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Theravance Biopharma Inc (NASDAQ:TBPH)
Q4 2019 Earnings Call
Feb 24, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good afternoon, and I would like to welcome everyone to the Theravance Biopharma Conference Call.

[Operator Instructions]

Today's conference call is being recorded. And now I'd like to turn the call over to Gail Cohen, Vice President, Corporate Communications. Please go ahead.

Gail B. Cohen -- Corporate Communications and Investor Relations

Good afternoon, everyone, and thank you for joining our conference call and webcast to discuss our fourth quarter and full-year 2019 financial results and outlook.

Joining us are Rick Winningham, Chief Executive Officer, Andrew Hindman, Chief Financial Officer, Philip Worboys, Senior Vice President, Research and Translational Science, 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 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 to Rick.

Rick E. Winningham -- Chairman and Chief Executive Officer

Thanks, Gail. Good afternoon, everyone, and thank you for joining us.

2019 was a year of achievement for Theravance Biopharma across our business. We advanced our research and development stage pipeline, building a diversified portfolio of differentiated programs and we strengthened our commercial capabilities. A key differentiator is our unique in proprietary expertise in designing organ-selective medicines that have the potential to significantly expand therapeutic index, increase safety -- increase efficacy and safety, and transform the treatment of serious diseases. Our ability to engineer and optimize drug properties has allowed us to hone in on precise organ selectivity to target the site of disease with the goal of avoiding systemic liabilities. This has driven the discovery and development of lung-selective YUPELRI for COPD, gut-selective TD-1473 and TD-5202, lung-selective TD-8236 for severe asthma, and a research pipeline of next-generation organ-selective programs.

These innovative differentiated products have the potential to bring meaningful value to patients, providers and payers. Our roster of capability enhancing partnerships continues to strengthen, with ongoing successful collaborations with Mylan for YUPELRI, Janssen for TD-1473 and TD-5202. In addition, we entered into a new agreement with Pfizer to out-license our skin-selective pan-JAK inhibitor. The late 2019 license with Pfizer was quite meaningful as Pfizer pioneered the development of medicines targeting the JAK/STAT pathway, and is ideally positioned to advance the skin-selective program and unlock its therapeutic potential. These partnerships complement and expand our capabilities and enhance our potential to transform the treatment of serious disease when combined with our research engine, our wholly owned pipeline, proven development expertise and commercial infrastructure. We've set the stage for data and catalyst-rich 2020, a year we believe can deliver significant value for stakeholders.

2020 will be an important year for our company in terms of delivering data across all of our key development programs as well as continued execution around YUPELRI. In 2020, we expect data from 1473 2b portion of the Phase 2b/3 study in ulcerative colitis and Phase 2 study in Crohn's disease in late 2020, plus the subsequent potential opt-in decision by Janssen in 2021. Top line results from the ampreloxetine four-week registrational Phase 3 efficacy study in symptomatic nOH in late 2020. In mid-2020, data from both Phase 1 biomarker study of 8236, our lung-selective inhaled pan-JAK inhibitor in moderate-to-severe asthma and from the Phase 2 lung allergen challenge study. Positive data from these studies would lay the groundwork for advancing to a formal Phase 2b study.

Continued development of TD-5202, our irreversible JAK3 inhibitor for inflammatory intestinal diseases is also partnered with Janssen. Today, we are reporting encouraging results from the Phase 1 trial and plan to collaborate with the Janssen on next steps in development. In addition to our current clinical stage portfolio, we've got numerous early stage organ-selective programs that are looking promising. We are focusing on moving three of those programs forward this year. Building on the successful launch and market introduction of YUPELRI over the past year, we and our partner, Mylan look forward to continuing to execute on our commercialization strategy and strengthen our performance as measured by key market metrics including formulary wins, total patients prescribed YUPELRI and increased access.

Finally, we expect continued strong performance by GSK's TRELEGY ELLIPTA, the first and only once-daily single inhaler triple therapy for the treatment of COPD. TRELEGY ELLIPTA has had the strongest launch in the US of any GSK ELLIPTA product to date.

And now I'll pass the call over to Phil, who'll provide an update on our clinical programs. Then Frank will discuss YUPELRI commercialization strategy and execution, followed by Andrew, who will report on our financial performance and outlook with commentary on additional items, including our recently completed financing. Phil?

Philip D. Worboys -- Senior Vice President, Research and Translational Science

Thanks, Rick.

Starting on Slide 6, TD-1473 is an oral gut-selective pan-JAK inhibitor designed to treat inflammatory intestinal disease directly at the site of inflammation with minimal systemic exposure or corresponding immunosuppressive effects. 1473 is in two clinical studies in partnership with Janssen. One, in ulcerative colitis and the other in Crohn's disease. RHEA is a Phase 2b/3 study of 1473 in patients with moderately to severely active ulcerative colitis. In parallel, DIONE is a Phase 2 study in patients with Crohn's disease. Both are these are currently enrolling patients, and we look forward to reading out data from the Phase 2b portion of the ulcerative colitis study and the Phase 2 Crohn's disease study in late 2020 to support what we believe may become a best-in-class efficacy and safety profile in the treatment of inflammatory bowel disease.

