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Aclaris Therapeutics (NASDAQ: ACRS)

Q4 2017 Earnings Conference Call

Mar. 12, 2018 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2017 Aclaris Therapeutics Inc. Earnings Conference Call. [Operator's Instructions] I would now like to turn the call over to Kamil Jackson, chief legal officer. Please go ahead.

Kamil Ali-Jackson -- Chief Legal Officer

Thank you. I am Kamil Ali-Jackson, chief legal officer of Aclaris. Please note that earlier today, Aclaris issued its press release announcing fourth-quarter and year-ended 2017 financial results. For those of you who have not seen it, you will find the release posted in the Investors section of our website at www.aclaristx.com.

Joining me for the call today are Dr. Neal Walker, president and chief executive officer; Chris Powala, our chief regulatory and development officer; Dr. Stuart Shanler, our chief scientific officer; Frank Ruffo, our chief financial officer; and Brett Fair, our chief commercial officer. Before we begin our prepared remarks, I would like to remind you that various statements we make during this call about the company's future results of operations and financial position, business strategy, and plans and objectives for Aclaris' future operations are considered forward-looking statements within the meaning of the federal securities laws.

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Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions, and uncertainties that could cause actual results to differ materially from those reflected in such statements. These risks are described in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of Aclaris' actual annual report on Form 10-K for year ended December 31, 2017, to be filed with the SEC later today and other filings Aclaris makes with the SEC from time to time. These documents are available on the Financial Information section of the Investors page of Aclaris' website at www.aclaristx.com. Additional factors may also be set forth in those sections of our annual report on Form 10-K for the year ended December 31, 2017, to be filed with the SEC later today.

We encourage all investors to read these reports and our other SEC filings. All the information we provide on this conference call is provided as of today, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events, or otherwise. Please be advised that today's call is being recorded and webcast. A link to the webcast is posted in the Investors section of our website.

I'll now turn the call over to Dr. Neal Walker, president and CEO of Aclaris. Neal?

Neal Walker -- President and Chief Executive Officer

Thank you, Kamil. Hello, everyone, and thank you all for joining us this morning. I will start with a brief update on our clinical development programs and other business highlights. Then I will hand it off to Brett Fair, our chief commercial officer, who will address our ESKATA pre-commercial planning activities.

Next, Stuart Shanler, our chief scientific officer, will review our clinical development plans and timelines, after which Frank Ruffo, our CFO, will review our financial results and 2018 guidance. Following our prepared remarks, we'll open up the line to take your questions. Chris Powala, our chief regulatory and development officer, will also be available during the question-and-answer portion of the call. Before we begin talking about the continued progress we've made across the company, I'd like to first acknowledge our talented and committed employees, whose efforts drive our ability to steadily advance our programs.

During 2017, we welcomed many new team members to the company. We now have over 160 employees who are working on everything from our earliest discovery and drug development efforts to the commercialization of ESKATA. It's an honor to work alongside these talented and committed folks every day. We have ambitious goals.

And while I'm the one who gets to talk with you about our accomplishments, none of what we do would be possible without the truly unwavering dedication of our entire team as we continue to develop innovative new therapies for patients. Now I'll turn to an overview of some of our recent key accomplishments and highlight our upcoming milestones in 2018 and beyond. In December, the FDA approved ESKATA for the treatment of raised seborrheic keratoses or SKs. ESKATA is the first and only FDA-approved topical, noninvasive treatment for raised seborrheic keratoses.

We have generated a high level of excitement around ESKATA in the dermatology community and look forward to our official launch in the second quarter of 2018. Brett Fair will cover this in more detail later in the call. In January, we announced positive top-line results from two Phase II clinical trials of A-101 45% topical solution for the treatment of common warts. And we look forward to reporting three-month follow-up data imminently.

We plan to advance the twice-weekly regiment into pivotal Phase III trials in the second half of 2018. Over the last year, we also advanced our Janus kinase or JAK inhibitor programs in alopecia areata, androgenetic alopecia, and vitiligo. We have multiple trials ongoing and expect readout starting in the second quarter through mid-2019. Stu will review our development programs and timeline in more detail later in the call during the clinical section.

With regard to our early-stage immunology pipeline, we continue to advance development of our selective MK2 inhibitor, our portfolio of ITK inhibitors, and our portfolio of JAK inhibitors. Our management team based in St. Louis, formerly Confluence, has continued to lead its world-class team of scientists and researchers in the development of small-molecule kinase inhibitors. The operation continues to grow on both the drug discovery preclinical side and also the service side of the business.

