Q4 2023 Verrica Pharmaceuticals Inc Earnings Call

Participants

Kevin Gardner; Investor Relation; LifeSci Advisors LLC

Ted White; President, Chief Executive Officer; Verrica Pharmaceuticals Inc

Joe Bonaccorso; Chief Commercial Officer; Verrica Pharmaceuticals Inc

Terry Kohler; Chief Financial Officer; Verrica Pharmaceuticals Inc

Stacy Ku; Analyst; TD Cowen

Presentation

Operator

And then yes, good morning, ladies and gentlemen, and welcome to the Veeco Pharmaceuticals Fourth Quarter and Year-end 2023 Corporate Update and Earnings Conference Call. As a reminder, this conference is being recorded. I'll now turn the call over to our host, Kevin Gordon of LifeSci Advisors. You may begin your conference.

Kevin Gardner

Thank you, operator. Hello, everyone, and welcome to Veritiv Pharmaceuticals Fourth Quarter and Year End 2023 Corporate Update and Earnings Conference Call. With me on the line this morning are Ted White, President and Chief Executive Officer of America pharmaceuticals, go Bonner CorSo, Chief Commercial Officer, Carrie Koehler, Chief Financial Officer, Dr. Gary Goldberg, Americas, Chief Medical Officer, and Chris Hayes, Americas team, Legal Officer.
As a reminder, during today's call, management will make forward looking statements. These statements may include expectations related to the launch and commercialization of Whitecap for the treatment of Luscombe can TGO., some in the United States, regulatory developments, the development of America's product candidates, our expected cash runway as well as overall business strategy and planned operations. These forward-looking statements are based on the Company's current expectations and involve inherent risks and uncertainties and based on those risks and uncertainties that could cause actual results and timing of events could differ materially from those anticipated in such forward-looking statements.
Please see the Americas SEC filings for important risk factors. Derica cautions you not to place undue reliance on forward-looking statements and undertakes no duty or obligation to update any forward-looking statements.
As a result of new information, future events or changes in expectations.
In addition, during today's call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalent. Our earnings release that we issued today includes GAAP to non-GAAP reconciliations for these measures and is also available on the Investor Relations section of our website.
I'll now turn the call over to America's President and CEO headway.
Ted?

