Radius Health (RDUS) Q1 2022 Earnings Call Transcript

Radius Health (RDUS 0.06%)
Q1 2022 Earnings Call
May 05, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Radius Health Inc. first quarter 2022 earnings conference call. [Operator instructions] I would now like to hand the conference over to Ethan Holdaway, head of investor relations.

Sir, you may begin the conference.

Ethan Holdaway -- Head of Investor Relations

Thank you. Hello, everyone, and thanks for joining us today. A press release and presentation that we'll use to guide the discussion can be found in the Investor Relations section of our website. A replay will also be available on our website following the call.

Before we begin, I'd like to remind everyone of our safe harbor statement on Page 2. This presentation includes forward-looking looking statements and non-GAAP financial measures. You can find the reconciliation of GAAP to non-GAAP at the end of the presentation. Our most recently filed 10-K and subsequent filings identify factors that could cause our actual results to differ materially from those indicated by the forward-looking statements.

Any forward-looking statements represent our views as of today only. Kelly Martin, President and CEO, will kick off the call with his opening comments. Mark Conley, chief financial officer, will then provide a financial update. Bob Valentine, head of commercial business intelligence, will follow with a commercial update.

Chhaya Shah, SVP of abaloparatide and elacestrant, will provide an update on abaloparatide and on elacestrant progress. And Liz Messersmith, SVP of neuroscience group, will finish up with an update on RAD011. We will then open up the call for questions. I'd now like to turn it over to Kelly.

Kelly Martin -- President and Chief Executive Officer

Thank you, Ethan. We appreciate everyone taking time to spend a few moments with us this morning. We realize there's a tremendous amount of things going on in the market broadly with individual companies. For the second earnings in a row, I have a rather expansive quote in the announcement, which if you haven't, I'd point you to.

It goes through a fair amount of topics that we believe are important to emphasize to the marketplace. After my opening comments, I'll turn the call to Mark, our chief financial officer. And then after his comments, he'll turn it to the rest of the team. We've all worked very hard on this earnings call for preparation for this earnings call.

And our goal is to make sure that you have an up-to-the-date assessment and information with regard to public information that is important to share. My comments will be focused, for the next few minutes, on the broad framework of the rest of the meeting. First and foremost, we continue to manage the company on an integrated basis. We listed talent there.

The market is super-hot for talent. Our retention of talent is a very important topic and our specific recruitment of talent continues to be something that we all have to work on and focus on as the talent market in biotech is super-hot and particularly for certain functions. You'll hear from Mark on the balance sheet, you'll hear from the team on the assets. But from a financial and balance sheet point of view, the interrelationship between timelines, spend and revenue is something that we manage and monitor on a daily, weekly, and monthly basis.

Tymlos, our core revenue-producing asset; our main focus is rather simple. How do we maximize the cash flow generation in the U.S. for the SC product? We have talked in the past about ex U.S. extending the footprint.

You'll hear from Chhaya and Bob on that. And very importantly, preparing for the U.S. male launch, male market from a denominator point of view is anywhere from 10% to 25% more patients. The information that we have gleaned from the marketplace from KOLs and from investigators and clinicians is that the need on the male side of the equation, if anything, is more severe than female.

Our challenge commercially in marketing is how do you get to them in an efficient manner, and you'll hear from Bob on that to some degree later. Elacestrant, and more importantly the SERD space is certainly one that continues to provide a plethora of information of data of updates. Since our last discussion, there was another failure in the space, in the SERD space. Now that both Sanofi and Roche have, for whatever reasons, failed to hit their prespecified endpoints, we await with our partner, Menarini, on the output from both Lilly and AstraZeneca over the next six months.

But in the meantime, we remain resolutely focused on moving Elacestrant forward. You'll hear from Chhaya on that. We work very closely with Menarini on all aspects of this asset. The market opportunity as we make progress against our regulatory and go-to-market plans and others have not had success.

Obviously, the market opportunity potentially is expanding before us, and it's something that we're very focused on. Lastly around elacestrant. Our internal values with elacestrant from a risk-adjusted basis, obviously, risk is going in our model down, probability going up. And if you look at the totality of potential cash flows at different revenue, I would just say it's a very interesting asset for us even with our financial participation.

RAD011, you'll hear from Liz a bit later in a very disciplined manner. We expect to continue to move this asset forward. It's an asset that we shared for 2.5 hours at R&D meeting in early April -- April 5th to be specific. We had lots of back and forth after that meeting with various people.

