Xeris Biopharma Holdings, Inc. (XERS) Q3 2021 Earnings Report, Transcript and Summary

Welcome to the Xeris Biopharma Third Quarter 2021 Financial Results Call. My name is Ruby and I will be your moderator for today’s call. [Operator Instructions] I will now hand over to your host, Allison Wey, Senior Vice President of Investor Relations and Corporate Communications to begin. Allison, please go ahead.

Thank you, Ruby. Good morning. And welcome to Xeris’ third quarter 2021 financial results and corporate update conference call and webcast. A press release with the company’s third quarter financial results was issued earlier this morning and can be found on our website. We are joined this morning by Paul Edick, Chairman and CEO; and Steve Pieper, our CFO. Paul will provide opening remarks, Steve will provide details on our financial results and then we will open up the call for Q&A. We will also be taking questions from the chat function of the webcast portal. Before we begin, I would like to remind you that this call will contain forward-looking statements concerning the impact of COVID-19 on Xeris’ business practices, Xeris’ future expectations, plans, prospects, clinical approvals, commercialization, corporate strategy and performance, which constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including the effect of uncertainties related to the COVID-19 pandemic on U.S. and global markets, Xeris’ business, financial condition, operations, clinical trials and third-party suppliers and manufacturers. Other risk factors include those discussed in our filings with the SEC. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. I’d like to turn the call over to Paul.

