Merck & Co Inc (MRK) — Q2 2019 Earnings Call Transcript

Thanks and welcome everyone to our second quarter 2019 earnings call. The press release reporting our financial results in addition to the presentation for today's webcast are available on the Investors & Media page of the corporate website at www.acceleronpharma.com. Joining me for the call today are Habib Dable, our Chief Executive Officer; Kevin McLaughlin, our Chief Financial Officer; John Quisel, our Chief Business Officer; and Sujay Kango, our Chief Commercial Officer; and Todd James our Vice President of Investor Relations and Corporate Communications. As a reminder, we will be making forward-looking statements regarding our financial outlook in addition to regulatory and product development plans and research activities. These statements are subject to risks and uncertainties that may cause actual results to materially differ from those forecasted. A description of these risks can be found in our most recent Form 10-K on file with the SEC. I would now like to turn the call over to Habib Dable, our Chief Executive Officer.

Thank you, Ed. Good afternoon everyone and thank you for joining us today. This is one of the most exciting times in Acceleron's 16-year history. Not only have we built one of the industry's most advanced TGF-beta superfamily based pipelines spanning multiple disease areas, but with U.S. and EU regulatory filings under review for luspatercept, we're approaching the potential first approval of Acceleron discovered medicine. Our commercial team alongside our global cooperation partner Celgene is hard at work preparing for luspatercept potential approval. Patient access for this first-in-class erythroid maturation agent remains a top priority. In parallel, we are focusing on Acceleron led two clinical programs in neuromuscular and pulmonary disease. Our three ongoing placebo-controlled Phase 2 trials, two with ACE-083 and one with sotatercept has each completed patient enrollment and will help establish proof-of-concept with top line results from all three Phase 3 trials expected in the next nine months. This is meaningful progress for all programs in 2019 and we are well positioned to achieve our near and medium-term clinical and regulatory objectives. Turning to luspatercept, in June we announced that both the U.S. FDA and European Medicines Agency accepted the BLA and MAA filings respectively on luspatercept for beta-thalassemia and myelodysplastic syndrome associated anemia. This is a huge achievement for the Acceleron and Celgene teams and represents another important step in delivering this novel therapy to patients. With the filing acceptance, we are pleased with the FDA granting priority review for beta-thalassemia indication with the target action date of December 4, 2019 and a target action date of April 4, 2020 for MDS indication. Likewise, the marketing authorization application for luspatercept in adult patients for MDS or beta-thalassemia associated anemia has been validated by the European Medicines Agency. With the potential decision on the filing expected in the second half of 2020, we look forward to working closely with the U.S. and EU agencies to move this therapy toward approval. Patients are desperately in need of a viable treatment option and we believe that luspatercept could bring a significant improvement to patients with these conditions by potentially eliminating or decreasing red blood transfusion burden. Further luspatercept clinical development continued with three ongoing clinical trials: first-line treatment in lower risk MDS patients, non-transfusion-dependent beta-thalassemia, and myelofibrosis associated anemia. Additionally, we remain committed to expanding our clinical development plan to additional patient populations with anemia that could potentially benefit from treatment with luspatercept. I would now like to move to our Acceleron led programs beginning with ACE-083 in neuromuscular disease. We’re currently evaluating ACE-083 as a novel locally acting therapy with the potential to improve function in specific target muscles in two ongoing Phase 2 trials in patients with facioscapulohumeral muscular dystrophy or FSHD and Charcot-Marie-Tooth disease or CMT. Results from Part 1 of the trials demonstrated substantial increases in muscle volume in target muscles. We previously announced the full enrollment of Part 2 of the FSHD trial and recently completed full enrollment of Part 2 of the CMT trial. To summarize, beginning with FSHD, Part 2 of the trial is evaluating 56 patients with mild to moderate tibialis anterior or bicep weakness, randomized to receive either ACE-083 or placebo. Part 2 of the CMT trial is evaluating 40 patients with mild to moderate tibialis anterior weakness, randomized one-to-one to receive either ACE-083 or placebo. As outlined in this slide, the trial is designed to evaluate similar top line outcome measures post six months of randomized treatment period. These include the percent change in muscle volume and the changes in intramuscular fat fraction as well as the percent change in motor functions. In the tibialis anterior cohort of the FSHD trial, these include the six-minute walk test, timed stair climb, and 10-meter walk/run. In addition to these outcome measures, we’re also evaluating the change in disease-specific health-related quality of life as determined by patient-reported outcomes in the FSHD health index and the CMT health index as well as overall safety and tolerability in both trials. We believe that if the trial demonstrates improved functional outcomes, ACE-083 has the potential to become an important new therapy for patients with neuromuscular disease and unmet medical needs. We look forward to sharing top line results from both trials. We anticipate FSHD results in the second half of 2019 and CMT results in the first quarter of 2020. I'd now like to move to our pulmonary program where we recently completed enrollment in the PULSAR Phase 2 trial of our lead pulmonary candidate sotatercept in pulmonary arterial hypertension or PAH. We believe that PULSAR's rapid enrollment over the past 12 months underscores the excitement for the program and the urgency for new therapeutic options for patients with PAH. Currently, the only approved PAH treatments target three main pathways that promote vasodilation of the pulmonary vessels to reduce pulmonary vascular resistance or PVR. These therapies are used alone or in combination to improve exercise capacity and slow the progression of the disease. Sadly though, the median survival for patients is only five to seven years. We believe that sotatercept has the ability to engage a fundamental pathway in the disease by rebalancing BMPR2 signaling and potentially restoring vascular homeostasis. In preclinical models for PAH, sotatercept reversed pulmonary vessel muscularization and improved indicators of right heart failure. The PULSAR Phase 3 trial is a randomized, double-blind placebo-controlled study designed to evaluate the efficacy and safety of sotatercept in PAH patients. A total of 106 patients were randomized to receive placebo, low-dose sotatercept or high-dose sotatercept in combination with standard of care therapies. Following the six-month primary treatment period, participants in the trial will be eligible to continue in the 18-month extension period. The primary endpoint of the trial is the change from baseline in PVR, and the key secondary endpoint is the change from baseline in six-minute walk distance. We anticipate reporting top line results from the PULSAR trial in the first quarter of 2020. Additionally, our clinical team is currently enrolling patients with PAH into the exploratory SPECTRA study. And with that, I'll turn the call over to Kevin McLaughlin, our CFO to review the financials.

