Pfizer Inc. (PFE) Q1 2022 Earnings Report, Transcript and Summary

Greetings, and welcome to the Global Blood Therapeutics Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow prepared remarks. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Steven Immergut. Please go ahead.

Thank you, and welcome to GBT's conference call to discuss the company's financial results for the first quarter 2022 and to provide a business update. I'm Steven Immergut, Head of Communications and Investor Relations. With me today on the call are Dr. Ted Love, our President and CEO; Jeff Farrow, Chief Financial Officer; David Johnson or DJ, Chief Commercial Officer; and Dr. Kim Smith Whitley, Executive Vice President and Head of R&D. During today's call, Ted will give an update on our progress in Q1, Jeff will review our financial results, DJ will give an update on the Oxbryta launch, Ken will discuss our pipeline and then Ted will give a few closing remarks before we open the line for questions. Earlier this afternoon, we issued a press release announcing GBT's financial results and business progress for the first quarter ended March 31, 2022. Before we begin, I'd like to remind you that certain statements we make on this call that are not historical facts may be forward-looking statements that are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements are contained in our SEC filings, including, but not limited to, our most recent quarterly report on Form 10-Q as well as in today's press release. Copies of our SEC filings and press releases can be obtained from the Investors page of our company website at gbt.com. The forward-looking statements made on this call are only as of the time they are made, and you should not place undue reliance on such statements. Future events or simply the passage of time may cause our beliefs to change, and we disclaim any obligation to update any forward-looking statements other than as required by law. I'll now turn the call over to Ted.

Thank you, Steven, and good afternoon, everyone. The first quarter was a notable start to the year for GBT, highlighted by strong sequential growth in new prescriptions of Oxbryta, including a promising start to our launch in patient ages 4 to 11. The early feedback and metrics on the pediatric launch have been encouraging. For example, we've already secured coverage with many important payers for this expanded indication. In patient ages 12 and older, we had our best result for new prescriptions in several quarters. We are optimistic that this momentum will continue if our key growth drivers increased overall awareness and interest in Oxbryta as we expect. In addition, we are hopeful that the COVID-19 environment will continue to improve given the significant headwinds it has caused for delivery of regular in-person care for patients with SCD. With respect to Europe, we continue to make exciting progress. Following the marketing authorization for Oxbryta by the European Commission in February, we completed regulatory activities to put us on track for a potential approval in Great Britain by mid-year. We kicked off reimbursement discussions in Germany, France and England and continue to enroll patients in our early access program. We also began educating HCPs on Oxbryta and have robust activities planned for launch in Germany very soon and for the EHA meeting in June. During the quarter, we continued our efforts to aggressively advance our clinical programs while exploring additional therapeutic targets in SCD and other red blood cell disorders. For GBT601, we plan to initiate a Phase 2/3 clinical trial by mid-2022. And later in the call, Kim will provide an exciting update on the restart of our Phase 1 study based on patient interest. Altogether, we are well positioned to continue delivering for patients with SCD. We have continued to build momentum with Oxbryta both in the U.S. and internationally, and we are advancing what we believe is the most comprehensive pipeline in sickle cell disease. Our dedication to supporting the SCD community has never been stronger, and our progress with these and other efforts are highlighted in our recently published 2021 ESG report. With that, I will turn the call over to Jeff to review the first quarter 2022 results.

Thank you, Ted. Total net revenue from sales of Oxbryta was $55.2 million for the first quarter of 2022, in line with our guidance of $54 million to $56 million; first quarter revenue increased by approximately $16 million or 41% year-over-year. On a sequential basis, first quarter revenue declined slightly from the fourth quarter. This reflects the anticipated work down of inventory during the quarter following increased purchases by distributors at the end of the fourth quarter, an incremental increase in gross to net and the impact of Omicron variant in the first part of the quarter. These drivers were partially offset by the continued increase in the net number of patients on Oxbryta, days of inventory on hand at the end of the first quarter was in line with historical levels. Gross to net was 16.3% for the quarter, around 0.5% increase from the fourth quarter, primarily related to increased patient co-pay support as commercial insurance out-of-pocket deductibles reset for patients for the new year as well as higher 340B and Medicaid accruals in the quarter. Now turning to expenses. Cost of sales for the quarter was $1 million compared with $600,000 for the first quarter of 2021, which represents a slight increase on a percentage of sales basis. Cost of sales is anticipated to increase in 2022 as we begin to finish utilizing the remainder of our fully expensed inventory that was previously recorded as R&D expense. R&D expense for the first quarter was $53 million compared with $51 million for the same period in 2021. The increase in R&D expense was primarily due to an increase in external costs related to GBT601, partially offset by a decrease in external costs related to Oxbryta. SG&A for the first quarter was $75 million compared with $59 million for the same period in 2021. The increase in SG&A expense was primarily due to increased professional and consulting services associated with our expanded commercial and medical affairs operations for Oxbryta, including supporting the pediatric launch in the U.S. and launch readiness in geographies outside of the U.S., increased employee-related costs and operational growth, partially offset by a decrease in non-cash stock compensation expense. Both R&D and SG&A expenses were slightly below our expectations in the first quarter, primarily due to the timing of certain expenses that we now expect to be recognized later in 2022. Net loss for the first quarter was $81 million compared to $75 million for the same period in 2021. Basic and diluted net loss per share for the first quarter was $1.26 per share compared with $1.21 per share for the same period in 2021. We ended the first quarter with cash, cash equivalents and marketable securities of $662 million compared with $735 million at the end of 2021. Looking forward to the second quarter of 2022, we anticipate revenues in the range of $63 million to $65 million or sequential growth of 14% to 18%. We expect this will be driven by new prescription growth, including phasing in the first quarter, which was more back-end weighted in terms of growth of new prescriptions. And we expect this will be partially offset by an increase in gross to net and the timing of broad pediatric payer coverage. In summary, our first quarter results were in line with our expectations and we expect that revenue will grow over the remainder of the year. In addition, we continue to be well positioned with a strong balance sheet allowing us to continue to make key investments for future growth. And with that, I will now turn the call over to DJ.

