BioCryst Pharmaceuticals Inc (BCRX) 2009 Q4 法說會逐字稿

Good day, everyone, and welcome to today's BioCryst Pharmaceuticals fourth quarter 2009 conference call.

Today's call is being recorded.

At this time for opening remarks and introductions, I'll turn the call over to Mr.

Robert Bennett.

Please go ahead, sir.

Thank you and good morning.

Welcome to BioCryst's fourth quarter and full year 2009 financial results conference call and corporate update.

Today's press release and accompanying slides are available on our website at BioCryst.com.

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

Later, we'll open up the call for your questions.

Instructions for queuing up will be provided at that time.

Joining me today on the call are Jon Stonehouse, our Chief Executive Officer, Bill Sheridan, Chief Medical Officer, and Stuart Grant, Chief Financial Officer.

Before we begin, I'll read a formal statement regarding risk factors associated with today's call.

Today's conference call will contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information, and Company performance or achievements.

These statements are subject to known and unknown risks and uncertainties which may cause our actual results, performance, or achievements to be materially different from any future results or performance expressed or implied in this presentation.

You should not place undue reliance on the forward-looking statements.

For additional information, including important risk factors, please refer to BioCryst's documents filed with the SEC which can be found on our Company Web site.

This morning, Jon Stonehouse will provide an overview of highlights and progress during 2009, and anticipated news flow and events during 2010.

And Bill Sheridan will provide a clinical program update, and Stuart Grant will conclude with the financial results and a review of our balance sheet and cash use outlook before we open the call up for Q&A.

With that, I will turn the call over to Jon.

Thanks Rob.

Good morning and thanks for joining us today.

Over the last year BioCryst has made substantial progress towards the goal of becoming an enduring successful biopharmaceutical company, where success is measured by moving our drugs to the market.

We have transformed BioCryst from a discovery focused Company to one with its first full market approval, product sales revenue and an advanced pipeline that includes an increasing number of late-stage clinical development programs.

Here's how we're building our Company.

Our primary focus is on Peramivir approval to treat hospitalized flu patients in the US as a key midterm value driver.

We have broadened our development portfolio to initiating a program for gout, an important and growing disease where BCX4208 may address an unmet treatment need.

The secondary stock offering and stock piling strengthened our balance sheet and provided a long runway to support investment in our programs.

And finally, our Peramivir inventory and established partnerships have positioned us well to support any new stock piling opportunities.

In January we were excited to report the first ever approval of a BioCryst discovered drug.

Our partner, Shionogi has already begun the commercial launch of Peramivir under the trade name RAPIACTA in Japan for the treatment of influenza.

This approval came in advance of our expectations.

From Phase 3 data in mid-July to filing in late October to approval and price listing in January, Shionogi and the health authorities in Japan both moved very fast.

The pace of this filing and approval underscores once again the need for an intravenous antiviral for influenza.

This approval creates a recurring revenue opportunity for BioCryst in the form of double-digit growth fees on net sales as well as potential commercial milestones up to $95 million.

Shionogi estimates that over 10 million Japanese citizens annually are treated with influenza antivirals.

Shionogi has committed to manufacture around 700,000 doses over the first quarter.

The Japanese government has also established a goal to increase its antiviral stock piles to cover up to 50% of its population or about 60 million people, creating an additional opportunity for Peramivir in Japan.

Other recent highlights include the Green Cross filing for Peramivir approval in South Korea in December.

A total of six countries have now approved, ordered or authorized use of Peramivir during this flu season, including a $22.5 million order from the US government.

BioCryst was awarded an additional $77.2 million by HHS to fund the Phase 3 program of IV Peramivir.

Enrollment is complete for the Forodesine pivotal study in CTCL and last, but certainly not least, a Phase 2 study of BCX4208 in patients with gout was initiated.

This is a large and important market opportunity with approximately 2.5 million to 3 million gout patients in the US alone.

Now I'd like to turn it over to our Chief Medical Officer, Bill Sheridan, who will update you regarding our clinical programs.

Thanks Jon.

In late 2009 we initiated two Phase 3 studies of IV Peramivir in patients hospitalized with influenza.

One study compares standard of care plus Peramivir to the standard of care plus placebo (inaudible) conducted primarily outside the United States.

Enrollment is underway in this study and we are continuing to make progress in expediting the required total number of study sites.

