Good day, ladies and gentlemen, and welcome to the Avadel Pharmaceuticals Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference may be recorded.
I would now like to introduce your host for today’s conference, Lauren Stival, Head of Investor Relations. Please begin..
Good morning. I want to welcome you all to Avadel Pharmaceuticals' Second Quarter 2018 Earnings Conference Call. Before we begin, I will start with some cautionary statements.
The following presentation regarding Avadel Pharmaceuticals' includes a number of matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements.
These risks include risks that products in development stage may not achieve scientific objective, milestones or meet stringent regulatory requirements, uncertainties regarding market acceptance of products and the impact of competitive products and pricing.
These and other risks are described more fully in Avadel's public filings under the Exchange Act, including the Form 10-K for the year ended December 31, 2017, which was filed on March 16, 2018.
Except as required by law, Avadel undertakes no obligation to update or revise any forward-looking statements contained in this call presentation to reflect new other information, future events or otherwise. We will be using a slide presentation for today's call, which can be accessed on the investor section of our website.
After prepared remarks, we will be opening the call to the question-and-answer period. On the call today, we have Michael Anderson, our Chief Executive Officer; Mike Kanan, our Chief Financial Officer; and Greg Davis, our Chief Operating Officer. At this time, I will turn the call over to Mike Anderson. Mike..
Good morning ladies and gentlemen. Thank you for joining us this morning to recap the second quarter of 2018 and to discuss the strategic initiatives that we are working on as a Company. Before we begin our formal presentation, I would like to comment on what we believe is a meaningful overhang to our stock price.
Over the past couple of years, as we have transitioned the Company from being a drug delivery and reformulation Company to a specialty pharma Company. We have, on occasion, not adequately managed expectations.
From being delayed on FT218 to acquiring a pediatric business that didn't perform as we had anticipated and having to reduce our NOCTIVA guidance, we have clearly created frustration for our shareholders particularly our long-term shareholders.
As we have always said, the original unapproved to approved strategy was never intended to be a long-term strategy. The intention was to generate cash and the products have produced excellent cash flow, even better than we originally anticipated. But the revenue streams cannot be sustained given the entrance of new competition.
We have certainly seen the impact of that. But these products over the last few years have allowed us to transform the Company into an entity with two very large meaningful opportunities.
While we will always strive to protect our shareholders from divulging too much information that could compromise our competitive position we recognize that as we progress as a Company, investors have a growing need for information that allows them to make good decisions.
As such, we will provide additional information on today's call not previously disclosed. So moving into Q2, we came in above consensus with $29 million in top-line revenue, primarily from our three hospital products.
We are still planning to file our fourth hospital product, also a sterile injectable, sometime at the end of this year or in the first part of 2019.
As you may recall, we uncovered a potential safety problem with an existing product, have improved the formulation and are hopeful of gaining a preferred position with the FDA approval process as a result. Assuming approval, we expect meaningful revenue to begin in 2020.
Mike Kanan will take the deeper dive shortly into the dynamics that we are seeing across our hospital products and resulting revenue expectations, but overall these continue to be solid sources of high margin cash flow for us. Albeit not a piece of our long-term growth strategy like either NOCTIVA or FT218. I will dive right into FT218.
We recognize that clinical trial enrollment has taken longer and as such have kept quite a bit close to the vest regarding this product and the study.
On today's call, we are going to provide some additional transparency around where we are in the study and the ongoing initiatives to hopefully inspire some components in our ability to complete the study on a timely basis and to bring this important product to market.
For those of you who may have seen the release this morning, you know that we are approximately 50% enrolled. About 18 months ago, we began our trial in Europe where to be frank, very few patients have been enrolled to-date. So the majority of the patients have come from the U.S.
and Canada where for the most part we have only been operational for a little over a year. As we previously disclosed, there were some delays in getting the many U.S. sites up and running. Saw more commonplace issues like delayed IRB approvals et cetera.
Others were unique to FT218, like having sites engaging with the DEA in the middle of a licensing procedural change. As a result, we have only had the majority of our initially planned U.S. sites operational since second quarter of last year and we will be adding seven new sites in the U.S. over the next few months.
Some of these sites had been vetted for participation at the outset, but we are unable to join at that time for various reasons, such as capacity, competing studies and even DEA licensing issues. We are pleased they are now able to come onboard and open us up to new patient tools, new markets and new investigators.