Thank you, Jeff, and good afternoon, everyone. As I've done in the past, I will provide an update on three key metrics that will give you further insight into our progress. These metrics are: new prescriptions for Oxbryta, which informs underlying patient demand; the number of healthcare providers prescribing Oxbryta, which captures the progress we are making on adoption; and payer coverage, which speaks to the access environment for Oxbryta. First, new prescriptions. We delivered more than 1,200 new prescriptions during the quarter, our strongest demand quarter since Q1 of 2020. This was driven by the pediatric launch and incremental growth from the 12 and older group. Starting with the pediatric launch, we got off to a strong start in the quarter. We were able to leverage two years of Oxbryta education and awareness building from our original approval to quickly engage with healthcare providers on the pediatric label expansion and to train them on administering the new formulation in early January. Our team did an excellent job building excitement, particularly among pediatric hematologists and caregivers, and early feedback from this engagement has been overwhelmingly positive. This is reflected in the high number of new prescriptions in the quarter. Somewhat expected, the uptake in the pediatric population was strongest in the early part of the quarter when many physicians and patients have been eagerly awaiting the opportunity to start Oxbryta therapy. As a result, many existing prescribers had some of their younger patients ready to initiate therapy shortly after approval. In terms of COVID-19, we did see some impact from Omicron in January, reflecting continued caution by SCD patients and caregivers. However, demand and field team access dynamics did improve in February as infections declined. Similarly, our market research shows that comfort levels for in-person care bounced back quickly in February with most patients and caregivers preferring in-person visits for routine care. And in February, HCPs we surveyed indicated that the majority of their SCD appointments were conducted in-person. This is a good leading indicator that things are likely to start trending back to more normal health care engagement this year. Feedback from our field teams supported what we heard from our market research. Anecdotally, our team saw patient volumes increase in February and March, with ongoing headwinds for COVID causing some adult patients to be cautious due to the increased risk to their health. On the provider side, we continue to see office turnover and staff shortages. And when we look at the claims data in Q1, SCD patient visits to HCP offices remain below pre-pandemic levels. We believe the net effect of all these trends contributed to the sequential growth in new prescriptions for the 12 and older age group, along with the momentum from our DTC and real-world evidence that was presented at ASH last year and recently published in expert review of hematology. We also believe the 12 and older segment benefited from HCP engagement around the pediatric launch, given that the majority of our targets treat a range of age groups. We also continue to see a broad range of patient characteristics for those prescribed Oxbryta, such as baseline hemoglobin and VOC burden suggesting that the prescribers are increasingly recognize the importance of addressing polymerization and long-term health. The COVID environment has remained relatively stable from mid Q1 through April, though we are closely watching the recent uptick in cases. Assuming COVID impact does not escalate, we anticipate that new prescriptions in the second quarter will be roughly flat compared to the first quarter. This reflects slightly lower pediatric new prescriptions following the strong start with patients that have been waiting for Oxbryta, offset by continued incremental improvement in the 12 and older group. Looking ahead to the second half of the year. If the environment continues to improve, we believe we have the potential to accelerate growth driven by our ongoing DTC campaign, new real-world data that we continue to publish and the pediatric launch. The key leading indicators that we see as predictive of a return to sustained quarter-over-quarter growth are improvements in the industry-wide new-to-brand prescriptions and our patients' health care visits returning to pre-pandemic levels. While we are hopeful this will occur, we know SCD patients remain cautious. For example, all the SCD focused community-based organization meetings planned for the second half of the year are taking place virtually. As we prepare for more SCD patients to potentially return to face to face interactions with their health care providers, we are working to raise overall Oxbryta awareness through our ongoing DTC campaign. The metrics from the campaign around targeted audience reach continue to exceed our original goals. In the first quarter, this was aided by several new tactics, including updating the campaign to reflect the pediatric approval and an improved ability to target SCD patients, which we believe contributed to a higher frequency of monthly engagement. In addition, we launched our branded and unbranded content on new channels, including YouTube, Pandora and podcasts. Visits to oxbryta.com and SickleCellSpeaks.com, reached an all-time high in the first quarter. We also are seeing encouraging growth in the number of SCD patients visiting their HCPs within one month of seeing our DTC advertisement. As we think about recent trends, the conversion rate for new prescriptions was consistent with prior quarters. Similarly, Oxbryta adherence, which includes compliance and persistence for patients in the first year of therapy, continued to be within the range of our prior quarter’s and analogs. As we gain more data on adherence for year two and beyond, we are seeing lower adherence compared to year one as would be expected for any chronic medication. But we are encouraged that some patients in year one and beyond have restarted Oxbryta, and that Oxbryta adherence continues to trend better than SCD analogs. In addition, we continue to proactively roll out new tactics aimed at improving overall adherence, including long-term adherence. This includes additional services through our, a patient hub GBT Source Solutions, which continues to be an important driver of patient engagement and adherence. For example, early feedback on the email newsletters and mobile messaging that we launched around the end of 2021 has been encouraging. These services are also available to patients via our specialty pharmacies. And the data shows that patients engage with GBT Source or the similar services offered by these partners, have better adherence rates than those that do not. So we plan to continue investing and driving utilization of these programs. Next, my second metric, healthcare provider penetration. During the quarter, total interactions with healthcare providers increased significantly compared to the fourth quarter, which was lower due to the holidays and lingering impact of the Delta variant. And despite the impact of the Omicron variant in January, in-person visits continued to improve as they have for several quarters, reaching around 50% of our salesforce interactions with HCPs during the quarter. Against this backdrop, we added about 120 new prescribers in the quarter. This includes several prescribers from the 200 new targets we added for the pediatric launch. This group focuses almost entirely on patients that are 11 and younger. Encouragingly with the momentum from the pediatric launch on new prescribers and reengaging prior writers March was our highest month for the number of active prescribers in the last 12 months. When we look at the breakdown of writers, we continue to see prescriptions being written by both specialists and non-specialists, which we believe is a positive trend for the long-term trajectory for the long-term trajectory of the launch. Turning the payor coverage. We continue to have broad payor coverage for the 12 and older patient population with more than 90% of coverage lives, having access in the United States. And our focus is on making it easier for physicians to prescribe and patients to receive Oxbryta. In terms of coverage for the four to eleven age group, we made substantial progress and we are well on our way to achieving our goal of broad coverage by mid-2022, faster than we did with the adolescent and adult population. Before turning the call over to Kim, I also want to provide a brief update on our commercial activities in Europe. We are gaining experience with more than 100 patients participating in our early access programs across Germany, France, and the UK. And following our European Commission approval in February, we are working to launch Oxbryta in Germany in mid-May. We will have open pricing in Germany for the first year while we negotiate future reimbursement. There are around 3000 sickle cell patients in Germany, and we anticipate adoption will be gradual leading to minimal revenues for Europe in 2022. Separately, our team has also begun reimbursement negotiations in France and England. We have begun educating physicians in Europe, on Oxbryta, including plans for our robust presence at the European Hematology Association or EHA meeting in June. At EHA we plan to promote Oxbryta for the first time in Europe, engage with physicians, including our branded [indiscernible] and sponsor an educational program. We also recently held a successful internal launch meeting in Europe, where it was clear that our employees are excited about bringing Oxbryta to patients and to helping GBT achieve our mission around the world. And with that, Kim will now talk about the developments in our pipeline.

