Radius Recycling Inc (RDUS) 2018 Q1 法說會逐字稿

Good morning, everyone, and welcome to Radius Health's First Quarter 2018 Financial Results and Business Update. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to Elhan Webb, Head of Investor Relations at Radius Health. Elhan, please go ahead.

Thank you, Chelsea. Good morning, and thank you for all joining us on the conference call and webcast for Radius First Quarter 2018 Financial Results and Business Update.

Before we begin, I would like to remind you that statements made during this call that are not historical facts are considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factors section in your quarterly report on Form 10-Q and other reports filed within the Securities and Exchange Commission.

Any forward-looking statement represents our views as of today, May 10, 2018 only.

A replay of this call will be available on the company's website www.radiuspharm.com, and you can find the dial-in information for the conference call replay in today's press release, as well as on the company's website.

On today's call, we will provide you with a review of Radius Health's first quarter 2018 financials, an update on development plans for our pipeline and upcoming corporate milestones.

Joining me on the call this morning are: Jesper Høiland, President and Chief Executive Officer of Radius Health; Joe Kelly, Senior Vice President of Sales and Marketing; Amanda Mott, Senior Vice President of Market Access; Gary Hattersley, Chief Scientific Officer; and Pepe Carmona, Chief Financial Officer. The team will also be available for a Q&A session at the conclusion of our remarks.

I'd like to now turn the call over to Jesper Høiland, Radius' President and CEO, for an overview of our first quarter results for 2018.

Thank you, Elhan. Welcome, everybody, and thank you for joining us on the call today.

Today marks almost 1 year since TYMLOS was launched in the U.S. market, and I am pleased to be able to report on what continues to be a strong commercial launch. We have made substantial progress in expanding TYMLOS' market share in the anabolic market and supporting our long-term goal to become the leader in this space.

In the first quarter, TYMLOS achieved an average total market share of 13% in the anabolic osteoporosis market and reached first quarter sales of $14.5 million, representing a 90% increase over fourth quarter of 2017 sales.

Our sales growth and penetration in the anabolic market was driven by the expansion of our prescriber base and increasing market share with those physicians based on the differentiation of TYMLOS.

Our strengthened commercial access, combined with exclusive coverage with Express Scripts and achieving priority access to several important health plans also contributed to our successful performance in Q1.

Joe and Amanda will be providing more details on our commercial uptake and market access for TYMLOS later in the call.

I'm also extremely pleased about the significant progress that we have made in advancing our clinical pipeline in the first quarter.

After finalizing our development pathways for elacestrant and abaloparatide patch and signing a commercial supply agreement with the 3M company, we remain on track with our preparations to launch these global pivotal studies, elacestrant in the second half of this year, and our patch mid next year.

In the month of March, we also initiated the Phase III study for abaloparatide in male osteoporosis. If successful, we will file this trial as a part of an sNDA to seek to expand our TYMLOS label to include treatment for male osteoporosis patients.

I will now turn the call over to Joe Kelly, our Senior Vice President of Sales and Marketing, for an update on our TYMLOS commercial results.

Thank you, Jesper, and good morning, everyone.

I'm excited to present our commercial update for TYMLOS sales for the first 3 months of 2018.

So now turn to Slide 7. This slide shows growth by quarterly volume changes in the anabolic class.

Prior to the second quarter of 2017, the anabolic segment had been in decline for 5 years, and what we see now is high single-digit year-over-year quarterly volume growth since the launch of TYMLOS in May of last year. Our focused efforts across the commercial team in promoting TYMLOS has resulted in playing a significant role in the growth of the anabolic marketplace.

The next slide shows, since the launch of TYMLOS last year, we've seen solid growth trends, capturing 13% of the anabolic market share and 31% of new patient starts, both up significantly from the fourth quarter of last year. We expect that both the commercial and Part D books of business will continue to provide sustainable growth for TYMLOS, helping us achieve our overall market share goals, driving us towards a leadership position in the anabolic space with TYMLOS.

Please go to Slide 9.

Starting in January of 2018, we began to share with HCPs the complete data from the 3 treatment groups in the ACTIVE Phase III study, which was published in JAMA 2016. This information is consistent with the approved labeling for TYMLOS, and we are sharing it in accordance with recent FDA draft guidance.

Per the most recent HCP survey data, with inclusion of this information in our messaging, healthcare providers now recall nonvertebral fracture risk reduction as one of their top attributes for TYMLOS.

Next slide.

Approaching the 1-year mark of TYMLOS commercialization, we'd like to share with you key certain performance indicators, which show the underlying growth for the TYMLOS brand, which gives us confidence to attain our goal of reaching market leadership. There is a strong correlation between awareness, intent to prescribe and TYMLOS uptake. The source of this information is awareness, trial and usage survey data, which includes over 800 top anabolic prescribers in the mentioned surveys.

