Madrigal Pharmaceuticals Inc (MDGL) 2012 Q3 法說會逐字稿

Good day and welcome to the Synta Pharmaceuticals' third-quarter 2012 financial results conference call. Today's conference is being recorded and webcast. At this time for opening remarks I would to turn the call over to George Farmer, Vice President of Corporate Development at Synta Pharmaceuticals. Please go ahead, sir.

Hello, and thank you all for taking the time to join us today. With me are Dr. Safi Bahcall, our Chief Executive Officer; Keith Ehrlich, our Chief Financial Officer; and Iman El-Hariry, our Vice President of Clinical Research.

This morning we issued a press release that reported results for the third quarter of 2012. This release can be found on our website at syntapharma.com.

Before we begin I would like to point out that we will be making forward-looking statements based on our current intent, beliefs and expectations, which are subject to certain risks and uncertainties. Additional detail can be found in related SEC filings, also available through our website.

I will now turn the call over to Dr. Bahcall, after which we will open the call to questions. Safi.

Thanks, George, and thank you all for joining us this morning. Today it is going to be me, Keith, and instead of Vojo, our Chief Medical Officer, we have Dr. Iman El-Hariry, our VP Clinical Research. Vojo is traveling.

This has been a transformational year for us here at Synta. We have made great progress with ganetespib, our lead Hsp90 inhibitor on three dimensions. First, single agent activity has been clearly established in certain targeted indications such as ALK positive lung, HER2-positive breast, and triple-negative breast cancers.

Some patients have had responses for over two years while on drugs, which is an exciting confirmation of both clinical activity and long-term tolerability.

Second, results across the 20 trials and over 600 patients treated today have confirmed ganetespib is the first Hsp90 inhibitor to demonstrate clinical activity without the serious liver or common ocular toxicities seen with other drugs in this class.

And, finally, third, the randomized data presented at ESMO last September showed an encouraging survival advantage in second-line lung cancer, the first positive randomized data for an Hsp90 inhibitor.

We are very pleased to announce today that we have recently completed two key milestones in the GALAXY program. Enrollment of the planned 240 patients in the Phase IIb portion of the trial has completed. We have seen a very strong increase in awareness, enrollment and investigator and site requests for participation following ESMO. We enrolled close to 50 patients last month alone from less than 50 sites. We will have over twice as many sites which will participate in the Phase III.

And, second, we completed our End-of-Phase II FDA meeting, conversion of Phase III protocol, and have initiated the Phase III trial. We are enormously excited about this Phase III trial. It is very rare to be in Phase III with so much randomized data in exactly the same design, same dose, same schedule, same population and same multinational setting as in Phase II. This reduces many of the common Phase II to Phase III transition risks.

As was described in our release this morning the Phase III trial will be a larger version of the Phase IIb trial with two adjustments. First, the primary endpoint will be overall survival. Second, the trial be enriched for patients who showed the greatest likelihood of deriving benefit from ganetespib, based on analyses of the Phase IIb data.

One note about the Phase IIb. The protocol specified enrollment in the primary subpopulations of mutant KRAS and elevated LDH may continue until a prespecified maximum number of patients in each group has been reached. We expect up to an additional 60 patients will be enrolled over the next couple of months.

Enrollment of these additional patients is not expected to change our timelines of having final PFS data and updated survival data in the first half of 2013. It also does not change our primary focus which is winning in 2014, meaning a positive outcome on Phase III trial in the all adenocarcinoma group.

Patients with mutant KRAS and elevated LDH, however, have particularly high unmet needs. There are limited treatment options in the first case and a very poor prognosis in the second case, with a median survival of about four months.

The additional patients will not affect our longer-term all adeno approval strategy. The results in these populations, however, may create interesting opportunities next year for early filing discussions with health authorities based on the high need should outcomes be positive.

So, finally, I would like to summarize our expected timeline for the GALAXY program over the next 24 months. In the first half of next year we will have final PFS and updated survival data from the Phase IIb. That should be about 300 patients.

In the second half of next year we will have final survival data on the Phase IIb. In the first half of 2014 there will be an interim survival analysis from the Phase III trial. The second half of 2014 we will have final survival data from the Phase III trial.

We see GALAXY as the fastest and most efficient path towards registration. We do have, however, several other trials, including the CHIARA trial in ALK positive lung cancer and the ENCHANT trial in metastatic breast cancer.

