Good morning, everybody. I'm Doug Tsao, senior analyst at H.C. Wainwright. We are thrilled to have with us next, Theravance Biopharma, represented by the company's CEO, Rick Winningham. You know, as Rick, as a starting point, maybe just it'd be helpful to provide a quick introduction to the company and its current iteration. There have been some changes over the years, and, you know, you sort of gained a lot of strategic focus, so I think it'd be helpful to just provide a quick overview.
Sure. Thanks, Doug, and thanks to you and H.C. Wainwright for inviting us here to present. Yeah, Theravance Biopharma today we're a commercial stage company with a late-stage asset in clinical development. The commercial medicine that is on the market in the United States is a medicine targeted to COPD, chronic obstructive pulmonary disease, that we co-promote in the United States with Viatris, our partner.
The medicine that we have in phase III development is ampreloxetine for a rare neurologic condition, neurogenic orthostatic hypotension in patients with multiple system atrophy. We're a company with cash on the balance sheet. Very, very small use of cash relative to ongoing operations because of our commercial product, Yupelri, which generates cash for us, and we're looking to finish enrollment in the phase III program, the open label portion of the phase III program in mid twenty twenty-five. So that's a quick overview for you.
Maybe we'll start with Yupelri, which is a product that has enjoyed a lot of success, especially, you know, sort of as we exited the sort of COVID phase, and that sort of opened up the hospital market for you in particular. I think the last quarter was one where probably the first most sort of challenging quarter in some regards, that we've seen in some time, and especially in terms of pricing, and I think that was sort of largely due to the mix of business that you've had. Maybe it'd be helpful to provide some perspectives on what happened and, you know, what steps that both you as well as Viatris can take to sort of mitigate those impacts and improve pricing on a go-forward basis.
Yeah, I think, you know, the underlying brand volume growth has remained strong, 13% demand growth in the second quarter. The pricing gross-to-net adjustment that you mentioned, we'd highlighted in our press release, really attributing it to, you know, an unfavorable mix of the business in the second quarter. It's a Part B medicine that's reimbursed through Part B, so we. The product is sold through the hospital, it's sold through long-term care, sold through durable medical equipment suppliers, as well as traditional retail pharmacy.
And there, within those segments, there are different, you know, different channels of distribution and, you know, the gross to net adjustments really just address the, you know, the sort of the unfavorable mix coming out of the second quarter, going in, going through the second quarter, that the brand faced. The hospital business, you know, price and volume, has remained solid, through the second quarter and beyond, you know, into the third quarter. I think the, as we mentioned, the ASP, average selling price, which dictates reimbursement, was a little challenging in the second quarter.
We expect, while improving, to see a bit of headwinds through the next two quarters and then largely correct itself going into 2025, and I think that's by and large where we stand today. We've continued to see strong hospital growth, and we would expect that to continue because of its differentiated profile. And of course, the core strategy of the brand is to see that hospital growth feed the outpatient side of the business.
I guess, you know, when you think about your responsibility, you manage the hospital channel, and that is where we've continued to see some really nice growth. What have been the drivers of that? Because I think from a volume standpoint, the second quarter was one of the best, another record right from a volume standpoint in the hospital channel. What has been the key drivers of that, and how much more runway do you have in the hospital channel and the levers that you can pull to continue to enjoy success?
Yeah, that's a great, great question. The strength of the, the strength of Yupelri in the, in the hospital is really reflective of the strength of the value that Yupelri delivers into the hospital. It's a once-a-day, long-acting muscarinic antagonist, which is gold-standard therapy for patients with COPD. By getting Yupelri, putting Yupelri on the formulary, you know, many times Yupelri will displace another agent that's given two, four, six times a day. That displacement actually generates considerable savings for the hospital and labor. It also can displace handheld products, which the hospital, you know, has to buy more doses of those handheld products than what they use, whereas Yupelri is provided on a unit of use basis once a day in a nebulizer.
So that's a lot of value that's delivered into the hospital. I think we see continued opportunity for the hospital. In fact, you know, in the most recent quarters, we've continued to get formulary approvals, and we've continued to see movement into therapeutic interchanges, which is when any long-acting muscarinic antagonist is prescribed in the hospital, there's a switch to Yupelri, and that's really due to the underlying strength of the brand.
I'm just curious, how are you able to or the first, you know, resistance do you see, and when you're getting that therapeutic interchange, are those institutions switching from other nebulized products that might be delivered multiple times a day, or is it largely from the handheld products?
