Theravance Biopharma Inc (TBPH) 2019 Q1 法說會逐字稿

Ladies and gentlemen, good afternoon.

At this time, I'd like to welcome everyone to the Theravance Biopharma Conference Call.

(Operator Instructions) Today's conference call is being recorded.

And now I would like to turn the call over to Jessica Stitt, Vice President, Finance and Investor Relations.

Please go ahead.

Good afternoon, everyone, and thank you for joining our conference call and webcast to discuss our first quarter 2019 financial results and outlook.

Joining us are Rick Winningham, Chief Executive Officer; Brett Haumann, Chief Medical Officer; and Frank Pasqualone, Chief Commercial Operations Officer.

Following some prepared remarks, we will open the call for questions.

A copy of the press release and the slides accompanying this call can be downloaded from our website, or you can call Investor Relations at (650) 808-4045, and we'll be happy to assist you.

As always, I will remind you that this conference call will contain forward-looking statements, which involve certain risks and uncertainties, including statements about our product pipeline, expected benefits of our products, the anticipated timing of trial results and regulatory filings and expected financial results.

Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in the company's filings with the SEC.

And now I would like to direct your attention to Slide 3 and hand the call to Rick.

Thanks, Jessica.

Good afternoon, everyone, and thank you for joining us.

As we continue to make progress in 2019, we remain highly focused on implementing our strategy to discover, develop and commercialize transformational medicines with the potential to address important unmet patient, payer and caregiver needs.

Our key programs are all advancing.

TD-1473, our gut-selective JAK inhibitor for inflammatory intestinal diseases partnered with Janssen; ampreloxetine, our once daily norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypotension or nOH; TD-8236, our lung-selective JAK inhibitor for serious respiratory diseases; and YUPELRI, our recently launched once-daily nebulized long-acting muscarinic antagonist approved for the maintenance treatment of COPD partnered with Mylan.

Each of these programs represents our unique research approach that leads differentiated products which have the potential to offer meaningful benefits to patients, payers and caregivers.

Over the last several weeks, we have achieved important milestones in these programs.

Of note, we dosed the first patient in the Phase IIb/III study of 1473 in patients with ulcerative colitis.

1473 is a novel orally administered in gut-selective pan-JAK inhibitor in clinical development as a treatment for multiple inflammatory intestinal diseases.

In contrast to other oral JAK inhibitors in development or approved for inflammatory bowel disease, 1473 is designed to act locally at the site of inflammation in the intestinal wall to minimize systemic risk.

We are conducting this Phase IIb/III study in ulcerative colitis patients in parallel with Phase II study in Crohn's disease which is also underway in dosing patients.

In addition, we're pleased to be presenting data from our completed Phase II study of ampreloxetine at 2 upcoming scientific conferences, the International Association of Parkinsonism and Related Disorders and the 32nd European Neurology Conference, the latter inviting an oral presentation of the data, including the efficacy, safety and tolerability of ampreloxetine over 5 months of treatment.

In line of the well-known limitations of existing therapeutic options in nOH, we believe there is a compelling opportunity to provide patients with the potential medicine that may offer greater durability of effect and safety.

Our registrational Phase III program of ampreloxetine and symptomatic nOH is underway and actively enrolling in the 2 studies.

In our early-stage pipeline, 8236, our novel lung-selective inhaled pan-JAK inhibitor, is currently in a Phase I study in both healthy volunteers and asthmatics.

This study includes biomarker evaluation in patients with active disease.

We anticipate completing this study in the third quarter.

We're pleased to report that the YUPELRI launch is progressing following the commencement of formal sales and marketing efforts earlier this year in partnership with Mylan.

Frank will provide further details around the launch later in the call.

In summary, we continue to build momentum throughout the year with a lineup of important milestones leading to additional catalysts over the next 12 to 18 months, as our late-stage trials mature, earlier-stage programs advance to the clinic and our commercial efforts gain traction.

Before passing the call to Brad, I'll close my remarks on Slide 4 with an update on our economic interest in TRELEGY ELLIPTA, the first and only once-daily single-inhaler triple therapy approved for the treatment of COPD.

Sales of GSK's TRELEGY for COPD continue to accelerate.

The product is now available in 30 markets, including Japan, and has the potential for approval in China later this year.

We were pleased to see the Phase III CAPTAIN study of TRELEGY in patients with asthma met its primary endpoint.

In the study, TRELEGY a triple combination of fluticasone furoate, umeclidinium and vilanterol demonstrated a statistically significant 110 ml improvement in lung function versus RELVAR/BREO, a dual combination therapy of fluticasone furoate and vilanterol.

In the key secondary endpoint, TRELEGY demonstrated to the numerical -- 13% reduction in the annualized rate of moderate-to-severe exacerbations relative to RELVAR/BREO.

While this was not statistically significant, the addition of the anti-muscarinic component in TRELEGY appears to provide an additional benefit over an already effective therapy.

Recall that RELVAR/BREO previously demonstrated a 25% reduction in the annualized rate of moderate-to-severe exacerbations versus standalone steroids.

We look forward to additional data from the study which GSK plans to submit for regulatory review once the full dataset is available.

The addition of the asthma indication could result in a meaningful expansion for the use of TRELEGY over time.

As we previously noted, the nondilutive nonrecourse note financing tied to our economic interest in TRELEGY has significantly strengthened our cash position and is enabling us to drive forward our key programs.