We have a number of other initiatives underway that should accelerate the enrollment of the second half of our study. Recently, we were able to secure a protocol change without compromising our spot to include patients with limited past use of sodium oxybate.
The parameters around past use are that the patient cannot have taken more than a 4.5 gram dose for more than two weeks and last exposure to the drug has to have been at least 12-months prior to enrollment.
We have initially identified over 100 patients mostly through our online screening tool who were previously excluded and are in the process of contacting them to collect their history on sodium oxybate. We certainly don't expect the majority of these people to necessarily meet these new requirements and they may be ineligible for other reasons.
But we have been asked to provide some sort of context around the change as it relates to previously excluded patients and it should be additive.
Additionally, we have discussed this change with our clinical investigators and a number of them believe they have potential patients that may meet the new past use criteria now and into the future dependent upon when they took last sodium oxybate.
To support this effort, we also expect the database review currently ongoing across all of our clinical sites to identify some potential patients that may meet the past use criteria, who would now be eligible to screen.
Also, we have a new patient referral program we are implementing to help funnel patients from new sources into the screening process. In addition to the seven new sites expected to open in the U.S. over the next 12 weeks we will have two sites opening in Australia where sodium oxybate is not currently available.
We have a third Australian site that will be coming onboard sometime in the next four to six months and we will have all the key geographies covered there. After a good deal of research, we think Australia will be very additive.
Having recently received the required regulatory approvals, applications for import and export licenses are underway and site initiations are currently being planned. We believe we are seeing all of these initiatives taking hold as our randomization in Q2 exceeded those in Q1 by 50%. We are constantly assessing sites both new and old.
I now that many investors watch the list of active sites on our website and clinicaltrials.gov and you will likely see a few site closures over the coming weeks where we have not seen productivity.
In total, between now and early Q1, 2019, we expect to have up to 16 news sites, nine of which are expected to be active over the next few months as I said earlier. These new sites will also benefit from implementing the best practices that we have observed over the last 12 months relating to recruitment, screening and retention.
So we feel positive about their ability to provide patients for randomization. Many investors have also noticed the new primary completion date of September 2019 on clinicaltrials.gov. We were required to update this field when we made our protocol amendment. However, it is simply a placeholder and we are not yet prepared to set an end date.
We understand firsthand the frustration many feel around the time this study is taking to enroll, but we are confident it will complete and reiterate our belief that this product is going to be a game changer. This trial and potential product already have an impressive amount of awareness.
Our online screening tool albeit an extremely high level form that excludes the bulk of patients has already been filled out by over 2000 people. That is 2000 people already interested in our investigational one-time nightly sodium oxybate.
Given recent data, suggesting that 27% of patients are non-compliant in some manner with their second dose may provide a large piece of the puzzle as to why almost 50% of the patients who start with the twice nightly product for a debilitating orphan disease drop out within a year.
In recent qualitative market research, we have come to learn that physician preference for a once nightly is on average greater than 50% even when options for low-sodium or generics were available. We believe this is a good early indication of interest and with so few options available to patients.
Our near-term objective will be to continue raising awareness for FT218 enrolling patients in the trial. Regarding our second major strategic initiative NOCTIVA. I want to take a minute to address our revenue expectations here and why they changed from $10 million to $20 million to $5 million to $10 million.
From a demand base, we have seen positive reception and uptick, albeit a little slower in growth yet has resulted in over 2600 dispensed prescriptions from over 1000 unique prescribers since launch. While not yet completed, July is tracking to be our largest month yet with over 1000 prescriptions.
How that translates to revenue is based on the mix of patients who are Part-D and commercial and the co-pay assistance we provided to-date. What we have seen is a larger portion of Part-D than commercial originally expected, where preferred coverage has been virtually non-existent.
Furthermore with the influx of high-deductible plans for commercial patients, we have seen out of pocket assistant support at higher levels than originally assumed. Although they are now decreasing and our gross-to-net is improving.
This is important because overall, we have seen over a 70% success rate of getting Part-D patients on treatment through our specialty pharmacy cash program while we are waiting to secure coverage for these patients.
This has turned out to be more than 50% of our patients at the outset of this launch and this patient mix has resulted in a hit on net revenues. Barring this, it is still early and we have every reason to believe in the potential of this product.
This belief has certainly been confirmed by the feedback that we have received from numerous physicians and patients alike who have benefitted directly from NOCTIVA and have seen their night time symptoms dramatically improve many on the first night of treatment.
