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Aerie Pharmaceuticals, Inc. (NASDAQ:AERI)
Q1 2019 Earnings Call
May 7, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Aerie Pharmaceuticals First Quarter 2019 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, Sydney. 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; Richard Rubino, Aerie's Chief Financial Officer; and John LaRocca, Aerie's General Counsel. 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, forecasts, and guidance regarding our future financial and operating performance, including our 2019 net revenue and net cash flow and guidance. These statements will include observations associated with our commercial launch of Rhopressa in the United States and expectations regarding the recent commercial 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 regulatory agencies of our products and product candidates, including our efforts on international expansion. Lastly, we will address our manufacturing activities and capabilities. The potential of our pre-clinical product candidates and research findings, our financial liquidity, and 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 the result of new information, future events, or otherwise. Please note that we will file our 10-Q tomorrow.

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.

Vicente Anido -- Chairman and Chief Executive Officer

Thanks, Ami, and good afternoon, everybody. I appreciate you joining us today. We've made incredible progress over the last year, as we have entered this year with Rhopressa and obviously getting not only the approval for Rocklatan but actually getting into the marketplace in a short period of time.

Certainly, for this call, the big news is the widely anticipated Rocklatan launch. It officially kicked off May 1st of this year. As you know, Rocklatan is the only fixed-dose combination product in the U.S. for the reduction of intraocular pressure that includes not only, obviously, Rhopressa, but a prostaglandin. And it's the only one that's really once a day. And it's really the only one that's shown statistical superiority in IOP reduction compared to latanoprost in a United States Phase 3 trial.

Having just returned from -- ARVO Conference in Vancouver -- now, ARVO is the Association for Research in Vision and Ophthalmology -- as well as ASCRS Conference in San Diego -- ASCRS is the American Society of Cataract and Refractive Surgery -- I can tell you the level of interested in Rhopressa and certainly Rocklatan have never been higher among eye care professionals. We interacted with scores of physicians at these meetings and I believe the level of excitement and anticipation is greater in this space.

I do believe that Rocklatan has the potential to be a game changer in the treatment paradigm for glaucoma and intraocular hypertension and it's currently for distribution. It's certainly available for patients and we have about 60% commercial lines already covered in Tier 3, which is relatively consistent with the way we started off with Rhopressa just a year ago. Samples have made their way to physicians and, as some of you know, we've already starting picking up prescriptions. We are hopeful that the coverage for both commercial and Medicare Part D will come in at an accelerated rate relative to what we saw with Rhopressa over the last 12 months.

As we previously indicated, Rocklatan price is set just slightly above that of Rhopressa in order to maximize payer acceptance. Of course, the clinical efficacy, safety profile, and once-a-day aspect of Rocklatan will also be very important factors in getting broad payer coverage. We've had a number of calls already with some of the payers and have had some clinical reviews and the like and so, again, we feel, right now, very, very bullish about our prospects there.

Even though we just launched Rocklatan, we're already receiving very positive feedback from several ophthalmologists on how Rocklatan is reducing pressures to low normal levels or lower normal levels that were previously unachievable for their patients. These levels are consistent with what we say in the Phase 3 trials, where Rocklatan brought about two-thirds of the patients in the trial from baseline to about 16 mm or below compared to about only a third of the patients that were in the latanoprost arm of the trial.

As part of the kickoff, specifically in this week, we're conducting what we're calling the Rocklatan National Broadcast program. We have a video that we put together with leading glaucoma specialists and that video is going to go out this week. We have 62 sites around the country and over 1,000 doctors that will actually get to participate in this program over the next couple of days. The meetings or the programs will start tomorrow and go through Thursday. And so we're very excited about being able to reach that big of an audience this quickly with the clinical information about Rocklatan. And also in that trial, we will see quite a bit of information about Rhopressa as well, because as a reminder, in the Phase 3 trials for Rocklatan, the Rhopressa arm did better that what we saw in its own Phase 3 trials.

The second piece of important news actually relates to Rhopressa. We have increased our Medicare Part D coverage for Rhopressa, effective May 1st, from about 40% to 75% of covered lives. The commercial coverage remains strong at about 90% and about just over 55% of that is in Tier 2. The majority of coverage for Rhopressa now in Tier 2 across the board. We believe our Rhopressa volumes will begin ramping up as it now becomes much easier for physicians to prescribe without needing to deal with the prior authorization process which, as many of you know, can be laborious and certainly is not a whole lot of fun for the medical practices.

We also believe there are a number of eye care professionals who have held back on prescribing Rhopressa until they knew that we had majority coverage. So, here we are. I think achieving the majority Tier 2 coverage within the first year of launch is a major milestone for any company and we feel very strongly that that's we wanted to be because it brings the copays down to the $20 to $40 range for a prescription, where we believe the majority of the patients will pick up those scrips.

As you saw in our earnings release, we reiterated our 2019 net revenue guidance today at $110 million to $120 million for Rhopressa and Rocklatan. And as we said before, we're not going to break those out from a guidance point of view. Our Rhopressa net revenue in the first quarter came in at right around $11 million. Average net revenue per bottle was about $100, reflecting a higher proportion of Medicare Part D volumes.

