Brickell Biotech Inc (BBI) 2011 Q2 法說會逐字稿

Good day, and welcome ladies and gentlemen to the Vical Inc. financial results conference call. At this time I would like to inform you that this conference is being recorded, and that all participants are in a listen-only mode. At the request of the Company, we will open the conference up to questions and answers for invited participants after the presentation. I will now turn the conference over to Mr. Alan Engbring, Executive Director of Investor Relations. Please go ahead, sir.

Hello everyone. Welcome to our second quarter 2011 financial results conference call. Participating on the call today are Vical's President and Chief Executive officer, Mr. Vijay Samant; and Vical's Chief Financial Officer, Ms. Jill Broadfoot. I begin with a brief notice concerning projections and forecasts. This call includes forward-looking statements, including financial expectations and projections of progress in our research and development programs, that are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including the risks set forth in Vical's annual report on Form 10-K, and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, as well as the specific risks and uncertainties noted in Vical's news release on second quarter 2011 financial results. These forward-looking statements represent the Company's judgment as of today. The Company disclaims, however, any intent or obligation to update these forward-looking statements. Now, I would like to introduce Vical President and Chief Executive Officer, Mr. Vijay Samant.

Thank you Alan, and welcome to all our participants. In today's call, I will focus on updates for our leading development programs with TransVax we announced last month an exclusive worldwide license to Astellas, and I will discuss the path forward, and broader impact of this license. With Allovectin 7, we are approaching completion of our Phase III trial in patients with metastatic melanoma, and I will provide some detailed guidance on our anticipated progress. We'll start today with a quick review of our second quarter financial results by our CFO, Jill Broadfoot, and our updated cash book forecasts, reflecting the recent developments. Jill.

Thank you, Vijay. As we reported earlier today, second quarter 2011 total revenues were $800,000, compared with $2.1 million for the second quarter of 2010, which reflected last year's revenues from our dengue collaboration with the US Navy, and the contributions of AnGes funding for our Phase III Allovectin trial. Our operating expenses were lower in the second quarter of 2011, compared with the second quarter of 2010, primarily as a result of costs recognized in 2010 related to the dengue collaboration, and lower clinical trials for both Allovectin in TransVax. We ended the second quarter with cash and investments of approximately $45 million. In addition, we expect a $25 million cash payment within the next few weeks from our recent TransVax license with Astellas. The Astellas up front payment of $25 million is higher than the amount we had included for protected partnership payments in our original forecast for 2011.

In addition, we expect to receive payments from Astellas in 2011 for reimbursement of our costs for ongoing TransVax related activities. As a result we have revised our guidance, and are now projecting a net cash burn for 2011 of between $7 million and $12 million. Please note that we have excluded from our 2011 guidance the $10 million milestone payment due from Astellas upon finalization of the trial design for a Phase III trial of TransVax in hematopoietic stem cell transplant recipients. We expect to receive that payment no later than the beginning of the Phase III clinical trial, which we expect will begin in the first half of 2012. We believe the future financial benefits of the Astellas agreement to Vical will be substantial, both through the remaining development period, and for the years of commercialization ahead. With that I will turn the call back to Vijay.

Thank you, Jill. We announced the TransVax license agreement with Astellas just a few weeks ago, and it became effective 2 weeks ago with early termination of the Hart-Scott-Rodino waiting period. I will spend a few minutes today on a high level overview of the collaboration, provide an update on our post-announcement progress, and our path forward, and look at the opportunities that will open up for Vical as a result of this new collaboration. First of all, we are delighted to have the ideal partner for this program. Astellas is the second-largest pharmaceutical company in Japan, and one of the top 20 worldwide. Even more relevant are the demonstrated success in key relationships in the transplant market. With Astellas driving the program forward, we believe that TransVax is positioned well to achieve the greatest possible commercial success.

