Horizon Pharma plc (HZNP) Q3 2021 Earnings Call Transcript

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Horizon Pharma plc (HZNP)
Q3 2021 Earnings Call
Nov 3, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and thank you for standing by. Welcome to the Horizon Therapeutics Third Quarter 2021 Earnings Conference Call. [Operator Instructions] I'd now like to introduce Ms. Tina Ventura, Senior Vice President, Investor Relations. Please go ahead.

Tina Ventura -- Senior Vice President, Investor Relations

Thank you, Anthony. Good morning, everyone, and thank you for joining us. On the call with me today are Tim Walbert, Chairman, President and Chief Executive Officer; Paul Hoelscher, Executive Vice President, Chief Financial Officer; Liz Thompson, Executive Vice President, Research and Development; and Andy Pasternak, Executive Vice President, Chief Strategy Officer.

Tim will provide a review of the business, including our third quarter performance. Liz will then provide a review of our R&D programs, followed by Paul, who will discuss our financial performance and guidance in more detail. After closing remarks from Tim, we'll take your questions.

As a reminder, during today's call, we will be making certain forward-looking statements, including statements about financial projections, development activities, our business strategy and the expected timing and impact of future events. Our actual results could differ materially due to a number of factors, including the risk factors and other information outlined in our latest Forms 10-K, 10-Q and any 8-Ks filed with the Securities and Exchange Commission and our earnings press release, which we issued this morning.

You are cautioned not to place undue reliance on these forward-looking statements and Horizon disclaims any obligation to update such statements. In addition, on today's conference call, non-GAAP financial measures will be used. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and other filings from today that are available on our investor website at www.horizontherapeutics.com.

I will now turn the call over to Tim.

Tim Walbert -- Chairman, President & Chief Executive Officer

Thank you, Tina, and good morning, everyone. We delivered strong results again this quarter across our business and continue to generate record performance for our key growth drivers TEPEZZA and KRYSTEXXA.

The TEPEZZA relaunch continue to outperform our expectations, driven by rapid patient starts, stronger patient demand and increasing prescriber base. As a result, we are increasing our full year 2021 TEPEZZA net sales guidance to more than $1.625 billion.

KRYSTEXXA generated another strong quarter with new patient growth across rheumatology and nephrology as well as continued acceleration in the use of KRYSTEXXA plus immunomodulation, which is now more than 45% of new patient starts. We are raising our full year 2021 KRYSTEXXA net sales guidance to more than $550 million. We also generated strong growth from both RAVICTI and PROCYSBI. In total, our net sales increased 63% year-over-year and adjusted EBITDA increased 54% year-over-year, underscoring our position as one of the fastest-growing biotech companies. Given our outperformance, we are increasing our full year net sales guidance to $3.16 billion to $3.21 billion and adjusted EBITDA guidance to $1.315 billion to $1.345 billion. The midpoints represent 45% and 33% year-over-year growth, respectively.

Our strong performance was accompanied by several key achievements. We initiated our TEPEZZA randomized clinical trial in chronic thyroid eye disease patients in September. We announced results from our KRYSTEXXA MIRROR randomized clinical trial that demonstrated that KRYSTEXXA plus the immunomodulator methotrexate resulted in a complete response rate of 71% at month 6, a more than 30 percentage-point improvement compared to KRYSTEXXA plus placebo.

In line with our strategy to expand our pipeline for future growth, we announced five new R&D programs during an inaugural R&D Day in September. We presented new UPLIZNA data in multiple medical meetings, adding to the compelling evidence of putting the use of UPLIZNA in neuromyelitis optica spectrum disorder or NMOSD. We acquired a new biologic drug product manufacturing facility in Waterford, Ireland to support the continued growth of TEPEZZA, KRYSTEXXA and UPLIZNA as well as our development stage biologics.

From a talent and workplace perspective, we've demonstrated gender and ethnicity pay equity for the second consecutive time based on a pay equity study conducted by AON, a leading compensation consulting firm. We continue to be recognized as the best workplace, receiving 11 workplace recognitions this year, including being the highest ranked company in the biotechnology and pharmaceutical category on Newsweek's inaugural Most Loved Workplace List, which recognizes employee happiness and satisfaction at work.

Before I move on to our third quarter performance, I also wanted to highlight the announcement we made this morning regarding the retirement of our CFO, Paul Hoelscher. Paul is planning to retire in May of 2022 and will stay on in an advisory role through May of 2023 to ensure a smooth transition. Aaron Cox, who has been named EVP Finance and has been my Chief of Staff and Head of Corporate Development for the last 4 years, will be taking on the CFO role. Paul has been a tremendous partner to me over the last 7 years, and I'm very grateful for his leadership and dedication to Horizon.

I'm equally pleased to name Aaron to the role of CFO. Aaron has a deep knowledge of the business. He's been a leader in many of our major strategic efforts. He's led our capital market activities and has a strong financial background. I'm confident that Aaron, along with our experienced financial leadership team, will continue to drive our long-term strategy at Horizon.

Moving on to our third quarter results, beginning with TEPEZZA. Third quarter TEPEZZA net sales were $616 million with year-over-year growth of 115%. With the year-to-date TEPEZZA net sales of $1.72 billion, TEPEZZA became our first medicine to generate $1 billion in annual net sales. We continued our strong execution on the relaunch that followed the government mandated first quarter supply disruption. Since then, we have helped patients whose treatment was disrupted resume their treatment. We successfully converted new patients added during the disruption, and we continue to see strong new patient demand for TEPEZZA.

