Portola Pharmaceuticals (PTLA) CEO Scott Garland on Q3 2018 Results - Earnings Call Transcript

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About: Portola Pharmaceuticals (PTLA)
by: SA Transcripts

Portola Pharmaceuticals (NASDAQ:PTLA) Q3 2018 Earnings Conference Call November 7, 2018 4:30 PM ET

Executives

Cara Miller - Vice President of Investor Relations and Corporate Communications

Scott Garland - President and Chief Executive Officer

Mardi Dier - Executive Vice President, Chief Financial Officer

John Curnutte - Executive Vice President, Research & Development

Jeet Mahal - Vice President of Marketing and Business Development

Analysts

Dana Flanders - Goldman Sachs

Yigal Nochomovitz - Citigroup

Matthew Phipps - William Blair & Co.

Jay Olson - Oppenheimer & Co. Inc.

Vamil Divan - Credit Suisse

Kenneth Atkins - Cowen and Company

Operator

Welcome to Portola Pharmaceuticals Conference Call. This call is being recorded. At the end of the company's prepared remarks, we will open the call for questions and provide specific instructions.

I would now like to turn the call over to Cara Miller, Portola's Vice President of Investor Relations and Corporate Communications. Please go ahead.

Cara Miller

Thank you, and welcome to Portola's Third Quarter Financial Results Conference Call. Joining me are Scott Garland, President and CEO; Mardi Dier, Chief Financial Officer; and Dr. John Curnutte, Head of Research and Development. Also with us this afternoon for the Q&A portion of the call are Glenn Brame, Senior Vice President, Technical Operations; and Jeet Mahal, Vice President and the Andexxa Early Supply Program lead.

Before we begin, I would like to remind you that remarks on this call will contain forward-looking statements. A more detailed description of important risk factors that could cause our actual results to differ materially, please refer to our most recent quarterly report on Form 10-Q and our annual report on Form 10-K.

With that, I will turn the call over to Scott Garland.

Scott Garland

Good afternoon, and thank you for joining us on our third quarter 2018 financial results call. Before we begin, I'd like to share how excited I am to join Portola at such a pivotal moment in the company's history. It is incredibly rare for a company at this stage to have two potentially lifesaving medicines on the market, and another therapy in late-stage clinical development.

Andexxa, Bevyxxa and cerdulatinib, they were all discovered and developed here, and each uniquely addresses significant unmet needs. What drew me to Portola is its strong scientific foundation and the opportunity to potentially save patients' lives. I was also impressed by the caliber of our employees, and the strength and commitment of the executive team.

As this is my first opportunity to chat with you, I'd like to tell you about my early observations of Portola and my immediate priorities. Let's start with Andexxa.

Since joining I've had the chance to dig deep into the [division] [ph] market research and speak with a number of clinical thought leaders, and it's clear that Andexxa has a significant potential to address life-threatening bleeds.

Mardi will give you more details later in the call, but early interest in Andexxa remains high and we continue to receive numerous inbound inquiries from physicians and healthcare assistants. As you know, under the leadership of John and Mardi, the company executed a pivot in August to focus a greater portion of our resources on Andexxa. This was a critical move and I fully endorse this change in direction.

With just a few months into launch, we're already pleased with what we're seeing from utilization perspective and we're excited about the opportunity to educate the physician community fully on the important role Andexxa can play in their hospitals. Our top priority of Portola is Andexxa, ensuring the approval of the Gen 2 supply and a successful launch.

While we still believe that Bevyxxa is a best-in-class Factor Xa inhibitor, overcoming the many barriers that exist in the hospital market remains a challenge and revenues continue to lag behind our expectations. As you know, we've now focused our approach from Bevyxxa. We've tightened our resources to a small number of high-potential accounts to see if we can crack the code for driving use of Bevyxxa.

As Mardi mentioned at the Morgan Stanley conference call in September, we call this our Centers of Excellence program. We believe this tight focused effort will provide insights into how we might ultimately unlock the full potential of Bevyxxa. And we look forward to sharing key learnings from this approach in the future.

Importantly, as a result of our change in focus to prioritize Andexxa, we've been able to extend our cash runway into the first half of 2020. Mardi will talk more about this later. I'm excited to get on the road with the team over the next couple of weeks to attend medical and investor conferences. Then with a few more months under my belt, I'll share my broader vision for the company during our J.P. Morgan presentation.

