Antares Pharma's (ATRS) CEO Bob Apple on Q4 2020 Results - Earnings Call Transcript

Antares Pharma, Inc. (ATRS) Q4 2020 Earnings Conference Call March 2, 2021 8:30 AM ET

Company Participants

Tram Bui - VP, Corporate Communications & IR

Bob Apple - President & CEO

Fred Powell - EVP & CFO

Pat Shea - SVP, Commercial

Conference Call Participants

Briana Warschun - Jefferies

David Amsellem - Piper Sandler

Elliot Wilbur - Raymond James

Gregg Gilbert - Truist Securities

Raymond Wu - Ladenburg Thalmann

Operator

Ladies and gentlemen, welcome to the Antares Pharma Fourth Quarter and Full-Year 2020 Financial and Operating Results Conference Call. Throughout today's recorded presentation, all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions].

I will now hand the conference over to Tram Bui, Antares' Vice President and Corporate Communications and Investor Relations.

Tram Bui

Thank you, operator, and good morning, everyone.

Earlier today, we announced our fourth quarter and full-year 2020 financial results and operating achievements. A copy of the press release and slide presentation for today's conference call are available in the Investor Relations section of the Antares Pharma corporate website.

Before we begin, I'd like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Examples of forward-looking statements include those related to our future financial and operating results, including our expectations regarding the impact of the ongoing COVID-19 pandemic and mitigation measures implemented in response to the outbreak, on our overall business, operating results and financial condition, our ability to achieve the 2021 revenue guidance, future revenue growth, prescription volumes, and market share for our products and our partners' products including XYOSTED, NOCDURNA, and Teva's generic EpiPen, FDA actions and other regulatory activities including actions with respect to Makena and approval of Teva's pending ANDAs for generic Forteo and identified timing and result of ongoing and future development programs and clinical trials including ATRS 1901 and 1902 as well as programs with Pfizer and Idorsia and other product development activities and business development efforts.

These forward-looking statements are subject to certain risk and uncertainties and actual results could differ materially. They're identified and described in today's press release, in the accompanying slide presentation on Slide 2 and from time to time in the company's filings with the SEC on Form 10-K and as updated in Antares' recent periodic filings on Form 10-Q and Form 8-K.

Antares is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events or circumstances after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements.

Joining me on the call today are Bob Apple, President and Chief Executive Officer; Fred Powell, Executive Vice President and Chief Financial Officer; as well as Pat Shea, Senior Vice President of Commercial.

Let's review the agenda for today's call on Slide 3. Bob will begin with a high-level review of our business, and Pat will provide a more in-depth discussion on our commercial strategy and tactics for our proprietary portfolio. Fred will then go through the detailed financials, and Bob will conclude with closing comments before opening the lines for your questions.

Please turn to Slide 4 and I will turn our call over to our CEO, Bob Apple. Bob?

Bob Apple

Thanks, Tram and good morning everyone, and thank you for your interest in our Q4 and full-year results and operations updates.

We're very excited to report another record year with outstanding financial and operating results that we believe continue to highlight the strength of our diversified organization. Our achievements drove a 17% increase in our fourth quarter revenue to over $44 million and brought our full-year 2020 revenue to almost $150 million, an increase of 21% which beats Street estimates and came at the very top end of our revenue guidance range for the year. We had impressive contribution of 58% year-over-year revenue growth from our proprietary portfolio in tandem with strong product, development, and royalty revenue from our partner business.

Furthermore, we had our first full-year of positive net income, which was almost $10 million or $0.06 per share before the tax benefit and generated cash from operations of more than $21 million.

Throughout the year, we diligently advanced the growth of our commercial portfolio particularly XYOSTED and look to leverage on the success of our commercial sales organization with the re-launch of NOCDURNA.

We're also pleased to be able to share in the success of our partner products, such as Teva's generic EpiPen, while simultaneously developing our robust pipeline, with our internal proprietary portfolio on top of our Alliance pipeline.

Overall, we achieved record revenue for our proprietary portfolio, successfully supported our multiple pharmaceutical partners with their development programs, as well as manufactured millions of auto injectors for our products, and our partners products. We achieved these results, all despite the ongoing impact of the COVID-19 pandemic on our employees, suppliers, and the communities we serve.

As we look ahead, we believe our full-year 2021 revenue guidance of $175 million to $200 million, which represents 17% to 34% year-over-year growth, is a testament to the strong foundation we have built, paired with the significant growth opportunities we still have in our near-term and long-term internal and Alliance pipeline.

With that overview, let's move to Slide 5, to first focus on our proprietary portfolio, which is highest margin business and represents the most significant growth driver of the company. While OTREXUP remains a profitable product for us, we remain focused on driving this strong demand for XYOSTED which had revenue growth of 71% and 124% in the fourth quarter and full-year 2020 versus the same period last year. Total prescriptions for XYOSTED also increased 76% and 160% in the fourth quarter and full-year 2020 versus the same period last year based on IQVIA data.