Thanks, Allison. Good morning, everybody listening today. Let me start by welcoming you all to our first call as Xeris Biopharma as a result of the overwhelming support and approval of shareholders of both Xeris Pharmaceutical and Strongbridge Biopharma, we are now Xeris Biopharma, operating as one commercially focused biopharmaceutical company with a very compelling value proposition. For context, I’d like to spend a couple minutes talking about the profile of the new company. We have a very diversified revenue base. Our current commercial assets, Gvoke and Keveyis give us a rapidly growing presence in large addressable markets that already established strong revenue base has the potential to generate double-digit revenue growth over the next several years. With the additional opportunity for potential rapid launch of Recorlev in the first quarter of 2022 if approved by the FDA, leveraging our experienced endocrinology-focused commercial infrastructure. We also have a specialized commercial platform in a robust endocrinology and rare disease-focused infrastructure, including a fully operational patient and provider support teams trying to bring benefits of the company’s products to a wider range of patients with unmet needs. We also have a robust pipeline. In addition to Recorlev, which is filed and under review by the FDA for a relatively small and young company, Xeris has an extensive pipeline of development programs. We have the opportunity to extend current marketed products into important new indications and uses, as well as bringing new products forward using our formulation technology platforms in support of long-term product developments and commercial success. Importantly, we are also in a very strong financial position. We have forecasted year end 2021 cash of approximately $100 million including cash equivalents and investments, we will realize $50 million in pre-tax synergies by the end of 2022 from the Strongbridge acquisition resulting from immediate cost savings, cost avoidance including public company general administrative and other infrastructure cost, most notably within the commercial functions and we have an experienced management team. This is a unique reporting quarter for us. We are required to report third quarter Xeris standalone financials, yet the acquisition of Strongbridge was completed just one week into Q4. So, to evaluate our performance more accurately, we will provide some pro forma results as well as full year 2021 guidance on key metrics. With that, I am happy to say we had a very strong third quarter, pro forma net sales of Gvoke and Keveyis was $22.5 million, $11 million and $11.5 million respectively. That is combined – that is a combined growth of 19% compared to the second quarter of 2021 with Gvoke up 25% versus the second quarter and Keveyis up 15% quarter-over-quarter. Other highlights of the quarter and to-date include, a very healthy cash position as I stated. Xeris had cash of $93 million at the end of Q3, plus an additional $38 million coming into the company with the close of the acquisition. Steve will go into that in a little bit more detail later. The FDA approvals of our sNDA for the Gvoke Kit, which will be available in Q1 of 2022, as well as an extension of the room temperature shelf-life of the Gvoke 1mg HypoPen and Prefilled Syringe from 24 months to 30 months. We announced the Ogluo EU partnership with Tetris Pharma and they are on track to launch in the UK before year end. The initiation and completed enrollment of our potential once-weekly subcutaneous injection for levothyroxine Phase 1 study, the collaboration with Merck using our XeriJect technology, the achievement of revenue milestones allowing for the extension of our interest only period on our debt facility, which has a $17 million positive impact on our near-term cash, once again, Steve will go into details and importantly, the completed integration of the Strongbridge acquisition. Going a little deeper into the specifics, I’ll start with Gvoke. We continue to see strong demand for Gvoke quarter-over-quarter in terms of prescription and market growth. We owe that to a few factors. Our product, we have – we believe with the best product. Our message, Gvoke for all insulin taking patients which is beginning to – with prescribers; our extended sales footprint that we increased in the field at the end of Q2 and supported by an increasingly impactful insight sales effort; our improving access to physician offices; and our continued excellent payer coverage with over 90% commercial coverage unrestricted. What this is all add up to commercially? Our Q3 net sales were up 25% to $11 million from Q2. Gvoke prescription growth was up 28% from Q2 topping 27,000 total prescriptions for the first time and up 93% from Q3 of 2020. The glucagon market grew 26% from the second quarter, which is a significant uptick from the 5% growth we saw earlier in the year. Gvoke’s growth continues to outpace the glucagon market and in terms of market share, Gvoke’s TRxs are up 18% - are up to 18% as of the end of October. As you know, fourth quarter glucagon market prescriptions tend to decrease from the third quarter on an annual basis. Sitting here today, based on recent prescriptions, I am comfortable saying that we can maintain or perhaps even slightly increase prescriptions in the fourth quarter over the third quarter. Let’s move on to Keveyis. The first and only FDA approved therapy for primary periodic paralysis or PPP, a severe condition. We estimate 4,000 to 5,000 people diagnosed each year with PPP. Our established rare disease commercial experience and expertise has driven revenue growth of Keveyis quarter-over-quarter and year-over-year. The third quarter 2021 revenue of $11.5 million represents an impressive 42% increase over Q3 of 2020. Year-to-date revenue of $29.9 million is a 33% increase over last year. And given the results, we believe that full year 2021 net sales will be in the range of $38 million to $40 million exceeding historical guidance of $34 million to $36 million. Let me talk briefly about our pipeline, as well. I’ll start with Recorlev. As we’ve articulated, a tremendous part of the value of the Strongbridge acquisition is the market opportunity for Recorlev and the fit with Gvoke’s existing commercial infrastructure, which we believe will drive early penetration. I’d like to give some background on the opportunity, as well. There are an estimated 25,000 Cushing’s syndrome patients diagnosed, of which an estimated 8,000 Cushing’s syndrome patients in the U.S. are being treated with prescription therapy, approximately, 3,200 of whom are not well controlled. Many of these patients are treated with unapproved generics, including ketoconazole. However, branded products approved by this CS have been gaining prescribing share in the market once dominated by generics. With our established relationships in endocrinology offices and significant overlap with Gvoke, our 80 plus field reps, medical science liaisons, dedicated patient support services, reimbursement experience, we believe we can drive penetration of Recorlev and capitalize on what could be a $2 billion addressable market. Where are we today with Recorlev? The NDA is currently under review with the FDA with a PDUFA date of January 1, 2022. We are in full pre-commercialization preparation mode in anticipation for a first quarter launch. And in terms of our earlier stage programs, our potential for once-weekly subcutaneous levothyroxine, one of the most prescribed drugs in the U.S., we initiated and successfully dosed all participants in a Phase 1 study of our novel formulation of levothyroxine to evaluate the pharmacokinetics, safety and tolerability and as I mentioned, the potential for weekly dosing in a subcutaneous injection for the treatment of hypothyroidism. We expect results from the Phase 1 study in the first half of 2022, which will give us an indication of, whether or not we can achieve that once-weekly dosing. For Exercise-induced Hypoglycemia, we will submit an IND in the first quarter of 2022, and upon clearance, generate more clinical data addressing the management of Exercise-induced Hypoglycemia in 2022. In October, we announced the collaboration agreement with Merck, with an option to license our sub suspension-based formulation technology, XeriJect, for use with undisclosed monoclonal antibodies for the purpose of engineering ultra-high concentration, ready-to-use formulations. As you would expect, we are quite excited to be working closely with Merck on this project. As I stated earlier in my remarks, we’d like to provide some guidance to some important metrics you can better understand the value of our performance. For the full year 2021, we expect $76 million to $80 million in net sales, of which $38 million to $40 million is from Keveyis. We also expect to end the year with an impressive cash position of approximately $100 million. And this is after $40 million of one-time deal-related expenses. When we report fourth quarter and full year 2021 in early March, we expect to be providing full year net sales for our combined commercial products and not on an individual product basis. Now I will turn the call over to Steve to review details of our financial performance.