Today, we are pleased to report the results from the Phase 1 first-in-human study of TD-5202, our irreversible JAK3 inhibitor for inflammatory intestinal diseases also partnered with Janssen. This single and multiple ascending dose study evaluated the safety and tolerability of 5202 in healthy subjects. 5202 is generally well tolerated and as a single oral dose up to 2,000 milligrams and as a twice-daily oral dose up to 2,000 milligrams total per day given for 10 consecutive days. There were no severe or serious adverse events reported and all treatment-emergent adverse events in 5202 treated subjects were mild in severity. Vital signs and electrocardiogram assessments did not demonstrate any clinically significant changes from baseline and no clinically significant changes in chemistry or hematology parameters were observed post dosing. The trial also measured the amount of 5202 in the bloodstream. Consistent with our expectations of an oral-selective -- an organ-selective compound, the plasma levels of 5202 in these subjects were very low.

In fact, maximal concentrations, even at the highest dose tested, 1,000 milligrams twice daily were at least an order of magnitude below the predicted levels that may be associated with systemic activity. We believe 5202 may provide a promising additional therapeutic approach to addressing a range of inflammatory intestinal diseases, and we plan to collaborate with our partner Janssen on the next steps for development.

Let's turn now to Slide 10, on ampreloxetine, our once-daily norepinephrine reuptake inhibitor in development for treatment of patients with symptomatic nOH. The registrational Phase 3 program for ampreloxetine includes two studies as depicted on Slide 11. First, the SEQUOIA study assesses the efficacy and safety of a 10-milligram dose versus placebo over four weeks in 188 patients. Second, the REDWOOD study, which assesses the durability of response to ampreloxetine by placing 254 patients, including patients from the SEQUOIA study on open-label treatment for four months and then randomizing half of the patients to placebo in a double-blind, six-week withdrawal phase. Both studies are actively enrolling patients and the four-week SEQUOIA study is expected to report data in late 2020.

We believe ampreloxetine could offer distinct advantages over existing nOH therapies, such as droxidopa, which carries a boxed warning for supine hypertension. Our market research shows there are about 50,000 patients with nOH who could benefit from a safer and more effective therapy and were readily accessible primarily in tertiary centers. Importantly, we plan to commercialize ampreloxetine ourselves in the US.

Now to Slide 12 and 8236. This is our lung-selective inhaled pan-JAK inhibitor in development for the treatment of inflammatory lung diseases, including steroid-resistant asthma. There's a population of patients particularly with severe asthma, who are so-called T2-low rather than T2-high inflammation. And most of these patients don't benefit from either steroids or from biological agents. We believe there is opportunity with 8236 to treat patients regardless of T2 phenotype. And ideally, 8236 could be used as an inhaled alternative to steroids before these patients progress to biologics. As reported last year, initial results from the Phase 1 multiple and single ascending dose studies were encouraging. 8236 was generally well tolerated as a single inhaled dose up to 4,500 micrograms in healthy subjects and as a once-daily inhaled dose of up to 4,000 micrograms given for seven consecutive days in patients with mild asthma.

Turning to Slide 14. An additional objective of the Phase 1 MAD study was to determine biological evidence of an anti-inflammatory effect in the lungs of these mild asthma patients. We achieved this by measuring reductions in fractional exhaled nitric oxide or FeNO and established disease activity biomarker in asthma. Over the seven days of 8236 administration, these patients experienced reductions in FeNO compared to placebo at all doses above 150 micrograms. Based on these encouraging study results, we are conducting a Part C extension portion of this Phase 1 trial in patients with moderate-to-severe asthma. These patients represent the population that would ultimately be most likely to benefit from 8236. In addition to providing further opportunity to measure the effect of 8236 on FeNO, these patients are also consenting to having broncoscopies. So we'll be able to sample the cells and fluid in the lungs to look at additional markers of inflation, and we expect to see data mid-2020.

In parallel, we are also conducting a lung allergen challenge Phase 2 study. This is a mechanistic study in which patients inhale an allergen, which provokes an exacerbation like response in the lung under controlled conditions and is often accepted as a strong proof-of-concept in predicting a reduced risk of exacerbations, in patients with asthma. Results of this study are also expected mid-2020. We have numerous early stage organ-selective programs, and we are focusing on moving three forward this year.

Firstly, our inhaled nebulized lung-selective pan-JAK inhibitor intended for the prevention of lung transplant rejections and other serious inflammatory conditions of the lung, which we hope to bring to clinic by midyear. Secondly, our inhaled nebulized lung-selective ALK5 inhibitor intended for idiopathic pulmonary fibrosis. We are aiming to have this program in clinic toward the end of the year. And thirdly, our intravitreal eye-selective pan-JAK inhibitor intended for diabetic macular edema. We are currently conducting long-term toxicity studies for this compound, with the goal of advancing it to the clinic upon completion. We look forward to providing updates on these early stage programs as they progress toward the clinic.

So next, Frank will provide an update on the US commercial launch of YUPELRI.

Frank Pasqualone -- Senior Vice President and Chief Commercial Operations Officer

Thanks, Phil, and good afternoon, everyone.

Starting with Slide 19. We are concluding the first full commercial year since launch of YUPELRI, and we are pleased with customer acceptance and brand performance. YUPELRI is the first and only once-daily nebulized long-acting muscarinic antagonist that provides a full 24 hours of control for patients having gained FDA approval at the end of 2018 for the maintenance treatment of patients with COPD.

