Halozyme Therapeutics, Inc. (HALO) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Antares Pharma First Quarter 2020 Operating and Financial Results Conference Call. [Operator Instructions]. I will now hand the conference over to Jack Howarth, Antares' Vice President of Corporate Affairs. Please go ahead, sir.

Thank you, Jonathan, and good morning, everyone. Earlier today, we announced our first quarter 2020 financial results and operating achievements. A copy of the press release and slide presentation for today's conference call are available on the Investors section of the Antares website. Before we begin, I'd like to remind you that some of our statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include those related to our future financial and operating results, including our expectations regarding the impact of the COVID-19 pandemic and mitigation measures implemented in response to the outbreak, on our product supply, demand for our products, new patients and future prescriptions, future revenue, development programs and our overall business, operating results and financial condition, the adverse effect of the COVID-19 pandemic on the global economy and financial markets and the potential adverse effect on our future business and operations; future revenue growth, prescription volumes and market share for our products, new product approvals and launches, FDA actions and other regulatory activities, results of ongoing and future clinical trials and other product development activities and business development efforts. These forward-looking statements are subject to certain risks and uncertainties and actual results could differ materially. They are identified and described in today's press release in the accompanying slide presentation and from time to time in the company's filings with the SEC on Form 10-K and is updated in Antares' recent periodic filings on Form 10-Q and Form 8-K. Antares is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events or circumstances after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Joining me on the call today are Bob Apple, President and Chief Executive Officer; and Fred Powell, Executive Vice President and Chief Financial Officer. Let's review the agenda for today's call on Slide 3. Bob will begin with a high-level review of our business. Fred will go through the detailed financials, and then Bob will conclude with some closing comments before opening up the lines for your questions. I'll now turn the call over to Bob Apple. Bob?

