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Aimmune Therapeutics Inc (NASDAQ:AIMT)
Q1 2020 Earnings Call
May 11, 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 the Aimmune First quarter 2020 Earnings Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to turn the call over to DeDe Sheel. Please proceed.

DeDe Sheel -- Vice President of Investor Relations

Thank you, [Indecipherable]. Good afternoon, and thank you for joining us today to discuss Aimmune's First Quarter 2020 financial results and recent operational highlights. Today's call will be webcast, which will be available on our corporate website at aimmune.com. Joining me on the call today are Dr. Jayson Dallas, President and Chief Executive Officer; Andrew Oxtoby, Chief Commercial Officer; and Eric Bjerkholt, Chief Financial Officer. After our prepared remarks, we will open the call for questions. Daniel Adelman, our Chief Medical Officer, will join us for the Q&A.

Before we begin, I would like to remind you that during today's call and Q&A session, we will be making forward-looking statements. These forward-looking statements include Aimmune's expectations regarding the potential effects of COVID-19 on our business and financial condition; the potential benefits of PALFORZIA; the commercial launch of PALFORZIA, including engagement of our commercial field team with allergists; the timing for when allergy practices may reopen; timing for initiating direct-to-consumer mobilization activities and timing for payers in the United States to add PALFORZIA to formularies; the review period for PALFORZIA by the EMA and Swissmedic; development plans for AR201 and the multi-tree nut program; potential timing for completion of enrollment of our Phase 3 POSEIDON clinical trial for PALFORZIA; projection of cash spend for the remainder of 2020; the sufficiency of Aimmune's cash resources; plans to explore the use of AIMab7195 as an adjunct to our CODIT programs; the potential benefits of using biologics as adjuncts to CODIT and Aimmune's expectations regarding potential applications as a CODIT approach to treat life-threatening food allergies.

Risks and uncertainties that contribute to the uncertain nature of forward-looking statements include the effects of the COVID-19 pandemic on our business and financial condition; the expectation that Aimmune will need additional funds to finance operations; Aimmune's dependence on the success of PALFORZIA; Aimmune's ability to build a commercial field organization and distribution network; the degree of acceptance of PALFORZIA among physicians, patients, healthcare payers, patient advocacy groups and the general medical community; Aimmune's ability to obtain favorable coverage and reimbursement from third-party payers for PALFORZIA; Aimmune's ability to implement and comply with REMS for PALFORZIA; Aimmune's or any of its collaborative partners' ability to initiate and or complete clinical trials; the unpredictability of the regulatory process; the possibility of the Aimmune's or any of its collaborative partners' clinical trials will not be successful; the reliance on third-party for the manufacturer of PALFORZIA and our product candidates; possible regulatory developments in the United States and foreign countries and Aimmune's ability to attract and retain senior management personnel.

These forward-looking statements are based on assumptions and are subject to risks and uncertainties that can cause actual results to differ significantly from those stated on this call. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to our quarterly report on Form 10-Q for the quarter ended March 31st, 2020 for some of the important risk factors that could cause actual results to differ materially from forward-looking statements made on this call. Except as required by law, Aimmune disclaims any obligation to publicly update, revise any information to reflect the events or circumstances that occur after this call.

And now, I will turn the call over to Jayson.

Jayson Dallas -- President and Chief Executive Officer

Thank you, DeDe, and good afternoon, everyone. Thank you for joining us today for our first quarter 2020 financial. Firstly, I hope that you're all staying safe and healthy. We are working in unprecedented times due to the COVID-19 pandemic, with rapidly changing operating and economic environment. These present us and companies across the globe with unique challenges and uncertainty. The first thing I'd like to discuss is the impact of the pandemic on the PALFORZIA launch in the United States.

In the first quarter, we received FDA approval for PALFORZIA. And following months of preparation, we were ready to launch in the United States. We're very proud the first patient received commercial PALFORZIA on Friday, March 13th. The following week, the first shelter-in-place orders went into effect, and the vast majority of allergists around the country stopped seeing patients in person other than for emergency visits. This has remained the case since then. Given that the initial dose escalation and the first dose of each new dose level of PALFORZIA need to be administered in the allergist's office, the overall impact has been a short-term pause in the ability of new patients to be initiated on commercial treatment.

However, we are still receiving requests for information from allergists who are interested in prescribing PALFORZIA and from parents who want to get their children on therapy as soon as they're able. While most allergists aren't able to start new patients on therapy now, they can get their patients enrolled in the REMS program during this time. When allergists are able to reopen their practices over the next few months, patients already enrolled in the REMS program will be ready for their initial dose escalation with it.

As such, we believe the potential for PALFORZIA to be a blockbuster product that the first-ever approved therapy to treat any form of food allergy remain solidly intact. Although sales of PALFORZIA will be realized later than we had anticipated, we continue to remain in a strong financial position. Throughout this pandemic, we've prioritized the safety of our employees, the safety of patients in our ongoing clinical trial, and the safety of those patients who have been prescribed commercial PALFORZIA since its approval.

For our employees, we have made appropriate adjustments, including mandating a temporary work-from-home pharmacy and providing our team with the support in technology they need to continue doing their jobs remotely. I'm proud of the flexibility and commitment that the entire team has demonstrated during this unprecedented time.

For patients enrolled in our clinical trials, we have implemented remote clinical trial monitoring and ensuring continuity of trials in line with guidance issued by international regulatory authority. I'm pleased to report that we've been able to provide an uninterrupted supply of clinical trial medication to all patients in our ongoing clinical program. This will continue for as long as in-person visits to investigate the sites are not feasible.

