BioCryst Pharmaceuticals Inc (BCRX) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioCryst fourth quarter 2011 conference call. Today's call is being recorded. At this time for opening remarks and introductions I will turn the call over to Mr. Robert Bennett. Please go ahead, sir.

Thank you, and good morning, everybody. Welcome to our fourth quarter corporate update and financial results conference call. Today's press release and accompanying slides for this call are available on our website, www.biocryst.com. At this time all participants are in a listen-only mode. Later we will open up the call for your questions, and instructions for queuing up will be provided at that time.

Joining me on the call today are Jon Stonehouse, our CEO; Dr. Bill Sheridan, our Chief Medical Officer; and Tom Staab, our Chief Financial Officer.

Before we begin I will read a formal statement as shown on slide two regarding risk factors associated with today's call. Today's conference call will include 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 the actual results, performance or achievements to be materially different from any future results performance express 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 our -- to BioCryst's documents filed with the SEC, which can be found on our Company website.

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

Thanks, Rob. Good morning, and thanks to everyone for joining us today.

At our investor day in September 2010 we presented our strategic plan to create sustainable value based on advancing novel BioCryst discovered drug candidates. Today, almost 18 months later, we have made meaningful progress against that plan, and we now have the most promising risk balanced development pipeline in the Company's history. Today our portfolio includes two Phase 3 assets, peramivir heading into the home stretch of its Phase through influenza program, which is fully funded by the US government, and BCX4208, a gout treatment for which we reported positive results from the Phase 2b trial. And two highly innovative BioCryst discovered compounds BCX5191 and BCX4161 that are on track to be ready to file for first in human studies during the second half of 2012.

Both of our leading preclinical programs have advanced since our -- since the investor day and today Bill Sheridan, our Chief Medical Officer, will summarize promising preclinical results for BCX5191 the nucleoside analog polymerase inhibitor for the treatment of hepatitis C. He will also provide some details regarding the progress with BCX4161, our potent inhibitor of kallikrein, for development as oral prophylactic treatment for hereditary angioedema.

Let me recap the important recent progress in our most mature clinical programs. Our Phase 2 BCX4208 gout program advanced significantly during 2011, culminating in the successful outcome of the Phase 2b 24 week analysis and vaccine challenge sub-study we announced last month. BioCryst is currently preparing for meetings to gather regular advice in the US, EU and Japan to take place in the coming months. We are also actively engaging with potential partners to fund Phase 3 development and commercialization.

The gout market is large, and with the BCX4208 differentiating characteristics as shown on slide four, we believe it can be an attractive treatment option for physicians and a large portion of their patients. For example, it may be used safely and effectively in gout patients with kidney stones and in patients on other medications for chronic diseases, such as hypertension or diabetes.

Turning to peramivir. We are well prepared to file an NDA if the ongoing Phase 3 trial is successful. The strategic importance of peramivir is validated by HHS BARDA's support of up to $235 million to fund development, as well as activities to support an NDA filing. And on top of that, if approved, we believe a US stockpiling order for peramivir could help fund the Company's future in a meaningful way.

With this in mind it is important to remember that timing of -- to study completion is dependent upon the prevalence and severity of flu. Flu prevalence thus far in the northern hemisphere has been relatively mild. There has been some pickup recently, but it is still too early to predict this flu season. In contrast, flu has picked up significantly in Japan, where our partner Shionogi sells peramivir under the commercial name RAPIACTA. We will report out RAPIACTA sales performance for this flu season after we receive this information from Shionogi.

Lastly, for peramivir we reported in November that the Phase 3 study to support US filing includes an interim analysis to determine if the study's enrollment target for the primary efficacy population, which is set at 160, should be revised. Recently, it was agreed with HHS BARDA that the analysis will now be concluded after the first of two events; either enrollment reaching 70% of the current target of 160, or the conclusion of the southern hemisphere flu season later in 2012.

Additionally we have agreed to include a futility analysis. The three potential outcomes from the analysis are outlined on slide five. Under the first two scenarios, where the efficacy trend is in favor of peramivir, we would continue the study after concurrence from HHS BARDA toward either the current enrollment target or a higher target, depending on the trend. If the target sample size required to maintain power exceeds 320, we would stop the trial as futile and evaluate the data in hand. The statistical penalty for the interim analysis is small, 0.001, and this is a reasonable approach to resizing the study in the event our original assumption is for sizing were low.

With that, I will turn it over to our CFO, Tom Staab, who will discuss our fourth quarter and full year 2011 financial results.

Thank you, Jon and good morning, everyone. Today I would like to summarize the key elements of our fourth quarter and full year 2011 financial results, andthen move to a discussion of the changes in our cash position and our guidance for 2012.

Our guiding principle continues to be focusing our cash resources on advancing our portfolio of development programs while carefully minimizing noncritical and nonproject spending, thereby creating greater stockholder value. We have made significant progress on this principle and end fiscal 2011 with a strong balance sheet. Our financial position at December 31, 2011, provides stability and flexibility as we pursue our 2012 objectives.

Our fourth quarter 2011 financial results are summarized on slide six. Fourth quarter 2011 revenues were $5.2 million, as compared to $16.7 million for the fourth quarter of 2010. This change was primarily due to a $9 million decrease in peramivir collaboration revenue associated with the reduction of peramivir activities in 2010, including the completion of the 303 safety study as well as other fluctuations in clinical trial activity and related revenue recognition associated with the ongoing peramivir 301 Phase 3 study.

