BioCryst Pharmaceuticals Inc (BCRX) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the BioCryst Fourth Quarter 2019 Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. John Bluth at BioCryst.

Please go ahead, sir.

Thanks very much, Josh.

Good morning, and welcome to BioCryst's Fourth Quarter 2019 Corporate Update and Financial Results Conference Call.

Today's press releases and slides to accompany our call are available on our website.

Participating with me today are CEO, Jon Stonehouse; Chief Medical Officer, Dr. Bill Sheridan; and Chief Commercial Officer, Charlie Gayer.

Following our remarks, we will answer your questions.

Before we begin, please note that 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 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 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 can be accessed on our website.

Now I'd like to turn the call over to Jon Stonehouse.

Thanks, John.

What differentiates BioCryst is our focus on bringing oral drugs to patients who suffer from rare diseases.

These diseases have tough biological targets and very few companies even try to address that and let alone succeed, but we seek to do the extraordinary because patients have told us that the opportunity to take a pill or a capsule for their disease is what they desperately want.

They tell us this is a shot at an ordinary life because their disease and their treatment will play a much smaller role in their day-to-day living.

Today, this is not just something we're shooting for, BioCryst is making it a reality for patients.

With multiple approvals coming for our lead program in HAE and an even more exciting pipeline with our oral Factor D inhibitor, rare disease patients around the world and our company are moving into a new era.

Our priorities this year are very clear.

It's only March, and we're making early progress in executing our plan.

So far this year, we've submitted our new drug application in Japan, and the submission has been accepted for a review.

The review is under Sakigake designation, which means this would be the first approval in the world for berotralstat.

Next, we said we expected to hear from the FDA regarding our U.S. NDA submission, and we did.

We now have a December 3 PDUFA date, and the agency has said that they are not currently planning to hold an advisory committee meeting to discuss the NDA.

Lastly, we're on track to submit our MAA for approval in Europe by the end of the month.

This all adds up to an approval in Japan then in the U.S., both later this year, and then in the first quarter of next year approval in Europe.

Three approvals in approximately 12 months is extremely exciting and transformational to our company.

The other top priority for BioCryst is achieving proof of concept with our oral Factor D inhibitor, BCX9930.

As we announced this morning, we've dosed the first PNH patients in this study and remain on track to have data in the second quarter.

This is not only proof of concept for PNH but proof of concept for other complement-mediated diseases involving the alternative pathway.

Bill will go over the design of the proof-of-concept portion of our study and what we expect to see in the second quarter.

Charlie will go over the market for HAE and the very strong evidence that supports our view that many patients will want to use our oral once a day therapy, berotralstat, whether they're switching from injectable prophy treatment or switching from injectable acute therapy.

And he'll review our partnership with Torii in the Japanese market and why we're so excited about having this be our first market approval in the world.

But before I turn it over to Charlie, let me take a moment to make sure you have a clear understanding of our clinical data and why we believe this is such strong evidence that when many patients use our oral therapy, they're likely to have a benefit that will keep them on therapy.

If you turn to Slide 4, you'll see 2 graphs of data from our Phase III pivotal study called APeX-2.

On the graph on the left, you see the attack rate by month over 12 months for the completers on the 150-milligram dose.

What those data show is a mean attack rate at baseline of approximately 3 attacks per month going down to approximately 1 attack per month and staying there through 12 months.

This is a robust result.

What's even more interesting is when you look at the graph on the right.

These are patients on placebo in the gray boxes, and then we switch them after 6 months to active drug.

You see them drop from on average 2 attacks per month to about 0.5 attack per month on the 150-milligram dose for the second 6 months.

Again, a very nice response in attack rate reduction.

So this drug works and patients see meaningful benefit.

The next couple of slides bolster this point even more, whether it's the similarity of results when adding the data from APeX-S or when you look at the median attack rate, where in 6 out of 12 months, more than half of the berotralstat patients are attack-free.

You reach the same conclusion.

This drug works.

And finally, if you look at the safety and tolerability of berotralstat, you see a profile that is safe and generally well tolerated with the most common adverse events being mild and transient GI events.

So the remaining questions left are will patients want to use it and will physicians prescribe it?

I'll turn the call over to Charlie to walk you through the market research to answer these questions.

Thanks, Jon.

What is so compelling about our market research is how favorably patients and physicians reacted to the berotralstat profile.

After seeing the 6-month efficacy and safety data from the APeX-2 trial, patients are very willing to use berotralstat regardless of how they treat their HAE today.

Many physicians expect to switch current prophylaxis patients to our oral therapy while also expanding their use of prophylaxis overall.

And importantly, payers say they will reimburse for our drug if its cost is within the range of what they pay for injectable prophylaxis drugs.

Patients have told us for years that treating HAE with an oral medication is their dream.

Although they are grateful for the advances in injectable treatments, they want to reduce the burden these therapies add to their lives.

