OptiNose Inc (OPTN) 2020 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the OptiNose Q2 2020 Earnings call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Jonathan Neeley, VP of Investor Relations.

Good morning, and thank you for joining us today as we review OptiNose's Second Quarter 2020 performance and our plans for the year ahead. I'm joined today by our CEO, Peter Miller; our President and Chief Operating Officer, Ramy Mahmoud; our Chief Commercial Officer, Vic Clavelli; and our CFO, Keith Goldan. The slides that will be presented on this call can be viewed on our website, optinose.com in the Investors section.

Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements all. Statements that are not historical facts are hereby identified as forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements.

Additional information regarding these factors and forward-looking statements is discussed under the cautionary note on forward-looking statements section of the earnings release that we issued today as well as under the Risk Factors section and elsewhere of OptiNose's most recent Form 10-K and Form 10-Q that are filed with the SEC and available at their website, sec.gov and on our website at optinose.com.

You are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements during this conference call speak only as of the original date of this call or any earlier date indicated in such statement and we undertake no obligation to update or revise any of these statements. We will now make prepared remarks, and then we will move to a question-and-answer session.

With that, I will now turn the call over to Peter Miller. Peter?

Thanks very much, Jonathan, and good morning, everybody. We appreciate you joining us for our second quarter update. To start, I would like to commend and thank everybody in the OptiNose team for the outstanding job this quarter. We moved rapidly to adapt our business to an environment reshaped by the coronavirus pandemic and continue to drive the growth of XHANCE. While there will likely be continuing challenges related to COVID-19, our performance this quarter continues to reinforce my belief that this team is well on the way to delivering on the promise of XHANCE and I feel stronger than ever about our ability to build a very successful business.

Starting with Slide 3. We'll go into more detail in a moment, but I'd like to start by providing 5 key takeaways from today's presentation. First, we believe XHANCE demonstrated remarkable resiliency as we successfully adapted our business to the COVID-19 environment. XHANCE prescription volume continued to grow in the second quarter, which was impressive given the major disruptions to patient volumes and care pathways. Total prescriptions grew 84% year-over-year and quarter-over-quarter, prescriptions grew 11% and we continue to see growth in July.

For context, based on third-party data, we believe in the first 6 to 8 weeks of the quarter, physician offices experienced a 50% to 75% decrease in patient visits compared to pre-COVID-19 norms. And based on interactions with our field force and customers, we believe ENT and allergy practices were similarly impacted. As public health restrictions began to lift in late May, patient visits to ENT and allergy physician offices began to improve, but we estimate that the visits continue to be below pre-COVID-19 baseline, though with substantial regional variation.

In a few moments, I'll discuss more about what we did to adapt and how we will continue to achieve XHANCE growth moving forward in this environment. Second, we recently announced a co-promotion with kaléo. We're excited to partner with kaléo and leverage the strong relationships they have built with physicians in our target audience. Kaléo will promote XHANCE to an agreed-upon audience of office-based health care professionals, rapidly increasing both promotional reach and frequency for XHANCE.

The co-promote audience is large, including nearly 6,000 prescribers, about half of whom are incremental to the current OptiNose called-on universe. We expect kaléo sales representatives to train in third quarter 2020 and to commence in person detailing by October 1.

We've been impressed with the management team and business results that kaléo has produced and look forward to a strong partnership that we believe can have meaningful impact on XHANCE adoption.

Third, we are very encouraged by the significant growth in XHANCE market share that was achieved in the second quarter environment, our strongest share growth ever and believe this is indicative of resilient demand for XHANCE compared to the market as a whole. Importantly, there still remains enormous headroom for additional growth.

Fourth, despite the challenges of the COVID environment, we are maintaining our financial guidance for operating expenses and for increasing XHANCE net revenue per prescription for the remainder of 2020.

In addition, we continue to expect initial results from the chronic sinusitis clinical developmental program in the second half of 2021, which if positive, we believe will be a major driver of value for the company.

And fifth, we have a strong balance sheet with $125 million of cash as of June 30. And we believe that our existing cash plus additional funds that may be available under our debt facility with Pharmakon could fund operations until we have top line data from at least one of the CS trials expected in second half of 2021.

