英賽德 (INCY) 2005 Q2 法說會逐字稿

Good morning and thank you all for coming this morning. Because of the webcast -- and welcome to the webcast people, too -- we're going to get started on time. We have a fairly full agenda and the first part of the meeting will focus on a review of Study 203. This is the data we presented last week at the International AIDS Society conference and some of you may have listened to that webcast.

Dr. Friedman will begin with an overview of the results and also discuss a little bit of the objectives. Dr. Richard Levy, who is our Senior Vice President of Clinical Development -- Drug Development, will walk you through the data that was presented at IAS plus some additional data with a focus on how these results are influencing the design of Phase III. And Cal Cohen, who you heard on the webcast last week -- some of you did, I'm sure -- will just discuss how he sees being used in the market going forward. We'll then have a Q&A which will include Dr. Rob Murphy who some of you know; he's the principal investigator for Study 203. And after that we will go into a review of the second-quarter financial results which will be done by Dave Hastings.

As always would you please note the Safe Harbor and familiarize yourselves with the SEC and those risks associated with Incyte's business. With that I would like to turn the podium over to Dr. Friedman who was our President and CEO.

Good morning, everybody. I'm just going to be in an introductory mode here and most of the data will be presented by Rich Levy, our Senior Vice President for Drug Development; by Cal Cohen and then we'll open it up for Q&A.

When we first started talks about this study, and throughout the conduct of the trial, we had a number of objectives. Firstly, we wanted to demonstrate that Reverset had sustained clinically relevant potency in the patient population which we believed the drug would be used most -- specifically treatment-experienced patients. Secondly, we wanted to evaluate the safety of Reverset and pick the highest safe dose for our pivotal three study. And thirdly, we wanted the study to identify subgroups of patients in which Reverset was particularly efficacious around which to build a Phase III program while eliminating subgroups in which the drug was either less effective or not well tolerated.

So we've achieved all these objectives. We've confirmed that the 200 milligram once daily dose of Reverset provides the most potent antiviral affects and you're going to hear that this efficacy is especially impressive in the absence of the concomitant use of 3TC or FTC -- all three of these drugs are of the same class, thymidines -- confirm that Reverset is effective in a wide variety of HIV mutations, the M184B mutation that engenders high-level resistance to the two cytodines, 3TC and FTC, but not to Reverset. The TAMS, the thymidine analog mutations which engender resistance to ADT (ph) and B4T (ph) -- K65R, which you sometimes see in patients who are failing variad (ph) therapy and others.

And we've confirmed that Reverset is generally well tolerated at the 200 milligram dose. We've confirmed in the study that it should not be used with DDI and Rich will come back to that. And we've identified key patient subgroups to study in Phase III.

So to conclude my opening remarks I would say that Reverset has the characteristics required for successful development and marketing. It will be a one capsule once-a-day drug. It has potent antiviral activity particularly when used without FTC or 3TC and it's active against a wide variety of mutants harbored in treatment-experienced patients. To state again, it's thus far been generally well tolerated and in the extension study of 203 as well as study 901 that Dr. Levy will describe shortly, we'll be looking for durability response and especially for a long-term safety data as we plan for our meetings with the FDA and design our Phase III trials.

Now before turning this over to Rick I just want to deviate for a second and make an analogy. One of our jobs today is to make it obvious to you that there's no good reason to use the drug with 3TC or FTC. People, groups, humans get functionally fixed and it's very difficult sometimes to move people away from a concept even if it is a concept that's pretty shaky. When I led the development team for Sustiva about a decade ago, you can imagine at that time the NNRTI's were not regarded very favorably.

When we got the first Phase II data that showed that Sustiva blew the protease inhibitors away in comparative studies, there was a human (ph) cry and a tremendous backlash to that concept. Because of course you had to have multiple mutations for protease inhibitors to lose their activity. The problem is, as soon as you got the first one it was a very steep slope and you got to the last one fairly quickly. With Sustiva you only needed the K-103 end mutation to mutate to relatively high resistance.

While you can see how the data has played out over the years and we basically created a paradigm shift in therapy for HIV patients in first-line therapy. What I hope you come away with today is the feeling that if the data holds up, and we believe the data is fairly solid, that we will be creating a similar type of shift in the way treatment-experienced patients are given combination therapy. With that I will turn the baton over to Dr. Levy.

Good morning, everyone. As we just presented the data from Study 203 And Rio last week both as an oral presentation and as a poster, and we just had a webcast eight days ago where we went through the data in detail, my focus this morning will be to reiterate just the most key findings from the study and to answer some of the specific questions that we've actually gotten back from some of you over the past week. I'll also briefly remind everyone of our emerging Phase III plans and our anticipated positioning of Reverset assuming our Phase III trials are successful.

Then, as Pam mentioned, Dr. Cal Cohen will describe why physicians might opt for treating patients with Reverset rather than alternatives such as 3TC or FTC. We'll use the rest of the time for Q&A and we suspect many of you will still have questions after our presentation as well. So -- I didn't even realize I didn't have the slide up. So that was my overview of the presentation.

Going to the next slide; this is a diagrammatic of Study 203. In this study treatment-experienced patients with a viral load greater than 2,000 copies per milliliter at entry -- in other words they were failing their current regimen -- were randomized to placebo 50, 100 or 200 milligrams once daily of Reverset in addition to their failing regimen for the first two weeks. After two weeks every patient had the opportunity to optimize their regimen or change their background therapy and that decision as to what that background was going to be was made prior to randomization and prior to even blinded treatment during the first two weeks so that the potential for a bias or uneven distribution of the medications that would be used to optimize would be minimized.

Interestingly about a third of the patients in the study didn't optimize their regimen at that time point. And the main reason why those third of patients didn't do that is because their physicians felt that they were already on an optimized regimen for them even though they were not maintaining a viral load less than 2,000 because their just weren't better options. At the end of week 16 or after the first two periods, the patients who were randomized to placebo all got reversed out at either a 100 or 200 milligram dose. And every patient in the study, including those on placebo and those on Reverset, were eligible their regimen again, although at that point relatively few people did change them having already tried to get the best regimen at week two.

Now the way we've changed this slide a little bit is we've now added Study 901 to the last point. Study 901 is essentially a long-term extension to Study 203 and is anticipated to go on for several years. With 901 we expect to get primarily a lot of additional long-term safety data beyond the 24 weeks of Study 203. But the data that we presented at Rio, and that I'll go through with you again, was the final efficacy and safety data at both week two and week 16 and also included much of the safety data through week 24 already.

This is a slide which you have seen before and I know it's busy. It's here just to remind you that this is a population of HIV-infected patients who harbored virus that contained many of the key resistance mutations. The average patient had a viral load of 4.5 logs, which is in the order of 20,000 copies per milliliter, and had an average CD4 count of around 250 cells. To put that into perspective, this is roughly comparable to the patient populations that have been included in many of the other recent investigational agent studies in treatment-experienced patients.

So this slide shows the overall response at two weeks. As you can see by the p-values that we've added to the slide, all doses were more effective than placebo and 200 milligrams was statistically more effective than the lower doses. It's important to note that about two-thirds of the patients in this analysis and in the study were receiving 3TC or FTC, so these results are already dampened by the use of 3TC and FTC. And the results that I'm going to show you in the next slide will focus on the efficacy results when you didn't use 3TC or FTC.