No, I'd say, you know, it's a mix of both. I think, you know, we're able to overcome the challenge with the handheld products because of the degree of savings that Yupelri can provide through unit of use. And the labor savings that we can provide through a more efficient allocation of respiratory therapy and pharmacy time, you know, is quite significant, and I think that is, those are elements that'll continue to drive the brand. I think the brand, you know, we have to continue to stay focused on the growth in the hospital because I don't think we're close to being maxed out there. We should be able to continue to drive that growth and to continue to refine that hospital-to-home switch, because we're in the hospital really to drive outpatient business.
We've got to continue to drive that hospital-to-home switch such that we're driving the outpatient business by getting the patient on in the hospital, and just that it's important because the patient is in a compromised position in the hospital, and when they're provided Yupelri, they can breathe better, and that gives the patient a strong affinity for the product that helped them in the hospital.
You know, I think you've said previously that almost all patients, when they leave the hospital, do leave with a script in hand. What has been the sort of rate limiter in terms of getting that patient to fill that script and to stay on that script when they're in the community from a long-term basis?
Yeah, I think the critical is the faster the time of follow-up to that primary care physician or pulmonologist that's caring for that patient, the better once they get out of the hospital. Because, you know, usually they may get a month-long prescription, but we've got to transition that first thirty days into thirty, sixty, ninety days and beyond of additional therapy, and getting them back into the outpatient health system, again, either primary care or pulmonologist that can get them to more chronic prescriptions, that's really the key, getting them into the outpatient system as quickly as possible post-hospitalization.
How do you coordinate that with Viatris and ensure that you sort of don't have patients sort of falling through the cracks?
Yeah. And it's, you know, we continue to work on it. Obviously, the sales force of Theravance is a much smaller sales force than the one of Viatris. But our, you know, the work is, as we get stronger and stronger in the hospital in given geographies, and you know that there's a sizable number of COPD patients, because of diagnosis codes in that particular region, you know that a large, significant number of patients are going to be flowing out to primary care pulmonologists in that particular region. And it's just up to us and Viatris to work together to understand that flow of patients from the hospital out into those regional care providers.
And one of the sort of values, and I think that's somewhat overlooked by the investment community in terms of Yupelri, is the sort of runway that you have from an IP standpoint. I think you were granted another patent this summer. You've also made a lot of progress in terms of settlements with various generic challengers. So maybe just provide a quick update in terms of where you are from an exclusivity standpoint with Yupelri.
Sure. You know, we've... we're in the litigation with the generic filers. We've settled with a few, with a twenty thirty-nine date. The patent, actually, the first patent on peak inspiratory flow expires in the fall of twenty thirty-nine, and the settlements have occurred by and large at about six months ahead of that twenty thirty-nine date. So we continue, you know, it's in the middle of litigation, so I can't, you know, can't comment too much other than, you know, we feel strongly on the strength of the patent, the PIFR patent. And then, to your point, we were issued another patent in the summer, in July. The...
That's just in the beginning of the end of the litigation process. I think overall, to the point that you make, it strengthens our intellectual property position around peak inspiratory flow and the majority of patients, almost all patients who currently receive Yupelri in the outpatient setting. So it was an important patent to get issued. It's again, the second patent has a 2039 date, and you know, look forward to providing future updates as the situation evolves.
Okay, and maybe we should turn to ampreloxetine. You know, you did provide an update on enrollment in the pivotal Cypress study that's ongoing, in which you did sort of push out the timing a little bit. I'm just curious, how have things gone since then, and sort of what are the steps that you're going to be able to take to ensure that you hit, you know, hit the new target?
Yeah, I think that's a great, great question because obviously sometimes you see a little bit of a slowdown in the summer, particularly with these patients. We, you know, we haven't seen a slowdown in the summer. We hit our enrollment targets, you know, through the summer. As we mentioned in the call, we're bringing a number of centers of excellence, continuing to bring them on into the clinical program, which is important not only for the clinical program, but is important eventually for the commercialization of the product, to have those centers of excellence working with us on the study. We're adding those as, you know, sort of almost as we speak now.
They're, you know, they're important to us in finishing the study, but we've got a lot of good momentum, really, and accrual around the study. We've got two conferences coming up. One of them, the MDS conference in Philadelphia at the end of this month, and then another one later in the fall, the American Autonomic Society meeting, both of which will have poster presentations focused on ampreloxetine. Importantly, we'll have investigator sessions, such as to keep the key issues with the study in front of investigators and really working with them and providing all the support we can for them to continue the rate of accrual that they've been experiencing over the last few months.
You mentioned those two meetings. Is there any sort of new data that will be presented that you think will sort of help generate some additional excitement around the opportunity with ampreloxetine, especially in MSA patients?
