Nov 8, 2017
Executives
Anne Marie Fields - Senior Vice President, LHA Phillip Frost - Chairman and Chief Executive Officer Steven Rubin - Executive Vice President, Administration Adam Logal - Vice President and Chief Financial Officer David Okrongly - President of Diagnostics Business Unit Thomas Nusbickel - Chief Commercial Officer
Analysts
Louise Chen - Cantor Fitzgerald Christian Trigani - Jefferies Kevin DeGeeter - Ladenburg Eric Joseph - JPMorgan I-Eh Jen - Laidlaw & Company Mike Petusky - Barrington Research Brandon Couillard - Jefferies
Operator
Welcome to the OPKO Health Third Quarter Business Update Conference Call. At this time, all participants are in a listen-only mode.
Following management’s prepared remarks, we’ll hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded November 8, 2017.
I would now like to turn the call over to Anne Marie Fields with LHA Investor Relations. Please go ahead, ma’am.
Anne Marie Fields
Thank you, Victoria. Good afternoon.
This is Anne Marie Fields with LHA Investor Relations. Thank you all for joining today’s call.
I’d like to remind you that any statements made during this call other than statements of historical fact will be considered forward-looking and as such will be subject to risks and uncertainties that could materially affect the company’s expected results. Those forward-looking statements include, without limitation, the various risks described in the company’s Annual Report on Form 10-K for the year ended December 31, 2016 and its subsequent quarterly filings with the SEC.
Before we begin, let me review the format for today’s call. Dr.
Phillip Frost, Chairman and Chief Executive Officer of OPKO will open the call, followed by Steve Rubin, OPKO’s Executive Vice President who will provide an update on the company’s various businesses and clinical programs. After that Adam Logal, OPKO’s Chief Financial Officer will review the company’s 2017 third quarter financial performance.
Dr. Frost will then provide his closing remarks and we’ll then take your questions.
Now, let me turn the call over to Dr. Frost.
Phillip Frost
Thank you, all, for joining us today. As you just heard, Steve Rubin will open the discussion, followed by Adam Logal, and then I’ll make a few comments.
Steve?
Steven Rubin
Thanks, Phil. Good afternoon, everyone, and thank you for joining us on today’s call.
Throughout the third quarter, we continue to make meaningful progress on a number of our key business objectives. Those include building momentum in the commercial launch of RAYALDEE, increasing utilization of the 4Kscore test and further expanding its promotion, and advancing our clinical development programs towards commercialization.
On this call, I’ll discuss our progress across diagnostics, pharmaceuticals and our clinical development programs. Let me begin with a review of our diagnostics business BioReference Laboratories, which is the country’s third largest reference lab.
While impacting BioReference’s revenue growth in recent quarters, we continue to make investments in systems efficiencies, cost reductions and new leadership that we expect will translate into revenue and profit growth as we move into 2018. As Adam will elaborate, we are seeing trends, which lead us to expect our efforts of BioReference and GeneDx will result in improved revenues and operating margins for the remainder of this year and into 2018.
Throughout the quarter and recent weeks, CRL, GeneDx subsidiary continued to demonstrate its leadership to active engagement with the clinical and scientific community in all aspects of genetic and genomic testing. Among other areas, GeneDx has seen continued ongoing growth in its high-complexity exome and related test with a 29% year-over-year increase in exome testing volumes.
We were especially pleased to exhibit team GeneDx’s leadership in genetic and genomic testing with more than 40 poster and platform presentations at two prestigious industry conferences last month. We expect advances in GeneDx’s product lines and gene sequencing panels to add meaningfully to our diagnostics platform.
While we face some pricing headwinds with GeneDx year-to-date, we see evidence that those have leveled off and moving forward we expect to see improved performance for this unit, as we increase patient volumes and add test in multiple new clinical areas. Let’s turn now to 4Kscore test, our blood test that gives a man with elevated PSA levels a personalized prediction of his chance of having or developing an aggressive form of prostate cancer.
With more the BRL sales reps promoting 4Kscore, we are investing in enhancing our marketing efforts in order to increase awareness and utilization of the 4Kscore test. These initiatives include the development of a small urology sales team to complement at BRL sales efforts.
The new team has recently trained and deployed. In addition, we are looking forward to launching a direct consumer campaign in the form of regional television ads, which will begin later this month.
We are enthusiastic about this ad campaign and look forward to its impact. In parallel, we continue to generate data that we believe will support and expand the clinical utility of the 4Kscore test.
These new data will support our efforts to secure and expand ongoing favorable reimbursement, as well as drive utilization. Let’s turn now to the Claros 1 immunoassay analyzer, our novel diagnostic device that can provide rapid, quantitative blood test results in 10 minutes right in the physician’s office with only a finger stick drop of whole blood.