During the first quarter, awareness grows to 80% for TYMLOS, and intent to prescribe at 1 year exceeded teriparatide. And I would remind you that TYMLOS has been on the market for almost 1 year versus teriparatide's 15 years when considering this data. Both data points on this slide provides a large potential for further TYMLOS adoption going forward.

On Slide 11, we continue to see further evidence of TYMLOS uptake.

So far, the number of TYMLOS writers has more than doubled from December 2017 to March of this year. Among those TYMLOS prescribers, as you see on the right-hand side of the slide, the share of anabolic prescriptions has grown significantly year-to-date. As of March, TYMLOS is capturing nearly half of the new patient market share, with our current prescriber base that is expanding on a weekly basis.

Finally, our mission of becoming a leader within the anabolic space continues to be our #1 priority for TYMLOS.

Thank you.

Now I'll turn the call over to Amanda Mott, Senior Vice President of Market Access.

Slide 13.

TYMLOS continues to see uptake in managed care access as covered lives grows to over 263 million lives, with increases across all segments.

Since the launch of TYMLOS, we see a shift of the anabolic patient mix towards the commercial segment where TYMLOS' coverage in 12 months already exceeds teriparatide. With 88% of the U.S. insured population now having access to TYMLOS, we see market share growth in both the covered accounts, as well as spillover growth in noncovered accounts.

Slide 14.

For 2018 and 2019, we have a 3-pronged access approach: expand access, drive uptake and evolve the treatment paradigm.

First, we are focused on increasing access in Medicare Part D, with active engagement in the 2019 review cycle and additional off-cycle reviews for 2018. At the same time, we are actively supporting the conversion of this access to increasing the number of prescribers and the volume of prescribing.

Next, we are providing continued evidence of the clinical and cost-effective value of treating earlier to build bone, followed by maintenance treatments. At the Academy of Managed Care Pharmacy, AMCP, annual meeting on April 25, Radius presented 2 posters, supporting the differentiated value of TYMLOS and the paradigm shift.

Sequential therapy of TYMLOS, followed by generic alendronate, was shown to improve outcomes for a lower total cost of care than teriparatide followed by alendronate for the treatment of U.S. women at high risk for fractures. Also, sequential therapy with TYMLOS followed by generic alendronate was also shown to improve outcomes for a total cost of care compared to starting with generic alendronate for women at high risk of fracture.

On Slide 15.

As we execute on the access plan for Medicare Part D, it's important to note the CMS established timelines. Products approved after Q2, such as TYMLOS was in 2017, are not part of the standard Part D bidding process and therefore require off-cycle reviews. We are pleased to report that TYMLOS is already covered for 43% of lives through these off-cycle reviews due to its clinical profile, combined with its savings for both patients and the government in the catastrophic phase. This includes coverage on UnitedHealth, the nation's largest Medicare Part D insurance plan. We are currently in active negotiations with Part D plan sponsors as they submit their 2019 benefit designs to CMS for review and approval. This is an ongoing process as formularies and contracts are finalized with opportunities for additional 2018 off-cycle additions. Final formularies are published by the sponsors in 4Q to align with the open enrollment period for Medicare Part D patients.

We look forward to continuing to share TYMLOS wins once formularies and contracts are finalized.

I would now like to turn the call over to our Chief Scientific Officer, Dr. Gary Hattersley, for an update on our clinical pipeline.

Thanks, Amanda.

I'd like to provide a short update on our R&D pipeline.

We continue to be very encouraged by recent progress, with a significant focus on both life cycle management for TYMLOS and our 2 clinical stage oncology programs, elacestrant and RAD140, with the elacestrant Phase III study expected to start in the second half of 2018.

The next slide provides some additional detail on the status of our pipeline.

We recently initiated our male osteoporosis bridging study, which is a randomized, double-blind, placebo-controlled study that will enroll approximately 225 men with osteoporosis. The primary endpoint will be the change in lumbar spine BMD compared to placebo at 12 months and will also include a subset of patients that will undergo high-resolution CT imaging to provide information on both trabecular and cortical bone structure.

Pending positive outcome from this study, this data would be the basis for a supplemental NDA submission to seek an expanded TYMLOS label. We see this as an important study as part of life cycle management for TYMLOS, as men represent approximately 10% of the anabolic market.

We are also initiating a short-term clinical bone histomorphometry study in the first half of 2018 and believe this will provide important information to enhance our understanding and differentiation of the early anabolic effects of TYMLOS, with bone samples collected after only 3 months of treatment, where the relative contribution of bone modeling and remodeling to anabolic activity will be evaluated.

