NPS Pharmaceuticals' CEO Discusses FDA Approval and Commercial launch of Gattex (Transcript)

| About: NPS Pharmaceuticals, (NPSP)

NPS Pharmaceuticals, Inc. (NASDAQ:NPSP)

Discussion on FDA Approval and Commercial launch of Gattex Conference Call

January 2, 2013 5:00 PM ET

Executives

Susan Mesco – Senior Director, IR and Corporate Communications

Francois Nader – President and CEO

Eric Pauwels – SVP and Chief Commercial Officer

Analysts

Salveen Richter – Canaccord Genuity

David Friedman – Morgan Stanley

Joseph Schwartz – Leerink Swann

David Nierengarten – Wedbush Securities

Alan Carr – Needham & Company

Sam Isaly – OrbiMed

Operator

Good day, ladies and gentlemen, and welcome to the NPS Pharmaceuticals Conference Call. My name is Caris and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

And I would now like to hand the call over to your host for today, Susan Mesco, Senior Director of Investor Relations and Corporate Communications. Please proceed.

Susan Mesco

Thank you, Caris. Welcome to today’s conference call to discuss the commercial launch of Gattex. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. Please refer to our filings with the SEC, which are available from the SEC or our website for information concerning the risk factors that could affect the company.

Joining me on today’s call are Dr. Francois Nader, our President and CEO; Eric Pauwels, our Chief Commercial Officer, and other members of our senior management team.

I will now turn the call over to Dr. Francois Nader.

Francois Nader

Thank you, Susan. Good afternoon and a very Happy New Year to everyone joining us on today’s call. This was a very exciting holiday season for the NPS team and we were thrilled to close 2012 with an outstanding accomplishment with the U.S. approval of Gattex. After completing the most comprehensive clinical development program to-date in short bowel syndrome, it is very gratifying to finally be able to deliver this much needed therapy to patients.

For nearly 40 years, short bowel syndrome patients have relied on parenteral support to receive the nutrients and fluids that they need to live, but have risked serious life-threatening complications along the way. With the approval of Gattex, the lives of these patients can change.

Gattex is the first and only long-term targeted therapy that addresses the underlying issue of short bowel syndrome, which is mal-absorption. As you know, short bowel syndrome patients can be hooked to an intravenous line 10 hours to 12 hours each day. The Gattex studies showed that over half of the patients gained at least one infusion-free day each week, and nearly a quarter of patients achieved three or more infusion-free days each week. These data could translate into anywhere from 50 days to 150 days of independence from parenteral support each year.

The interim results of our two years study of Gattex in short bowel syndrome showed that 72% of patients achieved at least a 20% or greater reduction of parenteral support, after a year of Gattex treatment, with a 40% mere reduction in weekly volume. Further, what is especially exciting is that many patients achieved complete independence from parenteral support, while on Gattex, after being chronically dependent on PN, for up to 18 years.

Freedom for – from parenteral support allows patients to experience the simple activities that many of us take for granted by joining family functions, traveling from home for a weekend or just a simple night of uninterrupted sleep and that importantly completely eliminate the risk inherent to parenteral support. We are very pleased with the outcome of our label negotiations with FDA and as you probably know it by now, Gattex is indicated for the treatment of adult patients with short bowel syndrome, who are dependent on parenteral support. And it is approved for clinic use, making Gattex the first long-term treatment for short bowel syndrome. As such the label provides the flexibility for physicians to determine the best time to initiate Gattex therapy for their patients.

With respect to safety, the warnings and precautions are consistent with the non-pharmacology of Gattex, as well as the complications associated with short bowel syndrome and its underlying etiologies and certain clinical assessments are defined to ensure the continued safe use of the product.

We believe the risk evaluation and mitigation strategy or REMS program is very practical and aligns very well with our commitment to ensure that Gattex is used appropriately and that patient initiations are successful and sustainable. NPS and the FDA recognized the need and importance of conducting a voluntary long-term patient registry, which has been defined as a post-marketing requirement. We believe the registry will be instrumental in gaining a better understanding of Gattex for the long-term treatment of short bowel syndrome.