As a reminder, the early termination of the Hart-Scott-Rodino waiting period triggered an additional $25 million payment for Astellas, which we expect to receive within the next few weeks. Finalization of the Phase III trial design will trigger another $10 million payment. Up front and milestone payments for the commercial launch of TransVax would total up to $130 million. After the launch, Vical will receive double-digit royalties on net sales of products. We also have reserved the option to co-promote TransVax in the United States. From this point forward, Astellas has agreed to bear the responsibility and costs for all TransVax development work for regulatory approvals, and for commercialization. Because of substantial experience working with DNA vaccines, we agreed to help Astellas with manufacturing, regulatory and certain development activities. Astellas has agreed to reimburse for all of these efforts, including the cost of our employees working on TransVax, along with any related external expenses. Since signing the agreements, we established a joint a development team with Astellas, and together we have hit the ground running.

The initial focus is on finalizing the design of the Phase III trial for the HCT transplant recipients consistent with the goal of starting the trial in the first half of 2012. The design of the Phase II trial for the solid organ transplant recipients is being developed in parallel and Astellas expects to begin this trial in the same time frame. We believe that the TransVax program is now well positioned for success, and that the Astellas has the resources and the experience to advance much more quickly than we could do on our own. Once TransVax reaches the point of commercial launch, it should be a great fit with the existing Astellas transplant business. As you probably know, Astellas immunosuppressant program generated $2 billion in sales in the most recent Astellas fiscal year. Astellas has presence in all key regions, and is positioned well to be efficiently leveraging this new product into this market. We have well-established relationship with the transplant team, with prescribers, distributors, payers, scientific community, and the key regulatory agencies. This network should increase the probability of success for TransVax.

In our July call, addressing the Astellas license agreement, we described some of the initial benefits of the collaboration. I won't repeat those today, but will summarize by noting that we believe collaboration with Astellas is an important validation of our technology platform, and in particular the promising clinical results observed in TransVax in our controlled Phase II trial. In addition, we believe it gives Vical greater flexibility, stability, and the resources to devote to our other programs. We are evaluating our options to advance our early stage pipeline. This includes our CyMVectin prophylactic vaccine for the prevention of maternal fetal transmission of CMV during pregnancy, as well as our herpes simplex type II therapeutic vaccine, and potential expanded applications for Allovectin 7 for other cancers. Our immediate attention, however will remain focused on Allovectin, our normal immunotherapy for initial planned use in metastatic melanoma.

Let me now move to Allovectin 7. As we noted in our earnings release this morning, we have updated our guidance for a Phase III registration trial of Allovectin 7. We expect to complete this treatment follow up with a primary endpoint, which is a response rate at 24 weeks or more after randomization, by February 2012, and to continue monitoring the secondary endpoint, which is overall survival, and release the top line data for both the endpoints in the second quarter of 2012. We're excited about the Allovectin term program. I will to take some time today to walk through the details and the thought process behind these new projections. We enrolled a total of 390 patients in our Phase III trial from January 2007 to February 2010. The trial was randomized 2 to 1, with 260 patients in the Allovectin seminar, and 130 in the chemotherapy arm. Patients in the chemotherapy arm would get physician choice of dacarbazine or temozolomide. Our primary endpoint is the overall response rate at 24 weeks after randomization, or later. This time element is key, as it is intended to highlight the unique profile and durability of immunotherapy responses versus the transient nature of chemotherapy responses.

Let me remind you that in Phase II trial, we had 15 responders out of 127 patients for an overall response rate of 12%. If we only look at those patients in our Phase II trial, who have met the eligibility criteria for a Phase III trial. We had 11 responders out of 66 patients for a calculated response rate of 17%. Importantly, all of the response in our Phase II trial would have met the Phase III primary endpoint of response rate at least 24 weeks after randomization. The median duration of response was 13.8 months, but the minimum response duration was 6 months, and the longest was more than 5 years, and still going at the last check-up. For comparison, though, from a variety of melanoma patient populations, a historical median duration response for dacarbazine or temozolomide is typically 3 to 4 months. To maximize this opportunity of meeting our primary endpoint, we plan to keep the patients in study as long as possible. Our Phase III protocol was designed under an SP agreement and allows for a maximum 2 year follow period. Simply put, that means for the last patients enrolled in February 2010 we can count responders to February 2012. That is when we expect to close the trial for the primary endpoint.

