OPKO Health Inc (OPK) 2018 Q2 法說會逐字稿

Welcome to the OPKO Health business update conference call. (Operator Instructions) As a reminder, this conference is being recorded today, August 7, 2018. I would now like to turn the conference over to Miriam Miller. Please go ahead, ma'am.

Thank you, operator. Good afternoon. This is Miriam Miller with LHA. Thank you all for joining today's call.

I'd like to remind you that any statements made during this call by management other than statements of historical fact will be considered forward-looking and as such, will be subject to risks and uncertainties that could materially affect the company's expected results. Those forward-looking statements include, without limitation, the various risks described in the company's annual report on Form 10-K for the year ended December 31, 2017, and its quarterly report on Form 10-Q for the quarter ended June 30, 2018.

Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live call, August 7, 2018. Except as required by law, OPKO undertakes no obligation to revise or update any forward-looking statement to reflect events or circumstances after the date of this call.

Before we begin, let me review the format for today's call. Dr. Philip Frost, Chairman and Chief Executive Officer, will open the call; followed by Steve Rubin, OPKO's Executive Vice President, who will provide an update on the company's various business and clinical programs. After that, Adam Logal, OPKO's Chief Financial Officer, will review the company's second quarter financial performance. Dr. Frost will provide closing remarks, and then we'll open up the call to questions.

Now let me turn the call over to Dr. Frost.

Thank you for participating in OPKO's second quarter call. During my introduction to our first quarter call, I said, "If I had to characterize the quarter, I'd say good progress on all fronts." I'm happy to report that this also applies to the second quarter.

Our largest commercial unit, BioReference Laboratories, has been the object of a great deal of our attention. Geoff Monk, now the General Manager of BioReference, is now in full control and has made several operational changes to improve efficiency and overall results. He has moved people around and brought in new talent.

Sales are, of course, the lifeblood of the business, and Geoff recently brought in Cindy Jacke to accelerate sales growth. Cindy's previous experience as Sales Director for the East region of Quest has prepared her well for the challenge. And of course, Ben Solomon continues to be a star at our GeneDx unit from which we've expected great things, which he continues to deliver.

RAYALDEE is beginning to look like the commercial success we had thought it would be. Kirk Miller, our new Director of Nephrology Sales, working with Tom Nusbickel, our Nephrology Commercial Director, have made great strides. Dr. Charles Bishop, the developer of RAYALDEE; Dr. Akhtar Ashfaq, a terrific academic nephrologist working at OPKO, are working together to meet with important nephrology groups around the country to explain how RAYALDEE can be important for them in the management of their stage 3 and 4 chronic disease patients, with considerable success, I might add.

Last time, I mentioned that several clinical trials were ongoing, with patient enrollment proceeding nicely. Well, the pace has accelerated, and we've recently announced completed enrollment in our Phase III worldwide pediatric human growth hormone trial as well as our Phase IIb trial for OPK88003 or oxyntomodulin, weekly injectable medicine the for Type 2 diabetes and obesity, both sooner than anticipated and both proceeding nicely under the direction of Dr. Jane Hsiao and Dr. Tony Cruz.

As you will recall, I've expressed considerable enthusiasm for the market potential for our oxyntomodulin product, which has also already been shown in a previous 420-patient trial to be safe and effective with respect to blood HbA1c and lipid control as well as weight loss. The current trial aims to achieve even greater weight loss by administering the larger doses required for more weight loss while avoiding or minimizing the limitations of nausea and vomiting that may occur with higher doses. The trial is proceeding as expected.

All in all, we're looking forward to the positive events of the remainder of the year. And I now pass you on to Steve Rubin, who will continue with more detail.

Thanks, Phil, and good afternoon, everyone, and thank you for joining us today. I'll discuss OPKO's strategies for continued commercial and clinical advancement and our overall progress toward meeting our long-term growth and business goals.

Let's start with our clinical diagnostic business, BioReference laboratories or BRL, which is the country's third largest reference lab. We are pleased to report sequential quarter gains in revenues. As Phil noted, we are very pleased to see good early momentum for BRL under the leadership of Geoff Monk.

