Curis Inc (CRIS) 2009 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the second quarter 2009 Curis earnings conference call.

My name is Noelia and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's conference. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference, Mr. Michael Gray, CFO and Chief Operating Officer. Please proceed.

Thanks Noelia. Good morning and thank you for joining us. Today we will provide a corporate update and discuss our 2009 second quarter and year-to-date financial results.

Before we begin as always, I'd like to advise you that this conference call contains forward-looking statements regarding Curis's future expectations, plans and prospects within the meaning of the Private Securities Litigation Reform Act of 1995; including statements relating to the expected progress and benefits of our internal targeted cancer programs, statements with regards to our plans to enter into one or more licensing arrangements for these programs and the timing of such arrangements, statements regarding planned development of our Hedgehog pathway inhibitor program under collaboration with Genentech and projections of our future cash position. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including risks relating to our ability to successfully advance the research and clinical development of our targeted cancer programs, Genentech's ability to successfully advance clinical trials of PDCO 449, competitive pressures and our need to maintain our proprietary rights, our ability to successfully continue our collaborations with Genentech and enter into new collaborations on favorable terms if at all, unplanned operating expenses, our need to raise additional funds to finance our operations and risk factors described in our quarterly report on Form 10-Q for the quarter ended March 31, 2009 and the other reports that we periodically file with the SEC.

We caution you that we're making these forward-looking statements as of today and that we may not update any of these statements even if events and developments subsequent to the date of this call cause these estimates and expectations to change. I would like to now introduce Dan Passeri, Curis's President and Chief Executive Officer, who will discuss our corporate highlights and will provide an update on our pipeline. Following Dan's remarks, I will return to review our financial results for the 2009 second quarter and year-to-date financial results and we will then open up the call to any questions. Dan?

Thanks Mike. Good morning and thanks for joining us today.

Our second quarter of 2009 was another highly productive period at Curis. We continued to make very good progress with patient enrollment in our ongoing dose escalation Phase 1 trial of CUDC 101 which is our first-in-class multi-target inhibitor which is an HDAC EGFR and Her2 inhibitor. We also have progressed our Hsp90 inhibitor, CUDC 305, substantially through all IND-enabling studies and we expect that either we or a partner, if we are successful in ongoing efforts to license CUDC 305, we will file an IND filing for this molecule in the coming months.

We continue to remain very optimistic that we will be successful in our ongoing licensing efforts. In addition, our collaborator, Genentech, continues to progress in its development of GDC-0449. I'll begin my program overview with a discussion of this molecule.

As most of you are aware, GDC-0449 is a first-in-class and potentially best-in-class orally administered, small molecule, Hedgehog pathway inhibitor that's being developed under a collaboration agreement with Genentech; a wholly-owned member of the Roche group. Genentech and Roche are responsible for the clinical development and commercialization of GDC-0449 and Curis is eligible to receive cash payments upon the successful achievement of certain clinical development and regulatory approval milestones and royalties upon commercialization of the drug.

Genentech is currently conducting three ongoing clinical trials of GDC-0449 including a pivotal Phase 2 trial in advanced basal cell carcinoma, or BCC, that was initiated in February 2009. In addition, Genentech initiated Phase 2 clinical trials in metastatic colorectal cancer and in advanced ovarian cancer in 2008. The progression of this molecule represents an important source of non-dilutive capital to Curis as we have already received a total of $12 million for the initiation of these clinical trials.

In the pivotal Phase 2 clinical trial of GDC-0449, Genentech and Roche will evaluate approximately 100 patients with locally advanced or metastatic BCC in a global trial. This trial represents a significant development milestone for GDC-0449 in this indication and built upon the strong Phase 1 safety and efficacy data demonstrated by the drug in the Phase 1 trials which showed clinical benefit in a substantial portion of the advanced BCC patients. We believe that advanced BCC represents a fast-to-market opportunity that could enable first market entry for a compound that inhibits the Hedgehog signaling pathway.

In July, Roche provided an update on GDC-0449 in which it stated that GDC-0449 was one of 10 new molecular entities in registrational studies within Roche that are currently enrolling patients. Pending the successful outcome of the ongoing pivotal study in advanced BCC, Roche has projected that regulatory submissions could occur in 2011.

Regulatory submission and approval represent highly meaningful development milestones for Curis and as such, our shareholders. There is currently no standard of care for patients with these types of BCC's and we're very pleased by our collaborator [Genentech's Roche] progression of this molecule towards a potential NDA filing.

