Q4 2023 Tarsus Pharmaceuticals Inc Earnings Call
Participants
David Nakasone; Head of IR; Tarsus Pharmaceuticals, Inc.
Bobby Azamian; Chairman & CEO; Tarsus Pharmaceuticals, Inc.
Aziz Mottiwala; Chief Commercial Officer; Tarsus Pharmaceuticals, Inc.
Sesha Neervannan; COO; Tarsus Pharmaceuticals, Inc.
Jeff Farrow; CFO & Chief Strategy Officer; Tarsus Pharmaceuticals, Inc.
Francois Brisebois; Analyst; Oppenheimer
Andrea Tan; Analyst; Goldman Sachs
Jason Gerberry; Analyst; Bank of America
Oren Livnat; Analyst; H.C. Wainwright & Co.
Balaji Prasad; Analyst; Barclays
Corey Jubinville; Analyst; LifeSci Capital
Eddie Hickman; Analyst; Guggenheim Securities, LLC
Tim Lugo; Analyst; William Blair
Presentation
Operator
Yes, good morning and welcome to Tarsus' Fourth Quarter and Year End 2023 financial results conference call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to David Nakasone, Head of Investor Relations, to lead off the call. Please begin review.
David Nakasone
Before we begin, I encourage everyone to go to the Investors section of the Tarsus website to view the earnings release and related materials we will be discussing today. Joining me on the call this morning are Bobby Azamian, our Chief Executive Officer and Chairman, Aziz Mottiwala, our Chief Commercial Officer, Sesha Neervannan, our Chief Operating Officer, and Jeff Farrow, our Chief Financial and Chief Strategy Officer.
I'd like to draw your attention to Slide 3, which contains our forward-looking statements during this call, we will be making forward looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail.
With that, I would like to turn the call over to Bobby.
Bobby Azamian
Thank you, Dave. Good morning, everyone, and thank you for joining us on the call today. 2023 was the defining and foundational year for Tarsus as we successfully started our next chapter as a commercial company, we made significant progress on several programs in our pipeline, and most importantly, launched our first commercial product, extending the first and only FDA approved treatment for Dominic's blepharitis since its launch in late August, we have seen tremendous demand and growing uptake of Excel V among eye care professionals or ECP.s, and Devon has put forward as patients who have long awaited and effective treatment for this damaging and impactful either disease.
Today, I am pleased to report on the great progress made and extend this first full quarter in the marketplace as we continue to reach patients affected by this disease.
For the full year 2023, we reported nearly $15 million in net product sales and delivered more than 17,400 bottles of XMB. to patients. These are impressive really numbers exceeding even our own expectations throughout the fourth quarter of 2023 and early weeks of 2020 for extended has continued to solidify its place as an innovative category. Creating therapeutic diagnose patients with Dominick's blepharitis or DV. for short has driven initial demand for extending, and we expect this to continue as we work to reach to 1.5 million patients in the U.S. We were already diagnosed prior to the approval of extending in parallel, we are seeing early signals that we are reaching a next wave of DV. patients. Proactively visiting ECPs are complementary eye conditions such as dry eye disease, cataracts and patients who struggle to maintain their use of contact lenses. We estimate that these groups make up a significant portion of the more than 7 million patients currently visiting the ECPs who we aim to reach with extended, and we are already seeing increasing use across all of these patient segments. This traction is attributed to the tremendous strides we've made with ECPs over the last couple of years, we've engaged with all of our 15,000 target HCPs more than a third have written at least one dispensed prescription and more than half have become repeat prescribers who see the clear benefit of extending and are taking action to help their patients find relief. Just this past weekend, we met with many of the top surgeons at the American European Congress of ophthalmic surgery or a cause for short. And we heard very consistent and positive feedback about their experiences with XMV. and more importantly, the benefits their patients are experiencing. Our focus for 2024 is serving more ECPs and more patients. We expect to accelerate extend these reach by adding to the base of current prescribers increasing the number of prolific writers and working with payers to secure broad coverage, in fact, are improving gross to net underscores the strong traction we've already made with payers in just the first few months of launch, we are delivering on the high expectations we set for ourselves and look forward to making even more progress throughout the year. I am also proud of our continued pipeline progress as we work to bring more new categories of therapeutics to patients with meibomian gland disease, Brazil utilization and Lyme disease prevention.
Finally, I would like to thank all Parsons for their incredible contributions, relentless execution and passion for serving patient needs. Together, we look forward to serving countless more patients and advancing additional category, creating medicines.
And with that I will turn the call over to our Chief Commercial Officer, Aziz Mottiwala are more on the strong launch of extending and body.
