英賽德 (INCY) 2010 Q3 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Incyte Corporation third-quarter 2010 financial results conference call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Pamela Murphy, Vice President Investor Relations and Communications. Thank you, Ms. Murphy, you may begin.

Thank you and good morning. On the call today are Paul Friedman, Incyte's President and Chief Executive Officer; Dave Hastings, Executive Vice President and Chief Financial Officer; Rich Levy, Executive Vice President Chief Drug Development and Medical Officer; and Pat Andrews, Executive Vice President Chief Commercial Officer.

To begin Paul will review recent developments at Incyte and Dave will follow with a discussion of our third-quarter financial results. We'll then open up the call for Q&A.

Before beginning we'd like to remind you that some of the statements made during the call today, including statements regarding our plans and expectations for our drug development program including timing of our clinical trials, regulatory submissions and the potential safety and efficacy of our compounds, as well as our expected financial results and guidance, are forward-looking statements.

These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described from time to time in our 10-Q for the quarter ended June 30, 2010 and from time to time in our SEC documents. Paul?

Good morning, everyone. We continue to make excellent progress on all fronts as reflected in the increase in publications and presentations of our clinical results, most notably for our JAK 1&2 inhibitors. In particular, data from our lead JAK inhibitor, Incyte 18424, were the subject of a recent article in the New England Journal of Medicine in which the potential of 424 in the treatment of myelofibrosis was described.

As there are currently no approved therapies for this disease we are encouraged by the conclusions of the authors, as well as the comments in the accompanying editorial by [Vinuckie] which reaffirmed JAK 1 and JAK 2 inhibition as a new targeted therapy for myelofibrosis.

Now also tomorrow the full 24-week Phase IIa results of Incyte 28050 in rheumatoid arthritis will be presented at the American College of Rheumatology annual meeting. We're hosting a presentation of the data Wednesday evening, tomorrow evening, that will be webcast for those of you who are not attending the ACR meeting in person.

Beyond these accomplishments we're especially looking to the completion of the two Phase III trials with 18424 in myelofibrosis; the controlled portion of the US trial, COMFORT-I, has completed and we expect to release the topline results of the second half of December. And provided the results are positive we intend to submit a new drug application in the first half of 2011.

The European registration trial, COMFORT-II, being conducted by Novartis, is also expected to be completed this year and the MAA submission is planned in the first half of 2011 as well. Full results from both studies are expected to be submitted for presentation this coming June at both the ASCO and the European Society of Hematology meetings.

As part of our objective to expand the use of 18424 into a second indication in myeloproliferative neoplasms, we secured a special protocol assessment, which we've talked about before, for a Phase III trial in patients with polycythemia vera. And we began this joint global Phase III trial called RESPONSE in the US last month. And last week we announced the achievement of $50 million in milestones as a result of the start of that trial.

We look forward to the initiation of RESPONSE outside of the United States which Novartis has targeted to commence in early 2011. If trials progress as planned we could present that in the first half of 2013 and submit the SNDA in the second half of 2013.

Additionally, with respect to 424, the COGs group, the Children's Oncology Group is conducting now a pediatric Phase I/II trial of the compound in patients with relapsed or refractory solid tumors, leukemia or myeloproliferative neoplasms. Enrollment continues and is expected to complete in the second half of 2012.

Moving to our second JAK inhibitor, Incyte 28050, which is now known as LY3009104; this compound is in Phase II development for the treatment of RA. I had mentioned earlier that the data from the Phase IIa trial will be presented tomorrow. This compound is part of a licensing and collaboration agreement with Eli Lilly.

This quarter we elected to exercise our co-development rights for the compound. As it result of this decision we'll now be responsible for funding 30% of the associated global development costs through regulatory approval in RA. In exchange for co-funding the development costs our royalty rate will increase across all tiers resulting in effective rates ranging up to the high 20s for potential future global sales of LY in RA. We believe that this decision has significant future financial upside for the Company.

Last month Lilly initiated a dose ranging Phase IIb trial in patients with RA on background methotrexate therapy. This initiation marked both important progress in the clinic and the achievement of a financial milestone for us while we earned $19 million. Future clinical development including the Phase IIb trial will be conducted by Lilly.

Turning now to our Sheddase Inhibitor, Incyte 7839, which is under development for breast cancer. Results from the ongoing Phase II trial continue to demonstrate that the combination of Incyte 7839 with trastuzumab-based regimens may be of value in p95-positive HER2-positive breast cancer patients.

