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Puma Biotechnology Inc (PBYI) Q4 2018 Earnings Conference Call Transcript

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Puma Biotechnology Inc  (NASDAQ: PBYI)
Q4 2018 Earnings Conference Call
Feb. 28, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, my name is Tim and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After the speaker's formal remarks, there will be a question-and-answer session.

(Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the conference call over to Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. You may begin your conference.

Mariann Ohanesian -- Senior Director of Investor Relations

Thank you, Tim. Good afternoon and welcome to Puma's conference call to discuss our financial results for the fourth quarter and full year 2018. Joining me on the call today are Alan Auerbach, Chief Executive Officer, President and Chairman of the Board of Puma Biotechnology; Steve Lo, Chief Commercial Officer; and Maximo Nougues, Chief Financial Officer.

After market close today, Puma issued a news release detailing fourth quarter 2018 financial results. That news release, the slides that Steve will refer to, and a webcast of this call are accessible via the home page and Investors sections of our website at pumabiotechnology.com. The webcast and presentation slides will be archived on our website and available for replay for the next 90 days.

Today's conference call will include statements about the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes at Federal Securities Laws. Such statements are subject to risks and uncertainties and actual events and results may differ from those expressed in these forward-looking statements.

For our full discussion of these risks and uncertainties, please review our Annual Report on Form 10-K for the year-ended December 31, 2018, which will be filed tomorrow and any subsequent documents we filed with the US SEC.

You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this live conference call, February 28, 2019. The Company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law.

During today's call, we may refer to certain non-GAAP financial measures that involve adjustments to our GAAP figures. We believe these non-GAAP metrics may be useful to investors as a supplement to, but not a substitute for, our GAAP financial measures. Please refer to our fourth quarter 2018 news release for a reconciliation of our GAAP and non-GAAP results.

I will now turn the call over to Alan.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Thank you, Mariann and thank you all for joining our call today. Today Puma reported total revenue for the fourth quarter of 2018 of $71.1 million. Total revenue consisted of product revenue for sales of NERLYNX and license revenue. We are pleased to report that sales of NERLYNX also known as Neratinib, Puma's first approved drug have continued to grow since launch.

NERLYNX was approved by the US, FDA on July 2017 for the treatment of patients with early stage HER2 positive breast cancer who have previously been treated with a trastuzumab containing regimen. Today, we reported net NERLYNX sales of $61.1 million for the fourth quarter of 2018, an increase from the $52.6 million in net sales reported in the third quarter of 2018.

In addition, our fourth quarter results included license revenue of $10 million, which represents a milestone payment we received from one of our licensing partners. In a moment, I will turn the call over to Steve Lo, Puma's, Chief Commercial Officer, who will provide an update on NERLYNX

launch related activities and detail our commercial progress in the US to date.

As we announced in September 2018, the European Commission granted marketing authorization for NERLYNX for the extended adjuvant treatment of adult patients with early stage hormone receptor positive, HER2 positive breast cancer and who are less than one year from the completion of prior adjuvant trastuzumab based therapy.

We expect NERLYNX to be commercially available in the European Union this year, beginning with our launch in Germany and followed by additional countries -- additional European countries throughout 2019. In collaboration with our licensing partners, we also anticipate announcing a regulatory decisions on Neratinib for the extended adjuvant, HER2 positive early stage breast cancer indication in countries outside the United States and Europe during the first half of 2019.

We also look forward to several additional clinical milestones for Neratinib. As investors are aware in the fourth quarter of 2018, we announced top line data from our Phase III trial of Neratinib in third-line HER2 positive metastatic breast cancer, also known as the NALA Trial. The trial has a co-primary endpoint of progression-free survival and overall survival.

For the progression-free -- I'm sorry, for the primary analysis of essentially confirmed progression-free survival, treatment with Neratinib plus capecitabine resulted in a statistically significant improvement in essentially confirmed PFS with a p-value of 0.0059 compared to treatment with lapatinib plus capecitabine.

For the primary analysis of overall survival, Neratinib plus capecitabine resulted in an improvement that did not achieve statistical significance, but trended positively in favor of the Neratinib plus capecitabine arm of the study with a p-value of 0.21. For the secondary endpoint of time to intervention for symptomatic central nervous system diseases, also referred to as brain metastasis, the results from the trial showed that treatment with Neratinib plus capecitabine led to an improvement over the combination of lapatinib plus capecitabine with a p-value of 0.043.

