OPKO Health's (OPK) CEO Phillip Frost on Q3 2016 Results - Earnings Call Transcript

Nov. 07, 2016 9:49 PM ETOPKO Health, Inc. (OPK)11 Comments
SA Transcripts profile picture
SA Transcripts
130.77K Followers

OPKO Health, Inc. (NASDAQ:OPK) Q3 2016 Earnings Conference Call November 7, 2016 4:30 PM ET

Executives

Bruce Voss - LHA

Phillip Frost - Chairman and Chief Executive Officer

Steven Rubin - Executive Vice President, Administration

Adam Logal - Senior Vice President and Chief Financial Officer

David Okrongly - President, Diagnostics

Jane Hsiao - Vice-Chairman and Chief Technical Officer

Charles Bishop - CEO, Renal Division

Analysts

Dana Flanders - JPMorgan

Yale Jen - Laidlaw and Company.

Kevin DeGeeter - Ladenburg

Operator

Welcome to the OPKO Health Third Quarter 2016 Financial Results. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we’ll hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today Monday November 7, 2016.

I would like to turn the call over to Mr. Bruce Voss. Sir, please go ahead.

Bruce Voss

Thank you. Good afternoon. This is Bruce Voss with LHA. Thank you all for joining today’s call. Before we begin, I’d like to remind you that any statements made during this call other than statements of historical fact will be considered forward-looking and as such will be subject to risks and uncertainties that could materially affect the company’s expected results, including, without limitation, the various risks described in the company’s annual report on Form 10-K for the year ended December 31, 2015 and its subsequent filings with the SEC.

Before we begin, let me review the format for today’s call. Dr. Phillip Frost, Chairman and Chief Executive Officer of OPKO, will provide opening remarks, Steven Rubin, OPKO’s Executive Vice President, will then provide an update on the company’s various businesses and clinical programs, and Adam Logal, Chief Financial Officer, will provide an overview of the company’s financial performance during the quarter. We will then open the call up to your questions, after which Dr. Frost will close the call with some final remarks.

Now, I’d like to turn the call over to Dr. Phillip Frost. Dr. Frost?

Phillip Frost

Good afternoon and welcome to our conference call. This has been a really busy quarter and there is a lot to talk about. So I’m going to immediately turn this over to Steven Rubin to begin the session.

Steven Rubin

Thanks, Phil. And thank you all for joining us this afternoon. The third quarter was another productive period for OPKO as we made significant progress with numerous programs. In addition to growing our core diagnostic business, we closed our acquisition of Transition Therapeutics, announced our entry into the Companion Animal Health Market with a formation of a specialty business unit and continued preparing for the commercial launch of RAYALDEE in the coming weeks. We also made progress advancing a number of important clinical programs.

Turning first to Therapeutics, let me begin with an update on RAYALDEE. Our preparations for the upcoming launch of RAYALDEE are nearing completion. We have hired top level talent for our senior sales, marketing, market access and medical science liaison teams to support the upcoming launch. We have successfully hired and trained 10 telemarketing sales representatives and 35 regionally based sales representatives who will be fully dedicated to selling RAYALDEE.

We expect to continue building the sales team to mature size around 70 to 80 reps most likely by mid-2017. We’ve also hired and trained a team of 11 regionally based medical science liaisons who will support medical education efforts related solely to RAYALDEE. Our marketing and market access teams are fully staffed and are working on pricing strategy, favorable listings in key compendia and formularies, and a comprehensive portfolio of appropriate patient assistant programs.

Our marketing team has also assembled a large group of nationally-recognized key opinion leaders into a trained speakers’ bureau which will educate [targeting] nephrologist and endocrinologist on the appropriate use of RAYALDEE. As a reminder, the FDA approved indication for RAYALDEE is for the treatment of secondary hyperparathyroidism or SHPT in adult patients with stage three or four chronic kidney disease and vitamin D insufficiency. The FDA defined vitamin D insufficiency as serum total of 25-hydroxyvitamin D levels less than 30 ng/mL.