As a reminder, Theravance Biopharma holds an economic interest in TRELEGY that equates to upward tiering royalties of 5.5% to 8.5% worldwide net sales.

Later in the call, I'll discuss our recently announced dispute with Innoviva regarding Innoviva's material breach of its obligation to disperse royalties received from GSK related to the net sales of TRELEGY.

But now, I'll pass the call to Brett, who will provide an update on our clinical programs.

Brett?

Thanks, Rick.

Starting on Slide 5, 1473 is our oral gut-selective pan-JAK inhibitor that's designed to treat inflammatory intestinal disease directly at the site of inflammation in an organ selective manner with minimal systemic exposure or corresponding immunosuppressive effects.

Our objective is to enhance efficacy and safety of a conventional systemic therapy.

As Rick noted, 1473 is now in 2 late-stage studies in ulcerative colitis and Crohn's disease.

Turning to Slide 6. We recently announced the dosing of the first patient in a Phase IIb/III study, called RHEA, a 1473 in patients with moderately to severely active ulcerative colitis.

The Phase IIb dose-finding induction portion of the study assesses the effect of 8 weeks of treatment for 1473 on changes from baseline in total Mayo score as the primary endpoint as well as assessing rates of clinical response and remission, endoscopic mucosa healing and safety.

Patients who successfully complete the Phase II induction study are immediately enrolled into the Phase III maintenance portion of the study, which assess the ongoing efficacy and safety of 1473 for an additional 44 weeks.

In parallel, we're conducting DIONE a Phase II 12-week randomized double-blind placebo-controlled study designed to evaluate 1473's efficacy and safety in patients with Crohn's disease, which began dosing patients at the end of 2018.

The primary endpoint of this study is improvement in the Crohn's disease activity index, CDAI, measured to 12 weeks.

Patients who complete the 12-week induction phase will continue into the active treatment extension phase where all patients receive open label 1473 for up to 12 months to continue to collect safety data.

The breadth of our 1473 clinical development efforts in both ulcerative colitis and Crohn's disease reflects our confidence in the potential therapeutic benefit of our unique gut-selective pan-JAK inhibitor.

As illustrated on Slide 7, we believe there is a compelling strategic and therapeutic rationale for designing organ-selective drugs for single organ diseases, such as ulcerative colitis and Crohn's disease, which can provide a broader therapeutic index.

Other companies are seeking to exploit the anti-inflammatory effects of JAK inhibition.

However, pan-JAK inhibitors that are systematically active are faced with dose-limiting side effects that prevent these therapies from reaching the optimal doses required for full efficacy.

Some companies have attempted to reduce systemic risk by focusing only on selective JAK1 inhibitors.

However, these have been marked by evidence of systemic side effects as well.

Unlike these efforts to fix the problem of systemic exposure, our approach is to avoid it.

As shown on Slide 8, we do this by designing compounds with organ selectivity to treat inflammation only in the tissue of interest.

We design unique features into the molecule, such as low solubility and low permeability to allow the drug to penetrate only into the intestinal wall.

Any small amounts of drug that do pass-through the full thickness of the gut wall, drain into the portal vein that flows directly to the liver where the drug is rapidly metabolized and cleared by first-pass metabolism to minimize the amounts of drug that get into the systemic circulation.

Moving to Slide 9. Our confidence in the potential of 1473 as an innovative approach to the treatment of IBD is underscored by results of both preclinical and clinical studies that confirm gut selectivity.

In addition, we know that 1473 is highly potent across all 4 JAK isoforms, including Th2, which may play an important role in reducing the inflammation in Crohn's disease.

Th2 modulates both IL-12 and IL-23, both of which are blocked by STELARA, an approved product for the treatment of Crohn's disease.

We also have evidence that 1473 is not only active at producing inflammation at the luminal surface of the gut but also at reducing the inflammatory cell infiltrate in the deeper parts of the gut wall.

This effect is illustrated in the far right panels on this slide.

The T cell infiltration, stained in purple, deep in the intestinal wall tissue in a preclinical animal model, is shown in the upper frame, and the reduction in staining due to 1473 is shown in the lower frame.

We have previously reported encouraging Phase Ib data in ulcerative colitis.

An additional data will be shared in an oral presentation at Digestive Disease Week, or DDW, in May.

We're very excited to be collaborating with Janssen and in actively running the studies in both ulcerative colitis and Crohn's disease, and look forward to updating you as the year progresses on our enrollments and the expected readout from these studies.

Let's turn now to Slide 10, ampreloxetine, a once-daily norepinephrine reuptake inhibitor or NRI, in development for the treatment of patients with symptomatic nOH.

As previously reported, we conducted a Phase II study in patients with nOH.

In Part B of this study, patients who were treated with placebo showed an expected decrease in systolic blood pressure, shown in gray on the plot.

It was greatest during the period of the day that patients were awake, active and eating when their autonomic nervous systems were failing to produce adequate amounts of norepinephrine.

In contrast, ampreloxetine, shown in blue, resulted in an increase in blood pressure during the portion of the day the patients needed it, by preventing the reuptake of norepinephrine into nerve endings.

Importantly, at nights, when the autonomic nervous system is less active and norepinephrine levels are lower, ampreloxetine did not result in any additional change in blood pressure, thereby reducing the risk of supine hypotension that is observed with other treatments for nOH.

In Part C of the study, patients were dosed with open-label ampreloxetine once daily for up to 5 months with the primary endpoint collected at 4 weeks.

