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Good morning and welcome to the Q2 fiscal 2021 financial results conference call for HLS Therapeutics. On this morning's call, we have Gilbert Godin, Chief Executive Officer; and Tim Hendrickson, Chief Financial Officer. [Operator Instructions]Earlier this morning, HLS issued a news release announcing its financial results for the 3- and 6-month periods ended June 30, 2021. This news release, along with the company's MD&A and financial statements, will be available on HLS's website and on SEDAR. Please note that slides accompanying today's call can be viewed via the webcast, a link of which is available in the company's earnings press release and at its website on the Events page.Certain matters discussed today -- in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's annual information form, which has been filed on SEDAR at www.sedar.com.During this conference call, HLS will refer to adjusted EBITDA. Adjusted EBITDA does not have any standardized meaning prescribed by IFRS. Adjusted EBITDA is defined in the company's press release and annual filings that are available on SEDAR and on the company's website. Please note that all financial information provided is in U.S. dollars unless otherwise specified.I would now like to turn the conference over to Mr. Godin. Please go ahead, sir.
Thank you, Operator. Good morning, everyone, and thank you for joining us. On our call today, I will start off with a review of operational highlights. Tim will follow with a more detailed look at our financial results. And then we'll hold a Q&A session.The second quarter was another strong quarter for HLS, reflecting the reliable contribution of our foundational products like Clozaril and our royalty interest as well as the emerging contribution from Vascepa, a product with the potential to transform our business.With a quick look at the headline numbers. Q2 revenue was $14.9 million, up 19% from Q2 last year. Adjusted EBITDA was $6.6 million, up 36%, and cash from operations was $1.7 million, up from cash used in operations of $4.2 million last year. Tim will dive into these numbers in more detail, but we're very pleased with both our quarterly and year-to-date results, as they reflect progress in operational execution during a period with considerable interference from the COVID-19 pandemic. We understand that some observers may feel a little COVID fatigue as it relates to the pandemic's impact on our rollout, but we do believe that the skies are clearing and that progress towards the Vascepa inflection point is gaining momentum. We can already see evidence of the positive trend for the product.Looking at several of our key metrics for the launch, the number of patients, prescribers and prescriptions, all continue to increase at a strong clip sequentially. The number of patients grew 41% from Q1 to 4,100, and the number of prescribers grew 44% to 1,050. We will touch on our prescription numbers in a moment, but we believe these 2 metrics and their respective growth rates help to illustrate the growing interest and awareness of Vascepa and are a good sign of things to come.We have spoken previously of 5 catalysts that could occur in 2021 and that are essential components in reaching the inflection point for Vascepa. While the update curve for the product has been steep and getting steeper of late, the inflection point will represent a shift in the curve to a much more dramatic upward trajectory, which is typically encountered in successful launches when all catalysts come together.At this point, I would like to turn your attention to the slides that are viewable on the webcast. The first slide shows the Vascepa prescription uptake curve through the end of June. There are 2 key takeaways from the graphs on this slide. The first is that it shows the steadiness of the growth in scripts that have generated since the launch, despite being hit hard and very restricted in our interactions with physicians during the pandemic. In Canada, strict COVID-19 guidelines have been in place for the bulk of the period since launch and only in the quarter during the month of June have they begun to lift, a stepwise process that will continue during the summer month.Second, and for the reasons we just mentioned, we believe the impact of being included in the treatment Canadian Cardiovascular Society guidelines, Heart and Stroke foundation guidelines and Thrombosis Canada, is only beginning to be reflected in the curve, and we certainly have not yet felt the fuller impact. We expect to see a greater impact from this in the second half of the year, probably not a spike, but a steady trend that occurs over an extended period of time.In terms of the 5 catalysts shown on the right of the slide, today we have achieved reimbursement coverage with firms representing more than 90% of privately covered lives in Canada. And as mentioned, Vascepa is now part of the recommended treatment guidelines from 3 of the most respected organizations in the field of cardiovascular health.Another catalyst that is developing favorably is that COVID-19 restrictions are easing throughout Canada and the market is beginning to open up as a result. Canada has vaccination rates that are among the highest in the world, with 80% of those 12 and older having received at least one vaccine and 64% in that cohort are fully vaccinated. These numbers are