The safety profile of Neratinib in the Phase III NALA study was consistent with previous clinical trials of Neratinib. Puma plans to meet with the United States, Food and Drug Administration and European Medicines Agency during the first half of 2019 to discuss the results from this trial. We further anticipate that the results of the trial will be presented at a major medical conference in the first half of 2019. Puma also has an ongoing basket trial of Neratinib in HER2 mutated cancers refer to as the Summit trial.

In 2017, data was presented at the American Association for Cancer Research meeting or AACR demonstrating that HER2 mutations were found in approximately 2% to 12% of almost every solid tumor.

The initial data from the summit trial was presented at the AACR meeting in 2017 and was published in nature in 2018. We anticipate that updated data on the cohort of patients from the summit trial with HER2 mutated cervical cancer who were treated with Neratinib will be presented in the plenary session at the Society of Gynecologic Oncology or SGO Annual Meeting in March.

In addition Puma plans to meet with the FDA in the first half of 2019 to discuss the clinical development and regulatory strategy for Neratinib in patients with HER2 mutations, with the goal of discussing a potential tumor agnostic indication for Neratinib in HER2 mutated tumors.

We will continue to update investors as we obtain more information with regard to this matter. In addition, we expect to report additional data from our Phase II Control study involving the use of antidiarrheal regimens on Neratinib associated diarrhea, in patients with HER2 positive early stage breast cancer in the first half of 2019.

This will include updated data on the cohorts of patients receiving loperamide alone or in combination with budesonide or colestipol and will also include data from the most recent cohort in the trial that uses no antidiarrheal drugs as prophylaxis, but instead uses a dose escalation strategy during the first month of treatment in an effort to reduce the side effects and improve the tolerability of the drug.

I will now turn the call over to Steve Lo, who will discuss our US commercialization strategy and progress to-date for NERLYNX. Steve will then be followed by Maximo Nougues who will highlight key components of our financial statements for the fourth quarter and full year 2018.

Steven Lo -- Chief Commercial Officer

Thank you, Alan. NERLYNX has been in the US market since our FDA approval in July of 2017. Since then, thousands of patients have been prescribed NERLYNX. We continue to grow sales in the fourth quarter and look forward to continuing to provide NERLYNX to more patients. A reminder that during my presentation I will be making forward-looking statements.

On Slide 3, as you may recall, our network of six specialty pharmacies provide NERLYNX directly to patients. The specialty pharmacies conduct benefit investigations obtain a prior authorization approval from the insurance Company and then arrange with the patient to ship NERLYNX to their home.

We have also have a separate specialty distribution in office dispensing channel where the prescription does not need to be sent to the specialty pharmacy. This helps to facilitate the ability for certain patients to obtain NERLYNX directly from their physician's office, integrate its healthcare systems, and also the VA.

To allow better access for patients, we expanded the distribution channel throughout 2018 and established partnerships with physician networks. As a result, we have continued to see an increase in patient being dispensed NERLYNX through hospitals and physician practices in the specialty distribution network.

In the fourth quarter, sales in this channel, continued to grow and represented as much as approximately 19% of total bottles sold in certain weeks. Later in the call, Maximo will review the full financial results, but I will now provide you with the current sales results.

On Slide 4, you see quarterly net sales of NERLYNX since FDA approval. As Alan mentioned, our net product sales revenue grew to $61.1 million in the fourth quarter, a 16% increase over the prior quarter. We are also pleased to report full year 2018 net sales for NERLYNX of $200.5 million, our first full calendar year since launch.

The growth in the fourth quarter was the result of an increase in patient refills and the specialty pharmacies and also an increase in demand in both the specialty pharmacy and distribution channels. In particular, our partnerships with physician networks such as ION and US Oncology have given our sales force, better access and allow patients to obtain their NERLYNX prescription in the physician's office, resulting in the growth seen in the specialty distribution channel.

We were also encouraged to see some sales regions that previously have lower sales volumes growing during the fourth quarter as a result of new personnel hired into those regions.

Slide 5, shows the growth by quarter of NERLYNX bottles sold. This represents all channels specialty pharmacy and specialty distributor. There was a 12% increase of total bottles sold from Q3 to Q4 as well our steady growth throughout the year. You may notice the revenue growth is higher than the bottle growth. This is due to a more favorable gross to net in the fourth quarter.

On Slide 6, I would like to highlight an important program we launched in the third quarter of 2018 for patients. This is our supportive care voucher program, which provides up to three-months of antidiarrheal products for free to eligible patients.

