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Aerie Pharmaceuticals Inc (NASDAQ:AERI)
Q3 2019 Earnings Call
Nov 6, 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 Third Quarter 2019 Earnings Conference Call. [Operator Instructions] 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, Investor Relations

Thank you Sydney. Good afternoon and thank you for joining us. With me today are Vince Anido Chairman and Chief Executive Officer; Tom Mitro President and Chief Operation Officer; Rich Rubino Chief Financial Officer; Casey Kopczynski Chief Scientific Officer; and John LaRocca 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. Before I review the forward-looking statements I want to ensure that you have access to the MOST Phase 4 top-line summary slides and Japan's Phase 2 summary slides that are available on our website and will be presented later during this call. 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 updated full year 2019 net revenue guidance and full year net cash burn guidance.

These statements will include observations associated with our commercialization of Rhopressa and Rocklatan in the United States as well as recent top-line clinical data from our Phase 4 study in the U.S. and Phase 2 study in Japan. 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 strategies and capabilities with respect to international expansion. Finally 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 a result of new information future events or otherwise. Please note that we will file our quarterly report on Form 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 -- Chief Executive Officer and Chairman of the Board

Thanks Ami and good afternoon everybody. Thanks for joining us today. We obviously have quite a bit to talk about today in not only change in revenue guidance but also some exciting top-line clinical data that bodes pretty well for our long-term potential. So let's start with the update on the quarter and guidance and take it from there. As you saw on our earnings release we're lowering our full year 2019 net revenue guidance to a range of $61 million to $66 million from the previous range of $70 million to $80 million. The approach for the previous guidance was to anchor it in the trends we had seen in the summer. However based on some of the recent volume trends and expectations through the upcoming holiday season and lost days of sales et cetera we unfortunately had to lower expectations below the previous range. We believe that this relates at least in part to the churn factor we discussed in our last earnings call which is certainly continuing. However with the progress we have made with coverage and growing physician experience that I'll talk about in just a second I believe the churn factor will be a short-lived phenomenon until we reach the equilibrium in coverage between Rhopressa and Rocklatan. Now as we analyzed the weekly volumes we have seen some weeks of very strong growth and there's some intermittent choppiness with weeks of not quite very impressive growth. Our previous guidance assumed a more consistent growth pattern on a week-to-week basis.

While the inconsistent growth gains has really focused on a lot of short-term attention I believe this is a short-term launch-oriented phenomenon. And looking at our overall trajectory at a higher level beyond the week-to-week fluctuations our volumes have grown considerably over time and I believe the growth will continue and our long-term franchise potential still remains intact. I've spoken many times on the importance of the physician experience with our products and how each eye care professional will learn with experience how Rhopressa and Rocklatan will fit into their practice. The Phase 4 data that Casey will be sharing with you today on Rhopressa and we'll review shortly certainly shines a bright light on what they may be experiencing and those results certainly are a cause for optimism for continued future uptake for the products. Further on that point of the physician experience one of the things we took a look at was our top 5 prescribers for both Rhopressa Rocklatan and the franchise. They obviously have the greatest experience with Rhopressa and Rocklatan and I would say their prescribing habits represent a leading indicator pointing to what we may see as other prescribers gain experience. The statistics are pretty impressive when you consider the fact that we just launched our first glaucoma product just 18 months ago. That was Rhopressa. And the second product Rocklatan was introduced only 6 months ago. The top 5 prescribers of Aerie glaucoma products have a combined share within their practices of somewhere between 8% to over 26%. Obviously their experiences have been very positive.

I believe this data is of great significance as we look forward to the potential of our glaucoma franchise. From a national share perspective our franchise is currently around 1.5 market share points. And just remember that about double that or almost 3% market share is what we have in the upper decile doctors. So again it points to great future growth for the franchise. And just to help to put it in perspective LUMIGAN which is the largest branded product currently available in glaucoma has a 6% market share. So I think our performance is pretty impressive at this stage of our company's history. Of course our main target is Latanoprost and that has a 41% market share. So that's clearly where we want to go. And the fact that we have some prescribers already in the 18 to mid-20 range certainly bodes well to our future endeavors. And then you'll see as we walk through our new Phase 4 data for Rhopressa there are many reasons to be hopeful regarding long-term share potential for our franchise. We are seeing some recent signs of strength particularly with the Rocklatan update. The physician experience has largely been positive for both Rhopressa and Rocklatan. Our sales out to pharmacies which you know as we report achieved a record number of 17000 units for the first week of October. As you saw in our latest corporate deck and have seen continued range of somewhere between 15500 and 17000 units per week which again happened this last week. Certainly as we've entered this week the growth pattern continues to grow. This recent range is the basis for our updated guidance reflecting our expectations for the remaining 2 months of the year and the upcoming holiday season. On our last call in August I said we were seeing ongoing growth. I pointed to sales out to pharmacies achieving a new record level of 14200 units. Remember that was in August of this year. And now we're talking about 17000 units per week.