We have now filed the premarket approval or PMA of the Claros 1 analyzer and total PSA test with the FDA. Submission requirements were discussed and agreed with FDA, which in addition to analytical method validation also included two multi-center field studies involving a total of 864 men.
The first study determined the age group distribution of Claros 1 total PSA cash results in a normal healthy population of men aged 50 and older. The second study of men scheduled to undergo a prostate biopsy demonstrated that the Claros 1 total PSA test at a cut-off point of 4 nanograms per milligram – milliliter increased sensitivity of a digital rectal exam or DRE alone from 32% to 91%, resulting a detection of more cancers in DRE alone.
Once approved, we will leverage BRLs marketing, sales, and distribution resources to launch the Claros 1 total PSA test in the United States. With more than 25 million PSA test performed in the U.S.
annually, the Claros 1 total PSA cash represents a 625 million market opportunities. The Claros 1 quick turnaround is a key competitive advantage we consider the similar lab test for PSA can take up to a week to obtain results.
We continue to advance development of our other Claros 1 test with an aim to expand the platform to a number of important indications. In particular, we are working on test, which has synergies with our other products and programs such as testosterone and vitamin D.
Next year, we expect to initiate clinical validation studies and to file a 510(k) application for Claros 1 testosterone test. Beyond that, we plan on expanding the Claros 1 menu with the development of test for infectious diseases, cardiology, women’s health and companion diagnostics.
Turning now to our pharmaceutical business, let me start by discussing RAYALDEE. The first and only therapy approved by the FDA that both raises 25-hydroxyvitamin D and lowers parathyroid hormone levels with a safety profile similar to placebo.
We’re continuing to build sales momentum and have seen week-over-week increases in total prescriptions since the start of the year. Total prescriptions of RAYALDEE in Q3, as reported by IMS, increased by 66% compared with Q2, and total prescriptions of RAYALDEE in Q2 increased by 140% compared with Q1.
We’ve recently completed a quantitative awareness tracking and usage market research study, which showed that the percentage of nephrologists who prescribed RAYALDEE in the last 12 months increased to 16% as compared to less than 3% at the end of 2016. The updated KDIGO clinical practice guidelines create a significant opportunity for RAYALDEE as active vitamin D therapies, including Calcitriol are no longer suggested for routine use in stage 3 or 4 CKD plus nutritional vitamin D supplements, which are used by the majority of patients with stage 3 or 4 CKD remain characterized as an unproven treatment for SHPT.
We continue to aggressively educate nephrologists on the potential RAYALDEE to treat this patient population more effectively. Even with growing sales momentum, increasing market access and new KDIGO guidelines, our sales organization was not large enough to beat all the potential high-value targets for RAYALDEE at the desired frequency.
As a result, in the third quarter, we expanded our field-based sales force from 35 to 71 and expect to see the impact of a larger commercial team in 2018. This past week, our commercial team was out in force at the American Society of Nephrology Annual Meeting kidney Week 2017, where we had a significant commercial and clinical presence.
In addition the two large exhibitors, OPKO sponsored a clinical symposium on the benefits of RAYALDEE in treating SHPT in stage 3 and 4 CKD. We had favorable outcomes from two clinical studies of RAYALDEE presented in two posters and had a sizable commercial team detailing nephrologists and key opinion leaders on the benefits of RAYALDEE.
Last month, we were pleased to announce exclusive agreement with Japan Tobacco for the development and commercialization of RAYALDEE for the treatment of SHPT in non-dialysis and dialysis patients with CKD in Japan. We received an upfront payment of $6 million, with another $6 million payment to be made upon initiation of our plan Phase 2 study of RAYALDEE and U.S.
dialysis patients. We will also be eligible to receive up to $31 million in development and regulatory milestones and $75 million in sales-based milestones.
We will receive tiered double-digit royalties on net product sales. The Japan Tobacco will be responsible for all regulatory approvals and commercial activities pertaining to RAYALDEE in Japan.
Japan Tobacco together with its subsidiary Torii Pharmaceutical has a strong and growing franchise in renal diseases and hemodialysis, which makes them an ideal partner to bring RAYALDEE to physicians and patients in Japan, where they estimate there are 13.3 million people who have CKD and more than 300,000 are undergoing dialysis with both patient populations increasing due to the aging population. Turning now to VARUBI.
At the end of October, we are pleased to see our licensee, TESARO, received FDA approval for VARUBI IV for the treatment of delayed nausea and vomiting associated with chemotherapy. TESARO has garnered 50% of the market for the oral products, but intravenous treatments for chemotherapy induced nausea and vomiting account for about 90% of the market.
The current market for CINV therapies is $1.2 billion annually and growing to $1.8 billion annually by 2020 according to Transparency Market Research. We look forward to TESARO’s continued success in commercializing the VARUBI product line and expect to see the benefits of the VARUBI IV launch in 2018, as OPKO has entitled to double-digit royalties in both the oral and IV formulations of the drug.
