HLS Therapeutics Inc

TSX:HLS

Earnings Call Transcript 2019-Q4

[Operator]

Good morning, and welcome to the Q4 and Fiscal 2019 Financial Results Conference Call for HLS Therapeutics. On this morning's call, we have Greg Gubitz, Chief Executive Officer; Gilbert Godin, President and Chief Operating Officer; and Tim Hendrickson, Chief Financial Officer. [Operator Instructions]Earlier this morning, HLS issued a news release announcing its financial results for the 3- and 12-month periods ended December 31, 2019. This news release, along with the company's MD&A and financial statements, are available on HLS's website and on SEDAR.Certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's annual information form, which has been filed on SEDAR and can be accessed at www.sedar.com.During this conference call, HLS will refer to adjusted EBITDA. Adjusted EBITDA does not have any standardized meaning prescribed by IFRS. Adjusted EBITDA is defined in the company's press release and annual filings that are available on SEDAR and on the company's website. Please note that all financial information provided is in U.S. dollars, unless otherwise specified.I would now like to turn the meeting over to Mr. Gubitz. Please go ahead, sir.

[Gregory David Gubitz, Co]

Good morning, everyone, and thank you for joining us on today's call. As we have done in prior calls, I'll start off with a look at our activity during the quarter and the year. Gilbert will review developments with our product portfolio, and Tim will take a more detailed look at our financials. Following Tim, I'll provide some closing remarks, and then we'll hold a Q&A session.Before we begin our review of the year, I'd like to briefly address the ongoing developments related to COVID-19 and how they relate to HLS. In light of the ongoing uncertainty relating to the virus, we have taken prudent steps to minimize any potential impact to our employees, partners in the medical community, and patients. For the most part, these are standard procedures being adopted by companies worldwide that involve working from home and eliminating unnecessary travel.In his section, Gilbert will look at recent developments relating to COVID-19 and how they relate to 2 parts of the business in particular, our supply chain and the launch of Vascepa.Turning to our results. 2019 was a pivotal year for HLS, in which we achieved significant milestones that we believe strengthen the core foundation of the business and position the company for transformative growth. It was a year where we invested in the business to prepare for the launch of Vascepa and, to a lesser extent, CSAN Pronto, while continuing to generate strong operating margins and significant cash flow.2019 revenue was $54.2 million, adjusted EBITDA was $31.6 million, and cash from operations was $26.4 million. At year-end, cash on the balance sheet was $47.1 million, up significantly from the prior year. Obtaining priority review and subsequently gaining approval from Health Canada for Vascepa were the key operational achievements in 2019. Priority review is generally granted if 3 conditions are met: one, the drug addresses a serious life-threatening condition; two, there is no medication currently in the market to address that condition; and three, there is substantial evidence of clinical effectiveness of that new treatment. The criterion alone suggests a genuine need for such a product in the marketplace.Building on these achievements, subsequent to year-end, we announced that Vascepa was added to Health Canada's register of innovative drugs and, as a result, will benefit from data protection for a term of 8 years. At the time of that announcement, we also announced an increase to our peak year sales estimate for Vascepa in Canada to CAD 200 million to CAD 300 million per year, which we are reaffirming today, up from our previous estimate of CAD 150 million to CAD 250 million per year. With the recent launch of the product having taken place just about a month ago, our focus today is to lay down the fundamental basis of the product -- the product's benefits with key opinion leaders, cardiologists and endocrinologists, and see the basis of private and public formulary coverage.2019 was a busy year throughout our product portfolio. Early in the year, we in-licensed the exclusive Canadian rights for the Athelas One device, which is an FDA-cleared point-of-care medical device designed to help simplify the mandatory safety blood monitoring process for patients that are prescribed Clozaril. In the fall, we received a medical device license from Health Canada for the product, and we have branded it CSAN Pronto for the Canadian market. This product was launched late in 2019.We also completed a pilot program in the U.S. with the device where the device is known as Athelas One. Results from that trial will instruct our 2020 tactical plan for the device in the U.S. Also in the CNS therapeutic area, we in-licensed PERSERIS in 2019. And our new drug submission, or NDS, for the product was accepted for review by Health Canada subsequent to year-end. PERSERIS is a novel, long-acting injectable risperidone product for the treatment of schizophrenia that is already approved by the FDA in the U.S. In our view, this product could bring another treatment option to patients and practitioners contending with a very difficult disease state. And from a business perspective, it is a nice commercial complement to our existing CSAN franchise.As indicated in our financial results press release this morning, Health Canada has recently accepted the filing of our New Drug Submission, or NDS, for Trinomia. Trinomia is a polypill treatment option to help reduce the risk in patients of a second cardiac event. We believe there are excellent commercial synergies between Trinomia and Vascepa, as both would be promoted with the same sales force calling on the same prescribers. Trinomia is already commercialized in 31 countries around the world by its manufacturer, Ferrer, and other licensees.In 2019, we continued our trend of prudently managing our debt and capital requirements. In Q2, we completed a CAD 50 million oversubscribed bought deal financing. The funds are there to support our business development and growth initiatives and the financing also broadened our institutional investor base in both Canada and the U.S. In addition, throughout 2019, we continued to steadily pay down our debt. These 2 activities, when combined with the company's cash generation from operation, means we ended 2019 with a strong balance sheet and a net debt position of $46.7 million.With that, I'll turn it over to Gilbert for a deeper look at developments in our portfolio. Gilbert?

