Horizon Therapeutics PLC (NASDAQ: HZNP) Q1 2020 Earnings Call Transcript

Horizon Therapeutics PLC (HZNP) Q1 2020 earnings call dated May 06, 2020

Corporate Participants:

Tina Ventura — Senior Vice President, Investor Relations

Tim Walbert — Chairman, President and Chief Executive Officer

Elizabeth H.Z. Thompson — Group Vice President, Clinical Development and External Search

Paul W. Hoelscher — Executive Vice President, Chief Financial Officer

Analysts:

Jason Gerberry — Bank of America — Analyst

David Steinberg — Jefferies — Analyst

Annabel Samimy — Stifel — Analyst

David Amsellem — Piper Sandler — Analyst

Gary Nachman — BMO Capital Markets — Analyst

Ken Cacciatore — Cowen and Company — Analyst

David Risinger — Morgan Stanley — Analyst

Dana Flanders — Guggenheim — Analyst

Presentation:

Operator

Good morning, and thank you for standing by. Welcome to the Horizon Therapeutics plc First Quarter 2020 Earnings Conference Call. At this time, all participants lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s conference is being recorded. [Operator Instructions]

I would now like to introduce Ms. Tina Ventura, Senior Vice President of Investor Relations.

Tina Ventura — Senior Vice President, Investor Relations

Thank you, Chris. Good morning, everyone and thank you for joining us.

On the call with me today are Tim Walbert, Chairman, President and Chief Executive Officer; Liz Thompson, Group Vice President, Clinical Development and External Search; Paul Hoelscher, Executive Vice President, Chief Financial Officer; Vikram Karnani, Executive Vice President, Chief Commercial Officer; and Andy Pasternak, Chief Executive Vice President, Chief Strategy Officer. Tim will provide a high level review of our first quarter, including an update on COVID-19, our TEPEZZA launch and guidance. Liz will then provide a review of our R&D programs, followed by Paul, who will discuss our financial performance and guidance in more detail. After closing remarks from Tim, we’ll take your questions.

As a reminder, during today’s call, we’ll be making certain forward-looking statements, including statements about financial projections, our business strategy and the expected timing and impact of future events. Our actual results could differ materially due to a number of factors, including the extent and duration of the effects of the COVID-19 pandemic as well as other factors outlined in our latest forms 10-K, 10-Q and any 8-Ks filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements and Horizon disclaims any obligation to update such statements.

In addition, on today’s conference call, non-GAAP financial measures will be used. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and other filings from today that are available on our investor website at www.horizontherapeutics.com.

I will now turn the call over to Tim.

Tim Walbert — Chairman, President and Chief Executive Officer

Thank you, Tina. And good morning, everyone. During my remarks, I will discuss the first quarter business performance and the remarkable initial launch we have had with our thyroid eye disease medicine TEPEZZA.

However, I would like to start with a few thoughts about the COVID-19 pandemic. It goes without saying that these are unprecedented times. I want to recognize and thank the healthcare professionals showing such incredible dedication and tireless effort through this pandemic. I also applaud our employees who are helping patients access and maintain their medicines. It is with the commitment and support of so many people that we will get through this together.

Our priority at Horizon has been to safeguard the health, safety and welfare of patients and our employees as well as support the communities in which COVID-19 has made such an impact. Our commercial organization and patient services teams have done a tremendous job responding, doing everything possible to support patients and physicians during this period. This is a true testament to who we are as a company, always willing to go to incredible lengths to make a difference. We are also supporting our communities. We have donated more than $1.5 million to COVID-19 response efforts in our locations around the world.

With the diversity of our portfolio, and the fundamentals of our businesses intact, we are in a strong position as a company. We have a strong cash position with $755 million at quarter end, and a modest level of debt leverage following the numerous improvements we made to our capital structure last year. This strength and confidence in our future has allowed us to complete three transactions in the last month alone, including the addition of HZN-825, a new pipeline candidate for a rare, rheumatic disease, and two transactions to acquire payment rights related to future TEPEZZA royalties and milestones. Given the TEPEZZA performance this quarter and our significantly raised expectations, we believe the two TEPEZZA rights transactions will pay back quickly. We have business continuity plans in place across our supply chain to support the availability of our medicines at this time and do not foresee any disruptions in supply from COVID-19 moving forward.

Regarding the impact of COVID-19 on our business, while it impacts all of our medicines to some degree, it differs greatly by medicine, and we have done our best to estimate that impact in our updated full-year guidance. TEPEZZA has proven very durable in this environment based on the severity of disease and the unmet need for patients that have gone for years without a treatment. Our rare disease medicines have also been stable given the serious diseases they treat. We are seeing more of an impact to KRYSTEXXA and our inflammation medicines as well, as COVID-19 has reduced physician visits, and stay-at-home orders have impacted patient comfort levels with accessing their treatment. As it relates to KRYSTEXXA, we are seeing deferred demand from COVID-19 and expect it to begin to return as healthcare activity returns, which we have assumed will happen in the second half of this year. Paul will discuss the expected impact from COVID-19 in more detail.

Moving on to the first quarter results, including the launch of TEPEZZA. We had an exceptionally strong first quarter, with better-than-expected performance across all of our business units, well exceeding our expectations for net sales and adjusted EBITDA. first quarter net sales were $356 million, a year-over- year increase of 27% driven by orphan segment net sales growth of 47%. Adjusted EBITDA was $107 million, up 21%.

