Heron Therapeutics Inc (HRTX) 2008 Q3 法說會逐字稿

Welcome to the A.P. Pharma Third Quarter 2008 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a Q&A session. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded today, Wednesday, November 5, 2008. I would now like to turn the conference over to Mr. Don Markley. Please go ahead, sir.

Thank you. This is Don Markley with Lippert/Heilshorn & Associates. Thank you for participating in today's call. On the call this morning from A.P. Pharma are Ron Prentki, Chief Executive Officer; Greg Turnbull, Chief Financial Officer; and John Barr, Senior Vice President of Research and Development.

Earlier this morning A.P. Pharma reported financial results for the third quarter of 2008. If you have not received this news release or if you'd like to be added to the Company's distribution list, please call Lippert/Heilshorn in Los Angeles at 310-691-7100 and ask for Amy Higgins.

This call is being broadcast live over the Internet and the recording will be available for 30 days on the Company's website at www.APPharma.com. A telephone replay will be available for 48 hours.

Before we begin, I'd like to caution you that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of A.P. Pharma. We encourage you to review A.P. Pharma's filings with the Securities and Exchange Commission, including and without limitation the Company's Form 10-K and 10-Q, which identify specific factors that could cause actual results or events to differ materially from those described in the forward-looking statement. Furthermore, this conference call contains time-sensitive information; it is accurate only as of the date of the live broadcast, November 5, 2008. The Company undertakes no obligation to revise or update any statement to reflect events or circumstances after the date of this conference call.

I'll now turn the call over to Ron Prentki. Ron?

Thank you, Don, and good morning, everyone. I'd like to thank you all for taking the time from your schedules to participate in this call.

Today's call is going to be a busy one; we have a lot to talk about. That will include providing an update on APF530, including the release of some new clinical data from the Phase III trial. We'll be reviewing our financials for the third quarter and we'll also be discussing some recent cost reduction initiatives we announced today, and at the end there will be time for Q&A.

In a few minutes, John Barr will be sharing with you additional safety and efficacy data from the Phase III study for APF530, our lead program. The data includes predetermined secondary endpoints, which were not yet analyzed and available at the time we announced our top-line data just a few weeks ago in late September. And you'll hear that these results further support the clinical utility of APF530 in the treatment of chemotherapy-induced nausea and vomiting.

In addition to these clinical study results, we also made an announcement today regarding specific and meaningful steps we have taken to ensure the continued financial health and viability of A.P. Pharma. These actions were taken in response to a deterioration of the economy and the financial markets and will allow us to focus more of our efforts and our resources on our lead program, APF530. Importantly, these actions will also ensure our ability to advance APF530 through an NDA submission and well into the path to approval.

So now I'll briefly review some of the actions we have taken. First, immediately we have put on indefinite hold some of our earlier stage programs, including APF112, our Phase II stage program to develop a long-acting local anesthetic for the treatment of postsurgical pain. We have also put on hold APF580. This is our depo formulation of an undisclosed opioid, which we are developing for acute pain. This product -- program has completed preclinical testing and we're also announcing today that we successfully submitted our IND for APF580 and that this IND is now active.

We continue to believe that both of these programs have significant value and warrant continued development. However, we've decided that each of these programs has reached a logical stopping point prior to initiation of any additional clinical trials. These programs will be revisited once the Company's financial position allows us to consider additional investments beyond those which are needed for APF530.

Second, based on the narrowing of our development focus and the fact that we recently completed our Phase III clinical program for APF530, we have completed a reassessment of the needs of the organization and determined that reductions in staffing were also necessary and appropriate. Therefore, effective earlier this week we eliminated 18 positions from our workforce or approximately 35% of our total positions. In making these reductions, we have sought to retain the key personnel, core functions and knowledge, the achievement of our goals for APF530, as well to ensure that in the future we maintain our ability to restart the other programs which have been put on hold.

Finally, we've also taken on additional cash conservation measures, including broad and significant reductions in our overall operating expenses. Greg will be providing some additional details on the cost reductions in a few minutes.

But overall, I want to make it clear that the savings expected from the product pipeline actions, headcount reductions and other cutbacks will provide the Company with sufficient resources to allow continuation of key APF530 activities into the third quarter of 2009, well beyond the submission of its NDA target for December 2008.

With that as an overview, Greg will now provide a review of the financials for the third quarter.

Thank you, Ron, and good morning.

