Achieve Life Sciences Inc (ACHV) 2005 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Sonus Pharmaceuticals fourth quarter year end 2005 conference call. [OPERATOR INSTRUCTIONS] As a reminder this conference is being recorded today, Thursday, March 16, 2006. I would now like to turn the conference over to Ms. Pamela Dull, Director of Investor Relations.

Thank you, and good afternoon, everyone. We appreciate you joining us today for Sonus' year-end 2005 conference call. As a reminder, this call is being recorded and broadcast live on our website at www.sonuspharma.com. An archive of the webcast will also be available through the same link. We'll use the following agenda for today's call. First, Mike Martino, Sonus' President and CEO, will recap 2005 accomplishments. Second, Dr. Michael Stewart, our Chief Medical Officer, will provide an update on our clinical and regulatory activities for TOCOSOL Paclitaxel and will also review progress on our second oncology product candidate. Third, Alan Fuhrman, our Chief Financial Officer will provide a brief summary of our 2005 financial results as well as guidance on our 2006 burn rate. Finally, Mike will review 2006 objectives. Then we'd be happy to take your questions.

Before we begin, 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, 2005, a copy of which can be accessed on our website. With that I will turn the call over to Mike Martino.

Thanks, Pam. Welcome, everyone. 2005 was a productive and gratifying year for Sonus. We began the year with two primary strategic goals. First, take the next significant steps to position TOCOSOL Paclitaxel for approval on launch, and second to apply our proprietary TOCOSOL technology to broaden and deepen our new product pipeline. I'm pleased to take a few minutes to share management's perspectives on our progress towards achieving these goals. Our ultimate goal with TOCOSOL Paclitaxel of course, has been and remains to make it available to cancer patients and doctors around the world. We really believe the product has the potential to be their Taxane of choice, and true and sustainable value will ultimately be based, on their, the markets perceptions of the features, advantages, and benefits of the product.

Our 2005 plan therefore focused on three specific objectives to move us significantly closer to realizing this goal. First, to secure a special protocol assessment, or SPA, to confirm the trial design, data, and statistical analysis that will be required to get the product approved in the United States. Second, to initiate that pivotal trial. And third, to secure a corporate partner with the resources and commitment to support that trial and also to expand the global development and commercialization of the product.

I'm really delighted to say that we achieved each of these objectives. We concluded the special protocol assessment with the FDA in June. Under the terms of this SPA, a single pivotal study will be the basis for approval of our initial new drug application or NDA, for TOCOSOL Paclitaxel in the United States. We believe that the six months invested in negotiations with the FDA to secure this agreement before starting the Phase III trial was a valuable investment of time that mitigates the clinical and regulatory risks with TOCOSOL Paclitaxel. In accordance with the SPA, we then initiated the single phase 3 pivotal trial at the end of September. This trial is a head to head comparison of TOCOSOL Paclitaxel versus Taxol in women with metastatic breast cancer. With each drug administered weekly which we believe is the standard of care in both the United States and western Europe. Michael will review the details of this trial and provide an update in a few minutes.

Finally, in October we were pleased to announce the global partnership with Schering AG. We believe this partnership validates the potential value of TOCOSOL Paclitaxel as well as the clinical and regulatory strategy to achieve product approval in the U.S. Most importantly, the partnership provides the resources, capabilities, and commitments to dramatically expand the global development of the product. In this regard we've been actively collaborating with Schering now for about five months and I believe we've made great progress in mapping our a global development and marketing strategy for the product in all of the major geographies.

Our optimism for the competitive potential of TOCOSOL Paclitaxel is rooted firmly in the clinical data the product has generated to date, which we believe continue to be durable and encouraging. For example, we presented the interim results of our ongoing phase 2 study in metastatic breast cancer at the San Antonio Breast Cancer Symposium in December. Michael will summarize the details, but we think the essential take-away is that the data provide further evidence of the high activity, tolerability, and commercial potential for TOCOSOL Paclitaxel. Our enthusiasm for the commercial potential has been further validated in recent months as we've had the opportunity with Schering to share our data in meetings with more than three dozen key opinion leaders from the U.S. and Europe to get their feedback on the data as well as their thoughts on future development opportunities beyond the initial indication in metastatic breast cancer. The strong consensus feedback from these meetings can be summarized as follows.