As you know, we have said our net revenue per bottle is lower for Medicare Part D than commercial because we rebate more steeply and we have the doughnut-hole funding that we have to take care of. On the commercial side, also as you know, we can use copay cards to offset the cost to the patients. We can't do that on Medicare.

Looking forward, occasionally, we may fall below $100 per bottle as we move more and more into Medicare Part D and they become a bigger portion of our quarters. But, again, we expect that we'll bounce right around that line for the foreseeable future.

Now, looking at the Rhopressa volumes, once again, the wholesale inventories were consistent at the beginning and the end of the first quarter at about two weeks -- again, an industry norm. Our Q1 shipments to wholesalers were essentially flat from the fourth quarter of 2018 to the first quarter of 2019. At a high level, our first quarter volumes were moderated by the customary first quarter deductible effect, heavily sampling on the part of our competitors -- they build greater defense on Rocklatan -- and none of that really surprised us. When I was attending ASCRS, we had a lot of our district managers there and some of them were actually showing me photographs that they had received from their reps about the number of samples of competitive products that were in many of the practices. And certainly it's something that we have seen over the last number of years, where competitors try to negatively impact the launch of a new competitor.

Now, moving beyond the first quarter, we recently have been experiencing strong Rhopressa shipments to wholesalers, as well as sales out from wholesalers to pharmacies. I'm a strong believer that that metric is a far better of our success than the IQVIA data that we're currently seeing. We have been achieving record levels of some of those units out from wholesalers to retails. We've seen some increases in sales out throughout the months of April and into May.

To give you a more detailed perspective, if you look at our last corporate deck, we reported sales out to pharmacies for the last week of March at roughly about 9,500-9,600 bottles. And for the first week of May, that number jumped about 500 -- I'm sorry, about 1,000 bottles. So, quite a bit higher than what we saw before. Now, we do look at that data on a daily basis. We get yesterday's data, in terms of shipments from wholesaler-retail, we got that this morning. And, certainly, it was one of the highest levels we've ever seen, indicating that that trend that was established here a few weeks ago, in terms of Rhopressa shipments, will continue.

The next several weeks and months will be an exciting time for us, with expected continued growth of Rhopressa, with the increased coverage and what we believe will be significant pent-up demand for Rocklatan. Our sales team of about 100 territory managers is fully trained and excited to be discussing both Rhopressa, as well as Rocklatan, with the eye care professionals.

Now, as of now, more than 9,100 doctors, or nearly two-thirds of our targeted population, have written a prescription for Rhopressa and over 90% of the top prescribers in Deciles 9 and 10 have written Rhopressa scrips. Now, to give you another metric, 80% of the prescribers who write 50% of glaucoma prescriptions in the U.S. have prescribed Rhopressa to at least one patient, a clear testament to the broad usage we are seeing.

From a retail outlook perspective, we now have about 21,000 retail outlets across the U.S. that have filled a Rhopressa prescription and are obviously now buying from the wholesalers. That represents nearly a third of the retail outlets in the country. And that is up from just about 25% that we reported on our year-end call in early March. So, again, the more and more coverage that we get or the more and more outlets that continue to buy our products, the closer and closer the estimates that we get from IQVIA will become to our real net sales.

We have seen many doctors increase their confidence in Rhopressa and we fully expect this to continue since we now have market access for the majority of commercial Medicare Part D lives. Currently, they continue to expand their use of Rhopressa into various patient treatment scenarios. I think the most common is they use Rhopressa on what we call "on top of max medical therapy." Many times, that's 3-4 medications and they just add Rhopressa sort of as a last hope. And in many, many cases, they see an incremental drop in pressures. And as they get more and more comfortable with using Rhopressa, then they start moving it up in line and eventually just start using it right after a prostaglandin isn't enough to control these patients.

We did have an advisory board that met at ASCRS and we had a mix of mainly glaucoma guys, along with cataract and general ophthalmologists, and it was really interesting to see the shifts there or the interest levels. For the glaucoma guys, they're looking at Rocklatan as being the game changer. They're gonna look at it for almost every patient and think about using Rocklatan on those patients. Whereas guys like the cataract guys know that many of their patients, because they're inducing the surgery, can't take a prostaglandin because they've been shown to have some adverse effects after you've had a surgical procedure. And so they're looking, more and more, at using Rhopressa to control intraocular pressure through some of their surgeries.

So, again, we see that the marketplace is clearly choosing one product over the other for various specific reasons that are specific to their individual practices. We certainly have more than enough inventory to meet expected demand. Managing inventory levels, right now, we've got about 6-8 months' supply for both Rhopressa and Rocklatan. We also continue to de-risk our supply sourcing. Our owned Irish facility is exceeding our expectations, in terms of getting ready to be able to commercialize or for us to be able to ship product out of that facility. Remember, Rocklatan will be the first one we ship. We think we'll be ready toward the end of this year or the beginning of this year. And we also have a second contract manufacturer on board, because, again, we expect the demand for Rhopressa and Rocklatan will keep the two or three guys we have out there busy.

