Aerie Pharmaceuticals, Inc. (AERI) on Q4 2021 Results - Earnings Call Transcript
Operator: Good afternoon. Thank you for standing by, and welcome to the Aerie Pharmaceuticals Fourth Quarter and Full Year 2021 Earnings Conference Call. . Today's conference will be recorded. It is now my pleasure to turn the floor over to Hans Vitzthum of LifeSci Partners, Aerie's Investor Relations firm. Please go ahead.
Hans Vitzthum: Thank you, operator. Good afternoon, and thank you for joining us. With us today are Raj Kannan, Chief Executive Officer; Michelle Senchyna, Head of Clinical Development and Medical Affairs; and Jeff Calabrese, Principal Accounting Officer. Today's call is also being webcast live on our website, investors.aeriepharma.com, and it will be available for replay, as indicated in our press release. Now forward-looking statements and non-GAAP financial measures. On this call, we will make certain forward-looking statements, including statements, forecasts and observations regarding our future financial and operating performance and impacts of the COVID-19 pandemic and its variants, including our observations regarding ongoing operating expenses and net revenue per bottle. These statements will include observations associated with our commercialization of Rhopressa and Rocklatan in the United States and our collaborations in Japan, Europe and other regions of the world. They will also include plans and expectations regarding the success, timing and cost of our clinical trials. Additionally, we will discuss progress regarding maintaining, requesting or obtaining approvals from regulatory agencies of our products and product candidates, along with the associated business strategies regarding these products and product candidates. Finally, we will address our financial liquidity and other statements related to future events, including our financial outlook for 2022. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in today's press release as well as the risk factors included in our filings with the SEC. We assume no obligation to revise or update forward-looking statements, whether as the result of new information, future events or otherwise. Please note that we will file our Form 10-K tomorrow. In addition, during this call, we will be discussing certain adjusted or non-GAAP financial measures or additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the comparable GAAP measures, please see today's press release, which is posted on the Investor Relations section of our website. And with that, I will now turn the call over to Raj Kannan, the CEO of Aerie. Raj?
Raj Kannan: Thank you, Hans, and good afternoon, everyone. As you may know, I joined Aerie in December of 2021. It has been an exhilarating couple of months for me, and I'm even more convinced that I made the right choice to join Aerie, given the significant potential upside from smartly managing the multiple levers and on executing well for our shareholders. I'm very pleased to speak to you on Aerie Version 2.0 and why we remain confident about our growth in 2022 and beyond. During today's call, I will provide you with a high-level update on our performance in 2021, our outlook for 2022, and an overview of our commercial business. Then I'll ask Michelle to provide you with an update on our late-stage clinical portfolio, and in particular, our exciting prospects with AR-15512. And finally, Jeff will review the 2021 financials with you before I close with a few remarks. 2021 was a very productive year for Aerie. We delivered strong revenue growth for our first-in-class glaucoma franchise, which is comprised of our novel products, Rhopressa and Rocklatan. We reported several positive endpoints in our Phase IIb top line results on AR-15512 for dry eye that provided us with a high level of confidence in advancing the Phase III studies. We reported the positive Phase III top line results for Rhopressa in glaucoma in Japan. We executed a second agreement with Santen, and we maintained a strong financial position coming out of 2021. Taken together, these achievements have set up Aerie for success in 2022 and beyond. As I begin my third month at the company, I want to share with you what I see as the 3 strategic pillars for our long-term success. Number one, driving sustainable growth of the commercial business; number two, making smart choices with our capital in advancing our pipeline; and number three, reducing our annual cash burn rate in maintaining a solid financial position. Taking them one at a time, sustainable growth of the commercial business. Looking forward to 2022, our full year guidance for Rocklatan and Rhopressa sales is $130 million to $140 million, which represents an increase of 16% to 25% compared to 2021. I'll talk more on our commercial franchise in a few minutes. The number two strategic pillar, making smart choices with our capital in advancing the pipeline. You will note that we have made the difficult choices we need to make within our pipeline, which will enable us to expedite the path to market for the programs that we believe have the highest likelihood of success and return and either pause and/or monetize the other programs where appropriate. Today, I wanted to