We remain on track for initiation of the Phase III study with our short wear-time abaloparatide patch, which we believe could provide an important alternative to daily self-injection that has the potential to enhance patient convenience. As previously reported, we met with the FDA in January to align on the development path, which includes a single pivotal noninferiority BMD study with patients randomized 1 to 1 to receive either abaloparatide by subcutaneous injection or the patch, where the primary endpoint will be change in lumbar spine BMD at 12 months.

Following completion of the commercial supply agreement with 3M, the current focus remains on manufacturing scale-up activities for both the patch and applicator, with CMC preparation and manufacturing of clinical supplies the key activities to support initiation of this pivotal Phase III study, which we expect to be in mid-2019.

We also remain on track to initiate a Phase III study for elacestrant in the second half of 2018. As previously guided, this study would enroll approximately 300 patients with estrogen receptor positive, HER2 negative locally advanced or metastatic breast cancer that will be randomized to receive either elacestrant or investigator choice of hormonal agent with PFS as a primary endpoint. And as a randomized comparative controlled Phase III, this study could have the potential to support global regulatory submission.

Our current focus is on study start-up activities, which include revision and finalization of the study protocol and statistical analysis plan, revised site selection and CRO engagement.

We look forward to providing more details on this study when initiated, which we expect to occur in the second half of 2018.

We're also making continued progress with the ongoing Phase I study with RAD140, a tissue selective androgen receptor modulator. Dose escalation continues in this study, which is enrolling patients with hormone receptor positive advanced and metastatic breast cancer. To date, there have been no reported dose-limiting toxicities, and the MTD has yet to be determined. We expect to provide a more detailed update on this development program by the end of the year.

I'd now like to pass the call over to our CFO, Pepe Carmona. Pepe?

Thanks, Gary.

I will briefly walk through the income statement and uses of cash in Q1 2018. And afterwards, as previously discussed, I will provide some basic metrics of commercial expectations we have for 2018.

For the 3 months ended March 31, 2018, Radius reported net sales of $14.5 million and a loss of $61.6 million or $1.37 per share as compared to a net loss of $56.9 million or $1.32 per share for the 3 months ended March 31, 2017. The $14.5 million sales figure represents 3 months of shipments discounted by gross net adjustments. Our revenue recognition policy is in line with U.S. GAAP, and it is described in our Form 10-Q that we filed today.

On the right side of the slide, we show the figures on non-U. S. GAAP basis, which exclude share-based compensation, intangible asset amortization and noncash interest from the convertible note. You can see the reconciliation between GAAP and non-GAAP in the appendix.

Radius on a non-U. S. GAAP basis for the period March 31, 2018

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a net loss of $50.5 million or $1.12 per share as compared to a net loss of $47.8 million or $1.11 per share for the 3 months ended March 31, 2017.

I would like to highlight 3 points.

First, our non-GAAP gross margin continues to be 92%, which includes a 5% product royalty. Second, the slight increase in R&D expenses versus Q1 2017 is mostly driven by a one-off income from abaloparatide SE and [VATs] that were refunded in Q1 2017. In Q1 2018, we are investing in elacestrant, RAD140 and the male osteoporosis study. Last, the SG&A increase is driven by the ramp up in support of TYMLOS commercialization, which in this period last year, we had approximately only 1 month with a full salesforce and support expenses. The company is fully staffed to manage TYMLOS commercialization and run our pipeline clinical programs.

On Slide 21, we show our 2018 cash allocation.

As we said to you before, we are allocating resources to drive TYMLOS growth and continue advancing our osteoporosis and oncology pipelines. Our cash, cash equivalents and marketable securities balance as of March 31, 2018, was $367 million. In the first quarter, we reduced our cash balance by $62.5 million. Most of the uses of cash were for TYMLOS commercialization, R&D external expenses related to the ramp-up of our pipeline and annual employee bonus payout.

We have cash inflows from TYMLOS revenues and income from options and warrants exercised in the period. We have sufficient capital to fund our U.S. commercialization of TYMLOS and advance our osteoporosis and oncology pipeline.

Moving to Slide 22.

Now before I share the indicators expected for 2018, I would like to briefly explain the patient model for TYMLOS.

In an anabolic therapy, it is very unlikely to have a switch after a patient is on therapy unless it is influenced by the healthcare insurance plan. Consequently, the growth of a brand is dependent on capturing new patients, which is represented in the slide by the light blue figures or NBRx. And they persist through the duration of the therapy to build the total patients and units sold in a specific period and total market share, or TRx. At the end, TRx is the number of pens we have sold to patients. And as of now, it is highly correlated to our sales in the market.