certainly promising in terms of anticipating a shift back towards more traditional patient-physician interaction as well as to greater access to physicians for our team. While optimistic and encouraged by these numbers and what we are seeing in the field right now, we know this opening up will be at a measured pace as we are now in the summer months, and some people will also take some time to adjust to new conditions. While the possible impact of the delta variant cannot be excluded, we look forward to recent progress being an important tailwind to the uptake curve in the second half of the year.Our fourth catalyst is sales force expansion to reach the largely untapped audience of primary care physicians. Ultimately, we expect to triple the size of our existing sales team, which will enable us to reach an audience that will be 3x to 4x larger at steady state than the audience we're currently targeting. We would expect to begin to have these new reps in the field in the fourth quarter of this year.The final catalyst is gaining access to public reimbursement for Vascepa. This process remains in progress, and we believe we will reach this outcome within the typical 18- to 24-month window post-launch that is customary for a product like Vascepa, which, by the way, was granted a priority review from Health Canada. Given the strong clinical data supporting the product, the inclusion of Vascepa in treatment guidelines of Canadian and renowned international medical society, the favorable recommendation from CADTH and the solid pharmacoeconomic data that shows the cost effectiveness of the product, we look forward to a positive market access outcome for all Canadians that could benefit from this unique cardiovascular protection.The next slide compares the uptake of Vascepa to the post launched script performance of 2 other cardiovascular drugs, Eliquis and Pradaxa. As a reminder, while imperfect, analogs are useful in helping create a sense of perspective. These are 2 anticoagulant drugs that have similar aim in terms of a focus on cardiovascular risk reduction. This said, we are not suggesting we should match their path, and we all know that the competitive environment are unique and that the underlying market conditions experienced over the last 16 months are distinct from those that existed 10-plus years ago.You will note that we have made some changes to this slide since our last call. First, we have removed the range forecasting for quarterly scripts as the ever-evolving pandemic situation has repeatedly impacted our ability to do so. Secondly, we have plotted the script numbers into a bar chart, which shows the actual scripts for each product in the respective quarterly period post-launch. Third, we've added the line graph that shows in percentage terms on a quarterly basis post-launch where each product was in terms of its total peak year patient number achieved or projected.For example, in the sixth quarterly period following the launch, based on the prescription volume, the estimated number of patients that have been prescribed Vascepa equates to just about 1.8% of the midpoint of our forecast for peak patients' number of 130,000 to 150,000. For Eliquis, in the sixth quarterly period from launch, they were servicing about 1.4% of their 290,000 peak level patients' count but growing at a fast climb.This line chart shows you that in the first 2 years of the launch, prior to hitting an inflection point that the uptake should be increasing, but that at that early stage the patient numbers are still small percentages of what they ultimately could become. We think that at this point, despite the challenges posed by the pandemic, our launch is performing well when compared to 2 successful cardiovascular products that were not subject to similar conditions in their launch. This reinforces both our confidence in Vascepa and our conviction in this peak year sales estimate of CAD 275 million to CAD 325 million and its peak year potential total of approximately 130,000 to 150,000 patients.The chart also shows that Eliquis reached its inflection point in the seventh and eighth quarter timeframe post launch after they gained broad coverage. This is what we are striving towards now. Reaching it will be a function of the final catalyst coming together.As discussed on the prior slide, we now see measurable improvements in our ability to reach physicians and their ability to see their patient with many restrictions being progressively lifted in Canada. This should elevate our current detailing efforts in the second half of the year and enable us to get a fuller impact from our sales force expansion provided, of course, that we don't see a continuation or worse, a full return of those COVID-19 restrictions due to a delta variant flare up.Regardless of any near-term pandemic obstacles, the trend forward is upward, as evidenced by the 40-plus percent quarter-over-quarter growth in number of patients, prescribers and prescription. We see the growing number of catalysts combining to further support this positive view of the second half of the year.We're staying focused on the things we can control or influence and on are getting distracted from the big picture. And the big picture is that while the effect of the pandemic is significant, it is temporary, and it doesn't change the fact that the need for cardiovascular protection remains immense, that the Vascepa