BioCryst Pharmaceuticals Inc (BCRX) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioCryst second quarter 2012 earnings conference call.

(Operator instructions).

As a reminder, this conference is being recorded.

I'd now like to introduce our host for today, Mr. Robert Bennett, Executive Director of Investor Relations and Communications. Sir, please go ahead.

Thank you, and good morning and welcome to BioCryst's second quarter 2012 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 point all participants are in a listen-only mode. Later, we'll 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, Chief Executive Officer of BioCryst, Dr. Bill Sheridan, our Chief Medical Officer, and Tom Staab, Chief Financial Officer.

Before we begin, I'll read a formal statement, as shown on slide two, 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 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 documents filed with the SEC, which can be found on our Company website.

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

Thank you, Rob. Good morning, and thanks to everyone joining us today. BioCryst laid out aggressive clinical and business objectives for 2012. I'm pleased to report that over the first seven months of the year we have met or exceeded all of our goals towards advancing each of our four clinical and pre-clinical programs. BioCryst's key accomplishments to date in 2012 are highlighted on slide 3.

Today we announced the completion of IND-enabling non-clinical safety studies for both our pre-clinical products -- BCX5191 for hepatitis C, and BCX4161 for hereditary angioedema. We are on track to file INDs on both of these BioCryst-discovered drug candidates in the fourth quarter.

The BCX5191 Phase I program will include patients with hepatitis C so that we can test antiviral activity. In the BCX4161 Phase I program, a novel kallikrein inhibition assay developed by BioCryst scientists will measure activity against the intended target. Our goal is to get data from both Phase I programs in the first half of next year.

Adequate safety and confirmation of activity against the hepatitis C virus for 5191 and against kallikrein for 4161 should translate into meaningful shareholder value. Our strategy with BCX5191 is to move through development expeditiously so we can get to combination therapy trials with other oral treatments with hepatitis C. The goal in the field is getting a pangenotypic, interferon-free, once-daily oral combination therapy.

We believe nucs will be the backbone in those combinations, and with BCX5191 now about to enter the clinic, we have a very attractive asset. So the next important milestone is to demonstrate in Phase I that we have adequate safety data in healthy volunteers, and meaningful viral load reduction in patients infected with hepatitis C.

As a reminder, our strategy with BCX4161 is to take it all the way through commercialization independently in the US and to evaluate our alternatives to launch in other countries. We believe an oral treatment for prevention of attacks would be a game-changer for HAE patients and for BioCryst.

Phase I data should establish the doses for pivotal trials and essentially provide proof of concept for 4161 against kallikrein. As HAE is an orphan disease, the development of 4161 could progress rapidly, and it could be approved relatively quickly. Bill will share further insights regarding our pre-clinical program, including some experiments we've conducted that should help us select doses for clinical development.

Turning now to our ulodesine program. Ulodesine is the newly granted generic name for our PNP inhibitor previously known as BCX4208. Ulodesine is the first potential treatment for gout with a novel mechanism of action in about a half a century.

We were excited to announce last week favorable safety results as well as durable efficacy results from the 52-week extension phase of our Phase IIb trial. When you consider we have over 100 patient years of drug exposure, an adverse event profile similar to placebo and robust efficacy, we expect a relatively low risk for Phase III and a high degree of confidence that ulodesine can be approved and ultimately benefit a large portion of gout patients who are not responding adequately to xanthine oxidase inhibitors.

Our strategy for ulodesine remains unchanged. We continue to work to secure a partner to take over the ulodesine Phase III program and to commercialize the product. The partnering process is active and we remain on track to reach conclusion by year-end.

Lastly, I wanted to update everyone regarding the ongoing 5191 patent interference process. Since we originally disclosed on March 12 we have submitted an interference request to the USPTO and have also taken appropriate steps to avoid similar issues in other countries.

