurchased an additional $10 million of our shares under other board authorized programs.

Over the last 12 months, these share repurchase programs have reduced our outstanding share count by approximately 12%.

And finally, as you've read in the release, we are lowering our 2018 revenue guidance to $90 million to $105 million based on current market conditions.

This was primarily due to the entrance of new competitors to our hospital products and, as you already heard Mike talk about, lower NOCTIVA revenue.

With regard to NOCTIVA, keep in mind, we just launched this product in early May, and we are pleased with a number of early indicators performance.

Nevertheless, when we initially developed our guidance for NOCTIVA, we made certain assumptions around the mix of patients in Medicare Part D versus commercial insurance plan, the level of co-pay assistance and the timing of contracting with managed care organizations.

Early in the launch, we are seeing that the mix of less profitable Medicare prescriptions is higher than what we initially expected.

We would expect this to reverse as managed care coverage improves over the next couple of months.

This along with slightly lower revenue generating prescriptions had led us to reduce NOCTIVA guidance to $5 million to $10 million.

We expect an increase in net selling price as we continue to improve script volume and market access throughout the remainder of 2018.

Our R&D spending remains unchanged at $40 million to $50 million, and our outlook for SG&A continues to be $80 million to $90 million, of which NOCTIVA spend is expected to be about $50 million to $55 million.

These amounts are unchanged from our previous guidance, but are expected to be at the high end of this range.

And because of our anticipated losses in 2018, our effective tax rate is expected to be a benefit and will range from 0 to 10%.

With that, I will now turn the call back over to Mike for some concluding remarks.

Yes.

Thank you very much.

That does conclude the formal portion of our presentation this morning.

With that, we'll open the line operator for questions.

(Operator Instructions) Our first question comes from John Boris of SunTrust.

Just first question with respect to -- so first question just with respect to NOCTIVA.

Just your assumptions on the competitive front on when you anticipate possibly that Ferring will be coming into the market?

And then second question, just on FT218, really appreciate the update on the enrollment.

What do you need to have in place to be able to identify, how long it's going to take to enroll the other portion of the clinical trial?

John, let me start and reverse and answer your FT218 question first.

And then Greg Divis, who, as you know, is our Chief Operating Officer is here and he'll talk to the NOCTIVA component of your question.

As to FT218, as we've mentioned, we have a number of sites that are, over the next 2 months, 12 weeks, whatever, are going to be launched.

We'd like to see what the uptake of those sites is.

Once we -- and the Australian sites as well.

And once we see how those are commencing, we probably will be in a much better position to give you a firm end date.

We are buoyed by what we saw in the second quarter as compared to the first quarter.

And a lot of the initiatives we've undertaken, particularly as it relates to enrollment and working with the clinical sites, we think we're beginning to see some dividends on.

So -- but once we get some of those sites up and running and see the initial impact, we'll be able to give you a good firm date.

(inaudible)

So in Australia, Mike, there's no Xyrem available in those -- in Australia and nothing really to treat narcolepsy.

So does that enhance your ability to enroll?

Certainly, it does.

As you know, with the change in the SPA, our ability to include some previous sodium oxybate users, it's still on a restricted basis.

But in Australia, where it's not been readily available, there should be, in our view, a broader group of patients that would be available.

And so as a result of it not being available there today, we would hope that those would be pretty meaningful sites for us.

But we also hope that the additional sites we're adding here in U.S., I mean, we're looking at geographies that prior to this point didn't have local access, Chicago, Atlanta as an example, of 2 of them, which should also help move the enrollment forward as we open those sites up.

I'll turn the second part over to Greg.

Yes.

Thanks, John.

I think the answer to the Ferring question is pretty straightforward.

We're just not -- we have no visibility on their timing as far as launch is concerned.

In terms of the preparation, we'll assume they're coming imminently, but we have no visibility in terms of their timing, actual timing.

Our next question comes from Matt Kaplan of Ladenburg Thalmann.

So just wanted to dig in a little bit more to the competitive landscape for nocturia and NOCTIVA, in particular.

Given the potential entry of Ferring in the near term and how you're going to address that?

You spoke a little bit in your prepared remarks about the litigation.

How could that be helpful for you?

And -- could you give a little bit more detail on that?

And then also from a positioning and pricing point of view, how do you -- what flexibility do you have to successfully compete as Ferring enters the market?

