Good afternoon, ladies and gentlemen, and welcome to the Rockwell Medical 2019 Second Quarter Results Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer and instructions will follow at that time. [Operator instructions] Please do remind that that this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Ilanit Allen.

You may begin your conference.

Thank you, Lea. Welcome to Rockwell Medical's second quarter 2019 earnings results call. This is Ilanit Allen of In-Site Communications, the Investor Relations representative for Rockwell Medical. With me on today's call are: Stuart Paul, President and Chief Executive Officer; and Angus Smith, Chief Financial Officer of Rockwell Medical.

Before we begin, I wanted to note that certain matters we will discuss may constitute forward-looking statements within the meaning of the federal securities laws. Words such as may, might, will, should, believe, expect, anticipate, estimate, continue, could, potential, predict, forecast, project, plan, intend or similar expressions or statements regarding intent, belief or current expectations are forward-looking statements.

While Rockwell believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us as of today and which are subject to inherent uncertainty. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation, those set forth in Rockwell's SEC filings, many of which are beyond our control and subject to change.

Actual results could be materially different. Risks and uncertainties include: statements about the unique J-code for the Triferic powder packet; timing and the success of our NDA submission for IV Triferic; the potential market opportunity for IV Triferic and other Rockwell products; pricing and reimbursement status for IV Triferic, Dialysate Triferic; and other Rockwell products, including eligibility for add-on reimbursements under TDAPA pursuant to CMS proposed rule; liquidity and capital resources; expected duration of Rockwell's existing liquidity and working capital; success of our recently announced commercialization plans for Dialysate Triferic; and the success of our efforts to maintain, grow and improve the profitability of our business.

Rockwell expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by law. This conference call can be accessed on Rockwell Medical's Investor Relations webpage. This call is being recorded on August 8, 2019 for audio rebroadcast and can also be accessed on the same webpage. The call will be followed by a question-and-answer session. At this time, I would like to turn the conference call over to Rockwell’s CEO, Stuart Paul. Stuart?

Thank you, Ilanit. Good afternoon everyone and thank you for joining our call.

The second quarter was pivotal for Rockwell as we made significant headway advancing our Triferic portfolio. Today, I'll share updates around our initial commercialization efforts for Dialysate Triferic.

Our NDA for the IV formulation of Triferic progress in markets outside the United States, including just released data from two studies in China and recent CMS announcements.

We continue to see Triferic as an innovative therapeutic platform and we're excited about our initial efforts to build awareness of its unique therapeutic attributes. And as you may know, we have multiple formulations to Triferic for treatment of hemodialysis patients are just recently launched dialysate formulation, which comes in both a powder packet and the liquid ampoule and the IV version for which we submitted an NDA to the FDA in May that was recently accepted for filing with a PDUFA date of March 28, 2020.

There are more than 2 million people in the world today who receive hemodialysis treatments including over 450,000 in the United States. And because these patients lose iron during each treatment, anemia is a chronic issue for which roughly 80% receive traditional IV iron to address the condition. Maintaining healthy hemoglobin levels is extremely important for these patients and current treatment protocols, traditional IV iron and ESAs, erythropoietin stimulating agents, are costly and have been associated with both higher ferritin levels and adverse events.

Triferic, on the other hand, develops – delivers actually the iron and the hemoglobin maintenance that that hemodialysis patients need without increasing ferritin levels and without the risks associated with other therapeutics.

As the first and only FDA approved therapy indicated to replace iron and maintain hemoglobin levels, Triferic mimics natural iron homeostasis and its physiologic mechanism of action donates iron directly and completely to transferrin.

And we believe that Triferic is appropriate for substantially all haemodialysis patients and has the potential to shift the way that anemia is managed in this population.

Our estimates suggest a peak market opportunity of $400 million in the U.S. alone. And our expectation is that over time we will be able to penetrate a substantial portion of this market by establishing Triferic as the standard of care.

So against this backdrop, we achieved several significant milestones during the second quarter, starting with the launch of Dialysate Triferic.

During the quarter, we have realized our first commercial sales of Dialysate Triferic with a handful of targeted accounts through consistent with our – though consistent with our previous statements, our sales for the quarter were not material.

We're still very much in the early stages of our launch and executing on our strategic medical and commercialization plan for Dialysate Triferic is one of our top priorities for 2019 and we're confident that we are engaging with the appropriate target group of dialysis clinics in this initial phase.

