Global Blood Therapeutics Inc (GBT) 2020 Q1 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 call 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 first quarter 2020 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 the progress in the first quarter; then Jeff Farrow, our Chief Financial Officer, will provide an over of our financial results. He will be followed by David Johnson or DJ, our Chief Commercial Officer, to give an update on Oxbryta's launch. Ted will then provide an update on our research activities and other long-term growth initiatives.

Earlier this afternoon, we issued a press release announcing GBT's business progress and financial results for the first quarter ended March 31, 2020. 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 regarding 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 annual report on Form 10-K as well as in 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. Welcome to the Global Blood Therapeutics First Quarter 2020 Conference Call. When GBT was founded, we set out on a mission to transform the way sickle cell disease is treated. Last November marked a major breakthrough with the approval of Oxbryta, the first and only medicine that directly inhibits sickle hemoglobin polymerization, the process that causes red blood cell to sickle and break down. Red blood cell's sickling and destruction are primary pathologies faced by every single person living with sickle cell disease. This is consistent with our broad label and our focus on expanding Oxbryta's approval for patients younger than 12 years of age. Q1 was the first full quarter that we delivered Oxbryta to patients. Our performance has exceeded our expectations and demonstrates outstanding execution across our entire organization and our profound commitment to patients. Early feedback has been encouraging, particularly as we hear from more and more patients and physicians, who are excited about the impact they are seeing with Oxbryta. In addition, expanding access is a top priority, and we're pleased with the response from payers thus far.

Let's talk about the impact of COVID-19. But first, I want to say that our hearts go out to the thousands of patients and families directly impacted. We are also deeply grateful to the frontline workers who are working to keep us healthy and safe. On March 17, GBT announced the suspension of in-person interactions by our field teams and implementation of a remote working policy. This decision was difficult, but it was the right decision to protect patients, health care providers and our employees. It is difficult to project the precise impact of COVID-19, but we know it has created a temporary headwind for our launch. However, based on our first quarter performance, we do not believe the pandemic will impact Oxbryta's long-term potential. We view our strong performance as a reasonable proxy for what we might see post pandemic. We are pleased with the progress we've made to date, and we remain on track with our key launch activities.

We are particularly encouraged by the following 3 trends: number one, with increasing clinical experience, the demand for Oxbryta progressively increased in the first quarter, and with a growing number of new prescriptions and enrollment into GBT Source, our patient support program. New prescriptions were at their highest right before the World Health Organization declared COVID-19 a pandemic. While new prescriptions have subsequently decreased, we believe this is temporary and expect them to rebound as patients resume in-person visits with their doctors; number two, our field teams are successfully engaging with health care providers, even in a virtual setting. These engagements have translated into numerous first time Oxbryta prescribers. Based on our market research, awareness of Oxbryta continues to increase, and health care providers are increasingly leveraging telemedicine to interact with patients; and finally, number three, our payer meetings are proceeding according to plan. We've already secured coverage in multiple key geographies, and we are pleased with the rate at which patients are being covered through medical exception. We reiterate that we believe we will meet our goal of broad payer coverage by the end of the year. Like most in our industry, we decided to pause new patient screening and enrollment in our clinical studies. However, we are in close contact with our clinical sites and investigators, and we are following FDA guidelines intended to maintain study integrity. We remain confident that we will report top line results from our HOPE-KIDS 2 post-approval confirmatory study by 2025. We are well positioned to resume enrollment in all our clinical trials as soon as practical. Sadly, the pandemic has had a significant impact on the SCD community. We are proud that we were able to quickly provide support during this crisis, including more than $350,000 in funding to SCD nonprofit organizations. The specific role of Oxbryta during the pandemic has been a growing topic of interest. For example, the American Society of Hematology recently issued recommendations listing Oxbryta as an option for SCD patients with symptomatic anemia or patients who are difficult to transfuse. We believe that Oxbryta's oral tablet administration and favorable safety profile, coupled with services like electronic enrollment and home medication delivery are well suited to help SCD patients in the current environment. In summary, GBT is doing well, and the launch of Oxbryta is off to an excellent start. In many ways, COVID-19 has increased our focus and dedication to ensure that every patient who can benefit from Oxbryta has access to it. Our entire team is aligned to this mission, and it's thrilling to see our early success. With that, I will turn the call over to Jeff to provide an update on our first quarter 2020 financial results.