Four quarter 2011 R&D expenses were $14.1 million, down from $24.1 million in last year's quarter. Comparing the periods, the mix and overall decrease of R&D spend relates to the reduction of various peramivir and forodesine expenses, including the completion of certain clinical trials for those programs in 2010, partially offset by investments in BCX4208 gout and preclinical programs in 2011.

Fourth quarter general and administrative costs decreased 27% to $2.2 million from $2.9 million in 2010, primarily due to lower third-party professional expenses and completing the relocation of our headquarters to North Carolina. As mentioned earlier, we successfully controlled nonessential spending and were able to focus our resources on the advancement of our programs.

As you compare our results, please be aware that we have reclassified patent related legal costs to R&D expense, whereas these costs were previously classified as general and administrative expense. Consequently, approximately $400,000 and $1.4 million have been reclassified for the fourth quarter and 12 months ended December 31, 2010. We believe this classification more appropriately reflects research and development expenses and total program costs.

Moving below the line, we incurred $1.2 million of noncash interest expense and a mark to market loss of $1.1 million on our foreign currency hedge associated with peramivir royalties payable in Japanese yen. Both charges relate to the royalty monetization transaction completed in March 2011, which added approximately $23 million of nondilutive cash to our balance sheet.

Turning now to the full year 2011 on slide seven. Total revenues were $19.6 million, compared to $62.4 million in 2010, as collaborative revenue decreased by approximately $42 million. This decrease includes a $25.4 million reduction in peramivir collaborative revenue associated with lower activity and related expenses, as well as a $7 million milestone payment from our partner Shionogi and the sale of $8.3 million of peramivir bulk drug to both Shionogi and Green Cross. Unlike 2010, there was no corporate collaborative revenue in 2011, which contributed over $15 million in 2010.

R&D expenses in 2011 decreased to $56.9 million from $83.9 million in 2010. Once again, this decrease is largely due to the reduction of activity and completion of certain peramivir and forodesine clinical trials in 2010. In addition, a portion of this decrease is associated with $8.2 million of expense associated with peramivir bulk drug manufacturer for Shionogi and Green Cross which occurred in 2010.

General and administrative expenses decreased slightly to $12.3 million from $12.8 million in 2010, as 2011 cost saving initiatives offset one-time headquarter relocation costs, which occurred in the fourth quarter of 2010 and continued into 2011.

Moving below the line to other income and expenses for the year, we incurred noncash interest expense totaling $3.8 million. This interest obligation was funded by royalties from sales of RAPIACTA as well as from an interest reserve account established at the closing of the monetization transaction. In addition, we have incurred aggregate mark to market losses on our currency hedge associated with the royalty monetization totaling $4 million at December 31, 2011. The hedge and mark to market losses resulted from the continued strength of the yen as compared to the dollar. In regards to RAPIACTA revenue recognition, we have take and conservative approach to recognizing RAPIACTA royalty revenue and have elected to defer this revenue until we are comfortable we have an adequate product return history to record future revenue.

Now moving to slide eight. I would like to discuss our 2011 cash usage and our 2012 financial outlook. We ended 2011 with a strong cash position of $57.7 million, as compared to $66.3 million at December 31, 2010. Our operating cash usage excludes proceeds from our royalty monetization, other are nonroutine cash inflows, and cash posted for hedge collateral.

Full year 2011 operating cash use of $29.8 million was approximately $5 million below our guidance of $35 million due to careful management of nonprogram related expense and improved attention to working capital parameters. We are pleased that we were able to keep our 2011 operating cash usage to approximately $2.5 million per month and roughly equal to the approximately $29 million utilized in 2010, despite experiencing a significant reduction in our peramivir related collaboration revenue. Moving forward, we will continue to adhere to our guiding principle of directing maximum resources to our development programs and controlling nonproject spend in 2012.

In regards to our outlook for 2012, we are providing operating cash and operating expense guidance. Based upon current trends, assumptions, and our operating plan we expect 2012 net operating cash use to be in the range of $32 million to $38 million. Based upon the midpoint of this range, our year end cash position provides approximately 20 months of cash runway to achieve our 2012 objectives. Our range in outlook excludes any consideration of cash inflows, including those inflows which could be derived from out-licensing BCX4208. Any inflows in 2012 would offset and decrease the cash utilization range and increase our cash runway.

In regards to expenses, we expect total operating expenses to be in the range of $57 million to $69 million in 2012. As evidenced from our actual 2011 results, our annual results are heavily dependent on peramivir related operating expenses, and these expenses are largely a function of the rate of enrollment in the Company's ongoing Phase 3 clinical trial, which in turn is heavily influenced by the prevalence and severity of influenza in those geographies where we are enrolling patients.

That concludes the financial review, and I would like to turn the call over to our Chief Medical Officer, Dr. Bill Sheridan. Bill?

Thanks, Tom, and good morning, everyone. My comments today will focus firstly on the positive BCX4208 gout results announced in January, and secondly the promising preclinical results for our hepatitis C program, BCX5191, announced in yesterday's press release. I will also update you regarding our progress with BCX4161 for the treatment of hereditary angioedema, or HAE.

The various studies constituting our [ropa] Phase 2 proof of concept program for BCX4208 are summarized on slide nine. In study 203 we enrolled patient who had previously failed to reach the serum uric acid therapeutic goal of less than 6 milligrams per deciliter after treatment with 300 milligrams of allopurinol one saline. The interim analysis announced in January covered a total of 24 weeks [study] drug administration. An archive of January 9 presentation and webcast provide more detail, and these are available on our website under Investor Relations events.