Additional efforts are currently underway to better define the expected rate of progression in this subset of breast cancer patients and assist us and the design of a Phase III trial. This work is scheduled to be completed this year, as I've said. Once this is done we will convey our findings to you. We would also then plan to discuss the next steps for the FDA sometime in 2011.

Our oral cMET inhibitor, Incyte 28060, is currently in a dose ranging Phase I/II trial in patients with solid tumors. Transition of this program through Novartis is planned.

In August we initiated a new clinical program in oncology with Incyte 24360, a selective orally available inhibitor of indoleamine 2, 3-dioxgenase, an immune regulatory enzyme. This is an enzyme that's expressed in tumor cells and in activated immune cells and it dampens the immune response.

IDO interferes with immune function in several ways, by depleting the amino acid tryptophan which is critical for immune cell activation and growth; by increasing the local concentration of tryptophan metabolites which are toxic to the immune cells; and by increasing the levels of regulatory T cells which further suppress the immune response.

IDO expression has been clearly associated in a number of tumor types with poor clinical outcomes and decreased overall survivor. Preclinically we've shown that IDO inhibition, by increasing the anti-tumor immune response dramatically increases the efficacy of various chemotherapeutic agents in controlling tumor growth. And these results suggest that the IDO pathway is a key regulatory element responsible for induction and maintenance of tumor immune tolerance.

Our lead compound has been shown to be effective in multiple preclinical models of cancer and reduced tumor growth appears to be dependent on a functional immune system; this is consistent with the proposed mechanism of action. The Phase I/II dose escalation trial is enrolling patients with advanced cancers of all types.

Now before I turn to call over to Dave Hastings, in light of the recent publications on JAK inhibitors at ASH, and as we prepare for results of our Phase III data, I want to spend a few minutes trying to explain as clearly as I can the effects of JAK inhibitors on hemoglobin levels.

As I've indicated before, although some JAK inhibitors in development are selected for JAK 2, Incyte 18424 inhibits both JAK 1 and JAK 2. An obvious question that should be asked is how do compounds that inhibit JAK 2, which the erythropoietin pathway uses exclusively to signal, lead to increases in hemoglobin in a subset of patients? And while the mechanism remains to be experimentally clarified the following is a reasonable hypothesis.

Patients with myelofibrosis have primary bone marrow hypo function, but they also have to varying degrees high levels of pro-inflammatory cytokines which lead to many of the constitutional symptoms from which the patients suffer. Beyond these symptoms caused by the cytokines there's another type of anemia called the anemia of chronic disease which can be seen in patients with systemic inflammation.

And if you assume that there's a range in a population of myelofibrosis patients from those whose anemias are almost exclusively the cause of primary bone marrow hypo function, to those in the middle ground whose anemia has some chronic disease component, to those who actually have quite a significant component of their anemia as a result of their chronic disease, one would predict that this last group could have an increase in hemoglobin by virtue of effective shutdown of the pro-inflammatory cytokine pathways.

And in fact, when we analyze the data from all doses in our study, Phase II study 251, fully 45% of our patients who were receiving transfusions became transfusion independent with a median time to independence of 70 days and a median duration of independence of 148 days. These data compare quite favorably with any reported by competitors. We can discuss this further during Q&A if anyone wishes to do so. But I'll now turn the call over to Dave Hastings.

Thanks, Paul, and good morning, everyone. I'll start my review this morning by discussing our cash position, revenue and operating expenses and then I'll move to our changes in 2010 financial guidance.

We ended the third quarter with $396 million in cash and investments excluding $47 million remaining in an escrow account reserved for interest payments through October 2012 on the 4.75% convertible senior notes. So far our cash use this year has been $111 million; this amount excludes $183 million received from collaborators for milestones and upfront payments, $8 million received from the exercise of stock options and $159 million used to redeem the remaining 3.5% convertible senior subordinated notes.

In terms of revenue, we were pleased to announce additional significant milestones from our partners which will be recorded in the fourth quarter. Under our agreement with Lilly we earned $19 million for the initiation of a Phase IIb study in RA and we have earned $49 million in total milestones from Lilly this year. As part of our agreement with Novartis we earned $50 million in milestones for the initiation of a joint global Phase III study in PV.

