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`NPS Pharmaceuticals' CEO Discusses
`Q3 2013 Results Earnings Call
`
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`NPS Pharmaceuticals' CEO Discusses Q3 2013 Results Earnings Call Transcript | Seeking Alpha
`
`Nov. 6, 2013 2:42 PM ET | About: NPS Pharmaceuticals, Inc. (NPSP) by: SA
`Transcripts
`
`NPS Pharmaceuticals, Inc. (NASDAQ:NPSP)
`
`Q3 2013 Earnings Call
`
`November 6, 2013, 8:30 AM ET
`
`Executives
`
`Susan Mesco Senior Director, Investor Relations and Corporate Communications
`
`Francois Nader President and Chief Executive Officer
`
`Luke Beshar Executive Vice President and Chief Financial Officer
`
`Eric Pauwels Senior Vice President and Chief Commercial Officer
`
`Roger Garceau Executive Vice President and Chief Medical Officer
`
`Analysts
`
`Eun Yang Jefferies
`
`Joseph Schwartz Leerink
`
`Tazeen Ahmad Bank of America
`
`Salveen Richter Canaccord
`
`Geoff Meacham JPMorgan
`
`Alan Carr Needham & Company
`
`Boris Peaker Oppenheimer
`
`Carol Werther Summer Street
`
`David Nierengarten Wedbush
`
`Operator
`
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`Good day, ladies and gentlemen, and welcome to the quarter three 2013 NPS
`Pharmaceuticals earnings conference call. My name is Jen, and I will be your
`operator for today. (Operator Instructions) And I'd now like to turn the conference
`over to Ms. Susan Mesco, Senior Director, Investor Relations and Corporate
`Communications. Please proceed, ma'am.
`
`Susan Mesco
`
`Thanks, Jen, and welcome to our third quarter conference call. Before we start, let
`me remind you that today's call will include forwardlooking statements based on
`current expectations. Such statements represent our judgment as of today and may
`involve risks and uncertainties. Please refer to our filings with the SEC which are
`available from the SEC or our website, for information concerning the risk factors
`that could affect the company.
`
`Joining me on today's call are members of our executive management team,
`including Dr. Francois Nader, our President and Chief Executive Officer; Luke
`Beshar, our Chief Financial Officer; and Eric Pauwels, our Chief Commercial Officer.
`
`I will now turn the call over to Dr. Francois Nader.
`
`Francois Nader
`
`Good morning, and thank you for joining us on today's call. 2013 continues to be
`marked by substantial progress across all areas of our business. We are delivering a
`successful launch of Gattex in the U.S. We are actively implementing our
`international strategy to launch Revestive globally.
`
`We filed Natpara USBLA on October 23, and will be filing in additional countries in
`2014. And we are strengthening our pipeline with the first patient in of the Gattex
`registration study that are expected in the fourth quarter, along with initiation of the
`Phase 2a study of NPSP795 in ADH by mid2014.
`
`Let me first start with Gattex. The U.S. launch is proceeding exceptionally well and
`this is why the yeartodate revenues are exceeding expectations. The demand has
`been consistently strong as expressed by the number of new scripts and the market
`penetration.
`
`The reimbursement environment remains very favorable. Our gross to net sales
`reductions were better than expected. And compliance and discontinuation rate
`continue to be encouraging. Given this success to date, we are pleased to be
`increasing our 2013 net sales guidance.
`
`Another exciting milestone for Gattex on the clinical side was the presentation of
`twoyear data at the ACG Meeting in October. Since short bowel syndrome is a life
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`long condition and Gattex is approved for chronic use, demonstrating longterm
`outcome is very important consideration.
`
`It was very encouraging to see in STEPS 2, significant parental nutrition reductions
`across all three groups, who received Gattex with up to 33% of patients achieving
`complete independence. We already submitted these data to the FDA in support of
`revision of our U.S. label, and we will be making a similar submission to the
`European Medicines Agency in the first quarter.
`
`Let me now touch on our international expansion activities. As you know, earlier in
`the year, we acquired the international rights to Natpara and Revestive, which is the
`trade name for Gattex exU.S. This transaction create a superb opportunity for NPS
`to expand its geographic presence, manage its brand globally and generate
`significant revenues, given the sizable international markets for Revestive and
`Natpara.