As many of you know, the primary reason why a patient discontinues NERLYNX early is due to side effects. But discontinuations occur more frequently in the first month. While most physicians prescribe an antidiarrheal medications with NERLYNX, our research show that some patients may not fill the antidiarrheal prescription. There were also some physicians, not prescribing any of these medications at all, which we believe was due to the lack of awareness of the data from our control trial using prophylactic antidiarrheal drugs.

This supportive care voucher helps eliminate the financial barrier for patients to obtain loperamide, budesonide, colestipol or other antidiarrheal medications.

Since launching this program, a number of vouchers use has increased strongly from Q3 to Q4 and may have been an additional driver to sales growth in the quarter. We are encouraged to see more patients and physicians using these vouchers, which we are hopeful will help in keeping patients on drug longer and reducing the discontinuations.

On Slide 7, you see that most patients receive NERLYNX in 10 days or less and 74% of the patients receive it in 15 days or less, which we believe is a continued sign of a smooth reimbursement process and good payer coverage. This has been consistent throughout the time NERLYNX has been in the market. There is a small number of patients who have been prescribed NERLYNX for off-label use such as metastatic HER2 amplified or HER2 mutated cancer which we do not market or promote. This is when the insurance Company needs more information. These situations contribute to the longer times to fill shown on the right hand side of the slide.

Now, on to prescribers on Slide 8. We continue to make progress in reaching our target physician audience increasing to 68% in the fourth quarter. This represents physicians who our sales force has met with, not physicians who have prescribed the drug. Also there are more physicians restricting access to sales reps and we have opportunities to reach them through medical conferences or online, which is not reflected in the numbers here. We believe there are still more opportunities to reach more physicians especially increasing their awareness of diarrhea management options. We also believe that there are opportunities to get physicians who we have met with, but have not yet prescribed NERLYNX to begin prescribing NERLYNX.

As Alan mentioned, we are committed to making NERLYNX available to patients across the world, we have formed great partnerships throughout the world with companies who have commercial and regulatory expertise in that region. As you can see on Slide 9. We expect both regulatory approvals and launches outside the United States in 2019. In addition, on a parallel path we are exploring partnership opportunities in Europe, while also preparing to launch ourselves. We continue to make progress on ensuring NERLYNX will be reimbursed by the health authorities in Europe.

We recently completed our submission to (inaudible) in the United Kingdom. Germany, France and United Kingdom are the first countries in Europe, we are planning for product availability. As you may recall, we already have a managed access program in place for patients outside the United States.

To summarize, we are highly encouraged with the progress we've made with physicians, payers and patients and our full year net sales results for 2018. We continue to reach more prescribers and help patients receive and stay on their medication. We are committed to ensuring all appropriate patients have access to NERLYNX.

I will now turn the call over to Maximo Nougues for a review of our financial results.

Maximo F. Nougues -- Chief Financial Officer

Thanks, Steve. Let me start with a quick summary of our financial results for the fourth quarter of 2018. Please note that we will be making comparisons to Q3, Q2 2018, which we believe are better indications of our progress as flat commercial Company than all year-over-year comparisons.

For more information, I recommend that you refer to our 10-K, which will be filed with the SEC tomorrow and includes our consolidated financial statements.

For the fourth quarter of 2018, we reported a net loss based on GAAP of $30.7 million or $0.80 per share. Our GAAP net losses for Q3 and Q2 2018 were $14.2 million and $44.3 million respectively. As you may recall, our results for the third quarter of 2018 included a reimbursement from our insurance carriers of approximately $10 million for legal expenses in connection with various lawsuit.

In Q4, we recorded approximately $9 million of expense for estimated damages that may be paid pursuant to a jury verdict in a class action lawsuit.

On a non-GAAP basis, which is adjusted to remove the impact of stock-based compensation we reported a net loss of $12.2 million or $0.32 per share for the fourth quarter of 2018. As well as Steve mentioned, net revenue from NERLYNX sales were $61.1 million versus $52.6 million for the third quarter of 2018.

During December, one of the specialty pharmacies purchase approximate -- approximately $0.5 million to $1 million of additional NERLYNX, which we believe represented an inventory stocking ahead of an anticipated price increase in January.

NERLYNX net sales were $200.5 million for the full year 2018, compared to $26.2 million in NERLYNX sales for 2017. We are pleased that 2018 sales of $200.5 million slightly beat our 2018 revenue guidance of $175 million to $200 million. Our gross to net reduction was approximately 7% for the fiscal year of 2018. Cost of sales for the fourth quarter was $10.3 million, which included amortization of milestone payments to the licensor of Neratinib of approximately $1 million.