Turning to our initiatives beyond the U.S., I'd like to start with some observations from the ARVO Conference that we just attended, where we continue to see a great deal of interest in Aerie among doctors from outside the U.S. We had the opportunity to bring together several doctors, not only from the U.S. but also Europe, Asia, and Canada, to discuss our company as well as our progress. Their level of interest in us continues to be high. And we certainly have expanded our presence in those markets. I believe that, ultimately, we'll be recognized internationally as a new innovative ophthalmology company.

For us, execution is a vital component of building our reputation overseas. As you know, the European Medicines Agency accepted our MMA, or our Marketing Authorization Application, for Rhokiinsa, which is the name for Rhopressa in Europe. And they accepted that back in September of last year. We expect that in roughly 12 months -- so as we exit Q3, beginning of Q4 -- we'll expect to see an approval for that product, assuming success there. And after the review for Rhokiinsa is complete and approved, we do plan on filing the MMA, or, again, the Marketing Authorization Application, for Rocklatan, which is likely to take another 12 months to be reviewed.

Our plans in Europe are unchanged. We expect to commercialize Rocklatan first in Europe on our own. As a reminder, Rocklatan will be called Rocklanda in Europe. And so we'll be using some of those names interchangeably.

Also, we do have Mercury 3, our ongoing Rocklanda Phase 3 trial in Europe. We should have enrollment completed by the end of this year and have top-line data sometime in 2020. And as we have said before, Mercury 3 is expected to be beneficial for pricing purposes in the key European countries. It's not part of the approval submissions that we are going to be doing.

Now, to my earlier point on gaining company recognition outside the U.S., on April 1st, we announced Gianluca Corbinelli as our Chief Commercial Officer in Europe. He joins us with strong European commercialization background, having held related positions at both Shire and Bayer. So, he knows both front and back of the eye pretty well. With him on board, we will further build our presence in Europe and we have the leadership expertise now to navigate through the payer environment in each of our target countries in Europe as the need arises.

Now, regarding Japan, enrollment in our Phase 2 trial that's conducted over there is on track. We have roughly 25 sites that are conducting our trial and we look forward to reading out the results of the trial sometime toward the end of this calendar year. And as we announced and discussed previously, we already have our Tokyo office established and led by respectable leaders in Japan's ophthalmology network, principally in the clinical and regulatory and professional relations arena.

Now, moving on to our retinal programs, as a reminder, Casey and Theresa Heah were on our call last time and spoke quite a bit about that. It's one of the most exciting areas of research that we have at Aerie and we're actually developing a pathway to bring small molecules therapy to the back of the eye. An important benefit of small molecules chemistry is that it allows us to address a wider range of therapeutic targets than protein therapeutics, which we think is critical in treating or addressing the unmet needs for treating complex diseases, such as macular degeneration and diabetic retinopathy.

To enable the development of small molecules therapies for the back of the eye, we established our licensing agreement with a Dutch company, DSM, which provided us with exclusive rights to their bioerodable polyesteramide polymers for ophthalmology. And then as we said a couple of years ago, we are combining that with our technology that we acquired from the assets of Envisia, which included the right to use print manufacturing technology for ophthalmology.

Now, these two critical development activities provided us with a proprietary drug delivery platform that has the potential to enable reproducible, large-scale manufacturing of bioerodable sustained-release implants that are minuscule in size and, therefore, easily injected into the eye. And as you know, as we mentioned before, we do have an implant manufacturing that's actually taking place in our Durham, North Carolina headquarters. We commenced operations of our GMP-validated print manufacturing facility there to produce these tiny injectable implants for clinical use and we're actually supplying our dexamethasone insert out of that facility.

You read about the two highly innovative, pre-clinical, sustained release implants focused on retinal diseases and here, again, our team has made excellent progress. Shortly, we will have not just one but two implant product candidates in the clinic. The first, AR-1105, a dexamethasone steroid implant, has been in the clinic since mid-March of this year. The Phase 2 clinical trial that is being evaluated -- that product is being evaluated for the treatment of macular edema due to retinal vein occlusion or RVO. As background, RVO is the second-most common sight-threatening vascular disorder of the retina after diabetic retinopathy. So, an important marketplace and certainly one where steroids have proven to be very useful.

We believe that 1105 is particularly exciting as it has the potential for fewer side effects due to lower peak drug levels compared to the current leading products, along with improved administration through a smaller needle and, very importantly, a longer duration of efficacy. Remember, we're targeting six months for all of our retinal inserts.

Also, AR-13503, our second retinal implant candidate, had its IND accepted just a few weeks ago and we expect our first in-human study for this exciting product candidate to commence later on in the second quarter of 2019, and expect first-stage, top-line results in the second half of 2019. For background, AR-13503 is an Aerie-owned Rho kinase and protein kinase C inhibitor with the potential of treating diabetic macular edema, wet age-related macular degeneration, or wet AMD, and related diseases of the retina. AR-13503 has shown adhesion size decreases in an in vivo pre-clinical model wet AMD, a level similar to that of current market-leading product, Eylea.