Matt, it's Greg.

With regard to the litigation, there's really nothing we can say at this point in terms of where that status is and how that may ultimately play out and impact the launch timings or any other matters.

There is a couple of matters that dispute, including an IP matter, that we expect to be heard sometime in the early part of 2019, which is fundamental to the litigation relative to the dispute around the intellectual property that we believe they're infringing.

So that's from a litigation standpoint.

With regards to what levers we have, again, we have no visibility in terms of what their go-to-market strategy will be.

From that perspective, we certainly understand as the first mover what opportunities we have to position ourselves in consideration of them coming to the market at some point.

And as Mike referenced in his remarks, we do believe that we feel very good about our product in NOCTIVA, its clinical profile and the benefit it derives as a significant innovation for these patients.

As we may have discussed or shared previously, we are dosed, we are, by far, the lowest most efficacious dose of desmopressin.

We're anywhere from 17 to 67 times less desmopressin compared to the competitor or any other formulation of older formulation of desmopressin for that matter.

And we bring a very robust clinical profile with well over 1,000 patients studied in Phase III, with 2 multi-year safety and efficacy follow-up studies.

And for patients treated to the label and to the indication, we bring a very robust safety profile as well.

So we feel very confident in our product and what we can do for patients.

Having a competitor in the market certainly raises the awareness and the importance of nocturia, which is a key critical success factor in terms of establishing and creating a market.

So we think more noise will also be favorable to the market.

And we feel very good about the product in NOCTIVA that we have and are launching currently.

Yes, I think the last comment too would certainly tie to the challenges that we believe in the real-world setting, patients will experience in having to limit the fluid intake that is required around the dosing of the Ferring product.

But to not have liquid an hour before you dose, to dose an hour before bed to restrict caffeine and/or alcohol for a few hours, and then to not drink for as many as 7 or 8 hours after administration certainly is a limitation and a challenge in the real-world patient setting in terms of what needs to be done in that administration versus where we see NOCTIVA as a very simple no-lifestyle modifications, 30 minutes before bed, 1 spray in either nostril.

And then just going back to FT218, I guess in your prepared remarks, you detailed the placeholder status and in terms of the clinicaltrials.gov, September 2019.

I guess, given the initiatives that you have in terms of launching new sites and then amending the entry criteria, when do you think we'll have -- you'll have visibility to the ability to predict the kind of completion date?

And can you -- will you be able to provide us some additional detail in terms of updates on how those new initiatives, in terms of additional sites and the change in the entry criteria have had -- if they've had an impact?

Sure, Matt.

Well, as I think we may have mentioned, I think once we get these new sites up and running, both the sites in the U.S. and the sites in Australia, I think we'll be -- and give those a chance to get initiated and get patients involved, we'll have a much better feel for what the end date may look like.

Again, it's been choppy.

The enrollment over the 1-year-plus that we've really had these U.S. sites opened, has at times been quite good, and other times, it slows down.

But we feel like all these initiatives as well as these new sites and some of them quite promising with what we think will be fair numbers of patients will give us a good feel for what we're doing.

The September '19 date that was put in there, again, was a placeholder.

Our objective ultimately will be to do better than that if we can.

But I don't think we'll be comfortable in giving you any kind of significant update until those more -- these new sites get up and running and we see how they roll.

Okay, fair enough.

And then last question, in terms of the fourth NDA.

Can you give us a sense in terms of market opportunity for that product and given the potential safety differentiation as well?

Yes.

So the -- we have characterized the product in the past and nothing has changed that, as being somewhere between both $30 million and $40 million per year.

That's still the opportunity that will sit in front of us.

A lot of these unapproved products never having been examined by the FDA and I'm not just referring to this one, but lots of them in the past.

In some cases, don't meet current FDA standards.

We feel like as I've mentioned earlier, we've uncovered -- several times in the past, that we've uncovered some, at least, one important safety issue that we're going to pursue.

And that's for some sort of a special dispensation at FDA, whether that's represented by improving a product exclusivity associated with it or whether we can get some form of expedited review.

And again, we don't know what that will look like until we get there.

But we feel very strongly that we've improved the product that's used quite frequently in the marketplace today.

We're going to make every effort to make sure that FDA understands as well.

But $30 million to $40 million per year is what we view today.

