Ladies and gentlemen, welcome to the Antares Pharma's Second Quarter 2019 Operating and Financial Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I will now hand the conference call over to Jack Howarth, Antares' Vice President of Corporate Affairs. Please go ahead, sir.

Thank you, Amy, and good morning, everyone. Earlier today, we announced our second quarter 2019 financial results and operating achievements. A copy of the press release can be found on the Antares website at www.antarespharma.com under the For Investors section. This morning's teleconference also contains an interactive slide presentation. So if you have dialed into the audio-only teleconference, you can follow along with the slides, which can also be found on our website under the Investor Information section. The conference call and slide presentation will be simultaneously webcast on the For Investors section of the Antares website under the Webcasts & Presentations tab. If you're currently unable to access our website, the slide presentation will be archived under the Webcast & Presentations tab at the conclusion of today's call. Before we begin, I'd like to remind you that some of our statements made during this conference call will contain forward-looking statements, within the meaning of the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties and actual results could differ materially from those projected in any forward-looking statements. Forward-looking statements provide Antares current expectation or forecast of future events. Factors that could cause actual results to differ include, but are not limited to, market acceptance, adequate reimbursement, successful launch and future revenue from XYOSTED and Teva's generic EpiPen; market acceptance and future revenue from Makena, sumatriptan and OTREXUP; the timing and results of proprietary and partnered research; development and clinical trials, including ATRS-1701; methotrexate for ectopic pregnancy and development projects with Teva and Pfizer; statements about new product approvals and FDA action; and the Company's financial performance, including achievement of the updated 2019 revenue guidance and other factors which are also identified in today's presentation and from time-to-time in the Company's filings with the SEC on Form 10-K and as updated in Antares' recent periodic filings on Form 10-Q and 8-K and other filings made with the Securities and Exchange Commission. Links to these documents are available on the Investor Information section of our website, and we encourage you to review these materials. Antares is providing this information as of the date of today's conference call, and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events or circumstances after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Joining me on the call today are Bob Apple, President and Chief Executive Officer; and Fred Powell, Executive Vice President and Chief Financial Officer. Let's review the agenda for today's call on slide number three. Bob will begin with a high-level review of our outstanding second quarter results, Fred will go through the detailed financials, and then Bob will give you a XYOSTED launch update and review pipeline and future catalysts. After our presentation, we'll open the lines up for your questions. I'll now turn the call over to our CEO, Bob Apple. Bob?

Thanks Jack, and good morning to everyone on today's conference call and webcast. It's great to talk to everyone today. Jack noted a few minutes ago that we announced our second quarter earnings this morning. But what we didn't mention is that we reported very impressive quarterly and six month revenue growth. We took another big step for Antares, laying the foundation for what we believe will be a transformational period for our company. Our strategy drives us to focus on the development of a diversified commercial business, consisting of both proprietary and partnered products. We have long believed that our success as an organization is rooted in two simple core values. First, developing commercialized proprietary products, utilizing our device technologies that make a meaningful difference in the lives of our patients. And second, helping our industry partners accomplished the same. We believe our quarterly results validate those two core values and allow us to continue to focus on our revenue targets for the year. We have already made so much progress in fact, that I'm excited to announce this morning that we are raising our full year top line revenue guidance to a range of $100 million to $110 million for 2019. So let's talk about some of the highlights in the quarter and how our achievements over the past six months helped pave the way for what we believe 2019 will be a record year. Please turn to slide number four. Today, we reported approximately $28.4 million in total revenue, double the $14.2 million we reported in the second quarter of last year. This is the sixth consecutive quarter of total revenue growth. We believe this is a direct result of the successful execution of our corporate strategy I just mentioned. Product revenue grew 86% versus the same period last year and, importantly, represented the ninth consecutive quarter of growth. I mentioned in previous earnings calls that the shift from development revenue to product revenue was an important goal for the company, and clearly we have achieved that. The impressive product revenue growth was driven by all of our key proprietary and partnered products, such as XYOSTED, generic EpiPen and the Makena subcu auto injector. As a result of our product revenue growth, our royalty revenue from our partnerships grew 335% to $5.6 million. I would like to briefly touch on these key products before turning the call over to Fred. We launched XYOSTED with a full sales team essentially in January and we continue to see increased physician and patient interest in XYOSTED. In fact, XYOSTED is currently the fastest growing branded product in the testosterone replacement market. With regards to our key partner products, Teva launched Epi late last year in limited commercial quantities, but the second quarter of this year saw a dramatic rise in shipments to trade and increase market share of Teva's Generic EpiPen. Teva has informed us that the epipen for adults is in full launch mode and that they have entered into contracts with all of the major GPOs by the end of the second quarter. Teva still anticipates launching the EpiPen junior in time for the back to school market. The Makena Auto Injector continues to be a meaningful driver of growth for us as well. Physicians and patients continue to prefer the auto injector over the IM product, rezoning the Makena's highest market share in the hydroxyprogesterone market to-date, according to AMAG. So, how do we keep this momentum going? We have, after all, set some ambitious goals for the year and for the long-term. We believe that we will continue to succeed by staying true to our strategy that emphasizes proprietary and partner success. To that end, last month we made a commitment to both our proprietary and partner businesses by expanding our future laboratory, manufacturing, office and warehousing space in Minnesota. We believe this new facility will support our anticipated growth and significantly expand our capabilities as a developer of pharmaceutical products and as a partner to many companies to whom we work. We will gradually transition to the new facility as we update the site. And it's likely we'll complete the process as a lease when our current site expires. This has truly been a breakthrough quarter for Antares. We saw a substantial increases in topline growth and reductions in operating losses. But most importantly, we believe we have set a course for additional growth in future quarters. I'm now going to turn the call over to Fred for details on our outstanding second quarter and first half financial results. Fred?

