MannKind Corp (MNKD) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MannKind Corporation third quarter 2009 conference call. At this time, all participants are in a listen-only mode. Later instructions will be given for the question-and-answer session. (Operator Instructions) This call is being recorded today, November 2nd, 2009. Joining us today from MannKind are Chairman and CEO, Alfred Mann, President and COO, Hakan Edstrom, the Chief Financial Officer, Matthew Pfeffer, and the Chief Scientific Officer, Dr Peter Richardson. I would now like to turn the call over to Matthew Pfeffer, Chief Financial Officer of MannKind Corporation. Please go ahead and begin.

Well, good afternoon and thank you for participating in today's call. As is typical I will summarize our financial results for the third quarter of 2009 as reported earlier today. Next, Hakan will provide an update on key accomplishments during the third quarter of 2009. Peter will then provide an update on clinical developments and finally Al will comment on the current situation and our outlook going forward. We'll then open up the call to your questions.

Before we proceed further, please note that comments made during this call will include forward-looking statements within the meaning of Federal Securities Laws. It is possible the actual results could differ from these stated expectations. For factors which could cause actual results to differ from expectations, please refer to the reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934. This conference call contains time sensitive information that is accurate only as of the date of this live broadcast, November 2nd, 2009. MannKind's management undertakes no obligations to revise or update any statements to reflect events and circumstances after the date of this call.

Let's start with the financials. For the third quarter of 2009, total operating expenses were $42.8 million, compared to $69.1 million for the third quarter of 2008, and $53.4 million for the second quarter of 2009. Research and development expenses were $30.5 million for the third quarter of 2009, compared to $55.6 million for the third quarter of 2008, and $39.8 million for the second quarter of 2009. The decrease in R&D expenses for the third quarter of 2009 was primarily due to decreased costs associated with the clinical development of AFRESA and decreased manufacturing costs associated with raw material purchases. General and administrative expenses were $12.3 million for the third quarter of 2009, compared to $13.4 million for the third quarter of 2008 and $13.5 million for the second quarter of 2009. The net loss applicable to common stockholders for the third quarter of 2009 was $45.6 million or $0.42 per share. Compared with a net loss applicable to common stockholders of $68.5 million or $0.67 per share for the third quarter of 2008. Our cash, cash equivalents and marketable securities at the end of the third quarter totaled $56.6 million which compares to $46.5 million at December 31st, 2008 and $34 million at June 30th, 2009. Our cash burn for the third quarter of 2009 was $52.5 million in Q3, compared to $48.3 million in Q2, and $76.3 million in Q1. Our cash on hand and remaining credit facility from Al amount to $256.6 million as of September 30th, 2009. With that I'd like to turn the call over to Hakan Edstrom, our President and COO who will provides an overview of significant results during the last quarter.

Let me speak to our ongoing (inaudible) efforts which have been the subject of much commentary lately. As we reported last month, we have updated our guidance regarding the timing of a partnership deal. Previously, we have guided that we were aiming for deal by year end with a Q3 as a stretch goal. However, as discussions progressed, it became clear the uncertainty about the final label for AFRESA was creating a challenge to the [deep structure evaluation], not just with a potential partner with whom we had made the most progress but for others as well. In hindsight, the misalignment between our partnership time line and the FDA time line was inevitably going to create some uncertainties. Our proposed remedy seemed to let the regulatory process play itself out before we attempt to finalize the sales and marketing arrangements for AFRESA. We don't see any advantage in trying to force it into existence by an arbitrary date rather than at a point in time when both contracting parties have reached a true meeting of the minds regarding the proficiency and opportunity for AFRESA.

We know our product well. We have been continuing to run small studies since we concluded our registration trials and we are starting to really understand the potential of AFRESA to change the way diabetes is treated. Pete and Al will have more to say about some of the recent data. My point is only that we have a lot of confidence in AFRESA's ability to meet a poorly met need in diabetes and we have been busy bringing a number of potential partners higher and higher on the learning curve. One other recurring questions we've had lately is whether there will be an FDA advisory panel review for AFRESA in the December 15th meeting. As we have told you, members of the agency have indicated there is no need for a panel review and we do now know that we are not scheduled to appear at that meeting. It is for another product and another Company. Regarding the AFRESA NDA, the agency is now busy auditing our clinical sites and suppliers and with those updates I'll turn the call over to Peter. Peter?

