Iovance Biotherapeutics, Inc. (IOVA) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining the H.C. Wainwright 2021 Global Life Sciences Conference. My name is Jesse Kugler, and I'm representing H.C. Wainwright today. While we are virtual this year, we're confident we're going to be able to provide value to you with over 425 companies presenting at this conference as well as interactions through one-on-one meetings. H.C. Wainwright is a full-service investment bank dedicated to providing corporate finance, strategic advisory and related services to public and private companies across multiple sectors and regions. We have a total of 18 publishing senior analysts and 493 companies covered across all sectors. Please visit hcwco.com for more information. From a logistics standpoint, please make sure to reference your virtual conference online portal that provides your individual links to meetings and all presentations. Panels and all presentations are live and on-demand online from March 9 to the 10. With that said, have a productive and enjoyable day, and I'd like to introduce our presenter. I'd like to welcome President and CEO, Dr. Maria Fardis; Iovance Biotherapeutics. Take it away.

Thank you, Jesse, for the introduction. I will be talking about tumor-infiltrating lymphocytes for treatment of solid tumors today. Iovance is a public company, so I draw your attention to forward-looking statements that I will be making through the course of my presentation. At a glance, we are developing and we are planning on commercializing our TIL therapy. This is tumor-infiltrating lymphocytes cell therapy. This is a platform for treatment of solid tumors. We have clinical data in multiple indications. I will be talking about the specific studies that are ongoing. We have a GMP manufacturing process for development of these cells. The product is an autologous cell therapy. We also work on next-generation in our research programs in developing newer products for treatment of solid tumor through selection of certain TILs and generically modify these products. On the pipeline, we have a number of indications that are ongoing, including pivotal program in melanoma and cervical cancer. We have a registration supporting program in non-small cell lung cancer. We are looking at combination of TIL with checkpoint inhibitors in earlier line of indications, and we do a lot of academic collaborations to develop newer indications. And once we are interested in that data, we start company-sponsored programs. From an asset perspective, we closed the year with $635 million cash in hand. We continue maintaining global rights to all of our intellectual property. And we are developing and building our own manufacturing facility called Iovance Cell Therapy Center, or ICTC. In 2020, we focused on closing enrollment into our melanoma pivotal program as well as our cervical Cohort 1 study. As part of the preparation for our BLA for melanoma, we met with FDA in 2020. And we found out that they would like us to do additional work on our potency assays. So in 2021, our main focus remains developing -- continuing to work on our potency assay and developing it further to assure that we provide all the information, the agency is looking for in order for us to be able to move forward with a BLA submission for lifileucel, which is our TIL product in metastatic melanoma and cervical. And we look forward to being able to submit our BLA in 2021. In cervical cancer, we completed dosing our Cohort 1 pivotal program. And while we continue working on our potency assay, we also now have completed enrollment into our Cohort 2, which is for post PD-1 patient population, administering TIL in that patient population. And we think that, that may also be a supplemental cohort that could be added into the cervical BLA as well, once we have addressed our potency assay issues and we have talked to FDA to discuss the cervical cancer indication submission packet. As we think about non-small cell, we presented data through our collaborators, which is Moffitt Cancer Center. In 2020, we were very encouraged with the data that we saw, and we have started a registration targeted study, LUN-202. We have not started patient dosing yet. We have activated sites though as part of that program. We also have added additional cohorts into our basket study for non-small cell lung cancer. In head and neck, we presented preliminary data as a combination of TIL plus pembrolizumab in a conference called SITC in 2020. We were highly encouraged with what we saw in this combination setting, and we have expanded that cohort, continuing enrollment of head and neck patient population in that study. We continue with our manufacturing development, including development of generation 3, and we are moving that into clinic into a metastatic melanoma setting. Our success rate remains over 90% in manufacturing, and this is in over 400 patients that have been dosed into -- in the Iovance clinical program. In January of 2021, we gave an update about our Cohort 2 data in melanoma, which is a cohort that has been read out a few times. We gave an update about long-term follow-up of the cohort. We reported that in 28.1 months of study follow-up, we have not reached a median duration of response. This is after onetime treatment of lifileucel, with no other intervening therapy since TIL administration. So we were highly encouraged, and we do intend to provide additional data from -- in an upcoming medical conference in 2021, giving additional information about this recent data cut. Now going back to the technology and the product itself, thinking about what is tumor-infiltrating lymphocytes. This is basically our own immune system. When we are healthy, if there is a cell that is sort of a cancerous cell that is developed in our body, our immune system or tumor-infiltrating lymphocytes come to the site of tumor. They remove that. They kill that cell or the cells and they remove the disease basically. Either due to generic factors or sometimes environmental factors, the tumor may not be killed and removed, although the tumor-infiltrating lymphocytes did come to the site of tumor. Given that the diseases such as metastatic melanoma are highly diverse in terms of their mutational load, the fact that these TILs are recognizing the target is quite impressive, and we're taking advantage of that. So what we do is we remove the technology involved removal of a piece of the tumor. We then fragment the tumor, we allow the cells to leave the tumor, and we basically expand and rejuvenate these cells before putting billions of these cells back into the patient. Before we give the cells back to the patient and lymphodeplete the patient to remove their hospital microenvironment and then we give the patient the TIL we follow by up to 6 doses of IL-2. This is a onetime treatment. It's, of course, the utmost personalized medication that one can receive being its own -- the patient's own immune system that is basically just expanded and rejuvenated. In terms of mechanism of action, once the TILs are infused, they start going into circulation. They can find the tumor through the detection of the chemokines that are produced by the tumor, and they migrate to the tumor bed. At that point, there is a peptide antigen recognition, so the TIL recognizes the tumor. Remember that they came from the tumor, so they were able to see the tumor very well. And so they bind to the tumor antigen peptide that is presented on the surface of MHC. And once that recognition has taken place, the latest process starts, where the TIL start the killing process by production of perforin, granzyme and interferon gamma as well as others, and they killed -- direct killing as well as assisted killing of the tumor cells take place. I briefly talked about the process. This is a bit more of details of what happens for the patient and what happens to the tumor that we resect from the patient. On top of the graph, we are looking at the patient journey, the patient comes in, in a clinical setting, they get, of course, consented. A fragment of the tumor is removed, about a centimeter or so of the tumor is removed. Once the patient recovers from their surgery, they go home. The tumor is immediately shipped to our manufacturing facility in the bottom of the graph, fragmented, placed in media and the cells start departing the tumor and expanding at the same time. This is a 22-day manufacturing process that takes place. That's our Gen 2 manufacturing. We have other methods as well. But this is the one we have used in our registration supportive programs. And after the 22 days, we watch the cells. We harvest them. We watch them. We cryopreserve them, and we are ready for infusion if the patient is ready. If the patient is ready and the hospital is ready, we then ship the product over to the hospital. Before the patient receives their product, they receive a short course of chemotherapy, which is nonmyeloablative chemotherapy lymphodepletion. And they received cyclophosphamide fludarabine, then they receive TIL. And subsequent to that, we give them IL-2 to support expansion of the T cells that were just infused into the patient. That's about a 2- to 3-day process. And once the adverse events of the patients are resolved then the patient goes home. The manufacturing facility that we are building is out in Philadelphia. Currently, we are working with multiple CMOs in providing the cells. But our manufacturing facility is expected to be starting its clinical manufacturing in 2021 and commercial manufacturing in 2022. The facility is quite large. It's 136,000 square feet. And the first set of clean rooms have been completed as a matter of fact. The picture of those first sort of clean rooms is shown on this slide, and we are starting a proprietary work toward anticipated clinical manufacturing later in the year. We protect our intellectual property, of course, very heavily through very broad coverage around source of TIL, which could be tumor, marrow, peripheral blood. It could be frozen or nonfrozen starting materials. It could be a fragment or digest. The manufacturing process itself may be generation 2. We talked about that at the 22-day manufacturing. It could be generation 3, which is a 16-day manufacturing. We could use co-stimulants or not or we might be able to select or do generic modification of the product. From a clinical perspective, we have covered utilization of TIL with various clinical agents that we may be administering the TIL with as well as the patient populations. We certainly have been looking at IL-2 variants and the sort of different regimens you may be using. So we have well over 20 granted or allowed patents, U.S. and as well as international, that includes composition of matter for TIL products as well as methods of treatment. The indications we are pursuing are at a gland shown here. I do want to remind of the market potential for solid tumor about 1.75-or-so million cases still get diagnosed just in U.S. alone annually, and 90% of the cancer cases that are getting diagnosed are solid tumors. So this is still remaining to be a very large expected commercial landscape. Many of the indications we are pursuing. The frontline therapy has become anti-PD-1s. But subsequent to progression anti-PD-1s, the patients really do have very few options. It's mostly chemotherapy that the patients will have to receive. So we are targeting starting with late-line patient population, the post PD-1 patients and we are moving to earlier lines as well. Our pipeline shows that we have completed enrollment into the pivotal programs for melanoma and cervical cancer. We have a head and neck program. We have actually completed an enrollment into our relapsed/refractory program. But we have a cohort that is ongoing as part of the basket study, the IOV-COM-202. In the IOV-COM-202, we have 2 sets of settings that we are investigating early line, where we administer TIL plus pembrolizumab and late-line where we might administer TIL alone. And we are looking at 3 different indications of melanoma, head and neck and non-small cell. In addition, as I noted before, we have started an LUN-202 program. We have not started patient dosing yet. We have a CLL program. I will not be talking about that. It is an early stage program. And then we have a number of collaborations, including our collaborations with MD Anderson, Moffitt Cancer Center and otherwise, where we look at new indications through those collaborations. In metastatic melanoma, even to this date, we still see about 310,000 cases diagnosed annually, and about 100,000 of which is in U.S. And focusing on U.S., we still see about 7,000 patients, unfortunately passing away from metastatic melanoma. As I noted before, frontline therapy usually involves nowadays anti-PD-1. It might be BRAF/MEK if the patients have a BRAF mutation. But once they progress on their anti-PD-1s and/or BRAF/MEK if they had a BRAF mutation, really the patient only has chemotherapeutic options. There's a few other therapeutics that may be used, but most of the patients we see have run through their available therapeutic options. So what this chemotherapy offer these patients? It offers around 4% to 10% response rate at best and an overall survival of around 7 to 8 months. So this is a very difficult-to-treat patient population with very short life expectancy. We started a program called C-144-01 with 4 cohorts. Cohort 1 was using non-cryopreserved product. It was a Gen 1 manufacturing, which was around 6 to 7 weeks long. Cohorts 2 and 4 have the exact same manufacturing method of Gen 2. And the patient population is patients who have received 1 prior therapy, including their anti-PD-1, at least one prior therapy, including anti-PD-1 as well as BRAF/MEK if they had a BRAF mutation. We started this study in early 2018. In 2019, we had dosed our first patient into the pivotal Cohort 4. In 2020, we completed an enrollment into Cohort 4, and we are in follow-up. And Cohort 2 is the one that we have been reading, and I noted that we have recently cut the data, and we are at 28 months of study follow-up. Patient characteristics, as shown on this slide. I draw your attention really to maybe a few of them only on the left-hand side, you can see it in terms of prior therapies. Mean number of prior therapies for the patients to be dosed in this cohort was 3.3. The total number of patients that we ended up dosing Cohort 2 was 66. Of the 66, all of them had received prior anti-PD-1, so 100% of them. And 80% had received prior anti-CTLA-4, 23% had received BRAF/MEK. Not only they had received these prior therapies, but they had progressed on them. So they had progressed on prior anti-PD-1 at 99% and an anti-CTLA-4 of 77%. Maybe I also highlight a baseline LDH level. About 40% of the patients had elevated LDH, which is a poor marker for survival. And if we think about sort of tumor burden at baseline, they had over 10 centimeters of summary of diameters of target lesions only at baseline, showing that this is a pretty advanced patient population with a lot of disease at baseline. Treatment-emergent adverse events is shown on this slide. On the right-hand side, we're looking at TEAE table. And on the left-hand side, we see AE, adverse events over time. And it's very signature of a onetime treatment, you can see adverse events occurring at the time that the patient is repeating the therapy, including IL-2. And then once the adverse events are resolved and the patients go home, there's really very little that's happening over time. And again, this is a onetime treatment. In terms of response, we are looking at the data that is shown here. Of the 66 patients, we had 24 responders of them that is 36% response rate. Two were complete responders, which is 3%. Maybe I highlight just a couple of the points that are basically on this side. The disease control is perhaps an important factor to consider, given that the patients were all in progression starting coming into this study. So the disease control rate of 80% is certainly remarkable. So we did have a number of patients that had stable disease as well. When we think about the amount of product that we're administering, as an average, we had 27 billion cells that we have given to these patients and we talked about median durational response not having been reached a 28-months of study follow-up to date. On this slide, we're showing a swim lane. A couple of points are worth noting here. Responses developed fairly early or detected fairly early at around 1.5 months into the treatment. The response may get deeper over time. And we do see PRs converting sometimes with CRs or stable diseases converting to PRs. And on the left-hand side of this slide, we are showing that regardless of whether the patient had a PD-L1 high expression level or not, they may respond to TIL. And this is an important factor because if the patients are not particularly sensitive to prior anti-PD-1, they really run out of options very quickly, they're primary refractory. And what we see is TIL still is able to offer solutions -- response solutions to these patients. And we think that's an important factor for this type of polyclonal therapeutic option. On this slide, I'm showing you the waterfall. The stars are showing patients that had a BRAF mutation. What you can see is that regardless of the BRAF mutational status, the patient may respond. And so that's promising again because the patients who have a BRAF mutation might have also exhausted their BRAF mix therapeutic options. So to summarize the melanoma data, we were very encouraged to see 36% response rate, 80% disease control rate and a median duration of response that has not been reached at 28 months of follow-up. And we think that this certainly could be a therapeutic option for patients that have run out of their anti-PD-1 therapeutic option and/or BRAF/MEK. Focusing on head and neck and non-small cell both of these indications are being offered as part of a basket study, that is shown here, IOV-COM-202. This is a Phase II study, it's a multicentered, the top 3 cohorts cover melanoma. The Cohort 4, which is we call the Cohort 2A is head and neck. And Cohort 3 are all non-small cell lung cancer indications. What you can see is 1A, 2A and 3A or for PD-1 naive patients, where we offer TIL plus pembrolizumab, and the rest are relapsed refractory. And we can offer a single agent or maybe combinations in different settings. In head and neck cohort, the Cohort 2A, we had some preliminary data that we showed at SITC 2020. Before I cover that data, wanted to show you what is the landscape of care for these patients in terms of what therapeutic options they have. Head and neck -- this is head and neck squamous cell carcinoma, still is diagnosed of 66,000 cases a year in U.S. and 15,000 patients that unfortunately passed away annually. Globally, we see a very large prevalence of this disease. We see 890,000 cases and over half of them unfortunately die. The therapeutic options in the U.S. are really anti-PD-1s again in frontline as a single agent. That would be about a 16% response rate. One may receive anti-PD-1 plus chemo, so a chemoimmunotherapy combination, that has been reported at an overall response rate of 36% and a median duration of response of around 6 maybe to 7 months. Chemotherapy has been used heavily previously and the regimen that is most commonly used is called EXTREME. EXTREME offers 36% response rate and a median duration of response of around 6 months. Once the patients run through the front line therapeutic options for second line, they again may be treated with anti-PD-1, particularly if they did not receive anti-PD-1 in frontline. And in second-line post chemotherapy, we would expect a 16% response rate and a median duration of response of 8 months. So many of the patients that we had enrolled in our Cohort 2A, that I'll be presenting to you in just a minute, are, in fact, second-line patients post chemotherapy as what their bulk of their -- the patients were. And so expected single agent antibody -- anti-PD-1 antibody would expect to have given a 16% response rate and 8 months of median durational response. The data that we presented at SITC is shown here. We showed that TIL plus KEYTRUDA is showing in 9 patients a response rate of 44%, 4 patients had either a PR or CR and a disease control rate of 89%. So we were very encouraged to see this early data in terms of the depth of response. On the right-hand side, we're showing a swim lane for the responders. And what we see is fairly similar to what we saw in the melanoma setting, we are seeing response develop early or maybe stable disease converting to a PR and the responses may get deeper over time. So our CR that we saw was subsequent to a PR development. We saw a CR at around month 8. In the middle of this slide, you're also looking at TPS score for these patients, so PD-L1 status. And what you can see is 3 of the patients had a TPS score of equal or larger than 20 and 1 had a TPS score of less than 20, although it was higher than 1. So we were very encouraged with this data and will be decided to do to expand this cohort and enroll additional patients to see what is the true response rate and median durational response with a larger sample size and when we continue observing this with the patients. Now switching over to non-small cell lung cancer program. This is obviously a huge indication, a significant still unmet medical need, 229,000 cases get diagnosed annually just in U.S. and more than half of these patients, unfortunately, if you think about sort of the death ratio to nearly diagnosed, more than half the patients, unfortunately, die on an annual basis. In frontline setting, we really are seeing checkpoint inhibitors as a single agent or in combination with chemotherapy. So chemoimmunotherapy or immunotherapy is very dominantly used in frontline, particularly for patients that do not have an oncogene driver mutation. If they do have an oncogene driver mutation, typically a tyrosine kinase inhibitors use as front line. Once the patients progress in non-oncogene driver mutation patients that progress on chemotherapy, chemoimmunotherapy or immunotherapy alone, the second-line therapy is really paclitaxel or docetaxel that is offered to them. And docetaxel offers a 9% response rate in second-line subsequent to progression on immunotherapy or chemoimmunotherapy. The data that is shown here was presented by Moffitt Cancer Center that is our partners. They showed that they had dosed 12 patients. This data was presented at AACR 2020. Two of the patients had a complete response. A third patient had a partial response, yielding an overall response rate of 25%, and the complete responders were still continuing at around 12 months of study follow-up. This was highly encouraging for us for patients who had received already immunotherapy. And so based on that, we have started a registration-directed program, which is IOV-LUN-202, in which we have 4 cohorts. Cohorts 1, 2 and 3 are enrolling patients that are non-small cell lung cancer patients that are less than 1% TPS score. Cohort 2 more than or equal to 1% TPS score. And Cohort 3 is offering a core biopsy and a Gen 3 manufacturing, which is 16 days. So we have a few sites that are active on this study, and we look forward to being able to enroll patients and then providing data to the public. In terms of our research program, we continue thinking about potential IL-2 analogs. We have a program called IOV-3001. This product was licensed in from Novartis, and we are developing towards an IND-enabling set of studies in 2021. We think about how to select a more potent TIL. And there's various ways that we are doing that. We think about generic modification of TIL, and we have partnered with Cellectis for their talent technology to be able to modify these TILs and looking forward to providing additional data on this. We also think about process optimization and, in fact, have introduced Gen 3 which is a 16-day manufacturing process into clinic as well as lowering the amount of tumor that we need to a core biopsy. Iovance has a fairly broad footprint. Our corporate headquarters is in San Carlos, California, about 20 minutes south of San Francisco. We are also building our manufacturing facility in Philadelphia, and our research team is out in Tampa, Florida. We have about 250 employees, and I'm so proud to let you know that 76% of our employees have over 1 year of cell therapy experience. It's a highly technical team, very familiar with this landscape. From a financial perspective, we closed the year with $635 million in cash and no debt, and we expect that this will allow us to have a couple of years of runway. With that, I thank you and happy to address any questions subsequent to the call. Thank you.