In 2020, the testosterone market included approximately 7.6 million total prescriptions, primarily led by injectables. We feel we're in the very early stages of the market expansion and believe the demand for an easy-to-use once weekly virtually painless at-home testosterone replacement therapy will further support the adoption of XYOSTED. It is our view that the advantages of XYOSTED have only started to resonate with physicians, particularly during the pandemic for an at-home therapy. But more importantly, we also believe that the pandemic will establish new societal norms and medical practices that favor therapies that can be administered at-home and not in the traditional physician's office or medical setting.

We believe this paradigm shift will potentially benefit the majority of our products in our development pipeline, as the ease-of-use and at-home delivery is core to our technology platform.

As we look to expand our commercial footprint, a key strategic goal for the company was to expand our product portfolio through business development and we achieved that in the fourth quarter with agreement to license NOCDURNA in the U.S. from Ferring Pharmaceuticals. NOCDURNA indicated for a frequent nighttime urination due to a condition called nocturnal polyuria immediately expanded our urology portfolio and commercial presence in the therapeutic space.

As we leverage our relationship with urologist and endocrinologist, we expect that our commercial sales organization will prove successful with this acid, as they have with XYOSTED, given their track records thus far.

With that, let me hand the call over to Pat Shea, our Senior VP of Commercial, who will take a deeper dive into the commercial strategy and progress for both XYOSTED and NOCDURNA. Pat?

Pat Shea

Thank you, Bob, and good morning everyone.

I appreciate the opportunity to highlight our 2020 commercial accomplishments, as well as discuss our strategy going forward that we believe will continue to support the growth trajectory of our promoted products.

First and foremost, we remain focused on our flagship asset XYOSTED which has demonstrated to be a formidable player in a large TRT market that continues to grow. From a results perspective, fourth quarter prescription volume was our strongest quarterly performance of the year, achieving more than 43,000 total prescriptions, a 13% growth over prior-quarter. Additionally, as Bob just mentioned, XYOSTED achieved 160% growth in total prescriptions for the full-year 2020 compared to 2019.

We're very encouraged by the continued receptivity of XYOSTED from our target audience. Despite continued operational challenges due to the pandemic, we remained focused on executing our hybrid promotional model to drive an increase in awareness trial and use of XYOSTED. Fourth quarter was particularly challenging resulting in in-person calls to our targeted customers, occurring on average approximately 50% of the time. Our virtual detailing continues to be quite active and helps considerably when access to offices and providers has been hampered due to the pandemic. Additionally, we continued our digital and social media efforts geared to rising XYOSTED awareness and activation with both patients and physicians. So collectively, we believe, our promotional efforts are paying off. Throughout last year, we established a solid XYOSTED foundation and presence in the TRT market. We believe XYOSTED strong brand awareness and profile acceptance by our target universe, a growing prescriber base, as well as overall prescription growth and momentum are all positive indicators.

These accomplishments, coupled with the execution of our updated targeting strategy, and a new promotional campaign that strengthens the XYOSTED messaging platform around the attributes of convenience that Bob alluded to earlier, have the brand poised for continued growth.

Early results this year are encouraging, as XYOSTED total prescriptions in January were the second highest monthly volume since launch coming off of a very, very strong December.

Q1 is always a challenging quarter as the industry manages through the traditional dynamics of plan changes, payer coverage, and patient deductible resets. We'll continue to implement all of our access and affordability programs to help patients get their XYOSTED prescription filled, particularly in the first quarter.

Now I'll switch gears and update everybody on the progress of our NOCDURNA re-launch. As a reminder, we implemented a highly focused soft re-launch approach in the middle of the fourth quarter with very limited selling materials, and a promotional campaign that we essentially inherited from Ferring Pharmaceuticals. Our focus for the short period of time we had in Q4 was to start rebuilding NOCDURNA awareness amongst our XYOSTED prescriber as well, not interrupting our XYOSTED momentum. For those six weeks of NOCDURNA promotion, we were able to generate a modest TRx lift amongst this focused group of targets, while preparing for a more extensive and thorough re-launch that occurred just last week.

At our recent Virtual National Sales Meeting, we introduced to our salesforce new training materials and selling tools, a revamped promotional campaign, new brand positioning and messaging, as well as an enhanced targeting strategy. To ensure we allocate the proper and appropriate selling time to re-establish NOCDURNA, while remaining focused on our flagship XYOSTED, we're continuing to call on existing XYOSTED targets who also have the potential to prescribe NOCDURNA. Additionally, we're infusing a very select group of new high potential NOCDURNA targets, who our salesforce will call on with minimal distraction to XYOSTED.