Thanks, Paul. Good morning, everyone. My remarks this morning will focus on a few of the key financial results, the details of which are in the press release issued this morning and our Form 10-Q that will be filed later today. Due to the timing of the closing of the Strongbridge Biopharma acquisition, which as a reminder was October 5th, the financial results I am covering today reflect financials for Xeris on a pre-acquisition basis as of September 30, 2021. I will however comment on net sales as it relates to pro forma financial results and additionally, we will provide year-end guidance for net sales and cash. We continue to build momentum in the third quarter for Gvoke and reported another strong quarter from a net sales perspective reporting $11 million in Gvoke net sales in the third quarter, which is up approximately 25% from the second quarter of 2021, and up approximately 17% from the third quarter of 2020, which as a reminder was the quarter we initially launched the Gvoke HypoPen. The $11 million of Gvoke net sales in the third quarter was driven by strong underlying patient demand as evidenced by over 27,000 Gvoke prescriptions generated in the third quarter, a new record high for Gvoke. Gvoke net sales on a year-to-date basis through September 30, is $27.9 million, which is an increase of approximately 114% versus the nine months ended September 30, 2020. This is again being driven by continued growth of underlying patient demand for Gvoke. Keveyis had another outstanding quarter in net sales with $11.5 million in the third quarter, representing a 42% increase in net sales versus the third quarter of 2020. Keveyis net sales on a year-to-date basis through September 30 was $29.9 million, which is an increase of approximately 33% versus the same period last year. From a pro forma perspective, with the inclusion of both Keveyis and Gvoke, third quarter net sales was $22.5 million. This represents a 29% growth versus the third quarter of 2020. Pro forma year-to-date product net sales through September 30 were $57.8 million, which includes both Gvoke and Keveyis and represents 63% growth versus the nine months ended September 30, 2020. As we look ahead, and as Paul mentioned, we expect that Keveyis will exceed the high end of historical guidance provided for full year net sales estimates of $34 million to $36 million and Xeris is estimating a new range of $38 million to $40 million for full year 2021. On a combined basis, Xeris with both Gvoke and Keveyis will generate $76 million to $80 million in net sales for the full year 2021. As a reminder, my comments on cost of goods sold, operating expense and net loss results through September 30, 2021 are on a standalone pre-acquisition basis for Xeris. As we move down the P&L, cost of goods sold was $3.2 million for the three months ended September 30, 2021, an increase of $0.4 million compared to the three months ended September 30, 2020. Cost of goods sold was $8.4 million for the nine months ended September 30, 2021, an increase of $2.5 million, compared to the nine months ended September 30, 2020, which included primarily standard cost for products sold. Turning our attention to expenses. Total operating expenses increased by approximately $11.8 million in the third quarter 2021 to $32.21 million, compared to $20.4 million for the same period in 2020. This increase was primarily driven by increases to selling, general and administrative expenses of $10.1 million, which includes approximately $2.3 million in cost related to the Strongbridge acquisition. Year-to-date, 2021 operating expenses were $86.6 million, which represents an increase of $15.1 million versus the nine months ended September 30, 2020. This increase is driven entirely by increases in SG&A expenses, which includes approximately $6.2 million in cost related to the Strongbridge acquisition. R&D expenses for the three months ended September 30, 2021 were $5.7 million, compared to $3.9 million for the same period in 2020. The increase was primarily driven by higher expenses, associated with our clinical trials and pharmaceutical process development costs. R&D expenses for the nine months ended September 30, 2021 were $15.1 million compared to $15.8 million for the same period ended September 30, 2020. The decrease was primarily driven by a reduction in personnel-related cost of $1.2 million due to lower headcount and declining clinical trial expense of $0.7 million, partially offset by higher pharmaceutical process development cost of $1.3 million. SG&A expenses for the three months ended September 30, 2021 were $26.5 million, compared to $16.5 million for the same period in 2020. The increase of $10 million was primarily driven by an increase of $6.5 million in personnel-related cost due to mainly to an increase in sales force headcount and the aforementioned Strongbridge acquisition-related expenses of $2.3 million and an