BioCryst Pharmaceuticals Inc (BCRX) 2013 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the BioCryst fourth quarter 2013 conference call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will follow at that time. (Operator Instructions). As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference Robert Bennett, Vice President of Investor Relations and Operations. You may begin.

Good morning, and welcome to BioCryst's fourth quarter and 2013 corporate update and financial results conference call. Today's press release and accompanying slides for this call are available on our website, at www.biocryst.com. At this time all participants are in a listen-only mode. Later we will open up the questions, and instructions for queuing 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 will 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 results, performance, or achievements, to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on the forward-looking statements. For additional information including important risk factors, please refer to BioCryst documents filed with the SEC which can be found on our Company website. With that, I'll turn the call over to Jon.

Thank you Rob. Good morning, and thanks to everyone for joining us today. Throughout 2013, our team successfully executed a strategy to advance our core assets, while managing our operations with financial discipline. We ended 2013 with a series of positive events that represent real advancement in each of our core programs. Initiation of enrollment in the BCX4161 Phase 2a trial, selection of two optimized second generation kallikrein inhibitors with superior PK properties, the filing of our first NDA, as well as the release of additional NIAID funding for further BCX4430 development.

We begin this year building on a solid foundation with momentum to make even bigger strides with our programs. Our ultimate goal in HAE is to become a market leader in the prevention of attacks. By bringing to market a drug that can be given as one pill, once a day, to prevent all HAE attacks. 4161 does not have the profile to achieve this goal, but it could be a huge improvement over currently marketed therapies. We plan to follow 4161 with an improved second generation kallikrein inhibitor, that we believe has the potential to prevent all HAE attacks. Since our third quarter call, we have advanced enrollment in the 4161 proof of concept OPuS-1 clinical trial to the point where we are confident that we will report top line results by the end of the second quarter. The main goal of this pilot study is to understand the correlation between 4161 drug exposure in HAE patients and the reduction in attack frequency. Anything beyond even a modest impact on attacks increases the attractiveness of 4161 as an HAE therapy.

In December, we advanced two optimized plasma kallikrein inhibitors into preclinical development. Compared to 4161, these two compounds have similar potency and greatly improved selectivity and oral bioavailability. The oral absorption of both second-generation compounds surpasses 25%. In plasma concentrations of each optimized compound exceeded the target EC-80 concentration, at 24 hours after a single oral dose. To increase our likelihood of success, we plan to move both compounds forward into preclinical toxicology studies, with the goal of moving at least one into Phase I by the end of the first half of 2015.

Yesterday we announced that the FDA accepted for review our new drug payment for peramivir. The NDA was assigned a standard review time resulting in a PDUFA action date of December 23rd, 2014. The FDA also communicated that it does not currently plan to hold an advisory committee review of the NDA. If approved this would be the first BioCryst discovered drug commercialized in the US. We are preparing to make peramivir available in the US during the 2014/2015 flu season. Any revenue generated from peramivir sales through stockpiling or seasonal demand will help fund our HAE program.

We continue to move our broad spectrum antiviral BCX4430 through preclinical development under the NIAID contract that was awarded last September. The goals under this contract are to advance both the intravenous and the intramuscular formulations of 4430 through Phase I. While this is an early program, it's important to remember that we plan to pursue FDA approval via the animal rule, this has the potential to shorten the overall development time line, and if we're successful could result in 4430 sales through government stockpiling around the time we expect to launch our first oral kallikrein inhibitor.

Finally the next important milestone for the program is the publication of a scientific manuscript detailing additional research on the antiviral activity of 4430 against filovirus disease. Following the completion of our second generation oral kallikrein inhibitory discovery program, our team in Birmingham has the capacity to begin work on a new discovery effort. We have agreed with our Board to follow a strategy of discovering small molecules for rare diseases, and have chosen our initial targets. It will be some time before our discovery projects result in clinical programs. These projects are important for the long-term future of the Company. They serve to refill our pipeline as our current programs progress through development and commercialization.

