Ligand Pharmaceuticals Inc (LGND) 2009 Q3 法說會逐字稿

I will be your conference operator today.

At this time, I would like to welcome everyone to the Ligand third quarter conference call.

All line have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question-and-answer session.

(Operator Instructions).

Thank you.

I would now like to turn the conference over to Ms.

Erika Luib of Investor Relations.

Thanks, Christy.

Welcome to Ligand's third quarter financial results and business update conference call.

Speaking today for Ligand are John Higgins, President and CEO, John Sharp, Vice President of Finance and CFO and Dr.

Martin Meglasson, Vice President of Discovery Research.

A slide presentation for this conference call is also available in the Investor Relations of Ligand's Web site at www.ligand.com.

Before we begin, I would like to remind everyone that today's call will contain forward-looking statements within the meaning of federal securities laws.

These may include but are not limited to statements regarding intents, beliefs or current expectation of the Company, its internal partner programs and management.

These statements involve risks and uncertainties and actual events or results could differ materially from the projections described in today's third quarter press release and this conference call due to various factors including but not limited to failure of stockholders to approve the merger, Ligand's or the ability to satisfy the conditions of the merger, or that the merger is otherwise delayed ultimately not consummated and a failure of the combined businesses to be integrated successfully.

Additional information concerning risk factors and other matters concerning Ligand, and meta basis can be found in the respective current annual reports on Form 10-K as well as their other public periodic filings with the Securities and Exchange Commission, which are available at www.sEC.gov.

The information in this conference call relating to projections or other forward-looking statements represents the Company as best judgment as of today, November 5th, 2009.

Ligand undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

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

Hey Erika.

Thank you for introducing the call and reading through those disclaimers.

I would like to welcome everybody to the call today, this afternoon and for those who listen on replay as well.

We've had a busy past few months, no doubt.

The months has been filled with Company achievements, positive developments with our partnerships and some important announcements for two pending acquisitions.

Plainly I will say Ligand is doing well and as we look forward the last couple of months of 2009, we feel good about the business and assets we are assembling.

For this call I will have brief introductory remarks and John Sharp, our CFO, will then provide commentary on the financial results.

After that, in light of all the recent developments in our pending acquisitions, we will have a presentation with slides that will help frame our business strategy, highlight the pending acquisitions and the assets we have.

For those in front of our computer, the slides are available by going to our web site at Ligand.com.

As I mentioned the business is doing well.

To start with we had a very solid quarter financially.

Revenues are up 50% over the same period last year while expenses are essentially flat despite the significant addition of programs from the Pharmacopeia acquisition.

Furthermore, we finished with a strong cash position given our business outlook.

On partner front there have been numerous positive developments with our partner programs over the last few months.

Notably, Pfizer just notified us they're extending their JAK3 research program another year.

This was originally with Wyeth and now following Pfizer's recent acquisition of Wyeth, Pfizer is extending the program to the end of 2010 which will yield us $3.1 million in research payments.

Pfizer clearly has had success with their JAK3 program and demonstrated a big commitment to this category.

The research extension is meaningful to Ligand as we are eligible for potentially $175 million in milestone payments as well as a double digit percentage royalty on future sales under the collaboration.

Now, in regard to PROMACTA regulatory updates.

GSK filed a NDA in Japan for ITP and MAA is pending approval in Europe as well for ITP.

And in other GSK news this is past quarter we received $0.5 million payment for another research collaboration.

Another research partnership partnership development we announced is we confirmed we are eligible for a new potential royalty we formerly licensed to exLEXUS.

There are now they possible royalties to earn from this license with exLEXUS.

All three programs are developed or are in development partnerships with large pharmaceutical companies, specifically Pfizer, Bristol Myers and [Dieetsakio], all programs, again in development by those companies that we are now confirming will have the chance to earn royalties from.

Finally, over to the past few months we announced two acquisitions for Ligand.

We are very pleased with the business we are running and the assets we are assembling, and believe that both Neurogen and Metabasis are an excellent fit for our Company.

It was less than a year ago we closed our acquisition of Pharmacopeia and as I will discuss in the presentation in a little while that acquisition has been success to Ligand and helps illustrate the value of these deals.

With that I will turn it over to John for a financial review.

Thanks, John.

Jumping right into the financial results, total revenues for the third quarter of 2009 were $7.9 million compared with $5.2 million for the third quarter of 2008.

