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Theravance Biopharma (NASDAQ:TBPH)
Q2 2019 Earnings Call
July 31, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good morning. At this time, I'd like to welcome everyone to the Theravance Biopharma conference call. During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, press the * key, followed by the digit one on your touchtone phone. Once again, that's *1 to ask a question. If listening via webcast, please mute audio on your webcast device, before asking a question over the phone. I will repeat these instructions after management completes their prepared remarks. Today's conference call is being recorded. And now, I would like to turn the call over to Jessica Stitt, Vice President, Finance & Investor Relations. Please go ahead.

Jessica Stitt -- Vice President, Finance & Investor Relations

Thank you, operator. Good morning, everyone, and thank you for joining our conference call and webcast to discuss our second quarter 2019 financial results and outlook joining us or Rick Winningham, Chief Executive Officer, Andrew Hindman, Chief Financial Officer, Brett Haumann, Chief Medical Officer, and Frank Pasqualone, Chief Commercial Operations Officer. Following some prepared remarks, we will open the call for questions. A copy of the press release and the slides accompanying this call can be downloaded from our website, or you can call Investor Relations at 650-808-4045, and we'll be happy to assist you.

As always, I will remind you that this conference call will contain forward-looking statements, which involve certain risks and uncertainties, including statements about our product pipeline, expected benefits of our products, the anticipated timing of trial results and regulatory filings, and expected financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in the company's filings with the SEC. And now, I would direct your attention to slide 3 and hand the call over to Rick.

Rick Winningham -- Chief Executive Officer

Thanks, Jessica. Good morning, everyone, and thank you for joining us. 2019 is a critical year of progress that sets the stage for what we believe will be an extraordinary year of data-driven, value-creating milestones in 2020. Our key programs to represent opportunities to create transformational medicines. TD 1473, our gut-selected pan-JAK inhibitor for inflammatory intestinal diseases, partnered with Janssen, Ampreloxetine, our once-daily norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypertension, or NOH, TD-8236, our long-selective, inhaled pan-JAK inhibitor for serious respiratory diseases, and Yupelri, our recently launched, once-daily, nebulized, long-acting muscarinic antagonist, or LAMA, approved for the maintenance treatment of COPD, partnered with Mylan. Each of these programs has the potential to offer transformational value to patients, payers, and healthcare providers.

Our phase 2 B3 study of 1473 and ulcerative colitis is actively enrolling, as is the Phase two study in Crohn's. Both studies should yield data in late 2020, which could potentially trigger a significant opt-in decision and payment from our partner Janssen. Our registrational Phase Three program of Ampreloxetine and symptomatic NOH is under way, with data anticipated in the second half of 2020. Recently, we presented new data from our completed Phase 2 study of Ampreloxetine and NOH at two leading medical congresses, indicating both the magnitude and durability of effect and the safety of Ampreloxetine over 20 weeks of treatment in a small proof-of-concept study. Brett will discuss these data in more detail later in the call. Considering the well-known limitations of existing therapeutic options in NOH, we believe there's a compelling opportunity to provide patients with a potential medicine that may offer greater durability of effect and safety.

Turning to our early stage pipeline, 8236 is progressing in a Phase One study in healthy volunteers and asthmatics. This study includes biomarker valuation in patients with active disease. We anticipate data from the study in September of this year. We believe that 8236 represents a large therapeutic and commercial opportunity, and we're eager to see the results of this trial.

Shifting to commercial, we, along with our partner Mylan, are pleased that the Yupelri US launch continues to perform well against key performance metrics. In June, we and Mylan announced the expansion of our development commercialization agreement for nebulized revefenacin to include China. COPD in China's a significant, underserved market, and we're excited by the potential of Yupelri to have a positive impact on patients' lives. Frank will provide additional color of the Yupelri US launch later in today's call.

Accentuating the progress of our own US business, GSK's Trelegy Ellipta continues the strong sale trajectory. The product is now available in 36 markets, with more expected in the second half of the year, including China. GSK's filed supplementary NDA in support of Trelegy, showing greater reductions in all-cause mortality, versus Anoro in COPD. In addition, we're pleased to note GSK's intention to file regulatory submissions, in support of an asthma indication, following a positive readout of the Phase Three captain study of Trelegy in asthma. From today's vantage point, more than halfway through the year, we're confident in implementing our strategy to discover, develop, and commercialize transformational medicines, and with the potential to address important, unmet patient, payer, and healthcare provider needs.

2019 is setting the stage for an exciting 2020. We believe the momentum we have built is a testament to the extraordinary value resident in our company. We're immensely proud of our ability to execute and advance a rich pipeline of differentiated assets, that can yield a broad lineup of important milestones and catalysts, over the next 12 to 18 months, as our later-stage trials mature, our earlier-stage programs advance into the clinic, and our commercial efforts continue to gain traction.

Now, I'll pass the call to Brett. He'll provide an update on clinical programs. Brett.

Brett Haumann -- Chief Medical Officer

Thanks, Rick. Starting on slide four, 1473 is our oral, gut-selective pan-JAK inhibitor, that's designed to treat inflammatory intestinal disease, directly at the site of inflammation, in an organ-selective manner, with minimal systemic exposure, or corresponding immunodepressive effects. Our objective is to apply our organ-selective approach to the wall of the intestinal tract, to enhance therapeutic index, providing greater efficacy and safety over conventional systemic therapies.