Aziz Mottiwala
As I said last quarter, the response takes can be have been truly remarkable. And the results we're seeing so far demonstrate that our unique strategy and executional strength are delivering exactly as planned. It's clear from our results that the launch of extended is off to a tremendous start. During the first months of launch, we observed a significant number of patients with DV., engage and educated a broad foundation of prescribing HCPs and made significant early progress with payers. We've noted from the beginning that creating the next category and eye care takes time and requires teams to educate providers not only on the strength of extending but also on the disease itself. As such, high impact disease education campaigns and ECP engagement have been among the key pillars to our success and we're beginning to see the initial waves of ECP. adoption, leading to growing prescription volumes and meaningful patient outcomes. Prior to approval, we launched action-oriented visually focused physician and patient education campaigns to familiarize both groups with the impact of DV. and reinforce the simplicity and ease of diagnosis. We've also kept ECPs engaged through active peer-to-peer scientific exchanges conducted by our all optometrist medical force. Clearly, these efforts are paying off.
As of February 23rd, approximately 6,000 ECPs has started patients on extending and more than half are repeat prescribers. As a result, more than 17,400 bottles have been delivered to patients in 2023. We're thrilled with these results and the impact we're having on patients we've also learned a lot, and we're leveraging these insights to further optimize our sell strategy, particularly when it comes to transforming the next wave ZCP.s into routine and repeat prescribers. While we continue to call on existing riders, we are shifting gears with a focus on reaching the next group of ECPs who are familiar with DB and ready for a solution that may need a little more experience with extended before becoming routine writers. Based on our experience, this behavior shift often requires multiple visits by our salesforce. Our goal is to make them be a regular part of ECP. clinical practices. And we found that this usually happens after prescribers write five to 10 prescriptions and see the positive impact of Sandy on their patients. This threshold is not only important because they become frequent writers. They also become more competent and look more proactively across all the patient segments for additional DB. patients that can be helped by extending our most recent market research indicates that 75% of DCP's plan to more proactively look for and diagnose TB and 90% of those that have prescribed extend the expect to write more given their positive experience with this medicine. These numbers are powerful and reflect the strong potential growth opportunity yet. So having the next 6,000 target ECPs prescribed may take more time and effort on the part of our sales team. We have great confidence in our ability to convert this next wave of ECPs to proactive prescribers. In addition to the tremendous strides we've made in reaching HCPs and their patients, we've also had great success with payers. I'm pleased to report that we have secured several payer contracts since our last earnings call, including a major commercial plan with more than 19 million covered lives that has put extend beyond preferred status, we should begin to see the benefits of this coverage in the first quarter of 2024. In the meantime, and due to the clear value proposition of SMB, we continue to see initial non-contracted coverage that resulted in better than expected gross-to-net discounts of 58%, a substantial improvement in gross-to-net discounts based on our differentiated approach to distribution and patient access and all the work we've done over the past couple of years, and we'll continue to do with payers.
Before I turn the call over to Sesha, I would like to take this opportunity to express how proud I am of our commercial organization. This is a team that was strategically and thoughtfully assembled based on their expertise in eye care and successful new product launch experience and they've executed exceptionally and we are setting a new standard in product launches.
I will now turn the call over to Sesha to rebound and our Chief Operating Officer, who also leads our research and development to cover the progress we're making on our clinical programs session.
Sesha Neervannan
Thank you Aziz. I'm pleased to share that we have made significant progress across our entire clinical portfolio since our last earnings call reporting three very positive top-line data sets for all our Phase two programs. These data highlight the potential of TPO three in meibomian gland disease EPO for in popular personalization and TP oh five for the prevention of Lyme disease, all three product candidates target high unmet needs and are based on Lennar the same active ingredient found in extremities. And like I said, we also target the underlying cause of disease. In December 2023, we announced top line results from the early Phase IIa clinical trial evaluating TP oh three for the treatment of meibomian gland disease or NGD. in patients with Demodex mites, CBOT demonstrated statistically significant and clinically meaningful improvements compared to baseline in two objective measures of disease. One, the presence and quality of liquid secretion as measured by the meibomian gland secretion score to the number of planned secreting normal are clear liquid as measured in the central 15 glance of the lower eyelid and the treatment was well tolerated, much like XMD. four DB. These data demonstrate the immense potential of TPO. three in addressing the underlying cause of MGD., a disease that can lead to permanent changes in the tear film and progressive landlords. We plan to present the complete data set from this trial at a major medical meeting later this year and look forward to discussions with the FDA before the end of the year.
Regarding the path forward for TP oh three in MGT. As you may have seen in this morning's earnings release, we announced positive top-line results from the Phase IIa Gallatin trial evaluating TP. oh four for the treatment of popular personalization or PPR. CBI. four is a topical Aqueous Gel formulation of lot leaner in development for the potential treatment of PPR. a chronic skin disease characterized by facial redness, inflammatory lesions burning and stinging TB. four is designed to potentially treat PPR by eradicating Demodex mites, which may play a key role in triggering inflammatory responses associated with the disease in the GALAXY trial, significant statistically significant improvements in inflammatory lesions and IGA score were observed at week 12 compared to vehicle these are well-established regulatory endpoints for PPR. And the data also show that TP oh four was generally well-tolerated. The next steps for TPI. four will be complete data analysis and a potential meeting with the FDA by the end of the year to determine a path forward the last of the three studies, but certainly not least last week, we reported results from the Phase IIa corporate trial, 40 p. of file for Lyme disease prevention. As a reminder, CPO-5 is an oral tablet designed to be an on-demand solution for prevention of Lyme disease. It is believed to be the only non vaccine drug based preventative therapeutic in development that targets and kills. In fact, it takes before they can transmit the beryllium bacteria that causes Lyme disease results from the corporate trial demonstrated statistically significant benefit in killing attached Celltech versus placebo within 24 hours at both day one and day 30 after a single dose. No significant differences were observed between the high and low dose groups and the TPO. five was generally well tolerated. These data demonstrate that TP oh five has the potential to provide both rapid and durable protection against multiple tick-borne diseases. We plan to report the full data set from this trial later in 2024 and look forward to providing updates on our conversations with the FDA regarding the regulatory path forward in parallel with the incredible success we've had with externally, we're also advancing a clinical pipeline that we believe has the potential to deliver even more category creating medicines, and we look forward to additional catalysts later in the year.