Ted White

Thank you, Kevin, and good morning, everyone, and thank you for joining us for our Fourth Quarter and Year End 2023 earnings call.
I'd like to begin today's call by providing an update on Burke, his commercial launch since our last quarterly earnings call back in November. I'll then ask our Chief Commercial Officer job on a course of to provide a more detailed review of our commercial activities and why can't launch Following Joe's remarks, our Chief Financial Officer, Terry Koehler will review our fourth quarter and year end financial results. We'll then open up the call to take your questions.
First and foremost, the organization continues to be focused on our top priority, the launch of Y camp, which is the first and only commercially available FDA approved treatment from Alaskan contagious. And with our first full quarter of commercial operations now complete we're beginning to see traction in many of our targeted dermatology and institutional accounts as we execute our launch plan. Our fourth quarter execution resulted in 1.9 million in why can't net revenue, which we believe demonstrates our continued progress in driving adoption and reflects growing confidence in our prescriber base as we work to expand coverage of Whitecap to over 200 million commercial and Medicaid lives at the end of the year. As a further update on covered lives in December, we agreed to terms and coverage under the medical benefit with two of the largest PBMs. We're working to finalize those agreements. However, coverage under those medical plans became effective on January first, 2024.
In addition to expanding our lives covered on January 29th, we announced that the CMS issued a permanent J-code J seven three five four for Whitecap, which is under the health care common procedure coding system process. We expect that J-code for white cans will become fully published on April first, securing that J code for why cancer represents a critical milestone in our commercial strategy has a J-code enables providers to use the same code across all payers for reimbursement. We believe the J code will help grow Why can't utilization among the US Medicaid patient populations and increased overall buy-and-bill account utilization by simplifying the billing and reimbursement process for why can in the fourth quarter, very but also expanded our Why can't product distribution capabilities when we entered into an agreement with Walgreens to distribute. Why can't, through a specialty pharmacy, Walgreens joins versus existing specialty pharmacy new factor who continues to be instrumental in helping the Company distribute, why can't among institutions dermatology and pediatric medical practices. The Walgreens partnership is exciting as we look forward to the opportunity to grow that relationship and leverage Walgreens physical footprint and existing relationships with derm on call to build community awareness and grow treatment rates. On February first, we executed a distribution agreement with DMS. pharmaceutical, the prime vendor to the US Department of Defense to provide why Canada to U.S. military installations around the world. The DMS relationship was in direct response to outreach from the US military treatment facilities, requesting information on how to procure Whitecap for military personnel as the fourth quarter came to a close, we transitioned into the first quarter. We saw wins on the institutional side of our business with major IDNs and hospitals aiding Why can't to formulary and placing orders. We expect these wins to continue as we see more success in our efforts to combat unapproved compounded conservative, along with the anticipate publishing of the J code on April first. And now I'd like to give you an update on our efforts to eliminate the amount of comparative being improperly compounded for the treatment of ALS. As you know, we have consistently taken the position that we intend to fully exercise our legal rights and execute on our multi-prong strategy to clear the market of significant suppliers for unlawfully compounding at there. At the same time, we've cautioned you that we may not see the results of our efforts immediately. Rather, we have said that as the cumulative effects of our plan started to take effect, we'd expect to see noticeable reduction in the availability of competent comparative within a 12 month period of time.
Well, we believe we're on track and well on our way to hit our time line. For example, the last five oh three b. pharmacy in the United States on the FDA's outsourcing facility product report to report compounded comparative has discontinued. Compounding can threaten an informed. It's over 400 institutional customers of the availability of lithium. In addition, a number of large national license, Taiwan three pharmacies have also agreed to discontinue compound the comparative consistent with this reduction in the supply of compound to compare it. And we are regularly hearing in the market about the lack of availability of competitive concern and receiving inbound requests for why can't from from providers who are also informing us that they can no longer obtain compounding comparison as we witness the available supply of competitive therapies in the United States significantly decrease. We are further escalating our efforts to ban the EU legal importation of competitive threat and from Canada and specifically the illegal importation of non-FDA approved in certain products from Dormer labs in Canada. Similar to the actionable results we saw from our efforts with the five o. three A. and five O3b pharmacies, we believe that as we continue to execute and escalate our intended strategies, the illegal importation of Ceftaroline from Canada will be discontinued.
I'd now like to provide an update on our pipeline on January fifth, we announced that the last patient has been dosed in Part two of the Company's Phase two trial for VP. three one five, a potential first-in-class oncolytic peptide for the treatment of basal cell carcinoma or BCC. Bp-3 one five is a peptide that has been engineered to provide more targeted delivery to stimulate the patient's immune system and destroy cancer cells. We remain excited about the opportunity for this asset, which we view as either a potential nonsurgical alternative to Mohs surgery or as a neoadjuvant chemo therapeutic for a larger base of cell carcinomas, including advanced tumors or non resectable basal cell. The ongoing Phase two trial is a two part open-label multicenter dose escalation proof of concept study with a safety run-in designed to assess the safety, pharmacokinetics and efficacy of VP. three one five when administered intravitreally with adults with biopsy-proven BCC. The study enrolled 92 adult subjects with a histological diagnosis of basal cell carcinoma in at least one eligible target, least, our interpretation of the data from this study will focus on complete clearance as well as overall tumor shrinkage on patients who may have residual tumors. We expect initial results from the study in the first half of 2024. From an ex-US perspective, in December, we announced that Merck has development and commercialization partner. Turing pharmaceuticals reported positive top line results from its Phase three trial of TO. two zero eight, which is marketed as White Cap in the United States for the treatment of Alaska in Japan. The top line results show that the proportion of subjects achieving complete clearance of all treatable molluscum lesions at the completion of the confirmatory study, the primary endpoint of efficacy was statistically significant versus placebo t. 0 to oh eight demonstrated similar results to white cancer Phase three program and was well tolerated during the study sorry, intends to submit a manufacturing and marketing application for the product in Japan based on the results of the Phase three trial and other studies currently being conducted. In addition to Millennium. As we disclosed on January fourth, we announced alignment with the FDA with respect to the Phase three clinical development plan for Whitecap for the treatment of common warts. Following our Type C meeting. More specifically, we reached agreement with the FDA on the overall design components of a pivotal Phase three study for Whitecap that would support an efficacy supplement for the proposed indication of common warts. We will be seeking additional FDA feedback on our updated clinical design in the second quarter of this year.
I'll now turn the call over to Joe by foresight to review our commercial progress. Joe?

