Avadel Pharmaceuticals PLC (AVDL) 2019 Q4 法說會逐字稿

Greetings, and welcome to the Avadel Pharmaceuticals Fourth Quarter Year-end Financial Results Conference Call.

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

It is now my pleasure to introduce your host, Mr. Tom McHugh, Chief Financial Officer of Avadel.

Thank you, Mr. McHugh, you may begin.

Thank you, and good morning, and thank you for joining us on our conference call.

This morning, we issued our fourth quarter and year-end financial results news release, and this release can be found on our website at www.avadel.com.

As a reminder, before we begin, the following presentation includes several 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 the development stage may not achieve scientific objectives or 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 the Form 10-K for the year ended December 31, 2018.

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

On the call with me today are Greg Divis, our Chief Executive Officer; and Dr. Jordan Dubow, our Chief Medical Officer.

And at this time, I will turn the call over to Greg.

Thank you, Tom.

Good morning, everyone, and thank you for joining us on our fourth quarter 2019 conference call.

I'll start with an update on our business, the substantial progress we have made and our critical near-term milestones as we continue the execution of our strategic objectives and the transformation of Avadel.

I'll then turn the call over to Jordan to give an update on FT218, followed by Tom who will review the financials for the quarter.

I will end the call with a few closing comments, and we will conclude with the Q&A session.

With that, let's get started.

The Avadel team has made tremendous progress delivering on the key objectives that we set out at the beginning of 2019.

This included a significant restructuring and the acceleration of our FT218 program, both of which have been executed exceptionally well.

This performance is a direct result of strengthening our critical organizational capabilities, especially in the areas of clinical, medical and technical operations.

The momentum we have created for our company continued in the first quarter of 2020, with the recently completed $65 million private capital raise with a group of leading biotech investors.

This capital raise is another validation of both the strategy and the execution our team has delivered over the last 12 months.

As a result of this raise, we now have even more flexibility to accelerate our development plans for FT218, while significantly extending our cash runway.

We believe these highly regarded biotech investors taking a meaningful position in Avadel sends a strong message to the broader market about the progress of our FT218 program and this management team's ability to execute and collectively transform Avadel.

These actions have put us on an accelerated path towards recognizing the growth and value creation opportunity we believe FT218 may provide as we look to disrupt the approximately $1.7 billion sodium oxybate market, with the last patient last visit in the REST-ON trial being just 2 weeks away and the company subsequently reporting top line results of the trial in Q2.

We have already set in motion the next steps for the clinical and commercial development of FT218 in order to effectively and efficiently prepare FT218 for the market as well as prepare the market for FT218.

We are truly excited about the potential of our proprietary once-nightly extended-release formulation of sodium oxybate.

To date, the feedback we have received shows strong interest in FT218 from across the narcolepsy community.

We believe this interest is centered around the number of potential benefits associated with this once-nightly dosing regimen.

As I conclude my FT218 comments, I want to take a minute to address certain questions we routinely receive about intellectual property and our freedom to operate in this space.

First and foremost, let me be clear.

Although FT218 contains the same drug substance as the referenced twice-nightly sodium oxybate, it is a different drug product that will have a different label.

We are not an ANDA.

We are an NDA being filed under a 505(b)(2) pathway.

And as such, our label does not and will not match that of the referenced listed drug.

For example, FT218 will have its own clinical efficacy and safety data, its own clinical...

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We are now reconnected.

Please continue.

Thank you and our apologies to everyone.

We had a slight technical glitch here, but we are back on and should be good.

So I think we understand where we cut off.

So I'll go back and start on my conclusion of FT218 comments as it relates to questions we routinely receive about intellectual property and our freedom to operate in this space.

First and foremost, although FT218 contains the same drug substance as the referenced twice-nightly sodium oxybate, it is a different drug product that will have a different label.

We are not an ANDA.

We are an NDA being filed under a 505(b)(2) pathway.

And as such, our label does not and will not match that of the reference listed drug.

For example, FT218 will have its own clinical efficacy and safety data, its own clinical pharmacology, including specific drug-drug interaction data and its own dosage and administration sections in its label.