GDC-0449 also is in Phase 2 clinical testing in colorectal and ovarian cancer indications. Genentech completed enrollment of the 190 patient GDC-0449 Phase 2 clinical trial in metastatic colorectal cancer during the second quarter of 2009.

Genentech has indicated that if the proof-of-concept data from either the colorectal or ovarian cancer trials are positive, Genentech and Roche could consider a rapid expansion of development for the compound in several additional cancer indications. Genentech previously indicated that these data are expected in 2010. It's important to note that Curis is eligible to receive additional development milestones if either the colorectal and/or the ovarian cancer trials proceed to Phase 3.

In addition to the three ongoing clinical trials that Genentech is conducting, Genentech and the National Cancer Institute or NCI entered into a collaborative relationship during the first quarter of 2009 that allows the NCI to explore GDC-0449 in additional cancer indications that are not presently being evaluated by Genentech. Under this arrangement with the NCI, third-party investigators began enrolling patients in a Phase 1 clinical trial that is designed to evaluate dose and safety of GDC-0449 in pediatric patients with medulla blastoma known to involve a Hedgehog mutation and a Phase 2 trial to test the molecule in adult medulla blastoma treatments.

In addition to these two trials, a Phase 1 clinical trial in pancreatic cancer patients was also initiated and a randomized Phase 2 clinical trial in small cell lung cell cancer patients is planned for future initiation under this NCI arrangement. We are excited about this collaboration because these trials have the potential to generate additional data on 0449's application in tumor types beyond those being studied directly by Genentech and Roche and these data can potentially impact the future development of the drug.

Trial details of all studies are available on clinicaltrials.gov and we look forward to the potential future initiation of additional clinical trials under this NCI collaboration. Such future trial information is expected to be posted on clinicaltrials.gov as the respective trial nears initiation. We look forward to providing further GDC-0449 updates as additional clinical trials are initiated as well as when Genentech and Roche communicate other important scientific and clinical observations regarding this drug.

Now moving on to our internal programs, we are continuing to successfully enroll patients in a Phase 1 dose escalation clinical trial of CUDC 101 which is our proprietary first-in-class small molecule inhibitor which is a multi-target inhibitor for HDAC, EGFR and Her2 in the first of our proprietary targeted cancer programs that has progressed into clinical testing. The Phase 1 trial is designed as an open-label dose escalation study of CUDC 101 in patients with advanced refractory solid tumors.

The primary objectives of the Phase 1 trial are to evaluate the safety and tolerability of escalating doses of the drug and to establish the maximum tolerated dose and dose limiting toxicity. Secondary objectives are to basically assess the pharmacokinetics to evaluate the pharmacodynamic biomarkers and to assess efficacy and ability of CUDC 101 to effectively inhibit the respective targets, mainly HDAC, EGFR and Her2 in the patient populations that we are treating.

The study is being conducted at two sites within the United States and is expected to enroll between 18 and 40 patients across several dose escalating cohorts. To date, we have enrolled a total of 17 patients in this study.

We doubled the dose of CUDC 101 over three cohorts already for which the first nine patients included four patients treated at 75 mg per meter squared, three patients treated at 150 mg per meter squared and two patients treated at 300 mg per meter squared. The drug was well tolerated at 75 and 150 mg levels with most common side effects including grade 1 to 2 dry skin, decreased hemoglobin and hypoglycemia.

Dry skin is indicative of the EGFR inhibition and decreased hemoglobin and hypoglycemia are suggestive of HDAC inhibition. At the 300 mg per meter squared dosing level, two patients treated encountered transient grade 2 adverse events which was deemed possibly related to the study drug. Both effects were reversible upon discontinuation of the drug.

Though the levels were only grade two in severity, under the terms of the protocol, they were deemed dose limiting toxicities as patients missed a scheduled treatment day while the physicians were assessing the adverse event. As a result, we dosed down and treated three additional patients at 150 mg per meter squared dose level, noting that the drug was well tolerated at this level, consistent with the three patients that had been previously treated at this 150 mg per meter squared dose level.

We then increased the dosing to 225 mg per meter squared and dosed an additional four patients, noting that the drug continued to be well tolerated. We're still treating one last patient in the final dosing schedule and everything appears to be fine so far.

