Global Blood Therapeutics, Inc. (GBT) CEO Ted Love on Q1 2020 Results - Earnings Call Transcript

Global Blood Therapeutics, Inc. (GBT) Q1 2020 Earnings Conference Call May 6, 2020 4:30 PM ET

Company Participants

Stephanie Yao - Senior Director of Investor Relations & Corporate Communications

Ted Love - President & Chief Executive Officer

Jeff Farrow - Chief Financial Officer

David Johnson - Chief Commercial Officer

Conference Call Participants

Jim Birchenough - Wells Fargo Securities

Alethia Young - Cantor Fitzgerald

Yatin Suneja - Guggenheim Partners

Liana Moussatos - Wedbush Securities

Ritu Baral - Cowen

Matthew Harrison - Morgan Stanley

Mark Breidenbach - Oppenheimer & Company

Matthew Holt - JPMorgan

Jackson Harvey - Nomura Instinet

Raju Prasad - William Blair

Yun Zhong - Janney Montgomery Scott

Justin Zelin - Canaccord Genuity

Benjamin Burnett - Stifel, Nicolaus & Co. Inc.

Operator

Greetings and welcome to the Global Blood Therapeutics Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow prepared remarks. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Stephanie Yao. Please go ahead.

Stephanie Yao

Thank you and welcome to the GBT conference call to discuss the company's financial results for the first quarter 2020 and to provide a business update. I'm Stephanie Yao, Senior Director of Investor Relations and Corporate Communications.

Joining me on the call are Dr. Ted Love, our President and Chief Executive Officer, who will provide an overview of the progress in the first quarter. Then Jeff Farrow, our Chief Financial Officer, will provide an overview of our financial results. He will be followed by David Johnson or DJ, our Chief Commercial Officer, to give an update on Oxbryta launch. Ted will then provide an update on our research activities and other long-term growth initiatives.

Earlier this afternoon, we issued a press release announcing GBT's business progress and financial results for the first quarter ended March 31, 2020. Before we begin, I would like to remind you that certain statements we make on this call that are not historical facts may be forward-looking statements that are subject to risks and uncertainties.

Information regarding factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements are contained in our SEC filings, including but not limited to our most recent Annual Report on Form 10-K, as well as in today's press release. Copies of our SEC filings and press releases can be obtained from the Investors page of our company website at gbt.com.

The forward-looking statements made on this call are only as of the time they are made and you should not place undue reliance on such statements. Future events or simply the passage of time may cause our beliefs to change and we disclaim any obligation to update any forward-looking statements other than as required by law.

With that, I will turn the call over to Ted.

Ted Love

Thank you, Stephanie, and good afternoon, everyone. Welcome to the Global Blood Therapeutics first quarter 2020 conference call. When GBT was founded, we set out on a mission to transform the way sickle cell disease is treated. Last November marked a major breakthrough with the approval of Oxbryta, the first and only medicine that directly inhibits sickle hemoglobin polymerization. The process that causes red blood cells to sickle and break down.

Red blood cells sickling and destruction are primary pathologies faced by every single person living with sickle cell disease. This is consistent with our broad label and our focus on expanding Oxbryta's approval for patients younger than 12 years of age. Q1 was the first full quarter that we deliver Oxbryta to patients.

Our performance has exceeded our expectations and demonstrates outstanding execution across our entire organization and our profound commitment to patients. Early feedback has been encouraging, particularly as we hear from more and more patients and physicians who are excited about the impact they are seeing with Oxbryta. In addition, expanding access is a top priority and we're pleased with the response from payers thus far.

Let's talk about the impact of COVID-19. But first, I want to say that our hearts go out to the thousands of patients and families directly impacted. We are also deeply grateful to the frontline workers who are working to keep us healthy and safe. On March 17, GBT announced the suspension of in-person interactions by our field teams and the implementation of a remote working policy. This decision was difficult, but it was the right decision to protect patients, health care providers and our employees.

It is difficult to project the precise impact of COVID-19, but we know it has created a temporary headwind for our launch. However, based on our first quarter performance, we do not believe the pandemic will impact Oxbryta's long-term potential. We view our strong performance as a reasonable proxy for what we might see post pandemic.

We are pleased with the progress we've made to date and we remain on track with our key launch activities. We are particularly encouraged by the following three trends. Number one, with increasing clinical experience, the demand for Oxbryta progressively increased in the first quarter. And with a growing number of new prescriptions and enrollment into GBT Source, our patient support program.

New prescriptions were at their highest right before the World Health Organization declared COVID-19 a pandemic. Our new prescriptions have subsequently decreased. We believe that this is temporary and expect them to rebound as patients resume in-person visits with their doctors.

Number two, our field teams are successfully engaging with health care providers, even in a virtual setting. These engagements have translated into numerous first time Oxbryta prescribers. Based on market research, awareness of Oxbryta continues to increase and health care providers are increasingly leveraging telemedicine to interact with patients.

And finally, number three, our payer meetings are proceeding according to plan. We've already secured coverage in multiple key geographies and we are pleased with the rate at which patients are being covered through medical exception. We reiterate that we believe we will meet our goal of broad payer coverage by the end of the year.

Like most in our industry, we decided to pause new patient screening and enrollment in our clinical studies. However, we are in close contact with our clinical sites and investigators, and we are following FDA guidelines intended to maintain study integrity. We remain confident that we will report top line results from our HOPE-KIDS 2 post approval confirmatory study by 2025.