We have seen very interesting activity with ganetespib in these indications. We expect to present interim results from these trials in the first half of 2013.

I would like to share one patient example we received recently. One of our investigators was treating and ALK positive lung cancer patient. She had relapsed after treatment with crizotinib and had a large central tumor mass that led to complete collapse of the left lung. She also had extensive bone and brain metastases with extensive leptomeningeal disease. The patient was treated on a compassionate use basis with ganetespib. The six-week PET/CT scan showed a complete metabolic response with the left lung reinflated and regained function.

In addition, there was partial metabolic response in both the bone mets as well as the brain mets. As you all know, quite exciting to see brain mets responding.

As another example, we recently received the first report from a patient in our ENCHANT trial, a HER2-positive patient who received ganetespib monotherapy. We are excited to learn that our first planned PET/CT scan just three weeks after the start of ganetespib treatment showed both metabolic activity and tumor shrinkage.

To summarize, it is an incredibly exciting time for this program, a big inflection point with lots of data coming. Lung and breast cancer are the two biggest cancers in the world. We have six trials across each, have demonstrate clinical activity with ganetespib across both, and are positioning Synta to make a big difference to patients across both these tumor types.

I will now turn it over to Keith who will review our third-quarter financial results. Keith.

Thank you, Safi. And good morning everyone. There were no revenues in the third quarter of 2012 as compared to $1.7 million of revenues in the same period of 2011, which consisted of amortization of an upfront payment under the Roche agreement that was terminated at the end of 2011, and grant revenues. In the third quarter of 2012 research and development expenses were $11.7 million as compared to $10.8 million for the same period of 2011.

Third-quarter general and administrative expenses were $2.8 million as compared to $3.1 million for the comparable period in 2011. In the third quarter of 2012 the Company's net loss was $15 million or $0.25 per basic and diluted share as compared to a net loss of $12.7 million or $0.26 per basic and diluted share in the same period of 2011.

As of September 30, 2012 the Company had approximately $55.1 million of cash resources on hand. This includes net proceeds from the registered direct common stock offering to certain members of the Board of Directors in July 2012.

The Company expects to end 2012 with $38 million to $40 million in cash, cash equivalents and marketable securities. Based on our current operating levels we expect these cash resources will be sufficient to fund operations into the second half of 2013.

These estimates assume no additional funding from new partnership agreements or equity financing events, and that the timing and nature of activities contemplated for 2013 will be conducted subject to the availability of sufficient financial resources.

I will now turn it back over to Safi for concluding remarks. Safi.

This concludes our prepared remarks. Operator, we will now open the call to questions.

(Operator Instructions). Thomas Wei, Jefferies & Company.

First, I wanted to understand a little bit more about the Phase III protocol. Can you share with us more details on exactly how you're defining rapidly progressing patients for exclusion?

Sure, Thomas. Criteria is essentially patients who have experienced rapid disease progression on first-line therapy or shortly thereafter, and it is essentially the same as the time since diagnosis less than six months. It is a very strong overlap with that criteria that came out of the Phase IIb.

I see, so that is predominately what is driving it is that you have to have had a diagnosis of advanced disease greater than six months prior to study entry?

That would be the eligibility, yes, the inclusion. And it is essentially that. It is not precisely that wording, because that is obviously a standard stratification factor, and then when you get into eligibility, moving from a stratification factor to an eligibility criteria, you want to get the language that is most acceptable to investigators and regulators.

So we actually -- it is interesting, we did a lot of work on this. We obviously have a ton of data that came out of the Phase IIb randomized data, which gives us enormous amount of insight into the patients that are really benefiting from the drug versus the patients that are not.

One of the findings that leapt out of that, and is not particularly unusual to ganetespib, is that patients who are rapidly progressing or just going through first-line therapy don't seem to be getting much benefit, either from the control arm docetaxel or from the combination of docetaxel plus an Hsp90 inhibitor.

So that came very clearly out of the data. And then we spent quite a while talking to many -- probably over 15 of the top lung cancer investigators in North America, Europe, Asia, who collectively have been involved in essentially every major pivotal lung cancer trial over the past two decades, and walked through the data with them and got their thoughts. And there was extremely broad support for the approach that we are taking, which is really understand which patients are benefiting, which patients have the likely highest likelihood of benefit, number one.

