Achieve Life Sciences Inc (ACHV) 2005 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Sonus Pharmaceuticals Inc. Third Quarter 2005 Conference Call.

[Operator Instructions].

This conference is being recorded today Tuesday, the 8th of November 2005. I but would now like to turn the conference over to your director of investor relations, Ms. Pamela Dull. Please go ahead, ma'am.

Thank you, Michael and good afternoon everyone. We appreciate you joining us today for our third quarter conference call. As a reminder this call is being recorded, and broadcast live on our website at www.sonuspharma.com. The archive of the web cast will also be available through the same link.

We'll use the following agenda for today's call. First, Mike Martino, Sonus's President and CEO, will provide an overview of our progress during the third quarter and over past few weeks. Second, Michael Stewart, our Chief Medical Officer will review the status of our clinical and regulatory activities for TOCOSOL Paclitaxel. Third, Lynn Gold, our Vice President of Research and Development will review progress of our second product candidate which is a novel camptothecin derivative.

Fourth, Alan Fuhrman, our Chief Financial Officer will review our financials including providing some more details on the financial structures of our licensing agreement with Schering AG for TOCOSOL Paclitaxel. Finally, Mike will make a few closing remarks, then we will be happy to take your questions.

Before we begin, I'd like to remind everyone 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, 2004, quarterly forms 10-Qs for 2005 and other SEC filings, all of which can be accessed on our website.

With that, I will turn the call over to Mike Martino. Mike?

Thanks Pam, and welcome everyone. Just in case we have any glitches along the way, let me tell you that I am participating in this call from St. Louis, where I am attending services for our mentor and former colleague who passed away tragically over the weekend. The rest of the team are participating from our facilities in Bothell.

With the progress that we continue to make in Q3, and in recent weeks it has been an outstanding year to date for Sonus. We achieved a number of milestones for TOCOSOL Paclitaxel, and brings (ph) us closer to our goal, of commercializing an innovative approach to taxane-based y chemotherapy. We were pleased to start the quarter with the announcement of an assessment for the Phase 3 pivotal trial of TOCOSOL Paclitaxel.

This was a significant milestone that represented a tremendous amount of hard work on the part of the entire Sonus team, during more than six months of negotiations with the FDA. We believe this was a valuable investment of time and effort, as a special protocol assessment typically reduces the length of the NDA review period, compared to the time the FDA usually takes for NDAs submitted without one.

The third quarter was highlighted by the initiation of the pivotal Phase 3 trial for TOCOSOL Paclitaxel, which we began on schedule at the end of September. Michael Stewart will provide a few more details on that in a moment. Then finally, we were delighted to announce a partnership agreement for the development and commercialization of TOCOSOL Paclitaxel with Schering AG, know as Berlex in the United States. A milestone we believe, validated our efforts to date and propelled us into Q4 with confidence and momentum.

Schering is a recognized leader in the pharmaceutical industry, and has strong global development and marketing capabilities dedicated to oncology. This is an exceptional partnership for Sonus, that positions us to maximize the clinical and commercial success of TOCOSOL Paclitaxel on a global basis. Alan will review again the financial terms of partnership later in the call.

Before that, however I would like to share our perspective on six key elements of this collaboration as follows. All of these elements have been important to us all along the way in negotiations with potential partners, and we are delighted that they're all included as hallmarks of our agreement. First, Sonus and Schering share a common view about the growth and development of the taxane market space, and the roll that TOCOSOL Paclitaxel will play in leading that growth.

Second, Sonus and Schering are committed to developing TOCOSOL Paclitaxel, securing appropriate regulatory approvals, and launching the product on a global basis as quickly as possible. Third, the Phase 3 pivotal trial, which began in September, and is the immediate next step in securing initial regulatory approval in the United States, continues to move forward aggressively as planned under Sonus 's direction. Fourth, Sonus and Schering have formed a joint steering committee who will identify, prioritize and oversee the expanded development of TOCOSOL Paclitaxel on a coordinated, integrated, global basis beyond the initial pivotal trial.

Fifth, in addition to collaborating in the development of TOCOSOL Paclitaxel, Sonus has retained an option to co-promote the product in the United States. We will continue to evaluate the potential value of this option, as we advance the development of TOCOSOL Paclitaxel to commercialization. And finally, Sonus and Schering have agreed to explore other joint development opportunities. This could include products in Schering's pipeline, that might benefit from the application of Sonus' technology, and it could also include products in Sonus' pipeline.

