Radius Recycling Inc (RDUS) 2021 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Q1 2021 Radius Health, Inc. Earnings Conference Call. (Operator Instructions) As a reminder, the conference is being recorded.

I would now like to turn the conference over to your host, Mr. Ethan Holdaway, Head of IR.

Thank you, and hello, everyone. Thank you for joining us today. Our press release and presentation that we'll use to guide the discussion can be found in the Investors section of our website. A replay of the call will also be available on our company website 3 hours after the call. Before we begin, I'd like to remind everyone of our safe harbor statement on Page 2.

This presentation includes forward-looking statements and non-GAAP financial measures. You can find the reconciliation of GAAP to non-GAAP at the end of the finance section of the presentation. Our most recently filed 10-K and subsequent filings, identify factors that could cause our actual results to differ materially from those indicated by the forward-looking statements. Any forward-looking statements represent our views as of today only.

On today's call, Kelly Martin, President and CEO, will start with his opening comments. Jim Chopas, our Principal Finance and Accounting Officer, will then provide a financial update. Sal Grausso, Chief Commercial Officer, will follow with an update on the TYMLOS commercial business. Chhaya Shah, our Chief Business Officer, will provide a clinical and regulatory update on abaloparatide; and Liz Messersmith, Head of our Orphan Business Group, will finish with a brief update on RAD011. We will then open the call up for questions.

I'd now like to turn it over to Kelly.

Thank you very much, Ethan, and welcome, everybody. Thanks for taking some time this morning -- this Friday morning for our Q1 update. As Ethan said, you'll hear from the leadership team on various parts of the business. With regard to RAD011, Liz will give you a brief update on where we stand with that molecule and program. In future calls, you'll also hear from Rupert Haynes, who's accountable for the franchise, as we move that forward.

On Page 4, from an opening commentary point of view, I wanted to emphasize a couple of important things. We run the company based on the assets that we have. We have 3 large and identified assets. Obviously, abaloparatide, elacestrant and now RAD011.

For abaloparatide, the SC business in the U.S. is an excellent business with high margins and a lot of upside. Sal -- you'll hear more from Sal about the commercial pivots towards fracture patients. We believe that there's good upside with that business.

In addition to that, there's 3 other areas for upside. We will, obviously, have the patch readout, which you'll hear from Chhaya on in the second half of this year. We have the male readout also the second half of this year. And you have an international opportunity to globalize the molecule into other markets. We've made progress in Japan and Canada, and we hope to incrementally make more. I would characterize, and we characterize all 3 of those buckets as additional upside to the asset.

Elacestrant is now partnered with our good partner, Menarini Group from Italy. That transaction, in my opinion, last summer, was the most important thing over the last 12 months that we got accomplished. We like the space -- meaning, the breast cancer space. It is a crowded and sophisticated space. We do have with Menarini, the lead molecule from a time line point of view, and we would also characterize that data readout as upside to us, given the transaction that we did last year, which took out the event risk for us.

Last but not least, with RAD011, it was an asset that we were able to acquire at reasonable acquisition cost. It's an asset that has a multiplicity of applications, which you'll hear from Liz about briefly. Our initial focus is Prader Willi.

There's activity going on in additional potential orphan indications. We view that asset -- it's an asset that could have high optionality that would be easily absorbable from a P&L point of view. So that's the way we think about the portfolio of the current assets that we have.

From a P&L point of view, we continue to focus on the operating leverage of the company. We believe there is significant operating leverage within the company. And our focus, in addition to the portfolio approaches I described above, our focus also is resolute on the P&L, the balance sheet and then the value drivers of both the P&L balance sheet and the portfolio as they are interlinked.

More tactically for 2021, as we've said before, our areas of focus are 5 main ones: grow TYMLOS U.S.; execute abaloparatide with readouts in the second half of the year for both the ATOM study and the wearABLe study; expand where we can and where it makes sense, the abaloparatide footprint and lots of discussions are in plate; achieve elacestrant Phase III readouts with our partner, Menarini Group sometime in the second half of the year.

And importantly, with our new asset, the FDA meeting upcoming in June, post that meeting, hopefully, we'll have a path forward on a Prader Willi protocol and pivotal trial. That will be our main focus. And then subsequently, we will begin to look at other orphan diseases that might make a lot of sense with the same molecule.

So that's the way, philosophically, we run the company, portfolio, asset based, time lines, risk reward and how it all fits together. And just to repeat my commentary, with abaloparatide, international male and patch are all upside. SC is a business from a commercial execution point of view, which we believe has upside. Elacestrant, with our transaction of last year, we took out the downside. And the event -- and then positioning properly RAD011 for high option value would be an important part of the future value consideration of the company.

I hope that's helpful to all of you as we think about the company. And with that, I'm now going to turn it over to Jim Chopas, our Principal Finance Officer, and he will walk you through the Q1 financial results. So Jim?

Thanks, Kelly. Moving on to Slide 6. Our Q1 results continue to demonstrate progress toward our 2021 goal of positive earnings on an adjusted EBITDA basis. Our net loss decreased from $37.7 million in Q1 2020 to $15.7 million in Q1 2021. The improvement was the result of increased total revenue, improved sales productivity, SG&A reductions and the exit from oncology.

Total revenue improved by 17% year-over-year from $48 million in 2020 to $56 million in 2021 as a result of an increase in license revenue, partially offset by a decrease in TYMLOS revenue. The $11 million increase in license revenue was primarily from the approval of abaloparatide for the treatment of osteoporosis in Japan, which earned a milestone of $10 million, which was settled in April.

The increase in license revenue was partially offset by a decrease in TYMLOS product net revenue, which was down 6% year-over-year. The decrease was the result of reduced unit volumes from inventory channel destocking plus volatility in patient activity as a result of COVID-19 during 2020. There was a partial offset from an increase in net price.

We continue to show strong new patient growth in Q1, which Sal Grausso will discuss later in the presentation and reiterate our full year revenue guidance of $250 million in revenue.

Research and development cost decreased $7.4 million on a non-GAAP basis, primarily as a result of the exit from oncology and related reimbursement of costs resulting in a $10 million reduction in oncology costs. In addition, TD research and development was approximately $3 million lower due to the timing of development activities.

The cost decrease was partially offset by a $5 million payment due to Ipsen in connection with the approval of abaloparatide in Japan and $1.7 million of spending on our RAD011 program, which was initiated this quarter.