I think the science, the technology, and the patient need and opportunity there continues to be one that we view as attractive, and you'll hear from Liz on that later. Last but not least, and tying back to elacestrant, we had announced previously that all of the capital from elacestrant, however, we may receive it over time, would be returned to stakeholders, both creditors, and shareholders. And in so doing, we would certainly be able to utilize more strategically the NOLs that have built up in the company over the years. So that's at a high level.

Things that we remain focused on, again, I'd point you back to my quote, rather unusual for me to even have a quote, but certainly, one that's reasonably long, very specifically mentions a bunch of different things. So with that, I'm going to turn it over to our chief financial officer, Mark Conley, and Mark will take you through the financial aspects of the company. And then toward the end of the call, we certainly look forward to any questions you might have. Mark?

Mark Conley -- Chief Financial Officer

Great. Thank you, Kelly. I'll take us through the Q1 financial highlights. For fiscal Q1 2022, we had net product revenue of $43 million, a decrease of 5.2% versus Q1 2021.

This drop was driven primarily by reduced volume shipments resulting from the high distributor inventory build levels achieved at the end of 2021 in anticipation of our price increase. There were also expected payer dynamics that partially contributed to this reduction. The drop in license revenue versus Q1 2021 represents the timing of a $10 million regulatory milestone achieved last year in Japan, pursuant to our license and development agreement for abaloparatide with Teijin Limited. We continue to manage our operating expenses.

R&D costs declined by $9 million or 28% versus Q1 2021. Reduced cost for the abaloparatide TD and SC programs drove this decrease as did net program cost for elacestrant. These costs were partially offset by investment growth in the RAD011 program. SG&A costs declined by $4 million or 12% versus Q1 2021.

Reductions in professional support costs and net headcount drove this decline. Our resulting net loss was $18 million, a $3 million increase over our reported net loss in Q1 2021. For reference, when adjusting for the Japan regulatory milestone, we realized a $7 million improvement. On a non-GAAP basis, our adjusted EBITDA was a negative $9 million for the quarter versus negative $5 million in Q1 2021.

The driver of this difference is the timing of the $10 million Japan regulatory milestone. A reconciliation from GAAP net loss to adjusted EBITDA is included in the appendix. We ended Q1 with $72 million in cash and cash equivalents on the balance sheet. This represented a net cash burn for Q1 '22 of about $40 million.

In addition to the timing of our net working capital fluctuation, a majority of which was driven by reduced AR inflows, temporarily impacted by the inventory destocking activities, we realized some significant nonrecurring expenditures consisting of year-end bonus and severance-related payments, insurance renewals, and inventory tech transfer costs for our neuro business. Because of these anomalies and our projected growth, we expect our cash on the balance sheet to increase as the year progresses. A quick snapshot of our capital structure. As a reminder, our current term loan can be refinanced without prepayment penalties beginning in March of 2022.

As this trended chart illustrates, despite our decline in net Tymlos product revenue for the current quarter, we continue to make improvements within our commercial team that have led to increased productivity, most recently by 32% versus Q1 2021. And with that, I'll turn it over to Bob for the commercial update.

Bob Valentine -- Head of Business Intelligence and Digital

Thank you, Mark. Good morning, everyone. So I'll provide an update on the Tymlos commercial progress, and we can turn to Slide 12. So to comment qualitatively on the first-quarter performance, we observed seasonal patient demand dynamics that were generally expected for Q1.

The turn of the calendar year, we tend to see, and we indeed saw for Q1 of this year Tymlos patients transitioning off therapy at a higher rate than what we typically see across the rest of the year. We saw that in January and February, and we observed a rebound in March. Compared to the first quarter of '21, the difference in net revenue for the first quarter of this year was primarily driven by, first, a positive contribution from increasing active patients. This was offset by various factors, and we observed increased seasonality for the first quarter, as Mark alluded to.

Those factors include accelerated inventory destocking against the inventory stocking we saw in the fourth quarter as the general trend here was anticipated to include increased payer rebates that took effect in 2022, which offset the increase in WAC. And finally, patient support, such as co-pay assistance that more acutely impacts the first half of the year versus the back half of the year. If we go to the next page, we can see the performance more quantitatively. We outlined last quarter how we are monitoring and tracking the business with a focus on the entirety of the patient journey and sales process.