For example, Schering has a right of first negotiation for Sonus' second product candidate a novel tocopherol-based formulation of a proprietary camptothecin analog, which will described by Lynn Gold later in the call, and which we believe will be ready to go into a Phase 1 trial in 2006. With that review of progress, and those headlines regarding the Schering collaboration, I'd like to ask Michael to provide details on the clinical and regulatory progress with TOCOSOL Paclitaxel. Michael?

Thanks, Mike. We have made good progress of TOCOSOL Paclitaxel during the past quarter. We're pleased that enrollment into our Phase 3 study, which compares TOCOSOL Paclitaxel and Taxol for the treatment of metastatic breast cancer, began in the U.S. during the third week of September. Since then, four investigative meetings have been completed in Western Europe, Eastern Europe, and North America, with a total of more than 300 attendees from nearly 140 study sites and 17 countries. Site activations are underway worldwide.

As previously announced, our plan is to have a 800 evaluable patients are randomized or, 400 in each treatment arm. And we project that enrollment will be completed within no more than a year after the first patient was enrolled. As was also previously announced, the primary endpoint of this blinded study, is the confirmed objective response rate among women receiving TOCOSOL Paclitaxel or Taxol, as first line or second line treatment. All radiographic images will be independently assessed by radiologists who are blinded to treatment assignment, and all efficacy and safety data will be independently evaluated by a data monitoring committee.

That DMC had it's first organizational meeting in mid October. They will meet approximately quarterly to review available data, and we currently anticipate they will be able to complete final assessment of the primary endpoint results, during the first half of 2007, enabling Sonus and Schering to be un-blinded, and the NDA to be submitted later that year. Of course, the study will continue while the NDA is under FDA review. With patients being treated and followed clinically, for the secondary endpoints of progression-free survival duration, and over survival duration.

We are excited to have a pivotal trial underway. Investigators are around the world have told us that they are particularly excited to be doing it. They see this study as offering their patients access to effective therapy in either arm, including a product that they believe may well be better than those currently marketed. It was pretty invigorating to hear their enthusiasm for this study, during the various investigator meetings.

While we will not know the comparative performance of the two products during the conduct of the study, we will look forward to updating you about enrollment as it progresses. The clinical development program for TOCOSOL Paclitaxel comprises more than the Phase 3 study, of course. Additional trials are being planned now with our partner Schering Berlex. Some of these studies will begin in 2006, and we will tell you more as they roll out.

Let me take a moment now, to bring you up-to-date on progress on our Phase 2 trial in metastatic breast cancer. That study, which was the predecessor for the Phase 3 trial currently has 7 patients still on treatment of the 47 who were enrolled during the fall of last year. In addition to the investigative reported confirmed objective response rate of 53%, we now have the results from the independent radiologist who has reviewed all the images for all the patients, and who reports a confirmed objective response rate of 49%.

Not only is the concordance very high between the confirmed response rates reported by the investigators, and by the independent radiologist, but we're pleased to note that the response rate in these patients treated with TOCOSOL Paclitaxel compares quite favorably with published results of studies of Taxol, in similar populations of women with breast cancer. We will be presenting a full update on the study, including data on median time to progression and the safety and tolerability of TOCOSOL Paclitaxel at the San Antonio Breast Cancer Symposium. That presentation will be on Thursday, December 8, for those of you will be attending that meeting.

It has been a busy third quarter, and I want to congratulate and to thank the people across many line functions in Sonus, who have worked really hard to ensure that the time lines for these development programs have remained on track. They are truly an amazing group of professionals. It is a privilege to tell you about them, and to share with you the good news about the fruits of their labors.

I will turn the call over to Lynn Gold now, for an update on our novel camptothecin product candidate, which we continue to advance toward early clinical.

Thank you, Michael. Camptothecins are an important class of anti-cancer drug, that are currently used in the treatment of colon, lung, and ovarian cancers. However, like the taxanes, the full clinical benefit of camptothecins is currently limited by poor solubility, a short half-life, and significant toxicities. The marketed camptothecin analogs, topotecan and irinotecan are less effective than desired, due to these limitations.

With the objectives of improving anti tumor activity and reducing toxicity, compared to marketed camptothecin products, the Sonus R&D team is evaluating a novel camptothecin derivative. It is designated as SN2310, which is preclinical development. Encouraging preclinical results, some of which will be presented at the AACR-NCI-EORTC International Cancer Conference next week in Philadelphia, suggests that SN2310 Emulsion provides prolonged exposure to the active drugs, leading to better anti tumor defects, than equivalent doses of irinotecan in animal models.

Similar to TOCOSOL Paclitaxel, SN2310 Emulsion is a ready to use formulation that will be delivered intravenously as a small volume short infusion. We will request a pre IND meeting with the FDA, later this year to discuss the preclinical data on SN2310 Emulsion, and the protocol for our first human study. We are currently planning to enter the clinic with SN2310 Emulsion in 2006.