Once we get to that point we close the trial, collect and audit the data, and lock the database. The data will then be reviewed by an independent endpoint assessment and adjudication committee, or EAAC, which will make a final determination of each subject response status. The EAAC is composed of a radiologist or an oncologist who did not participate in the trial. The EAAC follows the charter agreed upon with the FDA and will determine which patients meet the established criteria for responses. We expect the data collection and the audit process and the EAAC evaluation to take several months. It's an intensive process. Based on the February 2012 target date, we are projecting that the primary endpoint top line data should be available in the second quarter of 2012. I will now move to our secondary efficacy endpoint, which is survival. Positive survival data could be a compelling factor in the approval process as well as a competitive advantage in the marketplace. In our Phase II study, the median overall survival is almost 19 months for Allovectin.

Among the patients who would have met the eligibility criteria of Phase III trial, the median survival is 22.5 months. These numbers are even more impressive, when you consider that more than 60% of the patients withdrew from the trial during the first cycle of treatment, most due to progressive disease. We have designed the Phase III trial to allow patients to remain on study for at least two cycles to give our treatment more time to help patients. For comparison, the median survival for the dacarbazine or tmz controlled group in recent studies in a variety of melanoma patient populations typically ranges from 6 to 11 months. We have calculated the target number of overall death events needed to show a statistically significant survival advantage, based on our assumptions from months of survival in the control arm and months of survival in the treatment arm. We have not yet reached the target number of overall deaths, but expect to do so in the second quarter of 2012. Remember, the study is blinded to Vical. I'm pleased to inform you that since our last call, we have confirmed with the FDA that we can lock the database for the response rate endpoint, and proceed to the EAAC evaluation, but continue to keep the trial open for survival endpoint. That allows us to keep the survival database open for several additional months without delaying the adjudication for the response rate endpoint.

By the time the EAAC process is completed we expect to be close to the target number of overall death events, so the timeline for the primary and secondary endpoints should merge at the end. Because there is no EAAC [grosses and more] for survival, because you are just counting the death event rates, we should be able to complete the survival analysis quickly and release the top line data for both endpoints at the same time. Again our best estimate as of today is that we should reach that point in the second quarter of 2012. We also are looking beyond that point to Allovectin's potential positioning in the marketplace. We have noted before this call that Allovectin 7 has a unique mechanism of action that could be synergistic with other melanoma treatments, especially the recently approved Yervoy, anti-CTLA4 monoclonal antibody. We are currently conducting a mouse study with Allovectin 7 and an anti-CTLA4 MAB in an accepted melanoma model as a first step in evaluating this potential synergy. We expect to have results from this initial study by the fourth quarter.

Let me move on to herpes simplex. I wanted to give you a quick update to as to where we stand with this program. Since our last call, we presented data at 2 scientific conferences, with the latest preclinical data for our HSB2 vaccine. We previously reported encouraging data showing that our prophylactic vaccine protected mice against challenge of 50 times the lethal dose of herpes simplex 2, providing sterilizing immunity and individual viral counts at both primary and latent infection sites. Our Vaxfectin adjuvant significantly improved the vaccine's effectiveness. Our therapeutic vaccine significantly reduced the recurrence of lesions in guinea pigs with latent infection as well as viral shedding. We repeated these studies because we wanted to make sure these were for real, and we are pleased to let you know that we confirmed these results, which are among the best ever seen with a HSV-2 in such a therapeutic model.

The latest data shows that even a small 0.1 microgram dose of the prophylactic vaccine provided 100% protection of mice against a challenge of 50 times the lethal dose of herpes virus and 100 microgram dose provided, 100% protection of mice against the challenge of 500 times the lethal dose of the pathogen. The 100 micrograms dose of the prophylactic vaccine also significantly reduced viral shedding at the primary infection site, individual viral counts at the latent infection site, both vaccines completely prevented primary disease and recurring disease in the prophylactic guinea pig model. We are now working with our collaborators at the University of Washington and HSV-2 clinical experts to complete the pre-clinical development to prepare this vaccine to advance it to human clinical testing. HSV-2 prevalence in the US alone is estimated around 15 million. About 20% of the 10 million people are asymptomatic. That presents a large potential market for a therapeutic HSV-2 vaccine. In conclusion, through the remainder of 2011 into 2012, we expect continued progress on our independent partners' programs. In our TransVax CMV vaccine program, we expect Astellas to initiate the Phase III trial in stem cell transplant recipients, and the Phase II trial in solid organ transplant recipients in the first half of 2012.

