Achieve Life Sciences Inc (ACHV) 2007 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Sonus Pharmaceuticals Inc. third quarter 2007 results conference call. During today's presentation, all parties will be in a listen-only mode.

Following the presentation the conference will be open for questions. (OPERATOR INSTRUCTIONS) This conference call is being recorded today, Monday, November 12, 2007.

I would now like to turn the conference over to Doug Sherk with the EVC Group. Please go ahead, sir.

Thank you, Mary. Good afternoon, everyone.

Thank you for joining us today for Sonus' Pharmaceuticals third quarter 2007 conference call. As a reminder, this call is being recorded and broadcast live on Sonus's website at www.sonuspharma.com. A replay of the webcast will be available through the same link.

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 uncertainty. Actual results could differ materially from our predictions and estimates as a result of various risk factors, including those identified in our annual report on Form 10K for 2006, and our quarterly reports on Form 10-Q for the first three quarters of 2007, copies of which can be accessed on our website.

Now I'll turn the call over to Mike Martino, President and Chief Executive Officer of Sonus.

Thanks, Doug. Good afternoon, everyone and thank you for joining us.

Here with me today are members of the Sonus' Senior Management Team, including Alan Fuhrman, our Chief Financial Officer, Dr. Richard Daifuku, our Vice President of R&D and acting Chief Medical Officer, and Dr. Elaine Waller, our Senior Vice President of Regulatory Affairs and Clinical Development. This afternoon we would like to give you an update on our analysis for the Phase III pivotal trial of TOCOSOL Paclitaxel, review our activities and events since we announced seven weeks ago the highly disappointing results of the trial, review our ongoing R&D strategy and programs including SN2310 and other projects in our discovery pre-clinical pipeline and review the focus of our work with Ferghana Partners. We'll also provide a financial update with guidance on our expected cash burn and need, given our restructuring and reprioritization of internal programs.

Let's begin with our analysis of the TOCOSOL Paclitaxel Phase III trial results. We have further analyzed the data from the Phase III trial, and at the same time, have updated our commercial assessment to include revised assumptions about the likely product launch date and relevant competitive landscape. There are three primary conclusions from this effort.

First, as we indicated when we first communicated the data on September 24th, the data from this trial, in whole or in part simply do not support a fileable new drug application for TOCOSOL Paclitaxel. In other words, at least one additional pivotal trial would be required to support an NDA.

Second, we have found nothing conclusive in the additional analysis that would give us assurance if a second pivotal trial was conducted that we could meet the clinical end points necessary to be commercially competitive. Specifically, given an expected delay of at least three years in the product launch date, due to the need for an additional pivotal trial, we do not believe that non-inferior efficacy would still be a commercially viable end point. There is nothing in our cumulative clinical trial experience, including data from the Phase III trial, which provides certainty that we could prove superior efficacy in another trial. While we may well improve the safety profile with a lower dose , there are no data in our cumulative clinical database to support an improvement in efficacy at a lower dose.

Third, the three year launch delay makes it very difficult for Sonus to financially justify the continued development of TOCOSOL Paclitaxel. We had originally anticipated launch in 2009. A 2012 launch would put us in the middle of the Taxotere and Abraxane patent expirations as well as the likely launch of other alternative Taxanes. In short, a three year delay until product launch into a more crowded and price sensitive market does not, in light of our recent results, support an incremental Sonus investment of $30 million to $50 million to continue the development of the product.

So what happened? The short, simple answer is that TOCOSOL Paclitaxel performed at the lower end of our range of expectations for both efficacy and safety while Taxol performed better than expected on both efficacy and safety. Let me elaborate on this just a bit.

First, regarding efficacy, in our Phase IIB trial in metastatic breast cancer, TOCOSOL Paclitaxel demonstrated a central reviewer reported response rate of 51%, with a 95% confidence interval of 35% to 67%. We expected the drug to perform in this range in the pivotal trial and the actual performance of 37% was simply at the low end of the range. Conversely, the investigator reported response rate for Taxol in the CALGB 9840 trial was 40% and given this result, we expected the adjudicated response rate for Taxol in our trial to be lower. The 45% response rate for Taxol in our trial outperformed this expectation.

