Global Blood Therapeutics Inc (GBT) 2019 Q4 法說會逐字稿

Greetings, and welcome to the Global Blood Therapeutics Conference Call. (Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to Stephanie Yao. Please go ahead.

Thank you, and welcome to the GBT conference call to discuss the company's financial results for the fourth quarter and full year 2019 and to provide a business update. I'm Stephanie Yao, Senior Director of Investor Relations and Corporate Communications.

Joining me on the call are Dr. Ted Love, our President and Chief Executive Officer, who will provide an overview of Oxbryta's approval and its unique positioning in the treatment landscape for sickle cell disease. Then Jeff Farrow, our Chief Financial Officer, will provide an overview of our financial results. He will be followed by our Chief Commercial Officer, David Johnson, or DJ, to give an update on Oxbryta's launch. Ted will then provide an update on our research activities and discuss GBT's 2020 key milestones and the company's long-term vision.

Earlier this afternoon, we issued a press release announcing GBT's business progress and financial results for the fourth quarter and full year ended December 31, 2019. Before we begin, I would like to remind you that certain statements we make on this call that are not historical facts may be forward-looking statements that are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements are contained in our SEC filings including, but not limited to, our most recent quarterly report on Form 10-Q as well as today's press release. Copies of our SEC filings and press releases can be obtained from the Investors page of our company website at gbt.com.

The forward-looking statements made on this call are only as of the time they are made, and you should not place undue reliance on such statements. Future events or simply the passage of time may cause our beliefs to change, and we disclaim any obligation to update any forward-looking statements other than as required by law. With that, I will turn the call over to Ted.

Thank you, Stephanie, and good afternoon, everyone. Thank you for joining us for Global Blood Therapeutics inaugural quarterly update conference call.

2019 was a historic year for the sickle cell community, and we are proud that GBT was part of making that history with the FDA approval and subsequent launch of Oxbryta. Oxbryta is the first and only medicine that directly inhibits sickle hemoglobin polymerization, which is the root cause of sickle cell disease. We are thrilled that within days of its approval, we were able to make this medicine available to the sickle cell community, which demonstrates the quality of the team that we've put into place here at GBT.

We believe that over time, Oxbryta, an oral medication taken once daily, will demonstrate the potential to fundamentally transform the course of sickle cell disease. Oxbryta was approved by the FDA on November 25, 2019, 3 months ahead of its PDUFA date. The accelerated approval of Oxbryta was based on the results of the Phase III HOPE Study, which were published in The New England Journal of Medicine in June of 2019.

Oxbryta was approved with a very broad label to treat sickle cell disease in adults and children, 12 years of age and older. The label also notes that Oxbryta improves hemoglobin and other clinical measures of hemolysis and that it may be given with or without hydroxyurea. Based on Oxbryta's label, we have an immediate opportunity to potentially improve the lives of approximately 86,000 people with sickle cell disease in the United States.

The sickling of red blood cells caused by the disease is associated with long-term organ damage, which contributes to the estimated 30-year reduction in life expectancy. This is very important when you consider that chronic organ damage is the leading cause of death in sickle cell disease. Oxbryta is unique in the market as the only treatment that directly addresses hemoglobin polymerization and the resulting sickling of red blood cells.

While it's still early in the launch, we've been encouraged by the feedback from doctors who prescribed Oxbryta and the patients who've started taking it and by the general awareness and excitement for the medicine within the sickle cell community. As part of our launch activities, we've had the privilege to interact with several patients who are taking Oxbryta and have shared with our team the impact Oxbryta has already made on their lives.

Let me tell you a story about one patient I had the privilege to meet a couple of weeks ago. This patient shared that before taking Oxbryta, he had a very low hemoglobin level of around 6.5 gram per deciliter, which led to extreme fatigue and anemia. He also experienced pain, but the fatigue was what took over his life, making it impossible for him to continue his job as a caregiver for the elderly and to take -- and to be the father he wanted to be to his children. He even said he felt like he wasn't going to live to see age 35. On Oxbryta, his hemoglobin level increased to 9.5 and he showed improvements in markers of hemolysis. He now has his own business and can play an active role in the lives of his children.

This is the type of impact we at GBT set out to make when we created Oxbryta. We want to help improve the lives of every person with sickle cell disease. In order to do this, we know that we need to flawlessly execute on the launch of Oxbryta so that we can meet the needs of this patient community. I'm going to now turn the call over to Jeff to share more about GBT's financial health and the operating results for the fourth quarter. Jeff?

Thank you, Ted. GBT had a very productive fourth quarter, and this is true from a finance perspective as well. Total net revenues for the fourth quarter of 2019 was $2.1 million, resulting from sales of Oxbryta, which we began shipping in early December. From an accounting perspective, we recognize revenue when our specialty pharmacy and distribution partners receive Oxbryta. Accordingly, it's important to note that our fourth quarter revenue reflects initial stocking by our distribution partners and is not an overall indication of overall prescription pull-through to patients in December. That said, we do limit our distribution partners to holding no more than approximately 30 days supply of Oxbryta.

As previously communicated, we will not be providing Oxbryta revenue guidance during 2020, and we will not be providing detailed metrics on this call, as we believe it is too early in the launch to draw any conclusions from this data set, other than to say, we are very happy with how the launch is proceeding.

On our first quarter 2020 call, when we have a full quarter's worth of revenue, we expect to be able to provide additional metrics. These may include enrollments in GBT Source, our patient support program, health care provider penetration and payer coverage. As always, our goal will be to provide useful metrics based on high-quality data available to us.