The first part of the interference process is for our patent examiner to determine that we have an allowable claim. This is simply standard patent prosecution process and we are in that stage now. If the claims are deemed allowable, it will then be forwarded on to the interference board. We expect the interference to be granted, and for BioCryst to be designated the senior party.

We remain confident, as is demonstrated by our outlook for increased investment in 5191 development, that this process will resolve in our favor. We will continue to provide appropriate updates as they become available.

With that, I will now turn it over to our CFO, Tom Staab, who will discuss our second quarter financial results.

Thank you, Jon, and good morning, everyone. I'm pleased to share with you some details regarding our strong second quarter 2012 financial results, including some financial and operational achievements discussed in today's press release.

I'd like to specifically highlight some progress and achievements made thus far in 2012 as they relate to financial goals we had previously established for the Company.

First, we have delivered substantial reductions in general and administrative expenses, with these reductions exceeding 50% in both the second quarter and six-month period ended June 30, 2012, as compared to the same periods in 2011. These savings illustrate our commitment to one of our key operating principles -- focusing our cash resources on advancing our development programs while minimizing noncritical and non-project spending.

In addition, we have successfully maintained a solid balance sheet. We closed the second quarter with over $53 million in cash and investments, a balance representing a decrease of $4.2 million from December 31, 2011.

Our ability to maintain sufficient operating capital while advancing our four development programs is a function of one, tight expense management and substantially allocating resources to development programs. Two, closely managing our working capital requirements by focusing on contractual terms and accounts payable and accounts receivable balance. And three, prudently raising capital with our ATM facility when favorable market and stock conditions exist.

For example, we have successfully reduced our receivables balance by over $20 million from the first regulation of 2011 and have raised roughly half of our second quarter operating cash burn through the ATM at a price point 4% above the VWAP for the quarter.

Now I'd like to discuss our second quarter financial results for 2012 in detail, which are summarized on slide 4. Revenues for the second quarter of 2012 were $4.2 million compared to $3.7 million in the second quarter of 2011. This increase relates to higher 2012 reimbursement of peramivir expenses from BARDA HHS associated with the continued development and ongoing 301 clinical trial.

Second quarter 2012 R&D expenses were $12.8 million, down from $14.4 million in last year's quarter. Our R&D program expense mix has changed as lower development costs associated with the ulodesine program were partially offset by higher development costs associated with the BCX5191 and BCX4161 pre-clinical programs as we prepare to advance these programs into the clinic by the end of the year. As we transition ulodesine development to a partner and advance our pre-clinical programs into the clinic, we expect this R&D mix trend to continue.

Second quarter 2012 general administrative expenses were $1.6 million and reflect a greater than 50% reduction to the $3.5 million of expense incurred in the second quarter of 2011, as discussed previously.

Moving below the operating line we incurred $1.2 million of non-cash interest expense in 2012, in line with the expense incurred in 2011. Both periods also included a mark-to-market loss of $1 million. The interest expense and hedge loss for both periods relate to our non-recourse debt and our hedge arrangement enacted in conjunction with the peramivir Japanese royalty monetization completed in the first quarter of 2011.

Our six-month financial results for 2012 and 2011 are summarized on slide 5. Revenue for the six months ending June 30, 2012, increased to $16.4 million compared to $9.2 million in the same period of 2011. The increase was primarily due to the recognition of approximately $7 million of previously deferred forodesine-related revenue during the first quarter 2012, resulting from the restructuring of the license agreement between BioCryst and Mundipharma, while revenue from reimbursement on peramivir development was virtually the same in both six-month periods.

Six-month 2012 R&D expenses were $28.3 million, up slightly from $27.9 million in the first six months of 2011. Expenses for 2012 included the recognition of $1.2 million of previously deferred expenses associated with the Mundipharma agreement, and higher development costs in the first half of 2012, associated with the BCX5191 and BCX4161 pre-clinical programs, all of which were virtually offset by lower ulodesine development costs.