Thank you, DJ. And good afternoon, everyone. On today's call, I will provide an update on our efforts to further expand Oxbryta’s clinical evidence and geographic reach, and our progress advancing our pipeline. Following on our regulatory approval in the European Union in February, we submitted for marketing authorization in Great Britain and believe we are on track potential approval by midyear. As a reminder in the UK Oxbryta was granted approval of early access medicines scheme EAMS, which provides two key advantages. First, patients that meet the eligibility criteria can gain early pre-licensed access to Oxbryta. We are pleased that UK patients have already started on Oxbryta through the EAMS designation. Second, medicines under EAMS that receive marketing authorization by the MHRA, as well as a positive assessment by NICE, benefit from accelerated NHS, England commissioning. In support of the pediatric launch this week at the American Society of Pediatric Hematology/Oncology or ASPO Conference, we will present results from the Oxbryta expanded access program for children with sickle cell disease, age four to eleven. The EAP data reinforces the efficacy and safety of treatment with Oxbryta in these patients, as seen in the HOPE-KIDS 1 Study. Those hope HOPE-KIDS 1 results were first presented at EHA last year and were published this April in pediatric blood and cancer. Importantly, the majority of patients in the EAP had improved scores as measured by the patient and clinical global impressions of change scale, indicating that Oxbryta treatment is positively impacting their lives. I also want to flag that a 77-patient, single center, real-world experience study of Oxbryta from Dr. Alan Anderson was published in late April in the European Journal of Hematology. Dr. Anderson presented this data, which showed a mean hemoglobin increase of two grams per deciliter and substantial improvements in patient quality of life at several meetings in 2021. At the Annual EHA meeting in June, we plan to present new Oxbryta, real world data and other studies that reflect our efforts to generate new data. EHA abstracts will be announced later this month and we are excited about our planned activities. Now let's turn to the pipeline. For inclacumab, our P-selectin inhibitor, we are enrolling patients in our two Phase 3 studies collectively named THRIVE. One is evaluating the reduction of VOCs over a 48-week treatment period based on inclacumab's potential for quarterly dosing. We believe this would be a meaningful improvement for patients compared to monthly dosing and aligns well with a typical sickle cell disease practice schedule of quarterly office visits. The other Phase 3 study is evaluating 90-day VOC, readmission rates, following an initial VOC hospitalization, which tragically occurs in around 50% of patients who experience an initial VOC. This study is enabled by inclacumab's profile and aligned with its best-in-class potential. We are continuing to focus on enrolling THRIVE as quickly as possible. Turning to GBT-601, our next-generation hemoglobin polymerization inhibitor that we believe has potential to be a best-in-class therapy. At EHA, we aim to share more data on GBT-601, including sickle cell disease patient EPO levels from the Phase 1 study. Separately, we aim to publish new preclinical data for GBT-601 in a peer-reviewed journal later this year. Based on the impressive data we reported at ASH in December, we are working to aggressively advance GBT-601. Our plan is to initiate a Phase 2/3 clinical trial with the goal of submitting for a full regulatory approval with FDA. We expect the Phase 2/3 design will allow us to advance more quickly into the pivotal Phase 3 portion and are working towards our goal of initiating the Phase 2 portion by mid-2022. The purpose of the Phase 2 portion is to identify the optimal dose to advance into Phase 3. As we explore higher doses, we believe they will lead to higher occupancy and hemoglobin increases, and importantly, consistently improve the red blood cell health of patients to resemble that of a sickle cell trait individual. We are also exploring a 150-milligram dose of GBT-601 with patients from our Phase 1 study. We are very excited that all six patients reach out to the clinical trial site wanting to restart therapy, providing us the opportunity to restart the study and explore a higher dose. In my experience, this is the first time I have seen the restart of a sickle cell study due to patient demand. Patients will receive a 150-milligram daily maintenance dose for six weeks. We anticipate data from this portion of the study will be available by the end of the year and include the same key endpoints as the data we reported at ASH in December. I am proud of the progress we are making with GBT-601, over a short timeframe, while also continuing to drive enrollment in our inclacumab studies and advancing our Oxbryta studies. I firmly believe GBT has the leading clinical and pipeline programs in sickle cell disease. I'll now turn it back over to Ted.

