Jazz Pharmaceuticals PLC (JAZZ) 2004 Q1 法說會逐字稿

Good morning. My name is Tanya, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Orphan Medical first quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press start, then the #1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you.

Mr. Folkens, you may begin.

Thank you, Tanya.

Good morning everyone, and thank you all for joining us today for the Orphan Medical first quarter conference call. On the line with me today we have John Bullion, who is our CEO and chairman; as well Tim McGrath, vice president and chief financial officer; Mark Perrin, our executive vice president and chief commercial officer; and Dr. Bill Houghton, who is our chief medical and scientific officer.

As mentioned a question-and-answer session will follow today’s prepared remarks. You should have received a press release by now. If you didn’t for any reason, please contact us and I will arrange to get you a copy.

Before starting, please be reminded that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including without limitation statements regarding operating results, earnings per share, growth opportunities, and other statements that refer to Orphan Medical plans, prospects, expectation, strategy, intentions, and beliefs. These forward-looking statements are based on information available to us today and the company assumes no obligation to update these statements as circumstances change. For additional information, please see the cautionary statements in our most recent Form 10-Q or Form 10-K filed with the Securities and Exchange Commission.

At this time, I will turn the call over to John.

Thanks, David.

Good morning. Thank you for joining us. We had a solid first quarter performance. Total revenue was 5.4m, 4.4 of which was product revenue. We filled nearly 5100 prescriptions for Zyrem in the quarter, which is the strongest quarterly performance to date. We completed patient enrollment for the first of our two excessive daytime sleepiness trials and moved our enrollment ahead nicely in the second. We submitted the investigational new drug application or IND for the use of Zyrem in the treatment of fibromyalgia syndrome which represents a market of significant potential. We assisted our partner, Celltech Pharmaceuticals, in preparing its application for marketing approval of Zyrem in Europe, which they submitted in March. I will add more details in a few moments, but first lets have Tim McGrath review the quarter’s financial results in more detail.

Tim?

As John mentioned, product revenue for the quarter ended March 31, 2004, was 4.4m compared to 4.6m in the prior year. The difference is attributable to the divestment of 3 products in June 2003. Revenue for the quarter from Zyrem was 1.7m compared to 600,000 in the prior year. We also received a $1m milestone payment from Celltech upon them filing their application in Europe. We reported a net loss to common shareholders of 4.3m, or $0.40 per share, compared to a net loss of 4.1m, or $0.39 per share, for the first quarter in the prior year. Gross margins remain consistent with previous quarters.

As of March 31, we had over $18m of cash. Our cash usage for the quarter ended March 31, 2004, was approximately 5.2m, down from the 5.9m for the first quarter of 2003. We expect that cash usage will decline slightly in subsequent quarters in 2004 as a result of increasing Zyrem revenue and decreasing clinical trial activity with the completion of the EDS trials. We expect that our cash position at March 31 along with expect milestone payments from Celltech will be sufficient to fund operations into 2005.

John?

Thanks, Tim.

Again, we had a solid quarter in revenues. Antizol sales were stronger than last year’s first quarter as more hospitals have stocked this antidote for ethylene glycol and methanol poisoning. We don’t expect the Antizol revenues to continue at their first quarter [indiscernible] across the rest of the year.

Zyrem prescribing that grew consistently through the second half of 2003 has continued and accelerated into 2004. New patient prescriptions increased at an increased pace, just to be redundant, in the second half of the quarter, with 744 new patients receiving a prescription for Zyrem. At the end of the quarter, over 1400 physicians have prescribed Zyrem. These growing numbers across the board are certainly encouraging and point toward continued growth.

Going forward, we anticipate our patient base from last year should generate 1.5 to 2m per quarter in revenue. We expect a strong growth in new scripts to continue over the balance of the year and therefore project that Zyrem will contribute 12m to 14m to total 2004 revenue. We project total revenues will be in the 18m to 20m range. These revenue numbers only reflect product sales and do not include any milestone payments from Celltech.

Celltech, who licensed the European registration of marketing rights for Zyrem, filed the application for approval at the end of the first quarter. This generated a $1m milestone payment and should result in an EU decision for their marketing application in mid-2005.