Before I finish I want to add one more thing. On behalf of the entire organization, I want to say thank you to John and Mardi for their thoughtful leadership and guidance during this period of change. Managing Portola through a transition like this took a lot of hard work and strong leadership.

I look forward to working with them and the rest of the executive committee in making Portola a highly successful company. So, Mardi and John, a huge thank you for all your efforts.

And with that, I'll turn it over to Mardi.

Mardi Dier

Thank you, Scott, and welcome to the team. We're very excited to have you here and look forward to partnering with you in this next critical phase in the company's evolution. And, good afternoon, everyone. I am pleased to provide you with an update on our progress this quarter and share some new insights on our Andexxa launch.

The market opportunity for Andexxa remains significant. We estimate that more than 4 million people in the United States are currently taking a Factor Xa inhibitor, and we expect that number to continue to grow at strong double-digit rates.

Among these patients, we estimate that approximately 3% will be admitted to the hospital with a Factor Xa inhibitor related bleed. In 2017, that equated to approximately 140,000 hospital admissions in the U.S. alone. Based on third-party data, we also estimate that up to an additional 1% of these patients may require emergency surgery, further increasing the overall opportunity for Andexxa over time.

As you know, Q3 marked our first full quarter of launch for the Andexxa Early Supply Program. And we are very encouraged by the demand from the participating hospitals. We've also had a strong response from medical societies, three of which added Andexxa to their guidelines and guidance documents in advance of approval.

The American College of Chest Physicians recently became the fourth society to add Andexxa to its guidelines and we expect more to follow.

Now for more specifics on the ESP or Early Supply Program. We've been managing the ESP to ensure we are getting our Gen 1 supply to as many patients as possible. Since launch, we've been able to release more Gen 1 supply than we anticipated. And we have a better understanding of the ordering patterns of the participating hospitals.

As a result, starting in late August, we determined we could expand the ESP to include additional sites that were requesting Andexxa. To date, more than 100 hospitals have ordered Andexxa. More importantly, even at this early stage of the launch, approximately 40% of these hospitals have already reordered.

We believe the success we are having in getting formulary approvals, orders and reorders is setting us up nicely for the anticipated launch of Gen 2 in early 2019. Additionally, the CMS new technology add-on payment or NTAP, which went into effect on October 1 will be beneficial for hospitals, as it provides direct reimbursement from CMS of up to $14,000 per claim.

During this first full quarter of the launch, we have observed that it takes - we observed that the time it takes to get hospitals up and running is variable among institutions. With some being fast adopters and others needing to go through a more protracted process.

We anticipate this variability to continue once Gen 2 is approved. The takeaway is we are experiencing strong hospital activation and we are seeing routine utilization trends that are very encouraging. We have a number of exciting milestones ahead, including the FDA PDUFA date of December 31, 2018 for our Gen 2 process and the CHMP opinion, which we also expect by the end of this year.

In preparation for an anticipated positive outcome in the U.S., we are moving ahead with plans to increase our U.S. field-force in early 2019. While our focus is on the Andexxa U.S. market, we continue to assess our European launch strategy as we approach the CHMP opinion date.

Our plan is to move forward with an initial launch in a handful of countries, where pricing and market access are more predictable, and where Factor Xa use is the highest. As in the U.S., we will initially target high-volume stroke and trauma centers. In parallel, we will be evaluating partnership opportunities in Europe and elsewhere. We will provide further updates on our launch strategy upon EMA approval anticipated in early 2019.

Overall, we are excited by the progress this quarter and remain very positive about the future of Andexxa. This early launch period is providing great insight into the demand for Andexxa, the approval process at our target hospitals, and the encouraging result that reflect the ordering and re-ordering patterns of Andexxa at the hospitals that are up and running.

Now, briefly on Bevyxxa. As Scott mentioned, we are narrowing our focus to a small targeted group of hospitals that have Bevyxxa on formulary. We are calling these hospitals our Centers of Excellence. And our goal in 2019 is to establish a blueprint of success for Bevyxxa within the hospital and outpatient settings. Experience within the centers of excellence will help us make a strategic decision on how best to maximize the benefit of Bevyxxa, and as we stated on the second quarter call during this evaluation period in 2019, we expect revenues to remain the same as prior quarters.

I will now turn it over to John for an update on our R&D activity.