I'll now turn it over to our CFO, Tom Staab, who will give an update on our financial results.

Thank you Jon, and good morning everyone. Today I will summarize our fourth quarter and full year 2013 financial results, and I will also share our 2014 guidance. At the end of 2012, we established a guiding principle for our operations and have followed this principle throughout 2013. This principle is to focus our cash resources on our core programs to advance them to value-creating milestones, and to eliminate non-critical spending. We will continue to follow this principle throughout 2014.

As John mentioned in his remarks, we were able to make substantial advancement in each of our programs, yet we were able to significantly decrease our operating cash usage. We take great pride in having been able to aggressively advance our programs to important value-creating milestones, yet also having been able to maintain the financial discipline to remain in the low end of our 2013 operating expense and operating cash guidance ranges.

We are pleased to have ended 2013 with over $40 million in cash and investments, which represents an increase from our cash balance of December 31, 2012. On slide seven, you will note that revenue for the fourth quarter of 2013 increased 158%, to $10.6 million, as compared to $4.1 million in 2012. This change was due to an increase in collaboration revenue from BARDA/HHS associated with activities supporting the peramivir NDA filing. With the filing of the NDA, we have completed substantially all of the development activities contemplated under the BARDA/HHS contract. Accordingly, we expect future revenue under this contract to be much lower than in 2013. Furthermore, at the aggregate revenue level we expect our total 2014 revenue to decrease from the level in 2013.

Fourth quarter 2013 R&D expenses were $15.6 million, up 41% from $11.1 million in the fourth quarter of 2012. This increase was primarily associated with higher development costs associated with the peramivir NDA filing, and the progression of our HAE program. But was partially offset by lower development costs associated with the ulodesine and BCX5191 programs. Similar to the revenue discussion, the fourth quarter represented a high level of peramivir R&D activity, leading up to the December filing of our NDA. This activity increased fourth quarter 2013 R&D spend and also increased the corresponding revenue we received under our BARDA/HHS contract.

Fourth quarter 2014 G&A costs were $1.3 million, a decrease of 34%, from the $1.9 million incurred in the fourth quarter of 2012. This decrease is primarily due to a focus on reducing non-project-related costs and the continued realization of cost containment measures including those associated with the Company's 2012 corporate restructuring.

Moving below the operating line, we incurred $1.2 million of interest expense in the fourth quarter of both 2013 and 2012. We recorded a mark-to-market head gauge of approximately $2.1 million in the fourth quarter of 2013, as compared to a gain of $782,000 in the fourth quarter of 2012. Both amounts related to the fluctuation in exchange rate for the Japanese Yen and US dollar. Interest expense in the hedge mark-to-market adjustment relate to our non-recourse notes and hedge arrangement enacted in conjunction with our RAPIACTA royalty monetization.

Turning now to the bottom line, please note we successfully decreased our net loss by 51% to $5.4 million, or $0.09 per share in the fourth quarter 2013, as compared to an $11.1 million loss, or $0.22 per share incurred in the fourth quarter of 2012.

Our full year financial results, are summarized on slide eight. Revenue for the 12 months ended December 31, 2013, decreased to $17.3 million, as compared to $26.3 million in 2012. The decrease was due primarily to $7.8 million of previously deferred forodesine related revenue recognized in the first quarter of 2012. This revenue resulted from the restructuring of our license agreement with Mundipharma.

2013 R&D expenses were $42.7 million, down 17% from $51.5 million in 2012. The decrease from 2012 levels resulted from lower development costs associated with the termination of our BCX5191 program in early 2013, lower spending on our ulodesine program, as we suspended development of that drug candidate, as well as a reduction of R&D infrastructure as compared to 2012. This decrease was partially offset by higher BCX4161 and BCX4430 development costs incurred in 2013. R&D expenses in 2013 also included a one-time $5 million non-cash write-off of a deferred collaboration cost asset associated with our ulodesine program and our PNP licensing agreement. Furthermore, 2012 also included the recognition of $1.9 million of previously deferred forodesine expenses associated with the restructuring of the Mundipharma agreement.