The rest of the year is going to be even busier than the first quarter. We are looking forward to the results of our two Phase III(b) clinical trials. These trials will dramatically increase the amount of clinical data on Zyrem. We expect the data to show that Zyrem if an efficacious treatment for excessive daytime sleepiness associated with this debilitating disease.

The clinical portion of the first trial, SXB-15, is complete, and we expect data from that trial to be collected over the next several weeks. SXB-15 is a 200-patient double blind trial that compares Zyrem and placebo in narcolepsy patients who are on stimulant therapy for excessive daytime sleepiness. The initial data from this trial should be available in late May, or early June, and more detail will be presented at the APSS meeting in the second week of June. This meeting is the largest in the field of sleep brings clinicians and researchers from all over the world together for several days to share knowledge about sleep, sleep disorders, and treatments.

Patient recruitment for the EXCEEDS trial, our second Phase III(b) trial, will be completed in the next couple of months. The results of this trial and SXB-15 trial will be incorporated in our supplemental NDA to be filed later in the year.

Just to remind you, the purpose of this SNDA, we hope to have positive data in order to broaden Zyrem label and position it as first-line treatment for narcolepsy. Our programs to develop an extended release form of Zyrem are proceeding on schedule as well.

We expect to begin our proof of principle trial to evaluate Zyrem as a treatment for symptoms of fibromyalgia in the second quarter. We have submitted the IND to FDA and they are performing their statutory review at this time. We look forward to this new program and believe that it holds a great deal of promise for the company. There are currently no FDA approved treatments for fibromyalgia which is estimated to affect over 4m patients in the United States and represent a market in excess of a billion dollars. As I said, the rest of the year is going to be busy, and it is also going to be exciting. We will certainly keep you updated on developments.

I will now turn the teleconference back to the operator who will pool for questions.

Tanya.

At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one, on your telephone keypad. We will pause for just a moment to compile the q-and-a roster.

Your first question comes from Don Ellis with Thomas Weisel Partners.

Good morning. Thanks for taking the questions. Three quick questions regarding the June APSS. Can you just kind of describe what kind of data will be released there? The second question is how many patients are in the EXCEEDS trial? And lastly, regarding the Zyrem extended release version, can you give us a timeline for how that product will go through the clinical trials, when you expect to follow it and all that?

Sure. Why don’t I ask Dr. Houghton to answer those questions.

Hi, Don. It’s Bill. The SXB-15 data addresses daytime sleepiness in conjunction with stimulants and it will be presented at a symposium at the APSS meeting, which I believe is on Tuesday evening of that meeting. We don’t know what the data is yet, but the unblinding will occur in about the middle of May and so we’ve got a very short time frame to prepare those presentations, but I feel confident as to the outcome.

The EXCEEDS trial also has 200 patients to complete. That will involve enrollment in excess of 300 patients because the attrition rate is significant due to the fact that patients are assigned to placebo as well and we expect patient enrollment in that trial to be completed by end July. The blind would, therefore, be broken at the beginning of fourth quarter, and we will combine that with the SXB-15 data to write the SNDA by the end of the year.

In terms of the extended release formulation, we have two parallel development programs, one of which was just completed. A canine study in the first prototype formulation with very promising results in one of those. There is some optimization of that formulation now, and we would proceed to the manufacture and chemistry development of data that would allow a human bile equivalent study to be conducted early next year. Other activities are at the stage where we have alternative formulations to go to screening in an initial canine study.

Thank you very much.

I would just like to remind everyone that there will be a major symposium featuring SXB-15 results on Tuesday evening, June 8, at the APSS meeting that will be held in Philadelphia. We will be putting out press releases when we near the APSS meeting as well.

Your next question comes from the line of [Brett Reece] with Wachovia Securities.

Good morning everybody. The first question – the Zyrem revenue in the first quarter was 1.7m and you are guiding 12-14 for the year. Can you just walk me through the arithmetic on how the new prescriptions and price of what the Zyrem is, you know, how you get up to that figure because that’s good growth.

Mark, do you want to address that?