Our 2019 plan remains to drive adoption by providing medical education to providers and increasing awareness and understanding of Triferic’s medical and potential pharmacoeconomic advantages.

Our approach is a phased launch of Dialysate Triferic with an initial focus on centers of excellence in the U.S. and our sample sites.

Our initial success has come from single site or small independent chains and we're working actively with multi-site independence and medium-sized dialysis organizations or MDOs to accelerate adoption, more on that and our plans for large sized dialysis organizations, or LDOs, later.

Well, let me share some of the feedback that we're hearing from the early adopters.

First, the clinics appreciate the ability of Triferic to maintain hemoglobin without increasing ferritin levels. This feedback is especially important in light of results from the recent Spherix renal anemia survey for Q2 2019, which showed that 73% of survey nephrologists expressed concerns about ferritin levels exceeding 1,000. The survey also indicated that the median ferritin level at which nephrologists become concerned is 800 and notably approximately half of U.S. dialysis patients have ferritin levels above 800.

Second, customers praised the convenience factor of our powder packet formulation because a single packet of Dialysate Triferic to deliver enough iron for 10 patients and clinics have noted a reduction in the nursing time associated with iron administration freeing up nurses to spend more time with their patients. And third, in contrast to traditional IV iron, Triferic can deliver bio available iron even to patients with inflammation. Traditional IV iron can face significant bioavailability challenges in inflamed patients because of the hepcidin block. And this can result in the buildup of iron in the liver and in the other tissues.

This positive response to Triferic is encouraging and as previously indicated we believe the sales cycle in haemodialysis centers is roughly three to four months and as anticipated sales are developing slowly.

As with any transformative therapeutic product, it will take some time for customers to change their mindsets, their behaviors and protocols within their haemodialysis clinics. Furthering our phased commercialization approach, we are targeting medium, small and independent dialysis centers that together treat roughly 25% of the haemodialysis patients in the U.S. And we've engaged in senior level discussions with all of the medium-sized dialysis organizations regarding system-wide arrangements. Though in some cases, we are in discussions to carve out smaller clusters of centers within these organizations as an interim step.

Negotiations with these chains are more complex and one item frequently requested by these potential customers is real world data, which we believe will be a compelling driver of future adoption. And to that end, we have numerous initiatives and process that we believe will yield the data we need to accelerate adoption with the larger providers.

First, we've entered into an agreement with a mid-sized dialysis chain to receive data from their use of Triferic during the sample program and going forward. I'm pleased to report that we received the data in July and we are in the process of analyzing that data.

Second, we're working to attain data from other clinics that participated in the sample program including a leading academic institution.

Third, we are re-analyzing data from previously completed clinical trials that we believe can provide useful information for our discussions with MDOs. And as we move forward from a sales perspective, we plan to expand our focus to include the large dialysis organizations next year following the introduction of IV Triferic if approved in the U.S. and this could potentially increase the patient pool for Triferic four fold.

Turning to reimbursement.

As discussed last quarter, Dialysate Triferic will be reimbursed within the CMS bundled payment for hemodialysis. And in late April, CMS issued a preliminary recommendation, which if finalize would establish a new J-Code, J-1444 for the Dialysate Triferic powder packet. This unique J-Code went into effect on July 1st, 2019 and it's separate from the existing J-Code, J-1443 for the liquid ampoule version of Dialysate Triferi.

Let me now turn to the IV formulation of Triferic. In May we completed the submission of our new drug application to the FDA, for the IV formulation of Triferic and we're pleased that on August 2nd the FDA accepted for filing our NDA with a PDUFA date of March 28th 2020. And as you may recall IB Triferic for adult hemodialysis patients was developed pursuant to a Special Protocol Assessment or SPA through which FDA agreed that an equivalent approach to Dialysate Triferic would be acceptable for review.

The NDA is supported by data from our equivalent study, which demonstrated that IV Triferic delivers the same quantity of iron to patients as does the Dialysate Triferic formulation. An open label randomized multi-period single dose study was conducted to establish the equivalence of doses between Dialysate and IV administration. And we presented results of this study at the Annual Dialysis Conference or ADC in March of this year. On July 29th, CMS issued a preliminary proposed rule that proposes to update payment policies and rates under the ESRD prospective payment system beginning January 1st, 2020.