So again the trajectory has been very positive. Now let's take a look at the third quarter results. Our combined Rhopressa Rocklatan revenues in the third quarter totaled $18.5 million bringing our year-to-date total revenues of $45.2 million. The net revenue per bottle for the franchise was $94 for the third quarter and $95 for year-to-date. Over time we do expect a modest decline in net revenues per bottle as we continue penetration in Medicare Part D which has a lower net price for reasons we have discussed before. One positive surprise for this quarter was that the coupon utilization for Rhopressa decreased meaningfully in this quarter. As you know coupon utilization is a component that reduces our net revenue per bottle for those claims flowing through commercial payers. Coupon utilization appears to be down because co-pays are already low enough being in the $30 to $40 range for the majority of the plans and that's where we're seeing less demand to the use of coupon to bring those co-pays down to as low as $25 which is the lowest that we can go with our co-pay cards. On our second quarter call we indicated the number of netarsudil prescribers was around 11000 out of our target audience of just under 14000 eye care professionals. We've grown that to now about 12000 eye care professionals who have prescribed either Rhopressa or Rocklatan representing 85% of our target audience. Also on our last call we talked about having over 3000 physicians who are writing netarsudil prescriptions on a regular weekly basis. That number is now over 4000. Focusing on Rocklatan last quarter I mentioned we had 1900 physicians have already written a Rocklatan prescription. That number has since more than doubled to over 4000 of which about a thousand of those doctors are writing consistently every week. From a retail outlet perspective about 27000 retail pharmacies across the U.S. have filled either a Rhopressa or a Rocklatan prescription up from 25000 that we reported in the second quarter earnings call.

That represents about 40% of the retail outlets in the country. However we have seen with the growth in the number of dispensing pharmacies and the growth in units that we have seen going from wholesalers to retail that our inventories at the retail level at the pharmacy level have been relatively consistent since the beginning of this calendar year. And so we're not seeing any dramatic growth or any growth at all in the retail inventories in the marketplace. On the important point of coverage Rhopressa now has a majority formulary access across commercial and Medicare Part D plans. And as I mentioned previously we're now seeing much lower coupon utilization as a result of very high coverage levels on the commercial side. For Rocklatan starting October 1 we have 80% formulary coverage for commercial. That's a major step up from the prior quarter. Medicare Part D coverage for Rocklatan is at 36%. And while we currently don't expect that percentage to increase meaningfully over the next several months it is important to note that in the addition to that 36% we have roughly 18% of Medicare lives for which we don't have coverage that are really part of the government's low income subsidy program. So when they receive a prior authorization prescription of which 80% of those are approved they will have a higher likelihood to accept that prescription especially because the co-pay is generally below $10. And so when you add that 18% Medicare lives which are in that low-income subsidy component to the 36% of the other lines that we have we now have about 50% Medicare eligible lives that have affordable co-pays for Rocklatan.

When you sum it all up we're seeing increasing experience with the products by the eye care professional including anecdotally mostly positive experiences and improved affordability on the part of the patient. Over time as patients cycle through the doctors' offices we expect continued penetration of the large patients with affordable co-pays. We continue to expect the long-term growth perhaps not a steep inflection but we are confident in continued growth and the potential of this franchise over the long term to peak at levels beyond a billion in US sales for Rocklatan and the long-term potential for Rhopressa being $350 million or so on top of that. Now with all that we are very excited now to have brand new objective clinical data from our Phase 4 study called MOST. That is available obviously on the site and Casey is going to talk about that shortly. This independently and qualitatively demonstrates the efficacy and tolerability of Rhopressa in a real-world setting. This new data we are seeing from our study for Rhopressa and the Japanese Phase 2 study for Rhopressa which we will discuss in a few minutes I am more confident than ever in the potential of the netarsudil franchise. Now before I turn the call over to Casey to cover the Phase 4 data I want to briefly mention a recent organization announcement we made that we did make public about a week or so ago. We announced the appointment of Dr. David Hollander as Chief Research and Development Officer. It's an executive officer position reporting directly to me. His start date is November 11.

David will direct the company's preclinical and clinical research and development groups as well as medical and professional affairs. Not only was he recently the Chief Medical Officer and Senior Vice President at ORA which is a large contract organization research organization very well-known in the ophthalmology circles but he was also at Allergan for a number of years on the R&D side. You can see from his background in our recent press release you will observe that David brings to Aerie and extraordinary list of talents and accomplishments not the least of which is he's a trained ophthalmologist with a focus on cornea. And we're very excited to have him on board. Casey remains Aerie's Chief Scientific Officer and remember he is one of the founders and will retain his focus on innovation strategy leading a newly formed science and technology group including Aerie's ophthalmic sustained delivery implant platform new product opportunities and acquisitions that expand Aerie's pipeline as well as representing us at global medical and scientific meetings.

And with that I'll turn over the call to Casey to walk you through the top-line Phase 4 data which are available on the website as Ami indicated earlier. Casey?