With that, I will turn the call over to Alan for a review of our financials.

Thank you, Lynn. I will briefly review the financial results for the third quarter, which we reported in our press release this afternoon, and then review the terms of our agreement with Schering. For the third quarter of 2005, we reported the net loss of 8.9 million or $0.37 per share, compared with the net loss of 3.6 million or $0.17 per share for Q3 of 2004. For the first 9 months of 2005, we reported a net loss of 17.8 million or $0.80 per share, compared with a net loss of $11 million or $0.55 per share, for the same period in 2004. The higher net loss for the year to date financial result, primarily reflects an increased level of spending, as we continue to execute the clinical and regulatory plans for TOCOSOL Paclitaxel.

In August, we strengthened our balance sheet with the completion of a private placement that netted $16.6 million. At quarter end, we had 23.4 million in cash, and no long term debt. We expect that our net cash burn rate for the fiscal year of 2005 will be approximately 1.8 million per month on average, and this will include the costs related to the Phase 3 clinical trial for TOCOSOL Paclitaxel. Regarding our partnership with Schering, I'd like to review the overall structure of the agreement, and then provide more details around some of the key terms.

However, in keeping with the spirit of our agreement with Schering, we may not disclose some of the terms of this agreement for competitive reasons. As previously announced, the partnership agreement consists of an equity purchase agreement, and an exclusive global licensing agreement. First, under the terms of the equity purchase agreement, Schering is taking a 15% ownership position in Sonus, with an investment of 15.7 million. This consists of 3.9 million shares at market price of $4.02, at the close of business on October 14, 2005.

In connection with the purchase agreement, Schering also acquired 5 year warrants to purchase 975,000 additional shares of Sonus, common stock, at and exercise price of $4.42. The exclusive global licensing agreement consists of an upfront license payment, clinical and regulatory milestone payments, sales milestone payments, royalties and cost sharing for U.S. clinical development programs. The upfront license payment of $20 million has been place in escrow and will be released to Sonus applying Hart Scott Rodino clearance, which we anticipate will occur near the end of this year.

Our preliminary assessment is that on a GAAP basis we will recognize this upfront payment as revenue in equal installments over a 36-month period, starting in 2005. In the conference call on October 18, we indicated we could receive clinical and regulatory milestone payments of up to $132 (ph) million, should all milestones be achieved. And, thinking about these milestones, there are three elements or dimensions to these payments. Payment amounts will be based on product launches in first and second indications, geographies including the United States, the EU, and Japan, and claims for non inferiority or superiority, on efficacy endpoint.

For example, if we get superiority across all the indications and geographies, we will receive a total of 132 million in clinical and regulatory milestone payments. Of this 132 million payments, 61% will be for an indication in metastatic breast cancer, and 39% would be for the second indication. For the metastatic breast cancer indication, if you look at an indication basis, 50% would be based on develop and commercialization in the United Sates, 30% would be in the EU, and 20% in Japan.

In addition to the clinical and regulatory milestone payments, the sales milestone payments in our agreement, totaled $35 million are based on worldwide sales, and are achieved at three separate sales thresholds. Royalties will range from 15% to 30% of annual sales in the United States, and are 15% of sales in the rest of the territories. It is our estimate, that we would reach the upper royalty rate in the United States at a very reasonable share of the US taxane market.

The final element of our licensing agreement relates to cost sharing for US clinical development of the product. This development program includes the projected 50 million cost for the Phase 3 and supported trials, which Sonus and Schering will share equally, plus other trials that will support market development leading up to product launch. Of course, these additional trials will need to be approved by the steering committee on financial, as well as clinical criteria. And Sonus' financial responsibility for these additional marketing support trials, contractually will not exceed 7.5 million in 2006, 10 million in 2007, and 5 million in 2008.

When you look at the equity investment, plus the milestone payments, plus reimbursement for shared development costs expected under the partnership agreement, the ranges are from 81 million, and this would assume product launch only in the US, for non inferiority objective response rate in metastatic breast cancer, and achievement of the lowest sales milestone. That would range up to nearly 230 million, assuming product launch in the US, European Union, Japan, superior efficacy in metastatic breast cancer, and the claims in one additional indication.

The value stream of these payments, excludes royalties. We believe that the estimated value of royalties could exceed the total value of payments and reimbursements outlined in the licensing agreement. Looking ahead then into 2006, we anticipate the following burn rates. Our base burn we anticipate will be a total of 16 million in 2006. Sonus' share of the Phase 3 and the supportive trials, would be approximately 13.8 million. And Sonus' share of the additional marketing studies, would be a maximum of 7.5 million. In this burn rate guidance, it is important to note that if we spend less in 2005 on our Phase 3 trials than projected, those costs will roll into 2006, and increase the projected base rate (ph) burn that I just outlined.