[Gilbert Godin, President & COO]

Thank you, Greg, and good morning, everyone. I will start with a look at our cardiovascular products and then comments on our CNS franchise.On the last day of the year, Vascepa, icosapent ethyl, was approved by Health Canada and was granted a broad indication to reduce the risk of cardiovascular events, that's including cardiovascular death, heart attacks, strokes, surgical bypasses or hospitalization for unstable angina in statin-treated patients with elevated triglycerides who are at high-risk of cardiovascular events due to established cardiovascular disease or diabetes and at least one other cardiovascular risk factor.It is important to mention that the 25% cardiovascular risk reduction of Vascepa is for the persistent cardiovascular risk that remains beyond the cardiovascular benefit of the statin, otherwise, on top of it. Vascepa represents the first and the only prescription medication for patients with those cardiovascular risk as well as a new treatment option for doctors that they never had until now.8 major medical societies, including the American Heart Association, the American Diabetes Association and the European Society of Cardiology now recommend Vascepa in their guidelines to reduce the risk of cardiovascular disease, which is the #1 cause of death worldwide. To put things in perspective, here in Canada, heart disease is an enormous economic burden with a total forecasted annual cost of $21.2 billion for 2020.On average, every 10 minutes, someone dies from cardiovascular disease. People with existing cardiovascular disease and people with diabetes with at least one risk factor have been shown to benefit from risk reductions to the tune of 20% reduction for cardiovascular death, 31% reduction for heart attacks, 28% reduction for strokes, and 35% reduction of the need for a surgical bypass.In addition to the recognition from many worldwide medical societies, in November 2019, the Endocrinologic and Metabolic Drugs Advisory Committee of the U.S. Food and Drug Administration reviewed and voted unanimously at 16 to 0 to recommend approval for the requested cardiovascular risk reduction indication and label expansion for Vascepa in the U.S.A. Unanimous advisory committee votes are uncommon, and this one reflects a substantial and consistent clinical evidence obtained in the trial.Vascepa capsules are the first and only prescription treatment consisting exclusively of the purified and stabilized active ingredient icosapent ethyl or IPE, which is a unique form of eicosapentaenoic acid or EPA. Recently, we learned of another failed trial for AstraZeneca's Epanova and Omega-3 mixture, a product containing DHA and EPA, which joins a long list of Omega-3 mixtures that have delivered failed outcome trials when tested on top of statins.In contrast to these other trials, 4 grams per day of purified and stabilized icosapent ethyl, which is Vascepa, is proven to reduce the risk of major cardiac events in high-risk patients. And this is why Vascepa is the first and the only Health Canada-approved prescription medication for this indication.During 2019, we were actively planning and preparing for the launch of Vascepa. We now have more than 30 dedicated staff who are working to inform and educate cardiologists, endocrinologists and other health care professionals on the benefits of Vascepa and how it can make an important difference in the lives of their patients. We launched Vascepa in Canada in mid-February. And while it is still very early, we're pleased so far with the reception by the medical community. Simultaneously to these efforts, we're working through the respective processes to gain access to the market and get Vascepa added to the various private and public drug formulary plans across the country.As Greg mentioned upfront, in light of developments related to COVID-19, we continue to promote the product, but we have withdrawn from face-to-face meetings between reps and practitioners. Our team members are respecting HCP's and institutions' individual policies, and they are complying with standard recommendation for social distancing. To be clear, our launch continues, but circumstances of the date require that we adapt and modify our strategy and our activity accordingly. As such, we're staying in contact with the medical community, albeit with a less physical presence, and we are moving