Novan Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2023

There are 9 speakers on the call.

Operator

Hello, and welcome to the Novan Inc. Quarterly Update Conference Call and Webcast. As a reminder, all participants are currently in a listen only mode. Following the presentation, There will be a question and answer session. Note that this webcast is being recorded at the company's request and a replay will be made available on the company's website following the end of the event.

Operator

At this time, I'd like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations or future projections. These are forward looking statements and involve risks and uncertainties. Forward looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws and are based on Novan's Current expectations and actual results could differ materially. As a result, you should not place undue reliance on any forward looking statements. Some of the factors that could cause actual results to differ materially from these contemplated By such forward looking statements are discussed in the periodic reports Novan files with the Securities and Exchange Commission.

Operator

These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. Additionally, certain information contained in this webcast relates to or is based on studies, publications, surveys and other data obtained from 3rd party sources and the company's own estimates and research. While the company believes these 3rd party sources to be reliable As of the date of this presentation, it has not independently verified and makes no representation as to the adequacy, fairness, Accuracy or completeness of or that any independent source has verified any information obtained from 3rd party sources. Joining us on today's call from the Novant leadership team are Paula Brown Stafford, Chairman, President and Chief Executive Officer John A.

Operator

D'Onofrio, Executive Vice President and Chief Operating Officer and John M. Gay, Chief Financial Officer. I would now like to turn the call over to Paula Brown Stafford. Please proceed.

Speaker 1

Thank you, Andrew. And thanks to everyone for joining us this morning. Novan is building a premier medical dermatology company that is focused on developing and Our priority is our NDA for birdasimargel 10.3% It is under review at the FDA with a PDUFA goal date of the 5th January 2024. We are in the review cycle and we have less than 8 months remaining. Since January, we have had a number of noteworthy accomplishments.

Speaker 1

Our entire team remains excited about our progress, our momentum and what lies ahead. Our NDA was submitted in early January. This represents the most significant milestone Novan has achieved to date and something of which we are extremely proud. In March, our filing was accepted for review with no known potential issues. And we were provided our PDUFA goal date, as I mentioned, as well as other expected milestone dates for a standard review cycle.

Speaker 1

We continue our dialogue with the agency, while we move forward with preparing toward our commercial supply of drug substance in anticipation of a potential approval. Verdasimer gel 10.3 percent is a novel topical nitric oxide releasing medication for viral skin infections. Verdasimer sodium, our active pharmaceutical ingredient, is a new chemical entity. Our NDA is based on a Phase 3 program that demonstrated clinical evidence of efficacy with robust clinical data from our BE SIMPLE 4 trial and a favorable safety profile for patients with molluscum. Our clinical trial data from B Simple 4 were published So if approved, this product would satisfy an important Patient care need, largely displacing in office procedures that are often cumbersome, painful and time consuming.

Speaker 1

Worldwide and the 3rd most common viral skin infection in children,

Operator

Through

Speaker 1

recent market research, we received caregiver feedback that speaks As you can see in these quotes here, it leaves children feeling depressed, hopeless, bullied, And last week, we actually received An e mail from a parent, we get these quite frequently. And this one, it was just a striking e mail. And at the end, it said, I am looking for a The market is prime for a topical self administered or caregiver administered therapy. The market potential is large with 6,000,000 patients in the U. S.

Speaker 1

We believe the lack of at home options results Freezing, cutting, blistering and off label and OTC offerings that have no proven efficacy. Per U. S. Claims data, over 70% of patients with molluscum go untreated. Whereas 65 percent of dermatologists will treat molluscum, but it's typically with a treatment We believe that birdasimargel 10.3 percent has the potential to become a first line therapy.

Speaker 1

But a wait and see approach is not a standard of care that patients or caregivers seem to benefit from today. So in the next seven and a half months, the FDA could approve 2 potential treatment solutions that we believe would complement one another. We believe if approved, brazemergel could be prescribed by pediatrician as a prescription product that would most likely be covered by insurance at the pharmacy, Whereby if approved, a new drug device combo could be used as an in office procedure by dermatologists across multiple visits, Our research shows that Healthcare providers are ready for a safe and effective treatment and specifically, bradasimargel, if approved. As you see here, there's a very high potential, very high Adoption rates are expected within 12 months of approval across the 3 primary HCP types, who are seeing molluscum patients today. So we're planning for success.