Number two, what is an objective practical and reliable criteria to use in the pivotal trial that is going to be in a multinational setting and used for registration?

And, number three, what will be most acceptable to investigators, institutional review boards and regulators around the world? And that is just a general set of principles about how you think about any eligibility criteria in a pivotal program, but also in particular this one in terms of when you have large randomized Phase IIb data set in the same setting and there is unclear signals.

So when we look at -- those are the three factors we are trying to optimize we feel pretty comfortable that the specific choice and language that we are using, which has a pretty high overlap with that -- with what people think about when they think about patients who progress very rapidly through first-line therapy. We feel pretty comfortable that we have a very good balance between all three of those.

And you had said before that you are going to share some of the statistical powering assumptions both at the final overall survival analysis and at the interim when you announced the start of this study. Could you share those with us?

Sure, we will obviously have more details when we have the startup of enrollment press release, which should be early next year. But what I can tell you is that we powered for -- the powering gives you about for an assumed hazard ratio of 0.7, an 85% power on final analysis, and in the neighborhood of a 40% and a 70% on the first interim and the second interim, if you assume hazard ratio of 0.7.

And if you assume a hazard ratio of 0.6 or below, then your final powering is ever 99% -- sorry, your final power on the final analysis is over 99%, and in the interim analysis it is extremely high as well maybe even 90%.

And just to tie it into the first question, using the criteria as been described on inclusion and exclusion and applying that to be Phase IIb population, what is the hazard ratio that you would see on that subgroup of patients from the Phase IIb portion?

It is less than 0.4.

Great, I will jump back in the queue. Thanks.

Brian Klein, Stifel Nicolaus.

Digging in a little deeper on the Phase III, first, can you tell us if the Phase IIb was stratified equally between the two arms in terms of patients who were rapidly progressing?

I think what you're asking is was there a stratification for rapidly progressing -- patients who entered the study with rapidly progressing disease, which if there is a stratification then the trial gets balanced automatically. I think that is what you're asking. And the answer is yes.

So one of the -- there are four prespecified stratification variables, and one of them is this time to diagnosis of less than six months, which is a very good proxy for rapid disease.

And did you see that approximately 30% to 40% of the patients enrolled in the Phase IIb were rapidly progressing, is that consistent?

Yes, in the Phase IIb ESMO data I think it was about 36% of the patients were diagnosis less than six months or rapid disease progression, and 64% were normal tumor velocity patients or normal progressives.

So what do you then estimate will be the median survival for the Taxotere alone arm who are not rapidly progressing?

That is a good question that you can look at both historical data and the results in our trial. And I think if you look at the Kaplan-Meier graphs in our trial it is right there. And to what extent that median survival is reflected of historical is something that we have looked into and I think it is generally within the range that you might expect.

So if we take the data from the Phase IIb and there the Taxotere alone arm survival was about seven months or so?

That is right.

Can we assume that in the Phase III, now that we are excluding rapidly progressors the median survival should be higher than seven months?

It is hard to -- there are a lot of different factors. In general everything else being equal that would be the case.

Okay.

The one thing I would caution is that medians are a one point in time, and people tend to get -- especially media tends to get very focused on median, but that really is one point in time. And obviously your final approval is based on the entire shape of the Kaplan-Meier graph, the survival graph.

And that is really what is captured in a hazard ratio, and what is captured in a logrank statistical test, a p value. So the most important thing to focus on, and certainly when we or biostatisticians look at the data and make plans, is really hazard ratios.

Got it. The purpose of my question is I really trying to drill down in terms of when we might get that final analysis. Is it safe to assume that the enrollment of 500 patients will take about a year from start?

Our projections is that we would -- and we have done these analyses and we have done these projections, and that was behind our estimates of having interim analyses in the first half of -- from the Phase III. Interim analyses in the first half of 2014 and final analyses -- final analysis in the second half of 2014. And that assume enrollment gets completed in 2013.

Okay, but your ability to have final topline data will require at least 75% to 80% of events to occur. And given the median of about at least seven months in the control arm, do you still think it is feasible to really have that data by the end of 2014?

We have done a whole series of simulations, analyses and projections, and with those assumptions that I mentioned that you complete enrollment and fairly standard assumptions, we do estimate interim analysis would take place in the first half of 2014, and final analysis would be in the second half of 2014.

Great, thanks for taking my questions.

