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Item 7.01
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Regulation FD Disclosure.
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The Company expects
quarter-to-quarter
growth in prescriptions
for QBREXZA
™
(glycopyrronium) cloth over the course of 2019, with such growth accelerating in the second half of the year based on the expected effects of the Company’s branded
direct-to-consumer
advertising campaign.
Based on changes to
the Company’s patient financial assistance program that became effective April 1, 2019, the Company expects its
gross-to-net
discount to improve from 76% in
the first quarter of 2019 to 45% to 55% for the second quarter of 2019, with further improvement in the second half of the year to approximately 40%. Based on these expected improvements in the
gross-to-net
discount, the Company expects that the growth in QBREXZA net product sales will exceed the growth in prescriptions. In the second half of the year, the Company expects QBREXZA gross margins of
80% to 90%.
The Company received a $30 million option payment in the first quarter of 2019 in connection with the option and license
agreement entered into with Almirall, S.A. (“Almirall”) in February 2019, pursuant to which Almirall has an option to exclusively license rights to develop lebrikizumab for the treatment or prevention of dermatology indications, including
but not limited to atopic dermatitis, and commercialize lebrikizumab for the treatment or prevention of all indications in Europe (the “Almirall Agreement”). The accounting for the option payment will depend on Almirall’s upcoming
decision on whether to exercise its option, which the Company expects
mid-year.
If Almirall exercises its option, the Company expects that a portion of the $30 million option payment and future payments
to the Company under the Almirall Agreement will be recognized immediately as collaboration and license revenue and a portion of such payments recognized ratably over time. If Almirall does not exercise its option, the Company would recognize the
$30 million option payment as collaboration and license revenue in the quarter in which the Company was notified of such decision or the expiration of the option.
The Company expects aggregate research and development (“R&D”) expenses and sales, general and administrative
(“SG&A”) expenses for 2019 of approximately $295 million to $315 million, including estimated stock-based compensation expense of approximately $35 million, with R&D expenses representing approximately
one-third
of the estimated amount and SG&A expenses representing approximately
two-thirds
of the estimated amount. SG&A expenses and the total of R&D and SG&A
expenses are expected to peak in the second quarter of 2019 and R&D expenses are expected to increase over the course of the year as the Company prepares for the initiation of its lebrikizumab Phase 3 program by the end of the year. The Company
also expects an additional $20 million acquired
in-process
R&D expense in 2019, representing an anticipated milestone payment due in connection with the initiation of its lebrikizumab Phase 3 trials
pursuant to the terms of its licensing agreement with F.
Hoffmann-La
Roche Ltd and Genentech, Inc.
The Company believes that its existing cash and investments on hand as of March 31, 2019 and either (1) the $90.0 million
available under its credit agreement with Athyrium Opportunities III Acquisition LP (“Athyrium”), assuming that the Company meets the net revenues covenant and subject to other covenants and closing conditions set forth in the credit
agreement or, (2) if Almirall exercises its option to exclusively license the rights to lebrikizumab in Europe, the $50 million the Company would receive in connection with the option exercise and the $30 million the Company would
receive upon the Company’s initiation of its lebrikizumab Phase 3 trials, are sufficient to meet its anticipated cash requirements into the first half of 2021 and to enable the Company to fund its planned Phase 3 clinical program for
lebrikizumab through receipt of topline results.
Forward-Looking Statements
The information in this Current Report on Form 8-K contains forward-looking statements and information within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those
sections. This Current Report on Form 8-K contains forward-looking statements that involve substantial risks and uncertainties, including statements with respect to anticipated growth in prescriptions for QBREXZA and the effect of the Company’s
branded direct-to-consumer advertising campaign; expected improvements in the gross-to-net discount and growth in net product sales and gross margins; the anticipated timing of Almirall’s upcoming decision on whether to exercise its option and
the expected accounting treatment associated with that decision; estimates and anticipated trends regarding R&D, SG&A and stock-based compensation expenses for 2019; the anticipated initiation of the Company’s lebrikizumab Phase 3
program, the anticipated timing thereof and the expected acquired in-process R&D expense in connection therewith; and the belief that the Company’s cash and investments on hand as of March 31, 2019 and either the funds available under the
Athyrium credit agreement or the amounts that would be received if Almirall exercises its option to exclusively license the rights to lebrikizumab in Europe are sufficient to meet its anticipated cash requirements into the first half of 2021 and to
enable the Company to fund its planned Phase 3 clinical program for lebrikizumab through receipt of topline results. These statements deal with future events and involve known and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as those
relating to the effectiveness of the Company’s branded direct-to-consumer campaigns; the Company’s dependence on third-party clinical research organizations, manufacturers, suppliers and distributors; the timing, costs, design,
implementation and outcomes of the Company’s clinical trials; the outcomes of future meetings with regulatory agencies; the Company’s ability to develop and maintain collaborations and license products and intellectual property; the
Company’s ability to attract and retain key employees; the Company’s ability to obtain necessary additional capital; market acceptance of the Company’s current and future products; the impact of competitive products and therapies; the
Company’s ability to manage the growth and complexity of its organization; the Company’s ability to maintain, protect and enhance its intellectual property; and the Company’s ability to continue to stay in compliance with its material
contractual obligations, applicable laws and regulations. You should refer to the section entitled “Risk Factors” set forth in the Company’s Annual Report on Form 10-K, the Company’s Quarterly Reports on Form 10-Q and other
filings the Company makes with the Securities and Exchange Commission from time to time for a discussion of important factors that may cause actual results to differ materially from those expressed or implied by the Company’s
forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this news release. The Company undertakes no obligation to publicly update any forward-looking statements or reasons why actual results
might differ, whether as a result of new information, future events or otherwise, except as required by law.