Andrew Obenshain: So the first tranche of $50 million, second tranche of $25 million, which is — it’s keyed off of either the 35 or the 55 starts by the end of the year. And then there’s a third tranche to ’25 that is fed off of a different metric which is gross profit.
Chris Krawtschuk: Yes. And just to be clear, the first tranche was the 75, the second tranche is the 25. 25 is attributable to the LYFGENIA patient starts, as I said, 35 by September, 55 by December 31. And then the third tranche is associated with gross profit. And then, of course, the fourth tranche is the 50 that is at the discretion of Hercules.
Jeffrey Hung: Yes, thank you. Yeah, you guys — you said that you wouldn’t comment on the number of patient starts for the $30 million gross profit. Yeah, okay, thank you.
Andrew Obenshain: That’s correct.
Chris Krawtschuk: That’s correct.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.
Salveen Richter: Good morning. Thanks for taking my questions. Just in line with the trajectory that you’re seeing right now and the understanding of the various onboarding dynamics, reimbursement dynamics, how are you thinking about the peak opportunity here for the drug? And just maybe an update on for ex-U.S. commercialization. Thank you.
Andrew Obenshain: Yes. So Salveen, it was little hard to hear, but I think you asked what the peak opportunity is for the drug?
Salveen Richter: Yes. And ex U.S. commercialization outlook.
Andrew Obenshain: Okay, got it. So let me take that. So we do see this as a multibillion-dollar opportunity at peak in the U.S. alone. Ex-U.S., we do think there’s a very attractive opportunity there as well. Right now, we, as a company, are focused exclusively on the U.S. If we go ex-U.S., we most certainly do that with a partner. We are watching very closely the reimbursement dynamics of gene therapy in Europe as well. That’s kind of a key dynamic that will determine the opportunity there.
Salveen Richter: Thank you.
Operator: Thank you. One moment for our next question please. Our next question comes from the line of Sami Corwin with William Blair. Your line is now open.
Sami Corwin: Hi, there. Thanks for taking my questions. I was curious if you could speak a little more as to the cost of goods in your gross margins and how you expect them to change as our launches across the portfolio continue. And then can you provide any granularity in terms of your assumptions for the LYFGENIA launch this year and the percentage of patients you expect to be covered or covered by Medicaid versus private insurers?
Andrew Obenshain: Yes, sure. Good morning. So let me have Tom take the second part first, and then I’ll go to Chris with the percentage of LYFGENIA in Medicaid.
Tom Klima : Yes. Just to give you the stats again, about 50% of patients or people living with sickle cell disease are covered by Medicaid, about 45% are covered by commercial insurance and then a small portion of Medicare. It’s hard to predict who the early patients will be, but we would expect over time that the payer mix will play out like we’ve seen historically.
Chris Krawtschuk: And then just covering on the cost of sales and maybe I’ll answer it a slightly different way, which I think is what you’re intending, is the gross margin. So the gross margin for the company will improve as we scale, and we’ve said that we would get to a 70% gross margin. And as we scale the company, not only with filling the capacity with infusions, and then continuing to kind of scale the capacity in a gated fashion over time as needed. The gross margin will continue to improve to achieve that 70% that we discussed.
Sami Corwin: Great, thanks.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Yanan Zhu [ph] with Wells Fargo. Your line is now open.
Unidentified Analyst: Hi, thanks for taking our questions. So just curious, when you say multiple patients enrolled for LYFGENIA, does enrollment imply approval of insurance. And the time from enrollment to cell collection is the main gaiting factor those washout period and also the pre-transfusions? If not what might be the gaiting factor you see. Also as a quick follow-up, if you can talk about the 19% gross to net to date, is that different significantly between ZYNTEGLO and SKYSONA, and any expectation for the gross to net for LYFGENIA to be very different from that 19% number? Thanks.
Andrew Obenshain: Thanks for the question. Tom, why don’t you address the enrollments, and then we’ll have Chris address the gross to net question.
Tom Klima : Yes. Again, we’re very excited about the multiple enrollments across multiple QTCs. I think it’s an indicator of strong demand. The road to yes, [ph] as we call it, is multifaceted, and the two big components there are, obviously, as you mentioned, making sure that they’re covered by their insurance and that’s taking approximately what it did with ZYNTEGLO. We’re seeing, on average, about two weeks. And the second part of being ready is being medically ready, and this is a little bit different with LYFGENIA than it was for ZYNTEGLO. With LYFGENIA there’s a washout period of the other medications. For example, hydroxyurea has to be discontinued for at least two months before they start therapy, and they’re also supposed to go for transfusions, at least two transfusions one month apart.
So once they’re enrolled and once they’re going through the process, if they’re not already doing transfusions, I mean if they’re already doing transfusions and they’re not on one of the medications that needs to be discontinued, they can go a lot faster. So I’m a little hesitant to give you an average right now because it’s just going to depend on the patients. And we provided enrollments today. Enrollment is an early indicator of patient demand the thing to watch going forward is the number of patient starts. That continues to be the value-creating moment for the company.
Andrew Obenshain: And then, Chris, do you want to comment on gross to net?
Chris Krawtschuk: So the 19% that we discussed between the combined two products, just characteristically, the difference between ZYNTEGLO and SKYSONA, ZYNTEGLO has an outcomes-based agreement, SKYSONA does not. And then what to expect on a go-forward basis as LYFGENIA comes into the fray is a higher increased Medicaid population associated with LYFGENIA. And that’s where you saw that we provided guidance to 20% to 25% associated with the combined gross to net population of all three products.
Unidentified Analyst: Got it. Thanks.
Operator: Thank you. One moment for our next question please. Our next question comes from the line of Luca Issi with RBC Capital Markets. Your line is now open.
Unidentified Analyst: This is Renon [ph] for Luca Issi. Thanks for taking my questions. I just wanted to ask, during the last [indiscernible] call after not receiving the PRV, you mentioned that you’ll engage in discussion with the agency and attempt to achieve a potentially positive outcome like ultimately, meaning receiving the PRV. Just wondering if there was any update on that.
Andrew Obenshain: Yes. Thanks for the question. We have submitted a request for reconsideration and we are in discussions with the agency. We’re not going to elaborate on ongoing discussions with the agency now, but we believe we have a clear and compelling rationale for why LYFGENIA to be awarded a PRV. We’ll provide an update when we conclude our discussions.
Unidentified Analyst: Perfect. Thanks for taking my questions.
Operator: Thank you. This will now conclude today’s question-and-answer session. I’ll now turn the call back over to Andrew Obenshain for closing remarks.
Andrew Obenshain: Great. Thank you, everyone for joining our call this morning and for your questions. Our management team is available for a follow-up call today, and please reach out to Courtney if you would like to connect. Thank you very much.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