Thanks, Habib. Good afternoon everyone. Our cash, cash equivalents and investments as of June 30, 2019, were $500.9 million. This cash balance includes the receipt of a $25 million gross milestone payment earned upon acceptance of the luspatercept BLA and MAA filings. This compares to December 31, 2018 cash, cash equivalents, and investments of $291.3 million. Based on our current operating plan and projections, we believe that current cash, cash equivalents, and investments will be sufficient to fund projected operating requirements until such time as we expect to receive significant royalty revenue from luspatercept sales. Collaboration revenue for the second quarter was $27.7 million. The revenue is all from the Company's collaboration partnership with Celgene and is largely related to expenses incurred by the Company in support of luspatercept, including the $25 million gross milestone payments. The next potential milestone related to the luspatercept partnership is $35 million, due upon the first approval from either the FDA or EMA. Total costs and expenses for the second quarter were $48.8 million, which includes R&D expenses of $34.8 million and G&A expenses of $14 million. The Company posted a net loss for the second quarter ended June 30, 2019, of $17.9 million. I will now turn the presentation back over to Habib for final remarks.

Thanks, Kevin. To briefly summarize priorities for the remainder of this year and beyond, beginning with luspatercept in hematology, our number one priority is the ongoing marketing application reviews with the FDA and EMA. We are also focused on the execution of the ongoing clinical trials in additional patient populations, along with the potential expansion of luspatercept development in other diseases associated with anemia. For ACE-083, we expect top line results from both Phase 2 trials in the next nine months, starting with FSHD in the second half of 2019, followed by the CMT trial in the first quarter. And finally, in PAH, we expect top line results from the PULSAR Phase 2 trial in the first quarter of 2020 and preliminary results from the SPECTRA trial in 2020. I will now open the call to questions. Operator?