Thanks, John. What we look at, of course, is our continuing patient base. As John mentioned, those patients coming in from last year generally should run continuing revenue about 1.5m to 2m. It does vary from quarter to quarter based on the compliance rate and, frankly, the first quarter compliance was not as high as typical, and I think that’s true after the holidays, etc., that you don’t see good compliance, and also we’re watching compliance as it relates to the mix of patients coming in on Zyrem as we grow with more off label prescribing for the product compliance levels tend to be not quite as high we see with the narcolepsy patients. Nonetheless, the current patient base from last year should generate 1.5 to 2m a quarter and then what happens is with this very rapid growth you’re seeing on the top line with new patients coming in, they grow exponentially through the year to run out at about 12 to 14m level. Just to remind everyone as what John mentioned that there was extremely strong growth, especially in the last half of the first quarter. New patients coming on Zyrem grew one of the strongest periods yet with almost a 30% growth in new prescriptions in that 6-week period prior to the 6-week period before that, and we move into April we continue to see very strong growth on new prescriptions. So I think that with the continuing patient base and the new patients coming on product, we feel comfortable with the guidance that’s been provided.

Right. Now can I ask you a question about your cash level and some of the language you use to describe time periods of how long it lasts? I mean, in your news release you say you got cash sufficient to fund operation well into 2005 and then on the call just now, you described it as you’re got cash sufficient into 2005. The problem is you file the shelf registration, people who are inclined to short the stocks, like sharks seeing a wounded fish in the water, you know, 18m divided by cash usage 5.2 [indiscernible] 3-1/2 quarters, what – could you be a little bit more specific how long the cash is going to last you and the timing of stock on the shelf registration, so I feel a little bit more comfortable?

I will certainly try to give you a little more comfort there. Obviously, there are a lot of variables that go into cash burn. I think the two key ones, of course, are the developing spending and marketing spending that we have going on. Those, as I described, are going to continue on. We do have two major trials concluding in the first half of this year. We do have another trial starting up, but we do expect overall that development expenses will moderate some over the second part of the year. The marketing programs will be put into place once we understand what the data are from the two trials. Obviously, we’ll have to look at how we approach those and, of course, we can’t do any direct marketing for those programs until we have approval of the SNDA. So we don’t see any huge increases in marketing programs there.

On the other hand, one of the important mitigators of cash burn, as you know, is revenue, and as Mark just described, we do expect a nice growth in the second half of the year in terms of revenue, so we expect that that will mitigate cash burn as well.

We also have – there are always other cash flow items, everything from stock option exercises to licensing agreements and milestone payments that also mitigate cash burn and provide capital. As you know, we have filed a shelf registration. We certainly don’t expect to do a financing until market conditions are appropriate and we have the data in from at least one of our trials and perhaps both. We really did that more as a prudent measure to be prepared to do a financing should the market be receptive and should the data turn out to be positive and our performance be as positive as we expect.

Right.

So I think all those things taken together make us pretty confident that our internal projections show that we do have the cash to carry us well into the ’05 time frame, and that, obviously, assumes no outside financing.

Thank you.

Your next question comes from the line of Ernest Andberg with Fetl & Co.

Good morning. Tim, over $2m of the burn in the first quarter, it looks like it came from the liability side of the balance sheet. What was going on there? Current liabilities went down by over 2m.

It’s a reflection of the critical trial activity and medical education activity in the fourth quarter. Those invoices were paid in the first quarter.

Okay. So if you assume a constant relationship there, you’re going to use a little bit cash in receivables and funding the losses over the rest of the year is what I see going on in the income statement balance sheet, correct?

Yes.

Okay. John, you said in the second half you expected to submit the NDA. Bill and his comments to an earlier question suggested that it might be essentially the end of the year. What’s operative?

I think we’re on the same page there, Ernie. I said second half and we would expect it to be later in the second half, more towards probably the fourth quarter than third quarter.

Okay. That answers that. Thank you.

Your next question comes from the line of [Wellington Chains] with Friedman Billings Ramsey.

Good morning. A couple of questions – just was the disenrollment and discontinue rate on Zyrem prescriptions or Zyrem treatment? And then also on the fibromyalgia studies that are planned, what’s the duration of those studies and what are the end points?