Selling, general and administrative costs decreased by $5.3 million or 16% on a non-GAAP basis as a result of our efforts to reposition the selling, general and administrative cost structure. Increased commercial productivity, combined with the pivot to postmenopausal high-risk fracture patients, together with reductions in corporate positions, allowed us to decrease compensation costs by approximately $3.5 million and professional service fees by $2.2 million.

The cost reductions provide the company with significantly improved operating leverage, which will be beneficial throughout the remainder of the year as revenue increases.

Moving on to the next slide. Our improved operating leverage and the refinancing of our senior debt facility has led to reduced cash burn. Our cash burn was 0 in comparison to Q4 2020. The term loan refinancing with MidCap added $13 million to our balance sheet, net of expenses. With significant operating leverage and continued improvements in profitability, we believe we are positioned to grow the company without the need for dilutive capital.

Moving on to the next slide. We continue to reiterate our full year guidance of $250 million in net product revenue and $10 million in adjusted EBITDA. We believe the growth in TYMLOS sales, combined with improved operating leverage will allow us to fully fund our strategic investments in 2021.

Moving on to the next slide. Our balance sheet continues to be strong with $115 million of cash and investments. As noted in our March 3, 2021 press release, we entered into a $175 million financing transaction to create a flexible debt structure with a more balanced mix of secured and unsecured tranches by repurchasing $112 million of the 3% convertible notes due September 1, 2024, which represents approximately 37% of the outstanding 2024 notes, and eliminating 2.3 million shares of potential future dilution upon conversion of the notes.

As a result, our unsecured convertible notes payable with limited prepayment options was reduced from $305 million to $193 million. Our term loan, which can be financed -- refinanced at any time was increased by $138 million. As noted previously, the refinancing added $13 million in cash, net of expenses and accrued interest to the balance sheet.

Please note that we early adopted ASU 2020-06, Debt effective January 1, 2021, which simplified the accounting for our convertible notes. As a result of the adoption, amounts related to our convertible notes that were previously recorded as a component of equity were eliminated as of January 1, 2021.

Moving on to the next slide. Our GAAP to non-GAAP reconciliation highlights the changes in non-cash interest as a result of the adoption of ASU 2020-06, as well as the debt refinancing charges, partially offset by the gain on extinguishment of debt.

With that, I'd like to turn over the presentation to Sal to give an update on our commercial business.

Thank you, Jim. Good morning, everyone. On Slide 12, I talk a little bit about new patient starts. As we previously communicated, we have the entire organization laser-focused on our new patient starts on therapy. In March -- we ended the quarter -- the first quarter strong. In March, we had 1,723 new patients on therapy, which was a 14% increase versus the prior 4 month averages, which led to a strong quarter-over-quarter growth, where we grew 14% in new patient starts in the first quarter '21 versus the fourth quarter '20.

On Slide 13, 2 topics I'll provide further commentary on. We're very pleased to announce that on May 1 of this year, 2021, that Humana has decided to add TYMLOS to the formulary of their Medicare Advantage plans. That will have the impact on approximately 5 million beneficiaries. It gives us an opportunity to have instantaneous access to patients or patients having access to TYMLOS at did not previously have access through Humana Medicare Advantage.

With that change, our increase -- well, we have an increase in our coverage for Medicare Part D from 83% to 91%, and also first line postmenopausal osteoporosis patients -- our first line -- but those that have a history of fracture has increased from 77% to 78%.

We continue to focus on the patients that have fragility fracture and the HCPs that treat fragility fracture that have underlying postmenopausal osteoporosis, we are pleased with our progress in this shift in strategy.

In Q1, our new patient prescribers: 42 of the top 50 of those prescribers were either orthopedic or specialist bone accounts. And that group of 42 actually grew new patient starts 26% versus the overall growth of 14% for total prescribers. In addition, we added over 100 new bone-focused prescribers in the first quarter. I look forward to hearing your questions.

I will now turn the call over to Chhaya for a clinical and regulatory update.

Thank you, Sal, and good morning, everyone. I will cover, as Sal mentioned, the clinical and regulatory progress we've made to date on Abalo program. We remain totally focused on delivering our top line results for the second half of 2021 for both Phase III trials, as Kelly mentioned.

The ATOM trial to add the male indication for TYMLOS and the wearABLe trial to add our new transdermal system, the patch program. For the transdermal product, we have proven in a clinical trial that our drug product used in Phase III is bioequivalent to our sterile drug product that is manufactured now at our final commercial facility.

Due to the success of the bioequivalent trial, we now have introduced commercial equivalent sterile drug product into our Phase III trial. This is all in agreement with our FDA alignment. So it's very good news for aligning the bioequivalence criteria.

For our SC TYMLOS product, we have successfully completed the formative human factor study, which now includes men and as well as women to confirm that our appropriate instruction for use and overall use of the product. We anticipate including this data into our potential male sNDA submission.

With the above successful activities, we are positioning ourselves to create a high-quality regulatory submission, assuming top line results are positive.

We've also made progress in our international space. First, I think, Kelly mentioned earlier, that we announced that our partner Teijin in Japan has achieved regulatory approval for Ostabaro. This is an important first step in globalizing abaloparatide franchise, a big achievement, and we have an effective partnership between Radius and Teijin.

Second, we've made progress in European filing by submitting our letter of intent in March to CHMP to target our submission to EMA in fourth quarter of this year. Additionally, we are in discussion at various stages, early and some advanced, with multiple regions for partnership to expand the abaloparatide footprint.

Overall, I think we're making good progress on all fronts with the Abalo program.

And with that said, I will hand it off to Liz Messersmith, who will walk us through the RAD011 program. Liz?

Thank you. Good morning, everyone, and thanks, Chhaya. So on Slide 17, I just want to provide you a brief update on where the RAD011 team is working and focusing, and that is right now on the Prader Willi syndrome program.

As Kelly mentioned, we do have a Type C meeting scheduled with the FDA that is scheduled to occur on June 16. And in that meeting, we will be presenting our clinical development plan as well as nonclinical appropriateness for the program.

In preparation for that meeting, we have been incorporating feedback from key opinion leaders as well as advocacy and foundation groups into our overall development plan. Based on the feedback, we are assuming that we'll be in a good position to start our global pivotal trial in Prader Willi in the second half of 2021.