Regarding safety, our focus from the beginning has been on peripheral sensory neuropathy, specifically Grade 3-4 peripheral sensory neuropathy. In our Phase IIB metastatic breast cancer trial in which patients were dosed with 120 milligrams per square meter, the Grade 3-4 peripheral sensory neuropathy rate for TOCOSOL Paclitaxel was 9%. We expected the Grade 3-4 peripheral sensory neuropathy rate in our pivotal trial to be no greater than this 9% given the lesser dose of 100 milligrams per square meter in the trial compared to the higher dose of 120 milligrams per square meter in the Phase IIB trial. The actual incidence of 12% was simply greater than our expectation.

On the other hand, the grade 3-4 peripheral sensory neuropathy rate for Taxol in the CALGB 9840 trial was 23%, and the incidence of 7% in our pivotal trial was dramatically lower. Considering all of these factors, we believe our goal to build shareholder value is best achieved by focusing our financial and human resources on our remaining programs and through efforts to expand our pipeline. As a result, we have terminated all efforts associated with the development of TOCOSOL Paclitaxel and we expect the process to be completed with the final close out of the pivotal trial in the first quarter of 2008. We expect the cost of terminating the trial will be fully accrued at December 31st and they are factored into our guidance for cash burn which Alan will share with you momentarily.

As we expected and as we previously disclosed, on October 3rd we received a notice of termination from Bayer Scheering of our collaboration and licensing agreement. Under the terms of the agreement, all rights to TOCOSOL Paclitaxel have reverted back to us. We have actually been approached with potential out licensing opportunities for the product but these discussions are in very preliminary stages. Our assumptions about the impact of termination of the Bayer Scheering partnership are also factored into the cash burn guidance which Alan will share with you shortly.

As we have mentioned in the past, and on September 24th, negative Phase III results would necessitate major changes for our company. As we announced in our 8-K filed November 7th, we have reprioritized our Research and Development program and streamlined our Research and Development operations to focus on the resulting priorities. We reduced the size of our clinical, regulatory and bio-statistics staff, reflecting the termination of our Phase III program and we further streamlined our administrative staff and cost.

In total, we eliminated four of 10 Vice President positions and 12 of 54 employee positions. These were all extremely difficult decisions. Our organization was very lean by competitive comparison to begin with and we had built an outstanding team as TOCOSOL Paclitaxel had developed through clinical trials. However unfortunate, these were necessary decisions and the resulting new organization has a total of 48 employees which includes five part-time positions. We believe this new organization reflects the appropriate balance between the need to reduce cost and the need to maintain the required resources to make progress on the reprioritized programs that Elaine and Richard will summarize shortly.

With that overview, I'd like to now ask Elaine Waller to review the status of the Phase I trial of SN2310. Elaine will be followed by Richard, who will outline our Research and Development strategy going forward, and introduce the programs in the pipeline behind SN2310. Alan will then provide the financial overview and I'll conclude with summary comments as well as comments on the process with Ferghana Partners.

Elaine?

Thank you, Mike.

We remain committed to the development of SN, TOCOSOL Camptothecin, which is our oncology drug candidate currently in a Phase I clinical trial. After a more complete analysis of the Phase III trial results for TOCOSOL Paclitaxel, we assessed the results as they may have related to SN2310, and believe that none of the results impact the SN2310 program. We plan to continue our SN2310 program and enrollment in our Phase I trial is ongoing.

As a reminder, an IND was submitted to the FDA in June of 2006 and Phase I clinical testing was initiated in September of 2006. Patients continue to be enrolled and treated and four different dose levels have been administered. It is noteworthy that to date, SN2310 appears to meet two of our pre-specified objectives. Namely, a longer half life for the active [moiety] SN38 Irinotecan, and greater dug exposure for a given dose compared to Irinotecan.

As with the conduct of any Phase I trial in patients with advanced cell tumors, the safety results will determine when the maximum tolerated dose has been reached, the timing of which is not entirely predictable. Given that we haven't yet reached our maximum tolerated dose , we anticipate having the available data to make a go, no-go decision on this drug product in mid-2008.