focus on AR-15512 for dry eye; AR-1105 for diabetic macular edema, or DME; and AR-14034 for wet age-related macular degeneration, or wet AMD. All 3 ranked high on our criteria for capital allocation including partnering options in ex U.S. markets. We believe that AR-15512 for dry eye could be a critical value driver for Aerie. We have a heightened sense of excitement about this product candidate and believe that this asset, if approved, could have a very competitive profile in the dry eye market. In addition to providing robust tier production, as early as after the first dose, AR-15512 is poised to deliver rapid relief of multiple dry eye symptoms and quality of life improvements, 2 significant needs that remain in the dry eye space. Our goal is to initiate the Phase III program in the second quarter of 2022. In a few moments, Michelle will provide further details on the relevant results from our Phase IIb clinical trial and why these results provide us with the confidence to proceed into a registrational trial for people with dry eye. Our other Phase III reading product candidate, AR-1105, for DME remains important to Aerie. AR-1105 has the potential to provide patients with a 6-month dosing interval with half the steroid use compared to the currently marketed product, which is administered once every 2 months. Importantly, AR-1105 provides us with the opportunity to validate our PRINT technology platform. It also enables us to advance a novel product candidate with a unique delivery mechanism for retinal diseases. We've been exploring a number of options for AR-1105, taking into account strategic, financial and regulatory factors. We're encouraged by the feedback we have been receiving from potential third parties, and we'll continue to evaluate options to move this product candidate forward via partnering where appropriate with the right company. Lastly, we're excited about targeting an IND submission for AR-14034 later this year. AR-14034 could be a well-differentiated product for wet AMD with a second-generation highly potent tyrosine kinase inhibitor targeting vascular endothelial growth factors, or VEGFs. In addition, it could potentially offer the longest dosing interval compared to anti-VEGF products on the market and in development today for wet AMD. And number three, reducing our annual burn rate in maintaining a strong financial position. One of my top priorities when I came to Aerie was to assess our cost structure and drive greater efficiencies in our ongoing operations to preserve cash and optimize capital allocation decisions. We recognize that our burn rate is higher than where we would like it to be, and we've made meaningful progress in making difficult choices in research, in development and particularly in SG&A. This area will be an ongoing priority and focus for me and the management team in continuing to bring our spend down and in driving efficiencies in our operations. We expect to reduce our total net cash used by approximately 15% in 2022 versus 2021, despite increasing costs, both in R&D, driven by initiating 3 Phase III studies for AR-15512 and in our ongoing operations. We've made difficult choices and put on hold a number of pipeline candidates, as previously reported, so we can focus on those with the highest likelihood of success and return on investment. We've cut expenses related to international markets as this is predominantly now partnered with Santen. We ended the year with cash, cash equivalents and short-term investments of approximately $140 million, and subsequent to year-end, received $90 million related to the second Santen agreement. In summary, given our targeted focus on the right areas that drive near to midterm value and our continuing progress in driving efficiencies in our operations, we believe we are well positioned financially heading into 2022. Now as I mentioned before, let me provide you with relevant details on our glaucoma commercial franchise and why we remain confident in sustainable growth in 2022 and beyond. In 2021, Rocklatan and Rhopressa revenues in the fourth quarter increased by 32% over fourth quarter 2020, mainly driven by a strong growth in total prescription while the overall market was flat. It was also driven by a meaningful increase in net revenues per bottle driven by product mix, rationalization of our rebates and our distribution fees. In 2022, we want to continue driving earlier adoption of Rocklatan and Rhopressa. We see 3 key drivers for the commercial growth story. Number one, we're excited to roll out our refreshed brand strategy that offers greater clarity and distinction between the brands, including the why and where to use them, which tested well with our prescribers in market research. We've taken a page out of the very successful cholesterol marketing with the lower is better theme in driving better efficacy right from the start as a primary reason for brand choice. For people with glaucoma, published evidence suggests that getting to a lower intraocular pressure number, or IOP, is better. Data suggests that for every 1 millimeter drop in IOP, the risk of vision loss is reduced by 10%. We intend to call attention to the fact that at Aerie, we have 2 powerful