Based on what we have learned during the limited time we have been promoting NOCDURNA, and preparing for the full re-launch, we believe there is opportunity for this product to help patients suffering from nocturia due to nocturnal polyuria. Our learnings have translated into a new, more comprehensive campaign that we anticipate will increase awareness trial and use of NOCDURNA amongst our targeted physicians.

Before I hand the call back to Bob, I would like to reiterate that we remain excited with the opportunities we have in front of us for both XYOSTED and NOCDURNA and believe that our commercial expertise in this space will support and enhance our growth.

Bob, I hand the call back to you.

Bob Apple

Thanks, Pat.

And I agree with you that we still have significant opportunities to enhance our growth through our proprietary portfolio. As we continue to execute on our commercial strategy for XYOSTED and NOCDURNA, we'll also continue to be aggressive in searching for other corporate development opportunities, while also remain focused on the development of our internal pipeline.

Last year, we successfully advanced our internal pipeline, which currently consists of ATRS-1901 a potential weekly formulation of an auto injector administered product in urology and ATRS-1902 an endocrinology rescue pen.

We conducted pre-IND meetings with the FDA and believe we have a clinical and regulatory path forward. With positive feedback from the agency on 505(b)(2) development pathway for both assets. We remain on track to file the IND for 1902 in the first half of this year, and 1901 in the second half of this year. We look forward to providing more detail on these assets and their opportunity once we file the INDs. While these internally developed assets represent potential future growth drivers that clearly fit our commercial footprint, we also have a robust commercial and development pipeline with our partners that we expect will continue to contribute to our overall growth.

We can start with Teva's generic EpiPen on Slide 7. The success of Teva's generic EpiPen and its contribution to our growth for the fourth quarter and full-year highlights the benefits of a highly diversified business. We're pleased to garner attractive royalties and strong demand for devices based on Teva's success with their EpiPen. Despite challenges throughout the year due to the pandemic and a muted third quarter back-to-school season, which historically is the strongest EpiPen quarter. We expect additional growth in 2021 as Teva entered this year with a market share north of 50% and we anticipate the COVID-19 vaccinations will provide an atypical and temporary boost in demand in EpiPen due to the low risk of an allergic reaction to the vaccine by some patients. We're working with Teva to ensure adequate supply as demand increases.

We also remain excited for the potential U.S. approval and launch of Teva's generic Forteo this year. Teva noted on the last earnings conference call that they're expecting the approval this year. Although Teva launched generic Forteo in 11 European countries Canada and Israel this past year, the more significant opportunity remains in the U.S. Additionally, albeit a smaller opportunity Teva noted that their ANDA for generic BYETTA could also be improved this year, which also utilizes one of our multidose pen products.

Let me also briefly comment on Makena before moving on to the Pfizer and Idorsia's development programs. First and foremost, Makena remains on the market and we expect that to be the case for the foreseeable future. Covis has indicated that the FDA hearing has not been granted to-date and that they are preparing for a potential meeting with a plan to address the FDA's position. We appreciate Covis's commitment to the product and openness to work with the FDA to provide additional information and/or conduct additional trials. We'll continue to supply Makena to Covis as they work through the regulatory process.

Turning now for our development program with Pfizer, which remains undisclosed based upon Pfizer's desires for competitive reasons. We were very excited to see Pfizer advance that asset late last year through clinical trials and targeting an ANDA submission to the FDA this year. As a reminder, this would be for a novel rescue pen and we believe will represent a large market opportunity. We look forward to providing fully packaged products to Pfizer and potentially sharing their success with escalating royalties to low-double-digits, if this product is FDA approved.

And to say the most innovative partner product for last, we still believe that the Idorsia development program for heart attack rescue pen could be transformational for the company. We're very pleased to report that after completing initial usability and reliability studies with our Quickstart device last year, Idorsia just successfully completed the clinical bridging study. With that, Idorsia will be able to initiate their global Phase 3 which they expect to occur in the first half of this year and we'll be enrolling approximately 14,000 patients. Their recent fast-track designation by the FDA highlights the potential importance of this product. We believe that the selatogrel rescue pen represents a significant market opportunity for Idorsia and in Covis. But more importantly, it may potentially be a breakthrough for physicians and patients and helps save lives.

With that, I'll turn the call over to Fred to discuss the financials. Fred?

Fred Powell

Thanks, Bob, and good morning, everyone.

I'm also extremely proud of all of our accomplishments this year. The fourth quarter 2020 finished with very strong financial and operational year for Antares.

Fourth quarter revenue of $44.1 million and full-year 2020 revenue of $149.6 million were both records as our revenue exceeded analyst consensus as well as hit the upper-end of our revenue guidance. Our flagship proprietary product, XYOSTED achieved over $46 million in revenue and grew 124% over 2019, while our primary partner product Teva's EpiPen achieved over $50 million in revenue and grew 46% from 2019. And for the first time in Antares history, net income was achieved for the entire year. Looking forward to this year, our 2021 revenue guidance of $175 million to $200 million, representing 17% to 34% growth assumes we remain on a similar growth trajectory.