Casey C. Kopczynski -- Chief Scientific Officer

Thank you Vince. I'm going to start on Slide 3 the summary of the results from the MOST study. So our MOST study was a Phase 4 open label multi-center study 12 weeks in duration. And we enrolled 260 patients. The use of Rhopressa in this study was at the discretion of the physician with respect to whether it was used as monotherapy or adjunctive therapy. Not surprisingly it was used most often as an adjunct to prior medications. And what we found in this study was Rhopressa was similarly effective whether it was added to prostaglandin monotherapy or whether it was added to patients who were on multiple different medications; in each case getting an additional reduction of about 4.5 millimeters of mercury at 12 weeks. So this showed us that Rhopressa is really indifferent to the number of medications on board. It provides very consistent IOP lowering. It was also used as monotherapy fairly frequently. And interestingly when used as monotherapy it was used most often in patients who were switched from a prostaglandin monotherapy to Rhopressa monotherapy. And in those switched patients Rhopressa produced similar levels of IOP lowering as the prostaglandin. So that was very helpful to see. And then finally the results showed that Rhopressa was well tolerated whether it was used as monotherapy or adjunctive therapy.

The most common adverse events were those that we've talked about in the past conjunctival hyperemia and vision blurred. And for the first time we were able to incorporate a patient survey into this study and we found that the vast majority of patients rated Rhopressa as tolerated well or better in the survey. So on the next slide Slide 4 I'm not going to go into details here. You can look at the study design from the slide deck online. But I'd just point out there were 3 visits; the baseline visit and then visits at week 6 and week 12. And the primary efficacy endpoint was change from baseline in mean IOP at week 12. So Slide 5 shows the results of the use of Rhopressa as adjunctive therapy. And if you look at the top of the table the first group is the group where Rhopressa was added to PGA monotherapy. And you can see that baseline IOPs in these patients while they were on the prostaglandin was 21.1 millimeters of mercury. So these patients were needing some additional IOP lowering. When Rhopressa was added by week 12 the pressures were brought down to 16.9 millimeters of mercury. That's a reduction of 4.3 millimeters of mercury or about a 20% reduction in IOP so very effective when added to PGA monotherapy. And then the bottom of this table shows what I just mentioned on the previous slide which is we got similar efficacy lowering even in those patients who were on 2 3 some of them were on 4 different medications; still brought those pressures down by 4.5 millimeters of mercury. On the next slide Slide 6 summarizes what was seen when patients were switched from prostaglandin monotherapy to Rhopressa monotherapy.

And as I said this was done fairly frequently in 57 different subjects here. So the baseline while these patients were on prostaglandin therapy was 18.2 millimeters of mercury. And at week 12 the pressures were actually lower by 0.6 millimeters of mercury while on Rhopressa monotherapy. So the pressures were brought down to 17.5. So the physicians were successfully able to switch out a prostaglandin for Rhopressa without losing any efficacy and in fact gaining just a little bit of efficacy as well. On the next slide Slide 7 is a summary of the adverse events. And as we've seen in prior studies there were no treatment-related serious adverse events. Importantly the discontinuation rate in this real-world study was in the 10% to 12% range for discontinuations due to adverse events. And I'm not going to go through the table in any detail here but just point out that the adverse events that were recorded are all very similar to what we've reported in the past except the frequency of particularly conjunctival hyperemia was actually considerably less than what was recorded in our Phase 3 studies. In terms of adverse events leading to discontinuation conjunctival hyperemia in the monotherapy group only led to about 1% rate of discontinuation. That rate was 4.3% in patients where Rhopressa was used as adjunctive therapy.

So on to Slide 8 I mentioned we included a survey of patients that asked them the question on this slide. How well are you able to tolerate the study eye medication? And overall regardless of how the drug was used 89.1% of patients said they tolerated the drug well or better. And in the adjunct therapy group where it was used most often that number was 88.5% who rated it well or better. So in summary then you know we now have a prospective real-world study and it confirms what we've been hearing from the physicians since the launch of Rhopressa. And that is that Rhopressa can be highly effective in real-world use whether it's used adjunctively or as monotherapy and that it is well-tolerated as monotherapy and adjunctive therapy in the large majority of patients. Vince?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Thanks, Casey. Great job. And I do believe this is pretty important new data for Rhopressa and I look forward to doctors continuing to have positive experience with Rhopressa and of course with Rocklatan as we continue to gain share. We will be sharing this information with physicians and look at publications et cetera. So we'll be able to release this data pretty broadly over the next few months. Attention topics our Ireland facility is making excellent progress in terms of readiness. Our plant there is expected to be ready for commercial production in early 2020 as we discussed earlier. You saw in our recent press release that Aerie submitted a Prior Approval Supplement PAS to the FDA in September to allow production of Rocklatan is Aerie's Athlone Ireland manufacturing facility. That will be the first product that we get to manufacture there. We also plan to also file a PAS in the first half of next year to obtain FDA approval to manufacture Rhopressa in that same facility. Now also regarding European approval of Rhopressa which remember is known as Rhokinsa in Europe the European Medicines Agency Committee for Medicinal Products for Human Use the CHMP adopted a positive opinion in September recommending approval of the Marketing Authorization Application or the MAA for Rhokinsa. CHMP positive opinion was reported to the European Commission for the final decision on that MAA and is expected sometime later this quarter. Once we have that positive outcome with Rhokinsa in Europe we plan to file Roclanda or Rocklatan for approval in Europe early next year. We also expect to read out top-line MERCURY 3 results in the middle of next year.

