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Edited Transcript of SBBP earnings conference call or presentation 26-Feb-19 1:30pm GMT

Q4 2018 Strongbridge Biopharma plc Earnings Call

TREVOSE May 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Strongbridge Biopharma plc earnings conference call or presentation Tuesday, February 26, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* A. Brian Davis

Strongbridge Biopharma plc - CFO

* Fredric Cohen

Strongbridge Biopharma plc - Chief Medical Officer

* Matthew Pauls

Strongbridge Biopharma plc - CEO, President & Director

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Conference Call Participants

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* Esther Lannie Hong

Janney Montgomery Scott LLC, Research Division - Director of Biotechnology

* Hartaj Singh

Oppenheimer & Co. Inc., Research Division - Research Analyst

* Liisa Ann Bayko

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Nicholas Carl Rubino

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

* Lindsay Rocco

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Strongbridge Biopharma Corporate Update and Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Ms. Lindsay Rocco of Elixir Health Public Relations. You now may begin.

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Lindsay Rocco, [2]

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Thank you and good morning, everyone. We are pleased that you could join us today for Strongbridge Biopharma's fourth quarter and full year 2018 earnings conference call. Joining me from Strongbridge this morning are Matthew Pauls, President and Chief Executive Officer; Dr. Fred Cohen, Chief Medical Officer; and Brian Davis, Chief Financial Officer.

Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Reference to these risks and uncertainties are made in today's press release and disclosed in detail in the company's periodic and current event filings with the U.S. Securities and Exchange Commission.

In addition, this presentation includes non-GAAP financial measures. This presentation is not intended to be a substitute for financial results presented in conformity with generally accepted accounting principles in the U.S. Investors and potential investors are encouraged to review the reconciliation of the pro forma financial measures included in the company's earnings release. The most directly comparable GAAP information and a reconciliation between the non-GAAP and GAAP figures are included in the company's fourth quarter 2018 earnings release, which has been furnished on Form 8-K.

I will now turn the call over to Matthew Pauls.

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [3]

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Thank you, Lindsay. Good morning everyone and thanks for joining us. For today's call, I'll begin by providing a brief summary of our fourth quarter and full year 2018 highlights and results. And then we'll turn the call over to Dr. Fred Cohen, our Chief Medical Officer, to discuss the ongoing Phase III clinical development program for RECORLEV. Brian Davis, our Chief Financial Officer, will then provide a financial overview. We will then open up the call for questions.

With that, let me start by saying that Strongbridge had a strong fourth quarter from a clinical, commercial and financial perspective, which is a reflection of our momentum and overall success throughout the past year. As you will hear from the team today, our accomplishments in 2018 demonstrate the value of our rare disease strategy and have positioned us for future growth as we continue to identify, develop and commercialize important treatments for rare diseases. Leveraging the momentum from last year, we entered 2019 with a focus on progressing the development of RECORLEV for the treatment of endogenous Cushing's syndrome.

And getting into our most notable fourth quarter accomplishments, let's start with the Novo Nordisk transactions. In December, we significantly strengthened our balance sheet with the sale of the U.S. and Canadian rights of MACRILEN to Novo Nordisk. As previously mentioned, a portion of the upfront cash payment of $145 million from Novo Nordisk to Strongbridge was used to repay all outstanding debt. Other key terms from the transaction include that Strongbridge will receive royalties on MACRILEN sales through 2027. And in addition, Novo Nordisk purchased 5.2 million ordinary shares of Strongbridge at a purchase price of $7 per share, resulting in gross proceeds of $36.7 million.

Another important key strategic term of the transaction is that Novo Nordisk will fund Strongbridge's 23-person rare endocrine commercial field organization over the next 3 years to promote MACRILEN in the United States. This aligns with the company's objective to maximize the potential of MACRILEN, while preparing for the potential regulatory approval of RECORLEV in endogenous Cushing's syndrome, a rare condition that's often treated by the same endocrinologist that diagnose and treat adult growth hormone deficiency.

Onto our rare neuromuscular franchise. KEVEYIS, our first commercial product, enabled us to build out a rare neuromuscular franchise, which continues to be a strategic pillar for the company. We are committed to serving the needs of the primary periodic paralysis, or PPP community, which is comprised of an estimated 4,000 to 5,000 currently diagnosed patients in the United States. As we prepare for the regulatory filing of potential launch of RECORLEV, there are many parallels and learnings that we have garnered from the KEVEYIS opportunity that we have and will continue to leverage across our business.