Thank you, Kim. In closing, we are off to a strong start in 2022. Given our progress, we are increasingly confident in the outlook for Oxbryta and our pipeline, which provide multiple, new growth opportunities in the coming quarters and years. For Oxbryta, new prescriptions are improving and we believe we have additional upside with the anticipated increase in in-person patient visits. And as we raise awareness through our many ongoing efforts, including our DTC campaign, our compelling clinical data and our pediatric launch. We also continue to invest in the near-term opportunities in Germany, France in the UK, afforded by a recent European commission approval, with the goal of potential broader expansion over time to add another layer to Oxbryta’s growth potential. In terms of innovation, we believe GBT is well positioned with what we view as the most comprehensive pipeline in sickle cell disease. And over the next several years, our goal is to have at least five medicines approved or in the clinic. This R&D goal is matched by our commitment to provide broader support to the SED community. On that note, I want to provide a brief update on potential federal legislation we are supporting that will provide new funding from multidisciplinary care teams across the lifespan of individuals living with sickle cell disease. This legislation is modeled after the federally funded hemophilia treatment centers, a network of 130 clinics that offer coordinated care to Americans living with hemophilia. The total package of $535 million would help the SED community several ways, including a dramatic increase in the funding for SED treatment centers. Currently, this funding is about $9 million per year, which is far below federal funding for other orphan diseases. The legislation would also fund 110 community-based organizations that support patients, families, and communities facing SED. If signed into law, this would be the most comprehensive piece of legislation for sickle cell in 50 years. In summary, we are well positioned to be the leader in sickle cell disease with multiple opportunities to positively impact the lives of the patients we serve. With that, we’ll open the call for questions. Operator?

Thank you. [Operator Instructions] Thank you. Our first question is from Ritu Baral with Cowen. Please proceed with your question.

Good afternoon guys. Thanks for taking the question. I wanted to drill down a little bit more into the distribution of NRxs sort of across the quarter? And maybe any color on what you’re seeing in April? Can you just confirm that there was sort of a net increase in NRx numbers over the quarter? I guess I’m trying to figure out if the pediatric bolus is over, but that growth is continuing into April. And then I have a follow-up.

Hi, Ritu. This is Ted. We’ll ask DJ to answer that.

Yes. Thank you, Ritu. Yes. So, we have seen an increase in net patients on Oxbryta in Q1 over Q4, just like we’ve seen every quarter, the pool of patients on Oxbryta has increased. And of course, as you would expect, because we have the new indication in Q1, we did see some healthy growth, not only in top line enrollments in Q1 at 12 – over 1,200 new enrollments, but the total pool of patients also went up consistent with that. So, we haven’t – we’re not here to talk about Q2 results. I don’t have a lot to talk about that. But we’re certainly pleased with the overall performance in Q1. It’s our strongest quarter from a pure demand perspective since the first quarter of approval two years ago.

And the pediatric bolus is pretty much over. Is that what you guys are anticipating internally?

What I tried to convey in my prepared comments was that we did see the strongest enrollments in the early part of Q1. So signifying that all that work we’ve done for two years, preparing the market, educating on Oxbryta. And of course, many of – in fact, two thirds of the prescribers in the pediatric pool of treaters are ones that we were already calling on for the two years because they also have 12-and-older patients. So yes, they had patients ready to go right when we got approval. And so that’s why that would make sense that was the strongest months for us. So yes, we think we’ve kind of gotten past that. Now, we’re moving on to more of a consistent number of enrollments expected from the pediatric group going forward.

Got it. And then just a quick follow-up on GBT601. What doses will you be investigating in the Phase 2a what’s the sort of range of doses? And will you be pursuing a loading dose strategy again in this study? Thanks.

Hi, Ritu, it’s Kim. Yes, we are going to be pursuing a loading dose similar to what we did with the Phase 1, MAD 1 and MAD 2 phases. And then we will be using a daily maintenance dose of 150 milligrams.

In the Phase 2a? Great. Thanks for taking all the questions.

So that’s to clarify, Ritu, I’m sorry. That was for the follow-up for the Phase 1. We have not disclosed a dose for the Phase 2 because, as you know, we are using Phase 2 for the dose finding portion. So that’s just what’s going to be going on with the additional Phase 1 restart.

Okay. And so the range of doses that you’re going to use in that, that’s to be determined?

So, we are going to explore, of course, the doses that we looked at, at least in our Phase 1 and consider doses based on a 100 milligram and 150 milligram before we decide whether or not we will explore doses above that.

Thank you. Our next question comes from Jason Gerberry with Bank of America. Please proceed with your question.

This is Parry on the line for Jason. Thanks for taking the question. I just wanted to get some additional detail on reinitiating the Phase 1 trial for GBT601. First, when could we expect to get an update on when patients will start getting dosed – and then I know that you spoke about the six patients, but is there a potential for a higher number of patients in the Phase 1? And then I just have one other question.

We are anticipating to restart the six participants, hopefully, all six, but we are not planning on adding new participants to the Phase 1 portion.

Okay. Thank you. And then just one more on the NRx number. Are you able to give a breakdown on adults versus teens in 1Q for NRx? And then I’m curious, in terms of the states that have gain coverage. Are any of these states from the key geographies? I know that you’ve discussed 17 states with this high concentration of sickle cell disease patients? Any detail would be helpful. Thank you.

