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Aerie Pharmaceuticals Inc  (NASDAQ:AERI)
Q4 2018 Earnings Conference Call
Feb. 25, 2019, 5:00 p.m. ET

Contents:

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Aerie Pharmaceuticals Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. Today's conference call will be recorded.

It is now my pleasure to turn the floor over to Aerie's Director of Investor Relations, Ami Bavishi. Please go ahead Ami.

Ami Bavishi -- Director of Investor Relations

Thank you, Vasif. Good afternoon and thank you for joining us. With me today are Vince Anido, Aerie's Chairman and Chief Executive Officer; Tom Mitro, Aerie's President and Chief Operating Officer; Casey Kopczynski, Aerie's Chief Scientific Officer; John LaRocca, Aerie's General Counsel; Theresa Heah, Aerie's Vice President of Clinical Research, Medical and Professional Affairs; and Chris Staten, Aerie's Vice President of Finance.

Today's call is also being webcast live on our website investors@aeriepharma.com and it will be available for replay as indicated in our press release.

Now, for forward-looking statements and non-GAAP financial measures. On this call we will make certain forward-looking statements including statements, forecast and guidance regarding our future financial and operating performance including our 2019 guidance for cash burn. These statements will include observations associated with our commercial launch of Rhopressa in the United States, expectations regarding the potential launch of Rocklatan. They will also include expectations regarding the success timing and cost of our clinical trials.

Additionally, we will discuss progress regarding maintaining, requesting or obtaining approvals from the FDA or other regulatory agencies of our product and product candidate, including our efforts on international expansion. Lastly, we will address the timing and cost of our manufacturing activities and the potential of our pre-clinical product candidates and research findings, as well as other statements related to future events. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in today's press release as well as the risk factors included in our filings with the SEC. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. Please note that we'll file our 10-K later this week.

In addition, during this call we will be discussing certain adjusted or non-GAAP financial measures. For additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures, please see today's press release, which is posted on our website.

With that I will turn the call over to Vince.

Vincente J. Anido -- CEO & Chairman

Hi, thanks Ami, and good afternoon everybody. Thanks for joining us today. We really appreciate you taking the time to be with us. We are all here together at our national -- our annual all-employee national sales meeting, so you get to hear from a few of our executives you don't normally hear from on these calls, including Casey Kopczynski and Theresa Heah. Also Chris Staten, our VP of Finance is on the call today and will cover the financials.

I think some of you know that Rich has been tending to his wife who has been diagnosed with a severe illness, and again, we certainly are sending our thoughts and our prayers to he and his family in this time of need. So he's doing exactly what we expect him to do, which is to be with his family. So, Chris will be subbing for him at this point. The purpose of today's call is to provide an update on how we ended 2018 and give you additional color on the significant progress we have made as we continue to rapidly build our company.

We will not be providing 2019 net revenue guidance on this call, and we're just a couple of weeks from hearing from the FDA in our Rocklatan approval and obviously having a certainty on Rocklatan will be a fundamental element of our guidance. We will however communicate our 2019 revenue guidance once we have certainty, and as we've said before, we will not provide guidance for Rhopressa and Rocklatan individually, but rather, we will provide guidance for combined revenue expectations for 2019.

We are, however, providing cash burn guidance for 2019 in a range of $210 million to $220 million, which is consistent with our 2018 full year actual results of 2015. When Chris gets on the call, he will provide some additional color on this guidance when he covers the financials. We did close 2018 very well positioned for a successful 2019. Our net revenues for 2018 were over $24 million, fell right in the middle of our range where we guided a year ago. Our fourth quarter net sales of $14.5 million is a pretty healthy run rate entering 2019.

We are entering the year with an annualized run rate for Rhopressa of between $55 million and $60 million by simply multiplying the fourth quarter net sales number times four quarters, and not assuming any growth at all. So that's a pretty darn good base when you consider that roughly a $60 million run rate gets us about halfway to Wall Street 2019 net revenue consensus, which is right now about $116 million. When you consider that Rhopressa remains in a steep growth curve with sales having doubled from third to fourth quarter in 2018, and then tack on Rocklatan on top of that, assuming we receive the FDA approval on or before the March 14 PDUFA date, you can see why we remain comfortable with the 2019 consensus guidelines.

Our $14.5 million in net revenues for the fourth quarter reflects no inventory build. Just again, there are no change in wholesale inventories from the end of the third quarter to the end of the fourth quarter. Both are only about two weeks worth of demand and it's typically two weeks plus or minus a few days here and there, and it's certainly completely in line with our expectations and industry norms. Our Rhopressa prescriptions as reported by IQVIA continue to show excellent growth.

Fourth quarter 2018 prescriptions were up 88% compared to the third quarter using IQVIA's recently restated data. The volume of Rhopressa units sold out of wholesalers in the pharmacies. Remember, this is a metric that we've been talking about for quite a while, which we think is far more accurate way of predicting where our net sales are going to be. So these are wholesale shipments to pharmacies, also show excellent growth, and it's corresponding to that 88% growth that I talked about in the prescription activity. In fact, we've been achieving record level of weekly sales out to pharmacies in excess of about 9,000 bottles per week. Certainly as you start thinking about that and applying any kind of growth rate (inaudible) to understand why we're so bullish on what the Rhopressa numbers could look like for 2019. As we've said, the accurate sales out data, we receive internally on a daily basis is much better indicator of our true sales performance than the IQVIA data is, at least for right now. We will be providing our sales out data every month for the remainder of 2019 so you have a clear sense of what's the true business volumes are.

We did file an updated corporate deck including the January 2019 data. It's again the sales out data and we did that on February 12. So you can take a look at that and sort of see the relationship between TRxs or unitized TRxs or bottles out the door or bottles that reflect those prescriptions, and then the sales out, i.e. the wholesale shipments to retail.

In that, you will see that our sales out are running about 30% higher in terms of bottles then the IQVIA bottle data. And again, there is a quite a restatement in the algorithm for IQVIA for the years. So we think that it's going to take a while for them to really begin reflecting what our true demand is here, so until we see some that gap closing, we're going to continue providing that sales out data. So again, you have a better feel for how the business is really running.

Also, remember that when you see the weekly IQVIA data, it maybe sometimes affected by the holidays as well as the ophthalmology conferences, which are often attended by the highest prescribing doctors. In fact, if you take a look at the data for January and early February, there was three large medical conferences going on Hawaiian Eye, Caribbean Eye and conference call telling it like it is down here in Florida. And so, it did impact the overall prescription activity in the marketplace. As of now, we nearly have 8,000 doctors that are writing prescriptions for Rhopressa. That's well over half of our targeted population. 85% of the top prescribers in deciles 8 through 10 have written a Rhopressa prescription. And the month ago, we tallied well over 700 doctors that already written in excess of 50 prescriptions in their practice and about 200 of which exceeded a 100 prescriptions in their practice.

We actually had a physician panel at our all-employee meeting today and all of them are very, very bullish on their successes with Rhopressa and that -- and they also spoke very highly about their expectations for Rocklatan. So we were pleased that not only the sales force got to hear that, but also that the entire company got to hear that. A key to growing these volumes include increasing our market access. We talked about that many, many times. We think it is the primary driver for our success.

As of now, we have 90% commercial lives covered, comprising about 55% in Tier 2, 35% in Tier 3. Don't forget, we are targeting Tier 2 so that the co-pay is as low as possible even though with this commercial side, we can certainly help out the co-pay situation with the cards that we can't do with the Medicare side. We continue to have about 40%, 42% of Medicare Part D lives covered in Tier 2, but we do expect that Medicare Part D coverage will increase within the next few weeks to include over (ph) 70% with co -pay structures equivalent to preferred Tier 2. In fact, that a product will have majority of favorable coverage before the first anniversary of its launch is indeed very rare and a testament to the rising stature of Rhopressa and the glaucoma Marketplace.