TEPEZZA had a fantastic launch quarter, significantly outperforming our expectations. As a result, we are increasing our TEPEZZA net sales guidance for the full year to greater than $200 million. We are also raising our full-year net sales guidance to range between $1.40 billion and $1.45 billion, driven by significantly higher TEPEZZA net sales, which is more than offsetting the estimated impact of COVID-19 on our other medicines. We have also revised our adjusted EBITDA guidance to range between $450 million and $500 million, which reflects the additional commercial investments we are making to support the higher-than-expected demand for TEPEZZA, our new TEPEZZA R&D programs we announced this morning and our recently acquired development-stage candidate, HZN-825.

The highlight of the first quarter was the extremely successful launch of TEPEZZA, which we initiated shortly after receiving FDA approval in January, almost two months before the scheduled PDUFA action date. The response to the medicine has been overwhelmingly positive from both patients and physicians, with uptake far exceeding expectations.

First quarter net sales for TEPEZZA were $23.5 million. To put this into context, our full-year initial guidance for TEPEZZA was for $30 million to $40 million. Three factors drove TEPEZZA outperformance. First, the severity of thyroid eye disease, or TED, and its debilitating, painful and vision- threatening symptoms, is a highly motivating factor for patients to seek out therapy. Second, our pre-launch efforts were incredibly successful. And third, the TEPEZZA launch execution has been stellar.

The severity of TED is an important factor contributing to the strong uptake. We’ve heard countless stories from patients about how challenging it is to live with TED and the success they have had with TEPEZZA. One came from a woman with rapidly progressing TED. In the month leading up to treatment, the disease had worsened to the point that she was on the verge of having to quit her job due to her double vision and other debilitating symptoms. Our patient services group immediately reached out to help her accelerate her treatment schedule, and she was able to start treatment in early April. By Easter Sunday, she was able to watch TV, drive, and very importantly regained her ability to work.

The broad indication we received at approval has also allowed patients with fibrotic disease, which is also known as inactive disease, to be prescribed TEPEZZA. One such patient with fibrotic TED was diagnosed as legally blind in one eye. Shortly after beginning TEPEZZA treatment, he rapidly recovered sight in the eye. In another case, a woman whose disease had been fibrotic for more than a year experienced a significant reduction of proptosis after taking TEPEZZA. Results like these are generating strong interest in TEPEZZA for the treatment of fibrotic TED, which is one of the reasons we are moving quickly into our planned new clinical program in fibrotic TED, which Liz will discuss in more detail shortly.

The execution of our commercial strategy and significant pre-launch investment resulted in approximately 200 patients starting therapy in the first quarter. We have also generated more than 1,500 patient enrollment forms, or PEFs, year to date. PEFs are a leading indicator of demand. As we evaluate our launch metrics, we continue to make great progress.

We continue to see significant use of TEPEZZA by our top-tier physician targets. In line with our expectations, about 90% of prescribers are ophthalmologists or oculoplastic surgeons. Patients are well-diversified across the country. Our current payor mix is roughly 50% commercial and 50% government. We expect the mix to shift to more commercial patients over time. Our site of care team activated more than 500 infusion centers in the first quarter. Activated sites are those infusion centers that are ready to administer TEPEZZA provided the payor approves coverage. More than 150 infusion centers administered TEPEZZA in the first quarter. Our payor team has met with payors representing nearly 90% of covered lives. Final policies have been published for more than half of those covered lives, with favorable policies for more than 70% of those covered lives. We are therefore seeing favorable access much sooner than we expected.

As it relates to COVID-19, after very rapid growth in February and March, the growth of our patient enrollment forms of TEPEZZA have slowed. Our significantly increased guidance to greater than $200 million incorporates that impact. Accordingly, our guidance this year would have been substantially higher if it weren’t for the impact of COVID-19. We’ve continued to see a similar number of new-patient starts in April than we did in March, which gives us confidence in our full-year guidance and even more confidence in our greater than $1 billion peak US net sales expectation.

With KRYSTEXXA, our biologic medicine for uncontrolled gout, we also delivered a better than expected first quarter, with net sales of $93 million, growing 78% versus 2019. As we’ve discussed in the past, we see three drivers of growth for KRYSTEXXA, which all contributed to our performance this quarter: expanded uptake in existing accounts and adding new accounts; increased use of KRYSTEXXA with immunomodulators such as methotrexate; and continued acceleration of growth in nephrology.

As it relates to immunomodulation specifically, physicians are using immunomodulators more frequently, as they continue to see evidence that it dramatically increases the KRYSTEXXA patient response rate. This includes the 79% response rate data generated by the MIRROR open-label trial, as well as numerous published case studies with similar or better results. In fact, we just learned of positive data generated from the RECIPE trial, which is an investigator-initiated, placebo-controlled trial evaluating KRYSTEXXA with the immunomodulator mycophenolate mofetil, or MMF. Liz will discuss this further in her remarks.

Based on data like these that continue to be presented and published, physician use of immunomodulators with KRYSTEXXA has grown to double-digit rates. We expect the adoption of the use of immunomodulators with KRYSTEXXA to continue and do not believe their use with KRYSTEXXA has been significantly impacted long-term by COVID-19. In fact, based on a market research study we conducted in March, approximately 75% of physicians have stated they continue to be interested in using KRYSTEXXA plus immunomodulation therapy despite COVID-19.

As it relates more specifically to the impact of COVID-19 on KRYSTEXXA, the vast majority of patients who started therapy prior to the mid-March impact of COVID-19 have maintained that therapy. However, due to stay-at-home guidelines that began in mid-March, many first-time patients have delayed the start of their infusions. In addition, patient visits to physicians have substantially declined, with rheumatologist office visits reduced approximately 50% across the board. This has resulted in a reduction in new patient generation. We see this resulting in deferred demand for KRYSTEXXA that we anticipate will begin to return to pre-COVID-19 levels following the return of healthcare activity in the second half of this year. As we evaluate that deferred demand, we have a database of more than 1,500 uncontrolled gout patients who are currently pending treatment with KRYSTEXXA. We are continually engaging with these patients to help them get treated when appropriate for them given their individual and their physicians’ circumstances.