So let me now provide a more detailed review of the financial results for the fourth quarter and full-year ended December 31, 2020, which brings us to Slide number 8.

Total revenue generated from product sales licensed and development activities and royalties was $44.1 million for the three months ended December 31, 2020, a 17% increase compared to $37.8 million in the same period in 2019. For the full-year ended December 31, 2020, total revenue was $149.6 million, a 21% increase from $123.9 million for the comparable period in 2019.

Sales of our proprietary products XYOSTED, OTREXUP and NOCDURNA generated revenue of $19.7 million and $62.9 million for three and 12-months ended December 31, 2020, as compared to $14 million and $39.2 million for the same periods in 2019. The 41% and 60% increase in proprietary products sales for the three and 12-months ended December 31, 2020, were principally attributable to continued growth in sales of XYOSTED. In 2020, XYOSTED achieved revenues of $46.5 million, which represents a $25.7 million increase over 2019.

Product sales, development revenue and royalties for our partner products in total remained relatively constant between 2020 and 2019, as they totaled $24.4 million and $86.7 million for three and 12-months ended December 31, 2020, as compared to $23.8 million and $84.6 million for the same periods in 2019. While the amounts remain consistent between 2020 and 2019, there's considerable revenue changes among the individual partner products. In 2020, we saw tremendous growth of EpiPen market share, as well as our EpiPen revenue, as we recorded total revenues for devices development and royalties of $50.9 million, an increase of $16 million over 2019.

Offsetting the positive gains we saw with EpiPen was the overall revenue reduction from AMAG's Makena. Our total revenue in 2020 from Makena was $14.2 million, which represented a $10.6 million decrease from 2019.

Our gross profit was $25.1 million and $86.5 million for the three and 12-months ended December 31, 2020, as compared to $23.8 million and $73.4 million for the same period in 2019. The increases in gross profits were primarily attributable to the increases in XYOSTED sales.

Selling, general and administrative expenses were $16.7 million and $62.8 million for the three and 12-month periods ended December 31, 2020, as compared to $15.4 million and $61.8 million for comparable periods of 2019. The net increase in selling general and administrative expenses for the three and 12-months period ended December 31, 2020, was primarily due to increases in equity-based compensation costs, which were partially offset by reductions in sales and marketing costs incurred as a result of the various stay-at-home orders and travel restrictions related to COVID-19 pandemic.

As of December 31, 2020, we concluded that as a result of generating pre-tax earnings, utilization of net operating loss carryforwards and future projected pre-tax earnings, it's more likely than not that nearly all of our deferred tax assets are expected to be realizable and maybe utilized to offset future tax liabilities. As a result, we recorded an income tax benefit of $46.3 million for the fourth quarter and full-year 2020 resulting primarily from the net valuation allowance release of $53.4 million for our deferred tax assets. This tax benefit resulted in $0.28 and $0.27 per basic and diluted share in the fourth quarter and full-year 2020.

As a result of our strong operational results and tax benefits recorded, net income was $51.4 million or $0.31 and $0.30 per basic and diluted share for the fourth quarter of 2020 compared to $4.7 million or $0.03 per basic and diluted share in the same period in 2019. Net income was $56.2 million or $0.34 and $0.33 per basic and diluted share for the full-year ended December 31, 2020, compared to a net loss of $2 million or $0.01 per basic and diluted share in the comparable period in 2019.

Finally during 2020, we generated $21.3 million in cash from operations as compared to using $10.6 million of cash in 2019, a $31.9 million reversal. As a result, our December 31, 2020, cash and cash equivalents were $53.1 million.

I'll now turn the call back to Bob for closing remarks. Bob?

Bob Apple

Thanks, Fred.

In closing, as you can see on Slide 9, we delivered outstanding full-year results with record revenue, profitability, significant cash generation, and continue the upward momentum that we believe is indicative of the strength of our organization. We strongly believe our diversified business provides sustainability and will help continue to advance and support our future growth as reflected on Slide 10.

This slide shows the numerous opportunities that are still in front of us that include continued growth of XYOSTED and the successful re-launch of NOCDURNA. The potential U.S. approval and launch of generic Teriparatide and exenatide this year by Teva, the IND submissions for ATRS-1901 and 1902 this year, Pfizer's NDA submission this year for potential FDA approval in 2022. And last but not least, Idorsia's initiation of their Phase 3 trial for the selatogrel heart attack rescue pen.

Beyond the impressiveness of 2021, potential milestones, we will also continue to aggressively pursue corporate development and business alliance to accelerate our future growth.

With that, I'd like to thank our employees for their many contributions to our success this past year, and dedication that have brought us to where we're today.

Operator, you can now open the lineup for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions].

Our first question comes from Anthony Petrone from Jefferies. Please go ahead.