Thanks Bob. Please turn to slide number 5. As Bob said, this was another tremendous quarter for Antares with significant sequential revenue growth and another reduction in quarterly net loss. Picking up on the theme Bob introduced, you will recall that over the past 18 months, we've had several substantial revenue and operating expense changes due to the approval of two partnered products and one proprietary product. With regards to the meaningful changes in revenue mix, AMAG's Makena Auto Injector and Teva's EpiPen were both approved in 2018 with the full launch of Makena Subcu in the second quarter last year and limited commercial launch of Generic EpiPen late last year. We are now recording device and royalty income for both of these products. On the whole, important proprietary product side of our commercial business, XYOSTED launch continues to go according to plan and OTREXUP has seen nice growth with the sales force detailing new physicians in the expanded territories. So let me start my financial overview by providing a detailed breakdown of our revenues and operating expenses for the second quarter of 2019. Total revenue was $28.4 million for the three months ended June 30, 2019, compared to $14.2 million in 2018, a 101% increase. For the six months ended June 30, 2019, total revenue was $51.7 million, compared to $26.9 million reported last year, a 93% increase. Product sales were $20.6 million for the three months ended June 30, 2019, compared to $11.1 million in 2018, an 86% increase. And for the first six months of 2019, we're $38.9 million as compared to $22 million reported during the comparable period last year, a 77% increase. Sales of our proprietary commercial products XYOSTED and OTREXUP totaled $9 million for three months ended June 30, 2019, compared to $3.8 million in 2018 and were $13.8 million for the first six months of 2019 as compared to $7.7 million reported during the same period last year. Partnered product sales totaled $11.6 million for the three months ended June 30, 2019 as compared to $7.3 million in 2018 and consistent revenue from Generic Epi devices, Makena, Teriparatide, Sumatriptan and Needle Free devices. For the first half of 2019, partnered product sales totaled $25.2 million versus $14.3 million reported in 2018. The three and six month increases in product revenue were primarily driven by sales of XYOSTED and Epi devices. Licensing and development revenue was $2.2 million and $3.2 million for the three and six month periods ended June 30, 2019 respectively, compared to $1.8 million and $3.1 million in 2018. Licensing and development revenue includes license fees received from partners for the right to use our intellectual property and amounts earned in joint development arrangement with partners under which we perform development activities or to develop new products on their behalf. Our licensing and development revenue for the three and six month periods ended June 30, 2019 was primarily from the Teriparatide and Pfizer rescue pen development programs. Royalty revenue was $5.6 million for the three months ended June 30, 2019, compared to $1.3 million for the same period in 2018, a 335% increase. For the six-month period ended June 30, 2019, royalty revenue was $9.7 million compared to $1.8 million in 2018, a 451% increase. Royalties are recognized based on in-market sales of products sold by our partners. The significant increase in royalties for the three and six-month periods of 2019 was primarily attributable to increased royalties from AMAG's Makena Auto-Injector product and from Teva on their net sales of the generic EpiPen product, which was launched in limited quantities late last year. Operating expenses were $17.6 million for the second quarter of 2019 compared to $11.1 million in 2018. Operating expenses for the six months ended June 30, 2019, were $34.9 million, as compared to $22.2 million in 2018. The increase in operating expenses for the three and six-month periods of 2019 was primarily attributable to additional sales and marketing expenses associated with the launch of XYOSTED. Net loss was $2.2 million for the second quarter of 2019, compared to $4.5 million in 2018 and $7.8 million for the six months ended June 30, 2019 compared to $10.7 million in 2018, a reduction of 28%. Net loss per share was $0.01 and $0.05 for the three and six-month periods ended June 30, 2019, respectively and $0.03 and $0.07 in 2018. At June 30, 2019, cash and cash equivalents were $40.2 million compared to $27.9 million at December 31, 2018, and $23.2 million at the end of the first quarter. During the second quarter of 2019, the company amended the existing loan and security agreement with Hercules Capital, and a new $15 million loan was funded upon the execution of this agreement for a total of $40 million. You'll recall that the first tranche of $25 million was funded to us upon execution of the original loan agreement in June of 2017. At the same time, we also announced the termination of the At-the-Market or ATM equity offering facility, which we did not utilize during the second quarter of 2019. Also, in the second quarter, we received $2.5 million or half the remaining balance in connection with the previously announced sale of ZOMA-Jet Needle-Free delivery system. We anticipate the transaction closing in the second half of this year and receiving the final installment of $2.5 million at that time. You'll recall that we recorded a gain on the sale of the needle-free product line in the fourth quarter of 2018. For the first six months of 2019, we sold Ferring $4.2 million worth of devices. We will stop supplying needle-free devices after the completion of the Ferring transaction. That concludes my prepared remarks. I'll now turn the call back to Bob. Bob?