The fundamentals of this market are intact and there is a significant unmet need for the 100,000-plus patients who are not being treated for their chronic and painful uncontrolled gout. Unfortunately, the health of these patients will continue to decline as they defer their treatment. We remain highly confident in our peak US net sales expectation of more than $1 billion for KRYSTEXXA.

Demand for our rare disease medicines remains steady, driven by first quarter combined average shipping patient year-over-year growth in the mid-single digits for RAVICTI, PROCYSBI and ACTIMMUNE and compliance and adherence have improved even more so during this environment.

I will now turn the call over to Liz for an update on our R&D programs.

Elizabeth H.Z. Thompson — Group Vice President, Clinical Development and External Search

Thank you, Tim, and good morning, everyone.

The first quarter was also very productive for Horizon from an R&D perspective. We received FDA approval for TEPEZZA and presented new TEPEZZA data. We announced several new R&D programs with both TEPEZZA and KRYSTEXXA. And finally, we acquired a development-stage candidate, HZN-825. I’ll review these developments and also provide our thinking about COVID-19 as it relates to our clinical programs.

I will begin with HZN-825, the development-stage pipeline candidate we recently acquired in the Curzion transaction. HZN-825 is an LPAR1 antagonist that we will be exploring in diffuse cutaneous systemic sclerosis, which is a type of scleroderma and is a rare, chronic and sometimes fatal autoimmune disease with high unmet need. In addition to skin thickening, these patients can suffer extensive fibrosis that causes internal organ damage, including interstitial lung disease, kidney disease and bowel disease. There are roughly 30,000 patients diagnosed with this type of scleroderma in the United States, primarily managed by rheumatologists, and there are no currently approved treatments for this disease.

Mechanistic rationale and early clinical evidence are promising for LPAR1 antagonism. This includes positive signals observed in an eight-week placebo-controlled Phase 2a trial of HZN-825, as well as continued improvement in the 16-week open-label extension period. While the results showed evidence of potential clinical benefit in patients with scleroderma, the timeframe was likely too short to show statistically significant clinical benefit. We plan to conduct a pharmacokinetic trial this year to support new-product formulation, and we also plan to discuss the registrational program with the FDA later this year. We expect to initiate a Phase 2b pivotal trial in the first half of 2021 and are excited about the potential of HZN-825 for treating this debilitating disease.

The approval of TEPEZZA in January was the culmination of a great deal of effort and dedication on the part of our whole R&D organization. However, it represented only the beginning of our clinical work with the medicine. Our strategy for TEPEZZA is to maximize its long-term potential. As such, today we announced two new TEPEZZA development programs, one to evaluate TEPEZZA in the fibrotic phase of TED, sometimes referred to as inactive disease, and another to explore the potential for subcutaneous administration.

Our trials for TEPEZZA in fibrotic, or inactive TED will evaluate TEPEZZA in patients whose disease is no longer progressive or inflammatory. Once the pain and inflammation of active or progressive TED subside, the inflamed tissue behind the eye becomes fibrotic. While the disease is no longer active, fibrotic TED patients may continue to experience proptosis, diplopia and other debilitating eye symptoms that can impair their quality of life. As Tim mentioned, we’ve heard that physicians are using TEPEZZA in this patient population with positive outcomes. We anticipate initiating a single-arm, open-label trial early next year.

Our other new program is intended to explore the potential for subcutaneous dosing of TEPEZZA, which is currently administered via infusion. Such options could provide greater flexibility for patients and physicians. We anticipate initiating a pharmacokinetic trial to explore this dosing option later this year.

We have decided to delay the start of our TEPEZZA exploratory trial in diffuse cutaneous systemic sclerosis to later this year, reflecting the environment and the demands placed on the healthcare system by COVID-19. And finally, we presented new TEPEZZA data during the first quarter from the pooled TEPEZZA Phase 2 and Phase 3 clinical trials that showed that TEPEZZA significantly reduces proptosis in TED patients regardless of age, gender and smoking status.

Moving to KRYSTEXXA. First, as Tim referenced, we’ve recently learned of the data from the RECIPE trial. RECIPE is an investigator-led, randomized, double-blind, placebo-controlled study to assess preliminary efficacy and safety of administering the immunomodulator mycophenolate mofetil, or MMF, with KRYSTEXXA. 32 patients with chronic refractory gout were randomized 3 to 1 to receive MMF or placebo in addition to all patients receiving KRYSTEXXA. The primary efficacy endpoint was the proportion of participants achieving and maintaining serum uric acid target levels below 6.

After 12 weeks of co-administration, all patients continued on KRYSTEXXA alone for an additional 12 weeks without combination MMF therapy to evaluate the longer-term efficacy and safety of this approach. The results are consistent with previously reported open label studies of KRYSTEXXA with methotrexate in which response rates were greater than the rates observed for KRYSTEXXA alone in the Phase 3 program. RECIPE adds to the growing body of evidence regarding the use of KRYSTEXXA with immunomodulation. We anticipate that the full results and dataset will be released in future investigator-generated abstracts or publications.