Now moving to (technical difficulty) our (technical difficulty) and SG&A so far this year are $91 million and $22 million respectively. As we have stated in the past, we do expect variability in our spending in these areas due to the nature and timing of clinical programs and the ramping up of the commercial infrastructure needed to support the potential launch of 424 in myelofibrosis.

Now in terms of the 2010 financial guidance, we are making the changes in the following four areas. First, we are reducing our gross cash use guidance from the previous range of $160 million to $165 million to a range of $150 million to $155 million. This cash use guidance excludes actual and potential future milestones received from partners and proceeds from stock options.

Second, we are increasing our revenue guidance from our previous range of $99 million to $101 million to a range of $168 million to $170 million.

Third, we are reducing our R&D expense guidance from a previous range of $135 million to $142 million to a range of $128 million to $135 million.

And finally, we are reducing our SG&A expense guidance from our previous range of $35 million to $40 million to a range of $30 million to $35 million.

We are gratified that we've been able to prudently manage our costs and remain in a strong financial position to continue making significant investments in our development pipeline and in the preliminary commercial effort for 424 in its first potential indication of myelofibrosis. And so with that, Paul, I'll turn the call back over to you.

Operator, we can now open the call for questions.

(Operator Instructions). Bret Holley, Oppenheimer.

Yes, thanks for taking the question. I was just wondering in PV how the number of patients refractory versus intolerant of HU breaks down based on the data that you have so far?

The ratio is about 3 to 1 with the 3 being resistant patients and the 1 being intolerant patients.

Okay.

AT least that's what we found in that population, that there are about 3 times more resistant, patients who are resistant then who are intolerant.

And would you expect a differential response for 424 in those two patient populations?

Say that again?

Would you expect a differential level of response with 424 in those different patient populations?

I don't think so. I'd ask Rich to add to what I just said. I don't see why should we expect that. I believe we probably have some data bearing on that in the Phase II study. Rich, would (technical difficulty)?

So the patients who are intolerant, basically just can't take any dose of hydroxyurea, whereas the patients who are resistant or so-called refractory, they can take higher doses but they still don't work. So, in terms of their response to hydroxyurea, if that were a choice, they really wouldn't have a good -- it wouldn't work. And if they chose another treatment, there's no reason why those other treatments should work any differently in patients who are either intolerant or refractory to hydroxyurea.

Okay, thanks very much.

David Friedman, Morgan Stanley Smith Barney.

Hi, thanks for taking my question. I was wondering if you could just talk a little bit about the plans for MF, not to get too far ahead of ourselves. But just when you're thinking about, number one, building out a sales force; if you could talk about some of the timing and steps you would take. And then the second is when you think about the MF market and the target doc, is it generalist hematologists or a hematologist oncologist or something even more focused than that?

Sure, this is Pat Andrews; let me give an answer to that. So as far as building out our sales force, we would look to do that next year. We have a good sense of how many refs and district managers we'd need. We've said that that number is between 30 and 70. We're still refining exactly how many it would be.

We are in process now of identifying a firm to work with to recruit that many people in an efficient way and in a narrow space of time. And we would probably start recruiting at the end of the first quarter for some of the more senior people and to have them all on board by the end of the third quarter/beginning of the fourth quarter.

And as far as target doctors, MF is generally treated by -- in the United States by hematologist oncologists and they are more likely to be in the community than they are in academic medical centers. And we would be planning on reaching about 6,500 of them, which should give us more than 80% of the prescribers reached directly through the field force.

All right, thank you very much.

Eric Schmidt, Cowen and Company.

Good morning. A couple financial nits for Dave first. Did I hear you right that you've now retired the entirety of the 3.5% convertible senior notes?

Yes, they're gone, Eric.

Okay, and you've been recording bigger milestones than I had expected. Can you preview for us a little bit what's to come next from either Novartis or Lilly? I know we're looking forward to 2011, but I'm looking for a little bit of guidance there.

Yes, as you know, we can't give you granular detail on that. What I would say is that we've had a very solid year obviously from a milestone perspective. And these things are lumpy in nature. So as you think about timing of initiation of studies and likely milestone events, 2011 wouldn't be as significant as 2010.

Okay. And in terms of new study initiations, what's the latest in terms of new indications for 050 with Lilly?

I think you're going to have to ask them about that. You mean -- you're talking about things beyond RA (multiple speakers).

That's right.