So for this first quarter, the Tymlos business enrolled almost 6,800 patients and added about 4,000 new patients. And we had an average active patient number of almost 14,800 monthly. The average active patients were up 4% for the first quarter year over year, which is a key indicator of growing patient demand. And finally, the first-quarter net revenue came in at $43 million.

If we go to the next page. We remain on a trajectory to reach the target of $232 million in net revenue for the year with, again, approximately 42% of that expected in the first half of the year. Our areas of focus for the remainder of this year include at the top of the funnel, driving new patient enrollments and getting the most appropriate new patient enrollments by leveraging positive label enhancements from the box warning removal last year, as well as mechanism of action data. And in concert with that, is our refocused sales strategy.

And finally, we continue to streamline the patient journey from enrollment to completion on therapy by increasing conversion to and duration on therapy. Not specific to the '22 performance, we are in the midst of preparing for an expected approval in osteoporosis in men, and that is ongoing. So with that, I will turn it over to Chhaya to discuss development for abaloparatide.

Chhaya Shah -- Senior Vice President, Abaloparatide and Elacestrant

Great. Thanks, Bob, and hello, everyone. I'll walk us through clinical development, as well as the progress on the pipeline programs. First, the male indication, we submitted the sNDA in Q1 of this year, and this is a 10-month review cycle with the FDA.

We are also presenting full data at AACE conference this month. This will be an oral presentation. Our expectations are to launch with male indication in early Q1 2023. For our pipeline programs, the depot program goal is to provide a longer exposure of abalo, such that it enables and have less frequent dosing than once per day dose.

So we have successfully progressed this program to identify candidates and formulations, which show longer-lasting exposure to abalo. With this data, we're going to the next step which is the preclinical testing. As far as the SIK inhibitor program, we announced in March an exclusive extension of a research collaboration with Mass General. And the focus of this program is development of novel oral Salt-Induced Kinase inhibitor in musculoskeletal disease.

This following demonstration of anabolic activity of candidate of oral SIK inhibitor. So again, development progress is going well pipeline progress going well as indicated before. Now switching over to geographic expansion. We submitted our dossier in Europe at the EMA in November of last year.

We're progressing through the cycle of day 120 questions and responses, and we're on track. We're expecting regulatory decision for our application in the second half of this year. For Japan, we anticipate a 14-day cartridge approved followed by launch with our partner, Teijin. As a reminder, this is the largest anabolic country in the world.

So that's a good thing. For Canada in partnership with Paladin Labs, we submitted an application in December of last year and expect regulatory decisions against the second half of this year. We'll add additional geographic areas in the coming months, and we'll continue to announce what those are. And then based on upon approval of all the regulatory authorities that we explained, we're expecting up to four ex U.S.

launches in 2023. A good expansion of our great molecule. I'll now switch over to elacestrant and discuss where we are here. So elacestrant is the first and currently only investigational oral SERD to show top-line results that are currently positive for both all-comers population, as well as ESR1-mutated population.

This is for ER+HER2-negative breast cancer. So as Kelly mentioned, we recently saw Sanofi and Roche announce that they did not have a positive trial outcome for their primary endpoint as it relates to progression-free survival. The EMERALD trial design included ESR1 mutant population as the primary endpoint for analysis versus what Sanofi and Roche trial, which were only evaluating the all-comer population in their primary endpoint. The other point is that EMERALD trial mandated that all patients received CDK4/6 therapy versus Sanofi trial, capping prior to using CDK4/6 at 80%.

In Roche trial, it was not mandatory. What that means is for EMERALD, we were evaluating advanced patient population that currently has no effective treatment options. So elacestrant really demonstrated in this patient population is significant clinical meaningful impact. We do believe that a further evaluation of elacestrant in early treatment paradigm will continue to demonstrate clinical benefit of this drug in advanced breast cancer patients.

More to come on this topic as Menarini continues to create life cycle plans around assumption. And I also have a slide later on that will speak a little bit more about the life cycle plans for this year. So to recap where we are on the development progress, again, great top-line results, and where we are is we've successfully set up our commercial supply chain such that we can launch and accommodate the launch of commercial supply based on, of course, approval of U.S. and Europe.

So we've had terrific regulatory meetings. We've had successful pre-NDA meetings with the FDA. It was very collaborative and it was very meaningful to us. We got some great feedback, and it was very positive.