General and administrative costs through June 30, 2012 decreased sharply to $3.3 million from $7 million in the six-month period of 2011. The large decrease resulted from a significant reduction of noncritical consulting and other administrative expenses, as well as expenses incurred in the 2011 relocation of our corporate headquarters to Research Triangle Park, North Carolina, that did not reoccur in 2012.

In the first half of 2012 we incurred $2.3 million of interest expense compared to $1.5 million in 2011. The difference resulted from six months of interest in 2012 versus approximately 4.5 months of interest in 2011. The first half of 2012 also included a mark-to-market loss of $1 million compared to $2.3 million for the same period of 2011, reflecting changes in the US dollar-Japanese yen exchange rate.

Now moving to slide 6, I'd like to discuss our cash usage and our 2012 financial outlook. At June 30, 2012, we had cash and investments of $53.5 million compared to $57.7 million at the end of 2011. Our operating cash usage for the second quarter and six months ended June 30, 2012, was $8.1 million and $20.1 million, respectively.

As a reminder, operating cash use excludes any impact of royalty monetization, hedge collateral posted or returned, sale of stock in the marketplace and any other non-routine cash inflows, including any proceeds from out-licensing.

We will continue to be vigilant and adhere to our guiding principle of directing maximum resources to our development programs and controlling non-project spend in 2012. As mentioned previously, we have succeeded in minimizing our total cash burn in the first half of 2012 to less than $5 million and have successfully kept our working capital balance at approximately $26 million.

In regards to our outlook for 2012, we are increasing our operating cash utilization guidance by $5 million. This change is primarily the result of an anticipated increase in our R&D expenses associated with the decision to fund Phase I development of our hepatitis C drug, BCX5191, in conjunction with lower-than-anticipated revenue and cash contribution associated with our parameter development activities and a mild 2011/2012 Northern hemisphere flu season.

Based upon current trends, assumptions and our revised operating plan, we now expect 2012 net operating cash use to be in the range of $37 million to $43 million, which reflects a $5 million increase to both ends of the previously disclosed range. We, however, are reiterating our 2012 operating expense guidance of $57 million to $69 million originally provided in February as we continue to expect this range to be appropriate.

As a reminder, our outlook excludes any consideration of cash inflows derived from out-licensing ulodesine and is also heavily dependent on peramivir-related operating expenses.

That concludes my financial review and I'd like to turn the call back over to Dr. Bill Sheridan. Bill.

Thanks, Tom. Today I will summarize recent progress and insights related to our BCX5191 hepatitis C and BCX4161 hereditary angioedema programs as well as the recently announced ulodesine Phase II results and the steps we are taking for that program to be Phase III-ready.

In the last three months we've made substantial progress on our hepatitis C viral RNA polymerase inhibitor, BCX5191. In the last call we described some of the nonclinical PK profiles of BCX5191. These data show that the drug is very well absorbed, is easily measured in the plasma and liver, and rapidly and efficiently converted to the active triphosphate form in the liver. This is important because the drug triphosphate is the form of the drug that works against the virus.

Since then we completed the nonclinical safety program and developed a human PK model and remain on track to file an IND later this year. The human PK model for once-daily oral dosing of BCX5191, was developed using the PK data from several nonclinical studies. The overall purpose of this modeling and simulation is to understand a likely dosage range that may be effective in patients with hepatitis C virus infection.

Slide 7 describes the main features of this work. The methods are standard and use multi-compartment PK modeling with scaling factors to predict PK parameters in a human population from the animal data. The figure in the top right of the slide illustrates representative output from the model -- in this case, a simulation of the drug levels in plasma and liver and the active drug triphosphate levels in liver after oral dosing of 10 mg once daily.

Also shown in a dotted line is the EC50 level for antiviral effect, a relevant target concentration for a nucleoside NS5B inhibitor. With this type of model it is also possible to simulate variation, as indicated by the 90% confidence limits for the liver drug triphosphate levels depicted in the lower right-hand figure.