Finally, on Slide 23, you can see our 2018 expectations on key performance indicators.

We expect that the U.S. anabolic market will grow between 5% and 7% based on the growth we have seen of new patients starting anabolic therapy.

As Joe shared earlier in this call, we have already seen a slight growth of this market, with 1% and 8% growth in Q3 and Q4 of 2017. Hence, we have a higher growth in the first quarter of 2018 and slightly lower growth in the second half, as we will be growing over an already larger anabolic market.

From a TRx perspective, we expect to have an average market share between 19% and 21%. In Q1 2018, we had a 13% average market share, and we expect this to grow along the year, driven by an increase in the share of new patients starting therapy and maintaining patients who are already on therapy with TYMLOS.

I look forward to your questions at the end of the call. With that, I will pass the call back to Jesper for the closing remarks. Jesper?

Slide 25, upcoming milestones. As we approach the end of our presentation, I would like to remind you of our most important goals and upcoming milestones.

As I mentioned before, we have finalized our development pathways of both our abaloparatide patch and elacestrant after receiving regulatory feedback in the first quarter and signing a commercial supply agreement with 3M.

We were disappointed to receive a negative opinion from the CHMP on our European MAA for abaloparatide subcutaneous, and appealed their decision in April. We also initiated our male osteoporosis study in the end of March 2018.

We plan to focus our Investor Day on osteoporosis on June 8 in New York City and hope to see you all attending in person or listening to our webcast.

We expect to continue achieving our goals in 2018 and in driving TYMLOS growth in the anabolic market.

I would like to thank you all for your support to Radius Health and would ask Chelsea now to open the call for questions.

(Operator Instructions) And our first question will come from Jessica Fye with JPMorgan.

Just a couple on the guidance. I was hoping to get a little more color there. I guess can you talk about what this could imply or how you're thinking about the exit market share for 2018 for TYMLOS on either a PMOT, TRx or NRx basis? And also, just as we try to think about net price, can you quantify the benefit to 1Q from inventory?

Thank you, Jessica, for your question. I'll pass it over to Pepe who is sitting, more than ready.

Jessica. So first, on the exit market share, we're explicitly not trying to guide that one because as I say, it's highly volatile. Now I think it's pretty straightforward. The lines are pretty straight. And you can take where we started the year, where we are right now and what the average is, and I think that you're not going to be off there.

From an inventory perspective, the -- by the end of the year, our inventory position was pretty much where we want it to be. And by the end of Q1, it was pretty much there. Normally, the channel carry between 15 and 25 days. It varies very little. So half of the revenue is coming from that, is not much coming from the inventory.

Great. And you also made a comment about gross margin. Should we think of the current gross margin as sustainable? Is there any room for improvement as you continue to grow volumes? Or should we think of this as kind of the go-forward gross margin?

Yes, good question. And the reason why I highlight that it's exactly for this. It's 5% royalty, -- or sorry, out of the 8 points of cost of goods, 5 points is royalty, which is going to remain the same. So the opportunity will be only on 3 points, I wouldn't predict much of a change there.

Our next question comes from Ying Huang with Bank of America Merrill Lynch.

Maybe, Pepe, can you talk about the gross to net in Q1? And then what do you think the trend will be for the rest of the year? And then, secondly, based on your guidance on the script growth for the class and also your expected market share, I kind of like did my quick back on the envelope math to get to about $95 million for U.S. sales for TYMLOS this year. Maybe you can confirm whether that's kind of like the right ballpark you are talking about. And then, lastly, can you talk about the persistence and also compliance from the patients on TYMLOS since you launched about a year ago.

Yes, so 3 questions. Gross to net, net sales guidance and persistency models. So on the gross to net, normally, what you would expect is, at the beginning of the year, you have some impact from the coverage gap from the doughnut hole, and definitely, that was properly accrued for. I would expect that in Q2, you will continue to look a little bit on that, and then there's going to be spacing of gross to net as you go along. During the year, the -- it is very early to give any guidance on this because the number of CMS reports that we have received since launch are not so many, and it is difficult to predict how much the comorbidity of the drug in order to see how that's going to play out through the year.

For the net sales of the year, we are explicitly not providing net sales guidance. I think that the key question is going to be your gross to net assumptions. And what I can say is the range from a market size perspective is, I think, it's pretty much on spot. Our market share should help you predict the number of pens, so the number of pens is going to be pretty much defined with what we gave you. I believe that if you start doing the math on our reported net sales and number of pens that have been gone out, you will start getting roughly to the numbers of what the gross to net is. So that's as much as I can tell you. From a -- the last question?

