BioCryst Pharmaceuticals Inc (BCRX) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BioCryst Third Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to Tom Staab, Chief Financial Officer. Sir, you may begin.

Thank you. Good morning, and welcome to BioCryst Third Quarter 2017 Corporate Update and Financial Results Conference Call.

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

Participating on the call with me today are Jon Stonehouse, Chief Executive Officer; Dr. Bill Sheridan, Chief Medical Officer; and Lynne Powell, Chief Commercial Officer.

On Slide 2, we have provided an agenda for the call, whereby, Jon will make some introductory remarks, Bill will discuss our agreed regulatory pathway to bring BCX7353 to market, Lynne will discuss the significant market opportunity for an oral HAE therapy, and I will discuss the details of our third quarter financial results. Following our formal remarks, we will answer your questions.

Before we begin, I want to direct your attention to Slide 3, which discusses our use of forward-looking statement and potential risk factors regarding an investment in BioCryst. As detailed on this slide, today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which could 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 these forward-looking statements.

For additional information including a detailed discussion of our risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which you can access on our website.

I would now like to turn the call over to Jon.

Thanks, Tom. Good morning, and thanks for joining us today.

The opportunity in front of us at BioCryst is significant, and we're determined to take full advantage of this opportunity by both executing our plan to approval and successfully competing in the marketplace. We recently completed our regulatory interactions and have feedback from both the U.S. FDA and European EMA to finalize protocols and get our trials started. Bill will go over the design of our single pivotal trial and long-term safety study in a minute.

These are the 2 major efforts on the critical path to approval. The design of APeX-2 is very similar to APeX-1. APeX-2 is just larger and longer. Replicating this design is important as a result of the APeX-1 results being robust, and this gives us confidence the probability of success in Phase III is high.

Wrapping up the regulatory update, last week the FDA also granted 7353 orphan drug status. So it's now full speed ahead. We're focused on execution and getting these trials up and running and driving them to completion.

I mentioned earlier, the opportunity is significant. Currently, U.S. HAE annual product sales totaled $1.5 billion. However, when you look at the number of patients treated with prophylactic C1 inhibitor, it's only about half of the total population. To get these prophylactic patients to switch and to get more patients on prophylactic therapy, you have to have something they really want. What they say they want consistently in our market research and public forums and surveys presented at medical conferences like the one at Allergy College Meeting a couple of weeks ago, is they want a normal life. A normal life to them is an effective and convenient prophylactic therapy. Once-a-day oral BCX7353 fits that profile beautifully.

That concludes my introduction. I will now turn it over to Bill.

Thanks, Jon. Recently, we completed very productive regulatory interactions with both FDA and the European authorities. And I'm pleased to share the details of the finalized Phase III program with you all today.

The regulatory guidance on the Phase III program was very useful, and we can now move forward with confidence with the BCX7353 efficacy and safety studies needed for marketing applications. The key changes to our proposal were to increase the duration of the placebo-controlled Phase III efficacy study from 16 weeks to 24 weeks and to evaluate long-term safety at both dose levels. These changes conform to recent regulatory precedent and optimize our opportunity to have both doses labeled with very competitive efficacy and safety results.

A quick note on dosing terminology. To conform to current convention, we have standardized nomenclature to the base content rather than the total salt weight of the compound. That means 175 milligrams salt dose is described as 150 milligrams and 125 milligram dose as 110 milligrams. They are the same; there is no change in dose.

The schema to the APeX-2 Phase III trial is shown on Slide 5. Subjects with at least one attack per month will enter a screening period and will then be randomized in 1:1:1 ratio to placebo or 1 of 2 doses of BCX7353, 110 milligrams once a day and 150 milligrams once a day.

Expanding the inclusion effect rate criterion to subjects with one attack per month broadens the population to choose from for this trial. The duration of blinded daily dosing is 24 weeks with final analysis for efficacy at that time.

The primary endpoint is normalized rate of investigator-assist angioedema attacks. Subjects will record the symptoms in a diary, and investigators will review each event.

The sample size of 32 per group supports power of more than 90% to detect a more than 50% reduction in attacks comparing either of the BCX7353 arms to placebo. After 50% of the subjects have completed 24 weeks, a blinded interim analysis will be done to check assumptions on sample size. Secondary endpoints will include quality of life estimates.

The subjects needed for long-term safety assessment will come from both the APeX-2 trial and a separate long-term safety study. Subjects in APeX-2 completing 24 weeks will roll over directly into a safety extension. Those randomized to 110 milligrams once a day or 150 million grams once a day will continue at that dose level, and those randomized to placebo will roll over to 110 or 150 milligrams in a 1:1 ratio. Dosing will continue through a total of 48 weeks. Analyses can be conducted when needed during this period to support regulatory submissions.

Conservatively, we expect at least 20 subjects in each arm randomized to active drug in the Phase III APeX-2 trial continuing in the rollover through 48 weeks.

The separate long-term safety study, APeX-S, is an open-label trial that randomizes subjects with hereditary angioedema to receive either 110 or 150 milligrams daily oral therapy for 48 weeks. Approximately 80 subjects per dose level in this trial are planned so that the total sample size for safety with 20 per dose level in the APeX-2 extension is 100 per dose level.

The 75 subjects who participated in our Phase II APeX-1 trial will have the opportunity to enroll in the long-term safety study. We will also expand eligibility to subjects who have not previously participated in the study of BCX7353. The goals of APeX-S are to evaluate long-term safety, quality of life and durability of response.

We are very excited about this program now that it is moving to Phase III. And my team is fully focused on executing all the work needed to start both the Phase III trial and the long-term safety study in the first quarter of next year.

Our company is looking forward to completing those studies and launching the first oral kallikrein inhibitor for hereditary angioedema. Lynne Powell heads our commercial team, and before handing it over to her, I'd like to provide some color on her background. Lynne is an experienced rare disease commercial leader, who came to us over 2 years ago following a very distinguished career at CSL, where she directed 5 global rare disease product launches for drugs in highly competitive markets, which now make up roughly 70% of CSL's revenue. I'm confident that our clinical trials will provide Lynne and her team with the label that they need to launch BCX7353 into a competitive market. And I'm thrilled that she's leading that launch.

I'm now pleased to hand it over to Lynne, who will describe the opportunity that this drug represents.

Thanks, Bill. As someone who has spent much of my career working in injectables, I am very excited to be developing what HAE patients want: a daily oral therapy to manage their disease.

The HAE market in the U.S. has undergone an evolution. Prior to the U.S. introduction of C1 esterase inhibitor in 2008, patients were fighting to survive due to the lack of effective therapies. This meant that they had frequent hospitalization and debilitating pain and were living attack to attack.

Living a normal life was not a consideration and many patients have referred to this time as the dark years. The introduction of CINRYZE C1 esterase inhibitor, which is a twice-weekly IV infusion, took patients out of the dark years and eliminated many attacks. But this isn't enough as patients are still looking for more convenience in their HAE therapy in order to lead a normal life.

In September, I attended an FDA HAE patient consultation meeting, and a very articulate 20-year-old woman explained what it was like going through her school years with HAE -- unable to play sports, unable to participate in social events, unable to attend all classes and not living up to her full potential. She was very excited for new therapies that are more convenient and allow fulfillment of patients' potential.

We are now moving into a new era of HAE therapy that will provide patients and physicians with prophylactic therapies that work very well but are much more convenient to administer. An effective once-a-day oral therapy will provide this to patients.

We recently conducted market research amongst the 178 U.S. HAE physicians that indicated convenience is just what they are looking for. Easier administration was the biggest unmet need ahead of cost coverage and then long-term efficacy.

At the FDA patient consultation meeting I spoke about earlier, a survey of patients shows that method of administration was the most important factor driving their treatment decisions, followed by insurance coverage. This is very similar to what physicians have indicated as the most important unmet need. It is absolutely clear that as patients have emerged out of the dark years, efficacy is substantially improved, and now what is important to them is improved convenience. I have worked in a number of mature rare disease markets such as primary immunodeficiency and hemophilia, which behave in a very similar manner. Once efficacy is satisfied, patients start to look for convenience and the ability to live a normal life that allows them to reach their full potential.

Estimates of prevalence of HAE and U.S. market size vary widely. We wanted to ascertain a more accurate estimate, so we carefully and conservatively identified an immediate target population of U.S. diagnosed and treated HAE patients. This involved analyzing purchase claims data, of comprehensive market research and competitive sales data. This population is approximately 6,500 patients. Of this population, approximately 50% use C1 esterase inhibitors as prophylactic therapy. As more convenient therapies are approved and launched, the proportion of patients on prophylactic therapy will continue to grow the market far in excess of the current $1.5 billion.

I believe that as an effective once-a-day oral therapy, 7353 will be able to provide patients with the ability to feel normal and to achieve their full potential.

Now I'll hand over to Tom to review the financials.

Thank you, Lynne. I am pleased to discuss the details of our third quarter 2017 financial results.

We closed the third quarter with $169 million in cash and investments, reflecting proceeds from the completion of a $92 million public offering in mid-September. Importantly, this raise allows us to fund and complete 2 important activities. Those activities are to complete the 7353 HAE prophy regulatory requirements to allow us to file an NDA and an MAA as well as to prepare and fully resource our commercial infrastructure to successfully launch 7353.

On Slide 11, revenue for the third quarter of 2017 increased to $8.8 million from $7.8 million in the third quarter of 2016. The increase related to larger collaborative revenue, which included a $5 million milestone payment associated with the approval of peramivir pediatric sNDA and also a $1.5 million of product sales to our Korean partner, Green Cross, to allow them to supply PeramiFlu in upcoming flu season.

These increases were somewhat offset by lower royalty revenue, as Japanese government stockpiling recurred at a much lower level in the third quarter of 2017 as the stockpiling royalties decreased $2.8 million from the level in the third quarter of 2016.

Government's stockpiling sales are very difficult to predict and have and will cause our peramivir revenue to fluctuate quarter-to-quarter in the future Q2. Research and development expenses for the third quarter of 2017 increased to $17.5 million from $14.1 million in the third quarter of 2016, primarily due to the increased development spending on the progression of our HAE portfolio, most notably 7353.

With the successful APeX-1 results and progression into pivotal development activities, a tranche of performance-based stock options vested and the related compensation expense was recorded in the third quarter of 2017. These increases were somewhat offset by a decrease in 2017 galidesivir development expenses, which are incurred and funded under U.S. government development contracts.

General and administrative expenses for the third quarter of 2017 were $3.3 million as compared to $2.8 million recorded in the third quarter of 2016.

This increase was largely related to stock option expense associated with the vesting of performance-based options referred to in my comments on R&D expense.

Moving below the operating line. We incurred $2.1 million of interest expense in the third quarter of 2017 as compared to $1.5 million in the third quarter of 2016. This increase related to additional interest expense on our $23 million senior credit facility that we closed in September 2016. We also recorded a mark-to-market hedge gain of $84,000, as compared to a mark-to-market hedge loss of $931,000 in the third quarter of 2016. These gains and losses result solely from the periodic changes in the US dollar, Japanese yen exchange rate between quarters.

The net loss for the third quarter of 2017 was $15.1 million or $0.18 per share compared to a net loss of $11.5 million or a $0.16 per share loss for the third quarter of 2016.

Moving on to Slide 12. We ended September 2017 with cash and investments of $169.3 million, an increase of over $104 million from our cash and investment balance at the end of fiscal 2016.

Our 2017 public offering resulted in the substantial strengthening of our financial position, and these financings provide the financial liquidity to accomplish critical activities to realize value in our 7353 program. With this added cash, we are now appropriately resourced to execute on our agreed regulatory requirements and to invest in launch preparation and commercialization to be successful in the competitive HAE market, whereby an oral prophylactic is the patient and physician's overwhelming choice for living a normal life with HAE disease.

Our operating cash usage for the third quarter of 2017 was $10.6 million and reflects a decrease as compared to the $14.8 million utilized in the third quarter of 2016. We believe our existing cash and investments will provide at least 2 years of cash runway. Our cash forecast, however, does not assume any influx of nonroutine cash inflows, so any realization of these inflows will extend our forecasted cash runway further into the future.

In regards to our 2017 forecasted results, we continue to expect to be within the upper half of our cash guidance range of $30 million to $50 million and to be in the upper half of our operating expense guidance range of $53 million to $73 million. As a reminder, equity-based compensation expense is excluded from our operating expense guidance.

That completes my review, and I'll turn the call back over to Jon.

Thanks, Tom. Let me conclude by saying once again, the opportunity in front of us is significant and we are determined to make the most of this opportunity. The market is large and growing. 7353 has the profile patients and doctors have been waiting for, and the plan to get to approval is clear and it's now time to execute. We look forward to updating you, as we execute our plan.

That's it for our prepared remarks. We'll now open it up for your questions.

(Operator Instructions) Our first question comes from the line of Jessica Fye with JPMorgan.

I'm trying to think about the timing of the long-term safety study. Will you open that for enrollment while APeX-2 is enrolling or wait until that's fully enrolled? And can you help me understand how patients would get into one versus other to the extent they are enrolling simultaneously? Can you also remind us when the preclinical carc study reads out? And then on APeX-2, I think you mentioned that after 50% of patients complete 24 weeks, you're going to do a blinded interim to assess the powering assumptions? What are the potential outcomes depending on what that blinded interim looks like?

Bill, you want to take those?

Sure. Jessica, thanks for the questions. With regard to the long-term safety study, we have 75 subjects who participated in a Phase II study. And they are all potentially eligible to come straight into the long-term safety study when we start it. So there will be no need to wait until the Phase III efficacy study has subjects rolling over before we start accruing patients for the long-term safety study. But we'll be managing where we implement things so that we optimize enrollment into the randomized placebo-controlled study and optimize enrollment into the long-term safety study. And at the appropriate time, we'll have the opportunity to open up the long-term safety study to BCX7353 naive patients as well that's having APeX-1 and APeX-2 patients. With regard to the carcinogenicity program, that's well advanced. And it's not going to be rate limiting for filing. These things will come together in 2019. But it's well advanced. And the nonclinical safety program in general, is, except for that, essentially complete. With regard to the interim analysis to check our assumptions, what that will consist of is a completely blinded analysis of the variance in attack rate. We're pooling all of the data, and it's a check on the assumption around variance. The potential outcomes are no changes or a modest increase in sample size. I'm expecting there will be no changes. But it's good discipline in clinical development, and there's an FDA -- actually, there's an ICH guidance that encourage sponsors to include that type of analysis in pivotal studies.

So Jessica, let me just correct one thing that you said. You said at 24 weeks, there would be the interim on APeX-2. And my understanding is when it's halfway enrolled that we would do the interim. Is that correct, Bill?

Yes, half the patients through 24 weeks. That's right.

Yes.

Okay. And with the enrollment criteria that you're looking at for APeX-2, what's your expectation for the baseline attack rate in the APeX-2 population?

Yes, that's a very interesting question. And we had a recent example. So the antibody study was presented at the College Meeting. They had basically a one-a-month eligibility criterion. People had a lot of attacks during screening, but on study, the placebo attack rate was 2 per month. So I think generally, our experience has been that you get approximately twice the main on study as the minimum attack rate. So if that happens in APeX-2, then we'll probably have 2 a month.

Yes, that's an important piece of new information, Jess, is that by opening the enrollment to a less frequent attack rate, it opens up a pretty sizable population that we otherwise couldn't have recruited. And we're able to do that because we're going to track them for a longer period of time.

Our next question comes from the line of Charles Duncan with Piper Jaffray.

Wondering about the screening period, 6 weeks versus, I think in the past study, APeX-1 was 3 weeks. How do you believe this could impact, if you will, the variance that you referred to in the last questions in terms of the attack rate frequency?

Bill, you want to take that?

Sure. Thanks, Charles. So I think the purpose of the screening period is twofold. One is to make sure that we have subjects who can follow the procedures of recording attacks in a diary and the like. And that's not a high bar, but we want to make sure that we don't have subjects getting randomized who won't be able to complete the requirements to follow the primary endpoint of the study. The second is to make sure that they are actually having attacks. And our expectation is that the vast majority of subjects will qualify very quickly. So we're still finalizing the protocol, obviously. And we'll get it submitted and hope to start, and we will start in the first quarter. The duration of the screening period is likely to be a minimum of 2 weeks. We may extend to 6 weeks by another couple of weeks, but it's not going to affect in any substantial way the variance of the placebo attack rate on study. As I mentioned a couple of minutes ago, in the study that was just presented a couple of weeks ago, the attack rate during the screening period was actually quite high. That's a little unusual. But I have every confidence that we'll have an adequate screening period that will have plenty of people qualifying, and that we'll likely see the same type of phenomenon we saw in other studies, where the mean on study attack rate will be about twice the minimum criterion.

Okay. And then regarding the powering assumption that you mentioned, 90%, so it would be greater than or equal to 50% reduction. In the past, we've always talked about, call it, 70%, 75% reduction being clinically important. But when you're talking here a little bit about 50%, does that reflect the change in the criteria for clinical value? Or is that just a way to state the powering?

Thanks. So it's purely a way to state the powering assumption. In the work we do to make sure that we have adequate sample size for a study of this nature, we do very extensive powering modeling and create all sorts of tables. This is a summary statement. Suffice it to say that we had p-values of 0.001, and like in our Phase II study, with sample sizes of 14 per group and 18 per group and 22 placebos. And we should have no problem getting small p-values and replicating those results in our Phase III study with 32 per group. It's just the way of studying the powering assumption.

But still your target is something perhaps north of 50% reduction in attack rate?

Absolutely. More is always better. And if you recollect the APeX-1 final results presentation that we made a couple of months back, we had a table in there about slicing and dicing the data in different ways. And we got 73%, 72% in 8 different analysis of the data. So it's pretty robust at the 125 milligram dose level in that study. So we expect to be able to replicate that.

And then last question in terms of clinical trial sites. Could you give us some sense of what percentage of these sites or patients will be U.S. versus ex U.S.? And then you talked about starting in the first quarter for APeX-2. Could that be January versus March? Or any further color on that?

Bill, you want to take the first part? I'll take the second?

Sure. So I think that the number of sites and the distribution of sites and the distribution of patients, I think that the U.S. is quicker to start compared to countries in Europe. That's just the way the regulatory process works in terms of ethics committees and the like. So we expect that U.S. sites will start first and then EU sites. What we've seen at patient meetings and in talking to investigators is that, as Lynne eloquently pointed out, there's lot of enthusiasm for once-a-day oral. If that translates into rapid enrollment, then it's possible that most of the subjects will come from the U.S. When we ran the OPuS-2 study with our first-generation compound, it was roughly balanced between the U.S. and Europe in terms of patient volume. We'll have right number of sites to get the patients we need in the time we need. And I'm not advertising a particular number of sites, but you can be completely confident that we'll have the sites that we need.

Yes, I'd just add to that, that having been at the Patient Summit in September in Minneapolis and then at the College Meeting with a lot of the people who will be our investigators in the U.S. a couple of weeks ago in Boston. Of all the studies we've ever done, I've never seen enthusiasm for a trial at BioCryst like I've seen for this one. And so hopefully, that translates into a lot of sites wanting to participate and a lot of patients wanting to get into the study. In terms of the timing of when we start, Charles, I'm not going to put any more fidelity than first quarter. Count on us to go as fast as we can. I think the fact that we now know what the design is, we lock down the protocol, there's a lot of early work in terms of getting sites up and ready, getting IRB approvals in the U.S. and all of that stuff, that takes a bit of time. But you can imagine that it's full speed ahead at BioCryst right now.

Our next question comes from the line of Liisa Bayko with JMP Securities.

Just a couple of questions for you. First of all, can you talk about just the patient population that you're going to be recruiting APeX-2? And what kind of background meds will they be on?

Bill, you want to take that?

Sure. Thanks for the question, Liisa. Subjects can be on stable background medications. In some cases, they may have to have a dose change or an alternative antihypertensive agent or antilipid agent or the like, depending on whether their medication is metabolized by the specific (inaudible). So we have very crystal-clear instructions in the protocol and very easy-to-follow checklist for the investigators. And I anticipate that there will be a broad range of concomitant medications in the study. Just a footnote also. Obviously, this is a study of a prophylactic medicine for HAE. All of the subjects will have access to their usual acute attack medicines and use them as they need, but they won't be allowed to take other prophylactic medicines for HAE, obviously.

Okay, that's helpful. And will you include patients that have laryngeal attacks?

Yes, sure. That's been the case in all of our prophylactic studies. And I can't remember the exact number, but a very large proportion of the subjects in APeX-1 and OPuS-2 and OPuS-1 had at least one prior laryngeal attack.

Okay, great. And then maybe if you can just comment a little bit more on the dosing. So the 150 milligrams, which I guess, equates to 175 in the old expression of that dose, can you maybe comment on kind of what sort of increase in exposure you see there and why you came to that dose, as opposed to let's say, 200, which I don't know what that would have translated to? But what I'm trying to say, maybe a little bit more granularity on your modeling and how you came to that as the second dose.

Yes, I'd be very happy to. So as you recall, and I'll just use the salt terminology because it's just simpler, to reference back to that for APeX-1 for the purpose of this question. So we had 125 milligrams, 250 milligrams and 350 milligrams. The 62.5 milligrams dose didn't work. We're not studying that anymore. 125 looked very good. And what we wanted to do was estimate an immediate dose that would have a good enough increase in exposure to expect that we might be able to pick up an increment in efficacy. Just so that for those who didn't listen to that call, the increase in exposure going from 125 milligrams to 250 milligrams, which is a doubling of dose, was a threefold increase in exposure. So we were able to take all of the data from our Phase I healthy volunteer study in our Phase II hereditary angioedema study, where we had very detailed PK and we were able to model by interpolation, and also using a more sophisticated PK modeling, what would be the expected exposure at different dose levels. And we chose the dose level of 175 because it was approximately twice the exposure compared to the 125 milligrams. So then, you can look at PK parameters like here, you're under the curve, for example. So it gives you about twice the exposure. The second thing we did is model a proportion of subjects whose trough level of drug would be above the threshold for efficacy. We took a look at different thresholds, including 4x and 6x the EC50 for kallikrein, for example. And we pick up most of the remaining subjects by increasing the dose from 125 to 175. So on both fronts, we think the PK modeling gives us a very good chance of showing a bump in efficacy at the 175 milligrams dose.

Yes, I would add, Liisa, that at the Boston College Allergy College Meeting, there was a poster from the COMPACT study that (inaudible) presented. And I think they're honing in on this target range, a bit more based on the efficacy that they saw and the trough levels of C1 inhibitor. And if 4x to 6x the EC50 is that range, then the 175 milligram dose, you go -- from 125 to 175, you go from 70% of people being above 4x the EC50 to 93%, so almost all of them. And at 6x the EC50, you go from 38% to 80%. So that's why we chose the dose.

Okay. And you feel like you don't really want to go much higher than that?

I don't think there is a need. I don't think there is a need.

Okay. And MAA timing. I guess you will file after the U.S.?

Yes, we're going to try to file as close together as we can. The good news is the concordance of feedback is very high. And so these trials will apply to both regions for approval.

Okay, great. And then just a final question for me. Are you working on any next-gen kind of compounds that you can share at all?

So is that question around kallikrein or is that question around other targets?

Kallikrein -- well, both.

Yes, so we -- okay. So we continue to explore other kallikrein inhibitors and potentially other indications, and that work is ongoing. And then as we've mentioned in the past, our discovery team is working on 2 other targets that are not kallikrein. But the diseases are rare diseases. The targets are validated and in one situation, it's a disease similar to HAE, where there's an injectable drug that's approved in a sizable market. We want to bring an oral. And in the other one, there is nothing, but patients die at a relatively early age. And so we think that, again, bringing an oral drug into that space would be extremely valuable. So more on that as we progress those programs.

Our next question comes from the line of Maury Raycroft with Jefferies.

Wondering, based on the APeX-1 study, it seems like you have some individual patients who tend to have more abdominal-only attacks. And from the Phase III screening period, I'm wondering if you'll potentially screen out some of those patients that may have a higher frequency of abdominal-only attacks.

Bill, you want to take that one?

Sure. No, we won't. I think that we're very comfortable with the dose selection that we've got for the APeX-2 study. And the 125 milligram dose level data out of -- which corresponds to 110 milligram expresses the base in APeX-2. That dose level in APeX-1 had a very safe and well tolerant profile and a low frequency of GI events. I think that we want to have the broadest label possible for this drug. And so it might be problematic, in fact, to exclude patients who have abdominal events. They're pretty common events in HAE. We want to be able to prevent those too.

Yes. And what I'd add, Maury, is, the issue is around the confusion of the adverse events at higher doses and higher exposures with the early symptoms of an abdominal attack. So it's not that our drug won't treat abdominal attacks. As you saw in the 125 milligram dose, it did a fine job. So the key to solving that problem is choose the doses that don't have those GI AEs. That's the way to fix it.

Got it. And I guess, along those lines, I'm wondering, if you've come up with a strategy that could be implemented in the Phase III to educate patients on differentiating some of the abdominal effects.

Yes, we'll definitely do that. We did a little bit of that in the tail end of APeX-1, but we'll do more of that in APeX-2. But again, I would stress that if you don't have GI AEs, the likelihood that you'll see that goes down. And I think also the fact that it's a longer study, I think being able to manage through is also, I think, more advantageous when you have a longer study. So I think we're in good shape.

Our next question comes from the line of Brian Abrahams with RBC Capital Markets.

First question is on the APeX-S study. Can you talk a little bit about the criteria, the types of patients you'll be including in that amongst the 7353 naive population? And how far along do you need to be with that study before you file the NDA?

Bill, you want to take that?

Sure. Thanks for the question, Brian. So it's being written as quite a broad eligibility. You could think of it as, if the patient is in otherwise good health, obviously, and they and their physician believe that they might benefit from prophylactic treatment with our drug, that's the thinking behind crafting ultimately the eligibility for the long-term safety study. We want to have that be pretty representative of the way the drug is going to get used in real-life medical practice once it's approved. And I'm looking on the second part of your question. I'm sorry, could you repeat that?

How far along you'll need to be before you file the NDA?

Ah, yes. So I think that's a very good question. And we'll be tracking the number of subjects who complete 48 weeks of dosing with both doses, for sure. We will be able to file the NDA once we get to 100 at both doses, for sure. On the other hand, by that time, we'll obviously have the 24-week efficacy and safety results coming out of the final efficacy analysis of the pivotal trial. And that will, I'm sure, influence thinking about how much safety data need to go into the file when it's submitted. There's also an opportunity to update the safety database during the review at a 6-month time point. So we'll be discussing -- once we get to that point with the relevant agencies, both in the U.S. and Europe, the timing of the filing.

Got it. Okay, that's helpful. And then just following up on an earlier question. Bill, I think you mentioned potential outcomes for the interim analysis would be there are no changes or modest increase in sample size. Just wanted to confirm whether there might be any triggers for a potential trial stoppage on either efficacy or futility at that point.

So the answer is no. And it's purely a blinded analysis of the variance of pooled attack rate. There are no efficacy comparisons being done at all. There's no alpha spend, so there's no futility analysis, no stopping rule.

Yes, that's a really important point. This isn't something to get a sense of the efficacy. It's more of the distribution of attack rate that we're seeing and were our estimates right or not, and then resizing. The likelihood that, that will happen is low, but I think it's a smart -- as Bill said, it's part of the ICH guidelines, and it's a smart thing to have built in.

Yes, that makes sense, and that's helpful clarity on that. And then, I guess, speaking of alpha, sort of what's required in terms of a p-value for this final analysis of the study on the primary endpoint? Do you need to hit on both doses or one or the other? Is there a -- like I said, do start with the high dose and then move to the low dose? How does that analysis statistically work?

Bill, it might be good for you to go through the Hochberg just to help him understand it.

So first of all, what are the requirements for success? So a really important point here is -- and this goes along with the regulatory precedent in this disease. It's a rare disease. And in common diseases, regulatory agencies typically want to have 2 pivotal studies. That's not the case here. We have one pivotal study. And there's regulatory guidance on the stringency of one pivotal study. So you have to be more confident in the outcome of one pivotal study in order to use that as your criterion to approve a drug. Nobody will tell you, well, you have to hit a p-value of 0.0 something or other. But a p-value of 0.04, for example, wouldn't be good enough. A p-value of 0.005 or something like that certainly would be good enough. So I think that we're very confident on the basis of the APeX-1 results that we'll have no problem getting a low p-values. So in general, people tend to talk about 0.01 or less being the requirement when you only have one pivotal study. So that's the first part of your question. The second part of your question was how to handle multiplicity, so there's one placebo group that is compared to 2 -- that's going to be compared to 2 active groups. There's a procedure called the Hochberg step-up procedure, which ranks the p-values. And provided that the top p-value is less than 0.05, that qualifies, whichever of those 2 groups has that highest p-value. Then you go to next one and you apply a multiplicity adjustment there. And again, cutting it to 0.025 is not an issue given the results of the APeX-1 study.

Our next question comes from the line of Serge Belanger with Needham & Company.

A couple of questions on the APeX-2 study design. I think during the last update, you talked about the Phase III potentially would be 12 to 16 weeks of duration. I assume that 24 weeks was the result of FDA or EMEA input. And then second question is, now that you're taking the long-term safety evaluation with both doses, does that get you to a position where you can file for both dosage?

Bill, you want to take that?

Yes, sure. Serge, you're absolutely right. So having both doses in the efficacy study and both doses in the long-term safety study gives you that maximum flexibility for what you're put in your label. So let's assume for argument's sake that the efficacy at 175 looks a bit better, and it's just as safe and well tolerated as the lower dose. And we want to have both doses on the label. And having safety at both doses supports that. So it basically allows you to go forward with both doses. It also allows in the event, for example, that there was an issue with tolerability at the higher dose, if everything worked out fine at the lower dose, then you've got all of the information you need to file for that and get it labeled.

Okay. And then the 24 weeks endpoint versus 16 weeks, was that?

Yes, yes. Absolutely. You are correct there as well. So I think that the upshot here really is that there's now a precedent in the field that studies of approximately 24 to 26 weeks in duration, the standard for approval of new drugs for prophylaxis in HAE. It gives us a very, very robust placebo comparison for safety as well as for efficacy for that 24 weeks, obviously. So we have no problem with that guidance and it should be a great study.

Yes. And as I've mentioned before, Serge, it opens us up to a lower attack rate in terms of entry criteria, which opens up another sizable portion of the population of HAE patients.

Okay. And then just a broader HAE market question. You mentioned the 5,500 patients in the U.S., half of them on prophylactics. What about the other half? Is it just a question of not happy with the efficacy of available treatments or lack of payer coverage, or they're being treated with acute treatments?

Thanks for the question. So as I've said, half are on C1 esterase inhibitor. The other half is split between quite a large proportion of that 50% on androgens and acute -- and also a proportion on acute therapies. And then there's quite an interest in other proportion that use acute therapies in a prophylactic manner. So that second half is an additional target for us because those patients may well want to have the convenience of a once-a-day oral as well.

Okay. And in terms of payer coverage, how would you describe it? And is there a number of step-throughs of acute therapies before prophylactic therapy is approved?

From the initial payer research that we have done, we haven't seen that the step edits required to go through acute. And at this stage, we see that the payers are looking to cover all prophylactic therapies.

Our next question comes from the line of Tazeen Ahmad with Bank of America.

Jon, I just wanted to clarify. Maybe I missed it earlier in your talk about how many sites you will be having for the Phase III program? And do you know if any of those sites might also concurrently be involved in any other HAE studies? And then I have a follow-up on financials.

Yes, I think there's actually an interesting window for us to enroll this study right now, where of course, there are other studies, but a lot of the big ones have ramped down. And so what KOLs tell us and the investigators tell us is that there's a window here that we have at the beginning of this coming year, in the first half of this year or next year, excuse me, to enroll patients. In terms of sites, like I said before, I could see a good portion of the patients coming from the U.S. for 2 reasons. One, as Bill said, patients or the sites get up and running faster. There's this ethics and competent authority approvals in Europe that just historically have taken us longer to get approvals. And so European sites come up a little bit slower than U.S. sites. And I really think that given that we can't use the APeX-1 patients for APeX-2 but we can use them in APeX-S, there will be less of a pool to choose from because we haven't had any patients in the U.S. on 7353. So there will be less to choose from in Europe. And there is lot of enthusiasm in the U.S. for getting on this study. At the Patient Summit in Minneapolis in September, we were approached by many, many, many patients inquiring about how to get involved in this study. So it's always hard to predict enrollment. Bill will always tell you it's never easy and there's always challenges and competing studies, but I'd like our chances of getting this enrolled in a good pace.

So keeping that in mind, if you start the study in the first quarter, is it realistic to think that we could have an interim read around midyear? Or would that be too aggressive an assumption?

Interim read in mid-'18? No. So the way the study is designed is it's 24 weeks and then we do the final efficacy analysis after all patients have completed the 24 weeks. And we've said that we expect that data in the first half of 2019. That hasn't changed.

Okay. So maybe I misunderstood what you meant by interim read. Is there going to be an interim read and could you make that public?

Yes. It's real important that you understand this one. This is purely for sizing purposes to make sure that our assumptions around attack rate, especially in the placebo arm, and the distribution of attacks is accurate. And it's blinded. So no, there won't be any report out other than if we change the size of the study. And again, the likelihood of that is low.

So just to be crystal-clear for everybody listening, there is no interim analysis of efficacy at all in the study.

Okay. And then the second question is for Tom, and sorry if I'm going to put you on the spot on this. But there is a proposal from the House Republicans as part of their tax reform bill to eliminate tax credits for orphan drugs. And so I wanted to get your thoughts. I know that Jon probably now several questions ago did mention that you guys are still investing in your pipeline and you have other areas that you'd like to focus on once you got HAE approved in the first asset. But how are you thinking about the importance of that tax credit? And would that impact you, should that tax credit go away?

Yes. So obviously, those tax credits are important to many more companies other than to BioCryst, and we're all waiting to see what happens. There has been lot of proposals that have come and gone over the last couple of years, and especially with the current administration. So the good news for us is certainly, if they take the tax credit away, that would not be a good thing. But if you have good drugs that satisfy an unmet medical need, people are going to pay for it. And as a loss-generating company, we have a lot of tax advantages outside of R&D credit. So I'll worry about that in 3 or 4 years after we get some good drugs approved. But at this point, I'm not worried at all about that.

Yes, the tax credit in comparison to a $2 billion market is tiny, tiny. So I don't think. Personally, I don't think it's going to discourage a lot of companies from not going after rare diseases. That's my opinion.

Okay. So how much do the R&D tax credits, for example, contribute to your current NOLs?

So that -- I don't have that on the top of my head, but that's disclosed in our last 10-K. I mean, it's a significant portion -- or I won't say a significant portion. It is a portion of our thing, but it wouldn't be retroactive. So all the tax credits that we have now are going to be applied in the future, and you're just talking about prospective loss of tax credit. And like I said, I don't think bio and pharma are going to let that go without a significant fight because that just hurts innovation in the industry.

And I'm showing no further questions in queue at this time. I would like to turn the conference back over to Jon Stonehouse for closing remarks.

Yes. So again, I really appreciate all the interest, and it's a really exciting time for BioCryst. We're heading into a Phase III. We're on the home stretch. And we're actually gearing up our commercial readiness to be able to launch this in a competitive market with a great profile drug. So we look forward to continuing to keep you updated, and have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.