agents that use a novel mechanism of action which is highly effective in lowering IOP, potentially getting patients to the lowest risk of vision loss right from the start. Rocklatan offers unparalleled efficacy in dropping IOP. So why not start with Rocklatan to maximize the IOP drop or make Rocklatan the first go-to switch brand. Rhopressa, on the other hand, consistently lowers IOP by 20%, regardless of baseline pressure, and offers the most powerful add-on. That's because of its unique effect on episcleral venous pressure, or EVP, which, as you know, remains a constant, and thus far, no agent has been shown to act on EVP. It is the powerful next option to consider regardless of background therapy or baseline pressure. This is why Rocklatan and Rhopressa are increasingly well differentiated with prescribers and unparalleled in lowering IOP. Given the encouraging feedback from high prescribers of Rocklatan and Rhopressa, we believe that the differentiated efficacy and good safety profiles of Rocklatan and Rhopressa provide physicians with a clear reason to prescribe our 2 brands. And we believe that this refreshed brand story could be the cornerstone to our commercial growth going forward. Number two, we expect to have better access to prescribers. We're encouraged that more than 80% of physician visits are now face to face. This suggests that we are starting to move to a new post-pandemic normal, assuming pandemic restrictions are further eased by the end of March. And lastly, #3, we have increased pull-through opportunities. Our broad formulary coverage paves the way for increased pull-through opportunities to drive greater adoption for our brands. In summary, I believe that the refreshed brand strategy with greater clarity in positioning and refreshed messaging, combined with better access to prescribers and increased pull-through opportunities on our broad formulary coverage, could position Aerie to achieve our revenue targets in 2022 and beyond to fund our journey to the future. Before I turn it over to Michelle to continue our story in building towards the future we want for Aerie, I wanted to take a moment to speak about personnel changes. As you know, Tom Mitro and David Hollander will be departing Aerie at the end of this month. I want to thank them both for their hard work and dedication. I'm pleased also to announce Aerie's new Chief Medical Officer, Dr. Gary Sternberg, who will join us effective March 1, 2022. Gary is a board-certified ophthalmologist and a well-rounded biopharmaceutical executive with the breadth and depth of relevant experiences in clinical development, medical affairs, strategy and business development that will be valuable to Aerie. Big welcome to Gary. Before I turn it to Michelle, I also want to thank the Aerie team for their performance in 2021 and for their dedication and commitment to the company's goals. Let me now turn the call over to Michelle, our Head of Clinical Development and Medical Affairs to continue building on the reasons for our excitement about the future for Aerie. Michelle?
Michelle Senchyna: Thanks, Raj. I'm going to focus my remarks on AR-15512, our dry eye product candidate, and then briefly mention the Rhopressa Phase III clinical trial recently completed in Japan. I will also provide a brief update on our Phase IV plan to continue strengthening the product profile for Rocklatan. AR-15512, or 512, is entering Phase III development as a differentiated novel first-in-class product candidate for the treatment of the signs and symptoms of dry eye. While there are a number of prescription and OTC products on the market for dry eye, as Raj previously mentioned, we believe there is a significant unmet need for new therapies that can provide rapid onset of efficacy, convenient dosing, and importantly, consistent improvements across a range of sign, symptoms and quality of life endpoints. Mechanistically, 512 is a trip M8 agonist that acts by stimulating the cold sensing receptors found on the nerve endings that innervate the cornea and eyelids. By stimulating these receptors, 512 leads to natural tear production and a cooling sensation across the surface of the eye that may lead to a reduction in dry eye symptoms. You may recall that Aerie released the results of our robust Phase IIb trial named COMET-1 in September of 2021. While our primary endpoints were not achieved, we showed a statistically significant dose-dependent improvements across multiple validated sign, symptoms and quality of life endpoints. We were particularly excited to see a statistically significant and very robust increase in tear production as early as day 1, the magnitude of which stayed nearly identical at day 14. For symptoms, a statistically significant improvement in favor of 512 was found as early as day 14 based on SANDE score. We also saw statistically significant improvements in ocular discomfort, eye dryness and numerous measures of daily living activities. In each of these endpoints, 512 separation from vehicle continued to increase over the 84-day study. Notably, all positive results were based on the full intent-to-treat population and were consistent with 512's mechanism. Overall, there was a high degree of consistency