Joe Bonaccorso

Thanks very much, Ted. As Ted mentioned, we had our first full quarter of commercial operations and we are gaining increasing traction among dermatology practices, pediatricians and institutions. There are a significant and growing interest in prescribing and adopting Whitecap among physicians and broad acceptance on the payer side. We also feel our agreement with DMS and the opportunity with the DoD will further accelerate adoption.
Since our last call, insurance coverage of Whitecap has grown significantly. We have increased our number of covered lives from approximately 112 million now over $200 million in both commercial and Medicaid coverage includes major PBMs such as CVSESI. and Optum. I'm pleased to say that our coverage metric has exceeded our internal expectations, and we believe this will ultimately translate into an acceleration in prescription growth of Whitecap over the next several months.
In addition, to our market access work. Our sales force reach has expanded over the last five months with over 4,000 health care professionals trained. We are seeing major integrated delivery networks adopt Whitecap with both the Mayo Clinic and Kaiser Permanente day beginning to order products through our distribution partner, Triple-S. We're also continuing to work to gain adoption with private equity-backed dermatology and pediatrician group practices. In support of our field efforts, we have expanded our sales footprint to 53 territories from 50 at launch. We're also adding two additional hospital reps as we continue to focus on driving adoption on the institutional side with HCPs at major IDNs beginning to adopt and with several other significant formulary wins, the incremental hospital reps will be critical in driving demand pulling through orders and maximizing the market opportunity, but also working towards adding two major hospital GPOs and utilize their support to drive further adoption. In addition, we're adding 14 pediatric reps in the first quarter. And so we plan to have a total of 20 pediatric reps in the field by the end of the quarter. Our focus on the pediatric footprint fueled by encouraging inbound traffic, which is consistent with our internal market assessment of the Luscombe diagnosis from pediatric practices across the country due to the size of the pediatric market. Our plan is designed to be efficient around major MSAs, and we will continue to work in coordination with our physician buying group partner, Main Street vaccines and pediatric focused GPOs I also wanted to touch again on the J-code Deco Ted's earlier comments. The receipt of the J-code is expected to be a significant driver of adoption among dermatologists for Whitecap. We believe that the J-code, which is expected to be published on April first, will streamline reimbursement, accelerate benefit verifications and provide consistent reimbursement, which is more challenging with a miscellaneous J-code. We have received supportive feedback from practitioners since we announced our J-code receipt, and we are working hard to educate the market and prepare for our code becoming effective on April 1st of this year.
I'll now pass it to Terry to review our fourth quarter and year end financial results.