solution is unique, and therefore the Vascepa potential remains unchanged.Looking now at Clozaril. Strong Q2 results again reflect its resilience and its strong attributes as a foundational product for HLS. Clozaril's patients' count in Canada through the second quarter was up 3% annually, which is an increase from our Q1 growth rate. That modest amount of growth shouldn't conceal the fact that we have grown our overall share of the market, reflecting the competitive merits of the product and its support system. As lockdown restrictions ease, we expect new patient access to the treatment initiation to continue to improve, which could benefit us in the second half of the year.CSAN Pronto, our point-of-care safety blood monitoring device that addresses the biggest barrier to clozapine adoption, is also expected to help improve patient access to Clozaril. 44 CSAN Pronto devices have now been deployed, which is up from 31 in the first quarter and 23 at the end of 2020. Some of the lift in patient counts in the second quarter is a result of the Pronto deployments. As the market opens up, our deployment strategy is reverting to larger institutional sites, deployments for the second half of the year. The response and feedback from practitioners remain positive, and we look forward to bringing this essential treatment option to a larger patient population as device deployments increase and broader patient-physician access approve.With that, I will turn it over to Tim for a closer look at our second quarter financials. Tim?
Thank you, Gilbert, and good morning, everyone. Starting with the significant progress on revenue and product sales. Revenue for Q2 was $14.9 million, up 19% from Q2 last year. Revenue increased due to higher sales from Vascepa, higher royalty revenues and another quarter of very solid Clozaril results, which for the Canadian Clozaril business, also benefited from the year-over-year rebound of the Canadian dollar from the currency lows experienced a year ago in the early months of the pandemic.As Gilbert mentioned, Clozaril remains a steady and reliable revenue generator for the business, and the number of Clozaril patients in Canada through Q2 increased by 3% annually, which is up from a 2% growth rate at the end of Q1. For Vascepa, it was another quarter of rapid growth as key fundamentals and catalysts that Gilbert described earlier started to come into place.Despite continued lockdowns across most of Canada for most of the quarter, Vascepa product sales increased 42% from Q1 on a sequential quarterly basis. Royalty revenue from the diversified portfolio of royalty interests acquired by the company in September 2020 was $2.2 million in Q2, up from the $1.8 million in royalty revenues in Q2 last year that was based on sales of Absorica in the U.S. market. HLS terminated its ownership of the Absorica marketing rights effective December 31, 2020. As a reminder, we expect the current portfolio of royalty interest to deliver diversified and modestly growing revenues over a 10-year horizon. So far in the 6-month 2021 year-to-date period, the portfolio has generated $4.7 million of revenue, comparing favorably with the $8.4 million of royalties for the 4 quarters prior to acquisition by HLS.Shifting now to expenses. Q2 operating expenses were up 8% from Q2 last year. Most of the increase is the result of higher sales and marketing costs for Vascepa, reflecting additional educational opportunities, following the release of the Canadian Cardiovascular Society's updated guidelines at the end of March. There was also an increase in the cost of product sales due to higher volumes of sales of Vascepa and the continuing rollout for CSAN Pronto.General and administrative and medical, regulatory and patient support costs were relatively flat to modestly lower than the same period last year. Adjusted EBITDA in Q2 was $6.6 million, a 36% increase from Q2 last year. The increase was primarily due to higher sales of Vascepa and higher royalty revenues, which were partially offset by the increase in Vascepa selling and marketing activities and the increase in cost of product sales related to higher sales volumes.Cash generated from operations was $1.7 million in the second quarter compared to cash used in operations of $4.2 million in the same quarter last year. On a year-to-date basis, cash generated from operations was at $8.9 million this year, tracking ahead of the $1.1 million in the same year-to-date period last year.Overall, we continue to have a strong financial position with $21.3 million of cash on hand at quarter end, up from the $20.6 million cash balance at the end of 2020. In addition, we have a $35 million revolving facility that remains undrawn as of today. And under the terms of our credit agreement, we are able to request incremental loans up to a maximum amount of $70 million to support acquisitions and other growth opportunities. In addition, in 2020, we filed a preliminary short-form base shelf prospectus to raise up to CAD 250 million that remains available to us over a period of 25 months, should the appropriate strategic opportunity emerge.And finally, yesterday the Board of Directors declared that the subsequent quarterly dividend of CAD 0.05 per outstanding common share is to be paid on December 15, 2021 to shareholders of record as of October 29, 2021.With that, I'll pass it back to Gilbert for his closing comments.