2013 General & Administrative costs decreased 24% to $5.2 million from $6.8 million in 2012. Once again, this decrease resulted from the focus on our guiding principle and the related cost containment measures and corporate restructure mentioned previously. Dropping below the operating line, we incurred $4.8 million of interest expense in 2013, and $4.7 million in 2012, and recorded a mark-to-market hedge gain of $5.3 million in 2013, as compared to a loss of $749,000 in 2012. In regards to the bottom line we were pleased that we successfully decreased our 2013 net loss by 23% to $30.1 million, or $0.55 per share as compared to a $39.1 million loss, or $0.79 per share incurred in fiscal 2012.

On slide nine, we have summarized our actual performance against our 2013 financial guidance, and also have provided our 2014 outlook. At December 31, 2013, we had cash and investments of $40.8 million, which reflect the successful public offering we completed in August that netted us $18.5 million. For 2013, our operating cash usage of $22.8 million was at the low end of our $22 million to $26 million guidance range, and represented a 38% reduction from fiscal 2012. 2013 operating expense of $48 million was also at the low end of our 2013 guidance range of $45 million to $55 million.

Looking ahead to 2014, we anticipate operating cash utilization to be in the range of $35 million to $43 million, and operating expenses to be between $48 million and $59 million. Drilling down into some detail, we expect to see an increase in R&D expenses, and this increase to correspond to higher operating expenses. The increase in R&D expenses is associated with a greater level of R&D activity in our HAE portfolio as compared to 2013, and results from the expectation of later stage and more expensive development of BCX4161, and more substantial preclinical development on our two second generation molecules in order to facilitate IND filings in the first half of 2015. The more extensive activity in our HAE portfolio is partially offset by the expected reduction in peramivir R&D activity in 2014.

Additionally, as noted in our press release we have specifically excluded equity based compensation expense from our operating expense guidance due to the difficulty in accurately projecting this expense. The change in our stock price over the last 12 months, expected future volatility, as well as the potential vesting of our performance based stock options, make this noncash expense difficult to predict. In closing, we are very pleased with the financial discipline and operational accomplishments we achieved in 2013, and look forward to continuing our success in 2014.

Thanks Tom. We started this year in a much stronger position compared to last year, and I believe it's in large part due to the great team of people and high quality assets we have at BioCryst. Over the next 18 months we have the opportunity to take the Company to an even better place, with the potential to be in a late stage development program with 4161, in clinical trials with our second generation HAE molecules, in the clinic with our broad spectrum antiviral program, commercializing peramivir, and discovering and optimizing new small molecule oral drug candidates for rare disease targets. We will remain disciplined and focused on the programs at hand, and I think over time you will begin to see how BioCryst can develop into a leading rare disease small molecule company.

That concludes our prepared remarks, and we'll now open it up to your questions.

(Operator Instructions). Our first question comes from the line of Charles Duncan of Piper Jaffray. Your line is now open.

Thank you, and congratulations on a good year of progress.

Thanks, Charles.

So Jon, I had a question, and maybe Bill can wax philosophical about this, but with regard to 4161 and more broadly the program for the first Phase II data coming up, I'm wondering if you could provide a little bit more color on your prepared remarks regarding a clinical affect that you would like to see?Is this all about the exposure and attack frequency, or is it some quantitative reduction in attacks that you're looking for? If it's the latter what would you see as being necessary?

Hi Charles, thanks for the question. So at this stage of development, what we currently have in hand is seven days of exposure in normal subjects, we learned a lot from that Phase I study, a very good relationship between exposure and the invitro inhibition of kallikrein that we saw and have discussed in previous calls. So the current study needs to build on that foundation. And the first thing that I would like to see is a relationship between exposure and outcome in reduction in attack frequency. So even if we see that small substantive patients who assimilate the drug, well that counts as a success for the program and establishes the scientific foundation for not just 4161, but also for the second gen compounds. When we move onto, then ask the question how much of a reduction in attack frequency do we need to see to support further development of 4161, I think that we will have to evaluate the data.