Going forward, we will continue to recognize amortization of the milestone payments to the licensor for about $1 million per quarter as cost of goods sold.

For fiscal year 2019, Puma anticipates NERLYNX net US sales will be in the range of $255 million to $280 million. We also assume that the gross to net will be approximately 9% in 2019. We further anticipate that Puma will receive licensing and royalty revenues from its licensing partners in the range of $5 million to $10 million in 2019.

We anticipate providing guidance on the expected range of 2019, NERLYNX sales in Europe on our second quarter earnings call. SG&A expenses were $41 million in the fourth quarter of 2018, compared to $28.5 million and $41 million for Q3 and Q2 2018 respectively.

SG&A expenses were included non-cash charges for stock-based compensation of $7.9 million for the fourth quarter of 2018, compared to $9.4 million and $8.5 million for Q3 and Q2 2018.

Research and development expenses were $38.4 million in the fourth quarter, compared to $36.4 million and $43.3 million for Q3 and Q2 2018. R&D expenses included non-cash charges for stock-based compensation $10.6 million compared to $11.4 million and $13.6 million for Q3 and Q2 2018.

In the fourth quarter of 2018, Puma reported positive cash flow of approximately are $8 million, compared to cash burn for approximately $7 million for Q3 and cash burn of $15 million for Q2 2018. We are pleased to have achieved our previously stated goal of positive cash flow in the fourth quarter. We ended the fourth quarter of 2018 with about $108 million in cash and cash equivalents and $57 million in marketable securities.

Our accounts receivables balance at the end of December 31st was $20.8 million. Our accounts receivable terms range between 10 or 68 days, while our days sales outstanding are about 38 days. Our distribution network maintains approximately three weeks of inventory. Overall, we continue to deploy our financial resources to focus on development of Neratinib. To ongoing clinical trials and the commercialization of NERLYNX.

Steven Lo -- Chief Commercial Officer

Thanks, Maximo. It's Steve. Since, we launched NERLYNX for the treatment of early stage HER2 positive breast cancer. In the third quarter of 2017, we have continued to receive positive feedback from patients prescribers and payers.

We will continue to move forward with our plans to advance and expand our commercial activities for the balance of 2019 and beyond. This concludes today's presentation. We will now turn the floor back to the operator for Q&A. Operator?

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Alethia Young of Cantor Fitzgerald. Please proceed with your question.

Alethia Young -- Cantor Fitzgerald -- Analyst

Thank you. Congrats on a solid quarter guys. One, I want to talk a little bit more about the discontinuations, and I know you've been there work there to try to help with that process. Would you be willing to going to characterize what the rate was this quarter and then maybe to follow more about what we think has really worked to kind of trastuzumab, maybe kind of more compliant when you are doing some of that installed base regimen.

And my second question, is just basically around European, we are talking about partnership we go along. I mean, is there a situation that you would prefer or, what kind of the task would work on making that decision around that go through in Europe?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Okay, on the first quarter a discontinuation. Steve, would you like to take up, please.

Steven Lo -- Chief Commercial Officer

Sure thing. Yeah, so, as I mentioned earlier, we've had a mix in the channel and so we typically only have visibility on patients in the specialty pharmacy channel. And what's also interesting is these patients may go back and forth. So it's a little more difficult today to track the discontinuations, but qualitatively what I can say is that we have seen the trend go down for a few reasons. One is, as I mentioned the supportive care voucher program has been extremely helpful.

We've been educating physicians a lot more about the control regimens. And then thirdly, we also have a nurse team in place, which they are out in the field, educating the practices and we also have a nurse support line available as well. So, all those in general, I think have helped qualitatively.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

And Alethia, just to add to that. Our understanding is that with any new drug that comes out, the more experience physicians get in using the drug. The better they get it managing side effects. For example, when loperamide and budesonide was first launched people had issues with the diarrhea and hand-foot syndrome and with affinity or when it was launched, we know people had issues with the stomatitis as they use it more they get better at managing it.

So, our assumption is that, that's probably benefiting us as well. To your second question -- to your second question regarding Europe. As Steve mentioned, we are looking at both opportunities to launch the drug ourselves and to establish some type of partnership or since just strategic type of situation.

