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Spark Therapeutics (NASDAQ:ONCE)
Q4 2018 Earnings Conference Call
Feb. 19, 2019 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator 

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2018 Spark Therapeutics, Inc. earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr.

Ryan Asay, head of investor relations. Sir, you may begin.

Ryan Assay -- Head of Investor Relations

Thank you, Lauren. Welcome, everyone to the Spark Therapeutics year-end 2018 Conference Call. With me today are Jeff Marrazzo, our chief executive officer; Dr. Kathy High, our president, head of research and development; Federico Mingozzi, our chief scientific officer; Ron Philip, our chief commercial officer; and Stephen Webster, our chief financial officer.

Please note that this conference call will include forward-looking statements regarding our products, programs and product candidates. Because such statement deal with future events and are subject to many risks and uncertainties, actual results may differ materially from those in these forward-looking statements. For a full discussion of these risks and uncertainties, please review our annual report on Form 10-K and our quarterly reports on Form 10-Q that are filed with the U.S. Securities and Exchange Commission.

Conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, February 19th 2019. Spark undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. This conference call is being webcast and will be archived on a website for approximately one week. Earlier this morning, we released corporate and financial results for the year ended December 31st 2018, and recent business progress.

This news release is available on the Investors section of our website at sparktx.com. I'd now like to introduce Jeff Marrazzo, Spark's CEO.

Jeff Marrazzo -- Chief Executive Officer

Thanks, Ryan. Thank you, everyone, for joining us. On this morning's call, I'll provide some introductory remarks before asking Ron to share performance update for Luxturna; Kathy to comment on our hemophilia programs; Federico to speak to our earlier-stage portfolio; and Stephen to review our financial results before taking your questions. 2018 was an important year for Spark, with significant broadening of our unique fully integrated capabilities and meaningful expansion of our product portfolio.

Luxturna has had a very successful launch in United States. We built and have demonstrated first of its kind commercial expertise, including establishing the ability to deliver a gene therapy product and to secure patient access. Last year, we retired much of the gene therapy-specific risks associated with launching a product from treating appropriate patients, establishing treatment centers, enabling a smooth and positive patient experience and successfully enabling market access and reimbursement. Our work implementing novel pricing reimbursement models including an outcomes-based approach have seen broad commercial acceptance and collectively have been an important step in the advancement of how innovative onetime therapies can be paid for.

We are pleased that other gene therapy companies are planning to incorporate these approaches and will join us in pushing this critical work forward. Our proposal to the centers for Medicare and Medicaid services to further enable appropriate reimbursement models for onetime therapies remains under review by the federal government. Our proposal includes both the short-term efficacy measure and a long-term durability measure that would enable Spark to offer payers the option to spread payments over multiple years, while providing flexibility for greater outcomes-based rebates than what we can offer under the current system. We are encouraged by recent announcements of proposed rulemaking intended to address the Medicaid drug rebate program to support value-based purchasing arrangements.

Additionally, a draft version of the Patient Affordability Value and Efficiency Act, known as the PAVE act was introduced on a bipartisan basis in late January. This draft legislation would remove many of the government price reporting barriers to value-based purchasing arrangements for onetime therapies and indicates increasing interest by congress. We think the time has come for action and urge the government to approve our proposal, so we can begin testing payment over time models with a robust outcomes-based component. Early last year, we completed a licensing agreement with Novartis for Luxturna in geographies outside the United States.

Last November, we successfully obtained approval of Luxturna by the European Medicines Agency. Luxturna is the only gene therapy for a genetic disease approved in both geographies. In 2018, we also made meaningful progress with our hemophilia programs, including fully transitioning SPK-9001 for hemophilia B to Pfizer and making advancements with SPK-8011 and SPK-8016 in hemophilia A. Our hemophilia A franchise continues to be a top priority for us, and Kathy will speak to this in more detail in a few minutes.

Importantly, we also continue to advance and expand our earlier-stage pipeline. In 2019, we expect to have candidates for two additional diseases ready for clinical investigation. We plan to file an IND for SPK-3006 for Pompe disease in April and narrowing of our prior second-quarter guidance. And we expect to complete the clinical trial readiness activities for SPK-1001 for CLN2 disease, which is a form of Batten's disease in the second quarter.

These programs are important to Spark because they service as technical proof-of-concept in the expansion of our platform to new -- into new therapeutic areas beyond Pompe disease and CLN2 disease. We have long recognized and spoken about the importance of manufacturing in gene therapy and have successfully executed on Luxturna commercial manufacturing needs, while creating and operating a serum-free mammalian cell culture suspension manufacturing system that creates significantly greater clinical and commercial scale. I'm pleased to report that we now have demonstrated analytical and nonclinical comparability and have FDA clearance for human dosing using the suspension made material for 8011 for hemophilia A. Before turning the call over to Ron, I would like to touch briefly on the expertise and competencies we have developed at Spark.