We are well-positioned to resume enrollment in all our clinical trials as soon as practical. Sadly, the pandemic has had a significant impact on the SCD community. We are proud that we were able to quickly provide support during this crisis, including more than $350,000 in funding to SCD non-profit organizations. The specific role of Oxbryta during the pandemic has been a growing topic of interest. For example, the American Society of Hematology recently issued recommendations listing Oxbryta as an option for SCD patients with symptomatic anemia or patients who are difficult to transfuse.

We believe that Oxbryta is a oral [ph] tablet administration and favorable safety profile, coupled with services like electronic enrollment and home medication delivery, are well suited to help SCD patients in the current environment. In summary, GBT is doing well and the launch of Oxbryta is off to an excellent start. In many ways, COVID-19 has increased our focus and dedication to ensure that every patient who can benefit from Oxbryta has access to it. Our entire team is aligned to this mission, and it's thrilling to see our early success.

With that, I will turn the call over to Jeff to provide an update on our first quarter 2020 financial results.

Jeff Farrow

Thank you, Ted. GBT had an outstanding start to the year in the first quarter, and we continue to maintain a healthy balance sheet. Total net revenue for the first quarter of 2020 was $14.1 million, resulting from sales of Oxbryta. This compares to $2.1 million in the fourth quarter of 2019 from the initial launch of Oxbryta, which we began in late November.

These first quarter revenues were driven by strong underlying patient demand as well as good early payer coverage, including medical exceptions. Additionally, our gross to net adjustment was 12% in the first quarter, which is lower than we anticipated future steady state.

The gross to net adjustment each quarter will be driven by patient insurance coverage, patient utilization of 340B pharmacies, the Medicare Part D coverage gap and the patient co-pay assistance. The 24% gross to net in the fourth quarter of 2019 was higher, primarily due to our accrual for the Medicare Part D coverage gap in the fourth quarter.

As previously stated, we anticipate that over time, our gross to net will stabilize at around 25% to 30% once we reach our expected payer mix. Cost of sales for 3 months ended March 31, 2020 was $135,000. Cost of sales was low in the first quarter, as the majority of the manufacturing costs related Oxbryta sales were incurred prior to FDA approval. And thus were recorded as R&D expense.

We expect that the cost of Oxbryta sales as a percentage of revenues will increase in future periods, as fully expensed product manufactured prior to FDA approval is utilized. It is important to point out that we believe we have enough commercial supply of Oxbryta to stay in estimated patient need with the remainder of this year and into 2021. And we are continuing to produce additional Oxbryta tablets.

Research and development expenses for the first quarter of 2020 were $39.8 million, compared to $34.5 million for the same period in 2019. The increase in R&D expenses in 2020 was primarily due to increased costs related to the development of inclacumab and other preclinical research activities and increased employee costs, including non-cash stock compensation. The increase was partially offset by decrease in manufacturing costs for Oxbryta that were expensed to R&D. Following the approval of Oxbryta by the FDA, we now capitalize manufacturing to inventory.

Sales, general and administration expenses for the first quarter of 2020 were $47.7 million, compared with $18.1 million for the same period in 2019. The increase in SG&A expenses was primarily attributable to increased employee related costs, including non-cash stock compensation and increased professional consulting services associated with the build out of our commercial operations and launch of Oxbryta.

Net loss for the 3 months ended March 31, 2020, $23 million compared to $48.9 million for the same period in 2019. Basic and diluted net loss per share for the 3 months ended March 31, 2020 was $1.20 per share compared with $0.87 per share for the same period in 2019.

We ended the first quarter with a strong balance sheet and with cash, cash equivalents and marketable securities of $615.2 million compared with $695 million at December 31, 2019. The decrease of $79.8 million included the one-time upfront payment of $20 million that related to the collaboration we entered into with Syros Pharmaceuticals is 2019.

We continue to believe our existing cash in investments and access to the additional $75 million under our existing term loan facility have the potential to provide the necessary runway for us to achieve positive cash flow, while enabling continued advancement of clinical development programs and other earlier stage product candidates.

As we look at the remainder of the year, especially at the uncertainty that the current global situation has injected into the financial markets, we feel confident that we are operating from a position of strength and we will continue to execute on our plans to get Oxbryta to patients.

With that, I will now turn the call over to DJ for an update on the Oxbryta launch.

David Johnson

Thank you, Jeff. Good afternoon, everyone. I'm excited to provide an update on the launch of Oxbryta. As Ted mentioned, we had an exceptional first quarter. As COVID-19 escalated, we are proud that we were able to quickly transition to a virtual working environment and minimize potential disruption to the launch.

I'd like to take a moment to recognize our field operations, marketing, medical affairs and IT teams, all of them work tirelessly to enable and support our virtual interactions.

Today, I'd like to share three metrics that combined with net revenues will give you further insight into our progress. These metrics are: new prescriptions for Oxbryta, which informs underlying patient demand; the number of health care providers prescribing Oxbryta, which captures the progress we're making in adoption; and payer coverage [indiscernible] percent of covered lives.