The second Phase 3 study is being conducted in North America to compare once-daily dosing of 600 mg of IV Peramivir versus 300 mg of Peramivir twice daily.

We've made good progress in enrollment.

We expect these two studies to be completed in the first half of 2011.

In addition, we are preparing a protocol for an external comparison study that will include influenza patients admitted to hospital and not administered antiviral drugs.

Clinical outcomes data from these patients will be compared to patients treated with IV Peramivir in our two prospective Phase 3 studies.

The same protocol will be finalized after regulatory discussions in the third quarter this year.

As reported in mid January, our Forodesine in cutaneous T cell lymphoma or CTCL pivotal study achieved its protocol specified objective of enrolling 100 late-stage CTCL patients.

These patients will be followed for up to six months, therefore topline data is expected in the second half of 2010.

Additionally, BioCryst exploratory Phase 2 study for Forodesine in subjects with chronic lymphocytic leukemia or CLL is continuing to move ahead and has enrolled more than half of its target number of patients.

We should also see data from this study in the second half of this year.

We are very excited about our ongoing Phase 2 study with BCX4208 in gout patients.

As Jon mentioned, gout is an important and common disease where new therapies are required.

We expect the first part of the study, a randomized, double blind, placebo controlled evaluation (inaudible) of three different doses of BCX4208 versus placebo to provide topline data during the second quarter of this year.

Also this year we plan to start a second Phase 2 study evaluating BCX4208 as an add-on or combination treatment to another uric lowering medicine.

Together data from these studies will provide a solid basis for design of a full development program in 2011.

This year we are also very excited to have reinitiated investments in our late preclinical compounds.

As these programs unfold, we will provide appropriate updates.

That concludes our clinical program update.

Our CFO, Stuart Grant, will summarize our financial results.

Thanks Bill.

I'll provide some additional color regarding the final results for the recent quarter and for the full year of 2009.

I'll give you some details regarding our cash position at year end, cash use for 2009 and provide an outlook for 2010.

There were three main drivers behind the increase in Q4 revenues.

Increased collaboration revenue from HHS associated with the ramp up of the Peramivir Phase 3 program, $22.5 million of Peramivir product sales for emergency use by the US government, and a $7 million milestone payment from Shionogi triggered by the regulatory filing.

R&D expenses also increased substantially due to the Peramivir Phase 3 program spend and costs associated with the initiation of the 4208 gout study.

G&A expenses increased in Q4 because of event driven increases and legal and consulting fees.

Q4 saw positive net income of $15.2 million or $0.75 per diluted share.

This was primarily driven by the sales of Peramivir under the EUA issued earlier this year.

For the full year, the net loss was 46% more than last year, again primarily as a result of margin on those product sales during 2009.

Our receivables balance increased by $22 million during Q4 to $33.7 million.

This is primarily due to higher reimbursement due from HHS related to the Phase 3 development program for Peramivir and these will be reimbursed in 2010.

As of December 31, 2009 the Company had cash, cash equivalents and investments of $94.3 million, an increase of $31 million from the end of 2008.

This increase was primarily due to $45.7 million in proceeds from a secondary offering that caused the November as well, Peramivir sales and the Shionogi milestone payment.

Our original 2009 guidance for cash use was from $30 million to $38 million and as you can see on slide eight, our underlying cash used, which excludes cash related to Peramivir manufacturing expense, was within that guidance range.

For 2010 we expect our cash burn to be between $25 million and $30 million and this will vary within that range depending on certain clinical outcomes.

That concludes the financial update and in closing Jon will summarize our milestones for 2010.

Thanks Stuart.

Based on the progress we've made advancing our pipeline in 2009, here are the key events for 2010.

Data from both the Phase 2 monotherapy study and an add-on study for BCX4208 in gout, data from our pivotal Forodesine CTCL study, data from our Phase 2 exploratory CLL study for Forodesine, potential for additional regulatory filings and approvals for Peramivir, and additional orders and royalty payments on seasonal sales of Peramivir outside the US.

We've accomplished much in the last 12 months but I believe the best is yet to come.

With that, we'll open it up for questions.

Thank you.

Today's question and answer session will be conducted electronically.

(OPERATOR INSTRUCTIONS) And we'll pause for just a moment to give everyone an opportunity to signal for questions.

And we'll go first to Charles Duncan with JMP Securities.

Hi guys.

Thanks for taking the question and congratulations on a pretty transformative year.