As shown, patients reported large improvements in their dizziness score as measured by a validated nOH symptoms score referred to as OHSA Question #1.

As Rick noted, upcoming scientific presentations at IAPRD in June and an oral presentation at ENC in July will highlight the efficacy, safety and tolerability data from the completed Phase II clinical trial, including the primary endpoint data at 4 weeks and the ongoing efficacy over 20 weeks of treatments with ampreloxetine.

The 5-month data from the exploratory open-label portion of the study further suggests that ampreloxetine produces a durable clinical response for as long as treatment is maintained and that symptoms reemerge once patients stop taking ampreloxetine.

Based on the positive results from the Phase II clinical trial and subsequent discussions with the FDA, we've also initiated the registrational Phase III program of ampreloxetine in symptomatic nOH.

The Phase III program, as illustrated on Slide 11, includes 2 studies: a placebo-controlled 4-week treatment study and a 4-month open-label study followed by a 6-week randomized withdrawal portion to demonstrate the durability of response.

Both studies got underway earlier this year and are actively enrolling patients.

Now to Slide 12.

An 8236, our lung-selective inhaled pan-JAK inhibitor for the treatment of inflammatory lung diseases, including steroid resistant asthma.

The clinical goal in asthma is to prevent exacerbations and reduce symptoms in patients who remain poorly controlled on inhaled corticosteroids, despite being compliant on their medication.

Some of these patients have what's referred to as Th2 high disease, and they move onto systemic biological agents that carry the risk of systemic side effects.

There are in addition, patients with so-called Th2 low disease for whom biological agents are not beneficial and who remain very difficult to treat.

We believe 8236 has the potential to be the first inhaled, nonsteroidal anti-inflammatory to treat these patients with more severe asthma, regardless of whether their disease is characterized as Th2-high or Th2-low.

8236 is optimized for dry powder delivery to the lung, and its profile supports a once-daily inhaled product with minimal systemic exposure.

We've initiated a Phase I study of 8236, including a repeat ascending dose portion in patients with asthma, to ensure that 8236 is well tolerated, following inhalation, but also to look at evidence of target engagement by assessing their levels of exhaled nitric oxide and other biomarker measurements from blood and bronchoscopy samples.

The study is expected to complete in the third quarter of this year.

Next, Frank will provide an update on the YUPELRI launch.

Thanks, Brett, and good afternoon, everyone.

Starting with Slide 13.

I'll take a few moments to discuss YUPELRI inhalation solution and provide an update on our launch activities.

YUPELRI is the first and only once-daily nebulized bronchodilator approved for the treatment of COPD in the U.S. having gained FDA approval at the end of last year for the maintenance treatment of patients with COPD.

Following shipments into the commercial channel in late 2018, Theravance Biopharma and Mylan formally launched our sales and marketing efforts in early 2019.

Turning to Slide 14.

I'll talk about our commercial strategy with Mylan.

Our combined sales infrastructures target HCPs that treat the universe of appropriate patients for YUPELRI with COPD.

These include physicians, pharmacists, respiratory therapists and other health care prescribers.

Focusing on the institutional setting, there are about 800,000 patients admitted each year to U.S. hospitals for worsening of their COPD.

About half of those patients leave the hospital with a prescription for nebulized therapy.

Having an established commercial presence in and around acute care centers gives us the opportunity to target large and addressable patient populations at pivotal times, starting in the hospital and with our partner Mylan, expanding into the outpatient treatment setting.

Theravance Biopharma is focusing on the hospital segment where we understand well the target audiences for YUPELRI.

The hospital is a critical site of care for patients with worsening COPD symptoms, as many experience increased difficulty using their standard maintenance inhaler device.

By targeting HCPs at key intersections in the patient's disease management process, our goal is to ensure appropriate patients have access to and begin using YUPELRI in the hospital.

We plan to partner with institutions in order to assist transitioning appropriate patients from hospital to home on YUPELRI with a unique and proprietary program called, "Care Within Reach."

Based on initial market feedback and early performance indicators, we believe we can drive adoption and sustainable growth.

Our customer base of prescribing physicians want to hear about this new and differentiated therapy.

Following product approval, our field sales team began working closely with physicians and pharmacists at hospitals to provide a complete YUPELRI overview.

When YUPELRI is accepted for inclusion on formulary, it will typically be placed into the hospitals electronic medical records or EMR in order to make it available for physicians to order.

As shown on Slide 15, we are tracking 3 key performance metrics to gauge success in building early market acceptance: formulary reviews and wins, patient uptake and market access.

I'll start with formulary reviews.

While achieving formulary status can be a 3- to 12-month process, we have seen early success since launch.

Through April, YUPELRI has been accepted on 17 different formularies, accounting for a total of 63 institutional accounts around the country.

44 of these accounts have ordered YUPELRI thus far, 7 of which are major academic centers.

We know of at least 72 additional formulary reviews scheduled between now and the end of June which account for nearly another 280 potential accounts.

In response to health care providers' request for information, our medical science liaisons have played a key role in developing and delivering critical scientific information on safety and efficacy to support the formulary process.

Turning to patient uptake.

In our first months of launch, our field force has exceeded its productivity goals relative to face-to-face interactions with HCPs.

These physicians have prescribed YUPELRI for approximately 4,500 patients.