That completes the financial review, and I'll turn the call back to Mike for some closing remarks.

Thanks, Alan. It has been an exciting and pivotal year for us at Sonus, thus far, capped by the completion of an outstanding partnership for TOCOSOL Paclitaxel. To review our progress once again, first at the end of June, we completed a protocol assessment with the FDA for the Phase 3 study. We believe the SPA significantly mitigates the remaining clinical and regulatory risks for product approval, and that the resulting rigor of the Phase 3 study, will give us opportunities to differentiate TOCOSOL Paclitaxel from other paclitaxel products.

Second, we initiated the Phase 3 study in September, with the design that will allow us to show that TOCOSOL Paclitaxel is at least as effective as current products, with the potential to show that it is significantly better. Third, we secured a partnership that we believe is very competitively valued, and allows us to accelerate the development of TOCOSOL Paclitaxel on a coordinated, integrated, global basis, in order to maximize it's full commercial potential.

Finally, and perhaps most importantly, clinical results to date for TOCOSOL Paclitaxel continue to suggest, that it is a highly effective, well tolerated, and easy- to-use product that could ultimately be the taxane of choice. To wrap up, for the balance of this year and into 2006 we will remain focused on three principal objectives. First, activating all study sites in the Phase 3 trial, and meeting enrollment goals in order to hit our NDA submission target in 2007.

Second, moving quickly to implement our agreement with Schering, to accelerate the global development of TOCOSOL Paclitaxel, and of course, as Michael indicated, we will keep you informed of these milestones as they occur. And finally, with resources now available moving our next product candidate SN2310 Emulsion into clinical trials.

With that, we like to thank you for joining us today, and for your interest and support. And we will now open the line for questions. Michael would you please take the first question?

Thank you, sir.

[Operator Instructions].

Our first question comes from Matt Kaplan of Punk Ziegel & Company. Please, go ahead with your question, sir.

Hi guys, thanks for taking my question. With respect to -- I know you started the Phase 3 trial recently, could you give us a sense in terms of the number of sites that are up and running now, roughly how many patients are going in? Obviously we understand that it is kind of a hockey stick type of enrollment that goes on in clinical trials, just to give us a sense of where you are.

Matt, it is Mike Stewart. I can tell you that our plan right now is to have all the sites activated within the next 3 to 4 weeks. I honestly don't have the information today. I have been traveling. We are doing investigative meetings, and the presentation at the European Congress of Clinical Oncology. I am -- back in the office yesterday and to be perfectly frank, I do not know exactly what the number is today, but I do know that I have been assured that everything is on track, and we anticipate having all the sites active before the first half of December. It is going on simultaneously worldwide. I know we have got a number of patients screened and enrolled. I wish I knew what the number was today. It is smaller today than it will be yesterday, but I'm sorry I do not know the exact number.

How many sites worldwide are you going to have?

There is about 140 worldwide, 17 countries.

All right. Thanks. One other question to make sure that we all understand the guidance for the burn rate in '06, that Alan just went over. When you add up those three components you are talking about a potential burn -- if all of the 7.5 maximum is hit on the additional trial commitment for Sonus, about $37 million. Does that make sense?

Yes. 37.3 million.

In those estimates or, in that guidance is -- are the clinical trials associated with the development of the Camptothecin product also included?

Yes, that is right. So, that includes continuing -- as you know we have ongoing trials in the metastatic breast, which will continue, bladder as well as additional studies that are included in these numbers. That should be our full burn without some unexpected things occurring. .

Would that be the net burn for the company then, including any R&D payments or, the share -- Schering AG's share in the cost of the ongoing studies?

Yes, that is correct Matt. These numbers that I gave you include the reimbursements net, back and fourth between Schering and us.

Great. Thank you.

Our next question will be coming from David Miller of Biotech Research.

Condolences on the lost of your friend too. Is one of the trust that you are planning a Herceptin agonist (ph) trial to try to move into that end of the market?

Let me give you a reflex reaction, and then turn it over to Michael for a better-informed medical opinion. I will tell you, at this point, from a business perspective, that we and Schering are looking into the space quite aggressively. We believe that there are some unique opportunities to quickly position this product, and are very reluctant to discuss the details of those in advance of launch in the studies for competitive reasons. I think you can look at the space and speculate on things that we, and others, are probably thinking makes sense.