Net revenue per bottle in the fourth quarter was $130 (ph), it's in line with the third quarter. As we pick up coverage particularly in Tier 2, we pay rebates to payer that bring our net revenue per bottle down. As we pick up more Medicare Part D coverage, our net per bottle should level off at about $100 or so per bottle. We expect that that's going to occur sometime in Q2, early Q2 of this year. In the meantime, we will have some variability on a quarter-to-quarter basis with our rebates our actual net price will fluctuate a little bit depending on which of the plans are buying, how many prior authorizations are written et cetera, et cetera.

So, we do expect to see some of the variability that some of you have already noticed from our press release. In the fourth quarter, net sales per bottle held steady as we analyze the channels and contracts through which our volumes slowed. And again as I mentioned, we do expect that variability to tone down a little bit as the product stabilizes over the next year or so. We continue to see many doctors increasing their confidence in Rhopressa and as a result, they continue to expand their use of Rhopressa in various patient treatment scenarios. Commonly, as we've talked about before, their first use of Rhopressa is by simply adding it on top of two or three other glaucoma therapies for patients -- that patients been -- already been taking, we call that max medical therapy. The doctors' confidence grows. They often remove certain of those therapies, and some of those as you know are two to three times a day, so the doctors happy to start ditching some of those and replacing them with Rhopressa.

Ultimately we think that they will migrate to just prescribing Rhopressa on top of a prostaglandin analogue. We are seeing that as physicians continue to gain experience with Rhopressa as there is organic growth within the doctors practices. I mentioned, we see some doctors are already writing over 100 prescriptions or show within their practice, and so -- we do expect market share within a practice to continue growing in addition to continuing to add new doctors that are writing Rhopressa.

As I mentioned earlier, we are calling in today from an all-employee national sales meeting and is particularly a busy time for the commercial team. By the end of this week, our Rhopressa sales force of roughly a 100 folks will be completely trained on Roclatan in anticipation of the Roclatan receiving approval on or before the March 14 PDUFA date. We have refined not only our sales force, but ourselves and commercial management team over the last several months, and I can tell you I'm very, very pleased with the progress we've made, especially as you consider how we exited in Q4.

I mean, an awful lot of progress in fixing a lot of the things normally occur as you launch these products, and so right now, I'm very confident that we have the right team in place to continue growing Rhopressa and ultimately drive Rocklatan through a rapid launch when it is approved, again, roughly around the time of its PDUFA date.

Our current expectation is that Rocklatan should gain market access, perhaps even at a more accelerated basis (inaudible) already impressive Rhopressa experience. And certainly, while we can't predict the outcome of the FDA's review of Roclatan, we do remain very, very optimistic and are pretty confident about the timing, again, hitting our PDUFA date.

I said before, it will be very difficult to predict Rhopressa versus Rocklatan volumes in the first year. Doctors, and we heard that again today, will follow their own path on a patient-by-patient basis and also reimbursement is going to play a key role in helping the physicians decide whether they're going to use Rhopressa or Rocklatan. We believe that at some point Rocklatan will take over as the Number 1 product for our company and I think -- we've said it right from the very beginning, we think that there's going to be ultimately a 3X difference in revenues between Rocklatan and Rhopressa, but I think it's not going to take place until probably back end of 2020, when we have not only Rhopressa fully covered by then, but also Rocklatan almost completely covered by then with managed care plans.

From a pricing perspective, we do expect to price Rocklatan at a slight premium to Rhopressa. Again, we've always talked about a $10 to $15 premium or so. So we're trying to make it as easy as possible for the plans to put Rocklatan on because there's really not much of a financial incentive either way. We're not providing any incremental incentives to our sales force to sell one product over the other as well.

So again, all we want to do is make sure that we get the market acceptance including necessary gains and market access, so the doctors have a choice between Rocklatan and Rhopressa to give to their patients. The important aspect of anticipated Rocklatan launch in the US, it's what we consider (ph) that -- it is our second product, and while we wait for the access -- the market access coverage for Rocklatan, we do believe that many, many doctors will continue writing for Rhopressa.

So we do think for 2019 there will be a bias toward Rhopressa use versus Rocklatan use, but again, Rocklatan use will catch up pretty quickly. Our business volume discussions always require supply chain elements. I believe we made excellent progress in securing reliable supply chain and we currently have about eight months supply of Rhopressa inventory on hand at our manufacturing site, not including that in the trade channels. We do expect to have our second contract manufacturer providing Rhopressa supply to us and we take it that approval for that secondary side will occur in the next month or so.

Further, as we continue to derisk our supply sourcing, our own Ireland facility is exceeding our expectation as our plan is to have commercial supply in Ireland starting in early 2020 along securing our ability to control sourcing, and remember, this will be for Rocklatan specific initially, but it also resulting in about a 40% reduction in already low cost of sales. As for Rocklatan, we continue to have about eight months supply of finished products and what we call bright stock,but it's not labeled yet, and we always do that in anticipation of the FDA approval. Once we get the approval, it really takes us about six weeks in order to get the labels printed and get the package inserts and cartons et cetera, et cetera, put the bottles back online and get everything applied so that we can begin shipping. So, while we do expect on or before the PDUFA date get the approval, it will take us roughly six weeks after that before we can actually ship it out the door.

Turning our initiatives outside the US, as you know, the European Medicines Agency accepted our marketing authorization application for Rhokiinsa, which is the name that we use for Rhopressa in Europe, and they did that in September of last year. I do expect that approximately a 12-month review. So, hopefully by the end of this calendar year, we'll have Rhokiinsa approved in Europe. As soon as that review is complete and we get the approval there for Rhokiinsa, then we'll file for Rocklatan in Europe.

Rocklatan will be called Rocklanda(ph) in Europe and we again expect about about a 12-month review. As a reminder, we do not expect the launch of Rhopressa upon approval. We are going to wait for Rocklatan or Rocklanda to get approved. So that we can get that price first before we actually introduce Rhopressa into the market. In addition to that, just want to remind everybody, we did make a decision to commercialize Rocklanda on our own. So we'll be building a sales force for that as we get closer and closer to approval.

Also, by the end of 2019, we do expect to have top line data for our Mercury 3 trial for Rocklatan. It is currently under way in Europe, which we expect to be beneficial for pricing purposes in the key European countries. We continue to observe growing interest in Aerie franchise in Europe and expect to amplify the presence with the Head of the Commercial for Europe. It will be starting efforts and we're starting over the next couple of weeks. In addition to this key hire, we now have over 60 employees in Europe that managed to build out and the operation of our manufacturing plant in Ireland.

We have employees that are focused on the execution of the Mercury 3 clinical trial that I just mentioned and we do continue to build our clinical and medical affairs team in Europe. Regarding our expansion in Japan, last week I attended investigator meeting in Tokyo and we prepare to initiate our Phase II trial for Rhopressa in Japan in just a few weeks. There were about 25 investigator sites that were in attendance and the level of interest there is pretty high, and our new office in Tokyo will oversee the clinical and regulatory activities in Japan.

As you know, there is some familiarity with ROCK inhibitors in Japan with a twice daily product currently marketed there. Importantly, aside from being once daily, Rhopressa, based on our clinical data, may have the possibility delivering higher efficacy and a better adverse event profile than currently marketed products. We were also told by a number of physicians in Japan as the data for the product that is currently available in Japan certainly shows that it's not particularly effective in treating patients with lower retentions and remember the intraocular pressure in Japan is roughly about 3 or 4 millimeters lower than the average pressure in the United States, and certainly that was born out in one of our Phase II trials. So we do think we may end up having a very, very successful drug for the Japanese market in terms of Rhopressa.