Persistency.

Persistency. So far, remember, we have been only in the market for slightly less than 12 months. And this is a therapy that should last between 18 and -- to 24 months, so it is too early for us to predict the persistency. We do have some indicators, but they are very early. And as well, remember, this is all about adherence as well. It's the mix of persistency and compliance on the drug. What I can say, and to be a bit optimistic on this is, we're not doing price increases as competitors are doing. And so not a double-digit or twice price increases a year with out-of-pockets that get off the patient.

So that helps from a persistency perspective, as well as the -- being a pen that you just after the first usage, you just put it on your purse. It's -- you expect that, potentially, there's a better compliance ratio there. But and the persistency and compliance models from our competitors are all public. We can share them with you off-line. But right now, my guidance would be assume our competitors' adherence and -- right? And then, definitely as we go along and we learn more, we will give you some updates on how we see these metrics moving. Yes.

And our next question comes from Geoffrey Porges with Leerink.

Appreciate all the transparency so far. If you could just come and build our models for us it would be perfect. First, could you update us with your thinking on the timing and likely pricing and impact a generic teriparatide would have? Secondly, could you comment on the sustainability of the anabolic market growth that you are seeing now? Do you think that's a multi-year phenomenon or a temporary phenomenon associated with the launch of TYMLOS? And thirdly, could you take us through some of the detail, bridging between where we are now on the patch and the start of the clinical trial in the middle of 2019? Because it's certainly longer, so what are the things that you could update us on between now and then so that we know that that project is on track?

I can start out with the first answer to your questions, Geoff, and that will be on the price. It's very difficult to predict what sort of price that a potential generic is going to come into the market. With the timing of it, as we anticipated is would it be at earliest in August of 2019 that they will come in. But of course, it remains to be seen. They also have some regulatory hurdles that they still have to overcome in terms of immunogenicity and approval in that respect and get their products on to the market. So it remains to be seen.

In terms of guidance, we think we have taken a cautious guidance of giving you a 5% to 7% market increase. We think the increase is here to go -- to stay. But of course, it remains to be seen what happens in the marketplace from a competitive point of view. We certainly believe that there should be a much, much bigger number in terms of number of patients being treated on an anabolic. We hope to see a change of what we call the treatment modality from last resource to early usage, that's what we of course is out trying to communicate, because that's where the patients, the postmenopausal women will get the biggest impact, building the bone fast, and building it strong and then maintain it with generic alendronate is basically is the way forward that we're seeing it.

So it's, of course, difficult to give you, for all the obvious, good guidance on the market growth, but we certainly, after we now have seen since we launched TYMLOS onto the market, we have seen a consistent growth of the market from 1% to 8% on the basis of the 3 quarters that we have presented here. We are giving you the guidance that we certainly think that that's going to continue on until the year-end. We all know that there is less than 50,000 women that are getting treated. And also, that there, in reality, should be plus 800,000 women that is candidates for getting treatment. So all in all, we have a huge market potential that we need to work on. But the first and foremost and most important thing for us is to get to market leadership. When we get to market leadership, then we will also be the ones that shape the market and drive the market going forward. The last point, in respect to the patch, I will pass over to my colleague Gary, who sits here next to me.

Yes. Thanks, Geoff, that's a good question. So back in March, at the last earnings call, we did provide guidance on the start of that Phase III study, which is mid-2019, as well as some updates on alignment with the FDA on the overall development plan. Today, we remain on track with that timeline that we had previously guided. And so the key activities right now really relate to CMC preparations and preparations for clinical supply materials, both patch and applicator will enable us to start that Phase III study.

Of course, also, with the initiation -- the completion of the 3M supply agreement, Radius and 3M are working very closely together to move this program ahead as smoothly and efficiently as reasonably -- as possible. We're also working together to get a contract manufacturer to do commercial scale up, and this will enable us to be able to meet the timeline for a potential launch. So it's a very busy time. We remain on track for that study start and fully committed to making this successful.

Just one thing, Geoff. In a couple of weeks, as Jesper said, we will have an osteo R&D Day. We will probably provide a bit more updates there. And obviously, as we go along through the year, as soon as we see that there's more relevant information that give you updates on our development, we will share it with the market.

And Geoff, it was the 8th of June in New York City that we will give the presentation.

Our next question is from Chris Shibutani with Cowen.

I guess I'll shift it over a little bit to the pipeline with elacestrant. Gary, could you just help us understand how you guys were thinking about the study? I know that you'll provide more details later. But if we think about what kind of PFS differential that you think would be meaningful versus a comparator arm consisting of investigator choice, what kind of minimum threshold would you think that we should be expecting, as well as what do you think would be sort of exciting, clinically meaningful or compelling?