John Curnutte

Thank you, Mardi, and good afternoon, everyone. In addition to our work progress with the Early Supply Program, which Mardi has just outlined. We also accomplished a number of clinical milestones during the quarter. First, we are on track for the December 31, 2018 PDUFA data for the anticipated approval of our Andexxa Gen 2 manufacturing process. In fact, we just received notification from the FDA that the PAS was deemed okay to file.

Today we have successfully manufactured enough Gen 2 supply to meet anticipated demand for the next couple of years. We have also finalized the protocol for the randomized clinical trial the FDA request, which compares Andexxa to the standard of care including PCCs. We are on track to initiate the study and to dose our first patient in Q1 of 2019. We are also developing a registry that will deliver important real world data, once the broader Gen 2 supply is approved. We plan to launch the registry in Q1 2019 and look forward to updating you on our 2018 full year financial results call.

Finally, we expect to present the full ANNEXA-4 results in a major medical meeting sometime in the first quarter of next year. And we are hoping for a simultaneous peer reviewed publication and a prestigious medical journal. Now upon completion of these milestones, we will continue moving forward with our plans to evaluate strategies to expand our label. Importantly, we plan to initiate a study for patients on Factor Xa inhibitors needing emergency surgery in 2019.

I will now turn to Cerdulatinib, our Syk/JAK kinase inhibitor, and the third compound discovered in our laps. I'm excited to share our progress with this compound and the encouraging ongoing clinical activity we're seeing across a range of B- and T-Cell malignancies, particularly in the T-Cell lymphomas. These include peripheral T-Cell lymphoma or PTCL and cutaneous T-Cell lymphoma or CTCL to difficult to treat blood cancers, for which there are limited treatment options.

We were pleased to hear from the FDA in late September that the agency had granted cerdulatinib Orphan Drug Designation status from PTCL. This is an important designation for the program. And just last week, we announced that we will be presenting new interim data from our Phase 2 study during an oral presentation at the American Society of Hematology Meeting in San Diego on December 3. The oral presentation will include additional data beyond what is in the abstract, including greater patient numbers, duration of response and the impact of cerdulatinib on the resolution of cutaneous and nodal lesions.

Based on these data in recent feedback from the FDA, we believe there may be an accelerated approval pathway for cerdulatinib and certain tumor subtypes. We look forward to continuing discussion with the FDA, including our end of Phase 2 meeting targeted for Q1 2019 to determine the regulatory path forward.

I will now turn it back to Mardi for the quarterly financial reports.

Mardi Dier

Thank you, John. Total revenue for the third quarter was $14.2 million, this includes $7.7 million in product revenue for our first full quarter of Andexxa sales and $7 million in collaboration license revenue. Please note that based on the terms of these partnerships, we expect minimal contribution from these collaborations in 2019. As we projected on our second quarter, Bevyxxa product orders remain relatively flat during the third quarter. However, we've recognized the net product loss for Bevyxxa during the quarter $552,000. This adjustment was primarily related to potential returns of initial launch quantities provided to wholesalers.

Net loss for the quarter was $71.3 million or $1.08 net loss per share, an improvement from the previous quarter, primarily due to the timing of Gen 2 Andexxa manufacturing and reduction in Bevyxxa spending. Our total operating expense for the third quarter was $83.3 million, down from $107.7 million in the second quarter, driven primarily from the timing of Andexxa manufacturing, and further spend reduction. This number also includes $11.4 million in stock-based compensation expense.

Cost of goods sold for the quarter was $4.3 million with our refined sales estimate for Bevyxxa, we took a $2.9 million charge in the third quarter related to Bevyxxa manufacturing. Research and development expense was $40.2 million for the third quarter of 2018, a decrease of $26.2 million from the second quarter, again mainly driven by the timing of Andexxa Gen 2 manufacturing and overall spend reduction.

Approximately $12 million or 30% of R&D expense for the quarter, and $75 million or 45% for the nine months year-to-date of total R&D expense was related to Andexxa manufacturing. Upon anticipated FDA approval of Gen 2, Andexxa manufacturing costs will be capitalized and no longer flow through R&D expense.

As a result, we anticipate decreased R&D spend in 2019, but as discussed 2019 R&D will include clinical cost for the randomized controlled study, and Andexxa label enhancing work like the surgical study John discussed.

Additionally, until we have further clarity on our ongoing strategy for Bevyxxa and our potential path forward for cerdulatinib, both remain a small percentage of total R&D expense. SG&A expense for the third quarter was $38.8 million consistent with the prior quarter. We expect an increase in SG&A in 2019 to reflect the expansion of the sales force and associated commercial spend with the Gen 2 Andexxa launch.