With that I'll turn the call over to Richard to outline our R&D strategy and program.

Thank you, Elaine.

Our goal is to develop small molecule treatments for patients with cancer. We have identified a number of opportunities where there is a possibility for major improvements in patient treatments while mitigating our development risk. We have focused our efforts on three such areas of opportunity.

One, developing pro drugs of existing cell molecules where a novel prodrug is designed to provide greater patient convenience and improved patient outcomes. Two, synthesizing Novel small molecules where an opportunity exists using no moiety to improve clinical shortcomings with the existing approved compound and three, formulating existing or novel (inaudible) drugs with a goal of improving on the safety of our efficacy profile.

Let me review some examples of each of these areas of focus. Sonus already has in the clinic an example of the first approach in SN2310, a novel prodrug of SN38, the active moiety of Irinotecan. As was mentioned by Elaine, preliminary data from our Phase I clinical trial supports the premise that SN2310 provides substantially greater exposure to SN38 over a longer period of time than Irinotecan. We have synthesized and are are evaluating prodrugs of other important drug oncology including (inaudible).

As an example of the second approach, we have synthesized and are evaluating a novel nucleoside with characteristics similar to (inaudible). As an example of a reformulation approach, we are evaluating the potential of a TOCOSOL-like formulation for (inaudible) with the goal of determining whether we can mitigate known renal toxicities and neural toxicities with this class of compounds.

In some instances we are integrating all of these approaches, developing novel prodrugs as known or novel molecules that we are formulating in TOCOSOL-like formulations. The goal of these formulation approaches is to improve our pharmacokinetics and pharmacodymanics compared to other formulation alternative. I look forward to sharing updates on these programs in near future on other quarterly calls.

I would now like to turn the call over to Alan Fuhrman, our Chief financial officer to provide the financial details of the third quarter. Alan?

Thank you, Richard.

We filed our 10-Q on Friday afternoon and released our third quarter results at market close this afternoon, therefore, I'm going to focus my comments today on a few highlights.

For the third quarter of 2007, we reported a net loss of $5.8 million or $0.16 per share, an 8% improvement from a net loss of $6.3 million or $0.17 per share during the third quarter of last year. Regarding our agreement with Bayer Scheering, due to the termination of the agreement, we will recognize $6.9 million in revenue in the fourth quarter of 2007, which represents the balance of the unamortized up front license fee that we received in October of 2005. There will also be a final net billing to Bayer Scheering in the fourth quarter relating to accrued expenses through the date of termination and the expenses associated with the close out of the Phase III pivotal trial.

Cash and investments totaled $40.7 million at quarter end which reflects a reduction from our Q2 cash balance of just under $4 million, however in the fourth quarter we will have significant payments for 1075 trial expenses that were accrued but unpaid at September 30th. In the fourth quarter we will also incur close out costs for the 1075 trial. As a result, we expect to finish 2007 with at least $30 million in cash.

With the current strategies recently implemented including reprioritization of programs and associated cost reduction and with the termination of TOCOSOL Paclitaxel development, our average cash burn will run approximately $1.4 million per month beginning in January 2008. We believe our cash will be sufficient to fund current operations through the third quarter of 2009. If at some point in the future we enter into a strategic transaction or in-license compound, our cash burn guidance will clearly differ from this estimate and we would provide an update at an appropriate time.

That completes the financial review and I'll now turn the call back over to Mike.

Thank you, Alan.

It's been only seven weeks since we reported our TOCOSOL Paclitaxel pivotal trial results. We were all profoundly surprised by the data and frankly hoped that we could learn enough from a thorough study of the trial results to justify continued development of the product through another trial. Unfortunately, that is simply proven not to be the case, therefore, we have moved quickly to reprioritize internal programs, implement appropriate cost cutting initiatives, and refocus our people, our capabilities, and our cash on the internal priorities that we continue to believe still have value. We have a relatively strong balance sheet considering the stage of development of our pipeline. Our team is reenergized and refocused.

