美國安進 (AMGN) 2004 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth quarter Onyx Pharmaceuticals financial results conference call.

My name is Michele and I will be your coordinator for today.

At this time all participants are in a listen-only mode.

We will be facilitating a question and answer session towards the end of today's conference.

If at any time during the call you require assistance please press star followed by zero and a coordinator will be happy to assist you.

As a reminder this conference call is being recorded for replay purposes.

I would now like to turn the presentation over to Onyx Pharmaceuticals.

Please proceed.

Good afternoon.

I'm Julie Wood, Vice President of Investor Relations and Corporate Communications at Onyx Pharmaceuticals.

Thank you for joining us today.

During the call we will review fourth quarter and year end 2004 financial results that were released earlier today as well as provide a general business update.

Please note that this call being held on March 3, 2005, is the property of Onyx Pharmaceuticals.

Any redistribution, retransmission or rebroadcast of the call in any form without the expressed written consent of Onyx Pharmaceuticals is strictly prohibited.

First Hollings Renton, our CEO will make some introductory remarks and then Marilyn Wortzman our Vice President of Finance and Administration will review our fourth quarter and twelve-month 2004 financial results.

Subsequently Hollings will make some closing comments before opening it up for questions.

Dr. Leonard Post, Onyx Senior Vice President of R&D and the Ed Kenney, the Company's Executive Vice President and Chief Business Officer will also be available during that time to answer questions.

We will be making forward-looking statements during this teleconference that relate to the timing and results of clinical trials and any regulatory filings for BAY 43-9006 as well as estimates as to future financial results.

Statements that are not historical fact are forward-looking.

References to what we expect, believe, intend to do, plan, estimate, or other statements referring to future events or results are intended to identify these statements as forward-looking.

Forward-looking statements are inherently subject to risks and uncertainties.

For a discussion of these risks and uncertainties we refer you to our annual report on Form 10(K) filed with the Securities and Exchange Commission on March 15, 2004; specifically the section entitled additional business risks as well as to our quarterly reports on Form 10(Q).

In addition our 2004 10(K) with updated risks and uncertainties will be on file with the SEC by March 16, 2005.

Also note that the forward-looking statements are based on our beliefs and assumptions as of today.

These beliefs and assumptions may change as a result of future events or the passage of time which would cause these forward-looking statements to be outdated and no longer our view.

We undertake no duty to update these forward-looking statements.

I would now like to turn the call over to Hollings Renton.

Thank you, Julie.

Good afternoon and thank you for joining us today.

We appreciate these regular opportunities to provide you with quarterly corporate updates.

During 2004 we had several important achievements.

These included a number of clinical milestones for BAY 43-9006 that we achieved with our collaborators at Bayer pharmaceuticals.

During the course of the year we activated approximately 100 sites internationally on the Phase III targets renal cancer trial.

This trial which is enrolling patients with advanced kidney cancer is well underway and we have nearly reached the target enrollment of over 800 patients.

In October with Bayer we reported final top line Phase II trial results for the 202 renal patients who participated in the randomized discontinuation trial.

As you recall in the study we met the primary end point, showing that disease stabilization was a drug effect.

This was based on the difference in the percentage of patients that were randomized to BAY 43-9006 or placebo that had stable disease at 24 weeks.

In addition we reported that time to disease progression for the entire renal cohort including those patients randomized to placebo was over 5 months.

This compares favorably to control groups in other studies -- that have reported disease progression of approximately 2 to 3 months in similar patient populations.

We are encouraged by these data as we believe that response rate alone may not be the best metric for this newer class of targeted therapies.

Instead, lack of disease progression or disease control may prove to be better measures for drugs such as ours.

With this in mind we look forward to the results from the pivotal Phase III study which has disease progression as an end point.

We expect to provide more data from the Phase II study at a scientific forum later this year.

Also during the year Bayer and Onyx selected two additional Phase III indications in metastatic melanoma and an advanced liver cancer.