Revenue of $64,000 reported for the third quarter was all derived from our development program with a major animal healthcare company, where they have been reimbursing our costs incurred in a proof-of-concept project. This is the program using our Biochronomer technology to deliver a presently undisclosed opiate to treat pain in companion animals over an extended period of time. And we intend to utilize the acquired knowledge in our own product, targeted for human applications to treat particularly, excuse me, intense pain. The proof-of-concept project has now been successfully concluded and the next step under discussion is a full-scale development phase with our animal healthcare company partner for this product.

R&D expenses for the quarter were $5.1 million, a 10% increase from the $4.6 million expended in this category in the comparable period of 2007. Year-to-date expenses of $16.7 million are 25% higher than the nine months period of 2007. Principal reasons for the increases in the year-to-date numbers are higher rates of expenditures for pipeline product preclinical work and higher headcount costs. The quarter's increment derives primarily from the same higher headcount costs and consultant expenses related to the pipeline preclinical activities.

G&A expenses increased by approximately $500,000 from 2007 levels to $1.3 million in the third quarter of 2008, and by about $460,000 for the year-to-date period to a total of $3.2 million in 2008. The third quarter and year-to-date increases were principally caused by higher stock-based compensation expense recognition and higher levels of third-party consulting and professional services expenditures.

The impact of the just mentioned higher operating expense levels was to create a total net loss during the third quarter of $6.2 million versus a loss during last year's comparable period of $4.7 million. The year-to-date net loss was $19.2 million, a $6.7 million increase from the same nine-month period of 2007.

The 2007 loss was importantly reduced by a $2.5 million payment received in June of 2007, which was recorded as a gain on sale of interest in royalties. This payment was made upon the achievement of certain milestones, which were part of the January 2006 transaction we completed for the sale of our rights to royalties on sales of Retin-A Micro and Carac.

Turning to liquidity. Cash, cash equivalents and marketable securities amounted to $16.5 million at the end of the third quarter, indicating a consumption of approximately $18.5 million since the beginning of the year, with the costs related to APF530 development program accounting for the major portion of those expenditures.

Earlier Ron reported on the cost reduction actions recently taken. Deferring further near-term development expenditures on our pipeline products will conserve at least $5 million between now and mid-2009. The headcount reduction, amounting to 18 individuals, should produce savings of direct compensation plus salary-related overheads, and that excludes any incentive compensation elements that might have been paid, of approximately $1.9 million on an annualized basis. I would note that such savings for the remaining portion of the current fourth quarter will be basically offset by severance costs of approximately $300,000. Other cost savings are expected from managed constraints on multiple operating expense categories.

When you look at our cash burn this year-to-date, the approximate numbers show a burn of about $7 million in the first quarter, $6 million in the second quarter and $5 million in the third quarter. Beginning with $16.5 million of liquid assets at the end of Q3, we do have some APF530 trial and NDA preparation filing expenses that should increase the fourth quarter spend rate, but we expect our adjusted operating plans to support continued corporate activities on into the third quarter of 2009. In the meantime, as previously discussed, it is our intent to conclude a commercialization partnership for APF530 with its attendant upfront capital infusion well before we would need to turn to other external financing alternatives.

Thanks, Greg. John Barr will now provide an update on APF530 and some of the new Phase III results which were announced today.

Thanks, Ron.

In our last teleconference, we presented the top-line data from our pivotal Phase III clinical trial of APF530 compared with Aloxi. APF530, as you all know, is our proprietary formulation of granisetron, designed to provide sustained blood levels of drug over longer periods of time to prevent both acute and delayed nausea vomiting following chemotherapy-induced nausea and vomiting.

In that call, we presented our data which showed the comparability of the APF530 clinical response with that of Aloxi. In brief, we showed that the APF530 at the higher dose tested, the 10 milligram dose, was as effective as Aloxi in the prevention of acute and delayed nausea vomiting following moderately emetogenic chemotherapy. The lower dose tested, the five milligram dose, was as effective over the acute period, but was slightly less effective over the delayed period. In addition, we demonstrated that APF530 was comparable with Aloxi in the prevention of acute CINV following highly emetogenic chemotherapy.

Since that time, we have received and analyzed more clinical data and the key points of which are summarized in today's press release. Our review of the data, including the data made public earlier, supports our contention of the 10 milligram dose as the clinically effective dose, and it is that dose we will propose to the FDA in our NDA. For this reason, we have disclosed additional data on this 10 milligram dose in our press release and our statements today.