We attribute this strong growth to the fact that we have continued to add new prescribers and further penetrate our existing prescriber base, deepening the penetration among ophthalmology subspecialist prescribing to TEPEZZA such as oculoplastic surgeons, neuro-ophthalmic surgeons and strabismus specialists. We also continue to expand our reach to ophthalmologists and endocrinologists who refer to a TED specialist upon diagnosis.

We also continue to significantly invest in direct-to-consumer marketing initiatives, including our branded and unbranded television campaigns, which have been effectively increasing awareness about TEPEZZA and TED. Our goal for these national campaigns is to increase awareness of TEPEZZA and accelerate the speed to diagnosis and treatment of TED.

We're also starting to proactively engage physicians on the use of TEPEZZA in chronic patients. As we noted last quarter, we now have 6 publications studying the successful experience with TEPEZZA treatment for a total of more than 50 chronic TED patients, surpassing the number of TEPEZZA acute patients studied in the Phase III clinical trial. The commercial team is leveraging these new publications to educate physicians about the efficacy of TEPEZZA in chronic patients with the goal to expand the use of TEPEZZA beyond the acute patient population.

We remain very enthusiastic about the prospects for TEPEZZA to help more patients address the serious, debilitating and sight-threatening aspects of TED. Given the third quarter's better-than-expected results and continued strong new-patient demand, we increased our full-year TEPEZZA net sales guidance to more than $1.625 billion, which is a near doubling of net sales in our second year of launch, despite the supply disruption and other limitations from COVID-19.

Our guidance continues to assume that the third quarter is the highest net sales quarter for TEPEZZA in 2021. This is a function of three factors: first, disruptive patients who resume treatment beginning in the second quarter; second, patients with patient enrollment forms, or PEFs, that were generated in the fourth quarter of 2020 and the first quarter of 2021 who started treatment after supply resumed in April; and third, new patients who started treatment in the second and third quarters.

Our increased full year guidance positions us for year-over-year growth of more than 60% in the fourth quarter. We estimate that the vast majority of fourth quarter growth will be driven by PEFs generated after reinitiation of supply in April.

We continue to see significant opportunity ahead for TEPEZZA, both in the acute patient population as well as in the untapped chronic population. We remain well on track for our TEPEZZA global net sales estimate of more than $3.5 billion. KRYSTEXXA delivered another quarter of strong performance, generating net sales of $158 million. As a result, we've increased our 2021 net sales guidance to more than $550 million, representing year-over-year growth of more than 35%.

We are very pleased to announce top line data from our MIRROR randomized controlled trial last week, demonstrating that 71% of patients randomized to receive KRYSTEXXA plus methotrexate achieved a complete response compared to 40% response rate for patients randomized to receive KRYSTEXXA plus placebo. Our clinical team is working to complete the analysis of the result to submit a supplemental biologics license application, or sBLA, in the first quarter of next year. We anticipate a standard 10-month review, and approval would allow our commercial team to proactively promote KRYSTEXXA plus methotrexate to physicians.

In the meantime, our medical affairs and clinical teams are working to present the MIRROR trial results and additional analyses from the trial at medical congresses next year. And we'll be engaging with key opinion leaders on the data as well. The MIRROR results are the culmination of a significant investment we have made in immunomodulation for the last several years based on our long-held belief in its potential to increase the complete response rate of KRYSTEXXA, which MIRROR has now substantiated. Immunomodulation is the core element of our strategy to maximize the value of KRYSTEXXA because it allows more patients with uncontrolled gout to benefit from the medicine, the only biologic approved for treatment of this debilitating disease.

We've been seeing increased adoption of the approach and estimate that KRYSTEXXA plus immunomodulation is now being used for more than 45% of new patients. The KRYSTEXXA team is continuing to drive strong PEF growth and adoption by both rheumatologists and nephrologists. We're seeing results in the growth of our prescriber base. By October, more rheumatologists have prescribed KRYSTEXXA this year compared to the total number of prescribers in all of 2020.

In nephrology, we significantly grew our prescriber base compared to 2020, to date exceeding the total of full year 2020 prescribers by 30%.

With UPLIZNA, our humanized monoclonal antibody B-cell depleter, we generated strong third quarter net sales of $18.7 million. Given the timing of UPLIZNA approval last year at almost the height of the pandemic, we're executing a full relaunch of the medicine, leveraging the patient-centric approach we used for both TEPEZZA and KRYSTEXXA. We made significant progress on that front. We completed the expansion of our commercial team in the third quarter. Our new team with deep neuroimmunology experience, relationships and market knowledge is now fully onboarded and started meeting with key physician targets early in the fourth quarter. In less than 6 months, we developed and launched a new brand campaign based on key opinion leader feedback and market research. Our goal here is to drive awareness about UPLIZNA and NMOSD, reduce the time to diagnosis and highlight the urgent need for treatment. We have put a robust commercial structure in place designed to support the complex aspects of the UPLIZNA patient journey. We also bolstered our site of care and reimbursement support, and we have been receiving positive feedback from both physicians and sites of care.

A critical part of our strategy is to drive physician and patient preference for UPLIZNA based on its differentiated mechanism of action, strong clinical data and clear patient benefits, which are doing to our investment in medical and scientific engagement to develop our scientific leadership position in NMOSD, which Liz will discuss in more detail shortly.

It takes time to effectively launch an infused rare disease medicine and educate stakeholders about the new medicine. We're off to a good start with UPLIZNA and expect to see the benefits of our new commercial organization and investments as we head into the new year.

I'll now turn the call over to Liz.