On the market access front, we've made important gains with the following confirmed coverage: approximately 50% commercial and 100% Medicare Part B for patients with supplemental insurance.

With respect to Medicare Part B patients, we were pleased to see that following our application, CMS recently announced the issuance of a permanent, unique, health care common procedure coding system or J code for YUPELRI that will become effective July 1, 2019, 6 months ahead of schedule.

In summary, we are pleased with our performance to date and believe we are well positioned to continue to drive early adoption and growth as evidenced by growing end-user demand, which has reduced the initial inventory from product shift in the fourth quarter of 2018.

In parallel, we've seen steady growth in new-to-brand prescriptions, new prescriptions and total prescriptions.

As of mid-April, 73% of YUPELRI prescriptions were written by pulmonologist, and YUPELRI share had grown to 6% of prescriptions written for long-acting nebulized bronchodilators.

It is important to note that a majority of YUPELRI volume does not flow through the retail channel, rather through the durable medical equipment or DME channel for which there is about a 3-month lag in data capture.

Visibility into brand performance will enhance over time as these data mature.

In closing, we're very encouraged by this early momentum in building market acceptance and the potential to continue to drive YUPELRI's uptick in the hospital setting and partner with Mylan to drive use in the outpatient setting.

Now I'll pass the call over to Jessica for a financial update.

Thank you, Frank.

I'll begin on Slide 16.

Revenue for the first quarter of 2019 was $5.3 million comprised of collaboration revenue, primarily related to our global collaboration agreement with Janssen for 1473.

Revenue for the first quarter of 2019 represents a decrease of approximately $3 million over the same period in 2018.

The decrease in total revenue resulted primarily from no product sales being recognized in the first quarter of 2019 following the sale of VIBATIV to Cumberland Pharmaceuticals late last year.

R&D expenses for the first quarter of 2019 were $53.8 million compared to $57.8 million in the same period in 2018.

The increase was primarily due to higher external expenses, driven by our key programs and higher employee-related expenses, which include the impact of the reduction in force announced in the first quarter of 2019.

First quarter 2019 R&D expenses include noncash share-based compensation of $6.2 million.

SG&A expenses for the first quarter of 2019 were $25.2 million compared to $24.7 million in the same period in 2018.

The increase was primarily due to higher collaboration expenses associated with the launch of YUPELRI, an employee-related cost which include the impact of the reduction in force announced in the first quarter of 2019.

First quarter SG&A expenses include noncash share-based compensation of $6.1 million.

We ended the quarter in a well-capitalized position with approximately $434 million in cash, cash equivalents and marketable securities.

Our 2019 financial guidance remains unchanged.

We expect our full year operating loss, excluding noncash share-based compensation to be in the range of $110 million to $130 million.

Operating loss guidance does not include royalty income for TRELEGY ELLIPTA, which we recognize as non-operating income.

Our share of U.S. profits and losses related to the commercialization of YUPELRI, potential future business development collaborations as well as the timing and cost of clinical studies associated with our key programs among other factors could impact our financial guidance.

Now I will turn the call back over to Rick.

Thanks, Jessica.

Just for clarity, the -- our operating loss guidance, excluding noncash share-based comp is in the range of $210 million to $230 million.

So as shown on Slide 17, execution against our key programs is driving us forward towards value creating events in both the near and the long term.

Important upcoming milestones include GSK's submission of the full Phase III dataset of TRELEGY ELLIPTA in patients with asthma to regulators.

Additional commercial metrics for YUPELRI and COPD as the year progresses.

Supplemental data from the Phase Ib study of TD-1473 in ulcerative colitis to be presented at DDW, 2019 in May; detailed results from the Phase II study of ampreloxetine and nOH in the presentation of data at the IAPRD meeting in June and the European Neurology Congress in July; completing and reporting from our Phase I study of our lung-selective inhaled pan-JAK inhibitor for TD-8236 to further progression of our Phase II Crohn's disease and Phase IIb/III ulcerative colitis studies for 1473 as well as our Phase III registrational studies for ampreloxetine; and advancement of our novel organ-selective research programs towards the clinic.

Our focus will continue to be on advancing our pipeline and reaching value-creating milestones.

And now before I turn the call over to the operator for questions, we also announced today that Theravance Biopharma has initiated arbitration against Innoviva in connection with Innoviva's material breach of its obligations to disperse certain royalties to us.

The royalties in dispute are those received from GSK as a result of net sales of TRELEGY.

We're proceeding with the arbitration which is confidential, subject to any required disclosure obligations under applicable law.

You may be aware that upon our spinoff from Innoviva in 2014 both companies entered into a binding limited liability company agreement that established Theravance Respiratory Company, LLC, which I will refer to as TRC.

TRC is jointly owned by our 2 companies, but is managed by Innoviva.

The purpose of TRC is to collect and disperse royalties from GSK's sales of certain products, including TRELEGY to each member.

The terms of the agreement plainly state that the member's interest owned by Theravance Biopharma entitles us to 85% of the TRELEGY royalties paid to TRC by GSK.

Net of TRC expenses paid and the amount of cash, if any, expected to be used in TRC over the next 4 fiscal quarters.

The TRC agreement imposes express fiduciary duties on Innoviva equal to those of directors of a for-profit corporation and those of a controlling shareholder.