Hi, guys. This is Andrew on for Carter. Thanks for taking our question. I had a couple. So, first on the FSHD study, in order to de-risk the movements in Phase 3, how critical is that as you demonstrated efficacy across both tibialis and biceps patients? I guess that to put in other words, if you demonstrated efficacy in just one cohort, how would you think about the potential profile of that Phase 3 given the more mixed data on the other side? I had a follow-up on luspatercept, but if you can start there, that will be great.

Yes. So, thanks for your question. This is Habib. It's an excellent question and I think was most important is as you mentioned, for us to be able to move forward in the Phase 3, there are a number of things that we are going to be looking at, both with the FSHD study and CMT study, which will be reading out in the first quarter of next year. Just to remind everybody, the primary endpoint of both studies is looking at the total muscle volume, and then obviously the path forward is really going to be driven by our ability to reliably increase functional improvement in the patients that we're treating. And so, whether it's FSHD alone, CMT alone, or the tibialis anterior or biceps, we will be looking at that data to ensure that we've been able to achieve some minimum thresholds. Some of those thresholds that we have talked about previously are looking at specific functional improvement such as in the tibialis anterior muscle. We're looking at six-minute walk, timed 10-minute walk/run, and four-stair climb. We are looking for trends but we are also looking at some deviations from placebo in the double-digit. That's really what we’ve given ourselves as a threshold. So, if you decide today as to whether or not we would go with biceps alone or TA alone or FSHD alone, we're going to be looking at the data in totality and after that, following conversations with the regulators, we will get back to you in terms of our path forward for Phase 3.

Regarding luspatercept and your plans to co-promote in the U.S., how is Acceleron positioning its team? Where do you see Bristol and Celgene operating, and how can Acceleron enhance efforts in this area? Thank you.

Sure, thanks for that question. As we have articulated before, the co-promote allows us to have a dedicated team. As you articulated, we have about a 20-person field force that is solely focused on luspatercept. The approach we’re taking with Celgene side is to ensure that there is a surround sound. We will be operating with all with two centers as well as the top doctor accounts to ensure that there’s coordination and collaboration, and we're going to maximize the opportunity. So, we're not limited to a particular cohort or position etc. What we’re going to do is synergize and coordinate and amplify what is necessary to drive an optimal value proposition for luspatercept and satisfy customer needs.

Great, thanks for taking my question. So, Habib maybe I have a couple of questions, the first one is just a little housekeeping, but you’re mentioning now approval or EMA decision in the second half of ’20 for luspatercept. It was filed I believe in early April. So, are you still sort of expecting a 12-month CHMP clock, and then 2 to 3 months EMA and could potentially go into Q3? I'm just trying to understand, is it the thinking about the second half? And then I have a follow-up as well.

Yes. So, yes, Yaron, that is our expectation for the second half. And again, as you've alluded to when you account for all of the clock stops, etc., that would take us into a second half potential decision. Beyond that, we haven’t elaborated on exactly which quarter that would fall into, but you’re right it accounts for all the clock stops.

Okay, has there been any request for EMA recently that we need to know about?

No, everything remains on track and is going as expected.

Okay. And then for the full PULSAR study, it’s a 106 patients, it's a randomized 3 to 3 to 4, and so overall, it’s going to be sort of 30, 40 patients in arm or so. I guess my question really has to be with, do you think it's powered for a statistically significant different? Or are you looking at trends at this point?

Yes, so with respect to the primary end point, again primary end point is for PVR, and it is powered to show a difference, and we’re looking for a difference of approximately 20% reduction in PVR.

Okay, and is the primary end point that is in both doses? Or is it one of them, the high dose really powered against the placebo?

Both.

It’s both okay terrific. Thank you.

Thanks again for the questions. A couple for me as well, I guess following up on the last question for the PULSAR study. In addition to PVR, do you ultimately need to see an improvement on the six-minute walk distance to justify moving forward? Or will the PVR end point be enough to go into Phase 3?