Over the past almost six years, we have continually invested the capital and time required to build distinctive capabilities in four critical areas of the gene therapy value chain. These four competencies are: first, target selection and AAV vector optimization; second, commercial and scalable AAV manufacturing; third, regulatory innovation and precedent-setting approvals; and forth, gene therapy market development and access. These unique competencies have been critical in helping guide our portfolio strategy on how we discover and develop gene therapies, how we select targets and prioritize our portfolio, how we manufacture and commercialize these novel therapies. Taken together, these capabilities increase the likelihood of our ability to successfully turn new ideas for genetic medicines into life-altering products for patients, while building a sustainable business.

We feel strongly that these unique and important attributes position us well for continued growth, expansion and success. With that, I'll turn it over to Ron to provide an update on our Luxturna commercial efforts.

Ron Philip -- Chief Commercial Officer

Thank you, Jeff. Good morning, everyone. We continue to be pleased with the Luxturna commercial launch. The novel gene therapy market development and delivery models we created for Luxturna in the United States have been successfully implemented.

With 75 vials shipped in 2018, and patients treated in all treatment centers -- 10 treatment centers, we have overcome much of the gene therapy-specific risk to commercialization. We are uniquely able to leverage this experience and expertise not only for Luxturna but also for maximizing the potential value of future gene therapy product launches for diseases like hemophilia A and Pompe disease. Recognizing the strategic importance of successfully commercializing the first gene therapy for genetic disease in the United States, we have taken an innovative approach to payment and reimbursement models, including implementing a pay-for-performance, outcomes-based option for payers where we stand by the efficacy and durability of Luxturna. These models have been incredibly well received by payers with several national payers providing coverage exclusively through these programs.

As we move into 2019, our commercial focus shifts to a more traditional rare diseases commercialization effort, increasing patient identification through genetic testing. To support this objective, we have expanded our sales force to drive additional reach and frequency to support genetic testing in existing and new customer targets, such as high-value retinal specialists, ophthalmologists and low-vision center optometrists. We have also expanded our nonbranded, direct-to-patient initiatives like eyewant2know.com to ensure that all inherited retinal disease patients understand the value of getting a genetic diagnosis and are equipped with the information necessary to efficiently and effectively do so. These efforts are expected to increase genetic testing rates for all inherited retinal disease patients.

Now I will turn it over to Kathy to talk about our progress with our hemophilia programs.

Kathy High -- President, Head of Research and Development

Thanks, Ron, and good morning. For hemophilia B, last year we completed our portion of the work on 9001 and fully transitioned the program for a partner Pfizer who initiated the six months run-in portion of a Phase 3 program last July. Hemophilia A, early last year, we were granted breakthrough therapy designation by FDA for 8011. We've generated encouraging Phase 1-2 data that we shared at ASH last December.

These data showed an excellent safety profile with no inhibitors, no thromboembolic events and no persistent or unresolved transaminase elevations, with accumulative 9.7 years of follow-up. The data also showed strong efficacy with a 94% reduction in bleeds and a 95% reduction in Factor 8 infusions across all three doses tested. Importantly, factor levels on our first two doses showed the potential for long-term durability, starting at approximately three to six months when the plateau levels are reached and out as far as 1.5 years as of ASH. These data continue to be met with positive feedback from the medical community based on the evidence for safety, efficacy and durability.

As we have outlined previously, we are generating additional data on 8011, including the incorporation of the standardized prophylactic steroid regiment aimed at addressing participants whose initial responses were not optimally controlled for long-term expression, as well as dosing with material made from our suspension manufacturing process. It's important to note that the incorporation of prophylactic steroids is aimed at preserving an initial response to vector infusion, which was seen in all participants. The immune responses we've seen to date do not represent a safety concern, rather if not managed optimally, they may impact efficacy. We've initiated the expansion of this Phase 1-2 study of 8011 and expect to share updated data, including for the five to 10 additional patients dosed with prophylactic steroids and suspension made material in mid-2019.

As we indicated last month, we've also initiated the run-in portion of the global Phase 3 study. Additionally, our hemophilia A lifecycle management plans are well under way with the initiation of a Phase 1-2 study for 8016, which we plan to use to target the inhibitor population. Inhibitors or neutralizing antibodies to Factor 8 occur in as many as 30% of people with severe or moderately severe hemophilia A. We've seen a high level of interest from both physicians and patients in the development of a gene therapy option for those with inhibitors.

With that, I will turn it over to Federico.

Federico Mingozzi -- Chief Scientific Officer

Thank you, Kathy. During the course of 2018, we made great progress both with advancing and expanding our early stage pipeline. With Pompe disease, we have shown preclinical proof-of-concept using the liver as a bio Factor 8 to distribute highly secretable form of the GAA enzyme through the plasma for up taking to target tissues, including the muscle where the enzyme acts. Not only have we seen preclinically that liver-mediated production of the secretable GAA enzyme has the potential to improve upon what enzyme replacement therapy can do in terms of clinical effect, but it also may induce tolerance to the enzyme itself, thereby reducing the immunogenicity.