I’d now like to review our clinical development programs, which we believe represent significant opportunities for OPKO. These programs are an important engine for creating both near and long-term value for our shareholders.
Our clinical and regulatory teams continue to work diligently to advance these important programs across a number of indications with our significant medical needs with limited options in large markets. Let me start with the programs in our renal business, where we believe an expanding product line can leverage our investment in a growing commercial infrastructure we built for RAYALDEE.
First, we’re finalizing plans for the initiation of a single dose Phase 2a clinical study with our NK-1 antagonist for uremic pruritus, which is a serious problem for more than half of the patients on dialysis. We are making final plans for Phase 2 clinical trial of a higher strength RAYALDEE for dialysis patient, which is partnered with Vifor Freseniusfor commercialization in Europe and elsewhere.
We have received favorable feedback on the trial design from the FDA. Turning now to our clinical pipeline candidates in metabolic and endocrinology diseases, we have a number of important late-stage programs underway or nearing the initiation, that should reach important inflection points in the coming months and into 2018.
I’ll start with our long-acting human growth hormone product, hGH-CTP, which is partnered with Pfizer for worldwide commercialization. Our global pediatric Phase 3 hGH-CTP study in 220 growth hormone deficient children is underway and we continue enrolling patients.
This is a pivotal, non-inferiority study comparing a single weekly dose of hGH-CTP with daily injections of a currently marketed growth hormone. This study is using the to-be-marketed pen device and formulation that will be launched commercially upon approval.
The Pediatric segment represents approximately 80% of the commercial market for treatment of hGH deficiency. Patients in the Phase 2 extension have been exposed to hGH-CTP for more than three years, providing us with long-term safety and efficacy data.
During this summer, we initiated a pediatric hGH-CTP registration study in Japan. This study is assessing pharmacokinetics and compares efficacy of weekly hGH-CTP to daily Genotropin in 44 pre-pubertal pediatric growth hormone deficient subjects.
This study design is similar to the global pediatric hGH-CTP study that’s underway. We expect to complete enrollment of this Japanese study by the end of next year.
With respect to the adult hGH-CTP Phase 3 study, as you know, we completed a post-hoc sensitivity analysis to evaluate the influence of statistical outliers on the primary endpoint result using pre-planned analysis protocol. Analyses that excluded outliers meeting predefined criteria showed a statistically significant difference between hGH-CTP and placebo on the change in trunk fat mass.
OPKO plans to request a meeting with the FDA to determine available data are adequate for BLA submission. In addition, we intend to discuss the pathway of introducing the to-be-marketed pen product for the adult growth hormone deficiency market.
We have a very exciting opportunity to advance OPK88004, a once-daily oral selective androgen receptor modulator or SARM for patients with benign prostate hypertrophy, which is also known as BPH or enlarged prostate. BPH affects half of men aged 51 to 60 and affects 90% of men over the age of 80.
In addition, 14 million men in the U.S. have lower urinary tract symptoms are suggestive of BPH.
Approximately, 50 million men in the U.S. have BPH.
Current treatment options, such as alpha blockers that relax the muscles or 5-alpha reductase inhibitors are either minimally effective or have negative side effects. We are particularly encouraged to advance our SARM candidate based on its ability to reduce prostate size in animals and PSA levels in human trials.
In addition, Phase 2 data of 350 elderly male subjects for another indication utilizing OPK88004 showed a significant increase in lean body mass and muscle strength and significant fat mass reduction. The study also showed an acceptable safety profile to permit clinical development.
We expect to initiate a Phase 2 dose ranging study in men with BPH by the end of this year. The study will enroll approximately 125 BPH men with a goal to identify adequate doses to reduce prostate size over a 4-month treatment period.
We will also assess other secondary endpoints such as PSA levels, lean body mass, fast mass and physical function. We expect that with the high prevalence of BPH, we should enroll and treat fairly rapidly and given the short treatment time, believe that we should have top line data in the second-half of 2018.
Turning now to OPK88003, our once-weekly GLP1-Glucagon dual agonist for the treatment of type 2 diabetes and obesity. As previously reported, data from a Phase 2 study with 420 diabetes showed that OPK88003 resulted in greater weight loss compared with the approved extended release exenatide and placebo.
In addition, the data also showed improvements in the lipid profile and similar reduction in HbA1c levels compared with the approved once-weekly product. Based on the promising efficacy data and safety profile, we are planning to initiate a dose escalation Phase 2b trial to optimize a dosing regimen that should achieve even greater weight loss, improved lipid profile and safety.
We are currently completing the manufacturer product and expect the trial to begin in first-half of 2018. So in closing, looking ahead, we expect that 2018 is going to be a busy and exciting year for OPKO, as we advance multiple programs with our promising development pipeline of product candidates.
We have multiple inflection points throughout the balance of this year and into 2018. Let me summarize some of them.