Because of this, we want to make sure investors aren't just looking at revenue in the first 12 to 18 months, but also on some of the metrics that we think are indicative of positive traction and long term value creation. We are first to market here in an indication never before approved.
This is a condition suffered by as many as 40 million patients with less than 10% being diagnosed and treated. It's equally prevalent in both men and women, is associated with a number of serious co-morbidities. And greatly increases the likelihood of suffering falls and fractures.
We feel good about the progress that we have made in just a few short months where we have gone from no team, no product, no coverage and no presence in the market. In just a few short months, our unaided brand awareness has reached over 60%, which is up from less than 15% in March and is reflective of just two months of branded promotion.
We believe this is representative of the high level of interest in NOCTIVA, particularly considering the importance of the education around Nocturia and the need to treat two awakenings per night.
The keys to success over the next 12 to 18 months include increasing the [relevance] [ph] of Nocturia as a condition worth proving independently, initiating trial and experience for physicians and patients and improving market access, particularly and especially in Part-D.
Each day, we are generating more noise in the Urology Community about Nocturia. We plan to release up to nine new publications over the coming months to highlight the importance of treating Nocturia and the innovation of NOCTIVA as a solution. Another critical success factor is payer coverage.
Right now, our commercial covered access despite some typical six month new product launch NDC blocks has outperformed many analog products with over 125 million covered lives in the first 90 days. Even with no contracts, we have secured two preferred brand formulary positions with major payers.
Furthermore, without any contracted preferred Part-D coverage to-date, we have still seen approximately 15% of all retail prescriptions get filled or get covered and filled in Part-D patients.
As we have now exited our first full launch quarter, and as the six month NDC block ends in September we expect coverage only to improve as we look forward to 2019 for our first Part-D wins.
These preferred coverage contracts, especially in Part-D are really going to be a critical factor, in how much revenue we are ultimately able to recognize over the next 12 to 18 months, given the mix of commercials to Part-D that we have been seeing.
To support physician initiation and experience we have distributed over 7000 full trade size samples in the market, which we expect to serve as a catalyst for future prescriptions. In addition to our launch here in the U.S., we have made the decision to seek approval in Canada.
In addition, we have initiated early development in the United States for primary Nocturnal enuresis or bedwetting, as well as additional new formulations. These are important opportunities to expand our urology and NOCTIVA franchise. As we have more to share we will provide those updates.
This leads me to touch briefly on the recently approved, but not yet launched product that will compete with NOCTIVA. From a marketing standpoint, we believe we have meaningful advantages specifically as it relates to the very strict restrictions on fluid intake both before and after taking the medication.
We don't believe these are reflective of real world patient experience. We have no insight into Ferring’s launch timing, but our job is to be prepared regardless, and we will be. Lastly as you know, we are now party to the legal proceedings between Serenity and Ferring.
We will not comment on litigation matters publicly and we will update our investors appropriately. Overall, our second quarter was one of investment and strategic execution.
We reported $147 million in cash and marketable securities at June 30 and are well capitalized to pursue any strategic acquisition or in-licensing opportunity that might be synergistic within urology.
I want to emphasize that we maintained our peak revenue estimates from NOCTIVA anywhere from $250 million to exceeding $750 million per year depending upon how much we can create and grow the overall market over the next 12 plus years.
These numbers have always considered competition in the market and the potential to further expand this franchise into other indications only increases our revenue potential. We are committed to growing in this area and we will keep you apprised of strategic initiatives as they arise.
Before turning the program over to Mike Kanan, I also want to let you know that at our shareholders meeting in July, we certified the election of two new board members who have just joined our team.
Geoff Glass, currently CEO of Sancilio and Company and former Pantheon executive, and Linda Palczuk, current COO of Verrica Pharmaceuticals who previously led a number of AstraZeneca's commercial units.
That concludes my update and I will turn the program over to Mike Kanan to review the quarter's financial results before I wrap up with some final comments and our Q&A session. Mike..
Thank you Mike. And let me also thank you for joining the call this morning. As you may have seen in this morning's release, our second quarter was a period of continued investment and focus on building the foundation to propel us forward into the future.
As you heard Mike say from our revenue standpoint, we came in above street consensus with $29 million in revenues largely from our hospital products which continues to generate positive cash flow.