Thanks, Jack, and good morning, everyone. We were speaking to you this morning during unprecedented times, but I'm happy to report that we had another solid quarter of financial progress for Antares Pharma. Today, we announced a 42% increase in revenue versus the first quarter of last year. In addition, we have seen an improvement in gross margin across our business, and we generated cash from operations. These strong results were driven in large part by sales of our flagship product XYOSTED as well as increased demand and market share growth for Teva's generic EpiPen. Our revenue is diverse and driven by a portfolio of 5 marketed products, revenue from 4 partner products in development and royalties. Importantly, total proprietary product revenue, which is our highest margin business, consisting of XYOSTED and OTREXUP sales, grew 163% versus the same period last year. On Slide #5, you will see that prescription trends for XYOSTED continue their upward slope through the first quarter before peaking in March. Since the product launched last year, more than 100,000 prescriptions have been filled, and approximately 5,300 different physicians have prescribed XYOSTED to more than 19,000 different patients. First quarter total prescriptions increased 18% sequentially from the fourth quarter of late -- of last year, and we believe much of this growth can be attributed to the expansion of prescribers writing XYOSTED at an enhanced copay card support program. We believe the enhanced copay program has made it easier for both new and current XYOSTED patients to fill their prescriptions while dealing with the annual resets of copays and high-deductible insurance plans. Unfortunately, right as XYOSTED prescriptions were peaking, the COVID-19 pandemic started the spread in the U.S. and state by state, shelter-in-place restrictions began to limit patients and our sales representatives' ability to visit physician offices. Fortunately, our commercial team had already trained all of our reps on an existing virtual selling platform that was being utilized by virtual reps that we had engaged in the fourth quarter of 2019. Once the entire sales force had been fully trained, our reps now had the option of adding virtual detailing into their daily routine of selling XYOSTED and OTREXUP, which, at that time, still included limited visits to physician offices. As a pandemic spread, we began to see that physicians were reducing office hours or limiting office access to patients only. As of today, our entire sales team is operating virtually. Armed with this virtual detailing tool, our reps were able to continue selling our products without office visits. They are able to get samples, copay cards and do product presentations all via the electronic platform. We also have been able to conduct virtual lunch and learns as well as virtual speaker programs that provide health care professionals with the information and tools they need to continue prescribing our products. The company and its sales representatives are committed to making sure patients have what they need at this critical time. And for those initiating treatment on our products, our goal is to minimize any disruption to new patient starts by staying in close contact with our customers. Generating new patient starts is a challenge under the best of circumstances. But in the context of the pandemic, it is especially difficult. Because we rapidly deployed these dynamic virtual selling tools, we are still able to generate new patient starts, albeit at a lower rate in an otherwise very challenging period. In addition to changing the way we communicate with our customers, we also had to make sure our messaging, as it relates to the unique product attributes of XYOSTED, were fully appreciated in a time of potentially limited access to care. XYOSTED is a once-weekly subcutaneous and virtually painless product that is safely administered at home. With current shelter-in-place restrictions, some patients may not want to or be able to visit our physicians for an IM injection or implantable testosterone pellets. If a patient has been diagnosed with low testosterone and has already satisfied the insurance prior authorizations to initiate testosterone therapy, they can be easily switched from a physician-administered IM injection or implant to an at-home self-administration of XYOSTED. We have targeted those physicians that perform in-office injections or implant testosterone pellets with our switch message. And we believe that is one of the reasons we continue to see new patient starts in this difficult time. We continue to refine our messaging through social media on Facebook and Instagram, and as a result, we have seen an increase in utilization of the Internet copay cards. In fact, we recently learned that our XYOSTED social media life is messy campaign had won a Gold Muse Creative Award in recognition for creativity in advertising, design and digital. When we look at ex-factory shipment data and weekly prescription trends, we believe April will be the highest month of total prescriptions since launch despite the COVID-19 crisis. XYOSTED continues to be the fastest-growing branded testosterone product on the market. While we cannot fully predict how COVID-19 impact future prescriptions, we are pleased with the results to date. Going forward, our team is developing a safe plan for return to the field as states begin relaxing their restrictions. We continue to remain focused on ensuring our customers and our patients to have easy access to XYOSTED while protecting the health and safety of our employees and the communities in which we operate. Turning now to Slide 6 and another one of our growth drivers, Teva's generic EpiPen. According to Symphony prescription data, 206,000 prescriptions were filled with Teva's generic EpiPen in the first quarter, representing a 43% share of the EpiPen market. Historically, the first quarter of every year has the lowest number of prescriptions due to seasonality and resets of copays and high-deductible insurance plans. While the overall -- overall EpiPen market declined in the first quarter versus the fourth quarter, Teva's share in the EpiPen market increased 7%, while their total prescriptions increased almost 13% sequentially during the same period. It is also important to point out that in the first quarter this year, the overall EpiPen market grew 8% versus the same period last year. While we do not fully know how COVID-19 may impact sales of Teva's generic EpiPen, we've been very pleased with the results through the first quarter. Turning now to our pipeline on Slide 7. Let's begin with Teva's generic version of Forteo. According to Teva, they believe their ANDA filing could be approved in the latter part of this year. As a reminder, Teva expects their generic Forteo pen will be fully substitutable at the pharmacy, and they maintain they have first-to-file status. According to Lilly's 2019 10-K, Forteo achieved $1.4 billion in global sales, with the U.S. making up $646 million of that total. Our agreement with Teva provides for us to sell the devices at cost-plus margin and receive escalating royalties from high single digit to mid-teen percentages. If approved, we believe the product represents a significant opportunity for both Teva and Antares. As a reminder, we have already manufactured and shipped prelaunch quantities of generic Forteo devices to Teva. The next exciting program in our pipeline is the selatogrel rescue pen, which is detailed on Slide #8. Last November, we entered into a new significant new collaboration with Idorsia Pharmaceuticals to develop a product combining selatogrel, a new chemical entity with our QuickShot auto injector. To date, Idorsia has completed 2 Phase II studies and believe selatogrel could be self-administered at the onset of symptoms to stop a suspected heart attack. We have initiated the usability and reliability studies with the QuickShot device, while a partner conducts a clinical bridging study as well as finalizing the Phase III study design with health authorities. The global registration study is expected to be initiated in the first half of 2021. Idorsia will pay for the development of the rescue pen and will be responsible for obtaining global regulatory approvals for the product. Antares will provide fully assembled and labeled finished product to our partner at cost-plus margin, will then be responsible for global commercialization of the product, pending FDA and foreign approval. It will then be entitled to receive escalating royalties on global net sales of commercial product. We believe that the potential importance of this product, both for patients, Idorsia and Antares can be significant. Turning now to our development agreement with Pfizer. We continue to make good progress on the program for an undisclosed rescue pen. As a reminder, subject to FDA approval, we will supply Pfizer with a fully packaged commercial-ready product at cost-plus margin and then receive escalating royalties from mid-single digit to double-digit percentages on end sales of the product. We will provide estimates on the development time line once we've received clearance from Pfizer. And finally, I'd like to outline some of the changes we have made to the way we operate as a company given the global health care crisis we are all facing. In response to the COVID-19 pandemic, most of our executive and administrative functions are working remotely, and we have limited the number of staff in our facilities to those necessary for essential functions such as development, manufacturing and supply chain. As discussed earlier, we suspended face-to-face activity for our field-based employees who are now utilizing virtual immune platforms and other forms of social media to connect with our existing and potential new customers and health care professionals. Antares provides essential medicines for our partners and patients, and we are committed to delivering on this important mission. We are working closely with our third-party manufacturers and distributors in order to manage supply chain activities and mitigate any potential disruptions to our ability to supply products to our customers and our partners as a result of the COVID-19 pandemic. Thus far, we have seen a limited softening of demand for our products through the end of March and into April. With a portfolio of commercial products that treat life-threatening and chronic diseases, coupled with our strong financial position, we believe that we are well situated to navigate through this pandemic and execute on our key strategic objectives to support long-term growth. I will now turn the call over to Fred for the financial details on our first quarter. Fred?