I am now going to turn over the call to Casey Kopczynski, remember he is our Co-founder and Chief Scientific Officer who is going to talk about the excellent progress we have made with our current manufacturing practices or cGMP facility in our Durham, North Carolina, headquarters where we're setting up our own course and what we can do for next generation of implant technology. Very, very important component of our product pipeline in the retina space.

Casey?

Casey Kopczynski -- Co-founder and Chief Scientific Officer

Thanks Vince. At Aerie we have great expertise in small molecule chemistry, which is what led to the discovery of the active ingredient in Rhopressa netarsudil. And for the past few years, we've been focused on applying that expertise in small molecule chemistry for the treatment of back of the eye diseases. Now, we know there is a critical need for new drugs that treat complex back of the eye diseases such as age-related macular degeneration and diabetic retinopathy. For example, in wet AMD, retina specialists have only one drug class available for treating patients, the anti-VEGF protein therapeutics. If a patient does not respond well to anti-VEGF or if after five years or so, they lose the initial gain that they had envisioned, physicians have no other drugs to turn to. Now contrast this with glaucoma where physicians can now draw from six different small molecule drug classes to tailor treatment to the needs of an individual glaucoma patient.

Now, in spite of a need for new treatments, small molecules have generally not been pursued for back of the eye diseases because unlike protein therapeutics, small molecules are rapidly cleared from the eye due to their shorter half lives. So, to enable the development of small molecule therapies for the back of eye diseases. We set out to identify a new, safe, and effective small molecule delivery technology that would reduce intravitreal injections to once every four to six months, which is the interval that retina specialists tell us they prefer for following up on their patients. We achieved our goal through our licensing arrangement with DSM, which is a global science-based company headquartered in the Netherlands, which provides us exclusive rights to use their proprietary bioerodible polyesteramide polymers for ophthalmology. And, our acquisition of assets from Envisia, which includes the rights to use PRINT manufacturing technology for ophthalmology.

These two critical business development activities provided Aerie with a proprietary drug delivery platform that has the potential to enable reproducible large scale manufacturing of bioerodible sustained-release implants that are minuscule in size and therefore easily injected into the eye. Aerie's implant manufacturing takes place at our Durham, North Carolina headquarters where last fall, we commenced operation of our cGMP validated PRINT manufacturing facility to produce these tiny injectable implants for clinical use. We're currently capable of manufacturing thousands of precisely sized implants per week within a mere 1,000 square feet of floor space. Not only do we now have the technology to potentially provide sustained release of small molecules, but also the ability to control our own destiny by owning the manufacturing process.

Personally, I believe the retina clinical programs that Theresa is about to discuss are just the beginning. This implant platform has the potential to provide a wide array of different drug treatments for different diseases of the eye, and ultimately help physicians provide more individualized care for their patients. Now I'd like to turn the call over to Theresa Heah, our Vice President of Clinical Research, Medical, and Professional Affairs to walk you through the progress we're making with our retina clinical programs.

Theresa?

Theresa Heah -- Vice President of Clinical Research

Thank you, Casey. Aided by the innovative technologies Casey just outlined, we are developing two highly innovative preclinical sustained-release implants focused on retinal diseases. Through the Envisia asset acquisition, we are developing AR-1105 a dexamethasone steroid implant. The Investigational New Drug Application or IND for AR-1105 was submitted in December, 2018. And in January 2019, we announced that the FDA reviewed the IND and it is now in effect allowing us at Aerie to initiate human studies in the treatment of macular edema due to retinal vein occlusion or RVO.

As background, RVO, is the second most common slight threatening vascular disorder of the retina after diabetic retinopathy. We expect to initiate a Phase II AR-1105 clinical study next month. As you can see, we are moving very quickly with this high priority component of our pipeline. We believe AR-1105 is particularly exciting as it has the potential for fewer side effects due to the lower peak drug levels compared to the current leading products, along with the improved administration through a smaller needle and very importantly, a longer duration of efficacy at six months.

AR-13503 for which we expect to submit an IND in the first quarter of 2019 is our very own Aerie-owned Rho kinase and Protein kinase C inhibitor with potential in the treatment of diabetic macular edema, DME, wet age-related macular degeneration or wet AMD, and other related diseases of the retina. AR-13503 has shown lesion size decreases in then in an in vivo preclinical model of wet AMD at levels similar to the current market-leading wet AMD anti-VEGF product. When used preclinically in combination with the market leading anti-VEGF product AR-13503, produced meaningfully greater lesion size reduction than the anti-VEGF product alone in a model of proliferative diabetic retinopathy.

We expect to initiate a Phase II clinical study for AR-13503 in the second quarter of this year and expect first stage top line results in the second half of this year. The many retina specialists we have spoken to have expressed quite a bit of enthusiasm about AR-13503 and the new mechanism of action it provides and many are eager to participate in our upcoming clinical trials.

As Casey stated, our ultimate goal is to satisfy the unmet needs in the retina market by providing new and innovative therapies with sustained efficacy over a period of several months. With that, I would like to turn over to Chris Staten to cover the financial. Chris?

Christopher Staten -- Vice President of Finance

Thanks Theresa. As a quick financial update, we recorded $14.5 million of net revenues in the fourth quarter or double the revenues generated in the third quarter. Our net revenues for the full year 2018 were $24.2 million within the guidance range we provided earlier last year of $20 million to $30 million. Our net revenues reflect volumes of nearly 112,000 bottles for the fourth quarter and nearly 190,000 bottles for full year 2018.

Our gross margin for the quarter ended December 31st 2018 was 97.4%. Our normalized gross margin was approximately 96.5% when considering inventory costs that were expensed prior to FDA approval of Rhopressa. Our fourth quarter 2018 GAAP net loss was $51.5 million or $1.14 per share. When excluding the $9.7 million of stock-based compensation expense, our total adjusted net loss was $41.7 million or $0.92 per share.

Adjusted operating expenses for the fourth quarter 2018 totaled $56.3 million, which includes $25.5 million in adjusted SG&A expenses, $6.8 million in pre-approval commercial manufacturing expenses and $24 million of adjusted R&D expenses. Pre-approval commercial manufacturing expenses were previously included in SG&A expenses and are now identified separately for further transparency. These expenses consist of inventory and inventory-related expenses prior to product or manufacturing site FDA approval. This expense category is expected to go away by mid 2020.

For additional information regarding our fourth quarter and full year 2018 results and prior period comparisons, please refer to today's press release and our Form 10-K which we filed later this week. Our full year 2018 cash burn, was approximately $215.5 million, in line with the high end of our guidance. We ended the year with $203 million in cash and cash equivalents and 45.5 million shares outstanding.

We also have the undrawn $100 million credit facility available, giving us very substantial total liquidity at over $300 million. With this level of liquidity, we see no need to raise additional equity capital to support our ongoing business operations. If we need to raise capital, it would be to pursue a business development opportunity. As Vince mentioned, we are providing 2019 full year cash burn guidance in the range of $210 million to $220 million, consistent with our full year 2018 actuals but with a different mix of components. Aside from annualization of our 2018 expenses to reflect a full year of the commercial team for example, our year-to-year expense growth is expected to be nominal. Because our Ireland plant is nearing completion, our capital expenditures are decreasing substantially, but are largely offset by increases in inventory build to support expected growth in product volumes.