For melanoma the decision was based on encouraging investigator assessed interim Phase I, 2 results.

The latest update on this ongoing study in which BAY 43-9006 is being administered with carboplatin and paclitaxel was presented at the perspectives in melanoma meeting in Berlin last September.

The investigator reported that of the first 54 melanoma patients enrolled there were 20 partial responses.

Another 26 patients had stable disease and 8 patients had either progressed or exited the study.

He also noted that prior to entering the study the participants were quite ill with about two-thirds of them having the most advanced form of metastatic disease, cancer that has spread to the internal organs such as the liver or intestines.

Since this is a combination study it's important to get randomized data in order to establish the additive benefit of BAY 43-9006.

Note that this was an investigator analysis that was not reviewed by the sponsors.

Since the database for this trial is still being finalized the results are subject to change.

For liver cancer, final Phase II trial results on 137 patients were presented at the EORTC meeting in September.

In this study there were 7 partial responses, 5 minor responses, and 59 patients with stable disease of at least 4 months duration.

Therefore about half of the patients had disease control.

The remaining 66 patients had their disease progress or exited the study for other reasons.

The investigator also reported time to disease progression of 4.2 months and overall survival of 9.2 months.

To test the efficacy of BAY 43-9006 in treating liver cancer Bayer and Onyx are planning to start a single agent Phase III study in the first half of this year.

In addition we are planning a Phase II combination study with the chemotherapeutic agent, doxorubicin.

In periodic updates throughout the year we have also shown the combinability of BAY 43-9006 with 8 different chemotherapies, these include, carboplatin, paclitaxel, irinotecan, 5FU, leukovorin, oxaliplatin, gemcitabine, doxorubicin, paxatir, and capecitabine.

In many cases, extension studies are now underway in specific tumor types and we expect to make additional decisions about the possibility of randomized Phase II studies during the coming year.

Approximately 2000 patients have already received BAY 43-9006 either as a single agent or in combination with other anticancer agents.

We have also continued expanding the Company sponsored and CTEP sponsored clinical trial program.

These studies include administering BAY 43-9006 as a single agent in tumor types such as breast and lung as well as in combination with other anticancer agents in a variety of tumor types.

Overall we have more than 30 clinical studies in progress.

Also in 2004 our collaborator Pfizer initiated a Phase I trial administering PD 332991 to patients with advanced cancer.

PD 332991 is the oral CDK4 inhibitor that resulted from our collaboration.

And finally about a year ago we raised net proceeds of $148 million in a secondary public stock offering.

As we begin 2005 our main emphasis is putting all necessary resources toward advancing the Phase III renal trial.

This includes ongoing data collection in order to be well-positioned to take advantage of a possible accelerated filing opportunity should the data be supportive.

Of course, we cannot promise that there will be an NDA filing for accelerated approval.

This is a decision that will be made once the data is known.

With that as a backdrop I would like to turn the call over to Marilyn for a recap of our financial results.

Thank you Hollings.

Onyx reported a net loss of $14.1 million, or $0.40 per share, for the 3 months ended December 31, 2004.

And a net loss of $46.6 million, or $1.36 per share for the 12 months ended December 31, 2004.

Onyx reported revenue of $500,000 for the fourth quarter and 12-month period ended December 31, 2004.

The fourth quarter revenue represents a milestone payment from Pfizer associated with the initiation of a Phase III clinical trial of PD 332991 that Hollings mentioned a moment ago.

Onyx reported no revenue for the comparable 3 and 12-month periods in 2003.

R&D expenses for the fourth quarter and 12 months ended December 31, 2004, were $10.2 million and $35.8 million respectively.

This compares to $7.6 million and $32.1 million in the same period of 2003.

The increase in R&D expenses in 2004 reflects higher clinical development costs associated with BAY 43-9006.

We anticipate that R&D costs will increase as the size of our clinical trial program grows.

Particularly given the previously announced plans to begin 2 additional pivotal trials in 2005; as well as our intention to support a number of other ongoing and planned clinical studies.