Thank you, Tim. In closing, we are prudently optimistic with respect to the second half of the year as additional catalysts will help drive Vascepa's uptake and improvements in the environment, as well as our CSAN Pronto deployments should VOI Clozaril to high new treatment initiation levels.Cardiovascular disease remains the #1 killer worldwide. There's a great unmet need addressed by Vascepa. Statins alone are not enough. Vascepa is the first and the only Health Canada approved drug that has been proven to significantly reduce the risk of death or major cardiac event in patients at risk, despite their use of a statin. As the only drug in its class, it has started to and will, more and more, help improve the lives of hundreds of thousands of Canadians with additional benefits to our healthcare system and society at large.That concludes my prepared remarks. At this point, I will ask the operator to please provide instructions for asking a question. Operator?
[Operator Instructions] Your first question comes from Noel Atkinson from Clarus Securities.
First off, so just your discussion of sales force expansion. Have you made a decision on whether you're going to build out your own in-house sales force for the -- to market to the primary care physicians or are you going to use a partner?
The sales force expansion question is on the verge of being finalized and we will certainly communicate those updates in the fairly recent future. For the time being, the options -- or none of the options have been fully eliminated. But as I said, that decision, as you can expect, will be communicated shortly because a deployment in the fourth quarter will require that we start to operationalize that decision. So stay tuned. This is something that should be coming during the course of August most probably.
Are you still targeting the pCPA negotiations to be done this quarter?
We're actually -- I guess no one said forbidden is too strong a word. We're held to complete confidentiality with respect to those discussions. They have started in delayed fashion as a result of the pandemic and I think that it's in the public domain that the backlog is significant at the pCPA. And therefore, we're engaging with them in regular fashion. That process is following its course. Well, when it will actually conclude is something that we don't want to and shouldn't be commenting on. I think we remain confident that we will gain full public access within that 18 to 24-month timeframe that we think is reflective of the value of Vascepa and we'll update you when we get to a point of clarity and confirmation on that element. But for the time being, we think that 18- to 24-month window is desirable and within our aim. Anything before that, of course on the front end of that range, would be highly beneficial as well.
Okay. And then just on the private side. Are there any of the large private insurers that have not yet added Vascepa to their formulary?
I will say very clearly here, no, we have secured agreements with all the large private insurance companies. That's why we could confidently claim that those firms represent more than 90% of all privately covered lives.
Your next question comes from Justin Keywood from Stifel.
On the sales force expansion, just had a follow-up question. Is this contingent on receiving the public reimbursement or are you going as said with the sales force expansion given that the private side could more than support the additional efforts?
Definitely the latter. We are proceeding with the sales force expansion in the perfect world. You could time these things, but we don't control the outcome of the negotiations. We're participating in good faith and so is the other party, and it will come in due course. But the sales force expansion is progressing and will be deployed, whether this last element and the process is finalized or not.
Okay. And then within the press release, the HLS reaffirmed the peak sales estimate for Vascepa, the $275 million to $325 million. Just as a reminder, is that still expected to be achieved? I believe, it was 4 to 5 years from the initial launch. And also are you able to characterize the contribution of that peak sales estimate? What would it be as far as the private and public side?