Cost of sales for the third -- for the 3 months ended December 31, 2019, was $48,000. Cost of sales was low in the fourth quarter, as the majority of the manufacturing costs related to Oxbryta sales were incurred prior to FDA approval, and thus, were recorded as R&D expense. We expect that the cost of Oxbryta sales as a percentage of revenues will increase in future periods as product manufactured prior to FDA approval, and therefore, fully expensed is utilized.

Research and development expenses for the fourth quarter of 2019 were $65 million compared with $36.8 million for the same period in 2018. The increase in R&D expense in 2019 was primarily due to increased clinical and regulatory costs for the Oxbryta sickle cell program; increased employee costs, including noncash stock compensation; and a $20 million expense incurred related to the Syros Pharmaceutical collaboration agreement.

Sales, general and administration expenses for the fourth quarter of 2019 were $44.6 million compared with $15.3 million for the same period in 2018. The increase in SG&A expenses was primarily attributable to increased employee-related costs, including noncash stock compensation; and increased professional and consulting services associated with the build-out of our commercial operations and launch of Oxbryta. A noncash gain of $8.3 million on lease modification in the fourth quarter is a nonrecurring item related to our upcoming move to our new location and the termination of our existing lease.

Net loss for the 3 months ended December 31, 2019, was $96 million compared to $49.2 million for the same period in 2018. Basic and diluted net loss per share for the 3 months ended December 31, 2019, was $1.59 per share compared with $0.93 per share for the same period in 2018.

We ended the year with a strong balance sheet and with cash, cash equivalents and marketable securities of $695 million compared with $591.8 million at December 31, 2018. This includes proceeds from the first $75 million tranche from our $150 million debt facility, with funds managed by Pharmakon Advisors, that we entered into in conjunction with the Syros collaboration agreement.

We have the option, but not the requirement to draw an additional $75 million under the facility until December of this year. We believe that the proceeds from this loan, in conjunction with our existing cash and investments, have the potential to provide the necessary runway for the company to achieve positive cash flow, while enabling continued advancements of clinical development programs and other earlier-stage product candidates.

With that, I will now turn the call over to DJ to share more about our Oxbryta launch activities.

Thank you, Jeff, and good afternoon, everyone. It is truly exciting to be here today, providing our first update on the launch of Oxbryta. We are very pleased with how the launch is going so far. One of our priorities is to get out there and educate physicians about Oxbryta and its approved label. I'm proud that our team was trained on Oxbryta's label on the day of FDA approval and has been in the field since, engaging with health care professionals about the medicine. Our field team is targeting nearly 6,000 health care providers that represent the top sickle cell treaters in the United States. Most of these health care professionals are in the 17 states that together represent approximately 85% of the people with sickle cell disease in the country.

Importantly, while our team is focused on these geographies, we have built a strategy and coverage plan designed to leave no one behind and to educate health care professionals no matter where they are located. In just a few short months following approval, our therapeutic specialists have reached approximately 80% of our highest decile physicians, and overall, have reached more than half of the nearly 6,000 targets health care professionals in the United States. In addition, our Medical Affairs function has a team of Medical Science Liaisons or MSLs, who are focusing on approximately 500 key opinion leaders in sickle cell disease. Our MSLs have reached about 70% of them since Oxbryta's approval. While it is early, we are encouraged by physicians' initial awareness of Oxbryta and their eagerness to learn about the approved indication and label.

Results from a pulse survey we conducted after approval showed that aided awareness of Oxbryta among top sickle cell disease specialists has reached more than 90%. This is an impressive result for just weeks after a medicine was approved. Additionally, hematologists are reporting an understanding of where Oxbryta fits into the treatment paradigm of sickle cell disease, given its unique mechanism of action, which directly acts upstream of other agents.

In our survey of specialists, the most commonly cited benefits of Oxbryta include increasing hemoglobin levels, improving anemia and reducing hemolysis. We're also beginning to see a differentiation in how physicians intend to use Oxbryta, reporting potential broad use of the medicine, consistent with the approved label. And among specialists, who have tried Oxbryta, the majority report being very satisfied with the medicine overall. Even with physicians onboard, we often need to educate the care and administrative teams within some of the larger institutions before we see broad utilization of Oxbryta in these settings.

In terms of formulary coverage, leading up to approval, we work to educate payers about sickle cell disease and learn about their specific processes and time lines for considering new drugs. Since this is our first launch, we immediately -- immediately following approval, we filed our CMS rebate agreements that will allow us to do business with our government payers. This is a requirement for companies launching their first product. For Medicaid, each statement has a period of time, generally 1 to 2 quarters, to load and activate these agreements. We are engaged in meeting with payers to share the approved label and to inform their clinical reviews of Oxbryta.

As Jeff mentioned, we are not going to report detailed metrics on payer coverage since launch, but we do think it's important to provide some color on how those discussions are going. I'm pleased to report that it is -- that in these discussions to date, we have seen positive interest from payers. Importantly, during the fourth quarter, we have had prescriptions covered in all 3 payer segments, meaning Medicaid, Medicare and Commercial through the medical exceptions process. This is despite an abbreviated time frame from when Oxbryta was approved in late November and the proximity to the holidays. And we are already having a few payers that have added Oxbryta to their formularies.

On the Medicaid side, Florida is one key state where Oxbryta has been added to the state formulary, with broad coverage consistent with the HOPE Study enrollment criteria. Alabama is another example where Oxbryta is being covered to label. In terms of commercial insurers, UnitedHealthcare is reimbursing claims of Oxbryta and some of the Blue's plans such as Blue Cross Blue Shield of North Carolina and Horizon Blue Cross Blue Shield of New Jersey are now covering Oxbryta with broad coverage policies consistent with labeling.