(Multiple speakers) as to the question. Obviously we've had what I would regard as productive talks with them. It's there call what they're going to do next, but I think there are -- there's some obvious ones that if I were doing it I would want to study the spondyloarthropathies, like ankylosing spondylitis and psoriatic arthritis, because that population in toto reaches about one-third in prevalence of what the RA population is.

And the anti-TNFs have worked there and I think it would be a high probability that you would test positive results. So I would go there. I suspect that we will get there, but at the end of the day it's going to be Lilly's call as to what we do next.

Okay, last question on the RESPONSE study. Can you estimate when you think you'll enroll that study and what percent of patients are going to be ex-US?

So, I'll answer it and if I don't answer it completely right, then Rich should step in. We've allowed ourselves a year to recruit 300 patients because -- and I'm hoping we'll be able to do it more quickly than that. We're up and running in the United States -- as I said in the prepared remarks, Novartis will start recruiting ex-US early in 2011. And it is our plan to have about half the patients come from the US and about half the patients come ex-US. Is that correct, Rich?

Yes, exactly.

Thanks a lot.

Rachel McMinn, Bank of America-Merrill Lynch.

Yes, thanks very much. Just Dave, I know you're not here to give 2011 guidance, but when we think about cash use going into 2011, obviously we've got the PV study which is somewhat replacing the MF Phase III's. But can you give us a sense of how we should be thinking about that higher -- obviously higher commercial expenses as well? But from an R&D perspective is that number going to be meaningfully higher than 2010?

Yes, I mean, I think we'll be responsible of course and judicious, but we do want to continue allocating capital to what we view as high-value programs and we'll continue to do that. And as you mentioned, Rachel, our investments in selling and marketing will increase. What's important to note, though, is that our guidance in terms of having enough capital to get 424 launched is still in place and we're well-positioned given the amount of milestones we recorded this year.

And then on the psoriasis, topical psoriasis product, there was really no mention this time. How should we be thinking about that product? Can you describe where you are in negotiations or if that's something that you're willing to take into Phase III yourself?

I'll start and then Pat Andrews, who has responsibility for business development, may want to add more. When we look at how the Company is maturing and where we seem to be -- to where we seem to be evolving, that program sits there all by its lonesome as in a therapeutic area where we would, if we took it to ourselves, only have a single product.

We believe that the data we have so far would indicate that with a properly run Phase III study the drug is registerable and would be a successful dermatology product. But as a single entity that would require a sales force different than the sales force that we're building up for oncology, myeloproliferative neoplasms to start, it has slipped a little in our priority list.

And so, we would like to find a partner. Sure, we could do the Phase III, but we believe at this point our money would be better well spent on some of the other programs. And I'll let Pat comment on the status of this development.

Okay, (technical difficulty) so we continue to discuss with some companies partnering opportunities because the Phase II results were positive and there's been little truly new for patients with mild to moderate psoriasis in a long time. 424 is an appealing product, it's once-a-day, it has rapid onset, a good efficacy and safety profile that might be combinable with other therapies.

So we have had interest. That being said, the opportunity is a little on the small side for some large companies and the development costs are a little on the expensive side for some specialty derm companies. So we're continuing to discuss to see if we can find a partner now or maybe later we could trust with this asset.

And then another just completely unrelated question and then I'll hop off. Just curious on the Phase III and the COMFORT-I and COMFORT-2 -- the endpoint is a little bit different than Phase III. And I'm just wondering if you have patients that are responding but don't meet the threshold by MRI that you've predefined, are we going to see that data? Is that data being collected and how will you be able to present that? Is there a specific secondary endpoint? Thanks.

Yes, so, we are very interested in that data and we obviously have -- and I'll also let Pat add from a marketing standpoint what we've learned. I mean, virtually all the patients get significant -- I'd say 85% or more get 25% or more decrease in volume by MRI. And so -- and virtually all patients get significant symptomatic improvement.

I mean, you have to set for regular -- obviously for regulatory approval, you have to pick a number and that's a number you have to achieve. And the reason we ended up at 35% is that we generated the data that showed that that 35% corresponded to a 50% decrease in length by palpation which was the parameter that was considered significant improvement by the international working group.

And so when we -- and when we look at the data that we had in that Phase II study, the median is about 33%. And so we powered the study so that we would easily meet the regulatory endpoint. But more important I think to you and to us is what kind of results do you have to get in a patient population to have physicians want to prescribe the drug?

And I'll let Pat expand a little bit on the marketing research that we have that is quite reassuring based on what we've gotten in Phase II and what we expect to see in the pivotal trials.