forward with the marketing activity that we can reasonably do in the current environment. We will provide more details on the product's launch on subsequent quarterly calls.As it relates to COVID-19 and the supply chain for Vascepa and Clozaril, we believe that, in both cases, our inventory levels are robust and give us no immediate cause for concern. We do not currently see any issues emerging in the supply chain, but as it presumably is the case for any business, we monitor the macro forces that are out of our control so that we can foresee any situation that is liable to change.The bottom line here is that inventory levels are solid and no imminent issues visible in either product's supply chain, but we are monitoring the situation closely.Regarding Trinomia, as Greg indicated, Health Canada recently accepted our NDS for the product. Trinomia is a polypill combination of an anti-platelet, that's acetylsalicylic acid; a statin, atorvastatin; and an ACE inhibitor, that's ramipril. We are seeking approval for Trinomia in adult patients with an established cardiovascular disease who have been adequately controlled with these 3 individual components. Given the standard time line for review, we expect a response from Health Canada at the end of 2020. And assuming the product is approved, we would expect to launch in the first half of 2021.On Clozaril. 2019 was an eventful year with our CNS franchise. We managed through a trade inventory disruption originating in the previous year and grew Clozaril's patient count by 2.4%. In the fall of 2019, we gained approval and prepared to launch CSAN Pronto to support our patients and their health care practitioners. This introduction will help our efforts to grow Clozaril's leadership position in Canada and to stabilize its position in the U.S. market. Tim will discuss further some of the factors impacting Clozaril's 2019 revenue in his section.Health Canada approved a medical device license for CSAN Pronto in October, and while the efficient launch took place last month, the introduction of the product into the Canadian market started just before year-end. In the initial phase of the rollout, we are focusing the deployment on the leading mental health centers across the country and are working through the usual administrative and technical processes required to get the product in use at those facilities. So far, awareness and reception of the product is positive and in line with our expectations. Some sites are more advance than others and contingent on the current environmental limitations related to COVID-19 that requires that we pause some implementations, we could begin to see some adoption of the technology, which in turn could become visible in the patient growth that would be reported in the coming quarters.Also, contingent on COVID-19-related limitation is the timing of the second phase of the rollout. Later this year, we will branch out to the satellite centers and clinics, addressing the needs of in-patients and outpatients in those clinics.In the U.S., the device is commercialized as Athelas One, and our pilot program there concluded at year-end. In total, more than 1,200 patients in 70 California-based clinics took part in the pilot. Overall, various aspects of the pilot program were positive and encouraging. Based on our learnings, we plan to proceed with a tactical and targeted approach to the device's utilizations in U.S. in 2020. We believe there is sustained interest in the technology and a real benefit can be brought to defined segments of the market.Finally, subsequent to year-end, our NDS for PERSERIS was accepted for review by Health Canada. If approved, PERSERIS would be indicated for the treatment of schizophrenia in adults. The product is a once-monthly, long-acting injectable risperidone. Risperidone is a well-established treatment for schizophrenia, and PERSERIS uses a proprietary subcutaneous extended-release delivery system providing sustained therapeutic levels of risperidone over a 1-month period from a single injection. If approved, we think that PERSERIS could bring another novel treatment option to patients and practitioners. Based on timelines, we would expect a response back from Health Canada at the end of 2020 and, if approved, for it to be in the market in the first half of 2021.With that, I will turn it over to Tim for a closer look at the numbers.