I would like now to address the commercial opportunity that Gattex represents. We previously reported from the literature and our own prevalent studies, an estimated 10,000 to 15,000 adult short bowel syndrome patients, who are chronically dependent on parenteral support in the U.S. However, based on precedence in the orphan space, we have also noted on many occasions that there is a high degree of inherent variability using top-down prevalence estimates for rare diseases, because of the small number of patients and the even smaller sample size used in prevalent studies.

The recent month, we initiated a bottom-up and added this to more precisely quantified addressable population. Important sources of patients were those managed by the top five national home infusion companies. Additional patients were identified through our website shortbowelsupport.com, through previous clinical trial participants and information gathered from our MSLs.

We also worked with various patient advocacy groups that support SBS patients or its underlying etiologies. Based on our findings, short bowel syndrome qualifies as an ultra-orphan disorder with an estimated Gattex addressable population of 3,000 patients to 5,000 patients in the U.S. While the addressable market is less than our initial prevalence estimate, we were very pleased with the results of our pricing research.

More recently, our commercial team commissioned a rigorous pricing and access study, with an internationally recognized consulting firm, who has specific experience in pricing multiple successful ultra-orphan products on the market today. Many factors were considered in establishing the price including the fact that Gattex is the first and only long-term approved therapy for short bowel syndrome, which is a life-threatening disorder.

The value Gattex provides to patients by improving the absorptive capacity of their intestines and reducing or completely eliminating the need for parenteral support, payors’ understanding of the direct and indirect burden of short bowel syndrome, the limitations and costs of current supportive care options and the need for an effective long-term treatment like Gattex; also, the potential of Gattex to address the long-term complications associated with short bowel syndrome and the chronic use of parenteral support, the minimal budget impact of Gattex, given the size of the addressable patient population and the ultra-orphan status of Gattex and last, but certainly not least, NPS investment in the most comprehensive research and development program conducted to-date in short bowel syndrome.

Consequently, and based on these considerations, we have set the annual list price of Gattex at $295,000. At this price level and given the expected patients’ adherence and compliance rates of 70% to 80%, we expect Gattex to achieve annual peak revenues well in excess of the $350 million per year that we previously expected. Our pricing strategy will go hand-in-hand with a focus on ensuring broad and sustainable coverage from both private and public payors.

The NPSP did not spare any efforts over the last couple of years to ensure comprehensive commercial readiness and are undoubtedly ready to successfully launch Gattex in the U.S.

At this time, I would like to invite Eric Pauwels, our Chief Commercial Officer to comment on our launch plans. Eric?

Eric Pauwels

Thank you, Francois, and good afternoon to everyone on today’s call. One of our very first elements of ensuring the successful commercialization of Gattex was to assemble a truly world-class team of passionate industry veterans. These individuals came to NPS from leadership roles at rare disease biopharmaceutical companies and many with specific expertise in successfully launching orphan products.

Gattex launch-readiness focused on five key areas. Building our field-based organization; physician targeting; patient identification; NPS Advantage, our concierge-like patient support program; and ensuring rapid and comprehensive market access.

With regard to our field-based organization, our leadership team has been in place for a couple of months and includes three key account directors and three regional business directors. For our sales organization, we are extremely pleased with the level of interest and talent that we’ve attracted, which went up to 24 area business specialists for the approval of more than 250 qualified applicants. The sales team who will market Gattex is now comprised of seasoned professionals with an average of 15 years of pharmaceutical industry experience and a successful track record with injectable orphan biologics.

Our field force will be fully deployed in February, after we conduct our national sales meeting. In addition, NPS Medical Affairs has deployed a team of eight medical science liaisons, who have been building awareness amongst SBS thought leaders for over a year and are well positioned to educate the medical community on the clinical value and profile of Gattex.

We are pleased that the launch of Gattex will be supported by an impressive number of peer-review publications, including the results of our Phase III STEPS study, which appeared in the December issue of Gastroenterology.

Our next strategic objective was to identify physician targets. As we mentioned on our last call, we developed an initial target list comprised of approximately 6,000 physicians who are practicing in roughly 1,000 institutions that includes centers of experience and large GI practices. These potential prescribers will be better refined once our field force begins calling on them individually.