First, taxanes will continue to be the backbone of effective chemotherapy for most solid tumors. Second, the most important and desired features for a new best in class taxane product include minimizing the requirement for steroid premedication, reducing or eliminating time consuming and costly preparation prior to use, being convenient, easy, and quick to use, so that nursing time is reduced and critical chair time is opened up for other needed therapy. We believe that TOCOSOL Paclitaxel meets these needs and could rise to the top of their preference list if it has at least equal efficacy to Taxol, the safety profile that we've observed thus far, and is priced responsibly relative to its benefits.

It has been reassuring to hear the detailed, insightful, and positive feedback from these key opinion leaders. Importantly, their high level of enthusiasm reinforces the results of the quantitative market research that we had previously conducted to understand the commercial potential for TOCOSOL Paclitaxel. Before shifting the gathers to talk about progress towards our second strategic goal, I'd like to say just a few words about the outstanding performance of our TOCOSOL Paclitaxel manufacturing team which includes Sonus, Secor and more recently Schering employees. As we previously reported to you, we had an end of phase 2 chemistry, manufacturing, and controls, or CMC meeting with FDA last year and it went extremely well.

We continued to manufacture TOCOSOL Paclitaxel throughout 2005 and, in fact, shortly after the phase 3 trial began, we completed the manufacture of all the TOCOSOL Paclitaxel needed for that pivotal study. Our partner, Schering AG is fully engaged in the manufacturing, planning process and together we have decided that a larger scale process is required to support worldwide sales projections. Schering has recently exercised their option to become the commercial manufacturer of TOCOSOL Paclitaxel, which could mean that they will manage the process directly with Secor or another contract manufacturer, or they could decide to manufacture the product themselves. We think the decision to control manufacturing is clear evidence of Schering's commitment to this product.

Our second strategic goal for the year was to apply our proprietary TOCOSOL technology to broaden and deepen our new product pipeline. I'm pleased to report that we achieved several objectives towards realizing this goal. First, we significantly advanced the preclinical development of SN-2310 injectable emulsion. Our second product candidate, which contains a novel camptothecin derivative. We presented encouraging preclinical data at the AACR-NCI-EORTC conference in November. We had a productive pre-IND meeting with the FDA in January to review our phase 1 study proposal. Michael will provide a few more details on that in a moment. However, at this point I want to reconfirm our intent to begin clinical trials with SN-2310 injectable emulsion this year.

Second, during 2005 and early 2006, we further strengthened our intellectual property estate by securing the issuance of three new patents in the U.S. and one outside the U.S. This brings our total number of issued patents to 13 including 9 U.S. and 4 non-U.S. Finally, we continue to strengthen our product development capabilities with additional people. We have a very focused and committed team at Sonus who have accomplished some exceptional things to date. We're currently -- we currently have 50 employees, and we anticipate that we'll be close to 70 employees by the end of 2006. So again, in summary, I have to say that 2005 was a very productive and gratifying year for Sonus. Now I'd like to ask Michael to review the status of our clinical and regulatory programs for TOCOSOL Paclitaxel and SN-2310 injectable emulsion. Michael.

Thanks, Mike. First, let me start with the phase 3 trial for TOCOSOL Paclitaxel. As you know, we initiated this study in September with the goal of enrolling 800 evaluable patients within one year. I'm pleased to report that we're making good progress and that enrollment in the phase 3 study is on target for completion before the end of September. We're now consistently enrolling more than 30 patients per week.