Speaker 1

Our NDA is in the review cycle at the FDA, and we're currently expecting the review to be complete by the goal date of January 5, which is again less than 8 months away. So as we respond to FDA information requests, We're also planning toward a potential launch. So specifically, we look to build awareness and excitement For our potential product among our customers as well as our employees and potential future employees, We work to educate healthcare providers about the disease and the treatment options. We look to deliver the best possible access program. We want to prepare our existing commercial organization.

Speaker 1

We continue to protect our proprietary platform technology with patents nationally and globally. Now the extent of these efforts remains dependent on funding available to the business. So our go to market strategy starts with the opportunity in the dermatologists' offices. They recognize the value. Their patients recognize the value.

Speaker 1

They are eager. So we expect pediatricians will look to them and follow. We will mostly market to non derm HCPs digitally. Once we prove out our marketing playbook with the dermatologists, we would look and expect to have the foundation to expand beyond dermatologists. The opportunity for bradasimargel is Compelling.

Speaker 1

So I'll now hand the call over to our Chief Operating Officer, John D'Onofrio, to provide an update on our commercial business for the Q1 of 2023.

Speaker 2

Thank you, Paula. Good morning, everyone. I'm pleased to report our promoted products delivered strong prescription growth compared to Q1 2022. This is the 5th consecutive quarter of strong commercial team execution delivering growth across our promoted product portfolio as compared to prior periods. Our team successfully launched new promotional campaigns for RHOFADE and WENZARA, moved to digital platforms and selling tools across our portfolio.

Speaker 2

Complementing our strong total prescription growth compared to Q1 2022, we have also experienced a significant increase in underlying demand for both RHOFADE and MINALYRA and increased ACP rider activity for Wenzora. Wenzora, which was launched in mid-twenty 21 Competes in a market that has many treatment options for psoriasis. As such, this is a positive trend in a very competitive market. For the quarter, we continued to grow our prescribing base and market share for our core promoted products. Q1 RHOFADE total prescription volume of 40,149 was less than 100 prescriptions short of an all time high set in Q4 2022.

Speaker 2

This represents an 11% growth over Q1 2022, 18% growth in new prescriptions and all time highs in both new prescribers and total prescribers of 8,000 9,000 respectively. As noted in previous calls, when Zuora was impacted in the second half of twenty twenty two by new competitive launches that have challenged the use of topical steroids in the U. S. For plaque psoriasis. However, our new promotional efforts have returned Winxor to growth of 9% in Q1 2023 versus Q1 2022.

Speaker 2

Mino Lyra continues to outperform the Declining minocycline market for acne, strong growth of 19% in total prescriptions and 18% growth in new prescriptions versus Q1 of 2022. Our strong prescription growth during the quarter was partially offset by 2 factors impacting our net profitability. We experienced a supply disruption in March for RHOFADE. This issue was quickly resolved and distribution channels restocked in solid demand and pull through in mid April. In addition, as it relates to our gross to net deductions, We experienced an increase in payer rebates as we moved from non preferred to preferred coverage, higher patient assistant co pay costs due primarily to a coverage mix shift of higher deductible plans and the result of patients' annual coverage deductible resets.

Speaker 2

We continue to work towards the implementation of tactical and strategic actions to reduce the impact of gross to net adjustments on profitability. Overall, we're excited with the total prescription growth performance, including new and total prescribers for our promoted brands. Thank you. And I will now hand it over to John Gay, our Chief Financial Officer.

Speaker 3

Thanks, John, and thank you to everyone for joining our call today. Before we review the activity for the quarter ended March 30 1, 2023, I will remind you that when I refer to prior year figures for the quarter ended March 31, 2022, It includes 20 days of activity based upon our March 11 acquisition last year and the related timing of the consolidation of our commercial business within our financial statements. As such, the comparability of the current year versus prior year Q1 should be noted as it relates to this 20 day stub period in the prior year. I would also like to let our listeners know that we are not yet providing guidance as it relates to Q2 and full year 2023 revenues or EBITDA. For the 3 months ended March 31, Our net product sales of $2,400,000 included in our commercial businesses total revenue was comprised of $1,100,000 for RHOFADE, $500,000 for Wenzora and $300,000 for Menelira with other products in our portfolio contributing 400,000 The increase in our net product revenue for the 3 months ended March 31, 2023, as compared to the 3 months ended March 31, 2022 was due to the timing of the EPI Health acquisition, offset by the impacts of a manufacturing delay with the delay with the supplier for our RHOFADE commercial product.