Our next question comes from François Brisebois of Laidlaw.

Just in terms of -- can you give any more color on NOCTIVA product awareness?

You talked about the 60% level.

What exactly does that mean?

Frank, it's Greg.

It really is just simply asking physicians, are you aware of any new product in the market for nocturia, and then having them without any sort of prompting cite off actual products from their memory.

So -- and roughly 60%, they're specifically naming NOCTIVA in that regard.

If you look at some of the other names they use, you can make a case that the actual awareness is higher because they may use something like the new nasal spray, they may use the new formulation of desmopressin.

We don't give any credit for those.

We only use it -- we only give credit when they actually specifically state the name.

The other way to measure that is when you give them a list of names and then that would be characterized as aided -- as an aided awareness level.

And in that case, we're well over 80% when you actually give a list of names of which NOCTIVA is one of them.

Okay, understood.

And then is it fair to say that the potential guidance for the time line of FT218 here to give kind of an unchanging guidance in the second half '18 is not necessarily a thing anymore, you're just going to wait and see how sites enroll?

Well, I'm -- we're hopeful that we can provide more color and guidance as to the end date by the end of '18.

But again, we want to see how these sites get up and running.

And no matter what it is, when they do, we'll try to quantify that and make sure.

What we don't want to do and what we will not do is put another date out there that we can't make, Frank.

And so we're going to be as conservative as we can to make sure that we don't -- that we more efficiently give people information that will be helpful in their decision-making.

And so we'll have to see what it's -- but we wouldn't take it off the board, but that's our hope to be able to do that.

Understood.

And then just lastly, if I can.

The NOCTIVA wholesale stocking impact on the second half '18 numbers, does that -- should we expect through the stocking issue, is that bounce back?

Or how should we look at NOCTIVA sales and the impact of the stocking?

Yes.

Frank, I think as we look at data today and we look at (inaudible) inventory on hand, we've seen nearly 3/4 of all scripts be filled at a lower dose initially.

So we've seen the lower dose product move out and move into a more standardized, I would say, fairly normalized rate, not completely.

So I think from that standpoint, it's less impactful on the lower dose.

But there are still a couple of wholesalers we'll be working through some of the higher strength product, given the current mix of strength in the market today.

Our next question comes from Jason Butler of JMP Securities.

I just had one about FT218 and the patients that become eligible now under the past use criteria.

Do you have any information about those roughly 100 patients in terms of why they stopped taking drug, and therefore, any opportunity to speculate on why they would be willing or able or eligible to enroll in the trial?

Yes.

So Jason, this is Mike.

We don't have any information right here, that information is available in our clinical sites.

And they continue to go through that to look at those patients and to make sure, which of those that can be now entered or considered to be part of the study.

I want to also let you know that those 100 patients aren't all inclusive of patients who previously may have been excluded from the study.

In other words, there may be -- that these were from the Link2Trials component.

There may be other patients in these studies.

In fact, there are, where they were previously excluded.

And as part of the database review, the clinical sites are going back to look at patients who fit that criteria.

Now with the previous use of sodium oxybate having been an exclusionary criteria, anybody who had ever been on it was immediately excluded.

It doesn't mean -- and so you can have a patient who now would be eligible by virtue of the changes to the SPA, but who as a result of other exclusionary criteria, may not be able to get into the study.

But those numbers are being prepared now, but we don't have specific information today on why somebody stopped sodium oxybate previously.

Those clinical sites would.

Did that answer your question?

Yes, helpful.

And at this time, I'd like to turn the call back over to Mike Anderson for closing remarks.

We appreciate very much your joining us today as always.

We have tried to be more visible with some of the information that we provided than we've done in the past.

We will continue to try to do that in the future to the degree that we can do it without risking, in any way, shape or form, the company's competitive position.

Each and every employee at Avadel Pharmaceuticals is held responsible for doing different components that make our business go forward.

We are going to up our effort to continue to get patients enrolled in FT218 and get prescriptions generating at a higher level on NOCTIVA.

At the end of the day, we have what we still believe and will always believe are 2 outstanding product opportunities and we will do everything within our power to make those come to fruition as quickly as possible.

With that, we want to thank you for your time today, and to look forward to updating you as we can over the next number of months.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference.

You may disconnect.

Have a wonderful day.