Lastly, I would like to take a minute to thank all the investigators and patients who made the study successful.
With that, I will turn the call over to Jeff to discuss the financial results accusation in 2023, we made great progress on our goal to further strengthen our financial foundation in support of our strategic priorities.
Jeff Farrow
Our fourth quarter and full year results reflect our ability to generate meaningful revenue while continuing to advance our pipeline of innovative therapeutics, and I'm proud to report that we generated fourth quarter extended net product sales of approximately 13.1 million in full year 2023 product sales of approximately $14.7 million. As a reminder, we recognize revenue when we ship it stemmed from our warehouse to the distributors, not on bottles received by patients. As mentioned earlier, sales for the year were driven by the thousands of VECP.s who have started their patients on extended more than 17,400 bottles that were delivered to patients and better than expected gross-to-net discounts of approximately 58%.
As stated 2024 is off to a strong start. We are pleased with the increasing number of bottles dispensed thus far, and we have secured several payer contracts since our last earnings call, including as disease noted, a major commercial plan with more than 90 million covered lives, and we remain on track for broad commercial coverage by the end of the year and Medicare coverage beginning in 2025. To be clear, the benefits of this new major commercial plan are not reflected in the fourth-quarter numbers we are reporting today. As many of you are likely aware, signing a contract with a payer does not have an immediate impact and it can take time for coverage to be reflected in the gross-to-nets. So we expect to begin recognizing the benefits of these contracts in the first quarter of 2024.
I also want to note that while the gross to net discounts we're reporting today is very strong. This improvement is primarily due to an increase in the non-contracted coverage we saw in the fourth quarter. Remember, payers have the ability to make changes that could impact gross to nets in future quarters until we secure these additional payer contracts. This could include increasing co-pays or coinsurance, which could result in greater bridging and higher gross-to-net discounts. Further, we expect to see the typical first quarter dynamics on scripts and net sales, including higher patient out-of-pocket costs due to the planned resetting of deductibles, the Medicare coverage gap, both of which would increase the gross-to-net discounts, the impact of the holidays, winter storms across the country and the out of office impact of medical conferences as well as other potential patient dynamics, all three of which could impact script numbers. As such, we expect gross-to-net discounts to be flat to slightly higher in the first quarter and then improving two are expected steady-state of 50% in 2025.
Turning to our P&L, our total operating expenses were approximately $57.5 million and $160.6 million for the fourth quarter and full year 2023, respectively. The increase in operating expenses quarter over quarter and year over year was primarily driven by increases in selling, general and administration expenses due to the addition of commercial infrastructure, marketing and education efforts and the sales force to support the launch of X Jempy gross margins for the fourth quarter were 91%, which includes the royalties that we pay to long ago. Looking at Q1, we expect total operating expenses to be in line with the fourth quarter of 2023.
With that, I'll turn the call back to Bobby for final remarks.
Bobby Azamian
Thank you, Jeff. Looking at the progress we've made within our pipeline and in the early months of launch, I remain confident about Tarsus has ability to become a leading eye care company, and we look forward to keeping you updated as we continue executing on an already successful launch trajectory. Operator, please open the line for questions.
Question and Answer Session
Operator
Thank you. At this time we'll conduct the question and answer session. (Operator Instructions)
Francois Brisebois, Oppenheimer.
Francois Brisebois
Thanks, guys, for taking the questions. And congrats on a very nice vocoder here. Just in terms of a couple of questions and thanks, Jeff, for the clarity on the gross-to-net. Very helpful. Is there any possibility here that your peak, 50% gross-to-net can end up being better or are we sticking to that? And this is kind of a more of an effect of a non-contract contracted plans with the growth in FX.
Bobby Azamian
Thank you, Frank. This is Bobby. I'm just going to reflect for a moment sitting here with the team at this early point in our launch about a couple of things I'm really proud of and then pass it to Jeff on just to reiterate, first and foremost on what a excellent first quarter serving our patients, doctors, payers as you know, and generating revenues. And all of these, as you've seen, are above target and signify the large impact that we anticipate would extend the and really the category creating commercial leadership that we're pioneering in eye care.
Secondly, I'm really proud that we can create additional categories through art, our demonstrated ability to deliver other new medicines, three positive Phase IIa readouts in the last three months. And I think all this signifies a very bright future for Tarsus will both extend the and our future products and routes to becoming an eye care leader.