Thanks, Fred. Please turn to slide six for an update on the XYOSTED launch. The launch of XYOSTED is without a doubt an important part of our commercial strategy and I'm happy to report that it's going well. Managed care access which is critical to the success of any product launch has continued to increase each month as we move towards our goal of two-thirds of all commercial lives covered by year-end. Through June more than 15,000 prescriptions had been filled according to data on Symphony Health Solutions. And that number does not account for direct sales of the product or all the multiple month refills. It is important to note that sales of XYOSTED to the wholesale distributors are higher than the number of prescriptions reported by IQVIA and Symphony. We were seeing a prescriber base across all of the medical specialties we've targeted. Urologists and endocrinologists are writing approximately half of all prescriptions, while general practitioners, nurse practitioners, physicians' assistants and all others are writing the balance. It's a good, diverse blend of prescribers and we believe it forms a solid foundation on which to expand. The most recent data shows that our prescriptions are being written for a variety of patients who are either new to testosterone replacement or patients who are switching from a gel or generic injectable. It's still early in the launch, but we feel the trends we're seeing in both the number of prescribers and the kind of patients using the product means the product is building momentum. Therefore, we believe we have now reached sufficient number of physicians and patients and created enough brand awareness to accelerate our social media presence. We launched a new campaign designed to educate patients and encourage them to ask their doctors if XYOSTED is right for them. And while our social media campaign is ramping up, we want to make sure we stay in touch with the physicians who write, so we have a number of second half marketing initiatives planned and a full slate of clinical congresses to attend. Turning now to slide seven, you can see the monthly prescription trends for XYOSTED continue to grow and are trending in a positive direction. More importantly, new prescriptions are increasing and refills are growing, a strong sign of patient persistence. Since launch, XYOSTED has recorded double-digit month-over-month sequential percentage growth in both new and total prescriptions. In summary, over the first six months since XYOSTED launched, we remain very pleased with the progress we've made thus far. Moving now to slide eight, and an update on our pipeline. Focusing first on our partnership pipeline, the Teva progress for Forteo or teriparatide for osteoporosis, and BYETTA, or exenatide, for Type 2 diabetes, are at the FDA following the ANDA pathway. To-date, Teva has received regulatory approval for marketing a generic retail in 18 countries outside the US, including Canada. We look forward to the potential FDA approval of these products, and in the interim, we have continued to shift pre-launch quantities of generic Forteo devices to Teva in anticipation of a commercial launch in 2019. We entered into an important collaboration with Pfizer last year. We continued development work on modifying our QuickShot device for use in Pfizer's rescue plan. Pfizer has initiated the development program on their end and our respective teams meet regularly. And although the drug is undisclosed, we are very excited about the potential for this combination product. We are continuing development work on our next potential proprietary product, ATRS-1701, a combination drug device product in the neurology space. We continue to make progress on this new device and we selected a CMO to work on the formulation. Early development is also progressing on another potential proprietary product, focusing on an unmet need in neurology space. We believe this product is a great strategic fit in our pipeline. And finally, last quarter, we disclosed another pipeline program for a product with orphan designation, an auto injector of methotrexate to treat ectopic pregnancy. We have initiated clinical planning and look to meet with the FDA to discuss the development pathway. With another oppressive quarter in the books, we believe Antares is building excellent momentum for the balance of 2019. Slide 9 lays out our potential catalyst. Based on positive physician and patient feedback, we believe XYOSTED continue to be a significant opportunity for Antares. Our number one priority is a successful launch in the U.S. market, which could become the main driver of top-line growth for the company. The launch by Teva, other generic equivalent to the EpiPen is gaining excellent momentum. Teva has seen an increase in the weekly scripts of the generic EpiPen and a strong market share of approximately 29% of the EpiPen market at the end of the second quarter, according to Symphony Health Solutions. Going forward, we expect to receive larger royalty payments on Teva's sales of the generic EpiPen, as well as continued significant auto injector product revenue as Teva moves toward their stated goal of 50% market share. AMAG's Makena continue to be a solid contributor to our revenue growth. AMAG is continuing to work hard to increase their share of the market and defend the Makena franchise by promoting the benefits of an auto injector. In May, AMAG reported the auto injector had captured 54% of the hydroxyprogesterone market in the first quarter of this year, a 7% sequential increase from the fourth quarter of last year. Based on the royalty report for the second quarter, we believe AMAG continue their market share growth of the auto injector. The demand for the Makena auto injector appears to remain strong and we are looking forward to more details on the progress when AMAG reports their second quarter results tomorrow. And of course, another catalyst for 2019 is a potential approval of Teva's ANDA for a therapeutically equivalent generic Forteo. We believe this is a potentially big opportunity for both companies and look forward to further guidance from Teva on their launch plans. In closing, this is an exciting time for Antares and for our shareholders. We believe that our second quarter and year-to-date results continue to show the progress we've made in focusing our future growth on increasing the commercial mix of our total revenue. The balanced revenue growth from both proprietary and partnered products help drive record sales. We believe our strategy for growth is sound. We believe our strategy is working and we believe that what we share with you today firmly places us on a clear path forward, toward an extraordinary period of continuing growth for the company. Operator, could you please open the line for the question-and-answer session?