Thanks, Bob. Looking at Slide #9, we had a strong first quarter despite the emergence of COVID-19 pandemic during the quarter. We recognized $33.1 million in the first quarter revenue, which was a record for any first quarter in the company's history and exceeded Street consensus of $30.5 million. So let me begin my financial overview by providing a detailed breakdown of our revenues and operating expenses for the first quarter of 2020. Total revenue was $33.1 million for the 3 months ended March 31, 2020, compared to $23.3 million in 2019, a 42% increase. Total product sales were $27.1 million for the first quarter compared to $18.3 million in the first quarter of 2019, a 48% increase. Sales of our proprietary commercial products, XYOSTED, OTREXUP, totaled $12.6 million for the 3 months ended March 31, 2020, compared to $4.8 million in the same period of 2019, a 163% increase. As Bob mentioned earlier in the call, we believe that XYOSTED's first quarter double-digit prescription growth versus fourth quarter 2019 was driven, in large part, by the continued expansion of XYOSTED prescribers and the introduction of our enhanced copay support program, which we have extended through the end of April. Licensing and development revenue for the first quarter of 2020 was $1.8 million as compared to $900,000 for the same period in 2019, a 92% increase. The increase in 2020 was primarily from the Pfizer rescue pen and the Idorsia lateral pen development programs. Royalty revenue was $4.2 million for the first quarter of 2020, compared to $4.1 million for the same period in 2019. The net increase in royalty revenue for the 3-month period was a result of an overall increase of $1.9 million in royalties received from Teva on their net sales of epinephrine injection USP, offset by a decrease of $1.5 million in royalties received from AMAG on their net sales of the Makena subcutaneous auto injector. While many analysts have discounted the Makena product from their 2020 Antares revenue models, the product remains on the market. Gross profit was $18 million for the quarter ended March 31, 2020, as compared to $12.3 million for 2019, a 46% increase. Gross profit as a percent of total revenue increased to 55% for the quarter ended March 31, 2020, up from 53% recorded for the same period in 2019. Operating expenses were $19.4 million for the first quarter of 2020, compared to $17.3 million in 2019. The increase in operating expenses for the first quarter of 2020 was primarily due to incremental sales and marketing expenses related to the commercialization of XYOSTED. For the quarter ended March 31, 2020, our net loss was $2.4 million compared to a net loss of $5.5 million for the same period in 2019, a 57% reduction. Net loss per share was $0.01 for the first quarter as compared to a net loss per share of $0.03 for the quarter ended March 31, 2019. During the quarter, we generated $5.6 million of cash from operations. At the end of the first quarter, cash and short-term investments were $50.3 million compared to $45.7 million at December 31, 2019. Finally, earlier today, we announced the suspension of our net revenue guidance for 2020 due to uncertainties regarding the impact of the COVID-19 pandemic and the duration of the state by stage shelter-in-place restrictions. As Bob said, we will continue to monitor the pandemic as it relates to a potential financial impact on our ongoing business and operations. I'll now turn the call back to Bob. Bob?

Thanks, Fred. In closing, I'd like to take a moment to thank our employees and our suppliers, all of whom are making extraordinary efforts to keep our operations up and running in order to provide products to our partners, our customers and to the patients who need them. The COVID-19 outbreak has severely impacted global economic activity, and many safeguards are still in place, including self-quarantine, shelter-in-place orders, business closures for nonessential services and restrictions on travel. Our employees have worked hard to minimize the negative impact of the pandemic on our commercial business. To date, we have seen a limited financial impact on our business due to our diversified portfolio of differentiated products. However, given the global economic slowdown, reduced field-based interactions with health care professionals and the uncertainty surrounding the scale and duration of the pandemic, at this time, we expect to see a short-term reduction in demand for our products and cannot rule out future impact on our revenue business. We will -- we continue to closely monitor COVID-19 pandemic in order to make timely informed decisions in an effort to minimize the impact to key business areas. We remain focused on driving commercial success, and we are committed to advancing our product pipeline. We believe our current portfolio of products and pipeline will grow and translate into future product revenue and royalties for our company. Thank you for your attention. This concludes my prepared remarks for today. Operator, could you please open the lines up for a question-and-answer session?

[Operator Instructions]. We'll take our first question from Ken Cacciatore of Cowen and Company.

