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Osmotica Pharmaceuticals PLC (NASDAQ:OSMT)
Q4 2019 Earnings Call
Mar 18, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Osmotica's Q4 2019 Earnings Conference Call.

[Operator Instructions]

I would now like to hand the conference over to your speaker today, Lisa Wilson Investor Relations with Osmotica Pharmaceuticals. Please go ahead, ma'am.

Lisa M. Wilson -- Investor Relations, In-Site Communications, Inc.

Thank you, operator.

Welcome to Osmotica Pharmaceuticals fourth quarter and year-end 2019 business update call. This is Lisa Wilson, Investor Relations for Osmotica. With me on today's call are Osmotica's Chief Executive Officer Brian Markison, Chief Operating Officer JD Schaub, and Chief Financial Officer Andrew Einhorn.

This afternoon the company issued a press release detailing financial results through the three months and year ended December 31 2019. This press release and a webcast of this call can be accessed through the Investors section of the Osmotica website at osmotica.com.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Osmotica's management as of today, and involve risks and uncertainties, including those noted in this afternoon's press release and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Osmotica specifically disclaims any intent or obligation to update these forward-looking statements except as required by law.

The archived webcast of this call will be available for 30 days on our website osmotica.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on March 18, 2020. Since then, Osmotica may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings.

And with that, I'll turn the call over to Osmotica's CEO, Brian Markison.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Thank you, Lisa. And good afternoon and thank you for joining the call today.

We continue to make excellent progress on our late-stage pipeline and the execution of our corporate strategy remains on track. With respect to RVL-1201, our novel once-daily ophthalmic for the treatment of acquired blepharoptosis, or droopy eyelid, the company's new drug application was accepted for filing last year and our goal date is July 16, 2020.

Starting with the filing of our NDA. We have continued to build a consistent presence at all the major ophthalmic medical meetings and physician interest grows by the day. Additionally, our commercial strategy is gaining greater clarity as we gather additional market research and KOL feedback. In the coming months, we will provide greater detail around the company's distribution pricing and early engagement strategies. We are genuinely excited to introduce this product, especially since there is no pharmacological treatment for droopy eye anywhere in the world and we plan to be the first.

Moving on to another exciting pipeline asset, arbaclofen extended-release, our novel treatment for spasticity in patients with multiple sclerosis. Following a Type C meeting with the FDA last November, we believe we have a path forward for resubmission of our NDA by the end of June this year. The main elements that support the submission will be study 3004, which examined 40 milligrams and 80 milligrams per day of arbaclofen versus placebo, and the improvement in the modified Ashworth Scale for both strengths given twice a day. The second major component of the submission will be study 3005, which will close this month and is a one-year safety study with patients receiving 80 milligrams per day. It is important to note that this dose is approximately double the highest recommended oral dose from the baclofen package insert.

We have greater than 100 subjects with over one year of exposure, which is very meaningful because the tolerability of this strength post titration was very manageable. The twice-a-day dosing schedule, low incidence of side effects particularly somnolence, and dosing flexibility could make a meaningful addition to those who need treatment for spasticity.

And finally, our previous studies 3002 and 3003 will all be utilized to support the integrated summaries of safety and efficacy. Looking ahead, we see RVL in arbaclofen ER as significant growth catalysts as we transition to more of a specialty model in terms of revenue. 2020 stands to be an exciting year for Osmotica as we aim to bring value to our shareholders and address significant gaps in patient care.

Now I'd like to turn the call over to Andrew Einhorn, who will discuss the company's financial results. He will be followed by JD Schaub, our Chief Operating Officer, who will share more details of the company's promoted products as well. Andy?

Andrew Einhorn -- Chief Financial Officer

Thank you, Brian.