Several Medicare Part D plans are also reimbursing claims for Oxbryta, notably SilverScript and Humana, which is the largest insurer of Medicare Part D drugs. Of course, we expect payer decisions to vary, with each imposing -- with some imposing greater restrictions or not choosing to cover Oxbryta. But overall, we believe we are on track with our plans for Oxbryta payer coverage. We continue to expect the first and second quarters to be focused on meetings and payer evaluations with increasing coverage beginning in the third quarter and achieving our goal of broad coverage by the end of the year.

With respect to GBT Source, our high-touch patient support program, we are proud that we launched the hub on the same day as the FDA approval of Oxbryta. While this support is unique for the sickle cell community, it is a best practice for rare diseases, and we think this community deserves similar support as other important diseases. It is gratifying that physicians and patients started Oxbryta treatment within days of approval. These patients were successfully enrolled and supported by GBT Source and from the pulse survey I mentioned earlier, the majority of specialists have reported finding GBT Source to be responsive and helpful when giving their patients access to Oxbryta.

However, not everyone has used patient support programs before, especially in sickle cell disease. And we're finding that some need more support to understand and adopt the process. Continuous education is the key, which we are proactively providing, but this will take time and we've seen -- as we've seen in other rare diseases that have been historically under-resourced. Additionally, we know that reaching patients and physicians to inform them about Oxbryta will be critical to the successful launch.

As a condition of Oxbryta's accelerated approval, we are required to submit all marketing materials to the FDA for review. We did this back in November at the time of Oxbryta's approval. While we are pleased that we've received comments on the patient marketing materials and are currently working to finalize them, we are still waiting for the agency's feedback on our marketing materials for health care professionals. Our goal is to launch our health care professional marketing campaign in the second half of this year.

We are happy that launch is going well and according to our plans, but we recognize we do have some heavy lifting ahead of us. Having launched more than 17 drugs in my career, I realize that we need to be flexible, nimble and ready to adjust based on the emerging trends and metrics. But we're off to a great start. I will now turn the call over to Ted to provide an update on our clinical development activities and our short-term and long-term priorities.

Thank you, DJ. Maximizing the potential of Oxbryta's launch remains our key focus. And as we think about our long-term mission, we believe that a successful launch will enable us to advance other initiatives to improve the lives of people with sickle cell disease around the world.

One example is by potentially expanding Oxbryta's label to include patients younger than 12 years of age. We plan to meet with the FDA in the first half of this year to discuss this, and we'll provide an update afterwards. We're also working to make Oxbryta available to patients outside of the U.S., including in Europe. Similar to the U.S., there is a relatively focused population of sickle cell disease in Europe, which we believe will allow for an efficient commercial infrastructure and launch. We plan to meet with EMA to discuss the regulatory pathway and next steps toward approval and will provide an update in the first half of this year.

Outside of Europe, we are developing a strategy with the goal of ensuring long-term sustainable access across the spectrum of health care delivery systems, particularly in the complex and underserved areas of Africa, Asia and South America.

We also continue to focus on generating scientific evidence that will help inform clinical use of Oxbryta. At the end of 2019, we initiated the HOPE-KIDS 2 Study, our post-approval confirmatory study. This study will use transcranial Doppler flow to measure the effect of Oxbryta and reducing the risk of stroke in children with sickle cell disease. It will enroll approximately 220 children, ages 2 to 15, at sites in the United States, Europe and Africa. We agreed with the FDA to complete the study by 2026, but we are working to complete the trial sooner.

In January, we initiated a dose-optimization study to explore the safety and tolerability of Oxbryta at daily doses of 1,500 to 3,000 milligrams per day in patients with sickle cell disease. Additionally, later this year, we plan to initiate the ActIVe study, which is designed to evaluate the effect of Oxbryta on physical activity in adults and adolescents with sickle cell disease.

Turning to our pipeline. We are focused on advancing best scientific approaches to transform the treatment of sickle cell disease and other grievous blood disorders. Our most advanced pipeline candidate, inclacumab, is a novel fully human monoclonal antibody against P-selectin that is being developed to treat severe pain, also known as vaso-occlusive crises, associated with sickle cell disease. We are preparing to initiate a pivotal clinical study for inclacumab in the first half of 2021.

In December, we announced the collaboration with Syros to discover, develop and commercialize novel therapies for sickle cell disease and beta-thalassemia using Syros' gene control platform to identify therapeutic targets and discover small molecule drugs that induce fetal hemoglobin. Our goal is to bring other innovative and differentiated medicines into clinical studies.

We also continue to work in our own labs, where Oxbryta was discovered on potential next-generation small molecules. We are excited that more investment and focus on sickle cell disease research is being advanced. Our team is closely tracking these developments and remain focused on building a balanced, best-in-class pipeline.

Before I close, I'd like to give our deepest thanks to the sickle cell community, the patients, families, advocates, investigators and clinicians, and other partners, without whom the approval of Oxbryta simply would not have been possible. I am especially proud of the team we built at GBT, a team comprised of people whose focus, passion and determination are centered on helping people with sickle cell disease. While we clearly have a lot of work to do, we feel we are on our way to realize our vision of making sickle cell disease a well-managed chronic disease. With that, we'd like to open the call for questions. Operator?

(Operator Instructions) Your first question come from the line of Jim Birchenough with Wells Fargo.