Firstly on prescriptions. We saw approximately 1,650 patients prescribed Oxbryta during the first quarter for a total of approximately 2,000 since launch. The vast majority of new prescriptions were enrollments into GBT Source, our high-touch patient support program that provides a wide range of real time and practical support, putting education and financial support that's customized each patient's needs.

We're encouraged by this level of activity and believe it's indicative of the positive interest in Oxbryta. The new prescription include patients who have received early payer coverage generally through the medical exceptions process, as well as patients without insurance for receiving free medicine under our patient assistance program. They also include patients whose insurance is not currently provided in coverage and are unable to secure a medical exception. In these cases, we're able to provide free drugs to eligible patients, while coverage is established.

And we're pleased that GBT Source team has successfully moved patient through the process and secured insurance coverage for them. In order to better understand the impact of COVID-19 on practices, in April, we surveyed approximately 50 sickle cell disease physicians, primarily hematologists on practice dynamics as it relates to patient and sales force interactions.

We were encouraged to see that more than 90% of practices are using some form of telemedicine, either phone or video. We also are encouraged to see that most physicians nearly 70% report having some level of comfort prescribing any new chronic sickle cell disease treatment without a live visit. In fact, 25% of those surveyed reported having prescribed Oxbryta following a virtual visit.

On the other hand, nearly 75% of physicians surveyed report a decrease in daily sickle cell disease patient volume, hence the COVID-19 pandemic began. This reinforces what we're seeing across the industry, that the majority of medical practices are experiencing a decline in overall patient volumes. And as a result, a reduction in new prescriptions.

Specific to GBT, we have seen as much as a 60% decrease in weekly new prescriptions for Oxbryta from the peak in early March. We expect the rate of new prescriptions to continue to remain lower as the second quarter progresses through the third quarter and potentially longer. However, we are encouraged that even during this time, we continue to see new prescriptions each week. As such, we remain confident about the long-term potential for Oxbryta.

Turning to health care provider penetration, we continue to actively engage with physicians. The majority of interactions for the first quarter were conducted in person before the transition to virtual interactive in the second half of March due to COVID-19. Feedback from the field team and our survey indicates that many practices are receptive to virtual discussions.

In fact, the survey showed many physicians are participating in engagements by phone and video with sales reps. We are regularly sharing learnings and best practices across our teams and are prepared to continue with virtual interactions for as long as necessary. We've adapted our existing materials and created new material to support these virtual interactions.

I'm pleased that we have recently launched our new branded patient marketing campaign to help educate about our trial and its effects on hemoglobin polymerization. We've also received FDA feedback on our branded health care provider marketing campaign and anticipate launching it in the coming months. The availability of these campaign materials come at a critical time to support our digital interaction with patients and physicians.

Based on updated market research we're encouraged that aided awareness of Oxbryta among top sickle cell specialists remains above 90%. Additionally, we continue to see strong interest in Oxbryta with over 90% of physicians indicating they will use Oxbryta in their practice and almost 60% indicating they plan to initiate Oxbryta within the next 3 months.

Through March, our therapeutic specialists have reached approximately 90% of our highest decile physicians and overall reached nearly 60% of the approximately 6,000 health care providers, we're targeting in the United States. Our team has visited our high decibel target at an average of 6x and have had nearly 18,600 total customer interactions since launch. As a result, approximately 525 unique health care providers have written a prescription drug of Oxbryta during the first quarter.

For a total of approximately 660 unique health care providers prescribing since launch. As expected, the majority of prescribers are hematologists. But we're encouraged that a growing percentage of primary care physicians and pediatricians are also prescribing Oxbryta.

Importantly, prescribers have written multiple prescriptions, averaging approximately three prescriptions per prescriber since launch. Consistent with the decrease in new prescriptions since COVID-19, the number of new prescribers of Oxbryta has also slowed. We continue to monitor to assess any potential impact to our long-term launch plans and will adjust accordingly.

Regarding payers. We're pleased that we have been able to continue payer meetings, many of which were already scheduled as virtual meetings before COVID-19 pandemic. Consistent with our expectations, we now officially have reimbursement coverage for Oxbryta in place with payers representing 25% of covered lives. Specifically, we have coverage in place representing 30% of commercial lives, 9% of Medicaid lives and 8% of Medicare lives.

Notably, we have secured coverage policies with the centralized Fee-for-service Medicaid plans in a 11 of the 17 priority states. This is an important step given the influence that the Fee-for-service Medicaid plans have on the overall coverage picture in the states.

Fee-for-service Medicaid in Texas and New York are good examples of two key states with large sickle cell populations that are now covering Oxbryta. In addition, it's important to note that even if Oxbryta is not yet on formulary, payers are covering many patients through the medical exceptions process. We are pleased with the progress we have made with payers. We remain on track to complete most payer meetings during the first half of 2020, and we continue to believe we will meet our goal of obtaining broad coverage by the end of the year.

I will now turn the call over to Ted to provide an update on our clinical development activities and pipeline.

Ted Love

Thank you, DJ. Since GBT's founding, research and development has been the backbone of our company. GBT teams discovered and developed a breakthrough in Oxbryta in record setting time. An approval occurred just five years after clinical testing began. However, we are only just beginning as we plan to continue to deliver major innovations for SCD.