To date, preclinical studies support the safety of the approach we're taking. We're assembling the results of our 3006 preclinical work and anticipate filing IND and having clinical supply ready for our -- from our in-house manufacturing facilities in April. We believe the approach we're taking not only has the potential to significantly improve the treatment option for patients with Pompe disease, but importantly, it also demonstrates proof-of-concept for a platform start that can be applied by -- to other lysosomal storage disorders. In 2018, we also made meaningful progress with our portfolio of AAV preclinical candidates targeting the central nervous system.

With 1001 and our candidates for Huntington's disease, we now have preclinical proof-of-concept delivering AAV to the central nervous system, demonstrating the potential applicability of our platform to a range of neurodegenerative disorders. With 1001, we are using the epidermal cells that line the ventricles in the brain as a biofactory, similar to what we're doing with our liver-targeting strategy to secrete and distribute enzyme through the cerebrospinal fluid to the effected tissue throughout the brain. This approach provides the potential for onetime global delivery to the central nervous system. By doing so, it has the potential to address the limitations that the blood-brain barrier poses too many current treatment modalities, while reducing the burden of long, frequent intrathecal or intracerebroventricular infusion or recombinant proteins.

We believe there is broad applicability of this approach and in addition to completing the 1001 toxicology and by distribution work and having material released next quarter, we're working to optimize a currently undisclosed product candidate for another neurodegenerative disorder using the same gene-delivering modality as 1001. With our program for Huntington's disease, we have preclinical proof-of-concept in multiple disease models with mRNA and protein knockdown of up to 90%. This strategy uses a micro RNA to reduce level of the mutant Huntington protein, which causes the disease. The intracellular knockdown of toximutant protein mimics the approach of antisense oligonucleotides and is proven would not only been an important therapy for Huntington's disease but also would have applicability to a broad range of autosomal-dominant neurodegenerative disorders.

Finally, we continue to invest in progress for inherited retinal diseases. In addition to our choroideremia program in Phase 1-2 development, earlier this year, we announced a new ocular program for Stargardt disease, which is the most common form of inherited juvenile macular degeneration with approximately 30,000 patients in United States alone. Stargardt disease results from mutation in the ABCA4, a very large gene with a coding sequence that exceeds the packaging capacity of AAV vectors. We are leveraging our R&D platform to explore multiple treatment approaches to Stargardt, including exploiting new technologies to overcome gene size constraints to generate a vector able to efficiently restore the function of the ABCA4 gene.

We will be providing more information on this program as it progresses to the clinic. I am very excited about the potential for broad applicability of gene therapy -- of our gene therapy platform. We're making incredible progress, and as Jeff outlined in his opening remarks, we have the capabilities necessary to realize the promise of gene therapy. I will now turn it over to Stephen.

Stephen Webster -- Chief FInancial Officer

Thanks, Federico. In the year ended December 31st 2018, we recognized 64.7 million in total revenue, of which 27 million was net product sales of Luxturna and 37.8 million was contract revenue associated with our agreements with Pfizer and Novartis. In the prior year, we recognized 12.1 million in revenue, all of which was associated with our Pfizer agreement. Cost of product sales for the year ended December 31st 2018 was 1 million, which consists of manufacturing, shipping and other costs, as well as royalties.

A substantial portion of the inventories sold during the period was produced prior to FDA approval and, therefore, was expensed to research and development in 2017. The cost of contract revenue for the year ended December 31st 2018 was 6.9 million, which consists of manufacturing and other costs associated with our agreements. Our research and development expenses for the year ended December 31st 2018 were 125.3 million compared with 135.2 million for the prior year. The $9.9 million decrease was primarily due to a reduction in internal R&D expense resulting from salaries and other Luxturna costs being capitalized as inventory following FDA approval, as well as costs associated with contract revenue.

These cost reductions were partially offset by an increase in salaries and other related benefits, as well as growth in external R&D expenses, primarily related to our hemophilia A and our preclinical development programs. Selling, general and administrative expenses for the year ended December 31st 2018, were 124.9 million compared with 111.1 million for the year ended December 31st 2017. The $13.8 million increase primarily was due to 14.9 million in higher salaries and related costs, including stock-based compensation, and a $6.1 million increase in legal and patent expenses, professional fees and other operating costs. These increases were partially offset by a reduction of 6.9 million related to an early termination of one of our leases as amended in 2017.

We recognized 110 million of other income during the year ended December 31st 2018, from the sale of our rare pediatric disease priority review voucher. Our net loss for the year ended December 31st 2018, was 78.8 million, or $2.11 basic and diluted net loss per common share, as compared to a net loss of 253.5 million, or $7.63 basic and diluted net loss per common share for the prior year. Our loss this year was favorably impacted by the sale of the priority review voucher in the second quarter. Please see our press release from earlier this morning for details on the year-end financial results.

As of December 31st 2018, we had cash, cash equivalents, restricted cash and marketable securities of 601 million. We earned a 25 million milestone payment from Novartis related to the European Medicines Agency approval of Luxturna in the fourth quarter, which had not been received by year-end. We continue to expect these cash, cash equivalents, restricted cash and marketable securities to be sufficient to fund our needs into 2021. We have 37.7 million shares outstanding.

We're now happy to take your questions. 