[Tim Hendrickson, Chief Financial Officer]

Thank you, Gilbert, and good morning, everyone. Starting with revenue, I'll first take a look at Clozaril results for Canada. 2019 net sales in Canada of $27.2 million were down 8.6% from the prior year. Of note, the decrease reflects the impact of a 2.4% reduction in the average exchange rate on the translation of results to the U.S. dollar, our reporting currency. The remaining decline in year-over-year revenue for Clozaril in Canada was largely attributable to changes in the Ontario government's purchasing directives, which we discussed at length in our Q3 call. In summary, these changes led to an increase in hospital inventories in Q4 2018 and then to a subsequent drawdown of inventory levels in 2019, with Ontario hospitals now maintaining a much lower ongoing base of inventory. The new pattern of more frequent hospital orders is more consistent with order patterns elsewhere in Canada. And all else equal, we consider this change as now being behind us.Over the longer term, the fundamentals that relate to the growth in the number of patients under treatment is what will drive the results for Clozaril. With our continuing growing patient count and strong underlying fundamentals, we remain positive on our Clozaril business in Canada, and we are excited about the potential of the CSAN Pronto device to drive future growth.With the CSAN Pronto introduction into the market taking place at year-end, there was little revenue impact for CSAN Pronto in our 2019 financials. We expect to see a growing impact in future quarters in 2020, primarily through growth in Clozaril product sales.In the U.S., the discontinuation of the previous authorized generic supply agreement accounted for $0.9 million of the $2.7 million decline in product sales year-over-year. As previously discussed, the authorized generic supply agreement had generated marginal results and was discontinued at the end of 2018. The branded Clozaril business in the U.S. market continues to experience modest low single-digit percentage volume declines year-over-year. We are continuing with our program to bring the Athelas One device to targeted clinics in the U.S. and look to this product as having the potential to help stabilize Clozaril revenue in the U.S. over time.Absorica royalty revenue was $9.6 million in 2019, compared to $11.6 million in 2018. After considerable volatility in recent years, Absorica prescription activity in the U.S. market is now relatively stable, though in a downward trend. Subsequent to the year-end, the distributor of Absorica announced that the U.S. marketer of the product had launched Absorica LD, a line extension to Absorica, that could provide the potential for near-term growth in our royalty revenues. While very early script data is showing some positive signs for the new product, there can always be timing effects in trade results and additional short-term volatility when transitioning from one product to another. We still expect that the economic life of our marketing rates for Absorica will terminate at the end of 2020.Cost of product sales for Clozaril continues to be stable and low relative to revenues. The reduction in cost of product sales from the prior year is primarily attributable to the decision to discontinue the previous authorized generic supply agreement in the U.S. market at the end of 2018.As for other operating expenses, selling and marketing expenses increased $1.9 million in 2019 as we invested in activity to prepare for and support the launches of Vascepa and CSAN product, including the pilot program in the U.S. market. Medical, regulatory and patient support costs also increased by $0.9 million as part of those efforts to prepare for the launches of Vascepa and CSAN Pronto, which included the work to secure CSAN Pronto approval in Canada. However, general and administrative costs were only up by $0.1 million in 2019 relative to the prior year.For 2020, we expected investment related to the ongoing launch and rollout of Vascepa will add approximately $8 million to $10 million in additional operating expenses.In addition to these operating expenses, we also expect to see a further deployment of up to $10 million in working capital to support the Vascepa launch, with most of this tied initially to building inventory in early 2020 to provide sufficient inventories to support the launch, including protection for potential over-delivery of our forecasts.For 2019, adjusted EBITDA was $31.6 million compared to $41.1 million in 2018, but still representing a strong EBITDA margin of 58%. The year-over-year decrease in adjusted EBITDA reflects lower royalty and product revenue as well as the increase in growth-oriented investment, particularly the selling and marketing costs and medical regulatory and patient support costs tied to the preparations for the introductions of Vascepa and CSAN Pronto.Interest on the senior secured term loan in 2019 was $5.7 million, compared to $12.2 million in 2018. The $6.5 million decrease is primarily due to the refinancing of the company's debt in August 2018. As at December 31, 2019, the principal debt balance outstanding under the new senior secured term facility was $93.8 million, compared to $98.8 million at December 31, 2018, and $137.9 million just prior to the debt refinancing last year, this represents a significant delevering of the company. Given the strong cash position following the equity raise in June 2019, the company's leverage ratio is even more favorable on a net debt basis, which was $46.7 million in net debt at year-end.Cash from operations was again strong in 2019 at $26.4 million. As at December 31, 2019, the company had cash and cash equivalents of $47.1 million, up from $10.9 million at December 31, 2018. Our cash position increased in 2019 due to continued and consistent cash generated from operations as well as the CAD 50 million or $37.3 million in U.S. dollars bought deal equity financing completed in Q2 2019. It is worth noting that this increase in cash position is after a milestone payment of $2.5 million to Amarin related to the Vascepa approval; a $1 million upfront paid to Indivior for PERSERIS rates additional investments to progress the regulatory filings for Vascepa, PERSERIS and Trinomia; as well as pre-commercial or pre-revenue spending on Vascepa and CSAN Pronto.As noted in our press release today, the addition of Vascepa to Health Canada's register of innovative drugs, thereby granting the product 8 years of data protection, resulted in a $3.8 million milestone payment being payable to Amarin subsequent to year-end. That milestone has since been paid, and those are checks we certainly don't mind writing.And finally, in 2019, we returned just over $4.3 million to shareholders in the form of a quarterly CAD 0.05 per common share dividend. Following payment of a dividend in Q1 on March 18, 2020, yesterday, the board declared -- our Board of Directors declared that the next quarterly dividend of CAD 0.05 per outstanding common share is to be paid on June 15, 2020, to shareholders of record as of April 30, 2020.With that, I'll pass it back to Greg for his closing comments.