The selection of the 10 mg dose is further supported when you evaluate the time to treatment failure, which for this trial would mean an emetic episode or the use of rescue medication. A greater proportion of patients treated with APF530 at the 10 mg dose remained failure-free over the five-day study period than those treated with Aloxi. This is the case where the patient has been administered moderately or highly emetogenic chemotherapy.

The statement that we made in our press release does bear repeating, but the clinical response we observed in the trial was consistent and robust within and between chemotherapy sites. For instance, when we look at the complete response, which is defined as no emetic episodes and no use of rescue medications, in our study, APF530 compared to Aloxi, the 10 mg dose is numerically higher and meets our preset statistical expectations of non-inferiority. If we look further, at complete control, defined as complete response with no-greater-than-mild nausea, we compare favorably to Aloxi. If total response is evaluated, which is complete response with no nausea reported whatsoever, then again we compare favorably to Aloxi. So what does favorably mean?

Assessments can be made comparing complete response, complete control and total response. You may analyze the data as either acute or delayed or as overall, which covers the first 24 hours following chemo as acute, from 24 to 120 hours following chemo as delayed, or from zero to 120 hours following chemo as an overall. Thus, the three time periods and three measures of clinical effectiveness, a total of nine analyses may be performed.

Following highly emetogenic chemotherapy, APF530 at the 10 milligram dose is numerically higher in five of these nine analyses compared to Aloxi's response. Following moderately emetogenic treatment, the APF530 10 milligram dose is numerically higher in all nine of these analyses. If you compare the quality of life questionnaire that was used five days after chemotherapy -- and this is a recognized and validated instrument to measure how well the patient has functioned in their life since chemotherapy -- there is no statistical difference between our 10 milligram dose and that of Aloxi. If you assess how well APF530 at the 10 milligram dose performed as complete response over multiple cycles and assess it as either acute, delayed or overall, then you not only see a consistent response, but an increasing response.

Hopefully you have the table in our press release in front of you, but let me attempt to walk you through the data. If you look at the moderately emetogenic chemotherapy, complete response over the four cycles, you will see that 212 patients were treated in the first cycle, with 240 and 184 and 134 in cycles 2, 3 and 4 respectively. A large enough patient population in each cycle to support our contention with efficacy has been consistently shown in all four cycles.

The Cycle 1 data is the same as previously presented for the APF530 10 milligram dose for acute and delayed, and you will note the overall complete response, which was not previously presented. It is indicated this 54.2% for the time period of zero to 120 hours. What is of note is the consistency of the response over multiple cycles and the tendency to increase to 58.8, then 60.3, then 63.4 in cycles 2, 3 and 4.

Similar observations can be made following highly emetogenic chemotherapy, with 240 patients in the first cycle, then 263, then 202, then 148 in cycles 2, 3 and 4 respectively. The Cycle 1 data for acute and delayed is the same as previously reported, and the complete response rates for the overall first cycle period are 64.6%, increasing to 72.2%, then 78.7%, then 79.7% in cycles 2, 3 and 4 respectively.

What is noteworthy in this data set is that the complete response rates observed in cycles 2, 3, and 4, particularly in the delayed phase, were greater than 80% complete responses seen. Had this response rate been observed in the first cycle and had Aloxi performed as it had in the first cycle and as we previously disclosed, then we would have met one of our clinical goals of showing superiority of APF530 in the delayed phase following highly emetogenic chemotherapy.

This information aside, it is evident that APF530 clearly demonstrates consistently beneficial effects in the prevention of nausea and vomiting, whether a patient is treated with moderately or highly emetogenic chemotherapy.

If we move on to the safety profile of APF530, let me start by returning to the one serious adverse event, which was possibly related to APF530 administration. I mentioned this on the last call when we talked about the top-line data, and we did so because we were trying to highlight the remarkably low number of APF530-related serious adverse events. However, we have become aware since then that this isolated incident has become of concern to some of you, largely due to misinformation. I'd like to clarify it -- excuse me -- clarify the event in question and hopefully resolve this issue.

This patient presented at an emergency room with cough, congestion and shortness of breath. She was admitted with a diagnosis of pneumonia. The patient was treated with antibiotics and other various measures of support, including low molecular-weight Heparin, and she was discharged 12 days later.

