Q4 2011 Thera Technologies Earnings Conference Call
Feb 08, 2012 AM EST
Thomson Reuters StreetEvents Event Transcript
E D I T E D V E R S I O N
TH.TO - Theratechnologies Inc
Q4 2011 Thera Technologies Earnings Conference Call
Feb 08, 2012 / 01:30PM GMT
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Corporate Participants
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* Denis Boucher
NATIONAL Public Relations - IR
* John Huss
Theratechnologies Inc. - President, CEO
* Luc Tanguay
Theratechnologies Inc. - SEVP, CFO
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Conference Call Participants
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* Adnan Butt
RBC Capital Markets - Analyst
* Pooya Hemami
Desjardins Securities - Analyst
* Neil Maruoka
Canaccord Genuity - Analyst
* Doug Loe
Byron Capital Markets - Analyst
* Cosme Ordonez
GMP Securities - Analyst
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Theratechnologies' 2011 earnings conference call and webcast.
At this time all participants are in a listen only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your questions. (Operator Instructions).
I would now like to remind everyone that this conference call is being recorded Wednesday, February 8, at 8.30 AM Eastern Time. And I would now like to turn the conference over to Denis Boucher from NATIONAL Public Relationss. Mr. Boucher, please go ahead sir.
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Denis Boucher, NATIONAL Public Relations - IR [2]
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Thank you and welcome. The speakers on today call include John Huss, President and Chief Executive Officer, and Luc Tanguay, Senior Executive Vice President and Chief Financial Officer of Theratechnologies. Their presentations will be followed by a Q&A period which will be open exclusively to financial analysts.
Before we start I have been asked by Theratechnologies to read the following message regarding forward-looking statements. I would like to remind everyone that Theratechnologies' remarks today may contain forward-looking statements about its current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or other forward future events or developments.
Several assumptions were made by Theratechnologies in preparing these forward-looking statements and there are risks that actual results will differ materially from those contemplated by the forward-looking statements. As a result, the Company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements.
Theratechnologies refers current and potential investors to the risks and uncertainties sections of its Management's Discussion and Analysis for the year ended November 30, 2011, available at www.sedar.com and at www.sec.gov under Theratechnologies' public filings.
Forward-looking statements represent Theratechnologies' expectations as of February 8, 2012. Except as may be required by securities laws, Theratechnologies does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. I would now like to turn the conference over to Mr. Huss.
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John Huss, Theratechnologies Inc. - President, CEO [3]
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Thank you, Denis. Welcome everyone and thank you for joining us today for our 2011 earnings call. I would like to provide you with a brief overview of our accomplishments last year before turning over the call to Luc, who will discuss our financial results.
As you all know, 2011 was a challenging year for the industry and a year of change and transformation for Theratechnologies. Throughout the year we have achieved measurable progress on several fronts.
We have now completed our first full year of commercialization in the United States. Quarter after quarter we have seen sales increase, and we are pleased to have ended the year with over 2,000 patients now taking EGRIFTA. In fact, the number of new prescriptions was within our forecast of 3,000 to 3,500. According to IMS data, we had 3,144 new prescriptions and 8,822 total prescriptions at year-end.
A few words on IMS. Though we will continue to rely on IMS data as a tool to capture demand trends, it is important for you to know that there is and will continue to be a discrepancy between publicly available data and actual sales figures. The trends up until now has been that actual figures tend to be better than those reflected in IMS.
While this is normal in the course of a launch of a new product, the average quarterly delta for the year was about 30%, which means that actual gross sales were approximately 30% higher than sales derived from the script data.
We have seen the gaps gradually narrow over time and don't expect it to remain at such levels, but note that it is likely that a gap will always remain. Although we don't have the final growth sales number yet for the full calendar year due to our reporting structure with EMD Serono, we expect to be close to the low end of our guidance of CAD25 million to CAD35 million.
As you know, reimbursement by public and private payers is extremely important, and we're happy to say that coverage is now over 80%. EGRIFTA is currently reimbursed by most private payers, including the 10 largest ones. It is also covered by Medicare and approved by Medicaid in most of the important states.