Briana Warschun

Hi, this is Briana on for Anthony, and congratulations on a great quarter and year. I'd like to start with two questions on your proprietary product line. First, on XYOSTED, you noted that January was a second highest volume quarter since launch. And I was just wondering, which I guess was out of the ordinary in terms of seasonality for the product. So I'm just wondering what is really driving the momentum so far this quarter and is it largely driven by the uptick in COVID?

Bob Apple

So I can turn that call, sorry question over to Pat.

Pat Shea

Yes, sure. So we've had a nice continuation of the momentum, as we talked about in the opening remarks or in my remarks. So January, I think is a combination of the continued focus of our Salesforce, certainly where we have confidence that the profile and the attributes that we've talked about relative to convenience and at-home administration are all playing into that momentum. And we believe as we just kind of come out of our most recent Virtual National Sales meeting with dialed-up emphasis on that convenience messaging, that will still see continued progress and momentum going forward.

Briana Warschun

Got it. Okay. And then -- that was very helpful. And then in terms of NOCDURNA, these new high potential targets that you mentioned, are these existing XYOSTED customers? Or are they also; are these high potential targets also potential XYOSTED new customers?

Pat Shea

Yes, great question. The majority of the, what we're calling I guess hyper targets are existing XYOSTED targets of which then a majority are pulled into our active called-on universe. So not only are they writing XYOSTED, but they're high potential within the TRT category.

Briana Warschun

Very helpful. And then I'll just ask these two questions on your partner's product line upfront. So what are your expectations for the EpiPen trends into the second quarter season? Are you expecting there'll be any stocking orders in Q1 through next season? And then on gene Forteo, I know you mentioned if you're expecting U.S. launch sometime this year, can you give any additional clarity on expectations for timing and we'll have pre-stocked auto injectors ahead of the build-out?

Bob Apple

Right. So on the Epi question; we expect the transactions to be pretty strong relative to last year from the first quarter and potentially second quarter, particularly due to the COVID pandemic. The mega sites and some of the other locations that aren't typically attached to a pharmacy are stocking EpiPens in case patients have an allergic reaction to the vaccine. So we clearly have seen a pretty significant increase, at least through January and we expect that to continue probably for the first two quarters. Obviously, once the vaccinations kind of finish up, we'll see that temporary impact probably come down.

We also hope that there's a regular or full back-to-school quarter this year, in 2021, with the pandemic, hopefully being behind us for the most parts in the September timeframe. So we expect the trend to be solid. We expect the Teva market share to remain consistent in that 50% range. And so overall, we'll see growth for clearly for the balance of the year on EpiPen for Teva and for us.

With regards to Forteo, we're extremely disappointed that it hasn't been approved yet, the agency has it's -- it's under review. There's no updates to provide. It's been very frustrating for both Teva and for us for not have that approval yet. And once the approval happens, they're ready to launch, they already have the launch quantities. As you know, we make the same exact product for Europe, in Canada, and in Israel. And so Teva is prepared to launch when the approval happens.

Unfortunately, with generic ANDAs, there are no real timelines that they have to follow like a PDUFA date. There are PDUFA dates but once they go outside of those PDUFA dates, then it's really up to them as to when they get to approve the product.

The good news is that it remains to be a priority review. It remains to be a first-to-file status. So we believe Teva will have six months of exclusivity. And so we're just waiting for that approval to happen anytime.

Operator

We'll now take our next question from David Amsellem from Piper Sandler. Please go ahead.

David Amsellem

Hey, thanks. Just a couple. So on first on XYOSTED and then also on NOCDURNA, so on XYOSTED and I apologize if I missed this, could you just talk about how you're thinking about virtual detailing versus in-person detailing and how you see that evolving as the year progresses? And I guess how much does that really matter, given that you've had success with the product, even in a virtual setting? That's number one. And then just talk about in-office visits, how do you expect that will trend? And then, just on the reimbursement landscape, can you just give us a little bit of a roadmap on how we should think about gross to net this year and if they look similar to what we saw in 2020? And then just quickly on NOCDURNA, just a high-level question. How do you frame this opportunity just in terms of where do you think volume to go? What do you think the dollar opportunity can be? And, just give us your sense of how big you think this product could be over time? Thanks.

Pat Shea

Yes. So I'll -- this is Pat, I'll answer the first part of the question relative to virtual detailing, stacked up against in-person. Clearly, we're firm believers that the in-person face-to-face interaction with your customers is the most effective way to sell the brand. And certainly, we're optimistic as the year evolves, we'll have more opportunities to have those face-to-face interactions with our customers.

I think we alluded to in the script, in the overview, the fact that that December fourth quarter, our in-person calls has had dropped due to some of the issues relative to the pandemic. But at the same time, our virtual platform was really running at 100%. So we see that balance continuing to be really important going forward. But firm believer that once we start getting into these situations where you do have face-to-face as more of a predominant interaction, that that's going to be super helpful for us to continue to grow the brand.