From an operations perspective, we remain particularly excited about the potential for BRL's GeneDx subsidiary, which continues to demonstrate growth and innovation in its high complexity exome and related tests. For the second quarter, GeneDx achieved a 38% year-over-year increase in exome-based testing volumes. As an impressive milestone in June, GeneDx announced that they have performed clinical exome sequencing on more than 100,000 individuals, representing one of the largest cohort sequence exomes by an independent clinical laboratory in the world.

The achievement also greatly expands the database of known clinically relevant genetic variants used as tools to help diagnose rare diseases. GeneDx continues to be a BRL standout as we have helped discover and contribute to phenotypic understanding of more than 62 novel disease genes in the last 3 years alone.

In addition to its exome and genome test, GeneDx continues to post growth in its overall product portfolio with year-over-year volume growth of more than 13%. During Q2, GeneDx finalized a major overhaul of its clinically driven testing menu and launched 20 new tests and also revised and updated 51 tests. During the remainder of this year, GeneDx plans to launch an additional 36 tests and will revise and update 57 more tests. These tests were selected based on specific clinical needs and reimbursement potential.

Moving on, our 4Kscore blood test gives a man with elevated PSA level a personalized prediction of his chance of having or developing an aggressive form of prostate cancer. During the second quarter, we've processed nearly 20,500 4Kscore tests, representing a 10% increase compared with the second quarter of 2017. The retention rate among urologists utilizing the test is also an important metric, with 80% of the urologists that ordered 4Kscore in Q1 2018 continuing to order this test in Q2 2018.

As you know, Novitas released draft noncoverage guidance for the 4Kscore test in May. While a final coverage determination from Novitas hasn't been issued, I will share an overview of the activities we, with the support of experienced urologists, undertook during the public comment period, which ended on July 13.

On May 31, OPKO made a presentation for -- I'm sorry, made a presentation for key publications with data demonstrating long-term predictability for a man with elevated PSA, a prostate cancer metastases, and mortality 15 years to 20 years later.

In addition, 8 leading urologists from academia and large neurology practices spoke about the clinical value of the 4Kscore test, in many cases, indicating why they couldn't adequately care for the patients without the 4Kscore test. We believe that the messages were well received.

We also subsequently met with Novitas' medical directors to address certain concerns and provide further clarity on clinical [validity] data. We have followed up with the data, evaluating how the 4Kscore test would perform in the Medicare population. We are also aware that many professional organizations, physicians and patients submitted written comments directly to Novitas in support of the 4Kscore test.

We appreciate the time everyone took to speak out on behalf of 4Kscore, which we consider to be an important test in the diagnostic paradigm of prostate cancer. We've been asked about the timing for Novitas to issue their final coverage decision. As we understand it, there is no specific deadline for Novitas' decision. But in the meantime, Novitas continues to process Medicare payments for 4Kscore tests.

Turning now to our pharmaceutical business. Let me start with RAYALDEE, the first and only therapy approved by the FDA that both raises 25-hydroxy vitamin D and lowers parathyroid hormone levels in patients with chronic kidney disease with a safety profile similar to placebo.

We are pleased to see Vifor Fresenius receive approval last month to market RAYALDEE in Canada for the treatment of SHPT in adults with stage 3 or 4 CKD and vitamin D insufficiency. We also expect to announce shortly the initiation of Phase II clinical study to study the safety and efficacy of RAYALDEE as a new treatment for SHPT in adults with vitamin D insufficiency and stage 5 CKD requiring hemodialysis. This trial will be conducted in multiple dialysis centers in the U.S.

From a quarterly performance perspective, the RAYALDEE numbers break down as follows: in Q2, the total number of RAYALDEE prescriptions increased approximately 36% versus Q1. Importantly, since the start of the year, we have seen a steady month-to-month increase in the total number of prescriptions.

