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Edited Transcript of AKCA.OQ earnings conference call or presentation 8-May-19 8:30pm GMT

Q1 2019 Akcea Therapeutics Inc Earnings Call

CAMBRIDGE May 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Akcea Therapeutics Inc earnings conference call or presentation Wednesday, May 8, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kathleen Gallagher

Akcea Therapeutics, Inc. - VP of Communications & IR

* Michael F. MacLean

Akcea Therapeutics, Inc. - CFO

* Paula Soteropoulos

Akcea Therapeutics, Inc. - CEO & Director

* Sarah Boyce

Akcea Therapeutics, Inc. - President & Director

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Conference Call Participants

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* Chad Jason Messer

Needham & Company, LLC, Research Division - Senior Analyst

* Guyn Kim

BMO Capital Markets Equity Research - Analyst

* Paul Andrew Matteis

Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst

* Subhalaxmi T. Nambi

Cowen and Company, LLC, Research Division - Research Associate

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Presentation

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Operator [1]

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Good afternoon, and welcome to your Akcea Therapeutics First Quarter 2019 Conference Call. As a reminder, this call is being recorded. I would now like to turn the call over to Kathleen Gallagher, Akcea's Vice President of Corporate Communications and Investor Relations. Ms. Gallagher, please begin.

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Kathleen Gallagher, Akcea Therapeutics, Inc. - VP of Communications & IR [2]

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Thank you, Nova. Good afternoon, everyone, and thanks for joining us today. With me on today's call are Paula Soteropoulos, our Chief Executive Officer; Sarah Boyce, our President; and Michael MacLean, our Chief Financial Officer. As a reminder, this conference call includes forward-looking statements regarding the financial outlook for Akcea, Akcea's business, and the therapeutic and commercial development of Akcea's products and development. Any statement describing Akcea's goals, expectations, financial or other projections, intentions or beliefs, including the commercial potential of TEGSEDI, WAYLIVRA and our pipeline drugs, is a forward-looking statement and should be considered an at-risk statement. Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of discovering, developing and commercializing drugs that are safe and effective for use as human therapeutics and in the endeavor of building a business around such drugs.

Akcea's forward-looking statements also involve assumptions that if they never materialize or prove correct could cause those results to differ materially from those expressed or implied by such forward-looking statements. Although Akcea's forward-looking statements reflect the good faith judgment of its management, these statements are based only on facts and factors currently known by Akcea. As a result, you're cautioned not to rely on these forward-looking statements. These and other risks concerning Akcea's programs are described in additional detail in Akcea's most recent quarterly report on Form 10-Q and the most recent Annual Report on Form 10-K, on file with the SEC. Copies of these and other documents are available from the company. In addition, earlier today, we issued a press release and related financial tables, including a reconciliation of GAAP to our reported non-GAAP financial measures that we will discuss today. To read this release and access the slides that accompany today's call, please visit the Investors section of our website.

Now I'll turn the call over to Paula.

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [3]

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Thank you, Kath. Good afternoon, everyone. Thank you for joining us. We've had a highly productive start to 2019. WAYLIVRA's approval earlier this week officially makes us a multiproduct global commercial company. So far in 2019, along with the conditional approval of WAYLIVRA in Europe, we have completed our first full quarter of the TEGSEDI launch. We successfully licensed AKCEA-APO(a)-LRx to Novartis and earned $150 million, and we continue to make progress on our pipeline. It's amazing to think that just 12 months ago, we brought the TTR franchise to Akcea. By the end of 2019, we will have 2 commercial products, 2 programs in Phase III development and 2 drugs nearing Phase II data. With this, and the commercial capability that we have built since our founding by Ionis, we are closer than ever to realizing our vision of delivering innovative solutions that improve the lives of those affected by serious and rare diseases.

Today, we'll be talking about the positive momentum we are seeing in TEGSEDI's launch and our plans for WAYLIVRA in Europe. We reported $7 million in sales for TEGSEDI in Q1. We consistently hear physicians and patients recognizing the benefits of TEGSEDI's strong efficacy, coupled with the independence of subcutaneous injection, where patients can treat themselves on their own terms. We are working to make TEGSEDI available in additional countries in Europe throughout the year, as well as working closely with PTC Therapeutics to make TEGSEDI available to patients in Latin America. We will also touch on our launch plans for WAYLIVRA in Europe. WAYLIVRA is the only drug for patients with FCS. FCS is a devastating disease. Take Diane, for example. She has spent the -- her life suffering from the burden of FCS. Diane has come close to death several times because of the life-threatening consequences of pancreatitis. She has had more than 30 surgeries on her stomach and multiple hospitalizations that have taken her away from having normal things in her daily life.