Elizabeth H.Z. Thompson -- Executive Vice President, Research & Development

Thank you, Tim, and good morning, everyone. The third quarter of 2021 marked another quarter of great progress in R&D. In addition to advancing our existing pipeline programs, we significantly expanded our pipeline, announcing the addition of 5 new programs during our inaugural R&D Day in September. All told, our pipeline today has the potential for 10 new medicine or new indication approvals in the second half of the decade.

The R&D Day also gave us the opportunity to showcase our talented and experienced team it was a pleasure to be able to talk more about R&D strategy in particular how expanding our pipeline with early to late stage program for sustainable growth in three ways. First by acquiring and developing medicines for indications that address unmet needs in rare autoimmune and severe inflammatory diseases particularly those in our therapeutics areas of focus. Second by leveraging our internal research as well as research-based partnerships and collaborations to drive earlier stage innovation; and third, by maximizing the range of potential diseases our pipeline molecules can impact. I look forward to continuing opportunities to discuss our progress in each of these areas.

Today, I'm going to recap some of our key programs, similar to recent calls. I'll start with daxdilimab or HZN 7734. Daxdilimab is the first and only plasmacytoid dendritic cell, or pDC, depleter in clinical development. pDCs are found in high concentrations in disease tissues of individuals with certain autoimmune and inflammatory diseases and this results in the significant inflammation and tissue damage, which are the hallmarks of autoimmune disease.

In addition to our ongoing Phase II trial evaluating daxdilimab for the treatment of systemic lupus erythematosus, we announced in September 4 new indications we are exploring, two are lupus-related, discoid lupus erythematosus and lupus nephritis. The other two are alopecia areata and dermatomyositis. Discoid lupus is a scarifying disease that can be significantly disfiguring and can also result in hair loss. One of the most important manifestations in lupus is the involvement of the kidney. pDCs can promote kidney damage and are associated with more advanced disease, which is why we're pursuing lupus nephritis.

Next is alopecia areata. Patients with this disease, for which there are no FDA-approved therapies, experience baldness to varying degrees. Alopecia areata can involve the entire scalp or even the entire body. And finally, we'll be studying daxdilimab for dermatomyositis, a rare condition that manifests a severe skin rash and disabling muscle weakness. We expect to begin Phase II trials for these 4 new indications in 2022.

Moving to dazodalibep, or HZN-4920, our CD40 ligand antagonist designed to block a central pathway involved in many autoimmune and inflammatory diseases. Dazodalibep is currently in Phase II trials for three indications: Sjogren's syndrome, rheumatoid arthritis and kidney transplant rejection.

During R&D Day, we announced a new indication for dazodalibep in focal segmental glomerulosclerosis or FSGS, a progressive kidney disease with high unmet need and no FDA-approved treatments. We expect to begin a Phase II trial for FSGS in 2022 as well.

HZN-825, our oral selective LPAR1 antagonist, has shown early signs of clinical impact in fibrotic disease. We expect to initiate 2 pivotal Phase IIb trials for HZN-825 by the end of this year, one in diffuse cutaneous systemic sclerosis and the other in idiopathic pulmonary fibrosis. For both of these disease states, we work closely with leading experts to incorporate learnings from prior trials to optimize trial outcomes.

Moving to UPLIZNA, our anti-CD19 humanized monoclonal antibody, we're currently enrolling patients in 2 Phase III randomized controlled trials, one in myasthenia gravis, or MG; and the other in IgG4-related disease. MG is a chronic, rare, autoimmune, neuromuscular disorder that affects the voluntary muscles of the body, especially those that control the eyes, mouth, throat and limbs. IgG4-related disease refers to a group of disorders marked by tumor-like swelling and fibrosis of affected organs, such as the pancreas, salivary glands and kidneys. We expect data for both trials in 2023. However, because the IgG4-related disease trial is event-driven, the readout timing may extend beyond 2023.

UPLIZNA indicated for neuromyelitis optica spectrum disorder, or NMOSD, a rare and devastating neuro inflammatory autoimmune disease that attacks the optic nerve, spinal cord and brain stem. NMOSD is severe and relapsing. And because attacks can result in blindness, paralysis and other disabilities, often permanent, it is critical to prevent relapses. We're rapidly building a base of compelling data to support the efficacy and safety profile of UPLIZNA. This growing body of evidence is a key component of our clinical strategy to establish scientific leadership in NMOSD. We shared data this quarter at key neurology congresses, including a presentation of a new data analysis from our Phase III NMOSD clinical trial. The results demonstrated the correlation of B-cell depletion and improved outcomes in patients receiving UPLIZNA, showing that the greater the B-cell depletion, the better the patient outcome, providing additional evidence of the central role B cells play in NMOSD.

At another neurology conference, we presented data showing that UPLIZNA may provide durable efficacy and a favorable safety profile for blacks with NMOSD who often have earlier onset of the disease with more severe relapses. Finally, a new analysis of data from the open-label portion of the Phase III trial was published in the Multiple Sclerosis Journal that highlighted a positive, sustained effect on attack risk in people with NMOSD treated with UPLIZNA for 4 or more years.

For TEPEZZA, we began enrolling patients during the third quarter in the Phase IV placebo-controlled trial evaluating TEPEZZA for use in patients with chronic thyroid eye disease. TED, a serious, progressive and potentially vision-threatening rare autoimmune disease begins with an acute phase during which inflammatory signs and symptoms, such as eye pain, swelling, proptosis or eye bulging and diplopia or double vision, progress over time. The acute stage is followed by a chronic phase in which inflammation is no longer present or has markedly diminished. However, significant signs and symptoms may remain and continue to negatively impact patients' quality of life. As a reminder, TEPEZZA has a broad indication for all TED patients and physicians can prescribe TEPEZZA for chronic patients today. Our objective for the chronic TED trial is to generate clinical data to better inform payers and physicians about the efficacy and safety of TEPEZZA in people with chronic TED. We expect top line results in the second half of 2022.