Thank you, Ted. GBT had an outstanding start to the year in the first quarter, and we've continued to maintain a healthy balance sheet. Total net revenue for the first quarter of 2020 was $14.1 million, resulting from sales of Oxbryta. This compares to $2.1 million in the fourth quarter of 2019 from the initial launch of Oxbryta, which we began in late November. These first quarter revenues were driven by strong underlying patient demand as well as good early payer coverage, including for medical exceptions. Additionally, our gross to net adjustment was 12% in the first quarter, which is lower than we anticipated at future steady state. The gross to net adjustment each quarter will be driven by patient insurance coverage, patient utilization of 340B pharmacies, the Medicare Part D coverage gap and patient copay assistance. The 24% gross to net in the fourth quarter of 2019 was higher primarily due to our accrual for the Medicare Part D coverage gap in the fourth quarter. As previously stated, we anticipate that over time, our gross to net will stabilize at around 25% to 30% once we reach our expected payer mix.

Cost of sales for the 3 months ended March 31, 2020, was $135,000. Cost of sales was low in the first 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 fully expensed product manufactured prior to FDA approval is utilized. It is important to point out that we believe we have enough commercial supply of Oxbryta to sustain an estimated patient need through the remainder of this year and into 2021, and we are continuing to produce additional Oxbryta tablets.

Research and development expenses for the first quarter of 2020 were $39.8 million compared to $34.5 million for the same period in 2019. The increase in R&D expenses in 2020 was primarily due to increased costs related to the development of inclacumab and other preclinical research activities, and increased employee costs, including noncash stock compensation. The increase was partially offset by a decrease in manufacturing cost for Oxbryta that were expensed to R&D. Following the approval of Oxbryta by the FDA, we now capitalize manufacturing to inventory.

Sales, general and administration expenses for the first quarter of 2020 were $47.7 million compared with $18.1 million for the same period in 2019. 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 operation and launch of Oxbryta. Net loss for the 3 months ended March 31, 2020, $73 million compared to $48.9 million for the same period in 2019. Basic and diluted net loss per share for the 3 months ended March 31, 2020 was $1.20 per share compared with $0.87 per share for the same period in 2019.

We ended the first quarter with a strong balance sheet and with cash, cash equivalents and marketable securities of $615.2 million compared with $695 million at December 31, 2019. The decrease of $79.8 million included the onetime upfront payment of $20 million that related to the collaboration we entered into with Syros Pharmaceuticals in 2019. We continue to believe our existing cash and investments and access to the additional $75 million under our existing term loan facility have the potential to provide the necessary runway for us to achieve positive cash flow, while enabling continued advancement of clinical development programs and other earlier stage product candidates.

As we look at the remainder of the year, especially at the uncertainty that the current global situation has injected into the financial markets, we feel confident that we are operating from a position of strength and we will continue to execute on our plans to get Oxbryta to patients.

With that, I will now turn the call over to DJ for an update on the Oxbryta launch.

Thank you, Jeff. Good afternoon, everyone. I'm excited to provide an update on the launch of Oxbryta. As Ted mentioned, we had an exceptional first quarter. As COVID-19 escalated, we are proud that we were able to quickly transition to a virtual working environment and minimize potential disruption to the launch. I'd like to take a moment to recognize our field, operations, marketing, medical affairs and IT teams, all of whom work tirelessly to enable and support our virtual interactions.

Today, I'd like to share 3 metrics, that combined with net revenues, will give you further insight into our progress. These metrics are new prescriptions for Oxbryta, which informs underlying patient demand, the number of health care providers prescribing Oxbryta, which captures the progress we're making in adoption and payer coverage measured by percent of covered lives. First new prescriptions. We saw approximately 1,650 patients prescribed Oxbryta during the first quarter for a total of approximately 2,000 since launch. The vast majority of new prescriptions were enrollments in GBT Source, our high-touch patient support program that provides a wide range of real-time and practical support, including education and financial support that's customized to each patient's needs. We're encouraged by this level of activity and believe it's indicative of the positive interest in Oxbryta. The new prescriptions include patients who have received early payer coverage generally through the medical exceptions process as well as patients without insurance who're receiving free medicine under our patient assistance program. They also include patients whose insurance does not currently provide any coverage and are unable to secure a medical exception. In these cases, we're able to provide free drugs to eligible patients, while coverage is established. And we're pleased that GBT Source team has successfully moved patients through the process and secured insurance coverage for them. In order to better understand the impact of COVID-19 on practices, in April, we surveyed approximately 50 sickle cell disease physicians, primarily hematologists on practice dynamics as it relates to patient and sales force interactions. We were encouraged to see that more than 90% of practices are using some form of telemedicine, either phone or video. We also are encouraged to see that most physicians, nearly 70%, report having some level of comfort prescribing any new chronic sickle cell disease treatment without a live visit. In fact, 25% of those surveyed reported having prescribed Oxbryta following a virtual visit. On the other hand, nearly 75% of physicians surveyed report a decrease in daily sickle cell disease patient volume since the COVID-19 pandemic began. This reinforces what we're seeing across the industry, that the majority of medical practices are experiencing a decline in overall patient volumes, and as a result, a reduction in new prescriptions. Specific to GBT, we have seen as much as a 60% decrease in weekly new prescriptions for Oxbryta from the peak in early March. We expect the rate of new prescriptions to continue to remain lower as the second quarter progresses, through the third quarter and potentially longer.