We have received confirmation this week from our clinical investigators that we are able to does escalate to the 275 mg per meter squared level which would allow enrollment in this next cohort pending successful completion of the last dosing cycle of the four patient at 225 which is currently ongoing. While we cannot be sure of the number of additional cohorts, we will need to reach our maximum tolerated dose. We believe that we are approaching this dose level.

We look forward to concluding the dose escalation portion of our Phase 1 trial and expect that this will occur in 2009. We also expect that we will initiate an expansion of the Phase 1 trial in 2009 to test CUDC 101 in patients with non-small cell lung cancer, breast, colon and pancreatic cancer. And the reason we selected those cancers is because of the supporting data pre-clinically that suggests that these cancers should be responsive to the drug.

Our other clinical observations to date include a mixed response in one head and neck cancer patient and the 150 mg per meter squared cohort. Another patient which was a metastatic breast cancer patient had shown evidence of stabilization of disease and remained on the study drug at 150 mg per meter squared, receiving a total of six cycles or 12 weeks. The patient has subsequently come off drug because of progress disease.

In the patient with the mixed response, one target lesion appeared to have been significantly reduced in size by greater than 30% while other metastases did progress. So that patient also came off drug.

The trial also has yielded certain biomarker observations such as a reduction in total Her2 protein in a patient tumor sample following four days of CUDC 101 treatment and an apparent inhibition of EGFR signaling has been observed in skin biopsies obtained from patients treated with the drug. In addition to these biomarker signals which suggests that CUDC 101 appears to be hitting at least two of its intended targets in humans, we also have the corresponding data on hypoglycemia which is indicative of HDAC inhibition.

We have observed dose-dependent pharmacokinetics in that patient exposure to CUDC 101 appears to increase dose proportionately with the amount of drug given in the first three cohorts which we have examined to date. We're hopeful that we'll continue to see evidence of biological activity in additional patients at dose levels above the 150 mg per meter squared. We are encouraged by the early data from this Phase 1 dose escalation trial, demonstrating that CUDC 101 appears to be well tolerated and we look forward to providing future updates in this program as new relevant metrics become available.

In addition to CUDC 101, we have been advancing our other pre-clinical drug candidates including CUDC 305 which is an orally available, wholly synthetic small molecule inhibitor of the Heat Shock Protein 90 or Hsp90. We've completed additional work to progress CUDC 305 towards an IND application filing including the manufacture and testing of clinical material and we currently anticipate that we or a potential partner will file an IND application for CUDC 305 in the near term. We recently presented data in two presentations at the 2009 AACR annual meeting that support 305's potential to be a best-in-class Hsp90 inhibitor.

The primary corporate objective for Curis is to monetize CUDC 305 as a means of accessing non-dilutive capital and we are continuing our efforts to secure potential licensing or other development collaboration for this compound. We continue to believe that this is an attractive asset for a potential partner.

In addition to our progress with CUDC 101 and CUDC 305, we continue to engage in active pre-clinical development efforts on our other targeted cancer programs and we hope to select another development candidate in early 2010. We believe that through prudent financial management and aggressive risk management, we have created a highly balanced business model. The systematic implementation of our corporate development strategy now provides Curis with the prospects of an increasing revenue source as our Hedgehog asset partnered with Genentech continues to move through clinical development and hopefully resulting in future market approval.

We view our approach as providing greater balance and sustainability since our partnership with Genentech has provided significant non-dilutive cash payments to Curis which in turn has allowed us to advance our proprietary programs to further stages of development than we have previously been able to do without the need for dilutive financing. We continue to evaluate strategic alternatives and through the successful execution of our strategic plan, including the potential of additional partnerships for advancing our proprietary programs, we expect to be well positioned to provide Curis with the financial stability to create greater shareholder value. I would like to now turn the call back over to Mike for financial discussion. Following Mike's remarks, we will open the call up to questions.

Thanks Dan. I'll now discuss our 2009 second-quarter financial results.

For the second quarter of 2009, Curis reported a net loss of $4.2 million or $0.07 per share as compared to a net loss of $2 million or $0.03 per share for the same period in 2008. Revenues for the second quarter of 2009 were $100,000 as compared to $3.1 million for the same period in 2008.

The higher revenue in the 2008 period was due to our recognition of $3 million in license revenues during the second quarter of 2008 from the achievement of a clinical development objective under our Hedgehog pathway inhibitor collaboration with Genentech. That was the initiation last year of the metastatic colorectal trial with 449.