Additionally, we believe that the experience and knowledge gained from launching KEVEYIS best positioned Strongbridge to acquire the rights to MACRILEN early last year, before selling the rights to Novo Nordisk at the end of the year. As part of our life cycle management planning for KEVEYIS, we are executing on a number of initiatives with the primary objective of maximizing the value of KEVEYIS over time. We believe that by the end of 2019 or into early 2020 that we will be in a position to provide an update on our life cycle management progress.

Our investment approach with KEVEYIS focuses on three key areas. Specifically, we are focusing our KEVEYIS commercial investment on, one, utilizing sophisticated data to identify physicians that treat PPP; two, fully leveraging our CareConnection patient services model; and three, engaging the PPP community through both patient advocacy, as well as targeted social media. We look forward to executing against our 2019 plans and believe that KEVEYIS will generate a positive contribution margin by the end of the first quarter of 2020.

So with that I'll turn the call over to Dr. Fred Cohen, our Chief Medical Officer, to discuss our clinical development progress for RECORLEV, which we believe continues to have the potential to be a first-line, first-choice therapy for patients with endogenous Cushing's syndrome.

I will now turn the call over to Fred.

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Fredric Cohen, Strongbridge Biopharma plc - Chief Medical Officer [4]

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Thank you, Matt. Good morning, everyone. As previously announced in the third quarter, the pivotal Phase III SONICS study of RECORLEV for the treatment of endogenous Cushing's syndrome met its primary endpoint, with urinary free cortisol or UFC [confirmed]as normal among 30% of the intent to treat population at the end of the 6-month maintenance phase.

Detailed initial results from the SONICS study were presented in October at the European NeuroEndocrine Association Annual Meeting, with additional data presented at the European Network for the study of Adrenal Tumors Annual Meeting in November. These analyses illustrated the favorable effects of RECORLEV on hypercortisolism and its comorbidities, particularly sustained improvements in markers of cardiovascular risk, such as LDL-cholesterol, hemoglobin A1C and body weight.

Further SONICS results from the end of maintenance analyses are planned for presentation at the International Pituitary Congress and the Endocrine Society's Annual Meetings in late March, and at the American Association of Clinical Endocrinology Meeting in April. These results will highlight additional benefits of RECORLEV on the signs and symptoms of hypercortisolism.

Additionally, submission of a manuscript of the primary efficacy and safety data from SONICS to a peer-reviewed journal is anticipated in the first half of 2019. 1-year data from the completed SONICS study are expected to be available in the first half of 2019. These data will include findings from the 6-month extended evaluation phase, which is primarily intended to characterize the long-term safety, tolerability and benefit-risk profile of RECORLEV.

From a regulatory standpoint, a Type C meeting with the FDA is planned within this quarter to seek guidance on the path forward to obtain marketing approval for RECORLEV in the United States, and that process is on track. We anticipate providing an update in the second quarter.

Finally, the receipt of top line results from the Phase III LOGICS study remains on track for the fourth quarter of 2019. As a reminder, LOGICS is a double-blind trial with no planned interim analyses prior to the receipt of these anticipated results.

And with that, I will now turn the call over to Brian Davis for a financial overview.

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A. Brian Davis, Strongbridge Biopharma plc - CFO [5]

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Thank you, Fred. Our press release contain details of our financial results for the fourth quarter and full year 2018. Rather than read all of those details, my comments will center on a few highlights.

As noted in the press release, our guidance for KEVEYIS revenues in 2019 is in the $18 million to $20 million range. We have significantly improved our financial and strategic flexibility as a result of the cash proceeds and anticipated future payments from our transactions with Novo Nordisk, as well as the repayment in full of our outstanding debt. We ended 2018 with $122.5 million of cash, cash equivalents and no outstanding debt. As for cash runway, we believe the combination of our existing cash resources, anticipated KEVEYIS revenues and payments from Novo Nordisk, as well as the continued prudent management of our operating expenses will provide sufficient capital to support our operations, at least through the first quarter of 2021.

And Catherine, with that, we are now ready to open up the call for questions.

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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 Esther Hong with Janney.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [2]

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So with respect to the Type C FDA meeting over RECORLEV, can you provide additional details on your expectations, and then, any potential logistics regarding accelerator approval? And then the second question is, any updates on business development plans in 2019? Thanks.