In addition to the pivotal phase 3 trial, we and Schering are collaborating on additional clinical trials to amplify the clinical experience that will be included in the NDA and to serve as the basis for expansion of TOCOSOL Paclitaxel development in the future. We anticipate starting additional trials later this year and we'll tell you more about them as they begin. As Mike mentioned, we presented very promising data at the San Antonio Breast Cancer Symposium in December. Our phase 2 trial in metastatic breast cancer, which was done as a lead-in to our phase 3 trial, showed an investigator reported, confirmed objective response rate of 53%. With independent radiologist confirmation of 49% from X-rays alone. The high concordance between the investigators clinical observations and the radiologist's independent adjudication of CT images is strikingly high and attests to the robustness of study conduct.

Even more importantly, they observed a median time to progression of 7.2 months, or about 31 weeks. We believe that compares very favorably to the recently published results of the subset analysis of the first-line treatment population in the Abraxane versus Taxol study which showed a median time to progression of 24 weeks for Abraxane and about 20 weeks for Taxol. The TOCOSOL Paclitaxel data are compelling and generated high interest among the breast cancer specialists who attended our presentation in San Antonio and as well as those with whom we've spoken in depth one on one in recent months. TOCOSOL Paclitaxel is performing at the upper end of published objective response rates and median TTP durations for weekly Taxane therapy in metastatic breast cancer. As with our other studies, patients in this trial will continue to be monitored clinically for median survival duration and we would not expect to have meaningful data on that endpoint until 18 to 24 months from now.

Turning how to the ongoing phase 2 study of TOCOSOL Paclitaxel in metastatic bladder cancer. Following the activation of several new study sites last year in the U.K., Spain, and the U.S., I'm pleased to say that enrollment in this study is now on track to be completed this year. Because so many of the patients began treatment during the last six to eight months it will not be until later this year that we will have our first look at response rates. Similar to our other clinical trials, patients from this study will also be monitored for time to disease progression and for survival duration. There are limited treatment options for advanced bladder cancer patients and we continue to believe that TOCOSOL Paclitaxel has an excellent opportunity to address an unmet medical need. As you may recall the FDA agreed with us, to the extent of granting orphan drug and fast-track designations for this program.

Now I'd like to discuss the progress with our novel camptothecin product candidate SN-2310 injectable emulsion. Although there are two commercially available camptothecin products on the market today, Irinotecan and Topotecan which are approved for the treatment of colorectal, ovarian, and lung cancers. Both pose substantial challenges in terms of efficacy, toxicity, and difficulty of use. Our goal with SN -2310 injectable emulsion is to provide a drug that has increased antitumor activity and a safety profile that is better than the marketed camptothecin products. We presented encouraging results of Sonus' work with SN-23 injectable emulsion at the AACR-NCI-EORTC conference in November showing prolonged exposure en vivo to the active drug with better antitumor effects compared to equivalent doses of Irinotecan.

As Mike mentioned, we met with the FDA in January to review the CMC and preclinical data for SN-2310 injectable emulsion and our proposed protocol for the first in human clinical study. The meeting was cordial, informative, and clear. FDA offered some specific recommendations and requests and told us they saw no obstacles to proceeding with our IND submission this year. To date the GNP drug product has been manufactured, the toxicology study reports are being written, prospective phase 1 investigators have been contacted, and we intend to submit the IND in the coming months as soon as all documents are finalized, and all required logistical and regulatory arrangements are in place.

It was an extremely busy fourth quarter, and the pace has not slackened coming into the new year. We are accomplishing a lot to increase the value of TOCOSOL Paclitaxel and SN-2310 injectable emulsion. With that I'll turn the call over to Alan for a review of our financials.

Thank you, Michael. I'll briefly review the financial results for the fourth quarter and year end which we reported in our press release this afternoon and then provide some guidance on our burn rate for 2006. For the fourth quarter of 2005, we reported a net os of 3.3 million, $0.11 per share, compared to a net loss of 5.4 million or $0.25 per share for the fourth quarter of 2004. For the full year we reported a net loss of 21.1 million or $0.88 per share compared to a net loss of 16.3 million or $0.81 per share in 2004. The higher net loss for the year to date financial results primarily reflects an increased level of spending as we continued to execute the clinical and regulatory plans to focus on Paclitaxel.

