In advance of our participation at the RBC Capital Markets 2020 Virtual Global Healthcare Conference on May 19, 2020, we are providing the following updates to certain aspects of our business.
Commercialization of ZILRETTA®
Our operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused. As a result of COVID-19 and associated stay at home and social distancing orders, patient visits to physician practices and clinics have been significantly reduced across the United States. ZILRETTA is required to be administered by healthcare professionals and since mid-March, patient access to physician offices and clinics has been limited. Some practices have shut down in-person patient visits altogether, while others are open to only critical or acute cases. In addition, we believe many patients have been reluctant to visit physician offices and clinics due to fear of contracting COVID-19. As a result of these adverse impacts on the operations of healthcare providers that administer ZILRETTA to patients and patients’ willingness to make in-person visits to healthcare facilities, purchases of ZILRETTA by healthcare providers dropped precipitously starting in mid-March even though ZILRETTA sales were trending within our expectations for the first quarter of 2020 prior to COVID-19.
With respect to our sales and marketing efforts, in late March, our Musculoskeletal Business Managers (“MBMs”) transitioned to “e-detailing,” and began utilizing various technologies to engage with our target accounts and physicians. Our MBMs continue to position ZILRETTA as an effective, long-acting, non-opioid, treatment for OA knee pain. We also believe ZILRETTA can play an even more prominent role for those patients whose knee surgery has been affected by COVID-19; specifically, delays, postponements, and cancellations of total knee replacement surgeries all have the potential to increase the need for effective pain management therapies, including ZILRETTA. However, we cannot predict when or if we may be able to capitalize on this potential opportunity, which will depend on when and to what extent patients are otherwise able and willing to see healthcare providers for intra-articular injections.
With respect to purchases of ZILRETTA by physicians, clinics, and certain medical centers or hospitals (i.e., healthcare providers that administer ZILRETTA to patients), following the impact of COVID-19, weekly purchasing volume, in units, had declined to a low of 627 for the first week of April but have steadily risen week-over-week in the second quarter. For the week ended May 17, 2020, we estimate that approximately 3,600 ZILRETTA units were purchased, which is higher than the average weekly purchases of
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approximately 3,400 ZILRETTA units over the three week period immediately prior to the impact of COVID-19 starting in mid-March.
Due to the highly uncertain nature of the continuing impacts of COVID-19, we cannot predict if weekly purchases of ZILRETTA will continue at recent levels. Therefore, recent weekly unit purchasing trends are not necessarily indicative of results that should be expected in any future period. In addition, weekly unit purchasing is not what we report as product revenue from ZILRETTA sales, as we record revenue based on sales to our specialty distributors and a specialty pharmacy, as opposed to purchases of ZILRETTA by physicians, clinics, and certain medical centers or hospitals. Also, as a result of the impact of COVID-19, the levels of ZILRETTA inventory held at our specialty distributors at the end of March relative to healthcare providers’ purchasing were higher than what we have typically experienced at the end of prior calendar quarters. We believe that the inventory levels at our specialty distributors relative to healthcare providers’ purchasing will return to levels that are more consistent with those that we have experienced historically by the end of May.
The COVID-19 pandemic has caused significant volatility and uncertainty, which could result in a prolonged economic downturn that has disrupted and is expected to continue to disrupt our business. As a result of these negative impacts, specifically the adverse impact on the operations of healthcare providers that administer ZILRETTA to patients, we continue to expect to experience a material decline in revenues for the remainder of 2020, and possibly longer, as compared to our prior expectations in the absence of COVID-19. For a further discussion of the risks that could impact demand for ZILRETTA and our revenue, as well as the potential further impacts of COVID-19 on our business, refer to the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
FX201 Clinical Trial
In early April, we announced that we were temporarily suspending our Phase 1 clinical trial evaluating the safety and tolerability of FX201, our investigational intra-articular gene therapy product candidate in patients with osteoarthritis of the knee, in consideration of guidance issued by FDA to ensure the safety of trial participants and minimize risk to trial integrity from disruptions caused by COVID-19. Subsequently, our principal investigators have indicated that they are now comfortable continuing to conduct the trial, taking into account patient safety and trial integrity in light of COVID-19. As such, we have decided to immediately resume the Phase 1 trial.