Earlier in the quarter, we announced the positive results of our MIRROR open-label trial, the precursor to the MIRROR randomized clinical trial. We anticipate sharing the detailed results of the open-label trial at the upcoming Annual European Congress of Rheumatology, also known as EULAR, in early June. We are also looking forward to additional presentations on the results of independent investigator trials and datasets using methotrexate and in other immunomodulators with KRYSTEXXA. Enrollment in the MIRROR randomized controlled trial, which we initiated in July of last year, is going well with approximately 80% of planned patients enrolled to date. There has been a relatively minor impact to this trial from COVID-19, and we expect to complete enrollment in the second half of the year, with results expected towards the middle of 2021.

Turning to PROTECT, our trial evaluating the use of KRYSTEXXA in kidney transplant patients with uncontrolled gout, here we are seeing more of an impact to enrollment from COVID-19, which we believe is due to the at-risk nature of the patient population. We therefore expect enrollment in PROTECT to be completed by the end of this year. Regarding our previously announced KRYSTEXXA shorter-infusion trial, again, we have decided to delay the start of this trial to later this year due to COVID-19.

In summary, we continued to advance our strategy to maximize the value of our on-market medicines as well as expand our pipeline, making significant strides in both respects during the quarter. During this time, we also remain diligently focused on the safety, health and welfare of everyone involved in our clinical trial programs.

With that, I’ll now turn the call over to Paul. Paul?

Paul W. Hoelscher — Executive Vice President, Chief Financial Officer

Thanks, Liz.

My comments this morning will primarily focus on our non-GAAP results, unless otherwise noted. I will begin with the first quarter, and then comment on how we are thinking about the rest of the year, including the impact of COVID-19 on our business.

First quarter net sales were $356 million. Our orphan segment generated net sales of $245 million, a year-over-year increase of 47%, driven by TEPEZZA, KRYSTEXXA, RAVICTI and ACTIMMUNE. Orphan segment operating income was $54 million, which reflects our significant investment in the commercial launch of TEPEZZA. Net sales for the inflammation segment were $111 million, with segment operating income of $52 million. As we noted previously, beginning this quarter, RAYOS is now included in this segment. We continue to reinvest the cash flow generated from this segment into our key growth drivers, TEPEZZA and KRYSTEXXA, as well as our pipeline.

Our non-GAAP first quarter gross profit ratio was 90% of net sales. Non-GAAP operating expenses were $214 million. This included non-GAAP R&D expense of $21 million and non-GAAP SG&A expense of $193 million, both in line with our expectations. First quarter adjusted EBITDA was $107 million, which significantly exceeded expectations driven by the strong net sales performance across our portfolio. The non-GAAP income tax rate for the first quarter was 12.8%, in line with expectations. Non-GAAP net income was $83 million, and non-GAAP diluted earnings per share were $0.40. The weighted average shares outstanding, used to calculate first quarter 2020 non-GAAP diluted EPS, were 213 million shares.

Moving on to our first quarter cash flow, the decrease in operating cash flow versus the prior year was driven by three main factors. First, we invested in working capital, primarily receivables and inventories, related to the launch of TEPEZZA. Second, receivables increased due to significantly higher gross sales for KRYSTEXXA versus the prior year. And finally, accrued trade and discounts decreased significantly due to reductions for VIMOVO related to the generic launch, along with lower accruals across other medicines due to the timing of invoices and payments.

As of March 31, cash and cash equivalents were $755 million, giving us significant flexibility to manage our business, invest in our growing operations, expand our pipeline and execute other strategic transactions. Our net debt-to-last 12-month adjusted EBITDA leverage ratio is 1.3 times. In the first quarter, we paid $105 million in milestone payments to River Vision and Roche related to the FDA approval of TEPEZZA, and $112 million to purchase our new US office campus in Deerfield, Illinois. Financial strength is a valuable asset during this period, and we are benefiting from the actions we took last year to significantly improve our capital structure. We reduced our gross debt by $575 million, extended our debt maturities out to the 2026 and 2027 timeframe and lowered our annualized net interest expense by more than 40%. Importantly, we have no maintenance covenants on our debt.

In terms of managing and allocating our capital, particularly during this environment, our balance sheet is strong. We are confident in our ability to generate substantial operating cash flow, and this confidence was underscored by the three strategic transactions we completed in the last month alone. Our business development activity remains focused on development-stage acquisitions like Curzion, and we expect to continue to pursue transactions to enhance our future growth prospects.

I will now turn to our 2020 guidance and provide comments on how we see the rest of the year playing out. While it is difficult to predict the overall impact of COVID-19, given the uncertainty of the scope and magnitude of the pandemic, we are providing the best estimates we have at this time along with some of the assumptions associated with our updated expectations. We are increasing our full-year 2020 net sales guidance range to $1.40 billion to $1.45 billion, reflecting the significant increase in our expectations for TEPEZZA net sales this year to more than $200 million, which more than offsets our expected impact of COVID-19 to our other medicines. We are also updating our adjusted EBITDA range to $450 million to $500 million, which reflects additional investments behind TEPEZZA to support our commercial efforts given the faster-than- expected uptake, as well as to support our new TEPEZZA R&D programs we announced this morning and our recently acquired development-stage asset, HZN-825.

We have widened both our net sales and adjusted EBITDA guidance ranges to factor in the greater expectations for TEPEZZA and accommodate for the uncertainty of the impact of COVID-19. Our updated guidance assumes that healthcare activity starts to return in the second half of this year. For TEPEZZA, we anticipate a significant, sequential increase in net sales from the first quarter to the second quarter. However, we expect the slowing of growth of patient enrollment forms we saw in April from COVID-19 to have some impact on full-year TEPEZZA net sales, which we now project to be more than $200 million. This expectation would have been substantially higher without the impact from COVID-19. Given the successful launch and the tremendous uptake, we remain more confident than ever in our peak US net sales expectation of TEPEZZA of more than $1 billion.