And now, I would like to turn the call over to the operator for questions. Operator?

Questions and Answers:

Operator

Thank you, sir. (Operator Instructions)

Our first question comes from the line of Adnan Butt of Guggenheim Securities. Your line is open.

Adnan Shaukat Butt -- Guggenheim Securities -- Analyst

Hey, thanks for the question. Vince, I just want to confirm, so the cash burn guidance will not change. The the next guidance update will be just the company providing Rocklatan and Rhopressa sales, is that correct? And how would you communicate that? Would you hold a call or is that press release?

Vincente J. Anido -- CEO & Chairman

So, hey Adnan. So, yes, the next interaction will be hopefully right after we get the approval for Rocklatan, and we'll will give you the net sales guidance -- we will give you range of net sales for the year. We do plan on doing that just vis-a-vis a press release, so that everybody has that. We're going to be at a number of investment conferences over the next couple of weeks and so, really, it's going to -- we'll have plenty of opportunities to answer investor questions pretty directly as they are all just congregating around that March 14 PDUFA date. So that's why we don't see the need for a call. In the press release itself, we'll also reconfirm some of these other metrics that we just talked about. One of the things that we do want to point out is that while we are giving you a net cash burn guidance for right now, our collections has been terrific.

I mean, we've been collecting a huge percentage of our sales and we've been doing that pretty quickly. So our burn is going to be impacted obviously, our net burn will be impacted by how much we collect.

Adnan Shaukat Butt -- Guggenheim Securities -- Analyst

Changing gears a bit...

Vincente J. Anido -- CEO & Chairman

(multiple speakers) and just derive it on it for you.

Adnan Shaukat Butt -- Guggenheim Securities -- Analyst

Thanks, Vince. Just changing gears a bit on actual sales. Do you know what's happening with Part D patients right now? Are they mostly getting samples and if that's the case then does the -- will the company have visibility on how many of them can be converted to sales quickly?

Vincente J. Anido -- CEO & Chairman

Yeah. So I'm going to have -- I've got Tom here with me. So I'm going to have him walk you through what we think is happening with the Part D patients.

Thomas A. Mitro -- Aerie Pharmaceuticals, Inc.

Hi, Adnan, thanks for the question. So certainly some Part D patients are definitely getting questions, but physicians just don't like to sample a patient over and over and over again, just sets a bad precedent or precedent for their office. So what I can tell you though is they are certainly waiting for two things. They are waiting for increased coverage for Rhopressa, which as Vince mentioned, we think will occur in the next couple of weeks. That's the first thing they are waiting for and of course the second thing they're waiting for is the approval of Rocklatan and we think that -- very excited about both potentials off of that.

Adnan Shaukat Butt -- Guggenheim Securities -- Analyst

Can I sneak one in on the pipeline. It's on 503 -- 13503. What's the objective here? Is it duration or differentiated activity or is it too early to tell? And did I hear right that you expect to update on 503 this year?

Theresa Heah -- Vice President of Clinical Research

That's right. Hi Adnan, this is Theresa. So for AR-13503 or 13503, it has the potential to inhibit angiogenesis, preserve the blood retinal barrier and reduce retinal fibrosis in retinal diseases. So our Phase II study is a safety study, and we expect to have the first or stage 1 read out in the second half of this year.

Adnan Shaukat Butt -- Guggenheim Securities -- Analyst

Okay. I'll get in line. Thanks.

Vincente J. Anido -- CEO & Chairman

Thank you.

Operator

Thank you. Our next question comes from Annabel Samimy of Stifel. Your question please.

Annabel Samimy -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Hi guys, thanks for taking my questions. Good quarter. So just a question on the Rhopressa Rocklatan dynamics. So we got the sense just in the past several months that Rhopressa has not that -- is being -- very much being used more as, I guess, salvage layer on to patients who are already on multiple treatments. I know you commented on it before a little bit, but how much is it moving earlier in treatment? Are they starting to take treatment -- other treatments away and is there a gray area, where, I guess, the target market for Rhopressa and Rocklatan may kind of be the same? So if that's the case, are you going to try to be more explicit with physicians? Which population do you think both are appropriate for? Are you just going to really leave that all together and let the two live in maybe a gray area for a while? So that's my first question.

I guess just to follow on that, are you doing anything ahead of the Rocklatan launch to I guess better solidify Rhopressa's place in the market, I suppose, in case you start to see some kind of reversal? Thanks.

Vincente J. Anido -- CEO & Chairman

So I'll answer the last part first, which is the biggest thing that we can do to solidify Rhopressa in the marketplace is continue making sure that we deliver the messaging in terms of its efficacy and it's safety, and once a day et cetera, et cetera, and ensure reimbursement. And so that's why this -- getting this last, roughly 35% incremental Medicare Part D coverage over the next month or so is so critical, because it will give the doctors an opportunity to really accelerate the growth of Rhopressa prior to Rocklatan walk in into the door. I think that the positioning for Rocklatan vis-a-vis Rhopressa hasn't changed from the day that we brought the company out. Rocklatan, we think because of its efficacy, because if it's once a day, because of its adverse event profile et cetera, et cetera, is going to be the most efficacious single drop that you can administer to a glaucoma patient, and so we think that ultimately a lot of doctors would just simply -- that will be their go-to drug. We don't think that's going to change at all.

We do think that Rhopressa will continue to have a place in the market in terms of initially, it's going to be for those doctors who have practices where the managed care coverage for Rocklatan hasn't kicked in yet. So you are going to see sort of a phasing. And then -- but ultimately we think that there's a lot of patients out there who are -- don't want the adverse -- the permanent cosmetic changes that you see with some of the prostaglandins. So Rhopressa could be used as a single entity agent. So I think there's patients out there that have Glaucoma and -- but their pressures are pretty low. So they may not need anything else other than Rhopressa to bring those pressures down. And we also know that there's a lot of doctors out there who don't like latanoprost. They really truly believe that Lumigan or Travatan are better drugs, are better prostaglandins, and so they can get many of the same efficacy effects that we see with Rocklatan, by simply adding Rhopressa to their favorite prostaglandin. So we think that that's how it's going to separate out.

But again, I think that there's going to be an awful lot of noise in the marketplace, especially this calendar year, with managed care reimbursement until that truly kicks into high gear and we're not going to see that -- the ultimate separation occurring until we get Rocklatan on motion formularies.

Annabel Samimy -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Okay, thanks. That was helpful. So the other thing I want to know was, I guess, you mentioned that net price was eventually going to come down to $100. I guess we expect it to be a little bit lower this quarter. So I know that you took a price increase back in November. Is your bottom --trough net price going to change over time, or -- I'm just sort of really surprised that net price was the strongest...

Vincente J. Anido -- CEO & Chairman

Little bit higher. Yeah, so, we do have an awful lot of ups and downs and puts and takes that we have to go through from an accounting point of view in order -- to come up with that final rebate calculation and the like. And so, for example, Tom was reminding me that we have over 40,000 prior authorization to get through. Remember, and for those 41,000 that got approved, the plans are paying retail. And so our average price is the full gross price minus whatever fees we pay wholesalers and things like that and prompt payment discount and stuff, so it's almost full price.

And so, the more of those we have, and certainly that's been part of the plan with some of the managed care groups that haven't put Rhopressa on formulary. So those really kicked into high gear in the back end of the year. And so I think that had an impact. We think, typically for every price -- for every 1 point of price increase we take. It's actually just cut in half, and that's how much we gain. And so, we picked up an extra 4 points, 5 points on a net price basis as a result. And so again, I think that ultimately when we get the majority of the plans reimbursing Rhopressa or covering Rhopressa will get down to roughly that $100 and then subsequent price increases, you will start seeing the net price start coming off that for.