Congrats on all the progress. Just a few questions here. First, just trying to understand, one could argue there could be a bit of an advantage for XYOSTED as you turn to telemedicine and during this time, with the take at-home options. So can you just talk about what percentage of patients are actually coming into the office? I know, obviously, the gel, they wouldn't be. But can you talk about a feel for that group of folks that are coming in and getting the injections and how you're targeting or able to target those clinicians? And then second question, on Forteo, obviously, we're still trying to understand what's going on there. Can you just discuss the differences between your product and the actual market at Forteo? I mean could it be that have had some complete human use or human factor studies? Give us a little bit of an understanding of the differences between the products to understand how hard that would be or easy that would be for them to complete? And then lastly, on the guidance, you are doing well and understanding there's a slowdown. But Makena, I believe, was not part of the original guidance, so you still have that product on the market. It's in May. So are we just being overly conservative as we look out? And obviously, there's a lot of uncertainties, but it seems as if you all are in better shape than many we follow. So can you just talk about the decision to actually remove the guidance and some of the puts and takes as we work through the balance of the year?

Great. Ken, I'll try to answer most of those questions in the order you asked them. So with XYOSTED, we -- the largest percentage of the market to date and continues to be people on testosterone is the IM injections. And that represents over 70% of the market to this point. What we do not know is what [Technical Difficulty] patients actually go into the office versus self-inject. I mean, we do know, clearly, there is a divide. Some patients just don't want to do it, and they go to the doctor's office. Some doctor's office don't want to be bothered with doing the injections, so they teach the patients to do it themselves. What we do know is that when a rep is in the territory and they are able to designate which docs are doing IM injections, they actually know which offices do them for the patients. And so they are -- each individual rep is focusing on those doctors. The same thing with -- if a doctor does, the implantable Testopels, the testosterone product that gets implanted once every 6 months. They know the physicians that are doing that. So they're targeting those specific doctors with the messaging about XYOSTED being able to use easily at home. And obviously -- and clearly, we have seen doctors switching who previously did the injections in their offices or the implantable testosterone pellets. So the messaging is working, the targeting is working, and we believe that's where we're getting a lot of the new patients because, as you know, from personal experience, probably most people are not going to the doctors anymore. And so in order to get new patients, the easiest ones for us to get on to switches. And the switches are probably those patients who were getting the injection done at the office and/or the implantable testosterone pellet. So it's not a precise number to say how many doctors do those procedures, but clearly, it's a meaningful part of the market, and that's what we focused on. So I think that was your question on testosterone. On the Forteo question, our device, for lack of a better term, is identical to the Forteo device. We've already shown that in user studies that it was easy to operate. No difference between patients who ever used Forteo versus patients who are naive to -- or patients who were actually used for Forteo. And so there's no additional information that's needed for the patient interface for our Forteo generic product with Teva. And so the application is under review. I think that there was some guidelines or guidance that was provided late last year about complicated or complex generic products that had to be applied to Forteo because it is a complex generic. And hopefully, the product will be approved as Teva suggests sometime this year. And so there's really nothing open on our end whatsoever on that product. So hopefully, we see the launch happen soon. On the third question, I think that was around guidance. I'll turn that over to Fred. So he can kind of walk through what we're seeing in our business and why -- whether or not AMAG was part of our guidance and things like that.

Thanks, Bob. Ken, when we took a look at the guidance issue, we took a look at a number of factors, including those that were actually driving the growth from year-over-year. The two major drivers from our revenue that we hit in 2019 versus our guidance for 2020 were continued growth in Epi but more importantly, the path that we saw XYOSTED taking. And as Bob mentioned earlier on the call, we've seen a slowdown in new patient starts. And as patients are unable to come into the office to do the blood draws, we would expect that would be normal that we would see a slowdown in new patient starts. And when you think about the XYOSTED process and how patients actually stay on it for a number of months and then fall off, it's a constant funnel that needs to be filled with new patient starts. So we were being cautious there. We don't know how long it's going to take before doctor's offices are open and allowing us to get new patient starts. When it comes to Epi, again, being cautious, that was the second largest driver of the increase in our revenue guidance year-over-year. We certainly hope to continue to see that Epi continue to grow for Teva as well as for us. But in case there's a slowdown there, we needed to be cautious. And finally, on the Makena side, we came out with the guidance that we had saying that the upper end of our guidance certainly included Makena into the full year. And the lower end of the guidance assume that there would be Makena in there for part of the year. Earlier in April, AMAG came out with announcement saying that they have seen slowdown in patients going into their office -- into doctors' offices. While we don't have any numbers that would be able to support what it will do for their forecast, which then impact our forecast. Again, we took a conservative approach there, looking at the potential slowdown in Makena for the full year 2020. So when we looked at all those items combined, we thought it prudent to pull the guidance at this time, and we look at it once the pandemic eases up.

We'll take our next question from Elliot Wilbur of Raymond James.