This longer duration of blinded study drug administration showed us a favorable clinical and laboratory safety profile of BCX4208 and persistence of benefit in reaching and maintaining the serum uric acidic goal. Given BCX4208's mild [immunological accretive] effects on [lymphocide], we also evaluated the health of the immune system by measuring antibody responses to two standard vaccines administered to qualified patients in a vaccine challenge sub-study. The results of the vaccine challenge sub-study are outlined in slide ten. Overall, the response rate for tetanus toxoid shown in the left panel and pneumococcal vaccine seen shown in the right panel were similar in BCX4208 patients compared to control patients. Response rates seen in the control patients were similar to literature reports. These findings indicate healthy immune function after 16 or 20 weeks of BCX4208 administration after the [client had changes in the lymphocide] count had stabilized.

The health of the immune system in patient receiving BCX4208 was also assessed by analysis of the pattern infections. Slide 11 summarizes the rates and types of infection adverse events presented as rates per 100 patient-months. The rates of infection adverse events in the BCX4208 arm were similar to placebo rates. The types of infections seen are those typically observed in this patient population, and no [opportunistic] infections were observed.

Efficacy results through 24 weeks of treatment are summarized on slide 12. The left chart shows the that proportions of patients reaching the serum uric acid goal for BCX4208 doses at both 12 and 24 weeks were similar for each dose study and compared favorably to placebos. Daily administration of BCX4208 with allopurinol approximately doubles the proportion reaching goal compared to allopurinol alone in this population of allopurinol [inadequate] responders.

The positive outcomes outlined on slide 13 establish a favorable safety and promising efficacy profile for BCX4208. The clinical and laboratory efficacy and safety findings after 24 weeks confirm that we have an attractive Phase 3 ready asset that is available for partnering. We will provide an update regarding one year results of the ongoing Phase 2b study in third quarter this year. With this [study] in hand, we now have over 900 patient-months of drug experience and no clinical adverse event signals. With this safety profile we feel comfortable that BCX4208 is ready to advance into a Phase 3 program.

Now, turning to BCX4161. We have concerned the potency and [oral bioavailability] of BCX4161 in preclinical models, and we established a predictive therapeutic window for BCX4161 in the prevention of hereditary angioedema attacks. As a reminder, bradykinin, the mediator of HAE attacks, is released by the action of active plasma kallikrein. The plasma kallikrein is the target for BCX4161. Both plasma kallikrein and another enzyme, tissue factor/factor VIIa, are inhibited by [submicromolar] levels of BCX4161 in assays that use the isolated enzyme.

So we proceeded to test the impact of theses attributes in plasma based assay systems. The goal of the studies was to evaluate whether there was an adequate therapeutic window where we could adequately inhibit bradykinin production without impacting the pathway of coagulation that is regulated by tissue factor/factor VIIa. The results of our studies are shown on slide 14 and 15. We tested BCX4161 for inhibition of bradykinin release through the action of kallikrein in a staphylococcus aureus stimulated normal humanplasma assay that had been described in the literature.

The potential impact on coagulation is evaluated using a standard assay called the prothrombin time. These results are plotted in the panel, with the concentration of BCX4161 on the X axis, the percent of bradykinin suppression on the left Y axis, and the ration of prothrombin time to the normal prothrombin time on the right Y axis. BCX4161 at submicromolar concentrations was able to inhibit bradykinin production in human plasma, despite using a massive stimulus with staphylococcus aureus. [Promulgation] of the prothrombin time required much higher concentration. If we compared EC50 to bradykinin suspension, 0.027 micromolars, to the concentration that doubled the prothrombin time, 5.2 micromolars, we can see that it would take about 200 more times BCX4161 to affect coagulation compared to the amount needed to benefit. So with these results we are comfortable that we have defined an anticipated therapeutic range and adequate PK safety margin for clinical trials.

As BCX4161 is a charged molecular [species], achieving adequate bioavailability proved a challenge. I'm pleased to report that our formulation research has resulted in acceptable pharmacokinetics after oral dosing in preclinical models in different species. The example shown on slide 15 uses the type of formulation that we are now proceeding to test in IND enabling safety studies. In this experiment we studied single oral doses of BCX4161 at 30 milligrams, 100 milligrams and 300 milligrams per kilogram. Over 24 hours, the plasma concentrations observed were well in excess of the bradykinin suppression EC50 defined in the human plasma assay that we reviewed earlier.

Preclinical PK parameters to BCX4161 indicate its potential for acceptable schedule for dosing in the clinic, for example twice daily. We are proceeding additional IND enabling evaluations, and we on track for the goal in being ready to file first in human trials [through] the second half of 2011.

Now, I will turn to our hepatitis C nucleoside NS5B inhibitor program beginning on slide 16. The treatment of hepatitis C is rapidly evolving, and as I'm sure you will all aware, this is an exciting field now. With the introduction of protease inhibitors to the market and our [innate] polymerase into the [visit] clinic, the focus is now on developing all oral, short course combination regimens with the goal of much better tolerability and superior are efficacy compared to today's standard of care. Simultaneously, regulators such as the FDA have shortened the development pathway, making development of direct acting antiviral for hepatitis C very attractive.

Turning to slide 17. Recently several [investigational] nucleoside and nucleoside NS5B inhibitors have shown compelling [virologic] efficacy in early clinical trials. These compounds work by being converted to their active triphosphate forms in the liver, binding to the active site of the NS5B polymerase and severing the elongation of the viral RNA chain. That action prevents viral replication. For optimal efficacy, the best in class nucleoside or nucleotide must demonstrate high potency and [pangenic] activity. It should be rapidly converted to the active triphosphate form of the drug in the liver, have excellent oral bioavailability, and PK predictive [delivery drug] triphosphate levels. For optimal safety it should show high specificity for the viral target and need only low doses. We believe that the experimental data covered in today's call supports the potential for BCX5191 to be a best in class drug.