Operating expenses for the second quarter of 2009 were $4.3 million as compared to $5.3 million for the same period in 2008. R&D spending was $2.3 million for the second quarter of 2009 as compared to $3.2 million for the same period in 2008.

The decrease is attributable to lower spending on our targeted cancer programs in connection primarily with our implementation the fourth quarter of last year of a plan to decrease spending in various R&D areas, particularly in pre-clinical and discovery research. General and administrative spending was $2 million for the second quarter of 2009 as compared to $2.1 million for the same period in 2008.

The decrease in G&A expense was primarily due to decreases in personnel and consulting costs again attached to our expense reduction plan that we implemented last year at the end of 2008. Offsetting these decreases, legal expenses increased due to costs associated with patent applications for our targeted cancer programs as well as other legal matters.

For the six-month period ending June 30, 2009 we reported a net loss of $3.1 million or $0.05 per share as compared to a net loss of $5.4 million or $0.09 per share for the same period in the prior year. Revenues for the six months ended June 30, 2009 were $6.1 million as compared to $5.2 million for the same period in 2008 and operating expenses were $9.3 million for the six months ended June 30, 2009 as compared to $11.2 million for the same period in 2008.

As of June 30, 2009 our cash, cash equivalents and marketable securities totaled $26.8 million and there were 63.8 million shares of our common stock outstanding. We estimate that that cash balance when combined with our receipt in July this year of $2.7 million in proceeds from the exercise of warrants to purchase shares of our common stock will provide us with sufficient capital to fund our planned operations into the fourth quarter 2010. That cash runway projection assumes no partnership as well as our advancement -- continued advancement of all of our targeted cancer programs.

That concludes the financial remarks and I'd like to open the call for questions. Noelia, would you open the call for questions please?

(Operator Instructions) Joe Pantiginis, Merriman Currhan Ford.

Good morning and congratulations on the progress. Dan, just a quick question on 305. Obviously looking for the potential of a licensing catalyst there and you did mention that it has properties for potential best in class. I'm just wondering if you could add a little color on what those properties are compared to say other Hsp90 compounds that are in development right now.

Sure; thanks, Joe. The primary attributes of the compound that we believe provided with the potential of best-in-class characteristics are namely it's a small molecule that has excellent oral bioavailability.

It crosses the blood-brain barrier quite effectively and we think that could give it a good market differentiation for primary metastatic brain cancer. And it has a very attractive PK, namely in terms of its [T half] in tumor tissue versus normal tissue.

It's cleared much more readily in normal tissue than within the tumor. So we think the overall attributes of it combined with the efficacy data that we have seen in pre-clinical models when compared directly with what we consider to be the gold standard small molecules, it appears to have a very competitive profile.

Ren Benjamin, Rodman Renshaw.

Congratulations on the progress. I guess a couple of questions maybe starting off with 101.

Is there any sort of conclusions that can be made based on the patients that have been treated so far? I know you have seen a mixed response in head and neck and a stable disease in breast cancer.

But can you give us an idea as to the makeup of the patients in this Phase 1? Are you -- going forward in this last group, are you starting to skew the enrollment towards one patient population or another? I think in the past we've talked about triple negative breast cancer patients. Can you just give us an idea as to what your thoughts are right now based on the data you're seeing so far?

Sure, as you know Phase 1 trials are difficult to ascertain meaningful metrics from data because the patient population is mixed and typically very advanced in terms of the progression of the disease. That being said, what we have seen so far is encouraging from the standpoint of the dosing levels that we're achieving demonstrate that the drug is well tolerated.

We are seeing good exposure, a sort of linear dose proportional exposure to the drug. So all of that is very encouraging.

We don't know what the MTD is yet, but we think we're probably going to be approaching it within the next couple or a few dosing cycles. In terms of efficacy, the key metrics are going to be the biomarker activity.

We have only taken a look at preliminary biomarker data so far. We've been waiting to be able to consolidate a panel of patient samples and that's really for cost efficiency.

Because if you pool them, you wait until you have a broader number, it's more cost efficient rather than doing a one-off each time. So we haven't completed the biomarker analysis.

That is an important metric if we can show that we're seeing suppression of the respective targets, again in a dose proportional level. That would be very encouraging.

In terms of efficacy, we have seen some hints of activity in a small number to date. But what we're hoping to do is now try to focus the expansion of accessing patients that have cancer types that would be indicative of the types of cancers we would expect to see some clinical activity.

So we do have a patient that is on drug presently that is an EGFR Her2 inhibitor. That's an important metric for us to monitor. That patient is still on drug and we haven't done the scans yet. So it's premature to really conclude everything but we are encouraged by the data we've generated to date.

And I guess just following up on that, and I don't know if you can comment on this. But obviously you're talking with the physicians who are treating these patients and I know at least one of the sites is well-known for conducting multiple Phase 1 studies and working with a lot of different compounds. Can you give us a sense of what the feedback has been or is it just been too early?

It's too early. The general feedback has been a general enthusiasm for the concept of the drug. We have been quite successful recently in enrolling patients and that is encouraging and I think it's too early to really comment on qualifying statements by the physicians because they just haven't analyzed enough data themselves yet. I think when we start getting scans at the higher doses and specifically scans on patients that have phenotypic profiles that are in the types of cancers where we should expect to see clinical efficacy, that's really when we will start getting that feedback.

The final data, how should we -- when should we be looking for that? And then will it just roll into a Phase 2 trial? What are the thoughts right now from the Company as to how things will go forward?

That's a very important question because we want to position this drug as a potential breakthrough in that it should demonstrate attributes that are different and distinct and competitive over the traditional tyrosine kinase inhibitors. That being said, we don't want to just blindly go into a Phase 2 without evidence that we do in fact have a unique molecule that has competitive attributes.

So what we are going to do is prior to going into a Phase 2, we want to do an expansion cohort where we are building out a more robust representation of certain patient populations where we are expecting to see hints of efficacy. So that's really what we're trying to do now is first determine the maximum tolerated dose and then look at expanding into specific patient populations. And then we want to also look at issues such as different cycles of drug exposure to see if we're seeing different PD effects and before we start spending the significant amounts of capital that you have to expand as you go forward in the clinical trials.

I think just a take-off from Joe's question, I understand that -- I know that everyone's focused on 305 and the partnering activity surrounding 305. But clearly 101 is -- has the potential to be the platform validator and probably one of the more (inaudible) platforms out there. So is there -- can you give us an idea as to whether or not partners are discussing 101 as well as 305 or people have approached you just to get some additional information and start talks on 101 at all?

Yes, very good question. It's mixed as different companies have different perspectives.

We're getting a significant amount of interest on the prospective mechanism of 101. Suffice it to say, the companies are looking at the clinical data with interest as well as investors.

So I think the Phase 1 data metrics that emerge are important. I want to underscore the 305, we don't consider to be a primary asset from the standpoint of our platform. It's an attractive drug candidate and our intent is to monetize that asset as a means of getting non-dilutive capital so we can continue developing 101 as exemplary for the platform.

We feel that that is the greatest opportunity to create significant value for shareholders where 101 represents a truly novel approach. And if we're seeing distinct activity with that drug, we have a platform behind it. So we think that represents the greatest upside potential for generating value for shareholders.

305 as you know is in a field that is becoming increasingly competitive. So we feel it's prudent to provide that to a larger company that has the capacity of accelerating development and hopefully demonstrating competitive attributes of that drug early on.

Switching gears to 449, Genentech as you mentioned completed enrollment in the CRC trial in the second quarter of 09. Data is expected in 2010 I guess for both CRC and ovarian. Can you remind me if there are any interim looks in these trials? Is it possible for data to be available earlier in these trials?

In those trials -- this is Mike. In those trials, no. The first data that will come out will be in 2010.

I think on Hedgehog broadly, there may be -- and again, these trials are not controlled directly by Genentech or Curis carrots but there may be some earlier data available through some of the ongoing trials under the NCI [credo] but that is again uncontrolled by Genentech. So we need to sort of be reactive and not try to predict the timing of that data either.

So you headed me off to my next question, which is the timing of those NTI trials. So I guess just one final question and that is when you talk about 2010 and advancing another candidate in the pipeline and hopefully by then we have gotten some results that validate the platform and so people pay a lot more attention to these other candidates that are in the pipeline, which of the candidates of -- which of the multi-targeted candidates do you think has the most -- the best chance of let's say advancing to IND level in 2010?

The last time I think we talked, 903 was in the lead, the PI3k HDAC dual inhibitor and clearly PI3k kinase inhibitors have been in vogue lately. Several deals have been done for those types of assets. Is that still your current thinking or has something leapfrogged this asset?

No, that's still current thinking. The HDAC PI3 kinase inhibitor has generated very attractive data. We appear to have real synergy with those two targets at least pre-clinically. So we're aggressively moving forward for selection of an IND candidate.