We are also evaluating external alternatives to access a broader, deeper pipeline and leverage our own internal capabilities, infrastructure and cash. Last month, we engaged Ferghana Partners to assist us in identifying and analyzing these alternatives. Our goal is to enhance, compliment and leverage our clinical pipeline, capabilities, infrastructure and cash. We are considering several possibilities including acquisition, merger, and in-licensing. The process is underway and we will not be providing updates on the status of these efforts unless and until there is a transaction, if any, to announce.

I really want to emphasize that our goal here is to leverage our existing valuable assets, including again pipeline capabilities, infrastructure, and cash, to maximize value. We are not in the mode to do a deal for the sake of doing a deal. At the same time, we are also acutely aware that our current share price is a deep discount to both current and projected year-end cash, and ascribe zero value to the assets and opportunities we have outlined today. Now that we have completed our internal reprioritization of programs and restructuring, the next step to addressing this discount is more aggressively communicate our strategies and programs to investors and today is the first step in that process.

I have to conclude our formal comments by saying that I'm extremely proud of all of our employees here at Sonus, who have remained focused and committed to our vision. We remain united in our belief and committment to our programs and their potential to yield cancer drugs to provide better therapeutic alternatives for patients. With that, I'd like to open the line for questions.

Mary, would you please open the line for questions?

Thank you. (OPERATOR INSTRUCTIONS)

Our first question comes from Mark Monane with Needham & Company. Please go ahead.

Good afternoon, greetings from New York City, thanks for taking our call.

Hi, Mark.

A couple questions here. On the Phase III trial, sometimes the drug fails the trial and sometimes the trial fails the drug. Since the time of the first announcement, do you have any comments regarding this question and can you go into further detail about the formulation issues if there's any TK or PD results from the formulations which are are important for the development of 2310?

Mark, I think the simple answer to your question is that the drug simply failed to perform up to the expectations that we had, based on the Phase II trial data. With regard to anything we've learned about the formulation, simply we believe that the formulation approach continues to have merit reflected in ongoing application and a number of programs that Richard has outlined.

I'll turn it over to him in a moment to talk about that a little bit further, but I think at the same time, I would say that we recognize that we will have to yield data on those programs, we'll have to share data on those programs, to demonstrate their value and to overcome a natural skepticism that all such future effort should be painted with the TOCOSOL Paclitaxel brush. We don't believe that to be the case. With regard to the formulation itself, I guess we've come to call a variety of approaches TOCOSOL, and in reality, that is a headline which encompasses a number of different approaches and maybe I'll turn it over to Richard here to elaborate.

Yes, well, with relationship to 2310 to start with, it's a novel chemical entity with a novel prodrug of SN38, the active moiety Irinotecan, so that's actually the important part. It is formulated in a TOCOSOL-like formulation, but it is not identical to the formulation that was used with TOCOSOL Paclitaxel, and I think that again, our use of TOCOSOL for formulating any given drug would be based on the characteristics of that drug and whether TOCOSOL would provide advantages over and above other formulation opportunities that are out there, and in some particular instances that we're looking into, we believe that there is data to support that, but we'll have to evaluate that on an ongoing basis.

That's fair enough and I think you heard you said that we'll, or Elaine say we'll have results in mid-2008?

On 2310 that's correct, yes.

And then for Alan, please. Closing out the year at $30 million cash, the financial statement is sprinkled with amortization and therefore, it doesn't necessarily respect the cash flow so can you spend some time elaborating on your response about $1.4 million per month burn, is that what we should use starting today and going forward?

Use that starting in January, Mark.

Okay.

Because Q4 is going to have the close out expenses related to the 1075 trial as well as pay down of accrued expenses that were on the books at September 30th. As you know throughout the Summer, that was a heavy period of activity for 1075 and at September 30th, a lot of those bills were unpaid, so we'll burn up cash related to that in the fourth quarter of 2007. What's on our books at the end of Q3 between $6million and $7 million deferred revenue on our balance that is a GAAP number, will not generate cash for us in 2007 or beyond. That was all cash that we took in when we closed the original partnership with Scheering in October of 2005. So Mark, what I think you're going to see going forward in 2008 is virtually no revenue on the top line as we had been reporting when we had a partnership with Bayer Scheering.