Jim Birchenough, BMO Capital Markets.

It is Nick standing in for Jim this morning. And I apologize if I missed the beginning of the call, so perhaps you have addressed this. But when you had your End-of-Phase II meeting with FDA, can you summarize for us perhaps what some key messages from FDA were that you included into the Phase III protocol?

And also did you discuss with them the possibility of a filing based on the GALAXY IIb data and what perhaps additional data that you would need to support an early filing?

Sure. The first part of your question, as you know, we and most companies can't get into minute details of regulatory discussions.

I think one of the things -- and in this particular case with this particular protocol, as you know, we are using the gold standard survival endpoint, so that is not as noncontroversial as it gets.

We are using standard of care -- patients in both arms receive standard of care, and patients in the experimental arm get our drug. So that is a very plain vanilla and precedented trial. So there is not a lot of surprises that the trial with a lot of precedence, a pretty standard trial, and it is really an extension of the IIb, for which we have now have a year and half, two years of experience in filing in many different countries, working with many different regulatory agencies.

So there are not a lot of surprises. I think one thing I can say is that a fair amount of the discussion or interaction we are just making sure we converged and agreed on the statistical plan. And we felt very good -- we are very pleased with where we ended up on the statistical plan. And we accepted entirely the agency's suggestion on the statistical plan. And that was, I think, the majority of the discussion or the focus.

I think your second question was on early filing. And I want to caveat here that the absolute number one focus of the Company is on winning in 2014, on having a positive outcome in the Phase III trial in 2014. We and everyone involved with this drug, whether internally at Synta or the many investigators in many centers we work with in US, Europe, Asia, understand how important it is to get this right.

We understand that we have an agent that has shown pretty remarkable clinical activity in a patient group that has got extraordinarily high and urgent unmet medical need, and we take that responsibility extremely seriously. And that has been our discussion with investigators and the investigators' discussion with us.

So we are not in the business of trying to -- it is not the highest priority in the world to us to try to see if we can move quicker by a quarter or two quarters. We are thinking about the five years and the 10 years and what this drug can do for lung cancer, whether it is second-line, whether it is first-line, whether it is maintenance, whether it is a combination with one agent or other agents, we think it has very broad potential and we do not want to take shortcuts.

Number two -- and by the way, not just lung cancer, but breast cancer. We think the drug has so much potential it would be a mistake to focus on trying to see if we can shave off a quarter here and there.

That being said, this question has come up quite a few times. It is obviously when we have 300 patients of randomized, multinational multicenter data it is pretty substantial data. And what we have said consistently is when we get there we will have those discussions, right now those discussions are too premature.

If there is -- especially if there is a patient subpopulation or patient subpopulations that have extremely high unmet need, where there are little or no options or they are dying very quickly, and there is some particularly impressive demonstration of benefit that would be the kind of context that maybe a year from now one would have some interesting discussions with agencies about possible options. But, again, that won't change the focus.

Thank you, and so how did you come up with an additional 60 patients? Does that give you, you think, enough patients' worth of data in those two particular populations to have a meaningful discussion about are we really changing the natural history of the disease?

Yes, exactly. So that was prespecified in the protocol how many patients you would need to answer a particular statistical question, and so that calls for some particular numbers. And based on what we are seeing in enrollment rates, which is that both groups are in approximate 25% to 30%, you can roughly back out that you need approximately in the neighborhood of 60 patients to get the number of patients you need to answer the question.

And that is 60 patients each not -- I am sorry, that is total, not each.

Correct, that is 60 patients total, so that the final total cumulative number of adeno patients would be approximately 300.

Okay, thank you. I will jump back in the queue.

George Zavoico, MLV & Co.

Congratulations on beginning the Phase III trial. Something obviously we and everyone else have been anticipating with great excitement.

I have a question about the rapid progressors. This is a fairly easy screen. It is basically patient history. You don't have to do any sort of other analysis. So this is not going to delay patient enrollment, is that correct?

That is correct. And that came up in discussions with many investigators. And I have to say it is a pretty quick discussion with investigators. They look at the Phase IIb data. They say, you're obviously seeing tremendous benefit in this group. These patients who are blowing through first-line therapy, they are not benefiting from your drug. In our experience with other trials that is pretty standard. They actually don't benefit much from second-line therapy anyway.

