Halozyme Therapeutics, Inc. Q1 FY2020 Earnings Call

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

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

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

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

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

We'll take our first question from Ken Cacciatore of Cowen and Company.

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

Great. Ken, I'll address your questions in the order you asked. With XYOSTED, the largest share of the market to date consists of people receiving testosterone via intramuscular injections, which accounts for over 70% of the market so far. We lack specific data on how many patients actually go to the office versus those who self-inject. However, we know there is a distinction; some patients prefer going to the doctor's office, while others are taught by their doctors to self-administer. When a representative is in the field, they can identify which doctors are performing intramuscular injections and consequently find out which offices are treating patients in that manner. Each representative targets those specific doctors. The same principle applies to physicians who administer implantable Testopels, the testosterone product that is implanted every six months. Representatives focus their messaging on those specific doctors regarding XYOSTED being easy to use at home. We have also observed a shift where doctors who previously administered injections or used implantable testosterone pellets are now switching their practice. This targeted messaging appears effective and is likely contributing to an influx of new patients, especially since many individuals are less inclined to visit doctors nowadays. To acquire new patients, it’s often easiest to target those who are transitioning from office injections or implantable testosterone pellets. While we cannot provide an exact figure on how many doctors perform these procedures, it is undoubtedly a significant segment of the market, and that remains our focus. Moving on to your question about Forteo, our device is identical to the Forteo device. User studies have already demonstrated its ease of use, with no differences noted between patients familiar with Forteo and those who are not. Therefore, no additional information is necessary for the patient interface for our Forteo generic product with Teva. The application is currently under review. Last year, guidelines for complicated generic products were issued, which apply to Forteo as it is classified as a complex generic. We hope to receive approval for the product this year as suggested by Teva, and there are no outstanding issues on our end. We anticipate the launch happening soon. Regarding your third question about guidance, I will pass that to Fred, who can explain what we are observing in our business and clarify whether AMAG is included in our guidance and other related details.

Thanks, Bob. Ken, when we reviewed the guidance issue, we considered several factors, including those driving our year-over-year growth. The two main contributors to our revenue in 2019 compared to our guidance for 2020 were continued growth in Epi and the trajectory we observed for XYOSTED. As Bob mentioned earlier in the call, there has been a slowdown in new patient starts. Since patients are unable to visit offices for blood draws, it is expected that this will lead to a reduction in new patient starts. The XYOSTED process requires a constant influx of new patients as individuals typically remain on the medication for several months before discontinuing. Therefore, we approached this situation with caution, as we are uncertain how long it will take before doctors' offices reopen to facilitate new patient starts. Regarding Epi, we are also being cautious since it was the second largest driver of our revenue guidance increase year-over-year. We hope to see continued growth for Epi, both for Teva and for us, but we needed to factor in the possibility of a slowdown. Finally, concerning Makena, our guidance indicated that the upper end included Makena for the full year, while the lower end assumed it would only be partially included. Earlier in April, AMAG announced they were experiencing a slowdown in patients visiting their offices. Although we don’t have specific numbers to assess the impact on their forecast, which would subsequently affect ours, we adopted a conservative approach looking at the potential slowdown in Makena for the entire year of 2020. Considering all these factors, we decided it was prudent to withdraw the guidance for now and will reassess once the pandemic situation improves.

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

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

Yes, regarding distributors, we did not see any stocking of our products, which seems to be a trend across the industry. They generally maintain about 20 days of supply in their warehouses and may have chosen not to spend cash during this uncertain time. Consequently, our inventory levels at distributors did not grow. With respect to patients, XYOSTED has performed well during the pandemic, with our refills at their highest and continuing strong, while prescription trends remain robust. However, as Fred mentioned, we are observing a decline in new patient starts, which is the ongoing growth we anticipated; the timing and impact of new patients returning to doctors' offices remain uncertain. Even when doctors reopen, patients may be hesitant to visit for testosterone treatments or related products. This uncertainty is why we approach guidance conservatively, as we are unsure about the long-term implications for our business in the near term. Overall, refills are strong, and there has been no stockpiling. In the case of XYOSTED, it’s a Schedule III drug, meaning patients cannot stockpile it, and many states restrict supplies to one or three months. So, stockpiling isn't occurring. Some patients may be more disciplined in continuing their medications while sheltering at home, which could have positively influenced XYOSTED and our other products. Nevertheless, we haven't seen any hoarding of testosterone, OTREXUP, or Epi either.