Our expanded sales team of 64 representatives had a significant positive impact this quarter, with 49% of prescriptions being new to brand and 54% of those prescribers new for RAYALDEE. Since launch, the number of physicians who prescribe RAYALDEE has increased steadily. We had 929 active prescribers in quarter 2, 764 in Q1 and 594 in Q4 of last year, so you can see the sustained momentum here. We ended Q2 with RAYALDEE being available to 83% of the overall insured population and 53% of the Medicare population. RAYALDEE is covered by plans representing 90% of the commercial population.

Overall, we continue to see progress in adoption, reimbursement and awareness of RAYALDEE. Our expanded sales team continues to demonstrate improving performance as our market penetration continues to grow.

Regarding our clinical development programs, we remain focused on progressing our portfolio, addressing indications of significant unmet medical need in large markets. And we have a robust pipeline of candidates at various stages of development, which provides attractive opportunities for creating near and long-term value for our shareholders.

Starting with our work in nephrology, as I just discussed. Vifor Fresenius received marketing approval for RAYALDEE in Canada in late July. They also remain on track to file a marketing authorization application with the European Medicines Agency later this year as a treatment for SHPT and CKD patients.

As also discussed, we will be initiating a global Phase II trial with a higher [strained] RAYALDEE in patients with stage 5 CKD and vitamin D insufficiency who require a regular dialysis. We expect to share the cost of this study with our development partner, Vifor Fresenius and Japan Tobacco.

In addition to this Phase II study, we plan to augment our growing presence in the renal market with synergistic products that address other significant unmet needs. This includes commencement shortly of a single-dose Phase IIa trial that evaluates our NK-1 antagonist in dialysis patients for uremic pruritus or itching. This is a serious problem for many patients on dialysis.

In our metabolic and endocrinology pipeline, we have several late-stage programs underway or nearing initiation that could reach important inflection points this year. As you know, our long-acting human growth hormone product, Somatrogon or hGH-CTP is currently in a global Phase III pivotal trial in growth hormone deficient children. The pediatric indication represents 80% of the growth hormone market. This program is partnered with Pfizer for worldwide commercialization.

We recently announced the completion of enrollment in the 225-patient trial in 30 countries. Based on this major milestone, the completion of the trial is now expected to occur in Q3 of 2019. This is a trial comparing a single weekly injection of Somatrogon with daily injections of GENOTROPIN. This study uses a multi-dose disposable pen device intended for commercial launch. We are hopeful that the outcome will support a standard of care dosing change from daily to weekly administration, which will improve the quality of life for children with growth hormone deficiency.

Last summer, we also initiated a pediatric registration study in Japan to assess pharmacokinetics and compare efficacy of weekly Somatrogon to daily GENOTROPIN in 44 prepubertal growth hormone deficient subjects. We expect enrollment in Japan study to be completed before the end of this year.

Last November, we began a Phase IIb dose ranging trial from one daily oral selective androgen receptor modulator or SARM to treat BPH or enlarged prostate patients. BPH affects approximately half of all men over age 50 and 90% of men over the age of 80. This 4-month is expected to enroll 125 patients at 30 sites in the U.S. to identify appropriate doses to reduce prostate size, the primary efficacy endpoint of the study. The study will also assess blood PSA levels, lean body mass and fat mass and secondary endpoints. Completion of enrollment is expected before Q1 of 2019.

In mid-June, we reported that enrollment in our Phase IIb dose escalation trial for OPK88003, our once-weekly GLP-1 glucagon dual agonist to treat Type 2 diabetes and obesity was complete. This is a study of 110 Type 2 diabetics at 35 clinical sites in the U.S. You may recall that we initiated this trial mid-March, and we are pleased that enrollment was completed so quickly, less than 3 months after initiation.

This study is evaluating HbA1c as a primary endpoint in weight loss, blood lipid levels and safety as secondary endpoints. The data obtained in this trial will be used to support the dose escalation regimen for Phase III studies.

