Rigel Pharmaceuticals, Inc. (RIGL) Q1 2020 Earnings Report, Transcript and Summary

Greetings and welcome to Rigel Pharmaceuticals Financial Conference Call for the First Quarter 2020. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce our first speaker, Dolly Vance, who is Rigel's Executive Vice President, Corporate Affairs and General Counsel. Thank you, Ms. Vance, you may begin.

Welcome to our financial results and business update conference call. The financial press release for the first quarter was issued a short while ago and can be viewed along with the accompanying slides for this presentation in the News & Events section of our Investor Relations page on our website, www.rigel.com. As a reminder, during today's call, we may make forward-looking statements regarding our financial outlook and our plans and timings for regulatory and product development. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our annual report on Form 10-Q for the year ended December 31, 2019 and subsequent filings with the SEC, including our Q1 quarterly report on Form 10-Q. Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances. At this time, I would like to turn the call over to our CEO, Raul Rodriguez.

Thank you, Dolly, and thank you for joining us on our first quarter 2020 financial and business update call. Also joining me on the call is Tarek Sallam, our Vice President of Marketing; our Chief Medical Officer, Wolfgang Dummer; and Dean Schorno, our CFO. I'd like to begin on Slide 5. First, I'd like to say that during these extraordinary time, the entire team at Rigel hopes you and your families remain safe and healthy. Importantly, we would like to thank all of the healthcare workers for their selfless efforts, which are absolutely vital. From a company perspective, our primary goal this time is to ensure the safety and health of our employees and patients. Rigel is taking actions across all of our business areas in order to continue executing on our strategy amid this challenging times. We are monitoring the impact this will have on our business going forward and we'll continue to adapt to the environment and provide updates as necessary. Now on to Slide 6. Rigel has four key value drivers, growing TAVALISSE in the US ITT market, capturing value in the global ITP markets via collaborations, breeding and capitalizing on warm autoimmune hemolytic anemia opportunity and expanding our pipeline of programs. Q1 of 2020 was certainly not what we imagined it would be to say the least. Nonetheless, we adapted to our environment, transitioned to virtual platforms and made important progress. In the recent quarter, we continue to grow sales on a year over year basis, reporting a 57% increase compared to the first quarter of 2019. We are very pleased with this given everything that is going on externally. This is a testament to the high quality commercial organization we have in place, as well as the highly differentiated and effective product we provide. In the global market, we're excited to have received approval for fostamatinib in Europe this past January. It will be marketed under the brand name TAVLISSE by our partner Grifols. The label we received is very attractive and exactly what we were looking for. It's broad and allows us to compete effectively in Europe. With this approval, we've recognized $43.1 million of revenue during the quarter, which included the $20 million milestone that we received in February. We look forward to Grifols making our products available to patients, which we expect them to do this quarter. Our next potential commercial opportunity is in warm autoimmune hemolytic anemia, which we believe is an even larger opportunity for Rigel. AIHA is another autoimmune disease like ICP, where the body produces antibodies that can state hematologic cell type, in this case, red blood cells. There's a real unmet need for these patients given that there's no approved products for this indication. And based on the progress we've made today, we are in a position to potentially be the first product on the market. We have generated encouraging data from our phase two trial of TAVLESSE in warm autoimmune hemolytic anemia, giving us the confidence that we have to move forward in our phase three trial. We have opened up over 80 sites across 22 countries for the phase three trial today. We have randomized 41 patients and we are making very good progress -- and we're making very good progress prior to the impact of recent events. Wolfgang will provide an update and also review our ongoing interactions with the FDA in just a few minutes. Lastly, we are very excited about further development that is taking place in all our programs. In addition to AIHA, we are exploring other potential opportunities for TAVLESSE, one which is in the treatment of COVID-19 pneumonia and related conditions. Wolfgang will discuss this rationale in his section. Our RIP1 and our IRAK 1/4 inhibitors per -- are in phase one trials, and we are very excited for the potential of both of these assets. IRAK and RIP are two of the most attractive immune targets in biopharmaceuticals today. And based on our early data, our molecules have demonstrated characteristics that gives us a lot of optimism for their potential. We continue to make progress in our discussions to secure a co-development and co-promotion agreement for one or both of these assets. And we believe we'll be able to do so by year end. Especially important at this time is that we have a solid financial position. And we have continued to strengthen by adding $30 million in cash from a combination of milestone payment from our partner Grifols and the use of our debt facility for MidCap. Dean will discuss this a bit later in the presentation. Moving on to Slide 7, we are excited about these key value drivers because they address areas of important medical needs and our major market opportunities. We are well positioned to capitalize across these areas even in this environment. ITP is a $1.1 billion market and growing in the US, outside the US ITP market is about $900 million. We think that warm autoimmune hemolytic anemia has potential to be a $1 billion market in the US, similar to the current size of the ITP market. And our pipeline continues to offer Rigel tremendous opportunities for business development activities and clinical trials in the near future, near term and in the future. With that, I'll turn the call over to Tarek. Tarek?