Because of stories like Diane, the patients and physician community across the globe have shared their excitement and relief that WAYLIVRA will be available to patients in Europe. This outcry support reinforces the importance of WAYLIVRA and the impact that it can have for FCS patients. In addition, we continue to execute on our pipeline program. We're thrilled with the Novartis partnership and believe they are the right partner with the depth and reach to develop AKCEA-APO(a)-LRx for the millions of patients with risk of cardiovascular disease due to Lp(a). For AKCEA-TTR-LRx, we are confident in this program and focus on expanding our commitment to the TTR community including patients with wild-type and hereditary cardiomyopathy.

We and Ionis are looking forward to sharing data from the ongoing Phase I/II study that AKCEA-TTR-LRx in the second half of this year as well as initiating the Phase III program this year. We also recently completed enrollment in both Phase II studies of AKCEA-ANGPTL3-LRx and the AKCEA-APOCIII-LRx, and we continue to expect data from both programs in the first half of next year. Our team continues to deliver on our ambitious agenda. As we look to the rest of 2019, we will continue to execute in our launches and our pipeline, as we deliver these important therapies to patients.

I'll now turn the call over to Sarah.

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Sarah Boyce, Akcea Therapeutics, Inc. - President & Director [4]

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Thank you, Paula. Patients and physicians are choosing TEGSEDI. This quarter, we have seen prescriptions coming from both naive and patients coming from our early access and open label extension program. In the U.S., the prescriptions are coming from cardiologists, neurologists and hematologists. We are getting deeper insight into the dynamics of the launch and the physicians treating hATTR. For instance, cardiologists tend to act with urgency to get their patients on treatment as they seem that patients rapidly decline and pass away due to hATTR. In neurology, there is more variability. Some treaters are acting with great urgency, while others require a lot of education on the importance of treating now as opposed to waiting a few months until the patient's next scheduled appointment. To underscore the urgency of treating this progressive disease, our field team is focused on showing the data from our open label extension study, which shows that earlier treatment with TEGSEDI leads to better outcomes on measures of neuropathy progression and neuropathy-related quality of life. These data were shared with the neurology community yesterday in an oral presentation by Dr. Brannagan from the Columbia Amyloidosis Center at the American Academy of Neurology or AAN annual meeting. These data underscore why we are also seeing patients switched onto TEGSEDI from both competitor drugs in the U.S. and Europe. Along with education on the importance of treating early, the team continues to focus on disease education. Our genetic testing program hATTR Compass is playing a critical role here especially as we look at community physicians who are less familiar with the disease and are motivated to take advantage of a genetic test that can easily and quickly help diagnose their patients. We continue to see the hATTR Compass program growing. And we now have over 550 physicians using the hATTR Compass program. The community physicians are important in the ongoing launch. There are approximately 50,000 patients worldwide and only about 10% to 30% of those patients are diagnosed. The patients who are diagnosed are primarily treated in academic centers. There are a significant number of patients who remain undiagnosed. By educating the community physicians, we are enabling faster diagnosis and allowing them to treat the patients in the local community with TEGSEDI's subcutaneous delivery versus being referred to an academic center.

Finally, the community hospitals are not participating in the ongoing hATTR clinical trials including ours. We continue to see reimbursement from both private and public payers who have had a positive response to TEGSEDI as an efficacious drug administered under a pharmacy benefit. Outside of the U.S., we are working towards reimbursement in multiple European countries. We are continuing to work with agencies in France and Germany to attain the appropriate value for TEGSEDI. We have received a positive final evaluation document from NICE. This is fantastic news for patients suffering from polyneuropathy due to hATTR amyloidosis in England who have had very limited treatment options. This is the fast reimbursement process completed for TEGSEDI in Europe. And we're pleased with the teams who work there. The PTC team continue to work to facilitate access to TEGSEDI for patients in Brazil and Latin America. We continue to roll out AKCEA CONNECT, our drug treatment program across all geographies.

AKCEA CONNECT epitomizes our patient-focused values, coupled with our rigorous and robust approach to execution. We have heard from physicians and patients that AKCEA CONNECT has been very helpful in building a monitoring routine and assisting patients and physicians as they go through the reimbursement process. Earlier this week, we received conditional marketing authorization for WAYLIVRA in Europe, which is great news for patients with FCS. WAYLIVRA is indicated as an adjunct to diet in adult patients with genetically confirmed FCS who are at high risk for pancreatitis and in whom, response to diet and triglyceride lowering therapy has been inadequate. There are approximately 1,000 patients eligible for treatment in Europe. As you heard from Diane's story that Paula shared earlier, FCS carries a heavy disease burden. People suffering from FCS have extremely high triglycerides that put them at risk of unpredictable and potentially fatal acute pancreatitis.

