Achieve Life Sciences Inc (ACHV) 2004 Q4 法說會逐字稿

Good afternoon. My name is Crystal and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Sonus Pharmaceuticals 2004 year end conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.

If you would like to ask a question during this time, simply press star then the number one on your telephone key pad. If you would like to withdraw your question, press the pound key. Thank you. Ms. Pamela Dull, you may begin your conference.

Thank you, Crystal, and good afternoon everyone. Welcome to Sonus Pharmaceuticals year end 2004 conference call. I am Pamela Dull, Director of Investor Relations. To begin the call, I'd like to remind everyone that some of the statements made today may include predictions, estimates and other information that might be considered forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from our predictions and estimates as a result of various risk factors, including those identified in our Form 10-K for the year ended December 31, 2003, our Form 10-Q for the quarter ended September 30, 2004, and other SEC filings, all of which can be accessed on our website. With that, I'll turn the call over to Mike Martino, President and CEO of Sonus.

Thanks, Pam. Hello and welcome, everyone. Joining Pam and me on today's call are Alan Fuhrman, our Chief Financial Officer, and Dr. Michael Stewart, our Chief Medical Officer. We have a full agenda today, and we are eager and excited to review our 2004 accomplishments and our key objectives for 2005. Before doing that, however, I'd like to say a few words about today's press release regarding Synt:em. Our agreement with Synt:em contemplates that the transaction would close on our before March 31.

The agreement further provides that if the transaction does not close by that date, then it can be terminated at the discretion of either party without the payment of a termination fee or liability; or Sonus at its sole discretion can extent the effective date to April 30 by making a 500,000 Euro forfeitable loan to Synt:em. At this point, we have concluded that despite the best efforts of the parties, that it will be impossible to consummate this transaction by March 31 based on SEC's review of the proxy, the resulting need for additional work to answer their questions, and the required minimum notice to our stockholders necessary to hold a special meeting to approve the transaction. Therefore, consistent with the provisions of the agreement and as indicated in our press release, we have informed Synt:em of our decision to terminate the stock purchase agreement, effective March 31, 2005. In reaching this difficult decision, the board and I considered the opportunities we have in front of us with TOCOSOL Paclitaxel, as well as the human and financial resources required to take advantage of those opportunities.

Specifically, we believe that TOCOSOL Paclitaxel has the potential to be a differentiated taxane [PHONETIC]. To achieve this goal, our clinical and regulatory team of advisors have recommended a pivotal Phase III trial with 700 evaluable patients, because we believe such a trial is necessary to provide the statistical rigor and power to achieve clinically relevant and meaningful primary and, importantly, secondary end points to support a differentiated label for the product. Michael will go into a little more detail on this trial in his comments, but suffice it to say that this trial size is at the upper end of our previous guidance of between 400 and 800 patients. We continue to believe that we will conclude a partnership to provide a significant portion of the resources necessary to undertake and complete this trial, and I'll update our progress on those discussions later on the call.

However, even with a partner, the scope and cost of the Phase III trial, together with our desire to stay intimately involved with the ongoing development and commercialization of the product, simply requires us to maintain the focus of our existing resources both human and financial, to assure the required progress. And short term, we believe this progress on TOCOSOL Paclitaxel is essential to ensure ongoing access to capital and an acceptable cost of capital, and we believe this focus is best achieved as a stand-alone company. We continue to have very high regard for the management, pipeline and technology of Synt:em, and wish them nothing but continued success.

We remain committed to a longer term vision of diversifying our business through our external development efforts and expect that we will continue those efforts when we have achieved the near term objectives of TOCOSOL Paclitaxel that we will outline in this call. Now before proceeding with our 2004 business review and outlook for 2005, I'd like to ask Alan to provide a financial overview.

Thank you, Mike. Regarding our 2004 financial results with today's announcement on Synt:em, we have requested a fifteen-day extension to file our 10-K in order to have adequate time to make the necessary changes to our 2004 financial statements and disclosures. We do not foresee any issue filing the 10-K within the extension period, and we will file a press release with our 2004 results as soon as practical. We did end 2004 with 20.6 million in cash. I also want to note that our Sarbanes-Oxley 404 audit is substantially completed, and will be finalized when the 10-K is filed.