It contains proposed revisions to the eligibility requirements for the CMS Transitional Drug Add On Pricing Adjustment program or TDAPA, which has the potential to provide two years of add on reimbursement for certain qualifying new drugs. Under the proposed revisions to the TDAPA rules if finalize certain ESRD drugs approved by the FDA under specific types of NDAs would be ineligible for TDAPA effective as a January 12, 2020. And while we've not yet received an official NDA classification code from the FDA for IV Triferic NDA, the classification of each of our prior NDAs for Triferic would fall into the category of drugs to be excluded from TDAPA under the proposed rule.

If our IV Triferic NDA is classified in a similar manner or in any of the other excluded NDA types, it would not qualify for TDAPA under the proposed rule. CMS is accepting comments on the proposals outlined in the preliminary rule through September 27th, 2019 and notably the FDA's policies and procedures around the classification codes state that the codes are not indicative of the extent of innovation or therapeutic value that a particular drug represents. We believe Triferic is in fact innovative. And we plan to engage with CMS both now and as additional data becomes available for Triferic to highlight the attributes that distinguish it from the current standard of care.

While we're still analyzing the impact of the proposed rule and what it would mean if finalized even without TDAPA, we remain enthusiastic about Triferic’s future and see this as a near-term setback. It doesn't change our longer term view of the peak market opportunity in the United States, which has previously stated as based on an assumed market price for Triferic that is within the CMS reimbursement bundle and not on a sustained higher price based on TDAPA eligibility.

In July, CMS also released a new reimbursement proposal intended to incentivize greater use of home dialysis and kidney transplants for Medicare beneficiaries with end-stage renal disease. Both home dialysis and transplant have support among healthcare providers and patients as preferable alternatives to in-center hemodialysis, but they're not as commonly used. Today patients on home dialysis generally must go into the clinic to receive IV iron due to the risk of anaphylaxis and while Triferic is not currently indicated for use in the home, we believe Triferic has the potential to be made available in this environment and could ultimately be a more convenient alternative to IV iron.

We are actively evaluating various regulatory strategies to progress our development of Triferic for home use.

Turning to the global market opportunity, the IV formulation stands to expand the market potential of our Triferic portfolio significantly. In many large markets like Europe and China, dialysis centers used dry bicarbonate cartridges or bags and so their existing protocols will integrate easily with IV Triferic. Developing our presence in these markets is a priority for us and we're making good progress.

As announced this morning, our partner in China, Wanbang Biopharmaceutical recently completed two clinical pharmacology studies of Dialysate Triferic with positive results.

With these encouraging study results in hand the next step will be from Wanbang to schedule the equivalent of a pre-NDA meeting with the NMPA formally known as the CFDA in China to determine whether the data from these studies are sufficient to support a filing for regulatory approval.

Commercial sales activity in this market would commence following regulatory approval. And as part of our licensing agreement with Wanbang we're entitled to up to $35 million of regulatory and sales based milestones, including an $8 million milestone payment upon regulatory approval of Triferic in China and a transfer price that incorporates a mark-up to cost of goods sold and a percentage of net sales in the low-to-mid 20% range. Wanbang is responsible for the cost of the clinical trials and regulatory approval program in China and we retained manufacturing responsibilities for Triferic for China. China is expected to become the largest ESRD market in the world over the next several years.

In Japan, our just completed market research confirms a total market opportunity of more than $250 million in that country and we are actively working to advance our partnership discussions. In Europe we're in ongoing discussions as well with potential partners that can help us penetrate that market. In Canada we expect to submit our application for regulatory approval for IV Triferic in the near future.

And as for our concentrate business, which still accounts for the lion's share of sales at present, we recently finalized a 4.5 year contract with DaVita. The contract is extremely important to us as DaVita represents roughly half of our concentrated sales at this point. The contract includes a price increase relative to our previous agreement and this new contract is a positive step forward for our concentrates business.

We are continuing to identify additional ways to enhance the profitability of the business and to extend our customer base both in the U.S. and abroad. In summary, we're pleased that we hit our two most critical milestones in the second quarter, launching Dialysate Triferic and submitting our NDA for the IV formulation. We believe we're building a steady pathway to sustainable long-term growth.