In our Phase III trial of Allovectin 7, we expect to complete treatment and follow-up for the primary endpoint by February 2012, and to release the top line data both for primary and secondary endpoints in the second quarter of 2012. Our Japanese partner, AnGes, is expected to initiate multi-national Phase III clinical trial of it's Collategene angiogenesis product in 2011. As a result of the Astellas agreement, we have revised our financial guidance, and now expect the net cash run rate for 2011 between $7 million and $12 million. That concludes our prepared comments. Operator we are now ready to open the call for questions from our invited participants. Thank you.

Thank you Mr. Samant. Your question-and-answer session will begin at this time. (Operator Instructions) Please stand by for your first question. Our first question will come from Ren Benjamin with Rodman.

Hi good afternoon guys and thank you for taking the questions, and congratulations on the progress. Starting off with Allovectin, can you remind us, Vijay, how many SMV meetings have taken place and how many more will take place on the way to the unveiling of the data?

I believe we've reported on five of those, Ren. We have them roughly every six months, so as long as the trial is open we will continue to do those every six months.

Alan, when is the next one -- I forget when the fifth one was reported. When is the next one due?

We reported the last one, I believe, in February, so as we should have one coming up relatively soon. There's a little bit of a fudge factor in those, because the report doesn't always come in the same amount of time. We wait for the report to come in.

And just for my understanding, in these meetings I understand that there is not a futility analysis and it's primarily safety, but they are unblinded to the data and they can recommend that the study halt or is that not an option?

That is not an option. They look strictly at safety and they can only stop the trial or recommend stopping the trial for a safety problem.

Okay. And switching gears real quickly to the Astellas partnership. Jill, can you remind us how the accounting treatment of the milestone will take place in the third quarter? Will it be amortized over the lifetime of the deal/ How should we will be looking at that?

We are working through that with Ernst and Young right now, but preliminarily we -- it appears we should be recognizing the full $25 million as revenue in the third quarter.

Okay. Great. And then, regarding Collategene, could you give us any sort of an update as to what might be happening with that program?

I think right now that is their key program. They are actively seeking financing both from the Japanese investors as well as US investors. They feel confident that -- they don't want to start the trial to -- until they make sure they have sufficient money to complete the trial. As you know their cash balances are very well-capitalized right now to start the trial, but they want to make sure they are sufficient cash. So hopefully by the end of third quarter they will be in a better financial position to begin the trial.

Okay. One final question regarding Allovectin. What happens -- you had mentioned that the target death rate or the number of events has not been reached. Is that in both arms or in one arm or total for the trial? And what happens if you don't reach that target at the two-year mark?

First of all, the trial is blinded to us, so we have no idea which arm the event rates are ahead or behind. We always look at the total number of deaths. So we based -- how do we predict? We come up with the number of the target event rates, which is based on a model, and then we assume what the median survival rate is going to be in the control arm, and we are going to assume a certain median survival in the treatment arm. Based on this we predict the different rates. And right now, we are behind in terms of that target number that we are reaching, and we expect that to reach sometime by the second quarter of this year. Hopefully those numbers hold up. If for some reason those numbers don't hold up, we'll give you guidance sometime hopefully in the first quarter of next year where we stand. I think we should have a better understanding. But right now, where I am, I feel that we're pretty good to meet those numbers by the second quarter of next year.

And just as a follow-up. When you had mentioned that you have a maximum follow-up time of two years, is that irrelevant of the death rate, or do both have to come together?

The maximum follow-up time is up for the response rate. The trial is -- remember that last patient was recruited to the study of February 2010. The study is a maximum follow-up for response rate of two years and that ends in February 2012. So any patients who may be still on the study for whatever reasons beyond February 2012 is not counted as a responder. At February 2012, that's it, that's the end for all the response rate counting. So no more data can be collected beyond February 2012, obviously.

Thank you very much. Congratulations.

Next we'll go to George Farmer with Canaccord.