Bob Apple

And I think David, this is Bob. The more important aspect is really the patients getting to the doctor's offices. I mean, we can do -- we can effectively detail physicians whether it's a virtual platform or in-person. Obviously, we prefer to be in-person.

Look the most important aspect is really the patient flow back into the doctors' offices. And that is still not, where it was before the pandemic. If you talk to any physician who's out there, and I don't think it matters, what practice they have, or what indication they're working on. They'll tell you that probably their practices are down 25% to 50%, because of the pandemic. And so we're still seeing that, we have about half the patients coming in that were coming in before the pandemic. And so we're looking for a significant uplift, when the pandemic starts to drop. And we've been like you said; unlike other people tell us, we've been very successful in growing XYOSTED during the pandemic. But I think we would have had much more aggressive growth had it not been for the patients' kind of slowing down into the offices. And so that's going to be key for us. And we're hoping that with the rollout of the vaccines that things will start to come back to normal.

But again, if it doesn't, what I mentioned in my overview is that, our devices, our technology is really geared for this potential shift where the patients want to stay, want to do more, remote telemedicine and things like that. We will be, I think our platform really will be ready for that, and we'll benefit from that. But overall, we still want to see more patients coming back to the offices. But we're doing, I think the team's done a great job with detailing thus far. Fred, if you want to give, David, your question on the reimbursement?

Fred Powell

Hey, good morning, David. When it comes to reimbursement, I think we're probably -- I think we're probably looking at about a 50% gross to net deduction. And the reason I say that is it's going to be consistent where we saw the end of 2020 and rebates, if you're keeping constant or if you're keeping your coverage constant or increasing it, they only go in one direction. So that's always a pressure on the gross to net deduction.

And then the other piece is, we plan to continue the same copay level of support and programs that we've had in the past. So I think when you take a look at where we're at 50% would be a reasonable assumption there.

Bob Apple

Yes. And then on the last question David, NOCDURNA, it's a tougher question for us to answer, which is how big we think the product is going to be. First of all, we don't give really guidance on a product or product basis. And it's a launch; it's a re-launch of a product that we believe fits really well in our bag. Urologists are obviously, the key writers for people who have nighttime urination issues. But you also see some endocrinologists possibly writing this because people with diabetes who also have low testosterone, also have nocturia, or due to nocturnal polyuria.

And so, we're really starting to just see, what type of opportunity lays in front of us, with NOCDURNA. So, we don't want to shed any expectations at this point, until we really get to understand how the message is resonating, how the utilizations are going to happen in the patient, what patients want to be the best for.

And more importantly, getting back to the original thing I mentioned just a few minutes ago, seeing patients come back on a more regular basis to visit their doctors and talk about these type of issues. And so overall, we think it's going to be a meaningful product, we think the team's going to do extremely well with it. And it literally just launched a week or so ago in earnest, after our National Sales meeting. So with new materials, with new messaging, really actually targeting not only our XYOSTED writers, but also now doctors who write for nocturia. This is the first time we're really going outside of our XYOSTED call audience. So we'll really start to see hopefully uplift on that and we'll be able to provide more color on it as the quarters go by.

Operator

Thank you. We'll take our next question from Elliot Wilbur from Raymond James. Please go ahead.

Elliot Wilbur

Good morning. Thanks. Just following-up on that line of commentary I guess question specifically for Pat. So there's a lot happening, sort of behind the scenes with respect to reinvigorating NOCDURNA. Just wondering if there's any success metrics that you could point us to in terms of trying to monitor the level activity there before we start to see an upturn in Rx's and should we be thinking about samples and the like potentially negatively impacting Rx uptick as you re-launch the product, basically just trying to get a sense of when it's reasonable to start to expect a more pronounced turn in Rx trends?

Pat Shea

Yes. Thanks, Elliot. With the Virtual National Sales meeting last week, and the whole new set of materials that the team has including this enhanced targeting now, it's going to take a couple cycles for people to get through that new material, and then start to generate some meaningful lift, right. So everybody talks that it's going to take somewhere between four or five, six types of contacts before you start to see an impact. And so we think that that can be accelerated a bit because we do have some foundation already set. But as -- but we're certainly looking at that type of timeframe in terms of actual number of details before you start to see a meaningful, meaningful rise.

As far as samples, listen, we're looking at that very carefully. We think we've allocated the right number of samples to our folks and have given guidelines in terms of sample allocation and sample drops in order not to interfere with NRx uptake and so we'll keep a close eye on that as well.