The increase in revenues of $2.7 million is due to $6.3 million in collaboration revenues resulting from agreements acquired from Pharmacopeia partially offset by a $3.6 million decrease in royalty revenues due to the charge in the contractual royalty rate on AVINZA from 15% down to 5% that became effective in the fourth quarter of 2008.

Research and Development expenses in the third quarter were $9.9 million compared with $6.2 million in the third quarter of 2008.

The increase of $3.8 million is primarily due to the cost of servicing our collaboration agreement, offset by lower costs associated with our internal programs.

Research and Development costs for the third quarter of 2009 include $1.1 million of asset impairment charges, related to the termination of our research corporation with Schering-Plough Corporation.

General and administrative expenses in the third quarter of 2009 were $2.4 million compared with $5.9 million in the third quarter of 2008.

The decrease of $3.5 million is primarily due to reduced legal costs as several on going legal disputes were resolved in early 2009.

As we look at our continuing business operations, a primary focus of our business strategy is strong financial management.

Here at Ligand we are continuously looking for ways to be more efficient and reduce spending.

These efforts are evident by the fact that despite having added an east coast facility from Pharmacopeia as well as our the additional costs of servicing our collaboration agreements, our total operating expenses excluding lease termination costs for both the third quarter as well as year-to-date were virtually flat in 2009 compared to 2008.

We allot also announced in the third quarter of 2009 that we entered into a lease termination agreement for our facility here in San Diego.

As a result during the quarter, we recorded lease termination costs of $15.2 million, which includes the net present value of the lease termination payments of $14.3 million, and $0.9 million of other costs associated with the lease termination.

As a result of the lease termination, during the third quarter, we also recognized $20.4 million of accretion of deferred gain on sale lease back.

With the many change that is have taken place at Ligand over the past two to three year, we have found ourselves with a considerable amount of excess space and long-term commitments.

And early 2008, we successfully sublet one of our buildings for the remaining lease term and now with this lease termination, we were able to downsize into an appropriate sized facility for our current needs.

And while the agreement calls for $14 million to be paid over the next two years, we will see significant long-term savings, as we expect our facility costs to go down by over $3 million a year.

Our total net income for the third quarter of 2009 was $1.8 million or $0.02 per share excluding the $15.2 million of lease termination costs and the $20.4 million of accretion of deferred gain on sale lease back, we had a net loss in the third quarter of $3.4 million or $0.03 per share compared with a net loss of $18.1 million or $0.19 per share in the third quarter of 2008.

Income from continuing operations in the third quarter of 2009 was $1.1 million or $0.01 per share compared with a loss from continuing operations of $9.1 million or $0.10 per share in the comparable 2008-quarter.

Income from discontinued operations in the third quarter of 2009 was $0.7 million or $0.01 per share compared with a loss from discontinued operations of $9 million or $0.09 per share, in 2008.

As of September 30th, cash, cash equivalents, short-term investments and restricted investments total $45.5 million.

Now, turning to our outlook for the remainder of the year we expect 2009 full-year revenues of approximately $33 million to $34 million consisting of approximately $12 million of noncash deferred revenue, royalty payments from sales of AVINZA and PROMACTA, revenue from the collaboration agreements and potential milestone payments from existing corporate partners.

For the fourth quarter of 2009, we anticipate total operating costs will be between $12 million and $13 million including noncash expenses of approximately $2 million.

We currently project to finish 2009 with approximately $50 million in cash, assuming the acquisition of [NeuroGen] is completed before year end.

For 2010, we currently forecast that our operating expenses will be approximately $30 million to $35 million that revenues will be projected to be at approximately the same level as forecasted expenses for 2010.

This revenue outlook does not include license or milestone payments from any potential new license agreement.

And with that I will turn the call back over to John Higgins.

John, thank you.

Now, again I would like to direct any investors who are in front of a computer to our web site, Ligand.com.

I have some remarks as well as Martin Meglasson, our head of discovery research, that will make off of a slide presentation.

What we want to do is share with you our strategy of the business we are running.

We will give highlights on these pending acquisition and give you a picture of the business, the business that we are excited about that has developed nicely over the past year, and once we look at these slides, the story will really come into focus.

Turning to slide five of the presentation, there is a simple summary of Ligand with strategy.

There are four main bullets here.