I want to thank Josh Lara, our former Chief Medical Officer, for his contributions to the success of GBT and Oxbryta. Dr. Gregory Bell, who brings extensive experience from his career at Merck, High Pharmaceuticals and Genentech, has stepped into lead our development authorization [ph] and he is doing a fantastic job. Greg joined GBT earlier this year as a Senior Vice President. We believe GBT is well-positioned to change the course of SCD for millions of individuals around the world.

In order to achieve this, we will need to evolve, just as we did at Genentech during my career there. Consistent with this, we've decided to recruit a Head of Research and Development. This individual will bring major experience in global R&D strategy and operations, clinical and nonclinical research, regulatory affairs and lifecycle management.

Our focus on and deep expertise in SCD vest GBT apart. And we believe this positions us to become the leader in SCD and deliver on our commitment to patients. In the immediate term, we are working to expand Oxbryta's approval for SCD patients younger than 12 years of age. We are scheduled to meet with the US FDA soon, and we'll provide an update later this quarter.

In parallel, we are working to potentially make Oxbryta available in regions like the Middle East, Latin America and Europe. We are in discussions with EMA on the regulatory pathway for Oxbryta in Europe. We expect to provide an update later this quarter on our go-forward plan for this region. As a reminder, SCD is geographically concentrated in Europe, which should allow for an efficient commercial infrastructure and launch, if approved.

Looking to our pipeline, our plans remain on track to initiate a pivotal clinical study for inclacumab, our novel fully human monoclonal P-selectin inhibitor in the first half of 2021. We believe that inclacumab has the potential to become the best-in-class treatments for Vaso-occlusive crisis.

Finally, we also continue to conduct additional research in our labs. And in collaboration with Syros with the goal of developing more breakthrough therapies for SCD. GBT is blessed to have extremely talented, dedicated and passionate employees from top to bottom and coast to coast. As a result, we're off to an excellent start with Oxbryta, providing a new treatment option and comprehensive patient support for SCD patients.

While we have a lot of work ahead of us, we're confident we will succeed in realizing our vision to make SCD a well-managed disease, giving patients the opportunity to live long and prosperous lives.

With that, we'd like to open the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from line of Jim Birchenough with Wells Fargo. Please proceed with your question.

Jim Birchenough

Yes. Hi, guys. Thanks for taking the questions and congratulations on the terrific launch. I guess just my question would be, if you could break out what the inventory contribution was to the first quarter sales number. And then, DJ, if you have a sense of the type of patients that are receiving Oxbryta out of the gate, if they're to know that 8 gram per deciliter threshold of higher unmet need, or if you're seeing a broader distribution of hemoglobin. I guess any insights on the type of patients being prescribed, and then just a quick one on any inventory commentary. Thanks.

Ted Love

Hey, Jim. This is Ted. Thanks for the question. [Indiscernible] it's hard to kind of account for inventory at this stage. We don't think it's been a significant contributor. In terms of the types of patients that we're seeing, the data that we get from the hub is fairly limited. But we don't -- we do know is the gender looks like you would expect in sickle cell disease about 60% female, 40% male. The age distribution is pretty typical, very similar to what you saw in the Hope Study. We don't collect hemoglobin levels, but we know anecdotally from interacting with physicians that some physicians have focused initially on lower hemoglobin patients, but patients are all over the map. We have patients that have started above 10 and actually people that have completely normal hemoglobin after starting the therapy. So there is a broad distribution, as we would expect.

David Johnson

Jim, maybe I'll add to that, too. In the Specialty Pharma channel, inventories purchased is pretty much on a just-in-time basis and regular ordering going on a weekly basis. We are aware that some companies noted that there was some stocking as it related to COVID. And so we did take a look at that as a possibility, and the short answer is we did not see anything material there. And really, the way we looked at that and because we don't have [indiscernible] trends sort of compared to prior years, we looked at the refills that were going through the hub, the refill requests from the patients, and it was sort of standard in the 30-day range. So new patients weren't ordering multiple months of inventory. But then we also looked at days on hand at our Specialty Pharma and inventory levels were diminishing at the regular rate. So one would imagine if in fact they purchased more in anticipation of stockpiling, the data on hand would have been higher than what we typically see and we just did not see that.

Jim Birchenough

That's great. Thanks, guys and congrats again.

David Johnson

Thank you.

Operator

Your next question comes from the line of Alethia Young with Cantor Fitzgerald. Please proceed with your question.

Alethia Young

Hey, guys. Thanks for taking my question and congrats on a very good quarter and launch of Oxbryta and Biotech. I guess I just wanted to talk a little bit more about what -- how you've been really seen in detail in April? I know -- I think in your script you said potential from the peak down 60%. So is it a factor of new pay? Is it a factor of the patients coming forward [ph] or doctors being hesitant to kind of start. Just if you can give us a more color on that, that would be great. Thank you.

Ted Love

So, Alethia -- Hi. Thanks for joining, Alethia. I think you’re really trying to get at kind of the overall COVID impact.

Alethia Young

Yes.

Ted Love

And what we essentially said in the call is that we've kind of qualitatively and quantitatively seeing a dip in prescriptions on the order of 60%. And the way we basically get at that is to know what our peak prescriptions were in a given week and then look at what they've done subsequent to that. So there has been a clear headwind. It's really too early to be giving too much details about this early in the launch. But we definitely think there's a real headwind that should go away. It is driven to some extent by patients not going to the doctor. We've talked to a number of physicians who have, in fact, told their patients if they want them to shelter-in-place. And some physicians are beginning to prescribe Oxbryta telephonically using Zoom, other technologies, but some have not moved to that. And so I think that's combined to create a situation where there is a headwind. We expect it to get better as the pandemic subsides. We also think we can make progress. We are making progress even with the shelter-in-place.