What's most exciting for us is that we've recently received approval for oral presentation at the upcoming PWSA/USA conference in June to present the previous Phase II data. That data will be presented by one of the former PIs from the Phase II study, Dr. Lynne Bird, and that will occur on June 23.

In parallel to this activity, we have ongoing efforts to look at the orphan pipeline, the additional indications and continuing to build out the operational base and talent of our team. As Kelly mentioned, Rupert Haynes is leading our efforts to identify additional orphan indications that would be a natural expansion of the cannabinoid RAD011 asset. We expect to have these plans finalized in the second half of 2021.

We're pleased to announce that we've hired recently, Venkat Goskonda, who has over 22 years of expertise in pharmaceutical science with specific emphasis in the cannabinoid area around formulations and delivery systems.

We are continuing to build out a strategy for global and regional opportunities, not only for Prader Willi, but additional indications of interest. And our supply chain and CMC progress with our partner Benuvia manufacturing as being managed by Chris Wilson to be able to ready our program and support our clinical trial initiatives in Prader Willi by end of year.

So with that, I think that is our update on Prader Willi and where we are with the RAD011 program, and I'll turn it back over to Ethan.

Thank you, Liz and team, for all the updates. We're now going to open up the call for questions.

(Operator Instructions) Our first question comes from Corinne Jenkins from Goldman Sachs.

So you all talked about the mix of orthopedics and bone specialists in that top 50 prescriber base is 42. How does that compare to maybe when you started this strategy or any time point in the past year or so?

Yes, Corinne, this is Kelly. Thanks for the question. I'll give you a couple of comments and then Sal can give you a deeper dive. The original marketing and sales strategy for the company was really based on sort of mirroring, if you will, the FORTEO sales and marketing footprint which, I think, from a launch perspective initial years was probably completely logical.

And as you can imagine, the Lilly sort of footprint was very dispersed and diverse and included primary care over -- or probably overly included endocrinologists, and so that was the way things started. And Sal, with his team have kind of done a pretty significant sort of hard ride into making sure that we get to the bone specialists. And so that's sort of a backdrop and maybe Sal, you can comment to Corinne on some of the specifics.

Yes. Yes, just to further add. I think when we -- before we started this we looked at our prescriber mix and we realized that we had a smattering of metabolic bone and orthopedic specialist in the top. And we realized that those were the most productive accounts, because we knew that they saw a high flow of patients that had fragility fracture. So we definitely expanded that.

And I would say that we definitely see a cycling out of some of the general med, rheumatologists, endocrinologists in that top 50 and the cycling in of new orthopedic specialists. They see such high patient counts, if you turn on the new office -- which isn't easy, it requires a lot of hard work -- they quickly spool up in terms of new patient starts.

And then maybe separately, can you talk about some of the feedback you've received from KOLs and patient advocacy groups as it relates to how you're thinking about the Prader Willi trial design?

Sure, that would be great. Liz, why don't you take that, obviously?

I'm sorry, Kelly, my system just cut out. Could the question be repeated?

Yes, the question -- yes, sorry, Liz, the question from Corinne is, some of the feedback and input we got from some of the KOLs with regard to the Prader Willi indication, trial, previous learnings from other participations, et cetera. So just some of the specific feedback we've gotten, I think, would be helpful.

Yes. That's a really great question. Thank you very much. So in the KOL feedback, what we've learned is hyperphagia is absolutely one of the key criteria that patients and families and physicians are trying to manage within Prader Willi. And that instrument around the HQ-CT, which is the validated instrument that is recognized by regulators is the key instrument by which that hyperphagia is measured.

Now there are some challenges with that instrument as it has been around for a while, and there have been behavioral modifications that are implemented in the care of these patients that makes the administration of that instrument a little more difficult. So we'll be talking with the agency about a couple of questions, in particular, on the instrument and our thoughts on how we can still utilize that instrument in an effective way. So that's great.

And then, I think, the other piece that we've learned from these inputs is -- there is a huge unmet medical need for this population, and the population overall is very interested and supportive of new therapies to address their needs, all the way from the advocacy groups to the physicians treating these families. It's just quite impressive at the level of organization, and they've all been very engaging with us to date as we get up to speed on how we advance the program.

And I would just add to that, Corinne, that from a regulatory point of view, this particular disease, certainly, has the attention of the highest levels within the neurology area.

Your next question comes from Geoffrey Porges from Leerink.

I appreciate taking couple of questions. First, could you remind us of the terms of your collaboration with Teijin in Japan? So how you will get paid for that? And then could you characterize the size of the opportunity there? And related question, will your partner to commercialize in Europe? And what terms would you advise us to expect? I mean I know it's sort of open there right now.

And then lastly, could you go through again the puts and takes in the reported revenue in the U.S. for Q1, just for TYMLOS. It sounds though there were quite a few moving parts and adjustments, and I'd love to know what the net price trend is and whether that -- what that's going to look like for the rest of the year?

Okay, great. Geoff. We'll turn to Sal and Jim for the third of your questions. On the first 2, I'll take -- in fact, sort of frame it out for you. The answer to your Europe question is, yes, absolutely. We would partner the asset -- we would partner the asset out. This is, obviously, for the SC product. On the heels of that, we have a patch product. So you can envision that the discussions are not just SC, but sort of SC plus other alternative delivery opportunities.

As we've looked at Europe, and it's a bit premature to kind of get involved. We've had some preliminary discussions, but as would be totally logical, any potential European partner would like to see where we get to from a regulatory point of view, which is quite a ways out. As you go through the time line of what Chhaya talked about, in the second half of '22 -- assuming we file in the fourth quarter of this year, the second half of '22 is when we would have regulatory clarity.

So sometime over the course of fourth quarter this year, first quarter next year, we would then be able to have a deeper dive with regulatory and with the potential commercial partners. It would look like any standard -- [bug] standard presumably something upfront milestones and royalties that are reasonable to us and a reasonable to a partner. We view it as all incremental upside for us. The pricing construct, as you would be well aware, Europe is very different.

We're thinking -- just thinking out loud, and Chhaya can comment perhaps where we're thinking about narrowing our focus to more fracture patients or high -- super high-risk patients as opposed to the sort of generic all-comers in osteoporosis, we think that can be something that's interesting. So it would be an upfront and some milestones, and to be determined, I would say, over the next 6 to 9 months. But we have had some discussions, but not business. It's not term discussions yet.