I anticipate that our SOX 404 audit report will indicate that our internal control over financial reporting was effective as of December 31, 2004, which means that we did not have any material weaknesses in this process. Next, I want to provide guidance for our 2005 burn rate. We expect to have a base burn rate of about 1.5 million per month during the first half of the year, increasing to approximately 1.6 million per month on average for the full year. The base burn rate does not include the cost of the Phase III pivotal trials for TOCOSOL Paclitaxel. The 2005 expense for the trial will be determined when the special protocol assessment is finalized and the actual start date of the trial is known.

We will provide additional guidance from the 2005 cost of the Phase III study once we have these additional details. Based on the size of the trial, as Mike has discussed, we estimate that the total cost of the trial over a period of about three years will be in the mid to upper $30 million range. At this point, that completes our financial overview, and I'll turn the call back to Mike.

Thanks, Alan. We'll used the following approach for the balance of our discussion today: First, I'll provide a high level overview of our progress over the past year on development efforts with TOCOSOL Paclitaxel. And then, Michael Stewart will provide some details on those accomplishments and bring us up to date with recent progress.

Following Michael's update, I will discuss our partnering efforts with TOCOSOL Paclitaxel, highlight achievements on our other key objectives for 2004 and summarize our objectives for 2005. So let's begin and review 2004, which was a very busy and productive year for Sonus. We met a number of strategic objectives throughout the year that we believe enhance our ability to deliver a greater value in 2005 and beyond. Our number one corporate goal for the year was to continue to develop and realize the value of TOCOSOL Paclitaxel. Appropriately, this goal consumed a lion's share of our attention and efforts during the year, and it accounts for a significant number of our accomplishments.

Specifically, we made the following progress: In March of last year, we completed patient enrollment in our clinical pharmacology study, comparing TOCOSOL Paclitaxel and Taxol. Treatment of the last patient to enroll was completed in June, and the final data were available in September. The results enabled to us update the Phase II trial plan and submit our data and analysis to FDA in September in support of our 505-B2 registrational strategy. An abstract reporting this study was also submitted to the American Society of Clinical Oncology in December, and I am very pleased to announce that the studies have been accepted for presentation at the ASCO meeting this year, which is being held in Orlando, Florida May 13 to 17. We are pleased to make three presentations about TOCOSOL Paclitaxel at the ASCO meeting in June, 2004, reporting the results of our Phase II A studies in ovarian, non-small cell lung and bladder cancers.

That was the first time that some U.S. and European investigators had seen detailed information about TOCOSOL Paclitaxel, and a great deal of interest resulted from that exposure. In September, we initiated a Phase II B study of TOCOSOL Paclitaxel on the first line treatment of women with metastatic breast cancer. We are pleased that the study promptly enrolled 47 patients in about six weeks. We've had an early glimpse of the data from the study, which are in line with expectations, and Michael will share more about that with you in his update. In September, we also submitted a proposal to the FDA for our Phase III pivotal trial; supported by information from the clinical and nonclinical studies conducted to date with TOCOSOL Paclitaxel, including as I said earlier, the data from the clinical pharmacology study.

That submission led to a productive end of Phase II meeting with FDA Oncology Division in December, where they indicated that it would be appropriate to proceed with a single Phase III trial leading to submission of a 505-B2 NDA for TOCOSOL Paclitaxel. Further, we agreed with FDA to use a special protocol assessment process for the Phase III study which will result in an agreement with the agency about how the trial will be conducted and how the results will be analyzed. We believe that investing the time required for the FDA process before we activate the study is valuable for Sonus, as it facilitates the review of the Phase III results and defines in advance what will be an acceptable basis for approval of our NDA.

In December, FDA granted orphan drug status to TOCOSOL Paclitaxel for the treatment of non-superficial urothelial cancer. We are pursuing an indication for the treatment of inoperable urothelial cancer in parallel with our 505-B2 strategy. The orphan drug designation for this indication adds to the fast track designation granted by FDA in 2003 for developing TOCOSOL Paclitaxel for the treatment of patients with metastatic or locally advanced inoperable urothelial cancer. Finally, throughout the year, our intellectual property estate for the TOCOSOL technology and TOCOSOL Paclitaxel was further strengthened with the issuance of four new patents, including two in the U.S. and one each in Taiwan and Canada; which are the first patents to issue outside the U.S. In the past couple of weeks another U.S. patent on our technology has also issued.