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [3]

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So Esther, this is Matt. Thank you for the questions. Let me take them in reverse order. With regard to business development, we obviously don't comment on any business development-related projects that we may be working on. I do think that our history here at Strongbridge -- as we continue to build the company is that we are active in looking at opportunities and that continues. And that's all I'll say on that front. I will have Dr. Cohen comment on the Type C regulatory process and timing.

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Fredric Cohen, Strongbridge Biopharma plc - Chief Medical Officer [4]

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Sure. So as I've just -- we do plan to have the discussion with the FDA in the first quarter of this year, and then following digestion of that and then any clarifying dialog we need to have with the FDA, we plan to update investors by the second quarter with the path forward, as we said. In terms of our base case, just to reiterate, we are anticipating that the FDA will guide us towards the need for both the full SONICS as well as the full LOGICS study for being in hand and included within NDA. Again, that's the base case. The upside case for us that we believe is supported with the unmet medical need, the way that SONICS was designed in terms of using a surrogate endpoint that's been established, and the precedent within this division of allowing approval on the basis of the single open label study, we believe that there is an upside case where there could be an accelerated pathway towards the filing, where we base it primarily just on the SONICS, to your point around accelerator approval. Again, we do think that the dialog that we're anticipating with the FDA in this quarter will make that pathway clear for us and then we'll update you guys accordingly. And with regard to timing, that's just so -- in the expedited or accelerated upside case, clearly we would be working hard to get it -- get the NDA filed as quickly as possible, probably realistically why we would love to have it filed by the end of the year, at the end of 2019, it probably would be more like an early 2020-ish. More details to come on that, obviously, as we have more clarity. In the base case, it would be about a year later than that. I hope that helps.

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Operator [5]

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And our next question comes from Annabel Samimy with Stifel.

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Nicholas Carl Rubino, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [6]

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This is Nick Rubino on for Annabel Samimy. First, how the efforts to educate physicians on titration helped patient retention. Are you still seeing attrition due to the side effects and how do you see those dynamics playing out 2019 and beyond? And then second with the 1-year SONICS, you had mentioned the safety pieces, but are we getting efficacy measures as well? And then, if I can just sneak in a quick fast one, with the MACRILEN revenue numbers you reported this quarter, are those purely royalty revenues or did those include full sales from October and November? Thanks.

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [7]

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Thanks for those questions, Nick. Let me give you a little insight on the first question regarding KEVEYIS. We learned a lot on the KEVEYIS fronts in 2018 regarding both KEVEYIS as well as primary periodic paralysis. And one of the key learnings which you well said was around the need, often to go a little bit lower and a little bit slower in the titration period. And, I'll ask Dr. Cohen just to comment briefly on that. I think, we have some learnings from Phase III trial and then from the clinical -- not just clinical instant -- in the clinical trial, but also in the commercial use too. So, Fred, do you want to comment on that?

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Fredric Cohen, Strongbridge Biopharma plc - Chief Medical Officer [8]

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Yeah. Yeah, sure. Great. So one of the things that we learned was that there are a significant minority of patients who experienced adverse reactions from the drug early on in the therapy. And one of them -- one of those reactions that's common is on -- a confusion on mental fog, if you will, that occurs. It's a transient response to the drug until the brain can sort of equilibrate and become used to the drug. But when it occurs, it needs to be addressed, it needs to be managed, and the best way that we know how to manage it is by lowering the dose of the drug. Well, it took us a while, I think, number one, to recognize that this was a reaction that was responsible for some patients discontinuing from the drug. And once we did recognize that, we put in place a series of educational efforts aimed at physicians initially and then later direct-to-patient education and care through the use of, for example, patient ambassadors that have given their time generously to help educate other patients. And so we're making great progress. I think, it's fair to say we've seen already changes in the way the titrations are going. And we've gotten feedback from patients who are now able to overcome the initial side-effects and have stayed on the drug, because they are seeing benefits from it in many cases. So, I hope that addresses that part of that question.

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Nicholas Carl Rubino, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [9]

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Yes, that's great. Then, with regards to the --

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [10]

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Yes, the MACRILEN revenues during the fourth quarter were product sales by Strongbridge. There were no royalties in our revenues for the quarter.

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Fredric Cohen, Strongbridge Biopharma plc - Chief Medical Officer [11]

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Yes, there was also a question you had about the 1-year RECORLEV data. So on the top line data that we will be sharing with you will include primarily safety data. But also we did measure some efficacy data as well, including urine free cortisol, as well as those comorbidity markers. And I'm pretty sure we'll be sharing that with you at the time we release the top line results.