Today, we are improving our operating expense guidance for 2018 to a range of $355 million to $365 million, down from our prior stated range of $390 million to $430 million. This spend improvement reflects a reduction in spend on Bevyxxa as well as additional savings for the year.

Cash, cash equivalent and investment for at September 30, 2018 totaled $380.9 million compared with $534.2 million at December 31, 2017. As a result of our strategic decisions and cost management, we've extended our cash runway into the second quarter of 2020, while still making important investments to grow the top line overtime. This includes spend for the success of our potential near-term catalysts, which includes the FDA approval and launch of Gen 2 Andexxa product in the U.S.; the positive CHMP opinion and EMA approval for Andexxa and associated launch readiness in Europe; and our End-of-Phase 2 meeting with the FDA and clarity on our regulatory path forward for cerdulatinib.

And with that, I'll turn it back over to Scott.

Scott Garland

Thanks, Mardi. In closing, we remain excited about the future of Portola. In the first nine months of 2018, we've gone through a significant transition of the company and we're starting a new chapter of leadership with the solid foundation. We bolstered our operational capabilities by making several key leadership hires, and I'm looking forward to working with the new executive team to achieve our goals. As you've heard on the call today Andexxa is our top priority, and we're encouraged by the early uptake, we're seeing in the market.

In addition, we limited our Bevyxxa efforts to a small number of target accounts, and as a result, we've been able to improve our operating expense in our cash runway. And finally, I'm excited about the early signs of clinical activity for cerdulatinib. More work needs to be done to flush out the development pathway, and until then, it remains a relatively small part of our R&D spend.

I want to thank you for your continued interest in Portola. I look forward to meeting you all in an upcoming investor conference or medical meeting. Now, with that, I will turn it over to questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from the line of Dana Flanders with Goldman Sachs. Your line is now open.

Dana Flanders

Hi. Thank you very much for the questions. Can you just flush out a little bit? I think you said 100 hospitals you were able to expand to. What are you seeing across these accounts? Are they limited in what they can order for Andexxa? And as they gain more experience, I mean, are you seeing month-over-month growth in ordering? And that's my first one. Thanks.

Scott Garland

Thanks, Dana. This is Scott here. I'll turn that question over to Jeet, who is running our Andexxa Early Program. Jeet?

Jeet Mahal

Yeah, thanks, Scott. Dana, so as Mardi mentioned, we have over 100 hospitals now that have stocked Andexxa post the focus changing to Andexxa in late August. About 40% of those have reordered. So it's still early in terms of being able to take a look at the data and make projections on where we're going. But we're very encouraged by what we see so far from those hospitals.

As you know, the label is for life threatening and uncontrolled bleeding. And what we've seen from these hospitals that have shared protocols is that protocols follow the label very well. Like all drugs though, in the initial usage, the physicians want to use it in kind of the most clear subset of patients. So we do think some of that early usage is more focused on the internal hemorrhage patients. And they'll probably change as they get more comfortable with Andexxa over time. But again, their protocol seem to follow the labels, they will be able to do that.

Dana Flanders

Okay, great. And then, my follow-up, just on the discussions you're having with formularies and I know you said some of them are a little bit longer than others, what's driving that? And as you look out into 2019 and you get Gen 2 approved, how does that impact how you plan to roll out Andexxa to those 1,000 hospitals? And I know that will be over a multi-year period. But maybe just think about how - or discuss how that is going to impact your kind of commercial strategy as you get expanded supply. Thank you.

Scott Garland

Yeah, as you noted, we do see activation time for these stocked accounts to vary from weeks to months. And I don't think we're surprised by that at all. Hospitals are very complex institutions. And some of them have multiple committees, where they have to go seek approval for as they were writing the protocol for Andexxa. And then they get a turnaround and implement it in various spots in the hospitals.

So those institutions, it'd just take them longer. And a lot of those institutions tend to be the big academic centers. And what we've seen in our Early Supply Program is this variability. The important part is though, again, from the - now, over 100 hospital stock, we do see many of these hospitals are able to get up and running, and running very quickly with the protocols that support the use [on call] [ph] label.