Well we take those in reverse order. We continue with the development question and then we’ll go back to Mark.

The protocol that’s being sent to the FDA as part of their IND proposal, a protocol proposes a study in 150 patients. It’s a three limb study. Two doses of Zyrem, one placebo, obviously blinded and randomized. The primary end points are those as determined by the FDA at their advisory committee open meeting last year which is a measure of pain, a measure of functionality using – and we’ve chosen to use the fibromyalgia impact questionnaire as that measure and patient global impression of change. Important secondary measures for Zyrem we have included very careful assessment of the characteristics of sleep in fibromyalgia and we will be looking specifically at the alpha intrusion component. There will be four polysomnographic assessments of the patients as well as subjective assessments of sleep. We are using electronic diaries for daily pain and fatigue measures and it will be in a patient group that discontinue all other significant drugs with just rescue medication as nonsteroidal anti-inflammatory drugs. So it’s a fairly classic protocol according to the FDA [indiscernible] is of three months’ duration.

And then just to add to your other question on disenrollment and discontinuation. Disenrollment is at 18%. Discontinuation is at 15%. Just remind you back at the end of last year, December 31, discontinuation was 14% and disenrollment was 18%. So I would say that it appears that those two measures have stabilized.

Okay. Great. Thank you.

Your next question comes from the line of Steven Abernathy with The Abernathy Group.

Hi John and Bill. The first question is for you real quickly. Are you saying that the fibromyalgia trial is patients refractory to current therapy. Is that what I’m getting from that?

[Indiscernible] we’ll take all comers who meet the American Rheumatology Association diagnostic criteria, they will have to come off existing treatment.

I’m sorry, Bill. That’s where I was going wrong. Okay. I understand there. Now you said there was a three arms and two of Zyrem. Can you give me the – is that just different dosages levels?

Yes. One group is a 4.5-gram dose. The other is a 6-gram dose, Steven. Placebo makes up the third arm.

And the reason, Bill, that you are not going to kind of titrate that up to 7 to 9 as you have in former studies?

The currently clinical experience if you look at the literature that has been published using Zyrem, those studies have been conducted at 6 grams and have shown efficacy. Fibromyalgia is a disease where there is a very [indiscernible] predominance of females with the disease, and we, therefore, expect a strong predominance of females in those clinical trials. It’s a proof of principle study rather than official dose finding study and we will certainly [indiscernible] whether Zyrem works at the 6-gram dose or whether it doesn’t. So we’ve limited the upper dose to 6 grams in this initial trial.

Okay. Continuation of a question for Bill, I think. If the data are comforting with both trials, and, obviously, in aggregate. Best guess as the filing and subsequent approval of the SNDA.

The filing we stick by our predictions before the end of the year. It will be late in the year because the data available from the second trial won’t allow us to look at that until August or September and, of course, we’ve got to integrate all of that data with our existing database. So there is a little more work to the preparation of the SNDAs than just the data from the two trials. Presuming that the SNDA is followed on time, we expect a six-month review by the FDA.

2004, so we’re talking about mid ’05?

Yes.

And that would be – John that would be about – John or Mark – that would be about the time you would expect delta in Zyrem usage? Is that pretty consistent with your scenario analysis?

Well certainly have an approved broader labeling allows us to market off of that label and certainly would expand the market for [indiscernible] narcolepsy. As I said, our goal with positive data from these trials is to position Zyrem as first-line treatment for all of narcolepsy and we certainly think that once we have approval on the SNDA that we would be able to do that.

I would just add, Steven, that the data will be, obviously, in the public domain and certainly will be very prominent in discussions at medical education venues and medical meetings. So it will have an impact to some extent. But, obviously, as John said, we can’t promote it until the actual [indiscernible] comes through.

Thank you all for bearing with me. One last question, given the scenario, if we just continue [indiscernible] that says that data are good. Currently you’re well known, all our channel checks certainly continue to confirm that you’re very well known and embraced in the sleep clinic community. EDS arguably is a different marketing channel. Somebody walked me through the scenarios that you have in front of you for addressing a much more fractured distribution network.