Operator

Your next question comes from Line of Yatin Suneja with Guggenheim Partners. Please proceed with your question.

Yatin Suneja

Hey, guys. Let me add my congratulations as well. Congrats on a very good quarter. Can you just comment on the success rate using the medical exception? And then, overall, what the payer approval rate has been? And then if you could also comment on, off these 1,650 or 2,000 patients that have received the prescription, how many were actually paid patients versus the patient that’s receiving free drug?

Ted Love

DJ, you want to take that?

David Johnson

Sure. Yes. Hi, Yatin. Thanks for the question. Yes, we're very pleased with how the payer interactions are going. And as we talked about, many of the payer interactions prior to the COVID pandemic were already virtual engagements and meetings that where already set up. So we've been able to maintain interactions through the pandemic and continue with those with payer meetings. So we're very pleased with that. The payer response is, changing on a weekly basis now because we've always talked about the first half of this year and specifically Q2 would be a time when we would be having a lot of formulary review meetings, and those are happening now. So we are payers coming on every week, having the formulary meetings and that sort of thing. So Q3, Q4 is going to be expect many more formularies to be published and for coverage to be brought by the end of this year. And we are standing by that goal, and we think that we are on track to deliver that as well in the second half of the year. In terms of medical exception, we're very pleased with that process. You know while we're not giving a rate on exact numbers, because, again, it's very fluid. We can tell you that we said in our prepared comments that about 25% of covered lives are -- have published coverage now in the payer environment. And being in Q1 of your launch, your first quarter launch, that's right in line with our expectations. So we're really pleased with that. But clearly, we're getting many more patients paid for based on net revenues and our demand numbers that we provided. It's clear that the medical exception process is also working very well as well. So we're pleased that GBT Source is able to help clinicians and patients get access even through medical exception or in some cases through our patient assistance free drug program.

Yatin Suneja

Anything you would like to add on the paid versus the free drug patients, based on the breakdown that you have given the 1,650 and 2,000 patients? Thank you. I'll get back in the queue.

Ted Love

Yes. So we're really not -- Yatin, thanks for the question. We're really not focusing on details like that. We do obviously have some free patients, but it's important to recognize that those patients will be converting over to paid patients over time as we get more and more coverage in place. And that, in fact, is part of the rationale for the free drug is to make sure that when a prescriber writes the drug that patient can get on the drug, even if the full payment process has not worked its way through. So we're committed to making the drug available. Over time, those patients will be converted to paid patients. But we're not really focusing on disclosing the specific metrics right now, because, as you just said, these numbers are all very fluid.

Operator

Your next question comes from line of Liana Moussatos with Wedbush Securities. Please proceed with your question.

Liana Moussatos

I’ve a question for Jeff about the impact of COVID on operations expense from Q2 onward, does it go down with revenues as well?

Jeff Farrow

You're rightly on. Just given, we'll have some organic savings. We are continuing to keep our focus on building up the commercial side and pushing forward as much as we can on the clinical side. But there will be some natural savings due to the clinical trial delays that we have, in particular other TCT study. And then we'd anticipate starting the active study a little bit earlier. So overall, we expect it to ramp up a little bit in the second quarter and then sort of stabilize out for the rest of the year.

Operator

Your next question comes from line of Danielle Brill with Piper Sandler. Please proceed with your question.

Danielle Brill

Hi, guys. Good afternoon and congrats on the strong start to the launch. I just have a quick clarification. Of the 2,000, I guess prescriptions into the hub, you said the vast majority were -- or I guess the vast majority were enrolled into the hub. Can you just -- can you give us a little bit more clarity on the exact number is that and how representative that is of actual patients on drug? Thanks.

David Johnson

Yes, hi, Danielle. This is DJ. The vast majority of our new patient starts and prescriptions do go through the hub GBT Source solutions directly. However, as a participant in the federal program such as Medicaid, that allows also to participate the in the 340B program. And so the 340B approved pharmacy institutions do have the ability to order directly from our specialty distributor. So there's a small percentage of patients that would go directly through the 340B program. Again, that has to be a small percentage because as you know our product being an outpatient product, patients preferring to have they shipped to their house the GBT Source solution oftentimes is preferred. But that's why we say not a 100% are going to go through GBT Source, but the vast majority are. Either way, we have visibility into the demand. So we see the demand, we know exactly the shipments because of very controlled distribution system. So the 2,000 since approval, our new patient prescriptions and that is encompasses the entire universe.

Operator

Your next question comes from line of the line of Ritu Baral with Cowen. Please proceed with your question.

Ritu Baral

Hey, guys, congratulations on the print, really remarkable. Couple questions for me. Can you talk about in the plans that you've negotiated or are negotiating, what prior authorizations could end up being? What are their requirements? And then also, can you talk about what doctors want to do with [indiscernible] require around lab values for hemoglobin response? Whether we're talking like right now in pandemic or sort of longer term in a year when they went, when the final coverage guidelines are drawn up.

Ted Love

So maybe I'll ask DJ --- Ritu, thanks for the question. Good to hear your voice. Maybe I will let DJ to talk [indiscernible] and I will make a talk a little bit [indiscernible].