I'll now turn the call over to our CFO, Angus Smith to review our second quarter financials. Angus?

Thank you, Stuart.

Let me walk you through our financial results for the second quarter of 2019. Sales during the quarter of 2019 were $14.8 million compared to sales of $14.9 million during the three months ended June 30th, 2018.

Our sales during the quarter and to-date have substantially consisted of sales of our dialysis concentrate products to DaVita, Baxter and international customers as well as deferred revenues related to the Baxter Distribution Agreement for our dialysis concentrated products and our licensing agreement with Wanbang for Triferic in China.

As Stuart mentioned, we recently signed a new agreement with DaVita for our concentrates products that extend through 2023, and this business remains a strategic asset for us as we supply approximately 25% of the U.S. market for hemodialysis concentrates. Gross profit increased in the second quarter of 2019 compared to the second quarter of 2018, due primarily to an inventory reserve expense for Triferic of $5.4 million for the three months ended June 30th, 2018 partially offset by a gross profit decrease in our dialysis concentrates products. The decrease in gross profit for dialysis concentrates products was primarily attributable to increased labor, materials and overhead costs.

Operating loss for the second quarter of 2019 improved to $10.4 million from $12.3 million in the second quarter of 2018. The improvement was driven primarily by the year-over-year, increase in gross profit and lower settlement expenses partially offset by increases in sales and marketing expense and research and product development expenses. The increases in certain expense items reflect investments we are making that are aligned with both our short-term and long-term objectives such as optimizing the launch of Triferic in the U.S. and advancing IV Triferic towards a potential FDA approval in 2020.

Selling and marketing expenses were $2.2 million in the second quarter of 2019 compared to $200,000 in the second quarter of 2018. The increase in sales and marketing expense reflects the investments we are making in professional and marketing capabilities to support the launch of our Triferic portfolio both now and in the future.

Research and product development expenses were approximately $3 million in the second quarter of 2019 compared with $1.6 million in the second quarter of 2018. The increase was due primarily to investments we made during the quarter for our Triferic portfolio, including a $1.3 million NDA application fee for IV Triferic and the development of professional medical capabilities to support the launch of Dialysate Triferic and IV Triferic if approved.

Net loss for the second quarter of 2019 was $10.3 million or $0.18 per basic and diluted share compared to the loss of $12.2 million or $0.24 per basic and diluted share in the second quarter of 2018. Net loss for the second quarter of 2019 included approximately $1.9 million of non-cash charges for depreciation, amortization and stock-based compensation.

Net cash used in operating activities was $10.4 million for the second quarter of 2019. The increase in cash used in operating activities was primarily due to the $1.3 million NDA application fee for IV Triferic and an $800,000 upfront payment on a CRO contract for our upcoming Triferic pediatric study as well as the change in other working capital of negative $1.9 million.

In June we announced the pricing of an underwritten public offering of our common stock with gross proceeds of $17.5 million. In July the underwriters in this offering partially exercise their overallotment option resulting in additional growth proceeds of $1.3 million. The funds from this offering will be used to support our ongoing investments in the Triferic portfolio, including the commercialization of Dialysate Triferic and IV Triferic, research and development expenses as well as for general corporate purposes.

As of June 30th, 2019 we had approximately $35.2 million of cash, cash equivalents and investments available for sale, and working capital of approximately $33.4 million. We anticipate that our cash and investments on-hand are sufficient to fund our business plan for at least the 12 months – next 12 months.

I will now turn the call back to Stuart.

Thank you, Angus. In closing, let me reiterate that we're deeply committed to improving the standard of care for anemia managementand and hemodialysis patients globally. The commencement of commercial sales in Dialysate Triferic is a significant first step in rolling out what we believe will be a transformative portfolio of products that addresses significant unmet medical need.

Early positive feedback from our initial customers is encouraging as we look to advance our platform over time. Supported by our strong management team, a world class medical advisory board, and a robust patent portfolio, Rockwell Medical is fully dedicated to improving patient care, while delivering value to our shareholders.

We will now open up the call to questions. Operator?

[Operator Instructions] Your first question comes from the line of Chris Raymond from Piper Jaffray.

Your line is open.

Hi guys, this is Nicole Gabreski on for Chris. Thanks for taking the question.