Speaker 3

RHOFADE was on back order beginning in March 2023 until mid April of this year. This temporary stock out of RHOFADE impacted the overall net product revenue during the Q1 of 2023 as there was a 28% decrease in the number of units sold in Q1 2023 from Q1 2022. I will note that this decrease of units sold is calculated based upon the total units sold in the 1st year prior year Q1, including units sold by EPI Health prior to the acquisition by Novant. However, I am pleased to report that the volume of units sold to our customers in mid April of $600,000 for the 3 months ended March 31, 2023. This amount relates primarily to the Saatchu agreement for the out license of SB-two zero six recorded in the Research and Development Operations business.

Speaker 3

Total cost of goods sold recorded in the Commercial business was $1,300,000 for the 3 months ended March 31, 2023. Cost of goods sold includes the cost of finished goods from our 3rd party manufacturers, sales based royalty and milestone expenses and other third party IP licensing costs. For the 3 months ended March 31, 2023, we recognized net product revenue related royalty expense of $700,000 within cost of goods sold. This amount included our current obligation to third parties in addition to amounts related to the accounting presentation for the MC2 licensing agreement. Our R and D business incurred research and development expenses of $4,800,000 for the 3 months ended March 31, 2023, 2022.

Speaker 2

Included in the fluctuation

Speaker 3

from the prior year quarter was a $1,000,000 net decrease in the SB-two zero six program related to the SB-two zero six NDA submission in January of 'twenty three, offset by a $1,000,000 increase expense related to a regulatory milestone payment, which became due to Ligand Pharmaceuticals during the Q1 of 2023. On a consolidated basis, SG and A expenses were $10,000,000 for the 3 months ended March 31, 2023 and 2022. Included in the fluctuation from the prior year was a $4,000,000 net decrease in transaction related expenditures In connection with the EPI Health acquisition, offset by an increase of $3,700,000 of selling, general and administrative expenses Encouraged to support the conduct of our commercial business operations. Consolidated net loss was $14,100,000 for the 3 months ended March 31, 20 $23,000,000 compared to $13,400,000 for the prior year comparable period. As it relates to our balance sheet, as of the end of the quarter, we had a total cash balance of $12,500,000 and accounts Receivable totaling $13,800,000 In the Q1 of 2023, we closed a registered direct offering for gross proceeds of $6,000,000 We received the Sato upfront payment of $5,000,000 related to the RHOFADE out license agreement in Japan and we have continued to use Our $15,000,000 accounts receivable backed factoring facility, which provides working capital in an amount that is up to 70% of our commercial businesses' Gross eligible receivables.

Speaker 3

We will need additional funding to support our plan and future operating activities related to our brazemagel 10.3 percent product candidate and our business in general. We believe that our existing cash and Cash equivalents as of March 31, 2023, plus expected receipts associated with product sales From our commercial product portfolio, we'll provide us with liquidity to fund our planned operating needs into the late Q2 of 2023. Variability in our operating forecast driven primarily by commercial product sales, timing of operating expenditures and unanticipated changes in net working capital may impact our cash runway. We continue to be laser focused on obtaining the additional funds necessary To get to a potential approval and launch of midazir gel 10.3% if approved, including evaluating strategic opportunities, while at the same time conserving cash by delaying or deferring certain expenditures. We have been pursuing and will continue to pursue additional capital to a broad range of financing strategies and other strategic alternatives.

Speaker 3

With that, I'll hand it back to Paula.

Speaker 1

Thank you, John and John. I truly believe that Novan is in the position to succeed with a potential approval and an infrastructure to support a potential product launch. We are highly focused on driving towards The potential approval of brazemergel 10.3 percent on aligning our commercial infrastructure to support a potential launch on the continued growth of our marketed products and improving the gross to net profitability. And as John mentioned, we continue to aggressively pursue additional potential capital or strategic relationships And these activities include the evaluation of options such as debt, equity, in license, In closing, we at Novan are committed to building a premier medical dermatology company. We remain focused on executing and delivering results, and we're excited for our future.