First question for Bob, you hear the terminology stockpiling and pantry loading thrown around quite a bit these days with respect to pharma performance in the first quarter. Just curious, from your perspective, whether or not pharmacy or distributor stocking had any incremental net benefit to XYOSTED trends in the quarter or potentially with respect to partnered product sales as well?

Yes, sure. So with regards to distributors, we didn't see any stocking whatsoever of our products. And I think that was probably across the industry. I think that they have a system pretty well intact. But they keep about 20 days of supply, if that, in their warehouses. And I don't think they wanted to put out the cash in an uncertain time for them during this pandemic. So we didn't see any growth in our inventory levels at our distributors. When it comes to patients, XYOSTED has done pretty well during the pandemic. Our refills are the highest they've been and they continue to be, and our script trends look really strong. But I think Fred mentioned, what we're -- we're seeing a lessening of new patient starts. And that's the continuous growth that we expected to see and may still see, but we just can't predict at this point what that impact will be and how fast those patients will get back to the doctor's offices. Even if the doctors open their offices, I think that patients might be reluctant to go into the doctor's office to be treated for testosterone replacement or other of our products. And so that's why I think we were being very conservative with the guidance and saying, "Hey, look, we just don't know long-term -- at least in the near term, what this means for our business." But overall, the refills have been strong. I don't think anyone's stockpiled. With XYOSTED, I'll be honest, it's a Schedule III drug. It's a hormone, it's testosterone. So you're not allowed the stockpile it as a patient. Certain states don't even allow you to get more than 1-month supply, in other states limit you to 3-month supply. And so there is none of that happening. Now our patients being more vigilant and staying on the product or at-home shelter or shelter in place, they might be. Because it's one thing that you can do, they can keep getting their medicines, they can stay vigilant with that. And I think that has positively impacted XYOSTED and our other products. But overall, no stocking, no hoarding of testosterone or OTREXUP, and we don't think that's happened with Epi as well.

Okay. And I wanted to ask as a corollary to that, based on some of your comments in that response, just on your overall views, impressions of the effectiveness of virtual detailing. I think before the pandemic, it was probably only 7% to 8% of details. Now seems like it's 50%, certainly RXs for XYOSTED have held in very well. And for a lot of other specialty promoted products seem to be seeing the same sort of effect. So early days, of course, but just curious on your thoughts on the effectiveness of virtual detailing whether or not this could mark the beginning of kind of a shift in the traditional spec farm promotional model, meaning less feet on the ground and more virtual detailing, more digitization of the detailing process. Whether or not it actually translates into potentially lower overall expenses or maybe allows you to just greatly enhance your frequency and reach beyond what you were thinking previously?

Right. So I mean we were fortunate, like I mentioned earlier in the presentation or my talk that we had already had a virtual platform in place last year, at the end of the year, for reps that we had hired virtually to cover our white space, territories that we don't have feet on the ground. And we made -- we were able to beta test that out and make sure that they could get samples, make sure they could get the copay cards and do everything effectively. And fortunately, that translates to a very smooth transition for us and an early transition, I think, when you look at companies, much larger companies have struggled with the virtual detailing platforms. So I think that is maintain -- that's why our business in XYOSTED and OTREXUP kind of maintained and continued its growth trajectory. What we -- so I would say it's effective, right, because it clearly protected our business. The one element that has nothing to do with the platform is that patients weren't going to the doctor's offices. So it's hard for use to say how effective it's going to be in the future once the doctors -- or once -- I'm sorry, once the patients start going back to the offices. So if you see the patients going back and you can still virtually detail and still get new patient growth that you need to see the growth that we want in this product, then I do think it could long term impact not only how we approach it, but how doctors approach being detailed by the reps. And so overall, I think it's early to make any assessments. I think that when the offices open back up, I think that doctors will still want to see a lot of virtual detailing because they're going to want to focus 100% of the patients who haven't been able to get into the offices. And their businesses have suffered really -- has suffered as well. And so they're going to be focusing on getting those patients back and probably not spending a whole lot of time with reps. And so the virtual platform is going to have to continue for the foreseeable future. And so we see there's a mix. If it's in office that's wants to see the reps, they're going to be in the office, getting those docs and get new patients on our therapy, get samples and things like that. For the ones that -- for the doctors, they don't want to see the reps, then we'll continue virtual detailing. So overall, I think we're well prepared, and we'll see where the future takes the industry. But right now, we think it's going to be a mix going forward.

Okay. And one last question for Fred. With respect to operating cash flow in the quarter of $5.6 million. I believe that's a record level, looks like it was driven maybe more by payables and accrued expenses than drawdown on some of the asset accounts. But how do we think maybe about that number progressing over the balance of the year? Still seems like you might have favorable working capital dynamics working for you over the next couple of quarters as well based on maybe an improvement in receivables and inventory. Just want to make sure I'm thinking about that right.