To ensure that Innoviva causes TRC to fulfill its contractual duties to distribute royalties and to discharge its own fiduciary duties, the TRC agreement imposes significant limitations on Innoviva's authority as manager, including requiring Theravance Biopharma's consent before taking actions or omitting to take actions that would reasonably be expected to have a direct or indirect material and adverse event on the company's economic interest in TRC or its rights, preferences, privileges or obligations.

Without any justifiable grounds to do so, Innoviva recently caused TRC to not remit any royalty payments to members for the quarter ending December 31, 2018.

These payments were due on March 31, 2019.

As noted in Innoviva -- in the Innoviva quarterly report on Form 10-Q for the 3 months ended March 31, 2019, filed with the SEC on May 1, 2019, no distributions were made to Theravance Biopharma with respect to our 85% economic interest in TRC.

Innoviva also informed us that it intends to cause TRC to not remit any royalty payments related to GSK's net sales of TRELEGY to members through calendar year 2019.

This intended action is equally unjustified.

With this context in mind, I want to make a few points.

First, we intend to aggressively enforce all aspects of our binding 4-year-old agreement with Innoviva and TRC to ensure we continue receiving our full 85% share of royalties linked to TRELEGY net sales.

Commercialization of TRELEGY by GSK, a global leader in the development and commercialization of products to treat respiratory disease began in late 2017 and TRELEGY has been a significant success.

Second, there is no justification for Innoviva to cause TRC to withhold any material amount of cash.

Our conviction with respect to this position has only been strengthened after conferring extensively with counsel, including the premier civil litigation firm of Quinn Emanuel, which is representing us in this manner -- matter.

Lastly, we're confident that the arbitration process that is commencing provides us with an expedient form for resolving this dispute in our favor and retaining all rights to our stipulated portion of the TRELEGY royalties.

I'll now shift to discussing how this dispute presently impacts our recent note issuance.

On November 30, 2018, our wholly-owned affiliate Triple Royalty Sub LLC, I'll call the issuer, closed the private placement of $250 million of nonrecourse triple farm 9% fixed rate term notes that mature on or before April 2033.

The notes are secured and the primary source of funds for debt service is the issuer's economic interest in any future royalty payments made by GSK to TRC.

The notes bear an annual interest rate of 9% with interest in principal payable quarterly beginning in April 15, 2019.

Through October 15, 2020, the terms of the notes provide that to the extent they are insufficient funds to satisfy the issuer scheduled quarterly interest obligation, the shortfall may be added to the principal amount of the notes without a default or event of default occurring.

The terms of the notes also provide that at Theravance Biopharma's option, the quarterly interest payment obligations can be satisfied by making a capital contribution to the issuer, but not for more than 4 quarterly -- consecutive quarterly interest payment dates or for more than 6 quarterly interest payment dates during the term of the notes.

For the April 15, 2019, interest payment date, we made a capital contribution to satisfy the interest payment obligation for that scheduled payment.

If necessary, interest may be paid in kind or the company may exercise its capital contribution option in the near future, while we arbitrate this dispute with Innoviva.

We continue to maintain a strong capital position.

That is why we work to resolve this dispute in our favor.

We intend to sustain momentum by executing our go-forward strategy.

We believe the arbitration process provided for under the TRC agreement will enable us to pursue and achieve a favorable resolution in a timely manner.

Again, we firmly believe there is no justification or legal basis for Innoviva to cause TRC to withhold any material amount of cash.

We are confident that Theravance Biopharma will prevail in this dispute and retain all rights to its full portion of the TRELEGY royalties paid to TRC by GSK.

And now I'd like to turn the call back to the operator for questions.

(Operator Instructions)

We'll have our first question from Geoffrey Porges from SVB Leerink.

This is Brad Canino on for Geoff.

I have questions on both YUPELRI and TRELEGY.

For YUPELRI, I'd like to hear if your initial 4,500 patient volume has been from stealing share from the other nebulized LAMA?

Or if it has been accretive to that specific market segment?

And then going forward with your current commercial strategy, how much market expansion do you anticipate versus direct competition?

Yes.

Good question on YUPELRI.

The patients that we've treated thus far may have taken some share from the other twice-a-day long-acting muscarinic antagonist, but I also think that largely we're adding some new patients, probably from the handheld market who in fact just can't get benefit through the repeated use of the handheld products.

There's probably also some share coming from nebulized products that are used 3 to 4 times a day, like DuoNeb, because in many instances, the inconvenience and the pressure put on patients to administer a drug 3 to 4 times a day to get adequate broncodilation is just -- it's just not -- it's just not efficient to get their therapy versus a once-a-day product.

Frank, any other comments?

No, I think you've covered it, Rick.

We are seeing some business move over from handheld devices in the hospitals because there's a lot of wastage in hospitals with handheld devices.

And there is a lot of momentum within hospitals to switch patients to nebulized therapy.

So we've seen some share gain there.

And to your point, we've also seen some share gain from products that are administered more than once daily.

That's helpful.

And then on TRELEGY asthma.

Should we at all temper expectations for the opportunity, given the exacerbation benefit, to miss statistical significance?

I realize that patients care a lot about increased breathing ability, but I'm asking more in relation to potential payer and access challenges without the specific benefit on the label?

Yes, I'll start, then I'll turn it over to Brett.

I think -- GSK markets TRELEGY, I think, to get an extraordinarily detailed answer, you probably should check with them.

But I think what the CAPTAIN study showed, as you note, was a significant level of additional broncodilation on top of gold standard therapy for these patients in asthma that, in fact, they would feel every day.