Maria. Thank you very much for the presentation. We appreciate all the time and effort that goes into preparing. Hopefully, our next conference will be one that we could hold in person rather than virtually. But in the meantime, we're very grateful for your flexibility and your presence online this year. Thank you again from the entire H.C. Wainwright team, and have a great day, everybody.

Welcome to our panelists, corporate and investment clients. I wish all a healthy and productive remainder of the first quarter. I'm Michael Meyers, Vice Chair, Head of M&A and Strategic Advisory Services at H.C. Wainwright. On behalf of John Chambers, our President and Head of Investment Banking; Richard Gormley, our Vice Chair and President of Capital Markets and all of our colleagues at H.C. Wainwright, it's my great pleasure to welcome you to our Global Life Sciences Conference. This conference follows our 22nd Annual Global Investors Conference in September and our BioConnect 2021 Conference in January. And while the venues have been quite different for all of us since March of last year, we look forward to offering you a rich virtual content over the next 4 days -- 2 days, excuse me, to include our panel of this afternoon and virtual wine tour and tasting of this evening. With that, I would now like to introduce our moderator and facilitator of our reimbursement panel, Scott Gottlieb. Scott is a physician and life science and information technology investor who served as the 23rd Commissioner of Food and Drugs. Since having departed FDA, Scott has been a leading voice of balance and reason in support of addressing our current public health crisis. Currently, Scott is a resident fellow at the American Enterprise Institute and a partner with New Enterprise Associates. Scott is also a member of the Board of Directors of Pfizer and Illumina, in addition to other life and technology sciences companies. Welcome, Scott.

Thanks.

Before Scott asks his first question, I will ask each of the panelists to introduce themselves, beginning with Cindy McDonald-Everett of Seagen. Cindy?