increase in marketing and selling expenses of $2 million. SG&A expenses for the nine months ended September 30, 2021 were $71.5 million, compared to $55.7 million for the same period in 2020. The increase was primarily driven by an increase of $10 million in personnel-related cost due primarily to an increase in sales force headcount and Strongbridge acquisition-related expenses of $6.2 million, partially offset by lower marketing and selling expenses of $2 million due to a decrease in advertising. Looking ahead from an operating expense perspective, as I mentioned in my remarks last quarter, we expect that we will continue to incur costs related to the Strongbridge acquisition, a majority of which are expected to hit in the fourth quarter. As a reminder, the acquisition closed on October 5th and there were one-time expenses triggered by the actual closing of the deal for both Xeris and Strongbridge. However, we believe that the $50 million in deal-related synergies will be reflected in our operating expenses and will be fully realized by the end of 2022. Additionally, our operating expenses will include in the future cost for preparing for the potential launch of Recorlev in Q1and supporting the continued growth of both Gvoke and Keveyis. From a debt perspective, at the end of the third quarter, we had debt totaling $90.7 million, consisting of $47.2 million of convertible debt and $43.5 million under our senior credit facility with Oxford and SVB. As we announced earlier today in our press release, due to the continued strong performance of both Gvoke and Keveyis, Xeris has achieved a full 12 month interest-only extension on our debt facility with Oxford and Silicon Valley Bank, which pushes out principal repayment to start no early than Q1 2023 and avoids approximately $17.4 million in principal payments in 2022. From a net loss perspective, for the three months ended September 30, 2021, Xeris reported a net loss of $26 million or $0.39 per share and a net loss of $72 million or $1.11 per share for the nine months ended September 30, 2021. The net loss and per share figures include transaction-related expenses of $2.3 million or $0.03 per share and $6.2 million or $0.10 per share for the three and nine months ended September 30, 2021 respectively. As of September 30, 2021, Xeris had total cash, cash equivalents and investments of $93 million, compared to $133.8 million at December 31, 2020. Xeris received an additional $38 million from Strongbridge at the close of acquisition on October 5, putting Xeris in a healthy cash position. Xeris anticipates yearend cash, cash equivalents and investments of approximately $100 million. This estimate is inclusive of one-time costs for both companies of approximately $40 million including the extinguishment of debt by Strongbridge. As a reminder, Strongbridge paid off its remaining debt facility with Avenue Venture Opportunities Fund upon close of the transaction. This pay-off amount, including fees totaled approximately $11 million. Though we will continue to incur acquisition-related cost in 2022, including severance, a majority of the cash impact from the transaction-related cost will be realized by this year end. As we have mentioned, we expect that our 2021 yearend cash, cash equivalents and investments to be approximately $100 million, we project the rate of cash burn to improve over the course of 2022 as our revenue base continues to grow and generate cash. Let me remind you that we will be launching Recorlev in Q1, if approved. However, as we affirmed in our press release this morning, the company believes that its current cash resources, including cash, cash equivalents, and investments are sufficient to sustain operations through at least the end of 2022. The revenue growth from our current marketed and potential future marketed products will ultimately determine when we will be cash flow breakeven. To summarize, we had a great quarter in terms of net sales for both Gvoke and Keveyis and we anticipate both products will finish 2021 on a high note. We have integrated Strongbridge quickly into Xeris and are already realizing the synergies we committed to delivering and the full effect of those synergies will be fully realized by the end of 2022. We are in a solid position from a cash perspective and further strengthen our cash position with deferring over $17 million in principal repayments for the Oxford SVB debt into 2023 at the earliest. We believe our current cash position, along with the cash generated from two growing commercial products in Gvoke and Keveyis and the potential cash generated from Recorlev if approved will allow us to continue to fund the commercial infrastructure necessary to drive Gvoke, Keveyis and Recorlev, if approved, fund our R&D pipeline and lastly, fund our overall corporate infrastructure necessary to effectively run a public company. I will now turn the call back to Paul.