I think we are committed to doing what's best for the shareholders, and that includes the senior managements of the Company and the Board of the Company, we are always committed to doing whatever is in the best interest of the shareholders.

Alethia Young -- Cantor Fitzgerald -- Analyst

Okay, great. Thanks.

Operator

Our next question comes from the line of Paul Choi of Goldman Sachs. Please proceed with your question.

Kelly -- Goldman Sachs -- Analyst

Hi, this is Kelly (inaudible) for Paul Choi. Just have one quick question, on how much of the plans, the cash flow profitability had tied to metastatic utilization 2019? Thank you.

Steven Lo -- Chief Commercial Officer

Yeah, so in terms of the metastatic our assumption is that we would file the NDA in the first half. I think, its mid-2019, I believe, so June-ish time frame. I would anticipate that either it's a priority review or it's a standard review either of those would not be completed until 2020. So our guidance and our cash flow assumptions for 2019, do not include any utilization in the third line setting based on the NALA data.

Operator

Our next question comes from the Yigal Nochomovitz of Citigroup. Please proceed with your question.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Great. Hi, thank you and congrats on getting to cash flow positive for the fourth quarter and hopefully beyond. I had a few questions. Alan, are you able to say at this point when you might be EPS profitable if that's something we could expect this year? And then on the guidance, I hope, I heard the numbers right. I think it was 255 ,million to 280 million could you just expand on that a little bit, because obviously you guys took a 10% price increase recently in January and so that would imply that seems that the guidance is maybe a touched conservative, I just wanted to get a better understanding of what's going into that range? Thanks.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Yes, so regarding your first question on when Puma would be EPS profitable. I don't know that we would be EPS profitable. In 2019, obviously we have the opportunity to be fully cash flow positive in '19 with certain assumptions around that. I think, we'll be able to get a little bit better guidance on that, on the second quarter call.

In terms of your question on the guidance when we issued our guidance in 2018, $175 million to $200 million. The first question regarding that when someone saying well, your guidance looks conservative. And my answer to that was well we're much happier to take a conservative guidance and we're more than happy to adjust that whether whenever we need to later in the year.

So, you're asking the same question again, I think it's fair to assume that we are always more comfortable being conservative and that certainly gives us an opportunity to later address that later in the year.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Okay, perfect. And then just to follow up, could you comment it all, as far as how much of the, the December holiday seasons may have in some respect than headwind to the 61 million that you reported in the fourth quarter?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

I don't know that we have any evidence that the December holidays had any impact headwind or a tailwind. I don't think we have any evidence that it was either.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Okay. And then, just a few other market dynamics question, have you seen any shift toward colestipol and away from loperamide and can you comment on what the percent of patients that might be going beyond 12-months? Thank you.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Okay. So first of all, shall I take it...

Steven Lo -- Chief Commercial Officer

So, I'll address the first question on -- to colestipol. So we don't receive any prescription data on the, in antidiarrheal. So this will always be anecdotally, what we get from the market research from physicians or what is reported back to us on the physician's office. I would look at it this way. We've been fairly agnostic, the most important piece is we want patients to receive an antidiarrheal when they receive NERLYNX prescription and that's been the main message more physicians are becoming more aware of the control data and they see the data for themselves.

But we have seen colestipol, budesonide and loperamide used across the Board.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

And then I would add to that, we applied to FDA to have our label updated. So, you'll remember that at the time we got approved we were only allowed to put in the data on, from the control study and just the loperamide alone arm, because at that time -- that was the only arm we had a full 12-months of data on.

Unfortunate that arm, has a very high rate of discontinuations, I believe, if I remember the data correctly. The control study showed that in the loperamide alone arm, the discontinuation rate was somewhere around ballpark 40%. We have, we submitted somewhere around November to December of last year to have the designated arm put into the label. So, I would anticipate that, sometime probably Q2 was so -- we would be getting the label updated to include the budesonide arm, we will then follow with the colestipol arms. I think the last data we had on the budesonide arm. That we be published, I thought the discontinuation rate was (inaudible) as I remember this correctly was somewhere in like the 20% to 25% range or something like that. And obviously, shifting to that will help improve the discontinuations as well. So I think that as we get that data into the label, right now we can promote it and as we get that data into the label we'll be able to promote so I'd imagine we would start seeing more use of those regimens going forward.