Obviously the more the better, but for example if it turns out that patients with hereditary angioedema absorb the drug less well than normal subjects, but a fraction absorb it very well and do very well with the reduction in attacks, then that could still be a great drug. One could imagine doing a trial of therapy with a marketed drug and those who do well stay on it. And that would be a great advantage with the normal compound of this disease. So at increased levels of effect, the [LEV] study with [Synrise] showed a 50% reduction in attack frequency. If we see something similar with this drug that would be astoundingly good, to see that with an oral agent, and obviously better than that, that would be fabulous. I think that's the way we're thinking about it. The other important element not to forget is that this is a four week study in HAE patients and gives us very valuable information on safety and tolerability that will set us up for the next study.

Let me ask a follow-on with regard to since you brought up that other comparison study, or study to do a comparison with, it seems like there are always some hazards in comparing a cross study. When you look at the types of patients that you're enrolling in the current Phase II, I believe you're looking at a minimum of four per month attacks, where as others have looked at an average of four per month or so. Are there potential compounding variables with regard to, call it the severity of disease or attack frequency, and ability to draw conclusions or comparisons?

Yes, I think you're bringing up a truism in clinical research, which is it's always difficult to do cross study comparisons because the studies are done at different times, and different locations, background therapies could be different, and they could be factors you don't understand. So the internal validity is fine, because we are randomizing the sequence, and each patient entered on the study gets both active drug and placebo in four week blocks. The internal validity is fine. I think that we'll have to see what the demographics looks like at and what the attack frequency actually is on the study. You are correct in the way you described eligibility criteria. It could be that the actual attack frequency is an average of one a week, or it could be more or less than that on the placebo period. I think no matter what it is, it is difficult to make cross study comparisons that are valid.

And one more, and I'll hop back in the queue with regard to strategy, Jon your last statement in your prepared remarks, in terms of becoming a Company that is absolutely focused on rare diseases, I guess that seems like a good thing to me in terms of the business model, but I'm wondering what you see as being differentiated in your strategy, and what gives you some competitive advantage perhaps going forward and executing on that?

I think the first thing is most of the companies you see in this space are companies that have biologics and its replacement, typically rather than an enzyme inhibitor. When we started looking at targets we were pleased to find while there weren't an abundance, there were some where an enzyme blocker would actually work in a rare disease, so I would categorize what we found, we're not going to go into detail on what the targets are until we get into the clinic, but I can broadly describe them in terms of two categories.

One is a disease where there's already a biologic, and so the target is validated. The clinical path is already outlined. But the biologic is given in an IV form, and an oral could be a revolutionary change for patients in that disease. The second bucket is again a validated target, but there isn't anything, and so we're taking a little bit more risk on the clinical and regulatory front, but we're confident that we can get there because we're looking at diseases where they are horrific, and patients can die. And so we think that the regulators will be a bit more flexible if we're able to show data on these targets with our enzyme inhibitors that has the potential to make a difference for patients. That is broadly what we're thinking about and working on.

Thanks for taking my question.

You are welcome. Thank you, Charles.

Thank you. Our next question comes from Heather Behanna of JMP Securities, your line is open.

Hi thanks for taking my question and congratulations on the progress.

Thank you.

You are welcome. I just have a couple of questions. The first is more about peramivir. I was just curious if you guys could give some color to historically with approval of medications, and sort of the timing of stockpiling that comes after approval, if you could just give us a little bit of color of what we might think about historically when we try to think about what might happen with peramivir stockpiling?