RAYALDEE is the first product to receive FDA approval for this indication. RAYALDEE fills a void in the available treatment options for approximately 9 million American adults, which represent a potential market estimate to exceed $12 billion annually.

The current standard of care is aggressive supplementation with nutritional vitamin D, which is an approach that is neither FDA approved nor demonstrated to be safe and effective in this population. A recently published review of published randomized clinical trials concluded a nutritional vitamin D is completely ineffective against SHPT.

The only other FDA approved therapies for SHPT in patients with stage 3 or 4 CKD or active vitamin D hormones namely oral formulations of Calcitriol, Paracalcitol, Doxercalciferol these therapies are not recommended for routine use in this patient population according to the newly revised draft KDIGO clinical practice guidelines, which were recently published for public comment. KDIGO an acronym for kidney disease improving global outcomes is internationally regarded as the authoritative clinical practice guidelines for the appropriate care of CKD patients.

We continue with our pre-commercial plans for RAYALDEE and remain on-track for a launch in the fourth quarter this year targeted late November just after the annual meeting of the American Society of Nephrology where OPKO and RAYALDEE will have a major presence.

In addition to the considerable U.S. market opportunity the global market for RAYALDEE is substantial and we are working closely with our partner Vifor Fresenius to bring RAYALDEE to Europe and other international markets, as well as the development of RAYALDEE for end stage or stage V renal disease.

Let me now turn to our diagnostic segment. BioReference Laboratory posted solid revenue during the quarter with a bulk coming from traditional reference lab testing, along with modest sequential quarter growth with 4Kscore. Our goal is to continue to grow this segment through increased sales in core lab and genetic testing services 4Kscore and the Claros 1 point-of-care test.

Moving on to progress for 4Kscore, our innovative blood test that predicts the probability of aggressive prostate cancer, we continue to work with payers to secure favorable reimbursement and are making incremental progress. Last year, the American Medical Association granted a CPT 1 code for 4Kscore, which will be effective as of January 1, 2017.

We have a number of pricing agreements already in place with payers. We are continuing to work with Novitas Solutions to reinstate their positive local coverage decision or LCD. Novitas is the Medicare Administrative Contractor or MAC that governs our BioReference facility in New Jersey where we run the 4Kscore test. We have submitted a complete clinical dossier in Novitas which included background information, physician experience and extensive clinical validation.

We expect Novitas to include 4Kscore in its February review cycle for a draft local coverage determination. In the meantime Novitas has been and continues to pay for 4Kscore Medicare submissions. We remain confident in a positive LCD from Novitas for 4Kscore as there is ample clinical validation to support favorable reimbursement as supported by numerous published peer reviewed studies and the inclusion of the U.S. national comprehensive cancer and network guidelines for prostate cancer early detection and in the European association of urology prostate cancer guidelines panel for 2016 EAU guidelines for prostate cancer.

We also continue to work with Palmetto to address their concerns as you know while Palmetto does not administrate Medicare submissions for the 4Kscore because our laboratory is not within their region, they nevertheless issued a negative LCD on 4Kscore. As we previously reported 4Kscore’s currently being marketed by approximately 200 BRL sales reps to both urologists and primary care physicians. We continue to see growing test volume remain very encouraged by the increasing physician use of the test.

During the quarter ended September 30, 2016 approximately 16,000 4Kscore tests were performed. A 9% increase from the quarter ended June 30, 2016 and a 365% increase over the comparable period of 2015. Which leads me next to a discussion of our plans for the Claros 1 point-of-care system, our novel multiplex instrument system to provide rapid high performance blood test result at the point-of-care.

As a recap Claros 1 has declined to run a wide array of immuno-diagnostic tests in the physician’s office or hospital nurses’ station, using a single drop of blood negating the need for centralized reference laboratory for many common tests. We’ve ramped up our efforts to advance Claros 1 through the regulatory pathway towards commercialization in the U.S. and plan to initiate FDA registration studies for a PSA point-of-care test by the end of the year.