And so if I subtract $40.7 million and I take $40.7 million and subtract $30 million and then the cash, the actual cash used in operations would be $10 million?

Yes, just for this quarter and again, there's about--on our books at the end of the the quarter, we have accrued expenses of almost $9 million and those are mostly related to the 1075 trial so we got to pay all of those down now that the trial has concluded.

Thanks for your added information and thanks for going over the stated future plans for Sonus.

Thank you, Mark.

Thank you.

Our next question comes from Matt Kaplan with Punk Ziegel. Please go ahead.

Hi, guys. Thanks for taking my question.

Hi, Matt.

Just wanted to dig in just a little bit more so I understand kind of the rational, obviously to a certain extent the failure of this large Phase III where you failed to show non-inferiority calls into question to a certain extent the platform technology with respect to reformulating injectable drugs. I mean, you failed to show a benefit on side effects and you also failed to show as much efficacy and obviously everyone's very surprised by that, so it's very, very surprising that that was the outcome of the study, but just in terms of why are you so confident in terms of the platform, TOCOSOL platform beyond formatting drugs as prodrugs to actually have utility, beyond the platform at AKA how you're appliant to SN38, and the TOCOSOL Camptothecin where it's (inaudible) bound to be used outside of that? Can you comment on that, maybe that's better for Richard?

Well, it's a difficult question to answer, because I think it really has to be viewed on a case-by-case basis, and I think that the applications that we're looking at, I don't want to get into all of them in great detail at this point because we're in the process in some instances of still working on our IP, but for example, we have disclosed here that we are doing some reformulation of--that's currently in research [Sisplatin] and the reason for that is based on relatively strong literature that Vitamin E can mitigate the side effects of [Sisplatin] particularly with regards to neuropathy and perhaps not quite as strongly but there are some data that it might also help with renal toxicity, and so I think that that is really the fundamentals of that and we're in the process of evaluating whether in fact that is true in our hands. We haven't reached any conclusions on that yet, we have some data that appear to be promising but I wouldn't go beyond that.

But I guess maybe more broadly, when you analyze a Phase III data and you take a look at that, what gives you confidence or is there anything that you see there that the technology will be--will serve utility or be useful outside of this, because obviously, Vitamin E was thought to potentially have an impact on the neuropathy and in the case of Taxol and that didn't prove out.

Well, I think, Matt, keep in mind that on TOCOSOL Paclitaxel, the primary driver for the decision to discontinue development is the commercial assessment that a., with a three year delay, a non-inferior objective response end point would not be competitive, and b., therefore, given the patent expirations of the two leading products in the space, the introduction of other Taxanes and other Taxane alternatives, for example, (inaudible) and with the resulting price intensity, price pressure that we see in the market that we simply can't justify ongoing investments in TOCOSOL Paclitaxel. So in other words, given these Phase III results, the window of opportunity on that formulation has closed.

Sure.

At the same time, we think we learned a significant amount from the Phase III trial to apply to other product opportunities where the window of opportunity is still open.

And again, I think one thing that needs to be emphasized, Matt, is that these are not identical formulations and that's perhaps a weakness in our presentation, if we've confused that fact, because the formulations that we're looking at versus this plan are actually quite different. While that SN2310 is reasonably close although it's not identical to go into review with TOCOSOL Paclitaxel but the ones that we're looking at in the context of [Sisplatin] are actually quite different. So, there is some Vitamin E or Vitamin E derivatives in there but they really are not identical by any stretch.

Yes, and then maybe Mike, talk a little bit about your strategy to focus on--to continue your focus on oncology. It seems like oncology is a very crowded space in terms of new drugs and development and also other drugs out there, a lot of drugs coming off patent as well. Talk a little bit about your strategy to focus on oncology.

I'll let Richard cover the technical aspects of that. From an overview perspective, I would say that oncology is what we have come to know, and we think that we have built significant capabilities not just on the bench but also in pre-clinical with various pre-clinical models that are appropriate to the development of oncology drugs, and additionally, in the capabilities that we have retained in a more streamline form in our regulatory and clinical operations.