Questions and Answers:

Operator

[Operator instructions] And our first question comes from Phil Nadeau with Cowen and Company. Your line is open.

Phil Nadeau -- Cowen and Company -- Analyst

Good morning. Thanks for taking my question. Just one question on the 8011, the study. It sounds like from your prepared remarks, you haven't actually started dosing patients treated with the prophy steroids and the new manufacturing material.

Is that correct, or am I misinterpreting what you're saying?

Jeff Marrazzo -- Chief Executive Officer

No. You might be misinterpreting. What we said actually, consistent today with what we said in January, was that we had initiated the work in expanding that Phase 1-2 study.

Phil Nadeau -- Cowen and Company -- Analyst

And have you said how many patients you have actually treated?

Jeff Marrazzo -- Chief Executive Officer

We have not.

Phil Nadeau -- Cowen and Company -- Analyst

OK. And then just one follow-up on Luxturna, can you give us some sense of how many patients you found? It sounds like you have pretty significant efforts at identifying patients, any metrics you can provide on how productive those will be?

Jeff Marrazzo -- Chief Executive Officer

Yes, so Phil, what I would say is that we're not providing sort of the specific number. What I can say after the efforts we've been executing on for the last year plus, including some different efforts prior to launch but certainly since launch is that we continue to see the returns, the yields in terms of the patients that we're finding as being consistent with the general epidemiology numbers that we've seen. That we had cited before, we actually got into the business of looking to identify patients. And so we are really -- we're very much encouraged by that.

Again, the yields would continue to support a trend toward that 1,000 to 2,000 patients existing in the U.S. and so really what our efforts are focused on this year in particular are continuing to increase the efforts to do the necessary genetic testing for those patients to drop out from the system.

Phil Nadeau -- Cowen and Company -- Analyst

Great. Thanks for taking my questions.

Jeff Marrazzo -- Chief Executive Officer

Thanks, Phil.

Operator

And our next question comes from Gena Wang with Barclays. Your line is open.

Gena Wang -- Barclays -- Analyst

Thank you so much. I would just have a quick question regarding hemophilia A program. So for the prophy steroid treatment, eight-week course from starting from week four, just wondering what's the rationale to starting at the week four not at the beginning when you dose the patient?

Kathy High -- President, Head of Research and Development

Gena, thanks for your question. There were several considerations about the timing of the regiment. Using reactive steroids, we had never triggered them earlier than about six and a half weeks, so we think that four weeks gives us plenty of time before the immune response usually gets -- has an opportunity to get rolling with this particular dose of 8011. So that's one reason.

The second reason is that in work that we had done years ago, we have demonstrated that there is an active process by the immune system of developing and promoting tolerance to the transgene product Factor 8 that occurs after vector infusion. We do not want to interfere with that process. So that was the rationale for the timing that we chose.

Gena Wang -- Barclays -- Analyst

And then also previously you commented that you won't increase the dose beyond 2e12. Based on current data so far, would that still be the case?

Jeff Marrazzo -- Chief Executive Officer

That's correct. That's not our plans.

Gena Wang -- Barclays -- Analyst

OK, great. Thank you.

Operator

Our next question comes from Michael Yee with Jefferies. Your line is open.

Kelechi Chikere -- Jefferies -- Analyst

Hi, thank you. Kelechi Chikere on for Michael Yee. I have a list of questions but I'll just ask one. Just related to your hem B program, his Pfizer dosed the first patient in the Phase 3 trial? And has Pfizer provided any recent comments affirming their commitment to driving this particular program forward, completing the Phase 3 and actually commercializing the drug?

Jeff Marrazzo -- Chief Executive Officer

On the first part of your question, I would defer the question to Pfizer to answer that. It's really up to them to determine disclosure. What we did say in our prepared remarks is that the six months run-in study for the Phase 3 program did begin in July of 2018. So obviously, that six-month period has now been complete.

And with respect to the second part of your question, from all of our discussions, and we, obviously, have joint steering committee that still exists, as well as what we have heard Pfizer speak about publicly, they're very much committed to this product in advancing it forward through to licensure and commercialization, and I will say, importantly, to doing that globally. They are an organization that has a hemophilia B drug on the market and the last time I checked many years ago, at least 60 different countries, and so they are certainly looking at -- from everything they have told us, looking at providing that globally to patients.

Kelechi Chikere -- Jefferies -- Analyst

Thank you.

Operator

Our next question comes from Vincent Chen with Bernstein. Your line is open.

Vincent Chen -- Bernstein -- Analyst

Good morning and thanks for taking the question. So one question on the SPK-8011. So as you noted in the press release and as presented at ASH, all the participants in the lower and middle doses should stable Factor 8 activity levels out to -- up to 78 weeks. Based on your -- I guess your long-standing experience in the hemophilia gene therapy space, both clinical and preclinical, would do you expect to see similar stable durability for higher doses? And will the midyear update you provide include durability data for the initial group of high-dose patients?