We are rapidly advancing our lead assets towards the clinic and remain excited about the potential of these assets in a variety of indications and therapeutic areas. I will now turn it over to Brett Fair, our chief commercial officer, who will provide an update on our commercial activities. Brett?

Brett Fair -- Chief Commercial Officer

Thank you, Neal. 2017 was a very productive year for our commercial team. We continued to invest in market research, gaining additional insights from over 2,500 patients and 1,400 HCPs to date. These critical insights have enabled us to finalize the pricing position for ESKATA as well as to refine our consumer and HCP campaigns, laying the groundwork for successful launch in 2018.

Our commercial organization expanded to 70 people as we have established our sales, trade, trainings, and sales-operations teams. We successfully on-boarded six regional sales managers and 50 sales specialists, bringing deep dermatology and buy-and-bill experience to our organization. Over 90% of our field team has five or more years of dermatology experience and over 70% of the field team has directly relevant buy-and-bill experience, all of them outperformers within the previous organizations. This positions Aclaris well for successful launch.

In 2017, we supported 30 key dermatology conferences, further strengthening our presence in the space. We generated a high level of corporate awareness, positioning Aclaris as a leading innovative biopharmaceutical company in dermatology. We also generated a high level of awareness regarding patient willingness to pay for SK removal, particularly for lesions located in cosmetically sensitive areas, such as the face and neck. We had a strong presence at the recent 2018 American Academy of Dermatology Annual Conference, the largest dermatology meeting of the year, generating a high level of ESKATA awareness, account leads, and preorders.

Our ESKATA launch reception was well-attended, with over 200 HCPs attending. Our ESKATA branding activities were highly visible and well-received, translating into over 300 account leads. We were very pleased with the response we received regarding ESKATA at these meetings. Dermatologists are excited about the product and eager to incorporate it into their practices.

Our professional-relations team has successfully built an ESKATA speaker bureau comprised of many leading national and regional thought leaders in dermatology. To date, we have trained over 60 dermatology speakers. And we have a nurse practitioner/physician assistant speaker bureau training scheduled in the month of April. Peer-to-peer speaker programs remain an important component of our overall launch strategy.

And considering the depth of our speaker bureau, we are well-positioned to successfully launch ESKATA and drive adoption in the offices. Ahead of our official ESKATA launch in the second quarter this year, our sales team is currently implementing key market-readiness activities, including establishing ESKATA centers of excellence, scheduling in-service programs, implementing the ESKATA Early Experience Initiative, and scheduling ESKATA peer-to-peer speaker programs. We believe this approach builds a solid foundation for a successful launch. In summary, we are very pleased with the launch preparation activities and we are very pleased with the high level of excitement generated around ESKATA.

We look forward to the launch and another successful year for our team. I will now turn the call over to Dr. Stuart Shanler, our chief scientific officer, who will provide an update on our clinical development programs and pipelines. Stu?

Stuart D. Shanler -- Chief Scientific Officer

Thanks, Brett. Firstly, regarding our clinical trials of A-101 45% topical solution for the treatment of common warts. In January 2018, we reported positive results from two Phase II clinical trials, that's WART-202 and WART-203, of A-101 45% topical solution, an investigational new drug for the treatment of common warts. A-101 45% met all primary, secondary, and exploratory endpoints of each trial analyzed to date, achieving clinically and statistically significant clearance of common warts.

We anticipate completion of the post-treatment to three-month open-label follow-up portion of the WART-203 trial in the coming weeks. We have scheduled an end-of-Phase II meeting with the FDA for mid-2018. And we plan to initiate two Phase III clinical trials in the second half of 2018. Turning now to our topical JAK inhibitor program.

Our ongoing clinical trials include AA-202 topical, which is a Phase II clinical trial of ATI-502, formerly ATI-50002, for the topical treatment of alopecia areata. This trial is to evaluate the pharmacokinetics, pharmacodynamics, and safety of ATI-502 compared with placebo in 12 patients with AA. It is a randomized, double-blind, placebo-controlled trial and is being conducted at two investigational centers within the United States. And top-line data are expected in the first half of 2018.

After completing the 28-day portion of that trial, patients will then enter a six-month open-label extension, during which all patients will receive drug. Our AUATB-201 trial is a Phase II open-label clinical trial of ATI-502 for the topical treatment of AA that will evaluate the effect of ATI-502 on the regrowth of eyebrows in up to 24 patients with alopecia areata. This trial is being conducted at two investigational centers in Sydney and Melbourne, Australia. And top-line qualitative data are expected in mid-2018.