Annabel Samimy -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Okay, great. And if I can just sneak in one more question. The adjustment factor that we should now, I guess, use for IQVIA, you mentioned it's 30%. Has that been -- is that the average that you see now with the restatement of the last year or is that -- does that fluctuate a lot or should we just assume that it's a nice metric to use going forward to really calculate the sales.

Vincente J. Anido -- CEO & Chairman

So right now it's about 30%. We think that that's a pretty good price because, again, in part it was due to the restatement of the algorithm for IQVIA. So that created a slightly bigger gap than we have seen in the past, but they restated all their numbers. And so if you take a look at our slide deck and you look at, and I'll you how often I've used that, I can tell you at slide 6, you will see that these lines are almost perfectly parallel. So it has been holding right around that 30% mark.

Annabel Samimy -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Okay, Okay, great, thank you so much.

Vincente J. Anido -- CEO & Chairman

Yes, ma'am.

Operator

Thank you. Our next question comes from Dewey Steadman of Canaccord. Your line is open.

Dewey Steadman -- Canaccord -- Analyst

Hi, thanks for taking my questions, and our thoughts go out to Rich and his family. I guess, on the the cash burn guidance with it being flat to 2018 and with $90 million or so more in revenue expected if consensus is indeed right, where that's been coming from? Commercialization expense -- SG&A has stayed relatively flat through 2Q, 3Q and 4Q. So is R&D driving that or is that is it significantly more commercial than what we're thinking at this point.

Vincente J. Anido -- CEO & Chairman

Yes. So I think from a commercial point of view, we're pretty well wedded out as I think there will be some incremental expenses on the commercial side as we launch Rocklatan and stuff, but some of it just simply a mix issue. So we had capital expenditures last year in Ireland as we are finishing up the plant. That plant's actually now doing validation batches. So it's cranking stuff out. So we don't see -- I mean, we're still spending some capital there, but it's single digit millions as opposed to tens of millions of dollars that we spent last year, but it's -- you'll see that in the mix and so let me just have Chris walk you through what we think are some of the dynamics in terms of the others, like the expense mix.

Christopher Staten -- Vice President of Finance

Sure. From an operating expense standpoint, there's pluses and minuses. So they're certainly one-time expenses that occurred in 2018 largely around those development areas. Again, they are offset by the annualization of some of our commercial spending as well. So again, there is pluses and minuses but we really feel that we should be in relatively flat from an operating expense standpoint.

Dewey Steadman -- Canaccord -- Analyst

Okay. I guess it, am I doing the math wrong? Are you not considering revenue into the door because there's an extra $90 million in the spend that's implied by a flat?

Vincente J. Anido -- CEO & Chairman

So I gave you the actual guidance for the year. I can't take that number down. So I'll give you -- so It's basically a gross expense number that we're giving you. So it's a cash -- gross cash burn. So it doesn't include any add backs or receivables in our sales and in the subsequent receivables off of that. And so when we actually give you the sales guidance, it's again, assuming the Rocklatan approval on its PDUFA date, it will be onesome total number, and then we'll be able to give you some estimate in terms of collections based on that -- on the timing et cetera, et cetera. And so, you'll be able to back into the number that you're looking for.

Dewey Steadman -- Canaccord -- Analyst

Okay. That's extremely helpful. And then, I guess on the restatement from IQVIA, obviously we don't work for IQVIA -- you guys don't work for IQVIA, but there is the restatement and it caused a lot of confusion with investors and can -- maybe Tom go through the dynamics of that restatement and why that needed to be done?

Thomas A. Mitro -- Aerie Pharmaceuticals, Inc.

Yeah, Dewey. I can give you a top line approach to it. So, what IQVIA was saying previous to now, what they've been doing is when a prescription was written and the pharmacist would take it and put it in a box and in essence get it ready the patient to come in to dispense it. At that time, they would call it a prescription. A percentage of those prescriptions are abandoned. They never get picked up by the patient. So it was -- they said it was like a false reading. What they're doing now is, they are not coming in as a prescription until the patient comes in, pays for it, and walks out of the pharmacy. So that's really was the restatement was all about, and they think this is a much more accurate count.

Dewey Steadman -- Canaccord -- Analyst

Okay. And do you think co-pay card usage or sort of co-pay shock may contribute to some patients abandoning Rhopressa script?

Thomas A. Mitro -- Aerie Pharmaceuticals, Inc.

Well, co-pay cards, I think would help, but remember, that's just for the commercial side of the business Deway. There's no co-pays as you probably know on the Medicare side. So that's the hurdle with Medicare.

Dewey Steadman -- Canaccord -- Analyst

Okay and then my final question is just on stock purchases. With the guidance that's about to be issued, at what point can executive start purchasing stock because I know there's been some investor concern about recent stock sales over the past few nine months or so.

Vincente J. Anido -- CEO & Chairman

We have -- like everybody else, we have windows that we have to go through and the -- we don't call out windows. Windows occur because they -- for some of us they shut down for most of the year.

Dewey Steadman -- Canaccord -- Analyst

All right, great, thanks guys.

Operator

Thank you. Our next question comes from the line of Serge Belanger of Needham. Your line is open.

Serge Belanger -- Needham & Company -- Analyst

Hi, good afternoon. A couple of questions on the formulary -- formulary coverage of Rhopressa. I think on Part D, you mentioned that you expect coverage for that segment to nearly double over the next few weeks. What kind of bullish or should we expect a bullish in prescriptions from that doubling of coverage? And then, as you think farther into 2019 (ph), they expect Medicare coverage to move a lot from that 70% coverage. And on the commercial side, I think the last update that you gave earlier this month, you were at 55% coverage in Tier 2. Should we expect any movements from that?

Vincente J. Anido -- CEO & Chairman

So, Dewey, for you first part -- I'm sorry, Serge, for the first part of your question, if you go back to the, again, that slide 6 that I just talked about a little bit earlier, and you take a look at the deltas that occurred when we went on, we had our first big gain in Medicare Part D Coverage in October 1 of 2018. And so, if you go back a month, and you look at what we were running, and then you see what the new number was when we added roughly 30 -- 30% Medicare -- incremental Medicare Part D coverage, there was about a 22%, 23% increase in TRxs and unitized TRxs or the bottle component associated with that as a result of that increase.

And, so, again, I think you're going to see something directionally about the same. They are neutrally -- let's say that we closed off and get this plan activated or these plans activated March, 1, it will take them almost a month to really kick it into high gear, because that's how long it takes for the patient to come back in and actually for to the impact, which is what we saw back in October. We didn't see much of an impact in October. It all in November. And so, I think that's what you can expect, and again, if it's a March 1 date, you'll see the impact starting April 1.

Serge Belanger -- Needham & Company -- Analyst

And then on overall -- as you look for coverage into further into 2019, do you expect any increases from that 70% level? And on the commercial side, like I said the -- in the prior update you were at 55%. Should we expect that to remain stable?

Thomas A. Mitro -- Aerie Pharmaceuticals, Inc.

Yes. Serge, this is Tom. I happen to answer that for you. So we will continue to get incremental improvements in Part D, but once we get to 70%, 75%, it's much -- it's difficult to get to much higher than that, but -- so you may see an incremental movement from 72% to 74% in a given month perhaps up to 78% depending on what accounts are there. I do think the one area that people don't look at, but does make a lot of difference out to physicians in the field are things like Medicaid accounts throughout the nation because those will get in the way from -- physicians from truly adopting, and we've done very, very well in that marketplace state by state. So, we have a high confidence that it's going to be a good situation.

