VYNE Therapeutics Inc. Q1 FY2020 Earnings Call

Greetings. Welcome to the Menlo Therapeutics First Quarter 2020 Earnings Call. Please note this conference is being recorded. I will now turn the conference over to your host, Michael Wood at LifeSci Advisors. You may begin.

Good morning, everyone, and thank you for joining us. Before we begin the formal remarks this morning, let me remind you that some of the information in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words that express and reflect optimism, satisfaction with current progress, prospects or projections as well as words such as believe, intend, expect, plan, anticipate and similar variations identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Such forward-looking statements are not a guarantee of performance, and the company’s actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Menlo Therapeutics’ filings with the SEC. These forward-looking statements speak only as of the date of today’s press release and conference call, and the company takes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call. So at this time, I’d like to turn the call over to Dave Domzalski, Chief Executive Officer of Menlo Therapeutics. Dave, please go ahead.

Thank you, Michael, and good morning to everyone. Joining me on the call is Matt Wiley, our Chief Commercial Officer; and Andrew Saik, our recently appointed Chief Financial Officer, who will take you through our financials. We’re very pleased to have Andrew on the team as this is his first quarterly call with us. I want to welcome him. So today, I will provide you with a brief update on both our commercial business as well as our pipeline. And then we’ll turn the call over to Matt and Andrew to provide more details. As you know, we launched our first product, AMZEEQ, in January. We have a PDUFA date coming up on June 2 for our second product, FMX103. And assuming it’s approved, that will put us on track to launch our second product later this year. Our Phase II study in acne for FCD105 is slated for a readout in the coming weeks as well. To begin, in early March, we successfully closed the merger, in which Foamix became a wholly owned subsidiary of Menlo Therapeutics. While we were disappointed with the outcome of the serlopitant Phase III results that were subsequently announced, the transaction has been structured to provide a certain amount of protection to Foamix shareholders in the event of this outcome. The issuance of the contingent stock rights resulted in 82% ownership in the combined entity for Foamix shareholders, providing an adjusted ownership split for both legacy Menlo and Foamix holders. The transaction also resulted in a higher cash balance for the combined company. Additionally, as a result of the merger, we are now also a U.S. domiciled publicly traded company. The launch of AMZEEQ, our topical minocycline foam product into the U.S. market as a treatment for moderate-to-severe acne marked the transition of Menlo from a development-stage organization to a fully integrated commercial company. We are very pleased by the initial results of the launch of AMZEEQ as well as the reception from patients and health care providers for our product, even though the momentum has understandably slowed as a result of COVID-19. The strong prescription numbers we saw through the middle of March, however, give us confidence that we will be able to successfully market the product as the COVID-19 situation stabilizes in the U.S. Matt will give you an update on our commercial strategy. But suffice it to say, we are doing everything we can to educate our customers about the features and benefits of AMZEEQ and increased trial and use of our product during the COVID-19 situation and as physician offices continue to open. FMX103, our 1.5% minocycline foam for the treatment of papulopustular rosacea is currently being reviewed by the FDA, which has set a target PDUFA action date of June 2 of this year. We have had fluid exchanges with the agency, and we do not anticipate a change in the PDUFA date. If approved, our current expectation remains for a launch of FMX103 in the fourth quarter. The NDA includes what we believe to be a very strong clinical package, both of our Phase III clinical trials that support the application met each of their co-primary endpoints, demonstrating a statistically significant improvement in the reduction in inflammatory lesion counts and IGA treatment success. Behind FMX103, our most advanced pipeline product is FCD105 for the potential treatment of acne. FCD105 is our topical combination product. It utilizes our MST foam platform and comprises a 3% concentration of minocycline and a 0.3% concentration of adapalene. Adapalene is one of the most widely used topical retinoids to treat comedonal acne. FCD105 is currently in a Phase II trial, which completed enrollment late in 2019, and we remain on track for our anticipated data readout this quarter. We had our last patient out of the trial before the COVID-19 shutdown, so we do not expect any impact on the timeline of a readout of top-line results for FCD105. We believe that if approved, this combination product of minocycline and adapalene could provide a novel therapy to potentially address unmet needs of patients and health care providers. Finally, we were pleased to announce a few weeks ago our license agreement with Cutia Therapeutics to market AMZEEQ in China as well as our other topical minocycline products when approved. This license agreement provides a $10 million upfront payment to Menlo plus mid-single-digit royalty payments on net sales of any of our licensed products to Cutia. We believe this transaction further validates our technology and the potential of AMZEEQ. It also helps fortify our balance sheet with non-dilutive funding. We will continue to seek additional partnership opportunities in non-U.S. territories for our topical minocycline product portfolio. So with that, let me now turn the call over to Matt Wiley, who will provide an update on our commercial activities.