Speaker 1

Thank you. And operator, you may now open the line for questions.

Operator

We will now begin the question and answer The first question comes from Oren Livnat with H. C. Wainwright. Please go ahead.

Speaker 4

Thanks. I appreciate the questions. I have a few. Just on the API business, I understand it's been a little volatile for different The last few quarters, aside from the destocking in particular this quarter, can you give us an update on the progress with the prior Issue you called out with regards to pharmacies maybe inappropriately pushing patients to copay cards rather than through Existing insurance coverage and are you able to quantify the, I guess, dollar hit this quarter from that destocking? Should we expect Fully reverse in Q2 such that sales will exceed maybe underlying demand by the same amount?

Speaker 4

Thanks.

Speaker 2

Yes. Thank you, Oren. I appreciate the question. Yes, we have been able as we noted, working with the pharmacies And seeing the issues that we saw in the second half of twenty twenty two, we have seen some improvement, but we do believe that the 1st quarter seasonality with the higher deductible plans, a reset and also seeing a shift To higher deductible plans has muddied that picture a little bit for Q1. We feel like it's a seasonality.

Speaker 2

We've seen that across the industry With not only competitors, but other companies and we feel like that will even out if you will over the next couple of quarters. We've also began implementing, working closely with our pharmacy network pharmacy partners in order to have better data and metrics as we mentioned in the second half of the year and that's continued into Q1. So yes, and I'll hand it over to John and he can provide a little bit more on the impact of the stock out.

Speaker 3

So thanks, Oren. Good morning. So related to your question, we did talk a little bit about on the prepared remarks about the decline in units sold. I think to the point of your question, we did see that rebound in mid April. So a lot of it was a timing issue.

Speaker 3

And so I think both from a TRx perspective, that growth trajectory continues as it relates Our demand on our sales side that was recouped effectively in April. As it relates to continued profitability, I think that will be Really twofold. 1, it will be addressing some of the gross to net items that John just mentioned, but as it relates to Total units sold, we see that recovery.

Speaker 4

Okay. And I know you're not giving guidance For 2Q or beyond, are you able to sort of characterize what you view the I guess you'd call it a normalized Size of this franchise, whether it's RHOFADE alone or the

Speaker 3

whole thing,

Speaker 4

adjusting for seasonal or one time push Do you look at this as a $20,000,000 business, a $25,000,000 in terms of like current run rate or is that not something you're able to sort of characterize right now? And I One follow-up after that.

Speaker 3

Yes. I thank Oren for that question. If you look at kind of where we ended up last year on a consolidated basis, we'll Just talk about on the total net product revenue, right, because the RHOFADE is by far the biggest component of that. We do expect to see growth year over year. Now part of that will be because of the full year of activity, but we do expect to see continued growth And the sales, if you will, of our commercial business.

Speaker 3

As it relates to a run rate, I think as As it relates to net product revenues, I think we'll continue to see TRxs grow and units sold grow. I think the challenge will be Addressing some of these gross to net components, but I think we ended up last year roughly 16,000,000 And net product revenue, I think we will exceed that this year. What percentage, I think, will be largely be dependent upon the gross That's a net matter that we discussed.

Speaker 4

Okay. And just lastly, to move to SB-two zero six, which is obviously the most important thing here. I guess, Well, firstly related to EPI, do you just look at it as a bridging strategy essentially to FC-two zero six now? Or should Are you looking at that as a growing business for the next couple of years beyond this year in your view? And then just on FC206 specifically, Did you receive a day 74 letter?

Speaker 4

Well, I assume you did. And did that, any changes to your expectations for what you need to do To prepare for approval or activities you need to do after approval to ramp up before launch?

Speaker 1

I'll start with that one, Oren, and then John can talk about the bridge. So SB-two zero six, We on in our basically our day 60 letter, they gave us all the information that you would typically get in a day 74. So we were Thrilled to get all that information in one and get it ahead of time. So we are and in that they provided Interim dates that are typical on a standard review that get you to the January 5 PDUFA date. So we have all the information we need from them.