Sonus now has a total of seven issued patents in the U.S. and two non-U.S. patents, with six of those specific to TOCOSOL Paclitaxel. We believe that our intellectual property provides broad protection to practice in our space, and we are committed to expanding that protection through existing products and potential new products. Now before reviewing our progress on other key objectives for 2004, I'd like to turn the call over to Michael to provide more detail on our progress with TOCOSOL Paclitaxel.

Thanks very much, Mike. As mentioned earlier, we've had an extremely productive end of Phase II meeting with the FDA Oncology Division late last year, during which we clarified several key issues about the preclinical, clinical and regulatory components that will be in our NDA when it is submitted. In particular, we discussed critical points about the design and conduct of our Phase III trial and the content of this NDA. Based on the guidance that FDA has provided, we submitted an updated protocol for review and we are proceeding to finalize our agreements about the study design, how it will be conducted and how the results will be analyzed. That's essentially what the FDA process is about, and it commonly takes about three to six months from start to finish.

We've been extremely pleased with the timely responsiveness of the FDA thus far in the process; but clearly, that's something we do not control. If we continue to make good progress as we've done to date, we will be on track to initiate enrollment of patients into the Phase III study during the third quarter of this year. Until the FDA is in place, we will not be sharing specifics about the Phase III study design. However, we can provide some general information. It is our intent to pursue a single pivotal trial in an indication where Paclitaxel is approved as a single agent, with a primary end point of objective responses rate and secondary end points of time to progression and survival duration.

We expect to submit the NDA with data on the primary end point, followed by supplemental applications when is data are mature for the secondary end point. Most importantly, we intend that this trial will be powered to achieve statistical significance on all three end points. We may have to enroll up to 800 patients in order to do that. We believe this is the best strategy. It has the potential to competitively differentiate our products and to increase its value to cancer patients and physicians. To support the NDA, we recently had a successful CNC meeting with the FDA to confirm the commercial manufacturing process, the product release specification and our facility testing program.

Production of the clinical supplies needed for our trials will be performed this year at the commercial scale. Turning to the bladder cancer program, as Mike mentioned, we were very pleased to receive notice from the FDA Office of Orphan Drugs that they had granted the designation to TOCOSOL Paclitaxel at the end of last year for the treatment of non-superficial urothelial cancer. Products designated as an orphan drug are those that are being developed to treat diseases affecting fewer than 200,000 people in the U.S. The Orphan Drug Act provides marketing exclusivity to the first sponsor to obtain approval for an orphan drug, as well as a waiver from the FDA user fee to review the NDA for the designated orphan indication.

The orphan drug designation complements the fast track designation awarded in 2003. We were pleased that the FDA has recognized the potential of TOCOSOL Paclitaxel to offer meaningful clinical benefit to patients with this unmet need. Our Phase II B. trial in patients with inoperable or metastatic urothelial transitional cell carcinoma continues to expand. In addition to U.S. study sites at major cancer centers in Philadelphia, Baltimore, Cleveland and Seattle, we will soon open new study sites in Spain and England. We believe this expansion in Europe will provide enough patients to be able to report statistically meaningful response rate information by the end of 2005, and we will keep you updated as the study progresses this year.

The Phase II B. breast cancer trial enrolled 47 patients last September and October, all of whom began receiving TOCOSOL Paclitaxel as the initial therapy for their metastatic disease. As of March 4, the investigators are reporting an overall objective response rate in the mid 30 to 40 percent range, and 35 patients remained on active treatment. However, these results are not yet audited and are subject to change. We anticipate being able to estimate median time to progression by late summer of this year, and follow up will continue throughout the next two years for the survival end points.

Finally, as Mike mentioned, we were notified last month that the Scientific Program Committee of the American Society of Clinical Oncology accepted the clinical pharmacology study that we conducted in the first half of 2004 for presentation at ASCO 2005 in Orlando in May. In that study, the pharmacokinetics and acute safety of Paclitaxel administered as TOCOSOL Paclitaxel and as Taxol were compared in a comprehensive study involving 36 patients with advanced non-hemotologic cancers. The study was conducted in Germany, Holland, Belgium, South Africa and the U.S. The largest number of patients was enrolled at the St. Georg Hospital in Hamburg, one of the largest hospitals in Germany, and Professor [INAUDIBLE], the head of the cancer center there, will make the presentation at ASCO on Sunday morning, May 15.