Okay, thank you, Paul. So, Rachel, we've done a fair amount of both quantitative and qualitative market research at this point to understand what matters to practicing physicians, particularly hemots trading MF patients. We've tested various product attributes including the level of spleen reduction and varied those attributes at the high end and the low end of what we might see coming out of our Phase III to understand the importance of that attribute in the prescribing decision.

And in general the level of spleen reduction can be much less than 35% by imaging, even down to 10% for some physicians and still be seen as appropriate therapy for their MF patients. I mean, this assumes of course that the other benefits that we've seen with 424, such as improvement in constitutional symptoms and an acceptable safety profile that remain consistent with the Phase II data. In short, you can have a clinically meaningful benefit with less than a 35% reduction in spleen volume that's in the Phase III.

Perfect, thanks.

Thomas Wei, Jefferies & Co.

Hi, thanks, this is actually Tommy for Thomas. Most of my financial questions have been answered; I just had one to get sort of a follow-on 424 question. So to follow on your comments just not in market research, spleen reduction and also earlier with the hemoglobin effect by JAK inhibit -- can you sort of just put it in context for us how you see the overall competitiveness of 424 in light of the new data on JAK inhibitor competitors? I'm speaking of the Cytopia YM and targeted sanofi compounds being presented at ASH. Thanks.

Yes, so, I mean previous data -- first of all, the targeting compound, the [S-bio] compound, don't really very effectively take out JAK 1. We've discussed this at some length, that to shut down the co-inflammatory cytokine pathways you are -- you can do that much more effectively if you have JAK 1 as well as JAK 2 inhibitory activity.

I mean you can demonstrate that in cell culture, in animal models -- basically by taking out less of both JAK 1 and JAK 2 you can shut down the pathway if you have that kind of a profile. If you just sort of JAK 2 inhibitor you have to go higher in your JAK 2 inhibition to shut down the cytokine pathways as effectively. And when you do that you crossover to a greater inhibition of bone marrow function. And I think if you look closely at (inaudible) data in its complete form it was fairly high incidence of anemia.

The other thing is when you go higher and you are giving hundreds of milligrams a day, which all you do with all three of those compounds, you then get into ranges where the milligram burden to the organs of the individual is such that you begin to see non-mechanism based toxicities. And if you happen to also crossover and hit other kinases like FLT-3 you also can have toxicities. S-bio and TargeGen are both FLT-3 inhibitors and they have significant GI toxicity.

The Cytopia compound is a JAK 1/JAK 2 inhibitor, it's about probably three years behind us. As I tried to convey to you in my notes without calling them out, but you have now done that, we have exactly the same results in terms of having people become transfusion independent analyzing data the way that they've analyzed it.

I've become more and more certain over time that there is a subset of these patients who have a significant component of their anemia from the chronic disease aspect and those are the people who, if you titrate your JAK 1/JAK 2 inhibition properly you can get a bump in their hemoglobin. I suspect that the people who get hemoglobin bumps with the image, even though those mechanism -- that mechanism of action is not understood, probably the same subset of patients -- there's probably a lot of crossover in that subset.

Obviously there's a tipping point if you go too high and you take out too much JAK 2 you'll overwhelm the benefits that you get from blocking the cytokine pathways. And in that regard, just looking at the Cytopia compound, it's about 10 times less potent on JAK 2 than we are, it's about 40 times less potent on JAK 1. So it is a JAK 1/JAK 2 inhibitor, but its ratio has a disadvantage compared to our ratio in terms of avoiding that crossover into having too much JAK 2 inhibition.

But they haven't studied very many patients, they haven't studied them for very long. I think if you look at the abstract you see that there are toxicities that we don't have. And so, when you put it all together we're ahead and we have the best compound.

Great, that's very helpful, thanks.

Avik Roy, Monness, Crespi & Hardt.

Hi, guys. Well first, I don't know if Ruxolitinib is more pronounceable than INCB18424, but congratulations getting an actual name for the drug. My question is, what are your thoughts about non-hematologic toxicity whether with your drug or some of the others? Just based on your experience -- based on your experience in clinical trials and your discussion with opinion leaders, which of the non-hematologic toxicities do you think are most important in terms of adherence and discontinuation?

You mean that we have or that others (technical difficulty)?

That have been seen (technical difficulty)?