So this, again, is the overall result at 16 weeks, again including the two-thirds of patients that were using 3TC or FTC. Again, 200 milligrams was clearly the best dose and overall showed meaningful efficacy advantages over placebo. But from here on out I'm really going to try to focus on the way the drug is going to be used in the future which is without 3TC or FTC.

So here's the two-week results, now just focusing on the add-on period and again looking at people in green who were taking 3TC or FTC where we saw a 0.4 log drop, which shows that the drug is active in the presence of 3TC, but it's much more active as shown by the yellow line at the bottle when people were not using 3TC or FTC where we saw a 1.1 log drop at the end of two weeks. Now to put this in perspective -- remember that Gilead's study with tenofovir where they added tenofovir to a failing regimen, they saw about a 0.6 log drop at two weeks which was then maintained.

So the 1.1 log drop that we're seeing here is, in fact, particularly impressive because most of the patients in the study already had mutations that confer resistance to tenofovir -- I shouldn't say most, about 45% -- and many of these patients were failing tenofovir-based regimens.

So this slide follows up on that point now showing the long-term results in patients who didn't optimize their therapy comparable to the Gilead Study. And remember that with the Gilead Study they saw a maintenance of about that 0.6 log drop through -- beyond 16 weeks because their study went longer than that. Ours, we're cutting it off at 16 weeks because that's really the end of the efficacy analysis for this study. But as you can see by the line at the bottom, this yellow line here, we got by week three actually a 1.5 log drop and maintained that 1.5 log drop as very study through 16 weeks, again in subjects who were not using 3TC or FTC which is how we expect that the drug will be used in the future.

So Reverset is a very powerful drug even in treatment-experienced patients who harbor resistance mutations to multiple NRTIs. Here are the results at 16 weeks based on comparing 200 milligrams of Reverset without 3TC or FTC with placebo either without 3TC or FTC or a placebo when used with 3TC or FTC. We believe that the primary efficacy end point for Phase III studies in heavily treatment-experienced patients will be the percentage of patients with a greater than 1 log viral load drop at end point which would essentially be that 24 weeks. Additionally, we expect that the Phase III studies will include both optimizers and non-optimizers because some treatment-experienced patients just can't optimize their regimens any further.

So I've highlighted in white the results for the all patient analysis because this is the likely primary analysis for a Phase III study in a similar patient population. As you can see, there's a big difference in the responder rates between 200 milligrams without 3TC or FTC on the order of 75% to 80% versus placebo (technical difficulty) without 3TC or FTC on the order of 25% and also better than placebo with 3TC or FTC in the order of 45%. In the optimizer group you still see meaningful differences, but just because we say that the studies will be based on an optimized regimen, there will be non-optimizers in there which also contribute to the differences that we see. So We believe that the all patient analysis is the best one to look at for predicting the pivotal results in Phase III.

So this is a little bit of a complicated slide. One of the questions we're asked is how certain we are that the comparison between Reverset without 3TC or FTC and placebo with or without 3TC or FTC -- how certain we are of those results because it's based only on a subset of patients. The best way for me to answer that question is to look at the p-values of the comparisons between the groups because the p-value is essentially a probability that the difference is due to chance. So with a 0.0071 p-value between Reverset 200 milligrams without 3TC versus placebo without 3TC or FTC, that means that there's a 0.7%, or less than a 1 in 100 chance that that different is due to chance.

Similarly, if you compare again Reverset as it will be used versus placebo with 3TC as an alternative, the p-value of 0.00521 means that essentially there's a 5% chance that this difference was due to chance. So even though the numbers of patients in these subgroup analyses are small, the magnitude of the difference gives us a lot of confidence that the Phase III results will also demonstrate that Reverset is more effective than 3TC or FTC in treatment-experienced patients. And if there's any confusion about this I'll be happy to come back to it during the Q&A.

This is information that Cal Cohen presented in Rio but was not included in the slide set that we went through with you at the webcast last week. As you can see, 66% of the patients who received 200 milligrams without 3TC or FTC went to less than 400 copies per milliliter and 60% of the total patients went to less than 50 copies, which is the most stringent current measure of undetectable virus. The results in the placebo groups are clearly much less impressive.

Everyone agrees in the field that the ultimate goal is to try to get the level of HIV down to undetectable levels in the blood, though this is not often possible in heavily treatment-experienced patients. And I'll tell you that based on the informal discussions I've had in Rio with people, it was this data showing that you can actually get most people to undetectable levels in treatment-experienced patients that was most impressive for the HIV specialists at the IAS conference last week.

I'll now turn to safety. Reverset was very well tolerated in the study as shown by the small number of moderate to severe adverse events. With the exception of asymptomatic hyperlipasemia, which I'll discuss next, no other moderate severity and possibly related treatment adverse events were reported more than one patient in all of the Reverset arms. Hyperlipasemia has been the primary safety finding in this study. There was a low-frequency, about 5%, of hyperlipasemia when used without ddI, but a higher frequency when used with ddI, so we're not going to be using Reverset with ddI in the future and we expect the labeling will indicate that as well.

All of the hyperlipasemia 200 milligram group was asymptomatic and only three patients in the study developed symptomatic pancreatitis which I'll discuss here. Two of the patients with symptomatic pancreatitis were using higher than recommended doses of ddI and tenofovir and this is a known risk factor for the development of pancreatitis. The third patient who had symptoms of pancreatitis developed the symptoms during an alcoholic binge and he had a prior history of pancreatitis and this is not attributed to drugs.

There was also won asymptomatic patient who developed an abnormal pancreatic ultrasound at the time when he developed hyperlipasemia, but his CAT scan done about a week later was normal. Other than the one patient with pancreatitis that the investigator attributed to alcohol and to an alcoholic binge, no patients have developed clinical symptoms of pancreatitis unless they were taking ddI and tanofovir at higher than the recommended doses. We need to see long-term safety data to determine if Reverset might cause pancreatitis in the absence of ddI, but, based on the data we have seen so far, we're optimistic that such cases, if any, would be rare.

In conclusion about the study itself, and this slide focuses only on the data in patients who are going to use Reverset -- who will use Reverset the way it almost certainly will be used in the feature which is without 3TC or FTC, Reverset was highly effective, 1.1 log decrease at two weeks; at 16 weeks a 1.4 log decrease, an 80% greater than a 1 log drop; 66% less than 400 companies; 60% less than 50 copies. As I've shown you, and this study was more effective than 3TC or FTC which is by comparing it to the use of those drugs in the placebo group. It was generally well tolerated when used without ddI with a 5% incident of asymptomatic hyperlipasemia and no clinical pancreatitis except, again, for the one patient with the alcoholic binge.

This slide is an attempt to answer some of the question that we've been given about exactly how many patients were included in the analysis that was presented either today or last week. And I won't take you through these slides, but they're here for each of you to look at to help clarify the data for you. While again, some of the subsets are small, the p-values that we've shown you indicate that the likelihood that the differences that we're talking about are most likely not due to chance and that gives us the confidence that we'll see similar results in the Phase III study.

This slide shows the number of patients (technical difficulty) in the all subject analyses with the first number in each box representing the number of enrolled patients and the second number being the number that completed at 16 weeks.