Previously, preclinical and clinical and Phase II data showed that once-weekly dual agonists such as our OPK88003 improved glucose control, caused more weight loss and improved the blood lipid levels compared to GLP-1 products currently on the market. In our previous Phase II study of 420 diabetic patients, greater weight loss was achieved compared to the approved extended release exenatide and placebo. These data also showed improvement in the lipid profile and a similar reduction in HbA1c levels compared to the approved once-weekly product.

We are happy to report good momentum with our commercial products and the successful efforts of our sales team particularly related to RAYALDEE. We applaud the approval of RAYALDEE in Canada and look forward to pursuing additional regulatory approvals for RAYALDEE in conjunction with our partners.

We are very pleased to have completed enrollment in our Phase IIb trial evaluating OPK88003, our oxyntomodulin drug for Type 2 diabetes and weight loss, and in our global Phase III study of Somatrogon in children with growth hormone deficiency.

We are enthusiastic about GeneDx' achievement, sequencing the exomes of 100,000 individuals and are proud of the contribution this data may have on the development of new approaches to treat rare diseases. We have put forth every effort to provide the data that Novitas requires to reach a positive final coverage decision in the 4Kscore test.

And at a high level, we are advancing a robust clinical development program that addresses several large markets. We expect to make meaningful progress with these programs and to achieve several important milestones.

And with that overview, let me turn the call over to Adam for a discussion of our second quarter financial performance. Adam?

Thanks, Steve. As we make -- as we continue to make significant progress on our R&D and commercial activities, we've also made significant improvements in our financial performance. We reported financial results that were in line with the guidance we provided during our call in May.

Overall, our net loss decreased to $6.2 million or $0.01 a share on net revenues of $264 million for the second quarter of 2018 compared to a net loss of $17 million or $0.03 per share on revenues of $293 million for the comparable period of 2017. While we are still early in our operational overviews, under our new leadership at BioReference, we have made significant the progress in our efforts to improve our operating efficiency.

During the second quarter of 2018, we were able to reduce our cost of revenue as well as selling, general and administrative expenses by 9% or almost $26 million compared to the second quarter of 2017. Our investments in R&D were $29 million for the second quarter of 2018 compared to $33 million for the 2017 period.

During the second quarter of 2018, operating and net loss benefited from a reduction of contingent consideration expense of $19.7 million related to changes in assumptions related to the timing of milestone payments due in connection with our acquisitions.

Moving to diagnostics revenue on a sequential basis. Revenue increased by approximately $5 million from the first quarter of 2018 resulting from increased volumes in the current period on consistent reimbursement rates. Revenues in comparison to the prior year second quarter reflect a volume decrease in the clinical lab testing of approximately 1.4% as well as overall reimbursement pressures, including the impact of PAMA. These decreases were partially offset by volume and reimbursement increase in our genomics testing.

As I mentioned on our call last quarter, revenues and cash flows are benefiting from the revenue cycle management program we initiated last year, and accounts receivables balances and DSO continued to decrease. The improved collection cycle and overall yield on each [succession] has continued to improve throughout 2017 and to the first half of 2018. We continue to focus our efforts on improving our collection yield despite challenging market dynamics, particularly in our genomics testing, where we are currently focused and have the largest area of opportunity for further improvements.

Regarding our pharmaceutical division's performance. We recognized $4.8 million of revenue related to the sales of RAYALDEE during the quarter, a 36% increase on a sequential basis from the first quarter of 2018. Total pharmaceutical product revenue for the quarter was $28.5 million compared to $29 million from the 2017 period.

Revenue related to the transfer of intellectual property during the second quarter of 2018 was $19.1 million compared to $29.7 million for the 2017 period. As a reminder, the 2017 period included a $10 million nonrecurring milestone payment related to VARUBI.

We closed the quarter with approximately $80 million in cash, cash equivalents and marketable securities. Our improving cash flows from BioReference and RAYALDEE led to a 52% reduction in cash used in operations when comparing the second quarter to the first quarter of 2018 and reflects the 25% reduction in cash used in operations compared to the second quarter of 2017.