So, we're very excited. As you know, that's a VEGF inhibitor. So, we're excited, from an efficacy point of view, at least in the pre-clinical stage, we were able to achieve that. Importantly, when we use pre-clinical combination with that product, 503 produced meaningfully greater lesion size reduction than the VEGF product alone. So, certainly, it shows that the combination or inductive therapy would be very well tolerated and certainly could be very efficacious in humans.

Lastly, our research initiative remains focused on many potential benefits of Rho kinase inhibitors that we've discussed before and included an evaluation of our Janus kinase inhibitors, as well as some interesting ideas in presbyopia. From a business development perspective, we remain interested in large ophthalmic diseases, which I currently classify dry eye as probably being one of our more interesting ones. As I mentioned before, there's roughly about nine companies that are reporting data over about a 6-9 month period. So, you've got a lot of things going on in our space and certainly a lot of things going on in our company.

With that, I'll turn it over to Rich to cover the financials.

Richard Rubino -- Chief Financial Officer

Thanks, Vince. As a quick financial update, we recorded $10.9 million of net revenues in the first quarter, reflecting volumes of nearly 108,000 bottles. Our gross margin for the quarter ended March 31, 2019 was 96.5%. Our normalized gross margin was approximately 95.5% but considering inventory costs that were expensed prior to FDA approval of Rhopressa.

Our first quarter 2019 GAAP net loss was $48.0 million or $1.06 per share. When excluding the $12.6 million of stock-based compensation expense, our total adjusted net loss was $35.3 million, or $0.78 per share. Adjusted total operating expenses for the first quarter of 2019 were $46.0 million with adjusted selling, general, and administrative expenses of $27.2 million, adjusted pre-approval commercial manufacturing expenses of $3.6 million, and adjusted research and development expenses of $15.2 million. For additional information regarding our first quarter results and prior period comparisons, please refer to today's press release and our Form 10-Q which will be filed tomorrow.

Net cash burned for the three months ended March 31, 2019 totaled approximately $54 million, with $148.9 million in cash and cash equivalents as of March 31, 2019. Shares outstanding at quarter end totaled 45.9 million.

Further, on liquidity, we have said a number of times that we believe that we have adequate liquidity to take us to breakeven, which we expect to occur at the end of 2020. We have also been quite clear that we have no expectations to raise additional equity capital in the near term. We recently increased our undrawn credit facility capacity through Deerfield to $200 million, as announced a few days ago, bringing our total liquidity to an Aerie record of $315 million. I believe this puts us in a very strong position as we focus on our sales execution, geographic expansion, and continue to support the growth of our pipeline.

As Vince mentioned, we are reiterating that we expect full-year 2019 net revenues in the range of $110 million to $120 million on a U.S. GAAP basis, representing combined net revenues for Rhopressa and Rocklatan. We are also reiterating our net cash burned guidance for full-year 2019 in the range of $130 million to $140 million. This range includes the gross cash burn guidance of $210 million to $220 million, partially offset by estimated full-year 2019 revenue-related net cash inflows of $80 million, which includes accounts receivable, collections, and rebate payments.

And now I would like to turn the call over to Sydney for questions

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press "*1" on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press "#". To prevent any background noise, we ask you please place your line on mute once your question has been stated.

And our first question comes from Annabel Samimy with Stifel. Your line is open.

Annabel Samimy -- Stifel Nicolaus -- Analyst

Hi, all. Thanks for taking my question. I wanted to ask you an obvious one first. With a $10.9 million first quarter, which is a dip from the fourth quarter, I guess what makes you confident about the $110 million to $120 million guidance. And outside of Medicare not coming in, what do you think are the biggest dynamics that could reverse from the first quarter? I mean, you mentioned a few things. There were deductibles, there was extra sampling by competitors. What is something that's going to remain sort of pressuring the sales and what may lift?

And then, second, obviously you came out of a couple of medical conferences. Based on what you're hearing, what do you think the dynamic is going to be between Rocklatan and Rhopressa and how these physicians expect to use the two products? And then, finally, on Rocklatan coverage, I understand you're starting with 60% at Tier 3. How do you think your coverage is going to proceed with Medicare Part D specifically? Thanks.

Vicente Anido -- Chairman and Chief Executive Officer

Sure. So, on the sales side, we're very confident because, originally, we expected that we would see this last 30% or 30 point bump in coverage, we thought that that would come in sometime in Q1. The two target companies that are firms that we are dealing with sort of delayed those implementation decisions until now. So, we think that they had, certainly, an impact on what the Q1 revenues are but we think that we can pick that up relatively quickly.

As a reminder, we were able to get a pretty good sized jump in prescriptions about a month or so after coverage started last time this happened, which was October. So, in November, we saw about a 27% increase in prescriptions. So, certainly, we were expecting that earlier. It's now occurring. But we think with pent-up demand, we can pick that up.

We do see signs of that already occurring, not just because we think we're going to get extra coverage but, as I mentioned during the call, we have seen over the last three weeks or so a fairly nice bump-up in terms of the shipments from wholesalers to retail. And we think that that's a prime indicator for continued success. And the fact that the salesforce has been able to overcome a lot of different things. We've had probably 40-plus thousand prior authorizations written with Rhopressa and folks are beginning to see the light at the end of the tunnel here, which is the fact that we'll be able to get Rhopressa reimbursed. And so we do feel comfortable that the range at $110 million to $120 million and all we've seen is a little bit of a blip from one quarter to the next.