However, we are encouraged that even during this time, we continue to see new prescriptions each week. As such, we remain confident about the long-term potential for Oxbryta. Turning to health care provider penetration, we continue to actively engage with physicians. The majority of interactions for the first quarter were conducted in person before the transition to virtual interactions in the second half of March due to COVID-19. Feedback from the field team and our survey indicate that many practices are receptive to virtual discussions. In fact, the survey showed many physicians are participating in engagements by phone and video with sales reps. We are regularly sharing learnings and best practices across our teams and are prepared to continue with virtual interactions for as long as necessary.

We have adapted our existing materials and created new materials to support these virtual interactions. I'm pleased that we have recently launched our new branded patient marketing campaign to help educate about Oxbryta and its effects on hemoglobin polymerization. We've also received FDA feedback on our branded health care provider marketing campaign and anticipate launching it in the coming months. The availability of these campaign materials comes at a critical time to support our digital interactions with patients and physicians. Based on updated market research, we're encouraged that aided awareness of Oxbryta among top sickle cell specialists remains above 90%. Additionally, we continue to see strong interest in Oxbryta with over 90% of physicians indicating they will use Oxbryta in their practice and almost 60% indicating they plan to initiate Oxbryta within the next 3 months.

Through March, our therapeutic specialists have reached approximately 90% of our highest decile physicians and overall reached nearly 60% of the approximately 6,000 health care providers we're targeting in the United States. Our team has visited our high decile targets an average of 6 times and have had nearly 18,600 total customer interactions since launch. As a result, approximately 525 unique health care providers have written a prescription for Oxbryta during the first quarter for a total of approximately 660 unique healthcare providers prescribing since launch. As expected, the majority of prescribers are hematologists, but we're encouraged that a growing percentage of primary care physicians and pediatricians are also prescribing Oxbryta. Importantly, prescribers have written multiple prescriptions, averaging approximately 3 prescriptions per prescriber since launch. Consistent with the decrease in new prescriptions since COVID-19, the number of new prescribers of Oxbryta has also slowed. We continue to monitor to assess any potential impact to our long-term launch plans and will adjust accordingly.

Regarding payers, we're pleased that we have been able to continue payer meetings, many of which were already scheduled as virtual meetings before COVID-19 pandemic. Consistent with our expectations, we now officially have reimbursement coverage for Oxbryta in place with payers representing 25% of covered lives, specifically, we have coverage in place representing 30% of Commercial lives, 9% of Medicaid lives and 8% of Medicare lives.

Notably, we have secured coverage policies with the centralized fee-for-service Medicaid plans in 11 of the 17 priority states. This is an important step given the influence that the fee-for-service Medicaid plans have on the overall coverage picture in the states. Fee-for-service Medicaid in Texas and New York are good examples of 2 key states with large sickle cell populations that are now covering Oxbryta. In addition, it's important to note that even if Oxbryta is not yet on formulary, payers are covering many patients through the medical exceptions process. We are pleased with the progress we have made with payers. We remain on track to complete most payer meetings during the first half of 2020, and we continue to believe we will meet our goal of obtaining broad coverage by the end of the year. I will now turn the call over to Ted to provide an update on our clinical development activities and pipeline.

Thank you, DJ. Since GBT's founding, research and development has been the backbone of our company. These teams discovered and developed a breakthrough in Oxbryta in record-setting time. An approval occurred just 5 years after clinical testing began. However, we are only just beginning as we plan to continue to deliver major innovations for SCD. I want to thank Josh Lehrer, our former Chief Medical Officer for his contributions to the success of GBT and Oxbryta. Dr. Gregory Bell who brings extensive experience from his career at Merck, KAI Pharmaceuticals and Genentech has stepped in to lead our development organization, and is doing a fantastic job. Greg joined GBT earlier this year as a Senior Vice President. We believe GBT is well positioned to change the course of SCD for millions of individuals around the world. In order to achieve this, we will need to evolve, just as we did at Genentech during my career there. Consistent with this, we decided to recruit a head of research and development. This individual will bring major experience in global R&D strategy and operations, clinical and non-clinical research, regulatory affairs and life cycle management. Our focus on and deep expertise in SCD sets GBT apart. And we believe this positions us to become the leader in SCD and deliver on our commitment to patients.