So focusing on the narrower group where you see the bigger advantage is the right thing to do. And in fact, they think it is something that should be done in the future for more second-line trials or pivotal trials. And as you say it is a fairly easy, objective, practical, reliable screen.

And are the other patient subgroups that didn't do so well in the Phase IIb portion was the smokers versus the -- current smokers versus the never smoked or recently stopped. How are you handling that subgroup in the Phase III?

That is a good question, George. We thought a lot about that. And what we saw in the data is that, as you can imagine, there is a very high overlap between patients who exhibit rapidly progressing disease, meaning their disease is growing and they didn't respond much to first-line therapy and there is a very high tumor velocity, and some of these other negative characteristics, such as current smokers or liver bone mets and so forth.

So by -- with the one eligibility criteria you actually reduce the number of these patients who are not very responsive, pretty broadly across the board. And that is reflected in the fact that in the Phase IIb data the overall hazard ratio is south of 0.4 with just the one eligibility criteria.

So, in other words, most of the rapid progressors were also smokers?

In fact, it is about -- if I remember right -- about half of the smokers who are exhibiting rapidly progressive disease. So about half of those are gone when you do that one criteria.

That helps your exclusion criteria immensely, yes, it does. Okay, finally, could you estimate at this time what the cost of the Phase III portion of GALAXY may be per patient or the total cost?

I don't think we have got into that level of specific detail in any of our guidance. I think what we have said in previous discussions is that the cost of our program is in line with the cost of other randomized oncology trials in this setting, which tends to be anywhere from $40,000 to $70,000 or $80,000 all included per patient.

Okay, thank you very much.

Robin Davison, Edison Investment Research.

Just some quick ones really on the Phase III design. First of all, are you specifically excluding patients that have metastases or obviously they are likely to be patients who are rapidly progressing anyway, but are those specific exclusion criteria?

No, there is no specific exclusion criteria, for example, on the liver bone mets or such. We, like most trials, have eligibility criteria around CNS mets. You will find that in almost every lung cancer and neck trial, in fact, many other terming types as well.

Right. Okay. On the KRAS and mutant -- and elevated LDH, you didn't look at that at all in the Phase III study, or do we assume those patients would be excluded by the -- again, by the poor prognosis?

No, they are not particularly excluded by the rapid progression criteria. And we are -- we do have prespecified secondary endpoints around those populations, because they remain of very high interest to our investigators and to us. As you know, patients with mutant KRAS have very limited treatment options. There's quite a few drugs that are -- have either been shown to be ineffective there or not indicated there.

Patients with high LDH die very quickly. Median survival is in the four-month range. So there is very high need there, and so it remains of particularly high interest.

Right, okay. Just this finally, I noticed, reading carefully the announcements that you're planning to allow four to six cycles of docetaxel, and then patients switch to, or can elect to switch to maintenance therapy.

Now I am wondering with the -- with you having observations really, obviously the point where you expect to see separation after -- it was certainly in the interim data -- about 100 days, patients would actually be on ganetespib monotherapy. Is there anything we can read into that?

Yes, first, a bit of a caution -- firstly, the four to six cycles are general practice. I mean, there are centers that use four cycles of docetaxel, there are centers that six, and there is a few centers that use more.

But it is correct. As in the Phase III we will repeat the same exact regimen and schedule as the Phase IIb. And, yes, once patients complete the chemo -- and patients just can't tolerate chemo in general, which is why it is usually terminated after the four to six cycles, they do go on maintenance single agent ganetespib.

I think there were a number of the lung cancer docs on the panel at ESMO, which you can listen to, which talked about their experience with long-term maintenance. And a number of them have mentioned they have patients up to 10 or 12 cycles with ganetespib -- with maintenance tolerating it well, and in their perception deriving benefit from extended usage.

And then in terms of your question about separation or not separation, I think that will be -- become apparent as the data evolves and we have some more maturity. But again we are talking about medians, and therefore four to six cycles is three or four months, and while the median PFS time typically is about three months, that does mean that half the patients are living longer than three months. So there is quite a few patients out there who are getting ganetespib maintenance as a single agent. And just as a reminder there is no crossover in this study.

All right, okay, excellent. Thank you.

Ryan Martins, Lazard Capital Markets.

Can you talk about what may predispose a first-line patient to be a rapidly progressing patient? What are the key variables and factors that lead to a patient eventually becoming a rapidly progressing patient?