[Gregory David Gubitz, Co]

Thanks, Tim. As you can imagine, HLS has extensive professional and personal relationships throughout the health care communities here in Canada and the U.S. And on behalf of our entire team, I just want to say that our thoughts and utmost respect go out to all of those dealing, either directly or indirectly, with COVID-19 and for their efforts to manage and contain this virus. Ultimately, we will get past this issue, but not without the tremendous sacrifice being made by those professionals and, frankly, by their loved ones as well.I also want to send a sincere thank you to the entire team at HLS for all the hard work and professionalism that has gone into executing on the list of achievements we have discussed this morning. We believe we have assembled a world-class team capable of creating a dynamic and growth-oriented North American specialty pharmaceutical company that puts the patient and practitioners' needs first. And we look forward to delivering on that commitment as we execute on our plan.That concludes my prepared remarks. At this point, I will ask the operator to please provide instructions for asking a question. Operator?

[Operator]

[Operator Instructions]Your first question comes from the line of Noel Atkinson from Clarus Securities.

[Noel John Atkinson, VP & Research Analyst of Growth and Innovation]

Well done on a solid Q4. I have, first, a couple of questions just on Vascepa. Have you been able to achieve any sales of Vascepa in Canada yet?

[Gregory David Gubitz, Co]

Why don't you answer that one, Gilbert?

[Gilbert Godin, President & COO]

Sure. Noel, thank you for your question and your comment. What has taken place on the context of the launch is effectively the usual filling of the channel. In other words, we've ensured in the days preceding the deployment of our sales force following our national launch meeting that the product would be available at the various points of cares and in pharmacies. And therefore, we proceeded with taking up and filling orders that came for that purpose.

[Noel John Atkinson, VP & Research Analyst of Growth and Innovation]

Okay. So -- but you've actually received wholesale sales so far then?

[Gilbert Godin, President & COO]

Excuse me, if what?

[Noel John Atkinson, VP & Research Analyst of Growth and Innovation]

You've received revenues from it so far, though?

[Gilbert Godin, President & COO]

Without disclosing anything that belongs to the subsequent quarter, we'll have some updates on that in May. I think it's fair to say that we proceeded with all those necessary steps and that would imply that, yes, there were some product placements that took place during the first quarter.

[Noel John Atkinson, VP & Research Analyst of Growth and Innovation]

Okay, great. A similar question, have any of the -- any insurance plans added Vascepa to their formulary yet?

[Gilbert Godin, President & COO]

We -- we're very early in the process. I think that we provided some views that private plans, 50% of our patient base, should be covered by privately covered plans. We'll be the first ones to contemplate and eventually make a decision on those listings, and we think that those listings could be acquired to the tune of up to 80% within the first 9 to 12 months. At this point, we will reserve our commentary for the period following or the earnings call following the first period. We're a mere 3 weeks into the process, and that's essentially the time that we've devoted to interactions, initial interactions, presenting product files and rationale for their listing. And I think that we will have a preliminary view of the result of that first quarter activity in about 6 weeks' time.

[Noel John Atkinson, VP & Research Analyst of Growth and Innovation]

Okay, great. How many total sales reps do you have in Canada? I missed the number. So like total number of sales reps in Canada currently and -- or at the end of last quarter. And how many work for cardiovascular?

[Gilbert Godin, President & COO]

Yes. In total, we have 30 sales rep, 22 in the cardiovascular division, and we have 8 field-based personnel in the CNS division. On top of those, we have an additional 11 people that are field-based and more devoted to the medical and scientific aspects, so field nurses, medical and scientific liaison. We also have a very active and competent leadership group at the regional level that is overseeing those resources. So in aggregate, we could say close to 40 people covering both Vascepa and Clozaril.

[Noel John Atkinson, VP & Research Analyst of Growth and Innovation]

Okay, great. And then just finally, on Clozaril. So the filings mentioned that most of the year-over-year decline -- revenue decline in Q4 for Clozaril in Canada was in Ontario. Have any other provinces changed their purchasing methods or patterns like Ontario did? And if not, do you see anything on the horizon for that?

[Gilbert Godin, President & COO]

I think that, overall, I'm talking here of the materiality of the market. There's been no changes with the exception of Alberta. And the changes in Alberta pertain more to the hospital environment as opposed to the retail environment. And Alberta went to a single source for their hospital setting. And that's the only, I would say, noteworthy change that we could allude to. I think we've communicated during the course of last year that we were successful in retaining our exclusive coverage and availability of our product, exclusively, in 85% of the Ontario market. That was probably the most significant and important development in our case was to retain that strong position. While it changes across the country, it varies from province to province, but overall, I would say it would remain pretty much the same.

[Operator]

Your next question is from David Martin with Bloom Burton.

[David C. Martin, MD & Head of Equity Research]

A couple of questions. The first one is Clozaril scripts on Symphony looked like they've almost doubled year-over-year. But we're not seeing that in your U.S. product revenue numbers. I'm wondering, is that script data inaccurate?