So we expect that to continue next year as we target more accounts. So going into the second part of your question, in terms of the Gen 2 rollout, we're - we have multiple tiers. And we've I think discussed this a little bit previously. The tier 1 or our first set of targets are about 600 U.S. hospitals are Level I or Level II trauma centers or have Comprehensive Stroke designation. So those are the biggest institutions across the country. The next tier of about 900 additional accounts, additional hospitals were the Advanced Stroke Center designation.

So those are all pretty important accounts for us. And then finally, from what we've seen in the Early Supply Program, we also want to be able to stock affiliates of these accounts too, because oftentimes patients might present to an affiliate account. That's where we want the drug to get started, if they're showing up there. And then they're transferred to the larger account. So we'll be going on next year to target as many as we can.

But that's basically how we see the universe. We think a portion will be up and running by the end of 2019. And that the new site activation rate will be roughly consistent with what we've seen across the first 6 months of the ESP program. So we expect it to be a - kind of expanded, but continuous process that we've seen so far.

John Curnutte

And maybe, Dana, just to add one more thing, obviously, we're still early in our launch. We're just getting our marketing and sales efforts up and running. But so far, we're very encouraged with what we're seeing.

Dana Flanders

Okay. Thanks and congrats on the progress.

Scott Garland

Thank you.

Operator

Thank you. And our next question comes from the line of Yigal Nochomovitz with Citigroup. Your line is now open.

Yigal Nochomovitz

Hi, guys. Thanks for taking the questions. So maybe the first one for me is regarding the 100 hospitals that have now ordered the product, it would be helpful if you could just provide a little bit more granularity in terms of how that is working. So I assume a subset of those are the fast adopters and then a subset are the ones that have had slower adoption.

Could you just give us some clarity on how that breaks out? What percent of those 100 hospitals are in the bucket that are still working through the protocols, although they have the drug they're not able to use it yet? Thanks.

Scott Garland

Jeet, go ahead.

Jeet Mahal

Yeah, hi, Yigal. So, yeah, over 100 hospitals are now stocked. And that's been a big jump from where we were on the last call in terms of the delta, in terms of the number of hospitals. So it's a little early to really I think put them in buckets. So most of those hospitals have done so in the last 6 to 8 weeks, right, so as we did the post pivot. So I don't know if we're ready to qualify those 40% or the 60% that haven't started using it as slower adopters.

Yeah, we'll just have to wait and see. But again, we are encouraged by getting this much interest so quickly in the product and even without a significant expansion of the sales-force yet, which we plan on next year or other commercial activities, which we plan on growing next year. So Yigal, just early I think to try to bucket them into different accounts or typing by time?

Yigal Nochomovitz

Okay. On the $7.7 million for the quarter, can you just give us a sense as to what percent of that was drug that was actually administered to patients versus what is ordered and waiting to be used?

Mardi Dier

Yeah. So, Hi, Yigal. This is Mardi. I think, what we said on the call, which is the best proxy for answering that question, is that we have over 100 hospitals that have drug and approximately 40% there are starting to reorder. Reordering in our view is a proxy for usage, so I think we talked in the last call, these hospitals - now remember all these hospitals know that there is a finite amount of supply. So they're stocking a certain amount, they're using it carefully at least that for this anecdotally, like, they know they may not be able to get as much supply as they want.

But then they do reorder, we've been able to drop ship to drive to them on an overnight basis. So it's all very efficient with these hospitals, right now.

Yigal Nochomovitz

Okay. And then more generally in terms of the demand trajectory looking into 2019. I don't know if you're able to do it now, but we'd be very interested in getting a sense as to how you think about the number of uses of this product at the different hospitals are you targeting both the urban centers and the more regional centers. Can you just provide some color on the range of expected use per month that would be helpful just the people to think about the trajectory? Thanks.

John Curnutte

Yeah, I think, you noted that we do expect that there is going to be a distribution depending on the type and location of the hospital. And a lot of these smaller affiliate sites, we don't expect to have tremendous volume as there is our areas smaller areas in terms of population. The other thing we want to make sure is that you're overlying that on Xa usage, right. So in the particular hospital will depend on the local Xa use patterns as well. But so far, we're really encouraging, what we've seen in terms of reaching the utilization, as Mardi noted.

We're not - these hospitals as far as we know aren't stocking drugs just to put on shelves or using it, and they're using it once they get up and running pretty regularly. At this point, I don't think, we have enough data to really project how that's going to play off across the expansion next year across United States, so far it's been very encouraging point.