Our loss for both Q4 2005 and for the full year have been offset in part by revenue we recognized in the fourth quarter related to our partnership with Schering AG. There are two elements to the revenue. The first is the amortization of $20 million upfront license fee that Sonus received under the Schering agreement. And the second element is the reimbursement of expenses for Schering's 50% funding of our phase 3 clinical program for TOCOSOL Paclitaxel. In total for both Q4 and for the 2005, we recognized 8.3 million in revenue. Of this total, 7.1 million was for reimbursed expenses for work completed on the phase 3 trial through December 31, 2005 and the remaining 1.2 million was the amortization of the up-front license fee.

In 2006 we anticipate significant increases in revenue for both R&D funding from Schering AG and from having a full year of amortization of the upfront license fee. At year-end we had 49.3 million in cash and no long term debt. We anticipate that our net cash burn during 2006 will be in the range of 38 to 40 million. I'd also like to mention that as of today both the audits of our financial statements and the internal control over financial reporting as required by SOX 404 have been completed. And I'm very pleased to report that we received clean opinions on both fronts from our independent registered public accounting firm. That completes our financial update. I'll turn the call back to Mike for some closing remarks.

Thanks, Alan. So this past year was very exciting for Sonus and marked an inflection point in our development. As we sit here today, we have a promising product candidate in phase 3 development that addresses a large growing market with a clearly unmet set of clinical needs. We have partnered that product with a strong international pharmaceutical company and that partnership puts us in a strong position to develop TOCOSOL Paclitaxel and launch it on a global basis in a way that both maximizes its clinical potential and the ensuing commercial value.

These accomplishments in 2005 have really launched us into 2006 with a great deal of momentum, activity, and excitement. We anticipate that this will be another year of solid progress. Our key objectives for 2006 include the following. First, completing patient enrollment in the phase 3 trial, for TOCOSOL Paclitaxel, enabling our NDA submission in 2007. Second, collaborating with Schering AG to expand the clinical development and manufacturing of TOCOSOL Paclitaxel to support the U.S. NDA, registration and other key markets and commercial launch on a global basis. Third, moving our second product, SN-2310 injectable emulsion into phase 1 clinical testing. Finally, applying our technology and capabilities to expand our product pipeline further through both internal and external development. With that we'd like to thank you for joining us today and for your interest. Would you please open the line for questions.

[OPERATOR INSTRUCTIONS] Our first question is from Mark Monane with Needham & Company.

Congratulations on your progress.

Thank you.

With -- we're very impressed by the enrollment numbers of 30 patients a week. Maybe the two Michaels can go over how they're able to enroll so many patients so quickly, what they've learned from physicians, and investigators in the success of this enrollment and maybe what competitive -- what competitors are out there looking for the same patient that may provide a threat if the drug gets approved and released in the real world.

I have a pretty easy answer to that question. Dr. Stewart, maybe you can explain how your team and you have accomplished those results.

Well, Mark, thanks for the question. I think it really does go to the fact that the study design has generated substantial interest not just amongst the investigators who are participating but even among the opinion leaders and the leading oncologists we've talked to. As Mike mentioned earlier, weekly Paclitaxel therapy really has become the standard of care in the U.S. and in western Europe, and that is rapidly occurring in other places that have had limited access to taxanes until now. So the study design itself one of substantial interest. I think the only real limitation we've run into anywhere has been the usual thing that you run into when you're starting up a trial which is the time it takes sometimes to get bureaucrats to sign contracts and the number of regulatory hurdles that you have to jump through, especially outside the U.S. where a lot of rules have been changing in the last year or two, but once the sites have been activated the investigators are truly interested in doing this and as we've talked to other people we've had other investigators who've wanted to join the trial. So I think that's a testimony to their interest, what they believe TOCOSOL Paclitaxel might offer to their patients.