Yes, so, it’s a great question Danielle. The primary end point of PVR is not going to be enough based on historical approvals that we've seen in this space. The gold standard has been and we believe will continue to be six-minute walk distance. We’re also looking at some secondary including six-minute walk distance, and we've given ourselves the thresholds there for that functional improvement of 30 meters. Now that said, we do believe that we are potentially approaching this disease area from a unique perspective to the mechanism of action of rebalancing BMP signaling. And as such, if approved, we could be one of the first disease-modifying drugs approved for these patients. We could have an opportunity to look at some unique endpoints as we think about Phase 3. As we move forward with the SPECTRA study, we are looking at unique endpoints such as cardiac MRI and invasive cardiopulmonary exercise testing. We want to see an improvement in six-minute walk, in addition to PVR, but we could be looking at some creative endpoints as we think about Phase 3, as we get a better look at patients.

Okay. So would a trend be enough there?

Yes, I think it's too early to say. Once we look at the data, we can couple that with what we're seeing in SPECTRA. I think we will have a better read. That said, I think 30 meters increase is what we've been hearing from a number of our stakeholders, as a threshold that we'd like to achieve on top of standard of care.

Okay. And then one other related to luspatercept, you guys mentioned plans for next indications. Can you just remind us what some indications of interest might be and when we might get an update on that?

Yes, coming out of last summer, we announced positive Phase 3 results for beta-thalassemia as well as lower risk MDS. Not only were we thrilled that luspatercept was able to show that it can restore healthy red blood cell formation in two very distinct diseases, but also it did so in a safe and tolerable way. We do have three ongoing studies today. We've got the BEYOND study, which is looking at non-transfusion-dependent beta-thalassemia. We've got the COMMANDS study, which is looking at the frontline settings head-to-head against ESA. We've also got the ongoing myelofibrosis study. If you looked at beta-thalassemia and myelodysplastic syndromes and all of the indications including the frontline settings and non-transfusion dependence, we saw an opportunity of over $2 billion. If indeed myelofibrosis at the next indications is successful, we believe that could add an incremental $1 billion in peak sales opportunity. We also feel that there is an opportunity to cast a wider net. Our teams and the Celgene teams are prioritizing some of those and identifying what else beyond myelofibrosis we could be looking at. We are looking at indications where we believe the unmet need is very high but also where the mechanism of luspatercept could have meaningful benefits to patients. Some of these indications could be alpha-thalassemia and chemo-induced anemia. More to come.

Just a couple of questions from us. I guess first on FSHD with ACE-083. I guess from talking to docs, it seems that some of the feedback we've been getting is that while presumably function in the TA and biceps is important, other muscles, shoulders, hips, groin are also relevant. I'm just wondering, if kind of speaking to, how, whether you think about how these other muscle groups might get into a desirable Phase 3 trial?

Okay. So Eric, you did cut out a bit, but I think what you're asking is based on some of the feedback you've been receiving from key opinion leaders that the tibialis anterior and biceps are obviously important muscles that drive disability in the patient early on, but there are other muscles that the disease progresses that may warrant perhaps some further studies around and potentially an opportunity for lifecycle management. Is that your question? Let's go. I think we may have lost, Eric, but I'm going to assume that it's the question. When we think about it, we were deliberate about the biceps and tibialis anterior muscle as the early muscle group to be looking at for a number of reasons. One, we've identified these being the actual dominant muscles that affected daily living activities for these patients in a very profound way. Furthermore, we know specifically if you think about the tibialis anterior muscle in CMT, for example, it's one of the earlier muscles that are affected with disease progression. If we are successful with FSHD or CMT or both, we will obviously take a look at the lifecycle management opportunities, and if we feel it's warranted, we can move into other dominant muscles where an intramuscular injection would have potential transformative effects on these patients' lives, then yes, we will consider it. But for now, the focus is really on these two studies and Part 2 of Phase 2 to ensure that we have a reliable functional benefit for these patients as we consider moving into Phase 3 or not.

Great and one follow-up if I may. I guess other concerns, PULSAR with the trial fully enrolled. Can you just comment on the rate of rollover into the open label portion? Whether the patients are continuing on their current dose or being converted to either the lower or high dose, and the frequency of follow-up for PVR?

Hey Eric, it's Todd. Sorry, you're really breaking up. So, we've heard PULSAR and that recruited well, but the rest was really hard to hear.

I'm interested in the rollover rates into the open-label extension portion whether the patients continue on their current dose or being converted to either the lower high dose and the frequency of follow-up for PVR back here?