Total revenues for the fourth quarter of 2019 were $59.9 million compared to $65.7 million for the fourth quarter of 2018. The decrease in total revenue reflects lower net pricing on sales of methylphenidate extended release tablets, venlafaxine extended release tablets and Lorzone, partially offset by higher revenues from non-promoted products. Net sales of methylphenidate and venlafaxine decreased 40% and 16% respectively during the quarter due to additional competitors entering the market, resulting in lower net selling prices and volumes, partially offset by lower than estimated product returns. Methylphenidate and venlafaxine net sales were favorably impacted by approximately $6.7 million in the aggregate, primarily related to adjustments of product reserves during the quarter based on actual product return experience.

Selling, general and administrative expenses decreased to $21.1 million in the fourth quarter of 2019, compared to $23 million in the fourth quarter of 2018. The decrease was primarily due to the realignment of our field force in the third quarter of 2019, offset by higher general and administrative expenses. Research and development expenses decreased to $7.1 million in the fourth quarter of 2019, compared to $14.6 million in the fourth quarter of 2018 due to the completion of the Phase III clinical trials of RVL-1201 and arbaclofen.

During the fourth quarter of 2019, we recognized intangible asset impairment charges of $29.9 million reflecting write downs of developed technology assets and distribution rights as compared to $98 million for the fourth quarter of 2018 reflecting write downs of goodwill and in-process research and development assets. Net loss for the fourth quarter of 2019 was $26.6 million compared to a net loss of $107 million for the fourth quarter of 2018. Adjusted EBITDA for the fourth quarter of 2019 was $14.9 million compared to adjusted EBITDA of $14.2 million in the fourth quarter of 2018. For a reconciliation of adjusted EBITDA to net income or loss, please see the tables at the end of our press release.

Full-year 2019 financial results are as follows. Total revenues for the full year of 2019 were $240 million compared to $263.7 million for the full year of 2018. Net product sales decreased $25.9 million year-over-year to $235.5 million for the full year of 2019 as compared to $261.4 million for the year ended December 31 2018. Net product sales of methylphenidate decreased 43% due to additional competitors entering the market, resulting in significantly lower net selling prices, partially offset by lower than estimated product returns. Product sales from venlafaxine increased by 14% for the year ended December 31 2019. During 2019, a competing dosage strength was launch which negatively affected sales volumes. However, volume decreases were more than offset by lower than estimated product returns and government rebates resulting in higher net realized selling prices in the period.

Additionally, during the third and fourth quarter of 2019, two additional generic forms of venlafaxine from competitors were approved but not launched. We expect that the additional competition for both methylphenidate and venlafaxine from these competitors as well as additional generic product approvals and launches in the future, if any, will continue to negatively affect our sales of these products in 2020 and future years. Methylphenidate and venlafaxine net sales were favorably impacted by adjustments of approximately $25.2 million in the aggregate, primarily related to product returns reserves during the year based on actual product returns experience.

Selling, general and administrative expenses increased $18.8 million during the full year of 2019 to $93 million as compared to $74.2 million for the full year of 2018. The increase in our selling, general and administrative expenses reflects additions to sales force headcount and marketing costs associated with the launch of Osmolex ER in the first quarter of '19, severance expenses associated with the sales force realignment during the third quarter of 2019, and increased share compensation expense and higher costs associated with being a public company. Research and development expenses decreased by $11.4 million in the full year of 2019 to $32.3 million as compared to $43.7 million in the full year of 2018. The decrease primarily reflects the completion of Phase III clinical trials of arbaclofen ER during the first quarter of 2019, partially offset by increased share compensation expense and the cost of manufacturing development batches of Osmolex ER during 2018, which costs were not present in 2019.

During the year, $283.7 million of intangible asset impairment charges were recognized primarily related to the write down to fair value of methylphenidate, venlafaxine due to price and volume decreases resulting from competing generic products. Our net loss for the full year of 2019 was $270.9 million compared to a net loss of $109.7 million in the full year of 2018. Adjusted EBITDA for the full year of 2019 was $68.8 million compared to adjusted EBITDA $95.1 million in the full year of 2018. Again, for a reconciliation of adjusted EBITDA to net income or loss, please see the tables at the end of our press release.