Hi, thanks for taking my question. With immunotherapy approaches to treating melanoma there appears to be a very strong correlation between response rate and overall survival. The primary endpoint of your trial is overall response rate at the 24 week or greater time point. So if you miss the OS endpoint, but you do see some sort of overwhelming survival benefit in the patients that respond, do you think that is sufficient for FDA approval?

I can't speculate what the FDA is going to say or what it's not going to say, but I will tell you one thing, with the approval of Yervoy, and the potential approval of the Roche Plexxicon drug, survival is going to be an important attribute that the agency is going to look at very carefully. And even if we meet the primary endpoint of the response rate -- which we think we are going to. We'll find out soon. Survival is going to be a very important attribute for the competitiveness of Allovectin 7 in the marketplace. So it's important to have that survival data on our hands.

Okay. And then again --

George, just to remind you -- the point you made before is an excellent one. If you look at our Phase II data, there is a very strong correlation, unlike a lot of other cancer studies, where we lack that correlation, our responders are going on to live very long. As you remember, most of our responders, half of them are still alive at the last look, almost five or six years after the study. So there's a pretty good correlation in immunotherapy, as you correctly point out, between response rate and survival. Assuming that correlation holds, then we should see a corresponding trend in survival as we see in response rate, and vice versa.

Okay. So it's also possible that if you don't hit this overall survival event rate by second quarter next year, you will discontinue keeping that going, and then report later in the year? Is that likely?

No. I think, here's the problem though. At some point in time you're going to have to lock the database completely and then announce both of them at the same time. That's our goal. Because we don't want to create an opportunity for speculation, one data versus the other. And right now, as it turns out, the way we have laid the time lines, both of these endpoints in terms of when they would become available converges, which will be in the second quarter. I think the second quarter looks like a very reasonable time frame, but we'll find out. As you know, there are three factors why the event rates are behind. One is there is always a lag in actual death occurring by the time we get the data. Or our assumption on the median survival in the control arm is different from what actually is occurring. Or, more importantly, the assumption on the median survival in the treatment arm is different. So is a combination of these three factors which could be causing the delay.

Right. All right thanks. Moving onto TransVax real quickly. Can you comment, Vijay, whether there should be any concern, particularly on the solid organ transplant setting, for common and steroid use in immunosuppressive agents in mitigating the immunogenicity of TransVax.

Absolutely not because even if steroids were used, and common therapy is used, let me explain to you that the patients in the hematopoietic cell transplant were severely immune compromised. You are actually wiped out their existing bone marrow and they are under severe immunosuppression in the first eight to 10 weeks of post-transplantation, and despite that we are able to mount very good immunal response in the first 100 days -- that is one of the unique plasmid DNA technology. It has the strength to prime the immune system mount those immunal responses even when the immune system is compromised.

Great. Thanks very much.

I do think that should be an issue at all.

And moving forward we will hear from Nathan Cali with Noble Finance.

Hey guys good afternoon and thanks for taking the questions. Just a couple of follow-ups to Allovectin 7. What is the overall survival rate for the patient profile in the study without treatment?

You mean what is the overall survival rate for patients who are getting the control arm treatment? Decarbazine and temozolomide?

Basically, if these patients weren't being treated, what would be the overall survival rates for this stage of melanoma? For these patients, stage 3 and 4?

I don't know what the survival would be if they are not getting treatment because most of them get treated and most of them get treated with chemotherapy as we have said previously and has been published in variety of studies. Patients who are in stage 3, 4 melanoma the constant data has been anywhere -- the Kaplan study shows anywhere from about seven to nine months, at best. Obviously there's a variety of studies using different patient populations, so the patients here do not have liver met, so you add a month or two months to that. That could be 11 months nine to 11 months, in that range, eight to 11 months, in that range.

Okay. And at the present time, according to completing enrollment in February 2010, do you guys have an estimated survival rate at this point?

No. We haven't disclosed what the event rate is, and what our assumptions are, both in the control arm or the treatment arm. Those are confidential.

And in addition to that, I know you talked about this earlier, but as far as closing out the study, how many events would need to occur for you to close out the study.

Again we have not disclosed the exact event number.

Thanks a lot.

Moving forward, we will hear from Nicholas Bishop with Cowen and Company.