Jeff Marrazzo -- Chief Executive Officer

We would expect that, yes. I think, we had spoken in the past about the fact that the data we have generated in Factor 9, that other data generated in Factor 9, both in-human studies, as well as preclinical data, as well as preclinical data we generated in Factor 8, as well as now clinical data we're generating in Factor 8, all seems to hold a consistent profile that, upon reaching a plateau, there is stable and considerably active expression. I'll let Kathy add anything. And so that's certainly been our experience and what we expect to see.

Kathy High -- President, Head of Research and Development

Well, I don't think I have much to add. I would just echo Jeff's statement that over a long period of time, AAV-mediated transduction of the liver in human subjects and trials has shown durable expression from the point of the plateau, and we do not have a reason to believe anything different will occur.

Operator

Our next question comes from Cory Kasimov at JP Morgan. Your line is open.

Cory Kasimov -- J.P. Morgan -- Analyst

First is the housekeeping one. For the SPK-8011 updates around midyear, given the deadlines for abstract submission, are you able to say yet if the plan is to present the updated data at one of the medical meetings relevant to hemophilia or would this be more on the lines of company conference calls you've done in the past? And then I have one follow-up.

Jeff Marrazzo -- Chief Executive Officer

Yes, we haven't determined that yet, but you can imagine that we always, if possible, favor presenting at a medical meeting, and it'll be just about the function of what's the appropriate venue that might make sense to do that.

Cory Kasimov -- J.P. Morgan -- Analyst

OK, all right. And then just to pivot now to a bigger picture question for your Pompe program. I'm just curious if you can speak to what you've heard from KOL to date about the unmet need in Pompe? And what a gene therapy might bring to the table over and above the therapies that are out there?

Jeff Marrazzo -- Chief Executive Officer

So -- and I think Federico made a couple of comments in his prepared remarks about the preclinical data that I think speak to nicely where we think this may be able to go and why we are so encouraged and excited about this program. I mean I think you know that ERT is the current standard of care in Pompe disease and certainly, especially, in the more severe earlier onset forms, the infantile forms, it can be lifesaving. However,, in our view, we see great potential to drive meaningful improvements over that standard of care, both from a clinical outcomes perspective but obviously just as importantly, from a treatment burden perspective. And as we have shown and Federico spoke to today, and as well as we have presented at prior medical venues, World Muscle Society most recently, the goal of 3006 is to drive improved secretion and sustained elevation of GAA plasma concentration and, thereby enabling a consistently active expression of GAA and an improvement in glycogen clearance relative to the current standard of care.

In our preclinical data, both in the animal models, as well as data that we've been able to collect in NHPs provide different sets of information that continue to confirm that, and it's certainly why we are both excited to be moving this down to the clinic with the IND being filed in the next couple of months in April.

Operator

Our next question comes from Mohit Bansal with Citigroup. Your line is open.

Mohit Bansal -- Citi -- Analyst

Great. Thanks for taking my question, and congrats on all the progress. I have two questions. So first I'll ask, regarding the assay, there has been a lot of talk around how to measure Factor 8 levels in these trials and how different assays could result in different numbers? Could you help us understand your stance there and how does that compare -- what are you using versus how does it compare to the FDA requirements as denoted in the guidelines released last year? And I have a follow-up.

Kathy High -- President, Head of Research and Development

Well, what I would say is that for this trial and most other trials, typically, we measure both using a one-stage coagulation assay and a chromogenic assay. And data from other sponsors has shown a discrepancy between the one-stage coagulation assay and the Coatest, which is one of several variants of the chromogenic assay. In work that we have done, we've actually been able to show that between a chromogenic assay by another sponsored Biophen or Hyphen, there's actually very good concordance between the one stage and that chromogenic, and we showed that data briefly at ASH in December. The distinguishing feature on the Biophen assay is that it uses human reagents in the test system rather than over bovine reagents, which is what is used in the Coatest assay.

And so as often happens for intricate enzymatic systems, if you use all human reagents, you may get better performance of the series of enzymes than if you switch species our mix species in the test tube. So we will be performing both one stage and chromogenic as is noted in the FDA guidelines, but we think that the discrepancy is less of an issue than people may think.

Mohit Bansal -- Citi -- Analyst

Got it. Very helpful. And another one on similar FDA guidelines. So in terms of your discussions with the FDA thus far, what is your understanding in terms of what FDA meant by normal range for accelerated approval in hemophilia? Would you say that potential for affiliated approvals could be off the table if the mean factor level is below 40%, 50%? Or is there even a number there?

Kathy High -- President, Head of Research and Development

So our understanding in the discussions is that what the regulatory agencies are looking for is a level of factor expression that will reduce the number of observed bleeds to none or very low. And the dialogue that we have had with them suggests that the data that will define that number is being developed in ongoing clinical trials. They encouraged us, as I believe they probably encourage all sponsors that if we feel that the data we are generating in the Phase 3 study merits accelerated approval that we should present the data to them in that kind of time frame.

Jeff Marrazzo -- Chief Executive Officer

I would just -- specifically to directly to answer your question as well, I would say that based on our interactions, they've certainly left the potential for accelerated approval for levels that would be less than 50%.