As Rick noted, 1473 is now in two late-stage studies, one in ulcerative colitis, and the other in Crohn's disease. Ray is a Phase 2B/3 study of 1473, in patients with moderately to severely active ulcerative colitis. The Phase 2B dose-finding induction portion of the study assesses the effect of eight weeks of treatment with 1473, on change from baseline, in total Mayo score, as the primary endpoint, as well as assessing rates of clinical response and remission, endoscopic mucosal healing, and safety. Patients who successfully complete the Phase Two induction portion of the study are immediately enrolled into the Phase Three maintenance portion of the study, which assesses the ongoing efficacy and safety of 1473 for an additional 44 weeks.

In parallel, Dione is a Phase 2, 12-week, randomized, double-blind, placebo-controlled study, designed to evaluate 1473's efficacy and safety in patients with Crohn's disease. The primary endpoint in this study is improvement of the Crohn's disease activity index, or CDAI, measured at 12 weeks. Patients who complete the 12-week induction phase will continue into an active treatment extension phase, where all patients receive open-label 1473 for up to 12 months, to continue to collect safety data. We expect data from the Phase 2B portion of the ulcerative colitis study and the Phase Two Crohn's disease study in late 2020.

Turning to slide 5, systemically active JAK inhibitors have been shown to be effective in treating inflammatory diseases, but continue to be challenged by dose-limiting side effects, that prevent such therapies from being used at the optimal dose. Last week, US FDA issued a new boxed warning about increased risk of blood clots and death, associated with the 10-milligram dose of tofacitinib that is used in ulcerative colitis. The warning also states that the approved use of tofacitinib in ulcerative colitis will be limited to certain patients, who are not treated effectively or who experienced severe side effects with certain other medicines. Recent presentations at major GI conferences, including the DDW meeting, reference the efficacy benefits of pan-JAK inhibitors in treating patients with IBD but also acknowledge the side effects of systemic therapies, that may limit their use at optimal doses. Our strategic focus has been on designing and developing pan-JAK inhibitors that are organ-selective, treating inflammation only in the organ of interest, without systemic impact. 1473 exemplifies this approach, as a gut-selective therapy, designed to treat inflammatory intestinal diseases. Whereas others are now focused on trying to solve the challenges of systemic JAK inhibition by only targeting a single JAK enzyme, we are attempting to avoid that problem altogether by restricting the pan-JAK activity of 1473 to the intestinal wall. In avoiding the side effects seen with other therapies, we believe our organ-selective approach can broaden the therapeutic index significantly, allowing us to dose at a level that achieves maximum therapeutic benefit. We've been encouraged by the absence of significant findings related to systemic immunosuppression in our ongoing clinical safety studies, including daily dose administration for 6 and 9 months. We look forward to continuing our 1473 development program, and generating additional clinical data in our current phase 2B/3 and Phase Two programs, to support what we believe may become a best-in-class efficacy and safety profile.

Let's turn now to slide six, and Ampreloxetine, our once-daily norepinephrine reuptake inhibitor, or NRI, in development for the treatment of patients with symptomatic NOH. Recently, we reported exciting new data from our Phase Two clinical trial of Ampreloxetine in patients with NOH, in a poster presentation at the meeting of the International Association of Parkinsonism and related disorders, or IAPRD, and in an oral presentation at the European Urology Congress, or ENC. As a reminder, the Phase Two study was designed to evaluate the efficacy, durability, and safety of once-daily oral Ampreloxetine in patients with NOH. Following the completion of a single ascending dose portion of the study, patients entered the open-label extension phase, referred to as part C, which was designed to evaluate improvements in patients' symptoms, and impact on blood pressure. As we previously described, the primary endpoint in part C was a change from baseline, in a measure of dizziness, referred to as OHSA question one, which is the endpoint that FDA has confirmed as the key endpoint for studies of NOH. OHSA stands for orthostatic hypertension symptom assessment and comprises six questions that assess different symptoms associated with NOH, including dizziness, fatigue, and cognitive impairment and shoulder pain. Ampreloxetine reduced OHSA question one by 3.8 points at 4 weeks, in patients who were symptomatic at baseline, and the effects were sustained through 20 weeks, and then returned to pre-treatment baseline levels after treatment was withdrawn.

Turning to slide seven, the new data, that we presented in June and July, looked at the effect of Ampreloxetine, not just on OHSA question one, but on total OHS score, covering all six symptoms and on the orthostatic hypotension daily activity scale, or OHDAS, that assesses patients' ability to stand and to walk. As is shown on this slide, patients who were symptomatic at baseline experienced improvements in their overall NOH symptoms, and in their ability to perform daily activities. Following four weeks of treatment, these improvements were sustained until the completion of 20 weeks of Ampreloxetine therapy.

The data also show that, following withdrawal of treatment at the end of 20 weeks, patients experienced a worsening of their symptoms, and a deterioration of daily activity scores, returning to baseline, pre-treatment levels. The mean change in total OHSA was 1.8 points, and the mean change in OHDAS was 1.5 points at four weeks, in the patients who were symptomatic at baseline. The responses in OHSA and OHDAS mirror those seen in the OHSA question 1 response, providing further evidence of consistent treatment effect in these symptomatic patients.