Yes, so I would -- so depending on if you're talking about 18424, and Rich can embellish this answer if I don't say things completely enough. With 18424, even in -- I mean, the myelofibrosis group, when you go beyond the hematologic issues, I guess the only thing that I would watch for are still mechanism-based toxicities. Because frankly we have not seen any significant non-mechanism based toxicities.

I mean we -- our ability to specifically take out these kinases and not other known kinases with our agents is pretty [exclusive]. We have very selective compounds in that regard. But in taking out JAK 1 and JAK 2, you do modulate the immune system, I mean that's why we're seeing the good efficacy in RA patients. And if you've modulate the immune system you have to watch for infections.

And while I think we've been fortunate by virtue of the fact that you don't take this mechanism at 100% and there's off time during the day, we've been fortunate in seeing only mild and minor types of infections, but that would be the other thing that you would -- I think you would look for.

If you're talking about other people's compounds, I think the FLT inhibition is problematic because folks are having a significant amount of GI toxicity and then there are non-mechanism based, or at least they appear to be non-mechanism based toxicities that have to do with lipasemia, amylasemia, some liver signals with the other compounds. Now those other compounds are being dosed at hundreds of milligrams a day, so it's not too surprising that you would see some of that with the competitor's compound.

All right, that's helpful, thank you.

Actually, Avik, before you go, this is Pat, I just wanted to comment on the Ruxolitinib, which is the pending INN for 424. We're really far along in the process, but they actually have to publish it before it's officially ours. So we've been sticking with 424 as the name everyone knows and loves before trying to transition to the pending generic name. Hopefully we'll know early next year and then we'll -- if that's it we'll use it more formally. And if that's not it they'll probably just give us one. So stay tuned for another couple of months before it's final.

All right, thanks a lot.

Josh Schimmer, Leerink Swann.

Thanks for taking the question. Paul, I was interested in your comments about 424's ability to eliminate transfusion requirements in patients. I guess a couple of quick questions then. First, wondering why this hasn't been something highlighted previously because it does seem to be a fairly important data point to have. And second, are you able to determine yet a priori which patients will have hemoglobin increases versus hemoglobin decreases? And if so, what are the predictive features? And if not what predictive features are you exploring for this? Thanks.

The answer to the latter part is, not yet. And we -- I think it is an important to parameter. You have to -- I think one of the things that has to be determined is how long the effects last, how much the hemoglobins go up. And Rich, do you want to comment any further on that?

No, I mean, I would say that there are patients who get better in terms of their hemoglobin and transfusion independence. And there are also people, as Paul talked about, whose bone marrow hypo function is the main reason for their anemia that don't get better or might get even slightly worse. And that's going to be true for all of the JAK inhibitors.

And so, we haven't made a big point of it because we think that the main benefits of the drug are improving the symptoms of the disease, shrinking the spleen to a clinically significant degree, and perhaps some other long-term disease modifying effects that will take longer to demonstrate.

I think the reason we talked about it now is there's been such a point made both by the abstract as well as by some of the notes that have been coming out trying to point out how, apparently based on the way the data was presented, that Cytopia's JAK inhibitor might have an advantage over ours in terms of anemia. And we just wanted to correct that by showing that if we analyze our data in similar ways you get similar results. We don't know, by the way, how to predict which patients will do better or worse without actually giving them the drug.

So the hypothesis is that it's based on the anti-inflammatory activity? I mean, is that something you plan on exploring, the correlation between baseline inflammatory activity and some of the inflammatory markers and symptomatology in hemoglobin changes, is that the (multiple speakers) or --?

Yes, I think what you're saying makes theoretical sense, but from a practical matter it's extraordinarily difficult to do. You're not going to find that there's a specific level of certain cytokines that you can measure in the blood that would be predictive. They're kind of all high in everybody and some are astronomically high and some are medium-high, but it doesn't really tell you that those patients are more likely the ones to respond to therapy. I don't -- I'd be skeptical about ever really figuring it out without giving the drug and seeing.

Got it, thanks very much.

Liisa Bayko, JMP Securities.

I just want to maybe ask a couple questions about the Sheddase program. I know results are going to come maybe early in 2011. Can you just give us a little more clarity on exactly what the trial design looks like and then what would get you excited about (inaudible) programs for the next step, so what we should be looking for in the data?

Yes, so, when we started the study adding the Sheddase Inhibitor to Herceptin and then later to Herceptin plus chemotherapy we were basing -- and what we were finding was that people who were both HER2 positive and p95 positive were doing pretty well, better than what is described in the literature.