In the immediate term, we are working to expand Oxbryta's approval for SCD patients younger than 12 years of age. We are scheduled to meet with the U.S. FDA soon and will provide an update later this quarter. In parallel, we are working to potentially make Oxbryta available in regions like the Middle East, Latin America and Europe. We are in discussions with the EMA on the regulatory pathway for Oxbryta in Europe. We expect to provide an update later this quarter on our go-forward plan for this region.

As a reminder, SCD is geographically concentrated in Europe, which should allow for an efficient commercial infrastructure and launch, if approved. Looking to our pipeline, our plans remain on track to initiate a pivotal clinical study for inclacumab, our novel fully human monoclonal P-selectin inhibitor in the first half of 2021. We believe inclacumab has the potential to become the best-in-class treatment for vaso-occlusive crisis. Finally, we also continue to conduct additional research in our labs and in collaboration with Syros, with the goal of developing more breakthrough therapies for SCD. GBT is blessed to have extremely talented, dedicated and passionate employees from top to bottom and coast to coast. As a result, we're off to an excellent start with Oxbryta, providing a new treatment option and comprehensive patient support for SCD patients. While we have a lot of work ahead of us, we're confident we will succeed in realizing our vision to make SCD a well-managed disease, giving patients the opportunity to live long and prosperous lives. With that, we'd like to open the call for questions. Operator?

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

Congratulations on the terrific launch. I guess just my question would be, if you could break out what the inventory contribution was to the first quarter sales number? And then DJ, if you have a sense of the type of patients that are receiving Oxbryta out of the gate, if they're below that 8-gram per deciliter threshold of higher unmet need or if you're seeing a broader distribution of hemoglobin? I guess any insights on the type of patients being prescribed, and then just a quick one on any inventory commentary.

Jim, this is Ted. Thanks for the question. It's early in the launch, so it's really hard to kind of account for inventory at this stage. We don't think it's been a significant contributor. In terms of the types of patients that we're seeing, the data that we get from the hub is fairly limited. But we do know that the gender looks like you would expect in sickle cell disease, about 60% female, 40% male. The age distribution is pretty typical, very similar to what you saw in the HOPE Study. We don't collect hemoglobin levels, but we know anecdotally from interacting with physicians that some physicians have focused initially on lower hemoglobin patients, but patients are all over the map. We have patients that have started at above 10 and actually people that have completely normal hemoglobins after starting the therapy. So there is a broad distribution, as we would expect.

And Jim, maybe I'll add to that, too. In the specialty pharma channel, inventory is purchased pretty much on an adjusted time basis and it's regular ordering going on, on a weekly basis. We are aware that some companies noted that there was some stocking as it related to COVID. And so we did take a look at that as a possibility, and the short answer is, we did not see anything material there. And really, the way we looked at that and -- because we don't have a year trend to sort of compare it to prior years, we looked at the refills that were going through the hub, the refill requests from the patients. And it was sort of standard in the 30-day range. So we knew patients weren't ordering multiple months of inventory. But then we also looked at days on hand at our specialty pharma and inventory levels were diminishing at the regular rate. So one would imagine if, in fact, they purchased more in anticipation of stockpiling, the days on hand would have been higher than what we typically see, and we just do not see that.

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

Congrats on a very good quarter and launch. It's good to see in biotech. I guess, I just wanted to talk a little bit more about what's been -- how you've been really seeing in detail in April. I know that -- I think in your script you said potential from the peak down 60%. So is it a factor of new -- is it a factor of the patients coming slow or are doctors being hesitant to kind of start? Just if you can give us some more color on that, that would be great.

So, yes. Thanks for joining, Alethia. I think you're really trying to get at kind of the overall COVID impact. And what we essentially said in the call is that we've kind of qualitatively and quantitatively seen a dip in prescriptions on the order of 60%. And the way we basically get at that is to know what our peak prescriptions were in a given week and then look at what they've done subsequent to that. So there has been a clear headwind and it's really too early to be giving too much detail about this early in the launch, but we definitely think there's a real headwind. That should go away. It is driven to some extent by patients not going to the doctor. We've talked to a number of physicians, who have, in fact, told their patients that they want them to shelter in place. And some physicians are beginning to prescribe Oxbryta telephonically using Zoom and other technologies, but some have not moved to that. And so I think that combined to create a situation where there is a headwind, we expect it to get better as the pandemic subsides. We also think we can make progress -- we are making progress even with the shelter-in-place orders.

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

Let me add my congratulations as well, congrats on a very good quarter. Can you just comment on the success rate using the medical exception? And then overall, what the payer approval rate has been? And then if you could also comment on, of the 1,650 or 2,000 patients that have received the prescription, how many were actually paid patients versus the patients that were receiving free drug?

DJ, do you want to take that?