These hospital products while not a long-term driver of the business continue to provide near-term shareholder value by paying many of our bills and we continue to allocate resources to high growth products that are expected to deliver near-term shareholder value. This evidenced by our continued investment in NOCTIVA.
Our bottom lines results during the six months included about $34 million in NOCTIVA launch spend and that is in-line with our previously stated expectations.
R&D in the quarter was almost $12 million a record high spend as we accelerate the pace of our FT218 clinical trial including the initiation of new clinical sites as you heard and recruiting initiatives.
Our NOCTIVA launched spend and R&D spend both demonstrate our commitment to allocating resources to high value growth products that may provide superior revenue and shareholder return over a sustained period of time. As you have seen from the release as well, or operating cash flow was negative in the second quarter.
Cash flow generated from our hospital sterile injectable business, however continues to be positive and an excellent source of cash which we expect will continue for the foreseeable future. These products carry gross margins in excess of 70% with very little sales and marketing costs or other overhead.
As you have heard Mike just say our cash balance was $147 million at June 30th. And we are adequately capitalized to complete the full launch of NOCTIVA and complete our FT218 trial. Now let's talk more specifically how we performed in the second quarter.
Revenue as I said for the quarter was $29 million down from Q1s level and down from $47 million in Q2 last year. The decline from both period reflect lower volumes and net selling prices due to more competition to our hospital products.
Our success with these products has been strong and we continue to evaluate other potential product, as sources of cash flow that can be developed cost effectively and with a high likelihood of success. NOCTIVA revenues were just under $1 million through the first six months.
Keep in mind, we are very early in the launch and as you heard Mike say, we are pleased to several early indicators of positive traction including demand, numbers of unique prescribers and product awareness levels. Cost of goods sold was about 12% of product sales in Q2, down from about 20% in Q1 and 10% with last year in Q2.
The decline in cost from Q1 was due to certain nonrecurring charges we took Q1, including an inventory write off and costs incurred for certain expedited trade. These costs did not reoccurred in Q2. Research and development expenses during the second quarter totaled $12 million up almost 20% from Q1.
This increases our result of higher spending on our restaurant clinical trial including new patient enrollment initiatives, costs associated with the initiation in opening of additional clinical sites and increased spending associated with testing and scale of a contract manufacturing services for FT218.
And as you heard Mike say, we are pleased that this record high spending helped us in Q2 by increasing enrollment more than 50% higher than in Q1. SG&A was $28 million in the second quarter up 14% from Q1.
The quarter-over-quarter increase was primarily due to about $18 million in costs incurred during the quarter associated with the April launch of NOCTIVA compared to $12 million in Q1. The spend was partially offset by the lack of SG&A attributable to our former pediatrics business, which was divested in February.
Included in our non-GAAP results are about $6 million in related party contingent consideration payments. Most of these payments are related to 20% gross profit - we paid on our existing hospital products. Also included in our non-GAAP results are $1.6 million of accrued cash interest expense on our tangible notes.
On a non-GAAP basis, Q2 diluted loss per share was $0.55. And finally, we recorded a tax benefit of about 3% or about $700,000. As I said in the past, a large portion of our NOCTIVA spend will be eligible to offset U.S. taxable income attributable to our hospital products.
As a result, this has eliminated a majority of our cash tax increase, a tax benefit we will be able to utilize in future years. Moving on to our GAAP results for the quarter.
The primary differences between our non-GAAP and GAAP income statements relates to how we treat the expenses associated with acquisition related contingent considerations, amortization of NOCTIVA intangibles and the interest expense on our exchangeable notes.
Please refer to the appendix which is a slide presentation for a reconciliation of our GAAP versus non-GAAP results.
The largest GAAP to non-GAAP difference in related to contingent consideration, included in the GAAP net loss for the second quarter were gains of almost $13 million related to changes in the fair value of related party contingent consideration.
These non-cash gains were recorded as a result of reducing the fair value of this liability due to changing market conditions across the Company's three hospital products. Additionally, we have differences between our cash interest expense and our GAAP interest expense on the exchangeable notes.
For GAAP purposes, we have record interest expense on the debt component at an interest rate commensurate with our specific credit profile and tenure for this debt and that amounted to just under $3 million. For non-GAAP purposes however, we report interest expense using the 4.5% coupon and that amounted to $1.6 million.