Certainly, the excitement level for both Rhopressa and Rocklatan in the marketplace after these two meetings is relatively high. And as I mentioned during the call, we do see a fairly good separation between the kinds of doctors that are looking at jumping right on Rocklatan versus the ones that will probably stick to Rhopressa. And so a lot of that will just shake out. Some of that will be a lot of the temporal element. Some guys will just start with Rhopressa and then eventually just start moving them to first-line and then jump in to Rocklatan.

I think guys, frankly, Annabel, are just going to start off with Rocklatan right out of the gate. And we've had quite a few doctors that have called in for samples that are doctors who didn't write one Rhopressa prescription and are jumping straight in to Rocklatan. So, we're seeing a little bit of mix there which is, again, going back to our stance about not providing guidance by product and instead doing so by totals. And so, again, I think it's going to be very different but it's going to be somewhat consistent with our product messaging for Rocklatan being the most efficacious and Rhopressa being the adjunctive one if folks don't like latanoprost as their primary prostaglandin. So, we'll see some of that.

On the Rocklatan coverage, we do expect that -- again, it'll mirror. Our sort of base expectation is it'll mirror what we saw with Rhopressa. We'll have 12% to 14%, something, a couple of months after launch, on Medicare Part D. That'll jump to about 40% in the September-October timeframe and then 75% after one year. I have to tell you, and I've admitted this before, which is, certainly, given the excitement that we see about Rocklatan out in the marketplace, a lot of these doctors are willing to go overboard to try to get their managed care plans to put Rocklatan on formulary. Some of these doctors weren't willing to do so for Rhopressa. So, we do think that there's a fair chance that we'll be able to accelerate beyond that.

I think I got your three questions.

Annabel Samimy -- Stifel Nicolaus -- Analyst

Yeah, you did. Thank you.

Vicente Anido -- Chairman and Chief Executive Officer

Yes, ma'am.

Operator

Thank you. Our following question comes from Serge Belanger with Needham. Your line is open.

Serge Belanger -- Needham & Company -- Analyst

Hi, good afternoon. A couple of questions for me. First, Vince, can you talk about any competitor activity ahead of the Rocklatan launch, in terms of counter detailing or any pushback from competitors?

Vicente Anido -- Chairman and Chief Executive Officer

Well, the biggest pushback that we've seen is purely the -- they started this quite a while ago. They started dumping samples into the doctors' hands. And as a way of trying to sort of fill any demand out there and try to induce the doctors or try to get them excited about using some other product instead of ours. Some of the photographs we've seen, we're talking about cases of samples going in from a couple of these competitors. So, that's not surprising. I think what they've tried to do is throw as much dirt as possible at Rhopressa because they knew that once they got to Rocklatan, with the efficacies that we've seen there that are pretty clear from the clinical trials, that they would not be able to take that one on. And so we think that a lot of the doctors just kind of shrugged their shoulders when they were trying to do that but, certainly, that kind of noise level did impact the Rhopressa continued growth. And as you saw, we had that, along with a number of other factors, sort of gave us pretty flat numbers for a couple months.

We do think that over the last three or four weeks that our guys have been able to fight through that. and it's obviously an onslaught but our guys fought through that and that's why we think we've seen quite a nice jump, roughly 10%, in terms of the weekly shipments from wholesaler to retail. We think that's a great indication for us that takes a while to show up in the IQVIA data. So, we've just been mainly sampling and taking on Rhopressa that's been the competitor response.

Serge Belanger -- Needham & Company -- Analyst

Okay. And then in terms of your salesforce, could you just give us an update on where you are in terms of the number of reps? And has that changed at all since launching Rhopressa a year ago?

Vicente Anido -- Chairman and Chief Executive Officer

It really hasn't. Let me just have Tom give you a little bit more detail, in terms of the numbers of the reps and the makeup, as well as the number of folks we have out in the field for managed care.

Thomas Mitro -- President and Chief Operating Officer

Sure. So, Serge, we have -- by the way, thanks for the question. We have 100 of what we call territory managers out in the field that focus on about 14,000 top prescribers of glaucoma medications. Obviously, most of those are ophthalmologists. And that really has not changed since launch. We have about seven people in managed care that call on both national payers, they call on federal accounts -- like Tricare is a good example, state Medicaid -- and then we have a couple of people in that seven that call on regional accounts. Not national accounts, but regional accounts. So, we cover the vast majority of the payer marketplace by either regional accounts, federal accounts, or national accounts.

Serge Belanger -- Needham & Company -- Analyst

Okay. One last one before I get back in queue. Vince, you've talked about your dry eye interest for a couple calls now. As you mentioned, there's quite a few players or a few programs in various levels of development. Any interest in early stage or late stage program there?