Now, switching to patient identification. Given the ultra-orphan status of short bowel syndrome, along with the fact that this is a condition of a condition, without a formal support of organization, patient identification is a critical strategic objective. Despite the limitations of finding patients in advance of having an approved product, I’m very happy to report that we have identified over 1,000 unique short bowel syndrome patients who are eligible for Gattex therapy. Now that we have secured approval, our patient identification activities will increase as our field organization will communicate the value of Gattex to physicians and other stakeholders and identify additional eligible SBS patients.

The fourth critical success factor is our personalized patient support service. NPS Advantage has been fully operational since late November. Our care coordinators are trained and ready to provide patients and healthcare providers with individualized support including personalized case management, reimbursement assistance, product shipment scheduling, time-based deployment, product refills and prescription renewals. We’re also leveraging the relationships that we have established with a number of patient advocacy groups such as the Oley Foundation, of course, to play an important role communicating the availability of Gattex to their members and disseminating educational materials.

The last area I would like to cover is the importance of ensuring their access to Gattex. Our market research shows that most short bowel patients have insurance coverage, and it’s approximately 60% covering by commercial plans versus 40% were covered by government and publicly insured. And, the majority of the product is being Medicare.

Our key account directors have deployed – have been deployed since October and are targeting the 75 key payor accounts that cover up to 80% of the U.S. insured population. Government have our label approved, we’ve been – we will put the final touches on our payor communication and educational materials, including the AMCP dossier. These tools characterize the SBS burden and the value of Gattex.

Based on the indications, we expect payors to provide broad access to Gattex. In our market access studies, payors clearly recognized the high unmet medical needs of short bowel syndrome, as well as the therapeutic improvement that Gattex represents over current treatment options. The value proposition is also notably strengthened by the many patients who achieved complete independence from parenteral support with long-term Gattex therapy. All payors indicated they would cover Gattex with an anticipated tier placement and restrictions fairly typical of other ultra-orphan products.

Here also our care coordinators are ready to help stakeholders, especially patients, successfully navigate the reimbursement hurdles such as prior optimizations and other restrictions. In addition, we have established a comprehensive patient assistance program.

First, our patients with commercial coverage, copay assistance will be coordinated through NPS Advantage to minimize or even eliminate our pocket burden. We also utilize third-party foundations for patients covered by public plans. And lastly, to those rare cases in which patients do not qualify for assistance or to bridge gaps in coverage, we offer a free goods program. As with other ultra-orphan drugs, during the initial six months to 12-month launch period, we expect that securing reimbursement to take 90 days to 120 days from the time of referral. We anticipate this period will improve as the commercialization progresses.

As a reminder, Gattex will be reimbursed as a pharmacy benefit or Medicare Part D and will be dispensed by our limited network of specialty pharmacies. Because home infusion is a key touch point for SBS patients dependent on parenteral support, we established a distribution network with the five leading specialty home infusion providers, Accredo, BioScrip, Coram, ThriveRx, and Walgreens.

Gattex will be dispensed by this network directly to patients as a monthly kit and we do not expect any meaningful inventory to be held in the channel at any given time. These home infusion companies are already providing personalized services to the addressable SBS population through an interdisciplinary team of experienced infusion professionals. So, they are perfect – they are really a perfect fit to also provide clinical services for Gattex. Their national and local presence will allow to enhance Gattex clinical, nutritional and educational services, expand our knowledge of key prescribers and importantly, we’ll find – more readily find patients.

These agreements are a win-win for NPS and the home infusion providers. In addition to receiving standard distribution cost and additional fees for clinical services, they can differentiate their businesses by offering Gattex and potentially expanding their market share within the highly-fragmented home infusion industry, along with contributing directly to the well-being of the SBS patients.

So, to conclude, we are ready to successfully launch Gattex. We have assembled the best-in-class team with specific orphan and biologic experience. The deployment of the field organization is underway and we have defined our initial list of physician targets. We’ve identified over 1000 Gattex eligible patients in our field force, who’ll work with the physicians to identify new patients.