Sure. Hi, Yatin. Thanks for the question. Yes, we're very pleased with how the payer interactions are going. And as we talked about, many of the payer interactions prior to the COVID pandemic were already virtual engagements and meetings that were already set up. So we've been able to maintain interactions through the pandemic and continue with those payer meetings. So we're very pleased with that. The payer response is changing on a weekly basis now because we've always talked about the first half of this year, and specifically Q2 would be a time when we would be having a lot of formulary review meetings, and those are happening now. So we have payers coming on every week, having their formulary meetings and that sort of thing. So Q3, Q4 is when we expect many more formularies to be published and for coverage to be broad by the end of this year. And we're standing by that goal, and we think that we're on track to deliver that as well in the second half of the year. In terms of medical exception, we're very pleased with that process. While we're not giving a rate on exact numbers, because again, it's very fluid. We can tell you that, we said in our prepared comments, that about 25% of covered lives are -- have public coverage now in the payer environment. And being in Q1 of your launch, your first quarter launch, that's right in line with our expectations. So we're really pleased with that. But clearly, we're getting many more patients paid for based on net revenues and our demand numbers that we've provided. It's clear that the medical exception process is also working very well, as well. So we're pleased that GBT Source is able to help clinicians and patients get access, either through medical exception, or in some cases, through our patient assistance free drug program.

Anything you would like to add on the paid versus the free drug patients based on the breakdown that you have given, the 1,650 and 2,000 patients?

So we're really not -- Yatin, thanks for the question. We're really not focusing on details like that. We do obviously have some free patients, but it's important to recognize that those patients will be converting over to paid patients over time as we get more and more coverage in place. And that impact is part of the rationale for the free drug, it's to make sure that when a prescriber writes the drug that a patient can get on the drug, even if the full payment process has not worked its way through. So we're committed to making the drug available. Over time, those patients will be converting to paid patients. But we're not really focusing on disclosing the specific metrics right now, because as DJ said, these numbers are all very fluid.

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

I have a question for Jeff about the impact of COVID on operations expense from Q2 onward. Does it go down with revenues as well?

You're right, Liana. Just given that -- we'll have some organic savings. We're continuing to keep our focus on building up the commercial side and pushing forward as much as we can on the clinical side, but there will be some natural savings due to the clinical trial delays that we have, in particular on the TCD study, and then we'd anticipated starting the ActIVe study a little bit earlier. So overall, we expect it to ramp up a little bit in the second quarter and then sort of stabilize out for the rest of the year.

Your next question comes from the line of Danielle Brill with Piper Sandler.

Congrats on the strong start to the launch. I just have a quick clarification. Of the 2,000, I guess, prescriptions into the hub, you said the vast majority were in -- or I guess, the vast majority were enrolled into the hub. Can you just -- can you give us a little bit more clarity on the exact number? Is that -- and how representative that is of actual patients on drug?

Danielle, this is DJ. The vast majority of our new patient starts and prescriptions do go through the hub, GBT Source Solutions directly. However, as a participant in the federal program, such as Medicaid, that allows us also to participate in the 340B program. And so the 340B approved pharmacies and institutions do have the ability to order directly from our specialty distributor. So there's a small percentage of patients that would go directly through the 340B program. Again, that tends to be a small percentage because, as you know, our product being an outpatient product, patients preferring to have this shipped to their house, the GBT Source Solution oftentimes is preferred. But that's why we say not 100% are going to go through GBT Source, but the vast majority are. Either way, we have visibility into the demand. So we see the demand. We know exactly the shipments, because it's a very controlled distribution system. So the 2,000 since approval are new patient prescriptions, and that is -- encompasses the entire universe.

Your next question comes from the line of Ritu Baral with Cowen.

Congratulations on the print, really remarkable. A couple of questions for me. Can you talk about -- in the plans that you've negotiated or are negotiating, what prior authorizations could end up being? What are their requirements? And then also, can you talk about what doctors want to do or what these plans may require around lab values for hemoglobin response, whether we're talking like right now in the pandemic or sort of longer-term, in a year, when they -- when the final coverage guidelines are drawn up.

So maybe I'll ask DJ -- Ritu, thanks for the question. It's good hearing your voice. Maybe I'll ask DJ to address the prior auths and I'll maybe talk a little bit about the lab values.