Scott Garland

And maybe - I know - sorry. This is Scott. We anticipated we get a lot of questions about detail of usage patterns, so far. But we really need to be careful this is still very early in a launch, we're quite excited about we are seeing from a utilization perspective as Mardi said, anticipate a lot of just talking, I don't think a lot of hospitals are going to order product as much and let it sit on the shelf and it's a drop ship model.

But when it comes to any detail specific questions about 2019, we really don't want to get into that right now, just because we don't want to get ahead of ourselves. Hopefully you understand that, Yigal.

Yigal Nochomovitz

Yeah. Understood. And then just one final one, when you talk about the 600 hospitals and then the 900 additional in 2019. Are you including be the IDNs in that or those are all individual hospitals?

Scott Garland

Yeah. Great question, yeah. That does include hospitals that are within IDNs. So there will be a separate effort within that those targets as you know, the IDNs many of them have a longer involve process in terms of making sure that they are approving on an IDN basis.

Yigal Nochomovitz

Okay. Got it. Thank you.

Scott Garland

Thanks, Yigal.

Operator

Thank you. And your next question comes from the line of Matt Phipps with William Blair. Your line is now open.

Matthew Phipps

Yeah, thanks for taking my question. And, Scott, welcome and look forward to meeting you soon. First, John you mentioned the CHMP opinion by year-end, but can you just, say, if everything's been submitted where you anticipate being include in the CHMP in the next week or you target in the December meeting?

John Curnutte

Yeah. Everything has been submitted, Matt, and pretty much everything has been right on time, as we have worked out with CHMP. The - as you know there is a fair amount of information that they have to review in our current thought is that this will be an opinion in December, end of the year as we've been saying.

Matthew Phipps

Got it. Thanks. And then, do you kind of touched on this, but there was a recent publication from bring to women's hospital on their initial use of Andexxa and also provided there are on institutional criteria use guidelines. Do you feel like that is pretty typical for the hospital so far in the early supply program and might translate to most of those kind of Tier 1 600 hospitals that you've been talking about upon the supply expansion?

John Curnutte

Yeah so - yeah, that's what we're referring to, that type of protocol is in line with the label for Andexxa, and that is what we're seeing across many of the institutions that are sharing them with us. So we do really see that the unmet need is there, right, I mean, not just with these intracranial patients, where we know the morbidity and mortality, so high. But also these other life threatening situations. So we really do think that this is a being viewed as a breakthrough therapy by these hospitals and feeling a critical need.

Scott Garland

Yeah, Matt, maybe just to add something to that, I've been involved a lot of drug launches you often see utilization in the early phase of the launch of the most high risk patients. And its decision to build comfort with the drug, you would expect utilization to broaden thereafter. I think, what we're seeing in the green papers essentially what we were expecting at this point.

Matthew Phipps

Okay. Thanks. Just one last one, Scott. I know, you're still early days there's probably kind of feeling things out. But if you could give your personal longer term thoughts, obviously focusing on Andexxa now in the U.S. getting the PAS. But in Europe, you guys have talked a little bit about maybe select countries for its licensing, cerdulatinib interesting, but can you afford the concept this point or do you have to wait on that a little bit, just because of the capital situation. Just any high level thoughts you can provide at this point. That would be helpful.

Scott Garland

Yeah, it happened to me, I meant, so obviously right now it's first and foremost Andexxa utilization on the United States and delivering solid revenue quarter-over-quarter and demonstrating our executional excellence in that regard. We obviously talked about the Bevyxxa being moved into a more centers of excellence focused approach, and I'm completely on board with that strategy. And again with cerdulatinib, I'm excited being an oncology guy actually I think that's an active drug and is something that I think has activity beyond the initial T-Cell lymphoma. I'm sorry, you see that as a product move forward. But obviously it remains a pretty small piece of our overall R&D spend, that we get a better sense.

As it relates to Europe, as Mardi said on the call is essentially a strategy, we're going to go after the larger select markets, where we think the factor Xa is used to significant and just to point out in Europe right now. Factor Xa is used as 50% higher than it is in the United States. So there's a real market opportunity there, a little after smaller markets - I'm sorry, larger markets, when we think there is high factor Xa as well as we better access to pricing and market access.

At the same time, we are going to be discussing in parallel partnership opportunities, will be those in unison. And we'll see where those conversations take place. We have seen the CHMP opinion that we're hoping to get in the end of the year, we start to executing against that.