With regard to Teijin, Jim, you want to -- Jim go through the specifics in addition to the upfront that we got in the first quarter?

Sure. Sure, Kelly. With regards to our Teijin agreement, we have regulatory and sales milestones of up to $40 million, $10 million of which we received in April, which we recognized in our Q1. In addition to that, we have a fixed low double-digit royalty on net sales of the abaloparatide in Japan.

And the Japan market, Geoff, as you would be well aware, is the largest -- currently, the largest anabolic market. The estimates of top line revenue in anabolics in Japan is somewhere in the high $2 billion to low $3 billion. Teijin is an excellent partner, and I would say, resolutely focused on launching abaloparatide. So from a cash flow point of view, once launch occurs, presumably, it could be a pretty interesting high-margin cash for us.

And last but not least, Sal, the puts -- as you said very well, Geoff, puts and calls. I would just say, first and foremost, as I'm sure all of your other companies are, the 2020 with COVID had so many things going on with regard to patients' activity, HCP activity. And so there's a lot of noise and all that stuff. But Sal, why don't you go through with Jim some of the details that would be helpful to Geoff for TYMLOS U.S. as far as the variability?

Absolutely. Jim, why don't you go first and kind of just talk through the numbers, and maybe I'll provide some commentary on each of those parts from a commercial perspective.

Certainly. Thanks, Sal. In terms of Q1, we have our natural seasonality, as we had mentioned in our last call, where typically Q1 is faced with some challenges with the resetting of deductibles, resetting of the coverage gap. To some degree, earlier in the year, we have increased co-pay assistance as people are working through their deductibles on high deductible plans. We traditionally have seen it in terms of our history that there's usually a Q4 to Q1 challenge inherently.

On top of that, we had some challenges where given kind of the duration of therapy that some of -- we do get some impact from 2020 that rolls forward and impacts us during the first quarter. So we felt some impact from some variability in 2020 as we had earlier mentioned. So at a high level, it was something that we see as transitory -- we believe is transitory, but partially due to seasonality and partly due to some of these transitory factors.

Go ahead, Sal. I think -- go ahead, Sal, some comments from here would be helpful.

Yes. I will just add, the first quarter was an interesting quarter, I think, as Kelly mentioned, for the whole industry. I think some of those -- that seasonality that we talk about that is seasonality that's related to change in coverage here for patients and kind of payer pressures and out-of-pocket cost is becoming more significant for -- across the industry for the first quarter.

I would say that, as we said earlier, our equation is simple. Our demand is -- new patient demand, which we said is 14% higher, plus continuing patients gives us our overall demand. So I think a little more color on the continuing patient is that COVID -- post COVID with some of our lowest new patient start cohorts that we've experienced. And with -- that kind of catches up and creates a lull in the continuing patient pipeline. So that's why we're so laser-focused on new patients.

We're very confident that we get those new patient -- shipments or new patient demand up that that's going to repopulate that pipeline, and we should see the unit -- the demand coming from the continuing patients start to rebound, starting here going forward. I'd further add that as most companies, there is -- we all experienced a loss of patients in the transition from December to January because of payer resets and out-of-pocket cost issues with patients and patients dropping off therapy.

And then lastly, it was a big deal. The February kind of winter storm, I even think it had a name Uri, really did have an impact on us in February in terms of business continuity. So I think all those factors blended together really kind of explain the quarter in Q1.

Your next question comes from Mohit Bansal from Citigroup.

Maybe -- so just little bit dwelling into Geoff's question. You also mentioned destocking in your press release, could you characterize how much destocking was there? Or was it a big impact on first quarter? And the related question is, where do you stand in terms of the wholesaler inventory levels right now? And could it be a tailwind for the next quarter?

Yes. Yes. Mohit, thanks for the question. It's a good question. Sal, why don't you tackle that and just frame it out. You and Jim, I think that would good.

Yes, I think, this is -- we've talked about before. We have -- with this transition to our limited distribution network, we have more visibility into all the dynamics of our business than we've ever had before. And I think the one area that we have complete visibility into is because we have inventory -- beginning month end inventory -- month end -- beginning month inventory and month end inventory for all of our channel partners. So we have a precise now beat on inventory throughout the entire channel.

And what simply happened is that in Q4 -- and that goes to part of that seasonality -- price changes have become predictable in the U.S. market in January across the industry. And so we saw a build in inventory in the channel in Q4 and then a destock in Q1. And Mohit, I think, you're right, the inventory -- the channel is lean in terms of inventory perspective. So that's something that we view as a positive for us going from second quarter forward.

So basically, the demand was -- the real demand was probably lower than the $60 million number you posted in fourth quarter, or it's hard than the $45 million you're posting now. So we should think of something like in the middle there as we think about second quarter, roughly. Is that a fair way to think about it?

I think from a distribution point of view, the answer is yes. I think that the fourth quarter was slightly higher than in retrospect, and the first quarter is lower. And so we would normalize things out for the balance of the year. So that -- I think that, as you kind of rebound in "from Q1 to Q2" on the distribution channel, that would be an uptick.

And maybe if I can squeeze in one more for RAD011. Could you talk a little bit more about the ranges of -- range of possibilities or range of outcomes from your meeting with the FDA, what you are trying to discuss with the FDA? I assume the endpoints and the trial design and everything. So if you should walk us through that? And then would you be disclosing it when you meet with the FDA?

I'll turn it to Liz on the second. But thank you, Mohit. We will update the market on RAD011 post clarity from the FDA. Now that clarity is both the meeting and then, as you would be well aware, sort of written confirmation. But we have spoken internally, and we think it would be appropriate externally to have a RAD011 only update to all of you sometime after we have that written, not just with the results of the PWS discussions, put some other discussions on other things. So Liz, you want to provide some further content to Mohit's question?

Sure. Thanks, Mohit. So this is the first time we will be talking with the agency about the program since we've acquired the asset. And so we need to go back and do some ground setting with them on our proposed nonclinical and clinical development plans and how we plan to advance it and what data is currently within the asset, what other things we might need to address and how we plan to address those, all in support of our goal to have this Phase III Prader Willi study be looked at as a pivotal study for the agency.