This is something that is observed in -- empirically in many trials, whether it is lung cancer, other tumor types. Sometimes it is characterized in the literature as outright progressors, these are patients who show up, receive first-line therapy, generally chemotherapy, and on their first scan six weeks later the tumors have continued to increase or increased very significantly. And that just happens in a pretty substantial number of patients. They are just totally unresponsive.

And exactly what is the underlying biology nature of that is something that quite a few people are trying to figure out. But I think the way people think about it is that their disease is extremely advanced. There is probably not one driving oncogene mutation, but probably multiple mutations, multiple pathways have been activated. Multiple resistance mechanisms have already been activated.

So essentially you have tumors that have evolved and have become very complex with many pathways turned on, both in terms of driving oncogenes and in terms of the pathways that drive drug resistance. Does that answer your question?

Thanks. Just a decision to increase enrollment in the Phase IIb, was this post the FDA meeting or was it something that was a plan anyway by the Company as part of the protocol?

It was just enormously high demand from investigators. We have sites and investigators that are e-mailing us almost on a daily basis. As I mentioned, enrollment almost doubled in the last month since ESMO, number one.

Number two, a lot of the feedback from investigators is you have a drug that is working. You want to get more data and really understand that very well. And in particular these are patients -- these two prespecified primary populations are the ones where you have some underlying biology, where there could be an important mechanistic connection between the disease and the mechanism of the drug. And there is really nothing for patients -- for either of those two.

So there was just very high demand from investigators. It does create some options for patients with very limited alternatives. And it build a much rich -- it just builds that much richer data package for us in 2013. We will have 300 or more patients in a large multinational randomized setting for a drug that is showing very promising activity.

And when you are there having more data it an incremental relatively low cost, and it create some very attractive options and some very useful information.

Okay. And maybe one question just to follow up on the Phase II data that has already been presented at ESMO. We saw two cuts of the data, the hazard ratio. There was a slight deterioration in the hazard ratio from I think about 0.7 about to about 5.57. Do you have an update on how that hazard ratio is looking? Has that -- but obviously have had more events since then. Has that improved since then or can you talk about how that has been trending?

We haven't looked at the data since then, since ESMO.

Okay, and --

I think I would be careful about positioning that is a deterior. You have one analysis, which is -- has more maturity or more follow-up time, and you have one analysis which was very fresh, where a lot of the patients had been very recently enrolled. So that is the kind of thing you would typically see in the middle of a trial. And those kind of things will disappear once patients have been enrolled and you have some good follow-up.

Okay. Are we going to have another follow-up of this data before you get the final data?

Currently we don't have any plans to do another analysis before the first half of next year, which would be the final -- triggered by the file PFS endpoint.

Safi, just one final one. Based on your cash levels and the impending initiation of the trial, how are you thinking about going forward cash levels, et cetera?

Well, as you know, we have a Board and large shareholders that are following our data extremely closely that understand that we are in the middle of what could be a very rapid and sizable inflection given the amount of data that is coming up. And they are obviously very sensitive to dilution, being large shareholders who invested over many years. And because of that we have no near-term financing plans that would be -- cause major dilution. We are looking at a number of other options.

That being said, our Board regularly evaluates all options and will continue to do so.

Okay, thanks for clarifying.

Thomas Wei, Jefferies & Company.

So far some more details on the Phase III trial. What exactly are you using in stratifying patients for randomization?

In general we are using -- in general what one wants to user is prognostic variables that are well-known and well-established and confirmed in our data. And we're using ECOG Performance Status, LDH. And I don't remember off the top of my head exactly what else, you will see more details in, I think, the press release [on start] at the moment.

And what about in terms of limits on say the number of patients from a particular geography?

No, we don't -- it is not very common to place quotas. We don't have any planned quotas. We anticipate that the geographical mix will be comparable to the Phase IIb. That has been working very well.

One thing I would emphasize is we spend a lot of time, as I mentioned, with many of the top KOLs who have been involved in essentially every pivotal lung cancer program and the folks internally here have many, many, many years of experience in many pivotal trials at many companies for many different agents.

One of the main lessons is that one of the biggest Phase II to Phase III transition risks that is probably not been appreciated very well, in addition to when sponsors change dose or schedule or a regimen or don't have a lot of evidence or insufficiently powered going in. But one of the main ones that is probably not as appreciated very well is the operational risk.