Outside of the US we would like to remind you that during fiscal 2011 we signed two new partnership agreements for the commercialization of EGRIFTA in our territories. We signed an agreement with Sanofi covering Latin America, Africa and the Middle East, and one with Ferrer for Europe, Russia, South Korea, Taiwan, Thailand and certain Central Asian countries.
In this regard we have made significant progress throughout the year, working with our new commercial partners to expand the geographic footprint of EGRIFTA.
Sanofi filed for regulatory approvals in Israel in July, in Brazil in August, in Argentina in September, and in Mexico in October. Ferrer filed with the European Medicines Agency in June. The application was accepted for review, and continues to progress along its regulatory course. It covers the 27 European member countries, as well as Iceland, Liechtenstein and Norway. In addition, Theratechnologies filed for approval in Canada in June, and the file was subsequently accepted for review.
We expect approvals in Europe, Canada, and in certain Latin American countries beginning in the second half of 2012.
Turning to R&D activities, our goal remains to maintain our leadership in the field of novel growth hormone releasing factors. Last year we announced the discovery of a novel GRF peptide. We have filed a patent application for this new chemical entity, which if granted would provide protection beyond 2030.
Following the discovery of the novel GRF we undertook preclinical feasibility studies to further explore potential new routes of administration. Note that this GRF may offer a broader range of methods of administration then tesamorelin, which is currently available by injection only, and may also be suitable for the treatment of a broader range of medical indications.
These include abdominal obesity, muscle wasting, mild cognitive impairment, and of course, growth hormone replacement in certain patient populations. As such, we were excited by the potential of this program.
While we made significant progress on several fronts, as mentioned, our industry faced important challenges in 2011, which compelled us to re-examine our business strategy toward the end of the year. As a result, we took decisive actions to address these challenges, refocusing our business strategy, terminating our COPD clinical program, which was still in very early stages, and accelerating our path to profitability.
So as you can see, 2011 was a big year for Theratechnologies. We start the year as a leaner and more focused organization, and we are well-positioned to carry out our 2012 business plan. In addition, we are in a stronger financial position.
On that note I would like to turn over the call to Luc, who will discuss our financial results before I turn to our objectives for 2012. Luc.
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [4]
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Thank you, John. Now for an overview of our key financial metrics for the fiscal year 2011. Consolidated revenue amounted to about CAD15 million compared to almost CAD32 million for the same period in 2010. Revenue in 2010 included a CAD25 million milestone payment from EMD Serono, but no revenue related to resales or royalty from EGRIFTA in the US. However, if you exclude the milestone payment you will notice that we had more than double our revenue in 2011 compared to 2010.
Revenue generated from sales of EGRIFTA to EMD Serono amount to a little over CAD8 million. Royalty revenue amounted to about CAD1.4 million for the selling period from January to September. Just remember that the royalty on sales are paid quarterly in arrears based on the calendar year.
Royalty revenue grew throughout the year due to an increase in the prescription base, which include both new and repeat prescriptions.
Finally, (inaudible) revenue also include the amortization of the initial upfront payment received from EMD Serono. We recognized a little over CAD5 million in fiscal 2011. The remaining deferred revenue from this upfront payment amount to about CAD8.5 million and will be amortized throughout 2012 and 2013.
Cost of sales of EGRIFTA in 2011 stood at CAD9 million. EGRIFTA sales are expected to become profitable when our own inventory is depleted and when the costs associated with validating additional suppliers are behind us.
R&D expenses stood at about CAD11 million in 2011 compared to about CAD14 million in 2010, a decrease of approximately 22%. Selling and market development expenses amounted to CAD2 million compared to CAD2.7 million, a decrease over 24%.
General and administrative expenses amount to about CAD11 million compared to about CAD8 million in 2010. The higher expenses in 2011 include CAD1.9 million in costs associated with a planned public offering of shares, costs related to the change in the leadership of the Company, and the cost of listing our shares on the NASDAQ.