And this is a similar slide, this time focusing on the key 3TC and FTC subgroups. So the move to our current plans for Phase III -- as I said last week, we currently plan to do two pivotal studies in non-overlapping populations which may allow us to use the same sites for both studies. The first study is intended to be in triple class resistant patients and will be a randomized double-blind comparison to 3TC. We also plan to do a second study. This study would also exclude the use of 3TC, FTC or ddI with Reverset and may involve patients who are less treatment-experienced. But until we've had discussions with our advisors, the community, the FDA and some others we're not ready to describe all of the potential details of this study. Our plan is to meet with these groups over the next weeks to months and start the Phase III studies this year.

So assuming that Phase III studies support what we've seen in Study 203 and that Reverset continues to be safe and generally well tolerated, we believe that Reverset has the potential to become a preferred nucleoside for use in treatment-experienced patients. This slide illustrates a number of potential ways Reverset might be used. For example, in patients who are failing their first line regimens there are a number of logical combinations of Reverset with other NRTIs that could provide greater antiviral potency, particularly against resistant viruses, than you can get from the currently available regimen.

In third regimens and beyond we believe that Reverset will be a preferred drug for those patients to haven't taken Reverset before or don't show resistance to Reverset. But I'll remind you that at this still early point in time we haven't identified new patients that confer resistance to Reverset. People are people are going to need to make a choice between using Reverset or 3TC or FTC as well as of using ddI. Because the emerging data suggests that Reverset is more effective than 3TC or FTC, getting more than half the patients to undetectable virus in the blood -- if Phase III data confirmed this and continued to indicate that Reverset is generally safe and well tolerated when used without ddI, we believe that Reverset will be used instead of 3TC, FTC or, for that matter, did in most treatment-experienced patients.

Now I'd like to turn the presentation over to Dr. Cohen so that you can hear his perspective on how physicians are likely to view these results and, assuming we see similar results in Phase III, how they are likely to make a decision to use Reverset alternative treatment such as 3TC or FTC. Cal?

Good morning. When we review these results I think clinicians have had a couple of observations that put these into perspective. The first I think is that this was a bold or brave design to use to study this drug only because in essence we just threw this drug out for clinicians to use in the best possible way they could, meaning treatment-experienced patients on a variety of regimens and a variety of circumstances from minimally to very experienced, from lots of concomitant meds to few concomitant meds. It was an exploratory study that did exactly what it was designed to do which was to explore what do clinicians need in this drug, how would they use it and then what have we learned from its use in a variety of treatment-experienced patients.

And as all of you know I'm sure, the success of Gilead as well as the prior success or still current success of Glaxo is based on the fact that 3TC or FTC are the mainstays of in essence every single first regimen. While there are some variations on that theme, those are pretty much on the fringes. And basically every first regimen here and abroad contains 3TC or FTC in virtually every other combination of what the third drug is including, of course, as afabrins (ph) as you heard earlier. So then what do we do next?

Well, all of you know historically that there has been a terrific job by initially Glaxo to maintain 3TC in every subsequent regimen from that point on. Why is that? The main reason is that HIV pays a small price to become resistant through 3TC or FTC and that price is measured at about half a log. When clinicians were designing second and third and subsequent regimens, that half log seemed like a reasonable addition to any subsequent regimen. It's an easy drug, it's one pill once a day at the current time and so why not? A half a log for one pill seemed like a decent trade for any subsequent regiment. And that was in essence the momentum that kept that drug alive through every subsequent regimen.

In recent years certainly clinicians have continued to discuss amongst ourselves when do we need that half log and when don't we. And it's been pretty clear from some studies done, particularly a study that was presented at the retrovirus conference about a year ago done in Europe, that in a randomized trial of people who were no longer responding to their first regimens, when switched they did a very simple randomized study, the study was called COLATE and the study was a very simple design. It was for patients who are in essence no longer responding to their current regimen, and the randomization was switch to the best three drugs versus the best three drugs plus 3TC; a very simple design to test what had become standard of care but had never really been formally tested.

And the design presented at the retrovirus conference had results that actually created a minor earthquake because it showed no benefit to the maintenance of 3TC or FTC in the follow-up regimen. And in that study actually everybody was using 3TC, FTC was at the time still a new drug. So there was no data to support that what had been common practice was (technical difficulty) necessary. If we can find three good drugs that suppress virus then 3TC was optional and in fact in that study it really didn't contribute very much at all to the next regimen.

Well, because these data were done from a European study and because perhaps there were no U.S. sites, the response of the U.S. research community was largely to ignore the study. It was dismissed, it must be those crazy French and what do we know? So that study was largely displaced by the mainstay of opinion which was that we would continue to use 3TC or FTC in every subsequent regimen. And indeed some investigators continue to describe what 3TC and FTC do without a critical examination of when do we need what it does.

And so this study is actually one of the first and is a groundbreaking study for us to really focus in on when do we and when do we not need the addition of that particular drug. Even though it's simple, it's still not necessary. So what we learned from this study is actually pretty clear -- when we continued 3TC or FTC in a background regimen of those not taking Reverset you saw that there was an enhanced response. It was, if you look at the percent of a greater than 1 log decline for example at week 16, you saw improvement by about 15%. So the hypothesis continues to work, 3TC was active, that additional half log provided an additional response for a subset of patients.

So is that the best we can do? For years it has been somewhat, for at least heavily treatment-experienced patients, the best we can do. In patients similar to those in this study with lots of resistant mutations, particularly the (indiscernible), the 41 and 210, a lot of our other drugs in the nucleoside family are obliterated; they have minimal activity including unfortunately tenofovir. Tenofovir in the presence of the 41 and 210 mutation has very little intrinsic activity. So maintaining 3TC is often the best we can do because these mutations are so destructive to the activity of other drugs in the class.

So what this study taught us is that that isn't necessarily the best we can do, it's the best we've been able to do thus far. And what this study showed us is that when we use this drug, DB4FC (ph), in the absence of 3TC, FTC we can do better. It's a very simple concept, not particularly dramatic in the field. We can always learn things and this study showed us that there are drugs that retain activity in the presence of these mutations and that this drug has even greater activity than either 3TC or FTC. It's a very simple concept. However, that simple concept is being launched into a clinician mindset, as you heard from Paul, that it was 3TC forever. So how hard is that going to be to challenge?

Well, I think one of the most important findings on this study is that about one-third, or 40% in some arms, 40% of clinician already had abandoned 3TC or FTC in their background regimen. So at least some clinicians are already choosing to see if we can do better with perhaps more compact regimens or just regimens in which we don't feel we need that additional drug. So already 40% are ready to dispense with 3TC if another drug can do just as well or better. What do we say to that other 60% in whom it's 3TC forever? I think what we say to them is 60% less than 50 is a dramatic outcome for a study in which you're simply adding one new drug to a regimen.

Right before I presented these data you might recall that Christine Kalama (ph) presented an analysis of the power study using Tibotech's Compound 114, a new protease inhibitor that has an extraordinary amount of buzz in the HIV community in part because of the studies that she and others have presented this past year. What those results showed is that an highly treatment-experienced patients just over 60% of patients at a viral load less than 50 copies on a 114 containing regimen. About twice as successful as a regimen without 114 using currently available CI's. That has created enormous buzz in the community and has really led to a lot of enthusiasm for the eventual approval of 114 when it gets here.

Interesting enough, in this study we see a similar dramatic difference, roughly a third of the patients got to less than 50 in the absence of Reverset with current standard of care. We double that to about 60% with it. I think it's that simultaneous occurrence of the observation that we can do better with drugs are reasonably simple that has led to renewed excitement for our field in creating a sequence of regimens that can be successful in our patients.