So that's key and upfront. It covers a lot of topics, quite frankly, when you talk about adequacy of your overall development plan and organization. So we'll be trying to align with them on -- and as well as setting expectations of what we will execute in the future. And as Kelly mentioned, after we have their feedback, we'll come back and give more detailed update on the outcome.

Your next question comes from Jessica Fye from JPMorgan.

First one is about TYMLOS, I guess, kind of volumes and commercial strategy with respect to those comments you made about 42 of the top 50 writers being orthopedic or specialist bone practices. I guess, first, what proportion of TYMLOS scripts are being written by those 42 writers? What proportion are they responsible for?

Thanks, Jessica. It's Kelly. I guess, Sal, you'd be in the best position to kind of give -- again, frame out the specific data on that. So why don't you do the -- handle that?

Yes. Hi, Jess. In my estimation, those prescribers represent probably around 20% of the total new patients for the quarter.

And can you help us think about the new patient growth for writers outside of those 42? I know you said that those 42 were kind of above average. What about the remainder -- the other 80%?

Yes. I'll just continue on. I think that's the key for us. So I think that, that market is very broad. So we have a lot of general medicine prescribers. And general med is what we would say rheumatologists, endocrinologists that treat other diseases and don't necessarily focus on bone as a primary. And so there's -- a lot of those prescribers, we're getting -- we get a breadth and not lots of depth in terms of prescribing. So I would say that for the most part, the tail has been pretty consistent from quarter-over-quarter.

And where the growth is happening is, as you kind of move up in the list to the more productive accounts and the more productive accounts tend to be these ones that are bone focused. And we've talked about the top 50, but that same situation does go, let's say, from 50 to 150, et cetera, et cetera. So that's -- the key is putting more focus where we have the greatest opportunity to get the most productivity from those prescribers.

I think it might be helpful, Sal, just to interject for Jessica, based on Jessica's question for you to just give a high-level overview of -- you've done a lot of work on existing -- to your point, sort of the broad distributed activity that we have, which is in and of itself, not negative or positive, but it's not efficient and it's not where the biggest flow of patients are. So maybe 1 or 2 factoids on, for example, how many territories have 5 or less patients or whatever the rate number you want, just to give sort of the size and scale. And what we're trying to correct versus what we're trying to get to? I think that might be helpful.

Yes. That would be great. So Jess, I think we've talked previously about this fracture focus, and we talked about the different types of fractures. And we went back and we did a lot of work on our customer segmentation. And we basically bucketed our customers into 4 groups, 3 of them are bone focused. So that's your traditional metabolic bone specialists. That is a physician or a physician assistant or nurse practitioner that is solely focused on metabolic bone.

Then we have the orthopedic practices, so this is orthopedic surgeons or people within the orthopedic practice that are basically treating patients for the underlying osteoporosis. Then we have the cohort of bone focused people that do spine. And then in the fourth bucket is our general medicine.

So I would say that the -- what we find is in the general medicine, we do have a lot of prescribers that may prescribe 1 or 2 new patients in the quarter and may not prescribe in next quarter. And so there's a lot of transition and turnover of our tail. And so with that, that's why we're kind of even further refining our focus and trying to move our effort more to those bone focused categories without alienating or leaving the general medicine prescribers that are productive.

So that's the key to optimize what we're doing in gen med. And really, for the -- for those physicians that are just doing 0 or 1 or 2, perhaps that's not where we put our focus, because they'll never grow to what we need to -- where we need them to be. And then keep that focus on those gen med physicians that do have the patient flows where they are, seeing and treating more patients. And then really turn and continue to shift the focus on those bone focused segments that we just laid out.

I think that's great. Thanks.

And maybe just following up on, I think, Geoff and then Mohit's question on the inventory swings. It sounds like you have pretty good visibility into the level of inventory in the channel. Can you just quantify the amount of the build in 4Q or as of quarter end and then the amount of the destock as of the end of 1Q? I guess at $1 million, $2 million, $3 million for coming there.

Yes, I would say, Jim, why don't you take that? And then, Sal, you comment, would be my suggestion.

Sure, Kelly. In terms of -- in terms of -- we have a lot of visibility to it in terms of the build and release of that inventory. I think that we're not disclosing the exact numbers. But it was roughly -- in terms of order of magnitude, it represented a good portion of the decrease in revenue going from Q4 to Q1. We're not quantifying it at this point, but there was a similar instance of destocking in Q4 to Q1 of the prior year, but it was greater this year.

Sal, you want to add anything to that?

Yes. I think the way that Mohit kind of talked about it is the way I think about it. I do think that there was a slight pull forward that we were unawares, given the visibility and -- I mean, looking back after we have more robust reporting, I think that's right. So the -- put it this way, the buy-in in the fourth quarter was equally offset as the destock in the first quarter. So I do think it was a phasing issue between the quarters.

And then just a couple on TYMLOS patch. Where do they stand with respect to generating stability data for the commercial scale TYMLOS patch? And you also talked about having completed the study comparing PK of the commercial sterile patch to the initial Phase III product and kind of moving the remaining patients in the wearABLe study onto the commercial sterile product. How many patients do you expect will get the commercial product? And for how long on average? Can you just elaborate a little more on that shift?

Yes. Thanks for those questions. Chhaya, you should take it. Yes, this is -- I just would comment that these tons and tons of work. This is sort of behind the current work, which is so critical and technically challenging. And Chhaya and our partners have done -- and her team have done a great job on this. So Chhaya, you want to frame out those answers to Jessica's questions?

Absolutely. And thanks for the question, Jessica, really great questions. So I think your first question, if I got it right, is when do we put the product on stability. We put the product on stability as soon as we make registration batches for -- in our small-scale of the equivalent sterile product, so that was months ago. And so we'll quickly get that data, and we'll put it into the NDA submission. Since now that we've had the bioequivalence, which is comparing our low bioburden product that we've put in Phase III to our sterile product, which was a huge win for us. It derisks the program, right? And it gets us into that area where we say, okay, we're confident that we can build -- make commercial equivalent sterile product at Thermo Fisher and our partners. So I think that was part 1 of your question, right?

Part 2 was with regards to -- and maybe Kelly and Sal, you can comment on this as well is, what is the segmentation of patients that will be on the patch versus how we're positioning it?

I think, Chhaya, it was for the completion of the trial, right? So the crossover from...

I got you.