We are mindful of our cash balance while we make investments into both our R&D pipeline and commercial activities. Based on our current expectations, RAYALDEE's commercial activities will become cash flow positive on a run-rate basis during the third quarter, resulting in further reductions in cash flow used in operations. Improving the operating margins and associated cash flow are anticipated to continue at BioReference, and the results are expected to further reduce our overall cash used in operations.

Looking forward to the third quarter, we expect revenue from services to be between $200 million and $220 million. This range reflects reimbursement rates remain consistent with the first half of 2018, with a slight increase in overall volumes. As a reminder, the comparable period of 2017 have revenue from services of $200.9 million after adjustment for the adoption of ASC 606 earlier this year.

Turning to product revenues. We expect the third quarter to come in between $28 million and $32 million, including revenues from RAYALDEE between $5.7 million and $6.5 million, while revenues from the transfer of an intellectual property expected to be between $18 million and $23 million, including several nonrecurring milestone payments anticipated related to our RAYALDEE partnerships.

Looking at expenses for the third quarter. We expect costs and expenses to be between $285 million and $305 million, including research and development expense of $33 million to $38 million.

For the full year, we continue to expect our effective tax rate to be in the single digits, and we look forward to providing further details on fourth quarter expectations during our third quarter update in November.

With that, I'll turn the call back to Phil.

Thank you. I think we can open the session for questions now.

(Operator Instructions) And our first question comes from Louise Chen with Cantor.

I had a few. First question I had was on your diagnostics business. As we look into second half '18 and beyond, how do you think about growth for that business? What are you doing to reach that growth potential? And what are the factors should we think about here in terms of headwinds or tailwinds in that business? And the second question I have was on RAYALDEE. Where do you think sales can grow from here? I know you give some guidance for the third quarter. What kind of pickup do you expect in the fourth quarter and beyond? And what's going to drive that? Then I had a question on your hGH program, but I'll ask it after the first 2.

So for -- thanks, Louise, for the questions. For diagnostics, I think we're going to continue to expect to see that business remain in a stable position. And that is what we expect for the remainder of this year and -- with some growth opportunities coming. I think where focus has been, what we've talked most about is improving the margins. And I think the first -- in this first quarter and second quarter of the year, we've made some pretty significant progress on that front. So I think long term, we should be in -- be able to get the operating cash flow and operating margins up into the mid to upper teens on a long-term basis.

I'll take -- Tom will take RAYALDEE.

Yes. In regards to RAYALDEE, we continue to be optimistic that if we continue to focus on growing new patients with existing riders and adding new riders that -- with the improved reimbursement, with the improved situation, with our access help, that we will be able to continue to see significant growth in Q2 forward and beyond.

Okay. And then just one last question here on the hGH program. Do you have any color on the pre-BLA meeting? And then also, what additional studies in adults might look like?

(inaudible) Well, we've had feedback from the FDA, and it was very positive in providing us the path forward. The decision that we've made internally is...

BE study.

Sorry?

BE study.

The bioequivalence study -- is we have to do a bioequivalence study, which we're planning to begin in September of -- well, we're planning to begin towards the end of the year. So that is an additional study that we have to do. Once that's done, I think that will also coincide with the end of the Phase III pediatric study. And at that time, we'll make -- along with our partner, Pfizer, we'll make a decision on how to best move forward with that BLA.

Yes. Louise, as you may recall, that the adult, unlike the pediatric, was -- the study was ran with a syringe in a vial. The pediatric was run completely from the get-go in a pen device. So we need that bioequivalence study that Tony mentioned, is basically just show the equivalent of the drug substance in the pen device for adults as well because that's what will be commercialized. And so it should pretty -- a simple quick study but necessary prior to submission.

Our next question comes from the line of Brandon Couillard with Jefferies.

This is actually Mike Koban, on for Brandon. First, on that hGH, when can you expect or when will we expect to see any initial data from that trial? And do you expect any interim data readouts?

There won't be anything interim. It's a 1-year trial, so you can -- the simple math and the date we did the administration in the last patient 1 year later. So -- and the trial will complete in the third quarter of next year. I'm not sure how long it will take to get it...