So are there trade-offs? Are we using Reverset but it's just difficult; I'd rather use 3TC, Reverset is a challenge? Well, hopefully these data convince you as they've convinced clinicians that there is not much of a trade-off. Based on these data it's simple; it's one pill once a day just as is 3TC or FTC, one pill once a day. The safety data have been I think important for us as well. And so I think what clinicians have learned from the study as we discussed it amongst ourselves in the past week is that these 16 week data that you saw with the three lines across have led to a confidence that if weight can see durable suppression in the first 16 weeks, for the past decade the first 16 weeks usually predicts the next few years in most studies.

That's why we do these short-term studies because they're usually pretty predictive. And these parallel lines that you've seen going across enviraload (ph) drops have been very I think exciting to clinicians to realize that for our patients we can do better; we don't have to stick to old paradigms when we can do better with new drugs. And that's why 114 is awaited because it's a new drug that does better than the current drugs and that's why I believe DB4FC will be a welcome drug to the armed (indiscernible) because it allows us to do better.

We can get a majority of our patients controlled rather than a minority. I don't think it's going to be that hard to convince clinicians to enroll these patients; triple class experienced patients are amongst the easiest studies to enroll because unfortunately we've got a lot of those patients in our practices and those are the patients most motivated.

I think these results will actually lead to rapid enrollment, a lot of enthusiasm, and hopefully, as you've heard it confirmed, the rapid availability and approval of a drug. And I think we'll have a pretty good uptake in our field based on at least these data presented today. So let me close my comments and turn it back over to Paul.

We'll open the session up for Q&A now and any one of the four of us will try to answer any questions that you have.

A question for Dr. Levy. If I remember it correctly (inaudible). Could it be that (inaudible) in the background regimen? So based on the data that you have so far, it's clear that combined (inaudible) regimen. So I'm just wondering what you're (inaudible).

Let me clarify what we said. The didn't say last week that we would be looking at Reverset with or without 3TC. We said we'd be comparing Reverset without 3TC or FTC to 3TC. So that we're not planning to use Reverset in the same regimen as 3TC in any of our studies. I won't say that no one would ever use the two in combination once the products are marketed, but that should be relatively rare because it doesn't make a lot of sense.

So essentially the Phase III trial that I'm talking about would be reiterating some of the data that we showed where you have Reverset at 200 milligrams dose once a day without 3TC or FTC compared to no actual placebo but it would be blinded 3TC so you wouldn't know which one you were taking. And the objective of that study would be to demonstrate what we've seen here in a bigger trial -- that Reverset is a better choice, more effective than 3TC in treatment-experienced patients.

My second question is (inaudible)

First, the p-value actually --.

(inaudible question - microphone inaccessible)

Yes. So the question was we saw a p-value of 0.007 comparing the 0.9 log difference between Reverset without 3TC to placebo and what is it in the overall patient population. So let me clarify two things. One, that p-value is not comparing the log difference. That p-value is comparing the responder rate based on the percent of patients who have the 1 log drop. We haven't shown p-values for of the log differences because we think those analyses are less critical because what you really want to do is look at the end point that would be used in Phase II trials.

But if you look at the overall patient population in this study, you would not have achieved a p-value of less than 0.05 comparing all of the Reverset with 3TC or without to placebo. But that's not what's important anymore because what's important is the Phase III studies and we're not going to use the drug with 3TC anymore. So what we're showing you is the very low p-value that the drug will be used at in future studies.

When you reshuffle the deck after -- in these treatment experience patients with this many mutations the most you get or what you expect to get is around half a log or so -- definitely less than one long reduction and that's exactly what happened here. So that's predictable. And now, like what Rich just said, we're not going to be using this drug with 3TC. So in a way our analysis is still better, as a matter-of-fact it's surprisingly better and it surprised the investigators in the trial at the response virologic response rates. No matter how you measure virologic response -- the one log drop, the amount it dropped, the percentage undetectable -- no matter how you cut it, all three ways works at the high does.

This is what you do in Phase IIb. This is not a Phase III trial. A lot of people -- their criticism of this trial has been more you shouldn't have done it with 3TC, well, we did in vitro data and we showed that there was a very modest interaction and you still have efficacy with 3TC. Okay, we learned how to optimize the use of this drug. I think you'd be insane to use it with 3TC frankly, but you do have some kind of affect. And we've got to get over the paradigm of you have to keep 3TC forever which I think we're going to end it at this particular point, I hope anyway.

(inaudible) can you go through again what some of the background therapies there were on (inaudible)?

I think there were 22% of patients who were using T20 or FUZEON in the study. And people were using all sorts of things. Most people were using boosted PI's -- in fact, many people were using more than one boosted PI in combination. What I mean by boosted is with Ritonavir, and most patients were still using nucleosides, two-thirds were using 3TD or FTC. I think about 25% to 30% were using ddI. So basically these people were so, for the most part, so treatment experienced that the people tried to throw everything that they could use -- even in the background regimen, which really shows that when you can show a benefit over that you're really showing that you're better than what's out there as a standard of care now.

I think what you're getting at though is the recent data with both Tipranavir and the Tibotech compound that when they optimized the therapy with T20 they had these phenomenal results. Am I correct?

The problem here with that approach is that a lot the -- 22% of the patients that were on T20, approximately half -- I can get you the exact number if you want -- were already on it. So they were failing a regimen with T20. That means really it's only about 10% were initiating T20 and then 10% through the four arms, the numbers got really small. So we couldn't see that kind of difference in this size of study. That's why you see the T20 affect in the big Phase III trial.

So in the really large couple hundred patient trials all on one dose then you're going to see that effect. And we would predict that if you optimize a regimen -- you put in T20, you put in Reverset or you put in the Tibotech 114 or Tipranavir, you'll have these phenomenal results. The same thing will happen here; we can't prove it with this study, but that's why. Does that answer it?

(inaudible question - microphone inaccessible)

With T20 or without or is that out of the question now?

(inaudible question - microphone inaccessible)

Okay. Actually we have to redesign the power calculation now, it actually goes in our favorite. The number of patients required for the Phase III study is going to go down because now we're talking about over a log.

(inaudible question - microphone inaccessible)

The question is we only saw hyperlipasemia with 100. That's not the correct interpretation. What we had was we had hyperlipasemia at 100 and 200. We didn't have any pancreatitis at 200. And the reasons are that we just happened to have two patients who used too much ddI or too much tenofovir and they just happened to be in the 100 milligram arm. As I said in my presentation, it's possible that someday we'll see somebody develop pancreatitis with 200 milligrams. We haven't seen one yet, so we think that most likely the frequency of that would be pretty rare, but if people used the wrong -- it won't be using ddI anymore, but people can get pancreatitis from other reasons as well. But that was mainly about pancreatitis, not hyperlipasemia.

If you want to read everything that we know about pancreatitis and HIV, there was an article out just two months ago in the Journal of AIDS; the first author is Ron Riesler (ph) from the University of Maryland and actually he and I reviewed all the cases of pancreatitis and all the cases of hyperamylasemia and all the cases of hyperlipasemia in 20 ATCG (ph) trials is 9,000 patients. You'll learn everything about it. It's a very complicated thing. There's grade three amylasemia, lipasemia and pancreatitis in quite a few patients that are not on ddI or any other known thing that causes pancreatitis.