Each one is important and I believe that we are true to our strategy.

First we are investing in promising large market research programs.

We are a bio tech research company.

Our focus is on quality, early stage programs, we do drug discovery or advanced animal pharmacology, Phase I, early Phase II trials.

We have clear success as a bio tech company.

That is I think indisputable as a drug research company and clearly a way we are going to drive value for shareholders.

Secondly, we are looking to acquire high quality fully funded partner assets.

We are in a very unique market, the Capital Market has been in many ways unforgiving to a lot of small cap biotech companies.

These are otherwise companies with good assets, good partnerships, good technology that have really struggled over the past year or two in this equity environment.

This has given us, what I will describe, virtually as a once in a industry-window of opportunity to consolidate high quality programs through acquisitions.

As we will discuss later we think this is important because and to my next point, it is a goal of ours to assemble a broad portfolio of assets.

We want to have a business that has as many shots on goal as possible that is diverse and that is rich in opportunity.

As we go through this presentation, I believe you will be convinced that we have many partners, many indications under development and many different molecules that are being advanced.

Not everything is going to work, for sure.

We understand that, but by having assembled this portfolio we believe with we have a broad and diverse upside and finally as much as we are making investments in the portfolio we need to run an efficient business that's not dependent on the equity markets.

Capital Markets are very, very important, no doubt but small companies that get stuck in terms of capitalization and have to finance at the wrong time often have a very punishing impact on their valuation.

The bottom line is in the box on this slide we believe this a strategy that will maximize the long-term potential returns for shareholders, while minimizing risk.

We also believe that Ligand is uniquely qualified to drive this strategy.

I say at that because we have clear research success.

We have a balanced business that has grown over time, and we have the management experience can successfully integrate these assets in the Company.

Moving to slide six, this is a slide that simply illustrates the two main components of Ligand's company.

There, there's a lot going on here, but this is actually fundamentally a very simple business.

The first part of our business is an incredibly rich portfolio of partnerships.

We have deals with nine companies.

This used to be more companies we've had mergers with Wyeth and Schering-Plough now consumed by Pfizer and Merck but we have deals today with nine major companies, 33 programs are in fully-funded Research and Development partnerships.

We may be doing some of the research for these companies but we are being paid to do it.

Most of the Research and Development is being paid internally by our partners.

We now have a chance to earn over $700 million in potential milestones based on success and also potential royalties on products some of which have very, very long remaining patent lives.

I have a couple of more slides later this presentation, but again this is one pillar of our Company we are very proud of.

The second pillar is our, our R&D engine.

This is what Ligand was founded on near 20 years ago.

We've have had clear success.

The core technology we are in drug discovery company.

We have Ligand dependent gene expression assays and combinatorial screening technologies.

We now having partnered out many earlier stage programs in the past, we still possess a very robust portfolio of development stage assets.

We have a Phase I antigen receptor modulator program a SARM program for muscle wasting and frailty as well as a variety of preclinical programs.

We are targeting big markets, anemia, diabetes, cognitive disorders, a basket of indications we are excited about.

Finally our research efforts are focused on the development activity, the discovery and development activities to support future partnering.

Individual, each or either of these components, we believe is compelling for investors.

Combined we believe this creates a balance and very powerful platform to potentially drive value for shareholders.

Moving on to slide seven, before I get into a little more detail around Ligand's business, I want to share, just a few perspectives, and we have on the challenges this industry faces and again why Ligand has a unique business approach to addressing these challenges head on.

The first and again, any biotech investors will recognize these issues.

They're not original in terms of our thinking, but they're worth talking about in terms of how we are addressing them.

The first is binary risk.

The reality is with medical research, most programs don't work out when research does work out, and products make it to market, the medical benefits and the financial reward can be very significant.

But the fact is companies often have a binary risk, there's one or two program that is drive the majority of value.

We address that by building a diverse portfolio of partnered assets.

As with other companies so too with Ligand, not all of our programs are partnership.

But we have a broad balanced portfolio of partnerships and different indications, we believe that will maximize our chance for upside.

Another issue is big exposure to capital market risk.

Clearly, we are addressing that head on by protecting our cash, seeking collaboration revenue to help offset any dilution we feel might otherwise incur.

Another factor is often small companies don't have track record, they're doing good research, but they have not discovered the drug, they have not successfully advanced to market approval or perhaps they haven't entered licensing deals.