Exactly. It was within the trial completing from -- into commercial product -- approximate estimation.

Yes. So we are -- as we've enrolled, it's a one-to-one randomized study. And we're about -- I would say about halfway through completing our patients' enrollment as far as they're completing the study. And we're on track for our top line results at the end of this year.

And I believe, Chhaya, the FDA had some guidelines where their wish for how many patients would be switched to commercial product. They had a certain percentage.

Yes. So the FDA said as many patients as you can get into sterile product. And so we are -- as we -- half of the patients are off. So we are about -- between 20% to 30% of our patients should be on the sterile patch.

Correct. So that, Jessica, -- so the target with the -- the agreement with the FDA was at least 20%, we would feel with all the success that the technical team has made that, that's -- we'll be able to check that box and then discuss the full filing with the FDA with that information incorporated into the filing.

And was it at least 20% for a certain period of time or just at least 20%, you get some exposure to that commercial product?

I think it was the latter.

Exactly.

Yes. No problem. Thank you.

Your next question comes from Annabel Samimy from Stifel.

I had a couple. So I guess, congratulations on the Medicare win. I'm a little bit curious, putting aside seasonality and some of the destocking shifts. It's the Medicare program is going to maintain the level of gross to net at a much higher than before the gross to net adjustments. So that's one question.

And the second is with your shift to more metabolic bone specialists and orthos, what do you see in the landscape that competitors are doing and it makes logical sense that you want to focus on that. So where are your competitors in that landscape?

And then finally, I also noted the discussion on the Black Box with regard to TYMLOS. So can you discuss that with us? And what specifically you're looking for? Is there any upside that we can potentially see from any kind of discussions there?

Thanks, Annabel. Maybe, we'll start with your last question first. Chhaya, I mean, could you take the work that you and the team, Bruce, et cetera, are doing on that. And then, Sal, I think you probably would take the other 2 questions. So Chhaya, why don't you start?

Yes. Sure. Thanks. So with regards to Black Box Warning, we have submitted a supplement to the agency with a 10-month review and we submitted that in December of last year, and we justified it based on the fact that the removal of the Black Box is regards to the class of drug. We are in the same class as FORTEO. So we are -- and we've included in there additionally that in our post-marketing data that there's a really justification to say that we can remove this, and that the product is safe, so to remove the Black Box.

We're also requesting in that same submission, the additional -- with regard to dosage and administration and duration of the treatment. Our PDUFA date for response back from the agency should occur in October of this year. So we're feeling good about that. We've had some communication with the agency and responded back to them on their questions. Sal?

And the other 2 questions, I just would preface it before Sal talks. Annabel as far as competitors and what they're doing, there's not that many competitors. What we can tell you is we know which patients actually would have the highest utilization and clinical need for a bone strengthening asset. And that continues to get reconfirmed and overly reconfirmed by people that are helping us sort of sort through that. So Sal, you want to just take sort of that -- the bone, the fracture folks and that sort of activity relative to, I think, maybe historically, sort of the anabolic awards and what everyone is doing and how you analyze all those things. But we're trying to be very focused on where the most patient flow is.

And again, the other thing, which is not news to anybody on this call, but one of the challenges of osteoporosis is 80% of the people are asymptomatic. So we're trying to narrow down where we focus and where the most patient flow is and where we can be most efficient. But Sal, you want to take that from there?

Yes, absolutely, I would love to. Yes, I think there's good momentum. And the momentum is based on that there continues to be a tremendous unmet need for postmenopausal osteoporosis patients that suffer fragility fracture. And the unmet need is secondary fraction prevention. And there's a lot of different organizations now making even more noise than before on this topic. And I think the one most interesting group, and there's been a paper published by -- put out by the American Orthopedic Association, where it was actually 2 renowned orthopedic surgeons, who talked about the importance of bone optimization and the importance of treating the underlying condition of osteoporosis in overall bone health.

So I think that there's a great momentum in the medical community around the importance of secondary fracture prevention and the importance of treating underlying condition and everyone doing more. And I think it's very encouraging that the people who see the patient at the time of the fracture are starting to look and realize that they have a bigger role in that. So that's one.

As far as the competitors, we have one. And I would say that they are very much focused in the same way we are on the fracture patients and the importance there. So I think there -- they were unified as an industry and the 2 people are involved and the medical community of the importance of secondary fracture prevention. So I think that we are doing and going in the same direction on that topic.

And Annabel's, as far as the second one, I think that was a very good question you asked me about Humana. And you're absolutely right. I've been doing these things for a long time. But the -- what's very encouraging is that with Humana and with Medicare, we tend to get rapid uptake of new patient starts, given how controlling Medicare plans are in terms of the before and after.

So you're right to say that, of course, in order to get access, we had to basically concede price in the form of an agreement with Humana, but we're very confident that at the end of the day, it's about net revenue. And that deal and that access will lead to increasing net revenue very rapidly in the next couple of months.

Can I just ask a follow-up on the orthos? So you just mentioned there was great momentum for the desire to treat secondary fractures. Are orthos typically the ones that use these anabolic agents? I guess in the past, you go to an ortho, you have a fracture, and they refer you back to your general physician or possibly an endocrinologist. So is this a new treatment area for them? Are they comfortable with it? Are they used to it? Just any color that you can give around that?

Sal, why don't you? I mean I would -- some introductory, comments is that orthopedic surgeon isn't going to -- they're not going to spend any time really on this, but they recognize, I think, more broadly now that ongoing bone health and follow up, particularly for certain age category and obviously, postmenopausal women, you automatically have osteoporosis.

So what we have found -- the best traction we have with accounts that are either completely new or relatively new are in -- I think in general, I think, Sal, can correct me sort of rheumatologists who have set up relationships with orthopedic offices and their practices and they get referrals post-surgery or post-treatment to all the patients. So Sal, you want to broaden that commentary or you can correct it.

Yes, absolutely, I would love to broaden. I think that's right, Annabel. That's why it's hard work to do. But I think what's happened is that everyone is acknowledging that it's pretty tragic, but less than 10% of patients who are treated for a fragility fracture actually are given a consultation for the underlying condition. And then what's happening is -- and a lot of literature says that those people that suffered that fragility fracture are 6x to 12x more likely to suffer a subsequent fracture in the next 12 months. And that's what the tragic situation is.