This was an exceptionally detailed study and the results confirmed that the TOCOSOL formulation is able to deliver substantially more actiontive Paclitaxel into the circulation than can be achieved with Taxol. [INAUDIBLE] we have already seen from previous studies about the ease of use and tolerability of TOCOSOL Paclitaxel given weekly for extended periods, as was done for over a year in some patients on the Phase II A. program. We believe we are assembling a compelling argument to demonstrate that TOCOSOL Paclitaxel will be the taxane of choice for patients and physicians. Before I wrap, up let me tell you briefly about Dr. Mary Bolton who has recently join us as Vice President for Clinical Research.

Marry received her Ph.D. in Physiology from the Johns Hopkins University and her M.D. from the Medical College of Pennsylvania. Following a residency in internal medicine, she deposed actual research fellowships in pharmacology and toxicology and a clinical fellowship in medical oncology. She is board certified in internal medicine and medical oncology. She was in private practice before joining the faculty of the Lombardic Cancer Center at Georgetown University. She subsequently entered the industry and has led clinical research teams for U.S. Bioscience, Orthobiotech, Genentech, Pro-Therapeutics, Daimler Genetics.

We are delighted that Mary has joined our team and know that she will add substantial value in completing the development and registration of TOCOSOL Paclitaxel and in advancing our pipeline candidates through clinical development. With that, I will turn the call back to Mike.

Thank you, Michael, both for the update and for the significant progress. Securing a partner was a key corporate objective for 2004. We fully expected to achieve this goal, and we did not. In retrospect, I can say that uncertainty on the part of prospective partners about our proposed 505-B2 regulatory strategy was a major concern for them.

We believe this concern can be addressed now that we have received positive guidance from FDA on our pivotal trial program, and are moving forward with the special protocol assessment process. Our partnering discussions are continuing in parallel with our decision with the FDA on the FDA. And at this point, we believe that finalizing a corporate deal this year is likely to come after the SPA. is in place. Now let's finish up our discussion on 2004 achievements. Our second corporate goal for 2004 was to continue to expand and apply our drug development capabilities to become a more diversified, multi-product company.

We continue to make good progress on this objective with the development of additional oncology product candidates. Following the presentation of encouraging preclinical data on our novel cancer [INAUDIBLE] derivative at the American Association for Cancer Research annual meeting in March, 2004, we made the decision to move one of those candidates into the latter stages of preclinical development. Our objective is to move this compound to an IND and then into Phase I studies as expeditiously as possible. Progress, of course, is dependent upon both available financial resources and the emerging preclinical data for the compound. Finally, and perhaps most importantly, throughout 2004 we also strengthen our team with the addition of talented individuals to complement the outstanding team already in place.

In January, Lynn Gold joined Sonus as Vice President of Research and Process Development. Sonus' veteran Dean Kessler was promoted to Vice President of Preclinical Development and Neile Grayson was appointed as Vice President of Strategic Planning and Corporate Development. In the middle of the year, Ingrid Rasch join us as Vice President of Human Resource; and in September, Alan Fuhrman was appointed Senior Vice President and Chief Financial Officer. Finally, as Michael just mentioned, we are pleased to recently bring Dr. Mary Bolton on board of Vice President of Clinical Research and Development. Again, all in all, 2004 was a year of hard work and steady progress that advanced our goal of creating a company with sustainable value, based first and foremost on maximizing our opportunities for TOCOSOL Paclitaxel.

Of course, value creation is a process, and that progress continues in 2005 with objectives that build on our 2004 achievements and take us to the next level as a more capable company and as a more valuable investment. Our objectives are still aimed at developing and realizing the value of TOCOSOL Paclitaxel and expanding and applying our technology to become a more diversified, multi-product company. Our specific objectives for 2005 are as follows: First ,we are working hard to finalize the TOCOSOL Paclitaxel Phase III special protocol assessment with FDA, and we expected to this within the next three months; Of course, dependent, as Michael said on FDA's timing.

Second, are our goal is to establish a cooperate partnership for TOCOSOL Paclitaxel, and we expect to do so this year following agreement of SPA with FDA. Third, we plan to activate the Phase III trial and we expected to this in the third quarter, based on availability of necessary financial resources. Fourth, we will continue fast track and orphan drug development of TOCOSOL Paclitaxel in advanced inoperable bladder cancer, with the objective of having statistically meaningful data by year end. Fifth, we will continue our efforts to move internal product candidates to clinical development. We currently expect this next product candidate to be our novel camptothecin compound, and our progress with this product will be guided by the ongoing strength of data from preclinical studies and the availability of financial resources.