Thanks, Dave. The early launch of AMZEEQ is very promising. The initial uptake and feedback from physicians exceeded our expectations, and we remain optimistic about how AMZEEQ will be used to treat patients with moderate-to-severe acne. The launch has obviously been interrupted by COVID-19, and we saw a pullback in prescriptions as dermatology offices closed due to government restrictions. Our field force, however, has stayed engaged and continued to make sales calls virtually. While the volume of calls per day has been reduced in the virtual environment, in many cases, the duration of and quality of those calls has improved. We have found in the virtual environment, many of our physician customers now have more time to learn about AMZEEQ and its differentiated attributes. We believe this should help increase the level of awareness of AMZEEQ and ultimately, trial for the brand. Despite the various government restrictions due to COVID-19, the number of unique prescribers continue to grow week over week, even during the period of shutdown. There have been over 3,200 unique prescribers of AMZEEQ since launch, with over 500 of them coming since the week ending March 13, which was the last week of non-impacted sales. We’ve been able to reach over 90% of our targets since launch. We are also seeing productivity of our targets growing, averaging eight prescriptions per target and over 10 from our most important customers, whom we refer to as our platinum targets. In February, we hosted a national satellite broadcast event, with two of the most prominent key opinion leaders in the field of acne, Dr. Jim Del Rosso and Linda Stein Gold. This single event drew over 350 attendees at 38 live venues. We have also hosted over 30 live and virtual speaker programs that have reached a total of 250 attendees. The field force is now redeploying where possible as government restrictions ease. In areas that are reopening now, there are some obvious changes to how we access physician offices and, of course, no one knows how quickly acne patients will return for diagnosis and treatment. This is happening now in some parts of the United States, and we expect that state and counties will continue to ease restrictions over time, allowing more direct selling activities. As we look at the last few weeks of prescription trends, it appears that the initial decline has stabilized, and we are now beginning to see volume for both NRxs and TRxs increase. We are encouraged by this as we navigate through the process of dermatologists reopening their offices. We will continue to leverage all of the tools we have at our disposal in our efforts to increase demand for AMZEEQ. Our market access strategy continues to execute as planned, and we continue to build towards broad access for AMZEEQ. We currently have approximately 50% of the market under contract. We were recently removed from the exclusion list of one of the largest PBMs, and this will increase our access now to approximately 60% of commercial life. Our access strategy is on track as we continue to work with the remaining key payers to ensure broad access to our products. We are also using this time to prepare for what we hope to be an approval and subsequent launch of FMX103. As you know, the PDUFA date for FMX103 is June 2. Assuming it is approved, our plan is to launch the product in the fourth quarter of this year. The patient and health care professional call on universe overlap between AMZEEQ and FMX103 is approximately 80%. We build our sales force in anticipation of launching both products and do not foresee a change in the structure due to the launch of FMX103. There will be some incremental launch costs, but given the similarity to the product, we will be able to leverage much of the commercial apparatus already built for AMZEEQ. Our strategy for market access for FMX103 will leverage existing contract payers’ knowledge of the formulation, its value proposition, and price, which we hope will make the formulary review and contract process efficient.