Expenses in 2011 in all sector of activity were offset by reduced bonus payment amounts among other factors. In 2011 we incurred restructuring costs of CAD716,000 following a re-evaluation of our R&D model in June. The restructuring also resulted in a reduction of payroll expenses of approximately CAD1 million.
Taking into account revenues and expenses from fiscal 2011, we recorded a net loss of about CAD17.7 million or CAD0.29 per share, in-line with our budget. Our objective in managing capital is to ensure sufficient liquidity position to finance our research and development activities, general and administrative expenses, working capital and capital spending.
For the year 2011 the use of cash in operating activities was a little over CAD27 million. The use of cash in 2011 reflected increases in inventory level of CAD6.4 million, and an increase in trade and other receivables of about CAD1.6 million.
Thanks to a steady increase in revenues from the first year of sales of EGRIFTA in the US, the refocusing of our R&D activities, and our conservative cash management, we are in an enviable cash position ending the year with over CAD37 million in cash on hand.
We expect expenses in 2012 to be approximately CAD15 million before restructuring costs, and we're aiming to be EBITDA positive in 2013.
Before I turn the call over back to John, I would just like you to know that the impact of our December announcement to discontinue the COPD program, resulting in the layoff of 37 employees, was not reflected in our 2011 results. This restructuring is expecting to yield significant operating cost saving in future years, including cost savings of approximately CAD10 million in 2012.
Certain nonrecurring charges will be also registered in Q1 of 2012. This include approximately CAD2.5 million related to severance, clinical trial termination and other fees, as well as a lease provision of about CAD4 million.
I will now turn the call back over to John for closing remarks.
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John Huss, Theratechnologies Inc. - President, CEO [5]
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Thanks, Luc. In closing I would just like to reiterate our priorities for 2012 as we continue to follow through on the work undertaken in 2011. On the regulatory front expect us to continue to support our commercial partners throughout the marketing approval process in new territories. With all the applications pending we expect to obtain, if all goes according to plan, our first approvals in these territories during the second half of 2012. Our partners will also continue to submit new applications in different countries throughout the year.
In terms of R&D activities we are conducting feasibility studies testing new methods of administration for the new GRF peptide. By mid 2012 we should be able to select the best mode of administration for our new compound and will finalize preclinical work on the compound in anticipation of launching of a Phase I clinical trial in the second half of 2013.
In addition, in the US EMD Serono will continue to push EGRIFTA, and we expect revenues to increase throughout the year. Finally, as stated by Luc, we're aiming to become EBITDA positive in 2013,.
Today Theratechnologies is a leaner and more focused organization. I am confident that we are well-positioned to reach our 2012 business objectives.
On that note I would like to thank you for joining the call today, and we will now take questions from financial analysts.
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Questions and Answers
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Operator [1]
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(Operator Instructions). Adnan Butt, RBC Capital Markets.
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Adnan Butt, RBC Capital Markets - Analyst [2]
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John, a couple of questions for you. Firstly, you mentioned sales figures for EGRIFTA for 2011. Is that a gross number or is that a net number that you gave?
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John Huss, Theratechnologies Inc. - President, CEO [3]
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The sales we are referring to are gross numbers.
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Adnan Butt, RBC Capital Markets - Analyst [4]
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Then in terms of the patients on drug, you said there is about 2,000 patients taking EGRIFTA at this time. How does that fit with the NRx number that you also pointed to? And can you say anything about compliance or gross net adjustment as well?
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John Huss, Theratechnologies Inc. - President, CEO [5]
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That is a good question. Actually, what you're going to see throughout the next year, obviously at the beginning when you launch a product the number of patients is equal to the new scripts. As time progresses, the new scripts captured by IMS don't reflect the number of patients anymore. So we have a bit more than 2,000 patients on drug in 2011. I think since launch now we are close to 2,500 patients. The reasons where you're going to see the curves divert between NRx and number patients is that IMS will capture any second prescription coming from the same physician as a new script.
So if a physician has put somebody on drug for three months, that would be one new script for the first month and then two repeat scripts for the following two months. If another prescription comes back from the same physician IMS will capture that first script of the renewed three months as another NRx. So you're going to see the number of scripts diverge over time.