Thank you, sir. [Operator Instructions] We'll take our first question from Stacy Ku with Cowen and Company.

Good morning. Congratulations on a very exciting quarter. I have a few questions. First on XYOSTED growth. Can you update us on the refill rates? How might we benchmark this against compliance a with intramuscular testosterone replacement therapy? Second, would you be able to provide any updates on Forteo. From what I understand, Teva may have a potential advantage over other competitors. How might this play out for you in terms of a production standpoint? And then I have one more.

Sure, so. Thanks for the questions. On the XYOSTED launch, obviously it's still early in the launch, but so far the refill rates are at around 75% of all prescriptions being written, which is actually very favorable compared to any other testosterone product on the market. Typically the gels, you see a very quick rotation out in a very short period of time, on average, only two to three refills and similar on the IM injections, a little bit longer, but still very quick turnaround -- short period of time that you are on the product. So -- so far the persistence been pretty strong with XYOSTED. Clearly, we think it's the way that the device operates and how easy it is to use and how painless it is. I think it -- hopefully at this point seems to be translating into very good compliance for the patients. The growth continued well into July. We don't have the final numbers from IQVIA yet, but we know that the prescription trends continue to grow and we clearly saw growth over June into July. So things are continuing to go well for XYOSTED. On your question about Forteo, the only thing I can say is that Teva's ANDA is a true ANDA where it is intended to be fully substitutable at the pharmacy. I think that when you look at the competitive landscape of other products that are trying to compete against Forteo, they are not of fully substitutable generics. They are products that are 505(b)(2)s. And so clearly there is a huge advantage for Teva for that product to be switched at the pharmacy when someone writes a prescription for Forteo. We continue to ship devices in Q2 to Teva in anticipation of their launch. And again, we look really -- we look forward to getting the approval in the U.S. too, and hopefully be launching that product in 2019. Like I mentioned earlier, it had been approved in 18 countries outside the U.S. and Teva is gearing up for that launch in 2019.

That's really helpful. And if I could slip in one more. Finally on EpiPen, Teva has provided commentary that they believe they could be approaching 50% share exiting 2019. Could you give any insight into the dynamics behind the potential demand in Q3 and supply for the back-to-school season?