Furthermore, one should not assume our strategy to advance this program was developed in isolation.

We have sought out and received expert advice from leading regulatory and legal advisers, not to mention the FDA itself, as sources for guidance and feedback on our overall strategy.

We are keenly aware of the Orange Book-listed patents of the referenced twice-nightly product and believe we have a path based on the clearly stated regulations to get FT218 to market quickly.

While we won't go into the specifics on this call, as we have stated numerous times, we believe there is a clinical or a data generation strategy that will inform our labeling and our regulatory strategy and take into consideration all relevant Orange Book-listed patents.

Our primary objective is to take the necessary actions to bring an FDA-approved FT218 to patients as soon as we possibly can, and we believe our clinical development, regulatory and legal plan is designed to support that strategy specifically.

We believe we are putting ourselves in the best possible position based on the relevant regulations and our FT218 specific data that we have generated, all of which we have done, while considering the guidance and feedback of leading experts and the FDA itself.

Now a few comments about our base hospital business.

Strategically, this business is all about cash flow generation that we use to support the development of FT218 with gross margins, net of any royalties of 50% to 55% on the 3 current commercial products, in 2019, generated over $25 million of free cash flow.

Tom will cover more specifics on these products during his financial review.

However, we remain very pleased with how this current portfolio continues to perform in the face of competition and pricing pressures.

I will conclude my opening comments today with these final thoughts.

First, the strategic moves taken by the company over the last 12 months have transformed Avadel while allowing us to begin to rebuild trust and confidence with investors that we can deliver long-term shareholder value.

Number two, we look forward to reporting our top line data readouts for our pivotal REST-ON trial in Q2.

Number three, we are well positioned from a liquidity standpoint to move forward towards an FDA approval and expand our market development and preparation work for FT218.

And our Board, management and employees are committed to doing what is in the best interest of the patients we serve and maximizing value for our shareholders.

This is the culmination of the activities I just touched on, which include simplifying and focusing our business strategy, strengthening our management and R&D teams, significantly reducing our cost structure, executing FDA-agreed strategic changes to our FT218 development program, which reduced the time to REST-ON completion by 12 months, and optimizing the cash flow from our hospital business to further support our FT218 development.

To date, our proven ability to execute on our strategy has been recognized and validated by both new and existing shareholders and supported by the expansion of coverage -- covering research analysts, which is greatly appreciated by me, our entire management team and our Board of Directors.

We take our responsibility seriously to execute and build real intrinsic shareholder value and are grateful for the support of all stakeholders and the execution of our team over the last 12 months.

I'll now turn the call over to Dr. Jordan Dubow, our Chief Medical Officer, to provide an update on the FT218 development program.

Jordan?

Thank you, Greg.

And good morning, everyone.

We are in an exciting point in the development of FT218, with only 2 patients left in the REST-ON Phase III study and the last patient last visit set to occur within the next 2 weeks.

Let me repeat, we have only 2 patients left in our pivotal REST-ON Phase III study, and the last patient last visit to set to occur within the next 2 weeks.

This puts us on track to announce the top line data from this study in the second quarter.

As we've discussed previously, based on the pharmacokinetic data that we presented last year for FT218, we think our pharmacokinetic profile should translate into clinical efficacy.

As a reminder, we demonstrated that FT218 at the 4.5- and 6-gram dose strength had the same exposure with a lower overall Cmax compared to twice-nightly sodium oxybate in lower plasma concentrations 8 hours after dosing.

We believe the PK profile of our investigational FT218 could potentially allow for patients to achieve a deep consolidated sleep with sleep architecture matching that of a normal sleeper without narcolepsy, while avoiding a second-nightly dose and the associated consequences that come with it.

As we get closer to the readout of our top line data, we believe FT218 will demonstrate robust, clinically meaningful and highly significant improvements in excessive daytime sleepiness and cataplexy compared to placebo, as has been previously seen with sodium oxybate, the only approved drug in the U.S. for both excessive daytime sleepiness and cataplexy in patients with narcolepsy.

As a reminder, it was just this past September that we announced the FDA's agreement to an amendment to the protocol, a statistical analysis plan for the REST-ON Phase III pivotal study and then that study would remain under a special protocol assessment agreement with the FDA.