Thank you Charles.

So I had a couple of areas that I wanted to ask about, one is Peramivir.

The other is 4208.

On Peramivir, I'm scratching my head a little bit with regard to the Japanese market opportunity and I'm wondering if you can help us understand really kind of the way that Peramivir could be used in the seasonal flu setting in Japan and maybe how they arrived at the pricing there.

So let me take a shot at it and Bill, feel free to jump in as well.

So the market is a big one, one of the largest in the world.

Shionogi has told us that approximately 10 million people receive antivirals each flu season and given the condensed population in Japan, the fear of infection is really high and therefore there is a lot of treatment.

The idea of having an IV, when the patient goes into the doctor's office, a single dose to treat is a real advantage for Shionogi over the existing therapies because it works fast, they're in the doctor's office anyway, and the healthcare provider knows that they got the full dose of the drug, not like a prescription for an oral drug where they may not comply and they may not take the full dose.

So I think that will have a big, big impact for Shionogi and the uptake in Japan.

I think the other thing that's worth commenting on is the public policy (inaudible) in Japan, (inaudible), they have a multi-prong strategy.

They want to avoid transmission of influenza, treat patients that are symptomatic, treat them out of hospital and avoid admission to the hospital if at all possible.

And the pace of enrollment in the Shionogi Phase 3 program was extremely fast, indicating there's certainly a willingness of investigators to give short IV infusions in the doctor's office without requiring a hospital admission, so there's a strong cultural and public policy, framework of Peramivir in Japan.

So it seems like you could argue that really it's two different, two totally different products in there for a pricing scheme whereas in the hospital you want to capture some of the pharmacoeconomic value of keeping people out of the hospital but in the outpatient setting you want to just get people to take the drug.

Yes, I think the quicker people get treated, the less chance of spread, right?

The quicker they get better, the less viral shedding and I think your earlier question about how did that affect pricing, clearly there was a massive premium over existing antivirals and that's a negotiation between the government and the company and so the fact that they got a nearly 100% premium over existing antivirals is a real testament to the value of this drug.

Okay, and then if we could turn to 4208, you said that you're going to have data this year.

Do you think that that will be -- let's say it's good data in terms of efficacy and good data in terms of safety, do you think that could inform a registrational path?

Let me just speak to that in some detail.

I think the challenge for us for BCX4208 in gout is to find an appropriate dose or doses that adequately suppresses uric acid and the way this drug works is to inhibit the enzymes purine nucleoside phosphorylase or PNP.

We know already from our psoriasis study that there's a dose response (inaudible) uric acid in people with normal uric acid levels.

The current study that we're involved in, in monotherapy with BCX4208, will give us similar information on what happens to gout patients who start off with high uric acid levels.

So that's quite informative and we'll have that data in Q2.

The next step is to combine 4208 with another uric acid lowering therapy to determine whether there's an additive or synergistic effect and that will give us the opportunity we hope to use lower doses of BCX4208 if we find a sweet spot that limits the effect on lymphocytes.

And as you recall, PNP inhibitors also can suppress lymphocytes.

That's something that we'd like to limit in gout patients.

So that's the set of goals and our objective with those two studies is to inform -- is to have the data in the form of a full development program clinical development plan.

So remember Charles about a year ago we said that we wanted to pick the next smart study that we could do with BCX4208 that BioCryst could pay for on its own nickel.

And I think we found a great approach.

Number one, the market's huge.

3 million people estimated in the US suffer from gout and it's growing.

The estimates are by the end of the decade it could be 5 million and there's still plenty of room, as Bill says, for new therapies for the treatment of gout patients.

So even if you get a sliver of that, the potential market is big and then as Bill said, we've got evidence that mechanistically and in the clinic, the drug drops uric acid levels in a dose dependent way.

So we're real excited about the plan we've got in place, and as Bill says, quickly then getting to the full development plan driving towards registration of this drug.

And then my final question is perhaps for Stuart and that is regarding the guidance for cash use $25 million to $30 million.

Is that inclusive of new trials for Forodesine and if not, is your trepidation on planning to spend more money on Forodesine because something you're seeing or just the time lines on the Forodesine trials?

The guidance we've given, Charles, includes a full development program, the one that Bill's talked about for 4208, Peramivir always looked fully funded by the government and there was the continued development of Forodesine so that guidance covers the full range of studies that are currently ongoing and also lets us restart more work in the preclinical space, so that's all inclusive in that guidance.