Good afternoon. Hi, everyone. I'm Cindy McDonald-Everett with Seagen. Seagen is a multiproduct global oncology company that is focused on improving the lives of patients with cancer. My role at Seagen is really to balance the imperative of innovation in the cancer space with ensuring that innovation can be sustainable and that patients can actually afford to receive that innovation. It's a complex problem and one that we'll talk about, I'm sure, a lot in this panel today.

Thank you, Cindy. Max?

Thanks, Michael. Good afternoon. I'm Max Colao. I'm the Chief Commercial Officer of Aurinia Pharmaceuticals. And we are a Canadian company that, after a 20-year journey in research and development, on January 22 this year, has its first therapy approved for lupus nephritis, a therapy called Lupkynis. And lupus nephritis is one of the most serious and life-threatening complications of lupus. And so we are right just beginning our launch and happy to talk about that as well. Thank you.

Thanks, Max. Thomas?

Good morning. Hi. Thank you. My name is Tom Schall. I'm the President and CEO of ChemoCentryx, Inc. We're a Bay Area company. We specialize in orally administered highly targeted small molecules for autoimmune rare diseases and orphan diseases. As an example, we currently have an NDA in front of the U.S. FDA for avacopan for the treatment of anti-neutrophil cytoplasmic autoantibody-associated, or ANCA, vasculitis with a PDUFA date this July. It's a great pleasure to be here.

Thank you, Tom. Ted?

Thanks, Michael. Good afternoon, everyone. Ted White, I'm the CEO of Verrica Pharmaceuticals. We're a late-stage dermatology therapeutics company that's focused on the development and commercialization of novel dermatology products. Today, we're addressing 2 of the largest unmet needs in medical dermatology, the first being molluscum contagiosum, a viral skin disease that primarily affects children ages 2 to 14, where there's no FDA-approved therapies. And therapies that do exist have major drawbacks such as pain and scarring. And then our second area of focus is in the area of common warts. 22 million prevalence in the U.S., again, no FDA-approved therapies. And the same challenges that exist with destruction modalities that exist for common warts.

Thank you, Ted. Jack?

I'm Jack Bailey. I'm the CEO of G1 Therapeutics. We are an oncology-focused company with multiple assets. Our lead asset was actually just approved by the FDA last month. It's a product called Cosela and it transiently arrest the G1 cell cycle to preserve bone marrow from carnage of chemotherapy. So we talk about all of our employees waking up every day, fundamentally transforming the chemotherapy experience. So we're very excited to be able to begin to bring this to patients here starting -- actually, last week was our first full week. So, a pleasure to be here.

Thank you, Jack, and congratulations. Maria?

Thank you, Michael. Good morning. My name is Maria Fardis. I'm President and CEO at Iovance Biotherapeutics. Iovance is a company that is developing cell therapy for patients with solid tumors. We see this as a sort of a platform therapeutic. This is using patients' own cells without genetic modification. At the moment, we have a manufacturing process, which is 22 days for these cell therapy products that is quite robust, with over 90% success rate in hundreds of patients. We are working on next-generation TIL products, and we are late-stage development in indications that are melanoma and cervical cancer. We are in active discussions with the FDA to define a potency assay for our product to be able to submit our BLA. Thank you for the invitation. It's great to be in this panel.

Thank you, Maria. Ron?

First of all, thanks very much for the invitation to be here. Delighted to be here. I'm Ron Cooper. I'm President and CEO of Albireo Pharma. Our company is a company that has a bile acid modulation platform, a small molecule platform, which we use for rare liver diseases. Our lead product is odevixibat, which we are very excited about having a PDUFA date in July of this year. This will be our first product that is indicated for a rare pediatric liver disease PFIC. It's a disease where there are no approved therapies. These are children that suffer terrible itchiness pruritus, terrible sleep and could be a fatal disease. So if approved, odevixibat would be the first drug for these patients. So our company's mission is to bring hope to families, and we hope to do that with odevixibat.

Thank you, Ron. Carrie?

Hi, there, everyone. I'm Carrie Bourdow, I'm the President and CEO of Trevena. We are a CNS-focused company with an innovative pipeline. The big news on the company was that we received FDA approval for IV OLINVYK late last year. And OLINVYK is -- we're launching OLINVYK. It's a drug for acute pain in the hospital setting, postoperative pain, and in ambulatory surgery centers. So the company was founded on Nobel Prize-winning science out of Duke University, and this is our first asset to go through to commercialization.

Thank you, Carrie, and congratulations. Scott Braunstein?

Thanks for having me, Michael. My name is Scott Braunstein, I'm the CEO of Marinus Pharmaceuticals. We have a single asset, ganaxolone, which has 2 formulations. Our oral platform is used for the chronic treatment of epilepsies, primarily rare orphan epilepsies. Our lead indication, CDD, will be filed over the summer. And we announced today that we're moving forward with a Phase III trial in TSC, tuberous sclerosis complex. Our IV platform is in the middle of a Phase III trial for the treatment of acute status epilepticus, also considered an orphan disease state, although there are about 150,000 cases of acute status in the United States. So we're very excited about what we're working on and thrilled to be a part of the panel today, Michael.

Thank you, Scott. Pleasure to have you. And Josh Ofman?

Michael, thank you very much. Nice to see everybody, and it's good to be here. So I'm Josh Ofman, I'm the Chief Medical Officer and Head of External Affairs for GRAIL, which is a company developing innovative genomic-based test to detect cancer early when it can be cured. As many of you know, cancer is soon to become the leading killer of men and women worldwide. And that's because we detect most cancers too late when patients present in their advanced stages, metastatic stages where the outcomes are poor. We only screen for 4 or 5 different cancers, single cancers in this country. And that in and of itself, while very important in reducing cancer-specific mortality, is not detecting enough cancer in the population. So GRAIL has developed some novel technology using genomic signals in the blood that can detect over 50 different types of cancer with a single blood draw and do it with a very low false positive rate, which has the opportunity to dramatically improve early cancer detection in the population, which we hope holds the potential to really improve or bend the cancer mortality curve. So that's what we're all about, and it's great to be here. Thank you.

Thank you, Josh. And it's wonderful to have you on the panel as well. Thank you for joining us. So thank you to all of our panel members. And now I will turn it over to Dr. Gottlieb.

Well, thanks a lot, and thanks, everyone, for joining us today. I thought what I would do is just offer a few thoughts of my own at the outset. And then I want to turn to everyone just to offer a few initial thoughts about the reimbursement environment, what they're seeing, what each of you are seeing, what are some of the challenges that you're seeing and how the landscape is evolving. And what you're doing in your businesses that would have been -- that's different now than maybe what you would have done 5 years ago to kind of accommodate some of what you're seeing. I thought I'd start out a little bit with what -- and I'm going to go in alphabetical order. So Jack, I'm going to turn to you first. I thought what I would do at the outset is sort of frame out some thoughts on what I'm seeing. And I'll start off with FDA because we were having a discussion before we all got on live here today about the FDA -- in some of the sort of reporting that you've seen, that FDA is becoming more conservative. And you've seen some actions that maybe signal some new change in the tenor of the agency's decision making. I've never, in my proximity to the agency, seen the agency sort of skew in a different direction in a short period of time. I mean the agency evolves its decision-making. It evolves, how it makes decision, the criteria on which it makes decisions, but it evolves over time in sort of an objective way. You really don't see the agency at a sort of macro level changing the complexion of how it makes decisions and its sort of tolerance for risk in a short period of time. And there's certainly nothing exogenous that would happen that would make people more or less cautious in the current environment. But the agency is so decentralized that to think that a change in leadership or something else is going to suddenly bleed down through the organization and change the tenor of decision-making, I just don't -- I've never seen it. I don't think these kinds of sort of conclusions are accurate. And I would just caution people around trying to read too much into 1 or 2 decisions. What I -- I'll just sort of close by saying when I would look behind these things, and I read some of the articles when I was there about the agency is getting more risk-averse because they made this decision, and it seems to surprise investors or executives. And whenever I did actually try to learn what was -- what had gone on, just from my own edification, just to understand, there was always product-specific things. I mean there was always something that was -- that really made sense. It was never sort of something that could be derived from, well, we feel differently about this now. So I would caution those kinds of conclusions. On the pricing environment, I think we're going to enter a challenging period and sort of, kind of happening in-state and you can all conclude that. But I think what we're going to see coming out of COVID-19 is a lot of accrued morbidity and an effort to try to promote broader access to healthcare. And we're going to see more and more data coming out, showing some of the consequences of that -- long-term health consequences of what occurred over the last year, not just directly related to COVID, but because of missed doctor visits, because of vaccinations that didn't happen, because of -- to Josh's point, screening for cancer that didn't happen, so now we're going to see more cases present. And you're going to see data start to develop around some of this accrued morbidity. I think it's going to disproportionately impact certain segments of society that are really faced with obstacles getting access to care. And it's going to inspire rightly so in access -- in an effort to try to expand access to healthcare services. And to the extent that we expand programs, expand eligibility, put more resources behind certain activities, some of that -- some of the money to pay for that is going to come out of healthcare. And I think that technology is always going to be an area where policymakers look to try to pay for some of the delivery side reforms. And we've seen it in the $1.9 trillion stimulus. There weren't a lot of pay-fors in there. That's how you get to $1.9 trillion in new spending. But one of the pay-fors that was in there related to the drug industry, and it kind of just didn't really belong there. There was no real policy rationale for it, but it was on the shelf. They were looking for some additional pay-fors, and it was an easy target and so it got embedded in the bill. And so I think that that's sort of a political harbinger of how the environment is going to involve with some of the pressure that we're going to face. This panel discussion is -- we're going to try to talk about product-specific challenges, both on a pre-commercialization side and post-commercialization side. And I think from my standpoint, the macro question is, is the drug development model under pressure in a way that could imperil that model? And I think the answer is, yes, it's under pressure. No, I don't think it's going to get imperiled. But we need to be mindful of the economic model that gives us this vibrant life science sector. And I'll just say as an aside, when I was at FDA and I did all these multilateral or bilateral meetings with Europeans and I went to Davos, I'd always hear from other leaders who -- for a better -- for lack of a better way to describe it, almost ridiculed the U.S. They would say, how could you guys pay so much for drugs? Why are you doing this? It's kind of silly, why don't you do what we're doing? And I think now you're seeing that we recognize as a society that this was something worth investing in, the life science sector, we wanted a vibrant life science sector. That doesn't mean that the high prices, the vibrancy of the sector is directly because of what we pay for drugs. But it is a result of the fact that we have market-based pricing. We were willing to make investments in this sector over a sustained period of time. And now you're seeing the consequences of that. We have a very vibrant life science sector and we were able to come up with countermeasures for a global threat quickly, very effective countermeasures more quickly than other countries. But is this model under pressure? When I look at the model pricing, in my view, drug pricing, at least at some level is based on the cost of capital. I mean that's how a venture capitalist would look at this. Yes, you would do -- Michael and I used to do this when we worked together, you do your models, the prevalence models and what your expected rate of return is, and you'd risk adjust it. You'd say how much money do I need to invest in this program? How do I risk adjust my odds of success? What is the time cost of capital that I am going to impute in the model? What is my expected return based on the prevalence? I didn't do this modeling, Michael did this modeling, I just want to be clear. Michael didn't trust me to do the modeling. But that's what you did. And so what goes into that? Well, the costs are going up, the direct cost of doing clinical trials are going up. You can argue the time is getting elongated. Even if clinical trials themselves are getting more efficient, the value inflection point is getting pushed out. Previously, you might be able to capitalize the program based on a Phase II result. And now you have to wait to a Phase III result to get this -- access to the same capital you might have gotten earlier stage at a comparable cost. And then on risk adjusting these models, I think the regulatory risk has been reduced because of greater certainty about how the regulatory agency makes decisions. And I used to always talk about this at FDA. I used to say, "Look, we could actually incentivize more capital coming to the sector, which is going to serve a public health purpose by creating more certainty, more clarity about our approval requirements because that reduces risk. More people are willing to take a risk if they know what the measurements are. So the more guidance we put out, we're actually serving a public health purpose by getting more investment into the sector of this ultimately going to hopefully lead towards more therapeutics." But the risk is going up at the other end of the spectrum, which is market access and reimbursement. It's no longer the case that you get a product approved, you're going to get reimbursed. And the time that it takes to gain market entry and sort of penetrate the market and gain peak sales is getting pushed out. And so that's created a lot of new uncertainty. And I think that's what we are here today to discuss, how is this evolving? How can we de-risk it? And how do we look at market access and the path towards reimbursement as a new risk that needs to be factored into how people look at the modeling when they're looking at making investments in drug programs. So we have a great panel to discuss this from a very diverse spectrum of the industry.