Most importantly, we were able to implement this amendment while retaining the scientific, statistical and clinical robustness of the study.

As a result of this amendment, we needed to recruit 205 patients into the study, instead of the originally planned 264, which we achieved and then exceeded in December, with the final enrollment of our 212 patients.

With enrollment completed, we have been able to reduce the time line to report data from the REST-ON study by up to 12 months from the original proposed time lines prior to the amendment to the study in September.

Looking ahead, we recently announced that we are initiating an open-label extension study for REST-ON and a switch study to evaluate patients switching from twice-nightly sodium oxybate to once-nightly FT218.

Although these studies are not used for regulatory submission or approval, we felt it was important to provide those patients who participate in the REST-ON study with continued access to FT218 during the review and approval process as well as to generate data for physicians and patients switching from twice-nightly sodium oxybate to once-nightly FT218.

We expect the first patient to be enrolled in the study by the end of Q1 2020.

We think the clinical data we have generated or are in the process of gathering for FT218 will serve as a strong basis for a complete regulatory package as well as position FT218 as a potentially disruptive new therapy in the narcolepsy market.

Additionally, as we look to the next quarter in presenting our top line data for REST-ON, we will also be presenting 4 posters on pharmacokinetic data of FT218 at the upcoming American Academy of Neurology meeting.

Some of this data was previously presented at the World Sleep meeting last year, but we will also be presenting new data regarding the association between adverse events and the pharmacokinetics of sodium oxybate.

I want to again thank all the patients, investigators and study staff who have participated or are currently participating in the REST-ON study as well as the Avadel team for getting us to this exciting and pivotal time for the company and for the patients we serve.

With that, I would like to turn the call over to our CFO, Tom McHugh, to review the financials.

Thanks, Jordan.

I will review a few financial highlights for the fourth quarter.

We announced earlier today that sales from our 3 current commercial products have continued to outperform expectations with total revenue of $11 million for the fourth quarter and $59 million for the full year 2019.

Fourth quarter revenues were down from $20.9 million in the fourth quarter in 2018, which was due to a combination of lower volume and lower net selling prices across our hospital products as a result of increased market competition.

Looking ahead, we are currently projecting revenue for the first quarter of 2020 to be at, or above, $10 million.

And finally, with respect to revenue, just a brief update on Nouress, our fourth hospital product for which we received FDA approval in December as well as associated intellectual property.

While we are making preparations for a potential commercial launch, we are not prepared to provide any timing regarding launch guidance for Nouress at this time.

As we have publicly stated, our patent infringement suit -- a patent infringement suit was filed against us in Delaware relating to this matter, but we've not yet been formally served notice of the suit.

As such, we are not obligated to respond unless we choose to proactively.

We think it is safe to assume this sort of action is a leading indicator of 2 parties that wish to try to resolve this matter outside of litigation.

And now a few comments regarding operating expenses.

Our R&D expense was $7.8 million, and the increase versus the prior year was primarily a result of our R&D spend on the clinical development of FT218.

Selling, general and administrative expense was $7.7 million in the fourth quarter.

And the decline versus the prior year is primarily due to cost reductions associated with the divestiture of Noctiva and lower operating expenses resulting from cost reduction actions implemented as part of our commitment to preserve cash.

We recorded $1.8 million of restructuring charges in the fourth quarter of 2019, mostly related to the closure of our operations in France.

We have completed most of the restructuring activities that commenced in early 2019.

And as a result of that restructuring, we reduced our annual operating expenses by over $80 million.

The company's net cash used in the fourth quarter was $8.2 million, which included a royalty payment of $2.7 million related to our hospital products business, with the remainder attributable primarily to recurring operations.

Our cash at the end of December was $64.2 million compared to $99.9 million at December 31, 2018.

And cash at the end of 2019 does not include the $65 million in gross proceeds from the private placement, which we completed in early February with several leading biotech investment funds.

Following the completion of that private placement, we had approximately $121 million of cash on hand.

And based on current cash on hand, continued cash flow generation from our hospital products business and our current clinical development plan for FT218, we have significantly extended our cash runway and the financial flexibility to support the acceleration of the FT218 program.