So what is BCX5191? BCX5191 is a novel proprietary adenine nucleoside analog NS5B inhibitor discovered by scientists at BioCryst using our deep expertise of purine chemistry and structure-guided drug design. BCX5191 has met stringent criteria for advancing to IND enabling studies as follows. [Pangenotypic] submicromoral potency against the isolated NS5B enzyme. Activity in the replicon assays. Excellent oral bioavailable. Conversion to high levels of the active triphosphate, both in tissue culture and in the liver. A favorable PK profile supporting once daily dosing. Specificity for the viral enzyme. And no evidence of toxicity in standard in vitro [screens] at high concentration.

Slide 19 gives the headline results from head to head comparative preclinical experiment with BCX5191 against the nucleoside inhibitor currently in clinical development, GS-7977. For this experiment we synthesized GS-7977 and dosed laboratory rats with either BCX5191 or GS-7977 at the same oral dose. Liver and plasma samples were then analyzed. The triphosphate of BCX5191 showed above 20 times higher Cmax and about 30 times greater exposure over 24 hours compared with the GS-7977 triphosphate in this experiment.

Let's go back to the list of criteria for a potential best in class drug. Slide 20 details the duplicate values [to] enzyme inhibition for BCX5191 compared to published values for GS-7977 across genotypes 1 through 4. BCX5191 displays submicromolar potency. In a published study GS-7977 generally showed micromolar potency.

Slide 21 shows the antiviral activity of BCX5191 in the replicon assay against genotype 1a and 1b. The [cancer cell line] that is the parent line for the replicon assay is not very efficient at converting BCX5191 to the triphosphate form. Normal liver cells, on the other hand, are much more efficient, achieving nearly 60 times the triphosphate level and five times the triphosphate initial half-life observed in replicon cells. The submicromolar to low micromolar EC50 in the replicon assay for BCX5191 is therefore likely to be an underestimate of the in vivo potency in infected liver cells because of low effective dug triphosphate exposure in the replicon cells.

The preclinical bioavailability results of BCX5191, summarized on slide 22, are excellent. BCX5191 is easily absorbed across the GI tract after dosing with drug dissolved in plain water, with bioavailability ranging from 71% to 100% across preclinical species. Drug levels in the liver are about two to four times higher than in the plasma, indicating active transport of BCX5191 into the liver cells. Liver drug levels are highly correlated with the plasma drug levels. BCX5191 is efficiently converted to the active triphosphate in the liver. As shown on slide 23, we saw high concentrations of BCX5191 triphosphate in the liver, with these levels exceeding the levels of drug in the plasma by five to 48 fold. As BCX5191 is an adenine nucleoside, we also measured ATP levels as a check on safety, and we [concern] that these levels remained normal.

Slide 24 addresses specificity. In this assay we are measuring the action of human RNA polymerase. And just to orient you in the panel, the bars from leftto right indicate what happens when there is no substrate; you get no signal. The second bar is the enzyme with substrate but no inhibitor. The bar on the far right is the enzyme with a known inhibitor and substrate added, and this is alpha-amanitin, and so you get no signal. In contrast, the BCX5191 triphosphate, across the dose range between 300 micromolar and 330 micromolar, we had absolutely no inhibition of the human RNA polymerase II.

Slide 25 summarizes the cellular and mitochondrial toxicity screen, demonstrating toxic effects in vitro at concentrations up to 100 micromolar, or in one case1,000 micromolar, across a range of different human cell lines and normal human lymphocytes.

Let's take another look at the head to head comparison to GS-7977 shown on slide 26. With BCX5191 triphosphate, levels were higher than the genotype 1b 1C50 for the full 24 hours after dosing, whereas in the case of GS-7977 this is true for less than four hours. These results indicate that BCX5191 has the potential for a low clinical dose. Importantly, given the virologic results seen with other NS5B active side inhibitors such as GS-7977 in early clinical trials, the superior liver drug triphosphate levels that we have seen with BCX5191 may translate into clinical efficacies that are at least as good and possibly better than the drugs currently in the clinic.

Slide 27 recaps our current knowledge of how BCX5191 stacks up. It is highly potent, has excellent bioavailability, and is converted to the active form very efficiently in the liver, achieving drug triphosphate concentrations that are much higher than GS-7977 at the same dose level. We are working hard to complete additional nonclinical experiments, including GLP preclinical safety studies, additional comparative pharmacology studies, and in vitro evaluations of BCX5191 in combination with other hepatitis C drugs such as Ribavirin. We are on track to achieve our goal of beginning first in human studies before the end of 212.

We are pleased with our program on both of our preclinical programs. Consistent with industry best practices, we are working on multiple earlier stage compounds to ensure we have additional optimized candidates for both the HAE and hepatitis programs.

Now, I will hand the call back over to Jon.

Thank you, Bill.

Looking ahead, to the next 18 months should be even more exciting, and here is why. First we expect substantial progress in the development of all of these assets during 2012. Second, we firmly believe each one has the potential to contribute significantly to shareholder value in the near and midterm. As an example hereditary angioedema represents a multi-hundred million dollar market opportunity, where an oral compound such BCX4161 would be a game changer for patients and for BioCryst. As this is an orphan drug indication with a short and clearly defined clinical pathway, successful development could lead to approval in a much shorter time frame than most development programs. This is a compound that BioCryst intends to commercialize ourselves and retain the full value. Best of all, this is just one of many assets we have at BioCryst to create sustainable value.