Yes. Thank you, Matt. Before I start with a review of the numbers, I want to remind everyone this is the first time that we have reported as the new Menlo Therapeutics, post the merger between Menlo and Foamix. The deal structure had Menlo as the legal acquirer, but Foamix was the accounting acquirer. So all historic numbers contained in our 10-Q are Foamix through the merger date and then combined financials thereafter. Revenues totaled $1.8 million for the first quarter of 2020 compared with $0.3 million in the comparable period for 2019. Revenues in Q1 2020 were generated from product sales of AMZEEQ, which we launched in January of 2020. For the first quarter of 2019, revenues consisted solely of royalties from our out-licensed product Finacea Foam. The decrease in royalty revenues for the first quarter of 2020 as compared to royalty revenues for the first quarter of 2019 was due to a stock out of Finacea, which resulted in no royalties this quarter. In April 2020, however, LEO informed us that they had remedied their supply chain issues related to Finacea Foam and have resumed commercial activities for Finacea Foam in the U.S. Cost of goods sold were $0.3 million for the first quarter of 2020. Our gross margin percentage of 85% was favorably impacted during the quarter by product sales with certain materials produced prior to FDA approval and therefore, expensed in prior periods. If inventory sold during the first quarter of 2020 was valued at cost, then our gross margin for the period would have been 79%. There was no cost of goods sold in the three months ended March 31, 2019, because our revenues in that period consisted solely of royalties. Our R&D expenses for the first quarter of 2020 were $16 million compared to $10.8 million for the first quarter of 2019. This increase was a result of higher employee-related expenses, including $3.8 million related to the severance expenses associated with legacy Menlo employees as well as increased payroll and related expenses. In addition, clinical and manufacturing costs related to serlopitant increased by $2.2 million. This was offset by a decrease of approximately $2.2 million related to clinical manufacturing expenses for AMZEEQ and FMX103. Our selling, general and administrative expenses for the first quarter of 2020 were $25.4 million compared with $5.3 million for the comparable period in 2019. This was driven by employee-related expenses, which increased by $10.5 million, consisting of $6 million primarily due to the expansion of our employee base, including the hiring of the sales force as well as $4.3 million related to the severance expenses for legacy Menlo employees. We incurred $3.6 million in expenses relating to the merger, including SG&A expenses. Sales and marketing expenses increased by $1.8 million related to the commercialization of AMZEEQ. Total one-time expenses related to the merger, consisting primarily of severance and merger costs, were $11.7 million in the first quarter. Our net loss for the first quarter of 2020 was $40.2 million or $0.95 per share as compared to $15.2 million or $0.47 per share in the first quarter of 2019. The increase in net loss was primarily due to an increase in expenses incurred in connection with our commercial line of AMZEEQ, together with the merger expenses and severance expenses for Menlo employees. Our weighted average share count reported in our first quarter financial results was approximately 40 million shares. The actual share count at the end of Q1, as disclosed in our 10-Q, was 61.5 million shares. In April, we announced the outcome of the Phase III serlopitant trials, resulting in the conversion of the CSRs from the recent merger, which resulted in the issuance of 74.5 million Menlo shares to Foamix shareholders of record as of the closing date. This means that our current share count post the issuance of shares related to the CSR conversion is approximately 136 million shares. Our cash and cash equivalents and investments totaled $82.7 million as of March 30, 2020. This amount does not include the $10 million upfront payment that we are due to receive in connection with the licensing deal with Cutia Therapeutics. Due to the COVID-19 impact and the resulting disruption of the AMZEEQ launch, and with the recent failure of serlopitant, we have reevaluated our cost structure and implemented a cost-savings initiative that we believe was necessary to extend our cost runway. I want to be clear, however, that these cost-savings initiatives did not impact the size of our field force, and we remain firmly committed to the launch of AMZEEQ and FMX103 later in the year. Changes that were made include us moving from primarily an internal to an external product development model which is more cost-efficient and flexible and will better serve the company moving forward. We also moved to quickly eliminate all legacy Menlo expenses from the organization, post the serlopitant results. Additionally, as we do not have any large-scale trials ongoing or scheduled in the near term, we reduced our support for clinical activities but are maintaining appropriate clinical capability for the future. You will appreciate that making projections of cash runway is highly uncertain in the current market given the impact and potential future impact of COVID-19. We believe, however, that with the cost-savings initiatives put in place and with the cash from the Cutia license that we continue to have a cash runway into Q2 of next year without the need to take on additional debt or equity financing. We remain laser-focused on the AMZEEQ launch as well as the planned launch of FMX103 in the fourth quarter, assuming approval, even as we aggressively manage our costs in the short term to extend our cash runway and look forward to the data read from FCD105 later this quarter. I will now turn the call back to Dave for closing remarks.