Turning to Slide 20. Remember that in our commercial strategy with Mylan, we focus on the institutional setting, while Mylan covers the outpatient COPD treatment segment. 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, making the hospital a promising setting to convert patients from competitive products to YUPELRI. Importantly, there are additional COPD patients that are routinely hospitalized for other conditions, unrelated to a worsening of their COPD symptoms, but who require maintenance therapy for their COPD while hospitalized. And these patients may represent an additional opportunity for conversion and treatment with YUPELRI.

Critical to successful implementation of the strategy is to have the patient remain on YUPELRI for maintenance treatment of their COPD following discharge from the hospital. This is best achieved through a cooperative strategy at the field level between Mylan and Theravance Biopharma representatives. Due to diligence and training and preparation between the two companies, this cooperation is working well, and we believe it will continue to play an important role in the future success of YUPELRI.

As shown on Slide 21, we are tracking key performance metrics, including formulary reviews and wins, patient uptake and market access. By the end of the fourth quarter, we continued to observe strong customer response and market acceptance. Through the end of the year, we achieved 85 formulary wins, which equates to 220 hospital accounts. 70 reviews are under way or scheduled by the end of the first half of 2020, representing more than 400 potential new hospital accounts, and we've provided exceptional medical information support to the field, with 100% of healthcare provider requests fulfilled in under 30 days. We estimate that through fourth quarter, more than 30,000 patients have been prescribed YUPELRI since launch. Since launch, our hospital-focused sales team has conducted over 61,000 healthcare providers sales calls, reaching approximately 90% of our currently targeted institutional accounts.

Now turning to our marketing efforts and the impact on marketplace perceptions and prescribing behaviors. Our marketing research data as of October 2019 showed that YUPELRI achieved 86% share of the nebulized LAMA market and 10.7% share of the long-acting nebulized market, including the DME market. Based on more recent marketing research, YUPELRI is used primarily in patients with an average age of 68. Three quarters of YUPELRI patients have a low peak inspiratory flow rate or PIFR and approximately 90% of patients on YUPELRI are in their later years of COPD, about 10 years after diagnosis. This is as expected, as these are classic nebulized patients. We're also pleased with the awareness level of YUPELRI among pulmonologists in both the hospital and community office settings. Over one-half of targeted office-based pulmonologists and approximately 40% of targeted hospital pulmonologists currently prescribe YUPELRI. And approximately half of YUPELRI patients are using the product in combination with other long-acting agents.

Turning to market and patient access. With respect to Medicare Part B patients, the early granting of a permanent J-CODE for YUPELRI has made a meaningful difference in facilitating reimbursement in the outpatient setting, and importantly, simplifying the fulfillment process for pharmacists and patients. Traditional Medicare, which represents nearly 80% of the YUPELRI patient population has been filling and reimbursing prescriptions more smoothly since the Permanent J-CODE was awarded. Medicare Part D open enrollment started October 15, 2019 for the 2020 year, and Part D coverage only applies to YUPELRI after 100 days in a long-term care facility setting, making up about 6% of the YUPELRI patient opportunity.

Coverage to date from major commercial insurance plans has been positive. Medicaid covers most products in the nebulized class and requires prior authorization, but does not hinder a Medicaid patient from access to YUPELRI. From launch through the end of 2019, YUPELRI is increasingly becoming an accepted source of potential relief for those patients in need of nebulized therapy for the maintenance treatment of their COPD. We believe that YUPELRI is delivering on its brand promise and has significant marketplace potential for growth. We are only one year of the life of YUPELRI, but we are pleased with our performance to date and believe we are well positioned to continue to drive adoption and to build upon the strong base of target prescribers and payers that we have established so far.

Now, I'll pass the call over to Andrew for a financial update.

Andrew A. Hindman -- Senior Vice President and Chief Financial Officer

Thank you, Frank. I'll begin with our financial results for 2019, then cover our financial guidance for 2020, and close with a brief update on our recent financing activities.

Starting on Slide 22. Revenue for the fourth quarter of 2019 was $29.5 million, comprised of collaboration revenue of $9.6 million primarily attributed to the amortization of the upfront payment from Janssen for TD-1473, licensing revenue of $10 million related to the upfront payment from Pfizer for rights to our skin-selective pan-JAK inhibitor program, and revenue from the Mylan collaboration agreement of $9.9 million. Revenue for the fourth quarter represents $13.8 million increase over the same period in 2018. The increase was primarily due to licensing revenue associated with the upfront payment from Pfizer and an increase in revenue from the Mylan collaboration agreement, partially offset by a decrease in product sales, which resulted from the sale of VIBATIV to Cumberland Pharmaceuticals in late-2018.

Full-year 2019 revenue was $73.4 million, comprised of collaboration revenue of $31.3 million primarily associated with our global collaboration with Janssen, licensing revenue of $28.5 million related to upfront from Pfizer and Mylan, and revenue from the Mylan collaboration of $13.7 million. R&D expenses for the fourth quarter of 2019 were $67 million compared to $52.3 million in the same period in 2018. The increase was primarily due to an increase in employee-related costs and share-based compensation related to long-term retention and incentive awards, plus external related costs associated with the progression of our key programs. Full-year 2019 R&D expenses were $219.2 million, or $190.3 million excluding non-cash share-based compensation.

SG&A expenses for the fourth quarter of 2019 were $33 million, compared to $25.5 million in the same period in 2018. The increase was primarily due to an increase in share-based compensation related to long-term retention and incentive awards. Full-year 2019 SG&A expenses were $106.1 million, or $74.6 million excluding non-cash share-based compensation. We ended the year in a well-capitalized position with approximately $285.8 million in cash, cash equivalents and marketable securities.