As previously reported, the results from this also demonstrated that Ampreloxetine treatment increased symptomatic patients' standing systolic blood pressure, with clinically meaningful improvements at the three-minute assessment, at all time points, with all weekly clinic visits, compared to the low, pre-treatment baseline for these patients. There no treatment-related, serious, adverse events reported during the active phase of the study, and Ampreloxetine was generally well-tolerated. We and our investigators were highly encouraged by both the magnitude and durability of symptom improvement, among this group of seriously debilitated patients. While this was a small, open-label exploratory proof of concept study, the fact that patients showed a durable response to therapy, that waned after treatment was withdrawn, provides us with confidence that Ampreloxetine could offer a meaningful clinical benefit and a favorable safety profile to patients struggling with the debilitating effects of NOH.

We're working diligently to continue evaluation of the therapeutic potential Ampreloxetine, through our ongoing, placebo-controlled registrational Phase Three program for the compound. That Phase Three program is under way and actively enrolling patients, and is comprised of two studies, as depicted on slide eight. First, the Sequoia study, which will assess the treatment benefits of Ampreloxetine versus placebo over four weeks, in 188 patients to assess efficacy. This study is expected to generate data in the second half of 2020. Second, the Redwood study, which will assess the durability of response to Ampreloxetine, by placing 254 patients, including patient from the Sequoia study, on open-label treatment for 4 months, for safety, and then randomizing half the patients to placebo, in a double-blind, six-week withdrawal study, to assess durability.

Now, to slide nine, and 8236, our lung-selective, inhaled pan-JAK inhibitor, for the treatment of inflammatory lung diseases, including steroid-resistant asthma. The clinical goal in asthma is to apply our organ-selective approach to deliver 8236 directly to the lungs, to prevent exacerbations and control symptoms in patients who remain poorly controlled on inhaled corticosteroids, despite being compliant on their medication. Some of these patients have what is referred to as TH2-high disease, and they currently move on to systemic biological agents, that carry the risk of systemic side effects. There are, in addition, patients with so-called TH2-low disease, for whom biological agents are not beneficial, and who remain very difficult to treat.

We believe that 8236 has the potential to be the first inhaled non-steroidal anti-inflammatory, to treat these patients with more severe asthma, regardless of whether their disease is characterized as TH2-high or TH2-low. 8236 is optimized for dry powder delivery to the lung, and its profile supports a once-daily inhaled product, with minimal systemic exposure. The ongoing Phase One study of 8236 includes repeat dose administration for two weeks in patients with asthma, to ensure that 8236 is well-tolerated, following inhalation at different doses, and also looks at evidence of target engagement, by assessing their levels of exhaled nitric oxide, and other biomarker measurements, from blood and bronchoscopy samples. We expect data from the study in September this year.

Next, Frank will provide an update on the Apell relaunch.

Frank Pasqualone -- Chief Commercial Operations Officer

Thanks, Brett, and good morning, everyone. Starting with slide 10, I'll provide an update on our launch activities for Yupelri inhalation solution. Second quarter of 2019 represents the first full quarter of promotional activities across the Theravance Biopharma-Mylan alliance, and we continue to be pleased with customer acceptance and brand performance. Yupelri is the first and only once-daily, nebulized bronchodilator approved for the treatment of COPD in the US that provides a full 24 hours of control for patients, having gained FDA approval at the end of last year for the maintenance treatment of patients with COPD.

Turning to slide 11, I'll remind you about our commercial strategy with Mylan. Our combined sales infrastructures target HTPs that treat the universe of appropriate patients for Yupelri with COPD, including physicians, mainly pulmonologists and hospitalists, pharmacists, respiratory therapists, and other healthcare providers. The Theravance Biopharma focus is on the institutional setting, where there are about 800,000 patients admitted each year to us hospitals for worsening of their COPD. About half of those patients leave the hospital with a prescription for nebulized therapy. Having an established commercial presence in and around acute care centers gives us the opportunity to target, and potentially convert large and addressable patient populations at pivotal times, starting in the hospital, and with our partner Mylan, expanding into the outpatient treatment setting. There are additional COPD patients that are routinely hospitalized for other conditions, not relating to a worsening of their COPD symptoms, and these patients may represent an additional opportunity for treatment with Yupelri.

Turning to slide 12, Theravance Biopharma is focusing on the hospital segment, a critical side of care for patients with worsening COPD symptoms. By targeting HCPs at key sections in the patient's disease management process, our goal is to ensure appropriate patients have access to and begin using Yupelri in the hospital. Based on executing this model, the hospitalized patients become an important source of potential Yupelri patients, as they transition back into the retail and DME channels. Initial market feedback and early performance indicators accumulated over the last six months continue to trend favorably.

As shown on slide 13, we are tracking key performance metrics to gauge success in building early market acceptance, formulary reviews and wins, patient uptake, and market access. Beginning with formulary reviews, or success momentum continues. Year-to-date. Yupelri has been accepted on 42 different formularies that account for a total of 136 high-volume COPD institutional accounts. 51 of these 136 accounts of order Yupelri thus far. There are an additional 86 non-formulary accounts that have also ordered Yupelri.

Looking ahead, we know of at least 93 additional formulary reviews scheduled between now and the end of September, representing another 405 potential accounts. Our experienced acute care field forces have applied their expertise in engaging decision-making, makers in the formulary review process, and our approval success rate once Yupelri has been scheduled for formulary review is about 90%. In our first six months of launch, our field force has exceeded its productivity goals, relative to face-to-face interactions with HCPs. We estimate that approximately 7,000 new patients have been prescribed Yupelri since launch.