The reason for which I think we need to be cautious when we look at prescription data, again, I think we need to look at it as a tool that is going to help us look at trends and adoption trends, but we need to be cautious when we translate that into sales. We have seen a gap. The gap is tightening, but there will continue to be a gap between that and sales.
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Adnan Butt, RBC Capital Markets - Analyst [6]
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If you just look at prescription data it seems that NRx and TRx, the curb is somewhat flat over time. You obviously have more access and more information than us. Can you say anything about what you see in terms of the quarterly run rate, especially in terms of the year that is -- the calendar quarter that just ended and going into 2012?
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John Huss, Theratechnologies Inc. - President, CEO [7]
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So what we have seen, we have seen an increase from quarter-to-quarter. What we have seen is we haven't seen a reduction in the percentage increase quarter-over-quarter, which again you can expect in a year of launch.
Now to come back to the efforts. I have sat down with the EMD Serono team, and believe me, the guys are motivated. They're doing a lot of activities right now. They have piloted different DTC campaign throughout 2011 and more in the back half of 2011.
They have seen pretty convincing results that the DTC campaigns are leading to shift in prescriptions. And they are, right now as we speak -- and I was on the phone to Jim Hoyes, the CEO of EMD Serono last week, and he confirmed again that they're rolling out DTC campaigns in various key areas throughout the United States.
They still have a focus team on the drug, so I am convinced that they're putting all the efforts to be able to shift these curves. And they're also cognizant of the fact that we need to push this product and to make it a success.
Yes, we're seeing a diminishing increase, but we're still seeing an increase in prescriptions. And with the plan we have seen from our colleagues at EMD Serono, I'm confident that we see -- and with better coverage, obviously, in 2012 versus 2011, I do expect to see these curves continue to increase.
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Adnan Butt, RBC Capital Markets - Analyst [8]
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Just a couple more, if I may, and then I will jump back in queue. John, do you think the sales force that they have on the product is the right size salesforce?
And then perhaps for Luc, can you say anything about what you see in terms of gross net adjustments for the price of EGRIFTA versus what a company might actually end up recording as revenue? And I will be back in queue. Thanks.
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John Huss, Theratechnologies Inc. - President, CEO [9]
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In terms of sales force, they have 40 reps today on the drug and also on Serostim. EGRIFTA is a P1, Serostim is a P2, so I definitely think they have the right size. I would actually argue they may have too many, but I would rather have too many than too few. And all the activities they are doing besides that are very encouraging.
So I think if there is one message we have captured from our collaboration with EMD Serono, they believe in the drug. They're pushing the physicians through the sales force and other activities in terms of medical education. But they have also recognized now the importance of going to the patient and getting the patient to request the drug at the physician level, which they're conducting that with different DTC campaigns.
So, yes, to answer your question, yes, I think they have the right effort on the drug and I am sure we will see the results of that.
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [10]
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I understand part of your question. As you know, we are paid on net sales, and on the first three quarter of the year the average difference between gross and net is approximately 12% to 14% discount between gross and net sales.
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Operator [11]
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Pooya Hemami, Desjardins Capital Markets.
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Pooya Hemami, Desjardins Securities - Analyst [12]
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Thank you for taking my questions. I just have a quick question on the manufacturing revenue and on the margins. Your manufacturing revenue in the fourth quarter was higher than in previous quarters. Do you think that is an increase in product demand or is it more of an inventory buildup on the part of EMD Serono?
And, secondly, I noticed that the manufacturing revenue was higher than your COGS. Is this the type of margin that we should see going forward?
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [13]
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I think the increase in the sales of product is reflecting an increase demand of the product, of course. Can you repeat the second part (multiple speakers)?
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Pooya Hemami, Desjardins Securities - Analyst [14]
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The second part is the margin. The margin for the manufacturing revenue is now higher than the COGS. Is that now a trend that we should see in future quarters at this type of rate?
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [15]
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It will depend on the -- we still have some inventory that we built when we were in research and development mode. So this margin might fluctuate in the first, let's say, two or three quarters. But through the end of the year, yes, we will still have a constant or a regular margin on our sales when we will use the new inventory that -- so the old inventory shall be depleted. By the end of the year we should be depleted, yes.