Thank you, Raul. Our current commercial efforts are centered around our first marketed product TAVLESSE, which as you see on Slide 9, is a kinase inhibitor indicated for the treatment of thrombocytopenia in adult patients with chronic ITP, who have had an insufficient response to a previous treatment. Let's move to Slide 10. I'd like to further elaborate on our first quarter performance that Raul highlighted earlier. We generated net product sales of $12.7 million, which was an increase of 57%. Compared to $8.1 million in the first quarter of last year. There were 1,398 bottles shipped to patients and clinics during the quarter, which excludes any change in bottles remaining in distribution channels which Dean will review in his update. This was encouraging, given the typical headwinds pharmaceutical companies face in the first quarter, particularly for oral specialty products, which are created by insurance reauthorizations, patient starting new plans and Medicare resets. What was, of course, atypical for the quarter was the rapid outbreak of COVID-19. Leading up to the month of March, we were excited to get out in front of our customers with our recent clinical data in second line patients, which I'll discuss in a few minutes, and deliver on our strategic priorities for the year, despite these typical first quarter headwinds. But then, as we all know, the current pandemic quickly change the dynamic of how we all work and interact with one another. However, we did see an uptick in March that has persisted through April, driven by a combination of both refills and new patient starts. Additionally, our persistency rate remained in the 54% range for the quarter, all of these important indicators of future growth. All said, we are pleased with the progress and foundation we have in place. While we certainly could not have anticipated COVID-19 occurring when it did, let me share with you what we're doing in this new environment to support our healthcare providers, their ITP patients and the TAVLESSE business, and how we believe that we exit this period of challenge well-positioned. Moving on to Slide 11. I'd like to take a few moments to provide you with an assessment of the healthcare environment our customers are facing during this pandemic. A majority of our physician customers and clinics have resist -- excuse me, restricted access, or fully shut down to drug company sales teams. In fact, many clinics and institutions are only seeing critically ill patients. They have even begun to triage their malignant disease patients that do not have imminent health risk or an acute need and are asking them to remain at home and wait to schedule follow up appointments. This is obviously an incredibly challenging environment for our providers, their patients and of course for us to attempt to conduct business as usual. Fortunately, we're in an age in which virtual technology is accessible and easy to utilize. Virtual engagements are a necessity for any measure of success in sales for the foreseeable future. And we are seeing offices increasing their telemedicine capabilities. As a relatively small and nimble organization, we were able to quickly adjust by making many of our in person activities virtual, including one on one physician conversations, in services to support new prescribers and their staff, as well as providing existing customers with ongoing support remotely. These engagements have been well received, and we will continue to optimize their effectiveness. Some additional feedback from our customers is that given the current shelter in place orders throughout the country, having an oral option is certainly perceived as a potential benefit. Recently, we launched the physician product sampling program. The objectives of the program are to encourage physician trial of TAVLESSE and assist in patient identification. And we're seeing an increased utilization of our sampling program, which we have been able to facilitate remotely. We're extremely excited to have a program in place to help physicians and patients Access TAVLESSE while limiting the risk of exposure to COVID-19 with fewer office visits. Turning to Slide 12. I'd like to share why we believe that we're poised for success once the current environmental situation normalizes. As a reminder, one of our key priorities for 2020 is increasing the utilization of TAVLESSE in earlier lines of therapy, and accessing larger patient pools represented by the chart on the left side of the slide. We feel that the second line data analysis summarized on the right side of the slide is critical in our ability to execute on that strategy. As a reminder, this is a retrospective analysis of patients in our phase three clinical trials that received TAVLESSE as a second line therapy, and of these patients 78% achieved a response. This is a similar response seen by other agents in this setting. This data was presented at the American Society of Hematology Conference in December of 2019. We then trained our teams and launched new materials in mid to late February. So awareness of the second line data is quite low. Well, our field teams now have these materials and are sharing them virtually, as you can imagine, they're excited to get out in front of their customers more broadly, with this new messaging. And once they're fully deployed, this truly represents an opportunity to share with healthcare providers, a new perspective on TAVLESSE's clinical utility and further supports our story in the earlier line treatment setting as the environmental situation normalizes. So with that, I'd like to turn the call over to Wolfgang. Wolfgang?