Terry Kohler

Very Thanks, Joe. by can't, revenues were $1.9 million in the fourth quarter of 2023 with total 2023 revenue for why can't have 4.7 million. This revenue represents the continued fulfillment of ex-factory orders to our distribution partner FFF enterprises as we continue to build awareness, drive adoption and expand insurance coverage and formulary access. In addition, the Q4 units were partially in support of our expanded distribution footprint with the addition of Walgreens as a second specialty pharmacy partner. We also recognized collaboration revenues of 122,000 in the fourth quarter of 2023 and 466,000 for the full year 2023 related to the clinical supply agreement with Tory pharmaceuticals gross product margins for the full year 2023 were 94%, which continued to benefit from certain components of standard cost of goods sold, including bulk production and assembly of applicators from our registration batches having been expensed as R&D prior to approval.
Research and development expenses of $5.3 million in the fourth quarter of 2023 declined versus the third quarter of 2023 by $1.2 million, primarily driven by reduced stock compensation expense. For full year 2023, R & D expenses increased to $20.3 million from $12.2 million in 2022, driven by increased CMC costs related to the preapproval activity, increased clinical trial costs for the B. three one five as well as an increase in stock-based compensation expense.
Selling, general and administrative expenses of 17 million in the fourth quarter of 2023 declined versus the third quarter of 2023 by $3 million, driven primarily by a reduction in stock-based compensation expense. For full year 2023.
Selling, general and administrative expenses increased to $47.3 million from $17.4 million for the full year 2022. The incremental spend was primarily driven by the approval and launch of Whitecap during 2023 and an increase in stock-based compensation expense. Gaap net loss was $67 million or $1.48 per share for fiscal 2023 compared to a GAAP net loss of $24.5 million or $0.72 per share for the prior year. On a non-GAAP basis, which excludes stock-based compensation and non-cash interest expense for full year 2023 net loss was $51.8 million or $1.14 per share compared to a net loss of $17.4 million or $0.51 per share in full year 2022.
And finally, as of December 31st, 2023, Barrick at aggregate cash and cash equivalents of 69.5 million. The Company expects its cash and cash equivalents as of December 31st, 2023, will be sufficient to fund operations into the second quarter of 2025.
And I'll now turn the call back to Ted for closing remarks.

Ted White

Thanks, Terry. I'm very pleased with the productivity that Bert continues to make across its commercial efforts and our pipeline. We are executing across our entire business, and we believe our success is translating into growing awareness and utilization of Whitecap as the first FDA-approved therapy indicated from Alaska and the only commercially available FDA approved treatments. We continue to forge excellent relationships with dermatology and pediatrician practices, and we believe that our efforts to increase lives under coverage is laying the foundation for the expansive coverage needed to maximize the commercial opportunity for Whitecap. At the same time, we're taking steps to ensure that patients have access to a safe, FDA-approved product.
That concludes our formal remarks, and I'll now turn the call over to the operator for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Stacy Ku, TD Cowen

Stacy Ku

Thanks for taking our questions and congratulations on the nice progress. So we had a few questions. So first, can you provide a little bit more detail around the ITM contribution any insight into additional institutions that are pending? Or are you've added recently to some metrics around that and whether you have a goalpost in mind of additions by year end and seems like some easy kind of low-hanging fruit to really convert understand it takes a little bit of time to it kind of establish the infrastructure. But any details would be really appreciated. That's the first question. And then second question is, can you provide any type of commentary around how clinicians are using, why I can't at this point, so just provide the most updated current split between specialty pharmacy, white bag service versus buy-and-bill. So that's the second question.
And then the third is just very early. I know very early, but are you getting a sense of how the adopters are using the product? Are they treating to clear up? Thanks so much.

Ted White

Thanks for the question, Stacy.
I'll turn that over to Joe

Joe Bonaccorso

but of course, a morning, Stacy, to answer your first question around the IDNs, we have a obviously a full implemented strategy. It's a great opportunity for why can't we have Kaiser Permanente and Mayo currently ordering. And we got several other IDNs close to, I would say, close to the finish line with formulary approval and expected first order sometime in Q2. We'll continue to look at the and prioritized by the largest opportunity. And then there's other strategies around some of the smaller IDN and health systems throughout the country. Hence, the expansion in the institutional field force to help drive that even more.
Our second question around, I believe, was around how the dermatology are split between specialty pharmacy and buy-and-bill. That's as you would expect with a miscellaneous J-code started to be leaning more towards white bag specialty pharmacy with about 80% of the volume going through there and 20% buy-and-bill. And that's a compilation of physician offices in our health systems as well. We expect the buy-and-bill component of this launch to grow the permanent J-Code expected to be published on April first. And then the last question, I believe, was around treat to clear. We're seeing dermatologists following that algorithm to want to treat the patient to clearance and everything we've seen so far. And the anecdotal feedback we've gotten from our customers is pointing in that direction that you'd want to get through a full course of therapy with the patient and obviously their assessment on when they think the patient is cleared and doesn't mean anything else.

Stacy Ku

Okay.
That's helpful. And if I could ask just a quick follow-up on the Adient contribution and what kind of this seems to be kind of bulk orders. So how should we think about the percentage of of this type of contribution in 24 versus some of the as we think about guidance of a consensus of 2024 around 20 million for the year?
Thanks so much.