And now I will turn the call back over to Greg.

Thanks, Tom.

In closing, we're very pleased with the progress made over the past 12 months and especially since last spring, with the addition of new management, followed by the key changes to our pivotal Phase III REST-ON study.

A key driver behind the execution of our different initiatives and programs is attributable to the Avadel team, including, to a large part, those of our team that joined us this past year.

We are now down to 2 remaining patients and less than 2 weeks away from the last patient last visit in the REST-ON study, which, as we stated, we currently expect will allow us to announce top line data in the second quarter.

The momentum we've established has continued in 2020 with our recent addition of new leading biotech investors via our $65 million private capital raise.

And all the change and -- although the change and progress has been positive, it is only the beginning, and we recognize that today is the new baseline against which will be measured.

We have to remain fully committed to executing the necessary strategic plans that we believe can build sustainable shareholder value.

I do want to thank our investigators, our patients, our shareholders and our fellow employees for all of their contributions to our progress and support of our strategy, and of course, our Board of Directors.

We look forward to providing investors and all stakeholders with further updates in the future and especially our upcoming Q2 2020 top line data readout for our Phase III REST-ON trial.

With that, I believe we're ready to open the line for Q&A.

And operator, I'll turn it over to you.

(Operator Instructions) Your first question comes from Matt Kaplan with Ladenburg Thalmann.

Congrats on the progress.

Just wanted to focus in a little bit on FT218, given the near-term readout of data that are expected.

Can you give us a sense in terms of how you think FT218 can differentiate from Xyrem in terms of clinical profile?

Matt, it's Jordan.

Thanks for the question.

Yes.

So I think as we've discussed previously, our Phase III study is a comparison to placebo.

And so the purpose of our study is to show the effectiveness of our treatment strategy in doing so versus placebo.

I think when we -- we've talked before, and I've talked to many of you on the phone, there are severe drawbacks to making cross-study comparisons.

That being said, we know those are made.

And so I think what we're really looking at is focusing on having, as I said, highly significant, clinically meaningful and robust data.

I think some of the things based on our PK profile, we're very excited about is the lower Cmax that we've talked about, there's some data to suggest that should result in lower rates of adverse events.

And as I said, having 1 dose and what we think will lead to more consolidated sleep, we think can have advantage as well.

So from the REST-ON study itself, obviously, all of our data is going to be compared to placebo.

We're excited to see our safety data and see what that looks like, and we have good expectations that there'll be differentiation there based on the PK data we have.

That's helpful.

And then in terms of additional clinical data that you think you should generate beyond the REST-ON data to perhaps further differentiate FT218 in the marketplace.

Are there plans that you have to execute some of those studies?

Yes.

So one of them, obviously, was being the extension study, which, again, the main purpose was to provide continued access to drug, but also generate some long-term data that we think will be helpful for us.

And obviously, the switch data will be important.

That's to commence soon.

And we've designed it in a certain way to get useful information from that study as well.

Outside of that, we obviously have a strategy and other things that we can do to position the drug and where we think we have differentiation.

Right now, the focus will be getting the data out of the NDA as quickly as we can, but we are evaluating all studies and looking at other things that we can do to help differentiate the product.

Yes.

And, Matt, Greg.

I'll just add a comment.

I think that this most recent capital raise just gives us additional flexibility and optionality in this regard that we hadn't had in the past and allows us to really think about how we can create and build value around FT218 between now, up to and through and past approval.

Your next question comes from David Amsellem with Piper Sandler.

Sorry, can you guys hear me?

Yes, we can.

Thanks, David.

Okay.

So just real quick on 218.

What are your thoughts philosophically on where pricing in the oxybate market is going ahead with you in the market and with low-sodium oxybate and eventually authorized generics and then vanilla generics?

Can you talk about the trajectory of pricing and the extent to which there could be price destruction over the next several years?

And where you fit in, in that pricing continuum?

And then secondly -- and you may not want to provide specifics on your thinking regarding whether or not there will be litigation with Jazz.

But can you talk about your views on whether there would be a 30-month stay here to the extent that Jazz does initiate litigation?