We are also utilizing digital marketing to augment our face-to-face interactions, to reach potential HCPs. During the second quarter, the HCP Yupelri website was updated to include downloadable resources that support prescribers and patients. Since March, we've seen significant increases in traffic to the site. Additionally, in April, a satellite broadcast was held with over 350 highly targeted HCPs, that attended either live or be a WebEx. We consider increased website traffic and strong HTP Presence at the satellite broadcast as good indicators that our non-personal brand awareness efforts are having an impact.

On the market access front, we have made important gains with the following confirmed coverage: approximately 46% commercial and 100% Medicare Part B for patients with supplemental insurance. As reported on our last quarterly call, with respect to Medicare Part B patients, we were pleased to announce a permanent unique healthcare common procedure coding system J code for Yupelri, which became effective July 1st, 2019, a full six months ahead of schedule. The permanent J Code coming 6 months early is considered a critical success factor, and it allows for full automation and prescription adjudication, simplifying the process for pharmacists in patients. Theravance Biopharma and Mylan have executed a comprehensive communication plant to pharmacy retailers and DME providers, to leverage the early win with a permanent J code. We believe the permanent J code will be a key business driver for the second half of 2019.

Through June, 59% of Yupelri prescriptions were written by pulmonologists. As a proxy for overall performance, Yupelri share has grown to 61% of prescriptions written for all nebulized, long-acting, muscarinic antagonists. It's important to note that a majority of Yupelri volume does not flow through the retail channel, rather through the durable medical equipment, or DME channel, for which there is about a 3-month lag and data capture. While we currently have DME utilization data through April, visibility into brand performance will enhance over time, as data mature. In summary, we're very pleased with our performance to date and believe we are well-positioned to continue to drive early adoption and growth. We believe that helping HCPs identify appropriate patients, delivering key messages emphasizing once-daily administration, and clinical data supporting full 24 hours of control allow us to be optimistic, regarding outlook for patients treated with this differentiated medicine.

I'll close on slide 14. We were delighted to announce the expansion of our strategic collaboration with Mylan, to develop and commercialize nebulized revefenacin in China. As Rick noted, the COPD market in China is a large and underserved opportunity. It is estimated that COPD affects nearly 100 million individuals in China, with approximately 40% of those patients suffering from moderate and very severe forms of the disease. COPD is one of the top three causes of mortality in China, accounting for over nine hundred thousand deaths annually. COPD presents a significant financial burden to the healthcare system in China, contributing up to $266 billion in cost annually. Under terms of this new agreement, we have granted Mylan exclusive development and commercialization rights to nebulized revefenacin in China and certain adjacent geographies. The terms of the agreement required Mylan to pay Theravance Biopharma an upfront of $18 1/2 million. We are also eligible to receive additional potential development and sales milestones totaling $54 million. Together with low double-digit tiered royalties on sales of nebulized revefenacin, if approved, Mylan will be responsible for all aspects of development and commercialization in the partnered regions, including pre- and post-launch activities, and product registration and all the associated costs.

So, in summary, we're very excited by our progress year-to-date, and we look forward to providing additional updates in the future. And now, I'll pass the call over to Andrew for a financial update.

Andrew Hindman -- Chief Financial Officer

Thank you, Frank. Let's begin my section on 515. Revenue for the second quarter of 2019 was $26.2 million, comprised of licensing revenue associated with the upfront from Mylan, for rights to nebulized revefenacin in China, and collaboration revenue, primarily related to our global collaboration agreement with Janssen, for 1473. Revenue for the second quarter of 2019 represents an increase of approximately $2.7 million, over the same period in 2018. The increase in revenue resulted from the upfront from Mylan, which was partially offset by a decrease in product sales, which resulted from the sale of Vibativ to Cumberland Pharmaceuticals in late 2018, and a one-time opt-in payment received from Alpha Sigma for the Velusetrag, TD-5108, in the second quarter of 2018.

R&D expenses for the second quarter of 2019 were $46.4 million, compared to $48.6 million in the same period in 2018. The decrease was primarily due to lower employee-related expenses, due to the reduction in force announced in the first quarter of 2019, as well as a decrease in share-based compensation, which were partially offset by an increase in external expenses related to the progression of our key programs. Second quarter 2019 R&D expenses include non-cash, share-based compensation of $5.7 million. SG&A expenses for the second quarter of 2019 were $22.2 million, compared to $25 million in the same period in 2018. The decrease was primarily due to lower Vibativ-related external expenses, due to the sale of Vibativ to Cumberland in late 2018, as well as a decrease in share-based compensation, which was partially offset by higher collaboration expenses associated with the commercial launch of Yupelri. Second quarter SG&A expenses include non-cash, share-based compensation of $5.6 million.

We ended the quarter in a well-capitalized position, with approximately $396 million in cash, cash equivalents, and marketable securities. Our 2019 financial guidance remains unchanged. We expect our full-year operating loss, excluding non-cash share-based compensation, to be in the range of $210 million to $230 million. Operating loss guidance does not include royalty income from Trelegy Ellipta, which we recognize as a non-operating income. Our share of US profits and losses, related to the commercialization of Yupelri, potential future business development collaborations, as well as the timing and cost of clinical studies associated with our key programs, among other factors, could impact our future financial guidance.