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Pooya Hemami, Desjardins Securities - Analyst [16]
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By the end of 2012?
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [17]
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Yes, the old inventory, yes.
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Pooya Hemami, Desjardins Securities - Analyst [18]
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In terms of the royalties that you recorded for the quarter, can you comment on whether the rate in terms of a percentage of net sales, how it was in the fourth quarter versus let's say in the third quarter when you had, I think about CAD570 million in royalties and now you have -- sorry, CAD570,000 and now you have CAD670,000, should we assume that it is roughly the same percentage rate?
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [19]
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Yes, we're still in the low end of our sales royalty record which is in the low-teens. But as you know we haven't disclosed the exact royalty rate.
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Pooya Hemami, Desjardins Securities - Analyst [20]
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At this point can you comment on any milestone payments? Do you expect any milestone payments in 2012 and/or you do have any guidance for expected EGRIFTA sales for 2012?
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [21]
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We do not provide any guidance for 2012, except what I just mentioned about the expenses of CAD15 million before restructuring costs.
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Pooya Hemami, Desjardins Securities - Analyst [22]
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And what about milestones, do you have any guidance on that?
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [23]
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No.
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Pooya Hemami, Desjardins Securities - Analyst [24]
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Okay, thank you.
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Operator [25]
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(Operator Instructions). Neil Maruoka, Canaccord Genuity.
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Neil Maruoka, Canaccord Genuity - Analyst [26]
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I just wanted to delve a little bit more into the new prescriptions, maybe in terms of the AXIS program, and how quickly is enrollment in the AXIS program growing? And how quickly -- how long is it taking the patients to move through that at the moment?
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John Huss, Theratechnologies Inc. - President, CEO [27]
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Actually, we're seeing a pretty good correlation between the number of patients entering the AXIS program. And the NRx -- I am sorry, and we're seeing the number of new patients going into the system is constant, which for us is a good sign that the number of scripts coming out of the program is going to be on a constant increase also.
In terms of timing, it is taking the system now less than a month to turn around the request. So as you know, medical necessity sheets come in and are being sent to the payers, and it takes about four weeks -- a bit less than four weeks now to turn the medical necessity sheets into actual new patient starts.
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Neil Maruoka, Canaccord Genuity - Analyst [28]
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And you have seen a number of new physicians that are now prescribing, so the number of physicians who have prescribed EGRIFTA has grown. Are you seeing a correlation there as well with -- as more prescriptions -- more physicians prescribe that you are seeing more entering the AXIS program?
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John Huss, Theratechnologies Inc. - President, CEO [29]
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I haven't seen the latest number of physicians prescribing, that is something I may take up again with EMD Serono to see what we can do there. Yes, we have seen definitely since the summer a great increase in the number of prescribing physicians. We have gone from something like 352 to over 1,000 prescribing physicians today.
But again, I think we have got a few innovators in there who prescribe quite a bit. And a vast majority of these guys have put a few patients on drug, still waiting to see the impact of these -- of the drug on the patients before renewing.
But the good news is we have got a pretty good base of prescribers going into 2012. So if they're convinced -- and that is the job now of the EMD Serono sales force is to go and get the feedback from the AC and how they have accepted the drug, and capitalize on these new physicians who do believe in the drug, who have tried it and make sure they prescribe more.
So the base going into 2012 is great. It is about two-thirds of the physicians that E&D Sereno call on, and that is a great basis to start the year with.
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Neil Maruoka, Canaccord Genuity - Analyst [30]
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That is a good lead-in to my next question. Beyond DTC campaigns, what programs could be put in place to drive new prescriptions higher?
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John Huss, Theratechnologies Inc. - President, CEO [31]
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I think what we have seen now is -- so in 2011 EMD Serono undertook a bunch of pilots in major cities. And they are now rolling out in the important areas where we are seeing increased capture and increased demand of the drug.
I think other than what they're doing, honestly, they're doing -- they have billboards, (inaudible), they're selecting very specific journals and increasing the awareness of the drug in these journals.