across the data, which is atypical in dry eye. 512 was also found to be safe and very well tolerated. Lastly, the totality of the results solidified the critical design elements we wanted to carry forward into Phase III, including the dose of 512. We are pleased to report that we have gained alignment with the FDA on our endpoints, which will be day 14 unanesthetized Schirmer's score and day 28 SANDE score. Our proposed pivotal clinical program includes 2 Phase III efficacy studies and a 12-month long-term safety study. Importantly, we are on track to have the first patient enrolled in our first pivotal Phase III study in the second quarter of this year. Moving to our glaucoma franchise. I would like to note that we are finalizing the details of a Phase IV study in the U.S. This study is intended to demonstrate the powerful efficacy of Rocklatan as a first-line therapy or the first go-to switch brand. We plan to kick this study off as well in the second quarter of this year. Lastly, a brief update on the clinical results with Rhopressa in Japan. In October of 2021, we reported the first Phase III study of Rhopressa in Japan demonstrated superiority versus twice-daily dosing of ripasudil, which is a different ROCK inhibitor marketed in Japan. A second confirmatory Phase III study required for approval in Japan is underway. Our partner, Santen, is taking the lead on next steps in preparation for registration. Lastly, before I close, I would like to thank all the health care professionals, Aerie personnel, patients, caregivers and families involved with our programs over the last year. I would now like to turn the call over to Jeff.
Jeffrey Calabrese: Thanks, Michelle. I'll focus my comments on our financial results for the fourth quarter of 2021. All numbers that I will review in this discussion will be approximate for easy sharing during the call. For additional information regarding our fourth quarter annual and prior period comparisons, please refer to today's earnings release and our Form 10-K, which we'll file tomorrow. Combined Rhopressa and Rocklatan net revenues in the fourth quarter of 2021 totaled $33 million, a 32% increase over the comparable prior period. We also recognized licensing revenues of $82 million related to the second Santen agreement announced in December of 2021, bringing total fourth quarter net revenues to $115 million. Our normalized gross margin for the U.S. glaucoma franchise for the fourth quarter of 2021 was 91%, which is consistent with prior quarters. In addition, included in cost of goods sold of $6 million is approximately $3 million of underutilized capacity costs for the Athlone, Ireland plant associated with the start-up of commercial production. We expect the capacity utilization number to improve on an annual basis as we continue to drive increased volume through the Athlone plant. Total costs and expenses also include $36 million of selling, general and administrative expenses and $21 million of research and development expenses, reflecting steady investment in sales and marketing for our glaucoma franchise and continued investment in our clinical programs. Our fourth quarter 2021 net income was $46 million or $0.96 per diluted share, which was driven by $82 million of licensing revenues related to the second Santen agreement. When excluding $6 million of stock-based compensation expense, our total adjusted net income was $52 million or $1.09 per diluted share. As of December 31, 2021, shares outstanding were approximately 48 million. For the fourth quarter of 2021, our net cash used in operating activities was $30 million, bringing our full year total of net cash used to just under $100 million. As of December 31, 2021, we had $140 million in cash, cash equivalents and short-term investments. Additionally, we received $90 million from Santen in January of 2022. As Raj previously mentioned, our 2022 guidance includes an increase to $130 million to $140 million in glaucoma franchise net product revenues and a reduction in total net cash used by approximately 15% in 2022 versus 2021, despite increasing costs both in R&D, driven by initiating 3 Phase III studies for AR-15512 and in our ongoing operations. We believe we are well positioned financially heading into 2022. Now I'd like to turn the call back to Raj for a few closing remarks. Raj?
Raj Kannan: Thank you, Jeff. To conclude, I am even more convinced than before that I made the right choice in joining Aerie, and our 2021 achievements have set Aerie up for success in 2022 and beyond. In 2022, we expect to deliver continued revenue growth in our glaucoma franchise. We expect to advance AR-15512 to pivotal Phase III studies which, if positive, could result in a compelling competitive product profile. And we expect to make continued headway in expense reductions to strengthen our balance sheet. We're excited about building Aerie Version 2.0, and I believe we have the right products, the right plan and the right talent to be successful in growing Aerie sustainably for the future. Thank you all for taking time to join us today. I look forward to the year ahead with confidence and in updating you on our progress along the way. Operator, over to you for Q&A.