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

We were fortunate to have a virtual platform in place at the end of last year for representatives we hired to cover areas where we didn't have a physical presence. We were able to beta test this platform, ensuring that they could access samples, copay cards, and operate effectively. This facilitated a smooth and early transition for us, especially compared to larger companies that have faced challenges with virtual detailing. This effectiveness helped maintain the growth trajectory of our products, XYOSTED and OTREXUP. It clearly protected our business. However, one factor unrelated to the platform is that patients were not visiting doctor's offices, making it difficult to predict future effectiveness once they do return. If we see patients going back and we can still achieve new patient growth through virtual detailing, it may significantly impact both our approach and how doctors interact with representatives. It’s still early to make conclusions, but I believe that when offices reopen, doctors will still prefer virtual detailing to prioritize patients who haven't been able to attend their appointments. Their practices have also suffered, and they will focus on getting those patients back rather than spending much time with reps. Therefore, the virtual platform will need to continue for the foreseeable future. We expect a mix: offices that want to see reps will do so and aim to bring in new patients; for those that prefer not to see reps, we will continue with virtual detailing. Overall, we are well prepared and will see how the future unfolds, but we anticipate a mix moving forward.

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

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

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

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

So I may have missed this, but can you remind us what the gross to net has been on XYOSTED? And going forward, given the severe economic pressures due to the pandemic, do you expect to subsidize patient out-of-pocket costs even more aggressively than you already have? If so, what kind of ramifications would that have on gross to net? Looking at the bigger picture, how do you view the subsidization of out-of-pocket costs? Secondly, you've summarized this already, but let me ask it differently. With many patients historically receiving their testosterone replacement therapy in the doctor's office, whether through intramuscular injections or implantable pellets like Testopel, where do you believe you'll be able to capture patients? Will it be from Testopel patients or those on IM injections who have to visit a doctor? How do you see this? And do you think this shift in paradigm will last even after the pandemic?

Sure. Thanks, David. I'll address the first part regarding the gross to net for XYOSTED. In the latter half of 2019, our gross to net was in the mid-50% range. As we entered 2020, we implemented an enhanced copay to assist patients with out-of-pocket expenses, especially with the reset of high deductible plans and the existence of higher copay plans. We aimed to ensure that both new and existing patients could access XYOSTED without substantial out-of-pocket costs. Consequently, we increased our copay card limit from $150 to $350 for the first quarter, and we extended this through April, which affected our gross-to-net calculation. We noticed a slight drop in gross to net, falling just below the 50% range, whereas we had previously maintained a low to mid-50s gross to net. We have continued this program through April, and it is still in effect at this moment. Looking ahead, I’m uncertain if we will maintain this program, but it definitely had an impact on our gross to net.

Yes. Regarding the long-term outlook, we anticipate that patients who used to visit doctor’s offices for injections will significantly contribute to our growth, just like with Testopel. To answer your question, yes, I believe this will become a new source of business for us, possibly accelerated by COVID-19. A significant portion of our new patients, over 50%, have been coming from intramuscular (IM) injections, possibly even more now. We had success with this approach, but we hadn't focused much on the implantable Testopel product because, firstly, it doesn't appear in IMS data, making it difficult to identify the doctors who perform the implants, and secondly, the patient demographic is different for the implantable option. However, we are now clearly observing Testopel patients transitioning to XYOSTED. Once they experience how easy it is to use XYOSTED and recognize its effectiveness, I believe they will prefer it over the painful and time-consuming implant procedure, which we consider less effective overall. The same applies to patients receiving IM injections. Once they try XYOSTED, we believe it will prove to be a superior delivery method and product for them. We are optimistic about patient retention, expecting similar persistence from those switching over as we see from patients new to testosterone or those who transitioned from IM injections at home. Importantly, we have continued to see an increase in new doctors prescribing XYOSTED, many of whom are likely the ones previously administering in-office injections and implants.

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

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

Regarding your question about Epi, we believe that COVID-19 will not significantly affect Epi. If someone is allergic to beef, they are still allergic to peanut butter and other allergens, regardless of being at home. Therefore, we think the need for the drug remains unchanged. However, there are two additional factors to consider. With rising unemployment, patients may start to limit the number of auto-injectors they purchase, as some are covered by insurance. The financial situation of the 30 million unemployed individuals could influence how many packs they buy for school, home, and other locations. The other aspect we're monitoring is the supply chain. Teva manages the sourcing and assembly of Epi, and we provide them with devices. If any of their vendors or suppliers face disruptions due to facility closures, that could affect Epi production. So far, there hasn't been a noticeable change. Teva's market share has remained steady in the 40% to 45% range, and we hope that continues. Regarding your question about XYOSTED, could you please repeat that? I didn't quite catch what you were asking.

Sure. Given that shelter in place measures have not led to complete office closures across the country, I would like to know what percentage of the targeted high-decile prescribers currently have their offices closed. Additionally, has telemedicine helped to mitigate any of the challenges associated with this situation?