So with that, I'll pass to Jeff to answer Frank's question.
Jeff Farrow
Thanks, Bobby, and good morning, Frank. It's early days yet. I think we're cutting a new pathway here with extending We don't really have a strong analog we can point to. So I think we're going to continue to guide to a ultimate steady-state gross to net of around 50% at this point as time goes on and we print a few more quarters, we might adjust that. But at this point, I think it's appropriate to keep it at that 50% gross-to-net.
Francois Brisebois
Great. And then just maybe a question on patients coming back and just wondering, you know, obviously some prescribers are going to want to see how this works with their patients and any feedback there that you're getting in terms of patients coming back, just to just to make sure everyone stays confident here that this is kind of a bolus start and these prescribers will keep going? And just any anecdotal feedback of patients coming back for a checkup after have extended and frankly disease?
Aziz Mottiwala
Thanks for that additional question. I'll tell you that one of the most exciting parts of this launch is hearing that feedback from doctors and patients, almost every single prescriber we talk to has had a extremely positive experience. So you're seeing physicians bring patients back mid treatment at the end of treatment and almost universally, you're hearing vast improvements in these patients.
Positive feedback. I think that's actually one of the reasons we've been able to penetrate 40% of the prescriber base. So quickly is that these doctors are hearing from their colleagues have great things are working. So I think this is going to continue to be a strength for us going forward. The drug doesn't disappoint feedback is positive, and I think doctors are really taken aback by how impactful this has been on their patients. And I think ultimately, what happens is that potentiates the physicians to think about additional patients in the practice. So you're starting to see them more proactively diagnose moving on beyond just the typical Demodex blepharitis patient, but thinking about potentially their recalcitrant dry eye patient, their cataract surgery patient or someone that can stay in their contact lenses. So I think it's really two things that we're seeing there. One is positive experiences leading to additional uptake and to really broadening the funnel in terms of how doctors think about the patient base.
Francois Brisebois
Okay. Great. And then, Bobby, I think in your remarks you talked about the team you're seeing in Europe for the conference. Have you just help us understand the thought process of extending potential US versus ex-US?
Yes.
Bobby Azamian
Thanks, Fred. To be clear on the conference I was referring to is called a cause of the American European Congress of surgeons actually held here in Europe. So we were at I want to hear, Dan, but it's a good question about Europe and I'll pass to, um to session to talk about some of the regulatory and opportunities there? And then also, Jeff talk about some of the broader strategic potential there.
Sesha Neervannan
Thanks, Bobby. Hey, Frank, Sasha here. Yes, with respect to Europe, we are proceeding with our plans to develop a product preservative free product for Europe. As you know, Europe is very big on preservative free medicines and really prefer that over preserved five. So we are developing a preservative free medicine. And in parallel, we are also in the process of seeking input from the European Medicines Agency for a pathway for regulatory filing and approval. And hopefully we'll be able to report on that later in the year. And Jeff, do you want to address the other part?
Jeff Farrow
Sure. Yes. So we Frank are in the process of doing a study that looks at both pricing and launch strategy over in Europe. I think right now it's a little early to make an ultimate decision on which pathway we're going. We're exploring all opportunities, whether it be a you build it ourselves, distributor relationship or licensing. So that will be probably something we'll update to later during the year.
Francois Brisebois
Okay, great. Well, thank you, and congrats guys on a great start here. Thanks.
Bobby Azamian
Thank you, Greg.
Operator
Andrea Tan, Goldman Sachs.
Andrea Tan
I am somewhat on for Andrea. Congrats on the quarter and thanks for taking the questions on. First here of what's your if you could describe your level of confidence that the ramp seen to date with extended continue as the prescriber education goes on and more patients are treated.
And then related to that, could you characterize the level of inventory stocking for 4Q.
Aziz Mottiwala
I'll start with via the RAB. And I think as I mentioned earlier, we've been really pleased. I think the key things here are one, the penetration into the ECP market right. We've got 6,000 prescribers already writing this product. We're seeing a very high repeat prescriber rate of over 50%, and that's only in six months. And I think that's really remarkable. I've been doing this for a long time. And to get to that level of penetration in just a few short months really speaks to the impact extending has on patients and also the need in the marketplace that's there longer term.
I think secondly, we've made great progress with payers. And I think as we continue to do that, that will also enhance the uptake as we have consistency and depth in our in our payer coverage.
And I think lastly, as I mentioned in the earlier question, the feedback here is really remarkable. I think that we're seeing a lot of additional support as doctors are on podium at these conferences sharing and before and after the impact that's having on patients, we actually had to update our website to let doctors upload the before and after pictures because they're so excited about the results they're seeing. So I think we remain very confident in the continued progress that we're going to make in the launch. With that said, we mentioned in the opening comments that 6,000 doctors are really remarkable number getting to the next 6,000, it's going to take additional work, right? We've gotten through sort of the early adopters. So the next wave is going to take a little bit more work. Salesforce is out there hitting the pavement. So I think we're going to continue to make that progress, but it's selling and take continued efforts and consistency in those efforts too, have that come to fruition, and I'll let Jeff speak to the other part of the question exists and good morning, Tony.