But I'm not sure, until we actually start the studies, that we're going to be prepared to go much beyond that, other than the financial detail which Alan has shared with you, that says beyond the core development cost of the 50 million that the parties are splitting, our maximum exposure on these additional studies in 2006 is about 7.5 million. Michael?

I would say that you are absolutely correct. One of the subsets of the breast cancer population, that it is well address with taxane, is the 20% or so of women whose tumors over expressed were HER2/neu. And that's a very well characterized and very well understood, and it is certainly known that for those patients who are identified as HER2/neu overexpressers, that a combination of taxane plus Herceptin, is better therapy than taxane alone.

But as you are aware, there are also other subsets in breast cancer that -- where different kinds of therapies and therapeutic combinations, are appropriate. And part of what's our job is with the joint steering committee is to sort out the priorities in which we will be addressing all of those subsets.

Fair enough. In this month's JCL there was a couple of editorials and a couple of trial publications on Abraxane. One of the editorials in particular was suggesting, at least the way I read it, suggested that measuring free (ph) Paclitaxel in the bloodstream might not be the best way to ensure compatibility between a taxane reformulation and Taxol itself. Can you comment on what this might mean for the results of your PK/PD study?

Yes, I would say that, without getting into a very extensive and complicated discussion --

...Yes, it might be better offline.

...and -- but I think that the role of the taxanes and the way they function means that there is a pretty good relationship between the amount of the taxane, which in this case was free (ph) taxane that it is available in a tumor cell nucleus, and its direct activity because it binds irreversibly to the alpha tubulin subunit. And so, I think that what is clear is that, if you have a way of measuring the free Paclitaxel concentration in the tumor cell nucleus, that would-be highly predictive for the efficacy you would have.

There is no good way to do that, and so what you have to do is measure things that are circulating in the bloodstream, and then construct responsible, good pharmacokinetic models that will allow you to predict what kind of exposure you're going to have in tumor tissue. You couple that with the measurements Paclitaxel and tumor tissue in animal models. And we have shown that we have well over twice the exposure in tumor bearing animals, within the tumor tissue as is delivered by Taxol. Measuring one piece is not sufficient, but taking that information and putting it into context, I think does allow you to have a much better understanding of what you are liable to see therapeutically. In the end, that is what we have to prove, and that is why we have to do the Phase 3 trial.

The San Antonio presentation, is that a poster or a oral presentation?

No, that is a poster presentation. Basically it is up all day on Thursday December 8. The discussion in the poster viewing session and the discussions are at the end of the day, staring around 4 or 4:30 I believe.

Thanks for answering my questions.

Our next question will come from Mark Monane of Needham and Company.

Could you comment a little bit more on platform? And, I have two questions. One is, can you comment a little bit more on the platform, and what you think the next steps are potentially beyond Taxol for development of this unique platform for better therapeutics?

And secondly, we know from the literature that Taxol works very well in breast cancer and ovarian cancer, yet almost has no effect at all on colon cancer. Is it possible that such a platform could take Taxol or other drugs, and test them in conditions where they previously hadn't worked, essentially due to some of the points Dr. Stewart brought up that not good enough concentration in the cell or, not able to overwhelm resistance?

Well let me, once again give some reflex answers, and then turn it over to Lynn to discuss the platform, and Michael to chat a little bit about colorectal. My reflex answers would be as follows. First, that we have made tremendous progress in the last 18 months in really making the TOCOSOL delivery technology one that is very versatile, not only in terms of solubilizing difficult to solubilize drugs, as well as less difficult to solubalize drugs. But also it stays consistent with the theme of being ready to use, convenient and easy to use.

And importantly, the significant progress we have made that I'd ask Lynn to chat about a little bit is really to design the N (ph) molecule in a way that we can dial in on specific desirable PK parameters. So, I think, that when we publish the data for example on the f Camptothecin formulation we will be in a better position to talk about what we have achieved in terms of circulation half-life resulting activity, with a correspondingly, we believe, favorable side effect profile. In addition to the fact that it is a convenient ready-to-use formulation.

With regard to colorectal, again I will turn it over to Michael for the specific details. I would say thought that when we launched the 4 Phase 2a studies initially, colorectal was one of the tumor types that we studied, that was on the basis of a very durable objective response that we observed in one patient in the Phase 1 study. We were not able to replicate that in 20 some odd patients in Phase 2a study. So again, with those overview comments, Lynn do you want chat further about the technology, and then turn it over to Michael to discuss colorectal?

Sure. As far as extending the platform beyond where we are, we had really spent this last year learning as much as we can through the TOCOSOL Paclitaxel Project about what is formulation technology does from the standpoint of the vitamin E, the PK properties, and extending the usability of the drug therapeutically. We have taken that from the standpoint of just the solubilization platform, which there are a variety of drugs that we could pull into that formulation, and take forward. To now, take a molecules and actually synthetically modify it to also achieve some of these same properties.