It will take a couple -- it normally takes about a couple of months to clean the data and then database locks. So I would say couple of months [half in], after say the August. So probably October, November, November, December. It depends on the data cleaning process, but it normally takes 2 to 3 months, 2 months.

Got you, got you. And then as far as the Claros PSA test, have you guys -- or could you walk us through how you're thinking about the unit economics of that offering? And as we try and start to think about commercial launch and have you finalized the instrument ASPs? And anything like that you could tell us would be helpful.

So commercially, we were still obviously pending FDA clearance for the device. It's a premarket approval process we're going through. And that is now at a stage where we -- we filed back in November, we received some feedback from FDA about the PMA. And they've asked for some other studies. We filed our first amendment with them, and we're now in the process of gathering the second amendment information from the field. Commercially, we've got the analyzer really pretty much where we've always said it was. It's -- right now, it's a first-generation analyzer. It's about a $2,000 unit. But there's obviously commercial flexibility in how we would have that paid for in the course of testing where partial payment for the analyzer is reflected in the cost of the cartridges. The cost of goods is something we're focused on as well. We have plans for automation of the process, again, pending final approval from FDA for that. So we're gearing up for PSA. But I also want to remind you that there's a great deal of menu expansion capability. And that expansion happens via a very different regulatory process. First off, it will be the second and third and fourth, et cetera, filings we will do, and these will be done by 510(k) processes, which are quite lower in terms of the bar for clinical trial requirements.

Great. And then I'll just squeeze one last one in there. Just on the GeneDx line, I believe that you said that they grew 13% in 2Q. Could you give us any sense of maybe how that -- how do you think about that in terms of revenue?

Yes. So we don't necessarily break out GeneDx separate from BioReference. And I think we always report that as a single line item. So it is blended in there. I think the volumes do translate in overall just into direct dollars. So GeneDx makes up about 17% of our overall revenue -- 17% to 20% of our overall revenue from services.

Our next question comes from the line of Kevin DeGeeter with Ladenburg.

As we think about the series of new tests or revised tests being launched at BioReference, is really sort of levers there on profitability skewed towards growing the top line? Or should we think about particularly the revised has -- being less impactful in terms of improving margins and potential profitability?

I think you're definitely -- as we noted, they are definitely based upon margins of reimbursement. What's key is as we've mentioned before, especially, in this area of sequencing, is reimbursement. And so you'll see a lot of the work that's being done is either where there's an unmet need or where there's clearly a test with some tinkering or modification that we're confident will have a quicker path to reimbursement. So it's clearly a focus on -- it's both top line growth and margins for sure.

And to a certain extent, GeneDx and the reference line that we call BioReference are slightly different business models. Whereas in GeneDx, the independent, constantly introducing new tests and we're -- and also dependent on reimbursement, of course. In BioReference, their gross usually comes almost entirely from expansion of the market and of course, again, depending upon reimbursement. And in both cases, I would say the teams have been working very hard to develop new approaches to help ensure growth. So we're pretty optimistic about the business.

Great. And then maybe 2 questions, if I may, on RAYALDEE. First off, how do we think about sales force sizing? And I guess, we're about 64 reps. What kind of traction would you need to see or improve -- further improvement patient access would you need to see to consider expanding the sales force further? And then just with regard to the dialysis study. Is that going to be the same capsule, just significantly greater number of capsules? Or do you completed optimization or a different-sized capsule to accommodate the potential dose for dialysis patients?

Yes. I'll take the first question first. There will be a single capsule, which will be taken in different doses, which is different than the capsule that's on the market today for the dialysis study. In regards to the sales force optimization, we will continue to grow the sales force when the opportunity in regards to the physician and the coverage warrants it. And so we're always looking at how can we continue to drive growth and when we can make a case to do that through expansion, the sales force will be doing that. And so we'll be continuing to look at to do that over time.

And better -- and clearly, the more sales people we want to hire.

Our next question comes from the line of Yale Jen with Laidlaw.