Thanks, Andrew. Before I close, on behalf of my fellow colleagues and Board members, our heartfelt sympathy goes out to the families who have lost loved ones from the COVID-19 coronavirus. And our best wishes for a full and speedy recovery go to those who are currently fighting this illness. And certainly, our gratitude is sent to the countless healthcare workers and first responders who work tirelessly on the front lines during these times. In closing, we continue to be resolute in our vision to create a scaled business in therapeutic dermatology through the development and launch of innovative products to address unmet needs of patients. We believe our initial strong launch efforts for AMZEEQ reflect the strength of the product and our commercial strategy, which we intend to replicate with the launch of FMX103 in rosacea when approved. As always, we plan to deliver on these goals while ultimately building long-term value for our shareholders. That concludes our prepared remarks. We are ready now to open up the call to Q&A. So, I’ll turn it back to the operator.

Our first question is from Louise Chen from Cantor Fitzgerald. Please proceed with your question.

Hi. Thanks for taking my questions. So, my first question is if you could provide more color on the stabilization and pickup of the AMZEEQ Rxs that you’re seeing. How many weeks has this been? And in addition to the reopening of offices, what else is driving this? And then secondly, you talked about this cost-saving initiative. I was wondering if you could give us more color on SG&A and R&D expenses into the second quarter relative to the first quarter given your comments here. And then on the margin side, is 79% what we should be using in the second quarter for sales? And then last question I have for you is on FMX103, you’re ahead of a launch here. What is your go-to-market strategy? And where would this product fit into the treatment armamentarium for patients and physicians? Thank you.

Absolutely, so, we’ve got a couple of questions there from me. So I’ll turn the first one over to Matt to provide some more color on the stabilization and pick up for AMZEEQ. So Matt, do you want to take that?

Sure. Thanks, Dave. Thanks, Louise for the question. So, what we’ve observed in probably the last five or six data points has been a bottom or kind of a formation of the bottom of our TRxs. And so the last data we have, which is from a week ago, we see that there’s been a slight uptick in TRxs. I think that’s due to the fact we had a handful of reps out making live calls about two weeks ago. We had a much larger number last week. And we anticipate actually that the majority of our sales representatives are going to have some live call activity this week. So I think that kind of speaks to the stabilization initially due to the virtual efforts that we undertook. And then the additional growth that we’ve seen, at least, in the last one data point that we have has been due to some of that live activity and probably more physicians seeing patients in their practices.

Yes. Thanks, Matt. So Louise, I’ll – this is Andrew, and I’ll take the next two questions. With regard to your cost savings, we’re not going to provide specific guidance on this call. But I think relative to Q2, what you’re going to see is a gradual decrease in our expenses relative to Q1. We had – in Q1, as you know, we had a launch of AMZEEQ, and we had two clinical trials wrapping up, one on serlopitant and then obviously 103. I think that you’re going to see a gradual decrease of expenses that should kind of stabilize into a new norm but later in the year, call it, by Q4. With regard to gross margin, gross margin is going to be a little bit variable in the near term. I think Matt has talked previously about the use of the trial card that we’re using in launch as we bring various medical groups up on formulary. That should stabilize. I think Dave has guided at a 90% gross margin going forward. I think that we’ll slowly see us getting closer to that number as we move into the year.