I'm not sure peramivir fits into any kind of historical comparison that you can do, given the unusual path that we've taken. I can tell you what we know, and that is BARDA has clearly said to us that in order to have a procurement conversation, the product needs to be licensed, and so approval needs to come first, and we've always said that, we've always known that. So I think that's the first step. How quickly that happens after, very difficult for me to predict. Obviously we'll pursue it as aggressively as possible. But I don't think you should expect any kind of real meaningful discussions to occur until after we get approval.

And then from an amount perspective, it's an IV neuraminidase inhibitor. We know the amounts that they stockpile for Tamiflu and those are in the millions of courses of therapy. We don't expect that. This will be more of a niche spot for their portfolio. We know that back in 2009, when we had just started a Phase 3 study they ordered 10,000 courses and paid $22.5 million, I would expect that it's likely to be above that, but beyond that I can't really tell you a whole lot.

Okay. That's helpful. And then I just had a couple of questions on the phase 2a study concerning that exposure is such an important outcome, if you can just tell us at what points or how often during the 28 day study you're looking at PK of patients, and if you're mostly looking for trough values, or give us a little bit more information on that?

The OPuS-1 Phase 2a study does have PK sampling. Clearly this is done as an outpatient study, in contrast to Phase I with normal subjects, the normal volunteers are admitted to a Phase I unit and stay there for seven days. The degree of detail that you can get in PK sampling in the first human Phase I is much richer than it is in an outpatient setting. But we will attempt to collect more than just trough PK values, and we'll see what we get at the end of the day, and how many samples that we can put into PK parameter calculations. I think what we're looking for here is past similar or dissimilar is the exposure in HAE patients compared to the normal subjects in the Phase !. So I think that we should have a good handle on that with the data we're collecting.

Okay. Great. And then just one more question about that study. If someone does have an attack and needs an acute therapy to help, are they then, are they still on the study? Do they have to discontinue from the study? What are the parameters?

So great question. As both as a physician and as a person, everybody would want people who get an attack for angioedema to get therapy for that attack, that's exactly what happened on this study. Whatever that patient uses, whether it's [ferocide or beronicich] or synrise to treat an acute attack they're able to do that. They will stay on the study. And indeed, that's exactly the way previous prophylaxis studies have been conducted, and that's the standard.

Fantastic. Thank you very much.

Thanks, Heather.

Thank you. Our next question comes from Serge Belanger Needham & Company. Your line is now open.

Good morning guys. I had a couple of questions on 4161, and peramivir. I guess I'll start with 4161. You mentioned you're presenting a couple of posters at AAAAI next week. I just wanted to know what day that you'll be presenting?And now that you've affirmed your time line for expected results on the Phase 2a study, just wanted to get an update on where you are with the toxicology animal data as you look for your applied potential Phase 2b study in the second half of the year?

Okay. Thanks for the question. With regard to the posters, they will be presented on Saturday at AAAAI in San Diego. We have a poster describing a bit more detail about the Phase I study, and we also have a poster describing a bit more detail about our kallikrein inhibition assay. So the actual data on the posters is embargoed until the presentation, and once they're presented then the posters will be available on our website.

With regard to the toxicology question, we're on track to having the results of our [third engway] toxicology program be available in time to support a 12-week Phase 2b study to be started in the last half of this year. So that's proceeding as expected.

Okay. And then on peramivir, now that you have a PDUFA date, I guess beyond stockpiling potential orders, there is a potential here for seasonal sales given the label that you're proposing. Just wanted to know if you have started partnership discussions, or what your plans are for seasonal sales?

Yes, our plan Serge is to make the drug available for seasonal sales. So we're doing all of the stuff that is associated with that. We conducted market research earlier, or actually last year. So we've got a pretty good idea of where we think it could be used in the emergency room possibly and urgent care, and then we're doing all of the planning activities to make sure that the drug is available shortly after approval, and so a plan in place to manufacture drug, package, all of that stuff, is in the works. And there are a whole bunch of other things around distribution and the like, that we're in the process of planning and we'll have in place, so that when people need the drug they can get it.

Okay. Thank you.

You are welcome.