Remember MERCURY 3 is a head-to-head comparison of Rocklatan with GANFORT which is one of the largest products or combination products available in Europe. If we ultimately obtain regulatory approvals for our products in Europe we'll execute on a commercial strategy which will consider or is dependent on among other things the overall pricing environment in the region and our perspective on capabilities and likelihood of success and positive cash flows in the region. We'll be looking at country-by-country analysis as we determine how to enter each market. A go-to-market approach is still being evaluated internally and we'll have a decision on exactly how we're going to do that as we close out this calendar year. Now for Japan we just achieved a major milestone with the recent positive top-line Phase 2 data which we've already reported.

You saw a press release yesterday and now I will turn it over again to Casey to present the highlights of that data. Casey?

Casey C. Kopczynski -- Chief Scientific Officer

Thank you Vince. Once again I'll start on Slide 3 for this deck the overall summary. This study in Japan was a 28-day masked placebo-controlled study where we were evaluating the efficacy of 3 different concentrations of netarsudil in Japanese subjects. All 3 concentrations that we studied met the primary endpoint of superiority to placebo in mean diurnal IOP at week 4. As expected in subjects in Japan where intraocular pressure tends to be about 3 millimeters lower than in the U.S. the baseline mean diurnal IOPs in the study were low around 20 to 21 millimeters of mercury. And by week 4 we still had quite impressive IOP lowering down to in the 15 millimeter range in the case of the 0.02% concentration. But all 3 concentrations were highly effective in lowering IOP. With respect to safety all 3 were generally well-tolerated all 3 concentrations with no serious adverse events. And looking at efficacy compared to tolerability the 0.02% concentration which is what is marketed in the United States was determined to provide the optimal efficacy and safety profile in Japanese patients. As we saw in the United States conjunctival hyperemia was the most frequent adverse event. Discontinuation rate was very low in this study only 1 out of 54 subjects in the 0.02% arm of the study discontinued early. And in general the hyperemia discontinuation rates were lower in this Japanese trial than in the U.S. trial. On Slide 4 is the study design and all I want to point out here is that we enrolled patients with either open angle glaucoma or ocular hypertension. But for patients who had the diagnosis of open angle glaucoma the lower end of the IOP range could be as low as 15 millimeters of mercury and be entered into this study. At the upper end they had to be less than 35 millimeters of mercury. For those patients with a diagnosis of ocular hypertension they had to have pressures at 22 millimeters or higher up to less than 35.

And again the primary efficacy endpoint in this study was mean diurnal IOP at week 4. Slide 5 shows the mean IOPs at each time point comparing baseline across week 1 week 2 and week 4. And you can see a very large separation between all 3 concentrations and the placebo group. And the differences were statistically significant at each time point for each concentration. Looking at Slide 6 this summarizes the primary endpoint mean diurnal IOP at week 4. And again all dose levels were highly statistically significant in IOP lowering versus placebo at week 4. And the 0.02% actually achieved the lowest mean diurnal IOP of 15.4 millimeters of mercury at week 4. On Slide 7 is a brief safety summary. There were no serious adverse events and 6 out of the 215 subjects discontinued due to an adverse event in this study. There was only 1 discontinuation each in the 0.01% and 0.02% arms and 4 discontinuations for adverse events in the 0.04% arm. And again I'm not going to go into details on this table. You're welcome to look at it online. But again the conjunctival hyperemia rate for the 0.02% of 37% is lower than what we have seen in our U.S. studies. So Slide 8 then just summarize again all 3 doses were highly effective and well-tolerated in the Japanese population. The 0.02% concentration provided the optimal efficacy and safety profile. We really believe that this level of efficacy at low baseline IOPs bodes well for its use in normal tension glaucoma which is of course a huge unmet need particularly in Japan but also in the U.S. and other countries.

And we will be meeting with PMDA in the first half of next year to discuss the Phase 3 clinical trial design and expect to start Phase 3 trials in the second half of next year. Vince?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Thanks Casey. Obviously this data is terrific for us as it relates not only to the Japanese market but as Casey mentioned also here it's got broader implications relative to those patients who do have glaucoma but also suffer or have it with lower pressures. And so it shows again that the drug works equally well at high and low pressures and we're excited about the potential there. As we have this positive Phase 2 data in hand we are now having and are in very active discussions with potential Japanese partners for any further development or certainly the commercialization side of things as we look at moving forward in Japan. And then as Casey mentioned we are determining the next steps regarding the Phase 3 preparations including a meeting with the PMDA which is the FDA equivalent in Japan which we think will occur sometime perhaps in Q2 of next year allowing us to start the Phase 3 trials in the second half of next year. Now just to talk briefly about our retinal implant programs we're very happy report that our AR-1105 sustained release steroid trial is now fully enrolled well ahead of schedule. And we look forward to a readout sometime in the middle of next year.

Our Rho kinase Protein kinase C inhibitor program the AR-13503 has entered the clinic as well and is progressing very nicely. We don't expect any data from this program until 2021 although we will be providing updates as we move forward with the program. Our earlier stage research and initiatives are also advancing as we explore our own molecules in the dry eye space neuro-enhancement dry AMD and psoriasis as just a few examples of the pipeline that we're pursuing and building. One last point and a big change from last quarter is that as of September we now have nearly $350 million in cash and cash equivalents and investments on our balance sheet and therefore believe that we are very well financed.