Our survey of 100 HAE patients gives us great confidence that many patients will realize that dream when we launch our drug.

Nearly 60% of the patients are very willing to use berotralstat and likely to take action.

What's particularly important is that 79 of the 100 patients are already on a modern prophylaxis therapy, and they too are very willing to switch to our drug.

Even among the patients who say they are very satisfied with our Cinryze, Haegarda or Takhzyro therapy are very -- half are very interested in switching to berotralstat.

So why do so many patients want to switch?

Many HAE patients have switched to new therapies in recent years, and they see oral therapy as the next big advance.

Injectable treatments have helped them get their HAE under control, but no drug is perfect and most patients continue to have some breakthrough attacks.

Takhzyro patients in our survey, for example, reported an average of just over 0.5 attack per month.

But we hear from patients and doctors that breakthrough attacks on prophylaxis treatments, including berotralstat, tend to be slower moving, milder and manageable.

What patients want now is a treatment that helps make HAE a smaller part of their lives by controlling their attacks and reducing burden of treatment.

They don't want to think about refrigerating their medicines, scheduling and preparing treatments and dealing with the discomfort of injections.

An oral once-daily medicine is something that HAE patients see as a more normal way to treat their disease.

Physicians who treat HAE typically believe treatment selection should be a shared decision with their patients, and most have recent experience helping patients switch to new therapies.

It's clear that physicians recognize the value of an oral drug for their patients because they expect to make berotralstat their most prescribed HAE treatment.

We surveyed a very large sample of 175 physicians who treat over 10% of all U.S. HAE patients.

After reviewing the product profile, they reallocated how they would treat their current patients in the future with our drug available.

The physicians expect to treat 41% of their patients with berotralstat, with about half switching from a current prophylaxis and the other half coming from expanding use of prophylaxis from 58% to 80% of their patients.

Physicians can overstate their intentions in market research but even cutting their expectation in half shows that berotralstat is likely to capture a sizable portion of the HAE market.

We are eager to start bringing our oral drug to HAE patients in the U.S. and around the world later this year.

We have attracted experienced commercial talent who bring recent track records of success in rare disease launches and previous experience in HAE.

They are joining BioCryst because they believe berotralstat is a transformative medicine with tremendous commercial potential.

We believe that berotralstat has a peak global market opportunity of over $500 million.

This factors in the enthusiastic patient and physician reactions to the product profile, payer willingness to reimburse and the size of the HAE populations in the U.S., Europe and Japan.

We are prioritizing our launch preparations for the U.S. and Europe and supporting our partnership with Torii in Japan, where berotralstat has the potential to receive the first regulatory approval in the world.

As Jon shared at the beginning of our call, we submitted our JNDA to the PMDA earlier this quarter.

With the accelerated review that comes from our Sakigake designation, berotralstat has the potential to be approved in the second half of this year.

As a reminder, the PMDA back in 2015 awarded berotralstat the Sakigake designation, recognizing its innovative nature and its potential to address a high unmet medical need for Japanese patients.

Our JNDA submission was based on safety and efficacy results from APeX-J, the first placebo-controlled, randomized trial ever done in HAE in Japan.

It also included the clinical data from our global trials.

Our Japanese investigators and local patient associations are excited by the results we shared from the 24-week pivotal readout of APeX-J.

The study met the primary endpoint for the 150-milligram dose of berotralstat and showed consistent, sustained reduction in attacks over the 24-week period.

It's important to note there are no treatments indicated for HAE prophylaxis in Japan today.

Berotralstat would be the first.

So the market is in essence a decade behind the U.S., which saw its first prophylaxis therapy launched in 2009.

With this in mind, our commercialization partner, Torii, is excited to help raise the standard of care for HAE patients in Japan to a level comparable with the U.S. Leveraging their success in building the HIV market from the Gilead partnership, Torii will be focused on disease education and awareness to both physicians and patients as well as supporting patient identification efforts.

Based on prevalence estimates, there are 2,500 HAE patients in Japan.

However, today, only approximately 500 are in the local registry.

In rare diseases, especially HAE, we've seen what happens when innovative treatments become available and there is focused investment and commitment in broadening education.

Increased patient awareness and diagnosis follows.

This will be a key priority for Torii.

In addition, berotralstat complements Torii's existing portfolio of allergy and dermatology products.

The broad reach of their medical representatives positions Torii well for the potential launch of an oral once-daily drug as the first prophy treatment in Japan.

We continue to see this as a great partnership for the success of berotralstat.

Before turning it over to Bill, I wanted to recap the economics from our partnership.

With PMDA approval this year, we stand to receive a $20 million milestone payment contingent upon clearing a minimum price threshold.

In addition, tiered royalty payments on net sales would range from 20% to 40% based on our Sakigake status.

This structure allows us to participate in the upside of Torii's commercialization success.

With that, let me now turn it over to Bill to update on our oral Factor D program.

Thanks, Charlie, and good morning.