Especially the chemical part is -- it's a very confusing story that is never going to be cleared up. The other point is that -- but are free to the paper for the exact actual statistics and stuff. When you do studies in these failing patients, this is not like you just rounded up 100 people off the street. They've been through lots of therapy, they've had multiple infections, a lot of these people drink a lot. There's all sorts of other factors in play here. They're on a variety of other drugs -- not just the A or V (ph) drugs, they're on all these other compounds and stuff. And to really sort out what's causing what is very difficult. And we're going to see complications. That's the nature of the beast at this type of patient population.

(inaudible) what percent non ddI in currently treated patients (inaudible) And if we see a creep up in the 901 extension, is there a level at which this becomes automatic in the process (inaudible)?

Those are excellent questions and I would just refer back to the paper. It's about the same percentage. It's a little bit hard because when you go back into the databases looking at this -- they're looking more at amylase than lipase, that's actually why we kind of went into the lipase mode because it's a little bit cleaner test. Amylase oftentimes gets confused with carotid and salivary amylase compared to pancreatic amylase. And typically in the studies they don't fractionate between the two so you over-report the amylase. There's a lot of problems with the whole reporting thing, but it looks like it's in the ballpark. There's always just like 5% to 10% that are having this.

So as soon as you start looking at it you start finding it. It's like what's now a virus. Illinois reports -- I'm from Illinois -- we have the highest rate of West Nile virus because we have reporting officers in every county of the state, we're the only state that does that. So it looks like if you're going to move to Illinois you're going to get West Nile virus. Actually it's much more likely you're going to get it here, frankly. But if you look you find it and so, in all these studies you're going to look and so we are going to find it.

The real thing is, I wouldn't focus too much on the chemical component, focus on pancreatitis. That's really what the issue is. If we start seeing pancreatitis we think due to this drug -- I'll be very honest, it's not going to be used for (indiscernible), but look, it's more effective than ddI. People are getting away from ddI for a variety of other reasons. Number one, you can't use it with tenofovir. That was the nail in the coffin for ddI. Sales of ddI, use of ddI -- I don't care about sales, I'm an academic guy -- but it's going down. It's just going to disappear pretty much off the face of the earth. So that's a drug with known incidents of pancreatitis.

If you've got some kind of a low -- D14 (ph) has been associated with it -- of course, we don't use that for other reasons. But Kaletra, I mean Kaletra is still the number one protease inhibitor. That's what's got a pancreatitis incidence rate. So it's a range of what Kaletra is causing -- I don't think there's any problems, particularly for any line after first-line. Keep in mind two-thirds of the patients are not on first-line. There's more non first-line than first-line.

(inaudible question - microphone inaccessible)

So for those on the webcast, the question was about CCR5 inhibitors and what role might that play if any and how we think of first-line and subsequent lines. The first question for us is when CCR5 inhibitors make it into first-line what will the studies show and will they be used first-line or second-line based on their success? It's amongst the biggest controversies at least in the medical community around CCR5 enthusiasm. Some are enthusiastic and some are actually reasonably skeptical and the studies will answer the question.

But I think that because it's a new class and because of the issue of receptor tropism and dual receptor tropism and tests to find it and the sensitivity of the test and all of the ensuing controversies. There's more controversy around that class than ever. I think that therefore if you put it in perspective, let's fast-forward two years and let's assume the studies show comparable responses of the standard of care of the two nucleotide afabrins (ph) versus two nucleotides, CCR5 or CCR5 with a protease inhibitors -- let's assume it's comparable.

What's the barrier to entry to first-line even with comparable success? And the barrier to entry is pretty high because we do pretty well in first-line. It's a workable achievement how well we do, but with, as you know, currently two pills a day and perhaps even seen one pill a day with a good long track record of safety and understanding what we have and what we don't have to worry about, we've got a great first opening move for our patients. And so to penetrate that marketplace requires us to do as well if not better and it takes years to show that.

So I think that a CCR5 will now sometime before a new class wedges its way in there even if the data are good. We don't know if the data are even that good yet, it's too soon. So I'm not too worried about it. Regardless of what the CCR5's do, I don't think that there's too much dispute that either 3TC or FTC will remain the first drug -- or at least a drug in the first regimen and only because it doesn't get better than those two drugs.

3TC is the hallmark, the benchmark by which we judge other drugs. It is one pill once a day, it has the best safety track record of any even though the list of adverse events in the package insert are as long as any, they're all under 1% and whatever is listed above 1% probably most of us don't think it was an accurate reporting and gathering of the data. It's a great drug; it will remain first-line because it deserves to be. The safety track record is extreme.

Therefore, in second line regimens we will have patients who have already taken 3TC and the only reason they're in second line and beyond is because 3TC is no longer active, they've acquired the money for (indiscernible) mutation and we will have this paradigm. What do I do with somebody with 184V? Do I continue 3TC to get that half log or do I replace it? And so I actually think regardless of the CCR5, if Reverset can be used with or without the CCR5, but I think the secret to the nucleoside will remain 3TC first regimen and then other things second and I do think these data support that this drug deserves to be second.

Again a 1 log -- 1.5 log -- if you look at one of those graphs -- a 1.5 log drop is as powerful as our antivirals get. And so I think this drug, obviously the studies have to bear it out, but this drug certainly warrants consideration after our most common first-line choices.

If you ask yourself how would you make a better 3TC since it's such a great drug and it's the number one antiviral, how would you make a better one? You would make a drug that didn't have that low threshold for the development of resistance and a drug that would work after initial failure. That's how you would make a better 3TC. Of course that's what everyone is trying to do. Whether this is the drug or not, the data is going to have to be proven. But those are the wholes in the Achilles' heel of 3TC.

(inaudible question - microphone inaccessible)

The question was how many people optimized and then of the people that either did or didn't optimize how many people were not using 3TC with Reverset? So basically it's about a third of the people didn't optimize, two-thirds did and then about two-thirds of the patients in the study used 3TC and FTC and about a third didn't. Now that doesn't mean that they optimized to using 3TC; most of the patients who were using 3TC or FTC, even though they may have optimized their regimen, didn't change the use of 3TC or FTC, they just continued it. There are only a handful of patients.

But the point about how certain are we that these results are real, that's why I tried to focus on the p-value before. Because what that tells you is the probability that what we were seeing as a superior efficacy result with Reverset without 3TC versus the placebo with or without 3TC are less -- I mean, in the case of placebo without 3TC or FTC was less than 1 in 100 possibility or 0.7%, that that different that we saw was due to chance.

And then when you compare Reverset, again without 3TC or FTC with placebo with 3TC or FTC, which is really the question that we are going to be asking in Phase III, what that was telling us is there's about a 5% chance that that superiority was just due to chance and then 95% chance that that difference was real.

(inaudible question - microphone inaccessible)

I don't have those -- well, I think I do have those exact numbers. This doesn't tell you the people who were on 3TC, but it tells you what the (indiscernible). Because if you look at the right hand column on this slide, 200 milligrams without 3TC, there were 16 patients enrolled of which 15 completed. And if you look at the optimizer sub group, 11 enrolled of which 10 completed. The numbers are small, but the p-values are small too, and that's the point that we're trying to make is if you have a big difference, which is what we saw, you don't need a lot of people to have confidence if the differences are real.

Because then no one would optimize to 3TC.