For KRYSTEXXA, our first quarter performance significantly exceeded expectations, with net sales growth of 78%. However, given the COVID-19 impact on new patient starts, we expect a sequential net sales decline for KRYSTEXXA from the first quarter to the second quarter in the 25% to 30% range. For the full year, we expect KRYSTEXXA net sales to be in the range of 2019 net sales. We have a database of roughly 1,500 patients currently pending treatment with KRYSTEXXA and will be working to bring them onto therapy. Given this, and the continued uptake of immunomodulation that we expect, we remain highly confident in our peak US net sales expectation for KRYSTEXXA of more than $1 billion.

For our rare disease medicines, we anticipate a limited disruption from COVID-19, given how important it is for patients to remain compliant on therapy, which we believe they understand and are motivated to do. For the full year, we expect net sales growth to be in the low single digits, given the limited opportunity to generate new patients until healthcare activity starts to return, which we anticipate happens in the second half.

For our inflammation medicines, we have experienced reduced demand related to COVID-19 since mid-March, particularly from new prescriptions, due to the absence of in-person engagement with physicians, as well as a reduction in patient visits to their physicians. We expect this impact to be somewhat offset by the virtual engagement of our sales representatives, as well as the use of telemedicine by many physicians, which allows them to continue to treat patients and prescribe our medicines. Based on what we are seeing today, for the second quarter we are anticipating a sequential net sales decline of 30% to 40% for our inflammation segment. We anticipate a relatively quick return to pre-COVID-19 demand levels, once healthcare activity starts to return.

Moving on to our full-year expectations for the rest of the income statement, our non-GAAP gross profit ratio is expected to be approximately 89%, which is modestly lower than our prior 90% expectation. This is primarily due to the impact of royalties associated with significantly higher net sales expectations for TEPEZZA this year.

We expect full-year 2020 operating expenses to increase modestly versus our prior expectations, driven by additional SG&A investment in TEPEZZA to support significantly higher patient demand, including investment required to support patient pull-through. As part of this higher opex, we also anticipate our R&D expense to increase driven by investment in HZN-825 and new TEPEZZA R&D programs that Liz discussed. We now expect our non-GAAP R&D expense as a percentage of net sales to be in the high single digits for 2020.

We expect full-year non-GAAP net interest expense to be approximately $50 million, as a result of the capital structure improvements we made in 2019. For our tax rate, we continue to expect a full-year non-GAAP tax rate in the high single digits. As we see every year, we anticipate some variability in our non-GAAP tax rate on a quarterly basis. Our 2020 cash tax rate is now projected to be in the mid to high single digits, lower than our prior estimate of low double digits, as a result of some benefits arising from the CARES Act. We expect our full-year 2020 weighted average diluted share count to be in the range of 213 million to 215 million shares, which, as we said last quarter, assumes the potential conversion of our $400 million of exchangeable notes into ordinary shares.

With that, I will turn it over to Tim for his concluding remarks.

Tim Walbert — Chairman, President and Chief Executive Officer

Thanks, Paul.

We had a great start to 2020, highlighted by the rapid uptake of TEPEZZA shortly after its initial approval in January, a result of our pre-launch activities throughout last year and the tremendous execution of the TEPEZZA commercial organization. Our continued focus on execution drove excellent KRYSTEXXA growth and resulted in our acquisition of the development-stage candidate HZN-825.

We increased our full-year net sales guidance for TEPEZZA to more than $200 million given the significantly higher-than-expected uptake. We also increased our total company full-year net sales guidance to $1.40 billion to $1.45 billion, reflecting our higher full-year net sales TEPEZZA guidance, which more than offset the impact we expect from COVID-19. We revised our adjusted EBITDA guidance range to $450 million to $500 million, as Paul said, to incorporate the additional investment we are making in TEPEZZA to support the stronger demand we have seen, our new TEPEZZA R&D programs as well as investment in HZN-825.

Our priority in the current COVID-19 environment is to safeguard the health, the safety and the welfare of patients and our employees. We are working to support our communities in their COVID-19 response efforts and at the same time are making every effort as a company to help minimize the spread of COVID-19, and we’re working to ensure continued patient access to our medicines.

The fundamentals of our business are strong. We have a robust cash position and strong balance sheet thanks to the improvements we made last year to our capital structure. We believe we’ll continue to be very well positioned for the long term.

With that, I will open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question comes from the line of Jason Gerberry with Bank of America. Your line is now open.

Jason Gerberry — Bank of America — Analyst

Hey, good morning. Thanks for taking my questions and congrats on the progress. My question really is around the impact that we’re seeing from COVID on TEPEZZA so far and sort of what you’re thinking about in terms of this first year launch contribution, particularly with private practitioners, I’m just curious I thought they were pretty meaningful proportion of the prescriber base and that the private practitioner, not the hospital-based practitioner, might be less likely to be taking appointments and things like that.

So, can you give us a sense of the sort of headwind that you’re working through while achieving this sort of result? And then just as a follow-up, you talked about investment behind TEPEZZA. It seems like an obvious candidate for DTC television advertising, just given the activation of a highly motivated patient. So, could you give us a little more clarity around some of the investments that you’re putting behind TEPEZZA? Thanks.

Tim Walbert — Chairman, President and Chief Executive Officer

Sure, Jason. Thanks for the question.