Sure. And I think you're looking at that right. When we had guidance out there, we thought we would be able to grow the cash over the full year. However, pulling the guidance, we need to take a look at where the cash is going to go for the remainder of the year. But yes, we would expect we'd still be generating cash from operating activities over the full year. We're may be using cash for CapEx expenses, but we still expect that we'd be in a good, very good cash position at the end of the year as well as during the year. Where we are right now, a little over $50 million in cash as of the end of the first quarter. It was significant in growth, we do have about $2.50 to $3 million of noncash expenses. So when you think about our operating income and we have those noncash expenses, going in there, it really doesn't impact our cash usage. So I know it's a long way of saying, we still expect we will continue to generate cash, maybe not at the same levels as we saw in the first quarter.

Yes. I would just add that one of the things that we did to prepare ourselves for the pandemic was we did start to build our inventories for our devices, right. They have a long shelf life as long as there's no drug in them. They, on average, have a shelf life of about 5 years. So we wanted to make sure we had enough XYOSTED devices and OTREXUP, and we kept making Epi and so forth. And so you saw our inventory build, and that may continue to be the trend where we want to make sure that we have enough devices to not disrupt our supply. And we use 3 different manufacturers for our devices, but they're all very large corporations, and they're all dealing with the pandemic. And so far, we've been very lucky that they haven't been closed down for long periods of time. But they're concerned about the same issues. If a number of their employees get infected, would they have to shut down? And so we put some of our cash into our inventory and that may continue for a little bit until we get through this pandemic.

We'll take our next question from David Amsellem of Piper Sandler.

So just a couple on XYOSTED. So -- I may have missed this, but can you remind us what the gross to net has been on XYOSTED? And then I guess going forward, given the economic -- the severe economic pressures as a result of the pandemic, do you expect to subsidize patient out-of-pocket cost even more aggressively than you already have? And to the extent you do, what kind of ramifications does that have to gross to net? Maybe taking a step back philosophically, how do you think about subsidization of the out-of-pocket costs? And then secondly, I guess you've addressed this in summary, and maybe I'll ask the question differently. With significant chunks of patients having historically gotten their TRT in the doctor's office, whether it's an intramuscular or an implantable pellets like Testopel, where do you think you're going to be able to get capture? Is it going to be from Testopel patients? Is it going to be from patients on the IM injection to go to the doctor to get it? How do you think about that? And do you think that ultimately, that kind of paradigm that shift is something that endures even beyond the pandemic?

Sure. Thanks, David. I'll handle the first part with the gross to net that we saw for XYOSTED. And in the second half of 2019, we actually saw our gross to net in the mid-50% range. When we entered 2020, we had enhanced copay, which actually is part 2 of your question as well as to if we were going to help out any of our patients out-of-pocket costs. We knew with the high deductible plans coming -- being reset as well as higher copay plans in place. We wanted to make sure that new patients could get XYOSTED as well as our existing patients to continue to get XYOSTED without a large out-of-pocket payment. So we increased our copay card from $150 up to $350 for the first quarter. And we actually extended that through April. And that's actually impacted our gross-to-net calculation. We actually saw the gross to net drop just slightly below the 50% range, where we had been in the low 50s to mid-50 gross to net prior to that. As I said, we continued that through April. And right now, it's actually still in effect as of right now. Going forward, I don't know if we would continue keeping that program in place or not, but it certainly did impact our gross to net.

Yes. And then your question on the long term, do we see patients who were going on the doctor's offices to get injections, will they be a big driver of our growth, same with the Testopel. I think that, to answer your question, yes. I believe they're going to be a new source of business for us that maybe has been accelerated because of COVID-19. We were getting patients from IM injections. I mean that's like 50-plus percent of our new patients are from IM injection or maybe even higher now. And so we were having success there. We weren't really focusing on the implantable Testopel testosterone product because, a, they don't really show up in the IMS data. They're hard to find those docs. So the rep has to know who's actually doing the implants; and b, they're just -- it's a different patient that's doing the implantable. So we didn't focus on that. But we're clearly seeing those Testopel patients now using XYOSTED. And I think once they see how easy XYOSTED is to use and what levels -- the levels that they get, I don't know why they would want to go back to that procedure, which is painful, and it takes time. And it's again not the greatest testosterone therapy in our minds, in our opinion. The IM injection is the same thing. I think that once a patient who was going back, who was going into the doctor's office and were getting the IM injection, even though the doctor was doing or a nurse was doing it, if they -- once they try XYOSTED, we really believe that, that's just a better delivery, a better product for their patient. And so hopefully, they will stay on, and that will really come through when the patient persistence. I think that once they switch over, we're going to see the same persistence of those patients that we do of someone who's just coming on either naive to testosterone and/or we bought the patients that we switch from IM, who were doing it at home. So I think that we definitely have new doctors. During this time, we still have -- we still saw an increase in new doctors prescribing XYOSTED. And I truly believe they are those -- they were the doctors who were doing an in-office as well as the implants.