Yes. Thanks, Chris. That's a good question. So I think when we look at the literature and when we look at the data that we presented at San Antonio back in 2000 -- end of 2017 with elacestrant, I think we're able to get a good handle on how currently approved monoclonal monotherapies perform. We would certainly guide towards looking at the BELLE-3 study as being a good example of a third line patient population that is heavily refractory, that we think is a good analog for this third line patient population.

And in that study, there was a fulvestrant monotherapy arm. And there, we see a PFS of about 1.8 months and a response rate of approximately 1.2%. We think this provides actually a good point of reference for how a single agent hormonal monotherapy is performing, this lateline refractory patient population. If you -- if we look at that data in the context of what we've seen with elacestrant so far, I think we feel very encouraged. In December, we did update our data set with an ongoing study data set with elacestrant where we saw a 5.4 month PFS with elacestrant as a single agent in the lateline population.

And as a reminder, those are patients that had seen a variety of different agents. About 40% of those patients had previously seen CDK4/6 inhibitors. We obviously recognize the increased usage of CDK4/6 inhibitors becoming much, much more common. And so I think our study that has a good representation of those patients, I think it's very meaningful. And we have -- also had about 40% of the patients that had previously received fulvestrant. And also, of course, many of the patients, most of the patients had previously seen aromatase inhibitors and other -- a number of other targeted agents. So I think those data sets really put the elacestrant data in appropriate context and give us a frame of reference as to what we could potentially see as we move forward in clinical development.

Can you remind us when we might expect a next maybe additional update? Will we see any posters or any additional information at the upcoming ASCO meeting?

So we haven't provided any additional guidance on additional presentations. But as we have already guided, once we initiate the Phase III study in the second half of 2018, we will absolutely be looking forward to providing more detail on the study and on the development program.

And for combinations, can you add anything there in terms of what you're thinking?

Yes. Combinations continue to be a significant area of interest for us. We certainly recognize the potential of -- the ability to combine elacestrant with a number of targeted agents. There's been a pre-clinical proof of concept work done with a couple of different targeted agents at this point. And in each of those preclinical models, there's the -- we've shown quite nicely the ability to enhance the antitumor activity of elacestrant by combining with a second agent. So we certainly recognize that this is a very appealing and very interesting path to moving elacestrant earlier in the treatment paradigm and something that we are looking to pursue through partnerships and additional engagements.

Our next question is from Matthew Harrison with Morgan Stanley.

Just a couple from me. I guess, first, on net price. Can you talk about if you think there are any reasons that gross to net would get worse throughout the year? Do you think this is the lowest level for -- or the highest level for gross to net in the first quarter? And then, on your guidance. Can you just tell us what the 2017 full year market number is that you're looking for the 5% to 7% growth off of? And then, finally, on the third, can you just talk a little bit about what you're doing right now to be ready to start that study in the second half of '18? And what factors could push you to the beginning of the second half of '18 versus the latter half or the second half of '18?

Pepe will take the gross to net and I will talk about the 5% to 7%. And Gary will, of course, talking about the start.

Matthew. So I wouldn't expect that things are going to get much worse or bigger gross to net. There is going to be variability because as commercial things that go into gross to net, so the -- some things usually at the beginning of the year, you have coverage gap, and -- or when you go through the doughnut hole, that impact that. But remember, we are very early stage in the launch. A large portion of our patients come from new patients, and then they hit the doughnut hole as they go in. So is it going to get better? I wouldn't be that aggressive so far.

Sorry, if I could add just one small thing to it where which you have to keep in mind, that that is if a health plan accepts TYMLOS on to a patient, then -- and we don't have a contract with them, then they will buy it at a WAC price, whereas, of course, it will be at a price that we have agreed with them. So all in all, I anticipate that you should see it being flattening out or being at the level where we are seeing it right now.

Coming to the 5% to 7% growth, if you take the number of pens sold last year in 2017, that's the amount of pens that we anticipate to increase with 5% to 7% for the end of this year over the course of the year. So you're seeing, of course, you have seen the last 2 quarters going up with 8%, and then you saw 1%. We think -- and that's also why we are guiding the way that we are that since TYMLOS was not onto the market in the beginning of the year, you will see a higher percentage in the first half of the year, whereas in the second half of the year, you, of course, have to take into consideration that TYMLOS was available on the market. And Gary, will you comment?

Sorry, Jesper, can I just follow up?

Go ahead.

I guess what I was asking for is, what was the 2017 number of pens just so we understand what the value is that you're using to grow off of?