[Gilbert Godin, President & COO]

We -- I will admit that we're not using Symphony. We're using a competitive source. The trend in scripts, as you may have noticed, is -- was visible and positive, a reflection of the success of our pilot and sustaining the brand that was otherwise slowly eroding. You mentioned double that would not be something that we would corroborate, but would certainly support the view that our scripts have been increasing. The actual operational results is the sum of not only the brand development, but also what happened in the '18, '19 time frame over which we experienced various level of demands and, certainly, extremely modest levels of success with the authorized generic. In other words, high revenues with very little profit content.Now those higher revenues were driven by high volume and low prices. You can probably relate to the dicey situation in which the generic marketplace has been in, in the U.S. and the Clozaril marketplace was no different. This is why, in the end, we've decided to terminate everything that relates to our authorized generic. It was contributing to the top line, but virtually nothing to the bottom line. And what you're seeing, to a certain extent, is the reflections of those ins and outs, and we're currently on the outflow, so it reduces the net sales reported.

[David C. Martin, MD & Head of Equity Research]

The sales that you're getting, the increased sales that you're getting with the brand, is that new patients coming on board? And are you having to heavily provide rebates or patient assistance programs to get this growth of the brand in the states?

[Gilbert Godin, President & COO]

The -- I want to be -- tried to be as useful as possible in that commentary. The addition to the Clozaril patient base in the U.S. is mostly made of new patients. Those new patients at first are usually titrated up and they are subject to weekly scripts. So it does create a bolus in terms of increase in scripts that doesn't always translate in terms of consumption or certainly not at the rate of what a stabilized clozapine or Clozaril patient would otherwise require. So that's another confounding element in the overall picture. New patients to the brand will need to stay on the brand for 6, 9 and up to 12 months before they become steady clients that will have a, I would say, standard-sized prescription every month.

[David C. Martin, MD & Head of Equity Research]

Okay, got it. Switching over to Vascepa. Do you have any color you can give us on your interaction with CADTH?

[Gilbert Godin, President & COO]

Yes. What I can say, actually, is somewhat limited in the sense that it's been posted on the website. The progress of our filing with CADTH has been posted on their website. It traces back to the June time frame, June of 2019, when we initially filed our dossier. And the latest posting made reference to a request for reconsideration by us, a sponsor, with respect to their embargoed response.First of all, I would say that, as defined by the process itself, in all interactions with CADTH, we're held to complete confidentiality. And secondly, what I can say is that a request for reconsideration is a possible part of that process. It's extremely well detailed in the CADTH process. Who and how and when such a process should proceed. So it's not uncommon and it can relate to any aspects of the recommendations the embargoed or call them the [ draft ] recommendations that fits the criteria for the reconsideration.I would, for further detail, refer you to the abundant source that the CADTH process itself is on their website. Just because we can't be any more specific as to the nature of our exchanges, we consider them to be normal course. Most manufacturers that brought product to the market in the past 5 years have been engaging with CADTH in various ways and reconsiderations. I've been part of those activities in the past. And I would say that we are no more, no less, no different than many dossiers going through CADTH.

[David C. Martin, MD & Head of Equity Research]

Okay. Two more quick questions, if I could. Is there work underway to get Vascepa into the treatment guidelines? I know they were delayed. They were supposed to be published in 2019, now it looks like 2020. What are your thoughts on being able to get the drug recommended in the upcoming guidelines? And then you mentioned the changes you've made due to COVID-19 as far as your sales force is concerned. What about your ability to talk with formularies? Is that being impaired?

[Gilbert Godin, President & COO]

Okay. Well, first of all, on the guidelines, I think the fact that the guidelines were not published or amended in 2019 is probably a good thing for us in that the novelty of the approval came at the far end of the year. And with a delayed process, it gives us at least a fighting chance to see Vascepa be considered. Having said that, this is not an area where we can have an active role. Everything we are doing is aimed at making sure that experts and key opinion leaders have all the information that they need. So we're kind of an open book here. We're making access to investigators if needed or any kind of experts, ours and those of Amarin, should they be needed and should they be useful.Vascepa represent a new class of preventative therapy for cardiovascular disease and the fact that many major medical societies in the U.S. and Europe now recommend Vascepa is encouraging. We think that it belongs in the next evolution of the guidelines we shall see. But our role is one of support and we are a source for information, and we're actively making sure that this is known.Your second question pertained to the private payers. The situation with COVID-19, as far as we're concerned, is not impeding our ability to continue to work on various aspects related to those various assessments. We have open lines of communications with the health and technology assessments groups like CADTH, and we certainly continue to communicate with the private payers. Should, on their end, require to pause or modify the way we interact, we will oblige. But for the time being, it is pretty much business as usual on that front.