The issue is that there's one paper describing this in the literature, although it's accepted that these p95 positive patients, and it's logical, that they would not do as well in general because you've got a very active flow pathway constitutively turned on that cannot be neutralized by Herceptin.

And so all we're doing now is we've been able -- by contracting with four academic centers throughout the world that have large -- large sets of histopathological samples and histories on patients who had metastatic breast cancer and we are taking those samples and staining for p95. And also correlating those results with their clinical course to simply confirm what the [Becelda] paper and our own data say is true and also to give us a feeling for how much p95 positivity you have to have to not do as well as if you had lower levels of p95 so that we could figure out the ultimate patient population for Phase III.

Now, there is a chance, we think it's not a big chance, but there is a chance that when we complete this analysis that it will not support the hypothesis that our data and the Becelda paper have created. We're cautiously optimistic that that's not going to be the case. But we want to complete these analyses and do a careful statistical analysis on the data that we have before we get ahead of ourselves.

And so, we're -- we are on track to have those data by the end of this year. And if, as we are expecting, the data support the hypothesis, it becomes a very interesting Phase III program. We'll tell you where we stand just as soon as we've completed the analysis and we will then go and talk to the FDA about a Phase III program.

Okay, great. That's helpful, thanks. And then maybe just a quick question for David. Can you just remind us of the accounting treatment for these milestone payments you've received?

Yes, they'll be recorded as revenue in the fourth quarter, Liisa. So milestones are treated as revenue as soon as they're announced.

And they're like the full amounts?

Yes.

Okay. Thanks, that's it.

Tom Russo, Robert W. Baird.

Good morning. Just a quick question for Pat. Based on your conversations with payers to this point, are you willing to make any comment on level of confidence on price versus the $40,000 to $60,000 range that the Company has kind of talked to in the past and maybe where within that range you might think you would be landing at this point?

So, we have had some more conversations with payers, truthfully not at a significant level, because the oncology market in the US at the moment does not have a lot of price constraint on it. Sometimes there's utilization constraint, like you have to have a prior authorization, but there's not really price constraint. So we remain very comfortable within the $40,000 to $60,000 level that we have previously spoken about.

Okay and then just last question. What is the current expected timing for publication of the Phase II data in PV? And then maybe again for Pat -- anything interesting from the market research about the demand for 424 there even before the label indication?

Rich, what was the publication (multiple speakers)?

Yes, I mean, the publication in the Phase II in PV would probably be sometime next year, depending upon whether it gets accepted at the first journal that it gets submitted to or we decide to then have to go somewhere else could really make a difference of months at a time. So I wouldn't be any more granular than next year.

Thank you. And then on the question of whether there might be early usage of 424 in PV -- so as everyone knows, physicians are allowed to write a product for an indication that's not yet been approved, but of course the manufacturer does nothing to promote that in any way.

So it comes down to thinking about what the physician will know about 424 in PV; generally they would know that through publications or possibly at conferences or other things where they might learn about it. Then they have to think about whether they would believe that the benefit is worth the additional risk associated with a product that hasn't yet been approved in that indication.

And then they'd probably factor in whether or not the product would be reimbursed for that indication, which would depend on what the patient's insurance coverage is or their willingness to pay out of pocket. So those are some of the factors that would influence whether or not there would be a usage of 424 in PV prior to our receiving the indication in that.

Okay, thanks.

Mark Monane, Needham & Company.

Thanks for taking my call. My question was just where do you see the place in therapy for 424 in patients with PV? And do you have any comments on possibly the market size of that specific population?

This is Pat. So we would be studying it in patients who are HU resistant or intolerant. And as discussed, that is a 3 to 1 ratio and it's about say between 20% and 30% of the total PV population of 95,000. And since they really don't have many other alternative I would think usage in those segments could be fairly robust once the drug is approved in those indications.

Okay, great. Thank you.

Being as we have no further questions I'll now turn the floor back over to Dr. Friedman for any closing remarks.

Okay, before I make closing remarks I just want to clarify two points. One is, most of the analysis that I've looked at on the percentage of people in the PV population who are either HU intolerant or resistant is near the top end of the range that Pat just enumerated, so more like 30%.

Secondly, we thank you for joining us this morning. I thought that there were a lot of good questions. And we look forward to keeping you informed of our progress. And with that we'll end the call. Thank you again and good morning.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and we thank you for your participation.