`
`The transfer of the EU marketing authorization for Revestive from Takeda to NPS
`was recently completed. We are actively building a targeted international
`infrastructure and we will be delivering key Revestive milestones over the coming
`months.
`
`At this time, I would like to invite Eric Pauwels to share some additional color on our
`U.S. and international commercial activities for Gattex and Revestive.
`
`Eric Pauwels
`
`Thank you, Francois, and good morning to those on the call. As Francois mentioned,
`we continue to be very pleased with the successful U.S. launch of Gattex. Our field
`force has been doing a great job, identifying new patients and expanding our
`prescriber base. We currently have nearly 600 REMs trained healthcare providers
`and the prescribers profile are in line with our expectations, with the majority being
`community based GI specialist.
`
`We've received a total of 452 prescriptions and about onethird of the patients are
`getting their parental support from one of our five distribution network partners. We
`are working closely with our partners and field force is also doing an excellent job,
`generating demand from the remaining 65% of patients outside of the network.
`
`There are currently 235 patients on therapy and we are confident that we will
`achieve our goal of having between 275 and 325 patients on Gattex by the end of
`the year. Our market access team has been effective in demonstrating the value of
`Gattex to the players and generating favorable reimbursement trends.
`
`As previously discussed, we continue to expect prescription to dispense time to take
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`an average of 90 days to 120 days. The gaining factors for dispensing Gattex are
`typically securing prior authorizations and reimbursement, obtaining copay
`assistance, confirming the completion of colonoscopies and scheduling initial nursing
`visits.
`
`Given the prevalence of tight market for short bowel syndrome, a key focus of our
`Gattex commercialization effort is delivering valuable support, one patient at a time.
`Particularly, given the complexities associated with this condition. As a
`consequence, we are pleased with patient compliance and discontinuation trends
`that we have seen so far. Compliance is 86% and discontinuations are just under
`10%.
`
`However, over the longterm soft injectable products for chronic nonsymptomatic
`disorder tend to have lower compliance and higher discontinuations. Therefore, we
`have guided to an eventual compliance range of 70% to 80% and a discontinuation
`rate of 20% to 30%.
`
`Now, the anecdotal feedback we are hearing from NPS advantage and our field
`based team continues to be very great gratified. Patients are telling us how much
`better they feel on Gattex and some of the success stories include the resolution of
`intestinal transit issues, eating lunch and dinner again for the first time in more than a
`year, changing an ostomy bag four times per day rather than 12. And complete
`independence from parental support with the removal of the central line. From a
`safety perspective, the side effects reported so far have been consistent with our
`label.
`
`Now, switching to our international operations. Considerable progress has taken
`place over the past few months. Similar to other orphan organizations, we expect
`that a small infrastructure would be needed in the 30 targeted countries we are
`planning to launch Revestive.
`
`Now that we are holder of the EU marketing authorization, we will soon begin pricing
`and reimbursement discussions in key European countries. With an estimated 3,000
`to 6,000 addressable patients, Europe is an important territory for Revestive with
`significant sales potential.
`
`We are planning on our first commercial launch to be in Germany, followed by the
`United Kingdom and Denmark. However, we expect the ramp to be slower than the
`U.S. with meaningful sales beginning in the second half of 2014. We're also getting
`ready to initiate named patient programs in Turkey, in France, in Canada, amongst
`others.
`
`In Latin America, our current focus is our market development, generating
`awareness and identifying addressable SBS syndrome patients. We are also geared
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`up to initiate named patient programs in selected countries. NPS will likely take nine
`to 12 months from the time of prescription, due to lengthy administrative and legal
`processes in countries like Brazil, Argentina and Colombia.
`
`For Japan, we've identified the appropriate corporate structure and we are actively
`developing our orphan drug and development strategy. We anticipate that the
`ministry of health will require us to conduct a small study in Japanese short bowel
`syndrome patients in advance of filing for registration.
`
`So in conclusion, these are exciting times for NPS. We are very pleased with the
`success of the U.S. launch so far. Key metrics such as sales, demand, penetration,
`endorsement, compliance and discontinuations are all tracking at or ahead of our
`expectations. We remain confident in our ability to deliver on our 2013 sales and
`patient care guidance, with sustainable growth momentarily continuing into 2014.