From the commercial side, I think your numbers are exactly right. We'll continue to try to flip accounts from Tier 3 and to Tier 2 as the year goes on and we'll see how successful we are but even that Tier 3, remember, it is not a bad situation to be in for the commercial accounts because you could use those co-pays cards. So any patient that's in Tier 3 that's using a co-pay card has a Tier 2 co-pay in essence. So it's not that big of a concern for physicians nor us or patients.

Serge Belanger -- Needham & Company -- Analyst

Okay, that makes sense. Just one broader strategy question. As we net out revenues from Rhopressa and Rocklatan here with the cash burn guidance, we can see profitability in the not-so-distant future. How do you balance the goal of being profitable with some pipeline assets in the retinal disease phase that could be Phase II ready by early 2020?

Vincente J. Anido -- CEO & Chairman

Well, that's a pretty traditional problem and by the way, it's a great problem to have, right. And so we think that we want to continue building the pipeline. We've been very, very open about continuing our presence in glaucoma and retina. Obviously now entering retina, we can get -- there is other two -- there's two other markets that we're very, very interested in and there's a lot of shots on goal that are coming up and specifically in the dry eye space along with the refractive, especially, the presbyopia category. And so, again, we are going to be looking at these. I think that if you -- if you look sort of a year or so beyond '20, so if you look at, not just when we could breakeven, but also the year after that, I think you'll see substantial enough revenues and coverage there where we can take care of anything that we want to put through the pipeline because, again, while some of these are expensive, the kind of revenues we'll be generating will allow us -- give us an awful lot of flexibility to that and then there is always the level of profitability that we could report. I mean, I don't have to be outrageously profitable. If I think I have enough products, and enough exciting new things coming through the pipeline in order to -- I prefer funding those and just simply reporting a profit -- for profit sake because you guys will know why we're doing it and you'll know that at a moment's notice, we could slip into profitability. So again, as we've done in the past, we'll be very transparent in terms of what our intentions are.

Serge Belanger -- Needham & Company -- Analyst

Thanks for taking the questions.

Operator

Thank you. Next question comes from the line of Oren Livnat of H.C. Wainwright. Your question please.

Oren Livnat -- H.C. Wainwright -- Analyst

Hey, thanks. Everything has already been touched on, but just so I can clarify a couple of things, on that cash burn guidance, while obviously we're going to be able to factor in revenue into that soon. Does that include assumed incremental promotional spend on Rocklatan assuming it's approved already?

Vincente J. Anido -- CEO & Chairman

There is still an awful lot of expenses that we've already incurred. So for example, we've been spending on Rocklatan since the tail end of last year, as we have put together programs for the market and the like. And so, there's lot of training that's been going on and stuff. And we've obviously had to build inventories both in terms of for commercial use, so that we can be ready to ship as soon as we get it approved, but also samples. So all those have already been incurred, so for the most part, whether we get to launch Rocklatan or not, we've incurred the majority of expenses that we're going to incur for this.

Oren Livnat -- H.C. Wainwright -- Analyst

Okay, it's helpful.

Vincente J. Anido -- CEO & Chairman

Reminder, this is as you know, and again I just want to reiterate for everybody's benefit. We're not eating to add to the sales force here. The only delta between this year and last year is that we have full year of our entire sales force, where last year, we had -- had a bunch of them started early, but then we really didn't have everybody fully loaded into the plan until about the March/April timeframe. And so -- but that's about the only delta. I mean, everything else, we just continue chugging along and and frankly is the -- I think, we're in pretty good position right now. So again, assuming the approval on its PDUFA date, we just don't think we need to change the expense guidance much, except for what I just went through for the fellows before you, which is to give you the -- instead of just the gross burn, we'll give you the net burn after we have collections.

Oren Livnat -- H.C. Wainwright -- Analyst

Okay. And also to follow up on that net price per bottle, I mean obviously left that upfront and highlighted that it's lumpy. It sounds like you're still guiding to a steady state around $100 a bottle, I think. Is that going to drop quickly once these March 1st contracts kick in? Is this maybe just some -- the last look at this $120, $130 level and that's going to drop quickly now, so we don't, I don't want to make a mistake of overestimating your price per script in Q1 or Q2. And also, since you did mention that Rocklatan itself should or you hope will have faster ramp up of coverage than Rhopressa even did, which was already pretty fast, should we assume that that more quickly comes in at the $100 plus small premium over Rhopressa, already in 2019 for modeling purposes?

Operator

Thank you. Our next question comes from the line of...

Oren Livnat -- H.C. Wainwright -- Analyst

No.

Operator

Oh, sorry.

Oren Livnat -- H.C. Wainwright -- Analyst

Sorry, did you guys hear that question? It looks like we are having technical difficulties. I apologize.

Operator

Ladies and gentlemen, please standby. Again, ladies and gentlemen, please remain in your line. We are experiencing technical difficulty, please standby. Ladies and gentlemen, again please standby.

Vincente J. Anido -- CEO & Chairman

Hey, guys. We're sorry about the -- the technical glitch here, in -- Oren?

Ami Bavishi -- Director of Investor Relations

Yes.

Vincente J. Anido -- CEO & Chairman

Oren, were you done with your question?

Oren Livnat -- H.C. Wainwright -- Analyst

Well, I don't know what you heard, but I didn't hear you at all.

Vincente J. Anido -- CEO & Chairman

Sure. Just -- throughout the back end of your question.

Oren Livnat -- H.C. Wainwright -- Analyst

Okay. So just to keep it short, it sounds like you're still guiding to about $100 steady state for Rhopressa net dollars per bottle. Maybe that happens then drops quickly from here with these incremental contracts coming on. But for Rocklatan, since you are projecting faster ramp-up of coverage there, should we assume sort of at-launch or -- and/or quickly thereafter that, that very quickly drops to that $100 plus premium over Rhopressa level or is that also going to have a good year of $150, $160 a pop?

Vincente J. Anido -- CEO & Chairman

We think it's going to be the latter. We think that again, we will be pretty open with you about how we're doing relative to coverage both on a commercial and Medicare Part D. Medicare Part D has a far bigger impact on the net price dropping than the commercial side does. And so, we'll give you the same visibility that we gave you during the Rhopressa component here. And so, I think you'll see about a 15% uptake in Medicare Part D, almost right out within the first few months, just like we did with Rhopressa, jumping up to about 40% plus by the time we get to October time frame, and then obviously kicking in a full gear at the beginning of '20. If it goes faster than that, we will tell you.

Casey Kopczynski -- Co-founder and Chief Scientific Officer

And so, we can't predict for you what that price will be?

Oren Livnat -- H.C. Wainwright -- Analyst

Okay, great. And just lastly, sorry, to have beat my time. Just on that IQVIA to sales out of -- to pharmacy delta, which is 30% now. Do you think that's mostly a function of IQVIA and their sampling, just not actually capturing reality as you see it or is some portion of that actually retail shelf stocking, and so that theory should narrow?

Vincente J. Anido -- CEO & Chairman

I think that at some point it will narrow and the reason for that is, it's not really the stocking component, because I think from a stocking point of view, if the pharmacy sees a new script of a doctor he hasn't seen one before, from which he hasn't seen before, to buy that bottle he may buy a second bottle that's about the extent of it. You don't see any of these pharmacies really stocking much of this stuff. But I think the biggest thing that we've noticed is, as we have continued to add new prescribers, these guys are in areas perhaps where there was no pharmacies buying Rhopressa. In fact, right now, out of the 65,000 potential outlets where you can buy prescriptions or you get your prescriptions filled, we're only on about 17,000 or so 18,000 of them around the country. And so, as we get more and more complete coverage and more doctors throughout the country using Rhopressa and then Rocklatan, I think that's where you'll see that, that delta getting a little bit smaller. But I think again, we're looking at probably -- we wish we could stop doing this in about a year or so, but my guess is that we may have to continue it through '20 because of the Rocklatan impact. And so but...