In addition, they are at risk of chronic complications due to permanent organ damage, including chronic pancreatitis and diabetes. On top of the physical symptoms, people living with FCS report major emotional and psychosocial effects. As we prepare for launch, there is significant synergy with the infrastructure we've built for TEGSEDI, and the team is ready to go. The physicians we plan to call on in Europe are lipid specialists, which includes specialized endocrinologists and cardiologists. We anticipate that most patients will be treated in a few academic centers. We are preparing to launch in Germany first, and then we will follow a typical launch sequence with additional countries coming onboard in 2020. In the U.S. and Canada, our regulatory discussions are ongoing. We are excited to also leverage our great relationship with PTC as their team gears up to deliver WAYLIVRA to patients in Latin America. We are now focused on executing our multiple launches, and our priority is to ensure access to TEGSEDI and WAYLIVRA for patients who need it.

Now over to Mike.

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Michael F. MacLean, Akcea Therapeutics, Inc. - CFO [5]

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Thank you, Sara. In our first full quarter of the TEGSEDI launch, we are pleased to see that our team is executing according to plan. For Q1 2019, due to the Novartis opt in on AKCEA-APO(a)-LRx, we had a total revenue of $164 million and an operating income of approximately $45 million on a non-GAAP basis, including non-GAAP operating expenses of $119 million. Our revenue includes $7 million of product sales from TEGSEDI. As we discussed last quarter, we are recognizing revenue using the title model. Given the manner in which patients become eligible to receive commercial product, we are able to match demand to shipments, which provides clear visibility into our distribution channel. We use this information to ensure that the sales into the channel are in line with the expected number of patients on therapy. Further, we sell TEGSEDI in packs of 4. Each sales increment is recognized as revenue on that basis. This is the first quarter of our profit/loss split with Ionis on the TTR franchise. Given this is the first time we are reflecting the impact of the profit/loss split in our financial results, I would like to reiterate our presentation. From an accounting perspective, we record all product sales related to TEGSEDI and all expenses related to the commercial activities of the TTR franchise.

For development activities, we report our share of the total development cost incurred by us and Ionis as research and development expenses. The impact of the entirety of the profit/loss share with Ionis is included in determining our operating income or loss. We ended Q1 with $322 million in cash and short-term investments. This includes the $150 million in cash we received from Novartis in Q1 when they licensed AKCEA-APO(a)-LRx. As we have recorded, Akcea retained the entire $150 million and settled this sublicense fee obligation to Ionis by issuing $75 million in common shares, which slightly increased Ionis' equity ownership in Akcea to approximately 76%. Earlier this week, we announced the conditional approval of WAYLIVRA in the EU. That approval -- with that approval, we have earned a $6 million milestone payment from PTC, which we will split 50-50 with Ionis. That milestone payment will be recognized as Q2 revenue and as Sarah said, PTC is actively working to make both TEGSEDI and WAYLIVRA available to patients in Latin America.

Turning to our financial guidance. With $322 million in cash at the end of Q1, we believe we have sufficient cash on hand to carry out commercial activities for our products, as well as to fund progression of our current pipeline to decision events. We look forward to having 2 drugs commercially available, and we will realize a high level of organizational efficiency with multiple products launching in the EU.

Now I will turn it back over to Paula.

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [6]

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Thank you, Sarah and Mike. Before closing, let me touch briefly on how we are advancing our pipeline. Novartis is running the Phase III program for AKCEA-APO(a)-LRx, also known as TQJ230. They exercise their options at the end of February, and they have rapidly moved this program forward. They have already opened an Lp(a) epidemiology study and initiation activities for the Phase III cardiovascular outcome study are underway. Novartis continues to show their expertise as a leader in the cardiovascular space and that they are the right partner to move this game-changing program forward. We and Ionis are working to initiate the Phase III program for AKCEA-TTR-LRx in patients with ATTR. We plan to initiate 2 studies: one in patients with hereditary ATTR with polyneuropathy, and one in patients with both hereditary and wild-type cardiomyopathy caused by ATTR. Our Phase I/II study for AKCEA-TTR-LRx is ongoing, and we anticipate data from that study in the second half of this year. We have a number of other clinical data readout throughout 2019 and into 2020. We are expecting data from our WAYLIVRA study in FPL in the middle of this year. In the first half of next year, we are expecting data from our Phase II study of AKCEA-APOCIII-LRx in patients with cardiovascular disease driven by high triglycerides and our Phase II study of AKCEA-ANGPTL3-LRx in NAFLD with metabolic complication. Both of these studies are now fully enrolled. By the end of this year, we will have 2 commercial products, 2 Phase III programs initiated and 2 Phase II products nearing data. We are executing on multiple launches, we have a solid pipeline, and our experienced team is executing across our business. We are pleased with the TEGSEDI launch, and we look forward to launching our next product WAYLIVRA.