`And finally, we are preparing for our first international sales of Revestive with
`meaningful revenues on track for late 2014.
`
`I will now turn it back to Francois to give you an overview of our progress on Natpara
`and the rest of the pipeline.
`
`Francois Nader
`
`Thank you, Eric, for this overview. Let me now switch to Natpara. I'm happy to report
`that on October 23, we submitted our USBLA putting us on track for the potential
`approval of our second rare disease product in the U.S. before the end of 2014. The
`NPS team did a superb job preparing the 443,000 page BLA submission to the FDA.
`USBLA is supported by a significant safety data and the largest clinical program ever
`conducted in hypoparathyroidism.
`
`We are gearing up to support the Natpara BLA review by advancing three key tracks.
`First, interacting with FDA, as it reviews our BLA; second, preparing for an advisory
`committee panel, in case the FDA decides to have one; and third, readying for
`potential FDA preapproval inspections at our facility and at our contract
`manufacturers and clinical sites. These activities are a top priority for the Natpara
`team and as we did with Gattex, we are putting the right resources in place to get to
`the finish line and secure U.S. approval of Natpara.
`
`For those of you who are new to the story, let me just share with you why the NPS
`team is so excited with the prospects of having Natpara approved.
`Hypoparathyroidism is a rare and highly symptomatic endocrine disorder,
`characterized by insufficient levels of parathyroid hormone.
`
`The lack of parathyroid hormones can lead to severe hypocalcemia and
`hyperphosphatemia with dramatic consequences on the bone, the muscular system
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`and the neurological system. Unfortunately, taking high doses of calcium and active
`vitamin D to increase serum calcium can lead to serious unintended consequences.
`
`Since serum phosphate levels are elevated, increasing serum calcium may lead to
`irreversible calciumphosphate deposits in the kidneys, arteries or brain. At the
`recent ASBMR meeting, Dr. Bart Clarke, presented an analysis from the PARADOX
`burden of illness study, in which 67% of the 374 respondents reported joint or bone
`pain, despite receiving standard management with calcium and vitamin D.
`
`Natpara is a bioengineered 1to 84 parathyroid hormone that was designed to replace
`the endogenous hormone. Our landmark Phase 3 REPLACE study, which was
`recently published in Lancet Diabetes & Endocrinology journal, demonstrated with a
`high degree of statistical significance, that 53% of Natparatreated patients achieve
`normal calcemia, while reducing that calcium and vitamin D intake by at least 50%.
`Only 2% of the placebotreated patients were able to meet this triple primary
`endpoint.
`
`Maintaining normal calcemia, while reducing the reliance on calcium and vitamin D is
`certainly clinically meaningful. But it is also important to demonstrate Natpara's long
`term outcomes on the organ systems affected by hypoparathyroidism. This effect
`was demonstrated in two ways: first, Dr. John Bilezikian of Columbia University
`reported a beneficial effect on bone during the six month REPLACE study; second,
`four year data published by Dr. Bilezikian from his ongoing eight year
`hypoparathyroidism study showed that patients on Natpara increased their bone
`turnover markers suggesting that treatment with Natpara returns bone metabolism to
`levels closer to those individuals with normal parathyroid function.
`
`Based on the significant unmet medical need, the optimal mechanism of action of
`Natpara, the strength of our Phase 3 data and the longterm outcomes data on bone,
`we believe that if approved, Natpara is positioned to change the standard of care for
`hypoparathyroidism, as the first full length PTH replacement therapy. Consequently,
`we are increasingly confident in the significant global market opportunity this product
`represents.
`
`For Natpara and as for Revestive, international markets will be an important long
`term value driver. Takeda recently submitted a request to EMA to transfer the
`Preotact marketing authorization to NPS. We have also requested orphan
`designation in Europe for Natpara in hypoparathyroidism.
`
`We have completed an extensive market research of the global market potential of
`Natpara, and we are executing our commercial strategy in key international market.
`We look forward to sharing with you a comprehensive review of the Natpara
`opportunity at our upcoming analyst event on December 6, in New York, details will
`be forthcoming.