Yeah. So, like I mentioned earlier, the demand has been very strong and Teva really just started to engage in full contracting at the very end of the second quarter. And so we saw a pretty tremendous growth even with our contracting. So, obviously, now that we believe all the contracts or most of the contracts are in place, we expect to see an acceleration of that growth. There continues to be supply disruptions for our competitors with both Mylan and Impax, where [indecipherable] had issues with the auto injector. We do not knew nor does Teva, Teva has sufficient supply from the market. And so we feel that they'll continue to potentially take market share as we go forward. Their expectation is to have the EpiPen Jr. available for the school launch or I'm sorry, at start of the school year. And you know, if that's the case that will help in bringing more market share potentially. Because clearly, it's not a large percentage in a market, but I think it's an important percentage on the market for the pharmacies to have both products on their shelves.

Congratulations again. Thank you.

Thank you.

[Operator Instructions] And we'll next hear from Oren Livnat with H.C. Wainwright & Company.

Hey, guys. Yeah, my congratulations as well on the pretty big quarter. Couple of questions, on XYOSTED, obviously reported sales were higher than I think most of us were expecting from third-party prescription data, I think it implies, obviously, an IQVIA number is about a $450 value product. Can you just confirm to us a couple of things, whether there is any impact from channel fill inventory impact positively on this quarter? Also, maybe just talk to us about the upside you highlighted in real life versus what we're seeing in the data. Is that just a sampling issue in your mind or is that actually just the retail guys pulling in more stock than in anticipation of refills and they are seeing actual scripts so far? And just lastly, can you comment just knowing where you are in contracting, what sort of current and/or steady state gross to net number we should use against WACC going forward? And if I may, just on EpiPen. Can you just remind us is there a lag on royalties from Teva? Like a quarter lag still or has that changed such that the big back-to-school boom in 3Q, should we expect to see that hit next quarter for you or is that going to be a fourth quarter royalty bump? Thanks.

So Oren, thanks for your questions. I will answer the Epi question first and then I hand over the XYOSTED question to Fred. On the Epi, we currently book royalties on the quarter, so we are -- we book Q2 royalties based on the Q2 revenues. So, for Q3, if there is an increase in sales related to the back-to-school timeframe, we will see that in Q3. So there is no lag anymore. We get a report from Teva as to how much they shipped. We estimate the royalty and then we get that royalty sometime in -- 45 days after the quarter is over. As far as the multiple questions on XYOSTED, and I'll let Fred try to answer that.

Thanks Bob. With that -- I'll start with the channel fill question you had. We’re able to see how much inventory all the big three distributors have at the beginning of the quarter as well as the end of the quarter. And we actually saw a tightening of the inventory that they had on hand. Meaning, they had more days on hand at the beginning of the second quarter as opposed to the end of the second quarter. So, we don't believe -- it's not a channel fill issue that we saw with the revenue numbers taking place. With regards to the IQVIA and the Symphony data versus what we're actually reporting, well, we actually reported the shipments we actually make from our 3PL to the distributors. We, then, are tracking the information from Symphony, internally it's IQVIA, and we are seeing where it doesn't match up very well. And there are probably several reasons why that could be sampling is obviously one that could be some of those that we sell direct to is another one. Plus, patients often will get multiple months on their rebuilds. So the prescription may actually come back as one refill. When it backs, it could be three or six months worth of refills that are taking place. But there is truly a disconnect between what's actually being reported by Symphony, as well as what we actually see going into the trade, since the trade is not increasing the amount that they have in terms of days on hand for their sales.

And the only thing else I would add Oren is that, in product launches, this is not a typical for products where there's not a lot of volume, it's very hard for them to estimate through their geospatial kind of analysis as to where the scripts are coming from and what the volume is, because they obviously don't do 100% sampling. So we have that element. And then I think what Fred mentioned as well, what we're seeing is, for the patients that are already on testosterone, the doctor knows they're going to continue to stay on it. So they're just being switched to our product, if they're on an injectable IM and they are being switched to XYOSTED. So I think the doctors are much more comfortable, giving multiple prescriptions in -- or multiple refills in one prescription as opposed to if it was a totally new drug and they've never been on it. It maybe a bit more cautious as to how they do that. So we think it's really a combination of those elements where we're seeing this, larger amount of shipments being made. What we do know is that the retailers are not stocking our product. It's a high priced product from a WACC standpoint. There is no need to stock a product when you can get the product within a day from your distributors. And so, you know, we -- like Fred mentioned, we do a really good job of monitoring our inventory levels at the distributors, and there's clearly has not been any kind of channel build or any like that.

And Oren, I think you had one other question that was the gross to net piece. And as we take a look at where our gross number is for the WACC price, it's $499. We're seeing less than a 50% gross to net deductions. So, as you look at your model going forward, I assume that it's going to be less at this time. Again, as we continue to add additional plans, we see rebates that could impact the gross to net and also with the first bill free programs that we have that could also impact it as well. But as of right now, it's a little bit below the 50% gross to net deduction.