Vicente Anido -- Chairman and Chief Executive Officer

So, we'd like to get things, like everybody else does, after proof of concept. Dry eye has got to be one of the toughest things that we could ever do and we've got an industry littered with failures. And so we do think that there's a few of those that appear to have something unique and different. Remember, I also talked last time. There's two sort of almost not quite distinct but sort of distinct segments within dry eye, which is just those where the patients just need more tears and other ones that are involving a gland disease. And so there are some interesting technologies that are approaching one or the other. But, again, we think that if we can get a proof of principle, something that seems exciting to us, that appears to work, that we can use our development expertise, formulation expertise, etc., to move them through the pipeline pretty quickly.

And then as you know, we did have a poster at ARGO, which is the first one that we've ever had, taking a non-Rho kinase inhibitor. We had, out of our library, as we made all of these molecules, we came up with a combination of Janus kinase and IKK, which has a very, very strong anti-inflammatory activity which appears to do pretty well in dry eye models. And so we're excited about that but it's pretty early on. So, we'd like to see our licensing activities or our business development activities move us a little closer to the marketplace in that.

Serge Belanger -- Needham & Company -- Analyst

All right. Thank you.

Vicente Anido -- Chairman and Chief Executive Officer

Yes, sir.

Operator

Thank you. And our following question comes from Bill Maughan from Cowen & Co. Your line is now open.

Bill Maughan -- Cowen & Company -- Analyst

Hi. Good afternoon and thanks for taking the question. I was hoping you could just comment on the rationale behind the timing of taking out the $100 million credit facility on top of a currently undrawn $100 million credit facility. And then after that, as with regards to the Irish plant, what are the steps to getting that up and running and are there any material risks to the timeline? Thanks.

Vicente Anido -- Chairman and Chief Executive Officer

Great. Hey, Bill. I'm gonna have Rich talk to you a little bit more about the timing of taking on the additional line. And then I'll deal with the Irish facility. Rich?

Richard Rubino -- Chief Financial Officer

Yeah. Thanks, Vince. Essentially, as I have said many times, if you are facing an opportunity to increase your financial flexibility, take advantage of it. And that's what we did. Essentially, we've got a record level of liquidity right now. I don't think anyone needs to worry about us having to raise equity capital between now and breakeven. And it basically gives us an insurance policy as we continue to build this company. From a commercialization perspective, international expansion perspective, it's important to have. And I think it also gives us maximum flexibility with regard to pipeline enrichment programs, including business development. So, we decided to take advantage of that opportunity and, honestly, with regard to timing, is it one week versus another, that doesn't really mean anything. It was a strategic decision. Vince?

Vicente Anido -- Chairman and Chief Executive Officer

On the Irish facility, we have already made all of the three validation batches that we need to make in order to feel comfortable that the folks over there know how to make the products. And so they passed all their testing successfully so that's great news for us. And, in fact, it happened quite a bit earlier than we expected. So, right now, there's nothing else from that perspective that needs to occur. We do have an awful lot of cleanup to do and the like, in the sense of getting ready.

The two big things is we need to get ready for Irish inspections -- so, the authorities in Ireland will inspect the plant and sort of sign off there. And, by the way, because of all the manufacturing that is done in Ireland, the EU considers Ireland to be one of the toughest places to get a sign-off. So, it's a tough hurdle but I think the team is up for the challenge. Shortly after that, the FDA will go into that facility. While it is possible that the FDA won't inspect our facility, they'll just sign off based on the Irish sign-off, it's highly unlikely and it's very seldom. In fact, I can't think of any examples where they've not gone in and inspected a brand new facility that has never supplied the United States before. So, those are the two big steps: Irish sign-off as well as the FDA. And we expect all that will occur between now and the end of the calendar year.

Bill Maughan -- Cowen & Company -- Analyst

Great. Thank you very much.

Vicente Anido -- Chairman and Chief Executive Officer

Yes, sir.

Operator

Thank you. And our next question comes from Difei Yang with Mizuho. Your line is open.

Difei Yang -- Mizuho Securities -- Analyst

Hi. Good afternoon and thanks for taking my questions. So, just a couple. The first one on Rocklatan. How do you think about the -- how should we think about the net price per bottle for '19? And, as well, how should we think about the stocking impact to the revenue?

Vicente Anido -- Chairman and Chief Executive Officer

So, on the Rocklatan pricing, again, we just don't see -- we try to price it roughly about the cost of a latanoprost generic prescription. So, it's Rhopressa plus that. And so I think you'll see the same attrition and moving down toward the net price at just over $100. Say, $105, $110, maybe $115. And the attrition from our gross price down to that is all going to be driven by how quickly we get on Medicare Part D formularies. And so the faster we get on those, the faster the attrition to the price will occur. And just like we did with Rhopressa, we will make sure that we give you the heads up so that you can see that price erosion occurring so that you can adjust your models accordingly and so that you can also begin your job of estimating what our net sales are going to be in any one given quarter.

Regarding the stocking, we use the same program that we did, in terms of the numbers and the like, that we did with Rhopressa. So, we didn't try to overstock. We just try to put something out there that was somewhat reasonable so that we can work through it pretty quickly. And, again, the uptake is purely going to be a function of how many of these doctors jump on Rocklatan versus switching over or sticking with Rhopressa. And so we don't think we put in enough to screw up too much of the revenues due to the stocking that we put in.