Yes. I will offer some initial thoughts on the go-to-market strategy and then turn it over to Matt. But just to echo his thoughts on the stabilization and pickup for AMZEEQ, again, I’m very pleased with the work that our team has done under very challenging environments. The virtual efforts that the team has deployed, as Matt outlined, certainly it seems to stress that we’ve stabilized the business. The – we’ve seen increases in time with physicians, and quality of the calls with health care providers. I think all that bodes well for us as offices continue to open up. So again, very pleased with the work that the team has done under very challenging environments. For FMX103, as we said, we always view that the rosacea marketplace is an untapped marketplace for an opportunity for a product such as FMX103. Though it’s a smaller marketplace than the acne arena, there is less competition, fewer products that are in development in the category. And when we take a look at the data from FMX103 on our clinical trials, not only do we have very strong efficacy results in our primary endpoints and the reduction of lesion counts, but we also saw that had a very meaningful impact on sector end points such as improvement in erythema, which Louise, as you know, there are products in the marketplace, specifically indicated just for that. So, we believe the product has lots of optionality, lots of potential in the category. We know from our discussions with health care providers that they are eager for a new product to address patients’ unmet needs for this condition. I think we’ll deploy a lot of the same focused efforts that we have done with AMZEEQ. And so I’ll turn it over to Matt to provide some additional color on our go-to-market strategy.

Sure. Thanks, Dave. And so Louise, see, a couple of things to note here. One is that what we found in primary market research is that better than 70% of the current rosacea patients are dissatisfied with their current treatment. In other words, they are likely or extremely likely to choose another therapy if something new were to come to market. And we’ve seen this also in retrospective claims analysis as well, where we see that roughly 70% would either discontinue or switch medications after their first diagnosis and therapeutic option. So this, coupled with what we see from physician behavior and how they’ve responded in market research, where there is a high preference share for the product profile of FMX103, really gives us an opportunity to position around this unmet need. So, as we think of the go-to-market strategy, it’s really predicated on unique positioning, not dissimilar to what we did with AMZEEQ, focusing more so on the unmet need and the clinical profile of FMX103. We have an ambition to accelerate our support and market access environment to ensure that we do have broad access for the product. And then there are a couple of unique discoveries that we’ve made in the market itself that we plan on using as part of our platform. I’m not going to disclose those here for competitive reasons, but we think they offer us significant opportunities, especially as a smaller company to compete with larger competitors, and we’re going to use that leverage to our advantage.

Hi, everyone. This is Zach on for David. Thank you for taking our question. This is a bit of a longer-term question, but we were hoping to get a better sense of how the recent transition to telemedicine and other digital initiatives might permanently impact the promotional landscape in the broader derm space? And what that might mean longer term for AMZEEQ in both acne and rosacea? And I do have a follow-up after that. Thank you.

Good. So, we’re seeing an increase in telemedicine. And we believe that acne and potentially rosacea are disease states that could benefit from the advances in telemedicine. We would expect that as physicians become more comfortable with the platform, we will see an increase in diagnosis. Of course, where we focus our efforts is predicated on patient concentration. So regardless of whether physicians are using a telemedicine platform or seeing patients live in their office, we’re building our targeting approach around that patient volume. So, we will continue to educate our physicians, either in a virtual environment during the COVID-19 situation or live as we have historically, with those physicians who are using either a live or telemedicine platform. That’s pretty much it. Yes.

Okay, great. Thanks. And then one quick question regarding AMZEEQ. Given the macroeconomic landscape and less disposable income in general, could you maybe speak quickly to the extent to which you will provide greater patient out-of-pocket support over the long term? Thank you.

Sure. I mean right now, we do have a co-pay relief program in place, and we are capping a benefit of $40, but basically buying the prescription down to $35 as part of that co-pay relief. We also have a denial conversion program in place, but that typically goes away after you’ve secured broad access. That’s always been our ambition, to have broad access where the patient out-of-pocket exposure is relatively light. We always have flexibility in the future to make changes to those programs as we need to. But we feel like we’ve got a pretty good program right now in place to capture the majority of the patients and minimize the out-of-pocket burden.

Good morning. Thanks for taking my questions. And I’d like to expand my welcome to Andrew. First, just a question on managed – the remaining managed care contracts for AMZEEQ. What’s the expected cadence for additional contracting for the remainder of the year? And would you guys be willing to provide some guidance where you think the net pricing of AMZEEQ might settle either this year or long term? And I have a follow-up.