So other than that, honestly, I think they're doing all the right things. They need now to convert prescribers who believe in the drug into high prescribers. And if they're successful in doing that, by attracting the patients to the doctor's office and by convincing the doctors -- the physicians with the rest that this is a good drug than we expect the sales to further increase.
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Neil Maruoka, Canaccord Genuity - Analyst [32]
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Did you see an inflection at some point during 2011 where there is an increase -- more rapid increase in the number of physicians that prescribed EGRIFTA for the first time?
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John Huss, Theratechnologies Inc. - President, CEO [33]
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You have probably seen the IMS data. What we are seeing -- we're seeing a constant increase on a cumulative basis of the number of patients on drug and the number of scripts, but we haven't seen the inflection, and I'm still hoping it is going to come this year I think with the activities. Then again I think they have done everything to be able to see this inflection, but we haven't seen it yet.
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Neil Maruoka, Canaccord Genuity - Analyst [34]
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Just one follow-up on reimbursement. How many states currently covered under Medicaid, and can you update on the progress with New York?
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John Huss, Theratechnologies Inc. - President, CEO [35]
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I think we have now a bit more than 25 states accepted. And EMD Serono is going back to New York as we speak. And I have no further news on New York as of today, but they're on top of the ball.
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Neil Maruoka, Canaccord Genuity - Analyst [36]
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Okay, great, thanks very much.
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Operator [37]
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(Operator Instructions). Adnan Butt, RBC Capital Markets.
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Adnan Butt, RBC Capital Markets - Analyst [38]
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Thanks for taking my question. John, in terms of EU -- the EU process can you tell us if the 120-day questions have been resubmitted? And secondly when do you expect the sales to start for the second-generation products.
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John Huss, Theratechnologies Inc. - President, CEO [39]
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So, in Europe, as you know, it is a pretty well-monitored process. So, yes, we received the questions, the 120-day questions in October. We have sent in our answers, and are now on the receiving end again. We should get feedback from the EU in the first half of the year, and expect approval in the back half of the year. So we're on track and we are well on track. Go ahead.
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Adnan Butt, RBC Capital Markets - Analyst [40]
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Just remind me, I am sorry, are you in charge of getting them through?
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John Huss, Theratechnologies Inc. - President, CEO [41]
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So the time now is with Ferrer. So Ferrer has submitted the application and we're obviously helping Ferrer build the file and answer all the questions. So we have been instrumental in making sure that all the questions are answered.
But, no, so technically you are right, Ferrer obviously submits the files and officially answers all the questions, and they will also receive the feedback from the EMA, but we're in the loop and we're working with them on a daily basis on this.
So the message here is that we are on track and we are well on track and everything is following its due course, and we expect approval in the back half of the year.
The Phase I, my plan here is to -- we're conducting several feasibilities, as I've mentioned in the past. We are looking at different modes of administration. We should have finished all of the feasibilities by May/June. So by June we will be able to select which ones we want to take into the final preclinical mostly toxicology work. That will take us roughly a year just to finish the animal tox, and the plan is to have an IND and start a Phase I mid-2013.
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Adnan Butt, RBC Capital Markets - Analyst [42]
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Then final question, please. Which territories, if any, do you expect approval on this year?
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John Huss, Theratechnologies Inc. - President, CEO [43]
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So we expect, as I mentioned, Europe this year, we expect Canada this year, and we expect first Latin American countries. Now, again, Latin American countries approval dates fluctuate. So you're going to have to bear with me here. We do expect to have Brazil in the back half of the year.
We do expect to have Mexico, if not by the end of the year, very early in 2013. Argentina in the back half of this year. But we expect the first countries to come in in the back half of the year.
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Adnan Butt, RBC Capital Markets - Analyst [44]
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Okay, thanks again.
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Operator [45]
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Doug Loe, Byron Capital Markets.