Sure. So in prior auths, yes, we've had some really good conversations with payers over -- well, since approval. And we're happy to inform you that most of the approvals that have happened already with payers have been broad coverage, just like we had hoped. That includes open access, which really means a prior auth to label. And that's -- we have a very broad label. So that's certainly our goal, and we've had many that have approved this open access to label. The second most common is a PA to label and clinical criteria. So that's simply following the HOPE Study criteria that's in our label and that's fairly common as well. So that's -- hemoglobin is 5.5 to 10.5. That's not uncommon to see it in a prior auth as well. And so the vast majority of plans, we consider both those very broad criteria, and the vast majority of plans we see come online have been, in fact, 1 of those 2 categories. Periodically, we have seen plans come out with more restrictive criteria, and that might include requiring, for example, 2 VOC -- documented VOCs before the drug is indicated. And of course, that's outside of our label, that's outside of our indication, that's outside of our -- really, our profile of our product. So we're able to successfully go back in and educate those situations, and we're in the process of doing that in a handful of plans whenever they pop up to go in and make sure they see the data, and we've had success in reversing some of those prior auths. So those still are the minority of plans that have a more restrictive policy, and we are able to reverse that successfully. The only other thing I would add is periodically we view here HU being a standard of care drug that the payers are aware of. They often ask or maybe put in a prior authorization that HU has been considered for the patient. And of course, as you know, most -- all patients have already been considered for HU. So that's a pretty easy soft step at it. And so we're fine with that one as well.

And with regard to the lab values, Ritu, as you know, many lab values are actually recommended or required by labeling. Oxbryta is very fortunate in that there's no label recommendation for anything. Many drugs follow elevation of LFTs. So we have to follow LFTs, but that's not been anything that's ever seen. So there's no labeling to follow the LFTs. Physicians, many times out of curiosity, want to follow the hemoglobin, but there's nothing in our label about even following the hemoglobin because we know that the response to the drug in terms of how people feel, for example, doesn't even necessarily directly relate to the hemoglobin response itself. In addition, we know many times, people want to give this drug to protect patients. And actually one of the stories that I learned about over the weekend was a patient who unfortunately developed COVID-19, and the hemoglobin for this patient was falling -- was near or getting close to going below 5. This was actually last Thursday. I'm very proud that the physician reached out to GBT. We literally had drugs shipped to that patient, so the patient could begin taking them from Saturday. And I just got an e-mail from the physician today saying the hemoglobin is over 8 already. So that's an example of somebody using that value. But quite frankly, the patient would have told the physician, they feel much better, which is what they are going to tell the physician even without the lab values. So the lab values can be followed, but they're not part of any kind of requirement or even recommendation from the label.

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

I was wondering if you could talk a little bit about prescription trends you're seeing continuing. I think a lot of other companies that have reported have talked about seeing a bottoming in the second or third week of April and starting to see some recovery then. So maybe you could just put in context what that comment around what you had in March in terms of new starts? And if you're starting to see at least the bottoming relative to what some other companies have commented on?

DJ should probably add more detail. But I would say that we've definitely seen a decrease. And we don't know how long that decrease will last. So we don't want to underestimate the impact that COVID-19 could have on the future. Obviously, we feel great about the start and the long term potential, but we don't want to underestimate the enduring impact of COVID as long as it continues to restrict patients' access to seeing their physicians and other issues.

Yes. I would just add that, first of all, we are still getting new patient prescriptions every single week. So even during the pandemic and even with the significant drop, we are still getting new patient starts. And that includes new prescribers as well. It's not at the rate it was obviously before COVID-19, but every week we have new prescribers coming online and new patients getting Oxbryta. So that's the good news. It's too early to tell. It's early days as to how the trend's going to play out. We definitely saw the reduction happen pretty rapidly and dramatically, just like the industry did, and it's been less dramatic lately. The last few weeks have started -- I think you could, with a little bit of squint, say it's flattening out. But so have we hit the bottom yet? Maybe, it's hard to tell, but we should know over the coming weeks.

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

Congrats on the very strong early numbers. And I was wondering, maybe touching or following up on one of the earlier questions in the queue with regard to the types of patients that are in the early Oxbryta user population. I'm curious what fraction of these patients are already compliant on hydroxyurea? Is there a big discrepancy between Oxbryta users and HU users? And also, I don't know if I heard it earlier in the call, but have you commented on the prescription refill rate that you've seen so far?

So I'll start with the types of patient and then ask DJ to talk about the refill. We don't collect a lot of details about these patients in the hub, and we don't want to. The reason -- we want to make going into the hub as simple and as easy as possible for the physician or the patient. So that's why we don't collect that kind of information. In the future, we likely will be doing chart audits that will get the kind of detail that you're thinking about, Mark. But we don't have that information through GBT Source. Anecdotally, we do know that some patients are on combination therapies, on HU. We know patients are also getting ADAKVEO and Oxbryta at the same time. So we know the combination used, we don't have quantitative data at this stage.