Turning to Slide 5. Turning to our results, I'd like to begin with market share as we believe it is the best way to illustrate the resiliency and disproportionate market demand for XHANCE through the second quarter of 2020 environment. COVID-19 challenged us to build new customer engagement capabilities and to revisit and refresh our commercial strategy in ways that we believe will position us to emerge from the initial phase of the pandemic with renewed brand and organizational strength.

From a promotional perspective, during the second quarter of 2020, we learned how to interact remotely when necessary, incorporating digital tools where appropriate with physicians in our target audience. This is important because we expect to leverage this capability even after the current pandemic is resolved. Importantly, our success with these tools increases our confidence that our business can continue to be resilient in the event of future disruptions.

Though broadly reduced patient flow creates a challenge, we also believe that COVID-related disruptions in patient flow and pathways for patient care, including an increasing number of doctor visits via telehealth and delays in elective surgery creates opportunity because XHANCE can help physicians manage patients in remote or delayed care scenarios.

To facilitate this, during the initial months of the pandemic, we launched the ASSIST program. The ASSIST program offered 0-dollar patient out of pockets for the first 3 fills as well as support through a hub for new commercially insured patients. We closed the ASSIST program to new patients at the end of June and returned to our previously successful co-pay support programs. We've received great feedback from physicians regarding the support we rapidly stepped up to provide to patients as the pandemic started.

We look forward to emerging from the early phases of the crisis and seeing the steadily growing recognition of the benefit of XHANCE in general and particularly as a bridge during care disruptions, help position XHANCE for continued growth.

Slide 5 illustrates this market disproportionate strength of XHANCE during the second quarter as reflected in share. Share is expressed as a proportion of all intranasal steroid prescriptions written by the physicians in our target physician audience. You can see that share increased from 2.2% in second quarter of 2019 to 5.6% in second quarter of 2020.

But what I would especially like to draw your attention to the sequential increase from first quarter to second quarter 2020. As you can see, in the face of the unusual circumstances and our responses during the second quarter, XHANCE share grew almost 2 full points over the first quarter, the strongest incremental growth we have achieved since launch. As patient volumes hopefully continue to return, we're focused on sustaining and continuing to build off this base.

Turning to Slide 6. In second quarter 2020, there were 18,700 new prescriptions for XHANCE, a 20% increase in new prescriptions compared to second quarter 2019. The COVID-19-related collapse in patient flow this year had an impact on new treatment initiation early in the quarter. And following that reset, new prescriptions returned to a strong growth trend and in recent weeks are approaching the prior all-time highs that were set in the first quarter of 2020.

Refills, supported by reminder programs managed by our preferred pharmacy network partners, and we believe reflective of patient outcomes producing persistence after initiation, are a major contributor to the resilience of XHANCE. In second quarter 2020, there were 43,800 refill prescriptions of XHANCE, a 139% increase compared to second quarter 2019. This increase reflects a continued trend we have seen over the past 18 months in the number of prescription fills per patient per year within our preferred pharmacy network where we can assess this using de-identified patient level data.

This number has steadily grown from 3 a year ago to more than 4 in recent months. This trend is very encouraging, and we believe is reflective of patient feedback. We have new patient survey data reinforcing previous survey data that suggests a strong majority of patients previously using other nasal steroids experienced symptom improvement with XHANCE, prefer XHANCE to other treatments and are net promoters of the product.

Turning to Slide 7. Pulling the new and refill prescriptions together, the total number of XHANCE prescriptions in the second quarter of 2020 was approximately 62,500. This represents 84% growth over the second quarter of 2019. What really stands out is how strong the year-over-year and quarter-over-quarter performances were for total and new prescriptions, given the significant declines in INS market volumes that were driven by the COVID-19 pandemic. These gains coupled with the INS market decline translated into the strong market share growth I covered a moment ago.

Turning to Slide 8. Breadth and depth of prescribing is measured by the total number of physicians who have patients filling XHANCE prescriptions increased over prior year despite the substantial decrease in patient flows that we discussed earlier. Regarding breadth, in second quarter 2020, approximately 6,209 physicians had a patient fill at least 1 prescription of XHANCE, an increase of 40% compared to second quarter of 2019. Regarding depth, the number of physicians who had more than 15 XHANCE prescriptions filled by their patents in the quarter has grown even faster with that number increasing by 97% from second quarter 2019 to second quarter 2020, with now more than 1,000 physicians in this segment.