Terrific. One follow-up question is, with the trial enrolling so quickly, will you have opportunities for interim analysis? What will you look at on these analyses? And how will you know when the trial is over?

The -- as you know there's an independent data monitoring committee. They had their first meeting shortly after the official kickoff of the trial. They have a meeting upcoming in a few weeks because they meet several times a year to look at all of the data that are available until that time. The short answer to your question about interim analysis is that we do not expect that there will be an interim analysis because by the time the data monitoring committee would have sufficient efficacy data to do an interim analysis, the enrollment would have been completed. So they're meeting on a regular basis to review all available data, safety as well as efficacy, but we don't expect an interim efficacy analysis. The study will be completed as we said, we expect to enroll 800 evaluable patients. So once we get to that point, the DNC will tell us whether or not we've reached our statistical goals. There is an independent statistician who analyzes all the data and reports them to the DNC. We won't know what the results are until the DNC tells that you say we're done.

And what triggers that you're done? Can you go over the group, is it number of events? Is it the time at file? Could you go over that with everybody again?

Yes, it's the study plan is for best response because it's confirmed objective response rate. That's the primary endpoint. The assessments are done radiographically, so it's objective response as determined radiographically. And because it's best response, we kind of have to -- the DNC has to know that there are no patients waiting in whom they expect any further improvement and response. The time line on that is roughly the following. In metastatic breast cancer normally if a patient will respond, she will start to have a response within the first two months of treatment. Normally she will achieve best response by the fourth or fifth month of treatment. There are occasionally patients who might have a partial response by the fourth month and go on to a complete response in the sixth or seventh month. And so once the DNC sees the response information on the very last patient randomized, they will make a judgement about whether or not we've reached our goal.

Very helpful. Thanks for the added information.

Sure.

Thank you, Mark.

Thank you. Our next question is from Steve Lee with ThinkEquity Partners.

Hey, guys. Congratulations on a great 2005.

Thank you Steve.

I just have a couple questions. Regarding your partnership with Schering AG, how would you characterize the partnership thus far? How have you leveraged Schering AGs expertise in the oncology market, specifically the taxane market for your benefit so far?

I would characterize the collaboration to date as just that, very collaborative, very collegial, not without points of discussion and differences of opinion, but I think marked by a process that has a sense of urgency in addressing those issues and getting to agreed upon plans and that includes regulatory plans, clinical plans, as well as marketing plans. Without going into specifics at this point, because frankly both we and Schering consider this proprietary, Michael indicated that we would be starting additional trials later this year. I would say that we are very, very pleased with the depth and speed of understanding regulatory requirements and implications for our clinical trial plan from both the European Union and Japan. And I think that the implementation of those plans really will make true our statements that what this partnership brings us is the ability to very dramatically expand the global development of the product and ultimately the global commercial potential of the product. I would certainly welcome Michael and/or Alan to add additional color comments to that.

I would just underscore the point that Mike made that this truly has been a collaboration. We have had numerous face to face meetings with our Schering colleagues from the U.S., from Europe, and from Japan. This is not just an exchange of documents and information. It has been truly a refreshing and rewarding collaboration. I've been involved in other collaborations in other settings and I can tell you this one just has been delightful. It's a bunch of people in a room who are totally committed to the same goal, and the discussions turn around the science and the strategy, and they bring a depth of knowledge that is superb, and it has just been a thoroughly rewarding experience.

Great. My second question is just a finance question for Alan regarding revenue.

Yes.

You recognized revenue from Schering, I guess their -- their fees that -- their R&D expense that you split 50/50. Basically you recognized the revenue that you got from them, right?

The way it works is, we basically discuss that with our accountants in-depth and what we've determined is proper accounting for their reimbursements of the 50% share of the program are classified as revenue.