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`The last item, I would like to cover is our pipeline initiative, the registration study of
`Gattex into Gattex short bowel syndrome and the Phase 2a study of NPSP795 in
`autosomal dominant hypocalcemia or ADH. Regarding pediatric short bowel
`syndrome, we are on track to initiate our Gattex global pediatric registration study in
`this indication, before the end of the year.
`
`This openlabel study will evaluate three doses of Gattex in patients aged 1 to 17.
`Each arm will enroll on a sequential basis for 12 week treatment period for each of
`those. An attempt will be made to enroll additional subject in an observational arm
`that would receive a standard of care.
`
`The primary outcome measures will include a number of reported adverse events
`and the change in parenteral and enteral support requirement after 12 weeks of
`treatment with Gattex. We are also excited about launching our clinical program for
`NPSP795 in autosomal dominant hypocalcemia or ADH. Our Phase 2, proofof
`concept study is scheduled to begin in mid2014.
`
`As a reminder ADH is an ultrarare, lifelong genetic mutation that causes a change in
`the calciumsensing receptor physiology that affects children and adults. Regardless
`of what the serum calcium or PTH levels are, ADH patient continuously excrete
`calcium through the renal system, because the receptor is always sensing that
`serum calcium is way to high. This results in symptoms that can be life threatening
`and include convulsions and renal impairment. There is no approved treatment for
`ADH.
`
`NPSP795 is a calcilytic agent, which has a small molecule antagonist of the calcium
`receptor, and therefore targeting the source of the disorder the calciumsensing
`receptor. This program aligns perfectly with our corporate mission to bringing
`innovative therapeutics to patients with rare disorders of high unmet medical need.
`
`In addition, it is highly complementary to our existing endocrinology franchise since
`ADH is treated by a subset of the endocrinologist we are targeting for
`hypoparathyroidism. We will update you on this exciting program on upcoming calls.
`The next item I will briefly cover is business development. Just to mention that we
`are actively evaluating opportunities that qualify as innovative, firstinclass or best
`inclass therapeutics for rare diseases with true unmet medical needs.
`
`With that I will turn the call over to Luke to report on the financials.
`
`Luke Beshar
`
`Thanks, Francois, and good morning to all joining us on the call today. From the
`financial perspective, NPS continues to be in terrific shape, in fact, the best in our
`history.
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`Third quarter net Gattex sales exceeded our internal projections. It came in at $11
`million. We enjoyed favorable gross to net reductions, which is largely driven by
`positive trends and the cost associated with patient assistance programs. Our
`Sensipar royalties continue to be a solid contributor with more than $25 million of
`third quarter royalties and $76 million yeartodate. We also received about $700,000
`cash payments for royalties earned in the quarter on OrthoMcNeil's sales of
`NUCYNTA.
`
`Now moving to expenses, I'll start with cost of goods sold, which is $1 million or
`approximately 10% of Gattex sales. Our cost of goods sold this year consists
`primarily of royalties and packaging costs. As you may recall, the product being used
`to support the Gattex launch was produced prior approval and therefore expensed to
`R&D. We expect the suppliers to support U.S. product demand into 2015. And once
`the preapproval U.S. inventories depleted, we expect Gattex cost of goods sold to
`normalize in the range of about 20%.
`
`With respect to Revestive, we capitalized the API inventory that we received and
`regained the worldwide rights from Takeda, and we will begin expensing this
`inventory as the product is sold in international markets.
`
`For research and development, our expenses are relatively consistent with prior year
`at about $19 million. SG&A expenses increased by approximately $9 million due to
`the cost related to the U.S. launch of Gattex along with some initial costs to support
`our international expansion. The end result was essentially a breakeven quarter with
`the net loss of $0.01 a share.
`
`As I mentioned earlier, our financial position and outlook is strong as ever. We ended
`with the quarter $178 million in cash and investments versus $181 million at the end
`of the second quarter. And this should be more than sufficient to support the global
`commercialization of both Gattex and Natpara along with funding key new growth
`opportunities.
`
`Moving on to the guidance. We are, indeed pleased to increase our Gattex sales
`guidance to $28 million to $32 million from $25 million to $30 million and we remain
`on track to have between 275 and 325 patients on drug by the end of the year.