Jeff Farrow
On the inventory, much like any manufacturer, there's always going to be a certain amount of inventory at the channel, albeit in our case at the pharmacies, we've contractually limited the amount of inventory that these pharmacies can hold to between two to three weeks and I would just say that we are within that contractual period. If there is any sort of event that causes us to sort of go outside of that realm, we'll certainly highlight it because it could impact the following quarter, but at this point. But within that, that right.
Andrea Tan
Thank you. That's really helpful. And then a second question here on the back of the Lyme disease innovation that I believe you touched on it earlier. But if you could just reiterate the next steps and then how you're thinking about strategic options regarding partnering versus something externally? And lastly, if you could share details again around the commercial opportunity.
Sesha Neervannan
Thanks, Andrea, for the question. This is Sasha again. Yes, you know, first, let me let me highlight again, the data from the corporate trial. It's a it's a remarkable data to see if this is a very unique trial where we attach sterile techs to healthy volunteers to look for a ticker, which is our purported mechanism of action for preventing Lyme disease with our drug. And then the data, we're really, really pleased with the data and to see that it's still within 24 hours before it has a chance to prevent Lyme disease is a very important component on our on. Our plan is to continue to complete our analysis from this trial and take it to the FDA later this year and explore pathway for additional studies in this in this particular indication. And we'll it's too early to predict how that studies, those studies are going to go, but I will have a time once we have a chance to talk to them, we'll be happy to report that out.
And then I'll pass it on to Jeff for the partnering question that sort of takes Asia.
Jeff Farrow
So as Susan mentioned, we're going to be developing TPP. for both of these products and we'll have some discussions with the agency. What's interesting about realization is up. The eye care professionals have been expressing quite a bit of interest in this program. They see realization in their patients and they want to ultimately treat that if they have an opportunity to. And so we're going to explore that from a market research opportunity and see if there's a opportunity to potentially drop this into our sales rep's bag and then potentially at the derm indication could be partnered with maybe a derm company on the line program?
We are really excited about this program. I mean that data is pretty profound. I think what we would I'd like to do is it also have some discussions with the agencies and then potentially talk with some partners about a pathway forward. It is a likely large clinical study ultimately as a pivotal study and the call point will likely be sort of a general practitioner. So we would probably partner that one out either following this program readout or potentially we might do a smaller Phase IIb if we think there's a good return on investment there it.
Andrea Tan
Thank you so much. Congrats again to join me.
Operator
Jason Gerberry, Bank of America.
Jason Gerberry
Thanks for taking my questions and congrats on the progress here.
So on couple for me, just love to get your comment on this sort of early adopter 6,000 prescribers how that nets out between optometrists and ophthalmologists. And yes, early observations from the field in terms of whether you've got a right-sized field force on to go after the next kind of leg of prescribers or if you expect, there may be a need down the line to increase the size of the field force and then ultimately, ultimately, given the massive prevalence is there a revenue threshold that you get to that a DTC advertising campaign to either patients or providers is something that you can justify and makes sense. Thanks. Adjacent disease.
Aziz Mottiwala
Thanks. For those questions. I think first off, when we think about the uptake, as we mentioned, we've been really pleased with how things are going. The sales force has done a remarkable job here. And I think the 85 territories we had was absolutely suitable for the 15,000 targets that we've had. Right.
And when you think about how we reach those doctors. The 6,000 is roughly 60% optometrist, 40% ophthalmologists, but we're seeing great uptake in utilization across both the segments. I think as we look at going forward, one thing we have seen is that there's a high degree of promotional sensitivity which makes sense more making calls. Doctors are more proactive about seeing things here. And as we think about converting the next wave of adopters. We certainly do think about things like sales force expansion, primarily focused on frequency. Can we see these doctors more often accelerate that change in behavior and create more deep adoption among these doctors, including having them think about additional patient types. So it is something we're contemplating. I think that's something if we continue the momentum we have we could do sooner than later, but it's something that we'll be really rigorous and disciplined in how we approach.
I think the same thing applies here in terms of direct to consumer, I think it's less of a revenue threshold to your point. I think it's a little bit more around. Can we continue to see the level of physician adoption do we have enough doctors out there that will provide a clinical landing pad for these patients if we drive them in.
And then the second factor we really think about is continued progress and coverage and gross to net so that we're able to drive the highest value for those incremental patients we drive into a campaign. And I would also say that we think about this thing sequentially, right. You can think about a sales force expansion to really help broaden that adoption in parallel with coverage going. And then when you have a great base, both on prescribers as well as gross-to-net, then you'd layer in a more assertive direct-to-consumer campaign to educate and drive patients. And so a really good point in terms of how we think about those levers, and I think we're contemplating both of those in the not-too-distant future.