We also continue to advance our TEPEZZA subcutaneous administration program as well as our clinical program for TEPEZZA in Japan. We've submitted our trial design to the Japanese Pharmaceuticals and Medical Devices Agency and anticipate a trial start in the first half of 2022. In addition, long-term data from our TEPEZZA OPTIC-X open-label extension trial were recently published in ophthalmology that showed high rates of maintained response for proptosis, CAS and diplopia with no new safety signals. And as a reminder, the OPTIC-X patients had longer disease duration than those in the OPTIC Phase III clinical trial.

We also shared longer-term follow-up results from OPTIC at the Annual Meeting of the American Thyroid Association in October that reinforced previously reported data showing the sustained response in the majority of people treated with TEPEZZA. We plan to continue to share TEPEZZA data at upcoming medical meetings over the coming months.

And finally, for KRYSTEXXA, we were very pleased to recently announce the positive results of our MIRROR randomized controlled trial evaluating immunomodulation with methotrexate. The trial, which met its primary endpoint at month 6, demonstrated that 71% of patients who were randomized to receive KRYSTEXXA plus methotrexate achieved a complete response compared to 40% of patients randomized to receive KRYSTEXXA plus placebo.

The results of the KRYSTEXXA plus placebo arm was very similar to the 42% response rate previously demonstrated with KRYSTEXXA monotherapy in the Phase III program, a consistency that helps support the robustness of the trial results. The addition of methotrexate resulted in a 31 percentage-point improvement in the complete response rate over monotherapy. Seeing such a substantial improvement to a response rate is rare, and it reinforces the positive results of KRYSTEXXA plus immunomodulation we've seen from multiple published case series as well as our own open-label trial evaluating KRYSTEXXA with methotrexate.

This important milestone is the culmination of significant investment over the last several years with the goal of enabling more people living with uncontrolled gout to benefit from KRYSTEXXA. And we continue to explore ways to improve outcomes and identify new paths for treatment with KRYSTEXXA as exemplified by our shorter infusion duration, monthly dosing and retreatment trials.

Beyond these substantial efforts, we also continue to invest in developing new approaches that target the underlying cause of gout, such as our Arrowhead and HemoShear preclinical programs. As Tim mentioned, we expect to submit an sBLA application in the first quarter of 2022 to incorporate the MIRROR trial data into the prescribing information, and we expect a standard 10-month review.

Finally, we'll be announcing the results of the KRYSTEXXA PROTECT trial at this week's American Society of Nephrology Kidney Week. This trial evaluated KRYSTEXXA in the management of patients with uncontrolled gout who have undergone kidney transplants. We look forward to providing additional details on our key pipeline programs as well as updating you on our continued progress in the coming months.

I will now turn the call over to Paul.

Paul W. Hoelscher -- Executive Vice President, Chief Financial Officer

Thanks, Liz. My comments this morning will primarily focus on our non-GAAP results, unless otherwise noted. Third quarter net sales were $1.037 billion, representing year-over-year growth of 63%, driven by the record performances of our key growth drivers, TEPEZZA and KRYSTEXXA as well as the strong performance of our other rare disease medicines.

Our orphan segment generated net sales of $951 million, a year-over-year increase of 78% and representing 92% of total company third quarter net sales. Orphan segment operating income was $476 million.

Net sales for the inflammation segment were $86 million, with segment operating income of $34 million. We continue to focus on maximizing the cash flow generated from this segment to reinvest in our growth drivers and our expanding pipeline.

Our non-GAAP third quarter gross profit ratio was 85% of net sales. Non-GAAP operating expenses were $375 million. This included non-GAAP R&D expense of $74 million or 7% of sales versus 4% of sales in the third quarter of 2020. Non-GAAP SG&A expense was $301 million.

Third quarter adjusted EBITDA was $509 million, representing year-over-year growth of 54%. Non-GAAP income tax expense for the third quarter was $74 million. As we have seen in prior years, there can be variability in our tax rate across quarters. We continue to expect that the tax rate in the fourth quarter to be in the mid-teens to bring our full year tax rate in line with our projected low double-digit rate.

Non-GAAP net income for the quarter was $414 million, and non-GAAP diluted earnings per share were $1.75. The weighted average shares outstanding used to calculate third quarter 2021 non-GAAP diluted EPS and were 236 million shares.

Third quarter non-GAAP operating cash flow was $432 million. As of September 30, cash and cash equivalents were $1.1 billion, giving us significant flexibility to invest in our growing operations and to further expand our pipeline, including additional strategic transactions. The total principal amount of our debt is $2.6 billion with the earliest maturity in 2026. As of September 30, our gross debt to last 12 months adjusted EBITDA leverage ratio was 2.0x, represented achievement of our gross leverage target of 2x, well ahead of our year-end 2021 goal.

Turning now to our guidance. This morning, we announced that we are increasing our full year 2021 net sales guidance range to $3.16 billion to $3.21 billion from $3.025 billion to $3.125 billion. This reflects our strong performance across all of our business units in the third quarter as well as our increased full year 2021 net sales guidance for TEPEZZA and KRYSTEXXA.