We are seeing some headwinds. As we originally anticipated that hospitals would be a predominant place for infusions because there weren’t a lot of infusion centers and oculoplastic surgeons or ophthalmologists offices. We found that really hasn’t been an issue at all. There — as I said, there is more than 500 infusion centers that our folks have gotten activated. Over 150 of those have, in fact, administered TEPEZZA. What we’ve seen is our patient access managers working with the physicians’ offices and the patients have worked very well in identifying sites of care to make sure that patients can get infused. And many of these patients have disfiguring symptoms and double vision and just are living a very difficult circumstances and they’re taking action. With our patient services organization, we’ve been able to help find the right site of care to ensure they get treatment.

So, we haven’t seen any impact from physicians’ offices as being rate limiter. We are seeing impact from the ability to get new patients in and we’ve got a large number of PEFs, as I said over 1,500 at this point in time. So, you are seeing a slowing of the number of PEFs being generated and that is factored in our greater than $200 million guidance.

I think the second question is around our investment. We are evaluating DTC. You mentioned television. We’ve done a number of digital media efforts targeted at both consumers, potential TED patients as well as physicians and we are evaluating whether some broader media makes sense and we’re going to do some test cases there. Right now, our primary focus is the digital means.

Tina Ventura — Senior Vice President, Investor Relations

Great. Thanks, Jason.

Jason Gerberry — Bank of America — Analyst

Yeah, thank you.

Tina Ventura — Senior Vice President, Investor Relations

Chris, next question, please.

Operator

Thank you. And our next question comes from the line of David Steinberg with Jefferies. Your line is now open.

David Steinberg — Jefferies — Analyst

Thanks, and good morning. Couple of questions on TEPEZZA and congrats on the launch, particularly in this crisis, quite good execution. So, given that a lot of the infusion centers are closed and some of the doctors we’ve talked to, so those patients who have already been infused, a lot of them are using home infusion. Just curious what percent of the patients on-therapy are getting home infusions at this point?

And then secondly, in terms of the addressable market, Tim, I think you mentioned the actual incidents or the active population that you’ve used to your estimates were 15,000 patients to 20,000 patients with active form, the label is fairly broad. In your $1 billion plus calculation of peak sales, did that also include the inactive group because it sounds like the number of the patients getting therapy have inactive forms of TED?

And the final question is just your average price per patient. I think you talked about a net price of around $200,000 per course of therapy. Thus far, what’s the average price per patient? I know it’s wait days. Thanks.

Tim Walbert — Chairman, President and Chief Executive Officer

Thanks, Dave. I appreciate the remarks.

We have seen some infusion centers close, but for the most part, we’ve been able to find infusion centers should a physician and patient be amenable to go into them, but your point on the home infusion is a very good one. It’s something that we are starting to see, a number of different physicians utilize these services and we’ve had a number of patients that have treated via home infusion. I don’t have the specific numbers as it’s a moving target, but we do expect to see an increase over time in home infusions with TEPEZZA.

To address the overall population, as prior to approval, we had been talking about the incident population each year of 15,000 to 20,000 patients with active disease as you noted. We see the fibrotic patient population as a multiple of that 15,000 to 20,000. That is not included in our overall greater than $1 billion guidance. From an average price standpoint, we haven’t had any patient through a full course of treatment. So, it’s too early for us to talk about average price per patient. Our gross-to-net is generally in line with what we’ve expected so far.

Tina Ventura — Senior Vice President, Investor Relations

Good. Thanks, David. Chris, next question, please.

Operator

Thank you. And, our next question comes from the line of Annabel Samimy with Stifel. Your line is now open.

Annabel Samimy — Stifel — Analyst

Hi, guys. Thanks for taking my question and congratulations. So, you had mentioned that you had gotten some fibrotic patients on treatment. So can you tell us what types of patients physicians are generally seeing, and they the most severe patients, which ones are getting placed on therapy, how many are fibrotic? And, you also said that the fibrotic population is a multiple. Can you better quantify that?

And then on the subcu, what are the clinical requirements to get that program out? Is it just — are there clinical requirements or you need — is it just a simple — well, nothing is simple, but a PK study?

Tim Walbert — Chairman, President and Chief Executive Officer

Sure. So, to get at the first question, we don’t know specifically what percentage are fibrotic. I think that we are seeing a number of them come in and I would say, it’s enough that we’re getting a lot of comments that it’s working in that population. I just don’t have a specific percentage. We will hopefully learn more about that over time.

Looking at the fibrotic population, since approval, we’ve gone out and purchased incremental claims data and we’re doing that analysis right now. And it really depends on how you do the cut-off, whether it’s three years post active disease, five years. So, right now, we know it’s a multiple and we’ll update that as we finalize our analysis of that claims data.

Relative to clinical requirements, there is a number of different things. We’ve got to do formulation work to understand what is the right dose formulation and then really look at — there is a number of different things, whether that’s bridging studies and really, final determination based on conversations with the FDA. So we’ll have to update as that moves further along.

Tina Ventura — Senior Vice President, Investor Relations

Thanks, Annabel. Chris, next question, please.

Operator

Thank you. And our next question comes from the line of David Amsellem with Piper Sandler. Your line is now open.

David Amsellem — Piper Sandler — Analyst

Thanks. So, on TEPEZZA and then one on KRYSTEXXA. So, on TEPEZZA, I mean, it sounds like there is some modicum of a pent-up demand effect, so I realize your comment says about enrollments as the year progresses, but can you comment on what this kind of pent-up demand may mean for cadence of sales as we go to — as we move into 2021 to the extent you can do so?