That completes our prepared remarks, and we'd be pleased to answer any questions. Crystal, would you please open the line for questions?

[Caller Instructions]. Your first quarter comes from Matthew Kaplan.

Hi, guys, thanks for taking my questions.

Hi, Matt.

Congratulations on the announcement with respect to Synt:em. I think that's terrific news. The -- a couple of questions with respect to getting more of a sense on the FDA status and whether those -- and you gave us some color in terms of how much longer you think it's going to take . But what -- are there any kind of sticking issues that you need to get past with that?

It's difficult to speculate on what FDA may say based on the information we sent them. At this point, based on our discussions to date, we don't anticipate any quote, unquote, sticky issues. There is a process to follow. And the guidance that we've given is consistent with FDA's guidance on how much that overall process will take. Of course, to the extent that we control things, we'd like to move it along faster than that. Michael, would you add anything to that?

No, I agree. I think we are not going to know much more from them until they get their assessment from their external consultant, there is a -- the typical FDA process. The division uses the consultant from the ODAC [PHONETIC], and they do their own internal review of themselves of course, but I don't think we will be hearing any more details until we get the consultant

And I just want to make sure I was clear. There is no break up fee or any fee associated with the termination of the Synt:em acquisition?

That's correct.

Great. And it sounds like you've made terrific progress with respect to the Phase II B in breast cancer, 47 patients. Can you give us a breakdown in terms of the CRs and the PRs you mentioned, that you had a preliminary, unaudited response rate or objective response rate of 30 -- mid 30s to mid-40s range. Can you give us a sense in terms of the CR and PR?

Well, I actually don't have the data in front of me, so no, I can't tell you what the numbers are. They -- we look at two things. We do the first response assessment at -- after eight weeks of treatment. If there is a response, that individual patient then undergoes a confirmatory assessment four to five weeks later. Everybody then undergoes another assessment of 16 weeks. And so once we actually have all of the best response data, those films are under review by an independent radiologist. I think that in the coming weeks we'll have a much better sense of where they are, but actually today I don't have the breakdown. And this is, as I mentioned, this is the investigator reporter responses that keep coming in every week. So that's why I don't have the numbers right with me.

And could you remind us of the design of this study, is it weekly dosing?

Yes.

Okay, so it's a weekly dosing at what dose?

Starting dose is 120 per square meter every week.

For how many weeks, how long?

Well, they get treated -- it's a progressive disease, so that could be easily up to nine months on average, and some of them will go longer. Obviously, you know, we have -- the last update I had, we had 35 of the 47 still on treatment. Some of those come off treatment for reasons that were not related to progression. They've elected not to continue in the study. But in this situation, you would expect that by about nine months half of the women would have had progressive disease and the others would continue on treatment. It can go for awhile, but we hope to have median time to progression by later this summer.

Would this design of the study be -- potentially be similar to the confirmatory Phase III that you're talking about with the FDA?

Well, what we're talking about what the FDA, we very clearly -- it's been our intension to develop this product for weekly dosing, absolutely.

Thank you. I'll jump back in queue.

Thanks, Matt.

Your next question comes from Adam Noah.

Well, thanks for taking my questions.

Hi, Adam

With respect to your partnership with TOCOSOL Paclitaxel, can you be more specific about when you expect it this year -- third quarter, fourth quarter?

Well, clearly from our perspective, if you consider two of Alan's statements, number one that we ended the year with a little over 20 million in cash on the balance sheet, and secondly that will over the three years of this pivotal trial -- and I want to point out that, again, the pivotal trial is designed to support a primary objective response end point and secondary end points related to time to progression and overall duration of survival. And so particularly the gathering and interpreting and packaging the data on those secondary end points could take up to three years. But as Alan had indicated, we expect the cost of that trial to be in the mid to upper 30 million range. So we will require additional resources to feel comfortable initiating this trial and making a commitment to patients and investigators. We have been consistent with that -- an expression of that philosophy all along. So we are -- we are expecting to be in a position to initiate that trial in Q3. And everything we are doing is aimed towards achievement of that objective.

Do you expect any up front payments, or do you expect it to be mostly a back ended deal with taking over the trial cost?