Lastly, we are confident that we have the capability to move additional highly innovative preclinical compounds toward IND filing beyond 2012. This world class research is the fundamental driver in establishing BioCryst as an enduring successful company addressing unmet medical needs.

This concludes our formal remarks. We will now open it up to questions.

(Operator Instructions). Our first question comes from Charles Duncan of JMP Securities. Please go ahead.

Hi. This is Gena Wang on behalf of Charles Duncan. Thanks for taking my questions. I think my questions mostly around BCX5191, and it seems very impressive preclinical data. Wondering if you can help us understand a little bit more. I would like to hear your thoughts on nucleotides versus nucleosides? For example, bioavailability, toxicity, and how the BCX5191 can differentiate from other candidates?

Hi, thanks for the question. This is Bill. I will refer you to an excellent review published by [Michael Sopher] in the Journal of Medicinal Chemistry that came out in the last couple of weeks online. And in the review the reason for the development of nucleotides and prodrugs are detailed. The fundamental thing here is that all of these drugs work by getting converted to the triphosphate form of the nucleotide in the cell. So if you have a nucleoside, which is the base plus the sugar, and that gets into the cell, and the kinase that is in the cell makes the triphosphate, and it inhibits the virus, then you don't need to resort to a nucleotide or a prodrug.

So the only reason that nucleotides were synthesized in the first place is because, for those particular chemical molecules that were the sugar in the base, in other words, the nucleoside, the enzymes in the cell didn't make the first step which is the monophosphate. So they had to make the monophosphate. The problem then that they faced was that the monophosphate is highly charged, with three negative charges and it had no oral bioavailability. So to circumvent that they had to make a prodrug of the monophosphate of the nucleoside. In other words, aprodrug of the nucleoside.

I know this is technically complicated, but that's basically the story, and that review lays it out in a very nice way. So at the end of the day what you want is a drug that gets into the cell and makes high levels of the triphosphate and that has high potency. And that's -- thedata that we shared today we believe is very compelling that we have potential best this class asset.

I would add to Bill's comments this is a great example of our clever drug discovery folks and their ability to get nucleoside, to get the phosphate added, and to get it into the cell to get [triphos correlated]. So a great example of how we were able to figure things out when others weren't.

Thank you. My second question is could you help us understand a little bit more regarding the differences in [competiside] and the replicon assay?

Certainly. Thanks for the question. So the HuH-7 cell line is the parent cell line for the replicon assay, and the replicon assay has been helpful as the screening test to look at activity against subgenomic forms of the hepatitis C virus. And the reason that this is helpful is because animal models have been difficult to establish. The HuH-7 cell line is derived from a liver cancer. It is immortalized, and it has multiple genetic abnormalities. So in order to understand the results of our assay you need to understand how you well is the abnormal cell line making the drug triphosphates.

And as we detailed today, for our drug that abnormal cell line is not very efficient compared to normal human liver cells. So you have to adjust for that when you interpret the results of the EC50 values. The IC50 values that we have on the enzyme indicate that we have a highly potent molecule. The replicon cell assay results indicate activity against the virus. And liver triphosphate results indicate that we are getting excellent bioavailability and conversion to the active drug in the liver. So you need to line all of those things up. The difference between the replicon cell and the normal human liver cells are very profound.

Thank you. So my -- that is very helpful. My last question is I would like to hear your view on the emerging clinical paradigm going forward, giving many other candidates already, like, more advanced than you. So I would like to hear your thoughts than.

Sure. I will make a couple of remarks and then hand it to Jon.

From a medical perspective this is an incredibly exciting time, because very, very few patients with hepatitis C, who have even been diagnosed with hepatitis C, have ever had treatment, because the standard of care treatment has been too toxic and too long a duration with quite problematic side effects. Sot the pegylated interferon / ribavirin combination therapies have a real issue, and even with the addition of protease inhibitors and the bump in efficacy from protease inhibitors, nevertheless the side effects dissuades most patients from even attempting therapy.

So the future is looking very bright, and there is excellent reviews published on this topic. And if we can move to an all oral direct acting antiviral combination regiment, with much better safety profile and for a shorter course, suddenly everything is different. And so suddenly the people who have never had therapy who have been diagnosed can get treated and cured, and suddenly you can start asking health questions about shouldn't we detect all the other people with hepatitis C? Because in the long run the development of cirrhosis and liver failure and liver cancer. And hepatitis C is the number one reason for liver transplantation. So this is a serious problem.

So medically it is very exciting. And the proof of concept studies that have been published at the scientific meetings for the NS5B active inhibitors are absolutely unequivocal. So clearly they have [pangeneic peak] activity. This class of drugs addresses genotype 1, which has been difficult to cure with a standard of care, and the future is looking bright. So the class effect here is unequivocal.

And I think from a commercial perspective, anybody who is going to play in this space -- and it is a big space, as Bill has referred to -- is going to need nuc. And so having a nuc that's very potent that may be used at very low doses, perhaps having a better safety and tolerability profile. Perhapsbecause of its potency, a better profile against resistant strains of the virus. And who knows maybe even monotherapy. All of those things is are the potential here, and from a commercial perspective could make this extremely attractive.

Thank you. That's all my questions. Congratulations again on the progress of the clinical development. I will head back to the queue.

Thanks.

Our next question comes from Steve Byrne of Bank of America. Please go ahead.

Hi, thanks. Bill, I want to drill a little more into the 5191. When you showed a greater conversion to the triphosphate form, is any of that effect just due to a molecular weight difference from your molecule versus the GS-7977?