Matthew Phipps

Thanks, Scott.

Operator

Thank you. And our next question comes from the line of Jay Olson with Oppenheimer. Your line is now open.

Jay Olson

Thanks for taking the questions. I think, I understood that you said 60% of hospitals that are not reordered Andexxa have not started using it. Can you just talk about what the average quarter sizes per hospital in terms of the number of doses are in the order?

Scott Garland

Jeet, do you want to take that?

Jeet Mahal

Yeah. So I think in terms of the initial order, as Scott mentioned, there's no real incentive for the hospitals to put a lot of drugs on the shelf, right. So when we do see them is starting with a couple of doses, right. And then any time they use it, that's when they can just reorder and we drop ship and it comes to straight to them, but then 24 hours or so. So the reorders are the frequency we think that is roughly equivalent with the use and can range from anywhere from one pack to remember each pack has four vials of drugs, right. So they have to order or about on quantity to a few packs. But again they can do that any days a week, Monday to a Friday. And we drop ship it. So it's pretty constant.

Scott Garland

Maybe with the point there is that, we're obviously on an upward ramp as we activate these accounts, some of these are come on relatively recently. So with this is something, we're going to see continuing over time as these accounts mature.

Jay Olson

Okay. Thank you. That's very helpful. And then, whether the hospitals that have used Andexxa, I think you touched on this. But I didn't hear, if you gave a percentage of the patients, who've received Andexxa that have ICH bleed?

Scott Garland

Yeah. As we mentioned, we don't have a formal way of collecting the data, it's anecdotal at this point as [Dr. Fee] [ph], where we're starting a registry will be able to have better insight into patterns of use, once set up and running. We start to getting do that - from that. So anecdotally, as Scott mentioned that the physicians are early part of their experience curve with this drug. And a large portion of the use is intracranial hemorrhage that we do see or been told of uses outside of intracranial hemorrhage. So we do believe that that's very important again for this drug to be use in any of these life-threatening and uncontrolled bleeding situations.

But early days, the hospitals, how physicians there tends to start with the intracranial hemorrhage patients.

Jay Olson

Okay. Great. Thanks for taking the question.

Scott Garland

You're welcome.

Operator

Thank you. And our next question comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open.

Unidentified Analyst

Hi, this is Hannah on for from Matthew. So we know you're probably not going to give us too detailed expense guidance for 2019, right now. But we were hoping you could elaborate a bit on the puts and takes are, when it comes to 2019. So how much spending do you need to complete for Andexxa either through R&D or manufacturing versus where some areas of variable cost? Thanks.

Mardi Dier

So I think, I did a pretty good job outlining that in the script. So when we talked about R&D, we said that most - good portion of R&D year-to-date, which for Andexxa manufacturing. And that will be capitalized starting with Gen 2 approval. So you do expect Gen 2, I mean, R&D expense to go down in 2019, however. We will have increased clinical costs for Andexxa that looks like the randomized controlled study and label enhancing study that John talked about such as the surgical study, so that's R&D.

And then for SG&A, we've said that SG&A will expand with commensurate with the expansion of the sales force that we anticipate for Andexxa early 2019. So sales force that and related commercial expense for the Gen 2 launch. So we didn't have those parameters. I think from a COGS perspective, I think we said that we have a lot of Gen 2 supply for Andexxa. So we've had to pay the next couple of years of sales for Andexxa, you will not see the inventory flow through COGS. So that pretty much sums up your OpEx, and will provide OpEx guidance on the yearend call.

Operator

Thank you. And your next question comes from the line of Vamil Divan with Credit Suisse. Your line is now open.

Vamil Divan

Hi, great. Thanks for taking my questions. So just a couple a lot on Andexxa. One, just as you think about the PAS approval on December 31. I guess, what are the main risks as you see it, I mean, some investors I've spoken to are just kind of, trying to know [those things that are problem with the] [ph] success. Are there major things we should be concerned about are any standard at this point and we're likely to approved?

And the second one is on the perioperative side, and I think you said you were starting a study in 2019. If you could maybe just talk about what may be broad frame up of what the study would look like, how long it takes to get data from that study. And if you're seeing any off label use in that sort of thing, right now.

John Curnutte

Vamil, John Curnutte, here. So far as the PAS, the great news is that everything is really on track from everything that we see for the December 31 PDUFA date. And as we just shared, we've just heard from the FDA that the filing occurred on schedule as well. And everything has been pretty much routine in terms of our interactions with the FDA. And as you know for at least the routine things, we really don't comment on those.