Marketing expenses were $2.8 million in the fourth quarter and $5.4 million for all of 2004.

This compares to $884,000 and $1.4 million of marketing expenses in the same period in 2003.

We expect expenses in this category to increase as we establish a commercial infrastructure and engage in precommercial marketing activities for BAY 43-9006.

General and administrative expenses were $2.7 million in the fourth quarter and $8.8 million for the 12 months ended December 31, 2004.

In 2003, general and administrative expenses were $2.2 million in the fourth quarter and $6.6 million for all of 2003.

We anticipate G&A expenses will increase to support the Company's continued growth.

At December 31, 2004 we had cash, cash equivalents, and marketable securities of $209.6 million, as compared to $105.4 million at December 31, 2003.

At March 1, 2005, we had 35.3 million shares of our common stock outstanding.

As we have stated previously in 2005 we will continue to grow our investment in BAY 43-9006, leading to an expected higher net loss in 2005.

These activities will include an increased number of clinical trials as well as precommercial marketing activities.

Though we anticipate that expenses will fluctuate on a quarterly basis we are providing guidance for a net loss in the range of 75 to $85 million for the full year 2005.

Given that this guidance is contingent on a number of pending events we will provide updates throughout the year.

In January of this year we filed a universal shelf to provide the Company with increased capability and flexibility to take advantage of favorable financing conditions.

Though we have no immediate cash needs we want to be able to access the capital markets as we deem necessary to support our corporate growth.

I would now like to turn the call back over to Hollings.

Thanks, Marilyn.

Let me conclude with an update of the status of key projects and our goals for 2005.

Clearly the ongoing Phase III trial in renal cancer is our top priority.

We expect to finish enrolling the trial shortly and, after the pre-specified number of events is achieved, to conduct a formal analysis of the data based on disease progression.

Though the data is blinded to Bayer and Onyx the protocol does specify an event driven analysis using a measure of disease progression.

As directed in the protocol the results of this analysis are to be provided to an independent data monitoring committee.

When appropriate, a communication will be made to Bayer and Onyx in order to guide the compounds further clinical development.

Once Bayer and Onyx have made a decision regarding a possible accelerated filing based on these disease progression data we will provide a public update on our plans.

We are pleased that we started this study after a perspective review of the protocol with the FDA through the special protocol assessment process.

Although we have an agreement on the protocol the FDA always conducts a comprehensive review of a sponsors entire filings before acting on a regulatory application.

Subsequent to preparing and submitting a new drug application and assuming a favorable review by the FDA, we could commercially launch BAY 43-9006 in the United States in 2006 if the disease progression results are positive and suitable for accelerated filing.

It is too early to accurately forecast the timing of a commercial launch if we need to complete the entire study in order to reach the survival end point.

Although we had a successful Phase II study there can be no assurances that data from either the disease progression or survival analysis for the Phase III trial will support a regulatory filing.

As part of our preplanning for a product launch we have establish the nucleus of a commercial group led by Ed Kenney, who was introduced earlier.

Ed has assembled a small but experienced team of oncology executives; including Randy Kelley, VP of Sales and Marketing, Fabio Benedetti, VP of Medical Affairs, a Head of Marketing and our first Medical sales -- Science liaisons.

Each of these professionals has significant oncology experience.

We intend to continue expanding our commercial team in tandem with our clinical and regulatory progress putting in place the right group is integral to our view that accessibility to new oral treatments can create a shift in how and where cancer patients are routinely treated.

We believe that new targeted therapies, particularly those with modest side effects, may allow certain cancers to be treated chronically by community based physicians.

This is an important consideration with all therapies that can be taken at home by the patient.

In such settings it is critical to have a drug with limited toxicities and preferable that any side effects can be readily observed by the patient and reported to the treating physician.

In addition to the Phase III renal study we have plans to begin pivotal trials in metastatic melanoma and advanced liver cancer in the first half of this year.

The former as a combination study with chemotherapy and the latter as a single agent trial.