I'll now turn to our financial guidance. For the full year of 2019, we incurred an operating loss, excluding share-based compensation of approximately $192 million, which was below our stated guidance range of $200 million to $210 million. The variance was driven by the $10 million Pfizer upfront, which was not factored into our guidance for the year. Turning to 2020, we expect full-year operating loss, excluding share-based compensation in a range of $205 million to $225 million. The operating loss guidance does not include royalty income for TRELEGY ELLIPTA, which we recognized in our statement of operations as income from investment in TRC LLC or potential future business development collaborations, as well as the timing and cost of clinical studies associated with our key programs, among other factors that could impact the financial guidance.

I'll now direct your attention to Slide 24 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, for which Theravance Biopharma holds an economic interest that equates to an upward tiering royalties of approximately 5.5% to 8.5% of worldwide TRELEGY sales, net of expenses. As a reminder, 75% of the income from our investment in TRC is pledged to service outstanding notes and 25% of the income from our investment is retained by Theravance Biopharma. Sales of TRELEGY for COPD continued to grow. The product is now available in 38 markets with additional geographies expected in the fourth quarter, including China. In October, GSK announced that it had submitted a supplemental NDA for TRELEGY in asthma. Previously, GSK announced it had submitted a regulatory filing in support of the revised labeling for TRELEGY on reduction in risk of all-cause mortality compared with ANORO in COPD patients. There is an FDA advisory committee meeting scheduled for April 21, 2020 related to this application.

The addition of an asthma indication as well as a mortality claim in COPD could result in meaningful expansion for the use of TRELEGY over time. Finally, regarding recent financing activities, we announced on February 11, 2020, that we closed our public offering of 5.5 million ordinary shares at a price to the public of $27.00 per share. The gross proceeds to Theravance Biopharma from the offering are approximately $148.5 million before deducting underwriting discounts and commissions and estimated offering expenses. In addition, we disclosed in February that we're in advanced discussions with a limited number of investors to explore alternative financing strategies with respect to the company's existing $250 million non-recourse 2033 notes. We have recently entered into note purchase agreements with certain lenders to, among other things, issue $400 million in notes on broadly comparable terms, and we have since provided notice of optional redemption to the existing noteholders of the 2033 note, contingent on the closing of the new transaction.

Issuance of the notes is subject to the satisfaction of customary closing conditions in the near future. We look forward to providing additional details in the future. And now I will turn the call back over to Rick for closing remarks.

Rick E. Winningham -- Chairman and Chief Executive Officer

Thanks, Andrew.

At Theravance Biopharma, our mission is to create transformational value for all of our stakeholders. Our key assets are a strong search engine, fueling a rich and diversified pipeline of organ-selective assets, backed by a proven development and commercialization expertise, and high quality strategic partnerships, all supported by a strong capital position, which includes our economic interest in TRELEGY ELLIPTA royalties and a commercial asset YUPELRI. All this taken together has enabled us to create an exciting lineup of program milestones and value-driving catalysts in 2020 and beyond. Important upcoming milestones include additional US commercial launch metrics for YUPELRI in COPD, progression of our late-stage clinical studies of ampreloxetine in 1473 with important data readouts by the end of 2020, continued advancement of our earlier-stage compound 8236 plus additional novel organ-selective research programs entering the clinic over the next 12 to 18 months, and finally, further commercial and regulatory progress by GSK for TRELEGY, including FDA decisions on an sNDA for a mortality claim in COPD and an sNDA for asthma indication in 2020.

This is a pivotal time for Theravance Biopharma and we appreciate the opportunity to share our progress with you. And now I'd like to hand the call back over to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions]

And our first question comes from Geoff Porges with SVB Leerink. Your line is open.

Andrew Berens -- SVB Leerink LLC -- Analyst

Hey, thanks for the question. This is Andrew on for Geoff. And I have a question for 1473. I know you indicated that J&J decision will be in -- probably late 2020 or early 2021. So how does that affect your cash burn in the future and also the capital requirements going forward? Thank you.

Rick E. Winningham -- Chairman and Chief Executive Officer

Thanks, Andrew. This is Rick Winningham. Well, clearly what we're establishing is a multi-year capital base to enable us to recognize the promise of our pipeline. We've -- in the call today said that we expect data in late 2020 for 1473, the 2b study in ulcerative colitis and the Phase 2 study in Crohn's. The way the opt-in works is we deliver the data from those two programs to J&J and then they make the decision within a specific period of time, around 90 days on whether they want to opt in or not. An opt-in decision by them carries with it $200 million milestone, which would obviously strengthen our capital base at that particular time. So that's sort of the sequence of events right now. Certainly, with the existing cash balance, with the added cash from the equity deal that we completed this month, and then potentially the completion of the note refinancing, we've got adequate capital for a number of years to, again, to recognize the promise of our pipeline.

Andrew Berens -- SVB Leerink LLC -- Analyst

Thank you. That's helpful.

Operator

Thank you. Our next question comes from Louise Chen with Cantor. Your line is open.