Our AA-201 topical trial is a Phase II trial of ATI-502 for the topical treatment of AA that will evaluate the effect of two concentrations of ATI-502 on the regrowth of hair on the scalp in a randomized, double-blinded, parallel-group, vehicle-controlled, dose-response trial in up to 120 patients with AA. This trial is being conducted at 25 investigational centers within the United States. And data are expected by year-end 2018. Our VITI-201 topical trial, that's V-I-T-I-201 topical, is an ongoing Phase II open-label clinical trial of ATI-502 for the topical treatment of facial vitiligo.

This trial will evaluate the effect of ATI-502 on the repigmentation of facial skin in up to 24 patients with vitiligo. And data are expected in the first half of 2019. Our AGA-201 topical trial is a planned Phase II open-label clinical trial of ATI-502 for the topical treatment of androgenetic alopecia, that's A-G-A, also known as male/female pattern hair loss. And this trial is anticipated to begin in the first half of this year.

This trial will evaluate the effect of ATI-502 on the regrowth of hair in up to 24 patients with AGA. And data are expected in the first half of 2019. Regarding our oral JAK inhibitor program, AUAT-201 oral is a Phase II randomized, double-blinded, parallel-group, in vivo-controlled, dose-response trial of ATI-501, that's formerly ATI-50001, an oral JAK inhibitor for the treatment of AA. And this is anticipated to begin in the first half of 2018.

Data are expected in mid-2019. Turning to our earlier-stage immunology assets. We are on track to file an investigational new drug application or IND for ATI-450, our oral MK2 inhibitor, in mid-2019. We also expect to file INDs for both our soft JAK and JAK, ITK inhibitor programs by year-end 2019.

As you can see, we have multiple programs and trials both ongoing and planned. And we look forward to providing updates as we continue to advance our pipeline. With that, I'll turn the call over to Frank Ruffo, our CFO, who will provide an overview of the financial results for the year. Frank?

Frank Ruffo -- Chief Financial Officer and Treasurer

Thanks, Stu. Good morning. As I walk through our fiscal 2017 financial results and 2018 financial-guidance information, please reference financial tables that can be found in today's press release. As of December 31, 2017, we have roughly $209 million in cash, cash-equivalents, and marketable securities, which we believe is sufficient to fund our current operating activities into the second half of 2019 without giving effect [ph] to potential new business development transactions or financing activities.

For the full year of 2017, our total operating expenses were $72.9 million, compared to $48.6 million for the full year of 2016. Our operating net cash burn for 2017 was $54.7 million, versus $34.6 million for the prior year. On a quarter-over-quarter basis, our total operating expenses for the fourth quarter of 2017 were $25.7 million, compared to $19 million in the third quarter of 2017 and $11.6 million for the fourth quarter of 2016. Our operating cash burn for the most recent quarter was $17.9 million.

Net loss was $22.9 million for the fourth quarter of 2017, compared to $11.5 million for the same quarter in 2016. Our net loss was $68.5 million for the full year of 2017, compared to $48.1 million for 2016. R&D expenses increased by $6.2 million in the fourth quarter of 2017 compared to the prior year. This was primarily the result of a $2.3 million increase in expenses related to our common wart trials; a $2 million increase in preclinical and clinical development expenses related to our JAK inhibitor portfolio; and a $1.5 million increase in personnel-related expenses, including stock-based compensation due to increased headcount.

We also incurred a $1.5 million increase in medical affair expenses and other costs, including expenses related to our early-stage drug discovery programs. These increases in 2017 were offset by a $1.3 million decrease in expenses due to the completion of our Phase III clinical trials and NDA cost for ESKATA that were incurred in the fourth quarter of 2016. General and administrative expenses for the fourth quarter of 2017 increased $7.8 million compared to the same period in 2016. The quarter-over-quarter increase was primarily attributable to a $3.3 million increase due to precommercial activities for the launch of ESKATA and a quarter-over-quarter increase of $2.9 million in personnel-related expenses, including stock-based comp, due to increased commercial and administrative headcount.

Now turning to our 2018 financial outlook. We anticipate 2018 R&D expenses to be in the range of $67 million to $75 million, or $58 million to $66 million when excluding noncash estimated stock-based compensation expense. We expect that our 2018 SG&A expenses to be in the range of $80 million to $86 million, or $66 million to $72 million when excluding noncash estimated stock-based compensation expense. As of December 31, 2017, we had roughly 30.8 million shares of common stock outstanding.

And assuming no material issuances of equity, we would expect our full-year 2018 weighted average share count to be about 31 million. With that, I'll turn the call back over to Neal for some closing remarks.