That includes free drugs, not just discounts and rebates?

Correct. That's right.

Correct. All right.

And so as we move forward to gross to net, we'll get better as we give less free product out and as sampling and all those things kind of start to moving down.

All right. Thanks so much.

Our next comment -- question comes from with Piper Jaffray, David Amsellem.

Hi, good morning. This is Mickey Ingerman on for David. Thanks for taking the questions. First on XYOSTED, can you provide any metrics around the number of unique prescribers in 2Q and how that compares with one 1Q 2019? And then if you guys could comment on the nature of the step-throughs for XYOSTED. Most patients having to have prior -- been on a prior topical treatment before getting access to XYOSTED?

So, on the number of prescribers, I don't know the numbers off the top of my head, we're trying to look them up. But clearly we've had an increase in prescribers on a -- actually on a weekly basis. We continue to see new prescribers writing XYOSTED. And what we're doing -- what we're trying to do is get those prescribers to write multiple prescriptions as opposed to ones and twosies when they're -- as they're trying XYOSTED. Up to this point, there's around 2,400 prescribers, who have written for XYOSTED. And clearly it's the same dynamic that you see with any launch product. There are some large writers that make -- that take up a large percentage of the total number of prescriptions that are being written. But we are seeing not only a large number of writers, but also across all the spectrums that were -- that who were calling all we're seeing. Like I said earlier, about 50% of our scripts from endocrinologists and urologists which is unusual, because typically you see a lot more from the primary care docs. And I think that's because they really believe in the data that they're seeing as far as the levels and the testosterone and the steady state and so forth. The primary care physicians take a little bit longer to adopt just because typically they're waiting to see what the KOLs are doing. But still, we're seeing a 50% of our scripts coming from the primary care physicians or the sexual medicine doc. So, I think the mix is really good and we continue to see more and more docs writing XYOSTED. And I'm sorry I don't remember your second question.

Just the nature of step-throughs and whether patients have to have been on prior topical treatment before?

Yeah. So, it really depends on – if the plan has a contract with us. Typically, there – if there is any step-through, it's through a generic which is very normal for a Tier 3 coverage. And then, we obviously have plans where there's no step-through. The most egregious plans as far as with the high cost ones that try to keep those cost as low as possible from the pharmacy may do a double step, but that's very few of those. So, I think in general for Tier 3, we have their traditional step-through a generic and then you get to use XYOSTED. The good news is that where 50% of our patients are already on a testosterone product, they already done this step because the market is all generics, except for XYOSTED for the most part. And so it's been a relatively simple step-through for most physicians and patients. But again, we use manage my meds or CoverMyMeds – sorry, CoverMyMeds to help with the adjudication process for those patients that are new to therapy and have to go through maybe potentially a step.

Got it. That's helpful. And if I may sneak in one more. When is the earliest that we could see ATRS-1701 or the product for the urologic indication move into the clinic?

Yeah. So, we're continuing to do work on that. Our expectations is I think that we'll see potentially that in the clinics next year. We had to do some reformulation work that's ongoing, we think we're going to get there on that. And then clearly, what I mentioned earlier, it is a new pen and we've done a lot of development work, that's on track to be ready. And so I think things are moving along there and we expect to move that into the clinics next year.

Great. Thank you so much.

We'll next hear from Anthony Petrone with Jefferies.

Thanks, congratulations on the good quarter here. Couple on XYOSTED and maybe just some questions on partnerships. The first on XYOSTED, would just be – can you give us an update on the payor landscape, it sounds like you were ahead of schedule last quarter, how many covered lives are actually under contract at the moment? What benefit do you think that had on the print this quarter 9 million was well ahead of what we were expecting and how many more contracts could you expect before the end of the year? And then I'll have a follow-up on partnerships. Thanks.

So for XYOSTED coverage, we were probably around 60% of all lives covered. Like I mentioned earlier, we did sign when a larger PBMs late last quarter, and they are going through their review process. They put different tiers of plans on cover over time and so obviously the more generous plans are first ones that will cover XYOSTED and then as they look at their – through their formulary review, they start to drop in the other ones. So we're at 60 – roughly 60%, and that represents over 100 million lives covered for XYOSTED or more. I don't know the exact number, but I think it's really trending quite well for us toward our target of basically 75% of all lives covered by the end of the year. So that's – as we get more and more coverage, obviously it's making it easier for doctors and patients to get XYOSTED, so it's an important key thing for us. What was your second?