In addition, we've been able to provide uninterrupted supply of commercial PALFORZIA for those patients who have been treated since approval. Further, we have equipped our U.S. Practice Account Managers or PAMs with resources, so they can provide support to allergists and practices remotely. Our PAMs have continued to engage with allergists to provide important information on the REMS process and training and how to safely incorporate PALFORZIA into their practices. This engagement will continue until allergists and our PAMs are able to safely assume in-person interaction.

In addition, our medical science liaison team has continued to provide ongoing education to allergists. Allergists have remained engaged, despite the pandemic with many using their times to learn more about PALFORZIA. We are pleased with their sustained level of interest.

Finally, our formulary adoption conversations with payers are progressing well and as scheduled, and we are making great progress. Since the shutdown, we have conducted market research among allergists and caregivers to help us better understand what the PALFORZIA launch dynamics will look like after the shelter-in-place orders are lifted.

On the physician side, we expect that allergy practices will reopen regionally at varying rates over the summer. Allergists tell us that they are eager to reopen their practices and we're beginning to hear anecdotes of practice is planning to reopen in some parts of the country in the coming weeks. Our market research with caregivers is also very encouraging. The results revealed COVID-19 pandemic has had little or no impacts on caregiver's willingness to stop their children on PALFORZIA. In fact, over 70% of caregiver survey said that staffing their child on PALFORZIA is a top priority when the country reopen. Thus, the fundamentals of our business have not changed.

The interest in PALFORZIA among allergists and the need for patients to have an approved therapy for peanut allergy remained solid. All of our preparations thus far to launch PALFORZIA have positioned us well with allergists, caregivers and payers. In the interim, the body of evidence in support of PALFORZIA continues to grow. We will be presenting new PALFORZIA data at the European Academy of Allergy and Clinical Immunology or EAACI meeting, which will be held virtually from through June 6 through June 8. We will be presenting long-term safety, efficacy and immuno modulation beta of PALFORZIA as well as data on patient satisfaction with PALFORZIA treatment. We look forward to sharing these data with you following the meeting.

On the regulatory front, the review of PALFORZIA in Europe remains on schedule. We have submitted our responses to day 120 questions to the EMEA and continue to expect the review to be completed in the fourth quarter of this year. The Swissmedic review of PALFORZIA is also ongoing with a target action date of mid-2021.

Turning now to the pipeline. As is broadly true across the industry, enrollments of new patients into our clinical trials ceased once it was no longer possible for patients to be screened in person. Despite this, we would have been able to provide uninterrupted supply of study medication to all patients already enrolled in our clinical trial. As such, all of our clinical trials remain ongoing. Specifically, our POSEIDON Phase 3, kind of the efficacy and safety of PALFORZIA in young peanut-allergic children aged one through slightly less than four years continues. We are holding patients enrolled in the study at the dose that we're [Phonetic] taking at the time the shelter-in-place orders were put into effect.

However, no new sites will be added and the study will be completed at currently active sites. In part as a cost saving measure, we have made the decision to close enrollment in our Phase 2 clinical trial in patients with egg allergy. The patients presently enrolled in the study will be able to complete the trial. We intend to review the data from these subjects and then determine the best path forward. Regarding our multi-tree nut program, we've recently had a positive and encouraging pre-IND meeting with the FDA, which help define a clear path forward for clinical development.

Finally, we remain enthusiastic about our recently unlicensed AIMab7195 monoclonal antibody and the potential it may have in an adjunctive therapy with PALFORZIA and our other CODIT product candidates. AIMab7195 has the potential to improve the patient journey through the desensitization process and perhaps accelerate the time through emission in a larger percentage of patients than those treated with PALFORZIA alone.

Overall, we have taken and will continue to take a thoughtful measured responsible and flexible approach toward managing our business. We are carefully balancing launch preparedness with cash preservation. We will continue to prioritize safety in the coming weeks and months as we and society at large start the journey back to a new normal. We remain confident in our prospects and steadfast in our mission to improve the lives of people with food allergies.

I'll now turn the call over to Andrew.

Andrew Oxtoby -- Chief Commercial Officer

Thank you, Jayson. As Jayson mentioned, although the COVID-19 pandemic is effectively paused our U.S. PALFORZIA launch, I'm pleased with the speed and scope of the launch preparation activities that were able to complete following our approval on January 31st. Our 80 PAMs were fully trained on the final product label and deployed into the field within two working days of PALFORZIA's approval. By mid-March, over 2,000 allergists received at least one visit from a PAM. This means that in addition to covering our initial target list of 1,300 allergists, we were able to respond to numerous inquiries and reach outs from additional allergists and they start the question are there a [Phonetic] visit from a PAM or support from medical information departments.

During the initial few weeks following approval, we also worked diligently to implement the final REMS requirements that were communicated to us by FDA as part of the product approval process. The PALFORZIA REMS website went live on February 21st along with allergists, their offices and patients to enroll in the REMS program. And since then, over 700 allergists have enrolled in the REMS. In addition, we fully implemented all REMS requirements at our network with specialty pharmacies by mid-March. Of the support mechanisms, we're also brought online during February including our fully staffed patient support hub to help physicians and their patient caregivers with the benefits investigation and medical exception processes. Our co-pay program, which helps patients pay as little as $20 per month for the drug in conjunction with our insurance plan and our patient assistance program to help qualified uninsured patients receive access to PALFORZIA.

Although the COVID-19 pandemic presented an immediate term challenge to allergists being able to start new patients on therapy, we recently completed market research, which helps us to better understand how allergists and patient caregivers are viewing the COVID-19 situation and their attitudes and beliefs toward PALFORZIA as a treatment option. Over the period of a few weeks, we were able to conduct both qualitative and quantitative research with approximately 150 allergists and over 400 patient caregivers.