Louise Chen -- Cantor Fitzgerald -- Analyst

Hi, thanks for taking my questions here. I had a few of them. First question I have for you is on TRELEGY ELLIPTA. If you get this mortality benefit and the approval for asthma, how much could this drive incremental upside to sales? It seems like it could be orders of magnitude, but wanted to see if you could elaborate a little bit more here. And then for the upcoming adcom, what are you expecting this to cover? And how are you preparing for it? And the last question is on, you have some important data readout coming out for TD-1473 at the end of the year. And will you report both data sets for UC and Crohn's together or will it just depend on the timing? And if all goes as planned, as Janssen or Janssen have until 2021 -- or when in 2021 to exercise, and will you -- was that exercise amount still going to be $200 million? Thank you.

Rick E. Winningham -- Chairman and Chief Executive Officer

Yeah. So this is Rick. I'll just cover very briefly the TRELEGY questions and then let Brett cover the -- who's actually joining us, let Brett cover the 1473 readouts. So TRELEGY, obviously, Louise, we're distant from this on -- relative to GSK. We don't have any information that the market doesn't have. As we look at it just from an outside observation, clearly the asthma indication in the United States would make a significant difference to the total peak sales of TRELEGY. Whether it's orders of magnitude, I don't know whether asthma alone is orders of magnitude, but it's a fairly significant increase to peak sales is we would just roughly think about 50% to 60% on peak, something like that.

Mortality, while there isn't -- in COPD mortality, there isn't another product with a mortality claim in COPD. So you're probably looking at a pretty meaningful upside there. They're coming both from initial treatment, but also from a potentially persistence of treatment with TRELEGY. So needless to say, I think both of these indications would provide certainly quite meaningful upside to baseline projections right now that we have with TRELEGY. The adcom, I don't have any idea, any insight at all and what the adcom will talk about. Obviously, it's on the FDA website that's TRELEGY versus ANORO from the IMPACT study. And I think GSK probably, over time, will have a better perspective on what those discussions will be.

So Brett, we'll bring you in here to talk about the readouts from 1473.

Brett K. Haumann -- Senior Vice President, Clinical Development and Chief Medical Officer

Thanks, Rick. And hi Louise. Just one last comment on TRELEGY actually, and that's that I'll remind you that Breo initially was approved only in COPD. And so you may want to go and look at that. In terms of some indication at least of an analog of what happened when the asthma indication was introduced secondarily. Of course, Breo's launch wasn't nearly as successful as TRELEGY. So the absolute magnitude could be different, but at least you'll be able to reference that Breo sales curve in terms of the initial COPD and then the latter asthma impact.

You asked about 1473, and really it's going to be a function of when each of these studies readout as to whether we report them together or separately. Right now enrollment is tracking neck and neck for the two studies. They're very close together in terms of their predicted outcome and readouts by the end of this year. Of course, that's always subject to recruiting the very last patient that's needed for each of those studies. So until we have that certainty, I wouldn't be able to directly answer your question. But I think you should expect to see these data sets, either together or very close together in terms of their readout.

In terms of when Janssen would sort of make their decision, contractually, they have 90-day period after the second of the two data sets is available to inform their decision of opt-in, and that triggers the $200 million milestone. They do have the opportunity to consider one or other of the two data sets, so they could make their decision on the first of the two. Our expectation is they're likely to look at both data sets to inform their decision.

Louise Chen -- Cantor Fitzgerald -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question comes from Alexander Duncan with Piper Sandler. Your line is open.

Alexander Duncan -- Piper Sandler & Co. -- Analyst

Hi, thanks for the question. The partnership with Pfizer on the skin localized JAK inhibitor is pretty interesting. Could you provide any additional information on how your approach, or mechanism, could be differentiated from Incyte's topical ruxolitinib? Thanks.

Rick E. Winningham -- Chairman and Chief Executive Officer

Yeah, I'll answer that and then maybe ask Phil to comment a bit. Our approach with the skin program was much like our approach with any other organ system, is that we are developing a compound specifically to work in the skin. And this, I think, is different from other topical programs, where compounds may have been repurposed or selected out on other programs and then applied to the skin. Phil?

Philip D. Worboys -- Senior Vice President, Research and Translational Science

Yeah. I think that's the key feature of how we approach organ selectivity is we designed the compounds from scratch for the organ that we're intending them to go for. So as part of that, we consider the type of patients that we would want to be treating and also how we would then administer that compound. So what is the type of formulation and the breadth of formulations that we'd want that compound to be amenable to. So rather than repurposing a molecule, where you could be constrained by the features of that molecule probably initially that were intended for all systemic availability, we design our compounds from scratch for it to be organ-selective. So whether it's the physicochemical properties, the metabolic properties, all of that. And that was what really Pfizer were focusing in on is their features that were designed in from the beginning, that would lend itself to the broadest range of skin applications possible.

Operator

Thank you. And our next question comes from Josh Schimmer with Evercore. Your line is open.

Josh Schimmer -- Evercore ISI -- Analyst

Hi, thanks for taking the questions. First, on the JAK3 program. It looks like the dose is much higher than the 1473, the pan-JAK, at least that you've explored in the early testing phase. Which dose are you planning to advance? And is there a reason why the dose that you've explored so far is higher than 1473?

Philip D. Worboys -- Senior Vice President, Research and Translational Science

Yes, this is Phil again. So I wouldn't read into the dose range that we described as being predictive of where we think efficacy is. This is a Phase 1 study in healthy volunteers, where we purposefully pushed the dose. Because here, we're trying to establish the safety window. So we want to explore as high as is reasonably possible to understand the sort of dose range we have to then go into a patient efficacy study. So we want a window above where those doses would be in a patient study. So it's not indicative of where we think efficacy is the fact that we went up to 2,000 milligrams.