As of December 31 2019, we had cash and cash equivalents of $95.9 million and borrowing availability under our revolver of $50 million. We also had $268 million of debt, net of deferred financing costs.

Now, I would like to turn the call over to JD.

James Schaub -- Executive Vice President & Chief Operating Officer

Thanks, Andy.

All of our key promoted brands, Divigel, M-72 and Osmolex saw continued prescription growth in 2019, including the fourth quarter. As previously discussed, we completed a realignment of our field sales force in the second half of 2019 and began promotion within the streamline national footprint in the fourth quarter. We are encouraged by the immediate impact the restructured team has had and continue to believe the decision to realign territories late last year provides the necessary balance between ongoing support of our key promoted brands and a strong foundation from which to launch RVL if approved later this year.

Specific to key brands, Divigel continued its growth in the fourth quarter, prescriptions up 3% versus Q3 2019, while full-year 2019 total prescriptions increased 14% over 2018. Of note, over the past year, we received approval and subsequently have launched two additional strength of Divigel, 0.75 milligrams and 1.25 milligrams sachets, adding new options to our category-leading brand for both patients and physicians. M-72 also experienced a strong fourth quarter as prescriptions grew 9% versus Q3 2019, and 280% when looking at full-year '19 versus '18, having been launched in April of 2018.

Lastly, through December, 425 healthcare providers wrote or enrolled at least one patient in our AccessOsmolex program, for a total of 2,198 prescriptions. This represents an increase of 104 in terms of the number of new practitioners writing or enrolling, and 856 in total prescriptions since our last update in September. As awareness and experience have grown throughout 2019, we have continued to refine and optimize our commercial efforts behind Osmolex. We continue to see good access and strong persistency once patients begin therapy and remain focused on expanding the patient and prescriber base, albeit at a slower pace than previously anticipated.

As Andy commented earlier in the financial highlights, our generic and non-promoted products business continues to be an important contributor despite increased competition and the consolidated buying landscape. Our key legacy generics, methylphenidate ER and venlafaxine ER tablets, performed well last year, but as expected, have seen multiple competitors enter the market. We remain committed to the quality and supply of our portfolio and will leverage the ongoing contributions from that portfolio as we continue to progress our late-stage pipeline. We are looking forward to our July 16 PDUFA date for RVL and are gearing up for our strategic launch.

As previously described, we are building upon the strong foundation of our clinical program with a presence at key eye care meetings, including live podium and poster presentations highlighting our Phase III clinical data. Further, market development and KOL engagement is continuing to ramp up, and the support and contributions by our growing network of eye care professionals throughout ocular plastics, ophthalmology and optometry has been incredible. We remain highly encouraged by the potential opportunity to bring a first-in-class product to market and look forward to ongoing updates as we progressed through NDA review and launch planning.

I will now turn the call back to Brian.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Thanks, JD, and thank you, Andy.

And with that, operator, please go ahead and open the call for questions.

Questions and Answers:

Operator

[Operator Instructions]

And our first question comes from Randall Stanicky with RBC Capital Markets. Your line is open.

Randall Stanicky -- RBC Capital Markets -- Analyst

Hey, great. Thanks. Brian, can I start with the coronavirus? Are you guys seeing any impact on the base shared business, or is that impacting how you're thinking about the go-to-market strategy for RVL?

Brian Markison -- Chairman of the Board and Chief Executive Officer

Well, the impact we're seeing right now -- sorry. Good afternoon, Randall. Clearly, we've got people working from home now. We're conforming with the policies that are out there. Our sales representatives are at home as well, trying to be as productive as possible with telesales and other methods. In general, our supply chain is fine. We got out in front of supply chain quite a while ago. So we don't have any immediate concerns there whatsoever. And we're look at the weekly Rx's and we haven't seen anything much.