Operator: . Our first question comes from François Brisebois with Oppenheimer. You may proceed with your question.
François Brisebois: Congrats on the progress. So a couple of things. I noticed that you don't mention the net revenue per bottle anymore. Is that something that will keep going -- will keep happening going forward? And maybe just an explanation as to why you've not mentioned that. And then if we were to just do a quick back of the envelope, is it fair to say that it makes sense, based on the number of bottles, that it was actually a little higher, maybe around the $95, $96 per bottle? And then I have a quick follow-up.
Raj Kannan: François, this is Raj. The reason we did not put it in our prepared remarks is, as you well know, 2021 was the first year where we reversed the decline in terms of the net revenue per bottle. But as we always say, this is sort of like a volatile number and we can't guarantee what that number will be. There's always intense pressure from payers. And we continue to squeeze margins, both from payers as well as wholesalers, in terms of the fees and the rebates that we pay out. Suffice it to say, in 2021, if you want the number, it's -- average revenue per bottle was $90. So you're pretty close to what you did back of the envelope.
François Brisebois: Okay. Great. And then in terms of the glaucoma market being fairly flat through the year and then seeing growth here, is this something -- when you look at the market as a whole, as hopefully, we kind of get over this never-ending pandemic, do you expect the market to keep growing? Or is this more of a greater market share of a kind of stagnant market on the glaucoma side?
Raj Kannan: So François, great question. I think when we look at COVID itself, obviously, the market declined, overall market, and it was flat in 2021, but it would not be unreasonable to assume that we would get back to the pre-COVID market growth rate, which was roughly about 2% a year. I hope that helps.
François Brisebois: Yes. No, that's extremely -- and I'll try. Sorry, if I could sneak a quick one. In terms of the dry eye program, 512, there's been a lot of challenges in terms of reimbursement, maybe being a little more difficult these days. Any thoughts on reimbursement challenges in the dry eye market and why it might be something that we can work around here with Aerie?
Raj Kannan: Yes. Great question. I think given sort of our experience on gross to net and the intense pressure from payers, we are very cognizant about 2 things, right? One is to come out with a very strong product profile, as Michelle walked through her prepared remarks, in terms of why we believe the both achieving sign and symptoms would be quite a differentiated product in this particular space. And importantly, we are -- we've got at least 2 to 3 years before we start thinking about kind of getting into the market. So we are going to be working with payers and collaborating with them to be able to generate relevant data that would be meaningful to them as well. So we would be well prepared coming in with our dry eye. And like Michelle said, I think the company is quite excited about this particular asset moving forward into Phase III as quickly as we can.
Operator: Our next question comes from Louise Chen with Cantor.
Louise Chen: So first question is, is the potential sale of the company still on the table? I know prior management had mentioned that. And then there have been quite a few management additions in the near term, and how do you plan to do things differently than the prior management team?
Raj Kannan: Great, great questions, Louise. So let me talk about the sale. Obviously, the way I would characterize it is we remain focused, right, as a management team and as employees of the company, doing the right things that drive shareholder value. And I know it sounds like whether than apple pie, but I strongly feel that the better we do this, the better our share price will reflect the underlying value of the company. When there is interest that reflects the true underlying value to our shareholders that is consistent with the Board's perspective as well, we'll certainly update you. But at this time, we can't -- as you well know, comment or discuss on any potential interest from companies on sale or an M&A with the company itself. Louise, was there a second question?
Louise Chen: Yes. Second question was that there have been some recent management additions, and curious how you all plan to do things differently than the prior management team.