Bobby Azamian
And Jason, I just said, Bob, we were in the field every month as the team. I mean, I'm personally in the field every month of the team, and it's been really striking the waves of adoption. The disease alluded to. We're certainly seeing some of those folks that are still being educated about DV. and take a few visits from the sales force. But more and more, we're seeing doctors that I've had great experience with them we are thinking about other patients in their practice. We've ever heard doctors thinking about family members and treating them. There's there's such a strong response to this medicine, and we're seeing really no shortage of uptake by the ECPs. So I just want to reiterate that. And um, you know, as Yves mentioned, this is very promotionally sensitive. So that would with the strategy that we've implemented commercially, that would be the rationale for potential expansion to really bring doctors along that journey more rapidly in the future.
Jason Gerberry
If I could squeeze one final question in from with Lime, the update there. Just curious now that you've got this initial data, do you think that there is a stronger argument now for a pathway that different than the VALOR study that Pfizer is running, which is nearly a 10,000 patient study, given that you seem to have demonstrated being able to deliver something that's more On Demand with maybe a faster clinical proof point. So just curious, I mean, I see don't want to front-run your FDA interactions here, but just your thoughts on it seems like probably a key swing point perhaps and how you can partner and secure value for the assets?
Sesha Neervannan
Thanks. Jason. Sesha again here. Yes, we really pleased with the results that we saw. As I mentioned earlier on and the FDA hasn't we haven't taken this to the FDA obviously. But our hope is that the FDA uses data favorably as well. And as far as the comparison to the Lyme disease, certainly the vaccine, the vaccine is a very different approach compared to what we have. As you know, we we have a tick kill mechanism where the vaccine targets. See the actual bacteria that causes a Lyme disease and is very specific for the strains of those bacteria is where we are. And so the mechanism is inherently different on it. And the way we approach it is very different. It's early to speculate how the FDA will view our data. And this is a brand-new mechanism. So this is something that they have to absorb and understand as well. And we do hope to negotiate as a trial that can that can effectively assess the airline prevention through this mechanism. But it's too early to tell exactly how we will, how that will go. And we'll we'll certainly keep that in mind when we talk to them kind of packages, packages of funnel.
Jason Gerberry
Got it. Thank you, guys.
Bobby Azamian
Thank you, Jason.
Operator
Oren Livnat, H.C. Wainwright.
Oren Livnat
Thanks for taking the question. I was hoping we could just talk a little bit more about gross-to-net some after the 3Q call. So in November, you told us to be cautious going forward on gross-to-nets and or volume. I guess given some expected, it may be unbudgeted pushback from payers given the early uptake and clearly you dramatically outperformed that and improving meaningfully quarter over quarter. So you just help us just better understand, I guess how is that happening or is this just due to persistence of getting through prior offs and getting, I guess, essentially full coverage for some mix of this product and a balanced out bridging volume? Or is there something different going on behind the scenes that we don't understand.
I have a follow-up.
Aziz Mottiwala
Hey, Oren, thanks for the question. Yes, I think what you're seeing here is a real uptick in non contracted coverage. And I think this is due to a couple of things, right. One is we've been working with the payers for quite some time, right? We've initiated our engagement them well in advance of launch with disease education and obviously post approval, really sharing the value proposition NetIQ's Denby brings. I think the other part of this is our really unique distribution network that network really optimizes coverage for patients. We've obviously streamlined the process for PA appeal of what have you for the physician's office. And I think that has allowed us to maximize this opportunity. I think as Jeff mentioned in the opening comments, it is something that want to keep an eye on in term of headwinds because when you have non-contracted coverage. Of course, those policies can change at any given time. And that's really what motivates us to continue to secure contracts, and we're making great progress there. We remain confident in our ability to get the vast majority of commercial lives covered by the end of this year and 2024. And you see the progress there with the win that we mentioned earlier and in Part D would kick in in early 2025. So we continue to make progress there. And the way to think about that is that progress has to really solidify and secure where we are. And I think the other point is we've obviously made great strides and we have better than expected gross-to-nets getting to that 50% threshold that Jeff mentioned earlier, that next step up is going to take a lot of work, and that's going to take those contracts coming into play. So that's where our focus is now is securing those contracts securing the long-term value potential. But again, we're really pleased with starting from a great point and the progress we've made so far.
Oren Livnat
Okay. And I know it's really early, but you've talked about physicians. I've been a lot of positive experience. And I guess has that already translated to on an understanding of durability of response. I mean for the early, I guess, earliest patients who might have been on drug for a while, are we seeing them having, I guess, six months efficacy, so to speak, or something approaching that? Or are they already coming back for repeat treatments? And if there are refills or retreatments, how is as far as you know, being treated by insurance is it any different than the first script? Is there more resistance to a to a refill, so to speak and how that being contemplated in your contracting efforts?
Yes.
Aziz Mottiwala
So it's still very early. Right now, we're just six months into the launch. So we wouldn't anticipate a lot of retreatments, right? I think what we've said historically is that we'd anticipate to really start to see that start kicking in in 2025 when you've got a large bolus of patients that have been treated and then would be coming back. And if you really think about it. Even if a patient started six months ago, they probably haven't come back in for their follow-up visit, right, more of their annual exam. So I think that's something that we see later on down the line. With that said, we do see some exceptional cases where the doctors have had patients come in, had a great response want to keep them on therapy. But I would say that more the exception than the rule, and I think it's something we'd watch over time in terms of how we view that from the payer perspective, that is something that we've contemplated into our planning and discussions with payers. But again, this is something that will really be a phenomena. We'd see a little bit more meaningfully in 2025. And of course, the contracts that we're working on now would account for that in the go forward thinking.