I'd like to share some of the conclusions of this research with you now as well as actions that we are implementing as a result of what we've learned. Let me start by talking about what we've learned from physicians. And as you might imagine, allergists' practices have been greatly impacted by the pandemic with average patient volume down by 65%. Almost all allergists we surveyed said that they were currently seeing no new patients in the COVID environment and the majority of [Indecipherable] taken several weeks of patient backlog to work through when they begin to reopen their practices. Despite these short-term challenges, the allergists we surveyed indicated no change in their belief or enthusiasm for PALFORZIA as a treatment for the peanut-allergic patients and the majority said they still anticipated getting up to speed and starting patients on PALFORZIA during the summer months.

With these results in mind, we focused our efforts on providing resources that allergists can access and neutralize in a virtual environment. It will help them prepare now for their eventual practice openings. One example of this is a series of online on demand video training modules, which help allergists sets up their clinics and train their staff to safely administer the PALFORZIA. Another asset is a new specific website, which takes the allergists through a checklist of virtual patient preparation activities as part of a consultation conducted via telemedicine, including patient enrollments in the REMS program.

Turning to the conclusions of the patient caregiver research, we saw that the COVID situation clearly impacts caregiver willingness to currently enter healthcare settings. And that most caregivers are postponing visits by allergists for routine environmental allergy shots. Looking ahead, 40% of respondents indicated that they expected that it would be June before they return to the allergists with their child and 80% indicated that they would return by August. Very encouragingly, respondents indicated that the COVID-19 pandemic has had no impact on their willingness to stop their children on PALFORZIA. More than 75% report that they would be highly or somewhat likely to start their child on PALFORZIA in both pre- and post-pandemic scenarios.

With this understanding of the timing of caregiver willingness to return to the allergists, we plan to initiate our direct-to-consumer mobilization activities during the month of June and we expect to ramp these gradually through the summer across different channels. We've completed a lot of work recently to understand the media consumption habits of peanut allergy patient caregivers. And our intention is to ensure that caregivers are aware of the steps that they can take in consultation with our allergists to prepare their child for potential treatment with PALFORZIA.

Besides this work on the allergist and patient caregiver fronts, we're also making good progress with payers. Since mid-February, our strategic account directors have worked closely with our medical affairs team to engage with the clinical community of payers via web conferencing to discuss the details of our final product label and the clinical profile of PALFORZIA. Despite the challenging environment, these discussions have been progressing at the same pace as they were prior to the COVID-19 interruption. And by now, we've met with payers covering over 75% of U.S. lives on either commercial or managed Medicaid plans.

As of the end of April, there were 15 plans in the U.S., which have either interim or permanent policies written regarding PALFORZIA. These plans represent approximately 43 million lives, almost 29 million of which are own commercial books. Examples of these plans include the commercial books for Blue Cross and Blue Shield Federal Employees Program, Cigna and Humana. We're encouraged by the positive nature of the early conversations that have occurred since approval between our account team and payer clinical committees. We look forward to continuing discussions in the weeks and months ahead to enable additional access to patients, including our ongoing discussions with the large PBMs we anticipate should be making coverage determinations in Q3.

In conclusion, despite the challenges of COVID-19, we were able to complete all of our pre-launch activities, including the full implementation of our REMS program prior to the pandemic effectively shutting down the country. We believe we're in a strong position to support product uptake once patients are able to return to physicians' offices and look forward to continuing to work with allergists and their teams to help patients and their families suffering from the burden of peanut allergy.

And with that, I'll turn the call over to Eric.

Eric Bjerkholt -- Chief Financial Officer

Thank you, Andrew. We ended the first quarter of 2020 with a strong balance sheet and $371.6 million of cash, cash equivalents and investments. The first quarter increase versus the $158.2 million held on December 31, 2019 reflects capital raises highlighted during our fourth quarter earnings call, including the $200 million equity investment from Nestle Health Science and the $85 million draw on our loan from KKR. The increase is partially offset by cash flows used to operate our business, which included approximately $15 million of cash expenses unique to the first quarter.

As you would expect, and as Jayson mentioned earlier, we have reviewed our business plan for 2020 and the upcoming years in light of COVID-19 and have made adjustments to reflect the broader uncertainties caused by the pandemic. We have essentially frozen hiring of new employees, contractors and agencies and found a number of other ways to reduce expenses. As a result, we expect that quarterly cash spending for the remainder of the year will be substantially lower than what we reported in the first quarter. We anticipate that based on our current business plan, our financial resources fully fund the Company.

For the three months ended March 31st, 2020, net loss was $86.4 million versus a net loss of $54.3 million for the comparable period last year. On a per share basis, net loss for the first quarter of 2020 was $1.34 versus the net loss per share of $0.87 for the comparable period of 2019. In addition to reporting GAAP financial information, our 2020 first quarter results include non-GAAP financial measures, which we believe provide useful supplemental information to investors.

Non-GAAP net loss for the first quarter of 2020 was $66.1 million, or $1.03 per share versus non-GAAP net loss of $46.5 million, or $0.75 per share for the comparable period in 2019. Non-GAAP net loss excludes stock-based compensation as well as upfront cash and equity payments associated with the execution of the AIMab7195 license agreement in the first quarter of 2020.

Net product revenue for the first quarter of 2020 was $575,000, resulting from sales of PALFORZIA, which we began shipping in March. From an accounting perspective, we recognized revenue when our specialty pharmacy and distribution partners received PALFORZIA. It's important to note that our first quarter revenue reflects initial stocking by our specialty pharmacy and distribution partners in March, and is not an indication of prescription pulled through to patients in the quarter. As previously communicated, we will not be providing revenue guidance as we believe it is too early to draw a meaningful conclusion.