Neal Walker -- President and Chief Executive Officer

Thank you, Frank. 2017 has been a pivotal year for Aclaris as we continue to build out a highly experienced team and transition into a commercial-stage biopharmaceutical company. We have a deep clinical-stage pipeline, a dermatology and immunology portfolio focused on small-molecule therapeutics, and a robust discovery engine. In 2018, we look forward to building on this foundation with the launch of ESKATA as a cash-pay procedure performed in physician offices and also delivering on our JAK inhibitor and immunology pipeline.

All right. Ella, can you please poll for questions?

Questions and Answers:

Operator

[Operator's Instructions] And our first question is from Louise Chen with Cantor. The line is now open.

Louise Chen -- Cantor Fitzgerald -- Managing Director

Hi, thanks for taking my questions. So first question I had was on ESKATA. Do you have any guidance in revenues for 2018? If not, how should we think about it? And how and when will you recognize revenues for this product? Also with respect to your wart product, just curious how competitive a twice-a-week versus once-a-week product is? What do you compare this to on the OTC market? How often are patients treated there? And how long are they treated for? And then last question is just on some of your pipeline here on vitiligo and ATI-450, if you could talk about the market opportunity and who you'll compete with in these markets.

Neal Walker -- President and Chief Executive Officer

Sure. Thanks, Louise. This is Neal. So on the guidance front, we aren't providing revenue guidance, but we are -- we will be providing key performance indicators that Brett can walk through.

And I'll hand it off to Brett for that right now.

Brett Fair -- Chief Commercial Officer

Great. Thanks, Neal. Louise, how are you? So in terms of the key performance indicators for this year, this year really is about getting accounts on board and getting the accounts trained, making sure that we clinically integrate the product and getting them set up so that it's also integrated from a business perspective. Once we lay the foundation with those accounts, in effect, they're wired for sound and we can turn up the volume there.

And that's part of the reason why we're not providing guidance for '18. We're being pretty thoughtful and disciplined about setting up each of those accounts. So account adoption will be important. Physicians trained will be important this year for us.

I think speaker programs, the number of programs we're running will be important.

Frank Ruffo -- Chief Financial Officer and Treasurer

And Louise, this is Frank. On recognizing revenue, according to the most recent revenue pronouncements out there, we'll be recognizing revenues when we ship product into our distributor for ESKATA. So those will be recognized right out front.

Neal Walker -- President and Chief Executive Officer

So Louise, it's Neal. Back to your development-stage question, so on the wart products, so the two times a week versus once a week, we think, actually enhances compliance. It's just a little bit easier for patients to remember rather than just once a week. And as it relates to the OTC market, there really isn't a good comparison there.

The fact is that OTC products are usually multiple times a day usage over many months. And so an Rx product with a profile where you have twice a week administration over eight weeks, which is essentially 16 applications, and to have the clearance rates that we demonstrated, it's not even close to what you could achieve with OTC therapeutics. And as a reminder, when we look at the wart market in general, most people are targeting the genital wart space. And that only represents 17% of the entire wart market.

And the reason people have gone there historically is because it's easier to treat those warts than common warts. Common warts have traditionally been more difficult to treat. And this would be the first approved product for common warts. So, again, kind of consistent with our philosophy of going after white space and particularly with all the reimbursement headwinds, we want to go to an area where it's very difficult to step-edit or prior-auth you out of the script, which is obviously happening a lot.

And with the profile like this, where we can drive 16 treatments over basically two months, it's a really, really strong profile. And when you see the three-month data, the follow-up data that we'll be reporting within the next week or so, it will be an even better profile. So we're excited about that. And I think it's something that we'll be talking a lot more about.

On the vitiligo front -- market opportunity, this is something that it's pretty interesting. On a prevalence basis, it's 1% to 2% of global prevalence, which is on par with psoriasis. This, again, is another area where there's nothing approved for the treatment of vitiligo. And it's something we're really excited about.

There are a couple other companies out there looking at topicals. And I think as people recognize the value in vitiligo, there will be more competitors. We feel really well-positioned here. We have a compound that targets JAK 1/3 with 500 [Inaudible] more selectivity than JAK2 and really able to drive -- hit the mechanism right on the head with that asset.

On the ATI-450, that's, as you know, an MK2 inhibitor. And that, just as a reminder, works downstream of the p38 MAP kinase, which work at the top of the funnel. And the guys at Confluence basically developed this to overcome two major limitations with the p38 MAP kinase. And that was, one, tachyphylaxis.