Our GAAP net loss for the second quarter was $3.4 million for $0.09 per diluted share compared to net income of $28.9 million or $0.68 per diluted share in the same period last year. Moving on to our cash flow summary. We ended the quarter at $147 million in cash and marketable securities that is up from $94 million at December 31, 2017.
As most of you know in February, we completed our exchangeable notes offering and received net proceeds after expenses of $138 million. Simultaneously with the notes offering, we repurchased $18 million of our shares and also in 2018 we repurchased an additional $10 million of our shares under public Board Authorized programs.
Over the last 12 months, these share repurchase programs have reduced our outstanding share count by approximately 12%. And finally, as we have read in the release, we are lowering our 2018 revenue guidance to $90 million to $105 million based on current market conditions.
This is primarily due to the entrance of new competitors to our hospital product and as you already heard Mike talk about lower NOCTIVA revenue. With regard to NOCTIVA, keep in mind, we just launched this product in early May and we are pleased with the number of early indicators performance.
Nevertheless, when we initially developed our guidance for NOCTIVA, we made certain assumptions around the mix of patients and Medicare Part-D versus commercial insurance plan. The level of co-pay assistant and the timing of contracting with Managed Care Organizations.
Early in the launch, we are seeing that the mix of - less profitable Medicare prescriptions is higher than what we initially expected. We would expect this to revert as Managed Care Coverage improves over the next couple of months.
This along with slightly lower revenue generating prescriptions have lead us to reduce NOCTIVA guidance to $5 million to $10 million. We expect an increase in net selling price as we continue to improve script volume and market access throughout the remainder of 2018.
Our R&D spending remains unchanged at $40 million to $50 million and our outlook for SG&A continue to be $80 million to $90 million of which NOCTIVA spend is and expected to be about $50 million to $55 million. These amounts are unchanged from our previous guidance, but are expected to be at the high-end of this range.
And because of our anticipated losses in 2018 our effective tax rate is expected to be a benefit on where we range from 0% to 10%. With that, I will now turn the call back over to Mike for some concluding remarks..
Yes, thank you very much. That does conclude the formal portion of our presentation this morning. With that we will open the line up for any questions..
Thank you [Operator Instructions] Our first question comes from John Boris of SunTrust. Your line is open..
Thanks for taking the questions. Good morning.
So first question just with respect to NOCTIVA, just your assumptions on the competitor front on when you anticipate possibly that the Ferring would be coming into the market? And then second question just on FT218, really appreciate the update on the enrollment, what do you need to have in place to be able to identify how long it's going to take to enroll the other portion of the clinical trial?.
John, let me start in reverse and answer your FT218 question first. And then Greg Davis who as you knows is our Chief Operating Officer is here and he will talk to NOCTIVA component of your question.
As the FT218 as we mentioned, we have a number of sites that are over the next two months 12 weeks, whatever are going to be launched, we would like to see what the uptake of those sites is and the Australian sites as well. And once we see how those are commencing, we probably will be in a much better position to give you a firm end date.
We are buoyed by what we saw in the second quarter as compared to the first quarter. And a lot of the initiatives we have undertaken, particularly as it relates to enrollment and working with the clinical sites, we think we are beginning to see some dividends on.
So once we get some of those sites up and running and see the initial impact we will be able to give you a quick firm date..
So in Australia, Mike there is no Xyrem available in Australia and nothing really to treat narcolepsy.
So does that enhance your ability to enroll?.
Certainly it does. As you know, with the change in the SPA our ability to include some previous sodium oxybate users, it's still on a restricted basis, but in Australia where it's not been readily available, there should be in our view a broader group of patients that would be available.
And so as a result of its not being available there today, we have hoped that those would be pretty meaningful sites for us. But we also hope that the additional sites we are having here in the U.S.
I mean we are looking at geographies that prior to this point didn't have local access Chicago, Atlanta as an example of two of them which should also help move the enrollment forward as we open those sites up. I will turn the second part over to Greg..
Yes thanks John, good morning. I think the answer to the Ferring question is pretty straightforward. We have no visibility on the timing as far as launch is concerned. In terms of preparation we will assume they are coming imminently, but we have no visibility in terms of their actual timing..
Thank you. Our next question comes from Matt Kaplan of Ladenburg Thalmann. Your line is open..
Good morning..
Good morning..
Good morning Matt..
So just wanted to dig in a little bit more the competitive landscape for Nocturia and NOCTIVA in particular. Given the potential entry of Ferring in the near term.