Adam, at this point in the negotiations, I think everyone is best served if I don't negotiate in public. And I can say that we are -- our focused is on securing a partnership with someone who believes as we do that TOCOSOL Paclitaxel has the potential to be a differentiated taxane, someone who agrees with us that that requires a comprehensive and statistically rigorous Phase III program, in addition to an ongoing clinical development program to continue to differentiate the product after that initial approval, and is committed to providing the resources to implement that regulatory and marketing plan. And I would also say that we continue to be willing to -- not only willing, but we would prefer to not only stay involved in a meaningful way in the development of the product, as well as the commercialization of the product. And we are in discussions around a variety of deal terms and structures to share the opportunities and risks in that type of approach.

I have one more question if I may. You mentioned that you don't want to explain the details of your Phase III trial. I have a question. Please explain to me why you think you may need 700 or maybe 800 patients when your competition has been successful with patients in the 400 to 500 range?

Well, not all the competition has been successful with patients in the 400 to 500 range.

That's true.

I think it depends on -- let me give you a businessman's view, and then I'll turn the science, in addition to the business aspects, of it over to Michael. You know, certainly when you design a clinical trial, you need to consider the trade-offs. And you can make bets about your product over performing the control arm in a primary study, and if you're lucky and you win that bet, then you both get to go on to a secondary end point. If you're not lucky and you lose that bet, then you've just wasted the cost involved in studying that number of patients, whatever it is. The other trade-off that needs to be made, of course, is that if you have a strategy that is aimed at not just a primary end point but more importantly, secondary end points that you think are more clinically relevant and meaningful to physicians and patients, and you need to anticipate that along the way, there is going to be drop out of a study, and especially an oncology study.

So even though you may be able to power it up front with a sufficient number of patients to achieve your primary end point, if you don't adequately take into account the drop out you could effect, you may not end up with enough patients and sufficient power to support your secondary end points, which would undermine your long-term strategy. So those are the trade-offs that we are considering. Now, I'm sure Michael can -- could number one, express that a lot more eloquently han I just did, but also go into the science of it a little better. Michael?

I don't know that I can say it any better at all. I think that's exactly the point, that when you are setting out a study, you basically have to put in place everything you're going to need by the time that study finishes. And [INAUDIBLE] that will provide you sufficient power so you cannot only reach conclusion for that response rate up front that are truly robust conclusions, but that you can then go on to demonstrate the value -- the clinical value of the clinical benefit -- that is seen in delaying the progression of disease and extending the duration of people's lives. And if you undersize and underpower, you're never able to demonstrate those benefits. And we believe that this product has the potential to be fully differentiable. It has the potential eventually to have the label that shows it's the taxane of choice. You have to power and size your studies so that you can demonstrate that in the end when you get there, that you have delayed the time that people have progression of their disease and you've extended the length of time that they live.

You know, I would also dare say, Adam, that we believe, based on our research, that the clinical community would be eager to hear the results of a trial that they view as adequately designed and powered.

Thank you.

Thanks for your question. Crystal, any other question?

Yes, sir. We also have a follow-up question from Matthew Kaplan.

Hi guys, thanks.

Hi, Matt.

Just in terms of -- a couple of questions. With respect to the bladder cancer indication, could you give us -- just layout a potential time line for filing of that indication? Obviously it's a little bit early and you haven't finished the Phase II B yet, but just give us a sense of that?

I think, Matt, the thing that's really going to try that time line is discussion with the FDA or with other health ministries that we can't have until we have those results in hand from the ongoing study. And the reason for that is that normally one would talk about moving to a Phase III comparative study as the pivotal trial. The question in this kind of a disease where it's really, really hard to study just because there is a plausity of patients -- now that means that, you know, these are people who really desperately need a better therapeutic choice than the one they've got. But it's not easy to do a large studies in this patient population.

And so one of the discussions we will want to have with the health authorities is, based on the study that's right now ongoing, what would be the kind of pivotal trial that they would accept? And that could range from what's called pivotal Phase II type sizes up through pivotal Phase III type sizes, and the duration to get to the end of each one of those is rather broad. So I think it's probably easier to talk about the steps that we'll have to go through rather than to guess when we will actually be able to make them.

Great, that's fair. Thank you.

Thanks.

And just one other quick follow-up in terms of, Mike, I think you went through this pretty thoroughly, but when you -- when you went through your strategic assessment to make your executive decision to terminate the Synt:em acquisition, can you give us just any detail -- give us a similar detail with respect to what you saw in TOCOSOL Paclitaxel that helped you make that decision?