Thank you, Tarek. Good afternoon, everybody. I will begin on Slide 14. As you know, Fostamatinib is currently in an ongoing phase three pivotal trial in warm autoimmune hemolytic anemia. Here's an update on our progress, and how we are adapting in this current environment. Currently, we have 41 patients randomized into the study, which is nearly half of our target enrollment number. We had very good recruiting momentum until early March when the COVID-19 pandemic spread widely, and clinical trials sites begin to temporarily postpone screening. While this is effectively delaying enrollment for now, I'd like to emphasize the importance of the established operational foundation of our trials. We have over 80 trial sites in 22 countries that remain active. Hence, as soon as the COVID-19 situation normalizes, we should regain momentum rather quickly and efficiently. And since some countries are likely to normalize quicker than others, we can restart enrollment on a country-by-country basis, which will provide a competitive enrollment advantage. During the quarter, we also had productive conversations with the FDA about the program. As a reminder, the trial is placebo controlled with a one to one randomization to Fostamatinib placebo. Originally, the sample size was claimed to be 80 patients. We have increased the trial size slightly to 90 patients, which adds incremental powering to the study, and could help mitigate any potential missing data caused by COVID-19. We're still working with the FDA on finalizing the most appropriate usability measure. Since there is no drug approved to AIHA and we have the only AIHA trial in a pivotal phase three, we are setting the standards and work with the FDA to establishing this durability criterion. Turning to Slide 15. Like others in the industry, Rigel has been forced to rapidly adapt our phase three clinical trial conduct due to the current COVID-19 pandemic. The FDA recently provided guidance for the conduct of trials during COVID-19 which provide some flexibility that we are utilizing. For example, patients can get blood draws locally from their primary care physicians and have them analyzed at the local lab or some site visits can be replaced by virtual visits to collect basic safety information so the patient's risk of exposure to the virus can be kept as small as possible. We also maintain a laser sharp focus on collecting all obtainable data in order to maintain a complete and robust set for the patients that are already in the study. Regarding enrollment completion, right now, there is a COVID-19-related delay. At this time, we cannot give clear guidance on what the delay will be exactly. We will provide updates as the global COVID-19 impact becomes more certain. But as I have alluded to earlier, this enrollment pause should not impact our goal to have the first treatment to market for AHIA with all its first mover advantages. If anything, we could potentially extend our enrollment lead given the large numbers in the geographical range of our sites that remain active. Slide 16. Moving to additional pipeline options beyond AIHA, you see COVID-19 on the slide, and I will speak to the scientific rationale for Fostamatinib and potential activities in COVID-19 in a little while. Given the broad potential for Fostamatinib in our sick inhibition program, we considered a large pool of indications and we have narrowed the search down to the most attractive opportunities which we plan to pursue. Executing on an additional label indication for Fostamatinib will enable us to take full advantage of the exclusivity for this molecule, which is expected to be into 2032. In addition to Fostamatinib our IRAK1 inhibitor, the only inhibitor molecule of both IRAK1 and IRAK4 pathways continues to progress in the program and remains in good position. In preclinical studies, it has shown to block inflammatory cytokine production response to TLR and IL-1 one receptor family signaling, and a phase one human healthy volunteer study achieves its proof of mechanism and demonstrate its favorable PK characteristics. Finally, we recently completed the multiple ascending dose stage of our Phase I study with our systemic RIP1 inhibitor. Importantly, we have identified a dose range that is safe and is well within expected clinical efficacy. We confirmed the 14-hour half-life for these doses, which is quite significant as it should allow for once a day dosing. And as mentioned previously, we also plan to identify RIP inhibitors CNS molecule in the near future to move into the clinic as well. Now, let me shift gears and briefly share our considerations for the use of Fostamatinib in the treatment of COVID-19 patients. We truly believe there is a compelling scientific rationale for the drug to have benefit in treating COVID-19 pneumonia, as well as associated acute respiratory distress syndrome. Let me take you through that. Slide 17. As you may know, pneumonia is one of the most severe complications associated with COVID-19. Severe cases can progress to ARDS which requires invasive ventilation due to low blood oxygen saturation and frequently leads to death. Interestingly, this rapid progression often happens when the immune system has already begun to make antibodies against SARS-CoV-2 and the viral load actually decreases. That means that really the immune system causes a severe pathology, not just the virus. The sick pathway is involved in multiple mechanisms, as illustrated on this somewhat simplified slide. Look at the image on the right, please and I walk you through this. If you look at the virus particle in the early stages of infection, the replicating virus causes lung epithelial cells destruction and release of so-called damage-associated molecular patterns or DAMPs and pathogen-associated molecular patterns, PAMPs which find to C-lectin receptors so-called CLRS. Signaling through CLRS can lead to excessive inflammatory cytokine release and coagulopathy from vascular endothelial cells and to massive neutrophil activation inside the toxicity by a process called NETosis. All these events can damage the lung and also other organs such as the kidneys and the heart. SYK inhibition fostamatinib can reduce this highly inflammatory process. Now, if you look towards the left side of the image, you can see the second main mechanism for a hyper-reactive immune system. As a response to viral infection, our immune systems begin to make anti-SARS-CoV-2 antibodies. These antibodies find the virus and form immune complexes with the virus which then binds to FC gamma receptor-expressing cells such as macrophages, dendritic cells and monocytes. That can in some patients induce excessive release of inflammatory cytokines such as IL-1 beta, IL-6 and IL-8. Here too, SYK inhibition fostamatinib can ameliorate this resulting cytokine storm and prevent organ damage. Fostamatinib is the only approved SYK inhibitor that may interfere with the pathology of COVID-19 at multiple points through multiple cell types and could therefore work in COVID-19 related organ damage, pneumonia and ARDS of viral also other etiology. Now, this is not an entirely new concept as we do have preclinical data from a model of ARDS. On Slide 18, you see an executive summary of those mouse experiments. Here R406 is the active metabolite of fosta used in this model and essentially the same as fosta. On the left, you see the histology of lung tissue and the full different circumstances. Upper left, you see healthy lung tissue with clear alveoli where transport of oxygen into the blood happens. On the top right, you see the same thing when only fostamatinib is administered with no negative impact on the lungs. But looking at the lower left, you see acute respiratory distress syndrome induced by LPS which lead to massive inflammation, lots of fluid and cell debris in the alveoli, making oxygenation of the blood different or insufficient. On the lower right, you can see that fostamatinib has a clear beneficial effect on this pathology. Not surprisingly, as depicted on the panel on the right, this leads to survival of the mice with ARDS that were treated with fostamatinib. What are we going to do with all of this? We are currently seriously contemplating to get the drug into the clinic in one form or another. That could mean providing fostamatinib to some hospitals to support one or more investigator-sponsored trials to generate initial data. It could mean all the way to potentially a righteous sponsored clinical trial. We will keep you posted. With that, I'll hand over to Dean for a review of the financials. Dean?