Brett, given that he conducted the BREO Phase III program, I think, can provide -- when he was at GSK -- can provide some additional context on the benefit that was seen with TRELEGY.

Thanks, Rick.

Thank you for your question.

I think, again, obviously GSK would be in a -- the best position to answer the question about how they intend to use the data with payers.

I do think though having seen at least the limited information that they've presented, the numerical improvement of 13% is an important one, particularly if it's supported by other evidence in their full dataset, of improvements, for example, in severe exacerbations or improvements in the time to the first exacerbation, neither of which were reported but almost certainly were collected.

And the reason those are important is that those collectively point to the additional benefits that a triple-based therapy, like TRELEGY, could confer over and above what BREO already brings to bear.

And BREO's improvements are considerable.

Its own record, based on the registrational studies in asthma, showed a 25% improvement over the fluticasone furoate component alone.

If this data is robust and consistent, it would suggest that there may be an additional improvement over and above BREO that's conferred by adding that anti-muscarinic component.

Again, we don't have the full dataset.

So I don't want to speculate too much, but I do believe that, that information in its totality could be presented to payers in support of the additional benefits over and above those statistical significance achieved on lung function.

Our next question is from Louise Chen from Cantor Fitzgerald.

I had a few here.

So first question I had is why does selective JAK inhibition still drive safety issues?

And is pan-JAK inhibition more efficacious than selective JAK inhibition?

Second question I had was on ampreloxetine.

What aspects of the drug, based on your diligence of physicians support a first-line usage?

And do you anticipate any challenges to enrollment given a long placebo period?

And last question I have was on, given the fact that you have this positive CAPTAIN data, what is the additional sales opportunity for TRELEGY to you?

Thanks, Louise.

I'm happy to take the first 2 questions, and then I'll pass over to colleagues on the TRELEGY asthma.

Your first question was around selective JAK inhibition and whether that in fact has any benefits or challenges and whether pan-JAK inhibition may be better.

I think it's fair to say that people have pursued pan-JAK inhibition because of its broad-based anti-inflammatory potential.

And if you're able to harness all of the value of blocking all the isoforms of JAK, you really should get a broad-based anti-inflammatory effect.

And in fact that has been the principle with several products including tofacitinib that was designed initially to prevent organ rejection, and then was then repurposed for RA and more or less relief for IBD.

Now the risk without it, as you well know, is that as the dose is driven up to try and get better efficacy, the systemic liabilities come to bear because that drug is designed to get into the systemic circulation ideally to treat joints.

And as a result, what you see is immune suppression that really tempers or prevents being able to get up to the proper dose.

Tofacitinib demonstrated this very clearly in the Phase II program in IBD in ulcerative colitis, where the 15 milligram dose produced greater efficacy than 10 and the 3 milligram in that particular study.

They then went on in Phase III to test 5, 10, 15.

And after only a handful of patients were dosed to 15 milligrams, that arm of the study was stopped extensively because of concerns in the RA indication, not from the study itself.

But there were limitations in being able to get up to the optimal efficacious dose.

Now you might ask why on earth would we continue to pursue pan-JAK inhibition if that's the case.

Well, the truth is that because we believe we're able to localize this effect, we are able to harness all of the value and the benefit of a -- of the efficacy of pan-JAK inhibition.

But through design, we prevented that from becoming systemically available.

And in doing so, we reduced the liability and the risk associated with pan-JAK inhibition.

You have seen recently reports of JAK1 inhibitors that appears to have demonstrated efficacy and continue to be tested in diseases like ulcerative colitis and Crohn's, but even in the filgotinib data, the published data from the FITZROY study, which is the Phase II study in Crohn's disease, reported a 3% rate of serious infections in the active arm compared to 0% in the placebo arm.

And in fact in the appendix to that published article in The Lancet, there were reports of reductions in both the neutrophil counts and the NK cell counts in the active treated arms of filgotinib to a greater extent than was seen with the placebo.

So the targeted approaches may still carry a liability of systemic immune suppression, probably driven by the fact that even an isolated JAK1 inhibitor still pairs with the JAK3 or JAK2, and in doing so, starts to confer inhibition to other JAK isoforms.

So it's a long answer to your question, but I hope it addresses some of the points.

Your second question was around ampreloxetine and whether there were any challenges either to recruitments.

I think your question related to placebo.

Just to clarify, the studies themselves are actually relatively short.

Our first study of 4 weeks duration has a placebo in it, but it's only 1 month of placebo that these patients would be exposed to.

That is shorter than any of the droxidopa studies that in fact ran placebo-controlled studies for up to 12 weeks.

So we have a shorter duration, but believe that we'll be able to see efficacy compared to placebo over 4 weeks.

The second study has a 4-month run-in, but all patients receive active treatment during that period.

So nobody is on placebo.

And it's only in the last 6 weeks that they'll randomized to placebo in half the patients to withdraw.

We believe that the differentiations with ampreloxetine should confer first-line treatment advantage.

Bear in mind that the existing therapies, particularly droxidopa have some limitations, including the risk of supine hypotension that, in fact, carries -- it's conveyed as a boxed warning for droxidopa.

It's also a very short-acting agent requiring multiple doses during the day.

Our product would be once daily.

And as we showed with the data in the slide set, it's less likely to confer the risk of supine hypotension because it's an antagonist.

It takes whatever is available in the body and prevents its breakdown.