And I think what the bone treatment community and orthopedic community is realizing is that, as part of the care pathway, when they do follow us with patients, even if they don't feel comfortable in treating in their practice, that it's important that they ensure, as part of the care pathway that somebody is giving that consultation on the underlying condition. And that's what's different, is that, people are starting to have a more of the mind of the coordination to care with these patients, not just fix the fracture and then kind of they go off and have a risk of having a second fracture. And I think that, that's really and particularly important for people that treat vertebral compression fractures, because of the nature of that treatment and wanting to prevent the secondary fracture or prevent the second fracture.

So I think that's kind of what were -- so if it's not treat yourself, which some do, and some do have staff that do that or they refer to a metabolic bone expert. But in the very least, ensure that, that patient is getting a consultation for the underlying disease and having an opportunity to get treated.

Your next question comes from Vikram Purohit from Morgan Stanley.

So just 2 quick ones for me. First, on TYMLOS in Europe. Could you just give us a sense of what the gating items are and what the pending, to-dos are for you internally between now and a resubmission in the fourth quarter?

And then my second one was on RAD011. So understanding it's still relatively early days, but looking forward, how large of a commercial and sales force build out? Do you think you would need for this asset in Prader Willi if and when the time comes from commercialization? I'd just like -- would like to get a sense based on your diligence of how this patient population is positioned across the U.S. and how you're thinking of best reaching them when the time comes?

Thanks, Vikram. It's Kelly. I'll do the second one first. Yes, there's around 22,000 to 25,000 Prader Willi patients in the U.S. They're highly concentrated on where they receive care. The care is also, as Liz could attest and Rupert, it's integrated care. It's typically not a single doctor. It's a group approach.

Sort of early days. We would refine it, Vikram. But I would say sort of the commercial team -- commercial defined as the face offs to those doctors. We are blessed within Radius of having an outstanding medical -- market access group. So we could certainly leverage that. I would say, on the sales and marketing side, you're looking at 20 to maximum 30 people would be adequate, if not more than enough to cover the main centers. So it's not a big group. They'd be very focused. And I'd be comfortable saying that now and kind of just with the asterisk, that we'll refine it further, probably over the course of the next 9 to 12 months.

And with regard to Europe and abaloparatide, we're in great shape. Maybe Chhaya, you want to add anything to it. But we're sort of in midflight. I think most of the things that we have needed to do, we've done and it's now finalizing things. But Chhaya, why don't you give Vikram your thoughts?

Sure. Thanks. Thanks for the question, Vikram. Yes. So as I mentioned earlier, we submitted the letter of intent in March. And what we're waiting for is meeting with collaborator, which should happen in some time in the May time frame. And then we're in the flight, as Kelly says, is pulling together the dossier to be submitted in our fourth quarter. And I think we're on track for that.

Yes. We've spend a lot of time, Vikram, on post -- as Chhaya said, real-world data, and it's been -- we have a lot of it, and it's all rather compelling directionally. So that's -- we're in good shape with all of that. And we've had a fair number of discussions in Europe with the various countries. So we're -- we have a real good sense of what we have, what we need to deliver and how to deliver it. We appreciate the question.

Your next question comes from Douglas Tsao so from H.C. Wainwright.

Just following up on the sort of new focus on bone specialists. I'm just curious just given the shift that you've seen -- and sort of nice growth. What were they largely prescribing? Meaning, are they switching from FORTEO or they are using denosumab. I'm just curious, what were they using prior to sort of using -- starting to switch to TYMLOS. And generally, not just ones you switch, but broadly what's the sort of standard of care at those centers right now?

Yes. I'll let Sal answer it. But -- and Doug, thanks for the question. Sal has all the numbers. But you'll be shocked or -- I was certainly shocked as a relative newcomer here, but the vast majority of patients they have no therapy. And Sal -- so, it's not a switch market really. So Sal, why don't you elaborate?

Yes, that's exactly right. There's not much more to say, Doug. I think Kelly said it. Most of the time, these patients tragically are not being consulted or diagnosed or even treated for the osteoporosis. So I think it's usually a situation from very little. So there's -- that's why we're very excited about the opportunity and why we're so focused there.

And I would say that we -- okay, go ahead. We've listened to -- we have, obviously, a lot of reach out to different people, but any number of orthopedic surgeons or interventional radiologists, they kind of understand now. And this -- with sort of population aging and bone fragility, I think, it's becoming more and more recognized that prospective bone health, once you "fix an event" it's got to be incorporated into patient care. And again, we don't -- we're a small company. We don't need to turn on thousands and thousands of places. A few hundred will make a gigantic difference in our business. So I don't know, Sal, are you going to add more things?

No. No, that's it. I think that, generally, people are surprised with this kind of -- what they call the bone health crisis in the nation. I think a lot of the people are surprised that these patients that they treat don't make it back to the primary care and don't get to consultation, don't get through the underlying condition. So that's where it is. I think it's just a gap and apathy in the treatment paradigm in the pathway. And it seems like there's a group of people are now saying is that, hey, look, either we have to do something or we have to figure out how something is done for these patients.

And if I could just have a follow-up. I mean is it a sense that those providers, is it just a misconception around the safety, the efficacy? Or is it just sort of a sense of sort of an inclination not to treat, because of like bad experiences with bisphosphonates? I'm just curious just sort of what's leading it. Because, clearly, this is such an important health issue and yet -- and there seems to be such an obvious sort of answer.

Yes. Go ahead, Sal.

Yes. I think -- and that's what the challenge is. I mean orthopedic surgeons don't typically treat chronic disease or underlying diseases. So I think it's not something that's in their traditional flow. So that's what the issue is. It's really hasn't been the responsibility, historically -- at least the perceived responsibility. So I think it's just -- again, it's a gap in care. It's the handoff of a fragility fracture patient from an acute situation when they have the fracture to when someone fixes the fracture, and there's just not an appropriate timely handoff to somebody that might be in a position to get the consultation and treat for the underlying osteoporosis. And that's what's tragic.

And because, again, like I said before, that these patients are more susceptible to a second fracture in the first year after their first fracture. So that's just what it is. It's just a kind of [efficiency] gap in the care pathway. And so that's really what we're -- what needs to be addressed holistically.

Thanks Doug.

Your next question comes from [Raj Patel] from [Trillium].