Cost of revenue for the first quarter of 2020 was $257,000. In looking at our product costs, you will see a 55% first quarter gross profit margin. PALFORZIA is a medicine that needs to meet tight product specification. Because of the variability of source materials and these tight specifications, we periodically scrap manufacturing loss that do not meet our stringent product criteria. In the first quarter, we recorded on approximately $200,000 charge for scrapped product. We also recorded in the first quarter a benefit, totaling less than $100,000 for sale of the product that was manufactured prior to regulatory approval and was previously expensed to R&D. Adjusting for the scrap charge and pre-approval benefit with yield and adjusted gross profit margin of approximately 80%, which is consistent with our expectation for the reported level of sales.

R&D expense for the first quarter of 2020 was $36.5 million versus $31.3 million for the comparable period last year. Increase was primarily due to the $10 million cash and equity payment to Xencor in February 2020 for the license of AIMab7195. This increase was partially offset by decreased clinical trial costs primarily due to the closeout of certain PALFORZIA clinical trials and decreased manufacturing costs as we began capitalizing costs for inventory upon FDA approval of PALFORZIA. Adjusting for the AIMab7195 license fee, the first quarter continued a trend of reduced quarterly R&D expense.

SG&A expense for the first quarter of 2020 was $49.1 million versus $23.7 million for the comparable period of 2019. The increase was primarily due to additional headcount to support the commercialization of PALFORZIA, including a specialty field team of approximately 80 PAMs targeting practicing allergists and other costs related to medical affairs and the preparations for commercial launch.

With that, we will open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] For our first question, it's from Charles Duncan from the Cantor Community. Your line is open.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Hi. This is Charles from Cantor. Thanks gentlemen for taking my questions. Realize it's a tough environment, but I wondered if you could provide a little bit more color on the conversations that you're having with potential prescribers I guess in March-April versus now. Does there seem to be qualitatively any difference? And are prescribers continuing to put together list of patients that they anticipate as call it early adopters for PALFORZIA?

Jayson Dallas -- President and Chief Executive Officer

Hey, Charles. This is Jayson. Thanks for the question. I'll start, and then I'll ask Andrew to provide a little bit more detail. I think in a very high level, the way you can describe the sort of change in the conversations we've been having is in late March, early April, allergists were very focused on trying to figure out how they're actually going to manage their practice and helpful to think about many of these community-based allergists, essentially a small businesses that kind of in the same boat, but any other small businesses, which is what do I do with my staff, what do I do with my patients, what do I do with my office and my rent and how am I going to figure this out. And that was kind of all-consuming for them as they were figuring out how to enter what this transient new period was going to look like that we've all sort of dealt within the shelter-in-place environment.

Over the course of the last couple of weeks, though, that has fundamentally changed in what we've started to see is the allergy community looking forward to reopening, obviously in different ways and at different speeds across the country, but there's much more attention now on how do I build my practice back, how do I get up and running, how do I deal with my existing backlog, and then how do I continue to build my practice the way it was building before all of this started in the first place. And so, the ability to look forward of course means that you have a community of docs that are vastly more engaged and ready to start speaking about how they're going to incorporate PALFORZIA within the context of all immunotherapy into their practices. So Andrew, do you want to add a little bit of color to that?

Andrew Oxtoby -- Chief Commercial Officer

Yeah, I will. So as Jayson mentioned, we went through a good five or six-week period where allergists were very much grappling with the situation they found themselves and -- as we all and figuring out how to make adjustments to their practice and how they would operate and things of that nature. And so, our plans by this point by the time the sort of national pandemic was declared, we'd had about six weeks between approval and that period, which meant that by then, they had a chance to go out there and have initial conversations with over 2,000 allergists and to really have initial conversations and build relationships, which meant that they would enable once the pandemic hit to virtually engage ring around and sort of check in and see how things were.

And the overwhelming response was, hey, we're trying deal with this right now in terms of impacts in our practices. So please come back to us sometime in mid-to-late April and check back in and let's see where we were. So, we've done that. And I have to say, what we're seeing is two things. Number 1, allergists, first of all, are talking to us about, OK I live in a state where I'm starting to see that we're coming out of the shelter-in-place restrictions. So, I'm starting to think about what that looks like. And besides working through some of the backlog, I'm already thinking about patients that we're putting on PALFORZIA. And so, that's certainly encouraging dialog from that perspective.

And because of that, what we've done over the last few weeks of April as we put together some specific website information which allows allergist in a COVID environment to be able to help prepare their practices for when they are able to start seeing patients again. So what they're doing is able to REMS enrolled themselves in their practice, but also work with patients and via phone or telemedicine consultations enroll patients in the REMS program, so that when they do come up, they're able to start physically seeing patients again in their office. They are able to do so smoothly and seamlessly. And by then, the patient should have gone through the benefits investigation process and any medical exception process to get their insurance coverage. Those are conversations and that's a willingness to engage -- that's reason that wouldn't have happened in the first sort of five or six weeks since the national shutdown went into effect.

So, we've certainly seen a change in the tone of the conversation in the past couple of weeks. And those resources should help allergists, as they work through the coming weeks, and then into a situation where they can see patients again.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Okay. That's helpful, Andrew and Jayson. It sounds like it could reengage relatively quickly when an allergy practice opens up. I wanted to ask a question regarding the pipeline. You talked about the egg program closing down their clinical trial. Were there any observations in that program that I guess change your thinking about it? Or was it just simply a matter of, call it, enrollment and then strategic priorities?

Jayson Dallas -- President and Chief Executive Officer

Yeah. Most specific issue, Charles. We talked about enrollments being relatively slower that peanut allergy as you know, most patients outgrow unlike peanuts or other tree nut. And so, enrollment has been a little slow than we would like, but we did have patients enrolled. The challenge that we face though was that because we couldn't enroll new patients over the course of the last few months, if we carried on what we started enrollment again once we got back up and running, the duration of the Phase 2 program would have become extraordinarily long and then we're going to sort of the delayed the whole program downstream.