Thanks for the question, Steve. So as I indicated we dosed the animals on a milligram per kilogram basis. The molecular weight of the GS-7977 is about twice that of 5191. So even if you take that into account, we would have ten times more triphosphate in the liver and 15 times more exposure. So it is in the same range basically.

Okay, thank you. And then -- so then when you look at the IC50, and you are in the submicromolar range, there's -- you are dealing with the triphosphate form there in both cases, right?

Yes, you to use the triphosphate in the enzyme assay, because that is the only thing that will work in that assay.

Okay. And so what is it about the enzyme blocker in your case that makes it more effective at a lower dose? Is it in your view a stronger selectivity, or just binding affinity to the enzyme?

I think that it could be a variety of things. I think that this is adenine nucleoside analog. That is pretty unique. One paper I read recently talked about the possibility that adenine nucleosides would have less of a chance getting excised from the elongating RNA strand by pyrophosphate because of characteristics of adenine nucleosides that are different.

So we can't say why the IC50 values might be lower. I would caution, just for full disclosure, the values that we have shown here on slide 20 for 7977 triphosphate are from a published experiment. So this hasn't got quite the same head-to-head quality as the rat liver experiment. But on the other hand the important point here is that we have an potent compound that gets into the liver and gets converted to the active triphosphate at very high levels very efficiently, and that is what counts at the end of the day.

And, Bill, wouldn't you agree that given our history of structure guided drug design at BioCryst, Babu and his team have been effective as tight binding highly selective molecules, and perhaps that is part of a reason as well.

Right, that might be -- that could be a factor, too.

How many other targets is Babu working on down there in Birmingham, Jon?

Stay tuned. Stay tuned. I mean, my comments at the end of our prepared remarks, we have got this discovery engine. In 2008 and 2009, when small biotech companies were shutting down their research to it keep the cash, we made a conscious decision to keep that thing going, and now you are starting to see some of the fruit of their hard work. And we are just getting started.

And then just one quick financial one for you, Tom. When Shionogi has some sales of -- and you generate some royalties from that, say in the first quarter, will that flow through your income statement, or because you have already monetized this forward, will that not flow through the income statement.

Steve, first, thanks for asking a financial question. It is nice to field a question on a call.

In answer to your question, we given the early launch of RAPIACTA, we have made a conscious decision not to recognize the royalty revenue associated with that. It doesn't have anything to do necessarily with the monetization. We expect in the future once we get a little more history under our belt, and we get at least two flu seasons under our belt that we should have history and we will start recognizing that revenue. But I would not expect to see that in the first quarter, because we will just be getting that information and digesting that, and we are going to be reporting that revenue on a quarter lag. But you will start seeing that revenue probably -- maybe the tail end of 2012.

All right. Very good. Thank you.

Thanks, Steve.

Our next question comes from Raul Jasuja of Noble Financial. Please go ahead.

Hi, guys, and congratulations on some robust preclinical data on the HCV program. I have a couple of questions on the HCV program, and then I'll ask a couple on the gout program. Most of my PK questions have been nicely addressed by the previous analysts, butjust a couple more here. You talked about the nucleoside versus the nucleotide difference. We talked about the adenine versus the uracil for the sugar difference. The other question I have, and it may not be an apt question, but let me just try to see if I can peek deeper into the structure here. Bill, is there another or further differentiation in the class of the chemical structure besides the nucleoside versus nucleotide and besides the adenine versus the uracil that is unique to your compound versus others?

We haven't disclosed the structure yet, but I think your question is an excellent one, and maybe I could answer it indirectly this way. In the review that I mentioned in the discussion and in the body of the paper, one class of compounds that is talked about, we are just changing the hydroxyl to a fluorine on one of the positions in the substitution of one of the bases, changing the resistance profile against the virus, right?That was the only change in the molecule.

So I think that you have -- each molecule is unique, and we have a unique and protected proprietary molecule here with excellent characteristics, and we have to step through the rest of the preclinical pharmacology program and safety program before we get if into the clinic. We very much looking forward to getting it into the clinic, because we think it has great characteristics.

Great. This fluorination is routinely done with a lot of other small molecule drugs. Is this particular to your IP?

You shouldn't take my remarks as indicating anything to do with our IP.

Okay, all right. Okay. The other question I have is asking you to look ahead. Given the dynamic changes in the hepatitis C space, assuming you are going to do a Phase 1 study as a single agent looking at safety, beyond that, about a year or two years from now, what do you envision is going to be the appropriate combination Phase 2 study? And the reason I ask this is because having the right combination study could make a difference of months, and that could make a difference in this very active race for the best combination.

I think that we -- others are paving the way, as you well know, and we will learn from their experiences. And in consultation with experts in the field and with regulators, we will design the most efficient program. So I think we will be in a great position to be a [fast forward].

And then one of the observations I looked at is, 7299, the Gilead old [pharmacy] product -- drug, we have seen Phase 3 data I believe in genotype 2 and 3. Or some Phase 3 for genotype 2 and 3. The genotype 1a and 1b data may not be as robust as the two and three. Looking at this data, set do you think that your approach would be first to target the tougher to treat genotypes 1a and 1b to differentiate further from Gilead's product?

I think the clinicians in the field will want to have drugs that have high potency against genotype 1a and 1b, obviously tested in that group, because as you say, that is where part of the medical need lies.

Okay. And then let me move on to the gout space and ask a couple of question there, more in a general sense. And maybe -- I guess this is probably for Jon. Jon, one of the issues that has been in discussion is where are we going to see some sort of partnership validation in the gout space. What is your thinking, and how would you like us to assess the potential for a big pharma partnership, given where [R&D] is today and given where you're going the second half of this year? What is the interest?