It does not increase the amount of norepinephrine in an exogenous way as both droxidopa and midodrine do.

I'll pass on to Rick to answer the question about TRELEGY and the opportunity in asthma.

Sure.

Going forward, looking at TRELEGY, from a distance, I think, we see 3 potential drivers of growth.

One of them is continued penetration in existing markets for COPD of which we still believe current levels of penetration in COPD are relatively low.

The second growth driver is the addition of new markets in COPD.

GSK in their call highlighted the recent approval of Japan and made some positive remarks about the potential in China.

Those markets clearly would add significantly as would a continued rollout along the -- around the rest of the world.

And then the third driver as you note is asthma.

Asthma would be a significant addition to TRELEGY sales.

What the level is?

I'm not projecting exactly, but I do believe that it's quite significant relative to the existing base of business with triple therapy and COPD.

Now the market -- the market development opportunity is a little bit more in asthma, but I think, GSK will likely be able to take advantage of the number of years of work by Boehringer Ingelheim, where they have added SPIRIVA.

They have studies adding SPIRIVA to LABA/ICS therapy, showing a benefit and getting physicians and health care providers more comfortable with the use of triple therapy in asthma, and in fact, conveying benefits to patients much as you've seen in the TRELEGY CAPTAIN study.

So we would expect a fairly significant increase in the overall market opportunity for TRELEGY with an asthma indication in the United States and around the world.

Our next question is from Tyler Van Buren from Piper Jaffray.

This is Alex on for Tyler.

In terms of the upcoming ampreloxetine for Phase II data readout, is the 5-month time point cut-off based on efficacy and/or tolerability?

Or was it more of a logistical consideration?

And secondly, is there a potential for some patients to stay on therapy for an even longer period of time?

Then lastly, do you expect to see a difference in durability between Parkinson's and MSA patients?

Thank you, Alex.

This is Brett.

The 5-month period of time actually was pragmatic.

It's was purely logistical.

There was no either safety concern or concern about loss of efficacy.

We just felt that, that would provide sufficient durability of response for us to get a patent, some sort of sense of how these patients were tolerating the medication and whether they chose to continue taking the therapy.

In the 6 months, we withdrew therapy really as a proxy for not having had a placebo arm in the study up to that point.

And that was the opportunity to see whether symptoms would reemerge.

Your question about whether patients have the opportunity to continue beyond is a good one.

Several patients actually approached us and their physicians to request ongoing access on a named patient basis, and in fact, we have supported those requests to date.

So there are patients who have continued beyond the completion of the study and are now being supported under investigator initiated I&Ds to support ongoing treatment.

Of course, the other studies, the formal studies that will be running have the placebo built into them.

And so they will give even more robust assessment of the ongoing durability.

Those of what are required in order to file.

You asked about, I think, the durability of the response as well.

I think -- if I understood your question correctly, we do believe that both the mechanism of action as well as the fact that this is an antagonist sets this product up more likely to be durable.

You may be familiar with the fact that even in the droxidopa label, they report efficacy only after 1 week.

Now droxidopa is an agonist.

It's a pro-drug of norepinephrine.

And it may be that, in fact, stimulation of receptors by an agonist causes down regulation, which might explain why efficacy is lost over time.

In fact, what we see in our assessments of patients who take droxidopa is that the therapy appears to wax and wane in its efficacy, probably driven by the source receptor down regulation.

And the antagonist, such as ampreloxetine should not result in that effect because these studies that we are conducting right now are designed to confirm that finding.

Did that answer your question, Alex?

Yes.

And one further one.

Do you expect to see a difference in durability between the Parkinson's and MFA patients?

Because I believe it was potential for an efficacy or driving benefit in one population or the other?

Yes.

Sorry, I forgot to answer that portion of your question.

Based on the information and it was limited in the prior study, but we did enroll patients with both MSA and with Parkinson's.

Both disease states do appear to benefit from the treatment of ampreloxetine, although the numbers of patients are obviously smaller in that study.

We have though conveyed and carried that information forward into Phase III.

If anything, the signal and perhaps the mechanism of action would suggest that those patients with MSA are particularly well-suited.

That doesn't mean it wouldn't work in Parkinson's, but the patients for the MSA may in fact have a strong response.

For that reason, as reported in clinicaltrials.gov, we will incorporate a stratification into our studies, and a minimum of 40% of our patients will be enrolled with MSA, and that's intended to look specifically at your question, whether these populations benefit to a greater or lesser extent.

Our next question is from Brian Skorney from Baird.

Let me ask a couple of questions here.

Rick, I've certainly followed this company for a long time, so I'm as shocked as you in certainly the decision from Innoviva seems unjustified from everything I have known about the company.

But maybe you could just kind of provide a little detail in terms of any guidance on what their justification or their explanation actually is?

Are they questioning how that 85% interest should be applied?

Or are they questioning the validity of that 85% entirely somewhere in that?

Or are they trying to apply some sort of expenses to TRC before the amount that gets paid direct you?

Are they questioning the basis for the entire origination of the 85%, 15% split?

Yes.

So -- Brian, on that, one of the -- for just everyone's edification, the entire TRC, LLC, agreement was filed in an unredacted form at the time of the separation.

So anyone can go to the SEC website and take a look at the entire LLC agreement, including the dispute mechanism.

The one aspect of the mechanism overall is the nature of conflict between the parties needs to remain confidential, except as required under applicable law.

So I really can't comment on the nature of the dispute.