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Operator [12]

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And our next question comes from Hartaj Singh with Oppenheimer & Company.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [13]

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Just a couple of questions, Matt I've got. On your interactions with the FDA prior to this meeting, I assume you might have already submitted a sort of a briefing package and kind of there have been some interactions back and forth. Can you just give some color on, sort of, the gist of those interactions and what are some of the questions that maybe you're asking or FDA is wanting to be addressed prior to the actual meeting? And then a second question, just on KEVEYIS, to follow up with the previous question. Matt, can you just give some color on, sort of, new patients, continuing patients, what sort of -- how many patients are staying on drug, on average, just any color around what that dynamic is, because it seems that the drug is growing quarter-on-quarter. And then just your thoughts about that going forward. And then just a quick housekeeping question after that. Thank you.

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [14]

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Great, thank you Hartaj. So on the regulatory question related to RECORLEV. As a standard course for us, we don't comment on the interactions prior to having our final interpretation of the dialog. So more to come in the second quarter. And I think, Fred articulated well earlier what our base case assumptions are meeting both trials and the upside case around an accelerated potential approval, given the significant unmet need in Cushing syndrome, UFC being a stated accepted surrogate endpoint by the FDA, resoundingly positive, and we think compelling SONICS data. And then, in this division, in the review of Cushing's syndrome, single trial approvals. So that's where we're at and we'll provide an update in the second quarter. And then with regard to KEVEYIS -- and your question on KEVEYIS. So what we know is that there -- we are confident there are 4,000 to 5,000 patients currently diagnosed with PPP. We are seeing new patients regularly come onto KEVEYIS. And we are doing a much better job, as Fred mentioned, with regard to patient-to-patient interaction, patient-to-physician interaction, recommendations around maybe lower and slower titration or down titration. So we are seeing patients more often than not -- now stay on the drug through that kind of an interim period. And so, the big focus for us here is being smart and choiceful about our investment level with regard to KEVEYIS, because it's important for many reasons to try to drive KEVEYIS to profitability on a standalone basis as quickly as possible. And we're confident that we're on that path by the end of the first quarter of 2020. And parallel to that, given the fact that there are no other drugs really that are in development for the treatment of this ultra-rare genetic neuromuscular condition, PPP, we are working very feverishly and hard, as we've said previously, around life cycle management opportunities. We would love to have the opportunity to have more runway with KEVEYIS. So more to come by the -- probably by the end of the year, again, maybe into 2020 on our life cycle management plans. But this is a market that prior to us re-launching the drug really had no investment ever, was disorganized, unstructured. And we're confident that we're on the path to structuring it, organizing it and getting KEVEYIS to profitability, so that we're being smart and choiceful and wise with regard to our investment.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [15]

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Great. And Matt, that's great color. Just a follow-up on that. So roughly speaking, are you sort of seeing patients that are coming that are new to KEVEYIS being equal to patients dropping off, or is there less of a drop-off, just what's the dynamic there between the new and the continuing patients and the patients that are leaving, whether it's titration or for other issues?

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [16]

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So, we -- the trend is that more patients are staying on the drug than off. And that's based on the interventions, really in -- I guess in the back half of the third quarter and the fourth quarter by us, and of course to-date. So what we're -- the patient identification and identifying patients who are very motivated and physicians that are motivated and then providing the very strong level of support and service for them through that process, given the potency of KEVEYIS. I mean the drug really works. It really works. We are having success getting patients through that short -- I don't know -- for a 4-to-6-week period-ish, that range. But it's upwards of 8 weeks.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [17]

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Got it. And then just one housekeeping question on -- just how to think about operating expenditures, sort of, going forward for the year, just any thoughts there?

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [18]

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Yes, Hartaj. This is Brian, Hartaj. Thanks for that. So, on the cash basis, as I mentioned, we're looking at a runway that takes us through the first quarter of 2021. I think we have the benefit of the Novo Nordisk subsidy coming online here in 2019 to offset the commercial effort around MACRILEN. And so we'll have a little transition working through Q1 to get down on a cash burn basis. But we feel pretty comfortable in that low-to-mid teens area as we move forward. In fact, if you take that $122 million cash balance and just by simple averaging over the subsequent 9 quarters through the first quarter of 2021 that comes up to about $13.5 million. So a little more in this year, reflecting the transition down, reflecting we've got some increased RECORLEV program expenses (inaudible) high water mark, if you will, for the RECORLEV program, because we have SONICS and LOGICS and OPTICS running simultaneously, but obviously SONICS expense is winding down now that the 1-year data will be coming through. So again, enough cash to get us at least through the first quarter. And obviously, we'll have more definition on that as we go along as to how much more at least it can be.