Since we got the 24 week data and the vaccine challenge data, there was a remaining question outstanding around safety. And Bill said it in his prepared comments that we now have a body of evidence that -- more data than anybody be in this space, by the way, that is looking at combination therapy with allopurinol -- that gives us tremendous confidence that we have efficacy safety balance to allow us to go into Phase 3. And so you couple that with the differentiating factors, and we thought very hard about this. We got input from potential partners about how are you going to get the payors to reimburse this drug.

So we knew that there were competitors, and so things like drug-drug interactions, huge part of the population. Doctors don't want to change somebody on a beta blocker that they have controlled them for years. And kidney stones. Again, 20% to 40% of the population. Last thing you want to do is increase the amount of uric acid that is going through the kidneys when somebody has a propensity for stones. Those are big differentiators and so --

And then I think the last piece is we are looking for a license. We are not looking to sell the Company off of our gout program. We have way too much value beyond our gout program, so we are looking for someone who has got the resources, the capability to get this through Phase 3 and into the market, and then also seize the space and the opportunity on the upside, because it has been so -- the disease has been so poorly managed for years. That can really make this a big high value asset. And so we are willing to structure a license agreement more back end loaded. I have said that multiple times as well. That is really I think the difference between us and other people in the space.

Okay. Guys, thanks. And congratulations on good data on the hep C program.

Thank you.

Our next question from the line of Katherine Xu of William Blair. Please go ahead.

Hi, good morning. I have a few questions. First on the 5191 program. Just curious, so this is -- can you comment on the patent position so far, and then your patent strategy on this, and you views on the patent space of nucs for hepatitis C. And another question is have you looked at the [competisides] update -- uptake also 7977.

So I will start with the patent, and then turn it over to Bill. This is a fairly recently discovered molecule, and given the number of players in the space we did a thorough analysis of the intellectual property in this space and feel that we have a solid intellectual property position with 5191. So there are no -- we wouldn't be invested in [toxic] if we felt there were risks there. That is really all I want to say about the IP. Bill, do you want to --

Sure. In the data we disclosed today we have an indirect answer to your question, which is actually it is -- actually, it's also the best answer to the question -- which is when you administer the drug orally to rats, measure the triphosphate levels in the liver, and pretty much by definition what you are measuring is the drug triphosphate level in hepatocytes, because that is the vast majority of the weight of the liver.

So as shown on slide 26, the levels for the GS-7977 triphosphate in the liver are much lower than was achieved at the same milligram to kilogram dose compared to the levels of the 5191 triphosphate. So in vitro I'm not sure how much I would -- how much weight I would put on in vitro data compared to in vivo data.

Okay. I'm just curious for why did the other people went for nucleotide and the prodrug strategy, and then you guys can actually develop a stable nucleoside?

I think that if you are very interested in this area, I would definitely recommend reading Michael Sopher's review. So not all nucleosides are soluble. Not all nucleosides are stable. Not all nucleosides cross the plasma membrane of cells and get taken up into the cells. Not all nucleosides are efficient substrates for the kinase enzymes that add -- especially the first phosphate. That is the big hurdle is creating the nucleotide, which by definition is the nucleoside monophosphate.

So in order to succeed with the nucleoside have to have a soluble, stable, permeable and efficiently phosphorylated nucleoside. And that is what we have. So unless you have all those things, you to have some other strategy. You can take the nucleoside, which is sugar plus the base, and if it doesn't get phosphorylated to the monophosphate very efficiently, you have to make the monophosphate. Then you strike another problem, because adding a phosphate group with three negative charges means it will be very soluble, but almost no permeability and almost no oral bioavailability. So then you have to solve that problem by making a prodrug to neutralize the charge. And there are a variety of prodrug approaches that can do that, and people succeeded as doing the things, and GS-7977 in terms of medicinal chemistry technical success is a great example of that.

So 5191, it is -- you are saying there it no prodrug [moreaty] on it, or there is some kind of structure other than the nucleoside that you have on there, like a tail or some sort, that is conferring these properties?

So to be crystal clear, it is just a nucleoside, ifyou like, butit is a great nucleoside. So it is soluble, highly permeable, has excellent oral bioavailability, gets transported inside the cells, and is incredible efficiently phosphorylated. It doesn't have any problems being converted to the nucleotide, the monophosphate, and doesn't have -- and we've measured those, just didn't show them today -- and doesn't any problem getting converted to the triphosphate form, which then inhibits the virus. We didn't need to resort so any of those other maneuvers.

Great. Thank you. And I have another question on 4208. Can you just comment in general how you think -- I mean, you commented on the kidney stops and all that, but can you put it into numbers? How much the market you could capture, let's say, in the field -- in the world five years from now when let's say the uricosuric agents are on the market, they're combining with allopurinol/Uloric, and then for you also they are combining with allopurinol. And how are you going to position against those newer agents? The more detail with numbers, the better, if possible.

Yes, so let me -- we had a slide in previous presentations that are probably on outlined website. We took the [enhines] data and growth rate --enhines data currently (inaudible -- mic noise) which was 8.3 and the growth rate of roughly 4% and projected that out to 2015, around the time we will have the Phase 3 data. And if you look at the number of people that get diagnosed and don't get diagnosed and those that are diagnosed that get treated and not treated, and you will see it is a very poorly managed disease from that perspective. And then you go down to those that actually get put on allopurinol and don't get to goal, it is about 2.5 million people. So that is if you don't change the behaviors of physicians and get more people diagnosed and get more people treated.