While the strong growth trend in breadth and depth was blunted quarter-over-quarter during this spring, we believe that as patient volumes recover from the dramatic decline of second quarter, we will see a return to sequential growth in both breadth and depth. We believe the sustained trend of growth here illustrates, again, the resilience of XHANCE and long-term potential as we see even in the COVID-19 environment as an increasing number of called-on physicians became full-scale adopters.

Growing the size of this group remains a strategic priority for the company and is a significant focus of our commercial team.

In a few moments, I'll provide some closing remarks, but I'll first turn the call over to our CFO, Keith Goldan, for comments regarding our second quarter 2020 results and perspectives regarding our corporate guidance.

Thank you, Peter, and thank you to everybody joining today. Turning to Slide 10. As we reported, OptiNose recognized $10.3 million of XHANCE net revenue in the second quarter of 2020. As noted on prior calls, one of the metrics that we track is XHANCE average net revenue per prescription, which is calculated by dividing net revenue for the quarter by the estimated number of XHANCE prescriptions dispensed during the quarter.

We continue to believe this is a useful metric to evaluate net revenues generated per prescription. However, we remind you that this metric is subject to variability. That variability is a result of factors that do not necessarily reflect a change in the price that is paid for an individual unit of XHANCE, including ordering patterns and inventory levels for our wholesale customers and pharmacies that we sell to directly, utilization rates of patient affordability programs, the proportion of patients acquiring XHANCE through an insurance benefit and other factors.

Based on available prescription data purchased from third parties and also on data we received directly from our preferred pharmacy network, XHANCE average net revenue per prescription for the second quarter of 2020 was $164, a nearly $40 increase compared to $126 in the first quarter of 2020 and consistent with the expectation of improvement for the remainder of 2020 that we previously communicated.

Moving to Slide 11. This morning, we are maintaining all aspects of our previous corporate guidance. First, we expect that XHANCE net revenue per prescription will continue to improve through the remainder of 2020. The major factors that influence our gross to net deductions have not experienced structural changes relative to where they stood in 2019. Overall market access, which drives rebates, is generally consistent. And the terms of our base co-pay assistance program are unchanged.

In addition, the end of the short-term ASSIST program, which we believe supported our accelerated share growth through the disruption associated with COVID-19, should also contribute to improvement in the second half of 2020.

Second, for the full year of 2020, we expect total operating expenses to be in the range from $131 million to $136 million, of which approximately $11 million is expected to be noncash stock-based compensation.

Total operating expenses, excluding stock-based compensation, are therefore expected to be in the range of $120 million to $125 million.

Finally, regarding our clinical trials evaluating XHANCE as a potential treatment for chronic sinusitis, while ongoing changes and worldwide COVID-19 restrictions remain fluid, and add some uncertainty, we continue to expect top line results from both trials in the second half of 2021.

I'll now turn the call back over to Peter to give some closing remarks. Peter?

Thanks, Keith. Turning to Slide 13. Before opening the call for Q&A, I'll take a moment to discuss the OPN-019 program that we announced at the end of June. We've initiated this new program to take advantage of our proprietary nasal exhalation delivery system to enable delivery of an antiseptic to broad surface areas throughout the nasal cavity. The active ingredient of the broad spectrum antiseptic formulation we are developing has been shown in third-party studies to kill the virus that causes COVID-19 in vitro but being able to coat the entire high and deep surfaces of the nasal cavity has historically been a major challenge. We believe our EDS technology is uniquely suited to solve that problem in a way that standard approaches like nasal sprays do not.

COVID is caused by a respiratory virus that often affects people through the upper airways, which is why we use masks and social distancing to reduce transmission. Our EDS drug delivery technology is ideally suited to spread medicine throughout deep areas of a nasal cavity where the COVID virus appears to be multiplying and shedding. So we think this has potential to be a winning combination.

Because the planned components of this drug-device combination product candidate include both the active drug and delivery device, are currently commercially available in the U.S., we expect streamlined and accelerated development. We expect to have final formulation soon and once available, plan rapid in vitro experiments to verify antiviral activity. Interaction with the FDA to discuss an IND is planned shortly thereafter. Overall, we envision an accelerated clinical program, both because of the wealth of prior data supporting the product components and because of the pressing societal need for an intervention that fills the role OPN-019 is intended to fill.