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Operator [19]

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And our next question comes from Liisa Bayko with JMP Securities.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [20]

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Just a couple of questions for me, mainly about KEVEYIS. So first of all, I want to say congratulations, I mean you've made this into a product that reached $20 million this year, which is certainly a lot higher than where you thought the product couple of years ago. We technically were only talking about $1 million. So it's obvious that you've done a tremendous job in creating this market. But [again] your guidance a little bit, for this year, looks like $4.4 million is the kind of what you're coming off [4Q]. Your guidance of $18 million to $20 million implies a little bit of slowing growth. So is that -- are patients adds still happening at the same rate or is that lower, are you having -- struggling to find more patients or is it based on -- basically from your comments, I'm thinking maybe less revenue per patient because of dose titration. What's the kind of dynamic with add indications or revenue per patient? How does that -- what's sort of underlying the guidance?

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A. Brian Davis, Strongbridge Biopharma plc - CFO [21]

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Yes, this is Brian. So again, we're continuing the good news, is find patients. And we feel really good about the field force we have in place and they're performing very strongly, as Matt indicated in his comments and in the prior answer. We've had a lot of learning in this market and working through how best not only to attract patients, but also to retain patients. So we were conscious of the revenue range that we put out there, $18 million to $20 million and where we've come off of this year, we're going to be conservative in our approach, But the patient retention piece takes time and we think we're working through it. On the expense side, we have focused our investment and made decisions to decrease the territories to help make sure we get to a positive contribution margin or a profitability standpoint for the product. We went from 21 down to 17 territories. We focused our marketing expenses to those -- really targeted toward the patient, in order to help all of the revenue expenses to line up. So, we'll keep working through it, but we feel good about our ability to not only hit this range, but also to get this product to be one that's a profitable one. And as you pointed out at the beginning, it was a very challenging market to enter into. You're quite correct. Before we had acquired the drugs -- the drug, I should say, its sales had been less than $1 million in a year. So, yes.

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [22]

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Yes, so Liisa, the other piece on that to note is, as I mentioned, in parallel, we are looking at life cycle management opportunities and we'll update the market probably by the end of the year or in early 2020. And if there are potential opportunities to extend the life and runway of KEVEYIS, we will obviously, probably revisit our investment strategy with regard to the brand. But right now, it is to get it to profitability as quickly as possible and to grow the top line, which we will do both. And exiting the year, the low end of the range, we're tracking already to the low end of the range. So hopefully, there will be some -- even more enhanced or increased momentum as we go the year.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [23]

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Okay, fair enough. And then, I guess, as you look longer-term, are you still thinking this product is kind of easily a couple hundred million or do you have some other kind of target in mind longer-term now that you've had more experience selling the drug? Just thinking about how, kind of, directionally where we should be headed in terms of modeling. Thanks.

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A. Brian Davis, Strongbridge Biopharma plc - CFO [24]

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I think -- this is Brian. I think, there's a couple of things there, Liisa, that really play into that. So one is the patient penetration. So we think we've got an opportunity and we're really just at the beginning stages of it in terms of patient penetration. Now Matt and Fred were taking a little bit earlier about life cycle management opportunities, having a longer commercial runway will certainly allow us the opportunity to reach peak sales levels over a longer period of time that we have (inaudible). We're just operating with the current regulatory exclusivity. I think, the other piece that obviously plays into in this environment is around the price of the drug. And I would note, we continue to be very cautious in our thinking around that. So we'll talk about pricing strategy, specifically, but we're very aware of the environment that we're in and we're going to act appropriately in that environment, and really try to do all we can to make sure patients -- as many patients have access to the drug as possible over time. But we think there's a longer runway in terms of reaching out to patients and life cycle management opportunities would certainly help to get us up to higher peak sales levels.

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Operator [25]

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Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Mr. Matthew Pauls for any closing remarks.

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Matthew Pauls, Strongbridge Biopharma plc - CEO, President & Director [26]

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Thank you. In summary, these fourth quarter and full year 2018 results underscore that our strategy, our assets, our people, our capital and our infrastructure well position us for continued success in 2019 and beyond. Thank you for joining today's call and for your continued support.

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Operator [27]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.