The Company is now in a great financial spot right now.

That's the range that we did last year and the money from Peramivir really puts us in a strong position with a balance sheet that we'll see as well into the next two to three years, so we're in a very comfortable position right now with a strong balance sheet, Charles.

And Charles, this is Jon.

I think the other piece is, don't forget that our biggest program is covered by funding from HHS, which makes a big difference in terms of our consumption of cash over the course of the year.

Okay.

I'll hop back in the queue.

Thanks for the added color.

Thanks Charles.

And we'll take our next question from Bret Holley from Oppenheimer & Company.

Yes, hi, thanks for taking my question.

A follow up question on the cash use guidance, I'm just wondering if that envisions any pandemic stock piling orders in 2010 either in the US or outside the US.

No, that guidance is completely exclusive of revenue from potential stock pilings so that's an important message that we give that we consider that we have funds on the balance sheet to do the development programs.

As I said, through the next two to three years, any stock piling money that came would be upside to that and would draw additional cash to the balance sheet.

And I'm wondering, actually timing of stock piling orders in Europe.

I know that you've announced the partnership of Merck Serono.

How should we think about that?

So what we're doing right now is, because we're not in this frenzied panic mode of people flooding ICUs and hospitals, we're having conversations with government authorities around the globe through our partners in determining what mechanisms could be put in place to get the drug into the country and the size of orders and things like that.

Those are the kinds of conversations that we're having.

But I will say that because we're not in the thick of a panic pandemic, it will be more challenging to get orders.

So the key is we see an uptick in flu that could potentially get things moving faster and as Stuart says, that's all upside.

Great.

And my primary question is on the external comparator study for Peramivir.

Obviously haven't started that, I'm just wondering are you confident on the timeline there kind of aligning with the ongoing Phase 3s as far as the start and actually gaining the data from that other external comparator study?

Thanks for the question.

Yes, we're confident on the timelines there.

The nature of the study is to identify patients who have already been admitted to the hospital and do a medical chart review to collect certain information.

So this is quite different from enrolling prospects -- subjects in a clinical trial where you need to (inaudible) the therapy.

There's no intervention here.

Okay.

Thank you very much.

And we'll take our next question from Ren Benjamin with Rodman.

Hi, good morning and congratulations on the quarter.

Thank you.

I guess just a couple of questions, one regarding sort of the state-of-the-art of stock piling right now, can you give us sort of your best sense as to what the environment is looking like, what, if any, with your discussions with HHS just based on those discussions what do you think is going to happen regarding the total amount of orders that HHS could potentially stock pike?

And can you give us an update as to how much has been drawn down to date?

So a bunch of questions there, let me try to tackle them one by one.

I think the first piece around discussions with governments and HHS, as I mentioned before, I think governments are taking a pause right now and trying to figure out what, if anything, they should do.

I think some experts say based on previous pandemics, there's a potential for another wave this winter or spring and there are other experts that say that there isn't.

And the proof really will be afterwards when we see if it did or didn't come.

So I think governments in general, the ones that we're talking to, are really trying to think through what do they need and will there be more flu or not.

I think that's the first piece.

I forget the other part of your question.

The amount of Peramivir that's been --

That's been consumed thus far, so there was a report put out by HHS as a part of their, I believe, 2011 budget request and in that the report said that they had successfully treated 1,000 subjects and -- or over, excuse me, over 1,000 subjects thus far.

Other data that we've gotten from HHS says that the number of courses consumed is somewhere between 1,500 and 2,000 so clearly, some of those are getting 10 days worth of therapy versus 5 days worth of therapy.

Okay, okay.

And regarding Shionogi, is there any sort of guidance?

You'd mentioned on the call that they're hoping to manufacture about 700,000 doses for at least the first quarter, I think you said, or maybe it's every quarter.

Can you give us -- is there any guidance you can give us regarding the potential sales?

Yes.

Let me tell you what we know and what we don't know.

Okay.

So what we know is that they can make up to 700,000 courses this quarter and the rate limit are there, it's just the manufacturer (inaudible).

They have plenty of API so it's how quickly can they put it into finished drug.

That's number one.

So suppose the end of this quarter they'll be able to continue to make more.

If there's flu, they'll be able to continue to meet demand.

That's number one.