In all of those areas, we have very strong credentials and believe we can build upon that.

Finally another challenge the industry has with some companies is undisciplined spending.

Companies often overbill, they get over extended.

In Ligand's case we are tightly managing our spending and we try to give as much financial transparency as possible.

We are keenly aware of the challenges the industry faces and we are proactively running to minimize or avoid them so that when we do have success, the upside can be transferred to our shareholders.

Now, moving on to slide eight, I want to comment a bit on the two pending acquisitions, we have announced these two deal to acquire Neurogen, a Connecticut based company and Metabasis, more recently a San Diego based company.

Two public companies that have historically had a very exciting and rich history.

They have had strong investors.

They have been well capitalized in the past, had very good investors frankly and great science.

Their businesses have evolved over time and both companies in discussion with Ligand obviously have arrived at what we believe to be very attractive transactions for shareholders at both Ligand and these respective companies.

In the case of Neurogen, what Neurogen will contribute to Ligand is one partnership with Merck, a fully funded partnership for the VR 1 target which is a target that is focused on the pain market.

There's significant potential milestones and back end royalties if that program is success.

The pipeline programs primarily focus on cognitive disorders, they have an attractive array of drug research assets and also significantly at close we believe we will get cash and tax assets as well.

In the case of Metabasis, different company and market focus but a similar basket of assets.

They have a, what we believe is a partnership with Roche for hepatitis C.

This is a huge category of significant research across a variety of targets, very important medical market.

It is an early stage deal but one that again has attracted royalties, and back end milestones.

They have an equity stake in a small private company.

They have a pipeline programs for diabetes, hyperlipidemia and some other indications as well as drug research assets.

Both of these companies, again they bring a nice compliment a nice balance of partnered assets and pipelines and drug discovery that again will fit nicely in Ligand.

Turning to slide 9, I would like to make a comment on Pharmacopeia, this is a company that we acquired less than a year ago.

It is now fully integrated and I will say very successful integrated into Ligand.

We are now clearly one company.

We still run the research out of their office in Princeton, but this is a deal that if we look just at the last nine months, we are very pleased with what this company has brought to Ligand, and we do believe it is an illustration of the value and the power of acquiring companies in this market.

If we look at history we believe Ligand has emerged as a stronger, more diverse company with significantly greater upside.

The research advancements GSK has advanced to a couple of their programs to identify leads, Schering-Plough has an Alzheimer's research program.

They have advanced that.

We received a $1 million milestone for that.

I have already acknowledged that Pfizer is now extending this, they have affirmatively extended not just continued but extended the research for the JAK3 program.

We entered a new drug research screening deal earlier this year and all in, we have received more than $10 million in milestone and research payments.

I think by any measure this has been a successful integration, and we're proud of these achievements.

As we look at potential future news, Schering-Plough may potentially have phase II data on CXCR2, BMS may phase II data on the P38 program.

GSK is also working on potentially declaring some other drug candidates as well.

These are some programs, but there are others as well that may earn us milestone payments for various partnering events.

This was a creative deal.

It was well structured has worked out well for Ligand.

We are pleased to pursue other opportunities like Neurogen and Metabasis that we believe could provide similar opportunities to expand our business.

Moving to Slide 10, now let's get back and look at what, what the business, what Ligand looks like, if we focus on the two pillars of our business, the partnership portfolio, and then the R&D engine.

On the partnership portfolio on Slide 10, this is a simple slide, but it really drives home the richness of the program.

We have partnerships with undoubtedly the largest companies doing medical research, the largest pharmaceutical companies targeting the largest markets GSK, Pfizer, Merck, Bristol Myer, Roche on the list just a weak ago was also Wyeth and Schering-Plough, now those programs are assumed under Pfizer and Merck.

The markets thrombocytopenia, osteoporosis, Alzheimer's, cancer, hepatitis, COPD again a very impressive and diverse array of medical indications that are being driven we believe in quality partnerships by these companies.

Turning to Slide 11, this is a pie chart, that when you look at the details, the individual line items of all of these programs, frankly it is a long list and there's a lot of information there.

But this pie chart I think very simply illustrates the value and the balance of our portfolio.

Under partnership, there are 33 programs in development.

Just over 1/3 are early stage preclinical.

That's the feeder for advancing into the clinical stage, however other half of these 33 programs in are clinical development, Phase I, Phase II or Phase III.