Congratulations on the approval and launch and all the progress. I guess, one question. When I just think about the $2.1 million that was -- that came in, in December and the comment that the agreements are to hold no more than 30 days of inventory, should I assume or should we assume that, that was pulled through within 30 days? I just want to make sure I understand that. And then I'm just wondering from DJ's perspective, the payer agreements you have in place right now, could you say what proportion of covered lives that represents?

So maybe Jeff can get started, followed by DJ?

Sure. This is Jeff. In terms of your question on the metrics, it's early days, right? And so the estimates are sort of developing as time goes on. But I think it's -- that's a pretty good rough estimate of when that would -- expected to be cleared.

And regarding -- Jim, this is DJ. Regarding the question about the payer agreements and percent of covered lives, it's really early days still. And so we don't have a breakdown of percent of covered lives. That is one of those metrics that we're looking into providing at the Q1 call. We always expected that there would be some payer plans that would come on early in addition to plans that we're adjudicating patients based on medical exception. And we're just excited today to be able to confirm that it's playing out the way we expected and that there are some coming on early. And those are the ones that I commented on.

And DJ, maybe just as a follow-up, you mentioned the heavy lifting ahead. Is there anything that's surprised you in terms of that heavy lifting? Any barriers that you've seen that you didn't think would be as big a barrier or just anything in the heavy lifting that's a surprise in any way?

Yes, I guess, the one surprise that I've talked about is that there have been no surprises. So now this is playing out according to plan at this stage of the game. That said, there's always learnings. We're looking into everything every day. We're having interactions with customers from the payer side, the patient side and the physician side every single day. So -- but things are really playing out according to plan. So that's great. We did always expect there to be a big educational push in the first quarter of launch, where we just really need to get to everybody, both on the payer side as well as physicians in the institutions. It's sometimes not the physician in the institution that you have to convince. It's -- you have to go and make sure that the staff understands the new product and the pharmacists and all that good stuff. So that's what we built for, and that's we're in the middle of doing.

Your next question comes from the line of Alethia Young with Cantor Fitzgerald.

Congrats on all the progress so far. So maybe 2 from me. I mean, I guess, can you just kind of talk a little bit broadly about the experience that you're seeing in the hub? And I mean, it's probably too early to talk about any kind of timelines there, but just kind of any color you can offer up on the hub. And then the second one, obviously, something I'm intrigued about is this under 12-year-old population that you're going to talk about with the FDA. Can you just maybe talk about how much kind of information you have in the population so far and maybe some of the scenarios associated with that conversation in the first half of the year?

Maybe I'll start with your second part and then DJ will come back to your first question, Alethia. So that's the purpose of the meeting with the FDA is to go in and talk to them about how much data they would like to see in the various age categories to support lowering the label. Our likely strategy is to see how many patients they want to see in the 4- to 17-year-old range to drop the level down to 4 years old. And as you know, we've been treating patients below -- in that age range of 4 to 17 for a couple of years now. So we've accumulated a significant amount of data, and we just need to find out with the FDA exactly how much data will be needed to modify the label? And we'll give an update as soon as we learn that.

Yes. And Alethia, regarding the hub, so it's early days. For many people, it's the first time using the hub. I am excited to say that we did this pulse survey. And the pulse survey that I mentioned in my comments is 40 physicians. So it's a quick survey that we did in December. And it's -- they're all specialists, right? So these are folks that have significant number of sickle cell patients. And when we pulsed them about the access program and specifically GBT Source, we heard that the vast majority, over 2/3 agree or strongly agree on things like responsiveness, on ease of access to the program and those types of metrics. So that's -- that gives us a lot of confidence that the GBT Source was set up in a way to help optimize this whole process. So things are going great there. Now that said, there are clinics that are just getting up and running and are seeing their patients now that we have to make sure they understand the services that we can provide as well as filling out the form and getting it into the enrollment in. So that's what I mean by there's still heavy lifting to do. We have to get to everybody and make sure we do those trainings.

Your next question comes from the line of Lyla Youssef with Cowen.

This is Lyla on for Ritu. I was wondering if you could elaborate a little bit on the dose optimization study, and specifically, where -- what sites you plan on conducting it and any potential estimates for enrollment.

Lyla, this is Ted. So the dose optimization study is being conducted in Europe. You'll recall, we did our initial Phase I/II program in London. And we're basically going back to the same centers. There's a significant population of sickle cell patients in London that makes it readily available for us to do this kind of study. So the way this study is designed is that all patients will begin on the approved dose of 1,500 milligrams, and they will be dose escalated up to a maximum of 3 grams per day. And what we'll be looking for is the dose at which patients essentially maximize the activity or response to the drug or obviously the dose at which there's a tolerability issue, which we've not seen, as you know, up to 1,500 milligrams. And the reason for doing this study is that if you look at our patient experience so far, you literally see some patients effectively reversing their sickle cell disease. Their bilirubins return to normal, retic count returns to normal, hemoglobin goes to normal. And what we're really trying to explore is whether or not we can produce essentially the normalization phenomena in an increasing number of patients. We're very excited about that. And that's really the intent of that study. We -- the study -- I'll also end by saying, the study is being done in an open-label format, because this is a study where we're looking at objective endpoints of hematologic response. And we'll be collecting data throughout the year, potentially making some data available toward the end of this year or next year.

Your next question comes from the line of Liana Moussatos with Wedbush Securities.

Do you think it's reasonable for analysts to estimate that there are over a 100 sickle cell patients taking Oxbryta right now?

I know Jeff would love to answer that question.