As you guys have a number of clinical trials that completed patient recruitment, I think that data release probably will be one of the highlights over the next maybe few quarters. Could you sort of summarize some of the data releases possibly expected over the next maybe 2 or 3 quarters of different programs?

So I mean, I think the first data that we will have is some data on oxyntomodulin trial. As we said, that was fully enrolled and it's going quite well. So we expect to have data later this year, some preliminary top line data. Following that, sure, they will have data on the SARM, where that's going to finish enrollment either end of this year or early part next year. Growth hormone, of course, as I mentioned, we will have data hopefully towards the end of next year.

This year, all right. Okay, that's helpful. And just probably, if I add on that, you have -- appreciate the end guidance on the different revenues of different units. It seems that the BioReference Lab, as you said, third quarter may not have too much growth versus this quarter? Was there any specific headwinds for that guidance or just more conservative? Or can you see the narrative associated with that?

Yes. I think as we just look at volumes, volume trends kind of over the years, the first half of the year typically has slightly higher volumes than the second half. So it's going to -- we expect volumes to be consistent with last year, but also kind of in line with where we sell volumes in the second quarter. So it's consistent business in the -- compared to last year of $209 million, gives us an opportunity there to show some growth.

Maybe -- and maybe just squeeze one more question here regarding the growth hormone. And you mentioned that you're going to do another -- do a bioequivalence study and then contemplate for the future path with adult population -- patient populations. I'm just curious at the communication you had with FDA, had -- what kind of feedback they may have regarding the proposal to take away one outliers and make -- and the data looks -- actually was more in line with what you originally anticipate. Is there any feedback from the agency on that aspect?

Yale, we mentioned in our last call last quarter that we had -- the FDA and the feedback certainly gave us a path for submission of the data we have with a modified analysis. And what they're allowing us to do is to submit the pediatric data along with the adult data to supplement the submission. The discussion of strategy is, however, do we wait for the completion of the full Phase III data in pediatric, which is obviously 200 and (inaudible) 200 patients? Or do we just submit the smaller number in the Phase II, which, of course, was 3 different doses? Given the timing and the size of the market for the pediatric segment versus the adult, it may be prudent to wait. But I mean, it is -- as Tony mentioned, we do have to do a quick bioequivalency study, anyway, in the pen device. That would be a relatively short trial before we could submit anything. And so we haven't made a final decision, I guess, is a long answer, but that's -- there certainly is -- the FDA certainly is willing to look at our data with the modified analysis without requiring to repeat the trial.

Okay. Okay, great. And then maybe tag along the -- in terms of Japanese study, is that potentially in line -- on time for sort of a global filing? Or you think that problem will come after that you file for the U.S. and the Europe?

No, we definitely believe it is in line for a global filing.

We do have time for one last question from Eric Joseph with JPMorgan.

Just as it relates to the diagnostics and the services business, I'm wondering if you could just elaborate a little bit more on what opportunities you're seeing per volume growth longer term. Is there other opportunities for expansion of regional footprints or certain sort of particular opportunities within the current product offering or portfolio offering? And with it sounding like the genomics testing business being important part of the operational review process here, can you just kind of characterize sort of where you view GeneDx as a longer term -- as a -- I guess, how it makes up or what it constitutes services business longer term?

So this is Adam. I'll start off. So we certainly think that GeneDx is going to continue to grow at a much faster rate than the larger clinical lab business. We've seen double-digit growth throughout this year and last year in overall testing volumes, so that continues. And we continue to navigate the reimbursement environment within the genomics space. We'll continue to expect that business to grow and outpace the growth at the clinical lab. As far as opportunities, there's -- we're not going to go out and necessarily compete head to head on acquiring large outreach businesses. But we do think there are sizable pieces of business to be had outside of some of the hospital business, whether it be partnering up with independent physician associations or more regionalized ACOs. And we certainly think there are good growth opportunities for the clinical lab in some of the niche spaces. And we've had some recent successes in that space as well.

Okay, that is all the time we have today. Please proceed with your presentation or any closing remarks.

I just want to thank you all for participating, and we look forward to meeting up with you again next quarter.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines at this time.