Both studies will be conducted in patients with advanced disease.

More details on the studies will be provided when the trials are initiated.

We also have a number of ongoing Phase I and II studies evaluating BAY 43-9006 as a single agent and in combination with other drugs including some of the newer targeted agents.

Our clinical program includes both Company sponsored trials and studies conducted through collaborations with cooperative groups such as the Cancer Therapeutics Evaluation Program, known as CTEP at the National Cancer Institute.

As data from these trials become available we will provide updates at scientific meetings.

Data from these studies will be used to prioritize randomized studies in patients with the more common malignancies.

These activities demonstrate our progress and commitment to building an oncology business beginning with BAY 43-9006.

As part of our longer term strategic development we continue to assess inlicensing and M&A opportunities as mechanisms to broaden our product pipeline.

These ongoing activities will enable us to be opportunistic should the right prospect arise.

Thank you for your time and attention.

Operator, we would be happy to take questions now.

(OPERATOR INSTRUCTIONS) Our first question comes from the line of Steve Harr of Morgan Stanley.

Please proceed.

A couple of questions.

First on the guidance of 75 to $85 million net loss, does that incorporate potential cost of beginning to build a commercial sales force for a filing based on the interim analysis or is that without the interim analysis?

No, the range is there because of the prospect of costs for a sales force as well as other clinical activities of the Company.

Are you planning on, Hollings, an SPA, for the other indications?

Yes, in fact that's the last step in this process as you know in initiating pivotal trials, is to argue where we have unmet medical needs and there may be unique aspects of the protocol to actually have an active dialogue with the FDA under the special protocol assessment so that we have added clarity around the ability to use those trials for registration.

And just one question and I'll jump back in the queue, in terms of timing to hire a sales force.

Given the people you have on hand how quickly could you hire a sales force and how big do you think it would need to be for the launch of this product?

Okay.

Ed Kenney is on the line.

Maybe I'll ask Ed to take that question?

Yes, I think the first question was about the timing -- fundamentally what we are challenged with doing is calibrating off the regulatory progress of the drug.

We don't want to have folks on board too soon.

There's an expense associated with that and probably some regulatory risk as well.

We will be putting in place very soon first line management.

And they will be charged with making the decisions about who comes on board and the timing of it.

We haven't really announced precisely the size of the field force.

We have reached agreements with our partner in terms of how it will be, how we will configure it and those responsibilities are being delineated.

But we really haven't come down on the final number.

I think what we said as a general is that we would expect that the combined companies would have in the neighborhood of between 80 and 90 field people involved.

Great.

Thanks.

Next question.

Our next question comes from the line of Phil Nadeau of SG Cowen.

Please proceed.

Hollings, on the interim analysis in the submission to the independent board, do you have any idea or estimate of the time it will take from the day that the interim analysis is triggered until Wall Street might hear an announcement on your conclusions from that analysis?

Are we talking 1 month, 2 months, 6 months?

Do you have any estimate there?

Phil, we actually have not provided step by step break down of everything that's going to be required to get all the way through the, not only the analysis but the filings and the regulatory process that ultimately can get there.

So we have not broken that out in part for competitive reasons.

Okay.

Just so I understand what you just said does that mean you are not going to announce your decision to file, you would only announce--?

No, I didn't mean to imply that.

I was responding to your question about the timing.

When we have made a decision about where we are going to go after that analysis then we will make that publicly known.

I guess I was wondering, well, first let me take a step back.

My assumption from your comments is that the interim analysis hasn't been triggered.

Is that fair to say?

Again, we haven't said anything other than we will say something once we've made a decision.

And hypothetically just for informational purposes, how long will it take from the time that the interim analysis is triggered until you say something -- I'm not looking for a quarter in which would you make an announcement but just the time that would lag between those two events.

Well, again, without getting into the specifics, the data has to be prepared and given to the DMC which is the party that actually makes the determination around that analysis.