On that note I'll turn it over to Rich to cover the financials.

Richard J. Rubino -- Chief Financial Officer

Thanks Vince. We recorded $18.5 million in net revenues in the third quarter a 17.1% increase over the second quarter of 2019. Our franchise net revenues reflect volumes of nearly 197000 bottles for the third quarter. Our gross margin for the third quarter was 88.9%. Our normalized gross margin was approximately 87.8% when considering inventory costs that were expensed prior to FDA approval of our products. Our gross margin percentage for the third quarter was unfavorably impacted by approximately 5.9% primarily due to excess inventory. The cost of this was approximately $1 million and is a direct result of our lower than anticipated sales volumes. Our third quarter GAAP net loss was $49.4 million or $1.09 per share. When excluding the $10.6 million of stock-based compensation expense the total adjusted net loss was $38.8 million or $0.86 per share. Adjusted total operating expenses for the third quarter were $49.2 million with adjusted selling general and administrative expenses of $25.1 million adjusted preapproval of commercial manufacturing expenses of $5 million and adjusted research and development expenses of $19 million.

For additional information regarding our third quarter results and prior period comparisons please refer to today's earnings release and our Form 10-Q which will be filed tomorrow. Net cash burn for the 9 months ended September 30 2019 totaled approximately $131 million and we had $345.8 million in cash cash equivalents and investments remaining on our balance sheet as of September 30 2019. Shares outstanding at quarter end totaled 46.0 million. Net cash burn guidance for full year 2019 remains estimated at $160 million to $170 million. As stated earlier we have $345.8 million in cash cash equivalents and investments on our balance sheet at quarter end. In September 2019 we issued convertible senior notes due 2024 with gross proceeds of $316 million and net proceeds of about $275 million after fees. The notes include an effective conversion premium of 100% after giving effect to concurrent cap call transactions and a 1.5% coupon. With this financing we terminated our previous $200 million undrawn credit facility. Lastly for those of you that are trying to calculate days sales outstanding make sure you are using gross revenue in your calculation and not net revenue which includes offsets associated with liabilities such as rebates. In doing so you will yield DSO of 60 days which is consistent with our wholesaler payment terms.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Annabel Samimy with Stifel. Your line is now open.

Annabel Samimy -- Stifel -- Analyst

I'm going to ask one 5-part question. First has formulary implementation on the Part D side improved for Rhopressa? And what are the chances that Rocklatan is going to see the same delays? I know that expectation was that Rocklatan would be a majority Part D coverage coming out of 2019. I know you did some math with like the lower income Part D Medicare patients. But I guess I'm wondering if that's going to still reach that majority of coverage for just regular Part D patients. Do you expect steady state still to occur in terms of coverage for 2020 and does that apply to steady state for price as well? I think that's about 20 questions. So good luck.

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Thanks. I think I got it. So the most important metric is that I don't think that our projections have changed any. We thought that we'd reach some level of stability in terms of the Medicare Part D coverage between the two products sometime toward the back end of the second quarter of next year. I can tell you that there's a number of plans that are delaying some decisions not just on our products but in general as we saw this year. So it is hard to predict exactly what month any of that kind of information or when those kind of changes are going to occur. But we're still thinking it's sort of toward the back end of Q2 of next year maybe trickling into early summer that it looks like as of now we'll have that equilibrium established between -- and reach that roughly 75% Medicare Part D coverage. I have to tell you though that when we got to the high coverage levels with Rhopressa that certainly slowed up the level of interest for some of these guys to actually start covering Rocklatan. They just didn't see the need to do it very quickly. And so what we've implemented there is certainly a very active prior authorization program that is putting an awful lot of pressure on them. So the more work our reps do to enhance prior authorization and get those things going through those plans the more those plans will be incented to actually work with us and set up the right rebate programs and the like and get the products covered. But again long-winded answer to your multiple-level question. But the bottom line is it's still sort of the back end of Q2 of next year.

Annabel Samimy -- Stifel -- Analyst

And so what does that mean for price?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

It will be balanced out. So we'll continue dipping as we get more and more Medicare Part D. And then it will hit the bottom and then it will start coming back up. So I think that the phenomena that you saw for this quarter where we had lower coupon utilization and then that brought the net price up and kept it from sliding quarter-over-quarter as we look at getting greater and greater commercial coverage we'll start seeing some of that begin to go the other way. And so you'll see that balancing act occur. So again we'll see steady -- should see some continued slight declines as I said during my prepared remarks all the way through toward the back end of Q2 of next year.

Annabel Samimy -- Stifel -- Analyst

Okay, great. Thanks. I'll get back in here.

Operator

Thank you. And our next question come from Ken Cacciatore with Cowen & Co.