Yes. I'll start with the second part because it's easy. It's about down the middle, about 50-50. The privately covered population is typically a bit younger, often still active, might be more reflective of the risk related to diabetes and associated risk factor, while the public sector often could constitute a larger share of the patients with pre-existing cardiovascular conditions. Having said that, our assessment from an epidemiological standpoint would point on almost perfect 50-50 delineation between the 2.With respect to our range, I think that -- and this is more based on analogs. Typically products of that size and shape will come into their peak years during the course of the fifth year or following the fifth year leading into the sixth year. And beyond that point, their continued growth would be more related to demographic growth or price-related changes than actual penetration of the market. So I think we've been of the opinion very, very early on at the time of launch that the fifth year would be fairly representative. In practice, there are fluctuations around those averages. In our case, we had to deal with the pandemic in the first year, which hopefully we'll make up for in the coming years in accelerated fashion. But I think that it's safe to say that during the course of the fifth year or following the fifth year, we should pretty much be at or close to maturity.
Okay. That's helpful. And then just a final question on the Clozaril growth in Canada. You mentioned the CSAN Pronto being deployed in a more meaningful fashion. I'm just wondering if the MyCare Insite product, has that been deployed at all and is that contributing to any patient growth?
MyCare Insite has not been deployed. We've elected to defer the launch because we thought that launching -- and the uncertainty of the pandemic wouldn't necessarily be a smart thing to do. We continue with Pronto. We continue, obviously, with Vascepa, having launched before the pandemic, but we thought it would be safe to make sure that the environment is stabilized before we introduce the MyCare device. So we planned this for the backend of this quarter. The situations are starting to improve and the right factors are starting to converge. And that would seem to confirm that our intent here could coalesce and you could attend to a launch before the end of the year.
Your next question comes from Rahul Sarugaser from Raymond James.
So I guess my first question is specifically on the number of prescriptions for Vascepa. The guidance you had provided previously for this quarter was just sort of between 8,000 to 14,000, recognizing of course that there have been COVID related restrictions on limiting your ability to drive that revenue and seeing that the number came in slightly below that at around 7,600. But you do refer to June being really strong. And so perhaps could you give us a sense into how July looked? And given the ramp that you're seeing in June and hopefully July, what is your confidence that we should start now -- really start to see that ramp in the second half of the year?
Let me make a few comments with respect to that and I would say our limited ability in the very near-term to forecast kind of weekly data points. First of all, I want to say that the month of June was clearly stronger. You can see it on the TRx chart here, that curve is bending. It's not getting to the steepness that we alluded to during the call, but clearly a strong indication. And when I take a step back, while we did mention a range and we felt slightly below that range, I have no shame in reporting those 40% to 44% quarter-over-quarter growth. I think they're healthy numbers. It goes to show that it's hard to try to land, especially in the short-term, on a prediction of some sort, and that there are many elements, some of which are fundamentally sometimes random fluctuations and over a period over the other one. So I would say that yes, the month of June was strong. That month of June, clearly stronger than the previous 2 months, hence the shape of the curve. That strength is carrying into the second quarter. The -- I will not comment on July. It's still -- we're still getting the data for that month. But clearly July is typically a quieter month on the physician front. But when you look at it at the end of the quarter, at the end of the third quarter, these things get hold up anyway. So I would say that the strength is continuing in -- should be continuing into the third quarter.And with respect to where that will lead in terms of quarter-over-quarter growth, I'd love to be -- to have a great crystal ball and point to a precise number. I can tell you that strong double-digit growth here continues to show how undeniable the interest of this product by the physician and their uptaking is happening -- continuing to happen in spite of all this obstacle course that we've been facing. So I'd like to look at data in as detached away as possible, interpretate what the significance of that data is in terms of physician behavior. And in that case and in the present case, whether we look at it at -- from a near-term standpoint, on a week-to-week basis or from an aggregate fashion, it's quite undeniable that product is better and better understood, that this knowledge is being disseminated progressively, and that -- I think this is what makes it exciting to us to think of sales force expansion and eventually broadening of the access. It just opens up that rate of growth to a much larger segment of the market.