I don't know that it's any more detail, just maybe a different way of saying it, that what really converged as a combination of number one, data from our trials and guidance from our discussions with FDA that put us in a position to define our go forward plans with a lot more clarity and we believe certainty; and at the same time, emerging competitive data, which reinforces our believe that we have a very strong competitive product here. And that at this stage in our development as a company, our best interests are served by redoubling our efforts to focus on those opportunities, to maintain the flexibility in terms of allocation of all resources -- people and capital being two of the most important ones -- on the achievement of that objective. And that's where we are.

Great. Thanks again, and congratulations on your decision.

Thank you, Matt.

Your next question comes from Alan Long.

Hi, everyone. Thanks for taking my questions.

Hi, Alan.

On the -- I might as well follow up on the competitive stuff. Comment -- can you provide some color or comment on what the Zyletech [PHONETIC] data means for Sonus? I'm sure you can go both ways with it, but I'm curious, what do you have to say about it?

Well, you know, I think that a hallmark of our style and our philosophy from the very beginning has been to take the high road and talk about our product and our strategy. And you know, clearly, we actively scan the competitive landscape to learn what we can from it. You know, what we have said about TOCOSOL Paclitaxel is -- what Michael said -- is that we believe that we can demonstrate that it's at least a competitive product based on objective response rates and tolerability, that over the long-term that we believe we very well may have the potential to prove that it is a more efficacious product. To get there -- to implement a strategy that gives us a relatively near term opportunity to file an NDA under 505-B2 on the primary endpoint objective response a to continue with that trial to be in a position to file supplemental planes that are based on statistically rigorous data for the secondary end points will require 700 evaluable patients and -- to achieve 700 evaluable patients, as Michael said, we may well have to enroll up to 800 patients; again, concerning the usual drop out rates from clinical trials. And that's our strategy. And I think if -- if I could add anything, it would be that learnings from the competitive landscape have reinforced for us that we have a terrific product, that 505-B2 gives us an accelerated path to a meaningful and competitive approval, And we don't want to try to cut any more corners around that than are absolutely necessary and prudent.

Now hypothetically, you're -- you know, you're going for a non-inferiority trial, but can you talk about supplemental claims? Is one of those hypothetical theoretical claims could be superiority if the data comes out?

Sure. Sure, I think that's a very important point. I mean, you know, one of the -- you asked for learnings from others' fortunes and misfortunes, and I think you're exactly on track. One has to look at not only the end points that are postulated for Phase III, but the types of analyses. And you have to make sure that when you were setting up your study, when you'e sizing it, when you're reaching agreements with the FDA about what they will use as the basis for approval, you have to pick the right end points and you have to pick the right types of primary analyses. You have to go for the hardest thing to prove, because if that occurs, then all the rest of it will be nested within that. And the -- the FDA is very clear on -- they will give you anything you prove, but you have to prove the first thing first.

And as long you indicate up front that that's what you are going to for.

Exactly. That's exactly right. The agreement that you reach with the FDA is the end points and types of analysis. And, you know, I think that we certainly don't ever sea ourselves in the position of having to go back and try to renegotiate post [INAUDIBLE] what kind of primary analysis we were going to do.

Another way of looking at it, Alan, is that -- and this is just a general comment based upon the way the statistics work in any trial -- if you go for a non-inferiority evaluation of an end point, no matter what that is, and you can demonstrate that with statistical significance, then you probably have the power also to support a superiority evaluation if the data supports that. However, if you prospectively say you're going to prove superiority and you don't make it, then, you know, in our particular case, we think we'd probably be out of luck.

Got you. One last question. Assuming Avastin is approved for lung cancer, based on the data released yesterday, how might that affect SPA and the partnership negotiations?

I -- no, I've -- Yes, there was an announcement yesterday and frankly, I haven't seen the data to review them. Nobody has because they haven't been submitted to do the FDA yet. But I don't under -- I guess I don't understand the issue about how that would affect our SPA, because Avastin is a different product.

Yes, and beyond that, Alan, keep in minds that we've said we're going after an indication for which Taxol is approved as a singe agent. Our view is that as long a significant market opportunity for both Paclitaxel and Docetaxel, that the prevailing clinical approach is to use combination therapies. We don't see a [INAUDIBLE] in changing that; but also, what that says specifically is that is lung is probably not our primary target.