Operator

Our next question comes from Edward Nash with SunTrust Robinson Humphrey. Your line is open.

Edward Nash -- SunTrust Robinson Humphrey -- Analyst

great. Thanks, guys, very much for taking my questions. Wanted to ask with regard to the Huntington program, are you looking to specifically target the wild type or a mutant or both? And maybe, can you talk a little bit about what region of the Huntington gene you're looking to target?

Federico Mingozzi -- Chief Scientific Officer

Yes. So the approach we are taking is RNA knockdown and is not liver specific, so it will decrease both the mutant and wild type protein. And as far as the region of the protein that we are targeting, that's not the exon 1 but in fact is more a downstream RNA sequence.

Edward Nash -- SunTrust Robinson Humphrey -- Analyst

That's helpful. And just one last quick question that you did mention at the Salesforce, you increased that to be able to increase genetic screening. Are you able to tell us -- quantify that how many salespeople were added?

Stephen Webster -- Chief FInancial Officer

We've roughly doubled the number of salespeople that we had in 2018, and as Jeff stated, it's really to increase the genetic testing, overall genetic testing.

Operator

Our next question comes from Salveen Richter with Goldman Sachs. Your line is open.

Maryana Breitman -- Goldman Sachs -- Analyst

Yes, hi. Thanks for taking the question. It's Maryana for Salveen. I have two quick ones.

One is, what are the clinical plan for Huntington and Stargardt? Like you guys have it approximately when either of those programs can enter clinic? And I have a follow-up.

Jeff Marrazzo -- Chief Executive Officer

We're not providing guidance on that today. We're certainly excited about both of these projects. As we said, we have preclinical proof-of-concept, it's our Huntington's disease program, and we have multiple strategies to target Stargardt's disease and address the gene size constraints that Federico spoke about. And obviously in Stargardt's disease, we have a substantial amount of expertise and data to draft off of based on Luxturna when it comes to having the right approach in terms of gene cassette.

So we are not providing specific guidance, but we certainly will as we move along and get a bit closer to the clinic and look forward to providing that update then.

Maryana Breitman -- Goldman Sachs -- Analyst

Got it. And another quick one. Could you give an update on the commercial payer access to Luxturna?

Jeff Marrazzo -- Chief Executive Officer

Sure. It's -- I think we've indicated, I think, in the prepared comments that we have 85% coverage on the commercial lives. All the national major payers as well as the majority of the blues plans now provides coverage for Luxturna. The 15% that's left over in the commercial plans that don't have satisfactory medical policy coverage yet, we're going to handle on a case by case basis and largely guided by if patients show up in those plans.

The other update is, Spark path is obviously gaining traction with the payers, and we've had obviously additional interest in the outcomes programs on the commercial side. On the government side, we're currently at about 50% in terms of government-covered lives with satisfactory medical coverage. We expect to see additional states approved coverage into the midyear. As a general comment, government channel is a bit slower in adopting coverage as the state agencies work through their processes for determining coverage and reimbursement.

Operator

Our next question comes from Raju Prasad with William Blair. Your line is open.

Raju Prasad -- William Blair-Analyst

Thanks for taking the question. For the Phase 1-2 trial 8016, will you be utilizing a prophylactic steroid regiment and if not, could you just provide some color on the rationale behind that decision?

Jeff Marrazzo -- Chief Executive Officer

Yes, we haven't given that specific disclosure at this time. So we'll certainly talk about that at a future time where we're speaking more about the 8016 program.

Raju Prasad -- William Blair-Analyst

OK. And then just a quick follow-up. On Luxturna, I assume some of the first commercial-treated patients have passed that 90-day threshold. Is there any color you could provide on the outcomes there? And have there been any reimbursements for commercial patients?

Jeff Marrazzo -- Chief Executive Officer

Yes, we can't provide the outcomes on those patients because of patient confidentiality.

Stephen Webster -- Chief FInancial Officer

Raj, we have not paid any rebates on the outcomes-based programs.

Operator

And our next question comes from Whitney Ijem with Guggenheim. Your line is open.

Whitney Ijem -- Guggenheim Securities -- Analyst

Hi, guys. Thanks for taking the questions. First one is just on the government proposal here you're sort of urging approval of, can you remind us what specifically is being proposed? I think it's something under Section 402 demonstration product -- project, but can you tell us a little bit more about that? And is that Luxturna specific or will that have broader readthrough the gene therapies in general? Or should we expect the same process to be done for each kind of additional gene therapy approval going forward?

Jeff Marrazzo -- Chief Executive Officer

So you're correct that under Section 402 of the statue, we believe that the government has authority to enable a demonstration project that is in the interest of improving the efficiency and effectiveness of Medicare and Medicaid, but also as we've spoken about before, the benefit of this demonstration is that it would be also applicable to commercial and nongovernment beneficiaries and plans as well. The specifics of the proposal are -- would allow us to do two things conceptually, and then I'll talk about the details. First, would allow us to be paid in installments over time; and second, would allow for us to offer deeper rebates than what we are able to do under the current system. The -- in essence, it breaks down to four options.