Oren Livnat
Thanks and congrats on the great early performance pursuit or one moment on question.
Bobby Azamian
Appreciate it, Oren.
Operator
Balaji Prasad, Barclays.
Balaji Prasad
Hi, good morning and congrats again. So it's great to see the pipeline progress on what I seem to heard from your comments till now is that most of the progress in the pipeline is dependent on FDA meetings, which are anticipated towards the end of the year. So can you kind of tie up these three Phase three data points? Do you seen recently and take us through the next day or milestones of any David would reach of this.
Secondly, can you also comment around the business develop and business development enrollment you're seeing with both front and back-office opportunities? What kind of how competitive are these discussions and how reasonable are the valuation expectations within the space? And what should we be expecting from you towards the year in terms of BT? Thanks.
Sesha Neervannan
And cell biology, this is Sasha. I'll address the first part of this, but to the pipeline, yes, you are correct. I think all three of our programs on the next steps is really to complete the analysis from these from these studies where we've just issued top line and then look at look at the pathways and discuss the pathway with the agency. Beyond that, these are actually ways three different three, very different programs are the pathways are slightly different. The of the and indications are obviously different. So they all take a different different flavor, but it's the team is that we are treating the underlying cause. We are showing you showing the mechanism of eradicating the underlying root cause of all of these diseases. And it's really going to be a discussion with the FDA based on the based on these trials and how we want to contemplate taking it forward. It's going to be a discussion that it's too early for me to predict how it will go. But the next steps clearly is on a development pathway because these are these are somewhat different pathways for each of these programs.
Bobby Azamian
And this is Bobby. On the BD question. Thanks for asking that logic. As we've mentioned, we see our expertise really in two areas at this point. One is creating new categories with really young successful and then focused our development efforts. And the second is actually pioneering a new category commercially. And so when we look at BD, we really think about of those two capabilities that we believe we have in strength. And so as you mentioned, we are looking actively at front of the eye opportunities and we're going to be diligent and patient there. And we are really seeking things that could satisfy those two. It aims at creating new categories and new indications where we can serve patients that haven't really been served before in the front of the eye. And also now we have a leading sales force and they're calling on 15,000 ECPs. So we'd like to find additional medicines that we can serve those HCPs and patients with over time, we do expect to look beyond the front of the eye. And I think the back of the eye and even some adjacencies to our areas of expertise would be areas over the course of years that we would expect to look at and some we see in the front of the eye on a lot of promising assets out there, but we are going to be taking our time and we're very mindful of our focus and our balance sheet at this point in time.
Operator
Corey Jubinville, LifeSci Capital.
Corey Jubinville
Thanks for taking our questions and congrats on the early launch metrics. Just building off a question that was asked previously. Again, last quarter you spoke to us about the potential payer headwinds is non-contracted payers, Mr. input implement more prior on and in particular for any payers request included extend beyond their formularies. Have you seen them step back on prior U.S. requirements and also now the prior on landscape in general has started to settle in a bit of what specifically are most payers are requiring on these prior updates for reimbursement?
Aziz Mottiwala
Yes. Hey, guys. Thanks for that question. I think the way to think about the payer coverage, therefore, right, because it's a noncontracted we've seen these PAs out there. And I think that's always good news in the sense that, that means there's a path to getting the product approved. And I think that that's something that's really promising. And it also provides incentive for contracting. If the payers are covering this, we're seeing that volume go through I think in terms of any type of step back on a PA, I think that's something that we see as a headwind as volume increases and the way to think about this is it's sort of a race, right? You want to get these contracts in place as your volume increases so that you don't have any of these hurdles and to that extent when we see these PAs right now, typically they're pretty straightforward. They're limited to an eye care doctors or the patient needs to be seeing an ophthalmologist or optometrist, which of course makes sense because they're diagnosed at the foot lab. And then secondly, they're asking for confirmation of diagnosis. This is typically the slit lamp exams. So those are the two typical things. Of course, if you look out there, you're going to see some exceptions where it might be a little bit more cumbersome. But again, that is our motivation for contracting is to simplify these PAs, keep them consistent and, of course, avoid any step back, but the contracts are in place.
Corey Jubinville
That's helpful. And can you also walk us through your bridging program and in your experience to date, do providers and patients have a good sense of how to access that program and try to estimate, given the strong gross to nets, we're seeing so far, approximately what percent of scripts have gone through that bridge program versus being fully covered by payers?