Yeah. On partnerships, maybe just a quick update on Pfizer, the rescue pen where that sits, and I guess really in the wake of the changes that are going on in that business in and of itself. So we're seeing some strategic business unit's sort of pair up there and is a separation of certain businesses. So just any update on Pfizer and what the changes of Pfizer mean for that development program? Thanks.

Sure. As far as our Pfizer relationship, the recent transaction that they announced with Mylan does not appear to have any effect on our transaction. Our relationship was directly with Pfizer and not with Upjohn, which is the division that they are spinning off. And so there has actually been no impact whatsoever to that program. So, whether or not they spin the Meridian off in that transaction, first of all, it's unknown if they're going to do that or if it's even going to be approved. And secondly, it likely won't impact us in a negative way. And in fact, I think it could be viewed as a positive for us as they look to do more potential combination products. I think that in our relation stays quite strongly with Pfizer and it could lead to more opportunities, but I can't speculate on that transaction. It's going to take over six months for that to completely figure kind of land where we're close. And so for us, it's business as usual for Pfizer, and we don't see that having any negative impact on our business with them.

Thanks.

And we'll next hear from Elliot Wilbur with Raymond James.

Thanks. Good morning. Just real quickly, following up on your earlier comments around that gross to net realization, and we saw our expectations for sort of longer term values around that metric. Obviously, we expect it to improve, but I guess as we think about modeling out your numbers is, using the number around 60%. Does that sound something -- like something that would be sort of reasonably close to kind of steady state?

Wilbur -- Elliot, this is Fred. As I said, we're slightly below the 50% and the gross to net. We can't predict right now, how much it will improve. I don't expect it will deteriorate much. It could improve somewhat. It could get as high as 60%. But we're not there right now. And I can only comment on as to what we're at now.

Yeah. I think really -- right now it's, we still have -- we still anticipate on entering to other contracts with payors. And really depending on, where that rebate is going to determine ultimately, where we land, long-term potentially on XYOSTED. So, what I can say is, I think that, the gross to net are exactly what we expected in the launch year. And we expect them to continue to improve and for a branded product I think we're going to be right where most branded products are from a gross to net.

Okay, great, thanks. And with respect to the change in the full year revenue outlook, don't want to -- don't want to sort of over analyze the incremental change. But any comments you can make with respect to sort of, where you saw sort of the key areas of over performance relative to prior expectations? And what sort of the key driver behind the bump up, in your full year outlook?

Sure. And it's Fred. And as we took a look at some of the orders that we were receiving in from our partners as well as potential royalties, we saw the Epi being very strong in the back half of the year. In fact, it surprises how strong it was in the second quarter. And we continue to see that demand going through the end of this year. And even into the beginning of next year. And so that was probably the one area that we felt most comfortable about, as we were looking at our guidance going from that $95 million to $105 million, taking it to $100 million to $110 million, the product as well as royalties surrounding it.

Okay, Good. Thanks, Fred. And a follow-up financial question for you, as well. Could you just provide some color around operating cash flow metrics in the quarter? And what your expectations would be for, operating cash flow over the balance of the year?

Sure. In the second quarter, it was a bit unusual, right, because we've received in the $2.5 million from Ferring. Back half of the year, we expect to receive an, another $2.5 million in from Ferring as well. In the first quarter, based on timing of revenues, our inventories had built up, later on. When you get a chance to analyze the balance sheet, you'll see that the inventories actually came down, even though, we increased our revenue significantly, quarter-over-quarter. So, both of those items that allowed us to actually be cash flow positive, if you will, once you pull out the $15 million that we increased with the Hercules. Going forward, as we continue to see our revenue growth, we will need to continue to monitor our inventory as well as our receivables, to make sure they did not get out of balance and causing us actually use more cash, as we grow the business. But I would not expect to see significant cash usage, in the quarters going forward.

Okay, thanks. And one now final question for Rob, switching gears and turning to methotrexate and the potential ectopic pregnancy indication. I guess given the body of literature that's out there, with respect to this act is in that indication. I guess my assumption that had been that there is a reasonable likelihood that this could be a paper NDA. Obviously, you won't know that did they actually sit down with the agency. But do you think at this point that, that is a realistic expectation?