I can just comment on my optimism with regard to prevailing in the dispute with Innoviva in a timely manner.

And I think to the extent that one goes to Section 15.1 in the LLC agreement, that will describe in greater detail the dispute mechanism, and in fact, the timing of it.

Got you.

And then if I can just ask one more.

Just in terms of the collaboration revenue and how to think about the contribution from the Mylan, YUPELRI and the Janssen collaboration.

I guess, A, can you break that out at all?

I didn't hear if you actually explicitly said what YUPELRI sales were for the quarter, and in future quarters or even in the 10-Q, what will kind of the components of collaboration revenue be broken out?

Yes.

So the components of collaboration revenue, we will break them out.

Of course, the 2 components right now, one of them is more or less the amortization of the Janssen upfront, which Jessica described, is coming into the revenue line of the P&L.

The second one is effectively our share of the operating profits of the collaboration with Mylan.

Now when that is -- as we've noted before, when that's in a loss position, it shows up, down in the body at the middle of the P&L.

And that loss which will be described in the Form 10-Q is like $1.4 million -- our share of that loss is like $1.4 million or something for the first quarter.

We haven't disclosed YUPELRI sales.

Mylan didn't disclose them today, and we'll rely on Mylan's disclosure for the YUPELRI sales overall.

But what would be reported in the revenue line, going forward, is when that collaboration number turns positive then that positive number will be reflected in the revenue line.

I'm looking across the table at Jessica to make sure I've got this right.

So...

Yes.

No, Rick, that's true.

Okay.

Our next question is from Alan Carr from Needham.

Maybe we can spend a little more time talking about the lung-restricted JAK drug in terms of what you're assessing in that Phase I trial?

And what are the plans after that's completed in-house?

Thanks, Alan.

I'm going to just make a couple of comments and then turn it over to Brett.

We're quite excited about the inhaled JAK program.

It's being delivered in patients currently in a dry powder inhaled form that is commercializable.

So the team here has done really extraordinary work, not only in the characterization of the molecule but also in the formulation of getting the drug formulated into a DPI that can be delivered to asthma patients.

The team also designed an aggressive Phase I program that got us into patients very quickly after the single ascending dose portion of the Phase I, and then I'll turn it over to Brett to describe it a little bit better.

Thanks, Rick.

Alan, what we've done is, we did single ascending dose exposures just in healthy volunteers, but then immediately moved to 14-day duration studies, once daily administration for 14 days in patients with asthma and who had elevated nitric oxide levels in their breath.

Patients who aren't perfectly controlled on existing therapy do tend to have elevated nOH.

The reason we test these asthmatics is twofold.

Actually, we want to make sure that when they inhale a drug like 8236, they don't have paradoxical constriction of their airways, that's an irritancy issue that we try to rule out very early in these inhaled programs.

But of course, the fact that they also have elevated nOH allows us to look at that as a marker of biology.

I wouldn't call it a marker of efficacy but it's an -- it's an early marker of whether we're engaging the targets.

We do also look at things like lung function, but it's not in a powered fashion to look at lung function improvements.

It's purely to ensure that they don't have a decline in lung function enough to exposure it our drug.

So this is going to be descriptive.

It won't be a powered study in the classic sense, but I think we'll be able to create an early sense of whether this drug is in fact engaging the targets, in that sense, analogous to what we did prior -- previously in the IBD space with 1473, looking for early markers of biology and disease activity.

We're actually looking, in addition, with a limited number of patients at evidence of reduced inflammation in the lung itself.

So some of these patients are consenting to bronchoscopy and will be able to look at, what they call, brushings and washings.

We don't actually cut into the tissue but we brush along the surface of the bronchus and look at cells that are produced from those brushings.

So we will be looking at that as well.

And just as -- yes, just quickly to what size of an opportunity, if you look at some data that AstraZeneca has presented, where they cite some decision resources and IQVIA data source, there is probably about 5.6 million severe asthmatics in the United States that are -- that may be, in fact, treated with a steroid, but are not fully under control.

So the opportunity here is quite significant.

And the primary objective of the therapy is right along the same lines as what we're trying to do with IBD, and that's to deliver a powerful inflammatory modulator into the lung without getting -- having any effect, systemically, on the immune system.

If the -- sorry, go ahead.

Yes, I was wondering, if this is -- if the results are encouraging, whether or not this is something that you would do another round in-house to add more value?

Or do you think at that point, it's time to look for a partner to take it from Phase II on?

So it's a great question, Alan.

I think our current view is to keep going.

We have a product at the moment that is already in a formulation that could be commercialized.

It's dry powder from the very first study in man.

We obviously appreciate that there may be parties out there who become interested in data, and I think in that respect, we need to appreciate that we may not be the only people looking at our own data with interest.

But certainly, our view here is that provided we see evidence of biological engagements that we would progress into later-stage development.

One of the advantages of the current study is it's testing multiple doses over 14 days.

So we are hoping to get some early read even on whether we're able to start to tease out a dose response.

It appears we have no further questions on the phone.

I'd now like to turn the conference back to Mr. Winningham.

Please go ahead, sir.

Okay, operator.

Thanks, everyone.

It was a pleasure to provide an update to you on what's happened with the company through the first quarter.

We've got a very exciting year ahead of us as well as 2020.

And we look forward to updating you as the events in the company unfold over the next several months.

So thanks for participating, and have a good day.

This concludes today's conference call.

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