And I want to turn to all of you and just with sort of an opening question, just to level set, and I'll go through everyone just to get us grounded in how you're looking at the world, which is a -- what challenges are you seeing in your microcosm, and what do you find yourself contemplating or doing differently now that you might not have done in past. And Jack, I know -- you and I know each other a long time. You've sat on top of a very big commercial organization and looked at this over a very long period of time. So I don't think there's a better person really to start out with than you. If I could turn it over to you for some of your initial thoughts.

Sure. Thanks, Scott. Yes, it's a fascinating time, right, because I think all of us on this panel, and you would agree, you did so much in the role of FDA Commissioner. The scientific potential, the scientific understanding has never been greater, right? So you look at the potential we have to really crack the code on a lot of the toughest diseases, it gets you very excited. And that's why many of us are in this industry. But I think whether it's because the nature of pharmaceuticals is to drive demand, to make a negative service experience good or some of the actions that unfortunately were taken by the industry over the last many years in terms of unduly relying on price, right, has brought upon us this real change in the model, if you will, or at least an increase -- significant increase in the influence of those paying for it. So I think when I think about the 2 or 3 things, both with 30 years of big pharma and now with some biotech experience, it all -- there are some common themes. One is good innovation is still the key. The bar is rising on what defines good innovation, but I think that's what is incumbent upon all of us is to really be as clear eyed as possible of how good our innovation is versus the relative options and relative standard that's out there. I think, second, all of us, and this goes back, again, with big pharma and biotech, are we learned that you have to engage the payer earlier than ever. I would -- some people say, "What, is too early, bad?" And there are folks who say, "Well, if it's too early, you don't have enough to get their opinion on." At a minimum in that Phase IIa, you got to have a pretty good read so you can incorporate those payer requirements or at least concerns in your Phase IIb and then replicate it in your Phase III. But things like relevant comparator, right, versus the old days of placebo, meaningful endpoints, right, both clinically, economically, humanistically. And then I think the better you can define your target patient population, all of those things, I think, resonate with payers more and increasingly are required in your, both this clinical trial design and the evidence that you create. And I think the last thing we're trying to do is there's just such a period of experimentation throughout healthcare on the finance and the end of delivery of how do you track it? And it's interesting being a smaller company, right, to try and sort of get a hold of this tail of the tiger called the U.S. healthcare system as it throws different changes at you. But that's absolutely critical, I think, because it's going to continue to evolve as we experiment with different models, whether it be, again, on the reimbursement financing side or as the delivery system itself changes. So those would be a couple of things we're keeping an eye on going forward.

Thanks, Jack. Just quickly, you talked about -- just to follow up quickly with you. You talked about defining the target population better. And sometimes you have an opportunity to do that with a biomarker, but oftentimes, you don't. And so how do you do that in a way that's going to resonate without being able to do it biologically with something that's like a diagnostic?

Yes. Yes. I mean, obviously, by indication, our initial indication is for extensive-stage small-cell lung cancer, right? So the more, I think, you can define it, either in your filing or with the data, and you're right, sometimes a biomarker is impossible. I think some of it is almost trying to build that credibility with payers that you will use it for the focused population that you study. Again, I think, unfortunately, we've gotten ourselves in trouble as an industry over the last decade or 2 where initial focus was not what was stuck to. Now sometimes, it's physician-driven, obviously. But I think it's a challenge. Whenever you can get biomarkers, that's obviously the optional or preferable approach. But I think without it, it very much is how you design your studies, the data you do deliver and then being able to stick to that once you're in market, because the payers back, obviously this we know, they see the usage, and they'll know if you're off-labeling.

Right. Carrie, I want to turn to you, Trevena. Obviously, commercial products in a space that historically has been challenging. What kind of challenges are you seeing? What kinds of opportunities are you taking advantage of trying to penetrate an increasingly difficult market?

Yes. So we're launching in the hospital ambulatory surgery center market, right? That probably says everything everyone needs to know, particularly with COVID, launching a hospital asset in sort of now, hopefully, is more of the tail end, right, not the middle of the pandemic. I've been in launching drugs in the hospital market for a long time. I think some of the things that Jack spoke to are certainly part of the things that you think about in launching a drug in the hospital market or an ambulatory surgery scenario is you need to have true innovation. I make the joke, no offense to my colleagues on the panel, but I'd much rather sit across from a hospital, pharmacists, because they still want to engage around patient outcomes, right? If you have true innovation in a hospital setting, they are all about decreasing costs. The margins are tight. They've gotten even tighter in the last several years since I've been in this area. But they still are interested in adding things to the formulary or bringing things on in the outpatient -- hospital outpatient area where they can either improve patient throughput, get patients out a lot more quickly, right, or help prevent some of those really crazy costs or long lengths of stay that put even more pressure on hospital systems. So I think that's something to think about. We certainly designed our study so that we could have the generic added into our trial. So I completely agree with Jack. It's hard to think about designing trials moving forward where you would just be looking at your drug versus placebo if you're planning to come to market, right, and sit across from a Hospital Formulary Committee. I think the health economic analyses that we are doing and we're adding into the Phase II, Phase III planning, that's absolutely critical so that you can launch with true meaningful numbers to help physicians, to help pharmacy, stakeholders understand. We have a pipeline of assets, so everything from acute migraine to neuropathic chronic pain and epilepsy. So I am certainly looking at the entire reimbursement environment. But right now, the focus in launching OLINVYK is really on those key stakeholders in the hospital and surgery center. I think the other thing that you see, Scott, that you talked about earlier is the shift. Again, there's such a big push to get sick patients out of the hospital and try to get them more into the ambulatory surgery centers. So that's a big change, I think, in the last 5 years or so. There -- it used to be that the younger patients and more of the common procedures were being done in ambulatory surgery centers. We're certainly seeing more of the severe type procedures now shifting to the outpatient environment, which is a different reimbursement model. So you really have to understand both settings really well to understand how to launch in that market.

Just a quick follow-up. You mentioned engaging with the hospital pharmacists. When you talk to a lot of drug companies now, they talk about the challenge of engaging with physicians and getting access. Are you finding a big difference in the environment in terms of being able to get access to hospital pharmacists? Or are they still accessible to you? Because that might be an interesting dichotomy. You can't get access on the outpatient side. But maybe on the in-patient side you still can be able to have those conversations.

You can, but it is...

It's still difficult.

Yes. And it goes back to ensuring that you have strong innovation, that you've engaged with the pharmacist, that -- we all have advisory committees. We spend a lot of time talking to physicians. Now it's an equal mix that you need to have pharmacists and nurses on your advisory committee so that you're getting the input and you have those relationships built before you launch your drug, right, so that you can have a little bit better conversations with the folks that know you. And I believe, Scott, that you are a hospitalist. So you may be talking a little bit near and dear here.

I don't get detailed anymore, though. It's an amazing thing. After I joined the FDA, no one detailed me anymore.

That sounds like an offer there for a few of us to...

Thanks for that. Scott, I want to -- Scott Braunstein, I want to turn it to you. You're about to file on an innovative product in a rare space, and just to get your perspective on how you see the landscape and what kind of challenges you see sort of having to surmount. I know you announced earnings today. So feel free to make any forward-looking statements if you want to.

I appreciate it. Well, it's interesting. Our business is really -- it's twofold. It's the rare or ultra-rare business on one hand, and it's the hospital space on the other. So it's an interesting dichotomy that we battle every day. And I would say we're really looking at our business as a global business, and I'm spending as much time, we are, as a team thinking about reimbursement outside the U.S. So it's been interesting. I would say, on the rare and ultra-orphan rare side, there's still quite a bit of understanding that these patients don't have multiple options. And I think the key for us and for others is really engaging the advocacy community early and having the advocacy community with us along this journey. And I would say it's been interesting, even with our expanded access program, the advocacy groups have said, "We can help really drive this more than physicians can." I mean I thought that was an incredibly powerful statement. And fortunately, we've spent a lot of time with advocacy groups around the world. Some feel a little loved more than others. If we give a little too much attention to the U.S., our European colleagues come at us. And actually, CDKL5 deficiency has 3 major advocacy groups, which is quite interesting. But in general, the payers continue to be supportive. And quite honestly, even European reimbursement has been really in line with -- closer to the U.S., which has been quite interesting to me. I would say the flip side for us on the hospital side is we are in the middle of our Phase III, and having lived the life as the Chief Commercial Officer for another hospital company, I think we've understood that built into our Phase III efficacy data has to be relevant outcomes data. And that's going to be critically important. What I find interesting is on the U.S. side, we know that when we will meet with CFOs and pharmacists and formulary committees, it's about the cost savings to the hospital, which in our case, we believe, will be really transmitted through shortened ICU stays, significantly fewer patients going on general anesthesia and having complications related to general anesthesia. But I find it pretty interesting that the European view is very different. They want to see all the upfront cost savings. And right now, our payer interactions are much less focused on shortening ICU stays, for example. So I think what we are really thinking about is how do you run global trials yet meet the needs of different regulatory and payer environments? In our case, we have to run a separate European registrational trial for our IV product because standard of care is different in Europe than the U.S. We are -- we feel fortunate. We actually met with the EMA earlier this week and we think our European trial is going to wind up complementing our U.S. study, but we were just lucky in that regard. So it's complex when you're thinking about global markets, different regulatory agencies. How the U.K. will really fall into that mix over time, may become more problematic for us all and the different reimbursement strategy. So maybe I'll stop there and let someone else pick it up.