Following successful completion of our studies we expect to submit a PMA with the FDA in the first half of 2017. We expect to commence some additional study for our testosterone point-of-care test in 2017 followed by a 510-K submission in late 2017. Upon FDA clearance we expect to fully leverage PRL’s marketing, sales and distribution of resources for the launch of Claros 1 system in the U.S. In tandem with conducting these studies we are developing additional test for the Claros 1 including the test for vitamin D. We believe there are many more applications for this technology, including the infectious disease, cardiology, women’s health and companion diagnostics.

Moving on to our biologics division, we have made significant progress advancing a number of key programs and have a series of upcoming milestones with our improved long-acting proteins and peptides in development. Let we start with our long-acting human growth hormone products hGH-CTP, which is partnered with the worldwide commercialization with Pfizer.

The Pfizer agreement includes $275 million payable to OPKO upon the achievement of certain regulatory milestones, has double-digit tier royalties and the sales of adult hGH-CTP and a profit sharing after the launch of Pediatric hGH-CTP, which will include all indications of hGH-CTP and Pfizer’s Genotropin. Genotropin represents approximately 20% of the global market with approximately $600 million in annual sales and the overall market, the growth hormone product exceeds $3 billion.

We completed the Phase 3 study in adults earlier this year and have last patient out at the end of August. We expect our top-line data readout before year end. We have made good progress advancing plans for our global pivotal Phase 3 study in pre-pubertal growth hormone deficient children and expect to initiate the study by year-end. This study will evaluate a single weekly dose of hGH-CTP versus daily injections of currently marketed growth hormones.

In September, we are pleased to have a number of oral and posture presentations highlighting the 24-month efficacy, safety, pharmacokinetic and pharmacodynamics data from our pediatric hGH-CTP Phase 2 study at the European Society for Pediatric Endocrinology. These data affirm that a single weekly injection of our drug has the potential to replace seven consecutive daily injections of currently marketed growth hormone in pediatric patients. Clearly the hGH-CTP program represents a very large near-term opportunity for OPKO and we are excited to be advancing these late stage programs towards commercialization.

Let me now update you on our Long-Acting Factor VIIa-CTP for the treatment of bleeding episodes in hemophilia A or B patients with inhibitors that factor VIII or factor IX. We have planned to develop both an intravenous and subcutaneous formulation of factor VIIa-CTP for the on-demand treatment of spontaneous bleedings with the aim of less frequent administrations as well as for prophylactic use.

We have received FDA and EMA orphan drug designation for Factor VIIa-CTP and earlier this year we initiated a Phase 2a dose escalation study to determine safety and explore efficacy endpoints. This study is enrolling 24 patients from the U.S. We expect to have safety data from the first three cohorts by early next year and have the top-line data from the study in the second half of 2017. By the end of this year, we also plan to initiate a Phase 1 clinical study of a subcutaneous administration of this drug. This will be a single dose PKPD trial in healthy volunteers.

Current treatment options with Factor VII require multiple infusions to treat bleeding episodes because the short half-life. Also, frequent infusions are onerous when you used as preventative prophylactic therapy, especially for children. This is a $1.7 billion market opportunity and is growing by 7% annually, with only 25% of patients currently being treated.

We continue to believe that our long-acting Factor VII administered either by IV or subcutaneous administration could change the landscape by permitting children and adults to more easily self-administer at home on prophylactic basis and could increase the percentage of patients being treated.

During the third quarter, we have closed our acquisition of Transition Therapeutics. This transaction bought us two very exciting late stage assets that fit well within our development programs. Since the acquisition OPKO is focused on the development of TT401, a once weekly administered GLP1/glucagon dual receptor agonist for type 2 diabetes and obesity and TT701 orally active selective androgen receptor modulator or SARM.

In a Phase 2 study with 420 subjects with type 2 diabetes, TT401 demonstrates significantly superior weight loss compared to the currently-approved extended-release exenatide and placebo, as well as the similar reduction of hemoglobin A1c, a marker of sugar metabolism. Based on these data, we are now manufacturing and preparing product for our Phase 2b study, to optimize a dose escalation regiment to increase weight loss and glucose control, as well as refining the formulation and device use for a Phase 3 study.