Yes. Regarding the NRxs, we’re not breaking out NRx by age group. Our goal is to drive overall adoption with sickle cell patients in four and above. The pricing is the same and we know that these patients will matriculate into the 12-and-older category over time anyway. So another important dynamic to keep in mind is just that the 12-and-older population is still going to be the largest driver of growth going forward. It’s by far the largest group of patients. So, we think just reporting on overall demand, overall enrollments every quarter gives you the best idea of how we’re driving demand. So that’s where we’re at that time. And I forget the second piece.

The second question is related to specific states, if you’re able to provide any detail on key geography states.

Yes. We’re getting prescriptions across the 17 states that make up 85% of our sickle cell patients. As you would imagine, that’s where we’re also the bulk of the pediatric patients near that same geographies, and we are getting prescriptions across the state you would expect.

Thank you. Our next question comes from Gregory Renza with RBC. Please proceed with your question.

Hi, this is [indiscernible] on for Greg. Thanks for taking our question. I was wondering if you could provide some more color on your expectation around the growth trend in adult population going forward as the pandemic impact has gradually stabilized. What’s your latest thinking around providing more long-term sales guidance and probably breaking down the revenues by age group?

So Jeff, do you want to take that, because you speak to the issue about revenue guidance in the long term. I think we have up to now, as you know, focused on giving quarterly guidance, and our plan has been to move to longer-term guidance, but we really want to make sure that we are somewhat beyond the pandemic. And we’re not really sure if we’re there yet. We’re hopeful, but not really convinced that we’re completely be there with some of the variants that could be popping up it. So…

That’s exactly right, Ted. I think the biggest unknown that we have is what’s going to happen with the potential additional variants popping up and the impact it might have to patients visiting their physicians, which is a big driver new Rxs. So – and I believe the part of your question to is what’s our expectations on the 12 and above. We do anticipate that growing over time. We do expect to get back to sort of the level that we saw prior to the pandemic happening. It’s going to take some time. One of the things that we’ve referenced before in this past, given the fact that these patients haven’t gotten in to visit their physicians previously, the first visit might be one of those health check-ins – like how are you doing? Let’s talk generally what’s going on? And then maybe the second visit, is where we talk about, hey, there’s a couple of new medications out there for sickle cell, would you like to hear a little bit about that. So that’s why we’re anticipating it to be sort of a stepwise growth as opposed to a light switch in terms of growth there.

Thank you. Our next question comes from Akash Tewari with Jeffries.

Hi, this is [indiscernible] for Akash. So you have indicated a call. So previously, we noticed in the consensus estimate about 280 Oxbryta sales for 20 [ph] this year. And based on our math, this revenue implied about putting 100 new prescriptions per quarter for the rest of the year. Do you think that’s a reasonable goal for this year? And in addition, previously, you mentioned you have a goal to reaching $15 billion market cap by 2025. We believe that suggests around $3 billion to $4 billion product sales. What are some signals you saw major confident to reaching that target in 2025? Thank you.

Yes, Jeff, you may want to take part of that, but I’ll start off with the 2025 goal. So in building a company, you do want to set some aspirational goals for how you want to build a business. You want them to be realistic, though, as well. And one of the things that we did is that we looked at companies, which had actually moved from where we are today to a market cap of beyond $15 billion, we’re in that range. And if you look at those companies, those companies tend to have multiple products either approved or looking very likely that they will be approved shortly. And we certainly think we’re well positioned that with Oxbryta already approved with inclacumab in Phase 3 and with GBT601 being a program that we think we can move very aggressively with. And obviously, there’s more opportunities. We do have things going on in research and we have the capacity to do deals. So, we think the 5% is achievable. We also know that companies that hit these numbers tend to have significant revenue. And obviously, we think Oxbryta has long-term potential of generating revenue. We’re obviously growing our revenue quarter-over-quarter. And over the next couple of years, we think that the revenue could look like a company that has a position to be in that market cap. So there’s nothing mathematical. I don’t think there’s a program that tells you how to get to a market cap of $15 billion, but they’re ingredients. And we think we’ve got the fundamental ingredients to make it happen here.

In reference to the patient numbers, we’re really not in a position to speak to it because it does go hand-in-hand with revenue guidance. That said, I think what we’ve previously said still holds true that we expect growth in the back half of this year. A couple of things that are going to be driving that is our hope that the pandemic will subside, and we’ll start seeing more in-office visits, which will drive more NRxs. And then just a reminder that we still have to go through the payer process on the pediatric side. And so we expect to have broader coverage by the middle of this year, which, of course, will help revenues in the long run as well.

Thank you very much. Very helpful.

Thank you. Our next question comes from Yanan Zhu with Wells Fargo Securities. Please proceed with your question.

Hi, thanks for taking my questions and congrats on the progress and the four to 11 age group launch. Two questions perhaps. The one on the guidance and the prescription numbers, is the – is that from this quarter’s $55 million to the guidance for the next quarter at the middle point, $64 million revenue. How much of that is driven by the pediatric patients transitioning, I mean, four to 11 age group transitioning to insurance coverage and how much is that driven by increasing in demand? So that's my first question. Thanks.

Yes, and thanks for the question. We're not really in a position I think to bifurcate those out, but I think your point is a good one. As I mentioned on the previous question that we are still seeking broad payer coverage on the pediatric side. So obviously those patients that maybe weren't covered in the first quarter, becoming covered in Q2 will help us on that aspect of it but we also do anticipate growth overall in new prescriptions, somewhat incremental growth, but we do also expect some growth on the 12 and above as well. So generally I think what DJ had said was that we expect a, somewhat of a decrease on the pediatric side, the four to 11, just given the early access that happened there. But we do anticipate growth on the 12 and above side of prescriptions.

Which we saw in this quarter as well, yes.

Right, because, Jeff, I thought I heard you say when you were making the guidance, there is a phasing in part of consideration of that kind of dynamic. Basically that says in a sec back half of the first quarter, the demand is higher. So that's my understanding?