Let me give a quick comment, and then I’ll turn it over to Mark who has, obviously, got the marketing aspect of the picture there. Again, our label information that we will have from – that we currently have and that we will have from these next two trials is for narcolepsy and excessive daytime sleepiness in narcolepsy only. Now will doctors look at that and think about other potential uses? Yes, they’re already doing that. We are getting Phase IV questions and opportunities that we review as they come in and we look at. The scientific and clinical expansion of the works. Bill Houghton looks at those as they come in and decides whether they have merit and if they do then we obviously take steps to put small studies into place and if those are positive then those potentially will become larger studies and then we go back to the FDA for SNDA approvals on indications outside of narcolepsy. The fibromyalgia study will also do that. That’s exactly what we’re doing now on a larger scale, if you will. We do have evidence of potential efficacy and fibromyalgia in Zyrem treating fibromyalgia symptoms and so we are conducting this proof of principle study. If the outcome is positive, then we will put a much larger program into place to go forward to obtain a formal indication or labeling that allows us to position the drug for treatment there.

Mark, did you want to add something there?

Well, again, I’m just to reiterate what John said is just to remind you that the EDS trials are, in fact, in [indiscernible] patients so that there is not going to be a major change in terms of our customer base necessarily. When we get the approval it will solidify, we believe, Zyrem’s position as first-line therapy and as the foundation of treatment for narcolepsy because it addresses all symptoms of narcolepsy. As John said, to the extent that the practitioners begin utilizing the products outside narcolepsy we’re certainly seeing some of those signs now as the product is being used in various [indiscernible], etc. We’re going to evaluate the commercial potential after the data is out and if the approval comes through in mid ’05 or hopefully – [indiscernible] made on the application – we’ll assess whether we want to expand our sales force or expand any of our other commercial programs at that time.

That was the vector of my question was simply is your consideration expanding a sale force, building/expanding a sales force, or continuing to build and expand, or is your vector more partnering at that level since it seems like it may very well be a different market.

Well we believe that there is a good core 2500 or so physicians there, mainly affiliated with sleep centers. We cover them very well right now. We do have another 5000 to 7500 physicians who we consider secondary. They’re not quite as involved in sleep medicines but they clearly see some sleep disorders. The ability to really cover them on a high frequency level might require a sales force expansion, and I think we’ll just have to see where the EDS data takes us as far as how expansive we get, as well as what John says some of the other Phase IV studies and some of the other sleep disorders.

Thank you all.

Your next question comes from the line of [Oliver Marty with Columbus Circle].

Great. Thank you. A couple quick questions. First on the fibromyalgia, the filing, did that require an overview of the mechanism of action and, if so, what did you discuss as what you think is the potential mechanism here?

No. An IND filing doesn’t involve mechanism of action at all and that is hypothetical just like we believe Zyrem’s activity in narcolepsy is a reprogramming of central neurochemistry. We believe that similar mechanisms relate to the central processing of pain. We, of course, do know that GHB is a secretagogue with growth hormone response, and there is growth hormone response in fibromyalgia, and there is a growth hormone deficiency and, of course, we know what it does to sleep and there are specific sleep abnormalities in fibromyalgia and daytime fatigue is a major symptoms. So without having a clearcut understanding of the mechanism of action, it is plausible that it has an effect on several different mechanisms.

In this trial, is this trial – what phase is this trial considered?

It would be considered an early Phase II trial.

Okay. An early Phase II. Okay and I understand it correctly it’s going to be all comers who fit the diagnostic criteria.

Absolutely.

Do you know how many centers it will be at?

We’re thinking in terms of 20 centers.

And have you started the IRBs on those or is that something that’s just going to—

No. We haven’t started the IRB process because the protocol requires a statutory 30 day review period with the FDA and rather have to go back with amendment if the FDA choose to change anything in the protocol we’re talking in terms of drop protocol to potential [indiscernible] at the moment and as soon as that 30-day period is up we’ll declare it a final protocol and proceed to IRB submissions.

Okay. And is it at this point where you would ask for an SPA or a pilot II or is that at different times?

I’m sorry. I don’t understand the question.