Yes, thanks. You know, I got the question from my subscribers and I know that.

Yes. So we -- it's a good question. We don't see it. We don't see it implement -- we don't see it impacting our near term strategy.

Good deal. Thanks.

Thanks, Alan.

Your next question comes from the line of Randy Selleck.

Hey, guys.

Hi, Randy.

A couple questions for you. I want to just talk more about -- want to hear you talk more about your process for getting a partner and your timing, because it's certainly been delayed and you've explain why. Two, how much cash you have on your balance sheet, and I guess that's it -- a lot of the questions have been answered.

Okay. Well, let's take the data question first, cash on balance sheet, Alan?

Yes, Randy, we had 20.6 million at 12-31-04.

So your burn is still within the parameters that you had discussed in the past?

Yes. And -- that's right. And we had said early in the call that first half of the year we expect a base burn of 1.5 for the first half and an overall burn for the year of 1.6, but that doesn't include the incremental cost of what our Phase III trials will be. So I hope that --

You really need that partner in place by the trial -- the commencement of trial.

Well, I think we would need the partner in place and/or we would need additional financing, and our strategy has clearly been to pursue the partnering discussion.

Right.

Now in terms of the process, again, I don't think it serves anyone to negotiate publicly on this. I would say that we continue in discussions with a handful of potential partners. Some of them have been in discussions with us for a while, and I think are in the process of getting some of their questions answered. For example, the concern I had mentioned in the prepared comments regarding the validity of our regulatory strategy. And I believe we are in the process of more than addressing that. Some of those potential partners, frankly are new.

Some of them are people who had dropped out earlier in the process who have come back to discussions. Some of them are truly new. We are continuing with multiple discussions in parallel, and I think your assessment that ideally we would have the partner in place to provide the resources to initiate the Phase III trial in Q3 is a valid assessment. Crystal?

[Caller Instructions]. Your next question comes from David Gruber.

Yes, hi, Mike.

Hi, David.

I'm just trying to better understand here the price of admission. I mean, you now have with the delay -- strategically at least , you now have the PK data, the Phase iii -- Phase II three-week data, you have Phase II weekly data, and you have a limited amount of transitional cell data. From the regulatory side, you have the 505-B2 and you're getting an SPA. And then from the competitive side you know what the story is with ATPX and CTIC. So from the negotiating standpoint, would you say the price of admission has gone up significantly over the last three to six months, and do the potential partners recognize that?

Well, again, I don't want to -- I don't want to negotiate publicly here. I would -- I would back up from the specific question and say that our philosophy all along on this has been that the value of this product would increase over time with clinical data, and with the validation of our regulatory strategy. And so what we have done in the past year is continued to pursue a strategy based on that belief. It's taken no small amount of courage, because there's been enormous pressure on concluding the partnership based on expectations in all fairness that we had originally created. But at the end of the day our job -- our job here, our objective, our fiduciary responsibility, is to maximize the value of this asset, and we're pursuing a process with a time frame that we believe puts us in the best position to do that.

Okay. And then from -- and again, a very macro question, -- I know you can't get into the specifics. But are all the negotiations -- is everything more or less on the table all the way from kind of licensing deals, to co-development, to potentially selling the company? I mean, are you looking at all different options here?

Well, I would say that everything is on the table. At the same time, I want to add that we are -- we are not selling the company. But we are a public company. And we would be -- the board and I would be obligated to consider any responsive offer to acquire the company. But that's not our objective. Our objective is to partner TOCOSOL Paclitaxel through a more conventional partnering vehicle such as a license.

Okay. And the timing relating to the SPA, just to add certainty, or is that something that a partner wants or all of the above?

You know, I think it depends upon the individual partner and what we are balancing, frankly, is whether or not we can get an acceptable deal done with what we have in hand; i.e. minutes of FDA meetings and correspondence, or if we believe that there is more upside associated with waiting for that SPA to be finalized, we are prepared to wait for that.

Okay. Thank you. That's my questions.

Thanks.

There are no further questions at this time, sir.

Okay; Crystal, thank you. So if there are no further questions, we'd like to thank all of you for joining us today. I really believe that our accomplishments and our progress in 2004, as I stated up front, put us in an outstanding position to increase our value throughout 2005. As always, we appreciate your support. We look forward to keeping you updated on future developments. And that concludes the call.

This will conclude today's Sonus Pharmaceuticals conference call. You may now disconnect.