I'll now direct your attention to slide 16, and provide an update on GSK's Trelegy Ellipta, the first and only once-daily, single inhaler triple therapy approved for the treatment of COPD. Forward, Theravance Biopharma holds an economic interest that, equates to upward-tiering royalties of approximately 5.5% to 8.5% of worldwide net sales. Sales Trelegy for COPD continue to grow. The product is now available in 36 countries, with additional geographies expected throughout the second half of 2019, including China in the fourth quarter. In the most recent earnings call, GSK announce it in the middle to supplemental NDA, in support of the revised labeling for Trelegy, on reduction in the risk of all-cause mortality, compared with Anoro, in COPD patients, and earlier this year GS K reported the Phase Three captain study results for Trelegy in patients with asthma, and that had met its primary endpoint. We look forward to seeing additional data from that studying, which GSK plans to submit for regulatory review in the second half of 2019, in support of an approval for Trelegy in asthma. The addition of an asthma indication could result in meaningful expansion for the use of Trelegy over time.

And finally, as the newest member of Rick's leadership team, I'm very happy to thank him and the rest of the management team for welcoming me to Theravance Biopharma. I believe this company has built one of the industry's most promising portfolios of commercial product and development-stage programs, with a unique focus on organ-selective drugs, that offer the potential for localized therapeutic impact without the systemic exposure and the related toxicities. With these high-value asset positioning the company for near- and long-term success, I'm thrilled to join this team and to contribute to the efforts to maximize shareholder value into 2020 and beyond. I share the company's commitment for developing medicines that make a difference in the lives of patients, and I look forward to working to continue to company's pursuit of this important goal.

With that, I'll now turn it back to Rick.

Rick Winningham -- Chief Executive Officer

Thanks, Andrew. We're excited that you joined us as a valuable addition to the Theravance Biopharma team. Looking forward, and as shown on slide 17, execution against our key programs is driving us toward value-creating events for the near- and long-term and important upcoming milestones include for the progression of our 1473 clinical program, with data from the Phase 2B portion of ulcerative colitis, and the Phase Two Crohn's disease study planned for late 2020, progression of our Phase Three registrational program for Ampreloxetine, with four-week efficacy data anticipated the second half of 2020, completing and reporting out our Phase One study of our lung-selective, inhaled pan-JAK inhibitor, 8236, in September of 2019, continued advancement of our additional, novel, organ-selective research programs toward the clinic additional commercial metric for Yupelri in COPD, as the launch progresses throughout 2019, and GSK's submission of a full Phase Three data set of Trelegy Ellipta in patients with asthma to regulators in the second half of '19, in support of the asthma indication.

We're pleased with our achievements this year, including maintenance of our strong capital position, and the promising lineup of value-creating milestones that we anticipate over the next 12 to 18 months. This is an exciting time for Theravance Biopharma, and we appreciate the opportunity to share our progress with you.

Now, before I turn the call over to the operator for questions, I'll provide you with a brief update on arbitration against Innoviva. In May 2019, we announced that we had initiated arbitration against Innoviva, in connection with their failure to disperse certain royalties to Theravance Biopharma. Innoviva had caused Theravance Respiratory Company, LLC, or TRC, LLC, to not make any distributions to Theravance Biopharma, with respect to our 85% economic interest in TRC, LLC, for the quarter ended December 31st, 2018. Those distributions were due March 31st, 2019. Additionally, Innoviva stated that it intended to cause TRC, LLC to withhold making further cash distributions, through calendar year 2019. The arbitration hearing commenced on July 23rd, 2019. Resolution of the arbitration should occur in the third quarter of 2019.

And then, I'd like to turn the call back to the operator.

Questions and Answers:

Operator

Thank you, Sir. Once again, if you would like to ask a question, you may do so by pressing the star key, followed by the digit one on your touchtone phone. Is listening via webcast, please mute audio on your webcast device before asking a question over the phone. If you were using the speakerphone for today's call, please make sure your mute function is turned off, to allow your signal to reach our equipment. Again, that's *1 if you would like to ask a question, and we'll pause for a moment to assemble a roster.

And our first questions comes from Louise Chen from Cantor. Your line is open.

Louise Chen -- Cantor Fitzgerald -- Analyst

Hi, thanks for taking my questions. My first question here is what type of scientific evidence is there to support the use of inhaled JAKs to treat asthma, and when you report out data in September, what kind of metrics and biomarkers do you expect to report there? And then, second question I had here is do you have any timing on the Redwood data readout? And last question is back on Xeljanz black box warning that you talked about earlier in the call, is there any way to quantify that opportunity to you, and just in general physician concerned about oral JAKs, and even concern about selective oral JAKs. Thank you.

Rick Winningham -- Chief Executive Officer

Brett, do you want to take 8236 and then, the metrics?

Brett Haumann -- Chief Medical Officer

Absolutely. Hi, Louise, thanks for your questions. So, the first question was around the scientific evidence in support of inhaled JAK, and what evidence we would demonstrate in September. We know that the mechanistic underpinnings that support pan-JAK inhibition are likely to have an effect across a series or range of cytokines, that trigger both TH2-high and TH2-low asthma. And although we didn't touch on them in this presentation, the slide that I showed lists a range of cytokines that are triggered in both TH2-high and TH2-low disease. And we think, because of the pan-JAK inhibitory elements that we're triggering, we should have an effect on both columns, on the TH2-high and the TH2-low elements. And that contrasts with the way in which inhaled corticosteroids work, where predominantly, their effects are assigned against TH2-high-type cytokines.