As for TT701, SARM has been shown to be a highly selective agonist for anabolic effects on muscle and bone and potentially antagonistic to the prostate. In a Phase 2 study with 350 aging males TT701 treatment results in a significant increase in body muscle and physical function and decreases in fat mass without any change and to some degree even a decrease in PSA levels. We are currently planning a Phase 2 study to examine the selected antagonistic effects of TT701 to reduce prostate hypertrophy and provide anabolic therapeutic effects in aging males.

We talked briefly about animal health. Two weeks ago we announced our entry into the companion animal health market. The U.S. pet product market alone is worth some $60 billion annually of which more than $14 billion is for therapeutic products. This is an area with a substantial market opportunity as pets are living longer, develop many of the problems of human aging such as arthritis, cancer, obesity, kidney disease, diabetes and heart disease, diseases where OPKO has experience.

Our team including executives from the DBM Pharmaceuticals division of IVAX has considerable experience in successfully developing and marketing animal health products. Our OPKO animal health team will operate as a specialty business unit in cooperation with OPKO Spain, which is already in this business and OPKO Ireland, which has been developing several oncology products for animals.

Importantly, we can launch this offering with minimal investment by using our existing product and manufacturing resources. Products will be marketed through a logistics partner and select national and regional distributors. We are building our pipeline and plan to introduce several over the counter products for companion animals in the first quarter of 2017.

We've also initiated pilot studies evaluating the efficacy of RAYALDEE in dogs and cats with chronic kidney disease. Chronic kidney disease is a significant problem in Companion Animals particularly as they age. The companion animal health market is an exciting opportunity and given our experience, infrastructure and product portfolio we expect this to be very successful business segment for OPKO.

With that overview of our businesses, let me turn the call over to Adam for a discussion of our recent financial performance. Adam?

Adam Logal

Thank you, Steve and good afternoon, everyone. During the quarter ended September 30, 2016 revenue increased to $298 million from $143 million for the comparable period of 2015. This increase in revenue was the result of revenue generated by our diagnostics business at Bio-Reference. During the quarter we continue to make improvements in the financial performance at Bio-Reference through a revenue cycle management program that was initiated during the second quarter of 2016.

The most critical component of this program was the successful implementation of the new billing system, which occurred on October 1. This system will provide us with the power to more effectively manage our billing process, as well as our payer relationships while improving our collection timeline and effectively appeal coverage denials.

We believe our revenue cycle management program has the potential to significantly improve the profitability of our diagnostics business and look forward to providing further updates of our progress on future calls. The RCM program resulted in an increase in investment in our diagnostics business and resulted in non-recurring SG&A expense of approximately $7 million. We continue to invest in our pharmaceutical and diagnostic research and development programs and had approximately $24 million of R&D expense during the quarter, compared to $19 million for the 2015 period.

Loss from operations for the three months ended September 2016 was $23.6 million compared to $8 million for the comparable period of 2015. In addition to the increased investments in R&D in our RCM program, operating loss was impacted by a $10 million increase in amortization of intangible assets principally related to the amortization of our RAYALDEE assets as a result of our FDA approval. Prior to approval RAYALDEE’s intangible assets were classified as non-amortizing in process R&D assets.

Net loss for the quarter ended September 2016 was $15 million compared to net income of $128 million in the comparable period of 2015. The 2015 period included a number of non-cash non-recurring items including a $93 million income tax benefit related to the release of evaluation allowance against our deferred tax assets as a result of the Bio-Reference acquisition, a $17.3 million gain from a deconsolidation of SciVac and a reversal of expense related to the fair value changes of our derivatives of $32 million.

As I mentioned during our second quarter call, we received approval for a method change with the internal revenue service, which resulted in our receiving a cash refund from the IRS in October 2016 of approximately $40 million. This amount is in addition to our $144 million in cash, cash equivalents and marketable securities on our balance sheet at September 30, 2016. Our balance sheet remains in a strong position to continue the development of our ongoing R&D programs, as well as to support the launch of RAYALDEE in the U.S.