Difei Yang -- Mizuho Securities -- Analyst

Okay. Thank you. So, then changing the subject back to Rhopressa, you talked about, on the longer term basis, when all the cannibalization and when the market dynamics sort of stabilizes in three years, let's say, who do you think are the ideal patient profiles for Rhopressa? I think you have talked about non-responders to PGAs. Could you give us an idea with regards to how big this patient population is?

Vicente Anido -- Chairman and Chief Executive Officer

Sure. So, if you take a look at the pie chart that we provide for you in our corporate deck, you'll see the percent of patients that are still on a branded prostaglandin, something other than latanoprost. So, if you take a look at that, you'll see roughly about seven points apiece for Lumigan and Travatan. So, we think that there are a lot of doctors out there who don't like latanoprost. They really believe Lumigan or Travatan are a better drug and so we think one segment of the population will keep using Rhopressa by those doctors that simply don't like latanoprost. And so we think that that makes some sense.

There's roughly 10% to 15% of patients who don't respond well to prostaglandins at all. And so we think that that's a second segment that is likely to take some hold. One of the things that we found at ASCRS, because there was an awful lot of cataract doctors there, that cataract doctors that treat glaucoma and then they do cataract surgery on glaucoma patients immediately take many of those patients off of prostaglandins. And the reason for that is prostaglandins have been shown to cause systolic macular edema, which is a condition that cataract doctors hate to induce. And so they're immediately -- and certainly during our ad board, all the cataract guys are jumping up and down that there's very little chance that they're gonna use Rocklatan, that they're gonna stick to Rhopressa. So, we think as more and more of that takes hold, that you'll see further separation there. So, those are some of the segments where we see Rhopressa will continue to do pretty well.

Difei Yang -- Mizuho Securities -- Analyst

Okay. Thank you, Vince.

Operator

Thank you. And our following question comes from Esther Rajavelu from Oppenheimer. Your line is open.

Esther Rajavelu -- Oppenheimer -- Analyst

Hey. Thank you for taking my questions. Based on the first few days that Rocklatan has been on the market, have you received any early feedback on how quickly doctors are willing to switch their Rhopressa and latanoprost patients on to Rocklatan? Just that specific niche?

Vicente Anido -- Chairman and Chief Executive Officer

Yeah, we have. As I mentioned, and I'm gonna let Tom sort of give you some further details because he spent a little bit more time at ASCRS than I did and went to all of the regional meetings where we actually launched Rocklatan, but the thing that got highlighted for me is the number of doctors who had never written a Rhopressa prescription that jumped directly to Rocklatan. And they were calling the DMs, wanting samples immediately, and things like that. So, the level of enthusiasm of jumping over a product that you haven't tried to go right into a combination was pretty startling for us. But let me have Tom talk to you a little bit more about what they're seeing.

Thomas Mitro -- President and Chief Operating Officer

Yeah, I'd agree with what you said. I think the real impetus of that, too, is they look at this and say, wow. Of course, it's obvious to us, but here you have two drugs in one bottle for the first time that you only have to take once a day. So, their interest in consolidating all of that is huge. I mean, they spend a lot of time at ophthalmology conferences talking about adherence and compliance and trying to make things simple for the patient. It's ideal for Rocklatan. I mean, what they've been doing is just shaping this market for what we were ready to bring out. So, it is not a new story for them, it's just a story that finally has a punchline or an answer to it. So, I think they are very willing to try it.

I mean, as Vince saw at the conference last weekend, the number of physicians that came in saying that they put "x" number of people on Rocklatan before I came to the conference already. Which was startling to us. So, they're very enthusiastic about that and we're very happy to hear that as well too. So, hopefully that gives you an answer but they're very willing and eager to give this product a try.

Esther Rajavelu -- Oppenheimer -- Analyst

Great. Thank you. And then on the expense side, could you talk about your thinking on splitting the spend between SG&A and R&D over the next year or so? Where should we expect more of the heavier outflow?

Vicente Anido -- Chairman and Chief Executive Officer

So, on the selling expense line, we sort of reached where we need to reach, which is basically the full funding of the salesforce. We've got all the managed care guys we need. We have an awful lot of commercial programs or advertising and promotional programs and sampling and stuff like that. So, you'd think that this would be sort of a bolus year for us from that perspective. And then the R&D line is purely going to be driven by the success of some of the current programs that we have in the clinic, where right now, the early phase programs that we have for retina really won't start kicking into high gear until sort of the back end of next year, assuming that they're successful in the phases that they're in now. And so we're not going to see a huge, huge impact of those next year.

What you will see is, toward the end of this year, we'll be fully enrolled with Mercury 3 and then just complete that. And then we'll be scaling up a little bit on the clinical side for Japan as we finish up the Phase 2 trial in Japan this year and then, in later years, moving into Phase 3. So, I think we're, again, reaching sort of the peak in the U.S. relative to commercial expenditures and then R&D will kick in based on success of the programs.