We expect to initiate a Phase 2 study of a higher dose RAYALDEE product to treat CKD patients on dialysis; begin a Phase 2a clinical study of OPK88002, our NK-1 inhibitor for itching in dialysis patients; start a Phase 2 dose ranging study of OPK88004, our SARM for patients with BPH; complete enrollment at the pediatric Phase 3 study with hGH-CTP; initiate a Phase 2b dose ranging study of oxyntomodulin OPK88003 to evaluate safety as well as weight loss in glucose control; conduct clinical validation studies and file a 510(k) application for a Claros 1 testosterone test; received FDA approval for the Claros 1 system with total PSA; and advanced a Phase 2a study of OPK88001, our AntagoNAT for the treatment of Dravet syndrome. With our marketed programs, RAYALDEE and 4Kscore, we will continue to invest in expanded programs and new studies to achieve the commercial success each deserves.
We expect the BRL business to benefit from our two 2017 investments and new leadership and financial and operating efficiencies as we increase sample volumes and expand our diagnostic product offerings. Despite some of the challenges we face in our diagnostic sector this year, we remain highly confident in the potential for BRL and for the synergies we can leverage across diagnostic product lines over time.
We look forward to keeping you apprised of our progress, and we expect that our execution will drive value over time. With that overview, let me turn the call over to Adam for a discussion of our third quarter 2017 financial performance.
Adam?
Adam Logal
Thank you, Steve, and good afternoon, everyone. Revenues for the quarter ended September 30, 2017 totaled $264 million and our net loss was $46 million, reflecting our ongoing investments in research and development of our pharmaceutical pipeline of $32.3 million along with an $8.5 million investment in our commercial launch activities for RAYALDEE.
The comparable period saw total revenues of $298 million and a net loss of $15 million. During the third of 2017, revenues fell short of our expectations, principally at Bio-Reference as a result of lower than expected realization of revenue items from the early days of our system implementation, which occurred in October of 2016.
Further, we did not achieve the patient growth we had anticipated for the quarter, and we now anticipate revenues for the full-year to be similar to the 2016 overall levels. We are encouraged by progress that has been made at our higher-margin GeneDx business, which continues to see patient growth, and importantly, revenues for this portion of Bio-Reference reached the highest revenue levels since Q3 2016, a trend we expect to continue.
Our commercial team led by our new Head of Sales, Vicky Laughman, remains focused on returning Bio-Reference to accelerated growth in our patient base. Our revenue cycle management team continues to make progress in collecting more cash on each requisition.
Further, we have brought in our efforts on improving the profitability of our diagnostic operations through the initiation of lean team focused on process reengineering after the success we saw within our billing organization. While additional investments will be required to achieve industry-leading results, we believe our 2017 activities have positioned us to achieve operating margins in line with the industry during 2018.
Shifting gears to RAYALDEE. We have not recognized revenue from RAYALDEE in our financial statements.
But we continue to be encouraged by the growth in prescription trends, as reported by IMS, as well as increased demand for products shipments to the wholesale trade. From January through September 2017, IMS has reported that nearly 5,000 prescriptions of RAYALDEE have been filled with over 2,600 during the third quarter alone, a 66% increase from the second quarter of 2017.
With the increase of our field-based sales team, we expect that our prescription trends will continue to grow at an accelerated pace through Q4 2017 and into 2018. As of September 30, we have shipped approximately $6.7 million of RAYALDEE into the trade and record – have recorded that amount as deferred revenue on our balance sheet.
We estimate that we will begin recognizing revenue in the fourth quarter of 2017, assuming the estimates for the first nine months of activity continue to be accurate. Previously, we had estimated that the overall life cycle of RAYALDEE, we would realize a net sales price of approximately 55% to 65% of our gross revenue.
For 2017, we expect that our net sales price will be at or above the higher-end of that range, based on the patient mix and related utilization of RAYALDEE to date. At September 30, 2017, we adjust over $100 million in cash, cash equivalents and marketable securities on our balance sheet, with an additional $15 million in availability under our credit facilities.
We continue to be mindful of our cash balance and investments in both our R&D pipeline and commercial activities to align with the anticipation of our improving cash flow from both Bio-Reference and RAYALDEE, both of which are important drivers of achieving near-term break-even cash flow from operations. With that, I’d like to turn the call back to Phil.
Phillip Frost
Thank you. And I’d like to highlight two of my favorite subjects that Steve has already talked about.
First is the SARM, a selective androgen receptor modulator with possible indications other than BPH, such as urinary incontinence and our oxyntomodulin molecule to treat type 2 diabetes and obesity. Both were part of Transition Therapeutics, which we acquired over a year ago.
The SARM has already been studied in more than 300 men and found to have the following effects: an increased muscle mass and strength; a decreased body fat; it lowered the PSA; in preclinical studies and drugs, it decreased prostate size by 60% in three months and 80% in six months. This was the model used to test the prostate shrinking effects of the 5alpha-reductase inhibitors Finasteride and dutasteride.