The investigator responsible for this patient later concluded that the diagnosis should have been of pulmonary embolism, as this was noted during a CT scan done on the patient early on in her hospital stay. The investigator, as is his right as an independent physician in the trial, concluded that this pulmonary embolism was possibly related to the study drug. Unblinding of the patient determined that the patient had been administered with a low dose of APF530, containing only five milligrams of granisetron, and that this administration occurred 15 days prior to her hospitalization.

The medical monitor in the study concluded that aside from the timing of the adverse event relative to the study drug administration that there were other contributing factors such as obesity, use of chemotherapy itself, and use of hormone therapy, all of which, unlike granisetron, have a recognized effect on blood-clotting and could therefore have caused the pulmonary embolism. It should also be mentioned that we have not found any reports for similar events with Kytril, the current formulation containing granisetron.

So to return to a more general discussion of APF530, we have concluded based on our review of the clinical data that the safety profile of APF530 is very similar to that of Aloxi. A notable adverse event for this type of drug is constipation. The results of our trial indicated that 15.4% of the APF530 10 milligram dose patients experienced constipation compared to 13.4% of the patients treated with Aloxi. Headache, another recognized side effect of this type of drug, was observed in 10% of the APF530 10 mg patients compared with 9.7% in those patients treated with Aloxi.

As for the injection site observations, as indicated in our press release, we required the investigators to actively assess the injection site on day one and day five following chemotherapy. The results of this data collection is that we observed, as we reported previously, incidences of redness and bruising, greater than 90% of which were rated as mild in severity.

Because of the viscous nature of its formulation and because we administered APF530 as a subcutaneous injection, we are aware that some of you are concerned that this procedure would be frankly unacceptable for the patient. Let me try and allay some of these concerns. In over 1,600 administrations of the APF530 10 milligram dose, the larger of the two doses employed in the trial, we required the investigators to look on days one and five following the injection. Less than 0.1% produced any reports of pain on day one -- that is less than 0.1% on day one -- and approximately 4% reported pain on day five. All but four of these were recorded as mild and the four reports were recorded as moderate.

Because of the number of patients administered our formulation and because of the nature of the actual recording of the injection site observations and multiple administrations, we are convinced that APF530 can be administered safely in a manner which is highly acceptable to patients and healthcare providers.

Let me briefly summarize the overall profile of APF530 based on the data from our Phase III trial. We have clearly shown consistent and robust efficacy of APF530 and it compares favorably to Aloxi. Clearly, the effect of APF530 has been demonstrated over multiple cycles. The safety of the sustained-release formulation APF530 has been demonstrated in over 1,400 patients, and the data supports our movement to an NDA with an emphasis on the 10 milligram dose of the granisetron in APF530.

Let me conclude today by stating we are working diligently to move all aspects of our NDA ahead. We have further -- we are most far advanced with our non-clinical tox data with chemistry and manufacturing moving along and the clinical data coming together at a remarkable rate.

We have been working with numerous outside entities and I'd like to thank each one of them for their continued support of our goals. The most obvious goal is to submit the NDA by the end of this year and we remain committed to that goal.

With that said, I will return you to Ron and thank you for your attention.

Thank you, John.

As you have heard, as a company, we have made significant progress in 2008 and our programs continue to achieve major milestones, including the recent release of top-line Phase III data and today the release of additional data supporting the further efficacy and safety of APF530. However, in a time of volatility and chaos in the financial markets, A.P. Pharma has not been immune from the effects of this economic uncertainty.

We believe by taking the timely and meaningful actions we have outlined today, we are ensuring the Company's ongoing viability. Our goal is to maximize the value of the company by successfully moving our lead product APF530 closer to regulatory approval and commercialization. Given the cost reductions we have outlined today, our cash position will take the Company through the second quarter and into the third quarter of 2009. This will allow us to file the NDA in late 2008 and advance APF530 toward regulatory approval. And although we have elected to put APF112 and APF580 on hold, we continue to believe that these products have significant development potential and we plan to reinitiate programs when the Company's financial condition improves.

It should be obvious in today's call that APF530 is clearly our lead program and the major value driver for A.P. Pharma. As you've heard from John Barr, the clear and compelling profile is emerging from the clinical data that we've presented. If we are successful, APF530 will be one of two long-acting 5HT3 anti-emetics in the market. APF530 is pharmacologically differentiated from Kytril and other first-generation 5HT3 antagonists, maintaining therapeutic levels of granisetron for five days. This is fivefold longer than that for the first-generation product. The efficacy data clearly shows that a single dose of APF530 provides protection over the entire CINV phase, particularly in those regimens which comprise the majority of patients receiving chemotherapy. And we have heard today that these responses are highly durable and patients continue to benefit from repeated doses in cycles of chemotherapy.

Overall, the Phase III data for APF530 shows a product candidate which has compared favorably to Aloxi, having numerically higher response rates in a great majority of the primary and secondary endpoints. APF530 is also well tolerated with a safety profile comparable to Aloxi. By establishing APF530 as a safe and effective long-acting 5HT3, we will be competing for a potential $1 billion market. We believe that the strength of our Phase III data will support us in converting the market from the older first-generation 5HT3s to the long-acting 5HT3s including APF530. This strategy has allowed Aloxi to achieve sales approaching $400 million this year and a growth rate of 22%.

We are also actively working on pricing and reimbursement strategies for APF530, which we believe will be another key driver for physician usage, and we believe that APF530 would be highly competitive in this regard. We continue to aggressively pursue commercialization partnerships for the product and are in discussions with several companies. We would intend to complete such a partnership and expect the deal to include a significant upfront capital infusion in advance of any future capital needs for the continued operations of the company.

In closing, I'd just like to say that the decision to reduce our workforce was a difficult, but necessary one, and on behalf of the A.P. Pharma Board and management we would like to express our sincere thank you to our colleagues who have been affected by the decision and wish them the best in their future endeavors.

With that, I'd like to open it up for the question-and-answer session.

(OPERATOR INSTRUCTIONS). One moment please for the first question. Your first question comes from the line of Jeff Nelson with Ladenburg Thalmann. Please go ahead with your question.

Hi, good morning, guys.

Hi, Jeff.

I've got two quick questions for you. First, maybe you can give us a little bit of an update on partnership discussions and what your thoughts are on timing surrounding that? And second, maybe a little bit about presentation or publication strategy, are there additional data points that we can expect and what the timing on that could be?

As far as partnership, we are in discussions with a number of companies, a number of companies are in the due diligence process. We really haven't given any additional guidance other than we've given today, the thing that we would expect to complete a partnering deal in the next several months. So I think the goal will be to complete a deal before we would need to raise additional funds.

As far as publication strategy, John, any additional data?

Additional data is that there's still some more to come including pharmacokinetic type analysis, and we have been looking at the timing of the major oncology presentations and meetings next year. Whether or not we go to straight publication is still subject to internal discussion Jeff, but we will present and get this data out there in a more formal manner.

And we should mention that though we're releasing some of the data as it comes along, there will be additional data on things like responses in specific chemotherapy regimens and drugs, which could be of interest, and some other endpoints as well that we will have over the upcoming weeks and months, and we will release those either through a publication or in an upcoming call.

Great, thanks.

Your next question comes from Stephen Dunn with Dawson James. Please go ahead with your question.

Good morning, guys. I have one question for each one of you. John, I will go with you first.

Okay.

Well, looking at the cycle data, one thing that kind of pops out at me is I actually have higher response rates in the highly emetogenic patients. I was wondering if you could, I guess, explain to me what your thinking is why they have higher complete responses at highly emetogenic.

I think that Ron has actually kind of touched on it, and again we're still digging through the data, is probably the nature of the chemo agents. So we're still trying to dig apart on what goes -- is that the carboplatin regimens which are prevalent in the highly emetogenic that we are having much more effectiveness against as opposed to in the moderately emetogenic chemotherapy where cyclophosphamide is the predominant chemo agent. So that is what we believe, but we're still trying to tease the data apart to conclude that, and again that's what we're actively doing, doing that digging as we speak, so --

You should mention that the approach we used in -- I guess categorizing and ranking the emetic potential was the Hesketh algorithm, and what we may be seeing is that the differences could be that some -- I guess shortcomings of the algorithm. It's really -- was the kind of the state-of-the-art approach, but there may be some gaps in it that would account for these results.

And did we see the same type of difference in the control arm?

Yes, yes. I mean in both -- for Aloxi as well -- and we've actually seen similar kind of effects in other trials. So, I think everyone is using the same approach. FDA supports the Hesketh algorithm as the approach, but I think there again might be some shortcomings. And again the trial we conducted was probably one of the largest trials conducted in this setting, so we will get some very compelling data and important data on response on the chemotherapy drug and regimen.