We also had successful co-rapporteur and rapporteur meetings in early -- just a few months ago with EMA, and those were also very positive. So we are on track to submit this quarter the U.S. NDA submission to the FDA and anticipate the Europe submission that will follow shortly. So just to -- I mentioned earlier, the life cycle activity.

And I just want to look at forward-looking here from a perspective. So what we're happy to share here is the eLEcTRA trial is active, which is evaluating elacestrant in combination with abemaciclib for men and women with brain metastasis from breast cancer. The plan here is to have our first patient first visit in Q1 of this year. This is great progress that we've made.

Of course, Menarini is responsible for this, and they've made some amazing progress to get this trial started and start enrolling patients very shortly. There are also plans for potential other combination therapies with elacestrant, as well as evaluating an earlier treatment paradigm using elacestrant. Again, more to come as the trials are being evaluated by Menarini. So thanks for listening to the abaloparatide and elacestrant business update, and I'll now hand it over to Liz to cover neuroscience.

Liz Messersmith -- Senior Vice President, Neuroscience

Thank you, Chhaya. As highlighted in the R&D Day webcast on April 5, we are working to advance RAD011 asset to unlock the value of synthetic cannabidiol by initiating two lead pivotal programs this year. The programs to be conducted are viewed as initial indications that address specific primary endpoints, seizure reduction, and hyperphagia reduction. Success in either program has the potential to support advancement in other related indications with these symptomology.

We are including secondary endpoints in these programs to further assess opportunities which could be explored in adjacent neuropsychiatric and neurodevelopmental indications. The R&D webcast on April 5 is available on the Radius website for anyone wanting to review the supporting rationale for evaluating RAD011 in these programs. A summary of the program progress to date begins with Angelman syndrome. The pivotal program in Angelman syndrome called Scout 19 is planning to launch later this year.

The SCOUT 19 study is a Phase 3 study designed as a single pivotal registrational trial with the goal of treating seizures in individuals ages 18 months to 55 years with Angelman syndrome. It is a global study design to enroll approximately 225 patients across 40 global sites. Over the past quarter, the team has been working to align protocol feedback from the U.S. and EU regulatory agencies to provide this protocol with the greatest opportunity to address and align these perspectives within the study design.

We are continuing to progress and refine the study design, complete the regulatory submissions and progress on site selection for Scout 19 study has all occurred this last quarter. We remain on target to initiate patient activity in the second half of 2022. The next program to discuss is Prader-Willi program. The Scout 15 Pradelli study will evaluate RAD011 in a Phase 2/3 seamless design as a single pivotal registrational trial with the goal of treating hyperphagia.

We intend to conduct the study in approximately 35 sites across the globe to enroll about 200 patients between the ages of eight and 65 years. This quarter, we have advanced beyond the multiple discussions with FDA, key opinion leaders, and advocacy organizations, as well as progressed study start-up activities, to transition the study into the execution phase. We are pleased to confirm that the Scout 15 study is open for recruitment in the U.S. and that the first patient has been screened.

This reflects a shift in focus to asset execution and increased attention to the enrollment goal. I want to highlight that opening the study in the month of May coincides with Prader-Willi Awareness Month. The Prader-Willi community is searching for a treatment to address hyperphagia. We are pleased to have the Scout 15 Prader-Willi Phase 2/3 study open for recruitment and accessible to the community.

This Scout 15 program represents the most advanced clinical research program available for individuals with Prada-Willi, their caregivers, and physicians committed to serving these patients. The goal of the Scout 15 study is to evaluate the impact of RAD011 on controlling hyperphagia, a condition in which there are 0 treatments. We will continue to provide updates on the study progress as we work toward fulfilling enrollment with the goal of study completion in 2024. We are also working on a program design for infantile spasm.

Infantile spasm can be characterized as seizures with mild twitching to violent jerking beginning at an early age three months to eight months and about 1/3 of patients progress to refractory epilepsy and developmental delays later in life. The thought is that the progression to epilepsy is driven in part due to the lack of early, safe and effective treatments. We are preparing for regulatory interactions to discuss the Scout 20 infantile spasm study design. The proposed design will be a Phase 2 proof-of-concept study in which RAD011 is positioned as adjunctive therapy with standard of care in newly diagnosed patients.

The goal would be to enroll approximately 100 patients across 30 global sites with patient activity beginning early 2023. This proposed design will be discussed with regulators this year. Also mentioned in the press release is that we are the first to receive orphan drug designation for Dup15q syndrome. Dup15q syndrome is caused by a duplication of Q11.2 to Q13.1 portion of pramasone 15.