We'll take our next question from Anthony Petrone of Jefferies.

Couple of questions actually on the COVID impacts to generic EpiPen. I'm just wondering, as we head into the heightened season, what the expected impact would be there? Obviously, the back-to-school season is typically a seasonal high in terms of school districts ordering. So any impact on generic EpiPen as it relates to COVID-19? And then in terms of XYOSTED, COVID impacts. I mean is there an estimate at this point as to the percent of target physicians for XYOSTED, where the offices are actually closed? And how many of those have actually shifted to telemedicine, and whether or not the telemedicine actually facilitates that new patient start? If I heard you correctly, I don't actually believe it does.

So on your Epi question, we don't think that COVID-19 will have a dramatic impact on Epi. I mean if you're allergic to beef, then you're allergic to peanut butter and other stuff, doesn't change when you're sitting at home, you still have that threat. And so we think that from a patient standpoint, needing the drug, we don't think that changes. Two other elements, though, don't do them in picture, with all the unemployment do patients start to rashing the number of auto injectors they buy, because some are obviously covered by insurance, but multiple packs to have at school or at home and in the backpacks and everything, that may be impacted by people's financial position, given that there's 30 million people unemployed right now. So we think that has an impact. And then the other one that we keep our eye on is really the supply chain. Teva does the -- they source the Epi, they do the assembly process. We provide them devices. And if any of those vendors or suppliers have an impact from a facility being closed down, that obviously could impact Epi. So far, we haven't seen a dramatic change at all. Actually, Teva has been in that 40% to 45% market share range and we're hoping that continues. And on your XYOSTED question, if you could repeat that? I really didn't quite understand what you were asking.

Sure. So just considering that shelter in place is not -- at least across the entire country hasn't resulted in complete office closures. So I'm just wondering what percent of the targeted high-decile prescribers are actually have their offices shuttered? I guess that's the first part of the question. And has telemedicine helped bridge any of the gap there?

Yes. So I can't give you an exact number. What I can say is that urologists and endocrinologist and even the primary care docs, I mean their offices have pretty much stayed open for the most part. Urologists have to do procedures around prostate cancer and other things. But clearly, they have limited the hours. There's no question about it. We've seen it. In some places, they only -- they're keeping half hours, 4 hours a day or something like that, and mostly to see patients that are having procedures that are required. So what we do know is that the new starts, the patient new starts have gone down because those reduced hours. And quite honestly, I think most of it is probably because patients just don't want to go into the doctor's offices. They're afraid to be in contact with people if they're not -- if it's not necessary. So that's where telemedicine has helped in that. We've been able to maintain our current business. All of our patients that are on XYOSTED still can get the refills from the doctor's offices. They can get the prescriptions electronically sent to them are whether they go to CVS or Walgreens, they can go to retail route or otherwise, they can go to specialty pharma. We have a specialty pharmacy that will get the patients' drug to anywhere in the U.S. And we give that message to the doctor that if the patient doesn't want to go outside to get their medicine, we have a specialty pharmacy that does national distribution to patients' home. And so we've been able to do all that type of messaging through the teledetailing. And I would say that all of our reps stopped going to the offices by the end of March, no matter where the office was. I don't think there was many states at all that didn't go to shelter in place for some period of time. We are seeing that gradually changed, and we're telling our reps that they call the offices first, make sure they're open, make sure they will allow you to come in, be effective with your time, you go to those offices, try to get new patients going again. And otherwise, if the doctors or the offices they can't come in, then, again, continue to do what you need to do with the teledetailing. So it's going to be a mix going forward. But overall, it's impossible to really say how many offices close versus how many were operating in limited hours and things like that. The important thing is, we've been able to maintain our patients and grow refills. We -- our TRxs have continued to be strong. Where we've seen a softening is on the new patients. And those new patients, we believe that we're getting are probably the ones that were already on testosterone therapy and got switched easily as opposed to naive patients. I think we've lost potentially those a lot of the naive patients, the ones who never on testosterones during this time, and we'll get them back once things go back to normal.

We'll take our next question from Oren Livnat of H.C. Wainwright.

I have a couple of XYOSTED's follow-ups. I guess just immediately follow-up on Anthony's question for some clarification. Just so we're clear, a naive patient can't actually new -- be a new start on XYOSTED in a telemedicine environment. Am I right? They need blood draws? And then I have couple of follow-ups.