Thank you, Wolfgang. I'm on Slide 20. For the first quarter of 2020, we shipped 1,393 bottles to our specialty distributors. We shipped 1,398 bottles to patients and clinics which is comparable to the fourth quarter, where we shipped 1,422 bottles to patients and clinics. As in the prior year, we did see typical first quarter reimbursement issues, such as the resetting of co-pays and the Medicare donut hole. Incrementally, we did start to see the effects of COVID-19 in the latter part of the quarter. Also during the quarter and for the first time, we saw a five bottle reduction in bottles that remained in our distribution channels, resulting in a total of 591 bottles at the end of the quarter. We reported net product sales from TAVALISSE of $12.7 million, a 57% increase compared to the first quarter of 2019. Our net product sales from TAVALISSE were recorded net of estimated discounts, chargebacks, rebates, returns, copay assistance and other allowances of $2.7 million, a gross to net adjustment which is approximately 17.5% of gross product sales. We currently expect our gross to net adjustment to remain in the 18% to 19% range throughout 2020. In the first quarter, we did see a sequential reduction in net product sales, resulting primarily from the changes in the bottles remaining in our distribution channels and to a lesser extent to the impact of COVID-19 in the latter part of the quarter. Specifically in the fourth quarter of 2019, we saw a 96 bottle increase in bottles remaining in our distribution channels, compared to a five bottle reduction in the first quarter of 2020. The effect of this change in bottles remaining in our distribution channels was approximately $1 million when comparing the change in the fourth quarter of 2019 to the first quarter of 2020. Before we move on to net product sales, let me comment briefly on our expectations for the second quarter of 2020. While we would have expected to move past the seasonality of the first quarter caused by the reimbursement issues that we discussed and would have anticipated accelerated sequential growth like we saw in Q2 of 2019, the impact of COVID-19 in our business that started in the latter part of the first quarter continues and remains uncertain. As Tarek highlighted, we've made great strides in optimizing our ability to access our physician community remotely and to provide the many patients suffering from chronic ITP in the U.S. with access to TAVALISSE. Once the significant impact and restrictions caused by COVID-19 are behind us and the future begins to normalize, we expect to see continued strength and growth in our business. Currently, our long term view of the opportunity for TAVALISSE remains unchanged. Under the next slide, in addition to net product sales, Rigel's contract revenues from collaborations was $43.1 million for the three months ended March 31, 2020. As a reminder, during the quarter, we announced that we received the European Committee approval of our MAA for fostamatinib for the treatment of chronic ITP in Europe. With this approval, the company received a $20 million non-refundable payment from Grifols which is composed of a $17.5 million milestone payment and a $2.5 million creditable advanced royalty payment. In addition, $25 million of the $30 million upfront payments we received from Grifols in Q1 of 2019, which had been previously deferred will no longer be repayable by us to Grifols. Given this information, as well as the performance of certain research and development services, we recognize approximately $43.1 million as collaboration revenue in the first quarter of 2020. The remaining deferral amount of $2.2 million will be recognized as revenue as we complete certain research and development activities, mainly related to the conduct of our autoimmune hemolytic anemia Phase 3 clinical trials. Moving on to cost and expenses. The cost of product sales was approximately $155,000 for the first quarter of 2020. Total costs and expenses were $34.7 million in the first quarter of 2020 versus $31 million in the first quarter of 2019. The increase in total costs and expenses was primarily due to third party costs related to Rigel's ongoing pivotal Phase 3 study in warm autoimmune hemolytic anemia research and development costs related to other clinical programs and personnel-related costs, partially offset by stock-based compensation expense. As we look towards 2020, we continue to expect our total costs and expenses to increase by approximately 15% to 20% as compared to 2019 as we continue our commercial expansion and further our research and development pipeline. We ended the quarter with cash and short term investments of approximately $95.9 million. Incrementally we accessed the second $10 million tranche from our $60 million term loan facility with MidCap Financial which we received on May 1. The facility provides the company with access to an additional $40 million, which is subject to the achievement of certain conditions. Rigel currently has sufficient supply of TAVALISSE tablets and drug substance to meet the needs of our U.S. ITP commercial business, as well as our collaborative partners in clinical trials worldwide. Finally, I'd like to say that we will continue to undertake efforts to prevent or minimize disruptions to our business and operations while monitoring for new developments related to the evolving COVID-19 pandemic. At this time, we don't yet know the full impact of such disruptions on our business operations or financial condition. With that, I'd like to turn the call back over to Raul.

Thank you, Dean. As you can see that the COVID-19 pandemic has had an impact to varying degrees on all areas of the business but what we are trying to achieve has not changed. There will be unavoidable impacts on our business in the short term, but fundamentally, we remain on track. This is driven by the resilience and focus of our employees and their commitment to our patients. We will continue to grow TAVALISSE in the U.S. ITP market using virtual engagements to communicate across all the vehicles we use. We are excited about the use of TAVALISSE in earlier lines of therapy and the data that we have to support this position. Similarly, we look forward to European patients that suffer from ITP also having access to tablets and will support our excellent partner Grifols in their efforts. We will work to complete the enrollment of our AIHA Phase 3 study. The patient needs in warm autoimmune hemolytic anemia is no less real, no less pressing or no less important today than it was earlier this year. We will give them a much-needed treatment option. We will explore how TAVALISSE could potentially provide patients with COVID-19 related pneumonia a much needed new therapy. We will continue to advance our RIP-1 [ph] and IRAK1 programs and put in place a partnership for one or both of these important assets. We will work harder, smarter and more thoughtfully to accomplish what we set out to do. With that, I'd like to open the call up to your questions.

Thank you. We will now be conducting the question and answer session. [Operator Instructions] Our first question comes from the line of Yigal Nochomovitz with Citigroup. Please proceed with your question.

Great, thank you for taking the question. First question is related to the prescribing patterns for TAVALISSE in light of COVID. I understand you've shifted to telehealth primarily. But what happens for new patients? Is it possible for a hematologist to prescribe TAVALISSE to a new patient just via telehealth, or do they actually need to see the patient?

Sure. Thanks for the question you got and absolutely an appropriate one, given these unique times. When I was referring to the telehealth capabilities that we're seeing out there with our providers and our subsequent than ability to interact with them virtually, in fact, a lot of our activities that have taken place in March as well is continuing to April, as I had articulated, are supporting new prescribers. Not only are we ensuring ongoing support of existing prescribers but to answer your question simply, yes, we've absolutely been able to support new hematologist, new chemo clinics with virtual in services, onboarding even so far as sending via snail mail materials or even digitally so that their nurses and their staff are able to educate patients, whether they're educating patients in see to, live in person in the clinic or they themselves are doing it through telehealth mediums. I'll be honest, I've been very impressed by both our internal team as well as our external customers' ability to adapt to meet the needs of new patient identification. Hopefully, that answers your question.

That's very helpful. Thanks. I just wanted to make sure I understood Dean's comments a little better with respect to the sequential decline for 1Q 2020 versus Q4 2019 which I understand was driven by COVID in the latter part of the quarter, as well as the typical headwinds. With respect to 2Q 2020, to the extent that you can comment, are you saying, are you preparing the market to expect another sequential decline given the COVID headwinds or is that reading into it too much?

A couple of things you got there. The description of the reduction, the sequential from Q4 to Q2, we had 96 bottle increase in inventory in Q4, a five bottle decrease in Q1. So 101 bottles at a bit more than $9,000 per bottle on an average net sales price across our business. That's almost $1 million. As you look at the graphics that we showed that showed the reduction in Q1 of 2020 that was our purpose there. With respect to our view going forward, what we've said at this point is just kind of reiterate what Tarek said. Is that our view is that we haven't given guidance to date. We did see a sequential or we saw an uptick in our business in March that persisted into April but we just don't know the full effect and the access that will become available to us and we just haven't provided more information beyond those comments. Let me pause there and ask Tarek or Raul to add any incremental color.

Thanks, Dean. This is Tarek. The other thing too, just to reinforce is as Dean articulated, while we're not providing guidance and certainly like many organizations COVID-19 is adding an unknown variable. I spoke a little bit about the opportunity as well and so well, as an organization -- as a commercial organization, we would have loved to have had our fields face to face in front of our customers talking about the second line data, particularly as we had launched it towards the mid to late February timeframe. That still represents opportunity for us and so using the vehicles that we have in place, we are consistently delivering that message whether to new prescribers or existing prescribers as they're thinking about the appropriate patients for TAVALISSE. So just consider that as part of the balance of really how we're actually executing out there and delivering messages. Clearly, we can't wait to get in front of them in person when things abate, but we are certainly delivering those messages virtually right now.

Okay, great. That's helpful. This one might be best suited for Wolfgang. With respect to the new initiatives you've announced regarding COVID-19 trials and the sixth pathway, I just want to get a sense was this something that originated internally within your-- among your scientists or were you approached by academic groups that saw the potential for this drug to potentially treat COVID-19 patients? Just trying to get a sense as to how it originated and the extent of the investments that you would make in this sort of program?

The answer to your question is both. We have been approached by renowned institutions who are interested in using this drug. At the same time, of course, internally and based on the data that I have shown you we have thought there might be there for this compound and so this came at the right time. How much money would be spent? Raul, do you want to take that?

I do. A couple of comments. We were interested in acute lung injury, ARDS prior to the COVID pandemic in the experiments that Wolfgang showed on Slide 18, that's published. Something we've been very interested in exploring ourselves because ARDS is a substantial opportunity corollary to many other diseases, not just COVID-19. So when this came about, we knew that this was a good opportunity for us to consider. What we did is didn't have any discussions about it and we were subsequently approached, as Wolfgang said, by institutions that are already working in this area, doing trials, testing molecules. This is an opportunity for us to explore the use of our product in this important new area and obviously, we'll take advantage of it as fast as we can to put it into human testing. How much money it will take? I think I can't say just yet because we don't have that done yet. Right now we're exploring this investigator sponsored trial just because they are the fastest way to begin testing the molecule in this setting.

Okay, got it. Thanks for all that's very helpful.

Thank you. Our next question comes from Chris Raymond with Piper Sandler. Please proceed with your question.

Hi, this is Ally Bratzel for Chris, this afternoon. Thanks for taking the question. I think first just on the FDA interactions regarding the AIHA trial, could you clarify what the driver was there for increasing the sample size to 90 patients? Was that purely in response to potential COVID-19 interruptions or was that upsizing always a possibility as part of a pre-planned interaction with FDA?

Sure. There was some overlap. We wanted to meet with the FDA and we arranged for a date and at the same time, COVID-19 began. Our original driver was to increase the sample size slightly because it gives us a little bit more incremental power. Actually, to be specific, 90 would allow for one additional placebo responder to get a response and with that 25% delta still is statistically significant. There was a precaution and since enrollment went well, we thought, this is a very good idea. Now in the times of COVID-19, it does also mitigate against the potential risks to the handful of patients or not getting enough data to be fully evaluated. Right now that situation looks pretty good. We are looking very carefully into the amount of missing data and how patients come to the site and get their blood draws and it looks actually pretty good. The sites are doing a very good job, but this is-- the increase of sample size to 90 is a little bit of an added risk mitigation against that.

So the answer is both, Ally. I think we were prior to this COVID thing enrolling eight to nine patients a month in a pretty good clip and we're seeing good trajectory. I think we'll get back to that once the sites begin screening patients again. It's worth that extra little by the securities for both reasons.

Okay, next time. And then maybe shifting to ICP. A question about four months [indiscernible] that's going really nicely since they can queue for you first started describing that at around 45% and now it's up in the mid-50s. I think what we saw quote-unquote at around 54%. Could you just talk about the drivers that are impacting that? Were there Q1 seasonality impacts that maybe what allowed that to be flat in Q4 and Q1? And then maybe talk about how we should think about that we probably growing or maybe beyond the mid-50s or staying steady in the mid-50s throughout 2020.

Raul, feel free to layer on. Great question in regards to our persistency rate. As I share it, we're seeing approximately a persistency rate at four months for the quarter at 54% and as you articulated some good progress since launch. Actually significant progress since launch. I think as we think about to your question about what are the drivers, what are behaviors and how do we potentially perceive that looking forward? Well, certainly we don't have a crystal ball. I think what we've articulated in the past is that as clinicians and their staff become more familiar with the product, understand about how to manage the disease with this specific product, understand how to educate their patients about AEs and onboarding of it. As well as frankly, we talk about the specific patient type that they're using it in. We believe that all of these factors are going to impact and then correspondingly improve the persistency rate. One of the key drivers we think to the persistency rate and its potential growth in the future is really the line of therapy because obviously, later line patients have poor prognosis and potentially cycle on and off therapies more frequently. We believe, particularly that the second line data and as we move TAVALISSE into regular usage in the second and third line setting, that that is going to also correspondingly impact the persistency rate. Hopefully, that answers your question.

Ally, we've just started this in terms of moving into earlier lines of therapy with this new data from the meeting, as Tarek pointed on in this presentation. Really our presence in that segment, those earlier segments is really very small and that provides tremendous opportunity to grow. The opportunity would benefit itself in more patients, but also more patients staying on drugs longer, higher persistency. It's not just month four, but really across the entire crew that we expect to increase. Whereas we get into those earlier lines of patients who have a better response to products generally and are specifically with 78%. I think that's pretty exciting. You should expect to see that continue to increase. You're right we were 45, now it's 54 and it should continue to move upward.

Okay, got it. Thanks so much, guys.

Thank you. Our next question comes from Do Kim with BMO Capital Markets. Please proceed with your question.

Hi, good afternoon. Thanks for taking my questions. I was hoping if you could talk more specifically about the dynamics of how COVID impacted TAVALISSE sales in the first quarter. Other biopharma companies have been reporting that oral therapies have been seeing early refills and increase in 90-day scripts, causing a temporary pull forward in sales. Is that something you also saw or is it just difficulty in getting new patients and some slippage in existing patients?

Let me take a first stab at that and Tarek I'll ask you to comment as well. Thank you, Do. I hope you're doing well. So really Q1 is typically a challenging quarter. Remember last year, we had a quarter that was about flat. This quarter, we were thinking it was going to be about flat and then in March we usually see an uptick. We saw an uptick. It was not as pronounced as maybe we were expecting it to see and that's what causes moderation of growth there. We came in largely flat maybe slightly below where we were last quarter. Really, it had impact in many ways. Doctors and patients not seeing their doctor on a regular basis. Some of that is insurance reset. Some of that is want to go see a doctor and under COVID conditions, it's hard to separate the two out frankly and say it was due to this and that other than in Q1 you see the impact of both those effects, insurance resets as well as the COVID keeping patients from moving forward. We saw that and that's what depressed our growth. As you saw in March, we did see an uptick. It was not as pronounced and that continued into April. Tarek, any other observations?

No. It's a great question, though. I think to Raul's point, it's hard to pinpoint the specificity in terms of acceleration due to long-range like 90-day refills and things like that. We haven't necessarily seen that level of granularity impacting our business. Ultimately, with the headwinds we've seen from a reimbursement and insurance perspective, as Raul articulated, we really have seen momentum built in March and April. Obviously, the timing of this and our inability to be face to face with our customers is an area that we would have rather obviously been up been out there in person. To articulate whether it's A or B is a little difficult for us but needless to say, we're really encouraged by just the level engagement. I can tell you just based on sheer interest alone, physicians are amenable to meeting with our both commercial and medical field forces, they are excited to hear about the new data. So, just using that as a little bit of a litmus test to indicate that there's a willingness and a need for this information, I will say I'm actually pretty encouraged by that.

Okay, great. That's very helpful

Joe, if I could just add one quick comment there. You know, what's interesting, maybe a little surprising to me, is that in the quarter, Q1, we saw a decline in inventories that are at our distribution channel or in the distribution channel. Usually, we see about a decrease as Dean said, in Q4, we saw almost 100 bottle increase in inventories. And this quarter, Q1, we saw a five bottle decrease, no increase in inventory which created that unfavorable comparison. Actually, that was a surprise to me, I would have expected some increase in inventory just because of all that's happening, that didn't occur in Q1.

Right, right. No, that makes sense. And for Grifols launch in Europe, in your communications with them, has there been any discussions in a potential delay in that considering how hard Europe has been hit by the pandemic?

Well, what they've told us, actually, they put out in their press release last week, is that the product will be available to patients in Europe this month -- this quarter. And so that's good. Doctors can actually write the script and have it filled. The -- in terms of their active promotion of the launch, it's just very difficult to execute on that right now. No doubt they'll delay some of that activity. But the product will be available this quarter, which is good to see. And when things clear up a bit, they'll move forward. Interesting, different countries in Europe are suffering from this pandemic very differently. Italy and Spain, maybe one extreme, but it seems that some other countries, Germany is frankly handling it quite well, as well as we expected, not a lot of disruption. The Scandinavian countries, Norway, for example, are doing well. And so it's highly varied in Europe. It's not -- maybe not too dissimilar to the US in terms of different regions, but in some places, I expect them to move forward more quickly than in other places.

Okay. And last question, for Wolfgang, in the clinical studies for TAVALISSE to treat COVID, pneumonia and ARDS, are you thinking about a particular severity of the disease where TAVALISSE will be most effective? And as you have all these other therapies, anti-virals working for the more moderate patients, will -- would you think that TAVALISSE would be effective in the more severe patients?

Yes, so as you said yourself, TAVALISSE is not an antiviral, it's an immune modulator, right. So, I see the greatest opportunity certainly, in particular, initially in the cases that have advanced to pneumonia, and they could start as early as just verified pneumonia, but no invasive ventilation required. But I could also see potential in the patients who are already on a ventilator. And as you know, they have like very high mortality rates. Given what I have shown you, and how sick inhibition might work, I think that definitely, that will be the place to start. Once you get to a point where you have establish safety and efficacy at that stage, you could, move yourself forward and say, well, shall we use this as soon as you have any type of respiratory symptoms? But there will be probably the second step.

Got it. I hope everyone stays safe there too. Thanks for taking my questions.

Thank you, Joe.

Thank you. Our next question comes from the line of Tessa Romero with JP Morgan, please proceed with your question.

Hi, guys. Hope you're all doing well. Thanks for taking the question. First one for me, on [indiscernible]. if I could. So you have widespread sites geographically, which I think could be favorable in rebuilding momentum when the COVID pandemic normalizes. Sort of what are the key push pull levers to consider on the enrollment side and potentially still meeting the prior mid-2021 data timing? I think you have a 24-week or a six-month primary endpoint for this study? And then I have a follow up.

Sure. I'll ask Wolfgang to add, but I will just preface it by saying, we think that this is a very attractive opportunity, and the product will be very important product for patients suffering from warm autoimmune hemolytic anemia. So our view of the opportunity really hasn't changed at all. And the reason we believe so strongly in this is that we opened up baby centers across the world in order to execute on this trial as fast as we can. And that does give us a lot of geographic diversity that allays the impacts of COVID being very different in different European countries. And so it'll help us a good deal and I think we'll get back to enrolling patients at a clip of eight or nine patients a month once the sites are back focused on the. But that'll be different, and they'll come back at different speeds. And it's hard to predict right now what that speed differential might be, which is why it's harder for us to say this is when we think it'll be completed. Wolfgang, do you want to add any other thoughts on that?

Yes, you covered most of the answer for the question. I guess we have -- so basically, what we discussed is you need to be comfortable, and your patients’ needs to be comfortable to participate in the study and that means you want to come to your study visit so that they can draw your blood and all this type of things. And in the -- obviously in the height of the pandemic, their comfort level wasn't very high. I would say now that the things are more and more reopening and beginning to normalize, we can start thinking about this again. But again, it -- things change very quickly these days, but once we feel it is safe for the patients to come back to the site and participate in the study, then reopening of enrollment could be considered.

Okay, that's helpful. That's helpful. And I may have missed it in some earlier comments, but just a quick one for me. What -- sort of in the height of the pandemic, what were you seeing on NRXs versus TRXs versus kind of what you're seeing sort of in late March? I think you said there was an uptick into April. I'm just kind of trying to get at, can you give any more kind of color on if it was new patients that were kind of declining or if it was some of your existing patients? Yes, any additional color you can provide on that point would be helpful. Thank you.