`
`Please note, at beginning of 2014 we will no longer report the global number of
`prescriptions or number of patients on drug. These metrics we have provided this
`year is really to provide you an insight into the initial launch year, we will however
`continue to guide on full year net sales. Our operating expenses excluding cost of
`goods sold and sharebased comp, our guidance remains in effect at $140 million to
`$150 million for the year.
`
`So to summarize the financial update, we continue to be delighted with the U.S.
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`launch trajectory for Gattex. We're excited about the international Revestive
`revenues starting in 2014. We are encouraged by the potential U.S. approval of
`Natpara in May 2014 and its subsequent launch. Our royalty base portfolio continues
`to deliver significant and consistent value. And our financial position and outlook is
`the best it's been in our history.
`
`As this time I'd like to turn the call back over to the operator to begin our Q&A
`session.
`
`QuestionandAnswer Session
`
`Operator
`
`(Operator Instructions) Your first question comes from the line of Eun Yang from
`Jefferies.
`
`Eun Yang Jefferies
`
`Based on the third quarter report, so 94 new patients were added in the third quarter,
`but looking at your guidance, even at the highend of guidance, that you are
`expecting about 50 more patient added for the remainder of the year. So I'm kind of
`wondering why do you think the less number of patient would be added compared to
`third quarter, I mean granted that there are only two months still left. Is that because
`you anticipate increases in discontinuation rate and decreases in compliance rate or
`is that the conversion rate from the script to patients studying on the therapy is
`decreasing?
`
`Francois Nader
`
`That's probably three or four questions in one, so I'll try to address them one at a
`time. But first let me address the weekly prescriptions. We've been very happy with
`the way things are going. Our weekly prescriptions have been very consistent with
`the vast majority of the week bringing anywhere between 9 to 12 new scripts. So we
`have couple of weeks, where we had exceptions, so the numbers were either lower
`or higher. But the overall picture is very favorable.
`
`And this is really confirmed by the feedback we're getting from the field organization
`that it's continuously generating demand. As I said it, actually Eric said it, even
`though we have 35% of our patients coming from our five partners, the rest 65% are
`coming from the rest of the market. So we're not seeing any softening in our
`demand. The demand continues to be very encouraging.
`
`Now, related to compliance, which was I think one of your questions, we always said
`that the compliance will end up being between 70% and 80%. We also said that at
`the very beginning of any launch, specifically with the selfinjectable, patients tend to
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`be perfectly compliant. But we also know from experience that when you think of a
`selfinjectable, specifically in a chronic nonsymptomatic condition like Gattex in
`short bowel syndrome, we believe that over time compliance will soften a little bit.
`
`So as much as we're excited with the 95%, we knew that overtime the compliance
`would start drifting down and would land probably within the 70% to 80% guidance. I
`cannot tell you when, but this is the norm of thing, which again in comparison to
`other selfinjectable is a remarkable compliance. Think about insulin for example,
`where compliance is significantly lower.
`
`So allinall we are quite excited with this launch. As I said, practically all our metrics
`are pretty much either on track or exceeding expectations. And the conversions are
`going well. It's taking the 90 to 120 days, as we projected. So here on no surprises.
`
`I wish we could do it quicker, but remember that Gattex is a complicated product, so
`we need to think about not only the traditional reimbursement, the assistance for the
`copay, but also we have to think compared to other products, for example, about
`colonoscopies, and the assistance that the nurse is providing at the home of the
`patient, actually at the home of every patient. So I think I addressed all your
`questions, Eun, unless I missed one.
`
`Eun Yang Jefferies
`
`So the question is, after 120 days from the written script, what percent of a script
`does not convert to patient starting on therapy?
`
`Francois Nader
`
`We're not guiding on this, but what I can tell you is there is a wide range. And the
`range is not only because of everything I said, but at times there are medical
`reasons, why these patients cannot be put on Gattex, when we need them to be on
`Gattex, because of a medical decision.
`
`So we're not giving up on any patient. And we're tracking every one of them. And it's
`important to see that the reimbursement is where we predicted. The copay
`assistance is where we predict it. And it's taking time for some patients. On the other
`hand we have patients who are converted within a 30 to 40day period, which is
`excellent. Unfortunately it's more around 90 to 120 days on average.