The -- that meeting has obviously -- occurs after the events have occurred and the announcement is completed and then that will be communicated to the Company and the Company will have the opportunity if appropriate to look at the data and make a determination.

Okay.

And last question, given that you have a planned interim as well as a final analysis is there any statistical penalty for the interim analysis?

We haven't broken out the specifics of the statistics but we have said that it is -- that number one is that the FDA has agreed to use this one well controlled study for the full approval analysis around survival and that there is the interim analysis.

We haven't talked about exactly what the P value determinations and agreements are but it is common if there is -- look, during the conduct of a trial to allocate the P value between the full approval analysis versus the analysis that occurs during the trial.

Okay.

Great.

Thank you very much.

Next question comes from the line of Jeffrey Meccam of JP Morgan.

Please proceed.

Good afternoon.

Any color on the design -- the size of the melanoma or liver cancer trial?

I know in the past, you've just sort of generally spoken about the comparitors but would the dosing as well in combination be lower than for the single agent studies?

Len, maybe if you would just summarize what we've said to date and then obviously we will provide more details when the studies start.

Yes, the melanoma trial is going to be taxel carboplatin two arms plus and minus BAY 43-9006.

Just like we've used in the Phase II where we think that 400 milligrams twice a day is the right dose to use in the combination with the taxel carboplatin just like it was with the mild therapy.

As Hollings said the exact details about the patient populations and the design is something that we plan to get into once we finalize everything and are ready to begin the study.

So hepatocellular carcinoma Phase III study will be monotherapy BAY 43-9006.

Randomized against placebo in hepatocellular carcinoma patients.

Again the dose will be 400 milligrams twice a day.

The same as we've used throughout all of the Phase II work and in our Phase III renal cancer study.

And, again, the details about patient population and some of the other things about the trial will be something that we'll get into once its finalized and we are ready to begin that one, too.

And the data that we presented on the Phase II study was in patients, first line patients, so there is no approved therapy for HCC.

So that trial will involve patients that are getting first line systemic therapy.

Okay.

Thanks.

Then turning to the renal cell, what are your thoughts on pursuing a CTD filing for either the interim or the final?

Len, you want to talk a little bit about CTD and just some of the mechanisms?

I'm not quite sure about the question, were you asking the format of the application or?

Right.

I mean would you pursue that -- would that electronic method for both the interim and the final analysis for the renal cell trial?

Well, let's see, without getting into details that we and Bayer haven't agreed to disclose on the exact format, the idea is that we are working on the overall package in the various sections of the NDA in a way that the clinical data will be the rate limiting step and that will be true if the clinical data comes from the -- from the progression analysis, or if it comes from the survival analysis.

So either way our aim is to have the other section so that they are not rate limiting.

And we are very much thinking of doing this in a way so that we can use the pieces for a global registration strategy.

The other thing just to add to that as you probably know Europe does not have the same approach for using surrogate end points that are likely to predict for clinical.

So our expectation is that European application although off of the same CTD would be under a survival analysis.

Okay.

Thanks.

Thank, Jeff.

(OPERATOR INSTRUCTIONS) Our next question comes from Jim Birchenough of Lehman Brothers.

Please proceed.

Hi, guys.

Hi, Jim.

A couple of quick questions.

Just on the decision to file in an interim I just want to see if I can understand the process and the decision criteria for the DMC.

Do they have a predefined P value they act off of or an absolute differential progression end point or do they have some leeway in terms of giving you advice as to whether to file, just trying to understand what guides them.

Len, you want to take that in a general way.

Yes, I mean the statistical plan is all worked out.

We talked about the statistical details as early as the SPA process before we started the study and there's a detailed plan that goes into the analysis that the DMC will do.

Now having said that, they look at a lot of other data, too.

And we always say that there's no one number that automatically determines a decision to file or approve.

But in terms of the specifics and the details that part is very clearly laid out.

Great.

Just in terms of, it strikes me that the activity we've seen in renal cells seems pretty good and the combo synergy with taxel and carbo seems to be the other area you would want to leverage.