But your points are well taken and your appreciation of the data is so very much appreciated. So just a quick follow-up question. I noticed a small uptick in sales and marketing in the quarter. Now is that sort of you guys ramping for Vascepa? You referred to that kind of starting to come online potentially in the next quarter. Can you give us a little more sense, a bit of a sense for what that sales and marketing number steady state should be as you get that sales force ramps?
Yes. I'll give a part of the answer and I'll ask Tim to chime in if there's anything that I'm missing here. The result of the second quarter is the aggregation of many things we've done. We have all hands on deck dealing in a situation as it evolves. It's like building a dam with the water level rising behind it as you build it in a sense. And I would say that the result is, first of all, an increase on Vascepa in spending as it relates to the favorability of the guidelines that were published. So we -- it triggered a number of activities that are clearly incremental and that's because we have a strong rationale to do so.At the same time, I want to make sure that it's noticed that we continue to be very -- we have a culture of discipline with respect to our spending. We want to make sure that that spending is done at the right time so that it's productive. And it's pretty clear that the pandemic had us reconsider certain type of spend because they thought they wouldn't have the same productivity and that productivity would be greater if we wait a little bit and then essentially unleash those means.I think the guideline is a good example of that. It happened at the end of March. We turned around and integrated those findings into the typical field and conferences related activities, publications and so on. And the time became ripe for those to be pushed and disseminated to the broader and broader number. And that will continue, I would say, for at least the next year, if not even longer than that. So I think that's pretty much some of the more granular element that can explain increases in spend, yet at the same time fairly favorable outcome in terms of top line and adjusted EBITDA. Tim, anything else you want to add?
No. I think that captures it really well. Certainly, that was the rationale behind the increased investment in Q2 that was directly in response to that opportunity and the strong recommendation that came out in those guidelines. And so that was a very, very smart thing to respond very quickly to that.
Your next question comes from David Martin from Bloom Burton.
You had mentioned that the 50-50 split between public and private reimbursement in your target market. When you get public reimbursement, is it just a matter of 1 plus 1 equals 2 or does getting public reimbursement also kick start greater adoption amongst the privately insured patients?
There's a little bit of both. I think it's a very good observation, a question here. Doctors that have become comfortable using the product understand well the patient profile, but also are well aware that it is only covered by private plans, are using it with those specific patients. And therefore, when the news of a broader public reimbursement was to reach them, you would expect them to fairly spontaneously augment significatively their use of the product, right. This has to be timed with those patient visits, of course. It doesn't happen the next day. But over the course of the next quarter or 2, you would expect that that generalization would happen.The other facet of the question is that some doctors will actually see public reimbursement as a signal, yet again of an additional endorsement and a validation of the value of a new therapy. And those doctors -- and I guess we could put them more -- in a slightly more laggard camp -- we'll get into motion after having received that signal and after having integrated everything that relates to the good use of the product. So I think it's a little bit of both net-net and all of that's what we confounded in the numbers coming. I think it just goes to show the strength of the impulse and the long-lasting effect of the impulse of gaining public access.
Great. Next question. Of the roughly 7,600 scripts in Q2, what percent of those would you say were fully reimbursed and what percent of them did you have to subsidize? And is that percentage of subsidized scripts going down each quarter?
The answer has a few facets as they were completely straightforward here, but we have what we call a VAP, the Vascepa Assistance Program, and that program is used by physicians and patients that are presented with it so that they can benefit of a certain level of support, financial support. In some cases, if the patient was not covered at all, that support would be very large. In the cases where the patient is covered but still has to face a certain -- a co-pay of a certain level, our assistance may reduce that out-of-pocket in a way that is not insignificant.So I would say that the use of the Vascepa Assistance Program is probably -- I'll here again ask Tim to corroborate. I think it's probably 1 in 3 patients. So 2/3 of the patients are actually either covered or are getting the product without financial assistance, and I would say that 1 in 3 is getting financial assistance. Tim, do you want to comment further?