[Operator]

Your next question comes from Tania Gonsalves with Canaccord Genuity.

[Tania Rae Gonsalves, Analyst of Healthcare]

So to start on Vascepa, again, just the impact of COVID, you mentioned that, obviously, face-to-face communications with health care providers is no longer possible for the foreseeable future. What kind of technologies are you using to communicate with them today? And what percent would you say of your target physicians are actually amenable to or reachable via these new channels?

[Gilbert Godin, President & COO]

Thank you for your question. We will be treading very lightly here on the specifics and the granular activities. They are part of our business plan, they are confidential. But I think one thing that you would probably concur with anyway is that novel technologies and access to physicians through e-technologies actually happen to be part of our plan. So those are continuing. I mean, it's in the public domain that we were planning to conduct 7 webinars involving Dr. Deepak Bhatt, the principal investigator of the REDUCE-IT trial, and Dr. Tardif, the Canada-based principal investigators for REDUCE-IT in Canada. So I think 3 of those webinar have taken place already. I think the attendance was in the 80 to 90 people, we have 3 or 4 more coming with a list of participants that appear to be at least as equal to the first ones.So that's an example of the means that we're in place. We're trying to leverage, I guess, the other similar opportunities in that fashion. Now some doctors are at the forefront of the crisis just because, regionally, it so happened to be structured in that fashion. Other doctors find themselves dealing with an empty waiting room. And therefore, the availability of each physician is really determined on a case-by-case basis.We're not there to impose ourselves. We can't talk and act naturally like nothing is happening. We're there to adapt. We're there to be useful.I would say that our 3 priorities with the COVID-19: First of all, protect the health and well-being of our employees; secondly, limit the risk of inadvertently spreading the virus; thirdly, addressing any urgent needs of our clients, physicians, patients and other stakeholders. So what we're doing is not much different than what everybody else is doing, and it's reaching out and saying, how can we help? And if the best we can help is to talk about Vascepa, we'd do so. If there are other means and other ways, we contemplate them, and if we can assist, we do.

[Tania Rae Gonsalves, Analyst of Healthcare]

Perfect. All right. You talked a little bit about you having the months of the sales of inventory stock up for Vascepa. Do you feel comfortable with that level? Can you quantify how many months of sales you have? And is this enough, you think, to meet your 2020 guidance?

[Gilbert Godin, President & COO]

A month of inventory is always a funny thing because the denominator is really -- can make that number fluctuate tremendously. What I can tell you is that, as always, because we believe in Vascepa, we're planning for success. And planning for success means that there could be upside scenarios and it would be pretty shameful not to be able to meet that upside scenario. So I can only tell you that we are in a very comfortable position when it comes to Vascepa. We can satisfy sales of a very high level, should they materialize, even higher than what we've originally planned.Having said that, and for the rest, we also have to rely on our partners here. And on that front, we'll take our cues from Amarin's recent response to similar questions. Their supply chain is globally diversified and there's nothing in it that is produced in China. In terms of the supply chain interruption, they stated themselves that it will have to be pretty catastrophic, that's their words, before they would have to worry about either the ability to get product or to work through the work in process that they have currently on hand.So we are solid on our own merit with what we've stocked for the purpose of the launch and more. And we have a sturdy partner at the back end that is also showing a fair amount of confidence in their supply chain. So we don't want to brush this aside, that wouldn't be responsible. We're just closely monitoring anything that could change the long view on those, but we don't lose any sleep over inventory levels, neither for Clozaril nor for Vascepa.

[Tania Rae Gonsalves, Analyst of Healthcare]

Excellent. Good to know. Shifting gears a little bit. So moving on to the recent Pronto rollout. I actually want to focus on the Athelas point-of-care device in the U.S. Can you specify which regions -- you said you're taking a very targeted approach there. Can you give us what regions you're targeting?

[Gilbert Godin, President & COO]

Actually, the targeting is not necessarily one that is regional. From the learnings of the pilot, we realized that certain clinics present much better dispositions to uptake, implement and use the technology. And therefore, we're making sure that those criterias are well understood and they find what is, in essence, a segmentation of the market. We have -- we're devoting finite limited resources to that deployment and want those deployment to be profitable to the sites that are getting the technology because the need is acute and they understand the benefit rather than just sprinkle all over the place and hope that they use it. So that's one aspect.The other one is that we're also dealing with organizations that can federate a broader need. And there are such groups. I can't disclose them, but we're in discussions with such groups. And those groups can -- in other words, entering more at the top of the pyramid and ensuring that, that group that is federating point-of-cares that could highly desire the technology facilitate the distribution and the penetration.