So, we believe that we will be leaning into both of those elements. That's why we believe we may be able to benefit a range of patients, regardless of their TH2 status. And in fact, we may see some benefits, even in those patients being treated with steroids, and not had full response in the past. One of the key biomarkers we'll be looking at in the readout in September is exhaled nitric oxide, and this historically is being used, both as a marker of the severity of disease, as well as a marker of how well patients respond to treatment. So, exhaled Nitric oxide is very easily measured in the breath of patients with a with asthma. It's high, elevated in patients with active disease, and it responds reasonably well to effective anti-inflammatory therapy. Historically, patients who are TH2-high, and exhaled nitric oxide in increased levels have a response, and for example, when they take steroids, you see a reduction in their nitric oxide. So that'll be a key point of focus for is, but without giving it all away, we'll also be looking at some other biomarkers, and we'll be describing those when the data comes out in September. Certainly, NO will be one of the most important ones.

You asked about Redwood and the readout on that study. We're feeding patients from the Sequoia study into Redwood, as well as recruiting new patients to supplement those patients. They'll continue to be in the Redwood study for longer than in Sequoia. As you may recall, Redwood is an open-label study performance, before patients go into this randomized withdrawal for six weeks. So, our expectation would be to have a slightly longer execution period or conduct period for that study. At this stage, we're not giving a descriptor on exactly when that study will read out, only because we're in an active enrollment phase. So, we look forward to updating you on how that continues to enroll, and I think we'll be able to point to the readout on that study with a bit more clarity, as this year progresses.

Rick Winningham -- Chief Executive Officer

And then, Louise's final question was just a question on Xeljanz, the important labeling change that occurred last week, and generally, the perspective on oral JAK inhibitors. I'll start with just a couple of comments. Obviously, the primary reason that we began work several years ago in organ-selective area, and initially designing a JAK inhibitor to be organ-selective for both the gut and the lung, was because we believe that the full benefit of the JAK mechanism could not be utilized through systemic delivery. And, if we could design the JAK inhibitors that could go into the tissues if interest directly, and in fact, then be absorbed and broken down in the bloodstream and cleared quickly, that we would spare the patient from the systemic immune suppression, as well as other potential effects of circulating JAK inhibitors, and I think that's what one of the issues that has arisen with Xeljanz, and in fact, we would expect that it would be likely that that similar issues, perhaps not the same but similar issues would, in fact, affect every systemic JAK inhibitor that's developed, because the dosing, it's a careful balance between the dosing that achieves efficacy, and then a dosing that, in fact, triggers untoward effects. I'll let Brett expand on my answer.

Brett Haumann -- Chief Medical Officer

Yeah, perhaps just one point to add, Louise, and in fact, we show it on slide five, a reminder that during the tofacitinib development program, the Phase Two data showed that, as the dose was increased from 3 to 10, and then to 15, that there was evidence of increased benefits to patients, particularly in their clinical response to treatment in ulcerative colitis. So, on one hand, systemic JAK inhibitors have been shown to increase efficacy as the dose is pushed up, unfortunately, history is now showing the 15 milligram dose was not able to be supported in Phase Three, and now the 10 milligram dose is not supported for induction in the commercial arena, without some very clear caveats and warnings.

And really, what this is conveying is a reduction in the therapeutic index for these systemic drugs that, by design, were actually not designed to treat ulcerative colitis. They were designed originally for organ transplant rejection, and then for the treatment of rheumatoid arthritis. So, they were deliberately designed to get into the systemic circulation. By contrast, or drug does not. By design, it is limited to the organ of interest. It is deliberately focused on the intestinal wall, and we think this actually validates the approach that we're taking. We'll obviously continue to remain vigilant in our own development program, but we do believe we have a very distinct and separate therapeutic index from tofacitinib.

Louise Chen -- Cantor Fitzgerald -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Tyler Van Buren from Piper Jaffray. Your line is open.

Tyler Van Buren -- Piper Jaffray -- Analyst

Hey, thanks guys, good morning. Just wanted to follow up on Louise's question on 8236, with respect to the readout in September, and specifically on phenol. I see on clinicaltrials.gov that there's a four-day SAD study and then a nine-day MAD study and so, will we get data from both of those, or what data will we get? At what time point will the phenol be, and what's the bar for phenol reduction, if you could remind us, that you would typically see with effective therapies, and therefore, what sort of reduction would you hope to see, or would be impressive?

Brett Haumann -- Chief Medical Officer

That's great, Tyler, and thanks for your question. Just clarity on the design of that study, the singular sending dose portion was done in healthy volunteers, whose exhaled nitric oxide would be within normal limits, less than 15 parts per billion. And so, we don't tend to focus on NO in patients with -- in healthy volunteers. The advantage, though, that we really wanted to lean in on, was that, having assessed single doses in healthy volunteers, we moved immediately to repeat-dose administration in patients with active asthma. And doing so, we're able to gauge a number of things. One is safety. We tend to move quite quickly with our inhaled products into patients with the disease, to make sure the drug is not causing a paradoxical bronchoconstriction, in other words, an unexpected bronchospasm. And we look at that fairly routinely, and quite early on. But, of course, one of the advantages of looking at this patient population is that their nitric oxide is elevated, so we're able to look, also, at a reduction in that level. The patients that we were looking to enroll were coming in with levels above 20 to 25 parts per billion, so really marking them as having active disease. And without prejudging the readout, of course, what we're looking to do is demonstrate a return into the normal zone for these patients, a reduction below what they came in with, and ideally, down to 15 parts per billion or less, as a marker of normalization of that inflammation. And so, those will be elements that we will obviously want to evaluate and describe when we read this data out.