These have being driven by again over eight different companies.

There are two dozen different indications being targeted.

Again in certain cases very long remaining patent lives.

Of note, two products earnings us royalty right now, two more are pending approved and may be launched in the near term.

Plainly I will say I'm not aware of any company anywhere near our size or valuation that has such a robust or impressive roster of partnered programs.

Turning to Slide 12, this is just a remark or two about our R&D engine, the other pillar of our business.

As we look at what we are doing internally, what are we doing to drive our own research that may yield new partnerships internally.

There are five lead programs that is we are looking at.

Of course a few of these programs will come to us presuming the Neurogen and Metabasis acquisitions close.

But these are important targets.

SARM, the energy receptor, and Oral EPO, a very large market for muscle wasting anemia.

The other area is the H3, has been well researched by other companies.

That's starting cognitive disorders and Metabasis will bring us the TR beta program for hyperlipidemia and Glucagon for diabetes.

Martin will give a little more detail on all five of these programs in his remarks.

In my last slide, it is slide 13 to leave you you with before I hand it over to Martin.

Again, just a final remark about our R&D engine, the results we have, what we believe demonstrates our success, but also gives us the credibility to make the decisions what to fund and drive forward for potential partnering.

Five molecules we have discovered or co-discovered have been approved and currently three are on the market.

It is a very impressive record and may be unparalleled by any other company our size.

The other two that have been approved that are not on the market are potentially pending launch, both were approved earlier this year in Europe for osteoporosis.

Ligand has entered over 15 licensing deals in our history.

The most recent deal was struck with GSK for a thrombocytopenia target for a drug that we discovered.

It was an attractive deal with a large back-end royalty.

Again we are pleased with the balance of the business.

We think we have the right strategy for market and believe the business is doing well.

With that though I would like to turn it over to Martin to give more highlights on our research activity.

Thanks, John.

Ligand conducts two wholly owned research programs in addition to numerous research programs in addition to numerous research programs that are already partnered with big pharma companies.

I will update you on our internal research programs today.

Turning to Slide 15, the rational for our selective Selective Androgen Receptor Modulators or SARM program is described.

This program aims to treat muscle wasting diseases, as shown by the cat scans ton right side of the slide, muscle mass decreases with normal aging.

The dark portion in the center of the radio grams is skeletal muscle.

The light portion is fat.

The total volume of the side is not changed much with normal aging, but fat tissue is replacing much of the skeletal muscle mass.

In about 6% of the older population, the loss of muscle mass is more severe and is referred to as sarcopenia.

In patients with sarcopenia, the loss of muscle mass and the weakness that accompanies it contributes to falls, bone fractures, costly hospitalizations, and premature mortality.

Sarcopenia also occurs in cancer patients with cachexia.

Cachexia is responsible for between 20% and 40% of cancer deaths, repleting the diminished muscle mass of cachexic patients is a promising approach for drug therapy.

Currently, there are a few options for treating sarcopenia in either the elderly or in cancer patients and the efficacy and safety of the current treatments is less than desirable.

Androgen receptors are present throughout skeletal muscle tissue and play an important role in maintaining normal muscle mass.

A drug targeting these receptors could be a good treatment for sarcopenia.

Ligand is actively pursue thing with our SARM program as is Merck in collaboration with GTX.

Turning now to Slide 16, Ligand's lead SARM LGD-4033 is described.

This compound has best in class potency and tissue selectively.

It is fully active on the androgen receptors in skeletal muscle and bone in animal models.

In the bone LGD-4033 has a bone building action.

As bone loss is common in patients with sarcopenia, this is a highly desirable effect.

The combination of stronger muscles and stronger bones would be expected to reduce bone fractures.

By comparison to its strong effects on muscle and bone, in the prostate and sweat glands, LGD-4033 has weak partial activity so that BPH and apnea that occur in patients treated with testosterone would not occur in LGD-4033 treated patients making it a safer drug.

Ligand is recently completed a Phase I ascending dose study in healthy men.

The full results will be presented in an appropriate scientific forum next year.

The top line results are that the compound was well absorbed after oral dosing and displayed good pharmacokinetics consistent with a once a day dosing.

Adverse events were infrequent in this study, none was serious or dose dependent and there was no evidence of clusters of adverse events into any particular category.

We are planning a Phase I multiple ascending dose trial with LGD-4033 that will begin shortly.

Another upcoming event is that we will present the LGD-4033 data from animal studies at the Gerontology Society of America Annual Meeting in a late breaking fashion that will be held on November 20th in Atlanta.

Turning now to Slide 17, we have a program to discover orally active Erythropoietin Mimetics that is in the advanced stage of lead optimization.

Erythropoietin or EPO is the hormone that regulates the production of new red blood cells.

When EPO is lacking or does not work properly in the body anemia results.

Anemia is common in patients with chronic kidney disease, many types of cancer, congestive heart failure or a chronic inflammatory disease.

The current treatment is in injection of recombinant human EPO protein.

An injectable EPO like peptide called Hematide is in clinical development.

Ligand is focused on a different approach, discovering molecules that is are small, orally absorbed, and binds to the EPO receptor at a different site than where EPO binds so they will not interfere with the patient's own EPO.

The photographs on right side of the slide show the effect of one of our compounds on hematocrytic stem cells from the bone marrow of a normal human volunteer.

The uppermost picture shows that in the presence of vehicle, the stem cells are visible, but Erythroid colonies do not develop so no new blood cells can be produced.

The middle picture shows that when EPO is present in a physiological concentration, Erythroid colonies are formed.

This is the critical intermediate step to forming new red blood cells.

The lower most picture shows if a Ligand EPO Mimetic is present, Erythroid colonies are formed just as if EPO were present.

The reddish color in these colonies is hemoglobin, that is already being synthesized in preparation for functioning red blood cells.

These data indicate that Ligand's small molecule drugs can take the place of EPO for stimulating red blood cell formulation.

Turning now to Slide 18, we will be adding several programs to our pipeline as we acquire Neurogen and Metabasis three of these are listed here.

From Neurogen we will get a histamine H3 receptor antagonist program.

H3 receptor antagonist have the potential to treat narcolepsy and mild cognitive impairment in the early stage of Alzheimer's disease.

From Metabasis, we will be getting orally absorbed glucagon receptor antagonists.

These compounds have the potential to be a new mode of treatment for type II diabetes by inhibiting the abnormally high rate of glucose production in these patients.

We will be getting liver directed thyroid hormone receptor beta agonist, activating the thyroid hormone receptor beta subtype in the liver, will lower LDL cholesterol and LPa in the blood stream by affecting the lipogenic genes expressed in the liver.

Elevated LPa is a risk factor for coronary heart disease that is not corrected by a current routinely used lipid lowering drugs.

By delivering our drug mostly to the liver, it should be possible to avoid the cardiac affect that occur when too much thyroid hormone reaches the heart.

This new drug could be added to current drugs in patients that do not show adequate cholesterol lowering with a staten-type drug to achieve better cholesterol lowering.

With that I will turn it back the presentation back to John Higgins.

Thank you.

One final slide and then we will open up the call for questions.

At the end of our presentation, slide 19, we have a summary of potential near-term milestone and events.

We have a robust calendar over partner company events we are excited either near-term activities that span regulatory news, the announcement of trial data, potential for product launches, also milestone payments, and so on.

Specifically, PROMACTA is pending approval in Europe and we believe in Europe in the next couple of months we could get updates on that regulatory status for possible approval.

Also, the Phase III hepatitis trial, we believe soon will be fully rolled, GSK has acknowledged that one of the Phase III hepatitis studies recently completed full enrollment and we believe the second one could be fully enrolled very soon.

The SARM Phase I trial, again as Martin said, the single ascending dose is finished.

We are shortly advancing to the multidose, so we can finish that next spring.

Also, just in about two weeks we will have a scientific presentation at the November Gerontology conference.

We have a potential for milestone payments for a couple of partners for different research events.

When we look at Pfizer, we believe there could be a launch of CONBRIZA in Europe.

The product was approved.

This is estrogen receptor modulator for osteoporosis that was approved earlier this year.

We believe that is subject to pricing authorization Pfizer could launch that some time next year.

And VIVIANT is the same drug, under a different name for the US market.

We believe there could be some regulatory activity with a potential panel review the next few months as well.

Martin identified we are making advancements of oral EPO, as we see Pfizer continue to research.

We may eventually the JAK3 compound out of Pfizer program, exam obviously we are looking forward to closing Neurogen.

We expect a shareholder meeting to be in mid December and Metabasis potentially in January.

With that, I would like to thank everybody for their time and attention.

We appreciate your support, and we will turn it over to the operator for questions.

(Operator Instructions).

Your first question comes from the line of Joe [Pempcymus] of Merrimen.

Hi guys.

Congratulations on great cash management, especially in these times as you alluded to.

Quick financial question, and pipeline question, if you don't mind.

Obviously, you know you are looking at relatively break even next year based on your guidance, and when you balance the increasing product royalties and your expenses going forward as you increase your program, and do you have any color looking forward with regard to sustained profitability as you hover around break even right now?

Yes Joe.

Thanks for the question.

Our outlook right now we feel very good about the business financially.

I think that the big message clearly is that we have significantly reduced expenses the last year or two.

A lot of this is just getting rid of I lot of administrative overhead, operating costs et cetera.

We are still funding a robust business.

This is not the high cost, you know Phase III multiyear commitment.

So the good news is that we can do quality research, but it is at the earlier end of the spectrum so they are lower cost programs.

We are finding that the time line for our research programs is about 12 to 18 months.

In a calendar year there's a fair amount of turnover in terms of finishing up projects and then redeploying it for work the following year.

We are still going through the details for the 2010 budget.

Our outlook is we think revenues could come close to matching expenses.

We need to close the Metabasis deal and look at the first 12 to 18 months of development for their main programs.

But we feel good within our research programming, we have a loft flexibility to fund a robust business.

We are not guiding to when we will turn cash flow positive or profitable yet.

We think the trends are compelling and running a tight business financially.

A pipeline related question, you have a lot of excitement around the SARM program and the oral EPO program.

As you are bringing the SARM program forward since it is already in the clinic based on your company strategy, at what point would you be looking to partner it?

And then, on top of that, with your current partner program I ask this question all the time, when do you anticipate visibility from CXCR2 or the P38 compound.

Joe, thank you.

The question for partnering for SARM, the earliest point frankly would be late next spring.

That's about when we expect the Phase I to be finished.

We feel good about the findings from the single ascending dose and at that time we will have the multiascending dose data.

As we said our goal is to actually partner the early deflection point.

Our view is that the cost for development is going up the time line, regulatory hurdles et cetera that the partner earlier makes sense for small companies, partly because we are also seeing, you can still enter some very lucrative deals in terms of potential milestones and royalties.

Having said that, Merck and GTX have made good progress in Phase II studies and we would not rule out a potentially a Phase IIA trial where we could get additional human efficacy data provided it is an early study with clear bio markers.

We aren't committing to it yet.

We need to finish the Phase I.

I have no doubt we will have inquiries or interest for the program when we finish the Phase I trial.

We just have to make the right call, if that's the best partnering point if we need a little more human data.

As far as you have the Schering-Plough and the BMS program.

These are two partnerships we feel very good about having brought them over from Pharmacopeia, they were in Phase II studies when we acquired Pharmacopeia.

Our sense is those studies, there are two or three Phase IIs for each program so a total of five or six.

Some of those have finished others are in the process of finishing.

But it is up to the companies and we are as interested as investors are to learn when now Merck will announce their data or BMS will announce their data by our collaborations we aren't entitled to have the inside review.

We will simply learn the data once the public markets do.

So we don't know the exact time lip.

But we are certainly eager to see if those programs are going to advance and what the time lines are we are advancing.

That's fair.

Thanks so much, John.

Thank you.

Thank you.

(Operator Instructions).

Your next question comes from the line of [Noah Uzall] of Deutsche Bank.

Your line is now open.

(Operator Instructions).

There are no further questions at this time.

Are there any closing remarks?

Operator, thank you.

Again we appreciate people's time on the call.

In light of all the evolving story, now we are a year past Pharmacopeia and now Metabasis and Neurogen, we wanted to use slides to help tell our story.

We are pleased with the financial progress as John identified, we I think had a major achievement in structuring this lease buy outs this quarter.

We are pleased with the news flow.

When we heard a couple of days ago Pfizer is extending the JAK3 program, that was a lot of excitement here at the Company because we are pleased with the progress we made there.

Really across the board we feel good about the business we are looking forward to finishing up 2009, and presuming both Neurogen and Metabasis close setting up to run a much broader platform in 2010.

Thank you for your time and interest.

This concludes today's conference call.

You may now disconnect.