Number two, we know the selling price but remember that our royalty, which we've guided between 10% and 20% is based on net sales, so there's some discount to wholesalers that you should expect.

And -- but what we don't know, so those are the two pieces of what we do know.

What we don't know is how much flu there will be in the course of this season and what the uptake will be in comparison to other therapies.

We think there are some distinct advantages but those are two pieces that only time will tell in terms of what the real consumption of Peramivir is in Japan.

Okay.

And I guess just one final question regarding Forodesine in CTCL.

Obviously the landscape is changing yet again and if there is positive results in the second half of this year, I know that you have an sPA but can you comment a little bit regarding the changing landscape.

Will it affect your application?

Do you think you may have to do any additional trials?

Yes, hi, thanks for the question.

We don't believe we'll need to do any additional trials for approval provided the efficacy and safety balanced data in the pivotal study is adequate.

And regarding then if it is adequate, is this something that is up for partnering discussions here in the US, because you're already partnered abroad, correct?

That's right.

That's right.

Mundipharma is our partner ex-North America.

With regard to how we'll move it into the market, we're still in the process of thinking that through and making decisions on that front and no final decisions have been made yet.

The key is to get to the data.

Right.

Okay, guys, thanks very much and congrats.

Thank you.

And we'll go next to Steve Byrne, Bank of America Merrill Lynch.

Hi.

I was wondering if you could, if you see a relationship between the amount of influenza activity and the penetration use of the H1N1 vaccine as Novartis has recently reported some very robust sales of a vaccine.

Do you see a relationship there?

I'm not sure I can fully answer your question but let me just make a comment.

I think that the uptake influenza vaccine is quite variable from country to country and in the United States for example for many years public health authorities have been trying to educate various high risk target populations in order to achieve higher vaccine penetration without success.

For example nurses are a case in point in the United States.

They have quite a large influenza vaccine uptake.

But despite the pandemic, at the moment it's not clear whether those uptake rates are being materially impacted at least in the United States.

I think that, and what we're hoping is from the public health perspective is that pregnant women, children, adolescents and the young, which is a different population than one typically targets such as infants and the elderly, in terms of high risk, one would hope that they would have a higher uptake because that's where the influenza has a big impact in a pandemic.

I think one thing's clear though, season after season, even with good vaccination programs, there's going to be flu and there's going to be a need for antivirals and for seriously ill in the hospital and IV antiviral is going to be key.

There's a persistent and almost unavoidable problem in terms of being ahead of the next influenza virus.

It matures fast, you don't know what type it is and every year in the United States a group of experts has to get together to decide which antigen to put in the next vaccine round and it takes many months to actually produce enough vaccine for a campaign so one can envision that there will be recurring instances of not having enough vaccine for a campaign and the virus is already here, and which is exactly what happened last year.

Well Bill, can you speculate on why the influenza activity say in the month has been relatively low compared to prior years or is it just a really random event?

So when we think about the turning of seasonal waves of influenza in the winter, in the north hemisphere, there's a variation in the start month from late November through February typically so it's nothing out of the ordinary at the moment.

Okay and I do have another one for you, Bill and that is you commented earlier about the potential for a combination with 4208 with another uri lowering drug, that potentially you could lower the dose and therefore maybe not have an impact on lymphocyte activity.

What I wanted to ask you though is do you -- are there any consequences of just an accumulation of nucleosides from reducing the PNP activity?

What is the fate of those if they're not degraded?

Excretion or degradation and so to completely prevent degradation, you would have to inhibit 100% of the enzyme, but you're correct that for example the (inaudible) accumulates in the blood in people who have been exposed to PNP inhibitors.

The only consequence we've been able to determine thus far with confidence is an affect on lymphocytes with regard to that accumulation of the (inaudible).

Thank you.

And we'll take our next question from Steve Brozak with WBB Securities LLC.

Congratulations gentlemen.

I want to go back to the Japanese question because there's a point I want to look at and I want more granularity on it.

There's a cultural difference in terms of how the Japanese approach viruses and there's also some legacy on data concerning difficulties as far as adolescents on the use of TAMIFLU.

And I'm thinking to myself that with Peramivir there's going to be an interest in terms of exploring greater use based on some of the peer review stuff that has come out in the past.

Would you agree with that?

Would you say that you've gotten a lot of pings about that?

And I think what a lot of people don't understand is the use of antivirals is much, much more prevalent in Asians, specifically in Japan, as an active form of treatment, not just for obviously significant high pathogen flus but just across the board.