Perfect, guys. Thank you very much for answering the questions and good luck.

Anand (inaudible) RBC Capital Markets.

So in terms of 0449 trials, do you expect -- when do you expect the next update in terms of enrollment in the BCC study or the ovarian cancer study?

I think we would have to defer to our partner, Genentech. But based on when that data is expected and 2010 data on all of those trials, I think it would be sometime later this year to early next.

So the timing of the BCC trial is 2010 as well in terms of results being presented, right?

Or early -- yes, 2010 would probably be reasonable. I think later than colorectal.

Okay and have they said anything about what their plans might be outside the US?

They have not.

But they do have rights for it?

Last November, Roche acquired the ex-US rights to -- this was pre-merger -- but to 449. So I believe both parties are developing the drug. And in fact, Roche did comment on the drug during its update I think about a week ago and they've been participating in the BCC.

They've been participating in the clinical development. So there is a worldwide development plan in terms of timing for regulatory submissions US versus Europe and rest of world. We don't have data on that right now.

I see that the timing of the potential partnership for 305 hasn't changed. So should we assume that you're speaking to a number of potential partners at this time?

Yes. Discussions have progressed well on that and we are still highly encouraged that we will be able to consummate a partnership.

And your expectations for the terms are unchanged from before?

Yes.

Finally, did I hear correctly on the call that dosing in the Phase 1 101 study has gone back about 150 mg per meter squared, so patients have been dosed at 275, was it?

No, we have gone from 150. So we repeated 150. So it's a total of six patients at 150. We dosed up to 225. We have treated four patients. The final patient, the fourth patient, is receiving the final dosing now. And subject to that going through smoothly, we've been approved to go up to the next dose which will be 275.

Okay and in terms of expanding to the specific tumor type cohorts, how many patients do you expect to roll at the expansion phase for the Phase 1?

Difficult to say but right now, our thinking is up to 10 in each category.

Any idea as to when these results either from the first part of the Phase 1 or the expansion cohort might be available?

Well the first part of the Phase 1 we're anticipating will be completed and analyzed within '09, hopefully before end of the year and we will report on that. Then we're also expecting to start the expansion by the end of 2009.

(Operator Instructions) George Zavoico, Westport Capital Markets.

Congratulations on a good quarter in predicting some of your R&D costs and OpEx costs since the beginning of the year. I have a question regarding the 449. Clearly there's a tremendous amount of interest at Genentech and NCI in all of these potentially new trials that are going to be initiated hopefully within the next several months or already have been initiated.

But that means that there needs to be more drug for all those trials. Are there any expenses to you in providing that drug supply for those trials? Or is Genentech paying for all of that now?

All the R&D efforts and costs importantly are with Genentech.

And with the extension cohorts that you plan to start by the end of '09, you mentioned that trial is at two sites. With the expansion cohort, are you going to go to more sites or just stay with the two that you are with?

No, we're going to go to more sites and we've already started networking.

Regarding your burn, you mentioned in your press release that you have enough until about 2010. But with more sites, with the expansion cohort, can you provide some guidance as to where your R&D -- how you expect your R&D burn to go in the next few quarters? It seems to be that it will have to increase.

It will increase but modestly. Right now our R&D burn has been more or less steady if not declining.

Our clinical costs would include still a pretty small number of patients, not so unlike the ongoing Phase 1. So I think combination of reductions in our discovery expenses with an increase in 101, our R&D won't increase substantially in the coming quarters and our cash runway predicts that. Going into Q4 2010, we can't really have a significant run-up in R&D at least in the near-term quarters.

So just on this [call], we have really been aggressive and prudent about managing our costs. So that's something we are looking at very aggressively on an ongoing basis. So if we're going to increase costs on one level, we're going to find ways of decreasing on others if we can.

I can see that. That's evident in your financial statements and congratulations on that. It's a pretty difficult time for everybody. In your projection for your cash runway, are you including any potential milestone payments in that or is that simply based on your cash in hand now and your projected burn?

The latter, no milestones, no partnerships. All that potential upside as it relates to our cash runway is not included in our projections.

Okay, that's great. Thank you very much and look forward to seeing results at some upcoming meetings.

Sir, at this moment, I'm showing you have no further questions.

Okay, thank you very much for your attention and we look forward to continually providing you with updates as new data becomes available. Thank you very much for your support.

Thank you for your patience this concludes your conference. You may now disconnect. Have a great day.