Rick E. Winningham -- Chairman and Chief Executive Officer

I think the other point is, as we're looking at potential conditions and we've referenced celiac before, I mean, clearly, for celiac -- to treat celiac patients, we knew we were going to have a very, very safe program all the way around. We've obviously learned things as we've gone through. I think in Phase 1, we tested a fairly high dose of 1473 and then backed off of that considerably for the efficacy studies. And here, we were just simply -- we were able to get in a very high dose over 10 days with really seeing almost nothing from a safety perspective, due to the fact that the drug is absorbed into the gut and then it's metabolized through first pass metabolism. So we're pretty excited about where we ended up here with what we would anticipate to be a pretty large window of margin safety.

Josh Schimmer -- Evercore ISI -- Analyst

And then there was a steep inflection in operating expenses, to a lesser extent the stock-based comp. You gave some sense of these trends in the guidance for 2020, but maybe give from that a little bit more color as to which of these now represent new [Indecipherable] growth or which we might see a pull back in the subsequent quarters?

Rick E. Winningham -- Chairman and Chief Executive Officer

Well, I'll make a couple of comments and turn it over to Andrew. If you look at sort of where we are in the evolution of cash, cash flow, dynamics for the company, clearly we're looking at right now and what we would see as potentially peak uses of cash coming through expenses through the income statement. And then as we've said before, we would expect YUPELRI to be, in a given quarter, cash flow positive for us this year, and then hopefully with continued success in 2021 turning positive for us. But we really look at the financing that we've done as really enabling this multiyear capital base, so that we're -- don't need to come back to the markets for additional capital, given the cash flow characteristics of the company. Andrew?

Andrew A. Hindman -- Senior Vice President and Chief Financial Officer

Yeah. And specifically, Josh, with respect to questions on trends around non-cash comp. I'm happy to take it offline with you, to go through the historicals there and address any follow-up questions.

Josh Schimmer -- Evercore ISI -- Analyst

Okay. Thanks very much.

Operator

Thank you. And our next question comes from Marc Frahm with Cowen. Your line is open.

Marc Frahm -- Cowen -- Analyst

Hey guys, thanks for taking my questions. Maybe just first a follow-up on comment you gave to Josh's question on the guidance. You mentioned the idea here with the raise that you did, and I guess, the potential debt offering you've described is to not come back to the market again for additional capital. Is that just in terms of equity? Or is that also inclusive of debt other than the one that you talked about on the call earlier?

Rick E. Winningham -- Chairman and Chief Executive Officer

Well, I think with the capital raises that we're talking about, we think we're in a pretty strong multi-year position with regard to capital base. So certainly this equity raise that we did was seem to be certainly adequate. And should we complete the notes that we've got out under consideration, then we're going to be in a very, very strong cash position for what we would think would be multiple years. So Andrew, anything else to add to that?

Andrew A. Hindman -- Senior Vice President and Chief Financial Officer

Yeah, it's that capital raise, in addition to the underlying dynamics of YUPELRI going to generate -- starting to generate cash on a brand basis, that's including all associated expense related to commercializing YUPELRI. The only other thing I would add is that we wouldn't take off the potential for a strategic transaction-related financing, but those are scenarios where we would come back specifically with a very clear use of proceeds regarding any financing related to that.

Marc Frahm -- Cowen -- Analyst

Okay. Great. Thanks. And then in the prepared remarks about YUPELRI, one of the things you mentioned in earlier times is the importance of kind of transitioning people from that initial experience in the institution setting with your sales force versus once they leave to go to the chronic setting with the Mylan's sales force. Is there any metrics you can give us on kind of the conversion rate? And how many people that you get on drug in a hospital actually convert to a chronic setting?

Rick E. Winningham -- Chairman and Chief Executive Officer

Well, the only numbers that we've talked about has been total patients prescribed, which is at as of the end of 4Q was 30,000 patients prescribed. We don't have any more granularity that we can share. We're hopeful, I think looking at the opportunity here in the hospital, this is 800,000 patients. And as Frank mentioned, half of those patients today walk out of the hospital with a prescription for nebulized therapy. I think that choice of nebulized therapy is really often driven by the action that the hospital takes when the patient is there, and it's what market research shows. And we do have -- we do know that we're making substantial progress, and I don't want to quote any numbers, but we do know we're making substantial progress. That once a patient gets prescribed YUPELRI in the hospital that there's a high probability of that patient walking out with an outpatient prescription for YUPELRI.

I think overall, the strategy that Frank outlined is working. It's working well, and we just need to keep moving up the efficiency and the effectiveness curve. Frank, is there anything else you want to add to that?

Frank Pasqualone -- Senior Vice President and Chief Commercial Operations Officer

Yeah, Rick, I would just say that this is a critical, critical part of the commercial plan. And it's a part of the commercial plan that we spend an enormous amount of time on. We spent an enormous amount of time on the coordination between head office and head office, but most importantly, there's a lot of coordination that's done in the field in terms of patient journey which physicians are serviced by which hospitals, numbers of patients coming out, patient comments. We know from our marketing research that patients that are prescribed YUPELRI are very satisfied with it, and in some cases, are asking to stay on it once they leave the hospital. I heard that -- I was on the field three weeks ago, and I heard that for myself as well as just -- I can tell you, while I was in the car riding around with our sales representative, he had four different calls with his Mylan counterpart.