Thanks, Steve. As you heard, Xeris fundamentals have never been stronger. We have two growing products. We are generating revenue with both Gvoke and Keveyis. They are both in the large addressable markets. Our guidance for yearend 2021 net sales is improved. We also have some near-term catalyst for the UK launch of Ogluo at the end of the year; potential for Recorlev approval early in the first quarter; the availability of the Gvoke kit in the first quarter; data from the Phase 1 study of levothyroxine in the first half of next year and additional work on the EIH program; and we are in a healthy cash position. So, with that, I will turn it over to the operator for any questions that we may have from people listening in. Thank you very much

Thank you. [Operator Instructions] Our first question is from David Amsellem of Piper Sandler. David, your line is now open. Please go ahead.

Hey, thanks. So, I have a few, starting with Gvoke. Paul, I may have missed this. But I just wanted to get your thoughts on how you think the market for the glucagon rescue market might accelerate if it accelerates at all as we move out of the pandemic. Are you looking for some appreciable uptick? And just help us think about dynamics for 2022. And then, secondly, can you comment on the potential impacts that you are seeing if any on Zegalogue, Zealand product? And is that a factor in any way? Then, on Recorlev, can you just talk to how you are thinking about access in the payer landscape? Because that lost on May that ketoconazole the racemic mixtures used with some frequency. So, how are you looking at tackling the payer landscape there? And then, the last question is on levothyroxine. I know, it’s early, but do you have a sense of your timeline to a potential NDA filing on that asset and what you might need to do for registration quality work? Thanks.

Thanks, David. That’s a whole bunch in there. So, let me take up one at a time. The market acceleration for glucagon, if you recall, pre-pandemic with just Lilly and Xeris out there, the market was accelerating. It was growing at 25 plus percent, high 20s, almost 30%. We would have anticipated and we did anticipate that by this summer, we’d be back to that kind of growth. Unfortunately, the delta variant sort of got in the way and we had kind of resurgence and doctors offices didn’t really open up and things haven’t. But if you look at the recent growth and you look at what’s going on in the market, of late, we are starting to see some acceleration and we think that’s going to continue into the fourth quarter. 2022, all things being considered. And if we kind of move a little bit beyond the pandemic, we expect the market to continue to grow and we think we are going to be part of driving that growth. The important thing we are focused on in the short-term is gaining share. As I said in my remarks, we are up to over 18% share and that’s our focus right now is to continue to penetrate gain share, gain share faster than the other companies and be in a position when the market does start to open up and physicians do start to change how they are behaving with patients we’ll be the beneficiary of that growth. So, exactly what that’s going to look like in 2022. We are not projecting yet, but we do expect it to kind of come back. In terms of Zealand, that product has not been a factor in the marketplace at all yet. So, we are not at all concerned about that. As you know, it requires cold chain refrigeration until once it’s taken out of the refrigeration it only has one year of shelf life. So, not a big impact. Payer access for Recorlev, what we are seeing with the new branded non-generic products is, payer access is pretty good. Our market research tells us that payers are going to be willing to pay for a better product will see what side-effects. And what payers usually put in place is they’ll put a step through. Most people have – will have already stepped through keynotes. So, will it be easy? Probably not, but we are very confident we will get payer support for Recorlev. And then, from a levothyroxine perspective, we don’t have a timeline. As you would expect, this first study, the Phase 1 study is to understand do we have a product. Do we have a once-weekly subcutaneous injection of levothyroxine, that’s what this study is designed to show us. Can we achieve that goal and if we achieve that goal, within a dose range that’s acceptable, then we’ll move aggressively into further development and we’ll talk about a timeline at that point.