As Steve discussed we expect to launch RAYALDEE in the coming weeks. I'd like to provide our thoughts around expected revenue recognition over the next several quarters related to RAYALDEE. Accounting guidelines by the SEC impose a high threshold for revenue recognition particularly for a company that is launching its first commercial products.

Key elements of our ability to recognize revenue under US-GAAP include having sufficient activity overtime to provide visibility into the distribution channel, the payer mix and any discounts, rebates and product returns. We expect the earliest we'll have sufficient visibility to reliably make the estimates necessary to recognize product revenues will be in the second half of next year. After accounting for all fees, rebates and other discounts, the net sales price that we expect to recognize on sales of RAYALDEE will be around $550 per unit or approximately 65 of our anticipated vac.

We expect after factoring in fees to distribution partners, group purchasing organizations, mandated government discounts and the discounts that we expect to be earned on our value based contracts with providers that the net sales price we will realize will be approximately 55% to 65% of the vac price over the life of the product. However, throughout 2017 as we establish RAYALDEE's position in the marketplace, we expect the net price that we will be able to realize to be at the low end of that range.

We are currently in negotiations with the top 8 Medicare part D plans, the top 5 Managed Care plans and the top 4 pharmacy benefit managers to have RAYALDEE added to their formularies. While we expect there maybe some utilization management restrictions initially, we have a number of access programs to help to mitigate any potential impact including a patient assistance program. We anticipate obtaining coverage and reimbursement from both commercial payers and part D providers starting in the first quarter 2017.

I'd like to turn the call back to Phil.

Phillip Frost

Thank you, Adam. Well as you heard me say in previous session of the story, the most important part of the company is its people. And during this last period, we have added several people that will be important going forward. One is in the Bio-Reference GeneDx unit which needed a new director and we've hired Dr. Ben Solomon to head this unit. As you know GenDx has been a rapidly growing, successful part of Bio-Reference and under Ben Solomon's guidance we think that we have a good shot and continuing the growth that we've enjoyed in the past.

We've also had the benefit of adding Jane Pine Wood to our staff. Jane has been largely known around the country as a consultant to other diagnostic companies for her expertise in dealing with compliance issues. As you know, compliance is a very important part of that business because it's very easy to get into trouble not because you are intending to do anything wrong, but because of it's so easy to make a mistake in your billing practices. And so it's very important to us to be very strong and having a good record with the payers in that regard and Jane will help us immensely.

On the marketing and sales side, we brought in Tom Nusbickel who in my opinion is one of the best marketing people I have come across in the industry. But more important he's thoroughly familiar with the nephrology business, knows the important players, knows the distribution channels and knows the subtleties of making a business like that successful and helping him to achieve that success we’ve hired James DeMarco, who has also had strong experience primarily in selling products for the nephrology market.

So together, they have succeeded in putting together a significant team, the likes of which I haven’t seen before. So I am very optimistic as everyone in OPKO about the future for RAYALDEE and hats off to Charlie bishop for having made all this come about.

Finally, I would like to expand a little bit on the animal health unit that we’ve created because to me this is really interesting and that it makes use of assets that we’ve already had in different parts of our company. As you know we have a unit in Ireland called EirGen, which is especially equipped in make very potent chemicals that need to be handled in special ways and examples of these are chemotherapy drugs.

Now, there are a couple of chemotherapy drugs that are in common usage in animals that they have developed and we’re in the process of getting them approved. Our Spanish company has a large line all products for animals that are sold over the counter and we are preparing to market these in United States.

So, we expect our first sales for our animal health division to begin early in 2017 and I can tell you talking about people that directing this unit and actually responsible for its conception is Jane Hsiao who was extremely successful in building a veterinary business for our IVAX Corporation in another life. There she took a business that had $10 million in sales and was losing money and took it all the way to a business that was doing hundreds of millions of dollar in revenues and profitable at every stage.

So we are very optimistic about this unit as I say it’s all about the people and I think we have a very well position for success in just about every area which we are dealing.

So I want to thank you for joining us and we look forward to your questions.

Question-and-Answer Session

Operator

[Operator Instructions]. And our first question is from the line of Dana Flanders with JPMorgan.