In some indications, there was only a transient effect in terms of efficacy. And then also there's some toxicity issues. But with the MK2 inhibitor working further downstream, we're able to overcome those limitations. And because it's an anti-TNF and anti-IL-1 beta, we actually have a host of indications that we can target both on the derm and non-derm side.

We're looking at things like psoriasis, psoriatic arthritis, hidradenitis, pyoderma gangrenosum, things like that. And then certainly, we'll look at adjacencies in non-derm indications as well.

Louise Chen -- Cantor Fitzgerald -- Managing Director

OK. Thank you.

Operator

And our next question is from Adnan Butt with Guggenheim Securities. Your line is now open.

Adnan Butt -- Guggenheim Securities -- Managing Director

Hey, good morning, and thanks for taking the question. Let me ask first on the alopecia studies. What should be the expectations? For instance, for the PK study that's going on, would you expect any sign of activity at this time or not? Or should we wait for the eyebrow study to kind of gauge activity?

Neal Walker -- President and Chief Executive Officer

Yes, thanks, Adnan. This is Neal. I'll handle that question. So I think the expectation is primarily looking at the biomarkers.

That was the original design of the study. It is a 28-day study. We wouldn't expect necessarily clinically meaningful hair growth. But we would certainly expect to see early signs.

You could see kind of little stubbly sort of hair growth. And that would be very exciting, particularly over that short of a treatment period. So I would look for that when we report out that data. And we also will be -- we slightly altered that design.

Originally, we had just gone with a 28-day study to look at biomarkers. But we decided to actually extend that into a six-month open-label extension since we'll have 12 patients in there. And that will involve taking the eight patients on drug and the four patients on vehicle and rolling them into that open-label extension.

Adnan Butt -- Guggenheim Securities -- Managing Director

So Neal, for the eyebrow study, the expectation there is for growth, right? That's what you're clarifying.

Neal Walker -- President and Chief Executive Officer

Exactly. So the eyebrow is a little bit different. That was -- that's designed as a six-month study. And we are looking for qualitative -- basically qualitative eyebrow growth.

We want to see -- look at pictures from baseline and then compare them to the three- and six-month type time points and looking at full clinically meaningful hair growth.

Adnan Butt -- Guggenheim Securities -- Managing Director

And just one on the earlier-stage pipeline, you mentioned 450, the MK2 inhibitor. You clarified some of its attributes. I wanted to ask where exactly in preclinical testing it is. And then secondly, the markets are fairly well-served with existing drugs.

How do you expect this 450 to differentiate itself to make its way into the markets that you mentioned at a high level?

Neal Walker -- President and Chief Executive Officer

Yes, for -- in terms of the stage, we're going through the GMP manufacturing process at the moment. And we're on track to get into an IND in the first part of 2019. In terms of differentiating, the fact that you have an oral -- potentially an oral anti-TNF or anti-IL-1 beta would be a great differentiator versus the injectable products that are currently on the market. So I think it would stack up very nicely just on mode of administration.

And then we'll see when we get into clinical studies. We think it's going to have a robust effect, but that remains to be seen. We've got to prove that out in the clinic. But I think we'll be able to differentiate both on safety and efficacy there.

Adnan Butt -- Guggenheim Securities -- Managing Director

OK. And just if I can sneak one in on ESKATA, I think I heard it mentioned that you've seen some preorders already. I had expected more of a sampling program earlier in the launch. So where in the year should we set expectations to see some revenues from that drug?

Neal Walker -- President and Chief Executive Officer

So we're launching in the second quarter. And the 300 preorders have come from 300 accounts. And I think that's an important distinction. Because when we look at it in an account, it's not just a single-doc office.

As I've mentioned in previous calls, one of the macro factors in dermatology is that you're seeing, kind of these roll-up phenomenon in dermatology, where a lot of the offices are combining. So what we're excited about is these accounts represent in a lot of cases multiple office -- sometimes multiple offices, sometimes upwards of 100 within one account. So we'll be obviously providing key performance indicators as we kind of sequence out of the second quarter and report the second-quarter revenues in August.

Adnan Butt -- Guggenheim Securities -- Managing Director

Thanks.

Operator

Our next question is from Donald Ellis with JMP Securities. Your line is now open.

Donald Ellis -- JMP Securities -- Managing Director

Thank you, and good morning. Could you give us some more details about the Early Experience Initiative? And it sounds like -- and maybe some more information about the revenue recognition? It sounds like you're going to use a wholesaler and then -- so you're going to ship to the wholesaler, record revenue in that quarter. And then the wholesaler ships to the physician. And that's where the pull-through is.

So will we see a little lumpiness initially in the revenue recognition?