That's correct. That is correct. Yes, particularly in the adults.

Right, right. Yes, given that there is a bolus in – when the pediatrics was approved, which is I mid-February, so it sounds like there has to be adult growth in the back half of the quarter for that – for you to consider facing in into next quarter.

Correct, yes.

Thanks for explaining that. And my next, other question is on the 150 milligram dose, so could you talk about, obviously if you have to choose a dose, this is a dose you have chosen a higher dose. What's the hemoglobin occupancy that you think you'll get based on your modeling? And is there a possibility that you will do something similar to what you did before that is having a, like a second part with even higher dose with these six patients? Thank you.

We anticipate with the modeling that obviously this will be adjusted because our original modeling was based on six participants. But when you look at those six participants, we should, with a 150 milligram dose get occupancies above 40%. So we are comfortable using those going into a Phase 2, but understand that we'll get much more data to support a model to find a dose out of the Phase 2 study.

And I think one of the other things that's important to point out is that we looked and showed you all a fair amount of [indiscernible] data. And we showed that many of the parameters on these patients were beginning to approach normality. We would love to have them actually arrive at mimicking the blood from a sickle trait individual rather than someone from a sickle cell patient. So that's the rationale for going higher to see if we can recapitulate, that state that looks like sickle cell trait and no longer sickle cell disease.

Thank you. Our next question comes from Yatin Suneja with Guggenheim Partners. Please proceed with your question.

Hey guys, two questions. First, I just want to confirm the guidance is 63 to 65 for Q2, correct?

Correct.

Okay. So if we look at the midpoint, your guidance is actually implying about $9 million off additional growth in 2Q, which is exactly what you did in second quarter of 2021? And this is the guidance that you're providing despite having an expanded label or limited COVID headwinds, a lot more increase in NRx that you're seeing. So I'm just trying to understand why revenues are not growing at a higher rate when you have all these dynamic in your favor? And then also maybe comment that will they accelerate in Q3; just help us understand this dynamic?

Sure, Yatin. It’s a great question and it is something that we wanted to make sure was understood. The biggest issue in – there's a delta between the NRx growth and the revenue guidance that we're providing. The biggest issues are really three folders. One, we still don't have broad payer coverage on the pediatric side, so while we might be shipping bottles or having requests come in, we can't recognize revenues on that. So that's going to inhibit the revenue growth. The other aspect to a less extent is our increase in gross-to-net. And then finally we have a dynamic in Q2 similar to what we had in Q1, where the quarter ends on a Thursday. And we have seen is one of our customers especially distributor tends to buy on that date, but that shipment is not received until the following quarter. So there results a fairly large purchase that does not get recognized in the second quarter. So that's part of the rationale as well for the lower on the guidance.

Got it. And then maybe just one more on the pediatric side, so of the 16,000 patients that you're targeting, can you just talk about realistically how many can be reached with Oxbryta mean, is it like 50%, 30% or higher? Just give us some number if you can in the longer term? Thank you.

Yes, this with DJ. I don't think we've ever given a market share estimate for our sickle cell patients, including the adult patients for that matter. I think if you look at some of the analogs in the marketplace that should give you an idea of what we can likely achieve and exceed. I mean, if you look at hydroxyurea consistently is in the 30% of patients in any given year are on therapy. There's a lot of patient's cycle on and off therapy, but consistently about 30% of patients are on therapy in a given year. So that would be if you assume around 100,000 patients that's about a 30%, I guess patient share. With Oxbryta being a broad indication and now going down to four years old, it does open up the market to 100,000 sickle cell patients that are now qualified for Oxbryta. With really no restrictions to speak of in terms of hemoglobin levels or other conditions that would, it's a very broad indication. So we would expect to do at least as good as that over time, it's going to take time. We do need to fully come out of the pandemic. We talked about some of the headwinds still being patient visits to healthcare providers still lower than we needed to be, but we are expecting that to improve this year. So yes, so I think all of our pediatric patients in the four to 11 are really candidates for us, and we're going to work very hard to get them access to Oxbryta as quickly as possible.

Great. Thank you very much.

Thank you. Our next question is from Ben Burnett with Stifel. Please proceed with your question.

Hi, good afternoon. This is Carolina Ibanez on for Ben Burnett. Thank you for taking our question. Expanding up on a previous question what do you expect to show in terms follow-up time for the six patients that are going to be restarted in the 601 – in the higher dose 601 study, and that will be part of the data update later this year?

Yes. You're talking about the follow up patient that we're restarting on therapy from Phase 1.

Correct.

We kind of said the toward the end of the year it's typically as where we try to present major news, depending upon when the patients we start, we would present all the data that we have. So it could be multiple months of treatment by that time.

Okay. And a quick – and a second follow-up question for the pediatric patients do you have a sense for the adherence in this patient population?

It's little early to have any adherence data. We only have a couple of months and in some cases, some patients are still awaiting to receive their first bottles and that sort of thing. So we don't have enough data yet, although we can look at our 12 and older population and we know for example that the 12 to 18 year olds in that group are actually the highest adherence. And so we think the younger the patients, and especially when the caregivers, the parents are involved we have the potential with the four to 11 year olds to have some of the best adherence yet. So we're excited to look at that and we should be able to talk about that more later in the year.

Okay. Got it. Thank you.

Thank you. Our next question comes from Raju Prasad with William Blair. Please proceed with your question.

Thanks for checking the questions. DJ, you just mentioned this kind of on the compliance rate in some of the younger patient populations. And do you guys have any data that supports kind of this from the early launch metrics that you're getting kind of repeat prescriptions from these younger patient populations. And if we're thinking about kind of pull through revenue in the next quarter, how much recurring revenue we could expect from kind of this bolus of new patients you brought in, in the first quarter? I got another one. Thanks.