I don't know if you could speak to that, but if you can, that would be helpful.

Yes.

Thanks, David.

First, as we think about pricing and not having any visibility to what anyone else will do in the marketplace, we certainly recognize that over -- a little over 15,000 patients or so represents approximately $1.7 billion of revenue.

So the price per patient is obviously quite expensive, running north of $120,000 to $140,000 per patient, per year, on average.

So as we think about pricing, and as we've done our research with payers and others, as you think about the kind of 2023 through 2025 window, when we're in an authorized generic scenario, I think the expectation is that you'll see some price compression but obviously not at the same rate as you will when you see multiple generics that likely will come in 2026.

From that standpoint, our view, not understanding what Jazz will or won't do around their low-sodium version, is that we believe that we have an opportunity to bring a product to market that can be priced appropriately to create access opportunities for us.

That between now and, if you will, the end of 2025, give us an opportunity to fully position FT218's rightful place in the marketplace, right?

So do we think that in 2026 when more -- the broader settlement kicks in, that there'll be additional price compression?

We do.

Do we believe that there could be some step edits?

We do.

But I think it's fair to say that these products today and even the authorized generic based upon our research are heavily scrutinized relative to prior authorizations, current step edits, quantity limits and medical necessity, right?

So we don't see that dramatically changing in the future as this molecule is typically a third line product, for the most part.

Nor do we think polypharmacy in this category is going to change either, and that there will always be a role for sodium oxybate in the marketplace.

It's our job commercially, from an execution standpoint, to take share of the sodium oxybate market, and that is 100% our focus both through commercial strategies, market access strategies, distribution and pricing strategies.

As it relates to 30-month stays and litigations, and -- again, we won't speak as to whether or not Jazz will or won't litigate.

What we can speak to, generally, David, is just the statute, right?

So as a 505(b)(2), as an NDA, as we noted in the commentary that our label does not and will not match that of the reference listed drug, twice-nightly sodium oxybate, we believe, based upon the statute, that there are options for us to effectively generate data, which we've already done -- and we are not going to discuss what that data says, that will inform our labeling strategy as it relates to the relevant Orange Book-listed patent.

And if we are successful in, in essence, addressing those Orange Book-listed patents in our labeling, appropriately for the statute, then we should find ourselves in a position where we're required to certify, nor Jazz would be in a position or anyone else will be in a position to then enforce a 30-months stay, right, based upon Hatch-Waxman.

It doesn't mean that parties don't have intellectual property that they choose to assert themselves.

However, we feel very confident that if we're successful in our regulatory, clinical and labeling strategies, that our probability, our likelihood to prevail even outside of Hatch-Waxman from a litigation standpoint, we feel very confident in it.

So we -- it's very clear for us, the strategy we've employed.

We've got great advice from leading experts.

And we've executed that, and we know what our data says.

So we're pursuing down that path, but there's no reason for us to disclose that data at this stage.

And yet, we feel we have a clear pathway to effectively address and deal with the Orange Book-listed patents.

And to be clear, a 30-month stay is not an automatic issue here.

Because, again, we are an NDA, our label does not match and will not match, and there will be differences around that, and we understand how those differences manifest themselves as it relates to their respective Orange Book patent -- Orange Book-listed patents.

Okay, great.

That's helpful.

If I may sneak in a follow-up.

And then just in terms of your proposed REMS, can you walk us through, to the extent you can, how your -- you believe your REMS on the product would not run afoul of what Jazz is doing and their remaining IP on the REMS program?

How should we think about that?

Yes.

I mean again, I don't think we're going to, if you will, tip our hand in a meaningful way here from that standpoint.

What we do know about their Orange Book-listed REMS patents is that I believe it expires in mid-2023.

It expires shortly after the first launches of the authorized generics from that standpoint.

And that there has been an alternative, if you will, secondary REMS that have been developed in -- by the FDA in conjunction and in console with the FDA that allows it to work, if you will, outside of the REMS program that is in place for the current reference listed drug.

So from our standpoint, there is a road map that's been created, for sure.

And again, we are a different drug product with the same drug substance.