How would you comment on that?

And I've got a followup after that.

(Inaudible) comment first.

I completely agree with the notion that the aggressiveness of treatment of symptomatic seasonal influenza in Japan is much more than in other countries.

If you have a look at per capita consumption of antivirals that (inaudible) that that is a correct statement.

Let me just comment on the safety remarks.

I think that there is -- you need to think about this, drug development and marketing in two buckets.

There's clinical safety that you get when treating clinical trial programs, which is obviously limited in scope because of the number of patients.

That being said, we're very pleased with the clinical safety profile of Peramivir.

It's a safe and well tolerated throughout all of the clinical programs and obviously the authorities in Japan would not have approved the drug unless they had confidence in the clinical safety data base.

And that doesn't -- that's a very important statement.

The next bucket is post-marketing safety and when tens of thousands or hundreds of thousands or millions of people have been exposed to the drug, there's opportunity to learn new information about safety.

So far we're just in the launch phase of Peramivir and pharmacovigilance is taken seriously by both us and by our colleagues at Shionogi and that data matures, if there are no signals with regard to analyses and safety, that may prove important for our drug.

And you're right, Steve, that the market did drop when some of these neuropsychiatric cases popped up so again, if Bill -- if things play out the way Bill just potentially described, then there is a potential for the market to grow.

But first things first, they need to file for the pediatric indication, which they said will come this quarter and then we just need to get the data to see how it looks.

Got it.

Now the last question and I'll jump back into queue.

We've got a (inaudible) meeting over at the National Academy of Sciences this Thursday-Friday and obviously government response in terms of contracting has been pretty marginal in a lot of other areas but they obviously have been talking about boosting it up in terms of the one quote-unquote [range] of success and as far as panflu is concerned.

I would expect that you guys are the showcase for that type of success.

What kind of modeling do see forward as far as continuing on it because the government typically has a tradition of building on success.

You've got robust relationship with the US government.

I would say that that's something that you're going to continue to cultivate and that I would assume that they've expressed the interest in the same.

Is that a fair assessment?

Yes, listen, we've invested a lot of energy in people's time in this company and working with the United States government on all fronts.

Our advanced development contract and our procurement contract, and we're real proud of the fact that two days after they placed the order for Peramivir it was in their warehouse.

And I think that to your point, they were very pleased with that as well and that's the highlight of success on their front.

So we have more work to do with them and the relationship I think is very solid at this point.

Great.

I'll jump back into queue.

Thank you gentlemen.

And we'll go next to Michael Schmidt with Leerink Swann.

Hi, thanks for taking my question.

I just was wondering regarding the gout program.

Could you comment a little bit more about the market opportunities that you see there?

Is there a particular group of patients that you see targeting 4208?

So let me just talk broadly about the market and then we can talk about how we'll sort through this as we move through the development program.

So broadly, as I'd mentioned, 2.5 million to 3 million people in the US alone suffer from gout.

Those are the estimates currently, and it's growing with things that contribute like the consumption of prescription drugs, consumption of wine, increasing weight and obesity.

Those are all things that give the thought leaders in this area concern that it could grow substantially and so their estimates by the end of the decade that it could be 5 million people.

Again, this is US market alone.

So you don't -- and then you look at the pricing of Febuxostat at about $5 a day and you don't need a big slice of the market to make this a highly, highly attractive opportunity for BioCryst.

So how it will be used ultimately?

I think it will be determined as we work through these studies and determine what kind of results we get and I'll turn it to Bill.

So BCX4208 represents a certain class novel mechanism of action drug for gout potentially and because it's a PNP inhibitor.

The existing drugs fall into three group-Xanthine oxidase inhibitors like Allopurinoland Febuxostat, which reduce the amount of uric acid produced, Probenecid and other uric drugs that increase the excretion of uric acid in the urine and finally drugs that metabolize uric acid like (inaudible).

And Allopurinol -- whole drugs have upsides and downsides so an upside for (inaudible) is that it can reduce the tophi, that's the collection of urate around the joints and so on.

The trouble is it's a foreign protein and there are allergy issues, and it has to be given intravenously.

The downside with preventatives is you have to take it multiple times a day in large doses and it affects the handling as multiple on the drugs that people could be harmed.

It's not very widely used.