Okay. And thanks. I know there was a lot there, but that was helpful. Thanks.

You are welcome.

Our next question is from Oren Livnat of H.C. Wainwright. Your line is now open. Please go ahead.

Thank you for taking the questions. On Recorlev coming up, can you just remind us what are your base case assumptions around labeling, particularly with regards to hepatotoxicity and whether you expect class sort of ketoconazole like labeling or what differentiation you would expect there? And to what extent that even matters commercially in your view given that one is approved that yours will be approved and ketoconazole isn’t? And then, just on Gvoke, I know Dave asked about the impact on Zegalogue. I am just curious what you are seeing and I know you are gaining share. So, it’s something I don’t know a huge problem, but what do you think with regards to generic emergency kit availability and to what extent that is affecting physician or patient access to Gvoke with regards to utilization management? Are there any changes out there and do you expect that to be a headwind going forward? And I’d ask you an apology. Go from there.

Okay. We haven’t even started labeling negotiations. So I am not going to start get into the label on Recorlev. At the end of the day, I really don’t think at the end of the day it’s going to matter. You’ve had non-approved products out there for a long time that are being used broadly. We are going to have a differentiated product that we are not worried about that. In terms of generic glucagon, no impact on Gvoke that we can assess. The change in the marketplace has been from the kits, the branded kits to the generic kits. We are not seeing any impact on overall market or on our ability to gain share.

Okay. And then, just on Keveyis, I know it’s a transitional quarter. It looks surprisingly good. I think you took a price increase, or they good took a price increase going into 4Q and the guidance implies sort of, I guess, flat to even down in fourth quarter. So, could you just remind us, is that just a lumpy product given the high price point we are at there or are there other moving parts? And just longer term, I know a big part of the potential upside to your deal with Strongbridge there was potential listing of additional IP on that product. So I am just wondering if there is any update on that front. How optimistic are you that there will be anything there listable in the orange book or issued in general to potentially extend the exclusivity. And just remind us what your base case assumptions are for the 2022 and beyond trajectory for Keveyis? Thanks.

Yes. So, we are not giving 2022 guidance on Keveyis yet. The fourth quarter or the third quarter I think was mostly patients growth. If price increase didn’t really hit until late in the quarter if not at the beginning of the fourth quarter, so really no impact there. We think it’s going to continue to grow and grow nicely. Our focus is patient acquisition and then persistence. In terms of IP, there is no update there. We are still prosecuting and appealing and going through the process with the Patent Examiner’s Office. We think there is an opportunity there. That said, ultra-rare products, experienced generics, probably about 50% of the time. So, and this particular product is sold only through one specialty pharmacy in the U.S. and the critical aspect of this drug the patient support is you really have to support the patients in terms of therapeutic initiation or initiation of therapy. You really have to support them in terms of their – in the first few months in terms of getting stabilized and you’ve got to provide support to have consistency and persistence of therapeutic management. So, that’s a total order for any potential generic company. So, whatever the total business is, it would decline very rapidly in a generic world, which I think is less attractive at the end of the day, not to say it won’t happen, but we don’t see that being a high likelihood at this point.

Alright. I appreciate it. Thanks much.