David Johnson

So in [indiscernible], yes, we had on some really good conversations with payers over [indiscernible] approval. And we're happy to inform you that most of the approval that have happened already with payers. Have then broad coverage just like we had hoped. That includes open access, which really means a prior [indiscernible] to label and that’s we have a Great broad labels. So that’s certainly our goal and we had many that have approved this open access to label. The second most comment is the PA to label and clinical criteria. So that’s simply following the Hope Study criteria, that’s in our label. And that’s fairly common as well. So that’s hemoglobulin 5.5 to 10.5, that’s not uncommon to seeing a [indiscernible]. So the vast majority of plans, we consider both those very broad criteria in the vast majority of plans we see come alive have been impact one or those categories. Periodically we have seen plans coming out with more restrictive criteria and that might include requiring for example, 2 BOC -- documented BOCs before the drug have indicated. And of course that’s outside of our label, that’s outside of our indication. That’s outside of our really our profile of our product. So we're able to successfully go back in and educate in those situations. And we're in the process of doing that in the handful of plans whenever a pop up to go in and make sure they see the data. And we've had success in reversing some of those prior off. So those still are the minority plans that have a more restrictive policy. And we are able to reverse that successfully.

Maybe one less thing I would add is periodically you hear, HU [ph] being a standard of care drug and the payers are aware of. They often ask or maybe put in a prior authorization that HU has been considered for the patient. And of course, as you know, most all patients have already been considered great [indiscernible]. That's a pretty easy, soft step at it. And so we're fine with that as well.

Ted Love

And with regard to the lab values, Ritu, as you know, many lab values are actually recommended or required by labeling. [Indiscernible] and he is very fortunate in that there is no label recommendation for anything. Many drugs called elevation of LST. So we have to follow LST but that's not been anything that's ever seen. So there's no labeling to follow the LST. So this is many times out of curiosity, going to follow the hemoglobin. But there's nothing in our label about even following the hemoglobin because we know that the response to the drug in terms of how people feel, for example, doesn't even necessarily directly relate to the hemoglobin response itself. In addition, we know many times people want to give this drug to protect patients. And actually, one of the stories that I learned about over the weekend was a patient who unfortunately developed COVID-19 and the hemoglobin for this patient was falling, was near -- are getting close to going below 5. This was actually last Thursday. So I'm very proud that the physician reached out to GBT. We literally had drugs shipped to that patient. So the patient can began taking it on Saturday. And I just got an email from the physician today saying the hemoglobin is over [indiscernible]. So that's an example of somebody using that values. But quite frankly, the patients would have told the physician they feel much better, which is what they want to tell the physician even without the lab guy. So the lab values can't be followed, but they're not part of any kind of requirement or even recommendation from the likes.

Operator

Your next question comes from line of Matthew Harrison with Morgan Stanley. Please proceed with your question.

Matthew Harrison

Great. Good afternoon. Thanks for taking the question. I was wondering if you could talk a little bit about prescription trends you're seeing continuing. I think a lot of other companies that have reported have talked about seeing a bottoming in second or third week of April and starting to see some recovery then. So maybe you could just put in context, what that comment around what you had in March in terms of new starts. And if you're starting to see at least a bottoming relative to what some other companies have commented on.

Ted Love

DJ, You should probably ask more details. But I would say that we've definitely seen a decrease and we don't know how long that decrease will last. So we don't want to underestimate the impact that COVID-19 could have on the future. Obviously feel -- we feel great about the star in the long-term, potential, but we don't want to underestimate the enduring impact of COVID as long as it continues to restrict patients access to senior physicians and other issues.

David Johnson

Yes, I would just add that first of all, we are still getting new patient prescriptions every single week. So even during the pandemic and even with the significant drop, we are still getting new patient start. And that includes new prescribers as well. It's not at the rate it was obviously before COVID-19, but every week we have new prescribers coming online and new patients getting on Friday. So that's the good news. It's too early to tell. It's early days as to how the trends are going to play out. We definitely saw the reduction happen pretty rapidly and dramatically, just like the industry did and it's been less dramatic lately. The last few weeks have started. I think you could, with a little bit of squint, say it's flattening out, but so have we hit the bottom yet? Maybe it's hard to tell, but we should know over the coming weeks.

Operator

Your next question comes from the line of Mark Breidenbach with Oppenheimer. Please proceed with your question.

Mark Breidenbach

Hey, guys, congrats on the very strong early numbers. And I was wondering, maybe, touching or following up on one of the earlier questions in the queue with regard to the types of patients that are in the early out spread user population. I'm curious what fraction of these patients are already compliant on hydroxyurea? Is there a big discrepancy between occupied users and NATU users? And also, I don't know if I heard it earlier in the call, but have you commented on the prescription refill rate that you've seen so far? Thanks for taking the question.

Ted Love

So I'll start with the types of patient in an FDA to talk about the retail. We don't collect a lot of details about these patients in the hub and we don't want to. The reason -- we want to make going into the hub is simple and as easy as possible for the physician over the patient. So that's why we don't collect that kind of information. In the future, we likely will be doing [indiscernible] that will get the kind of detail that you're thinking about Mark. But we don't have that information through GBT Source. Anecdotally, we do know that some patients are on combination therapies on a few. We know patients are also getting [indiscernible] at the same time. So we know the combination use. We don't have quantitative data at this stage.