And then, secondly on KRYSTEXXA, can you just talk about what underpins your confidence that we’ll see broad-based normalization in the second half? I mean, these are patients with a lot of comorbidities, these are vulnerable patients, so do you expect that there’s going to be a high degree of caution regarding getting these patients in? And, is that kind of caution reflected in your updated guidance? Thanks.

Tim Walbert — Chairman, President and Chief Executive Officer

Sure. I’ll start with KRYSTEXXA. Yes, David, it is factored into the guidance that we’re providing. There is hesitancy right now in patients wanting to go into physicians’ offices. Data that’s been published shows rheumatology visits are down 50%. The important thing is these patients are very sick patients from the standpoint of the severity of their uncontrolled gout. They’re often in a state with multiple flares going on or two flares, and potentially even needing amputation. So we see these patients as ultimately — they’re going to have to get out to deal with their disease. We feel very confident, because we’re maintaining communication. We’ve got a database of 1,500 of them. We continue to communicate with them.

We have factored into our guidance that it will take time because of the current hesitancy in those patients, but they will begin as we get through the second half of the year to get back into those offices and that’s what gives us that great confidence in our ability to get patients back on drug and get back on that strong growth trajectory that we’ve been in over the last four to five years.

And an important research that we got showed that in spite of COVID, 75% of the physicians say they intend to use KRYSTEXXA plus immunomodulation of our target position. So that gives us strong confidence that they understand immunomodulation, you’re doubling the efficacy of KRYSTEXXA and it gives them great confidence that it’s the right option for those uncontrolled gout patients. The other thing that is important is, as Liz went through, the RECIPE data which we hope to see published over the next coming months here at a scientific congress, that data was placebo-controlled, had 31 patients with mycophenolate. And we’ve seen methotrexate leflunomide and now mycophenolate, all immunomodulators, all with similar data well north of 80%, which is more than double the Phase 2 — Phase 3 data of 42%. So all of that makes us feel very confident in our ability to get KRYSTEXXA back on that strong growth trajectory as we move into 2021.

Tina Ventura — Senior Vice President, Investor Relations

And I think the other question was around TEPEZZA pent-up or bolus.

Tim Walbert — Chairman, President and Chief Executive Officer

Sure. So around bolus, and I think as we expected with the active population, there is anywhere from one to three years of active disease. Smokers typically have the longer side of that. So in the launch here, you’re going to have one, two years of incremental patients to the 15,000 to 20,000. So having only 200 of the 15,000 to 20,000 patients that are coming in this year, plus a multiple of that, that are in the bolus and the fibrotic patients, we think there’s just a tremendous runway that does speak positively as we move into 2021 and beyond.

Tina Ventura — Senior Vice President, Investor Relations

Thanks, David. Next question please, Chris.

Operator

Thank you. Our next question comes from the line of Gary Nachman with BMO Capital Markets. Your line is now open.

Gary Nachman — BMO Capital Markets — Analyst

Hi, good morning. My congrats on the TEPEZZA progress as well. So are you still confident you’ll get the J code on October 1 and how much that might help? It sounds like reimbursement is good already. Are you still confident there’ll be a big inflection when that happens? And then you said — yeah, one more thing, you said the ophthos and the oculoplastics are accounting for most of the use. I’m curious how much endocrinologists have to get involved in managing the infusions, just to help with the whole process?

Tim Walbert — Chairman, President and Chief Executive Officer

Sure. So, generally not involved at all. The endocrinologists treat the underlying Graves’ disease and they refer out to ophthalmologists to treat the eye. And then, the ophthalmologists and the oculoplastic surgeons are the primary treaters here. So they have not been heavily involved in the process. There are one-off endocrinologists who’ve taken an active interest, but for the most part, it’s over 90% is in the ophthalmologists and the sub-specialty of oculoplastic surgeons and neuro-ophthalmologists.

To your question around the J code, I think what we’re seeing overall is very good access, I think probably 80%-plus access at this point in time of the plan that have put policies in place, which is about 50% of the commercial lives, 70% of them are favourable, meaning beyond — they aren’t restricted to our indication or — not our indication, our actual clinical trial criteria. So we’ve seen more favorable — and also we expected 60 to 90 days on average time to get patients treated. And if you look at, when we had our second quarter call in early February, we had 500 patient enrollment forms at that point in time when we got 200 patients treated in the first quarter. So you can see we are getting patients on at a faster rate than we expected and overall access has been quite good.

Tina Ventura — Senior Vice President, Investor Relations

Thanks, Gary. Next question please, Chris.

Operator

Thank you. And our next question comes from the line of Ken Cacciatore with Cowen and Company. Your line is now open.

Ken Cacciatore — Cowen and Company — Analyst

Thanks. Thanks so much, guys. Congratulations on the launch. Just on TEPEZZA, one on KRYSTEXXA. On TEPEZZA, believe we entered at the later stages of Q1, we had about 500 enrollment forms and I think we did 200 patients, so really good conversion and now you’re up to 1,500. Can you just talk about who is not getting it? Are you learning anything about those that are not converting? And is this part of the kind of investing in personnel to make sure we’re grabbing as many patients as we can even though that’s a great hit rate?

And then, on KRYSTEXXA, just wondering you talk about a target clinician base at about 75%, either wanting to or using in combination with methotrexate, just wondering where is the broader community and what do you think kind of utilization for the combination could eventually go to over the next year or so? Thank you.

Tim Walbert — Chairman, President and Chief Executive Officer

Sure. So with KRYSTEXXA, I think the broader community in other research that we’ve done confirms that there is strong support for KRYSTEXXA plus immunomodulation. It makes sense. I think it’s been important that we showed beyond methotrexate that with methotrexate leflunomide and now with mycophenolate, we are seeing consistent results across the three immunomodulators, most used by rheumatologists. So we think that return in very positive for the future. And with the 1,500 patient database of patients that we’re continuing to communicate with, we feel we’ll be able to move them through the funnel as we move into 2021.