Yes, yes. I would just say that from a pediatric group in particular, we don't have enough data because they're really just getting going. So you need to look at that over time. It's really anecdotal from the clinicians that four to 11 year olds in the trials and the fully access programs, et cetera. And they would tell you that with the parents involved, the kids tend to do better on adherence. And we've seen in our own data that that the younger patients, the teenagers in our 12 and older category do in fact have better adherence than the adults. So we think everything's pointing towards better adherence. I would say that that, yes, over time what we've always said is that we want to be at least in the same category as the analogs, 50% to 70% adherence at the end of the first year therapy. We remain there right now with our therapies and we're going to watch it over time. We're putting a lot of resources towards supporting patients and we're hopeful that this year will be able to actually increase adherence in some groups over time.

Great. And then can you remind me the gross-to-net that you said in your prepared remarks, and then maybe just give me directional – directionality on the gross-to-net and the pediatric cohort?

Hey Raju, it's Jeff. So we had gross-to-net this quarter was about 16.3 and we do expect that to go up incrementally quarter-over-quarter to sort of a steady state of about 25% probably by midyear. I think it's better to look at it in aggregate because that's how we think about it. Particularly since price signal is flat between the two indications, but you are right there are more patients in the four to 11 age group that are on Medicaid as opposed to potentially being dual eligible on Medicaid and Medicare. So it is slightly higher gross-to-net on those patients, but in the aggregate we do expect to get to that 25% by middle of next year.

Great. And then maybe just one last one on 601, you mentioned that it was kind of inbound interest from the patients to get back on drug and to study 150. Just kind of curious to know would that, I mean, is there any thoughts about expanding the SCD cohort or have more patients or is it just bringing those six patients back in that were washed out of drug and getting them back on drug to look at occupancy before the Phase 2? And then just kind of as a Part B to that question is there a chance that you might study two dose cohorts in the Phase 2 trial after this data? Thanks.

Yes. So just to be clear, the plan was to do a proper Phase 2 study with dose ranging, and we're doing that. What happened with the six patients is that they called back and said, they'd like to go back on drug and we're opportunistic. So we thought that was fantastic news and an opportunity to oblige those patients and get more information, but that's not a subsidy for our Phase 2 study. So we're starting our Phase 2 study. That's where we're going to get the proper dose range. We're going to get more data from these six patients. But again, to be clear, it's not our Phase 2 study.

Great. Thank you. And would you file amendment to increase the dose level in the Phase 2 2150 – or is that already included in the design?

The plan is to expose these six patients starting at 150. I think Kim had that in her prepared remarks. And in the proper Phase 2 study, we'll look at a variety of branches. We obviously have shown you data on 100 milligrams. We saw that, that produced about 32% modification. We saw the [indiscernible] data look very exciting, but the patients didn't get perfectly to sickle cell disease. So obviously, we're going to go higher, and we're going to go longer and we're going to get the data and make decisions based on the data. So it's a little bit hard to tell you what the dose is going to be until we actually do the study.

Thank you. Our next question comes from Joon Lee with Truist Securities. Please proceed with your question.

Hi, thanks for taking our questions and congrats on the quarter. Just following up on the previous question. Impressive that you're able to restart the trial, the Phase I trial for 601 due to patient demand. It's also highly unusual. Was there any particular clinical benefit that they missed and complained that drove them to demand that we start? And did this require any level of dialogue with the FDA to get this restarted. Thank you.

We were really pleased to see that participants in the Phase 1 were interested in restarting 601. I think that what we're pleased with in the development of 601 is we have data from Oxbryta to go on. And as you know, in our HOPE trials, we had a global impression of health overall that shows that individuals felt better when they were receiving Oxbryta. So it's not inconsistent to think that individuals felt better and that was one of the reasons that they were interested in restarting. However, we did not query specifically why they were interested. But I think that just from knowing our Oxbryta experience, I would suggests that they may have felt better while on 601.

Did this restart required a consent from the FDA or in any way?

Well, I think that one of the things that is very interesting about this approach is that using intrapatient or intra participant dose escalation is kind of standard within our drug development. So I don't think that this really required an additional discussion with FDA. I think that what we did was pretty conservative. We looked at two doses, then we looked at our safety tolerability profile and analyzed the data before we offered an increase in dose for the participants restarting.

I mean, of course, I was of course, our protocols and things are filed with the FDA. So there's nothing FDA is not aware of. And our safety data from Phase 1 has been shared widely as well. So we feel good about the profile. And I would just add, I mean while we didn't do formal testing of the patients or how they felt, my suspicion is that they came back and said they wanted to go back on drug. They must have had something desirable, but we did not formally collect anything.

Right. No, because when I – when we did our touches, they said that the patients just felt better – and it's just such a big descriptor. So I just want to understand what aspect of this clinical improvement they were localizing just that was a curiosity. But I mean, it's good, but...

Yes. That – so I mean many of these patients with one, two, three gram increase in hemoglobin, they feel more like they can get their normal activities done. They – I mean, if you were anemic with a hemoglobin of, you wouldn't feel normal. And if it increased to 10%, you would definitely feel better. So I think a lot of it is that. Some patients have also complained that they have kind of daily pain that gets better when they have fewer sickle cells, presumably on treatment. But again, we didn't do anything formal. So we don't want to project it is if we get something formal. We are just being clear that the patients did come back and say, we want to go back on the therapy.

Thank you. Our next question comes from Tessa Romero with JPMorgan. Please proceed with your question.

Hey guys. Thanks so much for taking my question. The first one is, can you provide a little bit more color on what you are seeing with respect to in-office healthcare professional visits with sickle cell disease patients by age group, are there any differences that are noteworthy? And then I had one follow-up on the 601.