Just on TDAPA, so as far as you can tell what was the genesis of the proposed changes by CMS to TDAPA program? And I guess reading through some of the language; it appears that the proposed change was in response to concern about generic drugs taking advantage of TDAPA’s [indiscernible] exclusion from the bundle. But that said, what's an effective approach to convincing CMS at the proposed NDA classification system? Is not an appropriate tool for judging the level of innovation, a new product brings to Dialysate patients?

Hey Nicole, this is Stuart.

So thanks. Thanks for joining us today. And as you know CMS is accepting comments on the proposals outlined in the preliminary rule through September. Their preliminary ruling was very interesting. From our perspective obviously on the surface it seems to exclude the generics and identify dosage forms and formulations as by NDA type that the FDA has used for their internal classification scheme that were not really intended to judge or comment on the innovative level of these therapeutics.

So luckily we're looking at it. If we're excluded, it’s a near-term setback but we still don't really have a full answer on this. And we certainly are planning as I mentioned earlier to have significant interaction with them. It doesn't – the proposed revision does not change our peak market opportunity as we view it. And we certainly believe Triferic continues to have the potential to provide an enormous benefit to patients in the hemodialysis sector.

So at the end of the day, we'll be engaging with CMS and in the coming weeks and certainly providing commentaries that are geared toward explaining and helping them fully digest and understand the level of innovation that Triferic provides patients.

Great. Thank you.

Your next question comes from the line of David Bouchey from IFS Securities.

Your line is open.

Hi guys. Thank you for taking my question. This is kind of a – almost an anniversary for me. It was almost two years ago that I started coverage of the company, although sometimes it seems like it's been longer than that. Well – but I do have to say I'm impressed that you guys have been able to hit the milestones that you have.

You've locked in, set your peer in the other dialysis prices for the next few years with DaVita you've gotten Triferic, at least the Dialysate version on the market and you even got to that eligibility for at least once. We hope you can do it again.

So that having been said, how close are you to getting all the cost benefit data that you need from the Dialysate Triferic program, from the free sample program and from the launch of Triferic?

So, yes, Dave, first off, great to chat with you again and appreciate the questions and your coverage over the last couple of years.

I think it's a bit about this real world, this focus on real world data as I was mentioning. Customers that we're in discussion with and we're taking a very phased measured approach to bringing new accounts on board; we’re excited about the sales we're getting in terms of the initial feedback, as I mentioned, the early adopters. But it's a very measured targeted approach and what people are generally wanting to see is a level of real world data that perhaps is a – is a recent as 2019 generated data from procedures with Triferic and so we continue to work on pulling that together.

We've entered into an agreement, as I mentioned with a mid-size dialysis chain to pull that data over fully, once and for all and really get through it. There's a significant body of data there.

And so I'm excited that we're rolling through that and we continue to process and analyze data from the sample program.

So we do have a number of important sites and even prestigious institution that has significant experience with Triferic.

And pulling the data and getting it to a final point where we're ready for uses, it’s a bit of a process and we want to do it well, and we're working with the right parties to make it happen. And again, I think taking a measured targeted approach to who we felt would make the most sense to work with. To pull the data and then apply it in the specific targeted discussions that we're having with key accounts. We've been very focused on managing that process accurately and correctly, and without significant rush to make it happen. We want to – we want to make it right.

So I hope that kind of gets to the core of your question.

I think so. Stuart, can you give us any clarity on what our price range for the IV version of Triferic might be when you launch next year?

Hey David, it’s Angus speaking. Hey, thank you for the question. Obviously we haven't given any guidance on where we think pricing can shake out. And obviously we're continuing to analyze the impact of the proposed rule on potential pricing alternatives. We're still going through our price research on IV Triferic. The best I can give you at this stage, we’ve given you details and – on our last call about where Dialysate Triferic is priced. Clearly the pricing for IV

Triferic will depend on sort of the unique attributes of that product as well as whether or not it ended up in the bundles or it’s reimbursed separately.

So we're still going through our analysis there. And we’ll update the market accordingly once we have a better idea of where we're going to be.

Alright. Angus is the sales and training force now fully staffed or you’re going to hiring more people?

No.

As we've said before we are bringing the team on as we go through the year and so we expect to be fully staffed towards the end of 2019, and then again we'll evaluate where we are when we launch IV Triferic next year if it's approved.