Sure. I will provide some initial thoughts on managed care, and I’ll turn it back to Matt, and then Andrew can provide some thoughts on net pricing. But as I alluded to, we’re quite pleased with our contacts and our exchanges with the payers. I think it goes to the heart of our pricing and reimbursement strategy, which was to ensure patients and health care providers can get access to our product. That’s obviously our most important objective, but to do so also in a responsible manner. We’ve taken the approach to partner with payers in the managed care arena since the very beginning, actually 18 months plus before we even launched the drug. So, I believe it continues to pay off well for us. As you know, we – within the first two weeks of launch, we had under contract one of the largest PBMs, Express Scripts, in which AMZEEQ was added to their national formulary and a Tier 2 preferred status. That was unexpected for us, and we were pleased with that. As we alluded to in our call so far today, we’ve been removed from the exclusion list from another one of the largest PBMs. Our discussions in terms of contracts are fluid. We hope to have additional announcements in the coming weeks. Our objective has been to have the majority of the major payers under contract as we go into the third quarter. We continue to be on target for that. And we’ve found also that additional payers that were not in our modeling in some of the regions, say, out in the West Coast, have come to the table to negotiate contracts with us. I think, again, that goes to the benefits of the product itself. The view from the payers has consistently been that AMZEEQ provides unique benefits to payers or to patients. So it’s not viewed as just a new dosage form. We continue to have a product go through full P&T review. And so I think the clinical merits of the product, coupled with our pricing strategy, continues to be supportive, and we continue to see that. I’ll turn it over to Matt to have any additional thoughts on the cadence of our efforts and then Andrew can talk about net pricing.

Sure. Thanks, Dave. Yes. And I think Dave has pretty much summed up there. What I’ll say is that conversations with the payers have been good. It’s consistent with the market research that we’ve shared on previous calls and in previous venues. And we feel optimistic about being able to secure that broad access that has been our ambition since the start.

Yes. Thanks, Matt. Yes. And Stacy, thank you for the question and the welcome. Really happy to be here. With regard to net price on AMZEEQ, we’ve taken a decision to wait a bit and see how the market develops. What I can tell you is we’re really happy with our contracting. We think that that’s going extremely well. And as Matt alluded to, we expect to have full coverage. We do not view this product as something that we need to give away, right? We think that there’s a huge value-add with the product. So, we’re taking a position where we’re negotiating prices that we think are very fair to both us and to the derm offices. And we’ll be able to give you more guidance later in the year as things develop with the product.

Yes. And I’ll just add before, Stacy, if you have any additional questions. Yes, as we are in discussions with the payers for AMZEEQ, we’ve obviously let the payers know that we hope to have another product FMX103, and that will come back to them on. So since it’s the same product, but a different concentration and a different indication. Since we’re going through the efforts now of getting under contract for AMZEEQ, we hope that this should facilitate a quicker process in having FMX103, assuming approved, added to the formularies for these various plans.

That’s great. Yes, you kind of answered my second question. I guess just specifically, maybe your initial launch strategy for 103 in Q4. Is it going to be a little bit more targeted just given the current situation? Or any details would be appreciated.

Go ahead, Matt.

Yes. I mean so the way that we think about targeting is, again, we look at the rosacea patient concentrations in physicians. We look at predilection for brand versus generic. And we then rank those docs from top to bottom. So we can have a fairly targeted approach to this patient diagnosis in a way where we should see good productivity. And we’re seeing that already with AMZEEQ. Our targeting model is predicated on the same philosophy. And we’re seeing that as we are working through our targeting with our platinum targets, which are our highest decile positions are much more productive than our mid-tier, which are our goal targets. And then, of course, non-target for those that may be in an office where we have targets and they hear detail on AMZEEQ, they then also prescribed, obviously, not with the same productivity. So, we’re applying the same philosophy to FMX103, and we believe that that gives us a very focused and efficient way of entering a market.

