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Edited Transcript of AIMT earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Aimmune Therapeutics Inc Earnings Call

Brisbane Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Aimmune Therapeutics Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Oxtoby

Aimmune Therapeutics, Inc. - Chief Commercial Officer

* DeDe Sheel

Aimmune Therapeutics, Inc. - VP of IR

* Eric H. Bjerkholt

Aimmune Therapeutics, Inc. - CFO

* Jayson Donald Alexander Dallas

Aimmune Therapeutics, Inc. - President, CEO & Director

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Conference Call Participants

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* Benjamin Shipman Porter

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Brian Peter Skorney

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Christopher Joseph Raymond

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Corinne Jenkins

Goldman Sachs Group Inc., Research Division - Research Analyst

* Evan David Seigerman

Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst

* Justin Hayward Burns

RBC Capital Markets, Research Division - Senior Associate

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Aimmune Therapeutics Third Quarter Earnings Call. (Operator Instructions). As a reminder, this conference is being recorded. Thank you.

I would now like to turn the conference over to your host, Ms. DeDe Sheel, Vice President of Investor Relations. Please go ahead, madam.

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DeDe Sheel, Aimmune Therapeutics, Inc. - VP of IR [2]

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Thank you, Katrina. Good afternoon, and thank you for joining us today to discuss Aimmune's third quarter 2019 financial results and recent operational highlights. Today's call is being webcast, and a replay will be available on our corporate website at aimmune.com.

Joining me on the call today are Dr. Jayson Dallas, President and Chief Executive Officer; Andrew Oxtoby, Chief Commercial Officer; and Dr. Dan Adelman, Chief Medical Officer. After our prepared remarks, we will open the call for Q&A.

Before we begin, I would like to remind you that during today's call and Q&A session, we will be making forward-looking statements. These forward-looking statements include Aimmune's expectations regarding the potential benefits of PALFORZIA, including potential benefits for patients, caregivers, and allergists; potential approval of PALFORZIA by the FDA and the EMA, including approval timelines; the potential commercial launch of PALFORZIA, including launch timelines; the potential [wins] for PALFORZIA; the potential receipt of comments to the MAA; the first potential market in Europe; the timing for payers in the United States to add PALFORZIA to formularies; potential timing for completion of enrollment for Aimmune's Phase II clinical trial for AR201; the sufficiency of Aimmune's cash resources; Aimmune's ability to access an additional $130 million from its credit facility; and Aimmune's expectations regarding potential applications of the CODIT approach to treating life-threatening food allergies.

Risks and uncertainties that contribute to the uncertain nature of the forward-looking statements include the expectation that Aimmune will need additional funds to finance its operations, Aimmune's or any of its collaborative partners' ability to initiate and/or complete clinical trials, the unpredictability of the regulatory process, the possibility that Aimmune's or any of its collaborative partners clinical trials will not be successful, Aimmune's dependence on the success of PALFORZIA, the reliance on third parties for the manufacture of our product candidates, possible regulatory developments in the United States and foreign countries, and Aimmune's ability to attract and retain senior management personnel.

These forward-looking statements are based on assumptions and are subject to risks and uncertainties that can cause actual results to differ significantly from those stated on this call. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.

Please refer to the company's quarterly report on Form 10-Q for the quarter ended September 30, 2019, for some of the important risk factors that could cause actual results to differ materially from the forward-looking statements made on this call. Except as required by law, Aimmune disclaims any obligation to publicly update or revise any information to reflect the events or circumstances that occur after this call. Finally, I'd like to point out that Aimmune's food allergy treatments are investigational and are not FDA approved.

And now I'll turn over the call to Jayson.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [3]

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Thanks, DeDe, and good afternoon, everyone. Thank you for joining us today to discuss our third quarter financial results and some operational highlights.

This is a very exciting time for us, as we are working closely with FDA to complete the review of the BLA for PALFORZIA. If approved, PALFORZIA would be the first and only approved treatment for any form of food allergy. We look forward to offering a potential FDA approved treatment option to the millions of children and teens with peanut allergy, their families, and the physicians who treat them. Of course, we could not have done any of this without the patients, caregivers, investigators, and the entire food allergy community who participated in and supported our clinical trials, and we are immensely grateful to all of them.