Yes. And Mark, just to add to that on the refill side, and by the way, we will have that data in the future. We have always planned to do chart audits, so we'll get at the combination use and the hemoglobin levels. And now that we have a substantial group of patients with the start of Oxbryta, we'll be able to conduct those chart audits, and we'll have that data for you in the future. But Ted's exactly right, we hear anecdotally from physicians that combination therapy is pretty common. Regarding the refills, it's early days, but we're encouraged by the refill early data. We know it signifies that our patients are being compliant, and that's good. And the refill -- the vast majority of our patients are refilling on time, that is within a 30-day time window, and that does suggest that the adherence is as good as we had hoped it would be. So it is early days, we're watching it closely, but the refills seem to be happening on time for most of our patents.

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

Congrats on the quarter. Just wanted to go back to the question around free and paid script breakdown. I'm curious if you can say a little bit about what the free dug to paid script conversion rate has been? And what your expectations are for this dynamic in the near future?

So I don't think that we really have enough information. DJ, you can add, but I don't think we have enough information to really get that kind of insight. We -- I think it's just clear that the vast, vast majority of patients on free drug are going to convert to paid drug. More than 90% would be my prediction. But that number is changing, particularly early in a launch, where the number of patients is -- patients are new. But over time, we would expect a 90-plus percent of those patients to convert over to paid drug.

Yes. And I would say that the metrics we're giving you now, we think are the best metrics to determine underlying demand and launch success. So total prescriptions really is underlying demand. Are physicians and patients ready to start Oxbryta? And that's that enrollment or prescription number. Number of physicians that have prescribed Oxbryta and the penetration into the prescriber base we provided. And then, of course, the covered lives, how are the payers doing. So we're really focused on those. The other metrics really are much more variable and change from day-to-day. I can tell you that it's important to note that we believe we will achieve the broad coverage by year-end and able to convert many of free drug patients at that time. The other thing I would just mention dynamic wise is, in the early days of launch, PAP is generally much higher. That's the Patient Assistance Program or the free drug program. It's the highest it'll ever be and then it comes down over time. And we certainly are already seeing that dynamic. I think it's fair to say that the number of patients on free drug are less than we had expected.

Your next question comes from the line of Paul Choi with Goldman Sachs. Our next question comes from the line of Christopher Marai with Nomura Instinet.

This is Jackson Harvey on for Christopher Marai. I was just hoping maybe you could give a little more insight on any regional or geographic trends? Do you see maybe some more high-impact areas being less affected by the COVID-19 pandemic or vice versa, and how does that overlap with any inroads you've made with state Medicaid?

So thanks, Jackson, for the question. Well, just to go back and I'll say it again. We've previously shared that about 85% of our patients are from 17 states. And those states being in the Northeast, the Southeast, around California. And we've had enrollment, quite frankly, in a manner that kind of reflects where the population lives. We have not really had enough COVID experience, I think, to make any sophisticated statements around the impact of COVID, but we have had patients being enrolled from all the geographies that we would expect. And in rough proportion to the population that exists in those states.

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

I was just wondering if you could provide a little more color on what gross to net you're seeing in Medicaid coverage discussions? And kind of what mix of the current quarter was Medicaid versus Commercial pay?

Yes. So Raj, this is Jeff. Just wanted to give you a little sense of that the payer mix is going to change dynamically over the year. In fourth quarter, we had highlighted that we had a large number of Medicare Part D patients come through and were reimbursed. This quarter, we're seeing an increase in Medicaid, and we expect that to increase as time goes on, given the fact that we'll get more payers on board there. So we do expect our gross to net increase next quarter and continue through the remainder of the year, up to that steady state of 25% to 30%. We are seeing a little more Commercial coverage earlier than, say, the Medicaid. But other than that, the dynamics will be changing, until we get to steady state.

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

So this is a follow-up question on the 60% drop in the weekly prescription, but you also said that up to 70% prescription -- oh, sorry, the health care providers are comfortable prescribing drug without patients actually visiting the office. So say if the patient is willing -- or would like to get the drug, is there anything preventing the physician from prescribing the drug? And you said that you expect the COVID-19 impact to march through the end of third quarter and potentially longer. So is there anything that you've planned to potentially improve that prescription rate?

Well, so the 60% number -- well, thanks for the question. The 60% number was really a comparison of the peak week to kind of the lowest week that we've observed since COVID-19. And what's driving things? There are things moving in both directions, as you point out. One is that some physicians are not fully implemented yet in terms of doing telemedicine. As physicians come online and say patients come online, that could be a mechanism of recovery, and we're facilitating that. Some physicians are clearly doing it. That's why we continue to see scripts. But I think it's a little bit hard for us to conclude that the world is going to be as efficient as it was during the pandemic. I think we expect there to continue to be some headwinds for us. We're obviously doing everything that we can do with our force, which is also working remotely with physicians to try to stimulate more use, but part of the issue is that if you're not seeing your patient and patients aren't doing telemedicine with you, and it's hard to prescribe. But DJ, I don't know if you want to add anything specific beyond that, but I just wanted to say that we do expect there to be a continued headwind.