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Doug Loe, Byron Capital Markets - Analyst [46]
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Thanks for hosting the call. I had a question on just overall lipodystrophy market dynamics. As you know, the Company itself has done a number of market research studies to try and ascertain the market size in multiple markets. I was just wondering now that there is officially an FDA approved alternative for treating this disease population, I was wondering if availability of such a product is in any way changing the frequency with which HIV lipodystrophy is diagnosed and perhaps maybe still being treated by alternative therapies?
So I wonder if you could comment on whether you have any early data post EGRIFTA marketing on overall market size in the US, and if there is anyway that you are being able to stratify that overall patient population to determine which patients are more eligible or -- sorry, more responsive to EGRIFTA therapy, and if there are any learnings there that you might be able to use to drive future sales?
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John Huss, Theratechnologies Inc. - President, CEO [47]
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That is a great question. I wish EMD Serono were around the table with us. I am sure they have much more data than what I have seen. What we are hearing -- and again I don't have sound evidence to answer your question, but what we do here is, yes, I think one of the things that EMD Serono has to do now is to educate the medical community around this disease, because as you know there have not been any medical treatments in the past, and lipodystrophy today includes lipoatrophy and lipohypertrophy.
I will let you know the new treatment regimens for HIV have had a pretty good impact on the atrophy side of things. So actually one of the issues I think we are facing today is that we are all using the word dystrophy, but companies like Gilead and going out there and saying there is no more dystrophy. And EMD Serono is going out there and saying there is lipodystrophyand, and they're both saying the right things.
One means there is less atrophy, and they are correct, that is Gilead. And EMD Serono is going out there and saying, there is more dystrophy, i.e., more hypertrophy, and they are correct too.
So part of the education process here is to tell physicians about the difference between atrophy and hypertrophy and this is a condition worthwhile treating.
I think one of the obstacles we have here in the education process is bringing the hypertrophy up on the list of priorities of the things that physicians need to look at when they see HIV patients. Because, obviously they have many, many other things to think about, including infections and other things in this medical population.
So I don't have any numbers. Let me get back to my colleagues here at EMD Serono to see how they have it stratified. But to answer the question, yes, of course they have stratified. They stratify by physician. As you know, there are about 4,000 physicians in the US who take care of HIV patients. They're going out after the his top 4 deciles. They have started to stratify patients also by reimbursement status, by severity status, but I don't have any numbers.
I think they're understanding more and more and better and better how to target the right physicians with the right patients. But I don't have the numbers to give you, unfortunately, at this point. But let me see what I can do, and if I can come up with something to help you guys also better predict the uptake in different segments and what are the -- what I'm hearing is how big are the low hanging fruit here and how big is the patient pool which should jump on this drug pretty quickly?
My gut feeling is it should be somewhere around 5,000 to 10,000 patients, but I don't have these numbers. And then to get to the rest of the patients is going to take more time and more effort.
But, don't forget, I think the post-approval commitments that the FDA has required, we will be starting the registry, the post-launch observation study this year. This will also help us build confidence around the safety of the drug. It is a safety registry.
I think as time progresses, we will be able to capture much more information from this database and from the registry. And I hope it will show -- and that is what we are seeing today -- that there are no issues with the safety of the drug. And I hope we will be able to build on this and build the confidence and be able to increase the patient pool.
So that is much as I can tell you today. I know it is not very scientific, but my gut feeling is there is a good patient pool. And I will see what I can do with EMD Serono to quantifiy it for you guys.
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Doug Loe, Byron Capital Markets - Analyst [48]
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That would be helpful. Thanks very much.
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Operator [49]
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(Operator Instructions). Cosme Ordonez, GMP Securities.
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Cosme Ordonez, GMP Securities - Analyst [50]
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My question is related to -- for the development work that is going to cause the postponement of the amortization of your payment from Serono. Could you provide a little bit more details about what is entitled in this development work?
And, also, is there any work being continued regarding the cardiovascular risk and other issues related to the disease that might help improve sales of EGRIFTA?
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John Huss, Theratechnologies Inc. - President, CEO [51]
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Just for clarification -- good morning first -- when you talk about the amortization of the trials are you talking about the post-approval commitments or are you talking about the amortization of the initial upfront?