David Johnson

Yes, Mark, just to add to that on the refill side. And by the way, we will have that data in the future. We have always planned to do a chart on it, so we'll get out the combination use and the hemoglobin levels and now that we have a substantial group of patients at Starbucks bright up, we'll be able to conduct those chart audits and we'll have that data for you in the future. But Ted, is exactly right. We hear anecdotally from physicians, the combination therapy is pretty common. Regarding the refills, it's early days, but we're encouraged by the early refill data. We know it signifies that our patients are being compliant, and that's good. And the retail, the vast majority of our patients are refilling on time. That is third within a 30-day time window. And that does suggest that the adherence is as good as we had hoped it would be. So it is early days. We're watching it closely. But the refill seem to be happening on time for most of our patients.

Operator

Your next question comes from the line of Matthew Holt with JP Morgan. Please proceed with your question.

Matthew Holt

Hey, guys, thanks for taking my question and congrats on the quarter. I just wanted to go back to the question around free and paid script breakdown. I'm curious if you can say a little bit about what the free [indiscernible] to paid script conversion rate has been and what your expectations are for this dynamic in the near future?

Ted Love

So, I don't think we really have enough information. DJ, you can add [indiscernible], I don’t think we have enough information to really get that kind of insight. We -- I think it's clear that the vast, vast majority of patients on free drugs are going to convert to paid drugs. 90 -- more than 90% would be my prediction. But that number is changing, particularly early in the launch where the number of patients is -- patients are new. But over time, we would expect 90% plus of those patients to convert over to paid drug.

David Johnson

Yes. And I would say that the metrics we're giving you now, we think are the best metrics to determine underlying demand and launch success. So total prescriptions really is underlying demand. Our physicians and patients ready to start Oxbryta. And that enrollment or prescription number. Number of physicians that have prescribed Oxbryta and the penetration into the prescriber base we provide, and then, of course, the COVID lives. How are the payers doing? So we're really focused on those. The other metrics really are much more variable and change from day-to-day. I can't tell you. that's important to note that we believe we will achieve the broad coverage by year-end and able to convert many of free drug patients at that time. The other thing I would just mention, dynamic wise is in the early days of launch path is generally much higher. That's the patient assistance program or the free drug program. It's the highest it'll ever be. And then it comes down over time. And we certainly are already seeing that dynamic. I think it's fair to say that the number of patients on free drug are less than we had expected.

Operator

Your next question comes from line of Paul Choi with Goldman Sachs. Please proceed with your question. Paul Choi your line is now live. Please proceed with your question. Our next question comes from line of Christopher Marai with Nomura Instinet. Please proceed with your question.

Jackson Harvey

Hey, guys, this is Jackson Harvey on for Christopher Marai. I was just hoping, maybe you could give a little more insight on any regional or geographic trends. Do you see maybe some more high impact areas being less affected by the COVID-19 pandemic or vice versa? And how does that overlap with any inroads you've made with state Medicaid?

Ted Love

So thanks Jackson for the question. Just to go back and [indiscernible] that again, we some of the questions asked just to go back and novel set again, we've previously shared that about 85% of our patients are from 17 states and those states being in the northeast and the southeast around the California. And we've had enrollment, quite frankly, in a manner that kind of reflect for the population lives. We have not really had enough COVID experience, I think, to make any sophisticated statements around the impact of COVID. But we’ve had patients being enrolled from all the geographies that we would expect. And in rough proportion to the population that exist in those states.

Operator

Your next question comes from the line of Raju Prasad with William Blair. Please proceed with your question.

Raju Prasad

Thanks for taking the question. I was just wondering if you could provide a little more color on, what gross net you're seeing in Medicaid coverage discussions and kind of what mix of the current quarter was with Medicaid versus commercial thing? Thanks.

Jeff Farrow

Yes. So Hi, Raju. How are you doing. This is Jeff. Just wanted to give you a little sense of that. The payer max, is going to change dynamically over the year. In the fourth quarter, we had highlighted that we had a large number of Medicare Part DPATIENTS come through and were reimbursed. This quarter. We’ve seen an increase in Medicaid and we expect that to increase as time goes on. Given the fact that we'll get more payers on board there? So we do expect our gross to net to increase next quarter and continue through the remainder of the year up to that steady state of 25 to 30. We are seeing a little more commercial coverage earlier than, say, the Medicaid. But other than that, the dynamics will be changing until we get to steady state.

Operator

Your next question comes from Line of Yun Zhong with Janney. Please proceed with your question.

Yun Zhong

Hi. Thank you very much for taking the question. So this is a follow-up question on the 60% drop in weekly prescriptions. But you also said that up to 70% of the prescriptions -- sorry, the healthcare providers are comfortable prescribing drug without patients actually visiting the office. So say, if the patient is woman or it would like to get the drug, is there anything preventing the physicians from prescribing the drugs? And you said that you expect the COVID-19 impact to march through the end of third quarter and potentially longer. So is there anything that you plan to potentially improve that would keep scripts in [indiscernible]? Thank you.