Now, that is not to say, Matt, then in our broader Corporate Development efforts if we are successful in implementing that the strategy that our focus would remain in oncology. I think that is, that remains to be mains to be open to discussion. Again, the focus there is to try to leverage our existing pipeline capabilities, infrastructure with those of another company to develop more value. It is not inconceivable that that partner could have areas of focus outside of oncology, but we think given our capabilities and existing infrastructure, that that continues to be the right focus for us.

Richard?

And the other point, Matt, is that actually what you've raised is a little bit of (inaudible) because I agree that there are generics obviously that are on the horizon but that also offers opportunities. If, for example, you can develop a better generic, for example, by developing and we're not the only company doing this, but for example, by developing a prodrug of Ginsidavine that could overcome some of the pharmacokinetic limitations of Ginsidavine, and perhaps say be orally administered. So I think in every situation where there's a downside, there's also an upside and the question is to capitalize on the upside.

Okay, and just talk a little bit about the timing out of your strategic efforts because when I take a look at this--when Alan says you're going to end the year with $30 million in cash, and you're going to be burning $1.4 million, that's roughly $17 million a year, obviously. When do you think you could actually realistically, get something done strategically and then there be a point in time where it doesn't make as much sense because you only have enough to fund your internal programs going forward with--later on in 2008 to bring on additional programs outside of the internal programs to bring on additional molecules where you don't have other resources really to do it, so realistically, when do you think you can get something done strategically?

Well, all good points, Matt, and certainly things that we have considered in mapping out the strategy. I don't mean to be coy or evasive but I'm not going to give expectations on the timing of this except to say that we will do the right deal when the right deal presents itself and the right deal a., would have to provide an opportunity for us to leverage our existing capabilities, infrastructure and cash and b., would have to deliver the right value for Sonus' shareholders.

I'm pleased to say at this point that many opportunities have presented themselves. We are in active discussions with a number of them, the timing is simply uncertain. I can tell you that one of the things that we will be working against here is the disadvantage of being a public company, where a perspective partner will say, for example, we can read your value in the Wall Street Journal, but of course we are undervalued because we're a private company, we're a non-U.S. Company where efficient markets aren't at work and our efforts aren't being fully valued. Outside the U.S. there's kind of a stupid or a smart American play on that based upon your point of view, where a company will say, if we were freely traded in the U.S. we would be at a multiple of our current valuation.

Those discussions are not a constructive start for us and we're just not going to be inclined to go down the road of doing a deal where our shareholders are being disadvantaged. At the same time, I think you can imagine that there are private companies both in the U.S. and outside to which our being public is an attractive feature.

So there are a lot of moving parts here. Our objective is to do the right deal, not " A" deal and it's just really difficult to provide any guidance on timing.

Okay, and just one final question. Some of the characteristics of the Company or the deal that you're looking for in terms of whether it's the stage of development, can you give us a sense in terms of what a potential deal might look like, in your mind what you're looking for shareholders to benefit from?

Well, I think the simple answer there is that we're looking for a broader and deeper clinical pipeline.

Okay.

We really kind of like our earlier stage stuff and think we have pre-clinical data that's every bit as good as any pre-clinical data that's been presented to us, and frankly, we might be inclined to believe that the devil we know is better than the one we don't know, but on the other hand, we are clearly in a market where what is valued is clinical data. So if we could have one thing, if your question is what's on the top of our wish list, what's on the top of that wish list is a broader and deeper clinical pipeline with data that we believe are compelling.

Great. Thanks for taking all my questions.

You're welcome, Matt. Thank you.

Thank you.

Next question comes from David Miller with Biotech Stock Research. Please go ahead.

Great. Thanks for taking my questions.

Hi, David.

Can you tell us whether there were any country to country differences as far as efficacy, adverse events or dropouts in the Phase III trial?

The answer is no, there were no compelling differences.