Joe Bonaccorso

Yes. I think when you look at our hospital opportunity and you look at these facilities as best you can on a on a per patient per month opportunity. So we would think about 30% of our volume should be coming from the institutional side of the business, I would say approximately, that's what we're kind of thinking through right now that may accelerate more as we continue to adopt on the on the J code and you also got to look at this, Stacy as a binary event, right, once we get a facility up and running and committed to using adopting, why can't for your patients, we should be able to count on that repeat business month-over-month.

Stacy Ku

Very helpful.
Thank you.

Joe Bonaccorso

You're welcome.

Operator

Gregory Renza, RBC Capital.

Hi, guys. It's an issue for Greg.
Congrats on the quarter and thanks for taking my questions. Just a couple from me on how should we be thinking about the current molluscum TAM that remains occupied by treatments such as Curitiba and cryotherapy? And at what pace on a relative or even absolute basis, do you anticipate conversion to white count? And then just really quickly how should we be thinking about sampling of white counts through 4Q and any residual into 2024?

Joe Bonaccorso

Thanks again. So I'm sorry, I missed a little bit of your question in the middle there. But I believe you're asking how should we think about your cash and cryosurgery still being used versus why can't you know when when we got into this market it was understood that cure cash, it was probably used about 10% to 15% of the time that it most and cryosurgery was somewhere in that 30% mark of the source of business. So we're continuing to think about it adds. Physicians don't like using cryosurgery, especially on small children. It's very painful. It's technique dependent, and we think we can continue to take from that piece of the pie as well as continue to convert on the compound, the compounding piece of the market and also get new doctors off the sideline. They have not treated without an FDA-approved product that they're ready.

Great.
Thank you so much.
And then just just real quick on that. On the white count sampling, if there was any through 4Q and any into 2024 just for some clarity there.

Joe Bonaccorso

Sampling you're asking about?

Yes, yes.

So we do continue to sample as needed at yields. Sometimes it's just a function of getting our coverage finalized with wherever the insurance company may be for that doctor, we didn't have the permanent J-Code as that comes on board. Now, we expect more and more same day treatment. So that will continue to drive use of samples down and convert to real-time prescription. So it's a very efficiently managed program by us, and we're very judicious in how we go about doing it.

Great.

Thank you so much.
You're welcome.
Thank you for the question.

Operator

Next question we have is from Oren Livnat of H.C. Wainwright. Please go ahead.

Thanks. I just want to better understand the state of play with coverage. And maybe as it relates to the new J code, you talked about dramatically expanding covered lives numbers, I think to over 200 for nearly doubling quarter over quarter. What does that really mean on the ground? And what does coverage versus headline coverage versus pull through at the office level, does the J code in April mean that it will be really easy for patients and physicians? Are there still prior offs potentially necessary and have their friction?
Nice follow-ups.

Warren, that Oren, thanks for the question. Yes, as you know, as we're ramping coverage up, right, we have of over 200 million lives now, which is exceptional for a product this young in its life cycle. It's a medical benefit driven product. So you typically see less prior authorizations and you went on. And on the pharmacy benefit side, you'll you'll still have occasionally a prior authorization, which will be the label just the doctor having to put in their notes, the patient was two years of age and older, but to your question. Now we have a J code assigned right that streamlining the reimbursement, a portion of it and have your coverages clean, i.e. No prior authorization. That's going to facilitate same-day treatment for that patient under that insurance company. If there's a prior authorization, they got to just get that cleared and treat. So they have got to submit the paperwork rounding. But having both having this 200 million lives and the J-code now working in simpatico, if you will, should really help accelerate the adoption of why can't even more and just timing there so you mentioned being published April first.

I guess. Are there a couple of steps after that with regards to still getting that propagated through EMRs? Or is that how that happens automatically on April first. And then when that there, how much education effort is there still to makes offices aware that there has been a material change in their life is presumably got needs. And so yes, maybe when should we see an acceleration through the year of sale, whether ago?