Aziz Mottiwala
Sure. Yes. So I think the way that the way to think about the bridging program. Here's a lot of that is managed on the back end through our pharmacy partners in our network. And essentially what happens is we appeal the insurance. So we apply for coverage there. If it's covered, it goes through if it's rejected, we appeal. And if it's still not covered at that point, the patient is truly uninsured, essentially their insurance is not covering the drug, then we'll bridge it. So there's a step-through process that we manage on the back end. I think that's really helped us capitalize on the coverage that we have available today in terms of what percentages bridge, we're obviously not go into that level of detail today, but I can tell you even still that is still the number one channel, right? So you think about commercial Medicare and then bridging bridging is still the number one channel. And again, that's our motivation for contracting, right? Is so that as we reach our steady-state gross to net of approximately 50% as we get that commercial coverage at the end of this year, Part D next year, then we can start to wind that bridging down next year and have it be the smallest component and have a very minimal volume going through that going forward.
Fantastic.
Corey Jubinville
Thanks for taking the questions and congrats again.
Bobby Azamian
Thank you, Craig.
Operator
Eddie Hickman, Guggenheim Securities.
Eddie Hickman
They were ours are rather strong launch. Just a few questions from me as you reach deeper into those 15,000 target docs on how much of the hesitation is related to lack of payer coverage in particular, Medicare? And how much is just familiarity and education that you spoke about. Would you expect a significant inflection on on getting Medicare coverage given the DB. population skews towards older patients? Thanks.
Aziz Mottiwala
Yes, I think it's a combination, right? I think anytime you have physicians that are sort of sitting on the fence. I think number one, it's a new behavior, right? And that's why we continue to put a lot of effort in market education, continuing this disease state efforts, having our sales force out there. It is indeed behavior to have the start position start looking for the disease then trying the product. And what we've seen is that there's a really clear threshold in which we're shooting for adoption, and that's about five to 10 prescriptions. And I think there's two things that happened. One is the doctor begins the routine of looking for this. They see the results in the patients. And the second, to your point, it is the doctor and the staff become more comfortable with the reimbursement process. So it takes a few shots on goal for them to build that muscle, so to speak, I think in terms of when you get Part D, I wouldn't expect a huge inflection point. I think the way to think about coverage is we're going to build that steadily over time and I think that's going to facilitate ramp up steadily over time. So I don't imagine like a massive step-up. What I imagine is continued progress. And you think about this as the coverage comes in. You're also building the utilization among the doctors where they're starting to think about more patient types. They're building that familiarity with the diagnosis. And of course, the practice is building the familiarity with the reimbursement process. So I think those things will move in concert and I think you'll see a steady ramp over time and it will be on the back of both physician adoption and coverage improvement side of things? And then what do you think you need to see before you have a comfortable giving formal guidance either on volume or revenue basis going forward yet?
Jeff Farrow
It's just I would say we'd like to get some more quarters under our belt, see how the payer coverage is proceeding and then get a sense of some of the dynamics as it relates to scripts, right? Is there some seasonality that we need to be aware of during the summertime, for example, or some other things. So it probably sometime in 12 months down the road, we could probably start providing revenue guidance because we've got the acuity funnel that are question.
Eddie Hickman
Thanks, guys. Congrats again.
Bobby Azamian
Thanks, Eddie.
Operator
Tim Lugo, William Blair.
Tim Lugo
Thanks for the question and congratulations on the great launch so far with the new payer contracts being signed and kicking in in Q1, do you expect the scrip ramp due to these contracts at all and food contracts impacted GPN at all in Q1?
Maybe I missed it, but if you could provide any color cloud economics on these contracts are sort of we've thought on how these contracts will impact Q2, GTN?
Aziz Mottiwala
Yes, I'll start there and maybe Jeff can chime in on the gross to net impact here. I think that there's a lot of great news here in terms of building that coverage, getting a such a big commercial contract and making that progress towards building the commercial coverage this year. With that said, we do anticipate that should drive incremental utilization, but some of that is also offset by some of the headwinds we mentioned earlier.
Right. Q1 is always a difficult quarter on the plan reset. You have a lot of issues in terms of whether when practice when doctors aren't in the office are able to diagnose and treat these patients. And obviously, this is a product that's dependent on getting those new diagnoses and right. So I think that you're seeing is sort of an offsetting effort here where the contracts are going to drive incremental volume and utilization. But we are obviously, in the first quarter seeing some of those headwinds come to fruition with doctors being out of the practice for a multitude of reasons in the insurance impact that you see there as we progress the year, obviously, we should see continued improvements both in volumes and gross-to-net but I'll let Jeff speak more specifically to that.
Jeff Farrow
Yes, well said this is not much more to add. I think to your point, we do expect to see some improvement on the gross-to-net given some of these this coverage, but that will likely be offset by some of the headwinds that we talked about. Really the plans resetting the Medicare coverage gap and so we've guided to a flat to slightly higher gross-to-net discount just given some of those dynamics. But as he said, as time goes on, we still expect to have the broad commercial coverage by the end of this year with Medicare coming in in 2025 and ultimately ending it at 50% gross-to-net discount, say, say.
Tim Lugo
Okay, great. Thank you.
Operator
I'm showing no further questions at this time. I will now turn the call back to Bobby Azamian for closing remarks.
Bobby Azamian
I just wanted to thank everybody for joining us today. We're very proud of this strong first quarter, and we look forward to a steady build from here. So we really look forward to keeping everybody updated on our progress as we continue to pioneer new categories and eye care and beyond. Have a great day.
Operator
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