Elliot Wilbur

Okay, thanks. And just a follow-up question on XYOSTED trends, obviously, key is to maintain momentum of the asset. Still looking at relatively strong overall Rx growth in the TRT market despite the pandemic effects, but clearly is, I think Bob, you suggested the impact of lack of patient flow, lack of new starts on products, including TRT therapies is becoming more noticeable. So outside of us all hoping for things going back to normal and a reacceleration in in-patient visits to offices, one of the things that seems to be a little bit more in your control is trying to drive additional switch volume from existing injectable therapy. So I'm wondering if there's any alterations to the game plan in terms of writing a little bit more aggressive with respect to capitalizing on switch opportunities, given the uncertainty in terms of new patient starts.

Pat Shea

Yes, Elliot, great observation. The answer to that is yes, a big part of our recent National Meeting and a LSA revised promotional campaign, but we're just dialing-up in our messaging platform. The features of our brand that we think will stimulate a switch, hence all the attributes that Bob had alluded to earlier, the once a week dosing, the ability to get the drug and administer it at-home. Certainly, our efficacy and what we bring to the table from just from a general overall efficacy perspective adds to that story as well. But we've repositioned some of those attributes within the selling platform for our sales team and have asked them to go out and obviously prioritize those messages to the core group of XYOSTED prescribers that we currently have. Part of our strategy is to look at those positions and understand that they have a baseline right now of XYOSTED prescribing. We believe with this enhanced messaging and a high frequency strategy, whether it's in-person or virtual, that's going to help drive deeper penetration within that target group.

Elliot Wilbur

Okay, thanks. And just a quick financial question for Fred, with respect to gross margin performance and 4Q number was, I guess sort of towards the lower end of the range of recent performance, even though you had, I think a relatively high contribution from product sales, a lot of moving parts make-up that number. But just any thoughts there with respect to trends in the quarter and anything that we should be thinking about for 2021 that might be slightly different from 2020? Thank you.

Fred Powell

I appreciate that. And I think there are a lot of trends we saw exiting the fourth quarter, probably will continue into the 2021. I can say that because we mentioned about how strong EpiPen sales were in 2020 and we continue to expect that that's going to be a driver for us in 2021.

But the more important driver really is going to be the XYOSTED growth with EpiPen already at about 50% of the market give or take a couple of percentage points, we will see some incremental growth there. And that is a lower margin product than our proprietary products but where we're expecting to see the larger growth would be in XYOSTED. And that's really as we look at margins going forward and again, it's going to be the proprietary products. It's going to be XYOSTED leading the process. But NOCDURNA also has a very good margin as does OTREXUP. So that should be some improvements we should see over time in 2021.

And also for -- and one other point that it's importance with royalties for our partner products, especially with EpiPen, since the overall market was down in 2020 and we're hoping there's a rebound in math for 2021, with Teva's EpiPen having a larger market share entering into the year, if the market is higher overall, they keep that market share, the royalties will certainly drop to the bottom line. So we should see improvement there.

Operator

We'll now take our next question from Gregg Gilbert from Truist Securities. Please go ahead.

Gregg Gilbert

Thanks. Good morning. I have a few. Bob, you mentioned earlier about patients preferring therapies they can take at-home during the pandemic. Is that a key metric you're considering when you're considering new business development deals? Or was that really a comment more specific to your own portfolio as it exists now?

Bob Apple

Well, I mean I think it's clearly for our own internal portfolio is one of the key attributes, all of our products that we're developing internally are combination products, where the ease of use and at-home administration is a key attribute, besides the efficacy or the safety or whatever else, we're providing the improved detailing on.

But when you look at the partner products too, they do -- they're focused on the same type of attributes, whether it's a rescue pen, or it's any other products like Teva are doing, they're going to be at-home products. And so I think we'll -- I think our total portfolio benefits from that potential shift and how patients approach their own care on a go-forward basis. And so I think it's something that we will talk about more especially with our commercial team, as far as emphasizing it, and I think we also talked about that with our partners, and so they recognize the value of it. And I think it'll benefit us across the whole company.

Gregg Gilbert

Great. And in the testosterone market, it seems like the recent launch of the oral product is not affecting you, obviously you both can coexist and gain share from other dosage forms, is that how you see that marketplace in terms of the newer agents being smaller companies with different dosage forms, sort of both with the ability to eat into a large installed base of older dosage forms?

Bob Apple

Gregg, so far obviously, there's one oral testosterone product that's on the market, and hasn't done that well to this point. But I don't know if it's the pandemic, if it's the sales organization or whatnot, but overall, it's a very large market. And so there's an enormous amount of opportunity for really any product that comes into the market, as long as it's patient-friendly, gets your testosterone levels up and maintains it. And so what we view it as is the orals potentially, they'll have a patient population that's once an oral tablet as opposed to an injection may sacrifice a daily dosing or the products that are on the market right now are twice a day oral products versus an injectable.

And there's going to be a large percentage of patients that, as we know 70% of the market are injectables. And so, we're focusing pretty heavily on those to switch them over to a much better injection. So overall there's plenty of markets for an oral therapy, as well as for XYOSTED. I still believe we're the best product on the market, relative to PK and easy-to-use and once a week injection versus daily tablets.