For TEPEZZA, our updated 2021 net sales guidance is for more than $1.625 billion, representing year-over-year growth of more than 98%. As Tim noted, we continue to expect the third quarter to be the highest net sales quarter of 2021 for TEPEZZA.

For KRYSTEXXA, our updated 2021 full year net sales guidance is for more than $550 million, representing year-over-year growth of more than 35%.

In our inflammation business unit, we expect less than $5 million of DUEXIS fourth quarter net sales in our 2021 guidance given the at-risk generic launch that occurred in the third quarter. We are also increasing our adjusted EBITDA guidance range from to $1.315 billion to $1.345 billion from $1.26 billion to $1.30 billion. We expect our non-GAAP gross profit ratio for the full year to be approximately 87%. Our updated adjusted EBITDA guidance assumes an increase in non-GAAP operating expenses in the fourth quarter, driven by additional SG&A expense to support the UPLIZNA relaunch and continued investment in TEPEZZA. We expect full year 2021 R&D expense to approach double digits as a percentage of net sales.

We continue to expect non-GAAP net interest expense for the full year to be approximately $75 million. We continue to expect a full year non-GAAP tax rate in the low double digits. We estimate that our cash tax rate will be in the mid- to high-single digits in 2021. As always, our tax rates could change significantly as a result of any acquisitions or divestitures we may make or any changes in tax laws. We expect our full year 2021 weighted average diluted share count to be approximately 236 million shares.

With that, I'll turn it over to Tim for his concluding remarks.

Tim Walbert -- Chairman, President & Chief Executive Officer

Thank you, Paul. The third quarter was another excellent quarter, marked by strong commercial execution, continued progress on our strategy and multiple achievements. We generated record financial results driven by TEPEZZA and KRYSTEXXA as well as robust performance from our other rare disease medicines, and we see continued strong underlying demand.

We increased guidance for full year TEPEZZA and KRYSTEXXA net sales, total company net sales and adjusted EBITDA. We continue to expand our pipeline with the addition of 5 new Phase II programs. We announced positive top line results for our KRYSTEXXA MIRROR immunomodulation trial and will be submitting an sBLA to the FDA in the first quarter to update the KRYSTEXXA label. We completed the commercial expansion of UPLIZNA and relaunched it early this quarter. We continue to demonstrate the value we place on talent, demonstrating gender and ethnicity pay equity, once again and receiving multiple additional workplace awards.

Horizon remains one of the fastest growth and transformation stories in biotech. And we continue to generate significant value, not only for our shareholders, but also for the thousands of patients living with rare autoimmune and severe inflammatory diseases. We're excited about Horizon's future and remain focused on realizing the tremendous opportunity we see for the company ahead.

With that, we'll now open up the call for questions. Tina?

Tina Ventura -- Senior Vice President, Investor Relations

Anthony, please open up the call.

Questions and Answers:

Operator

[Operator Instructions] And the first question comes from the line of Chris Schott from JPMorgan. Your line is now open.

Chris Schott -- JPMorgan -- Analyst

Hey guys, I appreciate the questions. I just have two on TEPEZZA. Maybe first talk about, I think what's implied is about a $550 million fourth quarter number for the drug. Is that a decent run rate to build off of as we think out to 2022? Or are there still some sales in the fourth quarter from warehouse patients that came in during the supply disruption?

And I'll just ask my second one upfront here, also on TEPEZZA's chronic use, what percent of TEPEZZA sales are now in the setting? And are you seeing more uptake in chronic with some of the recent data publications? Or do you think the Phase IV study is really what's going to be needed here to get traction in that setting? Thanks so much.

Tim Walbert -- Chairman, President & Chief Executive Officer

Sure, Chris. As we look at the disruptive patients and how things have sequenced, they continue to come down. The vast majority of patients in the fourth quarter, we expect will have been generated post supply. And as we look at 2022, I guess the way to look at it is we've had four quarters of revenue in three quarters in 2021, a rare dynamic given the supply disruption. And the best way that we think to look at growth in '22 is on a full year basis, so look at it year-over-year. And as we look at consensus estimates of mid-30% growth, we think that's a pretty reasonable view in context of that dynamic.

Looking at the chronic population, we see that now increasing to low double digits as a percent of overall patients. So as I mentioned in my remarks, we have 50 patients of data across a number of published investigator-initiated studies. And our sales force has begun with case studies and presenting that data throughout the last several weeks. So we expect to continue to drive uptake in the chronic patient population.

Tina Ventura -- Senior Vice President, Investor Relations

Great. Thanks, Chris. Anthony, next question please?

Operator

And your next question comes from the line of Jason Gerberry from BoA. Your line is now open.

Jason Gerberry -- Bank of America -- Analyst

Hi, guys. Thanks very much for taking my question. Just two for me. Tim, in the past, you guys have talked about some doctors who are low prescribers for TEPEZZA might prescribe something like 1 or 2 TEPEZZA scripts. Curious, your commentary earlier, where are these low prescribers where you've gotten into? Have you had success pushing the low prescribers to becoming more mid- to higher decile type of prescriber? And then just on the MIRROR trial outcome, I realize that we'll get more detailed data at a future medical meeting, but just can you comment directionally what we saw with the infusion reaction profile if that looks similar to what was seen in the investigator trials and was an improvement relative to monotherapy? Thanks.