I mean just 2 quick follow-ups. You kind of touched on this, how you think about pricing and sort of positioning the IV versus the oral? And also how you think about pricing across the 2 different indications, CDD and TSC, do you think about that differently? Because it's a complex set of issues within the confines of your own portfolio there.

It really is. I mean our initial interaction for our lead indication, CDD, with U.S. payers as an example. That marketplace is -- there are about 75 to 100 newborns a year. And the pediatric population has really been genetically tested over the last 7 or 8 years. So we know that it's easy for us to really tackle the roughly 2,000 pediatric patients out there. So as an ultra-orphan, the good and the bad is the reimbursement of folks really are pretty open about orphan to ultra-orphan pricing. Now in many of you who know me know I'm a physician, I'm pretty grounded and I really believe the value we provide has to be equal to the pricing. But I think for us as a company, we're now thinking about adding on tuberous sclerosis complex indication and potentially other indications where we're really expanding access to the drug. And certainly, our payer discussions that are happening now are aligning towards our multiple indications rather than that single ultra-orphan indication. So we've built a lot of our thinking into what we would expect to be success. And fortunately, our announcement today about moving to Phase III and what we've seen on the Phase II level gives us comfort in that. I think we, in some ways, are fortunate. I'll put in air quotes to that. Our IV business is so dramatically different. Acute indication in the hospital, very different health outcomes. And we're thinking about the pricing paradigm there really, again, relative to the value that we will create. In the short run, we may run into issues about the same drug, but the doses are so different. The administration is so different. We're expecting to have 2 different trade names. Europe will require us to have 2 different names because the indications are distinct. So we are somewhat fortunate in that regard that we can separate our businesses, but it's been an interesting road thinking about those different pricing dynamics.

Yes. I mean I would expect the FDA would want 2 different trade names in that setting as well, though. I don't know if you can comment on it. Just...

We have actually received our first name, the FDA, and we haven't publicly disclosed it, and we're getting close on the second as well. So my family and friends kind of make fun of the names that I kick out at them, but it's something I think a physician has to be able to write for. I've noticed trade names have gone to either extremes, right? They sound like songs or they sound like something you can't even prescribe as a physician. So still near and dear to my heart.

When I was at FDA back in 2002, and this goes back a long time ago, we used to tell whether or not part of the process of determining whether or not physicians were going to be -- confuse names, write them in ways that they can be confused with other drugs where we would go -- we would -- we -- I shouldn't say we, I didn't do it. People would ask doctors who work with FDA to write out a name and then look at how they wrote it. That was -- that literally was part of the testing that went on. And then we looked at this and we're like, "This isn't good." Like, we need a systematic approach to doing this, a scientific process. And we went towards some more formalized testing. Now it's a very formal process, but it shows the evolution on the regulatory side as well in terms of coming -- validating the names that companies come up with. I want to turn to Max. Max, you have the first FDA-approved oral treatment for lupus nephritis. Same question to you, what kinds of challenges are you seeing in novel space, novel drug in an unmet medical need? What kinds of things are you doing differently?

Thanks, Scott. Yes. And just for context, so lupus nephritis is a rare disease and it affects a non-white patient population. And in our Phase III trial, we compared ourselves to the standard of care. And the net result was a 3x better efficacy relative to the standard of care, right, the standard of care is used first line. So a strong clinical value proposition. Now lupus nephritis leads to kidney failure, and getting to that level of efficacy that I mentioned makes all the difference to avoiding or reducing the risk of getting to kidney failure. So there's also a strong economic value proposition because, clearly, kidney failure is associated with very, very, very high cost as well as mortality, right? So we have this very strong clinical and economic value proposition. And to your point, Scott, we definitely took an approach of looking at willingness to pay. But we clearly thought about, hey, what's the cost of capital return based on this prevalence of this patient population. And so we priced ourselves at $65,000 per patient per year net revenue. That's the net revenue price, right? So not a crazy price. But irrespective, even though we have these very strong value propositions on both sides, we engaged exceptionally early and proactively with payers because we recognized that there was so much education required, that this wasn't on their radar screen. They didn't quite understand the disease. They didn't understand the consequences, right? And we had a novel dosing mechanism, so there are some challenges and complexities associated, right? So we engaged very early, which was great. But you also -- you highlighted a really important risk dimension, and we live this daily, which is market access and time to reimbursement. So even though we've had this very early engagement, right? We, right now, think we're very early in our launch, but we expect that it's 20 to 50 days between when a prescription is written to when it actually -- the payer adjudicates it and fills it, right? So 20 to 50 days is a long time in a disease setting where that -- where there's irreversible kidney damage. And so the -- so what that has -- kind of the result of that is that we had -- we really pumped up our investment in terms of case management, close systems to understand the prescription at every which way, step of the way, a field team that's dedicated only to helping physicians with prior auths, a support program for patients to try and bridge these long gaps. And so I think the consequence is you try and manage these risk dimensions, but they -- in the end, what they result in is you kind of scale up and scale up and scale up your investments to be able to manage those dimensions.

Hearing you say 20 to 50 days, and I assume a lot of that is prior auths and drug management by the payer, is that almost sounds like -- my question to you is, like, what's going on there in that time frame? Because it almost sounds like the oral drug is being managed like a biologic, that they're sort of applying the same...

Yes. Well, so this is interesting, right? So even though we were very, very proactive with payers, we were hoping to get policies in place very early, but there's only one Lupkynis-specific coverage policy today. So every other prescription, if it's not in that plan, goes through basically a non-formulary exception. So it's a kind of a generic prior auth, right? And so that's kind of hand -- filled that by hand and then reviewed individually, right? And so that's what the -- and then these days, you have distributed offices. So the MA in the practice is not in the same location as a physician. They're likely both at home. So trying to actually coordinate all that in a COVID environment is also quite challenging in itself. So that's -- I think those are just some of the friction points in terms of launching an oral treatment, a rare disease drug, and it does have an impact in terms of kind of the reimbursement and how you work through it.

Yes. Just one quick follow-up on another point you made. You said you engaged very early with the payers. What did that look like? What were you doing? What -- where were you engaging?

Yes. I mean, obviously, now, these days, you can really actually get into prelaunch, you can share your clinical data, right, your Phase III results, you can share the disease burden. And we tried with every payer as early -- as we were executing our submission. Some payers really didn't want to talk to us. They said, "Hey, we'll talk to you in a couple of months before the launch." But we tried as early as possible to get the data in front of them so that they could absorb it and understand the trade-offs. We obviously couldn't talk price that much.

Right. Thanks for that. Ron, I want to -- Ron Cooper, I want to turn to you. I think you're expected to launch your lead product in the second half of '21, if I read the material correctly. You're right in the thick of this, right? You're contemplating a launch, you're starting to do some of this work right now. What does it look like from where you're sitting?

Well, I guess, Scott, it kind of goes back to my experiences before. I worked in big pharma like Jack for many years in multiple countries, launched dozens of products, right? And when they were successful, we were well prepared. But we had some where I have to say we shored up the launch and payers were asking you questions and you didn't have the right materials. And then you ask somebody, where's our blank. And they say, yes, we can get that for you, but that's going to take 1.5 years or 2 years. You go, "Oh, I wish we would have had that, right?" And so I think that's the difference of being the CEO of Albireo. We've had the luxury of trying to plan a little bit earlier. And I think about it in 3 dimensions, about the right science and doing the right clinical trial, the right support material and the right engagement. So from a science perspective, I agree with all the other panelists, you have to be very careful about your comparators. And that's the reason we did a double-blind, placebo-controlled study, powered with background therapy in it. So having compelling science is number one. But to be honest, it's almost important now to have the right supportive material. And particularly in these rare, ultrarare diseases, there's some real challenges and gaps of information. And you can't expect payers to find that information because it's just not fair because we should be the world's experts on that. So the couple of things that we think about, first, natural history of the disease, right? Usually, there are bits and pieces of information. And so we work with academic centers to help create a natural history database. The second thing is, beyond the disease itself, we made an investment in doing a burden of disease study. And that's a big investment for a small company like ours, but we wanted to highlight the humanistic cost of PFIC. This is a disease where kids literally peel their skin off. They don't sleep, they don't grow. They don't do as well in school. So we wanted to capture all of that. And then the third thing, as the other panelists talked about is you need to have friends when you go launch products. And the best friends are patients and patient advocates. So engaging them early, and you can't show up at the very end and try and engage these folks, these take years. And then the last thing is payer engagement. And I'm a believer in payer engagement, but you have to engage the right payer at the right time. And I heard the comment, Max said, they weren't that interested at this time. Because sometimes, you only have one opportunity to make a first impression. But other payers, particularly European players, are very much involved in your clinical design and how you think about things. So I think what we're trying to do is we're trying to reduce the burden on patients. Look, obviously, regulatory approval is important. But these days, being ready for payer approval is important. And the way we think about that is really good science, good supportive material and appropriate engagement.

You mentioned engage the right payer at the right time, and it caught my attention. I'll ask you the same question, what does that look like? How do you map that? How do you have the knowledge to be able to approach the right payer at the right time?

Well, and that's where I think we're lucky that we have a strong team of people that have worked around the world and launched different products. And if I would kind of put it at extremes, if you go to some of these U.S. payers too early, you're going to leave an inappropriate impression. You're not going to have natural history disease. You're not going to have data. And particularly in an ultra-orphan disease, they're not really going to pay attention because it's just not on their radar. So if you go too early, you actually cause damage for your case later on. Whereas you take a European payer, be it GBA in Germany or the folks in the U.K. at NICE, they want to be involved. They want to give you some advice in regards to comparators, study design and the like. And they have a mechanism for that. So going to them early makes a lot of sense and starting the dialogue early. So you really have to try and figure out where that payer is, what's important to them. And as I said, you want to make the right first impression. And sometimes the right first impressions is 5 years before launch, other times, it's 6 months before launch.

And so the do-damage part would be go in with a case that isn't fully convincing because it's too early, and you only get one chance to make a first impression, basically, that's -- you have to go -- you have to figure out that moment. Is that basically what it comes down to?

Exactly. And for some folks, that's peri-launch time frame. And for other payers, I think it's years in advance. And that's...

And it's hard to go and have multiple dialogues.

And that's the art of doing this, right, figuring out which payer wants to engage with you at the right time to give the best outcome for your product and your company.