At what point would you ask for a special protocol assessment potentially?

Maybe not at all. If this trial is successful, we will proceed to classic Phase III development program. This is not a rare disorder like narcolepsy so we will expect to require a more classic database. We certainly would want some specialty protocols that could perhaps identify its role in the sleep disturbance of fibromyalgia. So at the end of this protocol this is to tell a company whether Zyrem works in fibromyalgia or not. It’s a [indiscernible] responsible way of establishing whether the drug truly works. If it does, we’ll proceed with a classic development program that would include two standard Phase III protocols, specialty protocols, and the formal dose finding protocol.

Okay. And then my last question is what is the average does now that you guys are seeing for Zyrem?

It is about 6.4.

6.5 grams. And just remind me on the pricing for the various doses. Are they constant across – what you’re starting 2.5?

4.5.

4.5 and that is at what price right now?

Let me answer it in a different way, the way I’m starting to look at this a little differently is the average script price, the average prescription is about $345.

And how long does that last?

That’s a 30-day supply.

30 day and so—

If they’re perfectly compliant.

That’s what I’m saying. So if I multiply it by my discontinuation rate or – excuse me. I’m trying to figure out is in this discontinuation rate or disenrollment rate, does that have any correlation with not taking the second dose? Or are these just simply patients that are stopping the drug 100%?

Yes. The disenrollment is we defined because of this unique prescribing distribution system. Just to remind you [indiscernible] patients who were prescribed the product and for whatever reason she was not even to get the first prescription filled. The discontinues are, of course, those after they started the drug have decided to stop it for whatever reason. So if you look at annual revenue per patient and I say $350 for perfectly compliant, then your going to get into various compliance rates. How often do they come in for refills? You have again because of the mix of patients from fibromyalgia patients, intermittent insomnia patients, and the narcolepsy patients, those compliance rates will vary from month to month.

And that $345 that you mentioned, is that to you or is that the price paid out of pocket?

That’s to us.

To you. And do you know what the end user is roughly?

Probably 20-25% higher and then various plans and copays and what have you.

Last question. What is the biggest negative that you hear back from the doctors today about the drug? Is it the second dosing, what is it?

We just completed some marketing research and it was impressive about how high the rate this product. They continue to be extremely impressed with its efficacy. I mean, just really impressed. On positioning it, it is – you know, on a 1:10 scale like an 8 with a lot of physicians doing top three box scores as far as how effective they think the drug is. I think – the drug, per se, doesn’t have negative, but I think what we’re continuing to see is the same things that you’ve seen since launch is just that a go slow, cautious approach. I am going to take one step at a time. Still a little intimated by the history of the drug and moving slowly is probably our biggest problem. That and the fact that some physicians do not aggressively treat the symptom of cataplexy.

Okay. And then my last question is just related to fibromyalgia. How many drugs have you guys seen that are currently in clinical trials?

We know Pfizer pregabalin and we know of [indiscernible] and there has been a single study done with [indiscernible] but that’s not our formal development program.

Okay. Thank you very much.

Your next question comes from the line of Chad Simmer with MJSK.

Good morning. Being that we’re now looking at probably mid 2005 on the decision of the EU. How will that work in terms of distribution? In the U.S. it is pretty easy because we’re just one country, but in the EU with all those countries, is there different issues with each country in terms of [indiscernible] or how is that going to be addressed?

That is something that Celltech are looking at very carefully. There will certainly be an entirely different distribution system. They won’t be a single central pharmacy. So it will be virtually classically determined by the controlled substance [indiscernible] of drugs in their country.

On average is it going to be easier or more difficulty than the distribution in the U.S.?

I would expect it to be easier but that won’t be determined until the drug is approved.

Okay.

And it will vary by country [indiscernible].

Okay. Thanks.

Your next question comes from the line of Dallas Webb with Sterling Financial.

Hi guys. Just had a quick question. Going back to the extended release formulation, you’re going to select a candidate by the end of the year, bring that into human trials early next year. Can you comment on the length of those trials and kind of the time line following that? How if progressive with the FDA? My second question relates to butamben. Can you just update us on the status there, the time line, when we may see data, and exactly what patient population is that drug going to be addressed? Thank you.