And now, I will open up the line for questions. Nova, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Paul Matteis from Stifel.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [2]

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Congratulations on all the progress. I wanted to delve in a little bit to some of the TEGSEDI dynamics in the U.S., and then I had a question on LICA and a question on WAYLIVRA. But on TEGSEDI in the U.S., I was wondering if you could talk about how it's going with the monitoring and whether or not the majority of that monitoring is being done at home at this time? And maybe just speak qualitatively in some of those dynamics.

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [3]

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Sure, Paul. So with TEGSEDI in the U.S. Yes, the majority of the monitoring is being done at home. As you know, we offer patients the opportunity to do that monitoring at home, or they could just do a local lab. Many of those patients are taking that opportunity because they can put that into their own schedule, and that's going really well. We're pleased with how that support is going for patients and how easily it is for them to fit it into a routine.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [4]

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Okay. Great. Thanks, Paula. And then on the LICA TTR program, what's Akcea's current thinking on the potential regulatory path forward in hereditary and cardiac disease? And specifically in hATTR, cardiomyopathy and wild-type, what's your current thinking on an outcome study and whether or not that study would be placebo-controlled or have a tafamidis competitor?

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [5]

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So I think first on the hereditary, I think you can look to our NEURO-TTR study to get some guidance expectations there. With regard to cardiomyopathy, we're working through those details now and as we get closer, we'll be sharing more of that detail at the time.

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Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [6]

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Okay. Okay. And then maybe just one more quick question on just the WAYLIVRA operating infrastructure as it compares to TEGSEDI. Is there any way you can sort of quantify how much bigger your sales presence and spending might evolve into ex U.S. over say this year and the next couple of years? Maybe just any numbers you can kind of give us or anything you can offer that would be helpful in sort of understanding the operating leverage.

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [7]

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Yes, I'll let Sarah talk to that.

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Sarah Boyce, Akcea Therapeutics, Inc. - President & Director [8]

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Yes, absolutely. Paul, one of the things that is great about TEGSEDI and WAYLIVRA is there is a lot of synergy from an infrastructure perspective as to what we've already built, that we can absolutely put to work on WAYLIVRA, not just sort of European infrastructure, but also AKCEA CONNECT. We do anticipate and we'll look at each country on a case-by-case basis where we may add a few additional headcount. But what we're really looking to do is maximize the synergy that we have between both drugs. And I think that's something that puts us in a really unique position to be able to do that. And the team is ready to go.

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Operator [9]

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Our next question comes from the line of Chad Messer of Needham.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [10]

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Let me add my congratulations on all the progress. Two quick ones for me: one on TEGSEDI, and one on WAYLIVRA. So for TEGSEDI, you said that you got, what you called, final advice or final evaluation from NICE. Just wondering if that means we should expect launch in England imminent or is there more to go through?

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [11]

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So Sarah, you want to take that?

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Sarah Boyce, Akcea Therapeutics, Inc. - President & Director [12]

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Yes, absolutely. So firstly, Chad, as you say, it was great news to get the final appraisal document through from NICE. And the way the NICE process works is it then goes into an implementation phase, where NHS England looks to implement. So our U.K. team is geared up and ready to start selling TEGSEDI in the U.K. pretty shortly. And so all of that work is ongoing. So it's in the implementation phase right now.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [13]

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All right. Great. And then just on WAYLIVRA, obviously very pleased to see the approval in the EU for FCS. EU authorities clearly looking at the drugs risk-benefit differently than the U.S. authorities at this point. Just wondering as we're waiting here for the next readout in FPL, should we expect the U.S. filing of that study is positive. Or is that something still under evaluation?

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [14]

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So firstly, I share your excitement about WAYLIVRA. So thank you for that Chad. It's so important for these patients that have nothing, so we're thrilled Europe and as we've said, we're still working with the U.S. But with regard to FPL, I think the data will guide us. So we haven't (inaudible) that we haven't read out. And so our filing will be highly dependent on that data.

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Operator [15]

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And your next question comes from the line of Do Kim of BMO Capital Markets.