It looks like you've few questions. But just big picture, outside of the inventory destocking, is there anything else that you didn't really expect? I think everybody keeps asking about that, I think. And my second question is the reaffirmation of the $250 million, right? If Q4 was a little bit -- exiting 2020 was a little bit of a lower run rate because of more inventory stocking than you anticipated, can you just provide some color around your confidence in that number? For the rest of the year, you've got -- you need some steep sequential increases.

Yes, [Raj], thanks for staying on yourself. Yes, it's good. I know, I know. I know. So we appreciate that. I would say, I'd give you my view the -- yes, the all -- big picture, just to quote you on the first quarter. The piece of the equation that was something out of the norm of what we were expecting was the channel. So that -- so we will normalize that Q2, Q3 and Q4, we've fully -- that will just be all normalized. And so that's the only thing that we -- if you take the equation of how do you get to net revenue, that's the only thing that was a bit of an anomaly for a variety of different reasons.

Patient kept growing -- overall, patients grew. We had some gyrations in the growth. January was strong, February was not. 2 reasons, much shorter month, and as Sal said, sort of the whole Midwest of the country was shut down with snow and ice and that's a double-digit part of our business, actually. So a week of that kind of has some impact. February was low. March was back up. April, early numbers as far as new patients and activity is good. Inventory management in balance. Q2, Q3, Q4 all look fine, and we're very confident in that.

We're also just reaffirming $250 million. We are highly confident on that number from everything we can see. Again, it complicated the new patient numbers we give, because that's our most important internal metric. That's a prospective indicator of future revenue. And then you have other components of the puzzle like net price and inventory and other things, which are more coincident with any given day, week or month or quarter from a P&L point of view. So as we look forward, if you look at our patient numbers that we started sharing in the fall and then now -- sort of through now, the continual building of patient numbers gives us high confidence that the target for the year is very doable, and that's why we reaffirmed it.

I would also say that we are hyper-focused on -- you'll hear us talking about EPS more than you had probably ever. Eventually, you got to be an earnings company. That's a goal that we have. The operating leverage you have is significant and the SC business, from a margin perspective, is highly attractive. So it doesn't take a lot from a sensitivity point of view for us to continue on the bottom line, both EBITDA and EPS to continue to make outsized improvements, and that's certainly a big goal for us as well.

So I broadened the answer based on your early morning awakeness on the West Coast. But I hope all of that is -- it frames it out for you logically.

Yes. No, that's helpful. Those final comments at least match my model. So that makes -- it makes me feel better about it. But one question on the new patient expectations. What should we be looking for? Like that 1,700 plus number in March that absolutely will be -- it will bounce around and I know the market is going to be hyper-focused on a monthly number, right, you guys are putting out monthly. But what's the right -- what are your expectations on those numbers going forward?

Well, I'll comment and then Sal could add. But I mean, compounding is a wonderful thing, right? So we want to -- it's not like we have a set number for any given month, but -- and we started with 3 months, but we expanded slightly to 4 months to take out some of the noise. But the way we look at the business, trying to be transparent to shareholders and the marketplace is -- as long as we're above the 4-month moving average, the trend is your friend and the compounding works with you, if you look at average duration of treatment.

So it's not like we have a set number for each month. Our number is to grow from the previous 4 months of activity. So every month that is what we -- that is our goal. It doesn't mean we're going to achieve that every month and then you -- usually there are sort of the moving average kind of resets a little bit anyway, because you're not going to have massive volatility. But what we expect internally is to grow that number relative to the previous activity every month. Do you want to add any things or refine that answer Sal? Please go ahead.

Not refine, just to add. I appreciate the thought about the monthly, perhaps some volatility. And I think of it that way, too. And I think we're looking for just sustained persisting growth. So as Kelly said, as long as that we are above that 4-month average and quite frankly, for the long view as long as that 4-month average continues to improve as well versus the prior 4 month average, these are the types of things, just getting that sustained growth so we can get that patient pipeline built up significantly. So that's all I would add there.

And yes, just to add more, [Raj]. As I tried to frame out early on the SC business is a great business. We want to grow that. And then the incremental upside, which the company has spent time, energy and money on, the male readout is important. The patch readout is important. And we've added some incremental international locations, while none of them other than Japan will be a significant change in trajectory. But if you sum up the -- sort of somewhat globalizing the asset, we tried to position things where we're almost to a point where it's all upside at various levels of opportunity. And that's where we're close. We're very, very close, obviously, from a P&L sustainability point of view. So I hope that's helpful.

And one -- then one last thing since you mentioned Japan. Do you have any expectations you can share Teijin's market share over time? How competitive is that market? Do they have competing products? Any of that?

We have done our own internal modeling. There was an internal model, which we're actually redoing as we speak. Teijin is positioned in the bone metabolic space very powerfully in Japan. I would expect them to be a top 2 or 3 participant in the space. They expect to be a top 2 or 3 participant in the space. I don't have market share necessarily. We have some internal numbers, which we won't share at this current time.

But I would just say, when we start thinking about translating all this into EPS opportunity, it's -- it's not insignificant for us at the Apex. Now the slope of the curve is something which we're drilling in a little bit more on. So I guess, we will come back to the market when we have a framed out part of that piece. I think that's a legitimate thing for us to sort of frame out for the marketplace. Sort of here's the range in Japan that we think is possible.

I lied I've bit more.

Sure no problem.

You're focused on different types of prescribers. Are you seeing anything different on the duration of therapy of their patients?

That's a great question. Sal, you want to handle that?

Yes. That is a great question. That -- we have not yet -- it's too early to -- I haven't seen the data. I just know that right now our persistent -- our persistence hasn't changed. It's too early to see the impact. I think that there's 2 factors together that in my estimation, will improve duration of therapy, and that is the focus on patients that are very severe and have the history of fracture, so more motivation to continue treatment.

And I do believe that all the work we did on the limited specialty pharmacy network, inevitably, it's going to ensure better experience through specialty pharmacy with a better chance for patients to stay on therapy throughout. So perhaps we'll comment more on that next time we have a call.

Okay. All right, [Raj]. Thanks for getting up early. Appreciate it.

I'm showing now further questions at this time. I would now like to turn the conference back to Ethan Holdaway. Thank you.

Thank you, and thanks, everyone, for listening into the call. As a quick reminder, a replay and the presentation will be available on our website following the call. Thank you again. That concludes our Q1 2021 conference call.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.