It sounds like a consulting enterprise is growing up right now.

We get a lot of help and a lot of offers for it.

Maria, I want to turn to you. You're developing a very innovative platform product in a competitive space where pricing has been heavily scrutinized by some of the payers. What are some of the challenges that you're seeing? What are some of the things that you're doing differently?

Yes, absolutely. So we are developing a cell therapy. It is a onetime treatment. The patients are in a hospital setting. They receive their therapy and they go home and the treatment regimen is over. So some of what my panelists are talking about is very much resonating with me because as we think about preparing for anticipated commercialization, we do think about how to educate the hospitals to make sure that they understand what is involved in the therapy itself and how they monitor for patient safety. We are seeing that there's actually a lot of willingness at the hospitals to have engagement early. They do want to hear about the therapy. They want to know how they can organize themselves in receiving a cell therapy. Cell therapies are fairly new, although there's been some older ones that have been launched, but there's a renewed interest in bringing cell therapies for cancer patients. A few products have now been approved, 3 different products have been approved for hematologic malignancies. But really, there's not been recent cell therapy products approved for solid tumors. So we are dealing with metastatic melanoma patients that are particularly late night. They have run out of their available care options, as well as cervical cancer patients. There does seem to be a lot of interest on the part of hospitals, and this is not just the physician community, the cell therapy groups, even their financial team at the hospital, the CFO's team to be at our take-off meetings that we have with the sites. And so that engagement really matters, the preparation of the hospitals really matters. At the same time, this is a little bit of a change in terms of how we think about patient care in cancer landscape. You're going from a chronic therapy to a onetime treatment, at least in the case of TIL alone being administered to the patients. We are also conducting combinations where we are combining with checkpoint inhibitors. So in terms of commercial readiness, as we think about what do we do to prepare for commercialization, there's really big buckets of activities that we undertake. One of them is site readiness. So we engage the sites. We engage -- we have a procedure where we go through kickoffs with sites. A lot of different functions are engaged, including the physicians, including the coordinators, including the nurses, all the way to the financial part of the organization as well as quality site to make sure that the product -- so patient-specific comes into this site, delivered to the right patient. And the whole chain of identity and chain of custody needs to be observed very closely. At the same time, we do engage the payers. I very much echo what my fellow peer team members on the panel, where we pay attention to which payers are ready to receive information and which are not. In case of CMS, they have been very open to hearing about new technologies given that these are unique products and the process of reimbursement is very different than other therapies. So they have been very open to receiving information very early. And we continue the dialogue. We keep them up to date in terms of our data, our -- sort of where we are in our development process. And then, of course, there is the aspect of readiness from a commercial perspective as it pertains to patient advocacy groups and patients themselves. Being such a personalized therapy, we have patients reaching out to the organization on a regular basis. It's just the nature of the beast. And so the company needs to be ready as a cell therapy company to really serve all of its clients, the patient and the patient family, the payers and the organization that becomes the payer landscape, the hospitals as well as all the physicians that are involved. It's a very high-touch product in general.

We saw some -- early on, and I was at FDA when Kymriah was approved. We saw some dichotomy in sort of the outpatient versus the in-patient delivery and reimbursement around cell therapy. Is it -- it feels like the hospitals have figured out how to deliver these products in a way that they can do it profitably, they can -- or they're not losing money. And CMS has figured out how to reimburse it. Is that your general observation that this is kind of settled out now, you're not seeing the big disparity between outpatient versus in-patient delivery, hospitals are more receptive to these products?

Excellent question, actually. This is such a live discussion, as a matter of fact, and very timely. The cell therapies that initially came to market are all in an in-patient setting. And I think we're just beginning to see consideration of outpatient setting for cell therapy treatment. So it's very much the dynamic that the sponsor has with the hospitals. Typically, we start with in-patient setting because we want to make sure nothing happens to the patient ultimately. At the end of the day, the last thing you want is to dismiss a patient too early and something happening to them when they're home. So we start with in-patient. Iovance has still stayed with in-patient setting. We haven't quite moved into outpatient setting. Although we have started thinking about how to shorten the duration of time the patient is in hospital, and there are ways. And you're correct that -- so there are 2 different components, and there are 2 ends of -- 2 sides of the same coin where the hospital needs to figure out how to make sure that they observe patient safety, at the same time, they don't want to keep the patient unnecessarily too long, particularly if they're not getting reimbursed for it. And I think both the sites have been improving over time. The reimbursement landscape has become better. There's additional codes that are being generated for these type of products, and that's fantastic to see. But at the same time, the sponsors are figuring out how to shorten the duration of time the patient stays in hospital or they stay in the vicinity of the hospital, not necessarily staying on a hospital bed. So they don't need to be sort of in-patient, so called. For us, we still have stayed with in-patient. And as time goes by, we are considering how to shorten the hospital duration, the time that the patient stays in the hospital. But yes, you're correct. I think in general, the hospitals are less out of money than when the product was initially launched. So yes, that's correct.

Yes. I remember with Kymriah when it first launched, and this goes back a little way, so I might not remember everything perfectly, but there was a challenge with the hospitals, with delivering that in the hospitals, hospitals were losing money. But it was shifted to the outpatient, where some people felt that could have been delivered in the outpatient environment, that the company would be able to recoup the investment, and you'd be able to sort of keep the providers whole. And what we talked about, because CMS was having a hard time coming up with a policy accommodation. And when we looked at it, the label required hospital administration. But when you look at the sort of provider landscape, you could have outpatient administration that has the same level of service as an in-patient setting. And so really, the right thing to do from labeling might be to require a certain level of care, but not dictate what the setting of site of service is. To say, if you're going to administer it, you need to have the ability to do X, Y and Z, but not say, well, it has to be in a hospital. And we've talked about affording that kind of flexibility. And this came around, again, with the therapeutic antibodies for COVID, where I, if I remember correctly, the labels also required hospital administration. And that tied them to hospital delivery when, in fact, you wanted to deliver them in an outpatient setting, at least initially. So it's something, I think, to think about long term, as companies are working with regulators around labeling, the label really -- as long as you can bring forward evidence to support, the label really shouldn't dictate a site of service. It just dictate the level of care that needs to be available at the time of administration. Because there's hospital outpatient infusion facility that are closer to the ER and the medical intensive care unit than the in-patient infusions facility where someone might go to. So just the geography doesn't necessarily dictate what the level of care is going to be. But thanks for putting up with me.

That's an excellent point, Scott. I do want to just emphasize that. I think that's an excellent point. It goes both ways, you're correct, that the label itself sort of restricting the location of administration becomes a challenge. At the same time, as time has gone by, the reason that happened, just to kind of defend, I guess, what has happened was when CAR Ts were coming to market, there was neurotoxicity as well as cytokine release syndrome that was happening. There wasn't entirely lack -- there was a little bit of a lack of clarity as to the timing of when is CRS, when are we going to see neurotoxicity. And by the way, this is not a comment about TIL therapy, this really is just purely about CAR T therapy. As time has gone by, I think the CAR T companies have figured out very well of the timing of when a CRS may occur. So they can release the patient and bring the patient back in for monitoring, should that be necessary. So I think that science has really dictated and sort of allowed for potential outpatient therapy. In case of TIL, we don't see the same adverse event profile. But your point is entirely valid. I think it's -- it would be nice not to be dictated on the site of care as a matter of fact.

And your point is a good one, that at the time of the initial approval, we didn't know as much so it was difficult to take that risk. But then the science evolved and sort of enabled it. It's a good point. Cindy, I want to turn to you, at Seattle Genetics. I know your -- same sort of question, which I won't repeat. But I know you're making a lot of use of real-world evidence in terms of how you're approaching payers and what you're building into your development programs. I thought maybe you can comment on that as well because you guys have done some innovative things there.

Yes. No, it's really interesting, actually. The notes that I had taken are exactly in those lines. I mean as an oncology company, really trying to think how quickly can we get to patients. So often, the tensions internally are -- we can go as quickly as possible with a single-arm study and get regulatory approval. Is that sufficient evidence to support reimbursement globally as well as in the U.S.? So we are looking at ways to optimize real-world evidence to address that evidence gap and really support speedy regulatory approval, but also provide the evidence that will support payers' understanding how it compares to -- Jack and Ron both talked about the importance of the comparator, but can you actually use a historical comparator. Can you look at kind of building evidence to support rare tumor types where you don't necessarily want to subject patients to a therapy that may not work just to have an active comparator study. So I think that leveraging data and engaging with payers and their data systems, they have a lot of data that we don't have as manufacturers is another opportunity for engagement beyond just talking about the clinical value of your product, engaging them in those discussions and leveraging their available data sources, I think, is really a great innovation that we can kind of keep moving forward and be on the forefront of that to really ensure that speed to regulatory approval actually equates to speed to access to patients. And we've seen many gaps from that in waiting for seeking regulatory approval outside of the U.S., particularly in oncology, we wait because we need to have this head-to-head evidence, and so we wait to get to patients in Europe. So really working with the regulators to understand, could we actually speed that if we did something different? Or leverage the U.S. data to support engagement with European regulators and payers. So really trying to link all of the perspectives and the available evidence that we have to meet patient needs. The other thing that I would say is perspectives and engagement with payers is as important, if not more important than clinicians. And the reason for that is if there is a hurdle put in place that they cannot prescribe, if we understand those hurdles and overcome them for the physicians, then we will also speed access to patients. So I think making sure that we're not leaving that behind because it can be difficult. But trying to really find what is -- what matters to that payer as a stakeholder, and can we resolve that issue as early as possible in our engagements with them?

You mentioned -- I wrote it down, you mentioned leveraging payer data. And it almost sounded like you're collaborating with payers to go in and evaluate their data for them. And I'm thinking, I mean maybe I'm, too, like -- I have on my mind, Pfizer and Israel, right? It is the ultimate collaboration between a company and a country to sort of share data in exchange for access. Is that -- are you thinking similar things when you refer to that?

Yes. And sometimes, they don't ask -- they don't have the same questions we have about their data. So they're looking at the data from a very specific actuarial basis. We're looking at the data maybe for a specific disease state, a rare disease, a rare cancer type, a rare diagnostic that might allow us to kind of interrogate and leverage with our data. So we're asking different questions of their data. So I think that's where the partnership comes to play, is that our questions can be very different and lead them down a path that they don't understand, even what they have in their hands. So some of those discussions can be really fruitful because they may have issues about quality or how to set a premium in some of those pieces. We're asking, do you have these patients in your system that we could enroll in clinical trials based on a specific biomarker? Do you know they exist? We've never really looked. So then they go to look. And then maybe there's an opportunity for deeper engagement even in the clinical development plan versus waiting till the end and sharing your evidence with them and then partnering to generate additional evidence.