Could you provide us with any type of guidance as to -- for the year as to how much that might be?

For the upcoming year?

Yes.

Yes, we had said that for -- we think that their half of it for this year will be coming up approximately another 10 million in 2006.

10 million? Okay.

And that's what they'll reimburse to us.

Does that include milestones, or is that just for R&D expense?

That's just the R&D expense. If you recall, the milestones are primarily regulatory approval milestones.

Okay. Got it. Do you foresee any milestones coming this year?

We do not foresee any regulatory milestones in '06.

Okay. Thanks a lot, guys.

Thanks, Steve.

Thank you. Our next question is from Matt Kaplan with Punk, Ziegel & Company. Please go ahead Mr. Kaplan. Hello?

Matt actually is not in the office right now. This is or Orlinda Lee.

Hi, Orlinda.

Most of my questions have been answered, but could you maybe comment on the recent press releases regarding Merck, KGAA, and Schering and whether that affects your interactions with them at all?

I guess the only comments we could make would be as follows. Number one, I've personally had discussions with both the senior executive at Schering on their management committee who has global responsibility for product development and oncology, as well as the senior executive with worldwide responsibility for the oncology business unit. Both of them have assured me that TOCOSOL Paclitaxel continues to be a very high and urgent priority for them. And that they are working hard to deliver their commitments against that project. Other than that, we know what you know, Orlinda, from the press. I would say, though, that one of the hallmarks of our management philosophy that I think has in good part been responsible for getting us where we are is to focus on the things that we can control and influence, and, we -- I think have received the assurances that we need from Schering that those announcements don't change anything with regard to this project.

Thank you.

Thank you. Our next question is from David Miller with Biotech Stock research.

Great. Thanks for taking my call, and congratulations on a very productive 2005.

Hi, David. Thank you.

The first question I have is somewhat related to the last one, which, is there any language in the contract with Schering AG around how it's handled if they are acquired? Do you have to provide approval to go forward? And also, if there's any language in that contract about them acquiring you.

David this is Alan Fuhrman. There is no language in the contract about them acquiring us. The contract is assignable, and approval cannot be unreasonably withheld by us. So I believe if we concluded that they were -- with a partner that had adequate resources, I don't think that we could block anything.

Okay.

Again, it's fully assignable, so -- the new -- if they were acquired, whoever acquired them would have full obligations to perform.

At the same time I would add that the contract also does not include -- and I want to emphasize, does not include a so-called termination for convenience clause.

Okay. Good to know. Was Merck AG one of the people in negotiation process for partnering TOCOSOL Paclitaxel?

Oh, I can't comment on that.

Thought I'd ask, just in case.

Nice try.

If I don't ask, then I just always have to wonder. Can you talk to us about your financing plans for 2006 if any?

David this is Alan again. If you just take the numbers that we talked about, we ended the year with 49.3 in cash, and we said we'll spend about 39, so, we clearly don't have enough cash to get to cash flow break even after the product is launched. At some point in time we are going to have to finance, but we never speculate on the timing.

Okay. And with the manufacturing, is there any added value to you from -- any added economics to you from Schering AG picking up the manufacturing and are you going to need bridge studies?

From a regulatory perspective there's no bridge studies that will be needed. It's simply qualification. I mean, from a U.S. perspective. The European health authorities would have to weigh in on that separately. We have not presented data to them on the subject but I can't imagine that it would be any different from any other product like this. Where you have certain specifications and you have to have demonstration lots to prove that you can meat your specifications then you get the establishment license, and that's the same for -- and if you open a new manufacturing site almost anywhere. Doesn't really matter where it is.

I just wanted to make sure.