Good afternoon and thanks for taking my question. I had a couple of accounting questions. One is the cash burn guidance for the year has been reduced by about $15 million, while the milestone is at $25 million. I wonder if you could provide any additional granularity as to what expense assumptions are included in that.

We don't get down to the level of expense assumptions, but we had included some monies in our cash burn forecast at the beginning of the year for a partnership. But it wasn't as high as the $25 million. Then there's also the cost reimbursement that Astellas will be providing for reimbursing us for our FTEs that are working on the TransVax program. Which is one of the reasons why we have left that range in there, as well. $7 million to $12 million. It depends on how much work is done over the year.

I think, Nick, we in our cash burn guidance -- the big news here is an assumption that we are going to get some partnership revenues. Now, we've got much larger up-front payments that what the original assumption was, if you take that delta, that basically explains what the difference is, and that's the bottom line.

Okay. Thanks. Two additional questions on the finances. Have you determined yet how you will be accounting for some of the outgoing payments to your other partners associated with the Astellas deal? Would they be separate line items or would it be included as a net?

It would be included as a net item. The forecast that we are giving right now has those assumptions built into it.

Okay. And you mentioned that the financial flexibility that you now have gives you some different options going forward in terms of development programs. At this stage can you say whether you're cash runway will be extended, or would you expect instead to expand R&D efforts?

That's what we're deciding right now. We have the ability to move forward, as Vijay said, with HSV-2 program which we are getting ready to do. We also have our CyMVectin program. But we're in the process of making that decision right now. Luckily we have enough cash to be able to make that decision.

Okay. And one final quick one on Allovectin if I could. If we contemplate the possibility in the second quarter that the event rate have not quite reached the cut-off that you have specified, would we then -- would we expect to see both data points later? Is that the outcome if I understand it correctly?

I think, if that indeed is the case, I think first of all, we would be pleased if we are indeed behind by that point in time, because it tells you that something is going on there. Obviously that is a good situation to be in. From what the eventual data outcome with this, but also it causes a delay in terms of getting the overall data. I think our goal, really, has been to make sure that we get both pieces of the data, the primary and the secondary endpoint, released then at the same time.

Okay. Thank you very much.

And next we will hear from Vernon Bernardino with Dawson James.

Thanks for taking my question. First, an operating expense question. The reduced cost, partly in the second quarter, was due to Allovectin Phase III reduced costs. I was wondering if you could describe that a little more as far as -- related to clinical trial cost or what drove the reduced cost? Then Allovectin-7, a question for further clarification earlier was asked about, at the two-year cutoff point. Just wonder if you could flesh out a little more what exactly a non-responder is? You had mentioned that, regarding the situation of the patient at that time. If for example what is a non-responder at that point. Thanks.

Let me take the technical question first, and then Jill will answer the financial question later. If at the end -- in February 2012, let's speculate for a minute there are five patients is still in the study and they're all stable disease. And for some reason they go into a special protocol and continue to get Allovectin 7, they respond in two months, say of April, 2012. It doesn't count. In February, 2012, they're stable disease, that's it, that's when it all stops. Nothing is counted if somebody responds as a stable disease patient that responds up to February, 2012, if they go to a compassionate use protocol, or an individual patient compassion protocol. So that is what that means. Is that clear?

So if that patient is a non-responder --

Non-responder, stable disease, that means he didn't respond.

That person is removed from the number of end patients in that arm?

The numerator -- the denominator always is the total number of patients in that particular arm. It doesn't change. If there are 260 patients in the treatment arm, that is the number in the denominator.

Okay.

It is all intent to treat. Not a variable. Intent to treat.

That is the better clarification. Intent to treat. The costs for Allovectin 7?

The expenses, a year ago at this time the amount of work that we were doing on Allovectin, as well as TransVax was much higher than the amount of work that we are doing now. So the further you get away from that last subject in, the less work there is as each of the patients eventually drop off. So it is the total clinical expenses for both of those programs that are lower this quarter than a year ago.