You know what, I've got one follow-up question for you. We've talked about engaging with payers. You have the luxury, with the portfolio you have, of also engaging with Medicare and with CMS, I assume, so maybe you can talk a little bit about that. Like how early do you engage with CMS also?

But you know what, Scott, it's actually really interesting. So Seagen has been a company for 20 years. ADCETRIS, our first therapy, has been in the market for 10 years. It was in a relatively rare cancer type when it started in Hodgkin's lymphoma late stage and then has advanced over time. And actually we've not had as much deep engagement with CMS, and part of that, I think, is kind of the time at which ADCETRIS launched. And then it just kind of continues to evolve as products do over time, but we're stepping into tumor types that actually require significant engagement with CMS. We're in bladder cancer, which is near 70% covered under Medicare due to the demographic. We're in breast cancer, which is a real focus for CMS as well. So really trying to figure out what is the engagement as you think about a broader portfolio and impact. One of the other things, I think, Ron and Maria spoke to is multiple indications. So when you have one indication that starts at a very late stage of disease and you intend to advance that therapy as early as possible in disease because you know you can have the most impact, those are 2 very different value propositions. So how do you rationalize that over time so that you don't impact your commercial opportunity? So it's all about patients but really trying to understand those pieces. And are there creative ways to work with CMS and others around indication-based pricing and other areas where you could really generate the value for patients as well as the commercial opportunity for the company? So those are the types of things that I think are really important to continue to push and interrogate and find opportunities as an industry to move the needle.

Josh Ofman, I want to turn to you, different -- much different environment, different kind of products. How are you thinking about the reimbursement challenge with a diagnostic? How do you think about what you need to show with respect to sensitivity and specificity of a test? Obviously this has been a challenging space for a lot of diagnostic developers. You're coming to the market with something that's potentially disruptive but also is going to potentially drive utilization as well, so you need to demonstrate the value proposition there. How are you thinking about that challenge?

That's a great question. I'll try to frame it. It's been fascinating journey moving from the biopharma space into the test development space and diagnostics, but maybe I could just think about -- the way I think about it is there are 3 macro trends that are happening and they're impacting the policy landscape for diagnostics. And I'll share those trends and then tell you how we're thinking about them. The first, obviously, is we have a health care system that focuses on fixing what's broken rather than on prediction, prevention and early detection. And we all know that we have to make that transition to have a sustainable health care system, and that's going to require a lot of modernization of Medicare and our policies. For example, Medicare doesn't pay for cancer screening and prevention, and so there is specific legislation that's been introduced over the decades to address that. That's not a sustainable model, right? So that's one major trend. We've got to make that transition. The other is really innovation, and the convergence of genomic medicine and artificial intelligence and machine learning is providing a -- an enormous amount of innovation into the system right now. They can dramatically disrupt not only how we're developing tests for early cancer detection but following cancer, detecting other diseases. So there is going to be this influx of really disruptive technology as a result of that convergence. And the third is what we learned from COVID, which is that we need to think about public health testing differently than we think about testing in the traditional medical sense. COVID is a great example. We had to dramatically improve the detection of COVID in the population. So the standards for testing, the way we evaluate tests need to change, almost analogous to cancer detection. We have got to dramatically improve the amount of cancer we're detecting in the population, which may take a different mindset in how we think about measuring the performance of testing, right? So -- and the paradigm change for us at GRAIL is to -- this big idea of moving from individual cancer screening to screening individuals for cancer, this idea of multi-cancer early detection, but to do that, you need to optimize different things in your test. For example, a single-cancer screening test optimizes detection. They don't want to miss anything and they accept very high false positive rates, right? The positive predictive value for mammography or Cologuard or low-dose CT is somewhere between 3% and 6%. So of the $25 billion we're spending in cancer screening today, most of it is being spent on false positive [ workouts ], and it creates enormous stress for patients and their doctors. So when we develop a multi-cancer test -- GRAIL's test, for example, can detect over 50 types of cancer. We have to optimize something completely different than sensitive. We have to optimize cancer detection in the population while minimizing harm. So we're optimizing specificity in positive predictive value. And we have positive predictive values that are in the 40% to 50% range, almost in order of magnitude better than anything we've seen in cancer screening. So that's very challenging to the regulatory mindset that's used to evaluating screening lung cancer at a time and introducing something that's very disruptive into how we might dramatically improve the cancer detection rate in the population. So from a policy perspective, there's a lot of work to be done, right, obviously to modernize Medicare. We're very encouraged by some of the CMS rules that have recently come out which are trying to take hold of this. We're also very encouraged by president's -- President Biden's focus on eradicating cancer. And so we think there are some trends that are going to help move this all forward, but there is work to be done. And that's because this is very disruptive. And the metrics that we use, the benefit-risk that we assess is going to, by the very nature of multi-cancer early detection, be different. And that's going to take some work.

Yes. So I wanted just to ask you. You've been in this field a very long time. You've seen a lot of evolution. My feeling is that the policy environment that we're entering now is one where companies are going to be more willing to trade margin for access, that getting more certainty around reimbursement is going to be valuable. And you may be willing to enter into implicit sort of arrangements where you lose some of your pricing privilege in order for that guarantee. And you kind of see it in the [ widened billing stuff ], right, where there's inflation caps but then they're plugging the donut hole. That really is a trade where you're sort of reducing people's pricing freedom, but hopefully, you'll make up. If you're a company, you'll make up in volume what you lose in margin because now consumers are going to be -- have lower out-of-pocket costs. Do you see that? Like is that a fair macro? You talk about some of the macro trends very well, by the way. I'm texting with Michael. I'm like, "I want to go back to what he said." I couldn't take notes fast enough, but do you see that as another sort of macro trend? Do you think that I'm right?

Without question, you're right. I mean, this idea, we've been talking about for many years. And Cindy and others will know it. Jack and others will remember, as you do, this idea of the patient out-of-pocket expense related to market access, uptake and pricing. And that's a complex Rubik's cube of issues, but clearly, trading off margin for market access, speed to market access, tying to approval, as Cindy mentioned, all of those are trade-offs that companies would be willing to make when margins have been very high like in biotech drugs and biopharmaceuticals. You get into the diagnostic testing space, where we're trying to develop public health-oriented tests that we know are going to have to be very low price if we want them to be used in a public health fashion. Those trade-offs may be different, right? And we're willing to really -- but the regulatory and payment parts of that puzzle remain the same, right, so we've got to get speed. So traditional screening tests, for example, have taken 10 to 15 years, and government-sponsored mortality [ studies ], to get approved; and yet Medicare had to create specific laws just to pay for them. That's not going to work in a world where we're moving really fast with technology disrupting the way we evaluate things, so we've got to create an environment that's amenable. Even when you have low-margin, low-cost tests, they can serve the population and the public health. So our technology, as an example, could be the first application of the Human Genome Project that has population impact because it's -- it can really be a public health test, but really on the regulatory and payment side there's almost nothing available, so we have to modernize Medicare. We've got to address these policy issues because we're about to see a wave of innovation like we haven't seen in the testing space in decades.

[ All right ], thanks for that. Tom, I want to just turn to you. And I think I've been able to [ sustain out of ] medical orders. So my grade school teachers would be very proud of me. And similar set of questions, but you sit in a unique position. You're going to be commercializing a drug for a rare disease but, if I'm correct, and correct me if I'm wrong, also looking to potentially displace some existing therapy. And so that's a little bit unique. And maybe you can just sort of talk about how you're approaching some of the commercial challenges and reimbursement challenges that you see.

Absolutely. Thank you, Scott. And such a great panel. And what impresses me about this panel is, I think, everyone and their companies are really trying to develop landscape-changing therapies or tests. These are not incremental advancements we're talking about, so there is a bit of irony to discuss the point of the discussions. Like how do we actually get somehow reimbursed for these things? When we tie these with potentially our new standards of care to value, that's going to be helpful. So one of the ways that we approached it in our program, maybe in retrospect perhaps a little too adventurously, but thankfully it worked out okay -- so our drug avacopan is a very highly targeted approach to antineutrophil cytoplasmic autoantibody-associated vasculitis, used to be called Wegener's, and other forms of GPA and MPA disease. The standard of care for almost 40 years now or pioneered by Dr. [indiscernible], as a matter of fact, is really high doses of prednisone or other glucocorticoids coupled with other broad immunosuppression. And that just [ tamps down ] the sort of neutrophil content, if you will, of the body and gets rid of the -- at least temporarily of the antineutrophil on -- damaging effects -- or the neutrophil damaging effects of the disease. And of course, the problem with high doses and chronic doses of prednisone is it causes its own problems. So with avacopan, we said, look, can we get rid of the daily oral prednisone? Can we just dispense with that entirely? The answer was yes. And fortunately, we could with avacopan still arrest the symptomatology, in fact keep it at bay in a superior way over the course of a year. We reduced the glucocorticoid-related toxicity [indiscernible] disease. We also increased renal function, which was a pleasant surprise, at certain parallels to the lupus nephritis program that we heard of earlier from Max. And also we could improve patient-reported outcomes [ for ] quality of life. So all of that was part of essentially the theme that you're alluding to and others have discussed going head-to-head with current best medical practice rather than just trying to be incremental. So yes, it's quite obvious, I think, to us and to many outside observers that getting people away from this need for daily prednisone is an absolute no-brainer. So what are the challenges? The curse of the obvious is that you don't really know how other people are thinking. And so as we've heard from others, getting the time to access will be very important. The time to reimbursement will be very important because obviously, if we're -- if our goal is to get people off of that, especially that first massive set of doses with prednisone the first 2 months, for example, we can't be waiting around to see if they're going to get the drug approved or get access to the drug. So that's something we're doing a lot of work on right now as well. The second point is again reminiscent of the lupus nephritis story. If you can actually delay time to end-stage renal disease and in our case maybe even take it off the table entirely, that's what the data suggests, that's a very important discussion around value; and yet it's not obvious because it's not short term. So payers -- while very sophisticated, the discussion around that is something that is very intense and been very appropriately being focused on, but how do you help them see a long-term gain as well as a short-term acute need to get this drug to people? So those are some of the things that we've been dealing with and, I think mostly productively, but it's been a very interesting journey, so far.

You talked about the waiting around for access and some of the deleterious clinical impacts. And we heard earlier that it's 20 to 50 days from time of prescription to time of access given prior [indiscernible] some of the interventions with the payers. Are you seeing the same thing there in terms of what you think the delays are going to be? And then what kind of things can you do to try to affect that in advance?