Now on the market to treat BPH. But they cause royalty symptoms since they prevent the formation of the active form of testosterone.
So we have some level of confidence that our SARM will be effective in our trials, which should begin within next few weeks. This, as Steve indicated, is a four-month Phase 2b trial in a 126 men, which will be completed in one year.
For the Phase 3 trial, we are considering also studying a combination of CIALIS in our SARM. Since BPH have and should improve with our SARM as the prostate shrinks, we don’t expect benefits to be noticed immediately.
But CIALIS is already approved in small daily doses to treat BPH. And since it works by relaxing muscle a different mechanism from the SARM, its benefits are noted quickly.
The combination should have a great combination of attributes without the disadvantages products now on the market. Remember, as Steve indicated, approximately 50 million men have symptoms of BPH in the U.S.
alone. Our next favorite project is our oxyntomodulin about which we have spoken before.
In a Phase 2 trial, 420 patients, they were shown to be safe and effective with once-weekly injections to treat type 2 diabetes and obesity. We will shortly begin a six-month trial to test the new dosing schedule.
We will escalate this dose over a longer time in an attempt to achieve more weight loss, while minimizing the nausea and vomiting, which sometimes occurs if the dose is ramped up too quickly. This limits the size of the maintenance dose and the amount of weight loss.
This is a great project and we can’t wait to get the results. Finally, I’d like to emphasize again what Steve has talked about before and that’s the importance of the recent approval of the IV form of VARUBI product by TESARO to treat nausea and vomiting due to cancer chemotherapy.
TESARO is a terrific company at marketing and sales, and they have done a hell of a good job in garnering 50% of the market for the oral product. But as I indicated, the oral product represents only 9% – only 10% of the total product.
And the total market presently at about $1 billion may rise to as much as $1.8 billion. And if TESARO is as good at getting market share with the IV product as they have been with the oral product, we stand to make a hell a lot of money from our royalty income.
So I leave those – my favorite subjects for the day with you, and we’ll now open the session to questions. We have with us in the room here to answer questions Dr.
David Okrongly, Dr. Tony Cruz, Dr.
Jane Hsiao, and Dr. Charlie Bishop.
Operator
[Operator Instructions] Your first question comes from the line of Louise Chen with Cantor.
Louise Chen
Hi, thanks for taking my questions. I had a few here.
So I’ll just go one at a time. So one of the things that we’ve been getting incoming questions on is the services revenue this quarter.
And you had given some color that I think, that you said that it should equal the 2016 number for the full-year. I just wanted to make sure that that was – I understood that correctly and get back?
Okay, go ahead.
Phillip Frost
Yes, that’s right, Louise. So the patient expansion that we expected has not necessarily come through.
And we continue to struggle to overcome some of the pricing declines that we saw earlier this year.
Louise Chen
Okay. And then in terms of RAYALDEE, I know that you have reported revenues yet.
But is there any color that you can give outside of the increase in prescriptions regarding the revenues, if people can just get a sense of kind of where the sales are trending towards?
Adam Logal
Yes. So, Louise, we’ve got – we’ve shipped about $7 million, or just below $7 million of product into the trade.
So, I think, that’s a reasonable approximation for year-to-date sales. I think, as we continue into see how the expanded sales force continues to increase prescription trends, I think, those are the best indications.
And with 66% quarter-over-quarter increases in trends without the sales force, we would expect that that’s going to accelerate in the fourth quarter and beyond.
Louise Chen
Okay. And then on your Claros 1 PSA test, you talked about $625 million market opportunity and you gave some color behind it.
But just curious if you could provide a little bit more assumptions, or how you think about the assumptions to get to that $625 million stock?
Adam Logal
Well, it’s based upon the reimbursement price for PSA and the total number of tests that are done. Most of the PSA testing that’s done is under our intended use for the product that we’ve now submitted, which is for detection.
So it’s a large market opportunity. We’re not going to get 100% of that market opportunity, but we do address the lion share of it with the intended use.
Louise Chen
And then the last question I had was on the 4Kscore TV ad that you’re about to start. When do you think we’ll see a pickup in the sales of that product based on your start time for the ad campaign?
And then also, how much is that going to cost you and how long will that run for?
Phillip Frost
It’s going to run for three months starting November 21, and it’s primarily in a Northeast. It’s not going to cost us a great deal.
It’s certainly not in the millions. It’s in the low hundreds of thousands.
But we have no idea of what to anticipate from it. It’s sort of a test.
And we will be monitoring the results very carefully. If it works, of course, we’ll make the investment.
Louise Chen
Thank you very much.
Operator
Your next question comes from the line of Brandon Couillard with Jefferies
Christian Trigani
Good afternoon. This is Christian in for Brandon.
Thanks for the questions. First off, at Bio-Reference, can you quantify any impact hurricanes may have had during the 3Q period?