So what we decided to do rather, given the business of Phase 2 program and this is not a labeling study, is to stop enrollment let the folks in the study finish up the trial. And then, just take a look at what learnings we can get from that patient population and figure out how to design an optimal Phase 3 program and how to construct a clinical development program for this allergy going forward. Dan is on the line. So, I'm going to ask him whether he has any additional commentary on that.

Daniel C. Adelman -- Chief Medical Officer

Thanks, Charles, and thanks, Jayson. I don't really have much to add other than every patient has an opportunity to gain additional insights into the performance of the drug. And we intend to look extremely careful at every data point and use it to inform our decisions, as we make choices moving forward.

Charles Duncan -- Cantor Fitzgerald -- Analyst

It's very helpful. Last question is for Eric. And that is, Eric, you had mentioned that you thought the current capital resources were sufficient to fund the Company or fully fund the Company I guess it's probably not forever, but you're making some assumptions about topline and getting back to a new normal or a normal normal. Can you share any of the key drivers there with us?

Eric Bjerkholt -- Chief Financial Officer

Sure. I mean, as we said on the call, we assume that there is some kind of return to normal some point this year and that the launch will actually take place in the late summer, early fall, and that we will start to generate revenues from then on out and that's reflected in our business plan.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Okay, perfect. Hopefully, you guys are right in terms of the return to normal. I think you will be. I'd appreciate you taking my questions.

Jayson Dallas -- President and Chief Executive Officer

Thanks, Charles.

Operator

For the next one, we have Chris Raymond from Piper Sandler. Chris, your line is open.

Allison Bratzel -- Piper Sandler -- Analyst

Hi. Good afternoon. This is Ally Bratzel on for Chris. So related to the market research you highlighted on the call, is it your sense that kids getting back to the classroom is going to be a big catalyst for PALFORZIA demand? And what kind of work are you doing at segmenting the U.S. regionally to have a sense of probability that kids in those areas will indeed be going back to school? So maybe just talk about your plan to induce stocks to start getting kids in the office now to get them prepared for that back to school and potential accidental peanut exposure.

Jayson Dallas -- President and Chief Executive Officer

Andrew, do you want to take that?

Andrew Oxtoby -- Chief Commercial Officer

Yeah, absolutely. So, I don't know so much -- I mean, from the research that we did, I don't know that getting back to school is necessarily a major catalyst or driver. There were some things that came out of the qualitative interviews that were interesting. Certainly, caregivers indicated that one of the things that they've become acutely aware of during the current shutdown is, a bit of the child did have some accidental exposure to peanut that they are vulnerable, so have to take them to the ER, which is something that they wouldn't want to do in an environment like this. Either now or certainly, if it should we are up [Phonetic] again in the future.

And so, it sort of brought home for them heightened appreciation for the need to address the situation and get the child on therapy to be able to address the peanut allergy. We didn't hear a great deal specifically about back-to-school, although it's certainly stems the reason that during the summer months before children do go back to school in the fall, but they would use that as an opportunity.

The other part of your question was around some geo regional differences across the U.S. The nature of the survey that we did was such that we were able to tease out some of the differences across the U.S. and we didn't see massive differences either on the caregiver or allergist side in terms of attitudes and beliefs. We did see some. One of the major things that we're looking out though is obviously being aware of the fact that some states are coming back to operating and out of the shutdown sooner than others.

And so with that in mind, we are prepared to mobilize both our field organization as well as potentially some direct-to-consumer mobilization work to make sure that caregivers of patients are aware of their treatment options and target those efforts more in areas of the country which are coming back sooner than the areas which are going to be like to shut down for a little bit longer. So that's the one way that we're able to use some of those geo differences.

Jayson Dallas -- President and Chief Executive Officer

I think there's probably also some leading indicators that we have as we start getting inbound requests from allergy offices in some parts of the country for us to actually come back and start visiting them. And as we actually do start seeing some new scripts come through into the benefit assessments after from those sort of various regions of the countries. As we sort of compile all of this, we will understand how things are going and where things are coming back to normal quicker than other parts of the country.

Allison Bratzel -- Piper Sandler -- Analyst

Got it. Thanks so much guys.

Operator

For the next one, we have Liana Moussatos from Wedbush Securities. Your line is open.

Shveta Dighe -- Wedbush Securities -- Analyst

Hi. This is Shveta for Liana. The first question is, what are some of the steps remaining for inclusion of PALFORZIA on formulary? And then, do you anticipate a broad coverage?

Jayson Dallas -- President and Chief Executive Officer

Andrew, do you want to address that?

Andrew Oxtoby -- Chief Commercial Officer

Yes. So, we are -- we're really in very early days of discussions with payers and the processes as follows. So, our account team and medical affairs team are currently working their way through conversations with the clinical committees of payers. And depending on the payer and their particular internal processes, those clinical committees will make recommendations to the P&C committee that will then make a determination regarding coverage as well as what's here will be covered on. It's a complicated thing because of the just the number of plans in the U.S. and the variations around benefit design. So it may be that at a national level sort of umbrella plan has a certain coverage determination.

The specifics of what that looks like may then vary a little bit depending on the particular plan that employee signs up for or regional variation about some of the umbrella plan. So, we're working through those. As I mentioned earlier on the call, we've had conversations now with a lot of the firms. And we're down to sort of Round 2 of some of these discussions. The large PBMs have a six-month period, by which, they won't make any formal coverage determination. And so, we're expecting that we would get some of that in Q3.

And what our goal is, is to make sure that as many patients as possible can have access to the products that are appropriate for treatment. And along with that, the prior authorization criteria which go into ensuring that they can get on the product are reasonable on [Technical Issues] with the label. And so far, the discussions that we've had and the policies that have been written, and there's about 15 plans that have written policies that cover PALFORZIA regarding PALFORZIA, those policies have prior authorization of by and large very acceptable. So, we're pleased with the progress so far, but it's early days yet.