No, I think that, the body of medical data out there supports obviously what we're doing. But, because it's an auto injector, because there really has never been an approval for methotrexate, for ectopic pregnancies, they're going to want to see some data relative to methotrexate, the auto injector for ectopic pregnancy. So, likely clinical studies will be required. And so, how large of a clinical program that will be, is really what the point of the meeting with the FDA will be. We don't anticipate it to be, a very large program. But at the end of the day, we still will have to dose patients, try to get the right dosing parameter for the majority of patients, because it is based on weight, basis to some degree. And so, there are parameters that we'll be working out with the FDA. But clearly, we do think, we will be putting methotrexate in people, in women that are preventing an ectopic pregnancy.

Great, thank you.

And from Ladenburg Thalmann, we'll hear from Matt Kaplan.

Hi, good morning, guys. Congrats on the quarter. I wanted to just dig into XYOSTED, for a minute. It seems to me that, they look -- sort of low hanging fruit for XYOSTED, would be taking patients off of other injectables and converting them to XYOSTED. I guess, where are you seeing the patients come from in terms of their background meds, background prior TRT therapy? Is it from injectables or is it from topicals and where are these patients coming from? Are they de novo patients?

Right. So 50% of our patients are de novo, so new to testosterone treatment, which I think is a great sign or a great signal that the doctor view this product as a first-line therapy. Obviously, if they're de novo, you tend to spend a little bit more time trying to get the coverage for it, because they got to go through this step. If there is a step through generic or if there is prior authorizations, they have to work their way through, but we've been relatively successful in doing that. On the balance of the patients, clearly, if they are on current therapy, the majority of those patients are intramuscular injection, where it's a pretty simple switch in the physician's mind and also in the patient's mind, where basically we believe giving them a better injection, a better injection process, steady state, as opposed to some of the variability that they see with the IM injections, and then we are starting to see some gel conversions. They are typically the more difficult ones to convert, because they're there obviously on a gel, because they're potentially afraid of needles or they are new to therapy. And that was the easiest thing in their mind to use, and then they realize it's not so easy to apply a gel every day. And so we're seeing patients convert from that, but that's taking a little bit more time than de novo and IM injections. But overall, we're really happy that all of those patients are becoming potential patients for XYOSTED.

Very good. And, I guess, given your initial success you've had so far in the launch, are you planning any changes in your sales organization, increasing in size or what are your thoughts there?

I mean, right now, obviously, we always look at the number of territories we have and how they're doing and whether there needs to be expansion or some of them actually are viable or not. Right now, we don't intend to change the number of reps. I think that, we currently have 83 territories that's working well, that will be an analysis that's done in the third quarter of this year, just so that we're ready for a Q1, if we decide to change anything. But honestly, I think that, it will be tweaks here and there and I'm not expecting any type of need to increase the number of reps dramatically at all. And so we feel really confident that we launch with the right number and that right now we seem to be maintaining that number as our go forward thinking. But again, the analysis has to be done towards the end of the year, and we'll update you if there's any kind of a change.

Sounds good. And then given Fred's prior comments in terms of cash usage, any -- you used a dirty word, profitability, what are your thoughts on achieving profitability in the coming quarters?

Yeah. So I think that, Fred, can answer this probably better than I can, but I'll take a shot at it. It really is a function of the mix of business that we get. Obviously, if our royalties continue to go up, that's a very profitable piece of our business, so that would have an impact on that. What we're striving for is clearly to be cash flow breakeven to positive, and just so that we can continue to grow the business. We're heavily investing in XYOSTED right now. And we had, I think, pretty terrific results from a cash burn standpoint from, a very small loss relative to putting such tremendous amount of resources on a new launch. And so, it really depends a lot on how fast XYOSTED picks up. Epi is a big wild card for us. If Teva hits there 50% bogey market share that could dramatically impact our profitability depending on the net selling price that they ultimately wind up with, that's another key factor for us. What do they sell the epipens for as they get more and more market share? And so our focus is really on cash flow as opposed to profitability, but I think that, we're putting things in place where clearly you can see us moving toward that. We just don't want to give a particular quarter or guidance as to when that profitability comes, because it -- that half of our business is outside of our control with our partners. We obviously shift in devices, we control that element, and so far we've been performing really well in that area. But at the end of the day, how Makena does, how Epi does and how other products, like Sumatriptan do really impact that profitability question. But all I can say is that we're executing and we're going to continue to execute and try to grow our business that we control. XYOSTED, it's a clear -- is off to a really good start in that area as well as OTREXUP.

Great. Thanks a lot.

[Operator Instructions] It appears there are no further questions at this time. So, Howarth, I'd like to turn the conference back to you for any additional or closing remarks.

Thanks Amy. And thanks again for joining us on today's conference call. If you have any follow-up questions, you can reach me at 609-359-3016, that completes today's call.

This concludes today’s conference. Thank you for your participation. You may now disconnect.