We're committed to supporting the inexpensive initial stages of development with our current operating expense plan and are seeking grants, partnerships and other sources of capital to support further development.

To be clear, while we and other parties are excited by the potential of this new drug-device combination to help combat both the current pandemic and future public health crisis, our focus remains on growing XHANCE and building a leading ENT and allergy company.

Thank you. Now I'd like to open the call for Q&A.

(Operator Instructions) Your first question comes from Gary Nachman with BMO Capital Markets.

It's Rafay on for Gary. So net revenue per prescription was $164 versus $197 in 2Q last year. Can you help quantify the components of that delta? How much of a drag was there from the ASSIST program? And how should we be thinking about net revenue per prescription in the second half of the year relative to the second half of 2019?

Yes. Rafay, this is Keith. Thanks for the question. I'll take that one. So first, I want to say that the -- we started from a lower base in 2020 than we did 2019. The increase we experienced this year, as I mentioned in my comments, almost $40 compared to the increase we saw last year, the $177 to $197 was $20. And that was driven by a couple of factors. The lower starting point was driven by, as we talked about on our 1Q call, the annual insurance deductible resets that interacted in the early part of the year with the increase in the year-over-year proportion of our prescriptions that were refills. So that's why we set guidance for the first quarter of the range $120 million to $140 million.

I noted the improvement this year was substantially greater than what we had seen last year quarter versus quarter. And while the revenue per prescription is not back yet to the 2019 levels, the gap is closing, and we believe there are factors, including ones that are unique to this year, specifically around COVID that give us confidence to give the guidance that we gave, that we continue to expect the average net revenue per prescription to increase throughout the year. We expect the patients to continue to meet their out-of-pocket insurance deductibles. As that progresses through the year, that's going to contribute to less co-pay assistance that we contribute as well as the ending -- the sunsetting of the ASSIST program.

As Peter mentioned in his comments, that program provided 3 prescriptions at no charge to patients. That included all commercially eligible patients, whether they were covered or not. So while we expect to see some weight on our third quarter -- early third quarter average net revenue per prescription as the patients continue to fill under the ASSIST program, that the sunsetting of that in June is going to contribute -- one of the contributing factors to increases through the rest of the year.

Keith, I'd add a couple of things to that, which is we said historically that the -- this year, the 2 major fundamental things that drive gross to net deductions are not terribly different, meaning rebates and the patient affordability program other than the choice that we made for the ASSIST program in 2Q. And that explains a good bit of the differential year-over-year. And the balance, by the way, as you know, this average net revenue per prescription, there's a lot in that number, and it's influenced by things like shipments, which aren't necessarily truly reflective of the price. But all in all, we continue to feel real confident that we're going to grow share -- we're going to grow price over the year because, as I said, the structural components of our pricing really haven't changed dramatically.

Great. And then on the kaléo partnership, could you provide some color on the economics there and how those are calculated given some of the overlap in the physician call audience? How many of the kaléo reps will be promoting XHANCE?

Yes. I'll let Vic Clavelli, our Chief Commercial Officer, take a portion of that. We can -- Keith and I can fill in, but you can talk about the called-on universe, Vic, and then we can maybe get into the economics.

Thanks very much. So kaléo is going to call on roughly an incremental 6,000 physicians for us. About half of those are already within our called-on universe, and they're just going to increase the frequency at which we'll reach those customers. The other half are going to be new customers for us. And so they're going to allow us to extend the number of customers who think about XHANCE within their patient base and yes...

Regarding economics, the first group that Vic mentioned we're going to pay on a cost per call basis. We have built into kaléo's plan, however, incentives on sales force to make sure that the business is being driven in that universe as opposed to just relying on a pay per call. Because obviously, you have to align incentives to make sure we're growing the business. On the 3,000 of that are not called on, we're paying on a per script basis. So that is where there is complete alignment of the kaléo team to just drive incremental volume, and we're going to pay on a per script basis for what they drive.

Your next question comes from Brandon Folkes with Cantor Fitzgerald.