So I'm just wondering if you could spend a bit more time talking about how you expand the potential use in renal cell beyond second line to perhaps front line and Ajuvin (ph) setting.

Whether there's any plans for studies there and then how you could further leverage the taxel carbo synergy into bigger markets like non-small cell lung.

Those are good questions, Jim.

Len, again do you want to respond to that.

Well, there is nothing fundamentally different that we know of about the biology of renal cancer before and after that first line of systemic therapy.

So I think there's every reason to think that an agent that works in second line renal cancer would be efficacious in first line renal cancer and where, we are working on plans to generate data that would actually prove that.

Ajuvin is a really interesting possibility for this drug.

With the safety profile, it sort of points in that direction and we are having some discussions about that right now.

Although obviously we haven't started anything on that yet.

Your point about combining with chemotherapy is a great point.

You heard Hollings list all of the things that have been tested in combination with 9006 and the conclusion is that in general it's quite combinable with chemotherapy and the melanoma experience is a pretty strong hint that you can get some additional efficacy with that and in particular with taxel and carboplatin.

After all we though lung cancer was the likely direction we were going to go with taxel carboplatin in the first place and it was only, you know, that minimal observations that emerged as a more direct opportunity.

We have all of this data coming in from the monotherapy and chemotherapy combinations studies that have been done.

What we will be doing is looking at those for signals that will point us in other directions.

We expect that we are probably going to move in the direction of randomized trials in some of the big tumor types like lung cancer.

And that's a very, that's a discussion that we are spending a lot of time with at the clinical pain with Onyx and Bayer and to work on that right now.

Just one final question.

It might be a little early to be thinking about pricing but just in general terms for add on, just wondering when you start to think about pricing are you guided by believe that pricing, perceive and arrestor pricing or just how do you think about the constraints on what you can price something like a 9006?

I think yes is the glib answer.

We look at all that, we also look, I think people skip over this, the value, the clinical value that the product represents in the marketplace.

In other words, how it -- just how good is it, you see a little bit of that price discrimination going on now in the oral drugs that are currently available.

And as you know the environment, the reimbursement environment is very, very fluid.

It's changed tremendously just in the last year and there's still -- still another shoe, at least one more shoe to fall.

But all those things are taken into consideration.

Well, thanks for taking the questions.

Thanks, Jim.

Our next question comes from the line of Gordon Cohen of Merrill Lynch.

Please proceed.

Hey, Gordon.

Thanks for taking the questions.

I have a couple of questions on guidance.

First on the expenses side, when we are thinking about expenses for R&D, G&A, and marketing next year, would the percentage of total expenses this year be a good indicator for next year?

I would say probably not in general.

Although you know we don't break out the guidance by line item.

We do it in the macro sense.

But clearly we have -- have had a much more substantial investment in the clinical program.

And the, although the marketing program did, commercial expenses did increase in 2004 it's still a relatively low base.

So I think you can't really look and try to work the same percentage off of those two numbers.

And again we are not going to provide more guidance but I just caution you to look at the -- there's really going to be a larger percentage growth in the commercial side than in the R&D side.

Could we expect any revenues in 2005?

Our guidance is the earliest approval is for 2006.

But from any other partnership?

No, the only other source of revenue for us is milestones under the Pfizer agreement and they are more back-end loaded and we would not expect to have milestones in 2006.

I just wanted to make sure I understood correctly what you were talking about before, the range of 75 to 85 million, if we assume, depending on the interim filings, it would be towards the lower end if you are not able to file an interim, and towards the higher end if you are able to file?

I would say that's the simplified way of looking at it, yes.

So most of the differences comes from the marketing expense?

Yes, I would say that's the big increment because the clinical trial program is likely to be roughly in the same order of magnitude.

If you are able to file on an interim, would you have to stop the Phase III trial due to ethical reasons?

If you hit your interim analysis and is that factored into the spending numbers?

The answer is no, but, Len, you want to just talk a little bit about how the trial continues on?