Oren Livnat -- H.C. Wainwright -- Analyst

Okay. So it's a sampling issue, an IQVIA accuracy issue? Yeah.

Vincente J. Anido -- CEO & Chairman

Well, it's not jsut -- yeah, it's an accuracy issue because again, we have 8,000 prescribers out of the 16,000 we call on -- a rough, I'm sorry, 8,000 out of 14,000 and they're in the major metro areas. So if they sample only major metros, we're doing great. Do they go out in -- out in the outskirts somewhere, they're not picking up us or anything. And so, I think it's also a function of where the majority of the high prescribers are.

Oren Livnat -- H.C. Wainwright -- Analyst

Okay, thanks. That's it for me, I appreciate it.

Vincente J. Anido -- CEO & Chairman

I appreciate. Thank you.

Operator

Thank you. Our next question comes from the line of Esther Rajavelu of Oppenheimer. Your line is open.

Esther Rajavelu -- Oppenheimer -- Analyst

Thank you for taking my questions. How are you expecting the burn to progress through the year? Is it -- is it more in the first half versus second half? Can you help us sort of think through that?

Vincente J. Anido -- CEO & Chairman

Actually one of the interesting things because it's not driven by any major events, and it's not like we're -- we've got like huge new plants or equipments going in and its second quarter that are not coming in first. It actually going to be pretty evenly split between the first and the second half.

Esther Rajavelu -- Oppenheimer -- Analyst

All right. I see. And then, in terms of -- you mentioned receivable as potentially an important source of cash, are you taking steps to improve receivables? I mean, if my math is right, I think the DSL came down by about 50% from the second quarter of last year. So what should we be expecting for 2019 on that front?

Vincente J. Anido -- CEO & Chairman

So I think the guys have done a terrific job of collecting our receivables. There are some changes that have occurred with some of the wholesale contracts and things like that, in terms of sort of when they take ownership and things like that may impact that number a little bit. But I think it's safe to say that if we are up there in that 80% -- 75%, 80% of net sales for the year that we collect, that would be a pretty good deal. And so, I think it's quite a bit -- it's actually considerably higher than that now. But I'd say just for planning purposes, I wouldn't go much higher than call it 80% of our net sales being collected in the year.

Esther Rajavelu -- Oppenheimer -- Analyst

Got it. Okay, and then...

Vincente J. Anido -- CEO & Chairman

(multiple speakers) and do better than that -- they then tell me they can do it, then I'll make sure you know too.

Esther Rajavelu -- Oppenheimer -- Analyst

Okay. And then with regards to the retinal portfolio moving into the clinic, how large will these trials be in terms of patient numbers for Phase II and the top line for Phase II are supportive? Would you be in a position to start Phase III before year-end? I'm just trying to get a sense for what's included in your cash burn for the year for the back versus the front of the eye.

Vincente J. Anido -- CEO & Chairman

Well, I can guarantee you that as much as I would love to be able to enter Phase III trials this year, I don't think that's possible. But let me just have Theresa kind of walk you through some of the enrollment numbers that are expected for this year.

Theresa Heah -- Vice President of Clinical Research

Sure. Thanks, Vince. So in terms of the sample size for AR-1105 the dexamethasone steroid implant, we have up to 45 patients to be enrolled in that Phase II trial, and in the AR-13503 trial, we had up to 102 patients to be enrolled in the Phase II trial.

Esther Rajavelu -- Oppenheimer -- Analyst

Got it. And then lastly, I just -- I'm curious to sort of understand if you'll share any of your considerations in deciding to pursue EU independently?

Vincente J. Anido -- CEO & Chairman

I'm sorry, say that part first part again?

Esther Rajavelu -- Oppenheimer -- Analyst

I'm just curious to understand some of the thought process and some of your considerations in deciding to pursue commercialization in Europe independently?

Vincente J. Anido -- CEO & Chairman

Yeah. So it was pretty straightforward. We actually thought that we would go ahead and find a partner in Europe and one of the things that we -- you will currently determine, especially looking at the potential partners for Europe, is that there's no real sort of European-centric companies other than one private one that's available that has some presence presence is many -- many of the countries. Typically the ophthalmic companies that are available in Europe or the Allergans and the Alcons of the world. And as you know, certainly here in the US in many parts of the world, they've also been contracting there commercial operations in ophthalmology.

So I didn't want to get caught up given that my products and also realizing that they were considerably bringing down their infrastructure there. We did look at some of the European-only sectors. We thought about going country by country. There are some interesting companies that are available, but it was just sort of -- is turning out to be far more laborious than we expected it to be and what we did find was quite a bit of talent available so that we can do it on our own.

And so as a way of derisking this thing, we could -- we will bring in our own commercial management team and the like, we could use a contract sales organization just out of the gate in order to make sure that we understand the dynamics of every country, and we are going to focus only on the Top 5 in Europe. So I think that helps considerably, but it was really -- the decision was driven by just -- again we did the math and we could make a lot more money if we did it ourselves than if we try to find a partner.

Esther Rajavelu -- Oppenheimer -- Analyst

Got it. Appreciate your interest. Thank you.

Vincente J. Anido -- CEO & Chairman

Same.

Operator

Our next question comes from Stacy Ku of Cowen and Company. Your line is open.

Stacy Ku -- Cowen & Company -- Analyst

Hello, thanks for taking my questions. First question is regarding Rhopressa and Rocklatan. What are your plans for co-pay cards? Will you phase out the co-pay assistance as Rocklatan is approved, which is -- if so what's your timing for these programs and if you are going to (inaudible).

Thomas A. Mitro -- Aerie Pharmaceuticals, Inc.

Thank you for the question. We plan on plan on having the co-pay card to address both Rhopressa as well as Rocklatan from the commercial patients and we'll get their corporate cards shortly after approval and launch.

Stacy Ku -- Cowen & Company -- Analyst

Okay. And then my second question, conversations with clinicians, they have been pretty impressed with IOP reduction and the population they call like the Hail Mary population. So given that we have this population, will your team kind of try to quantify how well Rhopressa has done for these patients needing surgery? Stated another way, should we be thinking months or years for metrics -- this effectiveness -- Rhopressa effectiveness in MC patients? Thank you.

Vincente J. Anido -- CEO & Chairman

Yes. It's actually the effectiveness that we see occurs pretty quickly. And so inside of the next visit, which is in some cases is short, is about a month or so later, we are currently conducting a Phase IV trial that gives us an awful -- a lot of utilization data on terms of how doctors are really actually using Rhopressa, and so let me have Theresa Heah, who also runs medical affairs talk to you a little bit about that Phase IV program.

Theresa Heah -- Vice President of Clinical Research

Yeah, thanks Vince. They are making a lot of progress with that Phase IV trial. It's a multi-facet observational trial looking at how's Rhopressa being used as a (inaudible) will evidence as adjunctive therapy, they have up to 250 patients we enroll as -- we started the trial and doing well in terms of enrollment. We -- when we have the data readout, the top line, we would definitely share with all of you.

Stacy Ku -- Cowen & Company -- Analyst

That's very helpful. Thanks.

Vincente J. Anido -- CEO & Chairman

Thank you.

Operator

Thank you. Our next question comes from Difei Yang of Mizuho Securities. Your line is open.