One is a three-year model and the other is a five-year model. Under the three-year model, there's both a model where we are paid upfront and then provide rebates back over time, rebates back at certain time points during that three-year window, as well as a model where we get paid over three years in installments. And then the five-year has a similar two-option frame where we get paid upfront and make rebates back over potentially a five-year period or get paid in installments over the five years.

Operator

Our next question comes from Ren Benjamin with Raymond James. Your line is open.

Reni Benjamin -- Raymond James -- Analyst

Great, guys. Thanks for taking the questions. Can you just give us your sort of thoughts on COGS for 2019? How we should be thinking about that? Any additional treatment centers that you plan to have on board or really is that number of salespeople really going to be focused on the current 10 centers that you have and expanding the number of patients there? And can you talk about any potential backlog in patients awaiting scheduling for surgery?

Jeff Marrazzo -- Chief Executive Officer

So maybe I'll take the last two, and then I'll turn it over to Stephen to talk about COGS. On the number of treatment centers, we're pretty comfortable with the number of treatment centers that we have in place right now. We feel there is ample capacity to handle the number of procedures per quarter for patients that are identified. And as far as the sales force, the sales force is really geared toward community practices.

And specifically, high-value retinal specialists, as well as ophthalmologists and low-vision center optometrists. we've been historically, kind of targeting kind of those retinal specialists. I think in 2019, our targeting is shifting a little bit more toward gaining reach in some of those of ophthalmology practices, as well as low-vision centers, and obviously, additional frequency in the high-value retinal specialists. So that's really the process that's under way in 2019.

Stephen Webster -- Chief FInancial Officer

As far as COGS go, so far through 2018, we've been in the low to mid-single-digit range there, as we mentioned in the prepared remarks, there's some zero cost inventory, we are still working through that was manufactured in 2017. But as that goes through, and we start working material produced afterwards, we still would not expect to see the COGS cross through a 10% range.

Operator

Our next question comes from Carter Gould with UBS. Your line is open.

Carter Gould -- UBS -- Analyst

Just a follow-up on 8016. given everything you know about the relevant mechanisms for 8016 versus 8011, the durability you have seen with your earlier programs? I guess how long should we be thinking about -- how long it will take to characterize the efficacy and safety of 8016 in part one of that study?

Kathy High -- President, Head of Research and Development

Well, we expect the Phase 1-2 trial to enroll over a shorter period of time because the stagger between subjects that was required in our first study, 8011, has been substantially shortened. So I don't think I can say much more than that, but it should be a shorter period of enrollment. And then in terms of how long people are followed, typically, we do like to have at least a year of durability before we make conclusions.

Operator

Our next question comes from Martin Auster with Credit Suisse. Your line is open.

Tiago Fauth -- Credit Suisse -- Analyst

Hi. Tiago for Marty. So just a couple of quick ones. Based on your directions with physicians and patients, where do you believe the bar is for durability of response in hemophilia A for a viable commercial product? And perhaps for the manufacturing, how should we think about the 400-liter capacity translating into number of doses per year?

Jeff Marrazzo -- Chief Executive Officer

So on the second question, what I can say is that while we do not disclose, sort of, what the number of patients per year is, based on our internal demand signal and forecasts from a commercial perspective, we do not see any challenge with meeting based on the 400-liter scale and the frequency in which you can cycle through and run batches in suspension. Your first question, I'm not sure I fully understood. If you could repeat it, that will be helpful.

Operator

Unfortunately, that line has already been closed. But the next question does come from Kennen MacKay with RBC Capital Markets.

Kennen MacKay -- RBC Capital Markets -- Analyst

Thanks for squeezing me in. One on 8011, was wondering if the suspension material you are switching to is the commercial material, and if that manufacturing process had been inspected yet by the FDA. And as you integrate this into the Phase 2 trial, if that could go directly through the high 2e12 dose, or if you had to deal a little bit of redose escalation?

Jeff Marrazzo -- Chief Executive Officer

The material was reviewed. The data from our analytical nonclinical company was reviewed and cleared by the FDA, and we do not need to do any dose escalation work. It will go right into the 2e12 dose.

Operator

Our next question comes from Joseph Schwartz with SVB Leerink. Your line is open.

Dae Gon Ha -- SVB Leerink -- Analyst

Hey, good morning. Thanks for taking our questions. This is Dae Gon dialing in for Joe. So two questions, one on the Pompe product and the other on the -- your program in CLN2.

So in terms of Pompe, I may have missed this, but can you remind us, what capsid you're using? And I was wondering if it shares substantial structural homology to Spark100 or Spark200 you're using on hemo programs? How are you thinking about pre-emptively addressing any immunogenicity issues? And are you intending on going both adult and pediatric patients in your initial Phase 1-2 after the IND filing in April? And then the second question on the CLN2 program. Dr. Angela Schulz recently presented a 3-year update on Brineura. So just based on your market research and talking with physicians, what do you think are the main takeaways from the presentation on the long-term follow-up? And where do you currently see the unmet need for your product in addition to the convenience of single administration?