Yes, I mean the plan is is that with this trial it has both the opportunity for accelerator approval based on the progression analysis and full approval based on the survival analysis.

Traditionally accelerated approvals have gone where you know, you do one study and go for accelerated approval and then agree to do the full approval study with the full clinical end point.

This design really rolls both into the same study.

But along with that comes the expectation that we will of course finish that study and get the -- get the survival end point.

Okay.

As I mentioned in my comments we did indicate that we've nearly reached the enrollment, the full enrollment for this study.

So it will be a matter of continuing to treat those patients and following for the survival analysis.

Great.

Thanks.

Our next question comes from the line of Howard Liang of A.G. Edwards.

Please proceed, sir.

Thank you.

Just some clarification on what you said about the interim analysis.

You said it will be based on a progression based end point, that's either time to progression or progression for your survival.

Will you also look at survival at the same time or is it purely based on TCP or progression free survival for the interim analysis?

Well, the analysis that we have indicated to folks that could be the basis for accelerated approval is around 8 progression related end point.

The data monitoring committee every time they meet look at survival.

And that's not what we have been describing as the expectation even though they look at it every time that we--.

And I guess related question, will you also look at time to progression in your final analysis to survival?

That is a secondary end point of the study.

Okay.

But in terms of allocating your P value, because one way to think about it is that your interim analysis for TCP will be out of a certain P value and the final for survival the rest of the .05, is that the right way to think about it?

Well, we didn't actually specify what P value it is but the two primary end points, the -- I'm sorry, one primary end point that's survival I should say and that analysis carries a portion of the total P value and then because we have the earlier analysis around the progression some part of the total P value gets allocated there.

Okay.

Then can you update us on the status of the Phase II randomized discontinuation trial in non small-cell lung cancer?

I know the trial was suspended at one point, is the trial being resumed?

Well, the -- Len you want to talk about just maybe in aggregate the trials that are underway, in -- let's just pick on small-cell lung cancer here.

Yes, non small-cell lung cancer there's quite a few things going on.

One is a -- is a single arm, single agent study that the Companies are sponsoring.

And one is a single agent, randomized discontinuation that, Hollings was referring to that is being run by ECOG.

And we also have a combination study that the Companies are sponsoring, specifically a non small-cell lung cancer with ERISA and then there are non small-cell lung cancer patients on -- there are some scattered across some of the other combination studies.

So there's a variety of sources of non small-cell lung data.

Does that answer your question, Howard?

I'm thinking about the suspension of the ECOG. study with that, has that been resolved?

Well, I think I should clarify what that suspension is.

That was a planned break in the enrollment to make sure that there was a -- the idea was that if there wasn't enough patients being randomized that that would mean that the study, there would need to be some kind of a modification made so that -- this is a planned stop, and I don't have an update for you on exactly the timing of when the information comes in on that and the decisions that come from that.

Okay.

Thank you.

Our next question comes from the line of Mark Karvosky of Piper Jaffray.

Please proceed sir.

First question is in terms of the interim analysis, are you guys pretty much in a black box until the DSMB gives you the results of the interim analysis or do you know when the events have triggered the beginning of the analysis of the data?

We know blinded data.

The data is however unblinded.

I'm sorry, it is not unblinded, it is blinded, so we know what's going on in an aggregate.

But we don't know what's happening in the two arms.

In terms of when thinking about the interim analysis, when the number of events has been reached in order to start that interim analysis you guys don't know when that occurs?

We have visibility on that, among some other broad parameters.

Okay.

Then the second question is regarding the sales force and commercialization plans, is it the idea now that you will build the sales force from the ground up?

Or I know you said you are looking at opportunistic M&A or partnership agreements, would you look to already marketed products in the space as potential providing you the sales force for 9006?

I will turn this over to Ed again in a minute but in general our view is we plan to build our own sales organization -- sales organization from the ground up which again Ed can comment on his team and how they are going about it.

And we are not -- not necessarily looking to do that through M&A.