I can't provide an exact number, but I can tell you that urologists, endocrinologists, and primary care doctors have mostly kept their offices open. Urologists need to conduct procedures related to prostate cancer, among other things, but they have limited their hours. In some cases, they are only open for a few hours a day to see patients requiring essential procedures. As a result, the number of new patients has decreased due to these reduced hours, and many patients are hesitant to visit doctor's offices unless absolutely necessary. Telemedicine has played a significant role in addressing this issue. We have been able to maintain our current business, and patients using XYOSTED can still receive refills from their doctors' offices. Prescriptions can be sent electronically to pharmacies like CVS or Walgreens, or patients can choose to use our specialty pharmacy, which distributes medications nationwide. We communicate to doctors that if patients prefer not to leave their homes to get their medication, we offer home delivery through our specialty pharmacy. By the end of March, all our representatives stopped visiting offices, as most states implemented shelter-in-place orders. We are now gradually seeing changes, and we advise our representatives to confirm office availability before visiting to ensure effective use of their time and to work on bringing in new patients again. If offices remain closed to visitors, our representatives should continue with tele-detailing. Moving forward, it will be a combination of both approaches. However, it's challenging to determine the exact number of offices that closed versus those operating with limited hours. The key point is that we have managed to retain our patients and increase refills, with strong TRx numbers. The decrease we have seen is mainly in new patients, particularly those who were previously not on testosterone therapy. We believe we may have lost many naive patients during this time, but we expect to regain them once normalcy returns.

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

I have a couple of follow-up questions regarding XYOSTED. I want to clarify Anthony's question. Just to be clear, a naive patient cannot start on XYOSTED in a telemedicine setting. Is that correct? They need blood draws? And I have a few more follow-up questions.

They can theoretically start, but they need to complete two blood draws on different days and go to a lab, many of which were closed for nonessential services. Doctors must get the necessary blood panels, which limits new patients' ability to begin treatment. While it might have been possible, the willingness of people to visit a lab for blood draws twice and then follow up with doctors presents a real challenge that any pharmaceutical company encounters.

It's clear that these switches are likely contributing to the unexpectedly positive RX trend compared to many other companies. I’d like to delve deeper into the sustainability of the switch business for IM patients. Perhaps I'm being skeptical, but do you think that many doctors or practices performing IM injections see it as an easy way to generate revenue? If patients start returning to the office, do you believe that this business model might not be as sustainable as you anticipate, especially considering patient preferences?

I believe that the trend has shown a significant decline in reimbursement over the last couple of years, which has surprised us since doctors are still willing to perform injections in their offices. These procedures occupy their office space and require patients to visit every few weeks, or every few months in the case of implantable options. The reimbursement has dropped so sharply from insurers that it's unexpected to see doctors continue this practice. It seems more like a service they provide for their patients now. However, when they return to normal operations, it’s likely they will prefer to avoid filling their offices with these injections, especially when the value isn't substantial. Instead, they will likely focus on new patients or those needing procedures that have been delayed. If a doctor switches to XYOSTED and is satisfied with the testosterone level results and the patient feedback, it would be challenging for them to revert to previous methods. Initially, these doctors were difficult for us to engage because they felt comfortable with their current injection practices. But once they recognize how effortless it is to switch, we believe they could become long-term users of XYOSTED moving forward.

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

This is Raymond in for Matt. Congrats on a strong quarter. I have a couple of quick questions regarding the impacts of COVID-19. Considering the various outbreaks in different regions, do you anticipate that some areas will recover at different rates?

We clearly observed the impact sooner in the regions that were most affected. California experienced this quickly, as did areas in New York and New Jersey, which are among our top-performing territories. We noticed the impact in these states, and that’s why we are being careful with our guidance; it will take longer for these states to return to normal. However, we still see strong adoption in states like Texas and Florida, which we expect to bounce back sooner. Overall, while some of the most affected states are our best-performing ones, we remain cautious in our guidance because we are uncertain about how long it will take to bring new patients back into the office. Our existing patients are staying on the medication, and we are pleased with that. It is the new patients that are crucial for the growth we aim for, as well as what investors expect. XYOSTED is projected to perform significantly better this year compared to last year, and this growth relies on attracting new patients.

Okay. I have one follow-up question. Are there any updates on your partner products and pipeline, specifically regarding Pfizer or Idorsia, and whether the pandemic might cause any changes in the timeline?

Yes, we've been fortunate so far. In my prepared remarks, I mentioned that it wasn't just about supply chain work; we had development personnel coming into the office for Idorsia and Pfizer because we have specific requirements to deliver pens and auto injectors to them. Those programs are ongoing. We were somewhat surprised, particularly with Pfizer due to their size, but both Pfizer and Idorsia have maintained a strong focus during this time. If anything, it may have sharpened their focus on the programs they want to advance. Up to now, we've seen no slowdown. We anticipate that the Pfizer program will not be affected since it doesn't require any clinical trials. As for Idorsia, we're continuously monitoring that situation and conducting user studies. Initially, we planned for 2020 to prepare for the Phase III in 2021, and we've manufactured the clinical supplies and devices they need. So far, we haven't heard anything about a delay for the Phase III starting. However, as you know, the pandemic has severely impacted clinical trials globally. Thankfully, Idorsia wasn't scheduled to start until 2021 anyway, so we're hopeful that when they're ready to proceed, everything will be back to normal. But we still can't predict that.

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

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