But there's all different patients in this market. It's a large market. So these products going to potentially appeal to a different patient, and there's plenty of room. So it's not a concern of ours. We keep an eye on it. But we're focused on growing our XYOSTED writers on our XYOSTED business and it's kind of independent of the oral products out there.

Gregg Gilbert

Great. And lastly, sort of a business model evolution question, should we be expecting any more external technology partnerships from you or should we assume that you're pretty much focused on turning your technology inward as evidenced by those INDs you plan to file on proprietary products? Thank you.

Bob Apple

Sure. Well, I mean, so the good news is that we do have a robust internal pipeline, with our 1901 and 1902. And so we're heavily focused on those, because we think there are next XYOSTED, over the next couple of years 1902 is the endocrinology rescue pen. We believe that's a pretty accelerated development program. And we're going to start the clinical study this year, file in 2022 and potentially a 2023 approval. So in the world of pharmaceutical, that's pretty darn quick.

And then in 1901, the urology pen, which is not a rescue pen but more of a like XYOSTED, a once weekly injection for patients in the Uro, Onco space. I think it will be a vast improvement, a little bit longer, a little bit more complicated program, but more still a 2024 filing, so it's not really that far away. So they’re key for us to continue to develop our internal pipeline. But we'll always be looking to use our core platform, our technology, our auto injectors and pen injectors, for our lines of business; it's a great business for us. It's one that brings us tremendous amount of upside with very low risk. That's been proven with Epi, we believe that'll happen with Forteo, and with our Pfizer programs and others. And so we still have a very active alliance business that we're trying to continue to develop, and we believe that'll also bolster our product pipeline, our development pipeline. We view both our internal and external pipeline as one pipeline for us. So we'll continue to focus on both.

Operator

We'll now take our next question from Matt Kaplan from Ladenburg Thalmann. Please go ahead.

Raymond Wu

Hi, this is Raymond in for Matt. Congrats on the great quarter. Just I guess two quick questions on how the pandemic might impact 2021 sales trends. I was wondering if you kind of saw some early evidence that the vaccination campaign has led to sales rebound in certain areas, and perhaps that might lead to a bolus of new patients that might surprise to the upside.

Bob Apple

So and I was just looking at each other who is to take the question. I would say that at this point, the vaccinations have not had an impact on the business meaning like that it's coming back, I think people are still very cautious as to how they go about their life right now. And I think, I'm not even sure what are we around 10% of the population vaccinated, it's not a very big number at this point, hopefully, the acceleration happens. And then we'll start to see life coming back to normal, and then I think we’ll see a potential uptick in XYOSTED. But obviously, we're still continuing to see XYOSTED grow throughout this whole period. So we're really happy about that.

But as far as like a surge in potential patients and scripts, we feel, I think we're looking to see that as more and more vaccines are rolled out to maybe 50% or more of the population. So, overall, we haven't seen anything lately. And in fact, in Q4, we saw go the wrong way. We saw the spikes really impact some of our larger territories, where you saw spikes in Texas and you saw spikes in New York and New Jersey, which are some of our best territories. They're starting to normalize. So you're seeing patients flow coming back in but it's still not pre-pandemic, for sure. So, overall we feel good about the business the next couple quarters we expect it to grow.

Raymond Wu

Okay, cool. Now, thanks for additional color. And I guess for the EpiPen, thanks for providing color on the vaccination trends in doctor's firms and pharmacies. But I was wondering if the school reopening dynamics might also play a role in 2021, potentially full retention works?

Bob Apple

Yes, we hope so. Last year, we saw about a 20% decrease in the market, because of back-to-school and we expect that with them currently pushing to go back-to-school even today with the pandemic still going on with the -- I think the Pre-K to second graders or eighth graders, whatever depending on the state you're in, we expect that in the third quarter of this year that there's going to be clearly a much better back-to-school impact than we saw last year. When it's at a 100% unlikely but we don't know, and I don't know exactly what's going to happen six months from now. But we do anticipate that market returning to some degree. And so we expect to see growth from that general market coming back, as well as these precautionary EpiPens that are being sold in the first couple of months of this year because of the vaccination programs.

We think as more -- as there's more and more megasites, they tend to need more devices than a lot of the injections wind up going to CVS and Walgreens over time. They have EpiPens in their stock. And so you're not going to see a huge influx of demand, when they start to roll-out to the pharmacies, but I think it's with all the megacenters and these other offsite locations, they absolutely have to buy EpiPens and so that's been positively impacting January and into February.

Operator

There are no further questions in the queue.

Bob Apple

Well we thank you for your questions and your participation. That ends today's conference call. Thank you very much. If you have any questions, you can always reach out to Tram Bui, our Head of Investor Relations.

Operator

Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.