Yes. So just to point, you back, we were awarded the J code in January. So we have started already working through a full a fully baked communication plan with the insurance community and letting them know that the J code was awarded and we're tracking now to see who starting to publish it.
Okay. So that is that's been going on since January. We're also working now to work with customers who are either currently buying down the miscellaneous J code or who have expressed interest in coming onboard to buy-and-bill. And the J code was final. And we're working to get those offices set up ahead of Jack of April one. And then as we continue to track towards April one, we got several more communication blast go into the payer community, post-April one, we'll continue to do that just to make sure we have our top 150 payers squared away, and it's always boots on the ground, right? So we have our we have our sales team out there and they're going to continue to make sure that the office is aware of the J-code itself, the J-code number, making sure that they have checked or insurance contracts to what their reimbursement will look like on the ASP. plus side of it. And that's always a deal. This is an account management drug, right? There's always that reinforcement of education and knowledge that we share with customers every time we're in the office in addition to our clinical sites.

Okay. And just to pivot real quickly to follow up an earlier question about how docs are using it, what do and I know it's quite early, but what do we know so far about retreatment rates? I know some patients have experienced clearance on one re-treatment. So what are you seeing trend-wise as we've tried to think about how to model this in terms of number average number of treatments per patient and on the insurance side, do you have any reason to believe that retreatments will be treated any differently from a low friction and payer perspective?

Yes. So let me take your last question first, we don't see any impact on insurance reimbursement is what is what you're asking on retreatment, right? They when they approved our product, they knew was it could be up to two applicators per treatment and they knew was for three treatments over 12 weeks. And we haven't seen any real hard cap on the end of the for treatment of somebody did in afib treatment, let's say, right. So no, we don't we don't anticipate friction there from the payer community right now, it's early. But what we're seeing is the typically two applicators per patient plus. We're also early on using samples there, right, Starter doses to get them going as we're building coverage. So the two plus two samples, a pretty good spot to be in and we're tracking towards how we modeled our thoughts around driving demand and what it would look like on a per-patient level as far as the applicator goes.

Okay. I'll get back in the queue, if there is a question by me.

Thanks.

Okay. Thank you.

Operator

The next question we have is from John surgery of Needham Company.

Please go ahead.

Hi, everyone. This is John on for Cerj. Congrats on your progress and thank you for taking our question. So regarding the upcoming Type C meeting for why can't label expansion in common warts would you be able to provide any color on the potential design of this trial and whether or not additional trials would be conducted in an external general award and that's include Joe and the investment required and any potential market opportunity for each of these indications? And second, can you provide any insight on how your partnerships with Walgreens is structured and whether we'll see any additional specialty pharmacy partnerships in the future.

Ted White

So John, thanks for the questions, but first, but I'll turn it over to Gary Goldberg, our Chief Medical Officer.

Thanks, Ted. For the Type C meeting follow-up regarding our common warts with the agency. And I think the way that you could think about it is it would be a typical Phase three program that you would expect the agency to ask us sponsored or run on?

Joe Bonaccorso

We are still in communications and look forward to come to us saying on more as we as we continue to finalize details of the trial design.

And then the second, I think the other two questions you had was regarding Walgreens. So Walgreens, the partnership with Walgreens is accelerating nicely as it just to recall why we went to that. That gave us an opportunity to further expand our insurance network within the specialty pharmacy world.
Right, adding a second pharmacy Walgreens also has 300 community health system stores, and we're working towards getting those stores staffed with Whitecap. And that will give us a presence across 50 states when that initiative is complete and we're going to start doing that deal sometime later this quarter into the second quarter. And we're always looking at our model, right? So what we really want to do here is be operationally efficient, and we want to think about ways to continue to ramp this acceleration.
So your other question regarding potentially adding another specialty pharmacy, we'll continue to assess that and see if there's a need to further strengthen our footprint and help accelerate business. So that's constantly under review by us.

Operator

The next question we have is from Kemp Dolliver of Brookline Capital. Please go ahead.

Great. Thank you and good morning. So two questions. First, what the model for the pediatric sales force? I think I've seen it various times you?
Well, we're going to have, I think, a part time pediatric sales force. And then I think I've also seen that this may be evolved to where today these are full-time hires with probably a compensation model that looks like the dermatology team?