That could be -- M&A could be a range of different things from marketed products to products that are in the clinic as well to fill the pipeline.

Ed, you want to talk a bit about how you are going to do this in terms of building it from the ground up with your folks there?

The prime criteria that we use to higher anybody from me on down has been prior oncology, substantial prior oncology experience.

And the oncology community, the commercial folks that are out there, it's still a fairly small community.

So folks are known to other folks in the space.

And what our plan -- to specifically answer the question is to do it on our own.

And the same is true of our partner.

As I said a few minutes ago we've reached agreement with Bayer exactly how we are going to configure.

We are circling around the size issue right now.

But how we design it is pretty much put to bed right now.

So we planned to it ourselves.

I think to Hollings point, if we are going to be opportunistic on the business development side it's other marketed products become available, you know how tough that search is, but should that happen then certainly we will be opportunistic and move in that direction as well.

And the agreement and the structure actually will allow us to do that.

Okay.

Great.

Thanks.

Our next question comes from the line of David Witzke of SunTrust.

Please proceed.

Thanks.

Most my questions have been answered.

A couple quick ones, regarding the interest free loans or the milestone 10 million at filing, 10 million on approval for a total with the prior 20 of 40, how will those work through I guess the balance sheet and income statement and do they just come off the first profits on drug or how should we think about that?

Marilyn?

It's recorded as cash and advance from our collaboration partner on our balance -- as a liability on our balance sheet.

And payment occurs ratably on a quarterly basis from a minority share of our portion of the net profits.

It doesn't flow through the P&L, just to be real clear, it's a balance sheet item of cash in and a balance sheet entry and then when we pay it out it's also a balance sheet cash out and then reducing the obligation, it comes out of only, only comes, the repayment only comes from a minority percentage of our profit share.

Okay.

I understand.

It will just be taken right off the balance sheet?

Right.

And regarding abstract committed to AACR.

I wonder if you are at the point where we can discuss what we might see in Anaheim next month?

I don't think we have ever released what's been accepted there.

To my knowledge.

Very good, thank you.

There will be some presentations there but again we haven't gotten into the specifics.

Our next question comes from the line of Jim Reddoch of Friedman, Billings.

Please proceed.

Hi, Jim.

Hi, thanks, two quick questions not related to the interim analysis.

The first is kind of following up on David's questions, revenue recognition, do you actually recognize some of the top line or plan to recognize some of the top line revenue from the product or do you recognize the profits and would that be as a top line item or something below the operating line?

Yes, just very, very simply because without getting into a lot of detail.

We record our 50 percent share of the profit after Bayer records the sales in their expenses.

So we get 50 percent of that profit.

And then in addition we would record as revenue what they would be reimbursing us for 50 percent of our expenses.

And then the third element is, excuse me, the third element is the royalties out of Japan.

So that would be a third source of revenue.

Okay.

Great.

And also on the melanoma trial.

What efficacy did you assume when you were controlling, when you were designing the trial, the efficacy that you assumed for the control arm?

I think you've talked about this before as in these patients as carbo tax maybe having a 10 to 15 percent response rate, for example, can you say just what went into the design?

We actually haven't even talked about what the end points are yet.

I think we can provide more guidance once we've started those studies.

Does that also have an interim analysis?

Again, we haven't provided the specifics.

When we get the trials up and running then we'll provide the specifics.

Okay.

Thanks.

Ladies and gentlemen, this does conclude the question and answer portion of today's conference call.

I would like to turn the presentation over back to Mr. Renton for closing remarks.

Not a whole lot more to say except for thanks again for joining us.

We appreciate it very much and appreciate the opportunity to interact with you and respond to your questions.

By all means if you have any more questions, give Julie a call and she'd be happy to answer your questions or direct them to one of us.

Thanks again, talk to you next quarter or out in the field.

Take care.

Bye.

Ladies and gentlemen, thank you for your participation in today's conference call.

This does conclude the presentation.

You may now disconnect.

Good day.