I'd like to start by taking a moment to share why targeting Factor D with BCX9930 is such a promising approach for diseases involving alternative pathway of complement.

First, Factor D is required for the alternative pathway to work.

That means that doses of 9930 that block Factor D will succeed in inhibiting the alternative pathway independent of the particular disease setting.

And Factor D as a target is the same in PNH as it is in nephritis and other alternative pathway diseases.

So proof of concept in PNH provides proof of concept for other diseases of the alternative pathway, not just PNH.

Next, Factor D levels is lowest of any complement pathway enzyme.

This means that you need less drug to inhibit it compared to other complement targets.

On top of that, Factor D levels do not increase with inflammatory illnesses, so the dose does not need to be changed when patients get illnesses like influenza.

Lastly, in contrast to other complement enzymes, Factor D has a unique structure and BioCryst's scientists have been able to design inhibitors like 9930 that intrinsically have better specificity against other serine proteases.

This leads to a lower likelihood of off-target effects and therefore a better safety margin.

Considering the attractiveness of Factor D as a target, we were very excited to announce today that we have started our PNH proof-of-concept study with 9930.

In PNH, our goal is to develop an oral monotherapy with excellent efficacy, whether or not patients in PNH have ever been treated with a C5 inhibitor.

Just recently, I returned from an advisory meeting with top world experts in PNH and diseases of complement where we discussed the profile of 9930: favorable preclinical pharmacokinetics and pharmacodynamics with large safety margins and in healthy subjects, linear and dose proportional exposure and outstanding PD profile and safe dosing to high exposures.

I was excited about the prospects for 9930 before the meeting.

But based on the experts' strongly positive assessment and their confidence in 9930 being successful in PNH, I'm even more enthusiastic now.

What these experts expect to see is that an oral potent Factor D inhibitor with great exposure like 9930 will be superior to C5 inhibitors.

To summarize their advice: for this drug, it is just a matter of achieving and maintaining adequate drug levels.

We're excited that the proof-of-concept study has now started and look forward to seeing evidence of proof of concept in the second quarter.

Because PNH is such a rare disease, we designed the proof-of-concept study to step-through dose ranging as quickly as feasible as shown in the study scheme on Slide 30.

Subjects in the first cohort will receive 50 milligrams twice a day for 14 days, then 100 milligrams twice a day for 14 days for a total of 28 days.

Subjects in the second cohort, the planned dose regimen, is 200 milligrams twice daily for 14 days, followed by 400 milligrams twice daily for 14 days.

Twice a day treatment will continue for subjects who show benefits such as improvement in LDH levels or hemoglobin.

We are enrolling 2 -- patients of 2 types: one, patients who are not taking a C5 inhibitor.

For these patients, 9930 will be their only treatment.

And two, patients who have had a poor response to a C5 inhibitor but are still on treatment.

For those patients, 9930 will be added to continued C5 inhibitor.

The first patients enrolled in the proof-of-concept study have been treatment-naive patients.

With a goal of monotherapy for 9930, data from treatment-naive subjects is our first priority.

Because PNH patients are very sick and 9930 could provide benefit to them, the protocol allows any patient with a benign rash to continue dosing.

We and the expert advisers that I discussed before expect that any benign rash events will resolve quickly and amount to a temporary and onetime occurrence.

As you may recall, this is what we saw in the healthy subjects we dosed through in the MAD portion of the trial.

We are looking for and expect to see clinical activity with improvement from baseline in LDH level and hemoglobin.

Hematologists have learned that this type of clinical laboratory evidence of efficacy in PNH, even when seen in just a handful of patients, is very compelling.

But our goal for this program is much broader than PNH.

The alternative pathway of complement is the same no matter the disease.

So -- and this is very important and it's worth repeating and was reinforced for us by the key opinion leaders in the space -- if we demonstrate proof of concept in PNH that an oral Factor D inhibitor can suppress complement, this result is directly applicable to many other alternative pathway diseases such as a set of rare kidney diseases, including dense deposit disease, C3 glomerulonephritis and primary membranous nephropathy, which currently have no approved treatments, and also acquired hemolytic uremic syndrome.

So following our proof-of-concept data in PNH, we intend to advance this program in both PNH and other complement-mediated diseases.

We have a very strong scientific and clinical basis to expect excellent results from our proof-of-concept study and very much look forward to reporting data in the second quarter.

Thanks, Bill.

You can see why we're so excited about the possibilities with BCX9930.

With positive results from our proof-of-concept trial, we'll be in a fantastic position by having both a very attractive pipeline with 9930 and on the homestretch to approval and launch with berotralstat.

As you look at our balance sheet and cash guidance for the year in our press release today, you see that we ended the year with $138 million.

This reflects the $100 million we added in the fourth quarter of last year but does not reflect the payment we received last month for the $14 million RAPIVAB shipment at the end of last year.

We expect our net operating cash used to be in the range of $125 million to $150 million.

This cash runway takes us through 2020 and funds the proof of concept for 9930 and the commercial and prelaunch activities for berotralstat.

Beyond that, we have sources of additional capital to provide financial flexibility that we will pursue over the course of the year.

We expect up to $20 million for approval in Japan from Torii.

We are evaluating royalty financing for berotralstat that would bring in capital at approval to fund the launch.

And with the proof-of-concept data with BCX9930, we have options to add capital, such as a partnership, to advance that program.

We're going to be generating revenue starting early next year with a product that has north of $500 million in peak sales, followed by a pipeline in a molecule with BCX9930 and more oral drug programs for patients with rare diseases right behind it.

All of this supports what I said at the beginning of the call: we are moving into a new era as a company.

Before we open the call up for Q&A, we've received a lot of inquiries on how galidesivir, our broad spectrum antiviral, could be used to treat patients with COVID-19, and we wanted to share the latest information with you.

This outbreak is a reminder that the U.S. government and governments around the world need to be prepared with a stockpile of broad spectrum antivirals that can be deployed quickly in situations like the current coronavirus outbreak.

This is why we've continued our partnership with the government over the past several years to advance galidesivir.

Prior research published in Nature has shown that galidesivir is active against more than 20 RNA viruses and in 9 different families, including coronaviruses.

The virus causing COVID-19 is a coronavirus, but we do not yet know if galidesivir has activity against this specific virus.

In Phase I trials in healthy volunteers, galidesivir was generally safe and well tolerated.

And last year, we opened a Phase II clinical trial with galidesivir in yellow fever under a contract we have with NIAID.

Since 2013, we have been in partnership with NIAID and BARDA in the development of galidesivir under contracts that totaled $82 million.

Because we have the relationship with the government, we have been working with them to figure out how we might help in this global health emergency.

We are working to get galidesivir tested against the strain.

We are evaluating participation in clinical trials and how we can increase drug supply.

All of this is being done with our government partners, and we are following their lead.

As these activities develop further, we will update you.

This concludes our prepared remarks.

Operator, we'd now like to open it up for questions.

(Operator Instructions) Our first question comes from Liisa Bayko with JMP Securities.

Congratulations on all the progress.

Just curious on -- if you could provide any update on the regulatory process.

This is a little bit different than some other kind of processes where we might have ADCOMS and so on and so forth.

So we don't have a lot of visibility between now and year-end when we expect approval.

So any updates you can give us on 7353.

And FDA interactions, where you are in terms of any kind of review, whatever, would be helpful.

Sure.

I mean it's a straightforward typical process.

As we announced earlier, our filing has been accepted by the FDA.

We have a PDUFA date of December 3, and there are typical routine questions that regulators ask and we answer as their review progresses.

So there's really not a lot to report there.

We expect that it will go in a typical way.

Any -- can you share any color you have on your pricing strategy and how you're thinking about that in that equation?

Yes.

I think the research that Charlie and his team did in the summer changed our view to some degree from what we had shared with you back when we got the data in around Memorial Day last year.

I think originally, we went into this thinking significant discounts were an important piece of what we needed to do.

When Charlie scripted the surveys with -- I think it was insurance companies that cover 100 -- or 80 million lives and PDMs that cover over 100 million lives, they basically said they get the need for an oral.

And as long as we're in that range of our competitors, which is somewhere between $500,000 a year and $600,000 a year, that we'll get reimbursement.

So we haven't made any final decisions.

That's what the payers have told us, but that was good information for us to receive.

Okay.

And then how do you think about that in sort of the European region?

Yes, it's interesting that the pricing in Europe is all over the Board in rare diseases.

In some cases, you see price parity where there's no competition for rare disease drugs.

And in other cases, you see significant discounts.

We think there's a real opportunity in Europe for prophylactic therapy.

It's largely an acute therapy market right now.

We're watching the competitors ahead of us and the moves that they're making, and we -- the goal is to get as much access to patients in the countries where we get approval and to remove the barriers to that access.

So we'll wait and see how things unfold.

Okay.

Great.

And then just on 9930, can you talk about your goals in terms of changes in LDH, hemoglobin?

For your proof of concept, what are your objectives?

What's the hurdle for you on those attributes?

Thanks for the question.

There are a couple of objectives.

Get through dose ranging quickly, that's an objective.

And so that's why we've designed it in the way I described.

Secondly, see how quickly and to what extent the LDH goes down and the hemoglobin goes up.

I mean the expectation here is that blocking Factor D will block all of the downstream events that turn into intravascular hemolysis and extravascular hemolysis, and that's very attractive.

The feedback we've had from our expert advisers is that they fully expect that to happen.

At the right exposure, which we'll discover in the proof of concept, we expect the LDH to come back into normal range and the hemoglobin to go up.

So that's a monotherapy situation.

Our first data will be in naive subjects, and we're very much looking forward to seeing it.

I think being more quantitative than that is a bit difficult.

Okay, fair enough.

Do you feel like you need to be kind of as good as Soliris and some of these other molecules?

Or do you think it's sort of akin to HAE where there might be some flexibility if you have an oral option?

How do you think about that?

Because of the position of Factor D in the alternative pathway upstream of C5 and because PNH is an alternative pathway disease, if -- we need to see, as I mentioned, that we can get adequate exposure and maintain that, the expectation from the experts is this will be superior to C5 inhibitors.

Okay.

Great.

Looking forward to that.

And then just finally, you talked about pipeline and molecule.

Can you maybe prioritize kind of where you see making your next few investments?

And what would be the next kind of points of visibility for us?

So what we need to really understand what the priorities will turn out to be is regulatory interactions once we have that proof-of-concept data.

And so we fully intend to explore that with several indications with the regulators.

Some of these diseases have no approved therapies.

Some of them affect children and have pretty disastrous outcomes.

So I think I'll reserve judgment on that, but we'd like to invest across the board, of course.

Our next question comes from Jessica Fye with JPMorgan.

I was hoping you could elaborate on the galidesivir comments this morning.

I guess how close are you to starting further work on the current coronavirus?

And can you maybe compare and contrast any similarities or differences you see between your product and remdesivir?

Yes.

So let me start with the latter first.

I mean they're both broad spectrum RNA polymerase inhibitors.

That's about as much as we can make in terms of comparisons.

As I said in the prepared remarks, this is such an important reminder that we've got to get broad spectrum antivirals into the stockpile because there's a lot of reacting rather than a lot of preparedness.

And so because we have a contract in place and we've got a relationship with NIAID and BARDA, our team has been in conversations.

And the 3 things that I laid out, getting testing against the virus, looking at participating in clinical trials and evaluating increased drug supply are all things that were in motion currently and we're working on.

Okay.

And can you also say how many patients you've dosed so far in the 9930 study?

And can you remind us how many you want to see complete dosing before reporting initial data?

Would you want to fill any of these cohorts before releasing data to the Street?

Thanks for the question.

It's not our usual practice to give a blow-by-blow on patient recruitment once we've announced that we started.

The trial is up and running.

That's great news.

And the proof of concept here doesn't need a lot of patients, so that will be assessed as we go.

And as we've seen with other programs in the past, just a few patients can be just fine, and we'll have proof of concept in the second quarter.

The protocol is designed to give us some flexibility in terms of how many patients we might need.

We may or may not need all of those subjects that are outlined on the slide.

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

Just a few maybe on Factor D. Since that's your next big pipeline asset, I just wanted to get some color from you on how you think your molecule might differentiate from the other Factor D inhibitors that are being developed, namely the ones from Alexion, and then a couple of follow-ups.

So I think what we've seen in other rare disease programs is that at these early stages, it's impossible to predict the future.

We just saw that palovarotene fell out of development in fibrodysplasia ossificans progressiva, for example, and that's a blow to patients with that disease.

So now there's less competition.

So all of the oral programs are at a very early stage.

I think that we're very excited about the characteristics of our molecule.

Not a lot of information is in the public domain about the competitor molecule, so it's rather hard to comment on comparisons.

Yes.

And the last thing I'd say is this is a huge market and so the ability for multiple oral players -- I mean you see how many injectable players are in this space; it dwarfs the oral.

So this is a really big market where multiple players can play.

Okay.

Great.

And then in terms of your proof-of-concept study, it looks like you're going to be looking at higher doses than the ones that you might have looked at already.

I think you looked at 100 mg for your previous trial.

So if you go up to, let's say, 400, how are you thinking about balancing that out with any observation of, let's say, rash?

Is that a big deal based on what you're hearing from physicians?

We have successfully dosed in the MAD 200 milligrams twice a day and 400 milligrams twice a day now.

We look forward to sharing the data from those healthy subject cohorts when we report the proof-of-concept data in the second quarter.

So our plan is to use those doses in the PNH proof-of-concept study in addition to the 50 and 100-milligram twice a day doses, as I outlined in our remarks.

Now overall, as we've mentioned before, rash has been seen in the majority of people in the MAD, and we've been able to dose through in a couple of cases in PNH patients.

That's the plan.

So -- and we feel very, very happy about the profile of the drug that we've seen so far.

And Bill, when you talk to the KOLs about this, the disease, the balance between the need to treat the disease versus the tolerability issue was...

Sure.

It was a simple conversation.

I mean PNH patients are very sick.

People with the nephritis disease, as I mentioned, are very sick.

And when there's an expectation of benefit, it totally changes the approach.

So the protocol allows people with benign rashes to continue dosing, and the expectation is from us and from the hematologists and from our expert immunology advisers that these things will be a temporary inconvenience.

Is there any built-in part of the protocol that allows you to lower the dose?

The expectation is that with the same dose continued, that the rash will go away by itself, and that's what we saw in a couple of cases in the healthy subject part of the study where the protocol allowed people with limited rashes to dose through.

So that's the plan.

Okay.

And if I could squeeze one in on 7353 -- or sorry, berotralstat.

It's going to take me a while to get used to that name.

So in Japan, historically, they have provided pricing for rare disease drugs that can be higher than what's seen in the U.S. Is that still the case?

Yes.

Like I said before, when -- I think it was Liisa who had the question about outside of the U.S. Japan is a country where there have been some pretty high prices on rare disease drugs.

The fact that we have Sakigake designation, I think, helps as well.

You get a premium for pricing, and it also has a positive effect in the math that goes into the price reductions that occur in Japan, I think, every 2 years or whenever that occurs.

So yes, we -- I think both Torii and BioCryst believe that (technical difficulty) a really fair price that reflects the innovation and the benefit, especially in a market where there's no other prophylactic therapies.

Our next question comes from Tyler Van Buren with Piper Sandler.

Could you just speak a little bit more about your future clinical strategy in terms of going after potentially both naive and C5 experienced patients once you see proof-of-concept data?

I'd be happy to describe it in general terms.

The exact complete development program strategy for this drug will be defined in consultation with regulatory agencies and expert advisers in the usual way.

But there's a wonderful opportunity here to help patients with a diverse array of diseases that are driven by other activity of the alternative pathway of complement.

So it's premature to predict exactly what the studies will look like or how many subjects we'll need.

But monotherapy with this drug and superiority to C5 inhibitors are expected, and that's the goal of the program.

Okay.

And you mentioned maybe the comparison to C5.

But what about C3?

Maybe if you could just comment on your thoughts on the recent published data and potential differentiation there.

Yes.

So in alternative pathway diseases, abolishing C3 is functionally equivalent to blocking Factor D. That's the way you should think about it.

I think a twice a week or more subcutaneous injection of large volumes is unattractive for patients.

Oral treatments are far more attractive.

Our next question comes from Brian Abrahams with RBC.

A few for me.

I guess, Charlie, thanks for the really interesting market research update.

Would love to know a little bit more in terms of whether you have any clarity on the types of patients that may be switching off their existing therapies to 7353.

Are there certain types of attacks that are viewed as being equivalently or perhaps even better managed with 7353 in (technical difficulty) used to foresee switching from more often?

Then I have a few follow-ups.

Yes.

No, great question.

Thanks for that.

And what we saw in our market research, and this is consistent with our conversation with patients, is it's really everybody.

Patients come from all types who are interested in oral therapy.

And so as I mentioned in my remarks about the market research, the majority of patients in our survey were actually already on and doing pretty well on injectable therapy, and they have a really high interest in coming over to oral.

So we think we're going to pull from all different types of patients.

Yes.

I would add that these patients are really satisfied in their current therapy.

And some folks have asked us, is it just the people that are having breakthrough attacks on Takhzyro that are interested?

And the answer is no.

These are patients that are very well controlled, very satisfied with their current therapy and half of them are willing to switch to our oral.

And the answer, Brian, is real simple, they want more out of their therapy.

There is a burden of therapy when you have to inject and so they want more.

Got it.

Great.

And then on the Factor D program, do you guys have any additional insights into the potential drug-associated rash?

And can you maybe clarify how the stopping protocols differ versus the healthy volunteer study?

Are they any looser to potentially enable patients to dose -- more patients to dose through the rash?

Sure.

Happy to answer that.

So the key insight here is that it's a benign phenomenon and it's benign clinically, it's benign pathologically when you biopsy the skin and look down the microscope.

And the expectation driven by a huge amount of experience in the field of allergy and drug rashes is that these things are self-limited and tolerance develops with continued drug dosing.

And that's the expectation.

I was chatting with a local physician who runs the desensitization clinic because these things are so common, right, with Bactrim, for example.

So there's a lot of learning in the field of drug-associated rashes of this nature that are completely benign.

So that's the key thing there.

With regard to the protocol for proof of concept, obviously, our clinical studies are done putting patient safety first and patients are getting carefully monitored.

If a patient develops a benign rash, the protocol allows continued dosing with the drug.

The expectation is that the rash will last an average of 4 or 5 days and disappear despite continued dosing of the drug.

So that's the plan.

And Bill, if they have itch, they can use antihistamine or cream.

Indeed.

Yes, or topical treatment.

Yes.

Got it.

And then just last one for me on galidesivir.

Can you remind us the drug's potency versus related coronaviruses?

The types of studies you might consider, are these studies that you would fund or that the government would fund?

And then just remind us of your economics relative to BARDA on the asset.

Is this something you have full control over and how long the IP life is there?

That's a lot of questions.

So Bill, you might want to take the activity on other coronaviruses first.

Yes.

So an interesting feature of the RNA polymerase inhibitors like galidesivir is they have to be taken up into cells and converted into triphosphate nucleotide in order to work, in order to disrupt viral RNA synthesis.