Adverse effects of nucleoside and nucleotide therapeutics are often observed as the dose is increased, and safety of dosing at levels that are effective against the target virus is the key success factor for this type of drug. Now, PK simulations predict that low oral doses of BCX5191 should show antiviral activity and also maintain adequate PK throughout the 24-hour period between doses in most patients.

Nonclinical safety testing results indicate that low oral doses are likely to be in a safe dose range. We look forward to evaluating actual PK safety and virologic effects in the Phase I program for BCX5191.

Also, a recently completed in-vitro study of the combination of BCX5191 and ribavirin showed similar activity compared to the combination of GS7977 and ribavirin against the hepatitis C virus. BioCryst plans to submit this and other 5191 pre-clinical results for presentation at an upcoming medical meeting.

Turning to our hereditary angioedema program, our lead candidate, BCX4161, a plasma kallikrein inhibitor, also completed nonclinical safety evaluations recently and this project is on target for filing an IND later this year.

In the last call we described the results of studies of kallikrein inhibition using a staphylococcus aureus-stimulated bradykinin release assay. This assay format is not ideal, so we worked on a simpler assay to bring forward into the clinic.

I am pleased to say that our research scientists have now completed development of a specific fluorometric assay for kallikrein inhibition. Representative studies of the effectiveness of BCX5191 in inhibiting enzyme activity of kallikrein in human and rat plasma are shown in the figure on slide 8.

The EC50 for BCX4161 in this assay is about six nanomoles in human plasma and 30 nanomoles in rat plasma, confirming that low concentrations of the compound are effective on the enzyme in their relevant compartment -- namely, the plasma. We can use this assay to follow the pharmacodynamic effects of BCX4161 as illustrated on slide 9.

The left-hand panel is a reminder of the exposures observed in rodents after oral dosing, which we have discussed previously. The right-hand panel shows the inhibition of kallikrein in a separate rodent experiment after oral dosing of 100 mg per kilogram. The inhibition was seen through 24 hours post-dosing and this result represents an important pre-clinical proof of concept for an oral plasma kallikrein inhibitor.

We will be able to use this assay in the Phase I trial to help identify potential therapeutic dose levels for pivotal trials. The main goals of the Phase I program will be to demonstrate adequate drug exposure via oral administration, safety and activity on the target. We look forward to evaluating the actual exposures, safety and PD effects of 4161 in the Phase I program.

Now moving on to ulodesine. As noted in our press release and summarized on slide 10, the extension of our large Phase IIb trial through 52 weeks has confirmed the longer-term safety and tolerability of ulodesine and the durability of its effect on serum uric acid in gout patients who had inadequate responses to allopurinol alone. Efficacy results over 52 weeks shown on slide 11 confirmed that ulodesine added on to allopurinol more than doubled the likelihood of reaching therapeutic goal compared to allopurinol alone.

After 52 weeks of treatment, ulodesine doses of 5 mg, 10 mg and 20 mg per day showed response rates of 45%, 47%, and 64%, respectively, compared to 19% for a placebo added on to allopurinol. The durability of ulodesine's efficacy was confirmed at 24 weeks and 52 weeks.

Slide 12 shows that adverse event rates remained balanced among the proposed Phase III dosages of 5 mg, 10 mg and 20 mg per day over the 52-week study period compared to placebo. No clinical adverse event signals were observed that distinguish ulodesine from placebo either by type or by rate at the doses tested.

Analysis of infections, summarized on slides 13 and 14, confirmed that the rate and pattern of infections were similar in the ulodesine and placebo groups. No opportunistic or unusual infections were observed.

In the Phase IIb trial we had stopping rules related to CD4 cells and absolute lymphocyte count, or ALC. The number of withdrawals was very low in patients treated with the Phase III doses, as shown on slide 15. No dropouts of 5 mg, one for 10 mg and four patients at 20 mg.