And how you are going to address that? You spoke a little bit in your prepared remarks about the litigation, how could that be helpful for you and could you give a little bit more detail on that? And then also from a positioning and pricing point of view, what flexibility do you have to successfully compete as Ferring enters the market?.
Hi Matt, Greg. With regard to litigation, there is really nothing we can say at this point in terms of where that that status is and how that may ultimately play out and impact launch timings or any other matters.
There is a couple of matters at dispute including an IP matter that we expect to be heard sometime in the early part of 2019, which is fundamental to the litigation relative to the dispute around intellectual property that we believe they are infringing. So that is from a litigation standpoint. With regards to what levers we have.
Again we have no visibility in terms of what their go-to-market strategy will be from that perspective. We certainly understand as the first mover what opportunity we have to position ourselves in consideration of them coming to the market at some point.
And as Mike referenced in his remarks, we do believe that - we feel very good about our product and NOCTIVA, its clinical profile and the benefits [indiscernible] as a significant innovation for these patients.
As we may have discussed or shared previously, we are by far the lowest most efficacious dosed of desmopressin, we are anywhere from 17 to 67 times less desmopressin compared to the competitor or any other formulation or older formulation of desmopressin for that matter.
And we bring a very robust clinical profile with well over a 1000 patients studied in Phase III with two multi-year safety and efficacy follow-up studies. And for patients treated to the label into the indication we bring a very robust safety profile as well. So we feel very confident in our product and what we can do for patients.
Having a competitor in the market certainly raises the awareness and the importance of Nocturia which is a key critical success factor in terms of establishing and creating a market. So we think more noise will also be favorable to the market. And we feel very good about the product in NOCTIVA that we have and are launching [indiscernible].
Yes, I think the last comment too was certainly tied to the challenges that we believe in the real world setting patients will experience in having to limit the fluid intake that is required around the dosing of the Ferring product to not have a liquid an hour before you dose, to dose an hour before bed, to restrict caffeine and or alcohol for up to two hours and then to not drink for as many as seven or eight hours after administration certainly is a limitation and a challenge in the real world patient setting, in terms of what needs to be done in that administration versus where we see NOCTIVA as a very simple no lifestyle modifications, 30 minutes before bed, one spray in either nasal..
That is helpful. Thank you. And then just going back to FT218, I guess in your prepared remarks, you detailed the placeholder status in terms of the clinicaltrials.gov September 2019. I guess, given the initiatives that you have in terms of launching new sites and then amending the entry criteria.
When do you think we you will have visibility to the ability to predict the kind of completion date? And will you be able to provide us some additional detail in terms of updates on how those new initiatives in terms of additional sites and the change in the entry criteria have had if they had an impact?.
Sure Matt. Well, as I think we may have mentioned I think once we get these new sites up and running, both the sites in the U.S. and the sites in Australia I think we will be - and give those a chance to get initiated and get patients involved we will have a much better feel for what the end date may look like.
Again, it's been choppy, the enrollments over the one year plus that we have really had these U.S. sites open as at times has been quite good and other times it slows down.
But we feel like all these initiatives as well as these new sites, and some of them quite promising with what we think will be fair numbers of patients will give us a good feel for what we are doing. The September 19 date that was put in there, again was a placeholder.
Our objective ultimately will be to do better than that if we can, but I don't think we will be comfortable in giving you any kind of significant updates until more of these new sites get up and running and we see how they roll..
Okay, fair enough.
And then last question, in terms of the fourth NDA, can you give us a sense in terms of market opportunity for the product, given the potential safety differentiation as well?.
Yes, so, we have characterized the product in the past and nothing has changed that, it’s being somewhere between $30 million and $40 million per year. That is still the opportunity that will sit in front of us. Lot of these unapproved products never having been examined by the FDA. And I'm not just referring to this one, but lots of them in the past.
In some cases, don't meet current FDA standards, we feel like as I mentioned earlier we have uncovered - several times in the past, that we have uncovered some at least one important safety issue that we are going to pursue and ask for some sort of special dispensation to FDA whether that is represented by improving a product exclusivity associated with it or whether we can get some form of expedited review.
And again we don't know what that will look like until we get there, but we feel very strongly that we have improved the product that is used quite frequently in the marketplace today. We are going to make every effort to make sure that FDA understands as well. The 30, to 40 per year is what we view today..
Alright. Thanks for taking the questions..