Right. They need -- right, they -- theoretically, they can start, obviously. But they need to go get to two blood draws on different days, go to a lab, which a lot of the labs were closed for nonessential things. The doctors have to get the blood panels and thing like that. So it's severely limited the ability for new patients to start. I'm not saying it couldn't have been done, but people's willingness to go to a lab to get blood drawn twice and then follow-up with the doctors is a real issue, I think, that we -- that any pharmaceutical company faced.

Got you. So then it's clear that these switches probably are responsible for what has been a surprisingly nice RX trend compared to a lot of other companies out there. So I guess at that point, you did kind of touch on it regarding the sustainability of that switch business, let's say, from IM patients. And I guess I just want to drill a little closer -- deeper into that dynamic in the offices. Maybe I'm just cynical, but do you think that a lot of these docs or practices that are doing IM injections in the office, see that as a easy revenue generator for them such that when patients -- if and when patients are coming back into the office, hopefully, that maybe that business won't be as sustainable as you think just from a patient preference perspective?

Yes. I think that the trends have been that, that reimbursement has gone down so dramatically over the last couple of years that we were actually surprised that doctors even are willing to do injections in the office. It clutters up their offices. The patient comes every two weeks, if it's an implantable once every 3 to 6 months, depending on how they're doing it. The reimbursement aspect of it is just gone down so dramatically from a payer standpoint, that it's surprising that they continue. I think it's more just a service that they offer their patients. But I think that when they come back and open up, they're not going to want to clog their offices with those injections. When there's not a lot of value to them, I think they're going to want to start work with the new patients, work with the patients that need procedures that they've been putting off. And so I think that if a doctor has been switched to XYOSTED, and they're happy with the results of the testosterone levels, are happy with the results of what the patients are saying. I think it's going to be hard for them to switch back. I don't -- I think they're going to -- they were -- for us, they were the hardest doctors to penetrate because they just said, oh, I'm fine, my patients, I can inject. I'll continue to do that. But once they see how easy it is to switch, we believe that they could be long-term users of XYOSTED on a go-forward basis.

We'll take our next question from Matt Kaplan of Ladenburg Thalmann.

This is Raymond [ph] in for Matt. Congrats on a strong quarter. Just some quick questions on the COVID-19 impacts, perhaps. So I was wondering, given the different outbreaks in different regions, do you see perhaps different regional areas to bounce back at different rates, perhaps?

I think that we clearly saw the impact sooner in areas that were hardest hit. We saw an impact in California rather quickly. We saw it in New York, New Jersey areas. And for us, they are some of our best territories. There's no question about it in California, LA, San Francisco area, New York and New Jersey or some of our top-producing territories. And so we saw an impact. And that's why we're being cautious with our guidance because those states are going to take much longer to go back into the normal process. We still have really adoption in states like Texas and others. So we should see -- in Florida, so we should see that returning sooner. But overall, some of the states that were most affected are some of our best-performing territories. And so we're just being, like I said, extremely cautious as to how we guide because we just don't know how long it's going to take to get those new patients back into the office. Our care patients are staying on the drug. We're really happy with how it's going. It's those new patients that continue that growth that we want to see as well as the Street. XYOSTED is expected to do quite a bit more this year than last year, and the only way you get that is with new patients.

Okay. And just one follow-up. I was wondering if you're -- on your partner products and pipeline, perhaps Pfizer or Idorsia indicating potential changes in the time line due to the pandemic by any chance?

Yes. So far, we've been fortunate. That's part of the -- when I had in my prepared remarks that it wasn't just supply chain work, we had development people coming in the office because of Idorsia, because of Pfizer, we have certain requirements to deliver pens to them and/or auto injectors. And those programs continue. And we were kind of surprised not so much about Idorsia but Pfizer because, obviously, they're such a large organization. But the focus for both Pfizer and Idorsia has been pretty intense during this time. And so if anything, it maybe even give them a bit more focus on the programs that they could move forward. And so we've seen no slowdown to this point. We don't think the Pfizer program will be impacted because there's really no clinical trials necessary for that program. The Idorsia one, we're -- we continue to monitor that. We're doing all the user studies. It was always envisioned that 2020 was going to be getting ready for the Phase III in 2021. So we got manufactured the clinical supplies for them, devices and so forth. We just -- so far, we've heard nothing about the Phase III starting later than expected. But as you know, globally, any -- clinical trials have been severely impacted by the epidemic. Fortunately, for us, we weren't -- Idorsia wasn't going to start until 2021 anyway. So hopefully, when they're ready to go, it's -- everything is back to normal. But again, we just don't know it.

At this time, there are no further questions in the queue. I would like to turn the floor back over to Mr. Jack Howarth for closing remarks.

Thanks, Jonathan, and thanks again for joining us on today's conference call. If you have any follow-up questions, you can reach me at 609-359-3016. That concludes today's call.