Ken Cacciatore -- Cowen and Co. -- Analyst

Thanks, guys, Just trying to understand is obviously the Part D is taking I'm guessing a little bit longer. And I apologize. I was late getting on the line. But just trying to understand why this elongation of kind of getting Part D up and running just any explanation. Obviously I would think it's different than what you expected as you entered the year. And then what's the magic level that we need to see before we can start forecasting a little bit more growth? It looks like in the low end of your guidance range you have obviously down quarter-over-quarter assumptions. So just trying to paste how we should be looking at as we walk into 2020 should we be thinking of fairly modest H1 and having to wait to H2 before we start seeing a little bit more inflection?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

So as I mentioned during my -- the last response to Annabel's question is we do think that we're going to see some continued movement on the Medicare Part D program. It's not going to come in the big chunks that we had seen earlier with Rhopressa. But the plans are just simply not putting it -- they don't feel the need to put Rocklatan on because they have Rhopressa on there already covered. And so they're slow walking some of that. But you know we do think we'll continue to make some progress there but are still pointing toward the back end of Q2 when we'll reach some level of normalization between coverage on both Rhopressa and Rocklatan. That level is in that 70-75% Medicare Part D range and roughly high 80s to 90% on the commercial side for that coverage. But again pointing to call it the middle of next year in order to achieve that.

I think a lot of it has been driven Ken by the fact that again we do have Rhopressa on formulary. So the plans are just sitting there saying fine. Just show me that and prove to me that there's a lot of interest out there for Rocklatan. So that's where the prior authorizations take a while. And as I've said earlier that's where the churn begins to occur and that's why we're seeing some of the slower uptake as a result of that. Relative to the quarter as I mentioned earlier we think that we'll still be reporting shipments from wholesaler to retail. We don't see that that's going to be impacted dramatically as we closed out this calendar year. But I do think what you're really going to see is the wholesale purchases start swinging relative to -- both up and down as it relates to quarter-end and Thanksgiving and the Christmas holidays and New Year's et cetera et cetera. So that's what we're just preparing for and that's why we did the change in the range.

Ken Cacciatore -- Cowen and Co. -- Analyst

Thank you, sir.

Operator

Thank you. And our next question comes from the line of Serge Belanger with Needham & Company. Your line is open.

Serge Belanger -- Needham & Company -- Analyst

Hi, good afternoon, I had another question on pricing. Can you just walk us through the different pricing components between Medicare Part D and commercial plans? And then what kind of factor the recent price increase plays in how we should see pricing progression in the fourth quarter and in 2020?

Richard J. Rubino -- Chief Financial Officer

Hi Serge. It's Rich. So the price increase we took most recently was about 9%. You'll see about a third of that making its way to net revenues over time. As we've said before the Medicare Part D business has a lower net because Medicare Part D has steeper rebates than commercial rebates. And Medicare Part D also has the coverage gap component the donut hole funding where pharma is required to fund 70% of the donut hole. So those two are the bigger chunks that will bring the Medicare Part D net revenue down lower than commercial. For commercial you have rebates generally at a lower level and you have the co-pay coupon card utilization which is treated from an accounting perspective as tantamount to a rebate. But as Vince mentioned earlier we're seeing that to be less the case as certainly Rhopressa has gained more coverage on the commercial side and co-pays are broadly more affordable.

Operator

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

Esther Rajavelu -- Oppenheimer -- Analyst

Thank you guys. following off on some of the comments earlier on Rhopressa versus Rocklatan on formulary why are these plans not considering the impact of the potential for higher compliance with the single fixed dose administration with Rocklatan versus Rhopressa? What do you need to do to show them stats around that?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Well we do have that information Esther. This is Vince. And really they're not spending a whole lot of time worrying about that kind of information. What they're really looking at is are the doctors really going to get on board with Rocklatan from a utilization point of view before they start even thinking about putting it on formularies. And certainly the wins that we've had were driven by the great work that our salesforce has done of driving prior authorizations for some of those plans. That's why we got to the 36% Medicare Part D coverage. And also from our managed care access team they were able to get the low-income subsidy patients under Medicare which added another 18 points to that which is how we got to the 50% Medicare Part D coverage at this point. But compliance alone isn't driving that at this point. We do have data showing it. We do have data now and we can certainly show them data like which you heard Casey talk about in the MOST trial -- in that Phase 4 trial that shows how Rhopressa works and we'll certainly give them some information on Rocklatan. But again for them it's all about the dollars and they're looking at if they can make a nice co-pay on a generic Latanoprost script and they're just looking at their financials. And so what's going to change that is purely driving prior authorizations because then they're going to be paying retail for those and that's going to cost them a lot of money. So the more we can impact that the quicker they'll get to the table to negotiate rebates.

Esther Rajavelu -- Oppenheimer -- Analyst

Gotcha. Thank you.

Operator

Thank you. And our next question comes from the line of Louise Chen with Cantor Fitzgerald. Your line is open.