Frank Ruffo -- Chief Financial Officer and Treasurer

OK, I'll take the first part of that question, then I'll hand off to Brett. So Don, thanks for your question. For as far as revenue recognition, yes, there may be a little bit of lumpiness upfront. We'll have -- as Neal mentioned, we have these orders.

We'll ship these into the wholesaler. We recognize revenue when we ship, not necessarily when the wholesaler ships into the physicians' offices. So to be clear, we'll have some costs that will be in gross to net. We don't expect a lot upfront.

So we'll have a decrement to the gross revenues to some extent. But again, to be clear, the revenue will be recognized when we ship into our distributor -- our one distributor at McKesson.

Donald Ellis -- JMP Securities -- Managing Director

OK. Then I have a couple of follow-up questions. Can you give us -- you've finalized the price. Can you give us kind of a range of what the price is going to be and then what your plans might be for DTC later this year?

Brett Fair -- Chief Commercial Officer

It's Brett. I'll answer the rest of the questions. So in terms of price, we priced it at $130 per SKU. The minimum order is in a case of 12.

So $1,560 for a case. The office, they'll mark it up. We think most will mark it up about 100%. But it will really vary from practice to practice.

I think some will see an opportunity to price it higher than that and will take advantage of that. So that's the price piece. In terms of -- I'll talk about Early Experience, then we'll touch on DTC briefly. So in terms of Early Experience Initiative, the thinking varies.

We have some -- we have a group of accounts that are really important to us in a number of ways. Either they participate in an advisory capacity, advise ad boards throughout the year. Many of these people are in our speaker bureau and regional influencers. And some of these people are just kind of key offices scattered nationally.

Well, we want them to have early experience with the product ahead of everybody else because they're regional influencers. So the thinking behind the Early Experience Initiative is we can -- we set them up with product so that they have an opportunity to trial it on three to four patients. And it's a platform for our reps to go in there and make sure that they're guiding the clinical integration perfectly in those practices, basically teaching them how to apply it, guiding to the right patient to the right lesions or positioning it for lesions in cosmetically sensitive areas out of the gate because our value proposition is so high there, and we want them to have their first experience with the product to be something special. So we'll guide them through the clinical integration, teach them how to apply the product and rub it in and then also set expectations for their patients.

And then we'll gather some of the feedback internally, and we'll take that into our national sales meeting. So it's kind of good for setting up of those centers of excellence that will be influencing and supporting our efforts once we launch. And it's also good for us internally getting that early feedback from this group. So we're kind of partnering with them.

That's the thinking behind that process. Once we get launched, then the reps will follow a similar process. With each account that they open up, they want to make sure that they're very thoughtful and very disciplined about clinically integrating the product. And then we'll start bringing that account adoption along.

We feel that account adoption, we'll be in a good place -- good enough place by the -- come the fourth quarter that we'll be able to activate the consumer. We know that we have a tremendous opportunity to engage consumers. The patient willingness to pay is significantly higher than the dermatologists even know currently. We've been educating on that over this past year.

But once we drive in patients that are asking specifically for ESKATA, they're not going to turn them down. And so towards the back half of the year, maybe right now, we're looking at that October 1 time frame. And that really will be driven by once we have a comfort level with a number of account adoptions that we have.

Donald Ellis -- JMP Securities -- Managing Director

Thank you.

Operator

Thank you. And our next question is from Tim Lugo with William Blair. Your line is now open.

Tim Lugo -- William Blair and Company -- Analyst

Thanks for taking my question. And I guess just a follow-up on setting up the early launch. Will these centers of excellence, setting these up, occur throughout 2018 and maybe into 2019, or is that something that's occurring right now? Are these regional leaders touching the product as we speak? And since DTC is going to start in Q4 but yet you're rev rec-ing into the wholesaler, do you believe that there could be a wholesaler bump in your revenues leading up to that DTC campaign?

Frank Ruffo -- Chief Financial Officer and Treasurer

I'll take the first part of that. Tim, thanks for your questions. Do I think there's any kind of ramp-up going into that DTC campaign? By that point, our wholesaler will be pretty well-stocked. Clearly, they'll have two to three weeks' worth of inventory.

And if we felt that we had to kind of push that inventory a little bit in order to meet demand, we would. But I think for the most part, anywhere between two to maybe four weeks of inventory with our distributor/wholesaler should be adequate to stock up for a DTC campaign.

Brett Fair -- Chief Commercial Officer

And Tim, in terms of the centers of excellence, we'll continue to establish those throughout the year within dermatology. And then as we start looking to cascade outside of dermatology, we'll be looking to set up centers of excellence in some of those specialties, things that come to mind like plastic surgeons and some of the others.