Raj Kannan: Good question, Louise. I think if you noticed, which there's been a trend recently that we're more focused now than we have been in the past, right? So there's very clear focus on getting our commercial growth trajectory right for the short term. We're advancing AR-15512 as a significant -- which we believe will be a significant value driver for the organization for the midterm. And there's a clear acknowledgment from management, at least, as since I've come on board, that our costs need to be controlled and our balance sheet needs to be strengthened. And so you saw the first meaningful reductions in our net cash burn to drive sustainable growth for the long term. So that's -- at least at the start, is very different from the Aerie, for lack of a better analogy of version 1.0, that was prior to sort of me taking on. The other thing I would say is the employees, when I have met them all throughout Aerie, they're quite reenergized given the clarity of focus and the purpose and the potential promising future that we could all help build together as a company. So I've held regular town halls, we provided transparency in the direction and the choices we need to make. We've set an operating model of collaboration between the executives and the functions, and we've provided a pretty realistic path in connecting the dots from where our vision is to how we get there. So I believe that Aerie employees today are joined even more so together with a shared set of values and a common purpose and are excited to be part of a company that has the potential to meaningfully change the lives of patients for the better.
Operator: Our next question comes from Stacy Ku with Cowen. You may proceed with your question.
Stacy Ku: Congratulations on the progress. So my first question is a bit of a follow-up on the first one. I just want to push a little bit on that net value per prescription. In the past, the company has been able to exceed $100 per prescription, a monthly prescription. So long term, what are your thoughts there? And then the second question is around the potential value of a partnership for the DME program, 1105. What would you think would be worthwhile for our collaboration?
Raj Kannan: Great, great questions. So when I look at sort of the average revenue per bottle, and that's sort of done the calculations since Aerie launched the products, and to your point, I think in 2018, it was $128. In '19, it was $103. In 2020, it was $81. So we've been sort of actually on a declining net revenue per bottle. And 2021 was the first year, given the volumes and given our rationalization in terms of how we looked at rebates, the company actually reversed that trend. Whether we get to above 100, obviously, there's always the intent and that's what we're working on. But I want to be very clear that I'm not promising or guaranteeing anything at this point in time. I think my focus really is to drive the underlying demand and really drive the prescriptions given sort of a refreshed brand story that we had in our prepared remarks. So we're quite excited that there is greater clarity in the positioning of our brands. And there's a clear refreshed messaging that seems to be resonating, at least, in market research with our prescribers. So I think we're looking forward with the execution. We're looking forward to taking that story and getting it out to the prescribers. On the second question in terms of DME, I think in quarter 3, there were -- in the transcripts, I noticed that we had mentioned that the potential opportunity for DME with a steroid is much bigger in Europe than it is in the United States. So obviously, the value of a potential partnership for companies that are entrenched in Europe, similar to what we did with Santen with our existing approved products, is very similar to the thought process that we could potentially monetize that and then further strengthen our balance sheet and refocus where we're great at, which is the U.S. market and continuing to develop our pipeline. I hope that addresses your question.
Operator: Your next question comes from Annabel Samimy with Stifel.
Annabel Samimy: Congrats on the progress. And also thank you for providing guidance for the first time in a few years. We all appreciate it. But just to press you on that a little bit -- of course, I have to press you on it. If you take the run rate from 4Q and pull it out for the year, I mean your guidance really implies little growth, if you're looking at 4Q as a run rate. And it seems that this year, you shouldn't have as much headwind from COVID. You're also implementing a marketing strategy. So can you kind of help us understand the pushes and pulls of that guidance? And whether this is just your first line in the sand and you want to make sure that you get it right. And then the second question is on the cost structure. I understand that you're looking at the cost very carefully. I guess how do you square that with the increased marketing push that you're going to be doing or the marketing strategy that you have? What are some of the levers that you can pull in terms of reducing some of the costs and also, I guess, the rationale for conducting a Phase I study in Rocklatan when it seems that you have some pretty decent understanding of how that product works and the actual efficacy. So I guess that's a somewhat loaded question for costs.