Just -- that's exactly right. To put a little bit more color on it, there's gradually 2 trends happening. We're seeing more patients go through and be covered by their private plans and not be part of that program at all. And then we're also seeing within the plan, greater proportion being picked up by the private insurers as well. So it's gradually coming down as a percentage that's covered by HLS.
Okay. Next question. The chart where you show Vascepa, Eliquis and Pradaxa. Pradaxa and Eliquis take quite a different trajectory after the sixth quarter of sales. I'm wondering if you can think back to why the 2 drugs diverged at that point. And do you think Vascepa looks characteristically more like Eliquis or like Pradaxa?
I think we've seen the limitations of those comparison. We're trying to define what is within the realm of various business cases. I think that's where the usefulness is. I certainly hope that we'd be closer to Eliquis than Pradaxa, although Pradaxa had a very nice career within this competitive set and in that time period. I think that in the end, what makes that curve evolve in a favorable way at some point in time boils down again to market access, right. This is ultimately the final frontier. And I mean -- by this, I mean the final barrier, right.Launching a product is like an obstacle course. You need to jump over the obstacle, circumvent the obstacle or bring it down. And this environment is -- hasn't changed over the years, even if sometimes some obstacles are becoming harder to either circumvent or overcome. But market access ultimately is always that they get to play for the full market and full market share and to fully materialize the value of the product. So I think that with respect to Eliquis here, one could say, hey, they're doing better or they're taking off faster. Yes. If they reunited with the conditions earlier, they will, which doesn't mean that once those conditions are reunited in the case of Vascepa, we will not have a spectacular path of our own. So I think that is really the intent and providing those elements of comparison is to comfort, reassure or give credence to some of those next things that we are working on, as being -- truly being catalyst.
Okay. I just have one quick housekeeping question if I could add it. The royalty dipped about $0.5 million versus Q1. I'm wondering, was there anything one-time about it? Should we expect it to bounce back, stay flat with where it was in Q2 or decrease further in subsequent quarters?
Tim, do you want to handle that question?
Sure. I think over time, we should expect it to be relatively stable. That's part of what we like about this diversified portfolio. We perhaps were a little ahead of the average after Q1. This probably brings us to a ground where I would expect it to be on average. If you look at the run rate, it's very nicely up versus where it was, kind of annualized for the period before we acquired it. And so it's very much tracking with our expectations on a year-to-date basis.
Sorry, should I average Q1 and Q2 and say that's the run rate or Q2 is a run rate?
No, no, the year-to-date.
[Operator Instructions] Your next question comes from Chelsea Stellick from IA Capital.
Just a couple of questions from me. If you could just remind me I guess what the current audience size is that you're targeting. Are the peak sales or the current target, is this based upon that audience size or is it based upon the audience size that would be cited by the fourth catalyst, the 3% to 4% increase from somewhat larger sales force? And is it safe to say that the whole sales force will be trained and deployed and targeted for Q4?
Three elements for that answer. First of all, at the time of our launch and in the months that followed as the pandemic progressed, we were targeting first, let's say, notionally about 2,000 physicians. We augmented that target size to 2,500, give or take, because some physicians couldn't be reached, right. And this has been the audience that we've been working on with the existing sales force. So bear in mind about 2,500, the intended list and size of target. The sales force expansion will allow us to close to triple that number. And therefore, once that sales force is expanded, you could expect us to grow closer to 7,500 and maybe 8,000 physicians.Having said that, over time, the number of physicians per sales representative also increases. In other words, once a preliminary, the initial contacts, the first 5, 6, 7, 8 visits have taken place, and we're go into maintenance mode, we then go to a second phase, which is to expand the roster of physicians that are introduced to Vascepa physicians. So I guess what I mean to say here is that if a rep will -- sales representative or territory will have at inception about 125 targets, at maturity that number could be much closer to 175 to 200. And that's why we're also saying that the maturity will probably reach closer to 12,000 physicians. We'll adjust along the way and we'll tweak things. It's also dependent on territory configuration, ease of travel, and reach, and so on. But these are the numbers, 2,500 today, more than triple in size that sales force expansion and eventually at steady state 10,000 to 12,000.