Okay. This one for Greg, I guess I just need a little clarification on the cost savings as a result of your announcements this morning. I heard, I believe, a $5 million in savings through mid '09 and then $1.9 million annualized in personnel costs. Is that $1.9 million in the $5 million or -- ?

No. The $5 million is really project expenditures; and then the $1.9, carefully qualifying that as an annual number, that is purely direct compensation and burden and such that goes with it. So for that period, you'd basically take the $1.9 million and divide it by two and add it to the $5 million.

Okay.

Looking at just those two components.

All right. And finally for Ron, and I -- we've talked about this before, the partners that are doing due diligence now, do they lean -- are we again looking at a global or a regional type of partnership?

It's a complete mix. We have companies with geographic focus, we have companies we're speaking to -- probably about 20 for the Asian territories, we have some that are European-only and some that are US-only and some global. It really is a very interesting mix of companies.

Okay.

And we really don't have a -- each market is sufficiently different that that -- I'm not sure if we have a view on whether a single partner would necessarily be the best approach or different geographical deals would be better.

Okay, great. Thank you.

(OPERATOR INSTRUCTIONS). The next question comes from [Robert McQuarrie] with [Viasys].

Yes, I'd like to ask -- the one question I have is for you John and it is, can you explain the significance of the superiority and -- or the lack of superiority between Aloxi and APF530?

I'd be glad to. It's one thing that I'd run over my time to do. You must remember that the primary goal of the study was to demonstrate statistical non-inferiority, a rather fancy term to show that we have comparable activity with Aloxi. We clearly demonstrated that, and based on our discussions with the FDA, that should, unless there's something I am unaware of, allow us to submit and have an approval for, as Ron put it, a second long-acting 5HT3 antagonist. While we failed to demonstrate superiority, which was, as I highlighted in the delayed highly emetogenic piece of the puzzle, Aloxi does not have any claim for that piece of the puzzle. So, again failing that was unfortunate in the first cycle, as we presented today, had we got the data that we saw in the second, third, and fourth cycle in the first, we would actually have attained our goal. Does that answer your question?

Absolutely.

Maybe I could clarify a couple points, one I think -- I guess failure -- it was a statistical failure. We were still numerically higher than Aloxi, it just wasn't at the level required for getting our statistical hurdle. Also I would point out some people are also a bit confused on non-inferiority as a basis for approval. And again, based on our discussions with FDA, prior FDA action, we believe that the results that we have are compelling and would make for an approvable package. And I will give two examples. These are actually relatively recent examples that -- it's pretty spot on. Sancuso is a granisetron patch, we don't view it as competition, but this product was approved just a couple of months ago and via the 505(b)(2) route, it's a formulation of granisetron. The comparator was granisetron also, and they were shown to be actually numerically inferior, but within the confidence intervals, and they were approved pretty much within the PDUFA time; I think they ran a couple of months over. Also Aloxi oral and injectable were both approved based on non-inferiority. So it's a standard approach. I think there again misinformation, some people question the approvability, but it really -- for 5HT3s this is the approach that FDA prefers.

Do I have the ability to ask one more question?

Sure.

My question would be the difference between Aloxi and the APF530, is there like a manufacturing benefit you guys have compared to Aloxi, which might, I guess, decrease the cost of the manufacturing or anything like -- in that -- I guess that specific discipline?

I'm not sure actually of the cost structure for Aloxi to tell you the truth. We would expect our gross margins to be well within pharmaceutical acceptable gross margins that we probably have a gross margin of 90% or greater. I guess one thing I would also point out is unlike MGI [NSI] we own the technology outright, we don't pay any third-party royalties and I believe that MGI [NSI will help] in a pretty significant royalty on sales. So our product could be a pretty good cash cow given the gross margin and also the fact that oncology products typically have lower promotion expenses.

Can you say whether or not there is an advantage over Aloxi?

As far as cost structure?

Correct.

Well, again I don't know their cost structure, but based on the royalties that they have due and also the -- I would expect our cost of goods to be comparable. But with the royalties they have to pay our -- probably our gross margins net of royalties would be greater.

Answers my question, thank you.

Sure.

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

That's all we had for today. Thank you again for participating on the call and we'll look forward to speaking with you in the near future. Thank you.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.