NPS Advantage is up and running, and our care coordinators are actively dialoguing with patients. Our key account directors are already interacting with the targeted 75 key accounts that represent most of the commercial and public payors. And finally, our go-to-market specialty distribution network is in place with the five leading providers of home infusion and specialty clinical services.

I will now turn the call back to Francois.

Francois Nader

Thank you, Eric. I would like now to comment on the forecasted trajectory of the Gattex launch. While we’ve made great progress identifying patients, as we have noted on multiple prior occasions, and as it’s typical with a number of successful orphan analogues, we anticipate its little uptick. We expect Gattex revenues to begin in the second quarter of this year; however, we anticipate meaningful revenues to kick in during the third quarter.

Our current expectation is that between 200 patients to 300 patients will be on Gattex by the end of 2013, with the vast majority of these patients initiating therapy in the later part of the year. We’ll provide you with the number of patients on Gattex at the end of each quarter, starting with our second quarter earnings call through the remainder of the year. Given the favorable label and our ultra-orphan pricing strategy, we have a bullish outlook for Gattex, again with peak sales now expected to be well in excess of our previous target of $350 million.

Five years ago, we set forth on the plan to transform NPS into a premier orphan drug business by refocusing our pipeline on rare disorders of high unmet medical need. With the approval of Gattex, we have taken a significant step towards achieving our vision. As discussed, we have a solid and comprehensive launch plan in place and we are ready to execute.

That concludes our prepared remarks for this afternoon. I will now turn the call over to the operator to take your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Salveen Richter of Canaccord Genuity. Please proceed.

Salveen Richter – Canaccord Genuity

Thanks for taking my questions, and congratulations on the approval.

Francois Nader

Thank you, Salveen.

Salveen Richter – Canaccord Genuity

Just had a question on – just if you can help us understand payor comfort with the $295,000 annual price, and what kind of tiering we should expect here, and I know it’s around 90 days to 120 days to get reimbursed at first. And what you think that will kind of even out at over time?

Francois Nader

Salveen, I would ask Eric to address your question. Eric?

Eric Pauwels

Salveen, thank you. That’s a good question. People desire to pay at comfort or clearly, our pricing in access study showed that there was – that all payors who actually going to cover the product. So, as you appropriately outlined there will be restrictions. Typically we expect these restrictions to be usually on tier four or specialty tiers and we anticipate the usual hurdles such as prior authorizations before actually the prescription can be filled, higher copays co-insurance. So, it’s important to note that these are very typical with ultra-orphan products and we have a number of key programs in place right now to assist those patients and physicians with NPS Advantage to get them three days tiers, and especially, we have a fairly robust program including copay, co-insurance and patient assistance programs that will help.

Salveen Richter – Canaccord Genuity

Great and just two quick follow-ups. In terms of the education that’s required here for physicians, what role does – do nurses here play and the treatment paradigm and are you targeting them as well? And then what proportion of the SBS patients or thus far it’s how many infusion providers accounting for?

Eric Pauwels

Okay. If you asked your first question, or follow-up question around nurses, yes, we actually are not just targeting nurses, but we believe that the entire treatment team is going to be involved in supporting the SBS patient. So, clearly nurses will play a key role. The first time Gattex is shipped, they’ll provide role in terms of counseling, injection training, and will follow-up on a weekly basis after initiation.

But in addition to nurses, we’re targeting nutritionists. They will provide key support and education to the SBS patient, particularly around nutritional intake requirement, rebalancing if you will as parenteral nutrition is being lean, patient will not have to intake more food and during that process, nutritional support is extremely important.

So, we see the change besides the prescriber really being the nurse, the nutritionists, and also the pharmacist, who actually dispenses the parenteral nutrition and it’s very important sometimes on a weekly basis in dialogue with the patients.

To answer your follow-up – second follow-up question, we believe right now the five key national providers that we’re working with comprise about a-third of the home infusion market.

Salveen Richter – Canaccord Genuity

Great. Thank you.

Operator

And your next question comes from the line of David Friedman of Morgan Stanley. Please proceed.

Francois Nader

David, are you there? Okay. We can’t hear you.

Operator

And Mr. Friedman, please check the mute function on your phone. Your line is open.

David Friedman – Morgan Stanley

Hi. Sorry about that. My phone was broken. Can you hear me now?