Phillip Frost
Yes. So, thanks.
It was a modest impact about a 1% overall.
Christian Trigani
Great. And staying on Bio-Reference, do you have any updated thoughts in terms of the potential impact of PAMA legislation looking towards the future?
Phillip Frost
Yes. I mean, we’ve expected for – throughout the year, about a 1% to 2% impact on overall Bio-Reference revenue from PAMA.
I think, based on the draft rates that we saw, we stay firmly in that 1% to 2% range. Obviously, as the rates get finalized, we’ll provide a better or more clarity later this year at our year-end call.
Christian Trigani
Understood. And then one last one for Adam just given cash burn, it looks like it trended slightly above $30 million in 3Q.
Do you have any other additional commentary you’d share in terms of your outlook for the balance sheet, perhaps how that figure stacked up relative to your initial view, or any other color you might add there?
Phillip Frost
Sure, yes. So Bio-Reference is going to be an important contributor to our overall cash flow and cash position.
And we certainly feel that Bio-Reference will return to its higher operating margins and cash flow from operations that we experienced last year. We made fairly significant investments in the business this year, both from a technology and process reengineering as it related to our billing operations.
So we fell short of our expectations, at least, for the first nine months on cash from operations from Bio-Reference. We think that that’s going to be an improving situation in the fourth quarter into 2018 to provide us the cash flow that we need to continue to fund our operations.
And certainly, RAYALDEE is going to play an important part of that to continue to grow from RAYALDEE to get from being an investment into the cash flow neutral to positive in the 2018 time period.
Operator
Your next question comes from the line of Kevin DeGeeter with Ladenburg.
Kevin DeGeeter
Hey, good afternoon, guys. Thanks for taking my questions.
I just want to follow-up actually on Adam’s last comments with regard to RAYALDEE potentially being a cash flow neutral to generating some cash. If you sort of think about a 70% or so in your sales force, what type of revenue range that sort of imply to get that component of the franchise to cash flow break-even?
And how do you think about the puts and takes of continuing more aggressive RAYALDEE, perhaps to gain deeper share versus getting the franchise to cash flow perhaps a bit sooner?
Adam Logal
So Kevin, the commercial organization is cost – going to cost between $8 million and $10 million per quarter. So that’s kind of the – where RAYALDEE revenue needs to reach to become break-even.
So obviously, as – we don’t expect that $8 million to $10 million per quarter to increase. So as revenue continues to catch up to that spend, we’ll start to see positive trends.
Obviously, we’re encouraged by where the scripts came out in the third quarter, as compared to the second quarter, and believe that trend will continue in the October numbers, as IMS has reported, continue to give us that confidence.
Kevin DeGeeter
Okay, great. And then just sort of building on the other portion of your observation on how to get the business positive cash flow, specifically, Bio-Reference, appreciate you’ve made significant investments in the business this year.
But I think one of the things that might be helpful for some investors is your perspective on what happened over the last, call it, three or four quarters that resulted in some deceleration of growth and why you have a high-level of confidence that you have your arms around it and with the investments that have been made, we should expect a return to more appropriate, normalized not just growth, but in cash flow?
Steven Rubin
Yes. So we have – we’ve been spending a lot of time of making sure that we’re getting the most out of each requisition that comes through the door from a cash respective, as well as right-sizing the overall organization of one going from having a higher growth rate than what we’ve seen over the last 12 or 18 months to a more stable organization, I think, we’re going to continue to focus on cash flow.
We’re going to look to make investments in technology, where it makes sense to reduce the overall footprint that Bio-Reference has to have, but continue to be able to provide the high-level service that our clients have wanted. We did make a change in our sales leadership during the third quarter to help reinvigorate the sales team.
And Vicky had been leading our GeneDx business since February of this year and we feel confident about what that – how that business has continued to grow and that she’ll be able to broaden that out and grow the clinical business on a broader basis.
Kevin DeGeeter
And then maybe just one more for me, then I’ll get back into the queue and that pertains to human growth hormones, specifically on the adult side. Steve, when do you hope to be able to meet with FDA to have discussion?
Is that a 2017 event, or perhaps in 2018? And then just as a related point, can you just remind us as to the potential or the opportunity for some of the bridging work to the pen device to sort of fit into that discussion and perhaps expand the amount of patient data that will be available for FDA to consider in a more sort of intermediate term for timeframe?
Steven Rubin
So Kevin, we’re asking for a date. So depending – the FDA will get back to us on what the meeting date will be.
It’s hard for me to tell sitting here in November if we’re going to have that meeting this year or early next year. And as we have said before, we will meet with the FDA, show them the data, including the modified analysis get an indication from them.
We expect on whether they believe that is adequate for submission of a BLA as is. If – we – one way or another, we have to do another study using the commercial product, which is the pen device.