In Phase III, monitoring will be based on ALC because the effect of the drug is not specific to a certain subset such as CD4. The ALC is a routine screen that simplifies the Phase III program. The lower chart displays the ALC changes from baseline and illustrates that the effect on lymphocytes plateaus after 12 weeks.

We have also completed a small trial in 20 gout patients with moderate renal impairment with satisfactory safety findings, and these data, together with the safety findings from 96 other patients with renal impairment, included in our completed Phase IIb trial, supports the inclusion of gout patients with mild or moderate renal impairment in the Phase III program. This is important because many patients with gout have impaired kidney function.

We're now focused on completing activities necessary to allow timely implementation of the Phase III studies. These include consultation with CROs, the production of study drug, and completion of the scientific advisor process with the European Medicines Agency.

Turning to peramivir, influenza activity following the last Northern Hemisphere season has continued to be light, with recent evidence of increased prevalence in some countries. Enrollment in the Phase III efficacy trial is continuing. We anticipate that a planned interim analysis will be completed towards the end of 2012. This analysis has the purpose of re-estimating the sample size required for the primary efficacy analysis of the study.

Finally, consistent with prudent R&D practices, we are continuing to make progress on several improved next-generation hepatitis C and hereditary angioedema compounds discovered by BioCryst scientists. In addition, we are evaluating other novel, small molecules for new indications.

All of our programs shown on slide 16 are advancing according to plan and we look forward to updating you as we make further progress in our development programs.

Now I'm happy to hand the call back over to Jon.

Thanks, Bill. So let's wrap up by reviewing the milestones for the remainder of the year, seen on slide 17. First, the filing of the INDs for BCX4161, BCX5191, and then advancing them into the clinic. Peramivir interim analysis in the fourth quarter and conclusion of the ulodesine regulatory and partnering discussions by year-end.

We'll continue to execute against our plan and we will carefully manage our financial resources.

So that concludes our prepared remarks, and we will now open the call to your questions.

Thank you, sir.

(Operator instructions).

Our first question comes from Charles Duncan of JMP Securities. Your line is open.

Hi, guys. Thanks for taking the question and congratulations on the recent 52-week data on ulodesine.

I wanted to start with the partnering discussions. Jon, you alluded to them towards the end of your remarks. I guess I'm kind of wondering if you anticipate additional clinical data yet this year from that program and, you know, how do you see that process rolling out?

Per our diligence, we believe that the end of Phase II meetings, at least with the FDA, that you've had, and the Phase IIb data that was seen in another program that was eventually acquired was important for that. So how are things going there with those partnering discussions?

So in terms of data, the Phase II program is complete and so there won't be any more data. And as we said before, we've completed our end of Phase II meetings with FDA. We've got the EMEA scheduled soon, and I guess the bottom line is pretty much we have the package that we need to finish the partnering process. So as I said before, with the acquisition of Ardea by AstraZeneca interest level picked up, and now that we've got the Phase IIb data, and have completed, the FDA discussion, the process is very active, and we're on track to complete it by year-end.

Okay. When do you anticipate being able to publish or present those Phase II -- the full Phase II results, and then also I'm wondering if you could go back, and something Bill said was intriguing with regard to mild to moderate kidney impairment. Can you estimate the market potential, at least from a percent of the incidence rate that is represented by those patients with mild to moderate kidney impairment?

So I think most of the action there, Charles, is in mild, and moderate is quite unusual in the gout population, and recruiting studies specifically in moderate renal impairment is very slow, but I think your point is correct, is that quite a big fraction of gout patients, because of hypertension and diabetes and also because of their gout, develop a mild degree of kidney impairment.

That's important, because many drugs are cleared by the kidneys, and I think we've worked out a very safe dosing regimen in that patient population. So we're very happy to include them in Phase III.

And the data?

With regard to publishing the data, I think our focus right now is on supporting the partnering. We will certainly write up the data and publish it in full, but right now we don't have plans for a presentation.

Then if I could ask one additional question with regard to the HCV or 5191 program, I like that you're moving into Phase I. It seems like a key value inflection point could come with the completion of that study.