Francois Nader

Yeah. Absolutely.

David Friedman – Morgan Stanley

Okay. Thanks. Sorry. Just a couple questions. Number one is can you just discuss what you except the average copay will be and what percent of patients you think will have coinsurance of 10% to 20% like some specialty drugs have? And then also maybe if you can just discuss what you expect your sort of blended gross to net to be when you’re at a steady state?

Eric Pauwels

Sure. Thanks for that question. I think right now, we clearly have identified that about 60% of the SBS population is going to have commercial coverage. Now 40% are public with primarily Medicare. In terms of the number of patients who have copay, the average should be somewhere between sort of the 15% to 20% copay and that will vary by plan. And as we get into market, we’ll probably provide you a little bit more clarity on the actual number and as we work in partner with our home infusion, we’ll be able to provide you with a little bit more specificity on that. But at this time right now, the average copay or coinsurance we’re looking at probably around 20%.

David Friedman – Morgan Stanley

And I guess one quick follow-up to that is did you do any work or is it even possible to do work on the patients’ side as to whether – I mean if the payors are willing to bear sort of 80% of that, what the willingness of the patients to bear 20% of 300,000.

Francois Nader

Well, I can address this question. Actually, our studies included patients; it included physicians; and it included prescribers. So, all three stakeholders were included in the study. And frankly, it became really clear that given the value that Gattex offered these patients; the price was pretty much inelastic. Now you’re bringing a very good point about the copay, but what we outlined in our presentation is we are covering the patients when it comes to the copay.

In other words, we don’t believe that a copay of 10, 20, but whatever number is something that your usual patient can afford. And therefore, we are supporting them through different mechanisms that Eric outlined and frankly, for those patients, who cannot afford and who are not eligible, then we have a free drugs program. So, I mean the whole idea David, is to make sure that the patients have access to Gattex and that the pricing and the copay would not be a hindrance for them to be – to get Gattex if they needed.

Eric Pauwels

Yeah. And David, I’ll just follow-up by saying that every insurance plan, particularly those patients, who are on commercial, will have certain maximums and those maximums are much, much lower than the overall cost of the drug.

David Friedman – Morgan Stanley

Okay. Do you have a sense of what the average maximum is and what happened after that? Was it just get picked up by the insurance plan?

Eric Pauwels

Yeah, I mean there’s certain cap. Some of them will be just in the few thousands. It really depends on the particular plan, and of course, what type of insurance the patient has. They can buy very nice plan and it would be very limited and others will require then to pay the entire 20%. So, it really varies across the board.

David Friedman – Morgan Stanley

Right. All right. Thank you very much.

Francois Nader

Thank you, David.

Operator

And your next question comes from the line of Joseph Schwartz with Leerink Swann. Please proceed.

Joe Schwartz – Leerink Swann

Hi, thanks for taking the question and congratulations on all the excellent execution. I was wondering if you could talk about how you expect your care coordinators to handle all of the interest from different stakeholders like nurses and nutritionists and payors and physicians and of course, patients. Do you have systems in place and I know you’re doing this all in-house or have you worked with others to design this – any of it being outsourced, for example, can you just talk about that?

Eric Pauwels

Yeah, sure, Joe. Good question. So, really, everything starts with the care coordinator. And our care coordinators are there to do exactly that; they’re coordinating a number of different aspects. So, they’re helping the patient or the physician, whichever comes from the doctor’s office – or actually comes from a patient – to begin the process of benefits investigation. So, they’ll go through, and with support, we’ll need – with the support of staff that we have, we go through that benefits in investigation.

We’ll determine what the copay of the insurance plan is, and then they’ll also work with the home infusion companies to ensure that the patient is actually getting the clinical services. So, they’ll not deliver the service themselves, but they will actually co-ordinate nutritional visits, nursing visits and others. So, they will actually be the point, if you will, or the face of NPS or Gattex to each patient. And this will be very important, because it just goes – it doesn’t go beyond just the reimbursement support. It really is that whole aspect of ensuring that whatever the patient needs from a clinical perspective, they’ll actually get.