You are welcome.

Our next question is from David Steinberg of Jefferies. Your line is now open. Please go ahead.

Hey guys. This is [Indiscernible] on for David. Thanks for taking the question. Two questions here. The first on, it looks like you guys recently outlicensed to Tetris for the EU. It looks like you are still on track to launch before the yearend. Could you just tell us a little bit more about the terms of the agreement? When you expect to start receiving milestone and/or royalty payments? And then just more broadly, you plan to look for more partners for other areas. And then, the second question just on XeriJect, you recently announced the collaboration agreement with Merck, obviously, a major pharmaceutical company. Can you just describe their interest in the technology and maybe tell us a bit more about XeriJect?

Okay. In terms of Ogluo and Tetris, the – we haven’t gone into specifics of exactly what the different pieces are. But there are launch milestones for the UK and key countries in the EU. There is royalty on sales for the UK and the EU. And there are sales achievement milestones that we can get. I think what we reported previously is approximately, if all goes well in upfronts and milestones, we could realize in the neighborhood of $70 million, $71 million over the next couple of years. And then, in terms of other partners, yes, we are fielding inquiries from numerous companies for other territories around the world. We are interested in licensing. Our liquid ready to use glucagon anywhere in the world that we can, but we are not in any advance discussions on any other territories as of yet. And then, the Merck collaboration, our XeriJect technology is suspension-based injectable technology. So, if you got a product, lot of the monoclonal antibodies require IV administration. So, sitting in a chair with an IV over some period of time, getting an infusion in order to get the product where it needs to be. What we believe and what we think we are demonstrating and what companies are interested in is we can take that monoclonal antibody, suspend it in our system and put it in a prefilled syringe for injection where the product reconstitutes using bodily fluids instead of in an IV bag. Four companies that are in that business, it could be a game changer and we can put very large molecules into that system and inject them in a very unique way that frankly other companies can’t do.

Awesome. Thanks very much guys. That’s it for me.

Anything else?

[Operator Instructions] Our next question is from Alexandre Bouilloux of Mizuho. Your line is now open. Please go ahead.

Hi, good morning. Thanks for taking my questions. Just a follow-up question on the collaboration with Merck, could you give us a sense for the time frame of when this license agreement could be exercised?

I can’t, not because I won’t but because the first piece of the collaboration is the feasibility piece which requires that we formulate the product in our suspension that we put it up on stability and that we achieve a certain level of stability over some period of time. So that I think historically that evaluation period has been anywhere from a year to 18 months. But they all vary depending on the product and the process.

Okay. Great. Thank you. That’s helpful. And then, just my second question on the peak sales opportunities for Gvoke. Just given the scrip’s data, you talked about it a little bit earlier that COVID environment, the launch curve so far. Has anything changed with respect to your view of what this product can achieve commercially at peak?

Not at all. We are bullish on Gvoke. At the end of the day, we say it all the time, I think the other companies say the same thing. There is over six million people who are on insulin. Insulin utilization is a risk factor for severe low blood sugar. If you are on insulin, you should have a ready-to-use glucagon of some form available, just in case. We think the Gvoke HypoPen is the best option. So we think there is a tremendous opportunity. We, like, many other companies have not had the ability to take advantage of that opportunity for the last 18 months to two years, because we have gone in the middle of a pandemic. As people – its effect, it should affect, but we are bullish as we’ve ever been.

Great. Thank you. Thanks for taking my questions.

Our next question is from Kelley Prince of Close Concerns. Your line is now open. Please go ahead.