Allopurinol has a pretty high incidence of rash and intolerance and some serious side effects in small numbers of people and according to published papers, with typical doses of that, 50% of gout patients don't get to goal.

So (inaudible) comment on because it's been launched.

But I think that from our perspective with a novel first in class, with a new mechanism of action, that creates a good opportunity, as Jon said, as we get our early data, that will help to inform the type of patient population to include in a full development program and the nature of the ultimate label.

Okay, thanks.

And for Peramivir, I was wondering, going out into the future regarding pricing, I was wondering how you view the competitive landscape regarding Tamiflu IV and (inaudible) IV formulations potentially coming out in the US.

So we think that with the pricing that we set with governments that we're in a real strong position to have a sizeable market when you look at the number of people that CDC says end up in the hospital each year, approximately 200,000 on average each flu season, because clearly there will be a premium price put on the government pricing that we set for the hospital market.

So that's an attractive marketplace and we are by far in the lead in terms of the development.

As far as we know, we're the only ones in a Phase 3 program with the amount of data that we have studied in seriously ill hospitalized influenza patients.

So I can't predict how the market will evolve over time but certainly based on the pricing that we've set with governments and the size of the market and the speed and lead that we're in in development, this is a very attractive opportunity for us in the mid-term to late into this decade.

Okay, thanks for taking my questions and congrats on a good quarter.

Thank you.

And we'll go next to Charles Duncan with JMP Securities.

Hi guys.

Thanks for taking the followup.

Had a couple of questions regarding the income statement.

One is really what is a percentage of R&D spend that is Peramivir in the last quarter?

And if you might, if you could just walk us through a little bit on the -- on really kind of how you get reimbursed for those expenses because it seems like you got -- you actually profited in the quarter and I know that probably going forward that's not always going to be the case if other programs take a bigger role in the R&D expense.

But could you clarify how that works, Stuart?

Yes, so I would say if you look at the (inaudible) a good chunk of that, I'd say well north of 50% is related to Peramivir channels so it's a big chunk of our R&D.

The majority of our R&D is related to spend on Peramivir.

So what happens is as we incur costs on our monthly basis, we bill HHS for that expense about 10, 15 days after the month end and it appears about 30 days after that and it appears all of our direct expenses that we spend externally, there appears a fee for the people inside the Company that are working on the program.

They pay a portion of our G&A expenses and they pay us some margin on top of that.

So the short answer to your question is whatever we spend either external or internal in R&D we get that plus some back from the US government.

Okay and could that fluctuate on a quarterly basis?

It's really driven by, when we book expenses we automatically book the revenue as well, including the margin, so Q4 for example, we were ramping up the two Phase 3 programs so the spend rate was high in Q4 so therefore the revenue is high in Q4.

As we go through the next four quarters that will absolutely vary depending on the level of clinical (inaudible).

Okay, let's see.

Any other questions.

No, I think I'm set.

Thanks a ton for the editor.

And we'll go next to [Don Bennett] with Los Angeles City Schools.

I was wondering if you could explain why there were so few orders of Peramivir in this country.

Was it because of the paperwork being difficult or why there were only just over 1,000 orders for -- considering so many people that didn't die this season, I was wondering about that.

So I think there's a few factors and we're not certain on this and we're certainly talking to HHS looking backwards now and saying what could have been done differently, what have we learned.

But I think one piece of it was the timing of when the emergency use authorization came and the timing of the order in relationship to the peak.

So it certainly wasn't well in advance of the peak and you've got to believe that that had some effect on the consumption of the drug.

I think the second thing, having been a drug marketer for years in my career, promotion and education of physicians plays a huge role and you recall that the emergency use authorization is for an unapproved drug and so there were very clear statements from the FDA and CDC that there was no promotion allowed by BioCryst because it's still under investigation and clinical study.

So clearly, if you can't promote it and educate doctors, it makes it much more difficult for them to be comfortable using.

So I think those are probably two things that had the biggest impact.

I see.

Is there any chance that -- a different question -- that Peramivir's third phase would be completed this year?

We've had enough experience with flu trials over the last few years that we really want to be realistic about the timing of these things.

And so we believe strongly that it'll take this flu season in the northern hemisphere, the southern hemisphere flu season and then another northern hemisphere flu season to enroll what amounts to in total about 700 patients or so.

So that's a lot of patients to study and realistically it's going to take us that long to get there.

I see.

Okay.

And last question, I understand you have in the stock pile you have 130,000 doses of Peramivir in your stock pile.