Hi, good morning. This is Chi for Jason. Thanks for taking my questions. Just a couple on the FCD105. Given near-term readout expectation, curious, what’s your expectation on the Phase II data, I guess, if it pertains to the safety and efficacy profile compared to AMZEEQ? And I guess the second question would be, just talk about how you’re thinking about your cost structure, reducing R&D activities. Just curious, does that in any way impact the development on 105 if the Phase II data supports? Thank you.

Thanks, Chi. So FCD105; it’s our first combination product. I think an important point to offer. As you know, developing a topical minocycline was a challenging exercise. We’re proud of being the first company ever to develop a topical second-generation tetracycline product, minocycline and doxycycline. No one has ever been able to do this before until we did it with AMZEEQ. This is on a stable molecule, minocycline. So we were thrilled to be able to do that with minocycline. Equally as important is it was also quite a challenge to develop a combination product with minocycline. And it took quite a bit of time, and it’s a credit to the development team that we have in the organization. So it’s really taking what we believe is a gold standard in the treatment of inflammatory acne, minocycline, with a gold standard for treating comedonal acne, which is adapalene. So we have a stable product, cosmetically appealing that now is underway in a Phase II study. It’s a fairly substantial Phase II study. Its 400 patients split across four arms, 25 patients in the combination arm of 3% minocycline and 0.2% adapalene. 100 patients in each of the known add arms, 75 patients in the vehicle. We’ll obviously be looking at efficacy as well as safety. The bar, obviously, for this Phase II is versus vehicle, but we want to measure it against each of the individual constituents depending on what a Phase II program would have to look like. So in terms of comparing it to AMZEEQ, I would not comment, Chi, on expectations until we actually see the data. Obviously, we have expectations, a meaningful expectation for this product. And I’ve said on record that if approved, the market, it could be the biggest product that we would have for this particular category. Dermatologists, they do use combination products, a combination product in a fair amount. And we believe it could address some needs for patients and health care providers. But I’ll hesitate on providing any comparisons to AMZEEQ, et cetera, or any other product on the market until we get the results. I think from there, again, we anticipate having the readouts sometime this quarter. From there, we would obviously, assuming success; we would schedule an end of Phase II meeting. That will take a little bit of time to get that scheduled. And then from there, depending on the results, then we could look to move towards a Phase III program for FCD105. But I would not envision that study taking place certainly until sometime next year, probably the earlier part of next year. It kind of goes to the cost expenditures for the balance of 2020. Our focus is squarely on the launch of AMZEEQ and what we hope to be an approval and launch for FMX103. There’s not a lot of large clinical activities for the organization over the course of the next couple of quarters. That’s just a function of timing and a function of the normal progress of completing a trial, getting in front of the FDA and then beginning to establish what the next trial would look like. So there’s no rush for us to do this. We want to make sure that we take appropriate timing, get in front of the FDA, review the data. And then go from there. In the meantime, again, we’re going to keep our costs squarely focused on the launch of AMZEEQ and FMX103, assuming approved, which has always been our focus for some time. I’ll turn it to Andrew to have any additional thoughts or color.

Yes. Sure, Chi. So there was $11.7 million in one-time expenses. They broke down. There were $3.8 million, mainly severance, actually all severance in research and development. And then $7.9 million in SG&A, and that broke down to $4.37 million and $3.6 million other. In addition, Chi, there were about $9 million of expenses that were recorded on the Menlo side in the period between January 1st and the merger date. Those don’t show up, obviously, on the financials, but they would show up in cash. And then some of them would show up in accrued liabilities on the balance sheet, right, if the sums weren’t paid. So total amount was $21 million for the quarter, but only $11.7 million ran through our P&L.

And we have reached the end of the question-and-answer session. I will now turn the call over to management for closing remarks.

Okay. Thank you, operator, and again, thanks to everyone for taking time out of your busy schedules to listen to our call. We look forward to providing you with continued updates as our business progresses. And in the meantime, we – on behalf of the company, wish everyone the best. Stay well, stay safe, and we look forward to talking with you soon. Thank you.

This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.