What do you think about the modeling that you discussed and its predictive value for clinical benefit there? And secondarily, I believe there is some news out of BMS in the HCV space, and I'm wondering if there are any implications in terms of your thoughts on the commercial opportunity and/or development strategy.

Okay, so let me take the modeling piece. I'm very pleased that we've been able to conduct really pretty extensive PK studies in nonclinical species and develop this model, and we have a handle now on what the liver triphosphate levels of the drug are likely to be on the basis of all of that information.

So it's very useful to be able to measure the drug levels in the plasma and be pretty confident about what sort of levels of the triphosphate we're getting in the target organ. So that's been a difficulty with the nucleotide pro-drug compounds, because they disappear so fast from the blood. So I think having that model is a definite advantage in proceeding into the clinic.

And then Charles, with regard to the news from BMS last night, I think the main message is it's not over till it's over. This is a gargantuan space. For those people that were out there saying Gilead and BMS have it tied up and why are you bothering, it's not over till it's over.

It's a big market and that's why we're moving as quickly as possible to get into the clinic, because we think we have a very attractive asset. We think there's a place to play in this big, big market.

With regard to the component of the question on does it change our clinical strategy, no. We want to be very careful in introducing new drugs into the clinic and we want to learn from everything that's already known about the development of direct-acting antivirals in hepatitis C. So we'll be fast followers, but we will maintain top-quality safety.

Thanks for the added color. I'll hop back in the queue.

Thanks, Charles.

Thank you. Our next question comes from Ed Arce of MLV & Company. Your line is open.

Oh, thank you for taking my questions. I was just wondering as you now -- first of all, congratulations on completing the toxicology and overall safety on the pre-clinical assets. I was just wondering, as you look to start enrollment on Phase I in the clinic with both of these assets, 4161 and 5191, when could we expect to get results from these trials?

So the average Phase I program has two different components. There's individual doses, that's called a single ascending dose, and then there are doses over several days, called a multiple ascending dose. Typically, an average program will take between 6 months and 9 months after you start. Then sometimes it goes slightly faster, but I think that's a decent range.

In my prepared remarks I said we're expecting data in the first half of next year. The gas pedal's to the floor, but we're not going to compromise quality by trying to go fast, so it's important that we do these studies properly.

I think the other thing, Ed, is typically, Phase I data isn't super-important in a program. I think in these two programs it's incredibly important because of the fact that you'll be able to test viral load reductions in the hepatitis C with 5191 and with this assay we'll get a really good idea -- as Bill said, it's like proof of concept to be able to identify the impact on the target. So these are unusual events, I think, in your typical Phase I data.

Right. Could you go over again how it was that you worked through the bioavailability hurdle that you had seen earlier with 4161?

So when you talk to the formulation experts, the art form here is really an art form, and you can't -- you just have to step through the work and test different formulations and use the accumulated knowledge in the field to make the right choices. So we put a lot of effort into developing a formulation that would improve solubility and permeability of the drug, with the goal of increasing the absorption.

We got to a point that we were happy with the results and invested in the pre-clinical program, and we're happy with the results of the pre-clinical program, and now we're going to invest in the Phase I.

So it still remains an issue, of course, because in general, drugs that have lower bioavailability, until you've got them in humans, you don't know what you're going to get. So the keys for us in the Phase I are the drug levels for safety and the PD effect on the target, and we'll know that soon.

Okay. Thank you very much.

Thank you. Our next question comes from Steve Byrne of Bank of America. Your question, please.

A couple questions on the 5191 design. Can you just provide specifics on how many doses you want to take into that, days of treatment, target genotype, anything along those lines?

I think you can take guidance from what others have done. As I said before, we'll be fast followers. The days of treatment for drugs in this class are often up to 7 days. The FDA guidance in general is 3 days in hepatitis C subjects, but because there's a very high barrier to resistance with the NSB active site inhibitors, typically that can be longer. But I think that you can take guidance from what other people have done.