Is there any -- has there been any orders from that stock pile recently?

So there have been some small orders off and on since we manufactured but nothing substantial that really moves the needle, so we continue to work with our partners around the globe.

Some countries are interested in getting some experience with the drug before they make a final decision on a bigger order so we're sending small amounts here and there, but nothing substantial yet.

Is there a shelf life?

What is the shelf life of that -- those products?

We currently have stability data up to three years and we see the drug to be very stable and that spans every quarter so there's no reason to expect that another five year shelf life product so there's no (inaudible) shelf life right now.

Okay.

Can I ask you one more question?

Yes.

I have friends from the Ukraine and they're concerned about the mutation there and I was wondering if Peramivir is effective in the -- the mutation of the H1N1, if that's being in the Ukraine at this time.

Let me answer that with a couple of comments.

I presume that you're referring to the H274Y or similar mutation in the H1N1 virus.

Yes.

It's been reported very sporadically so it's still a very rare event in the context of the pandemic influenza strain.

That makes it extraordinarily difficult to study so we don't have any direct evidence in patients with that particular mutation in that particular strain.

What we do know is that that mutation in [female] H1N1 influenza does affect the sensitivity to some of the [neuroinovase] inhibitors.

It's commonly referred to as the Tamiflu resistance mutation.

It does affect the sensitivity to Peramivir but not to as great an extent and it's hard to know whether or not that's going to impact the clinical value of Peramivir for patients infected with that virus.

We did have one experience in the emergency period during the time that there was an emergency IND in individual patient use that was very positive to the patient and that patient did have a mutated strain.

But that's an anecdote and I would caution in extrapolating that to (inaudible) conclusion.

Thank you very much.

Operator, we'll take one more question please.

Excellent.

We'll go next to Michael Murphy with New World Investor.

Thank you.

I had a couple of questions about the partners.

Hikma Pharmaceuticals, Middle East territory, does that include India?

No, it does not include India.

It's the Middle East and North Africa.

Okay.

So there's nobody in India yet.

Nobody in India yet.

And Merck Serono has Europe and Russia.

Does that include the Ukraine?

So it's Europe, Russia, Singapore and Canada and I'd have to go back and look at the Ukraine.

I don't have that off the top of my head.

And I think the mutation that we're interested in in the Ukraine is the D225G mutation.

I just wondered if there's any reason to think Peramivir will not work against that.

I'd have to look that up to give you an answer offline.

Okay.

Is anybody talking to the World Health Organization, talking directly to WHO?

We have had conversations late last year with the WHO and have had at least one conversation in the new year with them.

Great, great.

And I just have two other really quick questions.

I know the royalty rate in Japan is 10% to 20%, but can you kind of talk about the shape of that?

Does it start high and then go low with volume or does it start low because of their introductory costs and then kind of accelerate as that matures in that market?

It's your typical license agreement with a tiered royalty so it starts low, goes higher with bigger sales.

Okay.

And my last question is I think BioCryst is actually shipping the product under the EUA, is that accurate, that the warehouse is a facility, a BioCryst facility.

No, no that's not correct.

So when they place the order, we shipped, as I said, within two days to a central warehouse that was managed by HHS.

Okay, can you tell us how many orders there have been because that would probably relate to that 1,000 plus patients that they've had success with.

How many orders to us or how many orders from, or to CDC?

I guess how many orders to CDC, not how many courses, but how many orders since I think there's one order per patient under the rules.

Yes, Michael, all I can tell you is, and again this is a bit difficult for us to get insight into because the CDC's goal is to get this drug to folks and to focus on the people in need and not producing data.

But what we heard thus far is that over 1,000 patients have been treated successfully and we've also heard that the number of courses consumed is somewhere between 1,500 and 2,000.

So our conclusion is that some of these patients were on 10 days worth of therapy instead of five.

Most certainly.

Thanks.

Great quarter.

Thank you.

Thank you Michael.

And to answer that last question, Ukraine is not included in the Merck Serono territory.

Operator?

We have no further questions in the queue.

Okay, just let me wrap up real quickly and I would agree with Charles Duncan that 2009 was a transformative year for BioCryst.

We're off to a great start in 2010 and we have a number of important events coming this year so we look forward to keeping you posted as we progress and as always, thanks for your interest in BioCryst.

That concludes today's conference.

Thank you for your participation.