The PMOTs are -- were roughly 300,000 PMOT of pens. We can send you the exact number, just not to misquote what is in IMS. But it's basically IMS converted into pens.

Yes. And over to you, Gary.

Yes. So you had a question about the timing and activities associated with initiation of our elacestrant Phase III study. So we do continue to be on track as we've guided for a start in the second half of 2018. And the elacestrant Phase III really is the highest priority in our pipeline, so we are working very diligently to move ahead with the initiation of that study.

So just a comment on some of the activities associated with the initiation of that study. So we've changed our strategy as we described during the last earnings call from a single arm study to a larger randomized comparator controlled study. This entails some fairly significant, but actually fairly routine operational activities that need to be conducted as part of that change and transition. There are too many to really highlight -- to list them all in details, but just to give you some sort of flavor and some sort of sense, these include significant redevelopment and revision and finalization of the clinical study protocol, revision of the statistical analysis plan, selection of additional clinical sites, interactions with additional clinical investigators, as well as working closely with all of the vendors that are part of the clinical development plan to put this into action. So again, this is something that's -- it's a very high priority for Radius and something that we're working on very diligently and remain on track for initiation and what we believe is actually a very, very exciting and a very important study for us.

And your next question comes from Robyn Karnauskas with Citi.

This is Greg Harrison on for Robyn. So I see the elacestrant study is now referred to as a Phase III potentially registrational study. I think, previously, it was called a Phase II. Could you just talk about the reason for this change? And why you would consider it potentially registrational? And what needs to happen for it to be actually considered pivotal for approval?

Yes, absolutely. I can certainly comment on that. So previously, when we talked about the single arm study, that was a single arm study that had a response rate endpoint. That had the potential to achieve accelerated approval but would require a confirmatory study to achieve full approval. In that context, confirmatory study would typically be a randomized comparator control study with PFS as an endpoint.

In the change in strategy, our current proposed study is a randomized comparator control study with PFS as an endpoint, and PFS being an endpoint that's appropriate for full approval. So that's really the reason for appropriately defining this as a Phase III study that can potentially support -- pending a successful outcome of the study, defining this study as a study that could support registration, and therefore, a Phase III study.

Great. And is there a specific reason why you used the term potentially? Or is that just being conservative?

Just being conservative, obviously, since we don't have the results from this study in hands at this point. So just appropriately cautionary language, that's all.

Our next question comes from Mara Goldstein with Cantor Fitzgerald.

I have a couple questions. The first is just on the male osteoporosis study, what your realistic expectations about what that market potential is? And also, secondarily, what is the hurdle for efficacy in that population? And then I have some questions on financials, but we can do that after.

I will take the market potential. If we are looking at the stats today, we know that 1 out of 5 males will get osteoporosis. However, they are not getting the treatment to the same extent as we are seeing it. The market we estimate to be slightly above 10% in total in terms of males being treated. So on the clinical side?

Yes. In terms of the study itself, so the primary endpoint for the study is change in lumbar spine BMD at 12 months versus placebo. So there is a placebo arm in this study. It's a 2:1 randomization. So the objective is to achieve a statistically significant increase in lumbar spine BMD compared to the placebo group, so that would be the endpoint. When we look at other osteoporotic agents that have conducted studies in both males and females, we do see BMD increases between men and women that are generally comparable. So that obviously gives us an idea of the magnitude effect, what one might expect with an osteoporotic agent.

Okay. And then on the 3M arrangement, when do you anticipate starting to make payments to 3M? And when can we -- will we see that in the P&L? And then, secondarily, the company's discussed in the past the idea of reaching breakeven. And I'm just curious as to what the expectations on timing are that, given some of the change in some of the clinical trials in terms of size and scope? And if you can comment on that, that would be great.

Yes. This is Pepe, Mara. So first, let me address the second question first, the cash breakeven, because this -- we are being clear on this. So what we have financed for is TYMLOS commercialization. And from a cash to breakeven perspective, we haven't provided guidance exactly on timing, so or when that's going to happen, but with the current trend that we see, and if that one continues, we see a good line of sight to cash breakeven.

Now from the pipeline perspective, all the investments that we are making were a plan of the uses of proceed in the convertible offering that we did mid last year. So we are financing the transdermal patch program, elacestrant monotherapy study and life cycle management for TYMLOS, like the male study that we are running or histomorphometry study, and so on, so forth. What we are not financed for, and I'd like to be very clear on this, is we're not financed for is any earlier lines of therapy for elacestrant, so combination trials wouldn't be financed. And then if the smaller study of RAD140, which is also financed for the Part A, the Phase I Part A study, if we will need to progress on that one, that's not financed. Hopefully, that answers your questions.

3M.