[Tania Rae Gonsalves, Analyst of Healthcare]

Excellent. And last one for me. There was a little discussion around the pricing of Clozaril in the U.S., an increase in the gross-to-net discounts, which has impacted your sales a little bit. Could you talk to the reasoning behind this? I know it's been -- we've witnessed some care consolidation in the states. I'm wondering if that is what has prompted this and if that's fully baked in now or if we can expect this trend to continue through 2020.

[Gilbert Godin, President & COO]

Tim, would you -- do you want to take that question?

[Tim Hendrickson, Chief Financial Officer]

Certainly, happy to do so. Thank you, Tania. We've not seen any changes along the lines of what you mentioned there. I think the reference was actually to more favorable gross to net adjustments in the prior period. So really not anything in the current period along those lines.

[Gilbert Godin, President & COO]

By the way, our pricing in the U.S. has not changed in more than a year, if not 2 years now.

[Operator]

Your final question comes from Justin Keywood with Stifel GMP.

[Justin Keywood, Director of Equity Research]

I'm wondering, with the launch of Vascepa in COVID-19, is there potentially greater receptiveness for a drug for at-risk patients and then keeping patients out of the hospitals? And along those lines, would that affect any of the private or public payer process? Or are there still other challenges to contend with at this stage?

[Gilbert Godin, President & COO]

Thank you for your question. I guess my answer would be more of an opinion nature. I think that this -- we'll see where the dust settles in the end, but this whole COVID-19 epidemic here certainly puts on premium or puts a focus on anything that is of a preventative nature. And Vascepa happens to be a drug that prevents heart attacks and strokes and other cardiovascular events. So I think that, overall, from a societal standpoint, will prevention continue to progress in terms of the intention to treat? We think that is a possibility. I would certainly not -- wouldn't infer that Vascepa itself should be benefiting directly from the thinking and the consequences of the virus itself, but it's more on that broad front.Having said that, it is true that the patients that are the most vulnerable that have been mentioned are people of a certain age, people that are -- that have established cardiovascular disease and have diabetes. So this, at the periphery, could certainly help internalize the benefit of a drug that brings risk reduction and prevention at a general level.

[Justin Keywood, Director of Equity Research]

Okay. That's helpful. And then just for M&A, I'm wondering if there's been any change in expected values for assets given the large market correction and if this is a time to be opportunistic in executing on some deals.

[Gregory David Gubitz, Co]

That's a good question, Justin. It's Greg here. There's tremendous volatility in the market today. And I think companies are reassessing what their go-forward strategies are. So it would not surprise me if you're starting to see transactions at more realistic prices. But I think it's going to take a little bit of time for that to play out. But the bottom line is I expect there will be more transactions. Some companies will need to do transactions because they're in a bad place and some companies would view it as an opportunity.

[Justin Keywood, Director of Equity Research]

Okay. And does the focus remain the same as far as target therapeutic areas?

[Gregory David Gubitz, Co]

We haven't changed our thinking or our strategy about looking to in-license additional products to augment our psych franchise or our broad CNS franchise in Canada or our cardiovascular franchise, and we're still looking for the right opportunity to so call plant the flag in the U.S. and establish a commercial -- a real commercial presence down there. But we're seeing kind of steady as she goes.

[Operator]

And we have one final question from the line of David Martin with Bloom Burton.

[David C. Martin, MD & Head of Equity Research]

Yes. Justin's question got me thinking. I'm wondering, the cash you have on the balance sheet now, are you kind of viewing that as a war chest in case this COVID thing gets worse or are you still as amenable to bringing in new assets as you were previously?

[Gregory David Gubitz, Co]

I don't think our strategy has really changed. We have a nice cash balance that we will use, as we indicated, for acquisitions and to fund growth opportunities. That strategy continues. Will opportunities arise, Dave, that it makes sense for us to deploy that capital, and we'll look at it. But our basic criteria in terms of the quality of assets and the therapeutic areas hasn't changed, and we don't see any need to change that. But I do think, and time will tell, that the opportunity set should widen up a little bit and valuations should reflect that.

[David C. Martin, MD & Head of Equity Research]

Okay. And the investment in the Vascepa launch seems moderate in the context of the cash you have on the balance sheet. So yes, okay.

[Gregory David Gubitz, Co]

Okay. Thank you, Dave.

[Operator]

And I now turn the call back over to Mr. Gubitz.

[Gregory David Gubitz, Co]

Thanks, operator, and thank you all for participating on today's call. As always, we look forward to speaking with you and reporting to you in the coming quarters. Stay safe. Bye-bye.

[Operator]

This concludes today's conference call. You may now disconnect.