Unidentified Participant

Hi, thanks for taking questions. This is Jennifer on for Louise. Maybe just focusing on the pipeline I know you've talked about your interest in the dry eye space. And I'm just wondering what is your level of eagerness into adding to your current pipeline just given how productive the current pipeline is today? And then second maybe just talking about the current franchise given the evolving dynamics you've seen so far in 2019 has that at all impacted how you're thinking about the timing to your target peak shares for these products?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Sure. So we don't think that the peak level of revenues that we've always talked about the billion for Rocklatan and the $350 million for Rhopressa really impacted. You know we think that there's going to be some impact perhaps from timing. But we're talking about a year's phasing or so if that were to occur. We won't really know what the total impact is until we reach that equilibrium in managed care coverage that we talked about earlier of getting up to that 70-75% for Medicare Part D and high 80s or 90% for commercial. And then we'll be able to predict that a little bit better. And so it could be just simply a year- year and a half which is what we've lost from a launch point of view. As you know uptake has been slower. But as soon as we get that coverage hopefully we'll be able to kick it into high gear and we've got the salesforce in place now and trained to be able to get the pull-through once we get those contracts signed. On the pipeline point of view we are excited about our retinal pipeline and like what we see. But as we look at the major markets in ophthalmology the next big one where we do have an interest and both a shorter term one and a longer term one is on the dry eye space. We think that on a longer term perspective Casey and his team have been developing and we've reported at ARVO earlier this year on our Janus kinase IKK product for the treatment of dry eye and that looks very exciting.

But it's fairly early on and the number of patients that we have in the U.S. that suffer from dry eye in one form or another is about 30 million and only 2 million or 3 million of them actually get prescriptions. So we think it's a really large unmet need and it's certainly a market that we think that we can pursue. What's really exciting is the number of companies that have products at some stage or another for the treatment of dry eye that really are looking for partnerships to develop those assets and bring them not only -- get them through the clinic and then the FDA but commercializing them. And so we've been very bullish and certainly with the cash on hand we could be active on a business development point of view and we intend to do that. And we've been very up front about dry eye being one of the areas where we do want to look at business development activity. So that hasn't changed at all.

Unidentified Participant

Thank you.

Operator

Thank you. And our following question comes from the line of Difei Yang with Mizuho Securities. Your line is open.

Difei Yang -- Mizuho Securities -- Analyst

Hi, good afternoon. Thanks for taking my questions. So just a couple first of all with regards to discontinuation rate on either Rocklatan or Rhopressa do you think it sounded like based on the clinical data that it is not materially different from any other PGA agents out there despite the hyperemia rate may be higher. I just wanted to confirm that. Then secondarily with regards to seasonality for ophthalmology drugs in general chronical use ophthalmology drugs in general just from patient demand physician demand perspective no wholesaler dynamics; is Q4 seasonably in high demand or seasonably weak?

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Well let me take a stab at the seasonality component and then I'll let Casey comment on the discontinuation rate and Tom can also comment in terms of some of the market dynamics. But we don't see great seasonality in terms of a chronic med like glaucoma that is driven by anything other than reimbursement rates. And so folks fall into the donut holes. They have an awful lot of expenditures associated with that. And so that may impact it some as we close out the year. Obviously we pay an awful lot of money now to help close that donut hole gap and it does impact our gross to net. And so that helps those patients. So maybe that's going to attenuate somewhat as these kinds of programs kick into high gear. We do see at the beginning of the year some seasonality only driven by the fact that patients haven't yet reached their insurance minimums and the like.

And so once they get to having established those minimums then insurance kicks in and so we start seeing greater uptake on the prescription side. But that's literally taking maybe a month or month and a half in the early part of the year to impact it. So again it's not seasonality like we think about for like allergic conjunctivitis or those kind of diseases. But it is mainly driven by the patient's ability to pay and coverage. And so let me turn it over to Casey on the discontinuation rate changes and also on the hyperemia rates of our product versus the prostaglandins that are out there.

Casey C. Kopczynski -- Chief Scientific Officer

Yes so I think from a discontinuation perspective if you're looking at discontinuations due to adverse events with the caveat that we're comparing across studies. But certainly the real world data that we have now suggests it's not much different than for the prostaglandins as a class. The hyperemia rates I think we've always tried to emphasize that while the rates we saw in our Phase 3 studies were on the high end of what's been reported for prostaglandin the severity was mild in the vast majority of patients. And it tended to be transient. So it would show up at one visit but it would be gone at the next. And I think that's what you're really seeing in the real-world data now is that the difference in real world use is actually much smaller than what might have appeared to be the case when the Phase 3 studies where physicians are carefully capturing by biomicroscopy at multiple different visits across a 12-month period.

Thomas A. Mitro -- President and Chief Operating Officer

So this is Tom. I'll answer the bit about discontinuation rates as well too. And here's what we've seen when Rhopressa first was launched. Physicians added to the therapy of the patients and commonly they added it at the end of the line. And they would call that maximum medical therapy. So patients were commonly in using 3 medications and then Rhopressa would be added on and we saw a pretty fair amount of hyperemia at that point. But the good news was that they saw the type of IOP reductions that Casey reported in our MOST trial. So they were getting surprisingly good IOP reductions. So that encouraged them to move it up in the regimen. So now it's commonly added as the second product the first product added to a prostaglandin or perhaps the second or third product in the regimen. And they're finding that they see less hyperemia. What it just means is they're telling us is that the eye is just getting bombarded with less preservatives and things like that. So they're seeing far less hyperemia. So they're quite happy. The other way I look at it from a bellwether standpoint to show you that the discontinuation rates are not discouraging physicians is our prior authorizations. And Vince has mentioned this a couple of times. But the number that have been submitted on behalf of Rhopressa or Rocklatan by physicians is quite stunning. I mean it's over 100000 now since the launch of Rhopressa. And those things aren't necessarily easy to submit. But if they were discouraged because of the discontinuation rates they wouldn't be supporting the products as they currently are. So I think overall the physicians are very very happy with the products and I think their attitude toward prior authorizations and the way they're positioning the product now shows that.