When Phase IIs are conducted in one country, there might be 10 or 20 academic centers, and then the Phase III is in 150 centers in 15 countries. And one of the things that we are -- we built into our planning two years ago was that before we ever get to the Phase III we have already generated the experience in working in these 15 countries.

So we are going to be in 15 -- the same 15 countries, many of the same centers. And the countries and the centers -- the investigators in these different countries and centers have already gotten the practice and the experiences in the real world using our drug with patients. So there is no -- there won't be any practicing in the Phase III. A lot of that will have gotten -- already happened.

So we feel quite comfortable in continuing the same countries, the same centers and the same geographic mix essentially seamlessly between the Phase IIb and the Phase III.

And so with the more than doubling of the number of centers, you still think that geographic mix that we have seen so far in the Phase IIb study it will be reflected in the Phase III population as well?

Yes, yes. And there is a -- one of the other advantages of continuing the tail end enrollment pass the 240 patients is that there are many centers that have approached us eager to participate over the past several months, and this gives them the opportunity to participate.

So many of the centers that we are -- will eventually end up with a Phase III will be signing up over -- you have other recently signed up or are signing up now and will get some experience operationally before the Phase III.

And what about blinding and independent central review of responses and progression?

This is not a blinded trial. It is a survival endpoint. in fact, that actually never even came up at -- ahead of regulatory sitting across. That never came up in the FDA meeting.

Independent central review for scans, if we would need to use PFS or response, we would certainly consider an independent review, but we haven't -- that is not the primary endpoint.

And then, just lastly, can you tell us what the triggers are for the two interims in the final overall survival analysis?

Yes, that level of detail I expect would be the kind of thing that would be the press release. I don't actually have the numbers with me.

Okay, great, thanks.

Jim Birchenough, BMO Capital Markets.

My first question is on the comment you made regarding the responding brain metastases. I know this is just an n of 1, but were you surprised by that? And do you think this is an autocrine or a paracrine function, i.e., is ganetespib able to cross the blood/brain barrier, assuming that has been breached by a lesion, or is the systemic effect of Hsp90 inhibition sufficient to have a paracrine effect in what is considered a protected area within the brain?

And then my second question is, are you planning to validate any other biomarkers than you have discussed in the Phase III trial?

For both those questions I will turn it over to Iman.

Okay. For the first question around the brain metastases, we actually -- what you have seen is that this [is] a brain metastases. As you know, they will have reached an intact blood/brain barrier, which (inaudible) across of ganetespib into these lesions and really exacting there its effect.

Some of our agents, even small molecules, have not been really successful in really -- successfully affecting brain metastases. So I think for us this is extremely exciting -- I really mean it -- to see that you have a clear effect in terms of tumor shrinkage and in terms of reaching to a little disease stabilization in the brain by ganetespib. And it could be a function clearly of the ability to cross the blood/brain barrier, as well as specific activity of Hsp90 degradation.

In terms of the second question regarding the biomarkers, of course we have extreme interest understanding in more detail the patient population that we have enrolled in our Phase II trial, and we will be actually doing a series of biomarker analyses to be able to understand the characteristics and the level of activity (inaudible) with the clinical outcome with ganetespib combination treatment.

But at this stage you don't envisage that data making it onto the label?

Not for this program. I think if you look at where we are in the Phase IIb and the types of -- admittedly it is interim data, but if you look at the historical context of hazard ratios that have been seen in lung cancer, what we are seeing already is pretty spectacular, and it is very encouraging.

And if we can -- that is a very good reason and rationale to go forward with the program, as it is with the exclusion criteria and the focus on the patient group that is most likely to benefit as we have defined it.

Something simple and works and it is easy to apply and it is objective and reliable, that is terrific, like a clinical characteristic.

Sure.

As you know, biomarkers require biopsies. They require vendors. They require -- there is some level of analysis that raises -- that can be difficult. There are the tumor heterogeneity questions. So when you have something that is a clinical characteristic or a serum marker that has many advantages.

Yes, okay, thank you very much.

Thank you. That concludes the question-and-answer session. I will now turn the conference over to Dr. Bahcall for closing remarks.

Thank you everybody for your time and attention today. That ends this call.

Ladies and gentlemen, that concludes today's conference. You may now disconnect. And have a wonderful day. We thank you for your participation today.