On our call today, I will review some of our achievements this quarter, Andrew will discuss our launch preparations, and Eric will review the third quarter financial results.

As most of you know, on September 13th, the FDA's Allergenic Products Advisory Committee, or APAC, met to discuss and make recommends on the safety and efficacy of PALFORZIA. I am delighted to reiterate that the APAC voted 7:2 that the efficacy data, and 8:1 that the safety data, in conjunction with additional safeguards, support the approval of PALFORZIA. The FDA has requested the implementation of a risk evaluation and mitigation strategy, or REMS program, if PALFORZIA is approved. The REMS will help support the safe and appropriate use of PALFORZIA. As part of our original BLA submission, we proactively proposed a number of risk management measures that were consistent with the conduct of our Phase III clinical trial protocol. These risk management measures form the cornerstone of the REMS. Since the APAC meeting, we have been working with the FDA to finalize the details of the REMS and do not expect its implementation to have a material impact on the timing of PALFORZIA's approval.

Patient safety has been central to us since the beginning of PALFORZIA's development. It has undergone the same rigorous clinical development required by the FDA for any drug candidate seeking regulatory approval. As a result, we have generated the largest, most clinically robust database ever assembled for a therapeutic approach to peanut allergy, with over 1,200 patients in our trials and well over 1,000 patient years of experience. FDA approval would be significant for allergists and their peanut allergy patients. For allergists, PALFORZIA would provide a clinically validated, pharmaceutical grade, oral immunotherapy. Each dose has been precisely measured and sourced and manufactured to minimize lot-to-lot variability.

For patients and their caregivers, PALFORZIA would be a prescription therapy that is covered by insurance and administered by an allergist to support its safe and appropriate use. We will also offer support services to patients and families to provide information, promote adherence, and ensure access. These services will include a variety of educational materials, a dedicated call center, a copay card for eligible patients, and product delivery options in consultation with their physicians. Although we have not yet disclosed a price, we intend to price PALFORZIA to reflect its value as a biologic oral immunotherapy that has undergone rigorous clinical development, is manufactured under GMP standards, and provides the infrastructure to support streamlined patient access and assistance.

We continue to educate the allergist community, as we generate, present, and publish PALFORZIA data. As outlined in our press release last week, we will be presenting data from more than half a dozen studies at the American College of Asthma, Allergy, and Immunology Annual Scientific Meeting, taking place this week in Houston. We will present additional safety and efficacy data on PALFORZIA as well as real-world insights regarding the implementation of oral immunotherapy in clinical practice.

Before closing, I'd like to provide a brief update on our regulatory process with PALFORZIA in Europe and our ongoing clinical trial program. The European Medicines Agency, or EMEA, is currently reviewing the marketing authorization application that we submitted in June. We expect to receive the day 120 questions this month, and given a standard overall review time of 12 to 15 months, marketing authorization in Europe could occur in the second half of 2020. Upon approval, we expect our first European launch to be in Germany.

In September, we submitted an application to Swissmedic, the authority responsible for the authorization and supervision of therapeutic products in Switzerland. The standard review period for Swissmedic is approximately 18 months. Andrew will provide additional information on our launch preparations in Europe.

Our Phase III Poseidon trial, evaluating the safety and clinical efficacy of PALFORZIA in patients between 1 and 4 years of age, continues to enroll. And finally, as we have previously announced, in August, we dosed the first patients in our Phase II clinical trials for patients with egg allergy, and we continue to enroll the study. We expect to complete enrollment in the second half of 2020.

I will now turn the call over to Andrew.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [4]

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Thank you, Jayson, and if I may start with a brief apology. I've been battling a head cold, and it's left me with a bit of a sore throat, so appreciate your indulgence in listening to me, and I can assure you that I feel much better than I sound.

So as Jayson mentioned, this is an exciting time, as we prepare to launch our first medicine. We are building a strong commercial organization which has been specifically designed for PALFORZIA's launch upon its potential FDA approval. As I mentioned on the last call, the 3 critical areas we have focused on are ensuring we have the best people in place to successfully introduce PALFORZIA to physicians and patients, providing tools and resources to support the safe and appropriate use of PALFORZIA, and understanding the patient, physician, and payer communities. We are finalizing the hiring for all of our 80 field-based practice account manager roles. We have had over 5,000 applications for these 80 positions. We were able to be very selective about who we hired.