Congratulations on the quarter. Firstly, can you just elaborate a little bit on the patient funnel that you're seeing in July from both sides, firstly, in patients that are less willing to go and have surgery now in the current environment and may be managed on XHANCE? And then secondly, the process of getting these new patients into -- on to XHANCE? Just any color around that? And then secondly, if you can just provide some color around the scripts on nasal polyps versus the CS patients? And if you do have the data, is there a consistency around the population? And if it's so, split between those 2 populations as well?

Yes. I'll start, and Vic can add any color on patient flow. Brandon, I'll start with just the absolute number of patients, and we don't really have data on this. So I'm going to give it to you anecdotally. But we estimate that patient volumes are down, and it really varies geographically, probably somewhere between 0% and 25% depending on the office, depending on the geography. So I sort of start there relative to how July is sort of looking, if you will. What's interesting, Brandon, is if you look at a year-over-year category, the category is sort of back to where it was a year ago. So we're sort of thinking about it as if we sort of missed the season, if you will, because of the COVID pandemic. But it feels like category has reasonably normalized. And I just bring that up because if patients continue to return, there's a real potential for a tailwind in the back half of the year as you see the second season in late August, September, or October. We can't count on that, but it's something we're currently really watching. So that's sort of on a broad patient flow in script.

Now relative to your specific question on patients and surgery and delays of that effect, there really is variation there. In some areas, the surgery has really returned to pre-pandemic norms. We're seeing a fair amount of patients who are interested in surgery. However, there is no doubt there are a reasonable number of patients who do not want to get surgery right now. And physicians, some of the ENTs aren't -- don't have the same throughput they've had historically on the surgery front because of some of the procedures they need for cleaning in offices.

And as I stated earlier, Brandon, in the remarks, we think XHANCE is ideally suited for those patients. Because of the data we have on our efficacy that you're very familiar with, we bring enormous benefit to those patients. So we are obviously working -- our sales team is working with offices in ways that XHANCE can be used as a bridge, as we say it, for those patients. The process of getting patients on -- those patients on XHANCE. As you know, one of the benefits of our preferred pharmacy network is even if patients aren't coming into the office, there can via be telehealth, via prescription that's prescribed and it gets mailed directly to a patient's home. So in an environment where some patients may not be comfortable getting into a physician office is, as I said, we just think XHANCE is well positioned. And frankly, we think that's some of the reason we saw the very strong share growth that we had in the quarter. Vic, do you have anything to add on patient flows and things of that nature before we get into the split between nasal polyps and chronic sinusitis?

No, I think that was a real, nice summary, Peter. I mean we really saw the pandemic as an opportunity. Think about the patients that we were competing for when they are in the offices, and we looked at it as an opportunity to both increase our discussion about the use of XHANCE in that presurgical patient, perhaps and including those patients who were delayed to surgery. And we also looked at that as an opportunity, especially in the allergist community, to talk about the symptoms that patients are presenting with so that physicians could consider an empiric treatment decision when that was appropriate for their patients. And both of those allowed us to have XHANCE chosen in a broader range of their patients.

Relative to your last question, Brandon, on the split between nasal polyps and CS, it's really very stable. We have -- about 1/3 roughly of patients are diagnosed with nasal polyps. And as I think you know, Brandon, that data is -- it's not -- it's certainly not census data. It's a reasonable estimate. And then about 2/3 of patients outside of the polyp indication, and we don't see real dramatic changes in that split.

And then just with the growth in refills, are you seeing persistency creep up?

We have, Brandon. I mean it's a -- we're really encouraged on the refill front. As I said, steadily growing from about 3, 18 months ago. And I think we have really good data on this because this preferred pharmacy network is the significant majority of our business. We get de-identified patient data and it's truly census data. We know every single patient. We track them on a monthly basis in cohorts. And we've been over 4, up into the mid-4s, frankly in some of the months over the past several months.

So we're very encouraged by growth in refill. And it's clearly one of the major factors that allowed us to achieve the resiliency that we had during the pandemic. But by the way, I want to highlight, too, we're very pleased with new prescriptions. And as I mentioned in the script, we're actually back to reasonably the levels of new prescription that we were achieving, the record highs that we're achieving pre-pandemic, and it's obviously that's the base that we now hope to grow off of.

Your next question comes from Stacy Ku with Cowen.