So overall, I think we're on - based on everything we know right now, we're on an excellent track toward December 31. Now, we all know theoretically things can happen. The guidelines for the FDA allow them to extend the review by 2 months or up to 2 months, if there is a bolus of new data that comes into the application that they might request. That certainly has not happened at this point so - but it is certainly a theoretical risk.

So in summary, we are really right on track for that December 31 date based on everything we know today. And then on the surgery side of things, first of all the - we have already had preliminary discussions as we've shared in the past with the FDA on a surgery study, it's also on our - or has been on our discussion list with the EMA.

Certainly, let's focus on the FDA side of this. Right now, I think we and they want to entirely focus on the PAS. As you recall, this is a pretty substantial document that we sent to them that I think requires pretty much their full attention. So what we're planning to do is as soon as they complete their review of the PAS, we will initiate discussions with them on the surgery study.

Now, the surgery study is one where the exact design of which we have not come to an agreement with the FDA. There are many ways that one could do the study. And right now, one of the templates that we certainly are looking at is the way Praxbind studied surgery for the reversal of Pradaxa.

Up that is one type of an approach. I would say though that given the amount of effort that we put into thinking about surgery that I would hope that the discussions with the FDA would go smoothly, and that we would be able to get the study up and going by later in the year.

With regard to how long it will take, that really depends on what we negotiate. It may be again a range of numbers of patients and whatnot. What I can tell you is talking with surgeons out there in the community and in surgical meetings that there is a great deal of interest in this study. So I don't think it's going to be a lack of enthusiasm on the part of surgeons to raise their hand and say, we'd like to help you out with the study.

So again, let's - first things first, the PAS and as soon as the dust settles on that, we'll give you a lot more information about the details on surgery.

Vamil Divan

Okay, thanks so much.

Operator

Thank you. [Operator Instructions] And our next question comes from the line of Kenneth Atkins with Cowen. Your line now open.

Kenneth Atkins

Hi, guys. Thanks for taking my question. I'm just wondering if you can give us any updates on your thoughts about the best path forward for the Bevyxxa, whether that asset is best developed in your hands or potentially partnered, and what factors that would go into that decision.

John Curnutte

Yeah. Thanks. As we were saying earlier, clearly what we've done is focused our efforts on Bevyxxa at the Center of Excellence plan. And I think doing that is important, because it gives us insights into how ultimately we might be able to maximize the value of this drug either ourselves or with a partner, which gets to your second question.

At this point, all options are on the table. We won't comment on any specificity around that. That's certainly something that we'll be considering going forward.

Kenneth Atkins

Got it. Thanks.

John Curnutte

Welcome.

Operator

Thank you. And it looks like we have a follow up question from the line of Yigal Nochomovitz with Citigroup. Your line is now open.

Yigal Nochomovitz

Hi, guys. Thanks again. In some of the research we've done, we've noticed that there's a higher use of the high dose versus the low dose and maybe had been expected at least from my perspective. I was just wondering if you could comment on whether you're seeing any trends with regard to high dose versus low dose.

And then, also regarding the ordering, when hospitals order, are they ordering for an assumed low dose for a patient or a high dose or a mixture of both? Can you just help with that? Thank you.

Scott Garland

Jeet.

Jeet Mahal

Yeah, hi, Yigal. So we, again, don't have a formal way of collecting data via a registry. So everything that we know about utilization is anecdotal. As far as we can tell, there are some uses of high dose, but most institutions are using a low dose in any events for study. With the utilization rate of the high dose versus the low dose, it was very much favored towards the low dose, 85% to 90%.

As far as we can tell so far that seems to be the case. Now, when we get more data either through a registry or more months of utilization, we start to see the review comes from the hospital we'll have more. But at this point, we do expect majority of it to be the low dose.

And in terms of the hospital ordering, again, we don't know what they are specifically refilling for, right, so it's more of a refill model than it is ordering for the patient at hand. But in terms of the order sizes, they cover sometimes a low dose, sometimes a high dose, sometimes a little bit more than either one of those two.

Yigal Nochomovitz

Okay. Thank you.

Operator

Thank you. And I am not showing any further questions.

Scott Garland

Well, thanks again, everybody, for joining us on the call today. I look forward to seeing you in the future. Take care.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a wonderful day.