Thank you. Our next question comes from the line of Brian Abrahams of Wells Fargo. Your line is now open.

Hi guys, thank you for taking my question, this is Shin calling in for Brian. Maybe a follow up to Duncan's question, I was curious if you're embarking on a new discovery program or whether you're leveraging your existing strength in maybe new nucs or kinaese or protease, and just to be clear, when you say validated targets, are you referring to the target protein itself, or the pathway where that protein plays a role?

So at this time I'm not going to get into details which talk to selected, clearly our discovery strength is in structure by structure design with small molecule enzyme inhibitors. Things like ion channels you can throw out, for example. Or protein, protein interactions across a large surface area, they are not suitable for that type of technology. There are categories of, now that you mentioned some of them are very good, as potential classes of targets, the small molecule enzyme inhibitors, and that benefit from structure by structure design.

With regard to validation I think that it's a widely used term, and actually if you do a little research you get a lot of confusing answers on what do you mean by target validation. What we mean is a very deep and strong body of evidence that supports the path of physiology and the pathway and what we're looking for here is pathways that are relatively simple, that don't have a lot of branching and redundancy, and where there is excellent evidence that has accumulated around not just molecular evidence but invitro cellular tissue culture, animal model and human genetics, and if it's available obviously therapeutic intervention. So more the merrier on that, but we have a certain set of criteria, and we have high standards on selecting a target with regard to the body of evidence, and the consistency and depth of that evidence.

Maybe a follow-up is with your recent investments and focus on kallikrein, and with your rich chemical library of potential syrian protease inhibitors, I was wondering if you found any targets or compounds in the compliment pathway that might overlap?

So obviously if there are targets where our expertise in working on other scaffolds or other enzyme inhibitors could apply where we could go maybe a little bit faster that makes it even more attractive. So the answer is yes, if we see spots where we can leverage existing knowledge, we will certainly pursue those kinds of, as long as it fits all of the other criteria that Bill said.

Thank you very much.

Thank you. Our next question comes from Mario Corso, Mizuho. Your line is now open.

Good morning, thanks for taking my question. I was wondering if you could talk a little bit about as we think about post-Phase 2a on 4161, what kind of work you have either done or are planning to optimize the formulation and the dosing schedule? And secondarily, as we think about market potential, have you guys researched or thought about what effect having an oral treatment could have on the size of the patient population, I don't know, 5,000 or so patients on therapy now, where do you think that number can get over time? Thank you.

I'll take the first part of it. Thanks for the question. So the main goals of the formulation development program of 4161 right now to increase the dose in an individual capsule, to move from hard gel, which is just a temporary Phase I type of delivery vehicle, to a soft gel, and to move towards commercially acceptable shelf life stability program. So the formulation program is going well. At some point or another we'll need to do the relevant studies to show that whatever new formulation in a soft gel that we come up with, what sort of PK we get with that and compare it to the Phase I formulation, all of that is pretty standard sort of C&C development work.

So Mario, on the market question that you asked, let's start with 4161. Assuming that it's going to remain a three times a day drug, we think there's a decent amount of patients out there that just have an aversion to needles, and three times a day is going to be very reasonable for them to move to. And so I would say, and the better the efficacy and safety profile, the more people that are going to be on it. So I would say, I would be really pleased with 4161 achieving sales similar to Synrise, that's my perspective. Then if the efficacy better, even more, then with the second gen remember what I said, the goal is one pill once a day wipe out attacks. My view there is who wouldn't be on that if we're successful, right? Our view is that is equivalent to a cure for the disease. And so for patients, that's a major step forward, and so the market share there is much more significant.

Just as a quick follow-up, do you think there's a reasonable chance that the formulation optimization can that improve PK?

No, I think that the molecular characteristics are what they are, and I'm not expecting that formulation development will improve exposure. I am expecting a reasonable chance of increasing the dose, so for example we might be able to go from a 100 milligram capsule format to a 200 milligram capsule format. If that's the case, then that would be quite significant. Moving from hard gel to soft gel is a necessity, so we have to do that. I'm not banking on an improvement in exposure.