Tyler Van Buren -- Piper Jaffray -- Analyst

That's very helpful clarification, thank you. And the next one is on Ampreloxetine. It's helpful to see that chart, in the deck of OHSA and OHDAS. As we think about the Sequoia trial, can you take over powering for the primary endpoint, and what we need to see, so we can judge that based upon what we've seen with the existing data. And also, is there a possibility, just given the very limited demonstrated efficacy with the treatments on market, is there possibility that you guys could file after you get that Sequoia data, and prior to the Redwood data and potentially update the filing once you get the Redwood data?

Brett Haumann -- Chief Medical Officer

Great questions, thank you. So first, to the powering and the description of the Sequoia study. This is a study run over four weeks' duration, with the supporting buy-in of the FDA on the design. The study is powered to look at OHSA question 1, dizziness, which is the sentinel, or most critical endpoint, that the FDA has previously ruled on, actually, in the approval of Droxidopa, another product that's used for NOH. NOH patients currently use Droxidopa. Unfortunately, the data to support Droxidopa's use is not only limited, but demonstrated that efficacy is lost after about a week's worth of treatment. And in fact, even the label for Droxidopa reports that evidence has not been shown in clinical studies beyond two weeks. And so, our study of four weeks duration is felt to be important because it may be able to demonstrate sustained benefits for patients, beyond what's currently available to them through Droxi, for example.

So, we are powered to look at improvements in OHSA question one. There are 94 patients per arm in the 188 patient study, so we have equal randomization to the 10 mg dose of Ampreloxetine, or a matched placebo. We're looking to see at least a one-point difference between placebo and active in that study. As I've reported in the prior Phase Two study, we saw significantly greater than that in the symptomatic patients, and indeed, the way in which we define symptomatic patients is the way in which we're enrolling them into the Sequoia study. They must have a minimum score of OHSA1 of four or more out of 11. It's a 0-10 scale, and the patients must have a minimum symptomatology coming into the study. If we saw an improvement of one point or more, then our pairing would suggest that we see improvements. Actually, the evidence that I've shown you from the prior study, shows a much greater magnitude at four weeks, around 3.8, almost four points improvement.

Your second question was around the filing order. It's a good question. I think we are currently evaluating and working with the FDA on how compelling the evidence base would be, but certainly, if we see compelling evidence from the Sequoia study, even prior to the readout of Redwood, we would want to engage the regulators on that data.

Tyler Van Buren -- Piper Jaffray -- Analyst

Great, thanks very much for taking the questions.

Operator

Thank you. Our next question comes from Geoffrey Porges from SVB Leerink. Your line is open.

Geoffrey Porges -- SVB Leerink -- Analyst

Thank you very much, I appreciate the questions. First, just on the inhaled JAK bit, could you talk a little bit about when you might consider studying it in COPD in addition to asthma. Obviously, it would seem to be amenable. Could you describe the deployment of your pivotal trials for Ampreloxetine, specifically how you're going in terms of wrapping up study sides? And then, just a cash question, could you remind us of the cash obligations that you have for the balance of the year to the bondholders for the Trelegy royalty, and then your estimate of the unpaid cash is from Innaviva for that royalty obligation? Thanks.

Rick Winningham -- Chief Executive Officer

Sure. Brett, do you want to take the first set of questions and I'll...

Brett Haumann -- Chief Medical Officer

Yes, of course, I'll take the first two questions. First, your question around inhaled JAK and whether there's utility of using this in COPD. It's a great question, Geoff. There are about 1/3 of patients with COPD who have some evidence of underlying eosinophilia, or a sensitivity to steroids. In fact, there's an emergent condition now called ACOS or ACO, which really just stands for Asthma/COPD overlap, and the S is syndrome. So, ACOS is now recognized as an emerging and important population of patients, certainly biologicals that have been historically preserved for asthma are now being considered for patients who may have increased eosinophilia, and also have COPD.

The most recent guidelines for the treatment of COPD recognize that steroids may actually have better efficacy in those patients whose blood eosinophilia is above a certain level. There is no reason to believe that inhaled JAK would not also work in those patients, particularly those patients who may be susceptible. We also recognize that patients with TH2-low disease, whose disease might be driven by neutrophils, for example, may also be susceptible. And so, I think it's a good question. It certainly is an opportunity that we'd like to explore in the future. You may know that steroid use in COPD is limited, really, by the risk of pneumonia, as a sort of counter to the benefits, and so, it would be really important, particularly if we see a favorable therapeutic index, a favorable safety profile, to consider the use here. Right now, our focus is very much on severe asthma, but I don't believe it precludes us from considering those populations in the future.

Your second question was around Ampreloxetine ramp-up, and so, we're active in actually multiple countries, actually, 19 countries and counting, in terms of opening sites. We're active in the US and Europe, and in Australasia. And so, activities are going well, in both identifying sites, and now, moving to enrollment.

Rick Winningham -- Chief Executive Officer

I think, just to complement what Brett's saying, before I get into the royalty-related issues, is that generally what we see is that this is a rare disease, somewhat bespoke type of study, and when we open sites, we generally get multiple patients that are in the queue that may have the opportunity to go on study. Now, the royalties, and the royalty debt, in servicing the royalty debt through the notes, the publicly available information just to highlight it is, there's three ways that, effectively, we can do that. We can make a capital contribution in which to service any cash requirements under the amortization of the notes. We can use the distributions from the LLC to, in fact, satisfy those obligations, or we can pick, effectively adding the interest to the principal of the notes, and we can do that for the pick, and/or capital contributions for a fairly considerable period of time, into late 2020.