Steven Lo -- Chief Commercial Officer

Yeah, this is Steve. On your second question regarding patients who go beyond 12 lives. As I mentioned earlier, now that we have a larger specialty distribution channel in office dispensing it's becoming a lot more difficult to track that since some patients move back and forth. I know in the past, we reported that there are patients who go beyond the 12-months and that's still happening, but we just don't have the exact numbers behind that.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

All right. And just one quick one, I just want to make sure I heard correctly. You gave guidance for the licensing partner revenue $5 million to $20 million did I hear that correct -- $15 million to $20 million, what was that number?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Its $5 million to $10 million.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

$5 million to $10 million for 2019. Okay. Thank you.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

And Yigal, just so, you know, there's some other payments that we didn't put in there, because it's uncertain on the timing of them. So that number may be conservative. It's just they're certain payments that there are milestones that need to be hit. And it's not clear if those are going to come in 2019 or in 2020. So we did not include those milestones in that guidance.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Okay, thanks.

Operator

Our next question comes from the line of Cory Kasimov of J.P. Morgan. Please proceed with your question.

Cory Kasimov -- J.P. Morgan -- Analyst

Hey, good afternoon guys. Thanks for taking the questions. Most were asked, but one I have is, are you able to give us the net active patients by months, similar to what you've done in the last couple of quarters is opposed to just bottle sold?

Steven Lo -- Chief Commercial Officer

Hi, Corey. Yeah, this is Steve. Yeah, unfortunately it's -- as I've been mentioning, it's a little more difficult now, since we have expanded the specialty distribution channel and so because of that, we don't receive metrics from the in-office dispensing regarding app locations, whether their was a new prescription or even a refill. So, because of that high amount of variability and we kept track patients longitudinally it is very difficult to provide net active patients moving forward.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

(Multiple Speakers). Corey, just -- to just clarify Corey. Yeah, so in past quarters, as you know, we have the two channels. Right, their is the specialty pharmacies where prescription is written and then they physically delivered to the patient. And then there's the specialty distribution which we tend to call the in-office dispensing because the bottle just given the patient right in the physician's office.

In past quarters that in office dispensing was only about 5%. So our ability to say, all right, here is the estimate for the number of active patients the error bars around that, what kind of low.

As you heard, we are now seeing a lot of -- almost 19%, going into that in office dispensing it creates much larger error bars around those numbers and it makes it more challenging for us to try to estimate the actual number of active patients. So that the bottled numbers is probably the best way to do that because we assume every bottle is a patient right.

I can't understand why someone will get two bottles at once. That's probably the best way to do it.

Cory Kasimov -- J.P. Morgan -- Analyst

Okay, all right. And then, I guess just two clarifications, can you repeat what the gross to net was in 4Q and how that compared to 3Q?

Maximo F. Nougues -- Chief Financial Officer

Yeah, go to net -- the gross to net in Q4 was 4% -- in, or close to 4%, sorry. In Q3, it was close to 7%. The explanation for that is we have been using an estimate based on claims history that was our on, on a similar product. Now, that we have 12-months of claims we can actually go back and see what actually has happened for the last 12-months and we basically reconcile that in Q4.

Cory Kasimov -- J.P. Morgan -- Analyst

Okay. And then my last question is, how much did inventory change in the fourth quarter, ahead of the January price increase. I heard what you said about the one specialty pharmacy was like up to $1 million. But can you say overall, how much inventory changed?

Maximo F. Nougues -- Chief Financial Officer

Our estimate as remain fairly flat. Around the three weeks, I think, I mentioned that is really hasn't changed that much.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

And Cory, to think -- regarding the inventory builds from that one pharmacy, which was I think we said in the range of $500,000, to $1 million. An easy way to look at that is -- if you say that the quarter's numbers was about $60 million. There's 12-weeks in the quarter, so that's $5 million a week there is basically five business days of $2 million a day. So, that basically comes down to somewhere around one day.

Cory Kasimov -- J.P. Morgan -- Analyst

Okay, all right. Great. Thanks Alan.

Operator

Our next question comes from the line of Chris Shibutani of Cowen and Company. Please proceed with your question.

Unidentified Participant -- Cowen and Company -- Analyst

Hi. This is (inaudible) to Chris, add my congrats on the strong quarter. Do you have an estimate, of the average duration of treatment, specifically in 2018 and how that might change in 2019?

Steven Lo -- Chief Commercial Officer

Hi, this is Steve. Yes, I will provide a very similar answer because of the fact that we are unable to track patients who start or/are interim in the specialty distribution channel, it's very difficult to track patients longitudinally and therefore we don't have those duration numbers.