So there will be differences in that regard to some of the details around how our REMS and components of our REMS, which will tie directly back to our labeling and our regulatory strategy that we referenced a couple of minutes ago.

But we feel with the advisers we have who are fairly knowledgeable in this space and on this matter, we have a clear pathway for us on how we will build a REMS program that won't infringe Jazz's intellectual property, which, again, as I understand it, I believe, expires in kind of mid-2023.

Your next question comes from Paul Matteis with Stifel.

As it relates to contextualizing the REST-ON data, obviously, there's a lot of caveats across drop comparisons given how much older the Xyrem studies are and, of course, any other baseline differences.

That said, what will you guys be looking at in the data to garner conviction that 218 is just as efficacious as Xyrem?

And then I have a follow-up.

Paul, thanks for the question.

Yes.

I think, as I said previously, we're -- what we expect and what we'd like to see is highly significant data, clinically robust, clinically meaningful changes on our end points, right?

In MWT, there's been ranges in various studies that with twice-nightly sodium oxybate as well as some of the other recent studies, sodium oxybate is highly effective for cataplexy, big improvements on the CGI.

So I think, numerically, we expect to see robust, highly significant numbers.

I think if you look at older versus newer studies, even with different formulations of sodium oxybate, there are clearly differences in just deltas, if you look at it that way.

And so I think we expect just to see good numbers that, on face value, physicians could see the meaningfulness of it.

Obviously, we're doing a switch study as well, which will also show that we believe patients can switch from the twice-nightly formulation to our once-nightly formulation.

Great.

And then Greg, maybe can you just talk about -- assuming the data are positive, what do you want to accomplish in the rest of 2020 and 2021 as it relates to getting ready to launch the drug?

And how much of the legwork can be done ahead of time as it relates to establishing infrastructure that can make reimbursement and access a seamless process?

Yes, great question.

Again, I think that as we think about it, it's an evolution, right?

And there's a number of different workstreams that are important in terms of the preparation of FT218 for the market.

Whether that be medical affairs, whether that be market access, whether that be distribution and patient support services, whether that be commercial, infrastructure build and sales force footprint, so on and so forth.

So across all of those workstreams, I would say that as we go through data readout and through the balance of '20 and into '21, all of those will move at different paces from kind of planning to initial build-out to full build-out, right?

And some of those will be predicated upon not full execution until we have an approval, and we're in a 90-day DEA scheduling window.

Some of that will happen beforehand as we seek to build out.

But for us, from our standpoint, we have been in and continue to be in deep planning stages, where we then can move from planning to beginning to build and execute at certain time periods kind of T minus NDA submission or T minus NDA approval based upon our assumptions.

And we do agree that things like distribution, market access, medical affairs are all really important work streams that need to advance in a material way as we proceed toward an approval.

Your next question comes from François Brisebois with Craig-Hallum.

A couple have been asked already, so thank you for providing a lot on the IP here.

I was just wondering, in terms of -- obviously, timing here will be very important until the authorized generics come in and then the vanilla generics.

But can you discuss a little bit, you're getting really close to the end here of this clinical trial, any potential impact on -- I just have to ask about everything that's happening with this coronavirus involved with trials in the U.S., patients coming in, patients getting feedback.

And then on that note, just in terms of the switch progress, you're about to start it.

When can we expect readout here?

And does this open-label extension or switch have any impact on potential launch timing?

Yes.

So maybe you can address the latter question, and I'll finish up on coronavirus.

Jordan?

Yes.

So the open-label extension study is really one that we anticipate running through approval.

The switch study, we have a set number of patients that we're looking to enroll in that, which we haven't publicly stated yet.

And so in all likelihood, it's probably going to be a -- again, the extension study through approval, the switch study will be likely shorter than that, depending on rates of enrollment.

In terms of time lines, anything related to the NDA itself, this study should have no impact on it.

It's not required for submission.

It's not required for approval.

It's just, again, more additional data that we think is important for us to generate an FT218 as we look to position it for the market.

Thanks, Jordan.

Frank -- and thanks for the question about all that's going on in the marketplace today.

Clearly, it's -- we're very concerned for the well-being of our employees, for the well-being of our patients, our customers, our shareholders, everybody from that standpoint, and obviously, are very serious about our assessment of the situation.