Okay. So I think that we're all still struggling with trying to understand the approximate cause of the failure. I mean, I understand that there was a difference from your expectations, but was that driven by higher dropouts due to the higher than expected adverse events or what? I mean, because you guys have basically concluded that it likely wasn't the drug or the platform anyway, so in trying to help us understand and value the platform correctly, we need to have some kind of concrete idea of what went wrong in this trial.

Well, David, again, I think that it is--what is most surprising about the results of the trial for us was the performance of Taxol. We had conducted a meta-analysis in advance of the trial that we had shared with the FDA that strongly indicated that the response rate for Taxol would be in the range of 30% to 40%, and we expected based on the meta-analysis that it would be more in the middle of that range rather than at either of the end points. I think that's consistent with what we had communicated to the public in various corporate presentations throughout the development of the drug, and the reality is that the 45% response rate outperformed that expectation, and that is the most striking take away from the trial.

But I mean, we've talked about this before, you're giving these patients Paclitaxel. It's wrapped up in a different molecule, but fundamentally, that's what you're giving these patients with TOCOSOL Paclitaxel, and so it gets back to, I mean I understand how the bear Taxol arm performed so much better but that doesn't give us any insight as to why this Paclitaxel drug that you're giving them didn't perform better.

Well, I don't know that we will ever be able to give a biological or physiological reason for why it didn't perform better. All we can say is that it did perform in the 95% confidence interval from the Phase IIB trial, albeit at the lower end of that range, and when you combine those two things together , we simply missed the agreed upon end point with the FDA.

Okay. Are you compiling these data for publication, or presentation?

Oh, I think that's an open question. I wouldn't make any commitments for that at this point.

Okay, so to move on, so from a product advancement perspective, how far does your cash take you? So for example, I mean I understand that it would be Q3 of '09 as far as the cash burn rate but how far could we expect--how far could we expect 2310 to be advanced by that point and could we expect any of the current pipeline stuff to be in the clinic by then?

David, this is Alan Fuhrman.

Yes, I think your answer is that 2310 by the Q3 of 2009 , we would expect we would be in a Phase II, assuming that we continued to meet all our milestones along the way and we would have at least one new compound in Phase I development. So that cash forecast that I gave you factors those two things in in terms of what's in the clinic.

Okay, perfect. How does the current dose that you're dosing at in the 2310 trial compare to the kind of standard Irinotecan dose in the patients you're studying?

Well, that's a very difficult question to answer, because I think--and the reason is not to be evasive, it's simply that we have such our half-life is essentially longer, our AUC's of a given dose are so much higher, and that--we don't really know currently, and I guess the third overlay in all of that is that PKPD for Irinotecan is if you look at the literature, it's clearly described. In other words, it's not been entirely evident what correlates with outcome in terms of treatments with Irinotecan, whether it would be AUC or some other criterion, so I think that our goal is to keep moving our dose upwards and try to determine the NTD for it.

We don't know how far away we are are from that, depending on how we calculate a variety of parameters where we could be fairly close or we could be still a ways out, but I think that it's very encouraging that we have achieved these milestones because the thought when we started on this journey with 2310 was that it would be very beneficial to have a drug that had a longer half-life because it's a kind of--SN38 is reversibly bound to its target and so it's good to have a drug around it at all times and furthermore it's already been described in the literature, the drugs that are effective on that particular phase of the cell cycle also need to be present at all times.

Okay, and that actually is, go ahead.

So is that good enough? I mean we have other data that actually would further support efficacy but it's too preliminary. Mike just reminded me of that, it's too preliminary for me to discuss right here. We want to make sure it's repeatable so we have, I think I can say with certainty that our half-life in AUC's are substantially greater, and not by a small margin at a given dose, compared to Irinotecan.

Okay, so I guess that's actual a pretty good set up for I think what's probably my last question, which is are you more inclined to run 2310 in randomized trials in the next step than perhaps oncology companies traditionally are?

The short answer is absolutely, but I'll let Richard elaborate.

I think our plan is, and again, we obviously thought about this a fair amount but we haven't proposed anything yet to the FDA, but I think our plan is to do a control trial in the approved indication that for Irinotecan and that is colorectal cancer, and so that we can do a direct comparison, a single therapy in patients who have failed A5FU based therapy which is the current label for Irinotecan, and I think that that would give us, and I think people like you and other investors considerable confidence going into our Phase III that we would be successful there.