Raj Kannan: Thank you, Annabel. Let me just see if I can address each one of these questions. I think when you look at the fourth quarter, traditionally speaking, the fourth quarter is one of our strongest quarters during the year. So extrapolating that, I think, would be a very simplistic way of saying what our revenues could be. We look at prescription growth. We look at net margins, the revenue per bottle, there is a number of factors that we look at. And I think the target that we've set is ambitious. But however, like you said, I want to make sure that whatever guidance that I provide, we're comfortable that we can achieve that particular guidance that we provide to TheStreet. So obviously, there's a little bit of a mix of both of those factors that you mentioned. In terms of cost, I think we're becoming very precise, right? We've had 3 years of experience in terms of which prescribers have the intent to prescribe, what their predictive attributes are. So we're becoming very targeted in terms of where we want to dial up in the programs that seems to work and in the programs that don't work. And I think you'll see a very educated, thoughtful approach in how we thought about reducing our SG&A without necessarily touching the footprint, right, in terms of the number of sales reps and the promotional effort that we have. And then the last piece that you mentioned was the Phase IV. Obviously, this was something that, looking back, we could have started that very early on right after approval. And one of the things that has become better, right, over the years is the physician's perception of the product and the misconceptions they may have had especially around hyperemia. And I think what we want to do is to provide a Phase IV study that actually is in line with how we're thinking about promoting it, which is Rocklatan as the first initial preferred brand to go to versus whatever that they've been using. And to actually demonstrate real-world effectiveness in what we're saying. So actually putting the data in how we're promoting it, and that's what the Phase IV is meant for. I hope I captured all the questions.
Annabel Samimy: Yes. So the Rocklatan study is almost like the Phase IV MOST study that you had for Rhopressa, is that what I'm understanding?
Raj Kannan: Similar. Similar to that study. Correct.
Annabel Samimy: That real world experience to change the perception about the product?
Raj Kannan: Correct.
Operator: Our next question comes from Serge Belanger with Needham & Company.
Serge Belanger: I guess my first question is a follow-up to, I guess, one of the prior questions on guidance. Should we expect the same kind of quarterly cadence that we have been accustomed to over the last couple of years?
Raj Kannan: The quarterly cadence in terms of providing an update as to what -- I think we provided annual guidance. I think the quarterly will be pretty much in line with sort of how our trends has been. Like I just recently said, fourth quarter tends to be the strongest one and quarter 1 tends to be a little lower, right? So as we see, as we progress during the year, quarter 2 becomes better. Quarter 3 becomes better and quarter 4 is our strongest quarter in the year. So that's the cadence that I would articulate.
Serge Belanger: Okay. And on payer coverage, as we move into 2022, is there any changes to coverage policies? And is that an aspect of the business that you plan on improving as part of your growth strategy for the glaucoma franchise?
Raj Kannan: Great question. So as you know, in our prepared remarks, at the end of 2021 and in our investor deck, the refreshed investor deck, we provided -- we're actually quite pleased with the broad coverage and reimbursement that we have. So in the Medicare population, which is roughly about 60% of our business, we have roughly in the mid-90s in terms of coverage. And in the commercial book of business, which is roughly about 23%, 24% of the total, we've got roughly in the mid-70s, right? So -- and throughout the year, we constantly assess and calculate how do we rationalize rebates, right? So there are plans or books of businesses with mid-level or low level of control where we could potentially even consider being off formulary because we do get the prescriptions through. And that's the kind of back and forth that we continually monitor. And that's why you saw in 2021, the team has done a very nice job in figuring out how to rationalize those rebates across payers and across distributors and wholesalers.
Serge Belanger: Okay. And just the last one. Based on the credit cash balance and your efforts to reduce operating cash burn, can you just comment on what you're thinking of in terms of cash runway -- with the cash you have on hand.
Raj Kannan: Yes. So given my third month, I wish I could answer that clearly, but I wouldn't say this, right? There are a number of moving pieces right now. There are a number of assumptions that we're making, right? In terms of the growth rate for the commercial franchise, we're thinking about monetizing certain aspects of our Phase III pipeline programs. So -- and then we're also continuously assessing our cost structure and reducing our cash burn. So that -- those priorities -- let me kind of get solidified in the company in terms of how those things are moving, how those assumptions are coming through. I know for now, I can tell you that we are in a strong position to get through and execute on our short-term plans for 2022. But hopefully, as the year progresses, we'll have better visibility on how these assumptions are coming through, and I'll be able to give you a better picture as to what that cash runway could look like.
Operator: Our next question comes from Yigal Nochomovitz with Citi.
Carly Kenselaar: This is Carly on for Yigal. We have a few on the pipeline. I guess on dry eye, about how many patients do you expect to enroll in each of the planned Phase III studies? And then related to that, what's your expectation at this stage for how long those trials may take to complete enrollment?