Unidentified Participant -- Cowen and Company -- Analyst

Okay. Interesting and your cost -- maybe just a quick follow-up, do you have plans to look into this board to determine if you're relatively close to the maximum duration you might expect which would be about 12-months ?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

So, I think that, that is obviously something we're looking into. As you know, we have a number of programs in place as Steve mentioned, which include the vouchers, increased awareness of our control trial data and then obviously the label updates. So our hope is that whatever the current median duration of treatment is we have the opportunity to improve that in 2019.

But yes, we are planning on looking into that during during this year, especially as we get these new initiatives more rolling out to perhaps we can report on that -- at later call.

Unidentified Participant -- Cowen and Company -- Analyst

Got it. Thank you very much.

Operator

Our next question comes from the line of Kennen MacKay of RBC Capital Markets. Please proceed with your question.

Kennen MacKay -- RBC Capital Markets -- Analyst

Guys, congrats on the clinical and commercial execution on the quarter. First off, I had a quick follow-up on the inventory question given the sort of four time -- both increase in, in office dispensing with it, where there is some inventory, it seems like the statements around three weeks of inventory on hand, presumably for this channel we're a little bit different. Can you maybe help us understand a little bit for the entire quarter what the impact of inventory was given in prior quarters, it seems like its very close to nothing, presumably because it was almost all through -- on channel?

Maximo F. Nougues -- Chief Financial Officer

So, we actually haven't seen that change between channels in terms of the three weeks average. I looked for the last three quarters on what we have reported and again stays about the same. Obviously, our sales have increased for the number of bottles and inventory out there, it has increased but is that -- we still about three-weeks.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

And Kennen, you ramble something thereabout. It was 1-0 and now it's three-weeks. The inventory was never zero. And as always, I think since we've been tracking this launch. It's always been right around three weeks, we've never, it would be impossible to have zero inventory.

Kennen MacKay -- RBC Capital Markets -- Analyst

Okay. Apologies for that Alan. And maybe just more broadly, was wondering given the very impressive growth we saw from Q3 to Q4, sort of, if you could elaborate a little bit on commercially any of the differences that we've seen this quarter versus for instance prior quarter it will be much more in office dispensing and the impact of additional use of prophylactic Imodium or other antidiarrheal in new patient start? Thank you.

Steven Lo -- Chief Commercial Officer

Yes, this is Steve. Yeah, so there were a few drivers this quarter that we've certainly noticed. Number one, we had very strong -- of the patients that we track, who were able to refill. We track the -- an increase in rebuild and especially pharmacy channel. So, that was one driver. The second driver, as you mentioned included the growth in the in-office dispensing and the specialty pharmacies didn't suffer from that because they also grew as well. So, I believe that was certainly some very good demand driven there and then I also highlighted the fact that our high-performing regions have continued to perform, but we're now seeing some of the lower volume regions start to grow as well. And I believe that I think with new personnel in place as well as physicians being more educated with better access their understanding now on the efficacy, but also the ability to manage side effects.

Kennen MacKay -- RBC Capital Markets -- Analyst

That's it. Thanks, Steve. Congrats again. Really impressive commercial quarter.

Operator

Our next question comes from the line of Michael Schmidt of Guggenheim Securities. Please proceed with your question.

Michael Schmidt -- Guggenheim Securities -- Analyst

Hi. Thanks for taking my questions. I had a few, maybe first, Alan around the potential launch in Europe this year, how should we think about operating expenses going forward maybe thinking of the fourth quarter '18 run rate in terms of how much additional infrastructure, but I doubt it might be necessary?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

So, Michael, building a sales force in Europe is very different than building one in the United States because obviously when you build one in the US, you have to go all 50 states at once, whereas in Europe, you kind of go country by country, right. And you can't launch in a specific country until you get reimbursement, its only when you can launch in Germany, right, which is obviously not as big as United States. Obviously, its much smaller. So you tend to have rather than having a huge number of expenses upfront like you went on the US launch. It tends to be more protracted over time.

So, I think that on our second quarter call we start giving guidance for European sales and give a little more clarification on our path forward they will be in a better position to do that. But again, I wouldn't anticipate that the cost of a build-out in Europe in 2019 would be something that would be similar to what we did in the US, it's just a much smaller and longer-term type of the build.

Michael Schmidt -- Guggenheim Securities -- Analyst

Thanks. And then how should we see about pricing assumptions in Europe and potentially rest of world as well?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

I don't know that we're in a position to give that yet, I would rather wait until where -- put a more mature in our decisions on Europe and then we can give it at that time.