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Guyn Kim, BMO Capital Markets Equity Research - Analyst [16]

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First on WAYLIVRA, congratulations on the approval. I was hoping to get a little more of a sense of the launch in Europe. Could you tell us like how many patients are identified in Germany? Maybe a little more detail on the post-approval study and the register you have to keep for the conditional authorization. And remind us again, what the marketing schedule is in Europe.

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [17]

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Sure, Do. So with regard to the launch in Europe and obviously, we'll be starting with Germany and the other countries with rollout from there, and as Sarah already described, the team is ready to go. With regard to patients that -- we believe there's about -- all of Europe about 1,000 patients or so and there's no specific founder effect in a country like Germany, so I think you could scale up from there. I think some other important points to think about are these patients are likely going to be treated in key lipid centers so they're not scattered throughout. There is still obviously work to educate and find patients. It's a rare disease. Many of these patients have already presented many times in the emergency room because of the pancreatitis. There's still an education though for -- to move those patients -- the understanding that they actually have this genetic disease. Once thing that is good in Europe, probably different than the U.S., there is more genetic testing. So I would say more patients are genetically already confirmed in Europe. But that's part of a rare disease commercialization, is educating, finding patients and so obviously, we started that, and we will continue to do that. With regard to the postapproval commitments. I mean it really is a registry, so we're committed to collecting information about the patients on drug and in terms of their safety, et cetera. So that's something that we would have somewhat planning to do anyway, a registry which works out well for us because we have the plan somewhat drafted. And with regard to monitoring, the monitoring starts every 2 weeks, and there is an algorithm there. If a patient's platelet level drops, the monitoring could go to weekly from there.

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Guyn Kim, BMO Capital Markets Equity Research - Analyst [18]

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Great. Thanks for all the details. And on TEGSEDI, now that tafamidis is approved, perhaps you could give us your thoughts on how the hATTR market will play out. And any feedback from cardiologists on how tafamidis will be used?

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [19]

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Yes, Sarah, do you want to give some color there?

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Sarah Boyce, Akcea Therapeutics, Inc. - President & Director [20]

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Yes. So one of the things, Do, of course, we were anticipating, the approval of tafamidis as well as their indication. Obviously, for TEGSEDI, TEGSEDI is indicated for patients with symptoms of polyneuropathy. So there's a very clear differentiation between the 2 drugs and between how they were used. And one of the things that we have today is we have cardiologists writing prescriptions for TEGSEDI, and they're writing prescriptions for TEGSEDI today because of those debilitating symptoms of polyneuropathy that the patients are experiencing. So we don't really anticipate much change from an aspect of that dynamic.

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Operator [21]

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And our next question comes from the line of Ritu Baral from Cowen.

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Subhalaxmi T. Nambi, Cowen and Company, LLC, Research Division - Research Associate [22]

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This is Subbu Nambi on for Ritu Baral. And like everyone said, really congratulations on a great progress. My question is what's the mix now that we are a full quarter into TEGSEDI, what's the mix between the prescribers, mainly neurologists versus cardiologists that you will not -- would you be able to give us more details on that?

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [23]

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We -- so we have prescribers that come from cardiology, neurology and hematology. So we're seeing excitements from all of these divisions and importantly seeing the benefit of TEGSEDI as a powerful drug for these patients with an important subcutaneous injection advantage. And so we see mix of all of those 3 physicians.

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Subhalaxmi T. Nambi, Cowen and Company, LLC, Research Division - Research Associate [24]

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Are you giving the divide percentage yet? Or…

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [25]

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No, we're not giving that detailed percentage.

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Subhalaxmi T. Nambi, Cowen and Company, LLC, Research Division - Research Associate [26]

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And how fast is the REMS certification? What are the timelines for REMS certification for centers?

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [27]

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Sarah, why don't you talk about that?

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Sarah Boyce, Akcea Therapeutics, Inc. - President & Director [28]

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Yes. So REMS certification process has gone extremely smoothly. One of the things that many of these physicians, they are used to and familiar to prescribing drugs with REMS programs. So that's something that has been done very quickly. And it's important so that they have the right education and information to then go ahead and prescribe -- to be able to then prescribe TEGSEDI.

So from a timeline perspective, it's been something that has been shortened, and it's not in any way sort of impacted patients starting on TEGSEDI and getting that whole process going. It's been very smooth.

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Operator [29]

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And at this time, this concludes our Q&A session. I'd now like to turn the program back to Paula, your CEO for closing remarks.

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Paula Soteropoulos, Akcea Therapeutics, Inc. - CEO & Director [30]

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Well, thank you for your time today. We're pleased with what we've been able to accomplish so far this year. And we're looking forward to keeping you updated as we continue to execute on our ambitious agenda. Have a great afternoon.

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Operator [31]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone, have a wonderful day.