So that is kind of the base low hanging fruit. And I would say that is where we would compete with [lysinuric]. And so that by itself is a huge population. And a lot of potential. And if you look at the current price of Uloric at $5 a day, financially you could do the math on that. That is big. Really big. So --

[The amount] --

Go ahead.

Sorry, go ahead.

All right. So I -- so that is the base. I laid out for you the differentiating characteristics. I think another one that -- and we done our own market research -- primary market research -- another thing that resonates really well is for decades there has not been a new mechanism of action in this space. And we are bringing forward a PNP inhibitor that shows synergy with allopurinol, and the concept being low doses of both drugs gives you better efficacy with fewer side effects.

And in fact that resonates very well with physicians in terms of a differentiator. They are looking for new mechanisms of treatment, because the stuff they are seeing so far is just a new twist on an old mechanism. And it is not super appealing. So we think the combination of all of those things, and then driving more people -- and this is why we need a partner are that has demonstrated they can build markets -- driving more people to see their doctor and get treated could double that population. So it'sbig. Really big.

All right. So if we have -- we take the 2.5 million people, probably let's say a little more than half of them are not adequately controlled by allopurinol alone, and then let's say we take the 1.3 million or so people that are candidates for combo therapies, and is your marketing message going towards the kidney stone people? How do you diagnose those patients? I mean, versus picking the patients as your [candidate] versus lysinuric [plus let's say] Uloric or allopurinol?How do you differentiate -- [how does that know] those patients suitable for your combo.

So let me make one clarification. The 2.5 million is the population that doesn't get to go on allopurinol. So that is the market, right? We're going secondline after you have not been able to get controlled on the standard -- the 300 milligram dose of allopurinol. That's what we're going after, and that's is 2.5 million people projected out in 2015.

Think about it on this [cancombinant] disorders for a moment. If there are problems with drugs that inhibit transporters, right? That is the basis of their mechanism, right, is to inhibit transporters. And they interfere with the metabolism and transporting of other drugs, and these people are -- you see it in the published literature, you see it in our studies -- half of them are on antihypertensives. 40% of them on statins. A quarter of them are on type II diabetes medication. These guys are on polypharmacy. The last thing a doc wants to do is put them on a drug that interferes with a medication that they have been on chronically that they have got to adjust the dose. They're just not going to want to do it. And so that is a huge advantage for us.

And then on this kidney stone piece, what is interesting there is 20% of the population has actually had an attack, right? So there is clinical evidence of kidney stone. Another 20% is what is called silent stone, where they haven't had an attack, but you when you do imaging you see a stone. And that is -- from a marketer's perspective, that is wonderful because you go to the doctor and say, listen, you are not going to do a scan on everybody, so you don't know who is in the 20% or not. So why not use a drug that doesn't have a problem with flooding the kidneys with uric acid to lower uric acid?

So I have a simple perspective on the answer to your question. Allopurinol is very good for some patients as a single agent, and if they are doing well on that and the uric acid is controlled, they should stay on that drug. On the other hand, if they haven't achieved the goal, then they are not getting effective therapy, and they need something added. So I think all of those patients will be candidates for BCX4208.

Great. Thank you so much for taking my questions.

You're welcome.

(Operator Instructions). Our next question comes from Christian Glennie of Edison Investment. Please go ahead.

I had a question -- a follow-up question on the gout program. Is the Phase 3 -- start Phase 3 wholly dependent on finding that partner, or are there -- is there a situation in which you could start the Phase 3 ball rolling, initiate it yourselves given it's [slightly why I doubt doing] although slightly -- they're almost to the point of doing it -- completing it themselves.

I think the risk is, once you make the commitment to start a Phase 3, you have got to have the commitment, and that means the resources to do it. And our view has been I would rather get that in the hands of a capable and resourceful partner before I start it. If we are in the final negotiations, and it makes sense to get some stuff rolling, that is something that we will judge at that point in time. But I think in general the principle is we want a partner on board to get the Phase 3 rolling.

Okay. And then just because I slightly missed, at the end you talked about a program you developed and commercialized yourself. That was 4161?

Yes. I mean, this one fits perfectly for a company like BioCryst, right? Because as I said in my comments, it is an orphan disease. It is a small number of physicians that treat it, and -- so it allows us to put up a very small commercial infrastructure that is affordable, and it is a highly profitable disease area as well because there is such a high unmet medical need. And to have a game changer like an oral for preventing attacks could just be a major breakthrough. And so we want to keep that value, because it is straightforward and something that we can manage.

And then finally just on the hep C program. Obviously you are still fairly early stages, but an idea about I guess eventual development and commercialization in terms of getting partners on board, a point at which that might by the best point for you? I mean, obviously to in terms of the valuation point, how far would you like to take it?

So that is an interesting question. Our intention is to partner is, right, because it is a highly competitive space and speed matters here. So our intention is definitely to partner it. The open question is when. And I think the way we will answer that is based on value and speed. And we will see what the interest level is, we'll see what potentially value is, and we'll decided whether or not we'll take it another or partner it at that time.

But just based on the current trends that we are seeing with deals right now, it seems that people are going further and further back towards preclinical. And our intention is to partner, so we will see what the value in speed opportunity and make a decision from there.

Sure, makes sense. Thank you.

You're welcome.

I'm showing no further questions at this time, and I would like to turn the conference back over to Mr. Jon Stonehouse for any closing remarks.

Thank you. So as I said in my prepared comments the next 18 months should be even more exciting than the last 18 months, and the employees at BioCryst, at least in my five years, have never been more energized and dedicated to moving these molecules forward. So we look forward to updating you on our progress over the coming months and thank you for your interest in BioCryst. Have a good day.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect, andhave a wonderful day.