Thank you. Our next question comes from François Brisebois of Laidlaw. Your line is open..
Hey guys thanks for taking the questions. Just in terms of can you give any more color on NOCTIVA product awareness? You talked about the 60% level.
What exactly does that mean?.
Yes, Hi Franç it's Greg. It really is just simply asking physicians are you aware of any new products in the market for Nocturia and then having them without any sort of prompting cite off actual products from their memory. And roughly 60% they are specifically naming NOCTIVA in that regard.
If you look at some of the other names they use you can make a case that the actual awareness is higher because they may use something like the new nasal spray, they may use the new formulation of desmopressin, we don't give any credits for those. We only give credit when they actually specifically state the name.
The other way to measure that is when you give them a list of names and then that will be characterized as an aided awareness level and in that case we are well over 80%. When you actually give a list of names in which NOCTIVA is one of them..
Okay. Understood.
And then is it fair to say that the potential guidance for the timeline of FT218 here to give kind of an unchanging guidance in the second half 2018 is not necessarily a thing anymore, you are just going to wait and see how sites enroll or…?.
Well we are hopeful that we can provide more color in the guidance as of the end date at the end of 2018. But again, we want to see how these sites get up and running and no matter what it is when they do we will try to quantify that and make sure what we don't want to do and what we will not do is put another date out there if we can't make it.
And so we are going to be as conservative as we can to make sure that we more efficiently give people information that will be helpful in their decision making. And so we will have to see what it is, but we wouldn't take it off the board, but that is our hope to be able to do that..
Understood. And then just lastly if I can, the NOCTIVA wholesale stocking impact on the second half of 2018 numbers.
Should we expect through the stocking issues to bounce back or how should we look at NOCTIVA sales that may impact the stocking?.
Yes, Franç I think as we look at the data today and we look at channel inventory on hand, we have seen nearly three quarters of all scripts be filled at the lower dose initially. So we have seen the lower dose product move-out and move-in to a more standardized, I would say fairly normalized, rate. Not completely.
So, I think from that standpoint, it’s less impactful on the lower dose. There is still a couple of wholesalers where we will be working through some of the higher strength products given that the current mix of strength in the market today..
Understood. Thank you..
Thank you. Our next question comes from Jason Butler of JMP Securities. Your line is open..
Hi, thanks for taking the question. I just had one about the FT218 and the patients that become eligible now under the past use criteria.
Do you have any information about those roughly 100 patients in terms of why they stopped taking drugs and therefore any opportunity to speculate on why they would be willing or able or eligible to enroll in the trial? Thanks..
Yes, so Jason, this is Mike. We don't have any information right here. That information is available in our clinical sites and they continue to go through that to look at those patients and to make sure which of those that can be now entered or considered to be part of the study.
I want to also let you know that those 100 patients aren't all inclusive of patients who previously may have been excluded from the study. In other words, there may be - that these were from the [indiscernible] trials component. There may be other patients in the studies and in fact there are where they were previously excluded.
And as a part of the database review, the clinical sites are going back to look at patients who fit that criteria. Now, with the previous use of sodium oxybate, having been an exclusionary criteria, anybody who had ever been on it was immediately excluded.
It doesn't mean, so you could have a patient who now would be eligible by virtue of the changes to the SPA, but who as a result of other exclusionary criteria may not be able to get into the study. Those numbers are being prepared now, but we don't have specific information today on why somebody stopped sodium oxybate previously.
This clinical sites would.
Does that answer your question?.
Yes, helpful. Thanks..
Okay..
Thank you. And at this time, I would like to turn the call back over to Mike Anderson for closing remarks..
We appreciate very much your joining us today. As always we have tried to be more visible with some of the information that we have provided and we have done in the past. We will continue to try to do that in the future to the degree that we can do it without risking in any way, shape or form the Company's competitive position.
Each and every employee at Avadel Pharmaceuticals is held responsible for doing different components that make our business go forward. We are going to up our efforts to continue to get patients enrolled in FT218 and get prescriptions generating at a higher level on NOCTIVA.
At the end of the day, we have what we still believe and will always believe are two outstanding product opportunities and we will do everything within our power to make those come to fruition as quickly as possible. With that, we want to thank you for your time today and we look forward to updating you as we can over the next number of months.
Thank you..
Ladies and gentlemen, thank you for your participation in today's conference. You may disconnect and have a wonderful day..