Joe Schwartz – Leerink Swann

Okay, great. And can you talk a little bit also about who is addressable? According to your market research, what have you found, where have you found the biggest pockets of patients and what types of patients do you expect to go on the drug at various stages in the life-cycle of the product?

Francois Nader

It’s Francois. I will attempt to address your question here. So, the addressable population was quantified from the bottom up. And obviously, we tapped into the most obvious source of information, which was the five home infusion providers, because these providers actually deliver parenteral nutrition to patients and we were able to work with them on a very specific, targeted, if you will, patient list, I mean obviously anonymous. And we cannot do that given the restrictions of confidentiality and HIPAA and everything else. So, we kept really on the safe side of this exercise.

At the same time and in parallel, we had a number of patients who registered at the shortbowelsupport.com. Another set of patients were identified through patients advocacy groups; another were identified through our clinical research and the patients who participate in our clinical trial.

The biggest challenge of this exercise was to identify unique patients, because as you can very well imagine, you have a patient who actually is with one of the home infusion company, who has been in our clinical research program, who registered at the shortbowelsupport.com and he or she is a member of A.S.P.E.N. So, all of a sudden you have the same percentage of patients. So, this is why it is very important once we have the field force in place, which will happen starting in February, to validate all these leads and make sure that we work with the physicians and the caretakers to validate the list and make sure that we have uniquely identified patients.

Now this being said, we also looked at what percentage of the market these patients that we identified would represent. I mean, we have a certain number of ways to do that. And we landed on the number of 3,000 patients to 5,000 patients. Now this being said, Gattex is no different from most other orphan products who will face the same situation, where there was a dichotomy, if you will, between prevalent and addressable. However, over time, what these other companies and we might face as well is the fact that to start with an addressable population of 3,000 to 5,000 and over time this number could go up.

In parallel to all of the above, we are really pleased, as we mentioned, that with the label. So, the label gives us the flexibility – or gives rather the physician the flexibility to start Gattex when the physician determines that the patient is dependent on parenteral nutrition, which is a nice thing to have because, frankly, it takes away the rigor of six months or 12 months on parenteral nutrition and it becomes a medical judgment call.

That’s where we are today. So it is multiple triangulation of data, and probably the underlying common denominator of all of the above, it’s a small population and therefore the traditional methods that are used in larger populations or larger conditions have their limitations when you talk about small numbers like short bowel syndrome.

Joe Schwartz – Leerink Swann

Very helpful, thanks.

Francois Nader

Thank you.

Operator

And your next question comes from the line of David Nierengarten of Wedbush. Please proceed.

David Nierengarten – Wedbush Securities

Hi, guys. Happy New Year.

Francois Nader

Thank you. Happy New Year to you too, David.

Eric Pauwels

Happy New Year.

David Nierengarten – Wedbush Securities

Thanks. I had a quick question, if you had any feedback from payors on the length of treatment or requiring a certain type of response or a degree of response in order to – in order for the payor to continue to reimburse for Gattex. Thanks.

Francois Nader

The short answer is no. The long answer is usually payors rely on the label, and the label is very favorable in the sense that it positions Gattex as a long-term treatment, and as I said a minute ago, the initiation of the treatment is really in the hands of the physician. That’s what we’re starting to work from with the payors. As Eric mentioned a minute ago, we have identified 75 target accounts and our key account directors that are already working with these accounts, which they work to some extent before December 21 without having the benefit of the label. But now that we have the benefit of a positive label, the conversations are engaged.

At the same time, we developed the AMCP dossier. We developed the value proposition. We developed the burden of illness. So, all these elements constitute what the key account directors are working with, so far so good and time will say.

David Nierengarten – Wedbush Securities

If I could, a quick follow-up, just going back to patient identification, obliviously you stated that you identified over 1,000 unique patients eligible for therapy. Could you just describe a little bit of the process or why the difference – or what time it takes for everyone determined to go from say that 200 patients or 300 patients you’re talking about at year end 2013 to get into that 1,000 unique patient level?