It's -- we're not giving, Liana, patient numbers at this stage. And given due to the fact that there was some stocking that took place and there was some pull-through into the first quarter, we hesitate to give guidance in that regard. I think you'll have more clarity in the first quarter call.

Okay. And then will manufacturing cost impact cost of sales instead of R&D by the end of this year?

We expect that cost of goods sold will be light for the first several quarters and ramping up into the latter part of the third quarter and the fourth quarter to more normal ranges from a gross margin perspective.

You next question comes from the line of Danielle Crill (sic) [Brill] with Piper Sandler.

Congrats on the progress. I guess, first question is for DJ on some of the authorization requirements you're seeing. Just regarding some of the more restrictive recs that are popping up, I think you mentioned in the past that some payers just need more education. I'm curious how cumbersome the process is to modify these PA requirements once they've been established?

Yes. Thanks, Danielle. It's early days. And so I don't have a big end to call on for this. We -- I can tell you that we have had some isolated situations where we felt the restrictions were more severe than they should be, and we're not consistent with labeling. And happy to report that in one of those in particular, which was a Blue Cross Blue Shield plan, we were able to get in there with the team. We have a highly experienced payer team that has done this on multiple launches and to get in there very quickly and do an educational intervention. And to the credit of the payer plan, they made the change within a week of that meeting.

So we have seen the ability to go in and with -- through good science and good interactions and good dialogues, the ability to make those changes. And in that case, it was very clear that it wasn't consistent with the science or the label and the payer agreed with that as well. So we have had those situations. I'm also happy to say that it's rare that we've ever had to do that. I mean most of the plans that have come onboard early have been consistent with what our goal is, which is broad coverage, consistent with the HOPE Study, consistent with our label. So we have not had to have many of those interventions thankfully.

Got it. Very good. And you mentioned you guys have targeted -- or already reached a lot of your targets. I'm just curious, have you received any intake forms from the providers that your reps have not yet engaged with. And then, I guess, for Ted, curious what your views are on some of these competitive approaches to increasing hemoglobin for sickle cells such as the PKR drug from Agios.

So maybe I'll get started and then we'll come back to you, DJ. So with regard to those kind of products, Danielle, as I was referencing in my comments earlier, we look at all those programs. We actually, when we can, produce molecules with those characteristics and study them. So we're very aware of these other approaches. And it really is our intent to either do some of these things if we think they're useful ourselves or partner when we think it's appropriate. But the thing I want to just make sure people understand is that there's really very little going on in sickle cell disease that GBT isn't fully invested in, understanding and partnering, if it makes sense for us.

Yes. And regarding your first question about have we identified additional people through enrollments and whatnot that may not have been on our target list, that's exactly right. And that's why we're saying that our target list, which is a dynamic target list, we have the ability to add those folks immediately to the target list if they show up, either to an enrollment or oftentimes when a -- when one of our therapeutic specialists is talking to one of their targeted health care professionals. Another health care professional is in the office that's quite interested in Oxbryta and wants to start taking on the treatment of sickle cell disease. So they have the ability then to add that person to the target list. So our target list has gone up since -- from about 5,500 targets to nearly 6,000 targets just through that process, and we've certainly seen some people enroll patients that weren't on our radar that clearly had patients. So that's very exciting.

Your next question comes from the line of Matthew Harrison with Morgan Stanley.

I guess, one, could you just maybe talk in a little bit more detail, and I know you've done this before, in terms of where you are in the process with Medicare specifically? It sounds like you've been able to achieve some early results with some plans. But broadly, I know there's a time line associated with when these plans typically look at additional coverage. And then, Jeff, just separately, can you -- just for clarity's sake, can you just tell us how much, if any, in your view of what you saw in the fourth quarter was pull-through versus inventory?

Sure. So Matthew, this is Jeff. I'll start. We're hesitant to give exact patient numbers, but there was a significant -- there was a fair amount of number that came through in December that were paid drug through medical exceptions as opposed to through payer adjudication process. So we're not going to give exact numbers, but there was a fair amount of those that did happen in December. And then the rest was pulled through in subsequent periods in the first quarter.

And regarding Medicare Part D, we're -- I wouldn't say that we're kind of at the same place we are with all the payers. We're in the education mode. So we're meeting with all the Medicare providers. We're meeting with all the commercial providers as well as the Medicaid providers as well. Medicare Part D for us tends to be dual-eligibles. A lot of our patients are dual-eligible. So that's the situation where they have some really good health care coverage through those programs. They have low out-of-pockets and low co-pays through that dual coverage. And as I said in my comments, we have seen some of the big Medicare providers, namely Humana and SilverScript, start to adjudicate patients and pay for those patients. So Medicare is a smaller part of our payer mix overall, but I am excited and -- to see that they are coming online. But many of them still are being educated and we expect them to be online in Q3 and Q4.

Your next question comes from the line of Yatin Suneja with Guggenheim Partners.

Could you maybe help us understand what sort of measures you are taking to make sure patients are compliant to the therapies once they get it? What are your expectations in the long-term from a compliance perspective? And Jeff, if you can maybe talk a little bit about the gross to net. And then I have a follow-up.

Yes. We...

Can I ask DJ to take that? DJ, could you explain a little bit more holistically what the hub does (inaudible) noncompliance?

Yes, GBT Source Solutions recognizes that compliance is a critical factor in any chronic disease, but certainly with Oxbryta in sickle cell disease. So we built that in from day 1. The compliance measures include things like refill callbacks. We even have a text option. As one enrolls in the hub, it's much more than just a prescription. There's a patient consent involved that allows the patient to opt in to many of these features. Most patients are interested in having a callback or a text or an e-mail or all 3 ahead of running out of drug in any given month. So we provide that service. It's at our customized SP level, it's at the hub level, and it's all coordinated, kind of quarterbacked by the hub.

We also do a significant amount of education. So we have nurse educators in the GBT Source for patients. Education always seems to help with compliance. And then, of course, we have our patient navigators, which are field-based GBT Source resources that go into the clinics and have the ability to actually talk directly to patients about the hub services, but more often than not, are also talking to the staff within the clinic and make sure they have the information they need to educate the patient. So all those together really support the compliance of the patients. And we feel compliance will be good because of that, not to mention, of course, the profile of Oxbryta and the benefits that will bring and hopefully drive compliance as well.

So yes -- and this is Jeff, just turning to your gross to net question. We didn't provide it proactively just because it will fluctuate over time based upon the payer mix, but for this quarter, fourth quarter, was actually about 24%. And we saw a fair amount of Medicare Part D come through. So accounting for the doughnut hole, contributed to the little bit higher on the gross to net side of things there.

Your next question comes from the line of Mark Breidenbach with Oppenheimer & Co.

Congrats on the progress and just a couple of quick ones from me. First of all, should we expect that your specialty pharma partner network will be releasing script data to third parties to help us track scripts? And also a question, given the potentially long time line for HOPE-KIDS 2, I think I heard Ted said it has to be completed by 2026. Is it possible we could see the Phase IV ActIVe study step in and before HOPE-KIDS 2 and possibly serve as a confirmatory trial for Oxbryta?

So Mark, thanks for the question. I'll take the first question and then maybe pass it to Jeff. Yes, the -- as I said in the earlier remarks, the TCD study, the confirmatory trial, is by agreement with the FDA, designed to read out in 2026. We're working to do that earlier. But that's the agreement with the FDA, 2026. The ActIVe Study, as you referenced, we'll probably have some data available in 2021 would be our expectation. So we'll be starting that trial later this year and expect it to likely have some data available in the subsequent year. In addition, there are other studies that we are planning that we'll also be reading out earlier, because the goal really here is to even before the TCD study reads out to continue to support, provide evidence to really show what Oxbryta is doing and fundamentally changing the disease. So we expect studies to be reading out over time, because some are designed to read out much more readily.

This is Jeff. Just to touch on the first part of your question, we are blocking IQVIA from reporting data as most rare disease companies do. Just -- we want to make sure that there's certain context around the script data. So that won't be available publicly.

Your next question comes from the line of Matthew Holt with JP Morgan.

I wanted to follow up on the prior authorization criteria. For the PAs that aren't to label, can you provide some color around what additional requirements you're seeing?

DJ?

Yes, Matthew. The -- I'm happy to say, most are to label and to -- and/or to the HOPE Study criteria -- entry criteria, which as you know is broad entry criteria. So those are really the standard that we've been seeing. I referenced earlier one that was a little bit tighter than that, that had some requirements around VOC and things like that, that we just -- was not consistent with labeling. So once we had that discussion, that was changed immediately.

We've oftentimes said -- although I don't have any specifics for you at this time. In Q1, I'm sure we'll have kind of a larger database. But we've often expected that there might be some soft step edits this year and a soft step to edit for us would be a physician at a station that things like hydroxyurea have been offered to the patient. And so that would not surprise us, nor would it be a barrier to physicians, given that hydroxyurea has been offered to most -- every patient and can be used in combination with Oxbryta or Oxbryta in monotherapy. So we don't view that as a barrier. But that could be a prior authorization soft step that we would expect, but I don't have any hard additional PAs to discuss at this time.

Great. And then I realize it's early, but any sense of how dose reductions are being handled in the commercial market, given the switch in dose size when compared to the clinical trials experience?

I'm not aware of dose reduction data and certainly at this stage. As you know, during the conduct of the HOPE Study, there was really no appreciable dose reduction going on, because the drug is so well tolerated. In fact, I think -- if I recall, the discontinuation rate for diarrhea, which is rare, was -- I think there was 1 in the placebo group and 0 in the 1500 milligram arm.

Your next question comes from the line of Paul Choi with Goldman Sachs.

Maybe the first question is for DJ. DJ, can you maybe comment a little bit on what your sales force is hearing with regards to their initial discussions with physicians and prescribers specifically, their receptivity to a biomarker data point in the label? Or are they perhaps, with another product approved shortly before yours, maybe focused on the BLC market? Any qualitative comments you can offer there would be great.

I would say that physicians are thrilled to have Oxbryta as a therapeutic option. There's been such a dearth of innovation in sickle cell disease historically. And having 2 new products in close succession has been a real positive reception, I'm sure, for Novartis as well as us. But certainly, from our perspective, physicians are welcoming us with open arms to come and talk to them about Oxbryta.

We have not had the pushback around the mechanism. In fact, quite the opposite. It's a very unique mechanism with Oxbryta. It's the only therapy that works at the polymerization, fundamental phase of sickle cell disease. So people are quite intrigued by that. And then, of course, having a hemoglobin increase is viewed as a very positive thing, given that patients generally have a decrease over their life and now being able to have an intervention. So we have not had the pushback. The idea that the FDA approved Oxbryta in record time on a 3-month review under subpart H gives people a lot of confidence that not only is Oxbryta very safe, but there's a real need for it. So we've had a really good reception, I would say.

Yes. I mean I'll add to that. Since sickling and polymerization are fundamental in sickle cell disease and this drug is designed to inhibit that, it's not surprising that physicians see the drug working. They see the hemoglobin going up. They see the retic going down. The patient sees their jaundice resolving. The patient sees their capacity to do daily activities increase. So that's really one of the nice feedback loops here is that -- and I think we're seeing that in the data that DJ has collected, where physicians are communicating that they're very happy with the product. And I think just because the patients are telling them, they're very happy with the product.

Just how many calls -- times on calling on doctor prescribers, are you thinking about you'll require just in terms of education before you get initial prescriptions there? Any sense? Is it going to be a multi-call effort, maybe 1 or 2? Any color there? And then I had a follow-up question on data for this year.

Yes, Paul. Great question. And I do want to kind of preface my earlier comments as well as these with what I mentioned in my comments of the script is that we also recognize that there's a lot of heavy lifting still to do. We recognize that just walking in and introducing Oxbryta on one call for some physicians isn't going to be enough and that they really need to understand it. They also need to have a conversation with the patient, sometimes the whole family and then have the patient come back in for a second visit after they've had a chance to internalize it before they start even discussing the prescription. So there's a process here. There's a lot of education that needs to happen. Our sales force is seeing the nearly 6,000 physician targets. We try to see the majority of our physicians every single month, and of course, the highest decile physicians with the most patients multiple times a month.

So -- and that's just -- to your point, it's a recognition that it's a process. And we have to constantly be in there and share the information. And it's not just the physician or the prescriber, it's oftentimes the whole staff that we want to engage. It's getting everyone onboard with helping sickle cell patients. So -- and that's how we built the team. Our team is built to do all of that.

And can you guys -- I didn't hear it earlier in your comments. Can you just confirm that you'll have updated HOPE data at a medical meeting later this year? And just how do you think about that as a commercial driver in the second half of 2020?

Yes. Paul, thanks. The -- so the last bit of data from the HOPE Study is the 72-week data. And as we've previously guided, at 72 weeks, the study is grossly under-powered to look at things like VOC. So what we're really looking for is to show that the drug effect continues to be durable, and we fully expect that. The data will either be presented in a publication or a major medical meeting before the year is out.

Your next question comes from the line of Christopher Marai with Nomura Instinet.

This is Jackson Harvey on for Christopher Marai. I was just wondering if you can give us some early insight about the patients that are starting drug, for example. Are these the low hemoglobin patients that are interacting with the health care system more often? And then I have a second question on inclacumab. What are some of the gating factors there to getting this pivotal trial ongoing?

So I'll ask DJ to take the commercial question. I'll just quickly mention inclacumab, background. So we did a licensing deal with Roche back in 2018 for inclacumab. And for background, there was no drug. There was simply a Master Cell Bank. So we had to essentially -- we began the manufacturing and then demonstrated that the product was comparable to the previous product that Roche-Genentech had in clinical studies. And they studied almost 600 patients. So referencing back to that data for the IND and the clinical safety is important to us. But it takes quite a bit of time to start with the -- a Master Cell Bank and to rescale to commercial scale, which is what we're doing. So that's really the gating factor is getting all of the manufacturing redone. And we have mapped that out and fully expect that all of that will be behind us and will allow us to start the pivotal trial in the first half of next year.

Yes. And Jackson, regarding your first question on hemoglobin levels, I don't have hard data for you at this time. The reason for that is, is not only is it kind of early days, but in addition to that, we don't collect, as part of an enrollment into the GBT Source, any information, medical information regarding hemoglobins and that sort of thing. We want to keep that information with the clinician, and we don't want to slow down the process by collecting that information. So we don't have that information at this stage of the game. We have to get it a different way. And the ways that we'll get that and likely be able to hopefully report on it at the Q1 call would be through chart audits.

And so we'll be doing those chart audits, we'll be getting an idea. We've previously talked about that it wouldn't surprise us if the lower hemoglobin patients would be initiated quicker out of the gate for a lot of reasons. They are in the office more often. There is a greater unmet need. And there's a clear benefit to getting -- or an urgency to getting hemoglobin raised, so it would make sense. But I don't have any data for you at this time.

Your next question comes from the line of Debjit Chattopadhyay with H.C. Wainwright.

This is Aaron on for Debjit. And congrats on all the progress. So I just had a couple of quick questions about the physicians and their views on how they are seeing -- how they're prescribing Oxbryta alongside crizanlizumab? And if they're designed to sort of segregate patients based on their characteristics or if they're prescribing both? And also, could you talk about if they mentioned anything about weaning patients off of hydroxyurea and how they think that will fit into the picture of treatment?

Yes. So we really don't have formal data on that kind of stuff, but I can tell you that this question about using -- how you would use the 2 new approved drugs came up at ASH. And the physician leading the panel immediately said, the drugs actually have different indications. One drug, Oxbryta, is approved to fundamentally treat the molecular base of sickle cell disease. So it's not a symptom-driven treatment, whereas ADAKVEO, as you know, is approved to treat pain crises. So the drugs actually have different labels. And I know just from anecdotal experience that physicians, in some cases when pain is the issue, are reaching for ADAKVEO appropriately. And in many cases, those patients are also being directed to treat their fundamental sickle cell disease with Oxbryta. So I think there will be combination use. I know there is already combination use going on, but we don't have actual numbers of patients' data at this stage.

I would just add to that. This pulse survey we did, again, it's 40 physicians, they are specialists, so they're kind of the leading indicator, I would say. And it was early on. We did ask them how they perceived combinations. And they said, in about 1/3 of their patients, they might use ADAKVEO and Oxbryta together. So we'll see when the actual data plays out, but that was more of a perception.