Difei Yang -- Mizuho Securities USA LLC -- Analyst

Hi, good afternoon. Thanks for taking my questions. So, a couple of quick ones. The first question is around -- so if we think about two years down the road post Rocklatan approval, how do you think about where the positioning of Rocklatan will be, will it be mostly a second-line therapy or will it be sort of the standard of care first line?

Vincente J. Anido -- CEO & Chairman

I'd say two years out, by the time that we get the full reimbursement picture solidified for Rocklatan, if the -- any of the feedback that we've gotten from the KOLs and from other doctors that we chatted with, is any indicator at all, I think they're going to be using it as first-line therapy as a drug of choice. And it's going to be then Rhopressa being added adjunctively if they don't want to have a latanoprost on board, because they like other prostaglandins et cetera. But I think by the time that you get out two years post launch, so you're looking at '21 or so, I think you'll start seeing that big separation between Rhopressa and Rocklatan. Where up to Rocklatan, it's first line first drug of choice, enterprises for those patients either they have some other preferred prostaglandin or have low pressure or they just have patients who just don't want any -- permanent cosmetic changes that occur with the prostaglandin.

Difei Yang -- Mizuho Securities USA LLC -- Analyst

Okay, thank you. Then on prior authorization, so for those two or three patients, do you expect all of them to go through prior authorization each year and roughly what percent does that represent the business?

Vincente J. Anido -- CEO & Chairman

I think the prior authorization component it's something that the doctors tend to use to get their Medicare patients on drug as soon as they possibly can. And so what we see is a big drop-off in the prior authorization once we get the products on formularies. And so again, we should see by the end of this quarter -- so we should see somewhat of a drop off on the Rhopressa side for prior authorization or so be, as Tom mentioned some plans that haven't covered it yet, but those are going to be the 2%, 3%, 4% plans that we will keep working on, but the only way to get those patients, Medicare patients on our drug would be prior authorizations. So it will be a limited number.

Rocklatan is going to be the other way. I think until we get big chunk of the Medicare component taken care of, you'll see prior authorizations for that. And so we use all the available assistance that we can get to the patient to get access to our drugs and so we'll continue doing that, but it is something that goes away as we get more and more Medicare coverage.

Difei Yang -- Mizuho Securities USA LLC -- Analyst

Okay. Thank you, Vince.

Vincente J. Anido -- CEO & Chairman

All right. Thank you.

Operator

Thank you. Our next question comes from Elliot Wilbur of Raymond James. Your question please.

Elliot Wilbur -- Raymond James -- Analyst

Hi, good evening. First question for Tom and Vince. Looking at the overall glaucoma market, it looks like Part D is somewhere in the 55%, maybe high 50% range in terms of total book of business for the -- with the category. It seems like you guys are reasonably close to that level already although this would argue your current Medicare positioning is certainly likely to expand fairly significantly. So you think that is sort of the right number to think about in terms of the Part D representation for Rhopressa or do you think it's actually going to be quite a bit higher than the class as a whole?

Vincente J. Anido -- CEO & Chairman

No, I think, I just want to make sure that Elliot, that were on the same page here. And so we think that the market overall breaks out to about 50-50, right. I mean, it could be a little bit more Medicare than commercial, but it's roughly about 50-50. And so the numbers that we're giving you about right now having just over 40% Medicare coverage and going up to -- we have roughly 70% 75%, is of that 50%.

Elliot Wilbur -- Raymond James -- Analyst

Yes.

Vincente J. Anido -- CEO & Chairman

Okay. So I think that we will be able to get that and we do see some matters that just haven't been able to get on Medicare Part D regardless of the discounts that they're providing. But we think that given the number of meetings that we've had so far and the feedback that we've had from some of the clinical sessions that we've had with those plans, that with Rocklatan especially because of its efficacy relative to latanoprost and being the only drug that ever beat latanoprost in a clinical trial with one drop that these guys will put it on. So I think it should be at the upper end of what everybody gets.

Elliot Wilbur -- Raymond James -- Analyst

Okay. And then with respect to the recent VAT price increase of 9%, does any that actually fall to the bottom line or is that purely ingested by the supply chain?

Vincente J. Anido -- CEO & Chairman

If we had a bottom line, it would help us. But right now it's decreasing our expenses. So yeah, we get to realize about half of it. So half of it comes from us.

Elliot Wilbur -- Raymond James -- Analyst

Okay. Got it. And then maybe a bigger picture question for yourself, guys are necessarily the tip of the spear when it comes to the great rebate debate. But if you think about your business, I mean obviously could be very much impacted by significant structural changes to the rebate system going forward? So, as a management team, how do you guys think about that and as you scenariorize contingency plan, think about sort of how changes may impact our formulary positioning and product placement and what not going forward?

Vincente J. Anido -- CEO & Chairman

It's pretty hard to speculate. All we can do is just stay on top of all the plans and we certainly get an awful lot of information fed to us about the who could be doing what, and what the ultimate things you're going to be. The facts are that it's certainly for these drugs being new chemical entities doing stuff that none of the other drugs do et cetera, et cetera, gives us a little bit of leeway here because we don't see any substitution of our drug by other drugs that are out there, because again, they don't have the same characteristics. And so -- but I don't think -- I don't think any of the plans certainly will help us. I just don't think that they will have all that, but I think it will have an impact, it just won't be that dramatic because we've already given up quite a bit of discount which just going to be, we're going to have to give up something, but it will just be going into different pockets if you will.

Elliot Wilbur -- Raymond James -- Analyst

All right, thank you.

Vincente J. Anido -- CEO & Chairman

All right.

Operator

Thank you. At this time, I'd like to turn the call over to Vince Anido Aerie's Chairman and CEO for final remarks. Sir?

Vincente J. Anido -- CEO & Chairman

Thank you. I just want to thank everybody for taking the time. We do apologize for the technical glitch a little bit earlier. I appreciate you all staying on a little bit longer than what we normally like to have for these calls. We're excited about the prospects of the Company, we are certainly excited about how we exited '18 and really excited about everything that we've got on our plate for 2019. I think it is yet, once again a breakout year for our Company where will have two products on the market for the treatment of glaucoma with a little bit of luck. And so, we are very excited about that and as we said earlier, from a communications point of view, assuming that we get the Rocklatan approval on or before it's PDUFA date, we will communicate with you via press release relative to just not only updating the guidance we provided today, but also providing you with sales guidance. And so we'll be at a number of investment conferences in the March and April timeframe. And so we'll get plenty of opportunities to be out in the marketplace talking to investors and we'll be able to clarify then anything that we see coming out of any questions that we get.

So again, thank you for hanging in there with us today and have a good day.

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, you may disconnect your lines at this time.

Duration: 77 minutes

Call participants:

Ami Bavishi -- Director of Investor Relations

Vincente J. Anido -- CEO & Chairman

Casey Kopczynski -- Co-founder and Chief Scientific Officer

Theresa Heah -- Vice President of Clinical Research

Christopher Staten -- Vice President of Finance

Adnan Shaukat Butt -- Guggenheim Securities -- Analyst

Thomas A. Mitro -- Aerie Pharmaceuticals, Inc.

Annabel Samimy -- Stifel, Nicolaus & Company, Incorporated -- Analyst

Dewey Steadman -- Canaccord -- Analyst

Serge Belanger -- Needham & Company -- Analyst

Oren Livnat -- H.C. Wainwright -- Analyst

Esther Rajavelu -- Oppenheimer -- Analyst

Stacy Ku -- Cowen & Company -- Analyst

Difei Yang -- Mizuho Securities USA LLC -- Analyst

Elliot Wilbur -- Raymond James -- Analyst

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