Pramasone 15 is also involved in Angelman syndrome and Prader-Willi syndrome. Seizures in Dup15q are key symptoms as 50% to 90% of patients will develop some form of seizures. Speech and language development is particularly affected with universal delays ranging from moderate to severe. Manifestations of autism spectrum disorder, particularly difficulties with social interaction may increase from early to late childhood.

Our interest in Dup15q syndrome is based on the underlying similarity in chromosome abnormality and similarity in symptomology, seizures, and behavior. We have in hand a study design for Dup15q that we can progress forward if and when appropriate. Kelly, this concludes the updates on the RAD011 asset. I'll turn it back to you.

Kelly Martin -- President and Chief Executive Officer

Thank you, Liz, and thank you to Bob and Chhaya, and Mark for your comments. We packed a lot into Q1 announcement. That follows our February 23 full year '21 assessment and an announcement on dialogue. Since that time, we've had lots of great discussions with various folks in the marketplace.

We continue to look forward to doing that. And resolutely, as I said in my quote, we're very focused on controlling what we can control, which is maximizing the revenue Tymlos U.S., expanding Tymlos ex U.S. pretty aggressively, and we continue to look forward to updating the market on that progress. For our last [Inaudible] external to us and Menarini, that marketplace continues to evolve with some of the leading companies in the globe.

So monitoring that and then focusing on the positioning of elacestrant potentially in the marketplace in both U.S. and Europe is something that all of us are very focused on. And last, but certainly not least, RAD, very interesting opportunity given the lack of treatment options for these patients, given the lack of competition, frankly, in the very late stage -- and given the interest from various quarters in both this asset and importantly, any behavioral abnormality disease of which there are many. So we look forward to continuing to provide that progress to all of you on the various pieces.

And with that, operator, we will be happy to take questions. So if you can open up the line for Q&A, please do.

Questions & Answers:

Operator

Thank you, Kelly. [Operator instructions] Your first question comes from the line of Corinne Jenkins with Goldman Sachs. Your line is open.

Corinne Jenkins -- Goldman Sachs -- Analyst

I'm curious if you think about the male osteoporosis opportunity. To what extent is there an overlap between the target prescriber base versus the people you're already targeting for females? And to what extent do you need to shift the sale structure to accommodate that launch?

Bob Valentine -- Head of Business Intelligence and Digital

Yeah. Hi, Corinne. This is Bob. We anticipate there's a very significant overlap in the prescriber base.

It tends to be that the specialties that prescribe tend to be sex agnostic to a certain extent. Most of our Tymlos business comes from endocrinologists and rheumatologists. Now there is a bit of influence through the OB-GYN arena for the PMO patient, but it's a very small portion of the business. So for the vast majority of the business we anticipate overlap.

That's good news from an infrastructure perspective because we anticipate not having to significantly change the sale structure to accommodate detailing for osteoporosis and med.

Corinne Jenkins -- Goldman Sachs -- Analyst

That's helpful. And then you've obviously done a lot of work to streamline operations over the past year or so. I'm curious to what extent that project is kind of through versus where you still see potential for additional operating efficiency.

Kelly Martin -- President and Chief Executive Officer

Yeah, Corinne, it's been an ongoing process. We tried to be pretty thoughtful also on kind of repositioning or reengineering parts of the business. I mean I kind of view that as never-ending. There's always pieces of the puzzle that we either need to add some resources in certain things as you look forward or we don't need as many resources and certain things as we look forward.

So you should not anticipate significant drops in infrastructure costs or headcount or anything else like that. But I do think that we would continue to engineer certain functionalities. And the trend through the total headcount of the company is -- will continue to be slightly down as opposed to flatter up.

Corinne Jenkins -- Goldman Sachs -- Analyst

OK, great. Thank you.

Operator

Thank you. And our next question comes from the line of Annabel Samimy with Stifel. Your line is open.

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Hi. Thanks for taking my question. I guess my questions are a little bit bigger picture. So you have $72 million in cash, you are looking to be EBITDA breakeven this year.

I guess in light of a lot of the various programs you have going on for yourself, as well as partners, how should we think about sources of capital going into some of these development programs? Are you expecting any major milestones this year? And are the cost savings initiatives, I guess, specifically to Tymlos, are the, I guess, reductions in headcount and the increases in productivity sufficient to cover continued expansion of the product in what's still a relatively competitive market. So I guess it's more of a capital allocation question, how you're thinking about capital and where it's going to get you over the course of the next year to accomplish your clinical development goals. Thanks.