Tim Walbert -- Chairman, President & Chief Executive Officer

So first on the MIRROR, we expect to publish those results. And everything, at least that we've seen to date, is fully in line with expectations. And as we publish that data, we'll share more and more specific details. So looking then toward TEPEZZA, we continue to make progress across the prescriber base. The first phase of launch is always getting to those prescribers who are regularly seeing those patients, interacting with those patients like oculoplastic surgeons, neuro-ophthalmic surgeons and strabismus specialists. And as you move through the launch, it's expanding that to ophthalmologists and endocrinologists and overlaying that with our direct-to-consumer campaigns. So all that continues to progress, and that's evidenced in the results we saw in the quarter.

Tina Ventura -- Senior Vice President, Investor Relations

Great. Thanks, Jason. Anthony, next question please.

Operator

And your next question comes from the line of David Amsellem from Piper Sandler. Your line is now open.

David Amsellem -- Piper Sandler -- Analyst

Thanks. So, one on KRYSTEXXA, one on UPLIZNA. On KRYSTEXXA, so is it your expectation that you will be reaching a significant audience of physicians who are new to the product or who are on the fence about using it now that you have the MIRROR data in hand? Just talk about how you think about the expansion of the physician audience.

And on UPLIZNA, can you talk about what's driving new starts? Is it switching from rituximab or switching away from older immunosuppressants or de novo patients or some combination thereof? And in your conversations with KOLs and practitioners in general, where do you ultimately think the bulk of your business is going to be coming from at least in the near term UPLIZNA? Thanks.

Tim Walbert -- Chairman, President & Chief Executive Officer

Sure. With KRYSTEXXA, that's a really good point. When we look at the approach with immunomodulation, that has provided two real opportunities. One is to go back to those physicians who didn't have a great experience with KRYSTEXXA as monotherapy and went away from the medicine many years ago. So that certainly has been an opportunity to go back and give those physicians a reason to believe that they may see different results with KRYSTEXXA plus methotrexate as evidenced in the MIRROR trial.

But also, it's evidence when you have results that are 30-plus points better. So 70-plus percent response rates, like we've seen in MIRROR and replicated across the RECIPE trial with mycophenolate and the other studies that have been -- represented similar response rates. Getting those de novo patients to physicians who haven't had a lot of experience, it's a much different approach, especially as you see infusion reactions and a number of the other issues that were faced early in the launch 11 years ago aren't issues today. So I think we expect to see growth in those new physicians, new patients, but also continue to go back to those physicians who didn't have a great initial experience. And in culmination, that's what drove that 46% year-over-year growth we saw in the third quarter and us raising our guidance for the rest of the year.

Relative to UPLIZNA, we see about half of those patients currently on rituximab. That's the base of patients with NMOSD. As we look at our new sales force that's out there, we're continuing to see and we've generated data that we talked about last quarter being presented on patients who switched from rituximab. I would say we see the majority of patients switching from rituximab, but also de novo patients coming on to the medicine. So I still think commensurate with how rituximab is used in the market, it's a little over half the market, and we're seeing that be the similar conversion rate to UPLIZNA.

And as we ramp- p our commercial effort this quarter, we expect to be able to really start making a difference. We've got 4-year data published. Liz also talked about impressive data in the black population. So we think all of that together with our expanded commercial effort positions us really well.

Tina Ventura -- Senior Vice President, Investor Relations

Great. Thanks, David. Anthony, next question, please.

Operator

Your next question is coming from the line of Annabel Samimy from Stifel. Your line is now open.

Annabel Samimy -- Stifel, Nicolaus & Company, Inc. -- Analyst

Hi. Thanks for taking my questions. I just want to get a little granular on both of those for a minute. So maybe you can talk about whether do you feel that the market dynamics for UPLIZNA are meaningfully different than in your other franchises? And I guess what gets you comfortable that you can repeat the same successes that you had, say, in KRYSTEXXA and TEPEZZA given that it's a market that does have other therapies? And I guess what does that mean for other indications like MG that does have a number of competitive programs?

And then on KRYSTEXXA, again, so the 45% patients on immunomodulation, are those physicians that aren't using immunonmodulation, is there some other rate-limiting factor for those specific patients because it seems like there is a pretty decent amount of data already, not just with methotrexate, but with other immunomodulators that could have gotten them over that hump. So maybe you can just talk about what other rate limiting factors there might be in getting patients to co-prescribe. Thanks.

Tim Walbert -- Chairman, President & Chief Executive Officer

Sure. Annabel, I think it really comes down to the whole premise of doing the MIRROR placebo-controlled trial. And that is for submitting that, getting that included within our label and giving us the ability to actively promote KRYSTEXXA plus immunomodulation. Right now, we are getting the word out via congresses, medical education and publication of the various studies that have been out there. And the MIRROR data hopefully will be published as we get into next year. So it's really about ability to drive that uptake versus it naturally being learned in scientific communication. And as we get that data out and hopefully approved toward the end of next year, that will put us in a position to actively drive patients onto the immunomodulation strategy that is supported now by the MIRROR results.

Looking at UPLIZNA, I kind of look at it in a very similar way is that with TEPEZZA, with KRYSTEXXA, we are competing with standard of care. And standard of care in the case of TEPEZZA is surgery that was seen as the best option at the time until a new advance was brought forward. And we see UPLIZNA in a very similar way. Rituximab was the best agent available at the time with not much else available in a population where flares and patients that can get sight-threatening complications just don't have the option. So we see UPLIZNA as competing with standard of care. In this case, it's rituximab. And we'll approach it just as we have with our other medicines, help them understand the long-term data, the differentiated benefits of a humanized monoclonal antibody, CD19 benefits versus CD20 and how we see mechanistically that works better within NMOSD. So we think we've got the data and an improvement from standard of care. It just happens to be a medicine in this case versus surgery or really not treating patients in the case of KRYSTEXXA.

