Tom Reilly: Yes. Great. This is Tom. Thanks for the question. Related to the operating expense and the $40 million, which we’re on track to deliver and our expectations for expenses. As mentioned before, we reduced expenses from the second half to the first half of ’23 by $21 million. Our cost basis is approximately $50 million per quarter. Our expectation is to stay within that range, depending on pricing reimbursement decisions. We will invest in those opportunities, but we’ll find other ways to reduce costs. So our overall expectation is to stay within that $50 million operating expense basis. Related to your question on gross margin, very good question. Thanks for picking it up. What you’ve seen versus Q3 is a deterioration of gross margin, but that’s primarily due to launch supply that we provided for our partners, in particular in China.
So as the China market is moving forward, we’re providing products for revenue there. It’s about a 2.5 to 3-point reduction in margin impact this quarter versus the previous quarter. And then the question on how do you expect for margins moving forward. I think it all depends on the uptake in China and how much product side we’ll be providing. But we’ll give updates on the progress of the China market.
Unidentified Analyst: Thank you very much.
Operator: Your next question is from Paul Choi with Goldman Sachs.
Unidentified Analyst: Hi, everyone. Good morning. This is Khalil calling in for Paul. Thank you so much for taking our question. I guess my question is about the exclusive contracts that you’ve mentioned in the past. As those are renegotiated, have you seen any additional pushback as more generics enter the market? And have you or will you set a threshold for those sort of deterioration on those at which point the company would pivot to your own generic? Thank you.
Patrick Holt: Khalil, thanks very much for the question. Look, obviously, we track those contracts very carefully. We do see, I would say, on an annual basis, to renegotiate our exclusive contract, we do see annual impact to those pricings in the sort of low double-digit range typically. And that’s been something that we are seeing consistently. We don’t see necessarily significant changes to that, but that’s the sort of range that we see. What’s really pleasing is we have had a strong end to the year and a strong start to the year in terms of how we’re landing our negotiations. So the net-net of that means that we are participating in greater than 50% of the IP market volume. That has enabled us with our great managed care and trade and medical capabilities to pull through as we close 2023, a 57% market share in retained market leadership.
To your second part of your question, of course, we track the economics and the overall profitability incredibly closely. We have specific scenarios in our mind as to when we think those are attractive and when they start to become more marginal, and we have plans in place to react based on how those dynamics change, should they change. But as it stands right now, our focus is to extend our branded life cycle as long as we can. Our organization, our US team, from my perspective, has delivered a highly atypical performance for over three years since LOA, which provides incredibly important profits for the business, particularly for our growth in Europe. So we couldn’t be happier in terms of how we finished the year and how we started the year.
But as you well know, it’s highly dynamic. We monitor it very closely.
Unidentified Analyst: Got it. Thank you so much.
Operator: We have reached the end of the question-and-answer session. And I will now turn the call over to Patrick for closing remarks.
Patrick Holt: Well, thank you all for your attention, and thanks for all the Q&A. We really appreciate the interest and we look forward to having additional conversations on these important results in the coming days ahead. So thank you again for your time and wish you a great day ahead. Thank you.
Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.