Congratulations on the quarter. Another commentary on the strong refills. Can you talk a little bit more about that regional usage? Is it potentially related to the early pilot DTC programs? And then what are expectations for adding new patients given the modest recovery for in-house visits? And I have a few follow-ups.

Refill was really not impacted at all by DTC. I think the thing that's driving refill is 2 things. Number one, it's our pharmacy network, and our pharmacy partners do a really good job of refill reminders just to make sure that people are aware that they're eligible for a refill. But I think more than anything, Stacy, it's the product. And as I say, again and again and again, the one thing I know with complete certainty is this product really works. It's pretty substantially different than other products previously, especially intranasal sprays. And as you know, we have data that suggests we were comparable to surgery. So I think what the growth in refills, I think, is largely due to the product. That's how I would characterize that. Ramy or Vic, I don't know if you have anything to add to that.

We've said -- the comments about regional variation that we made in the prepared comments, we're primarily referring to the significant regional differences in how the COVID pandemic was affecting patient flows and not so much referring to differences in the regions where we did or did not have DTC.

Yes. Thank you, Ramy, for that. DTC, I'll just comment on it since you brought it up, is that we continue to be -- to evaluate DTC. We had to stop our DTC test a little bit earlier than planned. In the first quarter because of the pandemic, we made that decision. But we're very encouraged by what we're seeing in DTC. The thing is I've mentioned historically that we now know pretty firmly is that we can activate patients that we did a very strong job in the pilot markets of Hartford, Charlotte and Cleveland of activating patients, and we're sort of figuring out how we can make sure those activated patients get to the right offices, where we have to figure out how to expand coverage.

So I just have no doubt that DTC is -- there's going to be a role for DTC at some point in the life cycle of this product, especially as we expand the label. And therefore, broaden the target audience of physicians that we're calling on. We're just trying to figure out what the right time is to broaden at this point.

Relative to new patients, as I said, I was really very encouraged that if you look at the most recent weeks in new prescriptions, we're back to where we were pre-pandemic. And it's interesting, when this whole thing started, we started doing our modeling. And we sort of thought if we can get back to new prescriptions being by the end of July reasonably comparable to where we were pre-pandemic, we thought, okay, that's going to be a good base to grow off of, and that's where we are right now.

So what we're hearing from physician offices around the country is that -- and there really is regional variation here. But offices are pretty busy, the ENT and allergy offices. And I think the office -- the physicians have done an outstanding job, I think, of creating an environment which creates a safe environment for patients to come back to. Some are going to be reluctant but many are comfortable going back. And we -- I'm actually very encouraged, especially with some of the surges that you saw in some of the parts of the country. We obviously can look at prescriptions in some of those markets in Texas and in Arizona, and patient volume appears to be holding reasonably strong.

Got it. Great. And the kaléo promotion starting in Q4, just to clarify, would this be only for in-office visits? Or do they have a telemedicine presence?

It's all in-office.

Your next question comes from Randall Stanicky with RBC Capital Markets.

Peter, the stock is really -- story is all about growing prescription. So help us think about the timing and what we should expect from kaléo? I presume that you need to do some training and so this is probably more about looking at 2021, maybe early 2021. But help us understand what we should expect in terms of the opportunity to lift scripts from that partnership? And then the other follow-up to that is we're going into the summer, we're also in a pandemic, so it's obviously not normal times, but how should we think about seasonality? Recent prescription growth has been strong. So just in terms of expectations over the summer, what should we be thinking about with respect to that?

Yes. I'll start on kaléo and I'd like Vic to add color to it. Vic has really done a tremendous job working with the team at kaléo, and we're very excited about that partnership. And I think you know those -- that team has built a very strong business. And for 4 years has been calling on allergists with 1 product. So they have deep relationships with the target audience of allergists that they're calling on. So we're excited by not only what they've done, but the chemistry that's being developed between the teams.

Relative to impact, Randall, as we said in the prepared remarks, training is going to occur in the third quarter. Their season is really in the summer months for their EpiPen product historically anyway. So there, we didn't want to disrupt that, if you will. But we do think that heading into September, there should be good training that goes on...

AUVI-Q.

AUVI-Q. Thank you, Vic, I want to make sure I talk to the brand. They -- as I said, I think they have best-in-class, an EpiPen in the AUVI-Q product. It's really a very strong product. But their season is in the summer. So we don't want to disrupt that.