Tina Ventura -- Senior Vice President, Investor Relations

Thanks, Annabel. Anthony, next question, please.

Operator

And your next question comes from the line of Ken Cacciatore from Cowen & Company. Your line is now open.

Ken Cacciatore -- Cowen and Company -- Analyst

Hi. Good morning, team. Congratulations on all the progress. Just wondering, Tim, now you've had TEPEZZA, obviously, in the market for a sufficient amount of time to understand any kind of changing patient dynamics, so just wondering as you continue to push DTC, are you moving at all into more mild patients? I know mild is still very bad for this patient population. But kind of anything generally surprising to you, obviously, you've outperformed incredibly well, and I know you're driving into chronic a bit more. So maybe any context around differences from launch to what you're seeing now? And then, Paul, congratulations. I'll ask you a question, maybe Tim will chime in as well. Obviously, there's going to be potentially a lot of bottom line leverage as we go into next year as we start annualizing off of these really nice TEPEZZA and KRYSTEXXA and UPLIZNA trends. Can you speak to how we should be thinking about the potential leverage as we get below the top line into next year? Thanks so much.

Tim Walbert -- Chairman, President & Chief Executive Officer

Sure. Thanks a lot, Ken. When we look at the TEPEZZA dynamics and how they fall, I'd say the biggest evolution has been the use in chronic patients. We're not seeing them go back to mild patients. We see the 15,000 to 20,000 moderate to severe patients coming into the market and that 70,000 population of chronic patients to be the appropriate use of TEPEZZA. We don't have data and nor do we think TEPEZZA is a good choice in mild patients as that once they get to progressing and getting pain and diplopia and double vision, that's when we think TEPEZZA becomes the right treatment for those patients. So we're solely focused on the moderate to severe population of acute patients and driving that uptake in the chronic population. So that's the evolution we've seen. And Paul, do you want to speak to leverage?

Paul W. Hoelscher -- Executive Vice President, Chief Financial Officer

Yes. So we're not going to give specific guidance on '22 until after the fourth quarter on our call in March. But as we've said in the past, over the coming years we do expect margin expansion. And we do think that the EBITDA margin will expand as we get leverage on the SG&A spend, that should more than offset the significant increase that we have, that we're making in our investment in R&D as well as our investment in our international expansion ahead of really generating significant revenue there.

Tina Ventura -- Senior Vice President, Investor Relations

Thanks, Paul. Thanks Paul. Next question please, Anthony?

Operator

And your next question comes from the line of Yatin Suneja from Guggenheim. Your line is now open.

Yatin Suneja -- Guggenheim Securities -- Analyst

Hi guys, thank you for taking my question and congrats on very good execution. Question on KRYSTEXXA. Could you give a little bit color on the contribution you're seeing from nephrology versus rheumatology segment? And then any thoughts -- obviously, you are in the 40% range now with the combo use, what the peak might be and over what time period? Thank you.

Tim Walbert -- Chairman, President & Chief Executive Officer

Thanks, Yatin. So when we look at the KRYSTEXXA, as I mentioned, looking at through three quarters, we had 30% more than all the prescribers in 2020 in nephrology versus exceeding the total number for rheumatology, three quarters versus 2020. So nephrology, albeit off a small base, is growing even faster than rheumatology. As an overall contribution, again, we can't get to that data because a lot of these patients from nephrology are actually infused in similar places as rheumatology patients. But we're seeing strong growth in both of those segments, but off a smaller base, prescribers increasing more rapidly on the nephrology side. With immunomodulation, as we said, it is greater than 45%. We don't see 100% as a reasonable. But getting to that 70% to 80% range is, we think, pretty reasonable. And the ability to get there will be accelerated with getting approval of inclusion of this data in the label for KRYSTEXXA, which we expect at year-end next year.

Tina Ventura -- Senior Vice President, Investor Relations

Great. Thanks, Yatin. Next question please, Anthony?

Operator

And your next question comes from the line of Akash Tewari from Jefferies. Your line is now open.

Akash Tewari -- Jefferies -- Analyst

Thanks so much. Given the amount of case study reports you've seen and your prior assumptions for your TEPEZZA chronic study, is your base case that the chronic TED data will look very similar to the acute population on proptosis response? And additionally, what was the dollar amount of supply disruptive patient restarts that contributed to Q3 sales? And what was the quarter-over-quarter unprecedented[Phonetic] growth for TEPEZZA ex these patient restarts? Thank you.

Tim Walbert -- Chairman, President & Chief Executive Officer

So on specific, we're not getting into specific dollar contribution in the third quarter. The disruptive patients continue to sequence through. And we expect the vast majority of patients in the fourth quarter to be those generated post to the supply disruption. With the chronic readout and expectations around it, we look at it as a similar design in a population that TEPEZZA is being used in today and would expect results in a similar range.

Tina Ventura -- Senior Vice President, Investor Relations

Thanks, Akash. Next question please, Anthony.

Operator

And your next question is from the line of Gary Nachman from BMO Capital Markets. Your line is now open.

Gary Nachman -- BMO Capital Markets -- Analyst

Hi, guys. Good morning. First on TEPEZZA, just talk a bit more about your DTC efforts and what sort of impact you've been seeing from that? Finding these patients and improving diagnosis, how much you might step that up going into next year, especially as you want to expand more into chronic? And then in terms of your ex US efforts, I think Paul just touched on it before. So for TEPEZZA, outside of Japan, where else will you look outside the US And maybe also just talk about the time line for doing the study in Japan when it could reach the market. And then for UPLIZNA, just talk about what you're doing in the EU to prepare for the launch there, what the status is? Thank you.