In addition to modifying the drug, we are then going back to our formulation technology and incorporating the drugs that we have modified into that. So, now we have changed the properties of the inherent drug itself, so that we improved the half-life, improved for the drug localizes in the body, because of its lithophilic (ph) or hydrophilic (ph) properties, and -- as the aspect have the effect of TOCOSOL technology that has been beneficial with TOCOSOL Paclitaxel in the same framework. So, we look over the next 12 months to be able to extend the choices that we can make in derivatizing molecules and in formulating molecules for future use. Michael?

Turning to colorectal cancer infraction (ph). As we said before, we are interested in demonstrating that TOCOSOL Paclitaxel, can be the taxane of choice. And that that will be the product that has the greatest possibility to extend the use of taxane chemotherapy, in the way it is currently used, as well as to new ways. Obviously the path to do that in areas where taxanes currently have already demonstrated utility is much clearer than the pathway of exploring areas where until now, marketed products have not been able to become effective. Specifically with reference to colorectal cancer, you are absolutely correct.

One of the questions about whether or not taxanes could have higher activity in that disease, has been related to the amount of drug that has been delivered into tumor cells. But that is just one of the questions. Certainly that is one that we feel comfortable about being able to address with this product, and I think that is certainly one that we've been familiar with and aware of, but it is only one of the questions in colorectal.

And so, as we and Schering look toward optimizing the commercialization of TOCOSOL Paclitaxel, I think it is likely that we will be focused first on the places where taxanes are clearly proven to be useful. And -- moving into new areas is something that we will have to make choices about in terms of priorities. As Mike said, we did have the experience of seeing one patient who responded very favorably, and that led to another study that was done in more than two dozen patients, where that response rate was not reproduced.

That was very helpful. If I could just have one follow-up question, and that is on the Schering alliance. Can you talk again a little bit about -- I know you have mentioned this before, but what was it really that Schering really was looking for in terms of it's partnership with Sonus? What was Sonus getting from the relationship? And, have you formally gotten together as a group yet, and started plans for working on this project?

Let me again Mark, jump in with some overview comments, and then turn it over to the others, for their comments as well. On the last question first, the simple answer is yes, the collaboration is actively underway. In fact, we did attend the US Investigators meeting last week. Schering had a full contingent of people there actively participating in those meetings from a learning perspective. There have been several meetings held already, and others planned imminently. I believe we have a good management framework in place for managing the collaboration going forward, and that framework consists of several tactical teams that are working on a variety of issues.

So, the collaboration is in full bloom, so to speak. And I would say that from the Sonus perspective, we are quite pleased with the knowledge of oncology in general, the knowledge of the taxane space in particular, and Schering's commitment to this product opportunity and to developing it aggressively. I can speculate of course, on what Schering was looking for, in this relationship, and that speculation is that they were looking for a relatively late stage oncology opportunity, that could be differentiated in a fairly large market, with a clinical and regulatory plan that represented mitigated risk.

And we think to TOCOSOL Paclitaxel provided that opportunity to them on every one of those points. What we were looking for, in the relationship, ideally was someone who viewed this product the same as us i.e., a brandable, differentiable opportunity, in a large and still growing market, with the ability to coordinate and integrate development on a global basis, and a sense of urgency around doing that. Team in Bothell, anything to add to that?

This is Mike Stewart. I would just echo the comment that across all levels, whether it has been business or science or, the combination of those from marketing, to clinical, to regulatory, to manufacturing, the engagement has been fluid and rapid, and very, very rewarding.

Congratulations again on the alliance and becoming a Phase 3 company.

Our next question comes from David Marris of Banc of America Securities.

Hi, this is actually Jeff Craig (ph) on behalf of David Marris. A couple of questions. One a follow-up to the last question on the Schering deal. Was the bidding competitive? And if so, can you talk a little bit about what other suitors may have been at the table? And then, from your perspective, why Schering over others, if in fact that was the case?

And then secondly, as you look at the taxane market, obviously there are more products out there now than just Taxol. Can you compare and contrast your delivery technology a little bit with what else is out there, with (inaudible) Abraxane specifically? And then, when you look at that market and your plans to compete with those other agents, what a minimal would you need in the label, to have a very sound competitive position? Thank you.

Thank you, Jeff. I will take the first part of the question and then turn it over to Michael and Lynn to discuss the technology content. Then we can come back to what we view as the minimally -- the minimal label requirements to be competitive. In terms of the process itself, it was very competitive. In fact, it was competitive down to the very last moment of the Board making a decision on the right deal for us. There were several other players at the table, one in particular that we felt would have been also an outstanding partner. And in that regard, it was a difficult decision.