I think from a financial perspective, David, if we do not exercise the copromote option in the United States, aside from the regulatory milestones, our revenue would be a straight royalty on sales. If we exercise the copromote, there is a profit sharing arrangement. So at that point, any direct reduction in product cost certainly would be a benefit to us. Although I would add that I -- I believe there is potentially a significant benefit to the extent that we believe that even at our current scale this is a low-cost manufacturing process, that will give a great deal of margin flexibility to Schering in a competitive marketplace with the further manufacturing scale initiative, I would expect that margin flexibility to increase and significantly. So to the extent that that becomes a competitive factor in the market that is useful in driving market share that could certainly have a benefit to us at that point in time.

David, one other point that I'd like to make is, we do have an obligation to help Schering scale and validate the manufacturing process. So that's factored into our numbers as well, and we would continue to work with them, whether they're manufacturing, whether a third party is manufacturing. So we have that factored into our burn in 2006.

Okay. Alan, another question on burn. Does that include the new phase 3 trials that you have under tentative plan?

First, I would say that we don't necessarily have any additional phase 3 trials planned. We do have other--.

Sorry, other trials, yes, sorry.

Yes. That's true. I think we have said all along that we have allocated an additional $7.5 million in 2006 to cover our half of any additional trials that would be done relative to market support, or additional studies, and that's capped, 7.5 million.

And that's included in the burn projection you gave news.

Yes, it is.

Last one, add then I'll go away. Do you have a percentage enrollment level like U.S. and western Europe and outside that area? Like North America, western Europe, and ex that area?

No, we specifically, for two reasons, we do not. The first reason is that we wanted to generate maximum contributions and competitiveness amongst all investigators. So we did not set out targets for them. We've opened a horse race, and all the horses are running. The second is -- follows the discussion that we had with the FDA when we were setting up the trial, and that is in order to minimize enrollment bias, we did not want to stratify by geography. And so there is a central worldwide global randomization that operates 24/7 and investigators all over the world just come in in whatever order they see the patients, they go through the central randomization process and we do the drug distribution based on that.

Okay. But you don't have any information now about who is winning the horse race?

Internally we try to keep tabs on that, yes, but we're trying to maximize the competitive nature of what's going on. And so we're constantly adjusting where we put our efforts.

Okay. Great. Thank you very much for answering all my questions.

Thank you, David.

Our next question is from Jason Kantor with RBC Capital Markets.

Hey, guys. It's Michael Yee for Jason. We had a couple of questions.

Hi, Michael.

Hey. One, it's a non inferiority study. Assuming you see noninferiority in the sense of a marketing aspect what are the most important secondary end points you guys are collecting or focused on? And prospectively how do you expect those to turn out? Two is, now that you have a lot of patients enrolled, it's our understanding that there's a nonblinded kind of aspect to the trial in the sense that there's a difference in infusion times for the drugs. Is there anything anecdotal that you can characterize for us in the sense of how do patients deal with that difference, are they aware of that difference, or how do you think about that?

Let me take that. This is Mike Stewart. Let me take the second part of your question first. The trial clearly is not blinded to the patient and to the treating physician, because they do know whether they're getting 15 minutes out of the syringe or an hour out of an IV drip. But we have -- this is one of the reasons why we've set up such a strict control of information, so that we are completely blinded to that, and, in fact, with safety reporting and everything else, we have separate systems set up so that the investigators do not disclose to us what -- which treatment assignment their individual patient has received. So we've put in place independent monitors, independent systems that allow us to meet all of the appropriate standards for safety monitoring and safety reporting without compromising our knowledge of the treatment assignment for an individual patient.

Going back to your first part of your question, it is -- the primary endpoint is objective response rate and the primary analysis is noninferiority. Assuming that we do meet the criteria for statistical significance on that noninferiority analysis, the next thing that occurs is a nested analysis for superiority. And that's all spelled out, also in the statistical plan that's part of the SPA agreement with the FDA.