Dana Flanders

Hi, thank you for the questions. Just my first one on the 4Kscore, so just with the local covers decision from Palmetto now finalized just what are your steps forward there? Is that just you are going to try to provide additional data to try to get them to reverse the decision or just some additional clarity on what you can actually do? And then secondarily would you expect that decision to impact Novitas at all or are those relatively independent in your eyes? And then I have a follow-up.

David Okrongly

Hi Dana, this is Dave Okrongly I’ll take the question. So, with Palmetto the idea is to provide them with new information the literature is continuing to evolve on 4K in a very positive way. As you recall one of their issues was PSAs greater than 10. In the journal of urology in September this year there was a fine paper published about the 4Kscore and it’s used in men with a positive DRE or PSA between 10 and 25. And obviously the conclusion of that paper was that the test performed very well there as it had in our prospective clinical trial in the United States.

We also have another paper that came out it’s a retrospective study, but it’s a very important cohort it’s the prostate long colorectal ovarian group and again the 4Kscore test preformed exceeding well in this group of men which was actually coincidently a group of men that was part of the invention arm of that study and it was a very import study for looking at PSA as a screening test.

We performed very well on that study as well, all this new data is going to be presented to Palmetto so that we can continue to provide additional evidence to get them to overturn the negative coverage decision. With Novitas we’re working with them and as Steve mentioned we expect the February review cycle to be the next time we’ll hear from Novitas and we’ve provided them with lots of information that we think more than adequately demonstrates the reason why Medicare is and should continue to pay for the 4Kscore test.

Dana Flanders

Okay, great. And then just my second one in terms of just the 3Q revenues can you just talk about the pushes and pulls there? I think we were expecting a little bit of a stronger quarter from BRL services, so was that just seasonality or something else we weren’t factoring in? Thank you.

Adam Logal

Hey Dana its Adam. So I think from a quarter-over-quarter basis BRL was -- went from $266 million last quarter to $260 million this quarter. not a substantial swing one way or the other I think we did see lighter volumes, but I don’t think there is a trend forming there it’s just more of a late summer seasonality issue more than anything. And I think as we continue to think about Bio-Reference going forward the double-digit patient volume growth is on an annual basis is really what we’re expecting to see going forward.

Dana Flanders

Okay, thanks.

Operator

And our next question is from the line of Yale Jen from Laidlaw & Company.

Yale Jen

Good afternoon and thanks for taking the questions. First question is that giving your new endeavor in animal health space could you elaborate more in your strategic intent and sometime more specifically regarding what you anticipate this operation to potentially achieve let’s say in two or three year timeframe? And I have another one follow-up.

Phillip Frost

So we have Jane Hsiao to respond.

Jane Hsiao

OPKO Spain we have roughly about 50 different products for the companion animal use. So this first wave in first quarter next year that we have work out order labeling things like that for the U.S. market that will be introduced it’s only portion of that 50 plus products. So we’ll continue to import directly from OPKO Spain to the U.S. market.

And continue on that the opportunity with the oncology product coming from EirGen actually is kind of interesting situation the oncology product for the veterinary use FDA have a system it’s very similar to orphan drug, but the beauty of that FDA’s regulation, as long as you have shown that the molecule by the way all these molecule are generic of pattern molecule. So once you show that there is use, a utility in the animal healthcare you can apply for minor species minor use.

It’s basically once you get FDA to agree it is indeed a minor use meaning orphan you can actually start selling the product while you are doing the clinical efficacy trial. So we have identified couple of products like that that we’re planning to have clinical study initiated next year and possibly selling it at the same time. So those are the type of opportunity we see there. And the market or the product portfolio from the OPKO Spain actually cover different area.

There are group of products for joint, there are group of products for dermatological use and then there are group of products for general supplement. So plenty of opportunities for us in the older DVN product line and basically we can recreate it overnight. The way the business work in the United States basically relying on the distributors they’ll have their sales force which we still maintain the close relationship with them that’s why we were able to introduce the product in a relatively short time.