`
`Operator
`
`Your next question comes from the line of Joseph Schwartz from Leerink.
`
`Joseph Schwartz Leerink
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`I was wondering if you could give us any flavor on how many of the patients that are
`going on Gattex were previously identified by NPS versus are you seeing that
`patients are coming out of the woodwork, now that a drug is available and you've
`been out there detailing longer?
`
`Francois Nader
`
`It depends how you define woodwork actually, Joe, because 35% or so of our
`patients are coming from the 1,000 or so patients identified by our five partners, so
`differently where 65% of the patients that are currently having a prescription, if you
`will, that's coming from elsewhere. And to the credit of our sales organization that is
`expanding the market and looking at other different sources of patients.
`
`So this is very reassuring because the concern, what could have had, if lots of the
`patients were coming from this initial 1,000 patients identified, and this is absolutely
`not the case. We're continuing to market. I don't see any reason for the moment to
`change our 3,000 to 5,000 market size, but would certainly keep you informed, if
`things change in a substantial way.
`
`Joseph Schwartz Leerink
`
`And the how are your concierge services and nursingsupport personnel focused on
`or dedicating their time to new patients versus to finding new patients and getting
`them on drug versus servicing existing patients and keeping them happy with the
`therapy and dedicated to it, whether they're responding or not, need to be patient.
`Since it's so expensive to acquire a patient, I would think you'd want to try to keep
`them as long as possible?
`
`Francois Nader
`
`I'll ask Eric maybe to answer this question. Eric?
`
`Eric Pauwels
`
`We're spending an equal amount of time actually looking for new patients and that's
`primarily the role of the area business specialist. So our sales force is really focusing
`on generating demand and working at the healthcare provider level to generate
`referrals. But up course NPS Advantage and our nursing staff that we've hired on
`working to ensure that every patient that gets started is a quality patient. We're very
`focused on quality starts.
`
`That's really important to us as we try to get Gattex ambassadors, if you will, and
`insure that these patients can communicate the benefits. So there is an equal
`amount of effort by our area business specialists to find patients and our NPS
`Advantage care coordinators and our nursing staff to ensure that patients get
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`through the hurdles of prior authorization, reimbursement and copay and get a
`quality start and maintain therapy.
`
`Joseph Schwartz Leerink
`
`Other things that you can do or detect when a patient seems likely to be on the verge
`of discontinuing and you can help him determine whether or not that's the right
`decision to make or maybe they need to wait if they haven't responded fully yet and
`things like that?
`
`Eric Pauwels
`
`Yes. As a matter of fact, Joe, there is a very high touch point with the patients, very
`early on. So when patients begin therapy, we send a nurse initially that will train on
`injection and then patients are called once a week either by the nurse that looks
`within our current partnership or we have NPS nurses that will followup with them to
`ensure that the patient is responding and we get that feedback back to the
`healthcare providers.
`
`So essentially that is a really high touch point to ensure that start is a quality start
`because we know from our own experience that really the first three months are
`going to be very instrumental to ensuring that the patient has a good experience and
`will stay on to drug. So we do have a very systematic way on almost a weekly basis
`in that first initial period to ensure that patients get a lot of highquality starts.
`
`Operator
`
`The next question comes from the line of Tazeen Ahmad of Bank of America.
`
`Tazeen Ahmad Bank of America
`
`I just wanted to get some color on the types of patients that are currently on Gattex.
`Do you have any feedback on the baseline characteristics of patients that are
`currently starting therapy, like how many days per week do they start off needing
`PN? Also, what percent of your patients that are currently taking Gattex are patients
`that were already on the clinical trials that transitioned over to commercial use once
`the drug was approved? And the last question is, are there any patients that are on
`drug that you know of who only may need IV liquid support and not parenteral
`support?
`
`Eric Pauwels
`
`The types of patients actually can range quite broadly. I mean we have all kinds of
`patients in terms of age, demographics, ideology. Keep in mind that this is a very
`heterogeneous type of population. So we have patients as young as 18 and over 80
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`years old that we've gotten