So it also, David, I think relates to a not so subtle paradigm shift. I think if you're a small company with one product in the clinic, I wouldn't argue that you're trying to keep it as alive as long as possible, but the prospect of rendering an early depth to it is pretty scary. With a broader and deeper clinical pipeline then I think the focus very much needs to shift to early failure rather than late failure, and we view controlled Phase II trials as very much an important part of that puzzle. At the same time, I think it's what you have subtly pointed out as very important. That has classically not been the probe to be approached in oncology, but it is one of the lessons that we have learned as a management team from the TOCOSOL Paclitaxel experience.

Okay. We had talked about that previously, as you know, and so I just wanted to make sure that the next stage for 2310 after you get out of the dosing trials was to run it randomized, so that's good to hear.

That's very true, again, I'd want to go back, everyone, to the portion of the script where I talked about TOCOSOL Paclitaxel and the data we have and say that it is conceivable that we could design another trial with the things we learned from this trial and we're pretty confident but speculate that we could demonstrate non-inferior efficacy with a better side effect profile from those lessons, however when you look at the market and anticipate that that would mean at least a three year delay, those incremental investments are extremely hard to justify, and we think we can take those lessons and apply them to other products in the pipeline where the competitive window is more open and we have a better opportunity not just to get a good drug approved but to generate a positive return for shareholders and that's our focus.

Okay, that's it for my questions. Thanks for answering them.

Thank you, David.

Thank you.

Next question comes from Chris Holterhoff with ThinkEquity Partners. Please go ahead.

Hi, Chris.

Good afternoon, guys. Thanks for taking the call.

With the TOCOSOL Paclitaxel program now terminated, I was wondering if you still plan on taking a look at the Phase II study in bladder cancer and if so, if you would plan to communicate that to the street or just potentially to a partner?

Well, I think we are in--I think there are two parts to the answer to that. Number one, as indicated in the script, in our formal comments, we actually have been approached by a number of parties who are are interested in licensing the product, and if and as those discussions proceed, I think you can contemplate that those potential parties would have access to all of the available data.

I think the second part of the question is whether or not we anticipate publishing any further data from TOCOSOL Paclitaxel and I think the answer to that question at this point in time would be " No". We don't see a constructive outcome from that, but that certainly will remain under consideration. It's also important to note that as we announced on September 24th, we have halted all clinical development of TOCOSOL Paclitaxel and that included the bladder cancer trial which was still ongoing.

Okay, that's helpful. Thanks, and when you say you've had an indication of interest, is that including 2310 as well? I guess is that a program you would consider out licensing or partnering as well?

Certainly at an appropriate time. On 2310 we continue to believe that the primary value catalyst would be--to the just completed Q & A would be in a controlled Phase II trial, and our preference would be to generate the resources to get to that point. When we say that interest has been expressed, we mean specifically in TOCOSOL Paclitaxel.

Okay, great. Thanks a lot for taking my questions.

Thank you, Chris.

Thank you. (OPERATOR INSTRUCTIONS)

Management, I'm showing there are no further questions, I'll turn it back to you for closing comments.

Thank you, Mary.

I'd like to thank you all for, again for joining us today. We clearly understand that the results of the trial were very disappointing and surprising, they were disappointing and surprising to us as well. Given our assessment of those results, we think we've taken the right steps in reprioritizing our internal programs, reallocating our available internal resources including both people and dollars and refocusing on other opportunities in our pipeline where we believe that significant opportunity still exists.

We understand that there will be a level of skepticism associated with this and we have every intent to get back out there and communicate our story to try to address that skepticism. We also look forward to updating you on our progress in the near future on our next quarterly conference call.

Mary, that concludes the call.

Thank you. All right, ladies and gentlemen, that will conclude today's teleconference. If you would like to listen to a replay of today's conference please dial into 303-590-3000 or 1-800-405-2236 and enter the access code of 11101278 followed by the pound. We thank you again for your participation and at this time, you may disconnect.