Thank you. Our next question comes from the line of Ed Arce of Roth Capital Partners, your line is now open.

Hi everyone, thank you everyone for taking my questions. Actually a lot of them have already been asked but I do have a couple more. This is probably more for Bill. As I look at slide five on the deck, and I know some of this has been reviewed before, but I just wanted to ask if you could walk us through some of the assay and rat PK data, specifically the components that give you confidence in achieving the once daily oral dosing for the next gen?

Sure. I think the second generation program is very exciting, albeit early, and I'm very happy that we've got a suite of compounds that we have been able to promote into preclinical development, and as we went through the discovery process, our original goal was to come up with much better bioavailable compounds of similar potency and similar or better specificity. As we went through that process we got the results of the Phase I 4161, and we're actually pleasantly surprised with degree of exposure we got with that compound. We rate the bar, and the way we rate the bar was to go back to our comparison with synrise that we have talked about before, and how much inhibition of kallikrein in an invitro assay is associated with successful prophylactic therapy. It's about 80% inhibition. So if we can maintain 80% inhibition around the clock with a once a day administration, then that would be a good result. So that is the EC80 in that assay. The EC80 is four times the EC50 for a typical small molecule compound that is an enzyme inhibitor. What we really want to see here is drugs that are above the EC80, so more than four times the EC50, 24 hours after we give a dose to rats. And we had done that experiment previously with 4161, the results were on slide five, and we only got a 1.5 fold or 50% higher increase above the EC50.

But the result with the second gen is much better and we're more than five fold for both compounds. We exceed the EC80. So that's an important outcome of having better bioavailability with those compounds. We met all of the other goals that I mentioned, so the potency is similar to 4161, which is a highly potent compound, [sub nanamoa], the specificity is actually better, so we improved specificity, not that that's really an issue clinically with 416, because we already have hundreds to thousand times fold specificity that we think proved that, and the effect in improving the bioavailability is to have much more drug present a day after a dose, and that gives us confidence to invest in this program. Obviously we'll need to see what happens when we move from rats to primates to humans, but I think that given the excellent bioavailability, we're pretty optimistic that we'll be able to see similar opportunity for once a day dosing in people.

Great. Thank you. The only other question I guess I have is around your 2014 guidance, I just wanted to get a little bit more detail around the components of your OpEx, I know you said earlier in I guess one of the questions or comments, that you expect the R&D spend for 2014 to be higher than this past year. How do you see the SG&A spend, and what are some of the ranges that you think would be reasonable to assume for stock-based compensation? Thanks.

Thanks for the question, Ed. So in regards to op expenses, the primary, the predominant increase there is in R&D expenses. We've taken great pains over the last two years to reduce our G&A expenses to levels that they're currently at. So I wouldn't expect us to flip around and start increasing those significantly. We will have slight increases, just to make peramivir available, but it really pales in comparison to the R&D expense.

And when you look at R&D expense as I said in my prepared remarks with the expectation of a Phase 2b trial in 4161 that's longer in duration than 28 days, that expense with a lot more patients, or with more patients, that expense goes way up, and then you also take into account that we've been successful with two second generation compounds and we want to see both of those to get to IND in early 2015, so the lion's share of all of that work will be in 2014, and it will be effectively doubled because there are two compounds.

In regards to your last question, which is stock comp expense or equity based compensation, the reason we excluded that from our guidance is that it's based on some parameters that I just cannot predict. You can look at our stock performance, our stock was sitting just over $1 in January 1 of 2012, and now we're over $12. And so all of those, and that volatility, the actual stock price and the fact that we have some performance based options out there with success on our programs we're going to vest in stock options, that's an immediate hit. I just cannot predict and give you a range other than to say the range for 2013, or the stock comp expense for 2013 was roughly $4.5 million. So that sort of gives you probably a floor.