In terms of the number of cohorts and the drug dosage, I'm not going to get into details. During the Phase I you often make adjustments on the basis of what you see in the exposure anyway, so it's done -- these studies are very actively managed and you look at the data in real time.

Jumping over to the ulodesine Phase III design, the stopping rules for lymphocyte will only include total count, not CD4, that's correct?

That's correct.

So the same stopping rule for the total that you had during Phase II?

CD4 counts about half of the total, so it's a different number but it represents the same physiological parameter.

Okay, but if you applied the total -- if you only used the total of lymphocyte count as a stopping rule, would you have had any patients discontinue in Phase II?

So the goal here is to maintain the same safety standard moving from Phase II to Phase III. I think there are two things to emphasize.

One is that this is simpler, so that's good; the second is that we have two strategies in the Phase III, and one strategy is a typical randomized cohort design. You have to have that. The second strategy is quite important, which is a dose escalation study, because that's the way the label for urate-lowering therapy are written.

In that circumstance, people will only get -- gout patients will only get the 10 mg dose if they've already declared that they can tolerate the 5 mg dose. So from the safety perspective I think that that reduces even further the chance of dropouts.

Ultimately, the results of the Phase III are what counts, and that's what's going to determine what'll be on the label.

Yes, and I think if you go back to what we said all along, we tried to design this study in a way that would get as close to the design of the Phase III as possible to reduce risk. The more changes you make from Phase II to Phase III, the bigger chance you have of getting a different answer.

So length of treatment, 52 weeks, that's what it's going to be for a decent size of the population in the Phase III, end point's the same. Now we've got agreement that we can use a simpler test to be able to track the effect on lymphocytes.

So this is really important and I think gives us a high degree of confidence that the risk going from II to III is lower than average.

Then just lastly, what's your confidence level that the interim analysis for the peramivir Phase III program will indicate that your target patient number will be adequate?

So I think that's hard to answer. This is a cutting-edge study, the first-ever randomized controlled study done in the field of hospitalized influenza patients. That's really the reason for having interim analysis there. If this was a hypertension study we probably wouldn't be doing it.

I think the goal here was to remove risk, right? So a horrible outcome would have been that if we were off by, I don't know, pick a number -- 40 patients -- and we missed hitting a P value that could get the drug approved, because we were off slightly on our assumptions.

So the whole purpose of this is to take a look to see if our assumptions were adequate to get us to the trend that will get us to a positive P value, or do we need to adjust? The penalty for it was really low, and so we thought it was a good move, a safe move in terms of risk to benefit, and that's why we're doing it.

All right, thank you.

You're welcome.

(Operator instructions).

Our next question comes from Rahul Jasuja of Noble Financial Capital. Your line is open.

Hey, good morning, guys.

Morning.

Morning.

Morning, guys. Just a couple of questions here. I want to follow up on the gout partnering that was initially asked. So one of the questions I had, Jon, was that as you discussed with partners, the obvious discussions are obviously regarding the data, but are there any discussions that relate to the long-term use of these serum uric acid lowering agents? Given the fact that the literature is increasingly discussing the utility of serum uric acid as a potential risk factor or indicator of other comorbidities -- cardiovascular disease and metabolic syndrome and diabetes, et cetera?

Yes, that's an interesting question, because you're right -- the growing body of evidence that uric acid plays a role in something bigger than just a pain in the big toe is, the data's growing. I think it's becoming a more prominent part of our discussions with potential partners, because our mechanism is unique from everybody else's.

It's not like PNP inhibitors have been used in the marketplace for decades. This is a unique mechanism of action and we think there's some potential differentiators beyond kidney stones and drug-drug interactions that in the right hands of a sophisticated partner could really be big if we can link it to the effects of metabolic syndrome and cardiovascular disease and maybe even inflammation.

So these are tougher things to prove, no doubt about it, but I think the mechanism of action is a real advantage here, and something that has been a part of the conversations with potential partners.