The next endpoint that would occur will be progression-free survival, which is akin to time to progression, but it also includes, for instance, patients who die or leave the study for any reason other than documented disease progression. And we sensor them back to the time of last known nonprogression. So that's the next endpoint, and since it's not possible to do a noninferiority analysis on that endpoint that is the superiority analysis. The final endpoint will be overall survival duration and that again is a superiority analysis. So what will happen is the first analysis will be non inferiority, on a objective response rate. If that's met, that's followed immediately by a superiority analysis unobjective response rate and those are the data that are in the NDA. The secondary endpoints of median progression-free survival and median overall survival will come later after the NDA is submitted.

In terms of safety issues, I mean, you -- prospectively, do you expect to have less neutropenia, et cetera, et cetera?

I don't know whether we'll have less neutropenia. As you know, we actually think that even that dose for dose when patients are getting significantly higher exposure to Paclitaxel from our product than they do from Taxol. However, the phase 2 data to date suggests that even with that it's not neutropenia in a clinically dangerous range. We're not seeing sepsis, we're not seeing -- we're seeing very little -- we're not seeing any of the clinical consequences of profound neutropenia. So in the end, I don't know what the neutropenia rates, per se, are going to be, but clinically we have not seen people compromised as a result of that.

I think in other areas, we're anticipating that we probably have less toxicity than Taxol. And those are areas that some of the opinion leaders have told us are very important, in their patient's day to day ability to function, and their patient's day to day sense of appearance and functionality and absence of pain and myalgia and arthralgia and that sort of stuff. What we've seen to date in our other studies has suggested that we have advantages over Taxol.

Going back to one of the earlier questions to just be clear, it seems like there's an analysis by the Board at different time points, but, after the last patient is -- there's an analysis of about six or seven months after the last patient enrolled to see if there is a potential improvement for a response, or to see where the response is.

The Data Monitoring Committee meets about quarterly, and they look at all available data, safety data and efficacy data. I think that the time point where they're likely to reach their last final thing that they're looking at for response rate may occur -- well, if that response, for example, occurs six months after the last patient is enrolled, then the data monitoring committee would probably see that information two or three months after the response is documented, because the scans have to come in, they have to be adjudicated, the data entry has to go on, the statistical analysis has to go on.

So let's say you want to be finished with enrollment by September, you know. Could be X number of months to get a response, and then could be two to three months to the DSMP sees it, and that's kind of where we'd be.

Right. We're expecting they will probably tell us the results. It depends entirely on when enrollment finishes and it depends entirely on what happens to the last few patients who enroll. We're expecting to know something in the first half of next year.

That's assuming that even if those last few patients would even make a difference statistically. You could go both ways obviously.

Right.

Michael, we certainly don't want to be on this issue of speculation of data. We are -- we don't want to be on a soapbox, but I'll tell you, we are taking the high road here. I think there are several examples, including, perhaps, even one that's not too far from home of people who have speculated on -- prematurely on data from pivotal trials, and that is just a slippery slope. We believe that we have designed a trial based on the data we have to date that gives this product absolutely the best opportunity that we can give it to show how it can perform with data that is going to be -- that we're going to like. We're in the phase now where we just need to wait for that data to be available, and we aren't going to do anything to jeopardize even our perceived bias or partiality with regard to that data.

I think we're all on the same page there, and we think you're taking the right approach for sure.

Thank you.

Any further questions?

There are no further questions at this time.

Thank you. To wrap up, I'd like to mention that Dr. Stewart will be presenting at the annual Invest Northwest conference which is being held March 21, through 22, here in Seattle and is sponsored by the Washington Biotechnology and Biomedical Association. Our presentation is scheduled for next Tuesday, March 21, at 9:40 a.m. Pacific time, and 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 concludes the Sonus Pharmaceuticals fourth quarter year-end 2005 conference call. If you would like to listen to a replay of today's conference call please dial 1-800-405-2236, or internationally at 303-590-3000 with access number 11055049 followed by the pound sign. Once again, if you'd like listen to a replay of today's call, please dial 1-800-405-2236, or 303-590-3000 with access number 11055049 followed by the pound sign. Thank you again for your participation today, and you may now disconnect.