We have for a number of days and almost a couple of weeks now been conducting regular risk assessments across the entirety of our business, in some aspects, daily, and really understanding kind of where we sit and its impact on our programs at large and have put in the appropriate mitigation strategies to the extent that there are things that we can have some control over.

We're very pleased to say that with really only 2 patients left to go, which means we've enrolled and completed 210 patients and their last visits within a short window from now, we feel like we're going to get to completion of this trial, and that that won't have any impact on it.

We're obviously in discussions, sometimes daily, again with our sites as we clean data, get queries answered and look to move toward a database lock, which we certainly have a certain set of assumptions now.

At this stage, we haven't -- we don't believe that there's any material risk to our timing at this stage in terms of Q2 data readout, but it's something we can't predict tomorrow or a month from now or a year from now in that regard.

So we've taken the approach that we're going to manage it daily, basically, depending upon which business issue it is and it's relative importance to where the company is and what our near-term milestones are.

So we have a very good handle of it and what we're working on.

And if there's anything that comes up that changes that, we obviously will want to update everyone else.

But as we sit here today, given where we are on data readout, at this stage in terms of where we are in completion of the trial, we don't see a material shift in the time line at this stage.

Okay, great.

And then if I can sneak in one last one here.

We talked about data coming, we talked about preparations for launch, we talked about IP stuff.

I'm just wondering a little bit here in terms of time line, you got the authorized generic and then come 2026, when the other ones kind of come in, there's a little more pricing pressure debatably, can you just discuss a little bit what your research has showed or if we can look at any precedents that kind of makes sense where the formulary work, just to make sure that patients -- there's not necessarily a step edit where everyone that's on FT218 might have to go back through the 2-times nightly generic and then kind of go that way where they could potentially stay on FT218.

And then -- but it's more for the ones that were potentially on Xyrem to get a step edit.

And just the thoughts behind the formulary play at that time once the vanilla generics come in.

Yes.

I mean it's obviously something that we question and have just come off with some research to help think about that now and recognize that we're trying to answer a question that in 6 years, may be very different in terms of what's happening in the marketplace and benefit designs and how things have emerged or evolved from a health insurance perspective in our marketplace.

That being said, our feedback kind of, at the simplest description, would be that our expectation would be that price would come down.

And it's hard to really predict how much at this point.

Because we're not really sure how many of these 8 or 9 settlers will actually come into the market, right?

As a fairly small patient population overall, there's going to have to be an infrastructure investment around distribution and around REMS.

We're just not sure.

It's hard to predict 5 or 6 years from now at that -- from that standpoint.

And that certainly will have some bearing on what happens from a pricing standpoint.

But we do believe when it comes to currently treated patients, based on what we've heard today, and again, it's 2020, that we don't envision a scenario where patients will be asked to step away from their current treatment and be shifted back to something else as a process for, if you will, implementing a step edit.

At least as we've done research and think about it today.

As you think about new patients, we think it's pretty unequivocally clear that if pricing comes down in a material way that payers will likely implement some relevant step edit or some demonstration of it's not -- cannot tolerate or have failed, if you will, some definition of failure to be determined of twice-nightly generic before allowed to be on a brand.

It's also one of the reasons why we have every incentive to want to file right and complete and robustly, but as soon as we can to give us as much of a window as we can to really establish FT218's rightful position in the marketplace before we get to 2026.

And based again on the same research project we're coming off of now, the expectation around authorized generic is that, at this stage, will likely be treated like a brand, right, in terms of its coverage, its restrictions, its step edits or whatnot, that's currently happening today on the branded twice-nightly formulation.

Okay.

Great.

Congrats on the progress.

Thanks, Frank.

And thanks for everybody for spending some time on the call with us today and having a little patience where we had a slight technical glitch here early on in the call.

We appreciate everyone's time and for joining us today, and we look forward to providing you updates over the coming weeks on the progress we're making and throughout the balance of 2020.

With that, we'll end the call and wish everyone a great day.

Thanks.

Bye-bye.

Thank you.

This concludes today's teleconference.

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