Speaker 1

We will this summer. They will have an internal mid cycle review And we'll get that input late second, early third quarter. We'll get that input from the agency. So in terms of what we have to do now, we, as I mentioned, are Really focusing our effort on the approval and spending less on the Pre launch activities due to our financial situation. So but we are Preparing our drug substance supply so that we would be in a position to launch in the first half Of next year.

Speaker 1

So there are things that we need to do this year from a manufacturing standpoint to be ready for that.

Speaker 3

Yes. And Lauren, to the first part of your question as it relates And the activity of EPI Health and bridging, at the end of the day, when we did the acquisition of EPI Health is really twofold rationale. 1, was to give us The infrastructure to launch SB-two zero six as it relates to the sales force and the relationships. That was a key value proposition as it relates That acquisition because as folks know to do that either build internally or to outsource if you will It's very expensive. The other benefit obviously is that we acquired a great sales team, infrastructure, Leadership management and the products.

Speaker 3

Rotate is a great product and we fully expect to be able to Use our lifecycle management for that product and others in our current portfolio to provide value to shareholders. Now as Paula noted, The long view of Novan is SB-two zero six. And at the same time, we do have a current portfolio that we're going to execute against. And we think it does provide value, but again, at the end of the day, the long term value of Novanta SP-two zero six.

Speaker 1

Thank you, Oren.

Speaker 4

I appreciate it. Thank you.

Operator

The next question comes from Jeff Jones with Oppenheimer. Please go ahead.

Speaker 5

Good morning, guys, and thanks for taking the question. You just gave a lot of detail, but a couple of Follow ups here on Middle Era. It looked like sales took a hit as well, looking at 4Q to 1Q. Any comment there? And then on the BD front in terms of discussions with Sato around rights beyond Japan, I know there was a clock on those discussions.

Speaker 5

Can you give us an update on that?

Speaker 6

Thank you.

Speaker 2

Good morning, Jeff. Thanks for the question. In regards to Minalira, if you know, we look at the overall market dropped about 14% and we declined about 1.5%, if you will. So we look at it as just the market overall Decline from Q4 to Q1, and we still feel strongly. Also, again on the net side, as John mentioned, we saw the same Asians of the high deductibles and resets, but from a TRx perspective, that's what we're seeing.

Speaker 2

We still saw a strong prescriber base as compared to Q4. And so it was more driven just by the market itself for the quarter.

Speaker 5

Got it. So market and then gross to net?

Speaker 2

From a net, yes, net revenue perspective. I'll hand it to John for the second part.

Speaker 1

No, the second first, Sato. Yes, I'll take it. That's okay. So regarding the out license or their in license of raw fade into other countries. That clock is not up yet.

Speaker 1

So, we that goes into the end of the second quarter. So We'll provide an update at a later point on that.

Speaker 3

Great. Thank you, guys.

Speaker 4

Okay.

Operator

The next question comes from Jonathan Assoff with ROTH. Please go ahead.

Speaker 6

Thank you very much. Guys, might the R and D expense drop over the rest of this year such that year over year R and D I believe you mentioned that it would be at least on the Q4 call.

Speaker 3

Good morning, Jonathan. Yes, you're correct. We expect R and D to be flat compared to last year. And again, the rationale there being is a lot of the activity That we're currently in the process of doing as it relates to the NDA submission and administering any responses back from the FDA and preparing The facility that will run through R and D. So to answer your question, yes, we expect R and D to be flat year over year.

Speaker 3

And we saw a flat In Q1, although for quite a different reason.

Speaker 6

And are all Consolus stability batches submitted?

Speaker 1

Yes. Yes. I will take the opportunity to say you may not have there's sort of one line in the queue. We did have an issue with the Consolus name. It was conditionally approved by the agency.

Speaker 1

However, we will not be moving forward with that name. So we have sent in and we have other name With the agency in terms of getting, it would be conditionally accepted again until we had An approval, if we have an approval, but just we won't be using the Consolus name anymore.

Speaker 6

Okay. Back to 206. Thanks for that. So, will you have the exact same headcount for sales, let's say, in 8 ish months or now you're Saying it'll be over the first half of twenty twenty four before you can effectively really launch given you'll do less until you'll do less prior To approval just given the cash position. So will you have the same headcount and would a greater focus on Consolus Compromise the legacy EPI product sales at all you think in next year?