Ted Love

Well, so the 60% number, oh thanks for the question. The 60% number was really a comparison of the peak week to kind of the lowest week that we've observed since COVID-19. And what's driving things? There are things moving in both directions, as you point out. One is that some physicians are not fully implemented yet in terms of going telemedicine as physicians come online and patients come online. That could be a mechanism of recovery and we're facilitating that. Some physicians are clearly going and that's why we continue to see scripts. But I think it's a little bit hard for us to conclude that the world is going to be as efficient as it was during the pandemic. I think we expect there to continue to be some headwinds for us. We're obviously doing everything that we can do with our force, which is also working remotely with physicians to try to stimulate more use. But part of the issue is that if you're not seeing your patient, patients aren't doing telemedicine with you, then it's hard to prescribe. But, DJ, I don’t know if you want to add anything specific beyond that, but I just want to say that we do expect there to be a continued headway.

David Johnson

Yes, there's just been a decrease in volume of interactions between physician and patient during this time. But as Ted said, it is getting better every week as physicians, operationally and patients operationally become more comfortable with doing virtual meetings. The survey we talked about was 70% -- actually 90% of physicians, so they are comfortable doing telemedicine and already started. 70% said that they are willing to start new therapy this way. So we're encouraged by that. We've already seen it, give an example of what we can do to reduce any operational barriers. I receive every single day best practices from the field teams. I just received one from a representative in Pennsylvania. She did a Zoom session with five health care providers last week and also included our patient navigators. And they were able to go through a full Oxbryta package insert review and a full GBT Source distribution review and teach the office how to access Oxbryta remotely and virtually and answered all their questions. And we've already seen in that clinic enrolled a new patient since that interaction last week. So it's just about getting out and kind of reminding people about GBT Source how everything can be done remotely, and then they give it a try. So we're in the process of doing that across the country now.

Operator

The next question comes from the line of Justin Zelin with Canaccord. Please proceed with your question.

Justin Zelin

Hi. Good afternoon. This is Justin on for John Newman. First, congrats on the strong quarter. And it's good to see the Medicaid Fee-for-service plans are starting to come online. I was wondering if DJ could give us some color on the experience with states that predominantly offer Medicaid through managed Medicaid plans. Thanks.

David Johnson

Yes. Justin, thanks for the question. Yes, absolutely. So we said in the script that the Fee-for-service are very important because for a couple of reasons. One is, in the 17 top states for sickle cell patients that really cover approximately 80% of the patients in the U.S., there are some critical states there that have very high Fee-for-service, centralized Medicaid plans. I think about North Carolina, I think about Alabama. Now, these are areas where Fee-for-service really wins the day. And so it's really important to have those interactions and those coverages in those states. But in addition, the states that have high manage Medicaid, the New York's, the Texas, Florida's, these are also very important to have Fee-for-service on board, because in many of those states, they either mandate or simply influence the managed Medicaid plans and not have more restrictive policies than the Fee-for-service state Medicaid. So in Texas, for example, or you want to make sure that the centralized Texas Medicaid is giving good coverage for your product because they will help mandate that across the managed Medicaid. So we feel really good about the Fee-for-service plans coming on board 11 of the 17 key states we're covering up and we talked about Florida, Texas, Alabama, New York, to name a few. So that's why that's important. Manage Medicaid sometimes take the longer, you have to go to every single plan and we're in the process of doing that. But we have had patients, importantly be covered in the key managed Medicaid plans as well. I think [indiscernible], I think Anthem, some of these large managed Medicaid plans, we're also getting patients paid for as well. So we're in the process with most of those. United [indiscernible] Molina, these are all really important payers and we're having really good meetings with them as well. But in the interim, the medical exception process is working there too.

Operator

The last question comes from Ben Burnett with Stifel. Please proceed with your question.

Benjamin Burnett

Hey, thank you. Good afternoon and also congrats on the good quarter, especially under the circumstances. I guess, I just wanted to ask if you could provide or offer any additional color on the treatment setting where you're seeing early adoption of Oxbryta. Just in terms of what the mix is between tertiary care versus PCP thus far? And I guess how do you see that evolving, particularly through the shelter-in-place mandates that are in place?

David Johnson

Yes, this is DJ. So early on in the launch, as we expected, the specialist really the hematologist were the primary prescribers of Oxbryta. And they remained strong throughout Q1 and the dominant prescribers of Oxbryta. They have a lot of patients and they tend to be the ones that are closest to the data and whatnot. They also get referred the more difficult patients in need and those are patients that really need access to Oxbryta. So the specialist clearly, about half the prescriber -- prescriptions have come through the specialty channel. That said, as you progressed with your launch, you wanted to go deeper and deeper into the physician targets. And we're seeing that happen as well. So nurse practitioners and physician assistants are big prescribers of Oxbryta. PCPs [indiscernible] lot of sickle cell patients, especially in Medicaid, where they don't have access to specialists. We're seeing more and more primary care doctors write Oxbryta. So it is starting to make that natural transition as the PCPs learn from the specialists. So we're still focusing on both. We built our teams to be able to call on primary care and specialists and we're doing educational programs in both those communities. So I hope that helps provide a little clarity on that.

Operator

Ladies and gentlemen, there are no further questions at this time. And I would like to turn the floor back over to Dr. Ted Love for closing comments.

Ted Love

I'd like to just end by first thanking everybody for joining the call. Second, wish everyone stay safe and stay healthy in family. If there are other questions, feel free to reach out to Stephanie Yao after the call. Thank you.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.