And with regard to your question about weaning off hydroxyurea, we really have never investigated that and haven't encouraged that. I suspect, over time, you'll see everything, but we've not studied weaning hydroxyurea. And really, based upon the HOPE Study results, showing that these drugs are combined and work in combination, there's really no reason to advocate that a patient who wants to continue to take hydroxyurea wean off of it.

Your next question comes from the line of Raju Prasad with William Blair.

It's Sami on for Raj. I just have a couple of questions, and congrats on the launch progress. I was just curious if there was any correlation between the KOLs and health care providers your sales teams have been talking to and states where formularies have been approved? Because I think you mentioned about 70% of KOLs have been targeted so far. And then also, I was curious if you had any other ongoing studies that were examining organ damage or pain.

Maybe DJ can start, and I'll come back to the organ damage question.

Yes, I think I understand your question. If I don't, you can redirect me. But -- so how we built the sales team is to call on all the top clinicians in -- where the bulk of the patients are. So certainly, the 17 states that make up 85% of the patients are being called on routinely. And then the Medical Science Liaisons have kind of an overlay on the top KOLs within those same markets. So we are actively calling on them as well. And it's not necessarily tied to where the -- when and how the payers come onboard. We're actively educating everyone routinely and then the payer team is actively doing their job to get payers onboard in all those different cities and states at the same time.

So your second question was about other studies looking at organ damage. So I'll just remind everyone that blood is actually an organ. And I think the HOPE study has shown that we are preserving the first organ of attention in the blood. The TCD study, the HOPE-KIDS Study is focused on showing reduction of stroke risk, we described that already. The ActIVe Study is not directly looking at organs, but it's effectively looking at the function of organs, because it will be examining people's physical activity, which could relate to their blood, but it could also relate to their cardiac function. It will also be looking at their sleep. So that will be looking at some of their brain function activity as well. And then there are a whole range of other studies that we'll be doing either as IFTs or as company-sponsored studies that we'll be announcing over the course of the year. But there will be a number of studies that will be looking at organ damage or better organ function.

Your next question comes from the line of Yun Zhong with Janney.

So about that patient that Ted talked about on the call, he had a hemoglobin increase of 3 gram per deciliter. So I wonder how strong is the correlation between patient's subjective experience with objective measures such as hemoglobin increase and the reduction in hemolysis markers?

Yes, we really don't have good data on that, but my personal suspicion is that there is not going to be a perfect correlation. And the reason why is that you could easily improve a sickle cell patient without any change in hemoglobin. And the basis for that are several-fold. One is the rheology of sickle cells is not normal. Those cells are not deformable, they cannot transport through small capillaries and deliver oxygen. So if you simply modify the deformability of the red cell, which we know Oxbryta does, that data has been presented, without any change in hemoglobin, you will deliver more oxygen. In addition, sickle cell patients are making about 10x the number of red cells that you and I make. That's an enormous metabolic demand. You and I are making enough red cells -- even though red cells are only about 6 micrometers, if you were to line up the red cells coming out of your bone marrow, it would form a line growing at 15 miles an hour. So sickle cells are making a line of red cells growing at 150 miles per hour. So if you lower the burden of producing red cells, that's another basis for patients feeling better. So it doesn't correlate directly. But clearly, an individual who's got these other benefits in addition to a very dramatic increase in hemoglobin has a basis for feeling better, but it's not going to correlate perfectly.

Okay. Then on the ActIVe Study, have you finalized the measures that you're going to use, I assume, probably more than just fatigue reduction?

The protocol is not finalized yet, but we are actively working on that with KOLs, and it will begin, we expect, before the year. So I think we're targeting that at the beginning in the fourth quarter.

Your next question comes from the line of John Newman with Canaccord Genuity.

Just wondering if I could ask a couple of questions here. How much of the Oxbryta pull-through in the fourth quarter do you think was from patients that converted from the expanded access program? I'm just wondering how many patients are still in that program.

Yes, we're actively -- so what we did with the expanded access patients, and they weren't -- recall , we started the expanded access program in the second half of last year, and then we got approval 3 months early. So we were unable to totally grow the expanded access population as we had hoped. So there weren't that many. And what we did immediately is contact those sites upon regulatory approval and enroll those folks into GBT Source and start working directly with their insurance companies to convert them over to commercial product. Now we also are committed to those patients and others, by the way, that don't have coverage to keep -- either provide free drug for a period of time until the insurance comes onboard or, in their case, keep providing expanded access product to make sure that they're -- they don't gap in therapy.

So I don't have hard figures for you right now, but I can tell you that some of those have gotten coverage and others remain on free drug until they're insured. And that's consistent with kind of all of our patients is that the reason there's a disconnect on revenues and demand in these early days for any launch is because you're still working through the payer process that we've talked about. And so we'll go ahead and keep those folks on or initiate free drug for a period of time.

And then just as a quick follow-up, I think you mentioned during the call that the CMS reimbursement agreement nationally is in place. How many of the 17 states that you're targeting have you been able to sit down and talk with subsequent to that national agreement being put in place?

Yes, most of them. We're actively meeting with everyone. Recall that it's kind of a more complex process than that, because the states -- we're in all the states all the time, meeting with the Medicaid -- fee-for-service state-run Medicaids. But recall that the vast majority of states in the United States have also managed Medicaid partners, and they may have 10 to 15 companies running their Medicaid. And so we have to meet with all those companies as well in each state. So I can't tell you that we've met with all of those yet, but we're in the process. So that's why it takes a couple of quarters for them to have those medical reviews and then ultimately their formulary reviews.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.