Tim Lugo -- William Blair and Company -- Analyst

OK, understood. And maybe a wart question. For the upcoming Phase III discussion or end of Phase II discussion with the agency, what is the best outcome for number of warts needed to be treated in the Phase III? And the Phase II earlier in the year looked good to me but doesn't seem like the market is assigning much value to that program yet. What do you think right now the market is just missing?

Neal Walker -- President and Chief Executive Officer

Yes, in terms of -- the best outcome is always to treat the smallest number of -- or the least number of warts. So if you've got an outcome where you treated one target wart and use that as adjudication of the primary endpoint, that would be tremendous. I think we -- the way we designed the study was to take the feedback from the agency early on in treating multiple warts. And we obviously hit across all endpoints in a fashion.

So I think a range of outcomes is all favorable and more than likely that we have to treat multiple warts. In terms of what the market is missing, I think it's kind of looking at -- I think you have to just start at the top of the funnel and understand the progression of the wart patient, if you will. So there's 22 million patients out there in the prevalent population in the U.S. on just common warts.

As I mentioned before, that represents 50% of the total wart market. The genital wart market actually did extremely well. And that was only addressing 17% of the market. People with common warts are just as likely to go seek treatment as those with genital warts.

And when you put a -- I think what is missing is that when people understand that this will be the first approved Rx for this indication, it gives you more flexibility on pricing. You don't have to step edit, you don't have to prior auth. It just sets up for a more robust launch in that category. And I think when you comp the efficacy, again, 16 treatments for eight weeks, and compare that to anything available at the moment, either on the Rx side for genital warts or over the counter, it's no contest.

You're talking about treatments that go 12 weeks, 16 weeks, three times a day, two times a day, and then on the over-the-counter side, months of treatment, multiple times a day. So when you look at the burden and the kind of cost of treatment for the patient, it actually is on par with atopic dermatitis. And that's from a 2004 kind of cost -- burden-of-treatment study. And so I'm sure it's even greater, but we have 2004 data.

So I think we're doing our best to kind of educate the market on what the opportunity is there. And that's sometimes the challenge with white-space market opportunities.

Tim Lugo -- William Blair and Company -- Analyst

Understood. Thanks for the question.

Operator

And our next question is from Seamus Fernandes with Leerink Partners. Your line is now open.

Seamus Fernandez -- Leerink Partners -- Managing Director

Oh, great. Thanks so much for taking my question. So just three quick questions. So first, Neal, can you talk a little bit about the synergy of an aesthetic product line like ESKATA with medical products and also whether or not you see opportunities to access additional marketed assets, given the pullback that we're seeing from other med derm players in the market? The second question is, can you just help us understand better how the JAK actually works in vitiligo and what might be the risk to clinical success and how we should think about the timing of efficacy and how chronic treatment looks in this market? And then lastly, apart from the eyebrow study, which I know everybody is focused on but has been -- is more likely to kind of deliver results in the sort of late-second-quarter time frame, can you just help us understand when we're going to see additional data with the topical and the timing of those datasets?

Neal Walker -- President and Chief Executive Officer

Sure. So first -- the first question on the synergy between aesthetic and medical products, it's interesting. As I mentioned before, a lot of the phenomenon going on in derm right now is a lot of these practices are consolidating. And as such, you see a number of dermatologists with kind of different areas of interest, whether it's medical or aesthetic or kind of a combo of both or surgery, they're combining into one practice.

And that's to diversify their revenue-generating opportunity. So I think the effect on that is that in the past, you would have very distinct kind of sales forces that would target very distinct offices. I think that that will change in the future when you have similar call points. It can't be a one-to-one overlap.

But you will get some synergy out of that over time. On the access to marketed products, look, we're always kind of active on the BD front. We're always looking to maximize shareholder value and look at ways to leverage what we built. We now have a nice commercial infrastructure.

And of course, when there are interesting opportunities, we'll look at them. And I think it's an interesting time, given what you said, with some companies kind of declaring out of med derm. I think that creates opportunities for companies like ourselves. On the JAK-inhibitor front, to your question about how it works in vitiligo -- and I'll talk about it at a high level and then maybe hand it off to Stu.

So there's two main things that you have to do in vitiligo. One is you have to shut off the autoimmune attack. You have to shut off the inflammation. And then you have to wait a little bit until the repigmentation occurs.

And that's a function of basically waking up the melanocytes to stimulate the pigment production and then have it arise and actually be clinically evident. And maybe I'll just hand it off to Stu to talk a little bit more detail about that.