Speaker 1

Yes. I'll start and if John wants But where we are in headcount is that based on our cash position, we actually have a freeze on Hiring for our sales associates, so but we're still covering that 40 to 42 territories With the heads that we have, so we won't be increasing that. It was always our plan with SB-two zero six. We believed that going upwards, 50 to 60 in that range would Be the best thing for a launch, but we aren't launching in 2023. So and in terms of The positioning is that what you would end up with is verazimargel in the first position and RHOFADE in the second And then going on from there.

Speaker 6

Sorry, go on.

Speaker 2

Yes. I just think to follow-up just on Paula's point, when you look at the legacy EPI brands, we're going to target the same positions. So that footprint of representatives will complement as we launch Vodazamer. Also, we have a strong writer base, both GrowthWave, Winzora and Menelira, and we feel confident that that writer base We'll remain strong and then continue to move forward and grow those products even with the launch. It's a very complementary selling point With all 3 current products and then with edasimir, obviously, the top 3, edasimir, RHOFADE and Winzora We'll all do very well.

Speaker 2

And MENALYRA in the oral antibiotic market will be moved to 4th position at that particular point.

Speaker 6

Okay. You guys mentioned something about $700,000 booked into COGS. Does that mean there's another $550,000 that needs to be booked this quarter, as it relates to the $1,250,000 to a third party you have to pay from Sato's $5,000,000

Speaker 3

So, Tom, we've recorded that accrual, if you will, in COGS at the end of before. So as it relates to my prepared remarks and COGS of Roughly 1.3, 700 of that is royalty, the rest is what I would say is product COGS As it relates to the acquisition of materials for selling. But to your point that that prior milestone was recorded in Q4.

Operator

Thank you.

Speaker 6

And I guess it's safe to say that any sort of view towards in licensing any new products is deemphasized for the time being. Yes?

Speaker 2

I think that's probably a fair assumption.

Speaker 6

All right. Thank you very much.

Operator

The next questioner comes from Jeff excuse me, Kemp Dolliver from Brookline Capital Markets. Please go ahead.

Speaker 7

Great. Thank you. Couple of questions. First, there was the comment in the slide deck about Streamlining the commercial team, but it looks like the size of the commercial team has remained steady. What changes did you implement in the quarter?

Speaker 1

No, the size, I'm not Sure, what you're referring to in terms of the size of the commercial team, because the commercial team has decreased in size By compared to the 4th quarter. So we do not get this

Speaker 7

thinking of the number of territories.

Speaker 1

Okay. Yes. So we've said that we cover 42 territories And that's generally been with 40 to 42 people. We're currently around 37.

Speaker 7

And then with regard to the marketing initiatives that you've commenced for the promoted products, What are you doing differently versus last year?

Speaker 2

Yes. So in Q1, we launched brand new campaigns for both RHOFADE and WINSORA, which you've seen the uptick in performance. We also moved to digital platforms and selling tools for our representatives. It's been a real nice addition into the marketplace. We definitely executed on our strategy to build Wenzora awareness and usage, hitting all time highs in total rider for Q1.

Speaker 2

And we definitely focus on our messaging for fast week 1 results as a differentiator in the very busy and competitive psoriasis market. And We've also continued the momentum and strong growth on RHOFADE with all time highs in new prescriptions. And our goal is to establish the medical need of Persistent facial erythema and making sure you're treating that with a prescription product. So those initiatives from a marketing perspective, while we tried To ensure we're being fiduciary responsible to the shareholders has been received very well in Q1 and you could see that in the prescription group.

Speaker 7

That's great. Thank you. And the last question relates to the change in formulary position And granted that it's only a couple of months of data, but when you focus on say prescriptions versus rebate, And putting aside the seasonal effects, are you seeing a net benefit in revenue from Agreeing to higher rebates in exchange for the better formulary positions?

Speaker 2

Yes. Thank you for the question. So we are excited that we did on one of the major plans move from non preferred to preferred coverage Effective January 1. So obviously, we're paying higher rebates, but we'll see better coverage and lower co pay card costs. We did not see that in Q1 as much as we expected and we think a lot of that is due just to the shift in high deductibles and also With the reset plans, so it wasn't as clear to see, but on the individual basis, we have seen the benefit and we believe we'll continue to see that through Q2, Q3 and Q4, so it will continue to improve as we work through pull through of downstream accounts as well.