So this is a very, very important part of the commercial model. It's one that we spend a lot of time and a lot of coordination on.

Marc Frahm -- Cowen -- Analyst

All right, great. Thanks. And then maybe one on the pipeline. We're going to get these data updates for 8236. And maybe if you could help frame how we should look at the data, where do you think the real comparator is? Do you need to be start looking absolutely every bit as good as the biologics or do you think there's a place for also just maybe a little bit less efficacy, but you've got less systemic safety risk with being lung-restricted and oral?

Rick E. Winningham -- Chairman and Chief Executive Officer

Brett, do you want to cover that, and then we go back to Phil?

Brett K. Haumann -- Senior Vice President, Clinical Development and Chief Medical Officer

Yeah, sure. So I think we're likely to look at different magnitudes of response in the different population. Phil mentioned earlier on, there's T2-high population that we're interested in. These are patients who remain symptomatic on steroids or inhaled steroids, and are then moved over to biologics with or without oral steroids. In that population, I think what we're really interested in is maximizing the efficacy that can be achieved with an inhaled product before those patients have moved over to biologics. And so really what we're looking to do is enhance and stabilize the more severe patients using an alternative to inhaled corticosteroids that would achieve that control. We know that patients remain poorly controlled despite being entirely compliant on inhaled corticosteroids. And so there's an opportunity for more efficacy before we shift those patients over to biologics.

For T2-low patients, I think, there's an even greater opportunity. There, the biologics are not known to work. They don't have the efficacy. And there, those patients really have no alternatives. So again, our aspiration there would be to control them, to get the stability of their symptoms under control knowing that they aren't able to benefit either from steroids or from biologics. In terms of the magnitude of effect, I think the allergen challenge study will give us a very good early indication. Bear in mind that this is an experimental model that tries to provoke a large insult in the lung, an inhaled allergen, which stimulates significant outpouring of inflammatory markers. If we're able to see similar attenuation of that allergic response to what is reported with inhaled corticosteroids and with biologics, that will be a very good early indicator that we're likely to reduce exacerbations in the wild.

Ultimately, what's likely to be the approval endpoints in Phase 3 will be a reduction in the rate of exacerbations on an annual basis as has been seen and reported with other programs such as dupilumab and tezepelumab. I'll pass over to Phil, if he has any additional comments.

Philip D. Worboys -- Senior Vice President, Research and Translational Science

Yeah. I think when you look at Slide 13, the panel on the right which has the table of the T2-high and the T2-low JAK/STAT cytokines, that really sums up the proposition we're going for is we should be able to modulate all of those cytokines through the pan-JAK nature of 8236. So we would cover all the phenotypes, hopefully, that exist in asthma. And certainly, those patients on the T2-low side, which aren't well controlled, they carry a large healthcare burden in terms of utilization of healthcare. And the hope is to position our molecule, so we can cover the breadth of patients, obviously with the efficacy of biologics or steroids, hopefully beat them, because -- we should be able to dose up nicely because we won't be carrying the systemic liabilities that any oral JAK agent inherently carries because of how it's administered through the oral route.

Rick E. Winningham -- Chairman and Chief Executive Officer

Just one more point to add because I've had to just reinforce this with a number of different people, which is that when you look at the FeNO data that we presented, that FeNO data is in mild asthmatics. I think this was particularly encouraging that we saw a FeNO response in mild asthmatics, and that what we're looking for was simply a lack of bronchospasm. We wanted to make sure that the formulation was adequate for further development and we didn't see bronchospasm in these patients. But we didn't -- we also saw this improvement in FeNO. So this was pretty encouraging us, given that this was in mild asthmatics, and certainly in the range of what you see with other agents when mild asthmatics have been treated historically. So we're pretty excited about 8236. We're looking forward to the middle of the year where we can get the lung allergen challenge as well as the biomarker data in hand.

Marc Frahm -- Cowen -- Analyst

All right. Thank you.

Operator

Thank you. And our next question comes from Alan Carr with Needham. Your line is open.

Alan Carr -- Needham & Company LLC -- Analyst

Hi, thanks for taking my questions. A couple of them here. Rick, can you I guess elaborate on what's next for 5202? Do you essentially have to wait until after the 1473 data available from the next two trials and J&J makes an opt-in decision on that before you decide with 5202? And then, Frank, can you talk some more about YUPELRI? Can you give us a sense on the relative contribution of inside the hospital versus maintenance setting outside the hospital to sales? And then the last one is around the three programs that you're planning to submit INDs for this year. Is it your intention to develop and commercialize those in-house? Thanks.

Rick E. Winningham -- Chairman and Chief Executive Officer

Yeah, I'll cover 5202 and the INDs, and let Frank cover YUPELRI. 5202, yeah, I think we don't need to wait with Janssen in terms of mapping a path forward with 5202. It would be kind of inappropriate to think about the Janssen-Theravance Biopharma relationship as Janssen somehow waiting for us to throw 1473 data over the wall to them. Really, the Janssen-Theravance partnership today has been extraordinary, collaborative, literally on a day-by-day basis. They obviously have the 5202 data now and the 5202 teams are planning what comes next with 5202 independent, really, of what's happening with 1473.