Yale Jen

Okay. Thanks that’s very helpful. Maybe I wonder whether there is any comment potentially regarding what do you think from revenue perspective that what will be more optimal outcome let’s say in two, three years' timeframe?

Jane Hsiao

Well it’s too early to tell though but we’re looking at the millions of dollars for sure. To give you an example there is a product in the market for oncology is for companion anymore. If the size is in the tens or millions like $20 million is a big product. And we do see opportunities like that.

Yale Jen

Okay, thanks. And just last follow-up question on the drug development side that for the Transition acquired two products from Transitions. Could you give us a little bit more color in terms of the timeline to start these clinical studies and maybe more specifically on the indication and expected endpoints -- of the studies.

Phillip Frost

I'll ask Jane to respond there. Yeah thank you.

Jane Hsiao

We can ask Tom to do that.

Unidentified Company Representative

Okay I'll take that, thanks. Well the TT701 is a diabetes which is dual agonist. That as mentioned earlier went through a Phase 2 where it showed good data in terms of weight loss as well as HP1C. The plan now is to take it to a phase 2b study where we're going to look at a dose escalation, which is traditionally used with this class of molecules to improve weight loss and also HP1C but as well as also reduce things like nausea and vomiting in this particular class of molecules.

And so we expect that right now we’re manufacturing material, as well as also looking at the device that we would use. And we expect that work to be done by mid-2017. And so we do expect that to move into the clinic around that time, although we're just now initiating the manufacturing.

For SARM, similarly we did work on the Phase 2 in elderly males where we showed significant increases in muscle as well as in physical function and the loss in fat and really with no changes in PSA or slight decreases. And the key to this molecule is that it also shows the relatively potent antagonistic feature towards the prostate.

And so the plan here is to develop a Phase 2 or to start the Phase 2 study for to examine its selective antagonistic effects to reduce prostate hypertrophy, as well as at the same time provide the anabolic therapeutic effects that aging males often have, which is the decrease in muscle as well as increase in fat. This study is also expected to begin in mid-2017.

Yale Jen

Okay, thanks a lot. Appreciate it.

Operator

[Operator Instructions]. We do have a question from the line of Kevin DeGeeter with Ladenburg.

Kevin DeGeeter

Good afternoon guys, congratulations on the progress. I want to follow-up on the earlier question with regard to volume trends at Bio-Reference. And did you see generally similar type of growth trends throughout the third quarter. Did you see different level of activity and say July and August perhaps a return closer to trend line in September. And just general thoughts of what kind of volume trend you're seeing as we move into Q4?

Steven Rubin

Kevin so we did definitely see a rebound in volumes in October compared to July and August timeframe. It was the slight pickup in September. But we're turning back to our kind of expectations for that to support that double-digit patient volume growth.

Kevin DeGeeter

Okay great. And then maybe one for Charlie and his team. Charlie as we begin to think about potential mechanism to payers can use to at least initially control access to RAYALDEE. Should we think if those as primarily relating to step therapy where patients will have had to failed a given therapy. And if so what therapy should we think is more sort of remain to building out a step therapy, or should we think about other mechanisms for prior authorization other tools for controlling initial access?

Charles Bishop

Hi Kevin, thank you for your question. We think the mostly likely type of control that payers would use would be a step edit with the requirement that patients fail on nutritional vitamin D prior to moving to RAYALDEE.

We don't think this is going to be a significant barrier for RAYALDEE because survey show that about 75% of patients for stage 3 or four chronic kidney disease are on nutritional vitamin D. and we know that almost the whole of these patients have failed quickly or failed eventually.

So we don’t think this is going to be a significant barrier for us. Our research with the payers would indicate that prior authorization may not be imposed, but we won’t know until we lowered our pricing [indiscernible].

Kevin DeGeeter

Great, thanks so much. I’ll get back in the queue.

Operator

And we have no more questions in queue. Dr. Frost, do you have any closing remarks.

Steven Rubin

This is actually Steve Rubin. So, I just want to thank again everyone for attending the conference and we’re extremely excited as you could tell by the OPKO RAYALDEE launch and stay tuned.

Operator

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.

Recommended For You

Comments (11)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.