Okay. Great. Thanks. That's all I have.

Thanks, Ed.

Thank you. Our next question comes from Rahul Jasuja of Nobel Capital Markets, your line is now open.

Hi guys. Just a couple of questions. Let me start with 4161. I think this is probably for you. In looking at the development of 4161, and the follow-up on the second generation inhibitors, the preface being there's a huge distinction in the preclinical and the PK data, the second generation being dramatically superior from the data that you provided us. When do you plan to make the binary decision, I assume it's going to be after you seen Phase 2a data and compare them. Am I thinking right about that?

Yes, well, so I think we have the good fortune of having more than one asset, and in this business that's important because things can go wrong with programs. So the philosophy we're taking is we're going to advance all of these as far as we possibly can, and we'll constantly take checkpoints when the program hits a certain milestone to decide are we moving all of them, or are we moving less than all of them? And so right now, I would say that from what we see, there's the potential to bring two to market. Until we see things that indicate otherwise, that's the plan.

Okay. And then I want to also ask you about the costs of bringing two to market and the concept of, and I want to make sure I'm getting this right, is the thinking internally that the second generation once a day would wipe out complete attacks just because of the promise shown in the early stage studies and preclinical studies, the 4161 because of its nature, may be a potential use to decrease the number of injections used, the synrise and so on, so decrease the number of injections in high frequent attack cases, and if that's the case, is it streamlined to run a trial expecting to define where those patients who have a higher frequency and looking to decrease injection use?

Yes, that's not the plan. I think we believe at least from what we see thus far, that 4161 could be an attractive marketed product. And then if we're successful in bringing one of the second gens forward into the market, and it's the way we have described our goal, one pill once a day wipe out attacks I think people are going to move to that, right? So that's really the strategy.

Okay. And then one final question on peramivir. Given the path it has taken, the historical path, and so there will be renewal of the NDA and now the [inaudible-background noise] should we expect the label out there that is different that allows it to be used in a broader population give the past data and the past experience?

I think you should expect a label pretty similar to the other neuraminidase inhibitors, that is the label that you should expect.

Okay. Very good. Thank you.

You are welcome. Thanks Rahul.

Thank you. (Operator Instructions). Our next question comes from the line of Tazeem Ahmad of Bank of America. Your line is now open.

Hi guys, thanks for taking my question. Just on 4161 is the three times per day dosing kind of set in stone at this point, or do you think there is potential that you could maybe make dose it twice per day? And if so would you be in a position to know that from the upcoming data, or would you need advanced data and upcoming trials to do that?

Thanks for the question. So we will understand the potential for that much better once the current study is finished and unblinded. So if there's a really outstanding benefit, that would give us pretty strong reason to test twice a day. If the benefit is very, very modest, that would not be a stronger reason to test twice a day. So I think that we have to wait and see what that data teaches us.

So as long as I have you on the phone, just so I'm clear by what you're experiencing as benefit, are you defining the amount of decrease in breakthrough attacks, so let's say it is on par with synrise, would you consider that to be reason to pursue a twice per day, or would you want to see something much better than that?

So you're focusing on the right end point. I think the answer depends on the distribution of the data. So if the benefit is concentrated in a subgroup of patients who do extremely well, for example, for whatever reason, maybe they absorb the drug better, for example, then we still might have a reason to test twice a day. If on the other hand it's more diffuse, I think the impetus to test twice a day may not be as strong. I think at the end of the day it will be a regulatory negotiation potentially, because at some point in the development program there needs to be the appropriate dose or schedule ranging experiment to make sure we're not overdosing the patient. I think right now I want to keep my options open.

Okay. Thanks.

Thank you. And I am showing no further questions at this time. I would like to hand the call back over to CEO, Jon Stonehouse for further remarks.

I would like to say thank you again for your interest in BioCryst. The next coming months should be very interesting with the number of milestones that we will be approaching, and we look forward to keeping you updated. Thank you very much, have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone.