BioCryst Pharmaceuticals Inc (BCRX) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioCryst Third Quarter 2015 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 be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your first speaker for today, Vice President of Investor Relations, Mr. Robert Bennett. You may now begin sir.

Thank you. Good morning and welcome to BioCryst third quarter 2015 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 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; Tom Staab, Chief Financial Officer; Dr. Bill Sheridan, our Chief Medical 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, Company performance or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on the forward-looking statements. For additional information including important risk factors, please refer to BioCryst's documents filed with the SEC, which can be found on our corporate website.

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

Thank you, Rob. Good morning and thanks for joining us today. Since our last quarterly update, we've made significant progress toward our goal of bringing to market life-changing oral therapies for HAE. A few weeks ago, we completed enrollment of the OPuS-2 trial with over 100 patients enrolled, making it the largest HAE study to date.

We also completed and reported the results of a Phase I trial of BCX7353 in healthy volunteers. These Phase 1 study results are critically important because the PK and PD give us an extremely high degree of confidence; we have a once-a-day drug that has the potential to wipe out attack in HAE patients.

We set a very high bar of this study and we nailed it from a PK-PD perspective. When we look at the safety and tolerability results observed at doses necessary to get patients to the therapeutic target zone, we think we have a drug that is clearly suitable for further development. Of course, there were adverse events as there always are in Phase 1 studies, but we believe these are manageable and we will monitor for these in future studies. So in summary, it's full speed ahead to a four-week proof-of-concept study in HEA patients.

We've made meaningful and rapid progress in improving the formulation of avoralstat, such progress that we plan to initiate human Phase 1 relative bioavailability studies by year end for both a more concentrated liquid gel cap and a twice daily tablet. Data from these studies are expected in the first half of next year. Our goal is to launch of avoralstat with one of these improved formulations.

Last week, the Japanese Ministry of Health announced that of 60 drugs reviewed, 7353 was one of six drugs for any disease and the only drug for HAE to get designated the new "Sakigake" fast track review system. This new system is intended to promote R&D in Japan by dramatically accelerating development in regulatory approval of therapies in Japan, addressing unmet medical needs. We are very pleased that 7353 received this designation as we believe it reflects the importance of getting innovative new medicines to Japanese patients with HAE.

In addition to the progress we have made with our HAE programs, we have supported our partner, Seqirus, formerly bioCSL, in their preparation and launch of RAPIVAB in the US. We are executing our US post-approval commitments and are working towards filing for RAPIVAB market authorization in Europe and Canada sometime in the next 12 months to 18 months.

That completes my third quarter update. And now, I'll turn it over to Tom to review the third quarter financials. Tom?

Thank you, Jon and good morning everyone. Today, I'm pleased to report the details of our third quarter 2015 results, which reflect the continued progression in milestone achievement in our HAE programs. On Slide 5, you notice that revenue for the third quarter of 2015 increased to $11 million from $3.2 million recorded in the third quarter of 2014.

The significant increase was the result of higher levels of product and collaboration revenue associated with the sale of RAPIVAB and the Seqirus out-licensing transaction as well as increased collaboration revenue associated with BCX4430 development under government-sponsored contracts.

Increased product revenue was associated with recognizing revenue for virtually all previously deferred RAPIVAB sales or product out at distributors and the recognition of existing finished goods inventory sales, directly to Seqirus. Both were unique revenue items associated with the Seqirus out-licensing transaction.

In the third quarter, we recognized $5.7 million of RAPIVAB product revenue associated with these deferred revenue and inventory sales. In the future, commercial RAPIVAB sales will be recognized by Seqirus and will record royalty income according to the terms of our agreement.

Third quarter 2015 R&D expense increased to $20.1 million as compared to $13 million in the third quarter of 2014. This increase in 2015 expense was largely associated with the development of our HAE portfolio of product candidates, including avoralstat, BCX7353 and additional second generation kallikrein inhibitors, as well as expenses associated with discovery activity on two rare disease projects.

Selling, general and administrative expenses for the third quarter of 2015 increased to $2.7 million compared to $1.8 million for the third quarter of 2014. The increase relates primarily to activities in preparation for commercialization of the Company's HAE product candidates and to a lesser extent, commercial expenses associated with RAPIVAB.

Moving below the operating line, we incurred $1.2 million of interest expense in the third quarters of both 2015 and 2014. We also recorded a foreign currency loss of $352,000 in the third quarter of 2015 as compared to a foreign currency gain of $4.1 million in 2014. In the third quarter of 2015, the foreign currency loss represents an aggregation of a mark-to-market loss of $460,000, partially offset by a realized foreign currency hedge gain of $108,000.

Both interest expense and the foreign currency gain loss relate to our non-recourse notes and related hedge arrangement enacted in conjunction with the RAPIACTA royalty monetization. Our net loss in the third quarter of 2015 was $14.6 million or $0.20 per share as compared to an $8.7 million loss or $0.12 per share in the third quarter of 2014.

Slide 6 summarizes our nine-month financial results. Revenue for the first nine months of 2015 was $43.7 million compared to $8.2 million in 2014. The increase was primarily due to recognizing $21.7 million of revenue associated with the upfront payment in the RAPIVAB out-licensing transaction, RAPIVAB product revenue and increased government collaboration revenue associated with BCX4430 development.

Nine-month 2015 R&D expense increased to $53.7 million from $33.3 million in the nine months of 2014, primarily due to increased spending associated with our HAE programs and to a lesser extent, BCX4430 development and discovery activity on two rare disease projects.

Selling, general and administrative expenses for the first nine months of 2015 increased to $10.3 million compared to $5.4 million in 2014. The increase was primarily associated with the initiation of a commercial organization in preparation for commercializing our HAE product candidate, unrestricted grants awarded to the US and international HAE patient efficacy groups as well as deal-related expenses associated with the Seqirus out-licensing transaction.

Moving below the operating line in the first nine months of 2015 and 2014, we incurred $3.9 million and $3.7 million of non-cash interest expense respectively. We also reported a foreign currency gain of $861,000 in the nine months of 2015 as compared to a gain of $732,000 in 2014. In the nine-month period of 2015, the foreign currency gain represents the aggregation of a mark-to-market loss of $793,000, offset by a realized foreign currency hedge gain of $1.7 million.

Moving on to Slide 7, I would like to discuss our cash balance and cash usage. We ended the third quarter with cash and investments of $119.7 million, an increase from the $114 million at the end of 2014, due to the receipt of the upfront payment from Seqirus, offset by normal operating cash usage for the nine-month period. Our operating cash usage through the first nine months of 2015 was $28.1 million as compared to $19.8 million in the same period of 2014.

Note, these amounts do not take into consideration the upfront payment received in the second quarter of 2015. In regards to 2015 financial guidance, we forecast operating cash usage to be in the $8 million to $18 million range. This range does take into account the $33.7 million upfront cash payment and other adjustments associated with our RAPIVAB out-licensing transaction.

Based upon current plans and expectations, we expect our existing cash to provide us liquidity into 2017. In addition, we continue to expect our 2015 operating expenses to be in the $75 million to $95 million range. And as a reminder, equity-based compensation expense is excluded from our operating expense guidance.

Now, I would like to turn the call back over to John for some closing remarks.

Thanks, Tom. Looking ahead, we'll continue to press forward with the advancement of our HAE programs. We expect OPuS-2 results in early first quarter of next year and plan to initiate the four-week Angioedema ProphylaXis or APeX-1 proof-of-concept study of 7353 in patients with HAE by early 2016. This trial will evaluate the efficacy of three different doses of 7353 compared to placebo. Results from this trial should be available by mid-2016. So when you look at the overall progress we've made this year, we're getting closer and closer to our goal of bringing life-changing oral therapies to HAE patients.

That concludes our prepared remarks. We will now open it up for your questions.

Thank you (Operator Instructions) Jessica Fye, JPMorgan.

Hey guys. Thanks for taking my questions. To start out with a few on 7353, talking about this APeX data readout coming around mid-year, it seems a little faster than some of your other studies took to run. I guess first is that statement accurate? Second, how confident you can enroll that study in that time frame and then I missed the doses, but I think in past you talked about the lowest dose in that study being in the 100 milligram to 125 milligram range and the highest dose maybe up to 350. Have you determined yet specifically what doses you will evaluate in that study?

Hi, Jessica. Thanks for your questions. With regard to the doses, you are correct that the dose range will be from around about 100 milligrams in the low range, up to about 350 milligrams in top range. We will give definitive guidance on that once study starts, that means it's been through a regulatory review, IRB review and alike. So they are rather than anticipate the outcome of those interactions. We will confirm the final doses at that stage. We certainly don't need to go any higher than 350 milligrams in the top dose.

With regards to readout of that study, you are right, this is a little quicker than previous studies. One of the reasons is that this will be a parallel cohort design rather than a crossover. We had more experience now with running HAE studies. I think we've had tremendous enthusiasm from our leading investigators and key opinion leaders in response to the Phase 1 data for 7353, and they are raring to go.

Okay. Maybe a little more on 7353, I guess thinking about the efficacy of that product, when I look at the curves you have shown side-by-side comparing the kallikrein inhibition using that assay on the healthy volunteer plasma. And I see sort of sustained inhibition for 7353 over 24 hours compared with those sort of eight-hour up-down curve for 4161. In addition to just the higher sort of level of inhibition, it looks like you should have better coverage by filling in those gaps. Can you talk about the -- how should we -- it looks like it will be more efficacious, but how should we think about how much more efficacious that agent could potentially be relative to 4161?

So I think your observations are correct and that gives us a lot of opportunity to test the hypothesis that restoring the normal phenotype of kallikrein inhibition could risk through normal lives of patients with hereditary angioedema. So in addition, the variability in exposure and the variability in pharmacodynamic effect is smaller for 7353 than it is for avoralstat. So on the one hand, we have a once-a-day drug with smaller variation dose-related exposure, maxing out the pharmacodynamics effect at doses that are safe and well tolerated in the Phase 1, but it is a tremendous opportunity to improve efficacy.

Yes. Jess, this is Jon. I would just add that with the prophylactic therapy, the goal is for a patient to not have attack period, and we had in the OPuS-1 study three subject that had no attacks in the four-week period. We are going for way, way better than that and wiping on attacks as many patients as we can with 7353.

Okay. Maybe one last one, but for this APeX study at the enrollment criteria, how should we think about the baseline attack rate for the patients who are looking to enroll in that trial? Thanks.

Sure. I think that's a very pertinent question and the goal here is to have the baseline attack rate selected so that we are pretty confident that the placebo group subjects in the study, each will have at least one attack in the four-week period. So now, you can think about how do you approach that from a couple of different statistical perspectives. I don't want to give guidance on exactly what the attack rate criteria will be, but I think that given that we are shooting for very strong efficacy in this study that has two implications, one is that the sample size doesn't need to be very large, and the second is the number of attacks that we need in order to determine that efficacy doesn't have to be very big. So that allows you to be fairly liberal in the eligibility criterion for attack rate.

Charles Duncan, Piper Jaffray.

Thank you. Hi guys. First of all, nice progress in the quarter and just harping back to avoralstat, I'm wondering if you can give us any sense, even blinded sense of the attack rate that you saw in that trial?

Charles, thanks for the question. So, this study is still ongoing and we are treating this as an adequate and well-controlled study for

. We have no intention of looking at the data until the data set is locked and they will unblind it. So I can't give you a sense to what the attack rate is on the study because we haven't looked at it.

Okay. And then I guess comparing to some of the previous questions regarding wiping out attacks with 7353 for avoralstat, what do you think is clinically meaningful result in terms of being valuable to patients especially given the [starter] frequency of attacks?

So we have always said with the avoralstat that expectation would be Cinryze like efficacy. And so -- that's the expectation. And so we get a P value. As Bill said, this is a pivotal study. So if we get a P value, that's important. If we get a result similar to what we saw in OPuS-1, I think it's still a very attractive option for patients, because I can tell you having talked to patients and physicians, there is a good number of patients out there that just don't want to stick themselves with needles. And so, our belief is that some patients will do very well on avoralstat, unlike the convenience of an oral drug. So our expectations are very modest in comparison to 7353.

Okay. Jon that's helpful. And one more question on avoralstat, and then I wanted to ask you about the Japanese process. When do you anticipate the new formulations to come along and would you anticipate starting a pivotal study with those new formulations are doing some sort of breaching study post a pivotal with avoralstat?

Yes, so as I said Charles in the prepared remarks, we've made really good progress and rapid progress on the formulation. We have no intentions of launching avoralstat with the current formulation that we are using in OPuS-2. So what we would do is that PK study that I mentioned to you in the prepared remarks. If that looks like the data that we've seen in animals, then we would move this drug into human studies in HAE patients and we've got a couple of options. We have got open label safety study that we refer to as OPuS-4 that will be up and running at that time. And then we always have the option of doing another efficacy study in plugging one of those two formulations into that. So our plan is to launch with an improved formulation.

Okay. And then final question on Sakigake Designation System, I'm sorry, but I'm not really familiar with that Fast Track in Japan system. I'm wondering if you could give us a sense of the criteria that was perhaps used for designating 7353 under that system and what are the implications for development?

Thanks Charles. I mean the key thing about this - no I'm not surprised but you are unfamiliar with it, it's brand new. This is the first year of implementation of this system in Japan and a good way to think about it is that it has elements of designating drugs as potential breakthroughs and applying regulatory interactions in a very efficient ways. So that from suite to knots you get assistance in those interactions with the Japanese authorities and the goal being early launch and early availability of drugs that meet significant unmet medical needs and as shown in early clinical studies or even non-clinical studies that they have a lot of promise.

So I think that this is a super result for BCX7353 to be selected as I mean one of six drugs and the only HAE drug and the only drug in the relevant division in the Japanese authority. So this is the first year, obviously it's a competitive process, because more than 60 drugs were submitted and I think that the outcome here is going to be facilitated interactions with the agency. I think with regard to the criteria, it's all about a combination of how good is the data that indicates that the drug could have significant benefit and what is the disease that it's addressing and what's the extent of the unmet need in the disease based of its criteria.

Is there any way for you to know whether or not another HAE candidate was being evaluated?

No. No, we don't know what the other compounds were that were selected. The agency in Japan did put out a list of candidates that made it all the way through the process and got selected.

And Charles I believe it's an annual process.

Brian Abrahams, Jefferies.

Hi, thanks very much for taking my questions. A couple of questions on avoralstat. It sounds like you guys are making really good progress with the new formulations. So just a follow-up question on that first. I'm curious if you could talk a little bit more about what you are seeing pre-clinically, how de-risk do you think those are based on the work? And if successful what the optimal profile could be in terms of the numbers of pills and the numbers of times per day the drug could be administered?

Hi Brian, thanks for the question. The studies we have done pre-clinically, the case studies are in non-human primates and what we saw with the current clinical trial formulation of avoralstat in non-human primate studies was that it had a satirical absorption portion if you like. So as we increase the dose, you get to a limiting exposure and we saw the same thing in humans in the Phase 1 study with that drug and with the new formulations, the one that's the most exciting maybe I will focus on that is a solid dosage form that is quite novel. And in the non-human primates we see better exposure on a milligram per kilogram dose basis compared to with the current clinical trial formulation of avoralstat. And in addition to that we see that as we increase the dose we get better exposure. So I think that to the extent that the previous data on the current formulation was similar in monkeys and in humans, [kallikrein] we will see that in the human studies with this new formulation as well. So we'll know that in due course because they are about to start those studies.

Brian, I would just add that the first step would be similar exposure in a BID dosing that [rats] from what we heard from patients and physicians is a massive step forward with this drug. In fact they've even told us that they don't see a big difference between twice-a-day and once-a-day. That won't stop us from going from one pill once-a-day wipe out attacks with 7353, but it's a big step in convenience when you can take something in the morning and take it at night before you go to bed. And the second step as Bill says is get exposure and if we are successful with that there is a potential for greater efficacy with the avoralstat. So again if the human data lays out like the non-human primate data we've got a much more interesting profile for avoralstat.

And then I guess just on the timeline front for your avoralstat filing plans, what should our expectations be? Should we expect that the filing will still be paced by some of the FDA preclinical requirements and do you have any updates on that front? Or is the rate limiting step now completing whatever necessary safety efficacy and/or bridging studies you need to do for these improved formulations?

Yes. I think there is two scenarios and I can't handicap one or the other. Those two scenarios are that we are successful in our end of Phase 2 meeting with the FDA after we present the -- all the preclinical data, the six and nine months tox and the results of our 12 week study with OPuS-2. And we are able to convince the FDA that we can get a deferral on the two year carcinogenicity in rats. The other is that they say no, and then we've got to complete that and that will push it out over a year, so into 2018, well into 2018. But I think from a scenario perspective, obviously we prefer to have the deferrals but as I said before I can't handicap that.

So I guess, what would be the earliest potential filing considering that you would still -- even if the FDA defers the [carc] study you still want to do some additional work on the new formulation? I guess what will be required at the trial?

So as I said to I think it was Charles' question, we would switch people that are in open label long-term safety over to the new formulation once we are able and then we'd likely run an efficacy study, another 12 week efficacy study. I doubt it needs to be the size of OPuS-2. There would be a smaller 12 week study with this new formulation. The rate limiter in that will be the open label safety study. So in terms of drug supply and all those other things I think we are in good shape. So with the two-year rat carcinogenicity deferral we would have a filing in 2017 with the new formulation.

Christopher James, FBR & Company.

Good morning. And congrats again on all the progress and thanks for taking my questions, most of which have been asked. But just to get back to the question about the attack rate in APeX-1, should we think about that design being similar to what we expect to see from OPuS-2?

I think the way we might want to think about this is that we can be probably more liberal in the attack rate criterion for APeX-1 compared to OPuS-2 and in turn that was more liberal than the attack rate criteria in OPuS-1.

And Chris, I would say in fact to address this question that's another reason to be able to enroll faster too as when you have wider criteria. There is just more patients to pick from.

So the wider criteria written is you said a minimum, what you actually get on the study depends on who decides to come on to the study, and also qualified patient population that the investigators recruit. So the minimum doesn't return in the final attack rate that you actually have on the study that so long if we can recruit eligible subjects I will be delighted and there is no issue with having -- no physical issue on par issue with having a final average attack rate that's more -- substantially more than the minimum and I'm not worried about that.

And then on -- with the additional molecules, do you plan to pursue any additional indications? Have you ruled in or out any of the ophthalmic or neurologic indications with the new molecules?

We have got dozens and so we are spoiled with riches through the productivity of our discovery team, Dr. Babu and his team down in Birmingham, Alabama and we are in the process -- it's remarkable to me, how many potential directions we could go. And so the important thing is using our proto criteria that's guiding us to the successful point that we are at today, which is validated target. Always better if there is path at -- clinical and regulatory path that's known rather than blazing a new trail and then the competitive landscape and we will factor all that in and I would say sometime perhaps late next year we will give you more color on that.

Got it. That's helpful. And then on 7353 in Japan, have you done any work on the epidemiology of HAE in Japan, what are those numbers sort of look like?

It's really interesting that when you talk to people in different countries and this applies not only to Japan but I think to clinicians with who we have talked to and patient advocates who we have talked to in every country, where we have those conversations. And the story goes a little like this, is that, average physicians are unaware of the disease. They have might have been introduced to it in medical school, but have never seen a case and they have forgotten about it. The specialist community is very aware of it. But the number of diagnosed cases depends on access to therapies and on the activities of patient advocacy organizations in spreading the word, it's really interesting. So in communities and countries where those activities have been going on for quite some time like in the United States, certain European countries and places like Canada, Australia, the U.K. etc. the epidemiology seems to be pretty consistent from one country to the next and there does not seem to be any ethnic or racial variation in any specific disease. I think in Japan, the feel is that there are only 25 patients in Japan with HAE and it was known to be an incredibly rare disease, but we now know that that's not the case. And truth is sort of efforts that I just described through physician activities and patient advocacy activities, they are now probably more than 500 identified patients in Japan. Our expectation is that we will end up having the same sort of scale as we saw in the other countries where the proper epidemiology studies have been done. So I think the short answer to your question is a regular epidemiology study have yet to be done in Japan.

And Chris I would add, the patient efficacy is really starting with the momentum in Japan and as we have seen in the countries Bill described, when we get a good physician base that understands the disease and is fighting for, has the ability to do clinical trials to bring new therapies into the country and then strong patient efficacy, you then start identifying patients pretty quickly. So this Sakigake designation for 7353 and if you apply the one in 50,000 to the population of Japan that's 2,500 HAE patients in Japan, that's a really attractive market to us.

Lisa Bayko, JMP Securities.

Thanks for taking my question. Sorry if you have already addressed this. I just wanted your thoughts on the pretty remarkable appeal that was done with Dyax and Shire, and just any sense from you if Shire would be able to if they were interested add all [components] to their portfolio or would that be some sort of STC concern? Just curious on your thoughts there. Thank you.

Sure Lisa, so this is Jon. Let me comment first on my thoughts on the transaction. So I think it's another transaction that reinforces the point that companies with highly attractive HAE assets are getting really high valuations by other companies in the pharmaceuticals area. And so that's a good thing from my perspective. In terms of the STC, I certainly have my opinions on that stuff but really that question is better directed to the regulators because it really doesn't matter what my opinion is, it's what the regulators think about this so, no comment from me on that one.

Serge Belanger, Needham & Company.

Hey, good morning. I guess first to follow-up on some of the formulation questions. I know the goal this effort is to lessen the pill [barrier] especially for avoralstat, but of course it can also impact the safety profile of the drug and more specifically some of the GIs that we have seen so far? And then a follow up on that is, what kind of formulation should we expect for 7353 in the APeX study?

That's a very good question. So I think for the solid dosage form that I mentioned, you can expect that the vehicle related laxative effect won't be present for that formulation of avoralstat, because relevant excipients are not included in that dosage form. With regard to 7353, as is the case in all small molecule drug development, the first in human studies are done with very simple formulation to this case, it's typically active ingredient filled into hard gel capsule. That is not -- you never do those studies with commercial dosage form. We have got plenty of options with 7353. It's easy to handle. It's got a very nice pharmaceutical -- physicochemical characteristic profile and our commercial organization can do the appropriate research and we can decide whether we would like to have a capsule or a tablet and move forward as appropriate.

Yes, one of the things that's really interesting here is, as Bill and I were at the Patient Summit for the HAEA in Denver a few weeks ago and I can't tell you the number of mothers that approached us about a drug and the formulation for children. And while there is a long way to go to get to that point, that has become an higher priority for us and having the flexibility with 7353 to perhaps even put it in a liquid form would be fantastic for those types of patients.

Okay. And then just to switch gears a little. We haven't gotten an update on 4430. I think we are expecting some first clinical results maybe this quarter. I wanted to know about the next steps and if we should also see any developments towards government contract funding for that program?

Yes, so the Phase 1 is continuing to move forward, we won't have the results by the end of this year. And I think one point I would like to make is, the timelines are difficult to manage for us because they are not within our control. We have got a government funder that moves at a different pace. And so unlike the HAE programs and the speed at which we move in Phase 1s, this is clearly a different pace with 4430. Having said that, I think in total between BARDA and NIAID it's a $70 million contract in total. Probably less than 50% of that has been drawn thus far. And so there is still real interest by the government. There is still a real need in terms of a broad spectrum of antiviral and we are just moving at a different pace. And so I think as an investor the way I'd look at this is these things are funded by the government and the value for the company and for investors is any non-dilutive capital that we can get out of these in the form of stock piling orders or anything else, is cash that we would otherwise have to sell shares into the marketplace. And so that's the value of these programs. And we will continue to work on that. It's just a little bit frustrating for us because the pace is a bit different than the HAE program.

Okay. And then one more just to get Tom involved here. On the $5.7 million recognized in this quarter, I think you mentioned it was based on deferred RAPIVAB sales. Just trying to figure out how far we're going back for in terms of deferral and what we should expect in terms of royalties and sales by Seqirus going forward.

Sure. So, one, thanks for involving me in the call, so I certainly do appreciate it. Two, you are spot on, on your comments, it's a good question. So the $5.7 million effectively reflects all the deferred revenue that we booked when we launched the product in December of last year. And so, if you remember back, we elected to do the sell-through technology or sell-through methodology, which means that we don't recognize any revenue until the distributor ships it out to a hospital or a pharmacy or it's consumed by a third-party. And so with the Seqirus acquisition we effectively cleaned up a number of things, which is we transferred all of the distributor inventory off our books to their books, since we didn't recognize sales on it. And we also had a significant amount of finished goods inventory prepared for the upcoming flu seasons and we sold that to them. So effectively it was a cleanup entry in the third quarter to transfer all that responsibility over to Seqirus in accordance to the agreement. In regards to future expectations from Seqirus and royalties, we do get a royalty on it but I leave it up to Seqirus to forecast their sales. And as you are well aware flu is very, very difficult depending on the strains and severity of flu. So I am not aware of any public guidance.

Okay. And are you -- do we know when you are planning on the U.S. launch of RAPIVAB or is that underway?

It's underway Tom and I went to the launch meeting four weeks ago. They have got a sales force in place, medical affairs folks calling on hospitals, emergency rooms. And so they are in full gear.

Tazeen Ahmad, Bank of America.

A couple, what is -- based on where you are in development with 7353 when do you think is the earliest that you think this product could launch in the U.S.?

We have already said two years after 73 or after avoralstat. So it's fastest path is 2017, it would be 2019.

So you do have to do a longer carc study and 4161 gets pushed out then you would also expect 7353 to get pushed out?

No. In fact last time I think when we had this conversation at 7353 Phase 1 results call, I said clearly we're in a different situation with 7353 and we've invested in drug supply and the tox, so that we could start 13 week after 28 day and six and nine months after 13 week. And so the reality of that is that the two year carc start for 7353 is actually only six months behind the start of two year carc for -- of avoralstat. So very, very different situation.

And as I'm recalling you are also discussing the potential possibility of the two drugs launching closer together than we previously would have expected. So it seems like you're still moving forward aggressively. You are trying to do a formulation change for avoralstat, but how much benefit do you see that gaining because at the beginning of the call Jon you definitely said that if you're going for prophylactic you want to have as few attacks as possible on based on the data so far certainly 7353 would present a better option there. I guess how does that make sense commercially for you to continue to pursue a drug like avoralstat when in fact you could have 7353 launch not too far after that, and taking into account also that you could potentially have another drug in the market, the new Shire drug the X-2930 which also have very high efficacy. How do you kind of see avoralstat fitting into that?

I would describe it this way, it gives us options, lots of options to pursue different things. And so the goal with the whole program is to have a convenient dosed highly effective oral drug and we believe that's the market winner at the end of the day. I don't think -- originally we thought that avoralstat would ultimately fit that profile, with what we've learned in this solid dosage form, with the data that we see in animals and non-human primates that there is potential there to fit that profile. And so it gives us options. And I think that's important if our goal is to be the market leader with a highly effective convenient oral drug.

In a marketplace when you have 7353, 2930 and avoralstat, can you just give us a little bit more color on where you see avoralstat fitting into that?

If we get a drug that's one pill once-a-day wipe out attacks we don't need another drug. That would be the market leader, unless we choose to pursue other indications or something like that.

So the 7353 does enter the market you would expect it to completely cannibalize avoralstat?

Yes, that's always been the plan,

.

And then my last question is going back to comparing the pharmacodynamic effects of the two drugs, I think it was [Slide 13] in your deck from when you presented the data. When you talk about the mean percent inhibition comparing 7353 to avoralstat, again avoralstat at its peak had something close to about I would say like 75% mean inhibition versus I think the 350 mix dose might have been the vast performing one in the slide if I remember correctly which was closer to I would say 95% mean inhibition. Just given the results that you have got in the last OPuS trial of roughly 38% reduction -- mean reduction, what kind of the efficacy do you think would it be reasonable to expect for 7353 in your next trial? And also taking into account that your patient population was a little bit more broad in enrollment versus OPuS-1.

It's a great question Tazeen. It's hard to give precise estimates because I don't think enough research is finished yet to join the dots. So you're correct that the PD profile of avoralstat has features that are different from the PD profile of 7353 at the higher dose of the 7353. It's pretty similar in the range of inhibition achieved for 400 milligrams every 8 hours in the Phase 1 study of avoralstat when compared to 125 milligrams once-a-day of 7353, with the exception of course 7353 lasts all day whereas you have to dose avoralstat three times a day. But the achieved PD is in a similar range at that dose level and then at the higher dose levels of 7353 basically you get maxed out readings in the assay. So I think it would be premature to speculate on what the efficacy might be in, if it was to beyond making this statement which is, we were pretty conservative in the way we designed the study and made sure that the sample size measured in the study allowed us to detect a similar result that we got through our first one. So anything above and beyond that would be great and it's hard to sort of throw it up and understand where it lands and what that might be in terms of predictive value. I think that we are extremely confident that we will see a positive effect in OPuS-2 by some of p-value that we saw in OPuS-1 even when you cover up the lost half of the study and treat the first half of it as a randomized cohort design

we still get a p-value. So I think from that aspect I think we are confident.

And is your question more around 7353 efficacy, is that what you are asking?

Yes, that what's coming up in your next trial for that.

As I said before, you can't definitive yet because I think the body of evidence is yet to be developed, but there is every reason to believe that if you were still at the normal phenotype of kallikrein inhibition then you might have an attack of angioedema. So that's the goal and that's the opportunity and that's what we expect to get, should we be able to achieve through replicating normal phenotype of kallikrein inhibition in patients with HAE and keep them there.

And that's why we are so excited when we see doses like 350 even the 250 and the kallikrein inhibition that we are getting and the duration, the trough levels I think is really important right. Because what's different from avoralstat is that these trough levels are at or above the target zone for a 24 hour period.

As we have asked, [advices] the same questions you asked us, the feedback we get is this is tremendously promising.

Thanks. It was very good of you giving me color. Maybe the last question is then based on what you just said, what then the area would there be where you wouldn't want 7353 to be the compound that advances, because you have always maintained that you have got backup compounds in pre-clinic, would it be based on efficacy at this point or would it be a safety reason why this 7353 will not be chosen to be taken forward?

Jon mentioned the optionality of that portfolio. That includes the other second generation compounds that are in non-clinical development right now. And the only reason that we are doing that is to be prudent and just to have -- to know the right time in bringing one of those forward if necessary or otherwise it won't be necessary. So the easy way to think about the second generation portfolio including 7353 is with the exposures we are getting with the kallikrein inhibition we are getting, efficacy is steadying too much to say it's a foregone conclusion but it's about as close to a foregone conclusion as you can possibly get in this industry, not having done the study yet. But I think taking all of the evidence from all of the different drugs I think that's a pretty (inaudible). So for about safety we are very pleased with the safety and tolerability profile that we saw in the Phase 1 study. We will keep an eye out for the things that are still there in subsequent studies. And obviously it's all about efficacy safety balance, so if we had very strong efficacy and a safe and well tolerated product and manageable adverse events wherever they are, then that's a very attractive profile for once-a-day pill that hopefully wipe out attacks. So the only reason to have the backup compounds in non-clinic development is in case we need to switch one of those into the clinic. That's the only reason.

Okay. So if it's anything less than a 100% reduction on attack frequency will that warrant consideration of the other compound?

There is almost no such drug as a perfect 100% drug. So passing 95%, 85% or 100% depends on what the 95% confidence in the far end of point estimate. So you can easily do that, you can Google those statistical calculators, for those of you who are interested, I would encourage you to do that with the [set of process] that have been reported on those numbers, see what sort of comfort limits you get. I think that nobody should be disappointed or penalize the company on the basis of getting 90% or 95% or whatever it is instead of a 100%, that would be a foolhardy outcome or interpretation of that type of a number.

And the goal, remember the goal Tazeen, the goal is to get as many patients attack free as possible, right. Because that's where you really change lives and the more of those we with 7353 is the more attractive this compound becomes.

And another interesting thing about the chronic disease setting and this applies to just about every chronic disease you can think of, type 2 diabetes, hypolipidemia, hypertension, half of those diseases actually get managed. So you get it diagnosed and then the physician will choose a drug and start you on the lowest approved dose of the drug, to see how you're doing. So they don't start you on the highest approved dose of drug, they start you on, well, might be the drug has a 100 milligram dosage form, let's see how 100 milligrams does. And then come back and see me, if everything is fine, then we've achieved the goal of therapy or whatever that might be. So if the cholesterol is controlled or HDL or the blood pressure is controlled or if the hemoglobin A1C is controlled on that dose of the drug, well and good, stay on that dose for the drug. And if it's not, you need twice the dose of the drug or whatever is the step up in therapy. So step up therapy is basically the standard way that chronic diseases are managed. And I think that you should take a close look at the outcome of APeX-1 once we have those results and think about how did the large dose do -- or the little dose do compared to the high dose and were there -- was there a group of patients who did really, really quite well with the large dose and how did that pan out in the marketplace. So it's -- having an oral dosage form of the drug, gives you that tremendous flexibility in not treating every patient like they are a carbon copy of the last patient you saw.

Rahul Jasuja, Noble Life Science.

Hey, good morning guys. Thanks for taking my question. I'd just take a couple of left from the list here. I want to talk about 7353 and just maybe more of a clarification for me. So Bill, if I recall right, the half life was 50 to 60 hours and looking at -- if that's the right half life. Number one, is there a potential of a cumulative effect and then don't you also have some slack here in dosing given the long half life for once daily?

Yes, thanks for the question, it's a very interesting question. You are correct in your statement that the estimated half life in healthy subjects at steady state was around 50 to 60 hours. So let's take the last part of your question first. It absolutely provides slack. So what that basically means is if you are a patient taking the once-a-day drug and you forget a dose, probably nothing bad is going to happen to you, right, because it's not that critical when you take the next dose. You will still have plenty of drug on board and just start taking it again. But that's helpful thing from the point of view of practical human behavior. The half life absolutely supports once-a-day dosing.

His other question was the cumulative effective.

Yes. Did we reach steady state, so we are reporting the half life at steady state. And so the degree of accumulation of the drug is already there and we saw that, we actually displayed that. If you look at the slide that had the trough levels which is Slide 10 on the previous deck, you can see that there is a clear accumulation that you can measure in the trough levels. And so I think that the chronic studies tell you what is the safety of these exposures you are achieving at steady state. So that's the case in all of the drug doses after the first seven days basically.

Okay, that's helpful, thanks. Then moving on to 4161. I am not sure if we discussed this but does that have any food effect or does it not?

We really didn't have a food effect that was adverse whatsoever. So the drug can be given with food and that's what we intend to do in all of the studies moving forward with that drug.

Okay.

Avoralstat on the other hand did have a reduction in exposure with food, and the way that drug is given in our clinical studies is away from eating.

Okay, got it. And then just to I am being redundant here. I think it was Jon who mentioned that potentially 4161 with the new formulation could and again potentially be twice-a-day with either two or three or four pills, is that what was said?

Yes.

Okay.

So Rahul to our surprise and delight we are working on a solid dosage form that we see in animals could be a twice daily dose drug and as I said in my comments that's a big improvement in convenience when you go from three-times-a-day to twice-a-day. The priority of the formulation research prior to that was just to get capsule countdown but now we've got something that could dramatically make avoralstat more attractive.

Okay, good. That is helpful. And then my final question is I think I know the answer, the answer is probably no. But there is no difference between type 1 and type 2 HAE patients in the way they respond to pharmacological innovation, is that correct Bill?

That is completely correct. It is an interesting academic distinction with no practical implication in therapy.

And at this time I am showing no further questions. So with that said I would like to turn the call back over to CEO, Jon Stonehouse, for closing remarks.

Thank you. So the last few weeks I've had good fortune to be travelling around and meet with patients, patient advocates and physicians who treat HAE patients, and the enthusiasm for our programs and the encouragement that we gotten from these people has been amazing. In my 30 years of being in the business, I've never seen this before and that tells you a lot about what we have. That this is something that can really change patients' lives and they're in our corner pushing us to go fast and so we keep that in mind, we stay focused, and because we know that these patients are waiting.

As always we appreciate your interest in our company, and plan to keep you updated as things unfold. Have a great day.

Ladies and gentlemen thank you for participating in today's conference. This concludes the program. You may now disconnect.