Yes, it's a great question. So our -- we're still not approved, so we're still in all the discussions [ with this ]. I'll stress that, but learning from some of the wonderful examples, and thank goodness our industry is so open about sharing some of these experiences, yes, we've been really deeply engaged in payer discussions to try to make sure that this delay or this gap is somehow minimized. And probably the way to do that and -- is just with great evidence and information and say, look, folks, most prednisone-induced hospitalizations, complications, even death -- and prednisone therapy is the single biggest cause of first-year diagnose of death in this particular orphan disease. Most of that happens early. So the -- one of the big benefits of our drug avacopan is just taking that off the table. Let's not give them any credit if we can help it, but we have to get the drug to them when they're in that crisis or when they have that first diagnosis at long last. And so what is the -- and so then you just bring the evidence back from the real world, even historical. Look what happens in that first 90 days when pred load is massive. Look what kind of infections you get. Look at the 14,000 or so hospitalizations every year that occur, we think, [ in public ]. Most of those are coming when they're on really massive doses of pred. So there is an advantage. The disadvantage is, when you start designing these trials yay those many years ago, 6, 7 years ago, you're really not thinking about that kind of pragmatic discussion because no one was thinking about it at the time. So even if you engage payers really, really early on, it's that sort of human component that you're not thinking about. You're thinking about the very important abstract questions, of course, and you build those into your trial, but when you're really getting down to the nuts and bolts of what your data might tell you after that critical study, it's all these other questions would come up. But they can be filled. Those questions can be answered, and I think that's what we're doing with payers and our discussions now [ actually ].

Do you see the ability to actually change how they -- and I know it's you're early pre approval. You're not -- you don't have answers yet, but do you think that there is an ability to change how they're going to situate the product based on that evidence? Or do you think you're going to just get bucketed? Like it's just sort of categories. It may put certain products in certain categories and then broad categories, and you can't -- there's no room for really new ones.

Yes, I'll say this. I've been actually impressed with the sophistication of payers. And the kinds of discussions I thought we might have going in, which are very sort of basic and trying to describe for them why would they pay for a new product in this area and so on, hasn't happened. They are very sophisticated. So I think there is a very good chance of we won't be bucketed. I think they are thinking this through deeply. And I think in part of this because it's in their best interest to think it through deeply because it will have benefits, pharmacoeconomic benefits, for the payers. That's what's impressive. They're really sophisticated about some of these questions. And I agree with what Cindy said earlier. Some of the payer data really has been of great value to us in thinking through how to have these discussions more effectively and where some of the needs are that they understand that maybe we only and completely understood. So I've been impressed with sophistication, and I think we are not likely to be bucketed. I think they are thinking this through very deeply.

Thanks for that. Ted, I want to just come back to you and same question. You're going to have a product that's expected to be launched, I think, in this year. I can make forward-looking statements even if you can't, so how are you thinking about what you need to do now with the payers and looking out on a reimbursement landscape to try to set up -- set yourself up for the ability to access the patients that are going to be indicated for the product?

Sure, Scott. So our lead asset, VP-102, has a conditional branding named YCANTH, nice and short name. Active ingredient is cantharidin. We have a PDUFA date of June 23. I think our situation is a little unique because -- I think you all remember a company called Valeant Pharmaceuticals. And Valeant really put the spotlight on medical dermatology with payers, where payers really did not have a high concern with lotions and -- I call them lotions, potions and creams in medical dermatology. All of a sudden now there is the spotlight from the payer perspective. So as we're getting ready to commercialize, I can tell you that we did 2 things. We engaged with payers early on, and they signaled that they want to be involved early. And we also had a lot of interaction with physicians because dermatologists are going to be the end users for this product. Now we are unique because we're a topical product that's clinician administered. And one of the things that we learned from payers is that this is going to be considered a medical benefit, not a pharmacy benefit; and that it has to be clinician administered because our agent is a vesicant. It's a blistering agent. So having that information was important. Then talk to the dermatologists. We all know dermatologists make their money when they [ cry out ]. When they have that -- what I call that gun in their hand. And if you're going to take that gun out of their hand, you have to have something that's going to replace it. So we kind of mirrored both the payers and the providers at the same time, and I can tell you that, that was extremely beneficial. We has a SPA on our Phase III program, which we shared with all the payers. I will tell you our payer feedback has been very consistent. We've done 4 rounds of payer research and pricing research, and it's been -- it's very consistent in that they recognize the high unmet need. They recognize that this is a disease that's very contagious, that spreads. And they also understand the secondary factors to this disease such as bacteria infections and scarring and, of course, spreading the disease to siblings. So with all that said, then we looked at what are the barriers for the providers. So one of the barriers for the providers is that, especially when you're launching a new product, there's no FDA-approved therapies, they're hesitant to buy and build because they don't want to carry inventory. They don't want to -- especially now in COVID, a lot of these dermatologists have been hurt financially and they don't want to disrupt their cash flow. So we're doing something really unique. We've got a forward-deployed inventory model that we're going to be rolling out. We've partnered with [ minibar ] -- the company that owns [ minibar ] and basically using RFID technology, where the provider doesn't pay for the product until the product has been utilized. So once they go through the hub, they get the verification of benefits and they actually pull the product, that's when the billing cycle begins. And then we'll offer some extending dating which will allow 60 days for dating, so therefore no cash should come out of the provider's hands. The other thing we heard very clear from our provider -- from our payers was that stay under the specialty tier pricing. Because remember this is a disease that affects children, predominantly 2 to 14. If you stay under that specialty tier, which is roughly about $700, then you'll be off the radar. That's been very consistent. And not -- we're not suggesting we're going to price this product that high but because we see this more as a volume play. So again I would tell you that the -- engaging the payers early on has been very beneficial to us.

How are you thinking about the relationship to the pediatricians versus dermatologists? What is going to be the detailed point there? And so how do you think about that? Do you have discretion?

Sure. No, I -- listen. I think, from a -- this is what keeps me up at night. When you think about the commercial opportunity, Scott, in the U.S. you've got 14,000 dermatologists. You have about 400 pediatric dermatologists. Those will be our primary target audience. These are the people that are currently treating molluscum, but to your point, the pediatricians, these are your gatekeepers. This is the first line of defense that patients are going to. And since pediatricians don't want to be associated with pain, they're referring the patient on to the dermatologists. So when you look to grow the business: There's 87,000 pediatricians. So that's where the market opportunity is. Once they learn that we have an FDA-approved therapy on the market that's painless, we believe that's going to be our opportunity.

[ Okay ], thanks for that. With the closing minutes we have, I want to come back to Josh and Cindy just to sort of talk a little bit about the policy landscape. Josh, you've been in this field for a very long time looking at reimbursement issues. I'd ask you to just sort of give a sense of, looking in your sort of crystal ball, your policy crystal ball, what do you think the environment is going to look like. What do you think the legislative environment is going to look like? How do you see things shaping up on the hill? What do you think the headwinds are going to be from a policy standpoint?

Well, I think you kind of said it at the very beginning. I think there is just going to be ongoing and more intensive pricing pressure. And as innovation continues to come to the market, the pressure, particularly on rare disease, drug pricing, specialty drug pricing, is not going to abate. And so that will intensify, and so the set of solutions that are available to solve that problem is limited. And I think that the -- some of the trends like Medicare moving to alternative payment models, more capitated -- gives more capitated arrangements. Different types of delivery models are going to give biotech and biopharma companies more opportunities to be creative and to think about how to share risk and put more value-based contracting on the table and in more collaboration and in better partnership between the companies and the delivery systems with the payers. And as you -- as I think about those structures, the really interesting opportunities is between payers, provider systems and manufacturers because the value proposition is different for all of them. And sometimes, while you can deliver amazing clinical value to the health system, the economic value is all accruing to the payer. And yet we're trying to negotiate this all independently and it's very challenging. So I think the future under this we're increasing fiscal constraints, more pricing pressure exists is going to be to bring these parties into more collaboration...

What's the venue for that? What's the vehicle -- what would be the vehicle to do that in a way that everyone can kind of recognize the savings?

I think it's going to be in outcomes-based arrangements and value-based arrangements where there are commitments to either outcomes improvements, cost reductions to total cost of care commitments and being more holistic in the way we think about negotiating together...

So it will be contracting that spans multiple parties basically [indiscernible] contracting.

I believe so, but we're going to need some regulatory relief to be able to do that, as you well know. And -- but I think there are just very few other solutions to the pricing challenge if we want to maintain the robust innovation ecosystem that we so value in this country. If we're willing to give that up, well, then there are different solutions on the table, like what you saw coming out of the Trump administration with those favored nations clauses and international reference pricing, but those we know, from an pure economic and innovation perspective, are not great solutions. So there are very few other choices, but I'm sure Cindy has a lot more to say about that...

Yes, Cindy, yes. And we're coming up on the hour, so I just want to -- you to close this out and some thoughts on the environment and how you see the policy environment evolving.

Yes. I mean I would agree with Josh about the evolution. I mean the pricing pressure is going to continue, this idea that Part D and Part B, that there will be separations. Are there similarities between them? There are similar pressures. There may not be similar solutions. So knowing kind of the perspectives across the market. I think one solution that we all would agree we need to avoid is shifting those costs and the challenge and the burden to patients. And when we think about some of the benefit designs that exists in the private market, some of the challenge is that policies have allowed for patients to really carry the burden of some of the costs in the health care system. It's just not sustainable, so any solutions that we look for, I think, really need to be focused on protecting patients and ensuring that they can get access affordably to medications that they need; and that insurance actually works for them, not against them.

Well, I just want to thank everyone. We're up against the 2:30 and I want to just thank everyone. I think this is a good discussion with 10 people. And so we got through a lot of ground, so I appreciate it very much. And I want to just turn back to Michael just for some closing thoughts. Thanks a lot.

Scott, thank you. This was really a wonderful panel, multidisciplinary backgrounds, stages of development and engagement at different levels with payers and providers. And I think one of the points that really resonated and I think is worth following up goes to something that Josh cited earlier about AI's impact potentially on reimbursement or reimbursement policies. So it's given me at least food for thought in terms of future panel topics around reimbursement, but I want to thank all of the panel members. Indeed what we've discussed are rare-disease therapeutics or pediatric patients. We have talked about better approaches to cell therapy than even a couple of years ago. We've talked about really important disruptive approaches to treating diseases, novel approaches. And I think we all appreciate your commitment to innovation, and reimbursement must support that. And so this has just been a wonderful panel. I did take a lot of notes. I've learned a lot. I'm probably going to repeat a lot back to you as I meet with you and present to you over time. So thank you for educating me and our entire audience. Scott, it's always a pleasure. Do join us for wine tasting tonight. Enjoy your one-on-ones. Join our panels tomorrow. And [ Daniel Bilud, for cooking ]. Thank you. Thank you all. Have a wonderful day. Thank you, Scott.

Thank you. Thanks, Michael. Thanks, everyone.

Thank you.

Thanks, everyone.

Thank you. Buh-bye.

Thank you, everyone. Thank you. Bye.

Thank you.