I think just add onto that Dave, it’s important that that people understand we’re taking the necessary steps to build a world-class field organization. It's not going to be a massive army, it’s very focused, but we're bringing on people who have the right experience curve and the right level of nephrology experience that we think can help us hit the ground running as we take this measured approach with our key accounts that we're on-boarding working through the data.

We also have a medical science liaison field that reports up to our Chief Medical Office that is out there essentially focusing on medical education.

So with all of the targeted accounts that we're bringing on board, I think we have a good measured approach to getting everybody where they need to be by the end of the year.

Okay. And when will you start the pediatric trial? Do you have the protocols in place for that?

Yes.

So that we’ve said, we have signed a CRO contract during the second quarter for that protocols are in place and we're looking to begin enrollment later this year.

All right, thanks. I'll let somebody else ask some questions now. Thank you.

All right, thanks, Dave.

Your next question comes from the line of Raghuram Selvaraju from H.C Wainwright.

Your line is open.

Good afternoon guys. This is Edward on for Ram. I appreciate you taking the questions. I'm just looking at the NDA for Triferic for next year. I'm wondering what specific gating items remain to be completed before that review could occur?

Hey, Edward, it’s Stewart.

So, as far as gated items, I think the process is underway. We've been waiting 60 days post-filing to have confirmation that that we would have the acceptance from FDA. We've got the letter and the PDUFA date.

I think at this point, it's always interesting under an SPA, Special Protocol Assessment of this sort, where we feel we've done a really good job of taking FDA guidance in that SPA and meeting the bioequivalence end points that were mapped out and discussed as part of that agreement.

I think we're in pretty good shape here. FDA has a good experience with our prior NDA submissions around powder and ampoule for Dialysate.

So, we look forward to receiving whatever questions FDA may have for us about the IV formulation.

So we anticipate that there'll be questions coming. And I think consistent with our prior filings, we have a view toward a really knocking the questions down quite adequately without stopping the clock, without taking for everybody to get the questions answered.

So, it's important from that perspective just to keep the process moving and kind of gate through all the different questions that may come.

So, certainly we'll expect to get questions and have anticipated perhaps in certain areas, where some of those questions may come from, but we just – we have to wait and see what they say.

That makes sense. And looking at the Chinese data that came out earlier today, just a few questions on that. I noticed that there was some information about lean body mass for Chinese patients. And I don't remember seeing this in any of your previous data. I was just wondering how important that lean body mass data might be? And how might some of the increasing obesity in China and the U.S. maybe affect the frequency of chronic kidney disease? And how the efficacy might change for certain haemodialysis therapies? And could this be a potential advantage for Triferic?

Yes, no, great question.

I think what's interesting to us is the fact that there may be differences in lean body mass between the Chinese population and the American population, but the really nice thing was that the data showed us that there was really not a significant difference in the PK and pharmacokinetic, pharmacodynamic activity of Triferic in either population.

So from that perspective that gives us a good signal that it should work well in Chinese patients, despite the differences in body mass.

I think from the standpoint of obesity and changes in the diet and Triferic, I mean, clearly we haven't run a trial around diabetes and so forth. But I think, you know, we just – we love – what we love about Triferic is that it is very physiologic and haemodialysis patients are quite chronically inflamed.

And our view on – as I stated, our view on ferritin levels and challenges in managing IV irons and even ESAs, and this patient population are – they come with their share of issues, right.

So at the end of the day, the physiologic nature of how Triferic donates iron to transferrin and goes around the reticuloendothelial system, the macrophages, the liver goes straight to the bone marrow is a very important aspect of being on the side of helping to potentially be a better – much better therapeutic for these patients, given the state of chronic inflammation that they have.

That's a good answer. Definitely makes a lot of sense. And then as we look at the NMPA filings, I was just wondering what some potential scenarios might be if they come back and say that you need additional studies, what might those studies look like? And then how long would a submission process take? Should the regulatory material that you currently have be deemed sufficient?

Yes, thanks for the question. It’s Angus.

I think, as Stuart mentioned, the key next step for us there is to have a meeting with NMPA.

I think that's going to be very determinative in terms of next steps.