(inaudible question - microphone inaccessible)

Yes, the question was because people were not randomized to 3TC or know 3TC was there any SKU in the baseline between the patients. So we've looked at that but not in a completely finalized way so that I can tell you every patient. But basically the groups were fairly well-balanced between them. The comparison to -- the choice of whether or not you were going to use 3TC or FTC was based -- was a decision that was made before you knew what arm you were going to be in so that that should be fairly random between the two groups. But when you have 15 patients in a group there's a possibility that you'll see some differences, but we're quite confident that there were no differences in the baseline that would explain this difference. We're pretty comfortable that these results give us the confidence to do that type of study in Phase III.

So that question has come up several times about this randomization didn't include 3TC or no 3TC. The reason why we didn't do that was because we had in vitro data that showed that there was no significant interaction. But then you've got to do the experiment in humans and we did the Phase IIa study that had a treatment experience arm at this dose and we had about a 0.6 log drop at ten days. We felt confident -- since that was at least as much as tenofovir -- that this drug is active even when you give it with 3TC.

So we've basically powered everything based on that kind of log drop and we were very surprised that in vivo, which is why we all began research and doing experiments -- and randomizing we at least to the dose that the result was just so much more pronounced without the drug. So there's obviously a partial interaction that we didn't predict. And it actually just works in our favor. So even though you have this randomization, we'd be having kind of little bit more intense debates I think if the overall response rate was in the 0.6 to 0.7 log range. A tenofovir like response. And that is not the case here. So we have found the optimal patient population to use this drug.

Can you go through the Phase III design (inaudible) on this chart? And if you could, if there's any parts of it that between now and (inaudible) discussions with the FDA of where you think your possibility that it will be changed either in criteria as one (indiscernible) in the number of patients.

We have to be careful about promising that anything is final because we're a regulated industry and other people have input into these things. But from my perspective the key thing to do is to establish that we're a better choice than 3TC in treatment-experienced patients. And so I'm pretty confident that the study will be a -- at least one of the studies would be a comparison to 3TC in heavily treatment-experienced patients. Beyond that the details are more likely to be influenced by people like FDA or investigators.

But we try to do studies that are as close to the real decisions that people need to make as possible. So -- and try to compare it to the standard of care and then show that you're better. So the standard of care in treatment-experienced patients is pretty much to look at what people have received before, what their mutations are and what they're resistant do and try to pick the best regimen they can with existing drugs. And so we're not going to likely change that, but we're going to then say let's see if Reverset works better than 3TC as the Phase II data suggested they would be.

In terms of the details of entry criteria, whether in fact the percent 1 log drop will be the primary end point, which I would suggested largely because that was the approval basis for Tipranavir which just got approved last month and was the primary efficacy end point in the TMC114 study. So it seems as if from a regulatory perspective that's the likely end point for a treatment experienced patient population. So beyond that -- the details could change a little bit, but those things that I've talked about are likely to stay as I presented them.

I would say I think at this point for us to have every detail available and to be ready to publicly disclose it is asking more than we're able to do. I think we've given you a pretty good idea of where we would go. And based on reasonable numbers of patients, we believe the outcome of this study makes designing Phase III a heck of a lot easier than we thought it was going to be. (technical difficulty) after two weeks into the study. So we have a fair degree of confidence as long as long-term safety data remains relatively benign. Thomas Wei, you have a question?

(inaudible question - microphone inaccessible)

So we've looked at that with respect to -- sorry, the question was any differences in the background drugs between the different arms? So we've looked at that primarily in terms of the drugs that are used commonly because if there's something like D4T which is hardly used -- we haven't looked to see how much D4T was used in one arm versus another, but we did look at 3TC, FTC, obviously we looked at ddI. We looked at boosted PI's as a class rather than one particular drug like Kaletra or Atazanavir or anything like that. And yes, so each time we look to the ones that have -- are fairly frequently used, they're very well-balanced. But again, it's the rarer drugs which I haven't looked at carefully -- and T20 I think was fairly well-balanced between the arms as well even though it was only used in about 22% of the people in the study.

And on the (inaudible), how sure are you that there are no other drugs that -- I know that there is a good theoretical basis for why this might occur. But how sure are you that there are no (inaudible)?

The question is how sure are we that there isn't another drug interaction that we didn't pick up in this study. First of all when you use this drug without 3TC or FTC the response rates are incredibly good. If there's an interaction beyond that it's either helpful or it doesn't exist because the drug is working really well just if you eliminate the 3TC or the FTC.

The fact that we didn't see a big boost in the response rates with T20 is because you're comparing one or two patients per group in the non 3TC arm so I don't think it means anything. And theoretically -- yes, and Rob's point is people using T20 probably are the most resistant patients to the other drugs in the regimen as well. The other point simply is that if you look at the physiology of what happens to thymidine analogs like 3TC or FTC, they go into the cell and they get (indiscernible) by a set of enzymes that are nucleate specific.

So you use the same enzymes to phosphorylate 3TC, FTC, and reverse that. You use a completely different set of enzymes to phosforrelate the other nucleosides like AZT so that theoretically you shouldn't have an interaction and historically all of the nucleoside interactions have been between members that are essentially the same thing like AZT and D4T are both thymidines. The Shire (ph) compound, SPD754 (ph) and 3TC which had a complete blockage of effect when you use the two together.

So it's not just that it's a chance finding and is it real? It makes sense even though we couldn't pick up the more subtle interaction based on the in vitro studies that were done before the trial. And I'd ask my experts here to comment further.

Even the MIV compound which was a thymidine analog -- or it is a thymidine analog, but I think the drug is not in development -- that also had the same antagonistic interaction with the D4T patient that was presented by Christine Kalama. And the Shire compound you mentioned -- in the Shire compound in vitro it was like a complete blockage of the phosphorylation of the FPD754. So they knew right away from the lab studies that they shouldn't go forward.

That was not the case with us. Ours was just a partial interaction. So we wouldn't expect – it's the phosphorylation. Remember, these are pro drugs, the nucleosides. So we're not really concerned about T20. I think the T20 story is just the number of patients -- and plus, so many of them were experienced already. So they had already basically failed T20. The only other thing we need to do is look at the other nucleosides in these regiments and see if anything comes out. I really don't think anything will come out. The one-way need to look at as a backup here, but there weren't that many people (inaudible).

I think that's a pretty complete answer. The only instance where there's a drug interaction in the nucleoside class that is the Tenofovir renal phenomenon, but our drug doesn't have that activity. So yes, anything is possible and some fluky thing could occur, but there's no rational reason to think it would occur and there's absolutely no evidence from the data that anything besides what we're describing here occurred in this study.

Well, the other bad interaction is Tenofovir ddI and Tenofovir Bacavir. I know you get -- it's also antagonistic. And just from looking at our patients here, it doesn't look like there's any adverse reaction or interaction and with Tenofovir treated patients; a lot of them were on Tenofovir, almost all of them.

(inaudible question - microphone inaccessible)

I have not specifically -- sorry, the question was Gilead's basis of approval was based on the log reduction whereas Tenofovir was based on a percent that had a 1 log reduction and that the agreed primary end point that the Tibotech protease inhibitor TMC114 obviously had with FDA before they started their trial. Yes, things do change and I think that also the Gilead Study was a different design in that there was no optimization of the background in the Gilead Study and no one is doing those studies anymore because most people believe that if you have an opportunity to optimize, you should. And not everybody can, but you shouldn't do that sort of study. I can't speak for the FDA as a guarantee, but I'm pretty comfortable with that and maybe my colleagues have anything to add on that.