Great. I've asked this question before, but I'm going to ask it anyway again. You're preparing for this to be a Phase III-ready asset. It is a Phase III-ready asset, but you're going on with the other preparations so that the partner can take it over in a streamlined manner. But have you considered any thoughts about sort of developing it yourself or co-development, or is that still -- or it was never on the table but it is still not on the table?

Yes, I think that's a tough one. So the goal remains that we want to put it in the hands of another partner for a couple of reasons. One, we think the proper investment in this molecule requires some resource and capability that we just don't have.

So we could do the Phase III program with the capability that we have, but we'd like somebody that's really excited about this asset to invest even further, and so we want to see that.

I think the other piece is that we've got other assets, and limited capital. So something like 4161 and 5191 actually fit into what we can do. A big primary care drug is something that's more challenging for a biotech company, so while I'd love to do all of it, we have to make choices and set priorities, and the priority right now is to get this in the hands of a partner.

Okay. Then the other question that I have is regarding the NS5B and a better 5191. So obviously, the BMS news changes things a little bit for the next set of nucs potentially on the market.

Bill, you had spoken about a pro-drug, a nucleotide that needs to be a pro-drug, sort of a covalent linkage that needs to blunt the charge, versus a nucleoside, which is what BioCryst's drug is.

Can you sort of comment on that, if that has any ramifications as to the dosing or potential tox issues down the road? Add some color for me, if you can, on that issue.

Okay. So I think that the news from BMS just is a reminder that investigational drugs are investigational for a reason, and you have to step through the Phase I and Phase II and Phase II programs to build the safety data and understand the drug.

I think 5191, as you said, is a nucleoside, it's not charged, it does not have a pro-drug modality, and that's the reason that we can measure it in the plasma and develop the model that we discussed today.

I think that all of these drugs work ultimately by getting taken into the liver cells and converted into the triphosphate, and for the pro-drugs, what that means is they have to get metabolized and the pro-drug modality cleaved off before the drug will work.

I think that both approaches can work, and we've clearly got very encouraging clinical data that's already being generated with other compounds. This is a very attractive class of compounds in general. So I think it's probably impossible to speculate on which part of the molecule might be a safety issue. I think that our job is to get our job into the clinic and test in safety in PK and PD.

Okay. You guys showed data comparing it with G799 pre-clinical data. Was there data done that compared 5191 with Inhibitex drugs, previously 189R or Idnetix's nuc?

No. I think that the 7977 compound is the most advanced, and you'll notice therefore the clinical data is the most interpretable. Just as a reminder, that study was done by working back from the clinical dose and then giving a 10 mg per kilogram dose in rodents of our drug and their drug and looking at the PK of the triphosphate in the liver.

So the results of that experiment to us were very encouraging, that we could easily make lots of triphosphate with our drug, even that we know that the 7977 compound is clinically very active.

So with that plus the modeling, I think that we have a -- we can be as confident as you can be at pre-clinical stage about being able to get virologically active exposures in people.

Great, thanks.

Thank you. At this time I'd like to turn the call back over to Mr. Stonehouse for any closing remarks.

Thank you. So I hope you get a sense from this call that we're really excited about our future, maybe never more excited than we have been since we've been with the Company, because of the things that we're doing and the things that we see ahead.

We've got a great plan in place and we're investing very carefully in what we believe is an attractive set of assets. We're executing extremely well. This is a well-oiled machine and we're managing capital very carefully, as Tom noted with some of the reductions in expenses on non-core, non-program expenses.

The bottom line is this is a very different company, period. If you don't believe it, keep watching us continue to execute and keep watching us advance our programs, because we think we're approaching some really important milestones in the Company's history and we've got attractive assets to get us there.

So as always, thank you for your interest in our Company, and have a great day.

Thank you, sir, and thank you, ladies and gentlemen, for your participation. That does conclude your program. You may disconnect your lines at this time.