Yes, it's Todd, Eric. Thanks for the question. Yes, we just finished enrollment and we’re not in a position to talk about the percentage rollover at this point, but when we get into the top line announcement for example, we could discuss that more as all the patients would have gone through the six months. That would be a better data point for what that rollover rate would be.

Hi thanks for taking my questions, Habib and company. First one to just kind of follow-up and clarify some things from an earlier question. The SPECTRA trial, I guess, or the standard luspatercept trial is powered for the primary endpoint of PVR reduction. Just want to clarify it’s not powered on the secondary endpoint for six-minute walk? And then my second question had to do with you've obviously been in a really good position to be generating significant cash flows pretty quickly potentially from luspatercept. Wanted to talk a little bit about kind of how you’re thinking about external BD discipline going forward, as there's cash flow coming in and what is the sort of magnitude you think about and at what stage assets much of you looking to bring into the pipeline? Conversely, if you have a 100% success in your current kind of mid-stage pipeline, do you think you’ve got adequate resources and cash that you can manage global pivotal registration programs for both assets or would you potentially seek geographic partnerships around those? Thanks.

Yes, so great, Marty. The first part of the question was really around powering, and yes, it's high-powering for the primary endpoint for PVR. The meat of the question is on the second part, about our current cash resources and our intent moving forward. When we raised capital last time in January, one of the things I had articulated was that for the very first time, I would not be providing a cash run rate guidance as we have in previous calls. The reason for this is that we believe that based on the burn rate and assuming the opportunity to conclude our Phase 2 trials as planned, our visibility takes us to the point where we would have overlapping luspatercept royalties and receive various milestones. We never really see that one year of cash which typically triggers a need for another raise. If indeed we flip the card on all of our Phase 2 programs and we feel that we have the opportunity to move forward to Phase 3 from a position of strength or there’s an inorganic opportunity to help us build out our leadership strategy in any of the therapeutic areas we’ve committed to, that would potentially change our posture. That would be on the heels of positive Phase 2 data. We will evaluate all of those at the end of Phase 2, but right now, I think we are in an excellent position where we are able to conclude our Phase 2 studies and assess the best path forward.

I agree you're in an enviable position. Do you have any sense that you can frame for investors in terms of how important profitability is going forward? Or is that going to be dependent on the opportunities in the pipeline?

Yes, our goal is to innovate and to focus on bringing transformative medicines to the patients that we're serving. We're in a great cash position and have the ability to dictate our future moving forward. I think we're in a pretty enviable position in three therapeutic areas. We have two positive Phase 3 results from hematology, and three Phase 2s ongoing between pulmonary and neuromuscular. We're in a wonderful situation to conclude those studies and assess the best investment strategy moving forward. We will always be disciplined, ensuring that our primary focus as we innovate is to return value to our shareholders.

Hi, how you doing? This is Neil filling in for Geoff. I just have one question regarding luspatercept and the upcoming launch. Can you explain how the responsibilities will be shared between you and Celgene-Bristol? And how do you intend to report expenses and revenues in the U.S. and EU? Thank you.

Yes, great. Thanks for the questions again, I'll pass that commercial question on to Sujay, and perhaps maybe even Kevin for a little detail if there's anything that we can provide on the reporting.

Sure. Thanks for that, Habib. At this juncture, we are collaborating very closely with Celgene. Our discussions with them in relation to the promotional aspect include developing a complete day one through 90 launch plan. We have worked together through a joint collaboration committee that meets frequently and a joint operating team that meets almost monthly to map out our launch plan and strategy. All of our coordination is taking place jointly with Celgene, and we will be prepared day one, ensuring that there's a sense of urgency to support the needs of the patients and the physicians. Our primary focus is to target the beta-thalassemia physician population as well as the MDS physician population once we have the approval. There are no promotional elements at this juncture; it’s more training and preparation.

Hi, Neil. This is Kevin. As far as the reporting goes, Celgene or BMS will be reimbursing us for a large portion of our commercial appetite direct sales force etc. You will see an increase in the P&L collaboration revenue but the corresponding expenses down in the sales and marketing lines. Additionally, revenue obviously will be reported as product related revenue, royalty-related revenue will be reported, and we'll have profits in place which will be reported standalone on a quarterly basis.