Kelly Martin -- President and Chief Executive Officer

Yeah. Thanks, Annabel. Look, I mean, that's a great question because it's sort of what we do. It's this integrated management of cash flow, any expenditure.

And then as Liz went through lots of programs with RAD, it's sort of the gating of that in concert with cash and cash flow. If we look at Tymlos Q2, early days is we're comfortable with the first-half target that we would need to hit to get to the full year. And then Q3 and Q4, historically, since the product has been in the market are always the biggest markets. So if you combine that with less infrastructure, the cash flow dynamics in the second half of the year would be rather different than the first half of the year.

That's number one. Number two, we have previously announced, there is a small milestone we get when we file elacestrant from Menarini, so that's good. And from a capital structure point of view, balance sheet point of view, we can -- as I referenced in my commentary, we continue to have a really good open dialogue with the creditors. Our credit securities trade rather strongly.

And so there's always opportunities on the balance sheet side to both reconstruct our current balance sheet and utilize that for cash should we want to. But absolutely, we have to be cautious. We don't have enough headroom to go full bore on RAD or anything else for that matter. As Bob referenced, I think the abalo infrastructure -- the Tymlos infrastructure we have is very leverageable.

We've taken that down rather significantly in the last 24 months. 80 to 85 salespeople is a real good number. The marketing and market intelligence piece, the reimbursement piece, the market access piece. I mean, it's a tight group, and I think for the market that we could add to it which is male is well leverageable.

But make no mistake about it, we manage that, and we talk about that, and we debate your good question every few weeks which is -- let's not get over our skis. Let's make sure our appetite is not bigger than our stomach. Let's make sure we're not breathing our own oxygen. Let's be disciplined around the balance sheet, the cash flow, the risk, and the time lines.

In the RAD space, all of these things are interesting. All of these things, I think, from a competitive framework point of view would be enormously valuable with progress to the company. But you have to get there in a disciplined manner and manage that cash. So we're comfortable with our ability to do that.

We're comfortable with our ability to make some changes or pause some things or accelerate some things as we move forward. Lastly, sorry, I'll stop talking, the elacestrant assets, I intimated and Chhaya reinforced. The value of that asset is, in our view, in our models, is going up not down. That gives us some underlying confidence, objective confidence, and comfort that there's multiple matters or ways in which that value can be realized.

And the timing of that is predominantly in our hands. It would behoove us and shareholders and creditors for us to continue to work with Menarini on the elacestrant positioning and activity. It would behoove us to wait until we file and to wait until we get the output from the regulators. But all of that, if you put it in time perspective, is in 12 months or less.

So it's a long answer to a good question. I hope I've covered the pieces, but we -- this is sort of part and parcel to how we think of running the business every day and every week.

Annabel Samimy -- Stifel Financial Corp. -- Analyst

If I could have a follow-up for a minute just on the elacestrant piece. So you just mentioned that there are multiple manners that value can be realized from this. So I guess it does sound like you could potentially have a larger market opportunity, given the competitive landscape there. And so have you thought about what peak sales could be relative to where you thought it was when you struck the deal? And are you suggesting that there's manners to renegotiate some terms or is it all baked into the original deal? I guess that's what I'm curious about.

Is there more ways to extract greater revenues or milestones out of it -or economics, let's just say.

Kelly Martin -- President and Chief Executive Officer

Yeah. So the second part of your question first. There's no renegotiation necessarily with Menarini on the deal. The deal was a deal.

But the first part of your question is, well, how big is the market? Well, that's our $64 million or $1 billion question. The market is very large. The question is where are you on the treatment paradigm, number one, who are you competing with, number two. Number three, what the regulator says as far as a possible approval and the all-important label and how that lines up with pricing and reimbursement.

So one could imagine that we spend an enormous amount of time on that topic and particularly when new information becomes available. So 2.5 weeks ago having the news from Roche changed our calculus. Again, it changed our calculus when the Sanofi data came out. And so we await other data, but you're exactly right.

I mean, the sensitivity to revenue for elacestrant is very significant, and the amplitude of the numbers are very significant. And if you do the full cash flow generation, given the IP of that asset, which is in the mid-230's, the cash flow opportunity is something that we spend a lot of time on. And obviously, as a value to the company relative to our current market cap, something that is very important for us to do our homework on and for us to share our thoughts on a framework level as we go forward. So yes, it's a very important asset for us, it's at no more risk to us.