So I think on a demand basis, so far we're doing pretty good. I think the immediate hit, which will trickle down, has been the employee productivity and in general, what's happening with the physician community and patients in general where people are just staying home. So I think that's going to wash up on our shore at some point and we're staying as close as we can to it, but like others we're sort of all in the same boat together here.

Randall Stanicky -- RBC Capital Markets -- Analyst

Yeah. As you think about RVL, obviously that's going to be a big July event. Has your thinking evolved in terms of the go-to-market, the aesthetic versus medical opportunity and how you're looking to roll that out?

Brian Markison -- Chairman of the Board and Chief Executive Officer

Yeah, well, our thinking has obviously continued to evolve. We learn more every day, which is obvious I guess. Let me start with FDA review. It seems to be on track. We've had the normal discourse between us and the agency with minor questions that we've answered on time. And when we last checked in with the project manager, she assured us that everything was moving along and is on track.

Now, if COVID-19 has greater repercussions in the agency, obviously, that's something that we'll be mindful of. But as we're sitting here today, it looks like we're in good shape for our goal date, which is July 16, I think. On commercial preparedness, JD, you want to jump in a little bit?

James Schaub -- Executive Vice President & Chief Operating Officer

Yeah. Sure. And hi Randall. Consistent with some of our recent calls, the focus around awareness, medical education, market development, KOL engagement, disease awareness, is unchanged. I think we've continued to be out in front of the eye care meetings, working across the specialties in optometry, ophthalmology and the oculoplastics, really creating the buzz and getting more and more physicians and practitioners familiar with not just the product, but the condition. That continues to go well. I think it's exciting. It's refreshing to be in new therapeutic area with folks that are truly intrigued and supportive of what we're doing in trying to bring to market.

Beyond that on the commercial side, the buy-in expectation from eye care professionals as the base remains the focus. I think you asked about how it fits as a medical product versus an esthetic product. I think as our planning and launch strategy continues to crystallize and refine itself through market research and some of the other associated activities, we'll stay focused on the buy-in from the eye care community. But I think what does start to really take shape here is the product itself sits at the intersection of ocular medicine and ocular aesthetics. And how we position it so that the optionality and flexibility to build upon that foundation and into aesthetics over time remains really important in terms of the profile of the product in the market strategy.

So long-winded, focused on eye care, aesthetics is starting to take shape in terms of what the strategy and go-to-market profile for the product looks like, and from a practitioner standpoint, remains an important building block over time once we get the eye care folks to embrace and build that foundation.

Randall Stanicky -- RBC Capital Markets -- Analyst

That's great. And then maybe to finish, Brian, confidence in a partnering announcement in 2Q and what regions are you expecting? Thanks.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Confidence is still pretty high. Clearly, we're focused on Asia more than other geographies and travel got hit pretty hard. A key part of our process is meeting with the other side and getting a good feel and appreciation for their go-to-market strategy, because financial metrics are great but hearing the conviction of the partner face to face was important to us. So I think we're recognizing that that's not going to happen anytime soon. So we're adjusting to that. But I think our partner conversations ex-US are certainly moving at a pace that I've described and we're a little bit delayed, but not enough to kick me out of quarter or for me to revise what I've told the street.

And I think we're also thinking about and considering other options in the US as well because again as we're picking up more and more interest and it gets closer to market, I think the reality of this one of a kind asset is beginning to take shape with other people.

Randall Stanicky -- RBC Capital Markets -- Analyst

Got it. Thanks, guys.

Operator

Thank you. And our next question comes from David Steinberg with Jefferies. Your line is open.