We wanted a partnership that's really designed to work for both parties. Their season starts to tail in sort of mid-September, that's when we'll start-up our training. And then we expect to have them hitting the ground in early October.

One of the advantages, it's hard for us to predict the impact, Randall. One of the things that AUVI-Q -- that kaléo brings to the table is deep relationship with physicians. So this is not like we're hiring some force that has to develop new relationships with docs. They have deep relationships with these docs. Now whether -- what that's going to produce, we'll have to see. But it's part of the reason we're excited about it. I mean I think it's going to be more of a 2021 impact, frankly, more than a 4Q this year. But as I said, I think they're going to hit the ground running in 4Q. Vic, do you have anything to add?

Yes. I mean, the way I would -- I think about it really in the 2 cohorts of doctors we're calling on. And those doctors that we're already calling on, they're going to help us get that message about XHANCE in front of them more consistently. And so we would expect that to have...

And by the way, just to add, Ran -- you've heard us talk, Randall, we are a promotionally responsive product. And the reason we did this deal is that when we get additional contacts with docs, we see response, and we believe this was an efficient way to get contacts versus things like sales force expansion. But Vic, please, if you want to talk about the second segment?

Yes. And in the second segment, we know it takes somewhere between 7 to 12, maybe, let's say, an average of 10 calls for a doctor to begin integrating XHANCE into his other practice. And so that's what we're looking at.

In terms of seasonality, Randall, I sort of alluded to this in my last remarks that it's hard to predict, honestly. But if -- I'll give you the facts that if you take last year's -- the category, so not our brand, obviously, but the total category of INS prescriptions and you do an overlay of 2020 versus 2019, what's interesting is that where the market is in the July time frame is about where the market was in July of last year. So one thing we think could possibly be happening is that we missed out, if you will, on the surge of patients you see in the allergy season, in the spring allergy season because people weren't willing to go into offices. And many of those patients, as you know, they don't -- they just forgo care. They don't show up again in the summer. They've sort of dealt with their issue despite not going to the doctor.

Now we don't know this, but I alluded to this, if truly the category is somewhat normalized in the July time frame, there certainly is a possibility that you could see a really nice tailwind, and you'll now see the normal sort of seasonal lift that you see in the August, September, October time frame. But I want to be really candid with you, Randall, that's hard for us to predict that. So I gave you the data that we have available that we're looking at, but it's going to be hard for us to predict. But you said the right thing, which is we are very focused on growing prescriptions, not only refills, but new prescriptions.

Fair enough. That's helpful. And Peter, just -- we didn't talk about business development so far on the call. Is that something that's even in your thinking right now? Or are you solely focused on growing XHANCE?

It is, Randall. I mean we've said all along that we -- our ambition is to build a leading ENT and allergy company. And we've always said, job one is to get XHANCE firmly established in the market. And we think we have some work to do there. We think we're well on our way to accomplishing that. But I think there's -- it's certainly in our thoughts to think about bringing products into the company, either via co-promote or what would likely be a co-promote. Or we become the commercial partner for the product, an in-licensing deal at some point in 2021. And obviously, there's a fair amount of activity on the OPN-019 relative to partnering.

Your next question comes from David Amsellem with Piper Sandler.

Just a couple. So first, on the reimbursement front for XHANCE. Can you just talk through what you think you need to do to improve access, if anything? And with that in mind, do you think you need to contract more aggressively going forward? I'm just trying to get a sense for what your long-term strategy is regarding reimbursement/ whether it's anything you need to do differently or stay the course? That's number one. And then my second question is related to the chronic sinusitis nonpolyp indication. You've talked in the past about some sales force expansion, perhaps a co-promote. Can you update us with your latest thoughts on what you would plan to do or what you're thinking of regarding accessing general practitioners more broadly to the extent you do have favorable data in nonpolyp patients?

Yes, I'll start on access. And I really like Vic's comments because, as I think you guys know, we are just delighted to have Vic as part of our team. Vic was running, he was President of Pfizer's Inflammation and Immunology business. So he has run big businesses, built several blockbuster brands. And I think he has perspective on the -- including perspective on access. But I'll begin, David, by saying, we have good access. And I don't know that we say that strongly enough. To have 75%, 80% commercial access at this stage of the commercialization of the product is very strong.