Difei Yang -- Mizuho Securities -- Analyst

Thank you for the additional color. Thank you.

Operator

Our next question comes from Joe Catanzaro with Piper Jaffray. Your line is open.

Joe Catanzaro -- Piper Jaffray. -- Analyst

Hey guys, thanks for taking the questions. I'll try and stick to one question here. I just wanted to follow up on the top 5 prescribers and whether you could say anything about their usage and whether it's weighted more toward Rhopressa or Rocklatan and then whether there's anything about their practice their historical prescribing habits their geographic location that can give you any insight into why their usage of Rhopressa and Rocklatan is so high.

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Vince here. So what's interesting is again when I asked for the breakdown of the top 5 for Rhopressa Rocklatan as well as for the franchise I really didn't know what to expect. I heard a lot of anecdotals about one group really getting on board very quickly and stuff like that. What's surprising is first of all that the highest market share guy is actually on Rhopressa. That means he was using Rhopressa and then started moving a little bit to Rocklatan. But really it's still -- he's still #1 from a franchise point of view at almost 28%. But he's out in California and we don't have that great of coverage out there. And so but he just said this is my go-to now. Every patient that walks through the door that's who I put on there et cetera et cetera. The next highest one that we have is actually for Rocklatan and he's at 17% of his entire practice is Rocklatan. And he's out in the middle of Utah. And so when I look at the other ones what's interesting is that we have one in Downtown New York. We have one out in Ohio and the like.

And so there is no geographic predictor there. There's no one area that says -- I think we also have one in Miami in the Southeast Florida area. And so there's no predictor that says it's a geography that's driving it. We try to look at the overlay of managed care plans to see if like oh yes well it makes sense because we have full coverage for Rhopressa and they happen to be in one of the areas where we have almost 50% Medicare Part D coverage now with Rocklatan. And nope. That's not it either. These are just guys that have just made it -- they got excited about it and started writing for one or the other or both and are making it their biggest drugs within their practice. And so I think it points nicely to the fact that after only 18 months with Rhopressa and 6 months with Rocklatan that we were able to get to those kind of levels. It certainly gives the rest of the salesforce something to shoot for and it tells you that what we were hoping would happen is achievable. Because if we can get these guys after such a short period of time to get to those levels certainly over time and better coverage we should be able to get to the kind of numbers that we've been predicting for both Rhopressa and Rocklatan.

Joe Catanzaro -- Piper Jaffray. -- Analyst

Okay, got it. Thanks for taking the question,

Operator

And our next question comes from Donald Ellis with JMP Securities. Your line is now open.

Donald Ellis -- JMP Securities -- Analyst

Thank you for taking the late question. I have a quick question for Rich and it's with respect to the donut hole issue. Is it going away in 2020? And if yes how will that impact ASP from quarter to quarter?

Richard J. Rubino -- Chief Financial Officer

Yes. Not really clear what's going to happen with donut hole next year. For our purposes we're just assuming status quo into next year. But to the extent that changes I wouldn't necessarily think that's a windfall for us. As these laws changes over time generally you don't -- pharma doesn't get a gift. It often becomes more expensive. So I think we'll just have to stay tuned.

Donald Ellis -- JMP Securities -- Analyst

So it's not a done deal? It's not set to change in January of 2020?

Richard J. Rubino -- Chief Financial Officer

That's correct.

Operator

Thank you. And I'm not showing any further questions at this time. I would now like to turn the conference back to Vince Anido for any further remarks.

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Thanks. First of all I want to thank everybody for joining the call. It's an exciting time for the company and certainly while we don't like changing guidance ranges et cetera; we just wanted to make sure that you had the latest information that we have. And we've always promised that level of transparency in terms of everything we do. This is a particularly exciting time for Aerie as we continue to gain momentum on the commercialization side with new clinical data and new coverage at hand take advantage of the myriad of opportunities associated with our globalization and our pipeline developments. So again I want to thank everybody for joining us today and have a good evening.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Ami Bavishi -- Director, Investor Relations

Vicente Anido -- Chief Executive Officer and Chairman of the Board

Casey C. Kopczynski -- Chief Scientific Officer

Richard J. Rubino -- Chief Financial Officer

Thomas A. Mitro -- President and Chief Operating Officer

Annabel Samimy -- Stifel -- Analyst

Ken Cacciatore -- Cowen and Co. -- Analyst

Serge Belanger -- Needham & Company -- Analyst

Esther Rajavelu -- Oppenheimer -- Analyst

Unidentified Participant

Difei Yang -- Mizuho Securities -- Analyst

Joe Catanzaro -- Piper Jaffray. -- Analyst

Donald Ellis -- JMP Securities -- Analyst

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