The practice account managers or PAMs, will work closely with allergists and their teams to train them on the implementation protocol so that patients, physicians, and their office staff have positive, safe experiences with PALFORZIA. When we were recruiting, we looked for people with diverse skills which were broader than those of traditional pharmaceutical sales representatives. Many of our hires have experience in specialty launches, marketing, market access, patient services, and commercial operations, in addition to experience in field-based sales roles.

As you know, we were informed by FDA just prior to our advisory committee, that we should plan to implement a formal REMS program for PALFORZIA. Even with this short degree of advance notice, I'm pleased by the incredible speed of execution and flexibility from both our internal team and our vendor partners to accommodate these requirements into our commercialization plans. And as a result, we still anticipate being able to launch PALFORZIA, if approved, in January 2020. With this launch time line in mind, we have set the employment start date for our practice account managers as January 2nd, and we have a rigorous training program developed to onboard them.

As a reminder, with these 80 PAMs, we are appropriately resourced to be able to cover the approximately 5,400 board certified allergists in the U.S. At launch, our team will focus on supporting the 1,300 allergists we have identified as the physicians most ready to initiate PALFORZIA therapy, soon after potential approval.

Our market access team has met with payers representing over 90% of covered lives. We continue to work with payers to help them understand how the product will be prescribed and administered by allergists, and to define who the appropriate patient for PALFORZIA will be. While payers understand the unmet need we are addressing, we expect that PALFORZIA will be gradually added to formularies over the course of 2020, as payer P&T committees meet. Prior to inclusion on formularies, PALFORZIA would be available via medical exception.

We are establishing a patient support hub, which will provide product information and assistance navigating the PALFORZIA initiation process. This will consist of individual tailored case management that provides a person on the phone to handle patient queries, adherence programs, and reimbursement support. We also plan to offer copay assistance cards to reduce out-of-pocket costs for patients as well as a patient assistance program for qualified patients who are either uninsured or underinsured.

As part of our launch preparations, we have conducted a significant amount of market research with patients and their caregivers as well as the physicians who treat them. We recently completed a quantitative survey of 122 U.S. allergists with varying levels of experience with immunotherapy, in order to better understand the unmet need for patients with peanut allergy and assess allergists' potential use of PALFORZIA, and I'd like to share a few insights and learnings from this survey. First, 78% of all respondents said they are interested in OIT to treat food allergies. Second, amongst these physician respondents who do not currently administer OIT, there is strong agreement that there is a high unmet need in pediatric peanut allergy patients, and that the main reason they currently don't provide OIT is because there are no FDA approved OIT therapies available. Third, nearly 60% of physician respondents are willing to prescribe PALFORZIA right away with at least some of their patients. Thirty-one percent said they would be willing to try it after learning more about it, and a small minority indicated that they would wait until it has been on the market for a few months and they have seen some preliminary usage data, or they would wait until it is covered by insurance.

We also wanted to evaluate the readiness of the practices to administer PALFORZIA, and there were 2 key takeaways. First, 99% said they currently have patients 4 to 17 years of age whom the treat with allergy shots. This means their offices are physically set up to offer immunotherapy, observe patients after dosing, and that they have staff trained to administer epinephrine, if necessary. And second, 90% of physician respondents report that their practice has a designated observation area for patients who are being monitored. We realize that administering OIT will require a modification to their existing workflow. However, we are encouraged by these data. We feel the data we are presenting on practice logistics at the College meeting in Houston this week will support these findings as well.

Finally, we are making good progress in our initial European commercial buildout. As we previously announced, we submitted our MAA to the EMA in June, and our application for Switzerland to Swissmedic in September. Upon authorization, the first European launch market will be Germany, and in order to support this priority market, we have hired and onboarded both a general manager and a medical director for the Germany, Austria, Switzerland markets. They will be providing their -- they will be building their team and preparing for potential launch in the coming months.

And with that, I will turn the call over to Eric to review the financials.

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [5]

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Thank you, Andrew. We ended the third quarter in a strong financial position, with $200 million of cash, cash equivalents, and investments, compared to $304 million on December 31, 2018. The decrease primarily reflects net cash used in operating activities partially offset by cash provided by financing activities, including net borrowings from our debt issuance in January 2019 of $36.1 million. We expect that this loan agreement, plus cash on hand, will fund the launch of PALFORZIA and progress our pipeline.

For the quarter ended September 30, 2019, net loss was $64.5 million, compared to a net loss of $51.7 million for the comparable period last year. On a per-share basis, net loss for the quarter was $1.03, compared to $0.89 for the comparable period in 2018. R&D expenses for the quarter ended September 30, 2019, were $30.6 million, compared to $31.7 million for the comparable period in 2018. The decrease was primarily due to the completion of certain PALFORZIA clinical trials, which were partially offset by higher costs related to regulatory activities and increased contract manufacturing costs to support the potential commercialization of PALFORZIA as well as costs related to the Phase II clinical trial for AR201.

General and administrative expenses for the quarter were $34 million, compared to $21.3 million for the comparable period in 2018. The increase was due primarily to additional employee-related costs and external professional services, as we continue to build our infrastructure to support the development and potential commercialization of PALFORZIA.

With that, we will open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) For your first question, we have Charles Duncan from Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [2]

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First of all, thanks for taking the question, and Jayson and team, congrats on the progress in the quarter. Looking forward to next year, but had one question on commercial and then one question on the pipeline I wanted to ask you. Regarding the commercial question, this is kind of a veiled attempt at looking at pricing, but it really is about pharmacoeconomic value, and I'm kind of wondering if you have new information that would impact your thoughts on that relative to, say, earlier in this fall, perhaps even the discussed REMS at the recent AdCom, or the [via skin] refiling. Any thoughts on pharmacoeconomic value for PALFORZIA going into a possible launch next year?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [3]

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You know, we have actually done quite a lot of work on the pharmacoeconomics beyond just pure pricing and price setting, and of course, this is an area that both clinicians and payers are very well used to. There's a lot of reimbursements of therapies, both to treat other kinds of allergies, and to treat the complications and results of allergic reactions. But that being said, I don't think we've learning anything fundamentally different over the last few months, and I think every piece of guidance we've given in the past remains true, but let me hand over to Andrew.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [4]

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Yes, I mean, what Jayson says is correct. We've been continuing to build on an economic model that we share with payers as we have discussions with them, but there's nothing fundamentally new that we've uncovered over the past few months in regards to them.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [5]

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But it sounds like you have pretty firm understanding of pharmacoeconomic value and ready to launch, should it be approved anytime soon?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [6]

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Yes, we do. And I guess what I would say with regard to price, Charles, is that we've conducted research, and we've bracketed the research between 2 sort of bounds, the lower bound being the price point for the SLIT therapy, which is out there today, which covers nonlife-threatening conditions, which is somewhere between $3,500 and $5,000. The upper end of the research that we tested was that the launch price point for (inaudible) biologics, which is around $20,000. So we tested in between those 2 bounds, and we feel that we've got a pretty good understanding of what the appropriate price point will be, based on that research.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [7]

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That's very helpful; appreciate that added color. Regarding the kind of pipeline question that I had, this may be looking way, way out ahead, but I'm kind of wondering, as you think about application of the basic paradigm, I'm wondering, as you look at multi-nut allergy, how does that really differ from peanut allergy in terms of severity, prevalence, and maybe technical challenges that you could see? And could we see an IND for a multi-nut in 2020?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [8]

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Let me sort of take the middle piece of that first, which is the prevalence of multi-nut. So allergies to the composite of tree nuts, which is really walnut, hazelnut, and cashew, with sort of coexisting allergies to pecans and to pistachios, is about, as a group, as prevalent as peanut allergy is, and so we see it as a sizeable opportunity. I think as much as we've been groundbreaking and innovative in terms of potentially now bringing the first ever treatment for food allergy to the market with PALFORZIA, we're trying to be even further -- even more innovative, if you like, with our multi-nut program, by trying to actually bring one therapy that has all of those nuts together in one place, right? And so this, both from a technical perspective and from a regulatory perspective, is again yet another new paradigm. So where we're at now is actually trying to physically make the product that is stable and that is reliable enough for us to be able to think about even going to the clinic, and we think that's going to take us the bulk of 2020, so I would not anticipate seeing an IND until the end of next year. There's a lot of technical complexity to this.

But, if anything, Charles, the way to think about this is, we've decided to go a little slower up front to go way quicker at the end. Because if we did each of these nuts in series, you know, it would be 5 or 6 different products over a course many, many years, and we'd like to actually have a single solution that comes to market as a composite a little bit quicker than that whole process would take.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [9]

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That makes sense to me, and appreciate the added color. Good luck with the upcoming final review.

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Operator [10]

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Next question is from Chris Raymond of Piper Jaffray.

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Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [11]

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So just a couple questions. First, I guess on access, so we ran across a webinar put out by the American College of Allergy, Asthma, and Immunology that I think you guys sponsored, actually, that walks through pretty detailed reimbursement coding for OIT. You know, just curious, can you walk through the mechanics that you anticipate, once approved, for coding for reimbursement for PALFORZIA? When we look at the materials, these codes look pretty comprehensive. I guess the question is, do you believe they're sufficient, really, for docs to be able to get reimbursed pretty easily, like on day one of launch, or is there some sort of interim period, maybe, where there will still be barriers and you'll have maybe more of a tailored coding system, or something like that in place? Just, give us some perspective on that. Thanks.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [12]

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Chris, it's Andrew. Thanks for the question. So you're correct. So the College put out some guidance, I think it was end of August, early September, around coding that they would recommend for the various stages of administering an OIT immunotherapy. And worth reminding that today, with food OIT, there are a number of codes that are used out there, and so our role is not to provide guidance as to what codes to use, but to, I suppose, educate allergists as to which codes are available, either because they've been recommended by the College, or are currently being used today for food OIT. We're very confident that the codes that exist will be used, can be used. And there's also some discussions between the College and the Academy, which are the 2 professional bodies representing allergists in the U.S., around aligning on codes that they would recommend together. Those are ongoing discussions, and those are not discussions of which we're a part, but we are aware that the discussions are ongoing. And so, as those codes are developed and that consensus is reached, that's further alignment on even more specific codes that could be used.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [13]

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And, Chris, just sort at a very high level, we don't anticipate that we need to have anything new out there for folks to be able to prescribe out the gate. As we look at it, because the actual mechanistics of this are so similar to SCIT, or subcutaneous immunotherapy, codes that are traditionally and standardly used in the allergists office for those therapies would translate quite nicely. And I think, actually, if you look at the college guidance, that's pretty much what it says.

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Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [14]

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Okay, good. And then, just on the -- you know, you guys talk a lot about helping allergists with the workflow and the anticipated patient flow, once approved, and I think I've heard you guys talk at length about having this initial 1,300-physician target. I would imagine you don't want to give a lot of details on this, but can you just maybe give some general sort of flavor for where that 1,300-doc population is in terms of having workflow readiness, if you will? You discuss perhaps even some of these clinics changing around the walls and specific ways that their offices are designed. How extensive is that?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [15]

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Yes, so I guess that 1,300 probably divides into 2 broad categories, Chris. The first is you've got about 200 to 250 allergists that were either practicing some form of food OIT today or were involved in our clinical trials, and so they're pretty much set up and ready to go, and they're comfortable and familiar with the protocol and what would be needed. The remaining group, it really just depends on the individual practice and the particular physician. In some cases, it's understanding what their space requirements are to allow the observation of patients, and so making sure they've either got a communal waiting area or, if they prefer, some individual waiting rooms for patients. In other cases, it may be that they need to add some nursing staff to be able to help. In other cases, it may be just office staff to help with some of the processing of the paperwork and medical exceptions and prior auths. So it depends on the practice, and we see our job to make sure that we are facilitating some best practice sharing between people that are doing it and people that are getting comfortable with it, and those that want to learn how to do it, and so that will evolve as we launch the drug.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [16]

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I think, just maybe to add one thing to that, Chris, is that this is -- the 2 segments that make up this 1,300 are really the 2 segments who essentially are both willing and ready to initiate therapy. Now they're largely high-throughput SCIT centers, and so their ability to do high-volume immunotherapy procedures is already in place, and so it's more of a fine-tuning exercise in the practice, and that's exactly why we picked them as our launch population.

I would just sort of, out of interest, point you to one of the [posters] that we'll be presenting at the College might in Houston over the weekend, which actually looks at the real-world implementation of our immunotherapy versus SCIT in this kind of practice. It's just kind of an interesting read because it shows you, at a high level, that there's a lot of similarity.

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Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [17]

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Great, okay, and one more question, if I might. Just noticing AR201, I think last time you guys talked about it, last quarter, enrollment was I think anticipated to be mid-2020, and I think you guys are now describing it as second half. Can you maybe talk about, you know, is there any issue or challenges specific to egg allergy versus peanut, or is this just a normal sort of wrinkle?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [18]

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I think this is -- I wouldn't call it a wrinkle; this is kind of normal variation, right? We're still early in the recruiting process here. We don't yet have all of the sites up and running, and as we sort of learn from the sites what it takes to get patients in, we'll sort of revise our timelines. There is one added level of complexity with the egg program, and that is there are actually 2 food challenge tests that have to happen with each of these patients. So because there are 2 kinds of egg allergy -- there's an egg allergy to any kind of egg product versus an egg allergy only to eggs that are not baked, so there are a population who are not allergic to baked egg -- we actually have to do 2 food challenges and test them with both raw egg and baked egg preparations, and so it's a slightly more complex study. And it's really important to do that because we have to tease out the [powering] of the study to ensure that we have sufficient representation of both components of the egg allergy.

So I think this is sort of normal tweaking of expectations as we learn about recruiting these patients, but there's no fundamental issue.

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Operator [19]

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Next question is from Kennen MacKay from RBC Capital Markets.

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Justin Hayward Burns, RBC Capital Markets, Research Division - Senior Associate [20]

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This is Justin on for Kennen. Congrats on all the progress and forward momentum this quarter. Quick question for us on sort of the wait list that you guys are seeing out there. We did a recent physician check that highlighted about 2,000 patients that are sort of ready to go, upon potential approval for PALFORZIA. And granted, that's at a major healthcare center and likely an outlier at the high end. We're just kind of wondering what the feedback is you're getting from the 1,300 physicians that you've been in contact with and if they've also got wait lists, and if those are sort of in the dozens or if those are close to the hundreds, and sort of what that pent-up demand kind of looks like.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [21]

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Hi, Justin, it's Andrew. Certainly, what you've just shared is consistent with the conversations that we've also had with physicians. I think 2,000 would certainly be towards the high end. There are academic centers out there which do have pretty large waiting lists that are in the thousands. You also have smaller allergy centers which, you know, it's more modest waiting lists in either the dozens or the low hundreds. That said, the consistent theme is that if you look across the physicians that we've talked to, particularly those that are really ready and waiting to prescribe the therapy upon approval, there are waiting lists and there is a pent-up demand for patients that would like to go on this product.

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Operator [22]

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The next question is from Brian Skorney from Baird.

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Brian Peter Skorney, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [23]

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Building a little bit off of Chris' questions on reimbursement coding, can you talk a little bit about how you envision coverage working here with the REMS requirement around specialty distribution? Are each of the escalation doses going to be provided by the allergist at their office to take home the remainder of that dose to the home? And then, when it switches into a more maintenance therapy, you know, would you envision this being something that you could pick up the full dose at CVS? And how do you think insurers will kind of look at those 2 different payment models? Will the payment be reimbursed at the same level, whether it's administered and given upon the patient leaving the office or whether it's picked up in CVS?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [24]

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Well, so great question. We have, since the development of the program, really, been planning on the specialty pharmacy model to distribute this product for a number of reasons, including the patient experience, but also keeping in mind the safe experience for the patient. And so, the REMS requirements, even though there are some additional things that we need to work through in terms of reporting, the distribution portion of that is entirely consistent with the use of a specialty pharmacy model. And so, whether they're in the initial dose phase or the up-dosing phase or the maintenance phase, the plan is that we will continue to use specialty pharmacy to distribute the product to patients, either straight to the physician's office or to the patient's home.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [25]

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And I just would make the point, Brian, that we talked about having built a number of the component of what is now the REMS program into our initial BLA submission. And in fact, this distribution model has been what we've planned all along. One of the things that we're very, very conscious of as we think about, particularly the up-dosing phase, is the risk that any individual single patient has more than the dose than they're on at exactly that time in their possession, and we've created a model where that never happens and that there are a number of checks and balances in the process to ensure that that doesn't happen.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [26]

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And, Chris, the only other thing I would add as well, just getting back to the point of your question around sort of pricing differences at the different points in the dosing procedure, we've guided to this point that we are looking at a flat pricing model so that, regardless of where the patient is, whether it's in the up-dosing phase or in the therapeutic maintenance dosing phase, the price will be the same. And so, the distribution will be the same, and there should be no difference from either the patient or the payer perspective there.

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Brian Peter Skorney, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [27]

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Great, and then maybe just as a follow-up on sort of how the initial launch goes, when you think about the conversion of allergists who currently administer some form of OIT versus those who haven't yet adopted it as a treatment, I mean, what level of work is involved in terms of training physicians on PALFORZIA, how different it is for those 2 different kind of treating physicians? And do you kind of see that as somewhat of a limiting step to adoption in the beginning?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [28]

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Well, I certainly think that there will be some training up front for physicians that have not administered this before. As we indicated earlier, a lot of the physicians, the reason that they haven't administered is because they've been waiting for an approved therapy to be able to start OIT. And so, we will provide the training, both through our practice account managers as well as by facilitating some peer-to-peer programs and best practice sharing from those in that sort of 200 to 250 number which are practicing some form of OIT today, to the group which are ready to go, but need some initial training and perspective on how it's done.

The other thing I would say is that, as we've consistently said, there's a pretty good analog between the administration of shots for environmental allergies today and how OIT will be administered, how PALFORZIA is administered. And so, even though there's some training required around the specifics, certainly we don't think it's going to be a huge paradigm shift for many of these folks that have been practicing environmental allergy shots for a number of years now.

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Operator [29]

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Next question is from Evan Seigerman from Credit Suisse.

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Evan David Seigerman, Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst [30]

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Congrats on the progress. Just one on how we should think about expense next year in terms of the commercial ramp. Any color as to what type of expense guidance you want to give -- or not guidance, but just how to think about the investment you need to make as you launch PALFORZIA. And then, I have a follow-up question.

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [31]

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So expenses next year will clearly shift from R&D to commercial, but with the expected revenues, we do anticipate that the operating burn next year will be lower than what we've seen this year.

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Evan David Seigerman, Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst [32]

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Okay, and then my follow-up question, you know, in terms of the potential launch in Europe, I know you had mentioned some updates regarding your MAA application. You know, is the physician demand and the demand for an oral IT product for peanut similar in Europe? What has your market research shown, so we can start to frame that potential opportunity?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [33]

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Well, I think it really depends on the particular country, Evan. So there are some countries, and France is a good example, which we think is a really good opportunity for this drug, where there is some use of food OIT today by people practicing allergy. So that's a market where, much like the U.S., we will be going in with a group of physicians that already understand not just disease, but also how to use immunotherapy to treat it. On the other hand, there are other countries, and Germany is one, where there needs to be more education around immunotherapy as a way of treating this. And so, it really depends on the particular country.

We're very bullish about Europe as an opportunity. We think it is a longer-term opportunity, just because of the fact that some of the countries will go through some of this education that I mentioned, but it really depends on a country-by-country basis.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [34]

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Yes, just to be quantitative, you know, there are 32 countries when you talk about Europe, and vast differences between them. But in the top 5 markets in Europe, we have about the same prevalence in terms of patients between 4 and 17, which would be the indicated population, as we do in the U.S., about 1.5 million patients, and so there's not a whole lot of difference between that. We do see bigger differences when we start looking at Asia, where it's just slightly less common. But the need in Europe is just as high.

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [35]

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And our Phase III trials enrolled really well in Europe as well, so clearly, there's awareness and an unmet need.

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Operator [36]

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Next question is from Paul (inaudible) from Goldman Sachs.

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Corinne Jenkins, Goldman Sachs Group Inc., Research Division - Research Analyst [37]

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Hi, this is Corinne Jenkins on for Paul. Kind of in the same vein, could you talk a little bit about what kind of size you expect to need for salesforce in Europe and the cadence we could see with regard to a buildout of the commercial footprint there?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [38]

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Yes, and I suppose I would also direct you back to the answer we just gave around the dependence on the actual country itself. So for a country like Germany, which is about 85 million people, obviously need a bigger sales organization, but it's still a fairly concentrated subspecialty of physicians that are prescribing this, and so you're talking about a pretty modest and manageable number of people we'd have in the field supporting that group. And then, as you go into smaller and smaller countries, you'd be talking about much smaller, low single-digit numbers of people in the field. And so, we think that Europe is something that's very manageable, again, because of the very focused number of physicians that would treat this and prescribe PALFORZIA.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [39]

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And, Corinne, maybe one other consideration is just if you think about the timing and the staging of resource deployment, right? Because, really, if we get approved in the second half of next year, your initial launch is in Germany. It then takes at least 12 to 15 months to work through the reimbursement process in the other key markets. And we will be extremely thoughtful about resource deployment in a staged fashion, really kind of gated on certainty, or higher degrees of certainty, that you're going to get reimbursement in each of these markets, so that we're sort of thoughtful about how we deploy resource, rather than just casting a big footprint across Europe out the gate.

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Operator [40]

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Next question is from Derek Archila from Stifel.

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Benjamin Shipman Porter, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [41]

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Ben on the line. I know you kind of touched on this, or is there any more feedback that you guys can share from docs that you've heard from your reps right now? Thanks.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [42]

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All I would say, Ben, is that the feedback continues to be, this is a medicine that a lot of physicians have been waiting for. As we indicated in some of our opening statements, the main reason that a number of physicians have not been prescribing OIT for patients to date is a lack of an approved therapy. And so, the fact that there will be something approved that they can treat their patients with is something that they're very much looking forward to. And so, our focus is going to be very much on working with them and supporting them to understand how to administer the product safely and effectively.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [43]

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So Derek, just to be clear, we don't actually have reps in the field at the moment. We have an MSL team of about --

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Benjamin Shipman Porter, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [44]

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MSLs, yes.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [45]

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-- 20 people who've been out for about a year, right, and doing some of this work. But that is really complemented with some quite extensive physician research that we've done, and physician segmentation work that we've done. And I think the assumption that all allergists behave the same is something that, a while ago, we realized is just not true. And there really are discrete segments of allergists in terms of also the way they treat patients and the way they think about our immunotherapy.

We've consciously decided to focus our launch effort on what we think are the 2 most ready segments for OIT, those who are already doing it and those who tell us they're ready and excited about doing it, and they're just waiting for an FDA approved option, and to have high throughput clinics. There is a third segment that we kind of see as Phase II, where we think our MSLs will sort of move into as we bring the commercial team on board to cover those first 2 segments, and that's a population who are really willing to treat, but maybe have a little more to learn about how to implement it into their practice.

And so, we kind of see this in waves, and our whole approach is to sort of go to the place where we're going to sort of get early utilization first, and then go down into the rest of the allergy population over time. And there is no question that, when you see a new therapy come into a therapeutic area that hasn't had a solution before, that that is exactly how it happens in any case, right? There are folks who sort of wait to see what happens, and you kind of want to address those folks once you've got really good experience in the practices who are ready to adopt early.

And so, it's kind of a way of saying there isn't really one answer to your question. It's really quite dependent on how you think about segmenting the population.

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Operator [46]

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I am showing no further questions at this time. I would now like to turn the conference back to Dr. Jayson Dallas.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [47]

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Thank you so much. And just to sort of summarize, this is -- it's indeed a really, truly exiting time for us here at Aimmune, as we potentially get close to bringing the first ever FDA approved treatment to children and adolescents with peanut allergy. PALFORZIA, if approved, will be the first and only FDA approved treatment for any kind of food allergy, and we're really excited about that.

As we prepare for a potential commercial launch of PALFORZIA, we're building out a commercial organization and other supporting functions in both the U.S. and Europe, and we've been able to attract extraordinarily talented individuals to help us in this important mission. We therefore have the resources, both in terms of personnel and finances, to launch PALFORZIA, if approved as well as to advance our pipeline.

Finally, I would like to thank the entire food allergy community, especially the families who have participated in or are continuing to participate in our clinical trials, without whom the progress we've made to date would not be possible. I look forward to speaking to many of you in the coming weeks and months. Thank you very much.

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Operator [48]

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Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.