On the INDs, clearly, the first one in the queue is going to be the nebulized JAK inhibitor. We'd look to take that all the way. And the next will be the ALK5 inhibitor for idiopathic pulmonary fibrosis. That's a terrifically exciting program. And I think all the programs going forward, our first option is to carry these programs forward in the US by ourselves. And then the third in the queue is the intravitreal JAK program. As Phil mentioned, this is in long-term tox studies. Because of the long half-life of the drug, we really have to complete the long-term tox studies before we go into MAD. And I think that's probably not an IND this year, but it's probably in 2021. But nonetheless, we're quite excited about it because if we can -- if the compound can survive through the long-term tox study, then it should progress relatively rapidly after that because we won't be having to wait on safety studies as you sometimes do before you progress compounds to the next stage of development.

So that's sort of the way we're looking at it going forward with these next three as well as the answer on 5202, and then I'll turn it over to Frank to talk about the importance of the hospital business as it relates to the outpatient.

Frank Pasqualone -- Senior Vice President and Chief Commercial Operations Officer

Yeah. Thanks, Alan. We do see the hospital segment as very, very critical to the future success of YUPELRI. Again, going back to the 800,000 patients that cycle through the hospital on a yearly basis. We kind of look at that as similar to a DTC program, where you're trying to drive patients into the hospital. This is a venue where the patients actually come to us and they are there for us to convert them in the hospital and importantly send them back out into the community on YUPELRI. The primary audiences for us are pulmonologists, hospitalists -- and hospitalists. And these pulmonologists, as you know, when they service a community, they'll see patients both in the clinic or outpatient setting as well in the hospitals. And so the increasing level of experience that we're getting -- that these pulmonologists are getting, and I referred to that in my remarks, is increasingly trickling out into the community. So we see the hospital setting as important because it's an important patient capture, both of those -- both for those patients that come in with issues with their COPD and perhaps those that come in for elective procedures or something like that.

But we see it as a critical as to the sustainability of the YUPELRI franchise going forward. YUPELRI is very easy, given in the hospital or given in the community. It's once daily. It provides a full 24-hour coverage. It can be used in a standard jet nebulizer. And really it's the only once-daily neb LAMA right now, and it's going to be the only one for quite some time. So we see this as an investment opportunity, and we see this as a way to send patients back out into the community. When you look at how sales are built, the community is an important -- and probably the more important because we'll get patients on YUPELRI for, whatever, two days, three days, four days, whatever. Our goal is to get them back out into the community, keep them on YUPELRI, and they become a bit of an annuity for us.

Rick E. Winningham -- Chairman and Chief Executive Officer

When you're looking at numbers, Alan, COPD is probably -- there's about 16 million US residents that have been diagnosed with COPD. So this is a large -- unfortunately, for the help for the patients and for the system, this is a large, large, very -- highly prevalent condition. Obviously you've got -- we look at 10% of those patients really being candidates for nebulization, which with -- in fact, if you look at PIFR data, low peak inspiratory flow, it may be more than 10% of patients that could be -- that would be more optimally treated with nebulizers. But then you're down to about 800,000 patients that cycle through the hospital every year and about 400,000 of those patients today routinely leave the hospital with a prescription for nebulization. This is before the YUPELRI launch.

So this is a very, very significant opportunity for the company and for Mylan, given that what we're talking about is gold standard therapy in a once-daily nebulized long-acting muscarinic antagonist. So it's -- we've got a lot of work to do, and we're just really getting started. And as Frank said, the ultimate objective, of course, is to have to treat patients in the community with YUPELRI such that they can maintain control of their COPD and, in fact, stay out of more costly places of healthcare.

Alan Carr -- Needham & Company LLC -- Analyst

Can you say at this point what percentage of the revenue is in-patient versus the main outpatient maintenance, or no?

Rick E. Winningham -- Chairman and Chief Executive Officer

No. No, we can't say. I think it's probably a relatively small percentage of the total sales, and we would expect, over time, for it to be a relatively small percentage of the sales. But as Frank said, it's the place where you can catch patients. And we catch the 800,000 coming through. We know where these hospitalizations are. This allows for very targeted work in terms of both medical and commercial work and getting patients who may be on four-time a day nebulizer, or on to once a day nebulizer, really both it helps their breathing but also really changes their life.

Alan Carr -- Needham & Company LLC -- Analyst

Great. Thanks for taking my questions.

Operator

Thank you. It appears we have no further questions on the phone. I'd now like to turn the conference back to Mr. Winningham. Please go ahead, sir.

Rick E. Winningham -- Chairman and Chief Executive Officer

Yeah, I'd like to thank everybody for joining us today. It's been a great pleasure to update everyone on the progress that we've made. We've got a very special year ahead of us in 2020, and we look forward to updating you as the year goes on. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Gail B. Cohen -- Corporate Communications and Investor Relations

Rick E. Winningham -- Chairman and Chief Executive Officer

Philip D. Worboys -- Senior Vice President, Research and Translational Science

Frank Pasqualone -- Senior Vice President and Chief Commercial Operations Officer

Andrew A. Hindman -- Senior Vice President and Chief Financial Officer

Brett K. Haumann -- Senior Vice President, Clinical Development and Chief Medical Officer

Andrew Berens -- SVB Leerink LLC -- Analyst

Louise Chen -- Cantor Fitzgerald -- Analyst

Alexander Duncan -- Piper Sandler & Co. -- Analyst

Josh Schimmer -- Evercore ISI -- Analyst

Marc Frahm -- Cowen -- Analyst

Alan Carr -- Needham & Company LLC -- Analyst

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