Raj Kannan: Thank you, Carly. Great questions. So I think at this point, we know that we want to initiate Phase III or FPI in the second quarter. Just to give you a rough estimate, I think the total number of patients that we had in our Phase IIb, we're thinking about very similar numbers for a Phase III, 2 arms, but the details of those study design and the actual numbers will be rolled out as we finalize our protocol. In terms of the time line, right, this is a 90-day study. Day 84 would be the endpoint, but we will do it through 90 days. And I think, clearly, there's a model either from our Phase IIb or from others that you could easily draw the time line in terms of saying when would that last patient readout? And when would the company potentially be ready for a data readout from the Phase III. At this time, we didn't disclose it, but I think you have enough to model what those time periods might look like.
Carly Kenselaar: Okay. Great. That's helpful. And then we just wanted to clarify on the development strategy for AR-1105. Will Aerie move forward with investing in a Phase III program independently? Or is it more likely that you'll look to partner to fund the Phase III development? I think the company had previously talked about initiating that study in the first half of 2022. So just curious if that's still on track or if you're taking a pause while potential partnership discussions advance.
Raj Kannan: Yes. Thanks, Carly, for that question. I think AR-1105 continues to remain a very important product, and we're excited by it. But I think to your question, a straightforward answer would be the latter one, which is more likely to partner in terms of getting the partner to fund the development expenses for AR-1105, given -- especially given sort of the majority of the opportunity or the bulk of the opportunities outside the U.S.
Operator: Our next question comes from Jason Gerberry with Bank of America.
Jason Gerberry: Just on the guidance itself. So it sounds like there's somewhat uncertainty around pricing, so you don't want to guarantee sort of an outlook on the price dynamic. So is sort of the assumption then that the sales guidance is entirely driven by volume. Just wanted to tease that dynamic out that internally, you're not assuming any incremental price benefit? Or is it more mainly volume with a little bit of price? Just if you can clarify the price volume dynamics.
Raj Kannan: Yes. Thanks, Jason, for that question. I think if you look at 2021, roughly about 18% of the growth -- we grew 35%, right? And the predominant 2 drivers were prescription growth and the net price per bottle. So 18% or so was contributed by the increase in prescriptions and about 12% or so came from the net price per bottle. I think for modeling purposes, Jason, I would use the 90 that we left off with in terms of the average. And then there's about 6% contribution from incremental price. That's how we calculate it. That went into the guidance that we provided to TheStreet.
Operator: Thank you. Our next question comes from Greg Fraser with Truist.
Gregory Fraser: How many prescribers are there of Rhopressa and Rocklatan? And how did that number change in 2021? I'm trying to get a sense for how much of the population the sales force is calling on or already prescribers. And if you can comment on the mix between weekly and monthly prescribers that would be helpful.
Raj Kannan: Yes. So I think the total targeted prescribers that we go after is roughly a little over 10,000, 10,500 or so. And what was encouraging to see in 2021 was the increase in weekly prescribers, we got from 3,500 to 5,000. So it's roughly about 48% of our total target audience were starting to prescribe 1 prescription -- at least 1 prescription or more every week, and that was an encouraging trend. And so we see a potential opportunity there, Greg, in terms of continuing to grow the weekly prescribers in particular because that drives the overall demand.
Operator: Thank you. Our next question comes from François Brisebois with Oppenheimer.
François Brisebois: Sorry, just a quick follow-up here. When you were doing your research in terms of working on the brand and refreshing the messaging on Rocklatan and Rhopressa, and going Rocklatan first, did you come across KOLs or docs, prescribers not being aware of the reimbursement improvements on the Rocklatan front, just from maybe a lack of face-to-face time? Or was the reimbursement level very clear amongst prescribers when you did your surveys?
Raj Kannan: Yes. Great question, François. I think -- I would say that the 2 issues that we have been addressing and it has been declining and one of them is the payer coverage, the awareness around payer coverage. So this is an opportunity that I think in my prepared remarks, I had said that it's an opportunity for us in 2022 to get those pull-through opportunities where we have broad formulary coverage for our brands. So that is something that is an ongoing messaging that is integrated into the call with the physician itself. So we hope, right, that the broad formulary coverage now translates into many of the pull-through opportunities that the field force is working on in a coordinated fashion.
Operator: Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.