And a lot of the in vitro testing is done with cell lines.

The cell lines vary in their ability to do that.

So you have to take the in vitro activity assessments with that in mind.

And for example, with the MERS coronavirus, we had the Vero E6 cell line, which has about an 8% efficiency compared to normal human cells in making that conversion and the EC50 was around about 20 to 30 micromoles.

But at the end of the day, if there's in vitro activity and the government decides to go forward with a clinical trial, you learn in a clinical trial whether or not the drug has activity.

Yes.

And to answer your question on clinical trials, Brian, there's a number of them in China.

There's some in the U.S. The virus is moving around now, and so we're exploring all the different options to give the best assessment of testing it.

And also that gives a clear outcome, and it is done in a way that we believe gives a good answer, so high-quality study as well.

With regard to IP, we have method of use out to 2031, and so there's plenty of runway there.

And then with regard to the arrangement we have with the government and funding, I mean the ultimate customer -- this is not a commercial product.

The customer is governments, right?

And so working with governments has been the formula in this space, and we know it well with RAPIVAB, right?

And we've been through one global health emergency with the 2009 H1N1 pandemic.

So we're not putting BioCryst resources towards this because the government is funding it.

We have people that are dedicated to this.

And as I said before, we're following the government's lead on this at the end of the day.

(Operator Instructions) Our next question comes from Gena Wang with Barclays.

I will also follow Brian, asking a few more questions on galidesivir.

Just wondering if you can give any color regarding the activity compared to remdesivir from Gilead.

And then so...

Yes.

Well, go ahead.

Go ahead, Gena.

Sorry.

Yes, I can ask the rest later.

Okay.

So I'd point you to that Nature publication, and we can send -- John will send you the link so that you have a reference because I don't have it in front of me right now.

There aren't comparisons, but we can show you the in vitro activity to things like SARS and MERS and get you that answer.

Great.

That's very helpful.

And also it seems like -- do you have to do a preclinical study before moving to clinic?

And how soon you think that you can move to clinical study?

Yes.

No, I mean this is a global health emergency, so the rules are very different when you're in an emergency like we're in with COVID-19.

But I think the 3 things that I talked about before are the 3 things that we're currently actively working with the government on: the testing of this specific strain of virus with galidesivir.

The second is understanding how to participate in clinical trials.

Testing it in humans would be very helpful to the advancement of our program, and so we're evaluating that.

And then the third is increasing drug supply.

Sorry.

Just to comment on your question about preclinical testing.

Galidesivir has been successfully administered to healthy volunteers in 2 Phase I studies, so we've got quite a lot of information about the safety and the dosing and the pharmacokinetics of the drug in healthy subjects, which helps us a lot.

And you recall that we opened a study in yellow fever in Brazil.

So nobody has a relevant animal model for COVID-19 disease.

So with this current coronavirus and the relevance of any animal model to decision-making or predictive value for human efficacy is anybody's guess.

So nobody is relying on that stuff.

Yes.

And if the question is around which RNA polymerase inhibitor would the government choose?

The discussions we've had with the government is they'd like to have more than one broad spectrum antiviral in the stockpile, right?

There's issues of resistance.

Because they're broad spectrum antivirals, one may work on one virus, another may work on another virus.

So all the indications we've gotten from the government is that they need more than one.

Okay.

And when you say government, are you only referring to the U.S. or any other governments you are being in discussion?

And then how quickly you think that that will move to Phase III trial?

Okay.

So with relationships, it's the U.S. government for sure since, I believe, it's been a number of years since we've had a relationship with both NIAID and BARDA, and so that's our focus right now.

And in terms of Phase III, it's really difficult for me to predict the path here.

Again, the rules change when you're in a global health emergency.

I think the important thing now is how can we help with this global health emergency and people getting infected.

Because you've heard on the news that vaccines are going to take a while, so treatments are really the only defense right now.

And so if we can help there, we'll be available to do that.

Our next question comes from Serge Belanger with Needham & Co.

Just a couple of questions for me.

As you get ready for the MAA filing here, can you remind us again what your European strategy is?

Will you be looking for a partner?

And then...

No.

No.

Okay.

That's pretty clear.

Yes, but I'll expand.

Finish your second question, go ahead.

The other one is related to guidance.

So go ahead.

Sure.

So we've already got a team that is doing work in Europe and an experienced team.

Charlie and his GM leader in Europe are hiring in really expert rare disease folks.

One of the big things in Europe is the pricing process and people that have actually had hands-on experience in negotiating through to get pricing for rare disease drugs in the various countries in Europe.

And the beauty in Europe is it's super concentrated so it doesn't take a ton of resources.

It's a fraction of -- a small fraction of what is necessary in the U.S. So no, we're not planning on partnering there, and we're building that team and getting ready for the launch.

Okay.

Got it.

And then on guidance, how much of the launch spend is built into the guidance?

And maybe if you can give us a little more color on the R&D spend in 2020.

And then how is the search for a new CFO going?

Okay.

So let me start with the guidance.

So all the work to be ready to -- all the prelaunch activities, the buildup of the sales force, all of that is in the guidance.

So there's no skimping on that for sure.

So all of that -- and that includes building up the European organization as well.

And your second question was?

R&D.

Oh.

So I think the way you should look at the guidance is commercial increases over time because we're getting closer and closer to launch.

Clinical goes down a bit as -- of course, through the year, and manufacturing -- but it's heavy in the front of the year, and then manufacturing is heavy on the front of the year.

So it all kind of balances out and is fairly evenly spread quarter-to-quarter, but you get how the various components are at a high point going down or at a lower point going up.

Sure.

And then the CFO search?

Oh, I'm sorry.

Yes.

No, it's going -- progressing well.

So we hope to have some news soon.

And your final question comes from Maury Raycroft with Jefferies.

So I'm wondering for Japan, so you mentioned 500 are in the registry in Japan but there are estimated to be about 2,500 patients in Japan.

Can you say if you and Torii have made progress in getting new patients on the radar and potentially warehouse?

And then with the Sakigake status, does that accelerate anything on the reimbursement side?

And can you provide any perspective into what a revenue launch ramp in Japan could look like?

Yes.

So one of the reasons we chose Torii is not only the successful experience that they had, that Charlie mentioned with the Gilead partnership, but also just the reach that these guys have.

They have, Charlie, correct me if I'm wrong, I think close to 300 representatives in Japan.

So they're actively doing medical affairs work and the like.

And you're exactly right, Maury, it is a find-the-patient market because there aren't treatments.

But the fact that we've got an oral once a day, I mean the feedback that we've gotten from investigators around how once-a-day pill has changed their life -- we actually had one investigator tell us a patient said they forgot they were sick.

So the excitement around this is incredibly high.

And what we've seen in other markets around the world is when you get that kind of enthusiasm for a therapy, you're able -- and you have the pharmaceutical resources and you have the physicians that are educated in treating the disease and you have the patient association, that recipe causes the market to change dramatically and quickly.

Got it.

And with Japan contributing to revenue, could that start happening by the end of 2020?

Or what are your thoughts?

Yes.

So just to be clear, so the process is you get approval.

And I think one of the other questions you had was about Sakigake and how that affects the process and pricing.

And then there is a 60-day price negotiation period with the opportunity to add another 30 days if you're still negotiating price.

And since we've never been through the Sakigake process on this part, I can't really give you a lot of experience.

So the one thing I think you asked is if Sakigake speeds up the pricing.

It doesn't speed it up.

It just -- as we mentioned, it's prestigious for the drug and then it gives some opportunities in pricing over time, but it doesn't speed up that initial 60 to 90 days.

But clearly, if it's got Sakigake designation, the Japanese government believes that it's a highly innovative drug for a huge unmet need.

So I think that's really important.

In terms of -- so if you add all that stuff together, I wouldn't put a lot of -- remember, it's a royalty as well.

I wouldn't put any revenue in this year but next year, certainly.

Got it.

Okay.

And then just one more on galidesivir.

I guess you already have arrangements with the U.S. government.

But could funding to BioCryst from the U.S. be expanded based on the $8.3 billion in funding that's coming through Congress right now?

And does BioCryst positioning become more important if Gilead's remdesivir trial is successful?

Okay.

So let me take the first one first.

So it's absolutely beneficial to have a contract in place because the process to get a contract is pretty laborious, and we have that direct experience from all the years of doing it with both galidesivir and RAPIVAB.

So the government has the ability to add money to the contract.

That is much better than starting from scratch to start a new contract, and so we'll see.

I mean there's still money in the existing $82 million worth, so no additional money has been added yet.

But we'll see how that progresses, but it's certainly an option.

And then at the end of the day, I've said it before, multiple drugs that have broad spectrum activity are a must in the stockpile.

It's just an absolute must, and it's not to take away from vaccines and antibodies and the like.

But the whole idea of a broad spectrum antiviral is that you don't know what's going to pop up next, right?

And so if you have that activity, then you've got a better shot at addressing the illness quickly.

And again, it takes time to make vaccines.

It takes time to make antibodies.

And so we're hopeful that we'll continue to progress galidesivir.

I'm rooting for remdesivir as well because in this space, it's really important that we have options.

And so we'll continue to work with the government and take their lead.

And I would now like to turn the call back over to Mr. Stonehouse for any concluding remarks.

So as I said at the beginning, we're off to a great start in a year that we believe will be transformative for this company with approvals and proof of concept with a molecule that we believe can be an entire pipeline with one asset.

So we look forward to updating you as we continue our progress over the course of the year.

And as always, thanks for your interest in BioCryst.

Have a good day.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

Thank you for participating.

You may now disconnect.