Good morning and congratulations on all the progress. It’s really cool to see. I had a related question on the market size, because I was just assuming – I was assuming the six million people and I mean, I would like to also assume the people who are on the sulfonylurea, that does on the – all of the sulfonylurea, so it’s also called hypoglycemia, because we know that many of the 230,000 people that go to hospital in the U.S. every year for their hypoglycemia to take sulfonylurea. So, one is, is there any progress about the indication and especially, as you start talking to more doctors and all of that and by getting payments for that. So that’s one. But if we assume that no one would ever use this, which is the hope and given the massive advantage that this is last for two years. Is it reasonable to think that the market even just using this self-papers which is on the lower side? And that market appears to people who may buy it every two years and it’s none of the people with sulfonylurea is – and the market is certainly approaching, well, well, well, well over the – like the – I don’t know, I guess the amount of savings, rather it would be well, well over you would think and the investment required to get this full. But people would be well over what is being spent in ambulance visits, ER visits and hospital stays. And I mean, I had some estimates on ambulance, ER visits and hospital stays just to kind of understand what the costs actually are in this U.S. system for each of those because is it pretty different. But I don’t know it’s – I don’t know if its possible to get any help on those expense. But just wondered if this could we will have a linear way to think about it?

Yes. You are absolutely correct. People on sulfonylureas are at risk as well. No question about that. We tend to focus on the 6.7 million or 6.8 million, because in and of itself, that’s a huge number. And you’ve got less than, maybe 10%, 10% to 15% of those people who are actually getting or ready to use glucagon. That’s where we got to make change and that’s our focus.

Yes.

In terms of the savings, you are absolutely correct. The data is really not available in the last couple of years, because of the change – emergency room visits for 2020, you couldn’t even go to the emergency room.

Right.

But historically, historically, anywhere from 230,000 to 275,000 show up at the emergency room every year for severe hypoglycemia. And that’s only the ones who are actually quoted as hypoglycemia. Our estimates would be higher. And there historically been up to 27,000 deaths every year from severe hypo. So, the cost implications are significant. And that’s one of the reasons we’ve had no pushback from managed care. We’ve got no pushback from payers. Anybody that even people who are on sulfonylureas, we’ve had no evidence that there has been any rejected claims for anything because the payers recognize this is a life saving medication.

And did you say, could you say that you believe that you will be able to continue to really work on being generous about the Co-pays and so forth? Because, I don’t if any of the 230,000 patients like expects this to happen to themselves, but having the generosity to patients that they don’t have to pay a co-pay? It’s just incredibly helpful.

Yes. Especially, during the pandemic, our focus was on patient access and we extend the zero dollar co-pay continually through that period. I don’t see it lasting forever. But even if we go to normal co-pay support, it would be relatively low, 20, 30 bucks, 40 bucks, so.

Yes. Well, okay, we encourage any learning that we can do in the community as multi-stakeholders to work out what does it actually takes from a policy perspective, because making it zero does make it a lot easier just in terms of people acknowledging need and so forth. And especially given all the people on sulfonylureas has to do need this who might be coming from a more disadvantaged backgrounds and so forth. But thank you very much for all you are doing. It’s just really proud to following to you.

Thanks, Kelley. We appreciate it.

Our final question is a follow-up from Oren Livnat. Your line is now open. Please go ahead.

Hey. Thanks for accommodating. I just wanted to quickly touch on, just going forward, do you expect sales of Gvoke could generally track the prescription volume as you move forward? I know – and you gave pretty encouraging guide, but it’s surprisingly positive that you expect scrips to be flat net worth than Q4, which is impressive given the seasonal contraction we expect to see in fourth quarter of the whole market. So, is it relatively predictable? There no major inventory moves to that scrips to translate to sales in the fourth quarter and beyond at a given value per scrip?

Yes, I believe so, Oren. I think we’ve seen the wholesaler adjustments to inventory as we’ve crossed the one year mark. They’ve now got enough history that their inventory management is getting a lot, lot tighter. So, we think that gap between prescriptions and units is got to narrow somewhat.

Alright. That’s helpful. Thanks. That’s it for me.

We have no further telephone questions. So I will hand back to Paul Edick for closing remarks.

Thank you very much. Thank you for the questions. That was fun. And our message is, we have a healthy growing attractive company. And we appreciate everybody’s time and attention today. Thank you very much.

This concludes today’s call. Thank you for joining. You may now disconnect your lines.