Hi Habib, and thanks for taking the question. I just wanted to dig in a little bit more on the biology of FSHD versus CMT and just in particular some of the differences in those two diseases that could lead to possible differential muscle growth. Is there any reason to believe that either FSHD or CMT is more likely to yield a clinical benefit in the context of similar muscle volume growth? Thanks.

Sure. Thanks, Habib. Thanks for your question. This is something we've thought about a lot as we were setting up these trials. We view these two diseases as testing different hypotheses about where FSHD treatment provides the most benefit. I don't want to take a bet on which one is more likely to work. With FSHD, the pathology is starting in the muscle with over-expression of the DUCs-4 transcription factor, leading to degradation of the muscle. The premise of ACE-083 is if we can strengthen and rebuild those muscle fibers, it can restore function to the patients. With CMT, there are patients experiencing neuron death and a loss of innervation of the muscle fiber. In this context, boosting muscle mass and strength could restore function. Two different premises are being tested: the muscle origin in FSHD and the neurological origin in CMT. We won't handicap either as more likely to succeed.

Okay, got it. And then with respect to the different muscle endpoints, 6-minute walk to 10-minute walk, run, the four-stair climb, is there any reason to believe that one or more of those is more likely? Or do you have higher confidence in one of those endpoints? Or is it just a matter of seeing the data before you can make any comments there?

It really is going to be data-driven. We are one of the few companies to run clinical trials in this space and are establishing the endpoints that are appropriate. We’ve designed the trials to measure a suite of different endpoints and we’ll be looking at the totality of the data.

Yes, the only thing I would add to that, Yigal, is that we’re working closely with the University of Rochester to validate a PRO, the FSHD health index as well as the CMT health index where we’ll be looking at a number of questions affecting patients' activities of daily living. We will also assess that questionnaire as we look at the Phase 2 data and work with the regulators.

Okay that makes sense. And then just one question that wasn’t asked yet, maybe you expected this, just like to get your thoughts on MDS. You received or you and Celgene received standard review in beta-thalassemia priority review. Was that what you expected? If so, okay, if not, I'm curious what you have to say there? Thanks.

Yes, actually, I’ll repeat what we expected. We anticipated a standard review for both indications, but we always said that we would be prepared to execute on whether one or both got priority review. We were pleasantly surprised that we got a priority review for one of our indications and we are prepared to execute.

Thanks for taking the questions and great progress. First question on sotatercept with the PULSAR trial fully enrolled. Want to ask if this time you can comment on the nature of the patients who came into the trial in terms of the severity of their PAH and essentially the other therapies they were on that they came in on into PULSAR?

Hey, Leland, it’s Todd. Yes, so as far as the patients that were included based on the inclusion criteria we’re looking for functional class 2 and 2. We got what you’d expect from a normal split in a Phase 2 trial of this size. And then as far as single, doublet or a triplet, that comes down to which countries the patients got enrolled and what the standard of care is for that country. We got that appropriate mix based on how the trial enrolled per country.

Okay, great. A couple of quick questions on luspatercept. I think you’ve mentioned the test you planning to fully publish the data for MEDALIST and BELIEVE. Just wonder if you can comment on that publication strategy, if we might be seeing those coming up in peer review in the near future?

Yes, so the goal is to submit both of the studies in 2019, and we’re still on track.

Great and then just last if I may, any comment you can provide on the community trial enrollment?

No further updates; we continue to be pleased with that study. Once we get closer to full enrollment or absolute enrollment, we can provide a little bit more color on the exact timelines you can expect for top line release. But nothing new to share today.

Hi, good afternoon everyone. Thanks for taking our questions; maybe pivoting back to ACE-083 for a moment. With the Phase 2 trials wrapping up and the extension trial getting underway, can you comment on what you're thinking with regard to potential duration here over the longer term? Secondly, what do you think as you proceed toward the Phase 3 stage? What is the role of duration and sustainability of the muscle change and the agencies there going forward?