I think ultimately, what swayed that decision -- was the global reach of Schering and the ability to again, integrate and coordinate development on a global basis across countries, indications, etc. Their general experience in oncology and the very, very specific experience of key members of the Schering team in the taxane space. Resources and the sense of urgency around developing the product on multiple tracks, and of course, the terms of the deal, and the resulting value. Alan, would you add anything to that from a process or a value perspective?

No, I think you really covered it, Mike. I think it was competitive to the very end, and again for all the reasons you said -- global reach, and in particular the experience base of the number of their key management team, and taxane space I think was a very important point to us.

Great, thanks Alan. Michael, Lynn would you care to address the technology, and how it compares and contrasts to alternative approaches?

Yes, I think -- this is Mike Stewart. I think there is couple of observations I would make. There are still two taxanes that are available Paclitaxel and Docetaxel. They have both been available, Paclitaxel came in, I think late '92, and Docetaxel about -- within a year and a half after that. So these are both very well understood, active MoADs (ph). I think that makes it a little different from entering a space where you've got a fundamentally different molecule whose mechanism of action is not well understood, and not well characterized.

With respect to the ways in which people are trying to modify Paclitaxel, I think it is very clear that TOCOSOL Paclitaxel is probably the most elegant modification, because we have not modified the drug at all. We have done is dissolved it in vitamin E, which makes immediately bioavailable. That also means we've got a ready-to-use product, the only ready-to-use product, that is available for a small volume infusion that can be given very quickly.

The other competitive products, whether you are talking about the Albumin-bound formulation or, the polyglutamate conjugation or the lipozone (ph) formulation, all have the substantial difficulties in formulation that lead to, I think very different cost of goods, as well as a difference in the economics of use. When something takes a substantial amount of time to prepare it before it can be used for the patient, that adds significant cost in real dollars, as well as in time. And TOCOSOL Paclitaxel is the only ready-to-use product, absolutely nothing has to be done for it, and particularly nothing difficult has to be done for it. So, it is economically favored both in terms of cost of goods, as well as in economics of use.

When it comes to the comparisons of how these things affect people differently, obviously the only way that can be proven is in head to head trials. I would say that, despite that there are inferences people could draw. Paclitaxel and Docetaxel were not compared in a head to head trial, until 10 years after they had been in the market. That did not stop people from becoming familiar with the advantages and liabilities of each.

I think that, that will be very clear as all of the newer formulations are brought to market. People are already familiar with what they believe to be some of the liabilities of the albumin-bound product that came on the market earlier this year. Certainly in our investigator meetings, we are hearing from a lot of our investigators that they are familiar with that product, they have used it, and they are very eager to participate in this study.

I would say, in fact Michael that that raises I think, another interesting point regarding the competitiveness of the process, but from a different perspective. I think, at this point in the game it is fair to say that any potential partners for TOCOSOL Paclitaxel have had a fair and thorough opportunity to survey the landscape, and perhaps even have opportunities to acquire rights to other products. Certainly to include their evaluation of those products and how TOCOSOL Paclitaxel stacks up from the perspective of justifying the investment they have made.

I think that the final question Jeff, was around what kind of label we think is required, and the minimum to be competitive. And here we would say that our research clearly indicates that, if we are able to achieve a label with not inferior efficacy to Taxol, but against a Taxol control arm response rate that people view as representative of the historical experience with Taxol and Paclitaxel.

And in addition to that, we have advantages with regard to the side effect profile, and advantages with regard to convenience and ease of use that we think we have already clearly demonstrated. That we will have a very competitive market -- very competitive product that will get its fair share of this market. If on top of that, we are able to demonstrate superiority, on objective response and certainly superiority on time to progression or survival, then this is an extremely competitive product at that point.

Thank you, very much.

Our next question is coming from Vinny Jindal, with Wedbush. Please go ahead, sir.

My first question was about publication strategy. Obviously, you guys have completed 4 successful trials outside of breast cancer arena in Phase 2, 2 of which are in bladder, and that might form the 2 publications necessary for being able to market the drug in that indication upon approval. Have you guys thought about what the publication versus approval, versus NDA submission or SNDA submission strategy would be, for these follow-on indications to have as wide a market as possible upon approval?

Well again, let me give you a reflex business reaction, and ask Michael provide more meat and muscle behind that, if you will. I would say, again, that all this flows from the fact that our new partners at Schering have extensive experience in oncology and specifically in the Taxane space. I think that they came to us with a very clear and very aggressive plan for how to develop this product. We are in the process of reviewing that, getting to know that and debating some of the issues around that.