And so the thought process would be, if it’s – if the BLA is deemed – if the data we have is submission – is sufficient to submit a BLA, we would submit it and then do a bridging study. If they require more data then we would just power the study using the pen devices in adults, such as is adequate with the existing data to submit the BLA.
So that -- we’ll get that decision following a discussion with the FDA whether we can have that meeting this year or early next, we’ll find out.
Kevin DeGeeter
All right. That’s really helpful.
Thanks, guys.
Operator
Your next question comes from line of Eric Joseph from JPMorgan.
Eric Joseph
Hey, guys, thanks for taking my questions. Just a few from me.
I guess, first, with 4Kscore. You highlighted the television DTC campaign here beginning near-term.
I’m just wondering kind of overall, whether there’s any plan to kind of expand DTC beyond TV ads, whether you’re thinking about any digital – the incorporation of any digital footprint here in that campaign?
Adam Logal
The answer is yes. So that will be part, as Phil mentioned, this is kind of the first test.
But we certainly are going to do kind of digital directed advertising using the Internet and I guess, directing based upon search criteria. So that’s certainly part of it.
And it will expand the ad campaign nationally assuming that the investment pays off as we expect it to do from the initial response of these ads. So the short answer is absolutely, we expect, expand the DTC campaign.
Eric Joseph
Got it. And on RAYALDEE, I guess with the expanding prescriber base that you’ve seen over the course of the year, do you have a sense of the level of repeat prescribers that you are currently seeing?
And what kind of feedback you are – interested to know what kind of feedback you are getting from physicians from their patients?
Adam Logal
Yes. So we’ve had about 600 repeat prescribers and the feedback has been very positive from them.
They’ve been able to see the clinical result they’re looking for. And there are – some of them are beginning to dose escalate the patients as well.
Eric Joseph
Got it, got it. And on 04 in BPH, I guess, you are starting the Phase 2 with data hopefully in the second-half of 2018.
I know you’re just getting started here. But maybe you can kind of just orient us on what would be viewed as a clinically meaningful differentiation from placebo and what the trial is adequately powered to detect?
Thanks.
Steven Rubin
Well, the – what we are doing is a 125-patient trial, it’s Phase 2. And there’s two doses that are being examined in the study, and it’s a 4.5-month enrollment period, and it’s about a 4-month treatment period.
So we do expect to have data in the second-half. The key endpoints to move forward into a Phase 3 is going to be the reduction in prostate volume.
And similar to the products on the market, we would expect somewhere between a 14% and 20% prostate size decrease to be competitive and more than that, it’s obviously to be a better product. The secondly is the PSA level.
They’re expected to decrease somewhere between 30% to 40%. And at 30% decrease would be sufficient also to move forward.
We’re looking at other endpoints as well, which have to do with the anabolic effects, such as the increase in muscle mass, increase in function, decrease in lipids, for example, decrease in fat mass. Those are key endpoints for that patient population, and we’re also looking at some quality of life endpoints as well.
So we’re trying to get a broad array of second endpoints – secondary endpoints that we can then include also in the Phase 3 trial. We do think that we’ll enroll quickly.
Most of the sites that we have onboard believe that they have a long line of patients, because there’s a need for this area. And so I don’t think, we’ll have a problem to have data by the end of the year.
Phillip Frost
Joseph, let me give you a little perspective on a broad – a little more than we’ve discussed before. One of the reasons I like it so much and of course, there are no guarantees.
There’s a lot of work to be done to bring this product to market and a lot of time to be spent also. But one of the things I really like about it is that because of all the – of its unique features in addition to helping with the symptoms of the BPH, it will be a very easy product to market.
First of all, we start with the urologists, it’s a small group and we won’t need such as a big sales force, and they will be – I anticipate a huge demand for it. I would guess that every man above a certain age will be interested in taking this product, at least every man I’ve spoken to about it said where, when can I get it and or can I participate in the trial at least.
So that, I’ll repeat, no guarantees. But if this thing works, all bets are off, and we’re going to be very pleased.
Operator
Your next question comes from the line of I-Eh Jen from Laidlaw & Company.
I-Eh Jen
Good afternoon, and thanks for taking the questions. I have a few short ones.
The first one is that you estimate that the revenue from the service this year’s equivalent to last year’s, so my backup envelope estimate is roughly maybe $270 million for the quarter, which seems to be the highest amount of all four quarters of this year’s. Just curious what have you – what give you guys the confidence that that is something that can be achieved?
Adam Logal
Yes. So, I think, we’re – when we look at our trailing 12 months numbers in compared to last year, I think, we’re in line and feel like the demand of the business is going to be there for the fourth quarter.
Certainly, it’s not going to be something that’s easily achievable, but something we believe we can.
I-Eh Jen
Okay, great. That’s helpful.
And then for the Claros PSA test, you guys mentioned there’s two sort of studies need to be done. And could you give us a little bit timeline in terms of when that may be completed and then when you guys will be able to get possibly sort of a decision by the FDA time?