Sure. I'll take a stab at doing that. And Tarek, if you could follow the -- we saw continuing activity in both the new patients and continuing patients. And pretty good reaction in terms of that we were very positive in the start of the year in terms of what we were expecting to see, especially given the early-line data that we had presented at the ASH meeting. And so we were seeing good, and as expected, performance in the business across new and established patients. And then surprising this COVID hit at the month where you see an uptick. We saw a bit of an uptick, but not as -- maybe as profound as you would have expected.

Yes, Raul. Tessa, to your question. I think that last point, Raul is probably the only point I would have just layered on is specifically is that, as you can imagine, Tessa these are chronic disease patients and for a lot of oral therapies like TAVALISSE, not just ourselves, they tend to kind of work their way through these reimbursement hurdles in the first couple of months and so with that dynamic that we've seen, we have seen a more robust uptick in the past to March. So I think that last point that Raul articulated is just kind of the key points…

Okay, great. That's helpful. Thank you for taking my question.

Thanks, Tessa.

Thank you. [Operator Instructions] Our next question comes from the line of Kristen Kluska with Cantor Fitzgerald. Please proceed with your question.

Hi, good afternoon and hope everyone on your team remains well. So my first question is, as it relates to the Warm AIHA trial, I noticed on clinicaltrials.gov that you made modifications and added new centers during April. Were these centers part of the plan or have you made any changes as it relates to a result of the pandemic? And also, are you looking to potentially explore any backup centers in specific geographies as you continue to monitor the situation? Thank you.

Thanks, Kristen. I hope you're well as well. I'll ask Wolfgang to answer that.

Yes. No, so we opened sites according to our plan -- to our originally existing plan, there was no change. To your other point, I think with our 22 different countries, we are geographically pretty well prepared for a reopening, and as I said in my in my script, this could be a site by -- a country by country approach, right. So if you see that countries like Germany come back to normal a little bit quicker, we can certainly open enrollment, they are faster than in something very hard hit like Italy, for example. So I think we are extremely well prepared -- as prepared as we can be for the time of reopening and re-resume of randomization.

Kristen, thank you. And if I could add on that. In April, clinicaltrials.gov had additional sites opening in April, that -- I don't think that's correct. I think it may have been just a delay in updating the site because I don't think we've added any sites in April. But one thing that's useful to think about is, as we went forward with this and had the sites opened, our thought was having a patient enroll and then not having to make it able to make any of their visits would have not been a useful advancing program; we really prefer to have the patients where we're confident that they'll be able to make their visits because otherwise they're not going to be useful patients to study and enroll.

Okay, thank you for that. So while the majority of centers are postponing enrollment, is there anything that your team or investigators can do during this time to try to find patients that could be eligible once things start to open up again?

Well, you know, the patients are still there. And we know that the patients need a new product such as this, so that hasn't changed. Their willingness to come to a clinical trial site on a regular basis during stay at home orders is limited because of that. And also the -- some of the centers, especially centers that are part of major healthcare facilities in some of these cities are also reluctant to undertake additional obligations like monitoring patients and so forth when they are focused on other things; so for both of those reasons, it's quite understandable. But as the pandemic has nodded [ph] substantial impact in some countries, say Germany, for example; they'll have to be back to focusing and patients will be back to visit the clinic looking for potential therapies. And as part of that, we'll consider enrolling in our trial. But we're following that very carefully, all the centers are places where there are patients, we know they have patients that are potential patients for our clinical trial. Wolfgang, anything to -- anything further than that?

Yes, maybe just to add; it is such that all of these sites have an open eye on who might qualify for that study before they even screen the patient. Meaning, they have a list of names that they know they have AIHA, some of them might qualify now, some of them they observe for a while until the haemoglobin goes down. So that list of names exist for most of the sites, and once things normalize and we say, well let's continue enrolling; you can reach out through these patients, and then put them in real screening and see if they qualify for enrollment and randomization. So, there is activity ongoing.

Okay, thank you. And my last question here is, last quarter you listed some potential indications you might look at fostamatinib and beyond chronic ITP and Warm AIHA. Have your thoughts changed here at all or is the same potential list of indications what you're considering at this time? Thank you.

I think it's a similar list with the addition of ARDS and COVID ARDS specifically or COVID pneumonia, more broadly. That obviously was not something that a quarter ago we were thinking about, and now it's risen quite quickly, as you have surmised, in terms of our level of interest and we're looking at that very carefully.

Okay, thank you.

Great, Kristen. Thank you.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Raul Rodriguez for any additional closing comments.

Well, thank you for your interest. These are times that I think are extraordinary. Never have we gone through such a period of time, and -- but I have to say, I'm incredibly impressed and delighted to be part of an organization that worked so diligently to continue their work, whether it's at home, whether it's out in the field, and on virtual calls. It's been very impressive how quickly and thoughtfully our staff has made that transition. And I think a tribute to the dedication to the goals that we have to provide the product to our patients, to provide them additional product opportunities to treat their illnesses, AIHA, COVID ARDS. We will continue with that effort and make sure that we continue to make progress every single week whether it's in our living rooms, our bedrooms, our homes, or back in the office, I hope soon or in the labs. So, thank you for your support. And look forward to providing further updates. Take care.

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