It's something that we're very focused on, both tactically and strategically.

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Greg Harrison with Bank of America. Your line is open.

Mary Kate Davis -- Bank of America Merrill Lynch -- Analyst

Good morning. This is Mary Kate on for Greg. Thanks for taking our question. Perhaps in terms of drivers needed to maintain guidance of Tymlos sales, how much patient share are you anticipating to gain throughout the year to reach guidance? Thank you.

Bob Valentine -- Head of Business Intelligence and Digital

Yeah. I think what I'll point you to perhaps if you take a look at what we shared in Slide 13, some of the indicators include the growing average active patients year over year. That's our indicator of just purely for Tymlos that we're seeing increasing patient demand for the product. And assuming we can manage in a positive direction, some of the other elements we've discussed previously about the patient journey, converting those enrollments to active patients and then keeping those active patients on therapy for longer, we're really asking our business to do something-a pretty moderate to modest 5% growth year over year.

So we're not hyper-focused on market share per se to achieve that 232.

Mary Kate Davis -- Bank of America Merrill Lynch -- Analyst

OK, great. Thank you.

Operator

Thank you. Our next question comes from the line of Jessica Fye with J.P. Morgan. Your line is open.

Na Sun -- J.P. Morgan -- Analyst

Hey, guys. This is Na Sun on for Jessica Fye. I have one question on the elacestrant and another on Tymlos. In terms of elacestrant and its improving competitive landscape, what are you thinking about for the elacestrant royalty? Would you be monetizing that royalty? And if so, what do you think you're going to do with the proceeds? And then the second on Tymlos, it looks like the new patient prescription and Rx's have been declining recently on a year-over-year basis.

Can you talk about some factors that are influencing this decline? Is it COVID, is it just seasonality? What are you seeing? Thanks.

Bob Valentine -- Head of Business Intelligence and Digital

Yeah, sure. I can start with your second question there, which is related to the Tymlos. I think what you're referring to probably is new patient enrollment. I'll comment on two things.

First, as I mentioned, the average active patients is up. We don't publicly disclose all the details from that to net revenue, but you can kind of piece together that's a really good indicator for actual patient demand for the Tymlos product. In terms of sort of why the revenue is down for this quarter year over year. A lot of that is the increased seasonality that we explained, related to a handful of those factors first and foremost.

What we saw was an accelerated destocking in the first quarter of this year. We see this destocking in the past several years. Last year it kind of happened more spread out across quarter 1 and quarter 2 this year, it happened a little more quickly in quarter 1. So it's an acceleration of a destocking event that we would expect to happen in the first half of the year anyway.

And then there's other factors related to gross to net and our liabilities there that we're seeing some increased seasonality. So year over year, that increased seasonality has led to where we are from a net revenue perspective, but we do have indicators from a patient demand perspective that is moving in a positive direction.

Kelly Martin -- President and Chief Executive Officer

And the first part of your question, with regard to the financial arrangement with Menarini, we had announced previously milestones, which are regulatory plus sales are $320 million with at various points. And then the royalty is approximately 5% to the high single digits at various sales numbers globally. The important thing is it's global, it's all indications. It's an in combination.

So it's on the molecule in whatever form it takes in the future. And we also said that we would return 100% of that capital to our stakeholders, which are creditors and shareholders' obviously. And it's premature to outline how we would do that, but it's only a few ways you could do it, you buy shares, you pay down debt or you pay dividends or you do all three in some order. So it's a financial asset.

And our view strategically is that financial return should go back to those who help fund that program and that's what we intend to do, and that's what we outlined in February when we went through that. So hopefully, that is somewhat helpful.

Na Sun -- J.P. Morgan -- Analyst

Thanks, guys. Very helpful.

Operator

And our last question comes from the line of Eun Yang with Jefferies. Your line is open.

Eun Yang -- Jefferies -- Analyst

Thank you. So from the discussion with the regulators on elacestrant, do you get the sense that the potential approval path, would it be in overall patient population, or would that be more likely in a subset of ESR1 mutant patients?

Kelly Martin -- President and Chief Executive Officer

I'll open it and then turn it to Chhaya. But we will never comment on proprietary regulatory discussions with -- it just would be inappropriate. So we can't comment, but perhaps Chhaya can give you an overview of how those discussions are going.