Jayson Dallas -- President and Chief Executive Officer

Yeah. And I also add a couple of things. One is that we are right at the place we expected to be in terms of discussions with peers had COVID-19 situation not come into play. In other words, our progress in the work we've been doing with payers has been on track and played on target as we sort of go through the process of the launch. The other thing that's important is, as we're starting to see coverage decisions come through from the plan, we have yet to have any payer deny coverage. Also we have path [Phonetic] with the step out in place. And so, we're actually getting decent formulary cover. And by the time the allergy practices get back to opening up again and starting to put new patients on, we could actually be in a better situation than we would have been had those patients will go on in March.

Shveta Dighe -- Wedbush Securities -- Analyst

Got it. And just one question on the egg program. Can you talk about how many patients have enrolled in this study? And do you plan on sharing the data?

Jayson Dallas -- President and Chief Executive Officer

So, we haven't disclosed the number of patients in the study. And once the study is done and we will take a look at the data, we'll see what the data tells us. Obviously, we've always disclosed and published our data [Technical Issues].

Shveta Dighe -- Wedbush Securities -- Analyst

Okay, thank you.

Operator

For the next one, it's from Kennen MacKay from RBC Capital Markets. Your line is open.

Kennen MacKay -- RBC Capital Markets, LLC -- Analyst

Hi. Thanks for taking my question. And to your point, allergists are hurting financially and they've now largely missed the spring allergy shot seasoned in your survey anecdotally from physician checks and commercial checks you're doing. Do allergists understand the cash flow benefits to the clinic associated with prescribing AR101 and using this in patients. Thanks.

Jayson Dallas -- President and Chief Executive Officer

So, Ken, I'll start and then I'll ask Andrew to fill in again. Look, allergists have always -- allergists are -- practiced it even before the shelter-in-places have been hurting a little bit in terms of their patients being stolen by other practice -- sorry, other specialties. So, we've seen the severe asthmatics being sort of post if you like by the pulmonologists. And we've seen the skin diseases [Indecipherable] those kind of things go over to the dermatologists. And one thing remains very, very true throughout all of this. And that is that food allergy and intervention in treatments of food allergy is something that the allergist community absolutely know that they can own.

And the community have always perceived this as something that will enhance and grow their practices, simply because they have got patients in the practice, so their managers haven't been able to do anything for. And finally, they are going to be able to ask them therapeutic advantage. That hasn't changed. That hasn't changed at all from all the work we've done with the allergists through the shutdown. They see this as an opportunity.

In terms of them coming back into building up their practices, while they may be missed the window of new patients coming into the seasonal allergy season this year, they're still going to have to play catch-up for patients who have already started on the immunotherapy. Many of them have not continued dosing patients at all. And so, they're going to have to pay the catch-up, if they get back up to speed and it's going to be a composite of catching up and thinking about what new patients they can bring into their practice as they build it back to viability.

Andrew, anything you want to add to that?

Andrew Oxtoby -- Chief Commercial Officer

No. I think you summarized it well, Jayson. The only thing I would emphasize is that as you say, there is a very consistent feedback. And it's really feedback that we've uncovered through multiple rounds of market research, including the one that we just conducted over the past few weeks. And so, it's consistent with where we were pre-COVID and one would imagine that given some of the pressures that have been put on by the COVID situation, but not even not change, where is [Phonetic] actually even more important from that perspective.

The only other thing I think I would add though is that it's been market research which has given us this information. We as a commercial organization can't engage and will not engage in those nature of those discussions with allergists because how they run their practices and the financial implications of that is something that is for them to work through, but it is something that we've heard time and again through research that we've done over the -- well, last year, but in this year as well.

Operator

And for our next question, it's from Brian Skorney from Baird. Your line is open.

Brian Skorney -- Robert W. Baird & Co. -- Analyst

Thanks for taking my question, guys. Really just more of a housekeeping item. Eric, when you were talking about the cost of revenues on that cost line, you said that after the adjustments, the gross margin would be 80%, and that's what you would expect going forward here. And you kind of highlighted some of the amounts of product that was previously expensed through R&D. I'm just wondering is there any of that product remaining that's already been expensed or all revenue generating products from here on out, having the manufacturing costs associated expense in that quarter?

Eric Bjerkholt -- Chief Financial Officer

Yeah. Thanks, Brian. What I said was, that was the level of gross profit margin we would expect for this level of sales. And that's an important qualification because there's a lot of kind of fixed cost in the manufacturing organization and what have you that are allocated to cost of sales. And so, as sales grow, we would expect those to be amortized over a greater revenue base and gross profit margins to go up.

We said the -- we've only expensed less than a $100,000 of the R&D -- of the manufacturing cost that was expensed from R&D and there is a lot more to go, but we haven't been specific about how much.

Brian Skorney -- Robert W. Baird & Co. -- Analyst

Okay, great. That's helpful. Thanks.

Zegbeh Jallah -- Roth Capital Partners, LLC -- Analyst

For our next question is from Zegbeh Jallah from the Roth Capital Partners. Your line is open. Just kind of couple questions here. First one, are you continuing to see regional differences in terms of the number of allergists that are sort of buying. I just thought it might be good to know as we think about which region might be more affected when the shelter-in-place or [Indecipherable] kind of lifted. And then another question I think also for Andrew, how long does it take to typically get a patient to the REMS program? Just kind of wanted to know what the advantage would be for getting the patient through the REMS program now versus waiting. And then the last one maybe, Jayson, can you provide any kind of details on some of the data that we're going to see with regards to immunomodulation, the updated data expected at the Congress in June?

Jayson Dallas -- President and Chief Executive Officer

So, I'll ask Andrew to answer the first two, and then I'll ask Dan to give you a kind of high-level overview. Obviously, the specific data is embargoed, but he can give you a high level of peak into it. Andrew, why don't you start?