Now, given that we're in the middle of the arbitration right now, and we expect to take the arbitration by the end of the third quarter and have a decision from the arbitrator, I think we'll sort of play it by ear, relative to how we handle it, but, you know, all three options remain open to us, and hopefully the arbitration is resolved in our favor, and the distributions from the LLC will in fact service the notes going forward, because, as we described today, Trelegy's on a very exciting upward ramp, not only in the United States but globally. So, I think that's sort of a summary of where we stand with the notes, the flexibility, and hopeful for positive resolution of the arbitration before the end of the third quarter.

Geoffrey Porges -- SVB Leerink -- Analyst

Thanks, Rick. Could you just clarify what the cumulative cash obligation is, from the partnership, that's unpaid?

Andrew Hindman -- Chief Financial Officer

I'm happy to do the math for you, Geoff, but we'll have to follow up, because that's based on publicly available information. We can do the math and get back to you offline.

Geoffrey Porges -- SVB Leerink -- Analyst

Okay, no problem. Thanks.

Andrew Hindman -- Chief Financial Officer

Yep.

Operator

Thank you, and again, ladies and gentlemen, to ask a question please press * and then 1 now. And our next question comes from Alan Carr from Needham. Your line is open.

Alan Carr -- Needham -- Analyst

Hi, thanks for taking my question. A couple of them, you mentioned that you'll have data from the 1473 trials next year. Can you go over specifically which sets of data? Is it the 8-week data from the UC trial, or is it more than that? And then, also, maybe give you an opportunity to go over some of the earlier stage files, back in December you had highlighted some other, earlier-stage programs. Can you give us an update on those, and when they might be moving forward into the clinic? Thanks.

Rick Winningham -- Chief Executive Officer

Sure, you know, this is Rick, and Brett and I will tag-team this a bit. You know, if you look at the earlier-stage programs that we highlighted, obviously 8236 was one, and I look forward to sharing that data in asthmatics in the Phase One study, in the very near future. Another program that we highlighted there was a gut-selective irreversible JAK3 inhibitor, that would be used for celiac or potentially other inflammatory disorders of the GI tract. Obviously, that program continues to move forward, and I'll look forward to updating the public quickly on that. The other programs were for an inhaled ALK5 inhibitor for IPF. That continues to move forward, as does the eye program, the intravitreal program, for direct injection into the eye, which highlighted what looks like very favorable pharmacokinetics in the eye with, the opportunity, potentially, of a relatively limited number of injections over a year's period.

Now, I'd highlight the eye program, because when you're doing and eye program, particularly with the pharmacokinetic profile that we have of this medicine, the one benefit is that it, effectively, we'll do long-term talk studies before we enter the clinic. So, the eye program, the sequence that I just reviewed, the eye program would probably go toward the later end of those drugs that are entering in the clinic, and probably, the way to think about it, the irreversible JAK3 being toward the more near-term end. So that's sort of a summary of the early stage research projects.

Relative to the ulcerative colitis and the Chron's program, our expectations are for both of those data sets next year. Brett?

Brett Haumann -- Chief Medical Officer

Yeah, so just a bit more color on that, Alan. Referring to slide four in the deck that we presented today, you'll see that in Dione, perhaps the easier one to describe first, Dione is the Crohn's disease study, and we have 160 patients being evaluated over 12-week induction period. That study is intended to read out in its entirety next year. So, that is the first data set, Chron's would read out with all 160 patients. In the Ray program, it's complicated by the fact that we've got both Phase 2B and 3 running simultaneously, but the plan is for the Phase 2B portion, of 240 patients, to be completed next year in the readout. So, that's intended to find an optimal dose, that can then be, hopefully, used to simplify the remainder of the program. But just to summarize then, 240 patients in ulcerative colitis, reading out next year in the Phase 2B portion, and 160 patients reading out in a discreet Phase 2 study in Chron's.

Alan Carr -- Needham -- Analyst

Great, thanks for taking my questions.

Operator

Thank you, and I am showing no further questions from our phone lines, and I'd like to turn the conference back over to Rick Winningham, for any closing remarks.

Rick Winningham -- Chief Executive Officer

Thank you very much. Just to hit on one of the questions that came up from Geoff Porges on the outstanding notes is the total outstanding note balance is $250 million. These are non-recourse notes that carry an interest rate of 9%, that is paid off over time, the royalties that we receive in from GSK through the limited liability corporation. So, just a quick note, we are very proud to be to be able to bring you the progress that we've made to date, through 2019, in commercialization and development, as well as the continued progression of the research programs that are entering the early stage to enter the clinic, again, over the next several to 18 months. So, we're very excited about the progress of the company, we're very excited about where we're going, and we look forward to bring you further updates in the near future. Thank you.

Operator

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

Duration: 61 minutes

Call participants:

Jessica Stitt -- Vice President, Finance & Investor Relations

Rick Winningham -- Chief Executive Officer

Brett Haumann -- Chief Medical Officer

Frank Pasqualone -- Chief Commercial Operations Officer

Andrew Hindman -- Chief Financial Officer

Louise Chen -- Cantor Fitzgerald -- Analyst

Tyler Van Buren -- Piper Jaffray -- Analyst

Geoffrey Porges -- SVB Leerink -- Analyst

Alan Carr -- Needham -- Analyst

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