Federico Mingozzi -- Chief Scientific Officer

So I'll start with the Pompe -- so to answer questions. first was about the capsid and in fact, the capsid is Spark100, so that's the capsid we'll using this program. The second question was about addressing immunogenicity, and for that, we are thinking although, we haven't really disclosed the clinical protocol, and we will do so later on when we are filing the NDA, and so but we are thinking actively about the potential issue of immunogenicity. And when it comes to the patient population, the clinical trial is intended to enroll late onset Pompe disease patients to establish the safety and efficacy of the approaching adult population, and then we will think in the future what could be done for infantile population.

Kathy High -- President, Head of Research and Development

And then...

Jeff Marrazzo -- Chief Executive Officer

With respect to -- go ahead.

Kathy High -- President, Head of Research and Development

Well, I was just going to say, with respect to your question about CLN2 and whether there is still substantial unmet medical need, the infusions of Brineura are through an ommaya reservoir at a frequency of every two weeks or so, and that's really a substantial burden of treatment. And that would -- that something that would be addressed by a gene therapy approach.

Operator

Our next question comes from Matthew Luchini with BMO. Your line is open.

Unknown Speaker

Hi. This is Na on for Matthew. First question is, if there's any specific bottlenecks that's impacting the CMS review of the reimbursement plan? And second, can you just expand a little bit more on the Stargardt candidate, and how it is differentiated, given the others in this indication?

Jeff Marrazzo -- Chief Executive Officer

So maybe quickly and Stargardt's, it's probably a bit premature to talk about the specific points around differentiation. We've go four different strategies that we're pursuing, and as we settled down on one or a few of those and present that data -- that preclinical data is probably a more appropriate time to speak to that. With respect to CMS, the details of the proposal as I walked through before, have been completely worked through, through frankly a great collaborative effort between our organization and the folks at CMS and our understanding is that, it is about moving through a clearance process that is needed to occur within the federal government to enable regulatory change. And so we await that and certainly urge the government to take that step, not only given the benefit of potentially using it in Luxturna but creating a pathway to one of the questions that was asked before for other gene therapies of which as we all know, many of them are coming down the pipe pretty quickly now.

Operator

Our next person comes from Difei Yang from Mizuho Securities.

Difei Yang -- Mizuho Securities -- Analyst

Hi. Good morning. Thanks for taking my questions. So would you highlight for us what technical expertise are the most relevant and transferable when the development is moving from disease target through disease target.

I guess I'm trying to figure out what is the most valuable expertise? Is it vector selection, capsid, promote optimization, etc.?

Jeff Marrazzo -- Chief Executive Officer

So I think what I would say is, it's really all of the above, and I think that's one of the reasons that we think the investments that we made in dollars and building an organization and people over six years now is not something that people can easily replicate, because it is about all of those details and understanding that all those little details add up to big differences between products and that's even just in design, and then you step forward into there -- to manufacturing and how you make it. All those are critically important elements to what you see in clinical investigation, ultimately, how products can be different in this field.

Difei Yang -- Mizuho Securities -- Analyst

And then just a quick follow-up on Luxturna. Could you remind us who pays for the genetic testing? Is it the insurance company or Spark?

Jeff Marrazzo -- Chief Executive Officer

Yes, so Spark has sponsored a genetic test, a single gene test at this point in time. There are other options for IRD patients, FFB is sponsoring a test as well. So there's -- it's not just a Spark-related test that's out there.

Operator

Thank you. And this does conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Jeff Marrazzo, CEO, for any closing remarks.

Jeff Marrazzo -- Chief Executive Officer

I just want to thank you all, again, for joining us this morning. 2019 is certainly another critical year of execution and one that we are looking forward to with significant milestones and the potential for meaningful pipeline progression, and we look forward to providing additional updates and seeing you along the way, as we progress throughout the year. So thanks, again, for your time today.

Operator

[Operator signoff]

Duration: 54 minutes

Call Participants:

Ryan Assay -- Head of Investor Relations

Jeff Marrazzo -- Chief Executive Officer

Ron Philip -- Chief Commercial Officer

Kathy High -- President, Head of Research and Development

Federico Mingozzi -- Chief Scientific Officer

Stephen Webster -- Chief FInancial Officer

Phil Nadeau -- Cowen and Company -- Analyst

Gena Wang -- Barclays -- Analyst

Kelechi Chikere -- Jefferies -- Analyst

Vincent Chen -- Bernstein -- Analyst

Cory Kasimov -- J.P. Morgan -- Analyst

Mohit Bansal -- Citi -- Analyst

Edward Nash -- SunTrust Robinson Humphrey -- Analyst

Maryana Breitman -- Goldman Sachs -- Analyst

Raju Prasad -- William Blair-Analyst

Whitney Ijem -- Guggenheim Securities -- Analyst

Reni Benjamin -- Raymond James -- Analyst

Carter Gould -- UBS -- Analyst

Tiago Fauth -- Credit Suisse -- Analyst

Kennen MacKay -- RBC Capital Markets -- Analyst

Dae Gon Ha -- SVB Leerink -- Analyst

Difei Yang -- Mizuho Securities -- Analyst

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