Andrew Oxtoby -- Chief Commercial Officer

Sure. Yeah. So yeah, very good question. So with regards to HCPs that have certified in the REMS program, there are some states where we have far more than others and no surprises, it sort of winds up would be with the U.S. population. So, the five states with the highest number of physicians that have tested in the REMS, New York, California, Texas, Florida and Illinois.

And when you look at states which have said that they're in the process of opening currently and you look across the country, we end up with something along the lines of about 49% of those -- 49% of our REMS certified HCPs lineup with those states that are opening. So, it's about half. And depending on the survey that you look out of the piece of analysis that's done, that lines up with roughly 52% of the population of the U.S. And so, it's probably in line with what one would expect in terms of the number of HCPs lining up with the general population.

So, your second question regarding the REMS program. The actual enrollments of the patient in the REMS program is a somewhat straightforward process. It's really a consultation between the physician and the caregiver of the patient and usually the patient's presence as well, and completing paperwork certifying that the patient has access to epinephrine and understands the procedure that is funding up for and things of that nature. And that can be done virtually and we've got some information now on a specific website as I mentioned to allow the biologists and also the patient to understand exactly what that process looks like, but that's relatively quick.

The other thing that can be done virtually and prior to a patient actually physically visiting the allergist office is the benefits investigation and the medical exception process to make sure of the patient's insurance coverage is determined. And that's the process that can take longer. We've had a focus short as 24 hours. It can take up to a week or maybe a little longer. And so, that's something that can be completed prior to the patient coming in for any just -- for their first visit. And so, both of those things can be done virtually. And so, that's why we're encouraging people to understand what that looks like, so that they can -- once they are able to physically see patients, they can sort of hit the ground running.

So, the REMS program of certification itself is relatively short. But doing that in conjunction with the benefits investigation and medical exception process can take some time, once allergist clinic is open. Jayson, you have a question?

Jayson Dallas -- President and Chief Executive Officer

Yeah, I'm going to ask Dan to take the question around the [Technical Issues].

Daniel C. Adelman -- Chief Medical Officer

Sure. So, we are going to be presenting some data on long-term immunomodulation safety and efficacy from the open label roll-over study that was a continuation of the original Phase 3 PALISADE study. And again, without going into the details, we are going to be showing that there is ongoing immunomodulation during the first two years of therapy, with improvement in those biomarker parameters as well as ongoing improvement both in safety and efficacy.

Zegbeh Jallah -- Roth Capital Partners, LLC -- Analyst

Thank you.

Operator

For our next question, it's from Liisa Bayko from JMP Securities. Liisa, your line is open.

Liisa Bayko -- JMP Securities -- Analyst

You might have touched on it before, but I just want to clarify the cost of revenue $257,000. How much of that was the cost for the write-off of the one manufacturing lot, which didn't meet your manufacturing specifications? And then second question, do you guys anticipate kind of needing a six-month window to initiate therapy, given kind of theories that there is going to be return of the outbreak in the fall, just kind of six months from now? Thanks.

Eric Bjerkholt -- Chief Financial Officer

[Speech Overlap] first one. Go ahead.

Jayson Dallas -- President and Chief Executive Officer

Okay. Go ahead, Eric.

Eric Bjerkholt -- Chief Financial Officer

Yeah. My answer is very quick. It's approximately $200,000 was the cost of the write-off.

Jayson Dallas -- President and Chief Executive Officer

On the second question, I think one of the main reasons that we did research and we wanted to do both qualitative and quantitative research with physicians and patients was really to try to understand how they were thinking about coming back and whether they were going to be wanting to wait and see what happens. The results that we've had overwhelmingly tiered with [Phonetic] both sides of that equation really do want to get up and running quickly and parents and caregivers do want to get their children on to PALFORZIA therapy relatively quickly. I think in our assumptions and if we look at orders things that could happen, if there is a second wave of the virus, we don't necessarily believe that we'll see another national lockdown. We think that there will be probably pockets of shelter-in-place that's happening around the country, but things have been different geographically. We also think we may be in a place where there are other therapeutic options available and ultimately this year vaccine.

But the community told us quite overwhelmingly that they are not going to wait three to six months to see what happens. They said as soon as we can open, will open. And the caregivers told us as soon as the practices are open, we're going to bring our kids back and get them treated. And one of the advantage of PALFORZIA is that should someone stop therapy, and as said, we did have a couple of patients actually stopped therapy before the shelter-in-places. They can stay on those two [Phonetic] therapies that they are on for an extended period of time. So, if there is a regional or local shelter-in-place that kicks back in, they will be able to stay on the dose what they are on. And then, when things get back to normal locally, they will be able to carry out on the dosing. So, the flexibility of dosing is one of the really important things here. We can continue to provide patients that treatment at home through any shutdown period, once they're established on the medicine.

Andrew Oxtoby -- Chief Commercial Officer

Jayson, can I add one additional detail double quick to what you just said?

Jayson Dallas -- President and Chief Executive Officer

Yeah, of course, Andrew.

Andrew Oxtoby -- Chief Commercial Officer

Yeah. So, as Jayson indicated, the theme of our research was very much that patients and caregivers wanted to get on the therapy as soon as it was feasible to do so. And interestingly, we asked the question on the survey, how did the potential flare up or reemergence of COVID in that area affect their thinking around that. And we asked that question in the context of a product profile where they didn't understand or didn't have full awareness of the fact that they could continue to stay at that dose. And then, we asked the question again after they were aware of the fact that, there was a distribution mechanism that would allow them to keep taking the same dose to essentially remain about desensitization level.