Yes, I'd be happy to share some of the information. We – every quarter, we take a look at the claims data for sickle cell patients, and it still is below pre-pandemic levels in terms of health care visits across the board. When you look at it for 12 and older versus 4 to 11, the 4 to 11 are actually even farther below baseline. And the reason for that is because recall that the vaccinations for the younger kids has been slower and haven't gotten to all of them yet. So parents are very cautious about getting their kids in and around the health care system and out and about when they have sickle cell disease and could potentially contract COVID. So that's why those health care visits are down. It has everything to do with COVID risk or our patients being at risk for poor outcomes if they catch it. So they're just being cautious. They're being smart and the kids are being especially, I guess, conservative. So that's still the case today. Although, as I also said in my prepared remarks, our market research suggests that physicians and patients are feeling more optimistic about getting back in person our reps are getting back in person at higher levels now. So we think this is all a good sign and a leading indicator that we're going to get there.

Thank you. Our next question is from Paul Choi with Goldman Sachs. Please proceed with your question.

Hi, thank you. Good afternoon and thank you for taking our questions. My first question is commercial. And just going back perhaps to DJ's earlier comments with regard to a substantial portion of the growth coming from the pediatric population. I want to maybe just understand a little better as to why the 12 and older population growth here seems to be relatively flat. Is it just in terms of understanding slower NRx dynamics? Or is it – has it been just sort of issues with regard to adherence broadly over the population as to why this portion of the revenue mix has been relatively flat over the past few quarters? And then I had a follow-up question.

Yes. Just to be clear, I want DJ to answer, but just to be clear, it wasn't flat. There was obviously new patients coming in the four to 11 because that was just approved, but there was growth in the 12 and older. I think I want to make sure we want to be clear about that.

Yes, that's exactly right, Ted. We've seen growth across the board, of course, substantial growth in the four to 11 given that it's new. But we do see growth also in the adults being reinitiated now as we've gotten this approval. There's it makes a lot of sense as well. Many of the physicians that are now treating the four to 11-year olds also have patients in the 12 and older. And as they – as we got approval, in a broader set of patients and the FDA wanting it to get to lower ages. That's also a great signal to our clinicians that this drug has even more experience, has been tested and proven in the marketplace now. The real-world evidence is stronger than it's ever been. So for all these reasons, there's more confidence using Oxbryta across the board. And in fact, in the 12- to 18-year-old group, we saw some reasonable growth as well, suggesting that yet, some of those same physicians that are now using it in four to 11 are now initiating it in their – in their 12 to 18 year olds as well.

Thank you. Our next question comes from Matthew Harrison with Morgan Stanley. Please proceed with your question.

Great. Good afternoon. Thanks for taking the question. I just want to ask two things related to 601. So First, can you just remind us how much tox data you have and how long you can dose patients for with 601 right now, if there are any restrictions related to preclinical talks. And then second – what are the headwinds to starting the Phase 2/3 just in terms of this operational things? Or are there other things you're still considering related to dose and still doing some modeling and things like that? Thanks very much.

Yes. We're on target with our toxicology studies, there's no limitation for dose increasing based on that. And then the second part of your question was regarding...

So I guess I was asking more around if there's any limitation on duration of dosing related to the tox studies that you've done, I don't know if you've done all of the longer-term tox studies, and that has an implication on duration. And then second, I was just asking around the Phase 2/3 study in terms of getting that started. What are you waiting for to get that started? Thanks.

Yes. So there's no limitation on duration as well. And the – really the goal of the Phase 2/3 study will be, of course, with the Phase 2 to do dose finding and then to go over into a Phase 3 without having to start a new Phase 3 study. And there is really no limitation on the start of the Phase 2 other than the completion of the protocol, getting the sites on board and those study-related factors.

Thank you. Our next question comes from Li Watsek with Cantor Fitzgerald. Please proceed with your question.

Hey guys congrats and thanks for taking my questions. I guess I'm just wondering if you can comment a little more on the new prescription growth in Q1. What is sort of the relative contribution from I guess, improved cover situation versus sort of this new expansion to younger kids? And where do you see the trends go this year? And also, I guess, on the expansion into the pediatric population, can you talk about maybe the dynamics that you've seen in younger kids relative to adults? And are there any particular concerns from I guess, pediatric prescribers that you may call out and on penetration into this group. Is it mostly a function of access? Or are there any other considerations here as well. Thanks.

Yes, I can take that one. So yes, as we said in our prepared remarks, the NRx – we're not breaking it out by age group. We're looking at overall demand. We're super excited about having over 1,200 enrollments in the quarter, the highest we've had in over well, about two years and for a quarter, and that's really driven by both groups, the four to 11-year olds as well as the 12 and older. We saw growth in both those groups. In terms of dynamics in the kids versus adults. Yes, I mean, in general, pediatricians tend to be parents to be pretty cautious about what you put in the kid. So they're going to want to see and be convinced of a lot of the data. The good news is we got this indication after being on the market for two years. We have a wealth of real-world experience, safety data and experience in the real world. So we have a new formulation, for example, that was developed specifically for the kids that can be dissolved and into a liquid and given to the kids that way. And lots of great patient education and parent and caregiver education that goes with it. So we're set there. In terms of concerns, no new concerns. I mean if you think about it mechanistically, this is the exact place we should be going. The younger the population stopping sickling and preventing polymerization early should have the best impact on preventing downstream effects of sickle cell disease. So we're super excited about that, and we think the parents are as well. And then penetration-wise, we're very excited about being indicated across the board for all sickle cell patients ages four and older now. So we should be able to, over time be able to grow into more and more patients.

Thank you. There are no further questions in the queue. I'd like to turn the floor back over to Ted Love for any closing comments.

Okay. I'd just like to end by thanking everyone for joining the call today. We hope you all stay safe and healthy. And please feel free to reach out if you have any additional questions. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.