David Steinberg -- Jefferies -- Analyst

Thanks. I have a couple of questions. The first one is just revolving around the discussions with the FDA. To get some more granularity, I think you said that interactions with the project manager is going well. But just to drill down a little more, have you had any discussions with them? Are these comments from your talks with them in the last two or three weeks? Have you had the regular dialog during reasonably near term and has that changed from previously? And then secondly, with regard to partnering ex-US. I think on the last call you mentioned there was a lot of interest in Japan. Do you still have multiple companies that you're talking to and what sort of structure are you looking at? Are you looking more for a large back end or perhaps more cash upfront? Thanks.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Okay. Hey, thanks, David. So with the agency and the communication with respect to the review, since we submitted the NDA, there has been a routine back and forth and then it was ultimately accepted for filing I think last November. We have had exactly seven information requests. All seven of them have been clarifying questions around chemistry, manufacturing. Nothing that we couldn't answer within a day or two, or specified time frame. So I view the questions as routine and just clarifying questions, all around specifications of the finished product and things like that. Nothing major.

Last week, we did talk to project manager and she said she was not looking at any outstanding information requests at this time from the review division itself totally, and that she assured us that everything was proceeding at a pace that you would expect. And we project that we should be in a labeling conversation around the middle of June. So that's the good news on that front. Obviously, not a guarantee and subject to change, but so far so good.

Secondly on the ex-US partnership, I think looking specifically at Japan, they will probably need to do a little bit of clinical work in Japanese subjects before an application can be filed. So they're probably a year or two behind the US market. China may not be as far behind and certainly Korea could file with the US package with very little extra information, and we might even have already performed a bridging study that would satisfy that requirement. So given the time to market, and yes, we are in conversation with multiple players in Japan, multiple in China as well, but I think our preference at this time would be to partner with a Japanese eye care leader that can also handle China as well. But that could change.

And so I think we're looking for a balance. We want our Japanese partner or Chinese partner to make money obviously. There will certainly be an upfront ask. But I think it will also be milestone-based subject to certainly getting approval in that country, and also perhaps some royalty down the road or milestones in the place of royalty, but it will have a traditional construct and I believe that we will be supplying from our manufacturer into those markets, certainly at the very beginning.

David Steinberg -- Jefferies -- Analyst

Thanks for the clarity. Just one more question on the filing for arbaclofen extended-release product. In your discussions with the FDA, and maybe you can shed some light on it or maybe you can't, but have they essentially looked at some of the data and said and you ask them, is it OK to file and so you're filing? Or did you just say, we're going to file and they said, sure, go file? What extent those discussions have been on this filing given that you had one positive study and then one study that was more mixed? Thanks.

Brian Markison -- Chairman of the Board and Chief Executive Officer

I hate to tell people good question, but that's a good question. So we made a comprehensive submission to the agency on our filing strategy, what we plan to use for the integrated summary of efficacy and safety and how we plan to rely on the totality of our database. And the agency came back to us with very clear input or feedback on what they didn't want to see us rely on and what they did want to see us rely on. And they were particularly focused on the Ashworth effect in our second large randomized pivotal study and also our one-year safety study with the 80-milligram dose, and they asked us not to file until that study was complete, which is really what the timeline is all about, because database lock for the one-year safety study is a little bit later this month, like next week.

So we're going to go from database lock to submission in all of 2.5 to 3.0 months. So the agency was pretty clear in what they wanted to see from us. They did not request an additional clinical trial. So we're sort of our -- we are buoyed by that and we know we've got a package that describes excellent safety and efficacy, and a dose-response relationship. And we have a very clear value proposition we believe for this product. So we are encouraged. I think the risk adjustment that you and others have used in their modeling is fair. And I'm very comfortable with where we are in the feedback we got and the direction we got specifically from the agency in our submission.

But we did tell them we were planning to file. We gave them all the ingredients and how we would do it in a pre-submission for the Type C meeting, and it was quite a lot of information. The agency was very thoughtful in their response to us and they gave us excellent guidance, and we're using their guidance.

David Steinberg -- Jefferies -- Analyst

Great, thanks a lot.