With TEPEZZA, I think you pointed out accurately, on our fourth quarter call in early February, we have 500 patient enrollment forms. We treated about 200 patients in the first quarter. So they are cycling much quicker than we expected. And at this point in time, we have 1,500 patient enrollment forms. The whole thing is just a matter of time in getting them processed. We’ve added incremental patient, access managers. Overall, patient services team has done just an amazing job here and we are adding more resources there to be able to handle the greater volume than we expected. Right now, there is a small percentage, which is less than 10% of patients are for some of those plans that have not issued policies as yet, unlike the 50% that have, we’re still working through, a number of them that initially thought would take up to three to six months. We’re having a number of dialogues with those remaining plans and we hope to be able to move that less than 10% that are caught up from a policy standpoint.

So overall, I don’t think we’re having — seeing any major issues. It’s just a matter of processing those patients, getting them through and getting them identified with the right site of care to get treatment and we expect that conversion rate to continue to work very well.

Tina Ventura — Senior Vice President, Investor Relations

Thanks, Ken. Chris, next question please.

Operator

Thank you. And our next question comes from the line of David Risinger with Morgan Stanley. Your line is now open.

David Risinger — Morgan Stanley — Analyst

Thanks very much and congrats on the TEPEZZA update. So my questions are, first, with respect to KRYSTEXXA 2020 growth, could you provide a little more color, including whether there is any hesitation to use methotrexate in combination due to methotrexate’s infection risks. I know that would be off-label, but I also understand that doctors in some cases have enthused about that potential.

Second, given Selecta’s development of SEL-212, could you just please comment on rapamycin as an alternative to methotrexate? And then third, if you could provide any update on operating cash flow for 2020 following first quarter results. Thank you.

Tim Walbert — Chairman, President and Chief Executive Officer

Sure, I’ll address the first two and then Paul will address the cash flow question that you have. We’ve seen the opposite relative to hesitancy with methotrexate. In fact, as I mentioned in my remarks, recent research of rheumatologists and nephrologists show 75% indicated strong willingness and interest in using KRYSTEXXA immunomodulation with methotrexate. They also have the option of leflunomide and now we’ve shown that mycophenolate is a good option.

Your question about rapamycin is, this is not an immunomodulator that’s used in rheumatology and that in combination with the uricase has shown efficacy far inferior to what we’ve seen with KRYSTEXXA plus immunomodulation.

Paul, do you want to take the cash flow question?

Paul W. Hoelscher — Executive Vice President, Chief Financial Officer

Sure. So, regarding operating cash flow for the full year, we’re not providing specific guidance on that. However, I would say that we do expect to generate significant cash flow from operations for the remainder of the year.

David Risinger — Morgan Stanley — Analyst

Great, thank you.

Tina Ventura — Senior Vice President, Investor Relations

Thanks, David. Operator, Chris, it looks like we’ve got time for one more question, please.

Operator

Thank you. And our last question comes from the line of Dana Flanders with Guggenheim. Your line is now open.

Dana Flanders — Guggenheim — Analyst

Great, thank you. And congrats on the quarter and thanks for squeezing me in. My first question just on TEPEZZA, do you have any granularity on just the use you’re seeing across severe patients versus those that might be deemed more moderate to mild?

And then secondly, on your LPAR1 acquisition, just what type of clinical endpoint do you think FDA will want to see here as you move forward in development? And, do you think mRSS would be acceptable? Thank you.

Tim Walbert — Chairman, President and Chief Executive Officer

Sure. On the LPAR antagonist, that’s our HZN-825, where we acquired Curzion not too long ago. There’s been a lot of commentary in this space, looking at scleroderma around whether KRYS [Phonetic] is an appropriate endpoint FDA’s comment on it. And we think both KRYS and the individual components are critical and that both KRYS and the individual components as part of an endpoint is probably what is going to need to look like. Liz, do you want to comment any further there before I address the TEPEZZA question?

Elizabeth H.Z. Thompson — Group Vice President, Clinical Development and External Search

Thanks, Tim. Completely agree that the KRYS endpoint has been developed in the community in response to some of the challenges with the individual endpoints like the mRSS to give an overall composite look. That said, it is going to be important in our opinion to demonstrate some impact on some of those individual components as well. So completely echo what Tim said about the way we’re thinking about this disease state.

Tim Walbert — Chairman, President and Chief Executive Officer

Yeah. So we plan to meet with FDA here in coming months to be — we just got the IND transferred over to us and we’re setting up a meeting with the FDA to map out the Phase 2b program, which we said will start in the first half of next year.

Relative to, Dana, your question around use of TEPEZZA in severe and moderate, I would say that we’re seeing it in a typical population of patients that have active disease, moderate to severe disease and also those fibrotic patients, who by definition would at one point have been seeing to be more severe patients, but now are more in a quiescent stage. So, I would say right now it’s primarily moderate to severe population. And that’s the carve-out population that we identified as 15,000 to 20,000 active patients, which is a subset of — does not include the mild to early moderate patients. So it’s pretty much as we expected. What we are seeing greater than expected is used in fibrotic patients as well.

Operator

Thank you. This concludes today’s question-and-answer session. I would now like to turn the call back to Tina Ventura for closing remarks.

Tina Ventura — Senior Vice President, Investor Relations

Well, thanks, Chris. That concludes our call this morning. A replay of this call and webcast will be available in approximately two hours. Thank you for joining us.