Okay. And then regarding the cash burn, you mentioned some of the costs in the second half of the year would be driven by reimbursement to R&D and full-time employees. Just wondering if you could prided provide a little bit of detail on the status of those, or if there is still paperwork and so on with Hard-Scott-Rodino, and most of the cost and reimbursement will occur in fourth quarter.

The Hard-Scott-Rodino has cleared. So we are not waiting for that. It just depends upon the amount of work that we are doing for Astellas. We're getting ready to prepare for the Phase III trials. So it is all based upon that level of work.

Okay.

The (multiple speakers) factor in terms of reimbursement will be much larger next year than it will be this year. Is that correct Jill?

Yes. Next year it will be much larger.

Thank you for that detail.

(Operator Instructions) Next we'll hear from Stephen Willey with Stifel Nicolaus.

Thanks for taking my question. Vijay, I know you talked about not disclosing the number of events required to unblind the trial from an OS perspective, but can you remind us where you are on a assumption perspective relative to both control and treatment. I know you just threw out a nine to 11 that number on the control arm.

We have not given those publicly in terms of what our assumptions are, in terms of what the assumptions for the immediate survival of the treatment arm to the control arm. But generally you should be able to easily come up with those numbers on your own, Steve. You are a smart guy. Look at what our Phase II data was. On Allovectin 7 you can look at what the historical controls were, so you should be able to do that modeling yourself. We don't want to do is go patient by patient every quarter and tell you what the event rate is. I think we have gone through, we have used some outside statistical help to give us really tight guidance on how we should be modeling this. So a lot of thinking is done behind this.

Just don't jump to conclusions on me being smart. (Laughter.) Just trying to think about post-treatment therapy. Can you remind us what is the minimum duration of treatment that each patient was required to see, and then you guys remain blinded, but do you have any insight on patients who may be seeing other therapies after chemo and after Allovectin 7?

Let's talk about this because it is an important question that you're asking. First of all, as you know, we had changed the protocols here to make sure that we modified the resist criteria. That way we maximize the probability of patients getting at least two cycles of treatment. So remember our dropout rate in that price study was almost 62%. We want to make sure that number really goes down. That is really the goal of the study. We don't know what that number is. We will eventually find out what that number is because we are blinded to the study. The other question you are asking is, hey, what is the probability of this -- of these patients from either these two arms could have gotten into some of the other new two entities that were being clinically tested during that period of time. My answer to that question is if you go and look at those protocols, those were treatment naive protocols -- the Phase III protocols both for the Roche drug, as well as the front line treatment for Yervoy. So none of our patients were eligible for that even if they were progressive. As you know, the Phase III study for second line therapy for Yervoy actually did not allow anybody who was chemo refractory to go into that study, if it was enrolled in another protocol which was counting survival as an endpoint. Got it?

Got it.

So as a result the only time any patients could have gone into study in the United States was when compassionate -- when the drug got approved, what March or April of this year? April of this year in the United States, and just recently in Europe, though there was some drug available in Europe through compassionate use, but again those compassionate use preapproval had these restrictions. So remember both those front line studies were for treatment naive patients, and the second line therapy did not allow patients to come in if they were enrolled in a chemotherapy study or a chemotherapy arm where survival is counted as an endpoint. So a very tightly designed study. So I don't think -- whatever occurs after March 2007, it's randomized.

Okay. And just lastly on the accounting front. The $25 million that hits in 3Q. Is that net of any outgoing payments that are associated with fulfilling milestone payment and royalty obligations? Or that all $25 million that's going hit?

Ultimately it will be net.

Okay. So the numbers are netted out then?

The $25 million we expect to recognize as revenue, and any offsetting expenses to any other licensees, or any other costs, will be recognized at the same time that the revenue is recognized.

Net of the revenue payment?

It depends on what the expenses are, but if they will be recognized at the same time.

I think the burn rate reflects all the payments.

Yes. The burn rate reflects everything.

It was it was me trying to gauge what percentage of the $25 million ends up going out as opposed to hitting in terms of a lump-sum. But I appreciate the answers and thanks very much.

Thank you Stephen.

If there are no further questions I will now turn the call back over to Mr. Samant.

Thank you very much for attending this call. We look forward to seeing you all in the near future. Thank you.

Ladies and gentlemen, this concludes our conference for today. You may now disconnect.