Stuart D. Shanler -- Chief Scientific Officer

Yes, Neal pretty much hit it on the head. We have to shut down the inflammation that is causing the disruption of the melanocytes. So that's the pigment cells. So it's actually a very similar mechanism to that seen in alopecia areata.

And it's largely an interferon gamma-driven pathway. So we see the same type of biomarkers that we see in alopecia areata. And those are also down-regulated by the use of the JAK inhibitors. Now the opportunity to treat vitiligo topically is, there's a very -- we believe there's a very big opportunity there because the target for the drug is superficial relative to some of the alopecia disorders because the pigments themselves live right at the dermal-epidermal junction, which is actually fairly superficial and easy to access topically.

So we think there's a big opportunity today to affect the mechanism by applying a topical drug that will suppress the primarily interferon gamma-generated inflammatory -- inflammation and suppress that pathway and allow the melanocytes to repopulate and to start making pigment again.

Neal Walker -- President and Chief Executive Officer

Yes. And this is Neal again, Seamus. So to your last question on the timing of the eyebrow study relative to some of the other topical JAK-inhibitor work. So correct, you are correct, kind of back part of the second quarter on the eyebrow study.

And then we're looking at the second quarter for reporting out the PK/PD study, the biomarker results and then the end of the year for the 120-patient topical study in patchy alopecia areata. So that's kind of how that sequences.

Seamus Fernandez -- Leerink Partners -- Managing Director

Great. Thanks, Neal.

Operator

And our next question is from Liav Abraham of Citi. Your line is now open.

Liav Abraham -- Citi -- Analyst

Good morning. Just a couple of quick questions. On your warts program, I appreciate that you have an end-of-Phase II meeting with FDA coming up. Any color that you can provide on what the Phase III program will look like from a trial-design perspective? I assume you're targeting a very similar trial design to the recent Phase IIs.

Any commentary on that would be helpful. And when -- timelines for a Phase III readout? And then just a second question on the eyebrow trial, given that that's an open-label trial, is there any anecdotal commentary that you can provide on what you're seeing in that trial thus far?

Neal Walker -- President and Chief Executive Officer

Sure. So thanks, Liav. So it's Neal. So on the end-of-Phase II meeting, of course, we designed our -- we had a guidance telecon with the agency just trying to get to understand what they might be looking for in terms of endpoints.

And we designed the last Phase II studies to kind of comport with some of that guidance. So kind of similar to the question we were asked earlier, obviously we'll be looking to look at basically messaging the same endpoints that we just accomplished. And so we think it's probably going to be treating multiple warts. And we'll be looking at a clearance a week post the last treatment and then looking at a three-month follow-up.

And then we'll see. We will see at that end-of-the-Phase II meeting. And in terms of the Phase III studies, we intend to kick those off in the back part of the year. And it should take about 10 to 12 months from start to finish.

They're relatively quick enrollers. But that's what we would guide to. So we would anticipate starting in the back part of this year, and we'd have data in the back part of 2019. On the eyebrow study, of course, we'll announce the data when we get a full dataset.

We do remain excited about the topical program as we consistently said from the beginning.

Operator

And I'm showing no further questions. I would now like to turn the call back to Neal Walker for any further remarks.

Neal Walker -- President and Chief Executive Officer

Well, I want to thank everybody for joining the call. We're really excited about what 2018 will lead to. We're very excited about the ESKATA launch and the build that we've already seen through the AAD, which is one of the key meetings, it's the biggest international meeting we have in our space. And we kind of papered the town, left feeling very emboldened by the reception we had there.

And we're also very excited about our pipeline. We have multiple readouts throughout the year. We will report our first kind of -- our first revenue in the August time frame for ESKATA. And we look forward to reporting out on our pipeline as we continue throughout the year.

Thanks, everybody, for joining the call.

Operator

Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.

Duration: 47 minutes

Call Participants:

Kamil Ali-Jackson -- Chief Legal Officer

Neal Walker -- President and Chief Executive Officer

Brett Fair -- Chief Commercial Officer

Stuart D. Shanler -- Chief Scientific Officer

Frank Ruffo -- Chief Financial Officer and Treasurer

Louise Chen -- Cantor Fitzgerald -- Managing Director

Adnan Butt -- Guggenheim Securities -- Managing Director

Neal Walker -- President and Chief Executive Officer

Donald Ellis -- JMP Securities -- Managing Director

Tim Lugo -- William Blair and Company -- Analyst

Seamus Fernandez -- Leerink Partners -- Managing Director

Liav Abraham -- Citi -- Analyst

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