Yeah, I think you know, and without getting ahead of the presentation, you know, the poster at MDS will focus on long-term safety of ampreloxetine. Because in the previous program, we had a section of that program called the old study, where patients came off of the primary study and enrolled in a long-term extension. And that long-term extension study is the focus of the poster presentation. And ampreloxetine's been a very well-tolerated medicine, and I think that data should be important to people that follow the company and that follow ampreloxetine. I think the...
An important paper at the American Autonomic Society meeting is quality of life and the quality-of-life challenges that patients face with neurogenic orthostatic hypotension and how debilitating it is. It really you know forces patients into a sedentary condition, has them withdraw from life, so that if we can make a difference in neurogenic orthostatic hypotension in MSA patients, we can enable those patients to continue to live their life with their disease as long as possible. So I think those are a couple of highlights.
It's a question that I've gotten from a couple investors, is just you have been sort of expressed a view that the MSA market is much bigger than sort of some of the previously published estimates in terms of the patient population. What would you say to investors who say: "Well, gee, if enrollment's a little behind in terms of the pivotal study, does that tell us that maybe the market isn't as big as they think?
Yeah, I think it's the difference between, you know, execution of a clinical trial with the endpoint that we have, PRO, and we, you know, we as we've mentioned on the calls, our focus really is on high-quality patients that are really set up to meet the criteria of the study such that we can achieve an endpoint in the study with a minimum amount of variability. This is very different than what you see in the commercial market. I think the estimates that many people look at, the lower-end estimates, come from, you know, estimates that were taken, some of them from a door-to-door survey in London, you know, thirty years ago, on percent of population that has MSA.
The more recent estimates that you see from us or you see from University of California, San Diego, is really analysis of claims databases of MSA patients and neurogenic orthostatic hypotension. So I think there's a robust opportunity out there for a medicine that effectively and safely treats these patients and really enables them to move forward with their lives and as much as possible when living with Multiple System Atrophy.
And I did want to touch on sort of your balance sheet and how the Trelegy royalty sort of affect things, because I think that product has obviously had a really strong start to the year. I think at the beginning of the year, most people thought that you were in good shape to receive the $25 million milestone, and now it seems more likely than not that you'll receive the second $25, for a total of $50 million of milestone payments. Given how much progress you've made in terms of reducing your cash use rate or your burn rate, would that position you to return some additional capital to shareholders?
How do you think about, you know, prioritize capital as we think forward to not just this year's in terms of milestone payments, but down the road as well?
Yeah, it's a great question because Trelegy, you know, since we did the deal with Royalty Pharma, you know, a couple of years ago, Trelegy's continued to outperform sales estimates. And if you look at consensus on Bloomberg today, consensus would have us achieving, you know, both the $25 million and the $50 million milestone. Obviously, for us, I think Aziz has said this in his remarks before, you know, we're focused on what the third quarter turns in with Trelegy.
But hopefully, Trelegy remains strong in the third quarter, and that $50 million milestone comes really into solid focus and a very, very high probability of achievement of the target, and then us receiving the milestone. I think for us, we're, you know, we have made significant progress in reducing our burn rate. We continued with a strong focus on the expense base, really targeting capital allocation towards driving Yupelri business in a very targeted way, and finishing ampreloxetine and getting the NDA prepared, while we're in the phase III program. So if... Should we.
We've made a commitment before that we'll return excess capital to shareholders, and I think the $50 million milestone, when we hopefully receive it, and then, you know, the board will make a decision on that in the context of that comment. So we're excited about Trelegy's performance, probably almost as much as Royalty Pharma and GSK.
And just one final quick one for me, because I know, you know, you've continued, been consistent recently in terms of your, commitment to returning capital to shareholders. But, you know, as much as you have a long runway for Yupelri, does there come a point sometime when bringing in a second asset for the hospital sales force, for your hospital sales force, makes strategic sense, not only just for itself, but also just to give your rep something new to talk about? Because there comes a point, you know, after a product's been on the market for 10 years, where maybe physicians aren't as necessarily interested in, in hearing from the Theravance rep to talk more about Yupelri because they're using it An established use pattern.
The great aspect of Yupelri, I'd say is that we are still gaining, in fact, you know, most recent two quarters, gaining formulary approval and physicians becoming more and more confident in the place for Yupelri in nebulization, and the importance of Yupelri in a nebulization protocol, not only in the hospital, but in the outpatient setting. I see a lot of room for opportunity for education of physicians with Yupelri, and we're not close to where we're peaking out relative to, you know, physicians' or hospitals' interest in utilizing Yupelri. I'm comfortable with our portfolio as it sits today.
Okay, well, I think we're out of time, Rick, so we'll wrap it there, and we look forward to getting further updates from you.
Very good.
Thank you.
Thank you, Doug.