Yes, hey Paul, it's Habib again. Thanks for your question. This is a very important question. It’s the driver of our investments in the extension study. We can think about duration in two ways. One, what is the appropriate dosing into rollover patients while minimizing office visits and/or injections, and two, how long will the drug last? As you know, our primary endpoint in Part 2 the study was six months with dosing frequency of every three weeks. Patients rolling over into the extension study will be randomized for every four weeks or every eight weeks of dosing, giving us a better read on the appropriate dosing interval to maintain effect. In Part 1 data, we think efficacy was sustained up to eight weeks, but we'll see if that materializes in Part 2, more specifically from a functional point of view. With respect to how long the drug will last, that's another thing we'll look at in the extension study as we follow patients out. More to come, but this is a very important question on both fronts.

Okay, great. Thanks for that, and maybe just on luspatercept and myelofibrosis. As you think about the Phase 2 data coming up here in the not-too-distant future, can you maybe think about where is the bigger opportunity to where you're more optimistic? Is it in the transfusion-dependent or non-transfusion-dependent population? And do you see, what as being potentially a quicker area for development and potential label expansion?

Yes, so another good question, Paul. When we recruited for the Phase 2 study, we looked at transfusion-dependent and non-transfusion-dependent patients. We also looked at patients who are on ruxolitinib because of enlarged spleen and those who are not on ruxolitinib. I would argue, that the area that's probably most important would be those that are on ruxolitinib because they not only suffer from anemia due to fibrotic bone marrow but also from drug-induced anemia due to the mechanism of action of Jak inhibition. Our internal estimates show that over half of the myelofibrosis patients who suffer from moderate to severe anemia are on ruxolitinib. Thus, those patients that are on ruxolitinib and transfusion-dependent would be our largest opportunity. We have also established an internal hurdle rate of about 25% to 30% efficacy in this particular group based on research and feedback we’ve been receiving. That would give us the confidence to move forward.

Thanks for taking the questions. For the MEDALIST patient population, you said that the earlier you get the patients, the bigger benefit from luspatercept. From a commercial standpoint, what kinds of education or initiatives are you considering to encourage earlier treatment versus the 44-month median time since diagnosis for patients in MEDALIST?

Yes, so the first thing to keep in mind as we think about our anticipated label for MEDALIST, these are patients whose endogenous EPO levels are over 200 and therefore they would be ineligible for ESA or if they were refractory to ESAs. Approximately 95% of the patients in MEDALIST were refractory to ESAs, and as you stated, the median time duration from therapy, sorry, the median time to entering the trial from diagnosis was about 44 months. A lot of patients were on ESAs for 44 months because there was no other alternative until luspatercept was approved. We're hoping that once luspatercept is approved, if a patient is refractory to an ESA, we may be able to get them earlier by the mere fact we got another approved drug. The COMMAND study is doing exactly that by studying frontline dosing of luspatercept head-to-head against ESAs and it is designed to assess superiority. By having a drug approved in that indication, we hope that the time from diagnosis to luspatercept will shrink due to the availability of another option or the success of the COMMAND study.

Great, thanks. And then housekeeping question. Looks like SG&A ramped up a little bit from Q1 to Q2 relative to prior quarters, so given commercial preparations such as your own sales reps, how should we think about SG&A for the rest of the year?

So, this is Kevin. Thanks for the question. Obviously, as I mentioned earlier, sales costs will go up as we just brought on our sales force, but that will be reimbursed via Celgene or BMS. You will see an increase in the SG&A line, corresponding to increase in collaboration revenue. Outside of that, there's normal G&A growth coming into the commercial environment along with additional marketing efforts supporting both luspatercept and our internally owned programs in sotatercept and ACE-083.

Hey, Jeff, it's Todd here. As you can imagine, with four internally led programs running at any given time—including FSHD, CMT, PULSAR Phase 2 trial with 106 patients, and SPECTRA expected—this is the most we've ever had running at once. That’s where you’re seeing the increase on the R&D side and we can expect that through the end of those trials.

I want to close the call by thanking everybody for joining us. I appreciate your continued interest in Acceleron’s story and I look forward to meeting many of you over the course of the fall and winter as we close off the year, wishing you all a great remainder of the summer. Thanks again.