Now on the Medicare and Medicaid side, we're working to improve that. But we don't think, David, we're going to have to go the route of being more aggressive on rebates. We think we have a product that is recognized by the majority of the payers as bringing real value. But the fact that we've negotiated the contracts we have with the payers that we have suggest that. And on the couple that have are still outliers, if you will, in terms of contracting, we believe we're going to win the day on the product, not by having to give away rebates. But Vic, I don't know if you have anything to add on that.

So I'll just say, I've been really impressed. I think we have an exceptionally strong access team here, both in terms of our field-based national account directors who engage with the payers as well as with the pharmacy teams that support them. I think the truth is the value proposition for XHANCE is very attractive to payers. And it only gets more attractive as there are more biologic entrants into the space. The guidelines are pretty clear that prescriber should optimize topical therapy before they progress to surgery or biologic therapies, and we see a great opportunity to help them serve that need. And that's worked well for the brand.

It's interesting, David. We've talked about this historically. I mean our bigger challenge, honestly, on the access front is making sure physicians understand our access and affordability because there's just -- there's just this perception that branded products do not have good access and affordability. And we, in fact, have we think strong access and affordability. So I hope that answers your question.

On the CS trial, we don't really talk about the value of the chronic sinusitis indication that much. But as you know this, but as a reminder, the real value of that indication is significant broadening of the physician audience, which will bring a benefit of a substantial number of patients that are in that audience. And the numbers, as you know, about 10 million people being actively treated by any physician, about 3 million of those patients are in ENT/allergy, 7 million of the patients who have chronic sinusitis are in primary care. So we think arguably, the CS indication is going to produce more value than the nasal polyp indication just by the volume that can be generated in that segment.

Obviously, reaching 40,000 to 50,000 physicians, which is what's necessary to optimize the opportunity in the primary care segment, we think is probably best done via partner. And there are still a reasonable number of pharmaceutical companies in the primary care space, we think there will be good overlap or -- with products that they have that they're currently calling on from doctors who are already calling on who are seeing chronic sinusitis patients. So we are -- I'll just say, David, that we're sort of beginning that whole process of making sure we really understand the opportunity from a market perspective and beginning just initiating -- starting to have the conversations that are necessary to build towards that partnership.

Okay. That's helpful, Peter. And if I may just sneak in a follow-up. Would it be fair to say that with chronic sinusitis in the label, there would be significant expansion of DTC? And is that something that -- how have you contemplated that, I guess, is the question? And what kind of ramp in spend, I mean, maybe in a qualitative sense, would you expect, even in the context of a co-promotion arrangement?

Yes. I'm glad you brought it up, David, because potentially the greatest opportunity with the label expansion and reaching a lot of physicians where patients are potentially going to get moved into if they're made aware of the product. And as a reminder, by the way, 30 million people in the United States have chronic rhinosinusitis, 10 million are being actively treated, but the 20 million who are not being actively treated are latched. In other words, we know that they have historically been in physician offices, but they frankly have sort of given up because there just aren't options available that they feel are suitable for them. So the 20 million people is that DTC opportunity. And I feel -- my background as an OTC marketer, David, I think there is an enormous opportunity for DTC, particularly with label expansion.

And as I said earlier, what we've learned from our pilot in DTC, we can activate patients, even with a nasal polyp indication interestingly. So we've -- in the DTC, which you may or may not have seen, we appropriately have to say we have to talk about nasal polyps. There are some patients, when they hear that, they say, "Hey, that's not me." But I am reasonably certain. Actually, I am certain, David. If you say to people, "do you have chronic sinusitis, 30 million people raise their hand on that. So the ability to activate patients will only get stronger with our ability to communicate in the DTC advertising. And the holdback right now for us and I said this earlier, to make DTC an appropriate return on investment, we just have to make sure that activated patients turn into prescriptions by going to physicians who have awareness of the product. So that's what we're trying to wrestle through. But in a label expansion world, I think it's highly likely that DTC will be a major component.

I'm showing no further questions at this time. (Operator Instructions)

I guess with no questions, we'll close down the call. We thank everybody for joining, and look forward to our next update.

That concludes today's conference. Thank you for your participation. You may now disconnect.