Francois Nader

So, now – it’s Francois and I’ll ask Eric to take over. As we said, I mean the first patients who will go through the payor system, this process takes time. It takes between three to four months. So, we have a time issue. At the same time, we have REMS that need to be in place. We have also a need for a colonoscopy as that is again in our label, nothing different from our clinical studies, but nevertheless the patients will have to have had a colonoscopy within six months prior to starting the treatment. So, all this take time as well.

And our sales force won’t be deployed until probably sometime early to mid February. So, again it’s just a matter of uptake; it’s a matter of time and it’s no different. Again, it’s very important for me to emphasize the fact that our project is no different from many of the analogues – successful analogues that we compared ourselves to. It is just a matter of time. It is just a matter of process techniques to take place.

The other factor that is important, and I don’t want to underestimate the fact that the patients, who are chronically dependent on parenteral nutrition and are stable, tend to see their gastroenterologist once or twice a year. Okay. So, despite the attractiveness of a new product, we know that if we see their physician once or twice a year, it means that there could be a lead time of up to six months or maybe 12 months for them to be prescribed Gattex.

And the last point is also important is as with any other condition, you have physicians, who are early adopters, usually, I don’t know – 25% give or take of the physicians are early adopters. We have a fall of 25% or so, who are late adopters and they would wait for a year or two or three for the product to be marketed before prescribing it and we have the rest of the physicians in between. So, needless to say that we will account on the early adopters and those investigators, who were involved in our clinical trial to initiate the treatment on Gattex as early as possible, but it’s not de factorial and it’s a matter of the process that takes time.

Eric Pauwels

Yeah. David, I’ll also just add that the reimbursement time, we do anticipate the prior authorization. It’s going to take time as well as coordinating copay assistants and just the practical aspects of scheduling nursing visits and things like that, so these are all factors that are going to be very important to consider in terms of the time for patients to get on to drug.

David Nierengarten – Wedbush Securities

Great. Thanks.

Francois Nader

Thank you.

Operator

And your next question comes from the line of Alan Carr with Needham & Company. Please proceed.

Alan Carr – Needham & Co

Hi, thanks for taking my questions and congratulations on approval.

Francois Nader

Thank you, Alan.

Eric Pauwels

Thanks, Alan.

Alan Carr – Needham & Co

Couple of questions. One of them, what’s – what were your findings with respect to the size of the pediatric population and can you give us an update on your plans for expanding in that area? And then the second relates to, can you comment a bit on the nature of your – of the structure of your relationship with the home infusion providers? I mean how is that structured financially and wondering if you can give us the sense of the scale there in relation to the 295,000?

Francois Nader

Yeah, Alan, I’ll take the first question to say that the pediatric indication is a part in 2013 and frankly, we would be engaging the agency in this conversation. I cannot be more precise at this stage. We have – we are doing the work and work goes along really three lines. The first is, as I said, the interaction with the agency to make sure that we are aligned with the regulatory needs of the pediatric program. The second is the development of the clinical development plan that has been practically completed, but we’ll continue to vet our clinical development plan with a number of outside consultants. And the third element is the work that Eric’s team is doing in quantifying the market.

Now that we have the addressable population for the adult, it will be easier to extrapolate to the pediatric population. How – what I can tell, however, is independent from the size, we’re pursuing the indication as one of the key reasons is the unbelievable unmet medical need that we’re experiencing from the pediatric gastroenterologists, I mean, it’s a very active community, and frankly, they have been very – very strong in lobbying us to move along with a pediatric indication. And this is something that makes sense; it makes medical sense, ethical sense and business sense. So, stay-tuned probably over the next earnings call and maybe the one after that will give you a little bit more color, but it will be a product in 2013.

And I’ll ask Eric to address your home infusion question. Eric?

Eric Pauwels

Yeah, Alan, good question. I have to first say that we’re very deliberate in terms of selecting and working with our home infusion providers, and the reason is that we’re taking an approach that is highly home infusion-centric. The reason for that is that Gattex is a disruptive technology. We want to introduce it in the least disruptive manner.

And so, by doing so, we know that there has to be a win-win proposition for both healthcare providers and for patients. And I’m pleased to say that our home infusion providers and partners were very excited to work with us on a number of different fronts. What we have is a – is really structured the agreement on a couple of different levels, and really one exciting level is that they’ll be able to service, if you will, with the number of their infrastructure and folks in place, both nursing, pharmacists and as well as nutritionists which they’ve had on staff, but be able to provide the clinical services that are required for each and every patient to be successful as they transfer onto Gattex and, of course, manage parenteral nutrition.