Michael Schmidt -- Guggenheim Securities -- Analyst

And then maybe one for a question on sales dynamics in the fourth quarter. And I understand that a lot of that has been driven by refills and maybe a decrease in discontinuation better compliance rates. Can you help us understand maybe a little bit more how you're patient -- the new starts are trending relative to early in the year?

Steven Lo -- Chief Commercial Officer

Yes, this is Steve Lo. We did see an increase in new patient starts right in January, so that's at least encouraging and that's really essentially what we've been tracking.

Michael Schmidt -- Guggenheim Securities -- Analyst

Thank you.

Operator

Our next question comes from the line of Thomas Smith of SVB Leerink. Please proceed with your question.

Thomas J. Smith -- SVB Leerink -- Analyst

Hi guys. Thanks for taking the questions. Just on the number of prescribers you reached. I think you mentioned that you've now detail about 68% of your target. Can you give us a sense of how many of the physicians you detailed or I guess what you would call active prescribers of NERLYNX or maybe give us a sense of how many of those prescribers have yet to write a prescription for NERLYNX?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Yes. So, with regard to. So again, the physicians who we've detail means that our sales reps have met with them. It doesn't mean the're prescribers. The numbers in that graph are just the one our sales reps have met with not the ones that actually have prescribed the drug. I would say that a rough estimates is that I think we're looking at over 60% of them have become prescribers. So obviously, there's still a lot more to move there, there's lot more in the needle to move there in terms of new prescribers.

So, there's obviously still a very nice opportunity for new prescribers growth.

Thomas J. Smith -- SVB Leerink -- Analyst

Right. Okay, that's helpful. And then also could you give us a sense, I guess within these physician practices that it sounds like you're gaining better access to. What's your sense for how much drug these physician practices are keeping on hand in their office to dispense?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Yes, I think, we already commented that the inventory levels at -- to the in-office dispensing is the same inventory levels as in the specialty pharmacies. So, those two inventory levels appear to be the same.

Steven Lo -- Chief Commercial Officer

Yes. And this is Steve. I also add that because the wholesale acquisition price of this product is over $12,000 per bottle the way that the offices have their agreements with the specialty distributor typically they can order and receive product within 48 hours, so there really isn't a huge incentive for them to be storing a lot of product in the practice.

Thomas J. Smith -- SVB Leerink -- Analyst

Okay, great. That's helpful. Thanks guys.

Operator

Our next question comes from the line of Yigal Nochomovitz of Citigroup. Please proceed with your question.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Thanks. I just had one follow-up related to the interplay of the adjuvant market and the metastatic market and I know you only got the NALA data. I think December 17th probably didn't impact the fourth quarter, but I'm just curious, what have you heard in the channel checks as you speak with physicians about the interest in the run, in adjuvant given now this second Phase III trial we just shown for disease control is that creating a tailwind for the adjuvant market or is it not really a topic of discussion as you see it?

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

I don't know that we've seen any impact yet of that. Now, again, you're right. We just announced it in December. It's only been a month and a half or so -- I don't know that we've heard any feedback regarding that yet.

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Okay, thanks Alan.

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Sure.

Operator

This concludes our question-and-answer session. I'd now like to turn the conference back over to Mariann for closing remarks.

Mariann Ohanesian -- Senior Director of Investor Relations

We appreciate your interest in Puma Biotechnology. As a reminder, this call may be accessed via replay of the webcast at pumabiotechnology.com beginning later this afternoon. Thank you for your time and attention today.

Operator

Ladies and gentlemen, thank you for participating in today's conference call, this concludes our program. Everyone have a great day. You may now disconnect.

Duration: 52 minutes

Call participants:

Mariann Ohanesian -- Senior Director of Investor Relations

Alan H. Auerbach -- Chief Executive Officer, President and Chairman of the Board

Steven Lo -- Chief Commercial Officer

Maximo F. Nougues -- Chief Financial Officer

Alethia Young -- Cantor Fitzgerald -- Analyst

Kelly -- Goldman Sachs -- Analyst

Yigal Nochomovitz -- Citigroup Inc. -- Analyst

Cory Kasimov -- J.P. Morgan -- Analyst

Unidentified Participant -- Cowen and Company -- Analyst

Kennen MacKay -- RBC Capital Markets -- Analyst

Michael Schmidt -- Guggenheim Securities -- Analyst

Thomas J. Smith -- SVB Leerink -- Analyst

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