Operator

Thank you. And our next question comes from Ami Fadia with SVB Leerink. Your line is open.

Ami Fadia -- SVB Leerink -- Analyst

Hi, good afternoon. Thanks for taking my questions. Firstly, just to start with RVL-1201. Can you talk about the readiness of the sales force and training that you may have planned in the next couple of months ahead of the PDUFA date? And how should we think about putting that together in light of COVID-19 disruption? And also if you could talk about just the launch inventory and whether that's been -- already been put in place or if that's something that's planned in the next couple of weeks? And how should we think about that?

Brian Markison -- Chairman of the Board and Chief Executive Officer

Okay. Ami, it's Brian. I'll start it off and JD will pile in. But I think -- look, with COVID-19, we're all in a fluid situation. So the plans that we're looking at, we are revisiting every day. And of course, if we're all working remotely, it's harder to huddle up in a room face to face and make precise decisions, but we're all adjusting to that. The plan was to begin the profiling of our customers, the training of our sales force, all culminating in a launch meeting that would occur probably at the end of August, either before or shortly after Labor Day. We are obviously revisiting that. We will be prepared to launch in some format shortly after approval under any circumstance.

What we're analyzing are different ways to launch the product, if we're still in a constrained situation. So in other words, do I want to lose money on a hotel? Do I want to train people virtually? Do I want to push things back a little bit for the face-to-face interaction that I that I cherish and I know is a richer environment? So these things obviously we're taking into account, but when we get approval, we will be in a position to launch at some level, maybe it's a what you would call a soft launch than otherwise. And JD will chime in a second. Also on manufacturing, we're going to run validation batches in a few weeks. And from validation right into commercial, and we will have more than it of supply. We've got a dedicated line at Nephron, and all they're going to do is this for us 24/7. The good news is, their facility is in very high demand right now because the agency has asked them to stay in production for albuterol, which is a pretty important product at the moment.

So we're working very closely with them and we're excited that they're in demand with the agency. That only helps us. So JD, a little bit more on preparedness.

James Schaub -- Executive Vice President & Chief Operating Officer

I think Brian touched on preparedness, Ami. We are continuing to prepare from a sales training and readiness perspective. I think you'll see us stick to those plans in terms of timing and being prepared to go post-PDUFA date. To Brian's comments, I think just a function of really planning around the impact and the nature of the extent of the impact of things and how we want to do kind of personal engagement with our reps versus virtual training and deployment, and what that impact is to the nature of the launch. But all things continue to be on track and on plan from overall commercialization readiness perspective.

Ami Fadia -- SVB Leerink -- Analyst

Got it. That's helpful. Just with regards to the pivot from focusing on ophthalmologists and switching to more of aesthetic positioning of the product, just based on the additional thinking that you've done around this, when in the product cycle do you think that you might like to switch gears and change focus in terms of your sales efforts?

Brian Markison -- Chairman of the Board and Chief Executive Officer

Yeah. So, I think to clarify, I don't think it would be change gears and shift focus. I think it would be built, right. And so the inflection point as we think about going to market right now is really the endorsement by the eye care professionals, because this is an ophthalmic drop. And so I think that's important in terms of the popularization and ultimate adoption anywhere beyond eye care. So it's really more of a build. And I think as we get to market and follow through on the plans and the launch strategy, as we look out over the first 12 to 24 months, that will be a good indication of where this is headed beyond the eye care professional and practitioner continuum.

Ami Fadia -- SVB Leerink -- Analyst

Okay, that's helpful, Brian. Just last question from me on arbaclofen, just building on the question from before. Do you anticipate adcom from the FDA as a process for approving the product?

Brian Markison -- Chairman of the Board and Chief Executive Officer

Not at all.

Ami Fadia -- SVB Leerink -- Analyst

Okay. That's helpful. Thank you.

Brian Markison -- Chairman of the Board and Chief Executive Officer

I would embellish, but the short answer is no.