Chhaya Shah -- Senior Vice President, Abaloparatide and Elacestrant

So thank you for the question. Yes. So with the pre-NDA meeting with the FDA, what I can say, as I mentioned, it was very positive. Good feedback from them.

It ran over time, which doesn't usually happen, which is actually a good sign for us, and it was a very, very positive discussion. With the co-rapporteurs and rapporteurs, equally positive discussions with good questions, good answers from our team, and the rapporteurs walked away with being very satisfied with how we're doing and moving forward with the application, as well as the FDA. So kind of giving you a flavor of the meeting, but certainly nothing beyond that.

Kelly Martin -- President and Chief Executive Officer

I'll just add a couple of things. Just to remind you, the discussions are also with a companion diagnostic in both the U.S. and Europe. That's important.

No. 2 is when you're talking to regulators in the U.S. and Europe, many times those discussions intersect and sometimes they're slightly different based on the market and based on what those regulators historically or prospectively do in different areas. And so we're talking to Menarini is taking a lead on Europe, and we're working with them in the U.S., and those discussions have some commonality and some differences.

And it includes companion diagnostics, which is an important factor when you think about what you think the outcome might be and how that ties into labeling, pace identification, reimbursements, price, etc. So lots of discussion, and we certainly look forward to the filing to occur, and then we would make the market aware of that. And then from that point on, obviously, we would be radio silent on any commentary on either Europe or U.S. regulatory.

So hopefully, that's helpful.

Eun Yang -- Jefferies -- Analyst

Sure, yeah. And on RAD011, do you know if epidiolex is currently being used off-label in Angelman syndrome or like an infantile spasm?

Kelly Martin -- President and Chief Executive Officer

We suspect and anticipate that a small percentage of those patients, in some way, shape, or form use epidiolex. We can't prove that, and we don't know that for a fact. But if you look at -- if you just look at the data from GW now and Jazz and you look at the reporting of epidiolex commercial, they have a category which is diseases that are not necessarily on their label, they capture them in a big bucket. And so we presume there's any number of other diseases that clinicians utilize epidiolex some.

But in general, our view is that it is a very small percentage of those various patient populations. Is that fair on this?

Chhaya Shah -- Senior Vice President, Abaloparatide and Elacestrant

Yeah. I think that's fair. We don't actually have any visibility.

Eun Yang -- Jefferies -- Analyst

Yeah. OK. That is helpful. Last question on Canadian potential approval of Tymlos.

Would you expect a milestone payment? It seems like it's probable to come toward end of this year, then would you expect a milestone from Paladin toward end of this year upon approval in Canada? Thank you.

Chhaya Shah -- Senior Vice President, Abaloparatide and Elacestrant

So we're looking at an approval before the end of this year. The milestone premise --

Kelly Martin -- President and Chief Executive Officer

A small milestone that we have found. Yes. The interesting thing for non-U.S. is when we get these things set up, is just the recurring income and no costs.

Chhaya and the supply chain has done a great job. Our job then is really supply chain to the end market competitive partners. And as Chhaya went through, we expect the potential in '23 to have four market launches ex U.S. And I think that's all incremental to revenue of Tymlos globally.

And Japan, just to repeat, is the largest anabolic market. So that as a percentage of our total is reasonably significant.

Eun Yang -- Jefferies -- Analyst

Thank you.

Operator

Ladies and gentlemen, this does conclude our question-and-answer session. I'd now like to turn the conference back to Kelly Martin, our CEO.

Kelly Martin -- President and Chief Executive Officer

Well, we thank everybody for their time. Obviously there's a lot happening in the markets between broad stocks, individual companies activity, the biotech, biopharma sector, in particular, has got lots of choppiness to it. So we appreciate any time that you spent with us this morning, and we look forward to the next update as and when it's appropriate. Thank you.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Ethan Holdaway -- Head of Investor Relations

Kelly Martin -- President and Chief Executive Officer

Mark Conley -- Chief Financial Officer

Bob Valentine -- Head of Business Intelligence and Digital

Chhaya Shah -- Senior Vice President, Abaloparatide and Elacestrant

Liz Messersmith -- Senior Vice President, Neuroscience

Corinne Jenkins -- Goldman Sachs -- Analyst

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Mary Kate Davis -- Bank of America Merrill Lynch -- Analyst

Na Sun -- J.P. Morgan -- Analyst

Eun Yang -- Jefferies -- Analyst

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