Dallas, I think you’re getting a little ahead of the game in terms of trials with the extended release. We’ve got to know what we’ve got first and this is through research. It is expected to have appropriate formulation for human bile equivalent studies in the first half of next year. Of course, that is very timely for the fibromyalgia development program if those formulations meet our needs, and I would be eager to conduct the Phase III program in fibromyalgia with that one [indiscernible] formulation if it’s appropriate. You’re right. There will be safety data required. It won’t just be a [indiscernible] registration and we have the facility therefore of the fibromyalgia development program to provide that safety data.

In terms of butamben. We’re still at the stage of careful formulation optimization and that takes time. We are at the stage where we’re following particle size over three-month periods. We’ve made a lot of progress in maintaining stable particle size. We’ve done injection testing through epidural catheters and we expect to have that formulation appropriate for the required two week toxicology studies that the FDA have determined that we need to do before proceeding to human trials. We’ve submitted two protocols for human studies to the FDA and at our previous meeting as we reported they had no major concerns with those. The primary efficacy study was in people with malignant pain unrelieved by escalating dose of opioids. The second was a true proof of principle trial in post thoracotomy patients where the drug was actually placed around intercostal nerve roots at the time of open chest surgery and its postoperative analgesic [indiscernible] compared with the a standard local anesthetic.

I would like to remind everyone, in order to ask a question, please press star, then the number one, on your telephone keypad.

You have a follow-up question from the line of Ernest Andberg with Fetl & Co.

I think this is back for Bill. When he was talking about the proof of principal study in fibromyalgia, he said that it was a three-month study. Bill, are you saying that it’s going to take you once you start three months to complete it or you have to follow the patients after enrollment for three months?

Yes, the latter is correct, Ernie. The protocol for each patient is a three-month period which eight weeks active treatment. So it’s a protocol whereby the patients screen for entry criteria. They then titrate off their existing treatment and establish a baseline whereby we can chart the severity of their disease and then they enter the blinded active treatment phase of eight weeks treatment. So for each patient it is approximately three months. It certainly not all [indiscernible] completed in three months.

How long do you think it will take you to get the 150 patients in?

I’m hoping within six months.

Thank you. That’s all.

Your next question comes from the line of Steven Abernathy with The Abernathy Group.

Gentlemen, a quick follow-up for John and or Tim. Can someone share with me your expectations of revenue generation from Celltech and – I’m sorry, the timing of those revenue expectations so that I can kind of model this thing.

I think we discussed earlier in this call the timing the EU will make a decision and assuming that they approve the product, Celltech wouldn’t begin to market Zyrem in Europe until the second half of ’05. So we wouldn’t expect any royalty income, you know, realistically probably the fourth quarter of ’05 is when we would get our first royalty based on the third quarter. Obviously, royalty there would be extremely small as they start their marketing programs and launch the product. There will be some additional milestone payments and I think – I’m trying to think what we had said here in terms of disclosure. We haven’t broken down the detail of all of those milestone payments, but I think we said that the total would be in the 10 to 15 range and depending on timing and how we reach those but, again, some of that would occur over the next 12 months.

John, are they able to leverage any EDS data? Do they have the ladder to wiggle around with the additional EDS data that you’re aggregating?

I’ll turn that question over to Bill because he has actually been doing quite a bit of work in support of Celltech.

Not very much, Steven. The initial registration will be for cataplexy using the existing database and from a sales point of view the data therefore that will be available for their sale force is the same data that is available to our sales force now. They do have the option of submitting the excessive daytime sleepiness data as a further submission which would allow them full marketing privilege but, of course, in the meantime that excessive daytime sleepiness data would be published and presented at appropriate meetings and it’s an international community that is aware of such data.

Thank you all.

At this time, there are no further questions.

Well, thank you very much for attending our call this morning, and we look forward to updating you as we go forward, and we certainly look forward with excitement to the results of the SXB-15 study that we should be having results on toward the end of May or early June at the APSS meeting. Thanks again.

Thank you. This concludes today’s Orphan Medical first quarter results conference call. You may now disconnect. 8