David Okrongly
Yes. I-Eh, this is Dave.
We did complete those studies already. So they’re in the PMA that was submitted to the FDA on Monday.
And we expect, in about six months, we’re going to have approval for our first essay on the Claros and the total PSA.
I-Eh Jen
Okay, great. And then last question is that the for RAYALDEE, I understand that the trend is very positive right now.
Just a little bit thoughts in terms of – what do you guys see sort of hurdles are to a more rapid ramp up? Would that be just not be sufficient headcounts there, or some – any other push backs that you need time or for other sort of methods to overcome, in fact?
Adam Logal
Yes. So I mean, I think the reach and frequency are probably where the two things will be the launch down.
And as we’ve talked about in the past, those were things that when we were lining up insurance coverage, we understood we would fall short on. So with our expanded sales force, they’re going to be able to reach a higher number of prescribers and see those prescribers more frequently.
So those are the main hurdles. The continuing additional market awareness of the program and things like that will obviously help.
Tom, I don’t know if you have anything further.
Thomas Nusbickel
I think we’re, as Adam said, addressing the major hurdles in regards to reach frequency, increasing awareness and then also improving the access position and the physicians comfort with being able to get the drug and for patients that have low cap copays. So education and reach and frequency.
I-Eh Jen
Okay, great. That’s very helpful and thanks a lot.
Operator
Your next question comes from the line of Mike Petusky with Barrington Research.
Mike Petusky
Hi, guys. There – I had to be off the call briefly, I may have missed this.
Did you guys give a percentage in terms of payer coverage for RAYALDEE at this point, I know you’ve given that in the past?
Adam Logal
Hey, Mike, this is Adam. So we haven’t – we didn’t give any updated number.
The number is consistent with before, it’s still in the 68% range. We don’t see a meaningful change to that number until January 1.
So we have secured some additional formulary access that won’t be effective until January 1, so the number on that side hasn’t changed.
Mike Petusky
All right. And then just kind of saying with RAYALDEE, for the $6.7 million, do you expect to recognize all of that in the fourth quarter, or some of them in the fourth quarter?
Adam Logal
It will be some portion fairly. It will be – it should be fairly close to that number, but some portion of it.
Mike Petusky
Okay, all right. And then I guess, jumping over to Bio-Reference, did you guys disclose the segment margins in that business in the quarter?
Adam Logal
Yes. We would see the margins in the segment [indiscernible].
Mike Petusky
If you have that handy, I don’t know, I’ve done like three calls here.
Adam Logal
Sorry, so it is negative this quarter, Mike.
Mike Petusky
Okay. All right.
And then I guess, kind of following up on the previous question, so in 2016, your weakest Bio-Reference quarter by quite a bit was the fourth quarter. And it just seems like I guess, what I’m asking is, when you’re saying, the reps will approximate 2016, I mean, would being short of by $30 million approximating your view on $1 billion business, or essentially, it just seems like a real stretch the idea that you’re going to do $265 million or $270 million in that business when last year’s fourth quarter [Multiple Speakers]
Adam Logal
Yes. So for the fourth quarter, yes.
So the fourth quarter of last year was a particularly weak quarter as it related to reimbursement at GeneDx. We think it will be more in line with the earlier quarters of this year.
Mike Petusky
Okay. So you genuinely think, hey, we’re going to roughly match revenue from 2016 not like missed by $20 million or $30 million?
Adam Logal
That’s right.
Mike Petusky
Okay. All right.
And then just a last question on the 4KScore direct-to-consumer. Have you guys brought in anybody that maybe had a connection to Cologuard DTC campaign or anybody with kind of a track record to sort of help you guys in terms of how you frame up this type of issue for DTC campaign?
Steven Rubin
We had actually. One of our marketing people we recently hired he used to work for years with exact signs as a matter of fact, so…
Mike Petusky
Okay, all right. Okay, very good.
Thanks, guys. I appreciate it.
Phillip Frost
Sure.
Operator
You have a follow-up from Brandon Couillard with Jefferies.
Brandon Couillard
Thanks. It’s Brandon.
Adam, curious if you could share with us the actual 4KScore volumes in the third quarter.
Adam Logal
Yes, sure.
Brandon Couillard
And the size of the user base and maybe between urology and primary care?
Adam Logal
Sure. So we did 19,000 tests during the quarter.
Don’t have the user base. Steve, I don’t know, if you’ve got the user base.
Steven Rubin
I don’t, not here. We can get that for you as we don’t have it here with us right now.
Adam Logal
But we have seen a continued growth principally in the urology market on the score.
Brandon Couillard
All right. Thank you.
Adam Logal
Sure.
Operator
There are no further questions at this time. Dr.
Frost, please proceed with your presentation or any closing remarks.
Phillip Frost
No, I just want to thank, everyone, for participating.
Adam Logal
Thank you.
Operator
Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your lines.