And I think that you're going to find us reluctant to speculate on the specifics until trials are actually initiated. I think the important point though, philosophically is that we are in complete agreement with the philosophy that we first espoused at least a year ago. Which is for this drug to be successful, will require more than just a pivotal study. Now whether that more is in the form of other pivotal studies or market development types studies, I think that remains to be determined. Michael?

Yes, and I'd would like to (inaudible -background noise) a very specific regulatory answer to that, which is that in the US the law is very clear. Promotion and marketing must be defined by what is in the product label. That is the FDA's way of determining to practicing physicians and patients what their conclusions are, after they have reviewed data completely. From the FDA's perspective, what they have authorized for marketing for any product is what is in the product label. And I will encourage you always for any product, to be sure you compare anything you find in the literature to what is actually listed in the product label.

That's a great point Michael, thank you for keeping me on the right side of that line.

Having said that, I think that it is also really important for every product that -- we have a responsibility to our shareholders, and to the practicing physician and to patients to generate as much information as we possibly can. And one of the vehicles for getting that out to people, not instead of, but in conjunction with data that are submitted to the FDA and other health authorities for review, is to have (ph) publications in peer review journals. And so, we feel very strongly that every study we do should be published.

The publications will get out there as soon as we actually have all the data finished, and sometimes that means -- if your product works and you are prolonging survival then you have to go all that way, as long as it takes to get all of the data in and get them authenticated. So, we look at it from both perspectives, our responsibility to submit data to the FDA and make sure we get the best possible product label, because that is what drives our ability to market the product. And in addition, to discharge our responsibility to the medical community and to our investors, to get publications out there in peer review journals about everything that we do (ph).

The data we saw at ASCO was that a final wrap on those other studies, and if so, are those manuscripts already in preparation now?

What would you see if you look at those presentations is that there is a caveat that these are not final data, because we have not finished the final audit. Those studies are ongoing, some of them are wrapping up because they have only just reached their survival endpoints, and we are closing out the sites, auditing sites, auditing case forms, locking databases, and you will be seeing them in (ph) publications in due time.

Fair enough. On the issue of the Taxol label, and including the weekly dosing, is there any updates on any forward progress that has been made there?

As you probably know, the FDA has a pretty firm responsibility not to comment to one sponsor on what they're doing with another sponsor's product or label. And, I would say that they know their business, and there is not much we could have to add to what they are doing.

That's fair enough. On the new clinical compounds, the Camptothecin derivative, there are a couple of different companies working in that space, and I'm wondering if you can comment on the intellectual property of your particular compound, and how the overall IP landscape looks to you?

I would say Vinny, in general, that our survey of the intellectual property landscape is certainly one of the bases that we touch early on and throughout the product development lifecycle, to assure ourselves that we have adequate space to work, and I think at this point we feel more than comfortable with that. As Lynn indicated in her presentation, and I will ask her to comment on this again. The active ingredient in this drug will be a proprietary to Sonus, and we believe we are pretty comfortable with the delivery chemistry is proprietary to Sonus as well. Lynn?

What I can speak to is that there are several Camptothecin molecules out there in development. Most of them are pretty hydrophilic, although not all. And our task -- or our goal was to actually make this a very lithophilic molecule, in order to be able to incorporate it into the emulsion TOCOSOL essentially. And we have been able to do that in a way that I think you will find is very unique compared to anything out there. So, I think we have very good grounds in terms of where we are with our proprietary stance on this molecule.

Thanks for taking my questions.

You're welcome Vinny, thank you.

[Operator Instructions]

Management, there do not appear to be any further questions at this time. Please continue with any closing comments.

Thank you, Michael. I would like to mention that Sonus will be presenting at the RBC Dain Rauscher Northwest Investor Conference in Seattle tomorrow November 9 at 11:05 a.m. Pacific time. With Mike in St. Louis tomorrow, Alan Fuhrman will be making the presentation, which will be broadcast live and archived on our website. That concludes our call for today, and we thank you for your participation

Thank you, ladies and gentlemen. This does conclude The Third Quarter 2005 Sonus Conference Call for Sonus Pharmaceuticals. If you would like to listen to a replay of today's conference in full, you make go ahead and dial 303-590-3000 or, 800-405-2236, using the access code 11041345.

Again, if you would like to listen to a replay of today's conference in full, it would be available approximately 1 hour from now, you may dial 303-590-3000 or, 800-405-2236, using the access code 11041345, that's 11041345. You may now disconnect. Thank you for using ACT teleconferencing, and have a very pleasant day. Thank you.