Our hope is we're putting the finishing touches on the data package to submit to them and request a meeting, which we're hopeful will come sometime later this year. And that will help us to determine what the next steps are. We remain hopeful that that these two studies we've completed will be sufficient for a regulatory submission. If they're not, we'll solicit feedback from NMPA. But, you know, that's really kind of where we are at this stage. And then our hope would be that that if we can get a regulatory submission in, in relatively short order that we're looking at an approval within 12 months or so, from time – from time of submission I should be to be clear.

Right, right. And then Angus, I guess two more questions for you really quickly on the financials. When looking at the inventory reserve expenses, I was wondering if you could talk about the trend in future quarters and whether there's going to be a substantial variability between these different periods. And then when we look at R&D spend, just wondering what a steady state quarterly R&D would be now that some of the trials are winding down, but you might increase spending for the pediatric trial if you initiate in the fourth quarter.

Sure.

So, inventory reserves, if you look at over the course of the last 18 months or so, the large inventory reserve expense that we have been booked – that we've booked has been due to – largely to exogenous events and sort of timing of launch.

And so though there was a few quarters in 2018 when we had large inventory reserve expense and again that was related to decisions around separate reimbursement and TDAPA and things of that nature.

I should highlight that inventory reserve expense of non-cash, it reflects a reserve to inventory we have on hand that that we've already paid for, but it's just reflective of our expectations for the product type or for the sales volume for Triferic as we go forward.

So kind of predicting where that goes from quarter-to-quarter is difficult. But in the absence of any sort of exogenous events or major changes to our forecast, there shouldn't be any significant movement in the inventory reserve. And we're down to, I think, about a million – just north of $1 million or so of Triferic API on our books.

Okay. And regarding the R&D run rate going forward?

Yes, so, we haven't provided any expense reimbursement or expense guidance, but what I'll say is – we had – R&D expense for the second quarter was roughly $3 million reflected in that number was a $1.39 NDA application fee, which obviously won't recur anytime soon. But offsetting that will be increases in R&D expense related to both the ramp up of our pediatric trial and the continued ramp in our medical professional capabilities to support the launch of Triferic.

So, on one hand you've got an expense that goes away next quarter, but on the other hand there will be expenses that come on board to replace that.

So without giving us explicit guidance on R&D for the next several quarters that's probably the best I can give you.

Perfect, well that's great. Congratulations guys on all the progress and I look forward to future updates. Thanks.

Thank you.

[Operator Instructions] Your next comes from the line of Brandon Folkes from Cantor Fitzgerald.

Your line is open.

Hey, this is Bryan on for Brandon Folkes. My first question, if you could provide some color on which types of centers have placed orders of Dialysate Triferic? Thanks.

Sure, thanks for joining us today. And I'd say – as I mentioned on the earlier comments, we've been targeting specific single and medium-sized dialysis centers in the early days of the launch.

So it's still very early days.

We have a handful of accounts on board.

So we do have a good array of accounts that are placing orders, learning how to transform their clinic into successful use of Triferic and begin to really pick up the use as we move forward hopefully and into the rest of the year.

I think with respect to the larger clinics, as I mentioned, with the IV Triferic PDUFA date out there, next year, in March of 2020, we would expect to move into some of the larger organizations who have really developed more, I would say, of an interest on the IV formulations, so singles and mid-sized at this stage.

Great. And then if you could just talk about some of the awareness and medical education efforts you have planned Dialysate Triferic? And how you can leverage these once the IV is approved? Thanks.

Sure, sure. Well, you know, and that was part of the rationale launching Dialysate Triferic as we wanted to get out there and start building our medical education capabilities.

Our goal is to transform the standard of care and the treatment of anemia. And we needed to get out there and start building our medical science liaison team, which we now have.

Our MSLs are in the field actively visiting centers and discussing the science and the medical side of the treatment.

So, you can't underestimate the amount of attention and time required to do this properly and do it in a focused way.

So, we're targeting the right centers where we feel that we can have an impact fairly quickly and get them on board and move on to the next phases of this.

Great. That's my questions. Yes, congrats on the quarter and thanks for answering my questions.

Thank you. Thanks for joining us.

I am showing no further question at this time. I would now like to turn the conference back to our CEO, Stuart Paul.

Okay, everyone. Thank you so much for joining us this afternoon. We'll be in touch and look forward to talking with you on the next conference call.

Ladies and gentleman, this concludes today's conference. Thank you for your participation and have a wonderful day.

You may all disconnect.