Speaker 2

The dynamic of it being effective January 1 and being pulled through all the thousands of downstream accounts is also A part that will increase over the upcoming months. So yes, so we're pleased with it. We feel like moving to a preferred position definitely puts RHOFADE at this particular life cycle in a great position and the pull through will continue as we go through the year.

Operator

The next question comes from John Vandermosten with Zacks. Please go ahead.

Speaker 3

All right.

Speaker 8

Thank you and good morning, Paul and John. I want to ask a question on Your marketing efforts that you'll make assuming approval of SB-two zero six, are there any social media or similar approaches that you can use to improve awareness? And I'm wondering what the most effective medium is that you can use to increase awareness of molluscum And even the products that you currently are marketing?

Speaker 2

Yes. So John, thank you. Great question. So We before launch, we'll be using our medical affairs organization to make sure there's awareness of molluscum and some of the points Paula mentioned In the previous slides. And then when we look to go forward as far as our marketing efforts, we have developed a great So our launch strategy and promotional plan that will continue to evolve.

Speaker 2

We'll use the same tools that we're currently using in our existing platform, but absolutely we'll use Absolutely, we'll use digital and social media types of avenues to Not only promote the product, but to promote the awareness of the disease state as we've noted to ensure that this absolutely gets treated As a disease and there's a prescription medication available, we also believe this will help not only in the dermatology market where we have a strong Foothold and good relationships, but it will help us our initial launch into pediatrics and as we grow to evolve further down that road. So absolutely. Thank you for the question.

Speaker 8

Okay. And when you think about splitting the effort between awareness for providers and awareness for patients, How do you look at the effort there, I guess, fifty-fifty or maybe 70five-twenty 5? How do you think about that?

Speaker 2

I think that will primarily be driven off of resources and funding as well. I think primarily the beginning part will be around awareness at the physician level. And as we evolve and grow, the opportunity to expand that to patients and also caregivers of patients It's a fantastic opportunity and again I think cash resources will be a primary driver from that perspective. But our market research does show that that ability to reach the patient and the patient caregiver can absolutely impact this opportunity.

Speaker 8

Great. Thank you, John. And regarding RHOFADE in Japan with Sato, what is the development timeline and process for that Going

Speaker 1

forward. Yes. Thanks, John. So the process is that, and that is really for them to share For a timetable, but there is some development effort that is necessary in country before they launch. So they are beginning that process now getting ready to do the small development effort that they need there To then commercialize.

Speaker 1

So it won't be immediate.

Speaker 8

Got it. And I was looking at Panel estimates for the psoriasis category, looks like they're going to be about up 3%, say a little over $30,000,000,000 And I'm wondering, there's a few new entries into the category. And I'm wondering if, is it becoming more competitive or is there more Potentially complementarity among the medicines there and there's combination approaches, I guess, being used to more effectively treat. What are your thoughts on that?

Speaker 2

Yes. Great question. And when you think about the competition, it's not only there's more entrants, which we have noted is great For the market itself, because as we know, there's usually numerous prescriptions written to address the disease state. Part of it is just the size and the amount of investment coming in from these new companies. It's both larger pharma Companies with biologics and then the non steroidal companies that have invested a significant amount of Investments both from a field size perspective, you've seen DTC kind of campaigns coming out in additional types of promotional.

Speaker 2

So it's more around the size of the resources and investment in here. And again, I think it's been great. We believe it's been great for the market itself As the awareness and the opportunities, but as we've stated, steroidal use and especially a combination product With the steroid and the vitamin D analog, have an extreme place and benefit to these patients and that awareness only highlights the fast acting need to address psoriasis and we feel like with WINDURA that meets all patient needs from that spectrum And the increased competition and awareness is good for the marketplace.

Speaker 8

Okay, great. Thanks for the extra detail, John. Appreciate it.

Speaker 2

Yes, you're welcome.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Paula Brown Stafford for any closing remarks.

Speaker 1

Thank you all. Thank you, analysts, for your very good questions. I appreciate those. In conclusion, we believe the opportunity

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Earnings Conference Call
Novan Q1 2023
00:00 / 00:00