Well, certainly the move from an actual delta viral load or (indiscernible) viral load between arms versus a threshold in some ways is arbitrary, there's nothing medical about it. But ever since the Toro (ph) studies in which the background was optimized and then we see what does a new drug contribute versus just optimizing the background? It was really the Toro study that showed us in patients that, yes, you can get a greater absolute viral load drop, but there are various ways to understand that and a greater than 1 log difference between the arms allowed us to focus in on what was clinically an important difference and a pretty big hurdle.

A 1 log drop is not trivial. In fact, some of our nucleosides, even in completely naive patients aren't 1 log drugs, AZT is not a 1 log drug. It's less than that even if the virus is completely susceptible. So it's a pretty high hurdle and it started I think with the T20 studies because we found a drug that could meet that hurdle and allowed us to create a standard that allowed us to judge other compounds. PI's like Tipranavir and the TMC were able to jump that hurdle.

That doesn't mean that if you had a drug with less effect that you would ignore it, but it allows us to create a hurdle above which good drugs jump. And I think that's why in this study we used that hurdle to judge the difference of Reverset versus background, and again, it just showed data that allowed us to see that this drug was good enough to meet that hurdle.

If (technical difficulty) another Tenofovir comes along or if another drug comes along, they may revise it and say let's look at delta viral load and let's try 0.7 logs. 0.7 is something, it's not nothing, but a 1 log reduction is substantial and, again, it's not a given, some drugs just don't get there.

(inaudible question - microphone inaccessible)

You mean the design of the T05 (ph) study. I have a feeling the design of those studies is probably proprietary, so I'm sure I'm not allowed to share their study design. At least my understanding of my confidentiality agreement is that their study design and their endpoints are at lease under their control. Nevertheless I think that you've got treatment naive patients and treatment-experienced patients and for these drugs to get used you're going to have to have substantial differences between these arms. But some of the designs are superiority designs and some of them are equivalence designs. And so understanding that allows you to understand what we're looking work.

Again, in these designs, the beauty of this outcome is that it allows us to look for a superiority outcome. In other words, the standard of care can be improved on if you do this. This is not a replacement of Reverset instead of 3TC because 3TC has got a flaw and we're going to try to make it better. This is to make it better, a superior virologic outcome. And that, again, is a rare event in medicine for us to do better than a standard, not simply replace something as a lot of the studies have done these days.

And so the CCR5 studies have both designs and they're really in essence just going the entire gamut from treatment naive replacement strategies, can we be as good as a standard, to treatment experienced, can we be better than the standard of care? And so both designs exist.

The nice thing about just looking at the viral load drop as one of the end points and maybe even a primary end point -- and these will be discussions that the Company has with the FDA -- is that's the best way to look at durability because if you're going to lose the efficacy over time, that's the first place where you see the curve go up. Are you following? And you see on those curves there, it's flat. It goes down and it stays down. So you look the Tipranavir data -- Tipranavir is a very active drug in these protease inhibitor resistant patients, but you see -- right after about 12 weeks you see that curve kind of going up.

The reason is they don't have good enough drugs in the background. But there is something unique about the nucleosides in that we haven't been able to figure out the signature mutation really yet in in vivo. We'll be looking at that more closely. That's going to take a couple months to do. But those nucleosides, once they lock in, if they don't have that single mutation that causes them to fail, you have that continued activity. So I mean, the nucleoside backbones I think are here to stay. You have to pick the backbone that works best for that particular patient.

(inaudible question - microphone inaccessible)

The question is about the design of Study 901, the long-term extension study. So our plan is to keep Study 901 open for as long as patients need the drug. Potentially until they might be able to switch to the drug or the marketed product assuming it were to get approved. So we would end up with some very long-term data in the order of years before the drug gets approved. The study is basically -- was originally designed not to get a lot of efficacy data at all. Anybody can use whatever drugs that they want, there's no placebo-control to compare anything to. But we will get some efficacy data from the study as people get viral loads measured they're supposed to tell us.

Now just recently when we got this data we sent a letter to all the investigators telling them of the results of the Study 203 including the fact that the drug was working much better without 3TC or FTC and we gave -- so we gave them the advice that they might want to consider stopping 3TC or FTC, but we didn't mandate that they do that because they should be the ones making the informed decisions about each individual patient.

The people that may be on 3TC and Reverset who have undetectable viral load right now, it would be hard to mandate that they stop a drug if they're completely under control now. So the data that will come from this study will largely be about safety and we probably will be able to give some post hoc analysis to be able to look at the durability of response, but everybody is going to be different, there will be no control arm. It's not really designed to do that.

(inaudible question - microphone inaccessible)

Yes, it would have to be.

The agency love those Phase II studies to go until the drug gets approved. Because they're really the sentinel group of patients that you can identify with years of exposure of the drug before marketing is approved. Like in the Kaletra Phase IIb study which I was the principal investigator on, we just closed it last month. Seven years later. The drug has been marketed for years and we continue just to look at that sentinel group, how people did long-term. Patients are doing fine, but this is actually a key group, we'll follow this group for years.

Excuse me, one more point. There are people who have been on the 901 Study or on drugs between 203 and in 901 for over a year now. So even though 203 is just finishing, there are people who enrolled in 203 more than a year ago. So we're starting to get data already.

(inaudible question - microphone inaccessible)

So what we did in vitro before we ever went into the clinic was we looked at the triphosphate concentrations of ZD4 (ph) (indiscernible) triphosphate and found that at the plasma levels that we're attaining with the 200 milligram dose, we're already leading to sort of a plateau of how high you can get the (indiscernible) of the triphosphate concentrations which is the active form of the drug.

So we haven't gone higher than 200 milligrams per day because of the belief that it wouldn't add further to the efficacy. And given the results that we're seeing efficacy wise without 3TC or FTC, we're very comfortable that this is a good dose and take just a single dose most likely. Again, I can't promise what FDA will say, but our belief is that we can just take that one single dose into Phase III.

(inaudible question - microphone inaccessible)

Let me answer that. Nobody is going to put -- 3TC is not going to go in any kind of salvage regimen. It's not going to go in a second-line regimen because it's already been in the first-line regimen -- virtually everyone -- and that almost everybody will have resistance to 3TC. So there would never be a study where you compare 3TC as a really active drug compared to a potentially active drug. So it's just not going to happen. The whole reason to use it in these experienced patients is this Safa (ph) data that's out there, not clinically proven, that shows that the virus is somewhat crippled in those patients that maintain the 184 mutation and that's really the only reason why you even use it.

(inaudible question - microphone inaccessible)

But even if we didn't have an interaction there would be, in fact, no reason to use 3TC and reverse that together. Because the reason people use 3TC is to maintain the M184V mutation because it leads to about a half log lower viral load. But because Reverset will knock out the virus that contains the M184V mutation, 3TC would not be adding anything anyway even if there was no interaction (multiple speakers) because you're taking away the virus that 3TC is trying to maintain.

So that was my belief when we first started the program. We had these panels where we showed what the drug would do with various resistance to mutations. And the spectrum of in vitro cell culture experiments that we did demonstrated that Reverset had a much broader activity against a wider range of mutants. It covered absolutely everything that 3TC and FTC covered and, in addition, kept M184V down as well as wile sites (ph).

So we knew going into this that if you want to put them together, M184V was going to disappear as a major quadrant species. So this myth or quasi myth or reality but a modest reality of what you get by keeping M184V around would not obtain if you had the two together in any event.