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Cosme Ordonez, GMP Securities - Analyst [52]
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The amortization of the initial upfront.
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Luc Tanguay, Theratechnologies Inc. - SEVP, CFO [53]
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So we still have two years to amortize this upfront. And the period is linked to the work we still have to do with Serono on some formulation -- some formulation work and so on. So it is an estimate of the time we will still need to work on some formulation with our partners here.
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John Huss, Theratechnologies Inc. - President, CEO [54]
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Could you please repeat the second question you had, because actually while you were mentioning the second part we were trying to clarify what you meant with the first part. So can you repeat the second half of this?
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Cosme Ordonez, GMP Securities - Analyst [55]
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It is not a problem. Dr. Grinspoon has done quite a bit of work to understand the cardiovascular risks associated with AIDS lipodystrophy. And I'm wondering if this work is still continuing and if these could have a future impact on your sales of EGRIFTA?
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John Huss, Theratechnologies Inc. - President, CEO [56]
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That is a great question, thanks. Actually, the study was finalized at the end of the year. Steve is -- so Dr. Grinspoon at this point is looking at the data and it will be published in the first half. We are expecting it to be published sometime in the second quarter. We will be able to come back to you with more definite timelines in the near future, but expect to read more about that in the second quarter.
And I hope it will build the evidence around the field of growth hormone releasing factors. As you know, last year Dr. Vitiello conducted a trial in mild cognitive impairment in pre-Alzheimer's patients. And we were actually pretty stunned at the impact of the results we saw, both on healthy volunteers and on patients with mild cognitive impairment. Some of the cognitive functions were improved, actually, in both patients and healthy volunteers.
We are hoping to see important information and data coming out of Dr. Grinspoon's study also. And I hope this is going to help us move into further trials, both with Dr. Vitiello in the field of pre-Alzheimer's and with Dr. Grinspoon in learning more about our compound, about this class. Because this is going to help us narrow down the development process for the new peptides which we do want to bring into a multitude of potential interesting indications, which would include a subset of patients with abdominal obesity. So learning on what Dr. Grinspoon is providing us, but also mild cognitive impairment, building on what Dr. Vitiello was able to show and will show in further studies.
So right now we're discussing with both of them how we can initiate new trials. And obviously we're trying to get them sponsored by the NIH. That will be further evidence on the class and on our drug at no cost, which will help the class in the future, and obviously Theratechnologies in the future, because right now we own the class.
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Cosme Ordonez, GMP Securities - Analyst [57]
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Thank you very much.
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Operator [58]
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Pooya Hemami, Desjardins Capital Markets.
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Pooya Hemami, Desjardins Securities - Analyst [59]
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Just a couple of quick follow-ups. One is -- I know, John, you talked about that in the past that you would be doing some work with Serono maybe to get some more detail on compliance rates for people who are on the drug. Can you give us a little bit more of an update on that?
And my second question also is now that you expect to have Canadian market approval in the second half of this year have you thought about how you're going to market it? Have you looked at partnering the drug, and when should we hear of any announcements if that is the case?
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John Huss, Theratechnologies Inc. - President, CEO [60]
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So in terms of compliance rates, no, I don't have any data right now. I have been discussing this with my colleagues at EMD Serono. I actually have a call on Friday morning with Jim and his team and I will bring it up again. And as soon as I have something, I will see how I can share it with you.
For Canada we are still in the decision-making process. We have started looking at potential partnerships. We have not come to any decision yet, but as soon as we have, you will be informed. And I expect it to be in the first half of this year. So hang on for the information coming soon.
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Pooya Hemami, Desjardins Securities - Analyst [61]
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Okay, thank you.
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Operator [62]
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Mr. Boucher, there are no further questions at this time. I will turn the call back to you. You may resume with your presentation or closing remarks.
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Denis Boucher, NATIONAL Public Relations - IR [63]
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Thank you very much. So as there are no more questions from financial analysts, I would like to thank everyone for participating in today's conference call. I wish you a very good day. See you soon.
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Operator [64]
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Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation, and kindly ask that you please disconnect your lines. Have a great day, everyone.
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