On 3M, the 3M agreement is reasonably clear. We -- for most of the equipments, we a have pass-through that we need to pay for. And then there's some margin on the cost of goods. There is going to be investments then in probably most likely in the second half of this year. From equipments perspective, it can start a little earlier. We're obviously trying to accelerate as fast -- as much as we can the program. And during the first half of next year as well, and then we will start seeing more rather manufacturing type of expenses that are going to fall in R&D because of the stage where we are. There's going to be more on the clinical trials starting mid of next year when we get the first patient in.

And our next question comes Eun Yang with Jefferies.

I know you have talked about not providing sales guidance on the first quarter on the call. But it's not still clear to me the reasons that -- the reason is that, I think in the past, when we had a discussions, it was clear to me that you would provide the sales guidance once you have clarity, some clarity from the conversion from FORTEO under the Express Scripts deal. So is it fair to say that based on your discussion, that the reason why you are not providing sales guidance for this year is because of the variance in gross to net discount?

No.

No. There's several reasons which that one could be one. But what I think is more important for us in providing guidance is, this is a market that it's all about capturing new patients and is a market that has been declining over the last 5, 6 years. And I think that we need to start showing and feel very comfortable and committed that there is a trend that is changing in the market. We're capturing new patients that wouldn't have been captured before. We are capturing or we are activating prescribers that were not been -- that have left the anabolic category before, and that's why we're guiding that the market now is growing.

From a market share perspective, as I said, our persistency model in which you capture patients and you start building your base and the market share is kind of a snowball. You will see it growing as we go along, and we're very comfortable on getting to those levels of 19% to 21% that we said. But also, as Joe explained, in the places where we have activated prescribers, our market share is of NRx or number of prescriptions that those prescribers that are activated are putting in patients, we're closer to 49%. So it's a -- we feel very good about the trend. We are not going to provide revenue guidance. It's too early stage to do that. Hopefully, that answers the question.

Okay. Then are you planning to provide the guidance at some point this year?

We are not committed to that. We have never said that that would be the case. We always talk about leading indicators that would help the market understand where things are going.

And if I can just add, we feel that with the guidance that we have given on the market growth and the average market share for the year, that we have given or provided you with an insight that can calculate, give you a very good range of where we see the numbers for the full year. And the reason why we took the average of the year for -- is it's difficult to say, if it's year-end, is that the last day of the year, is that the last week of the year, is that the last month or quarter of the year? So we felt it was better to provide you with a number where you can see what is the trend line that we are having in front of us and thereby we would be able to help you. So that's -- with that in mind that we provided for the number.

And then, of course, the gross to net is something you will have to keep in mind that as we are moving into 2019, that's really where we will see the next big point for that, because that's where we are negotiating for the contract and market access of 2019, and that is taking place as we are speaking for vis-à-vis the Part D segment and for the commercial market that will happen over the summer. Nevertheless, keep again in mind, with the price point that we have picked, rebate is not really where you should be thinking of. In respect to where other companies are giving it, we have given a very, very responsible price to the market, and thereby, rebate is not really what we think that we should be negotiating with. We have given the whole thing upfront, you could say, by taking a different price point. I hope that gave clarity.

And then a second question is on the price increase that took place in February, 5.9%. What would be your net realized price increase from 5.9%?

Yes. We haven't provided a guidance on what percentage of the 5.9% goes into net. Obviously, nothing goes into net, it goes into gross to net. So -- but I would say a large portion of the 5.9% will go to net, at least 50%, let's call it. And what happened there is that when you have a price increase, there's several things that in the contracts that are all kind of interlinked between each other. You have things that kick in like administration fees or things that connect one contract to the other that start taking -- not rebate, but under contract kind of, that start increasing your gross to net and that doesn't pass through the net.

And I'm showing no further questions at this time. I would now like to turn the call back to Jesper Høiland, President and CEO, for closing remarks.

Thank you very much. Thanks to everyone for your interest in Radius Health. Maybe we weren't clear enough upfront, but we also had Amanda Mott and Joe Kelly here with us. We have decided that the first quarter focus should be on the commercial led by Joe Kelly. He's also going to join us for the road trip that we are going to make. We are going to be in New York tomorrow, and we're, of course, also available for calls. Should you want to give us a call, you have Elhan's contact details, so she will be able to provide that sort of linkage to us should you have any further questions that you would like us to elaborate on.

But as for now, I can only say that we are pleased with our first quarter result. And as we used to say, 1 down, 3 to go, then the year is done. There is a lot of things taking place at Radius as we are speaking, and we certainly look forward to meet with all of you in the future and discuss that further. So thanks from our end, and look forward to see you and talk to you in the near future. Thank you.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.