Ami Fadia -- SVB Leerink -- Analyst

Okay. Thank you.

Operator

[Operator Instructions]

Our next question comes from Greg Fraser with SunTrust. Your line is open.

Greg Fraser -- SunTrust -- Analyst

Great, thanks for taking the questions. On RVL, when you were discussing partnership discussions for ex-US markets, you mentioned that you're thinking about other options for the US as well. I was wondering if you could put some more meat on the bones there in terms of the options that you're thinking about.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Well, clearly, what's happening as a result of our exposure to the eye care community and all the medical meetings and conferences, the one thing that's inescapable with this drug is that as it works and lifts the lid, it changes a person's appearance. And quite frankly, if they had ptosis, they look better. So the aesthetic implications in this product are pretty interesting. And I think we are beginning to catch a lot of attention from other folks out there in that field. So again, we're getting a lot of in-bounds. We are very interested in talking to a couple of folks that have demonstrated real expertise in this field. There's always something we can learn. And look, we're wide open to partnering if one plus one equals three, but unfortunately I can't really shed any more light on it. It's extraordinarily early in our receipt of these in-bounds.

Greg Fraser -- SunTrust -- Analyst

Okay, that's helpful color. So when do you expect the RVL data to be published?

Brian Markison -- Chairman of the Board and Chief Executive Officer

We have submitted final drafts to JAMA Ophthalmology. And JD, I don't want to give the wrong...

James Schaub -- Executive Vice President & Chief Operating Officer

No, I think it's fair from a publication standpoint, Greg, that we're looking at early spring. So over the next couple of months I think is the current expectation for publication in one of the leading eye care journals.

Greg Fraser -- SunTrust -- Analyst

Got it, OK. And then just a couple quick ones for Andy. Do you expect additional adjustments to returns reserves for meth ER and VERT in the coming quarters? And any comments on about how we should think about gross margin in 2020 as contribution from those products declines? Thank you.

Andrew Einhorn -- Chief Financial Officer

Yeah. Thanks, Greg. To answer the first question, we assess the returns reserve quarterly in light of actual returns experience, as I noted previously. A lot of what happens is as prices come down, and depending on the contracts we have with the various customers, returns levels can be lower than what we initially put up. I would expect that we have seen the lion's share of that activity in 2019. It's possible we could see more in 2020. But we're certainly not expecting anything of the same magnitude. And Greg, what was your second question?

Greg Fraser -- SunTrust -- Analyst

Just if you could -- if you had any comments about how to think about overall gross margin in this year as contribution from meth ER and VERT continue to decline, as these are the higher margin products.

Andrew Einhorn -- Chief Financial Officer

Yeah. We would expect as we look forward, the margin, excluding depreciation and amortization, was about 76% in 2019. Clearly, as prices come down, we would expect the margin to be to be affected going forward on those products, although we also believe that a lot of the dramatic price declines given the number of players in those markets, we wouldn't expect anything as significant as what we saw in 2019. But it is a competitive market out there. We can't ignore that.

Greg Fraser -- SunTrust -- Analyst

Okay, thank you.

Operator

Thank you. And I'm showing no further questions at this time. I would like to turn the call back to management for closing remarks.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Okay. Thank you, operator, and thank you everyone for joining us today. I know these times of troubled and a bit turbulent, and we're all doing our best. So hang in there, we are. And thank you. Bye.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Lisa M. Wilson -- Investor Relations, In-Site Communications, Inc.

Brian Markison -- Chairman of the Board and Chief Executive Officer

Andrew Einhorn -- Chief Financial Officer

James Schaub -- Executive Vice President & Chief Operating Officer

Randall Stanicky -- RBC Capital Markets -- Analyst

David Steinberg -- Jefferies -- Analyst

Ami Fadia -- SVB Leerink -- Analyst

Greg Fraser -- SunTrust -- Analyst

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