Tim Walbert -- Chairman, President & Chief Executive Officer

Sure. Thanks, Gary. With UPLIZNA in Europe, we've hired our leadership team, one across on a pan-European basis as well as key reimbursement and also several of the commercial leaders that we expect to be in place to launch beginning in Germany post approval, which is still expected in the first quarter of next year. So we are continuing to ramp up our efforts there, also looking to prepare and ramp-up efforts in certain countries in Latin America.

With TEPEZZA, we continue to prepare our study and working with the Japanese authorities and look to finalize that and get a clinical program beginning enrollment over the next few quarters, which will then set in time line a few years out to get those results and get through the regulatory process. When it looks to DTC, we have ramped up those efforts substantially over the second half of 2021. And the real goal there has been to get patients, whether that is in one of our three adds[Phonetic] one is targeted grave patients to educate them that you may get thyroid eye disease, and that's more just to educate patients. If you look at our thyroid eye disease, non-branded campaign and the tepezza.com or TEPEZZA DTC campaign, both of those are geared toward helping patients get to our website and look to find specialists who treat thyroid eye disease.

So educate in the symptoms. And we've seen a significant increase in the number of patients going to the website, looking for a specialist finder. And we hear stories from our field and other areas of significant increase in questions being asked as a result of these commercials. So the ROI and all the different metrics that we look at are performing exceedingly well. And we continue to expect to use that as a resource moving into next year.

Tina Ventura -- Senior Vice President, Investor Relations

Thanks, Gary. Anthony, next question, please?

Operator

And your next question comes from the line of Mike Ulz from Morgan Stanley. Your line is now open.

Michael Ulz -- Morgan Stanley -- Analyst

Hey, guys. Thanks for taking the question. Just two for me. Maybe a follow-up on KRYSTEXXA. And Tim, maybe you could just talk about some of the trends that you're seeing more recently in patient enrollment forms compared to what you saw earlier in the year?

And then just on KRYSTEXXA in terms of the MIRROR data and what impact that could have on utilization? Is the way to think about it that presentation of the data early next year to drive some of that increased utilization? Or is it really more the label expansion that allows you to promote directly? Thanks.

Tim Walbert -- Chairman, President & Chief Executive Officer

Sure. Relative to PEF growth, we've been really impressed with the growth we saw in the third quarter, especially in the context of the Delta variant and the impact it had on the markets and the fact that we're able to still grow through that, and we continue to expect to see strong PEF growth throughout the fourth quarter and into next year. With the MIRROR data, as I said, it's greater than 45%. We plan on submitting that data at various congresses, which would probably be presented midyear based on our early estimates. And I think that will continue to raise awareness and will have an impact. But optimal ability for us to proactively promote will be once it's included in the label, which is expected by year-end next year.

Tina Ventura -- Senior Vice President, Investor Relations

Thanks, Mike. And Anthony, we've got time for one more question, please.

Operator

Okay. And our last question comes from the line of Navann Ty from Citi. Your line is now open.

Navann Ty -- Citigroup -- Analyst

Hi. Good morning. I have two questions, please. The first one is assuming we have positive data from the chronic TED trial, can you discuss your expectations around payer acceptance, dosing and compliance to the drug? And my second one, if I may ask, to comment on your retirement goal, was it driven by personal reason or to pursue another opportunity? Thank you.

Tim Walbert -- Chairman, President & Chief Executive Officer

Paul, do you want to comment first?

Paul W. Hoelscher -- Executive Vice President, Chief Financial Officer

Sure. It's strictly personal reasons. As we noted, I'm going to stay on as CFO for another 6 months and then stay involved as an advisor for the company another year after that. And it's really just a point in my life where I prefer to step back from day-to-day full time employment.

Tim Walbert -- Chairman, President & Chief Executive Officer

Thanks, Paul. Relative to the question around chronic data and when we expect to get that data in the second half of the year, we think the key benefit there will be, certainly, to help from a reimbursement standpoint and less about access and more about speeding the time to patients getting infused with their medicine. We don't think it will have an impact on dosing or compliance. We're seeing similar dosing and compliance. Everyone's getting the six -- full eight treatments over 6 months. Compliance is well north of 90% in both acute and chronic patients. So we think the main impact will be to help to accelerate reimbursement.

Tina Ventura -- Senior Vice President, Investor Relations

Great. Thanks, Navann. And Anthony, thank you. That concludes our call this morning. A replay of this call and webcast will be available in approximately 2 hours. Thanks for joining us.

Operator

[Operators Closing Remarks]

Duration: 56 minutes

Call participants:

Tina Ventura -- Senior Vice President, Investor Relations

Tim Walbert -- Chairman, President & Chief Executive Officer

Elizabeth H.Z. Thompson -- Executive Vice President, Research & Development

Paul W. Hoelscher -- Executive Vice President, Chief Financial Officer

Chris Schott -- JPMorgan -- Analyst

Jason Gerberry -- Bank of America -- Analyst

David Amsellem -- Piper Sandler -- Analyst

Annabel Samimy -- Stifel, Nicolaus & Company, Inc. -- Analyst

Ken Cacciatore -- Cowen and Company -- Analyst

Yatin Suneja -- Guggenheim Securities -- Analyst

Akash Tewari -- Jefferies -- Analyst

Gary Nachman -- BMO Capital Markets -- Analyst

Michael Ulz -- Morgan Stanley -- Analyst

Navann Ty -- Citigroup -- Analyst

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