And interestingly, there were positive before they knew about the profile of the product with regards to that sort of level of that ability to stay at that desensitization level, but their responses improved even more once they were fully aware of the fact that, that was part of the way the product was distributed and the way the product is administered. So, I do think it's actually an important aspect of our product, different, let's say, from environmental allergy shops that you can receive distribution at your home and continue to be to stay at that desensitization level until you're able to return and go back to your allergist's office.

Liisa Bayko -- JMP Securities -- Analyst

Thanks guys. Appreciate it.

Operator

And for our last question, it's from Paul Choi from Goldman Sachs. Your line is open.

Paul Choi -- Goldman Sachs -- Analyst

Hi, thank you. Good afternoon, everyone, and thanks for squeezing me in. Jayson, I think in your prepared comments, you said you're on the POSEIDON trial, holding the kids at their last dose. So either for you or for Dan, I was wondering if you could just maybe elaborate on if these kids reached the 12-month point and are not up to their 600 mg or 1,000 mg dose in Europe and 600 mg in the U.S. It's a plan to treat them at sort of last observation carried forward in terms of their dosing. And how does that potentially affect the trial? And I was just kind of wondering if you could perhaps elaborate on that. And then second, I had a commercial follow-up question for Andrew.

Jayson Dallas -- President and Chief Executive Officer

Yeah. So, I'll start and then I'll ask Dan to carry on. So, Paul, there is no 600 milligram or 1,000 milligram dose. The highest dose of PALFORZIA is 300 milligrams. And that's the dose that we will continue to titrate patients up to. It really doesn't matter how long the titration takes, so even if they go six, nine or even 12 months on an existing dose, once they are able to get in and have another visit in the clinical site, they will continue that titration up until they get to the 300 milligram dose. So, we anticipate continuing to titrate all patients until they all get up to the 300 milligram dose. I think what you're talking about is the level of protection that you get. And we know that folks are protected from 600 milligram, 1,000 milligram and our 18-month data showed even 2,000 milligrams of peanut, despite only taking 600 milligram dose.

Dan, anything you want to add to that?

Daniel C. Adelman -- Chief Medical Officer

No. The two-week interval that we usually use for up-dosing is as Jayson has said many times, it's a speed limit. You can't -- we don't want people to go faster, but they can certainly go slower and the flexibility that our regimen allows them to stay at those levels as long as they need to. We will up dose them. They will go on the protocol-defined duration of maintenance. And then, we will do the exit food challenges. And so, I don't believe that there will be any problem with interpreting the data at the end, and we will have a lot of safety data.

Paul Choi -- Goldman Sachs -- Analyst

Got it. That's very helpful.

Jayson Dallas -- President and Chief Executive Officer

[Speech Overlap] We have some opportunistic data that shows us what happens if you take slightly longer to titrate up from a dose than we did in the other clinical trial.

Paul Choi -- Goldman Sachs -- Analyst

Right. Got it. I see that's very helpful. Thank you. And then just a quick follow-up for Andrew with regards to the 700 patients -- I'm sorry, 700 physicians who have a find-up until the REMS. Can you maybe just provide some color for us as you're -- how many of them are currently actively treating patients with peanut allergy versus those who are potentially first time treaters for peanut allergy? Any color there would be helpful. Thank you.

Andrew Oxtoby -- Chief Commercial Officer

Yeah. Thanks, Paul. I assume what you're referring to is those that have been practicing food allergy, which was obviously prior to the approval of PALFORZIA. So in terms of those of the REMS certified, I believe it's around 75 to 100 of those folks we would put in that category. So people who have some familiarity with food allergy [Phonetic] and remember that that's quite a broad church because you have folks that have been doing food allergy across multiple different food items. Quite a bit for a number of years. But then, you also have that's very much bigger group in the -- which have gone on a very limited basis. And the reason -- the only reason they have been doing it is because they had a lot of demand from the patients that they wanted some sort of treatment for peanut allergy for their kids. And so, this would be only thing that was available to them.

And so, now with an approved option available ways they obviously enrolled in our REMS program and embracing the fact that there is an approved option that they can treat with.

Paul Choi -- Goldman Sachs -- Analyst

Great. Thanks for taking our questions.

Andrew Oxtoby -- Chief Commercial Officer

Thanks, Paul.

Jayson Dallas -- President and Chief Executive Officer

Thanks, Paul.

Operator

I am showing that we are out of time. I would now like to turn the conference back to Jayson Dallas.

Jayson Dallas -- President and Chief Executive Officer

Thank you so much. And so, just to end and to summarize, I remain extremely proud of the team here at Aimmune for rising to the challenges posed by the pandemic. I could not have asked for a more dedicated or talented group of professional. We are meeting these challenges with the thoughtful approach to our business, so that we can maximize the commercial potential of PALFORZIA, while continuing to preserve capital. We are confident in our prospects and our mission to improve the lives of people with food allergies and we approached the uncertainty for the coming months with resolve and from a position of strength. Lastly, I'd like to share my sincere wishes for everyone throughout the communities we served. Stay safe and healthy and to know that we will turn a corner and brighter days are ahead of us. As always, thank you for your ongoing support and for joining us for today's call.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

DeDe Sheel -- Vice President of Investor Relations

Jayson Dallas -- President and Chief Executive Officer

Andrew Oxtoby -- Chief Commercial Officer

Eric Bjerkholt -- Chief Financial Officer

Daniel C. Adelman -- Chief Medical Officer

Charles Duncan -- Cantor Fitzgerald -- Analyst

Allison Bratzel -- Piper Sandler -- Analyst

Shveta Dighe -- Wedbush Securities -- Analyst

Kennen MacKay -- RBC Capital Markets, LLC -- Analyst

Brian Skorney -- Robert W. Baird & Co. -- Analyst

Zegbeh Jallah -- Roth Capital Partners, LLC -- Analyst

Liisa Bayko -- JMP Securities -- Analyst

Paul Choi -- Goldman Sachs -- Analyst

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