Yes. There's just been a decrease in volume of interactions between physician and patient during this time. But as Ted said, it is getting better every week as physicians operationally and patients operationally become more comfortable with doing virtual meetings. And the survey we talked about was 70% and actually 90% of physicians said they are comfortable doing telemedicine and have already started. 70% said that they're willing to start new therapies this way. So we're encouraged by that, and we've already seen it. To give you an example of what we can do to reduce any big operational barriers, I receive every single day, best practices from the field teams. I just received one from a representative in Pennsylvania. She did a Zoom session with 5 health care providers last week and also included our patient navigators. And they were able to go through a full Oxbryta package insert review and a full GBT Source distribution review and teach the office how to access Oxbryta remotely and virtually, and answered all their questions. And we've already seen -- and that clinic enrolled a new patient since that interaction last week. So it's just about getting out and kind of reminding people about GBT Source, how everything can be done remotely, and then they give it a try. So we're in the process of doing that across the country now.

Your next question comes from the line of Justin Zelin with Canaccord.

This is Justin Zelin on for John Newman. First, congrats on a strong quarter. And it's good to see the Medicaid fee-for-service plans are starting to come online. I was wondering if DJ could give us some color on the experience with states that predominantly offer Medicaid through managed Medicaid plans?

Yes, Justin, thanks for the question. Yes, absolutely. So we said in the script that -- the fee-for-service are very important because -- for a couple of reasons, one is, in the 17 top states for sickle cell patients that really cover approximately 80% of the patients in the U.S., there are some critical states there that have very high fee-for-service centralized Medicaid plans. I think about North Carolina, I think about Alabama. These are areas where fee-for-service really wins the day. And so it's really important to have those interactions and those coverages in those states. But in addition, the states that have high managed Medicaid, the New York's, the Texas', Florida's, these are also very important to have fee-for-service on board, because in many of those states, they either mandate or simply influence the managed Medicaid plans to not have more restrictive policies than the fee-for-service state Medicaid. So in Texas, for example, boy, you want to make sure that the centralized Texas Medicaid is giving good coverage for your product, because they will help mandate that across the managed Medicaid. So we feel really good about the fee-for-service plans coming on board. 11 of the 17 key states are covering Oxbryta. We talked about Florida, Texas, Alabama, New York, to name a few. So that's why that's important. Managed Medicaid sometimes takes longer, you have to go to every single plan, and we're in the process of doing that. But we have had patients, importantly, be covered in the key managed Medicaid plans as well. I think of 17, I think of Anthem, some of these large managed Medicaid plans were also getting patients paid for as well. So we're in the process with most of those. United, WellCares, Molinas, these are all really important payers, and we're having really good meetings with them as well. But in the interim, the medical exception process is working there, too.

Your last question comes from Ben Burnett with Stifel.

Also congrats on the good quarter, especially under the circumstances. I guess I just wanted to ask if you could provide or offer any additional color on the treatment setting, where you're seeing early adoption of Oxbryta, just in terms of what the mix is between tertiary care versus PCP thus far? And I guess, how do you see that evolving, particularly through the shelter-in-place mandates that are in place.

Yes, this is DJ. So early on in the launch, as we expected, the specialists, really the hematologists, were the primary prescribers of Oxbryta, and they've remained strong throughout Q1, and the dominant prescribers of Oxbryta. They have a lot of patients, and they tend to be the ones that are closest to the data and whatnot. They also get referred the more difficult patients in need, and those are patients that really need access to Oxbryta. So the specialist clearly -- about half the prescriber -- prescriptions have come through the specialty channel. That said, as you progress with your launch, you want it to go deeper and deeper into the physician target, and we're seeing that happen as well. So nurse practitioners and physician assistants are big prescribers of Oxbryta. PCPs manage a lot of sickle cell patients, especially in Medicaid, where they don't have access to specialists. We're seeing more and more primary care doctors write Oxbryta. So it is starting to make that natural transition as the PCPs learn from the specialists. So we're still focusing on both. We built our teams to be able to call on primary care and specialists, and we're doing educational programs in both those communities. So I hope that helps provide a little clarity on that.

Ladies and gentlemen, there are no further questions at this time. And I would like to turn the floor back over to Dr. Ted Love for closing comments.

I'd like to just end by, first, thanking everybody for joining the call. Second, I wish everyone stays safe and stays healthy. And finally, if there are other questions, feel free to reach out to Stephanie Yao after the call. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for participation.