For Europe, we don't really expect a dramatic impact on the commercial expenses until sometime toward the back end of next year as we get closer and closer to not only having Rhopressa approval and the like but also the success we have with getting Rocklatan reviewed on a timely basis and getting it priced because that would be one of the key indicators for us in terms of scaling up the salesforces in Europe. And it will be on a country-by-country basis. One of the things that Gianluca was very open about was that we may not get a good price in some of these countries and so we may not enter them immediately until we can get a better price. And so while we talk about 75 sales reps for Europe, it's not like they necessarily all come in on the same day. So, again, we won't see that until the back end of next year.

Esther Rajavelu -- Oppenheimer -- Analyst

Okay. Got it. Thank you. Very helpful.

Vicente Anido -- Chairman and Chief Executive Officer

Yes, ma'am.

Operator

Thank you. And our next question comes from Oren Livnat with H.C. Wainwright. Your line is open.

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

Thanks, guys. If you can just help me from a modeling perspective here, Q1 value per bottle, you stated, was $100. Can you help us reconcile the fact that Medicare Part D came later than you expected yet the value per x dropped right down to $100 probably earlier than some of us expected? And also, separately, if that is $100 a bottle, that implies the gross-up or the difference between IQVIA bottles and the shipments through wholesalers is about a 20% premium, so to speak. And I think that was 36% the prior quarter. So, is that already collapsing faster than you expected and should we assume that that premium or difference is going to be mostly gone, as we move forward, quite quickly?

Vicente Anido -- Chairman and Chief Executive Officer

I'll let Rich give you some of the details here but just as a reminder, in Q4 of last year, we had a couple of things happening. No. 1, we got approval and jumped 30 points in October. We started seeing prescriptions in November. So, we only saw a stumped period so a lot of the prescription activity that we saw in Q1 was mainly driven by the extra 30 points that we picked up in Q4 in Medicare Part D coverage. So, that had a lot to do with it. We also, as I mentioned during the opening remarks, also had to deal with the doughnut hole component and the like, which also helped drive the price down. But let me have Rich talk to you some more about the details.

Richard Rubino -- Chief Financial Officer

Yeah, that's absolutely right. So, while our Medicare Part D coverage has been at 40% since October and didn't change to 75% until May 1st, we did see increasing penetration of that 40% that was covered over the past several months, which by definition brings us down to that $100 level. We've always said that the Medicare Part D net per bottle is lower because you have steeper rebates in those contracts. In addition, as Vince mentioned, we had the doughnut hole. The doughnut hole funding actually increased from 50% to 70% this year. So, you're just seeing that effect. Honestly, putting aside what your models or assumptions were, we're not surprised by the $100. It's what we always said we would yield. And will we bounce below that and above that on occasion? Well, that's likely but I think, over the long haul, the $100, I think, is the right number for us.

Regarding the relationship between IQVIA bottles and sales out, that premium, if you will, and calculation was about 30% to 35% in the fourth quarter. That is, if you took your IQVIA bottles and multiplied them times 1.35 for the fourth quarter, you'd get pretty close to our sales out. In the first quarter, that ratio did shrink somewhat to about 1.25. The reason why is what Vince referred to earlier, which is as our retail pharmacy presence increased from about 25% of retail pharmacies that dispensed a Rhopressa script to about a third, by definition, that narrows that gap. But there will always be a gap, even when we're at the full retail pharmacy penetration, because IQVIA doesn't pick up certain government business, like VA, as an example. Department of Defense, retired government defense employees. They're in a closed system that's not captured by IQVIA.

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

All right. Thanks. That's really helpful. Appreciate it. That's it for me.

Vicente Anido -- Chairman and Chief Executive Officer

Okay. Thanks.

Operator

Thank you. And I'm showing no further questions at this time. I will now turn the call over to Vicente Anido, Aerie's Chairman and CEO, for any final remarks.

Vicente Anido -- Chairman and Chief Executive Officer

Well, thank you. As I said earlier, this is an exciting time for the company. Having two products in the marketplace inside of 12 months of each other is certainly not something that you see small companies doing very often ad we're very excited about the prospects here. Again, coming out of a couple of meetings, we see an awful lot of interest in the products and certainly a lot of the doctors are going to pick and choose which one that they go after and the like and move forward from there.

But that's not the entire story in our company. We do have a pipeline that we're pursuing. Certainly, moving into the retina programs is a big deal. We have global expansion in Japan and Europe that's really also very important and the like. And so, again, in a very, very short period of time, we've been able to transition the company into a full-operating company and we do think that -- again, reiterating our revenue guidance of $110 million to $120 million and controlling the expenses is the right thing to do and that it'll set the tone and the stage for where we think the company will eventually end up. So, many thanks for spending your day with us. Bye-bye.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may now disconnect. Everyone, have a great day.

Duration: 54 minutes

Call participants:

Ami Bavishi -- Director of Investor Relations

Vicente Anido -- Chairman and Chief Executive Officer

Richard Rubino -- Chief Financial Officer

Thomas Mitro -- President and Chief Operating Officer

Annabel Samimy -- Stifel Nicolaus -- Analyst

Serge Belanger -- Needham & Company -- Analyst

Bill Maughan -- Cowen & Company -- Analyst

Difei Yang -- Mizuho Securities -- Analyst

Esther Rajavelu -- Oppenheimer -- Analyst

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

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