Okay. So the 2,500 or the 7,500 would be what could get you to the $275 million to $325 million range?
It would be a steady state -- would be once things have settled in and we should cover 10,000 to 12,000 physicians at that time.
And I guess, as we're seeing more restrictions with the delta variant, can we expect a Q4 target or does everything get shifted out more if there's more restrictions? And I guess I'm just trying to gauge the sensitivity of these targets to COVID restrictions.
Today, in spite of the improvement that we've been attending to during the second quarter, we still have a portion of our targeted audience that have not been reached or have not bit reach in sufficient frequency. So I think that if the situation remains stable and continue to improve, that will continue to improve. If in light of the uncertainty or the reemergence of constraints, some doctors could continue in the current path and not open their practice to sales calls, then I think that that should continue to limit us in terms of our efficiencies and our reach. So I've kind of made the promise to myself not to speculate on what lies ahead in the environment because, wait, let's face it, everybody has been wrong, including myself, in trying to say where the COVID will take us.One thing is clear. We have the radar screens deployed here and when the window of opportunity opens up, we chase it down. We'll continue to do this. Right now, it's positive. June was a clear improvement. July continued in that trend. Canada is in a good place in terms of their overall performance in terms of key parameters, the epidemic. So I definitely have optimistic lenses on, but I'm still fundamentally a realist and we -- display by play evolves on the basis of the reality rather than our hopes. Right now, it's good and it's in expansion. I think that's the positive news. If it contracts again, we'll have to deal with it and report it as is.
Okay. Another question from me. I don't know if it's possible to answer this or give us guidance on this, but what would the breakout be or what is the breakout of the Vascepa contribution to your revenue?
Tim, do you want to comment? We're -- we typically don't provide much guidance on a product to product level and furthermore on a -- in the context of a launch. But Tim, is there anything useful that you think could be shared here?
Yes. I think we've stayed away from that. The Vascepa results are growing and they're significant. So we've highlighted the growth particularly quarterly and I think we'll continue to do that.
Okay. Understandable. And just a last question for me. Just any commentary on pent-up demand for CSAN Pronto?
I'm sorry, on what kind of demand you say?
On any pent-up demand for CSAN?
Pent-up demand.
Yes, the pent-up.
Yes. Well, the -- yes, the -- I would say that the demand for the technology is not quite at the point of being like a spontaneous demand, right. We're not fielding requests for the demand. It is still something that we are deploying on the base of our own initiatives and our own outreach. So that's with respect to the deployments. And those deployments are not trivial, but when they're well done their effect is long-lasting. But it's a technological deployment. It requires training and then eventually, top of mind, recollection for the usage of the device every time in the future a patient could benefit from it.The -- what we have attended to in the second quarter, and that's why some of our numbers were good and better in relation to our competition, is that the deployment and the user of CSAN Pronto has shown its ability to bring to our registry and our Clozaril brand patients that might not have come otherwise, right, which is the whole point, right. Patients that would either refuse to undergo treatment initiation because of the intensity of that safety blood testing or existing patients seeing the benefit of that technology and voicing their preference or their doctors voicing their preference and therefore, those patients could and would end up being moved to our registry.So I think we're seeing this nascent effect. It's still clouded by the whole COVID environment, but at least we're seeing signs here that those dots are being connected and that's what we're counting on in the forthcoming quarters and forthcoming years is that this becomes a gold standard of sword and something that is uncircumventable.
There are no further questions at this time. I'll turn it back to Gilbert for closing remarks.
Thank you very much, Operator, and thank you to all of you. Thank you to all the analysts for their questions. So thank you for participating in the call. We look forward to reporting to you on our progress throughout the years or in interim we'll certainly communicate any meaningful developments as they materialize. Thank you very much. Goodbye. Have a good day.
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