Yes.

So great question. Um, you know, we were looking at a variety of models in pediatrics known that we had to get there. But based on the inbound traffic, we continue to get to the office and what we're hearing on the ground, we made the decision to step that would a full-time compensated field force. So we'll be building the team now down to 20 representatives and they will be hitting the ground in full April first. So we think there's a strong market opportunity with pediatricians, and we've decided to make that a full effort to go after it.
Okay. That's very helpful. And then the second question relates to sampling and just when we when you look at yourself, the sell-through data from triple F, how much of that volume is sampling and how much of that so far is that is reimbursed business so when we look at sampling, that's on a that's in a different lane for us, right? We're not we're not looking at that as our pull through from 3F. So sampling has just been on an as-needed basis based on the opportunity with the physician if they were looking to treat the same day.
Well, while we were getting our insurance coverage built out of the use and the white-box specialty more a pharmacy that has no no bearing on what we're doing at 3F as far as our revenue drives.
Okay. But just as a percent just looking at the overall activity and are we looking at 80 90% sampling at this stage or a lower number?
I'm sorry, I didn't catch less than your question?
Well, let me rephrase it. What's what percentage of the volume so far is?

Yes.

So what we typically do is an outright. I don't have an approximate percent for you but what I would say to you, the samples were have been tapering down significantly since we first launched the product in September October, right? So meaning that September, we were probably at our highest trying to get some of trial use and then now we're bringing it down. So I would say it's roughly maybe 5%, five, 6% of our activity out there is driven by sampling.

Terry Kohler

That's perfect.

Thank you.

Operator

Well, the next question we have is a follow-up question from Ari LoopNet of H.C. Wainwright. Please go ahead.

So just a couple of squeezing on, I guess to build on Ken's question, maybe a different way to look at it and everybody is getting at is can you comment on gross to nets ultimately you talked about Medicaid as an important part of the business. And is it a new specialty pharmacy networks? Where does that shake out now and going forward?

Terry Kohler

Morning, thanks, Lorne. Gross aggressiveness to date have been very consistent with our expectations prelaunch. So going forward, we continue to expect that net sales as a percentage of gross sales is going to be in that 45% to 50% range, but there might be some lumpiness in that number throughout the year, just depending on where patients are in their deductibles, but very consistent with what we we are we thought prelaunch and you expect that to improve as coverage and contracting come down through the year.
And what's the sort of terminal sustainable gross-to-net near-mine we would expect an improved focus coverage comes on and we have less impact to our co-pay program for insured now covered as well as as we transition more business to buy-and-bill which is favorability from a distribution standpoint. So you're probably even closer to 50%, the higher end of that range that I gave you once we get to a normal state Okay.

And lastly, are you expecting significant response from the FDA in March to the Citizen's Petition? How big a deal is this imported business now? And do you think they're going to just kick the can on and on a delayed response, are you expecting something material and what might be the next?

Yes, warn us that we don't expect them to kick the can have their response due in April, we continue to have outreach with the FDA regarding our concerns, and we fully expect to respond to them right.

But today, I do think they actually do anything or are they going to acknowledge your concern and we'll keep it at that.

Kevin Gardner

If I if I knew that I'd win the lottery system of processes until we think we made a very strong argument in our citizen's petition, there is precedent for what we're asking for, and we hope that the FDA rules in our favor, but obviously, I can't predict what they're going to do, but we're confident, but we will be successful one way or the other.

Okay.

Thanks so much.

Operator

Yes, there are no further questions at this time, I would like to turn the floor back over to Ted White for closing comments.

Ted White

Thank you, operator. So I'd like to thank all of you for joining us this morning. We're obviously very pleased with the significant accomplishments in 2023 and the progress we expect to make in 2024. And we look forward to providing another update on our first quarter earnings call in May. Thank you very much.

Operator

That concludes today's conference. Thank you for joining us.

You may now disconnect your lines and. AND, and we're going to the.

Okay.

Is this yes, and.? Okay. Thank you.
Yes, yes. And yes, yes, yes, thanks.
Yes, no.