In addition to that, they are – also be a part of our limited distribution network. So, the five of them will have the opportunity to dispense Gattex and make margin based on whatever negotiations that they have had with their payors in terms of the margin off the list price.

And then finally, we also – we have – they’ll be transferring data, important data as we’re building our SBS database and we’ll have a number of data transfers that we’ll be able to work with them on different fronts and ensure that on all of these fronts these types of agreements are allowing us to get data back and ensure that these patients are being managed accordingly.

So, those are the three areas that we’re working with our home infusion partners and I’d say they’re extremely excited to be a part of our network and helping us identify and treat these patients.

Alan Carr – Needham & Co

Okay. Thanks very much.

Francois Nader

Thank you, Alan.

Operator

Your next question comes from the line of Haige Lu with OrbiMed. Please proceed.

Sam Isaly – OrbiMed

Hello. This is Sam Isaly at OrbiMed Advisors. Yes, Happy New Year.

Francois Nader

Thank you, Sam. Happy New Year to you too.

Sam Isaly – OrbiMed

And just two questions rather unrelated for you. Number one, I learned a little bit about this, but could you clarify some more the recent Form 4 filings that you made towards the end of the year, the last days of the year? Just what was going on, there was a few hundred thousand shares notified under Form 4.

Eric Pauwels

Yeah, hi, Sam. Happy New Year to you as well. The impact of those Form 4s is related to options that were granted in 2010, I believe it was, two years or three years ago. And those were vetted by the nature of the options. The vesting was a little bit unique by the board in that it was a function of two-trigger function. One, your more typical time-based vesting. And then second, it was performance criteria in both of those meeting (inaudible) for the vesting criteria to be satisfied.

And our advice from outside counsel is that because of the unique performance aspect of the vesting, we – the reporting requirement for the issuance of those options does not trigger until both of those criteria were tripped.

So, that’s why the Form 4s were filed on December 21, which was the day that we got the FDA approval from – on Gattex, and therefore that’s what triggered the reporting obligation for those options, which have been issued in or included in all of our options outstanding for financial statement purposes but just simply had not been required under the SEC regulations to be reported pursuant to a Form 4.

Sam Isaly – OrbiMed

All right. Let me give in a way an easier and a tougher question. Your pricing and possible patient usage at exit rate 2013 would suggest all sales let’s say something less than $100 million worth of Gattex in 2014. You have some other sources of revenue and you have some expenses. Do you have a target year of profitability and what is it?

Eric Pauwels

We have internal projections and we have an expectation of when we think we’ll be profitable. We are not – we’ve not guided on our 2013 or beyond financials. So, it would be inappropriate for me to comment on that further on this call.

Sam Isaly – OrbiMed

Okay. Maybe we can comment off the call some day?

Eric Pauwels

Touché.

Sam Isaly – OrbiMed

Thank you.

Eric Pauwels

Thank you, Sam.

Francois Nader

Thank you, Sam.

Operator

And at this time there are no further questions in queue. I would now like to hand the call back over to Dr. Nader for closing remarks.

Francois Nader

Well, thank you for your participation on today’s call. Before ending this call though, I would like to take a moment and thank the short bowel syndrome patients, their families, and the investigators who participated in our comprehensive clinical development program. We truly appreciate their support in the development of this important new treatment.

I would also like to recognize FDA for their professional, fair and proactive review process. And last but certainly not least, I would like to recognize our NPS team. They worked very hard for many years with an exceptional degree of focus, dedication and enthusiasm. Very gratifying for all of us here at NPS and for the patients to reach our goal of bringing Gattex to the patients with short bowel syndrome who desperately need it.

We look forward to providing you with additional updates on Gattex and the rest of our business throughout the year. And with that, I wish you again a Happy New Year and a great evening.

Operator

And ladies and gentlemen, that does conclude today’s conference. Thank you for your participation. You may now disconnect. Have a wonderful day.

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