The goal is to get undetectable. So if the virus isn't replicating you don't need the 184V because you don't have any virus. And so we've just shown you've got 60% of the patients already are below the limit of quantization. By the time this drug gets out there we're going to have some really good drugs on the market. You know them all. You're going to have another one and the paradigm for treating second line and failing patients is really going to change because you're going to have probably just as good response rate as you do in the naive patients because now you've got a whole set up of second-line drugs that are good enough to really suppress the virus in maybe up to 80% of patients ultimately. So the whole 184V thing, it's kind of interesting.

Yes. One other point if I may, which is would it be better if it had no drug interactions? I mean it would be better of course if every drug is perfect, of course it's always better to have freedom to do everything. But I think as these guys said, there's a simultaneous drive in our field to not kitchen sink everybody and, in fact, to come up with the most focused parsimonious regimen we can that creates viral suppression. And so while the kitchen sink mega gigaheart (ph) is part of our history and certainly got us somewhere, it was only because we couldn't do better with more focused regimens.

The use of resistance testing allowed us to focus in on active drugs and not simply any drug. The use of more -- in more recent studies simplifying regimens to the least number of drugs is in fact where the field finds itself going because we can. And probably the peak accomplishment of that is to initiate therapy with a mono (indiscernible) PI as perhaps the penultimate achievement of this desire to simplify and not simply give anything to anybody. And so I don't think that we're going up against the grain to say wouldn't it be better if you could give this with everything. Actually we're going into the grain which is one of the most active drugs, let's use them.

(inaudible question - microphone inaccessible) My second question is on the (indiscernible) timeline for the Phase III trial. Using your assumptions that you saw on page 2 and do you think that the data you've generated is going to facilitate your ability to enroll the Phase III trial on a timely basis?

I'll just say this, we have a hard stop at 9:25, so we have a little less than five minutes.

I think there were three questions there. One, are we using the same formulation of the drug in Phase III that we used in Phase II? How fast do we expect to enroll Phase III? And do the results here make us believe that we can enroll it faster? So we are using a different formulation in Phase III than we used in Phase II and it's an improved formulation and it will be the formulation that will be marketed. We used tablets in this study; we're going to be using a capsule formulation in Phase III.

We've already done relative bioavailability studies and showed that they are the same so that there's no issue of having to change to a different dose. The new formulation still has some food effect, but it appears to be considerably less and we're in the process now of finding out exactly how many hours before or after a meal you could use the new formulation in Phase III.

In terms of enrollment timelines and what we learned from Phase II, I think that -- well, and also to combine in the third question -- I think that these results are going to be -- I've gotten lots and lots of calls from people coming out of the woodwork saying I loved your data, I really want to be in your Phase III study, I want to be involved with this. So I think the enrollment will go faster. We used 25 sites to do this study -- we're going to be using a whole lot more than 25 sites to do Phase III in a timely fashion. We set our goal as to enroll the study in a year, but I can't really predict the future as to exactly how long it would take.

I'll just add one sentence which is to get 60% less than 50 in this study is exactly what clinicians need to say they want to do the next study because that's not a common event. And part of research is to be able to bring the best you've got to the people you're caring for. And to have that kind of history to go to our patients and say we think we've got a good drug is exactly the kind of studies that get clinicians very enthusiastic just as what's happening now with the Tibotech compound. Those are the prizes in our field that the researchers actually value as part of what we -- as kind of part of the motivation to do research is to bring these pivotal studies to our patients before licensure, these results are pretty impressive in a way that's unique in our field.

Okay, there don't seem to be any further questions. I want to thank doctors Cohen and Murphy for taking time out of busy schedules to come and present and answer questions here this morning. I know they have to catch planes. We are going to continue with our quarterly financial presentation, but for those of you who don't want to stay for that you're welcome to slip out. But at this point I'm going to introduce our Chief Financial Officer, Dave Hastings, to take us through the financials.

Thanks, Paul, and good morning, everybody. I'd like to take just a few minutes this morning to review our second-quarter financial results which we released yesterday evening. As always our use of cash and our overall cash position are the key financial metrics we use internally to measure our financial performance and at the end of June 30, '05 we reported total cash of approximately $401 million. This balance reflects a use of cash in operation so far this year of approximately $46 million and the repurchase during the second quarter of approximately $28 million of our 5.5% convertible subordinated notes. This was partially offset by the proceeds of approximately $6 million from the sale of a strategic investment during the quarter.

It's important to note that we've taken advantage of very favorable bond market conditions and with the second-quarter repurchase of nearly $28 million of our 5.5% notes. And then with an additional repurchase in July of $7.5 million of our convertible notes, our total balance remaining on those 5.5% notes are now at $92 million. It's also important to note that all these repurchases have taken place at under par value.

In terms of our (technical difficulty) guidance for cash burn this year remains unchanged and we expect to burn somewhere between $120 and $130 million. This guidance excludes the repurchase of our 5.5% notes, any activity in connection with our strategic investment portfolio and any possible in license of products in clinical trial. It's also important to note that our use of cash and our R&D expense can vary from quarter-to-quarter -- can be lumpy -- and it depends really primarily on the timing and the execution of our clinical programs.

From an operating results perspective we reported total revenue of $5.6 million on year-to-date basis. Because of that amount of revenue we've recorded so far, we have increased our revenue guidance from 4 to 6 million to 6 to 7 million for the year. Both R&D and SG&A expense were in line with our expectations as we continue to focus particularly on SG&A and keeping that spending low. Our financial guidance in both those areas remains unchanged for 2005.

In terms of our below the line operating results, we continue to benefit from increased yields in our investment portfolio and therefore we're increasing our interest income guidance to 7 to 8 million from 6 or 7 million. We are also benefiting from the repurchase of nearly $36 million of our 5.5% notes and therefore we are reducing our 2005 guidance for interest expense to between 16 and 17 million from 18 million.

So with that, just to wrap up, we believe Incyte now has a very strong financial foundation. We have reduced our 5.5% convertible note to under $100 million. We have over $400 million in cash and I think we are well positioned to continue to advance our discovery and development pipeline. And so before I turn it back to Pam I'll take any questions you may have on the financial results or our guidance for '05.

(inaudible question - microphone inaccessible)

Yes, it is lumpy. We tend to record our accruals in terms of R&D expense based on patients enrolled. So as our clinical trials begin to enroll we have to record the relevant expense. So as we initiated CCR2 clinical programs, sheddase as well as a continuation of Reverset 203, that did increase the R&D expense in Q2. So it can be lumpy and it will vary from quarter-to-quarter.

(inaudible question - microphone inaccessible)

I think cash is a very strategic asset for the Company and we recognize also that our financial ratios are what they are. The 5.5% notes, I think we made a lot of good progress in reducing those. You should look for us to continue to reduce those over time. We're going to take advantage of good current bond market conditions and repurchase when we can at under par value and we'll continue to reduce those over time.

(inaudible question - microphone inaccessible)

It doesn't include either repurchases we've done or any future repurchases. I'm sorry, the question was does the cash burn include any repurchases of our notes and it does not. That's it? Thank you very much.

So we want to thank everybody for coming this morning. I hope that we have clarified some questions that came out of the presentation in Rio. We were very high on the efficacy data that we've seen and the ability to take the drug forward as long as the long-term safety holds. We look forward to talking to you in the coming months and with that we'll close the meeting and the webcast and good morning.