Thank you. I'd like to share with you some exciting data that we reported last week at the International Society for Biological Therapy of Cancer 2009 annual meeting. The preliminary results of two Phase I studies which have demonstrated that our novel investigational cancer vaccines, and MKC1106-MT and MKC1106-PP are well tolerated and show encouraging immune response rates and objective tumor response in very advanced melanoma and prostate cancer and other solid malignancies, setting the stage for Phase II studies. Before moving to the MannKind vaccines, all patients had active disease progression falling failure with conventional therapies. To remind you, MKC1106-MT is an active immunotherapeutic product consisting of three components, a DNA plasmid and two synthetic peptides, each of which is administered separately by the unique route of Intranodal Injection and together are designed to target two human specific antigens that are commonly expressed by melanoma tumor cells. MKC1106-PP is a similar agent that is designed to target two specific tumor antigens commonly expressed by a variety of solid tumor cells. Both MKC1106-MT and MKC1106-PP met the primary end points and in addition showed early evidence of clinical benefits which marks an important step forward for MannKind's oncology portfolio. These encouraging results persuaded us to move into Phase II trials, these innovative, targeted therapies which represent the cornerstone of our cancer immunotherapy program.

In an ongoing (inaudible) extensive trial, 18 patients with advanced melanoma have been treated with MKC1106-MT and evaluated after each therapeutic cycle of six weeks. Patients demonstrating a clinical response (inaudible) remained in the clinical trial and received up to eight cycles of treatment over one year. In all patients, repeat administration of the treatment was very well tolerated with minimal adverse events. We observed an immune response rate of greater than 40%, defined the percentage of patients who showed elevated numbers of antigen specific T cells in their blood upon immunization. Of the 18 patients treated, four had metastities confined to the lymphatic system. All four of these patients with lymphatic disease achieved durable, objective responses, defined as partial response based on tumor imaging using the cyst criteria. An unexpected outcome for a Phase I study in this type of setting. A subset analysis identified the presence of melanoma specific T cells at baseline in the patients of lymphatic metastatic disease. Overall, these results identified the class of very late stage patients that could benefit most from this type of therapy and this information will be used to design the Phase II trial of MKC1106-MT in advanced melanoma and the initial indications suggest that 1106-MT may be an effective in an even larger population of patients earlier in disease progression.

In the second study, 26 patients with advanced cancer who had diverse tumor types and metastatic disease and also progressive refractory disease were treated with MKC1106-PT. Patients evaluated up to two therapeutic cycles, 12 weeks and again 24 weeks as applicable. Patients demonstrating a clinical response or no evidence of disease progression remained in the clinical trial and received up to six cycles of treatment over nine months. In all patients, repeat administration of the treatment was well tolerated with again minimal adverse events. As with the MKC1106-MT trial, an immune response rate and an encouraging preliminary evidence of clinical benefit was achieved. In this study, an immune response rate of 60% was observed. Of the 26 patients treated, seven patients achieved clinical responses defined as partial response by the cyst criteria, change in PSA doubling time or stable disease for at least six months. Patients obtaining an immune response against both antigens persisting throughout the first two cycles of therapy were more likely to show clinical benefit, again setting the stage for further evaluation of Phase II studies.

Moving on to AFRESA, as Hakan indicated, we have continued several clinical studies and we're pleased with the results we've seen. We submitted our plans to the FDA for the definitive bioequivalent study that will be required for to gain approval of our second generation device, nicknamed Dreamboat. All preliminary studies have confirmed that we have successfully improved the efficacy of the device by over 30%, delivering the same amount of insulin to patients using only two-thirds of the powder and with a single inhalation and with lower air flow than with the first generation MedTone device. The study comparing Dreamboat to MedTone will not be started until we have agreement with the agency on the specific design. We're preparing for launch for first trial which will be short-term cross-over study in a limited number of patients and we anticipate being able to complete this by the end of the year with data available by our January PDUFA date. We're also starting our pediatric studies for the Dreamboat device shortly, as we believe it will be very well suited for use in children. Our ongoing review discussions with the agency have at their request resulted in a detailed pediatric plan for further development. In addition, with starting to operate patients into our ongoing clinical study 117 on the new device to give us some longer term experience. We continue to interact regularly with the agency, promptly answering their questions as is normal. Now I'd like to turn the call over to Al.

Thank you, Peter. Before I address the AFRESA opportunity, let me start my comments by saying that because of the magnitude of the AFRESA program, no one seems to care about our pipeline. Yet, we have several other exciting product opportunities, for example, using the Technosphere process of delivery. We have reported on our GLP1 program and we will have more to say in the near future. Moreover, as Peter described, our immunology program plat platform is also very promising. Both of our two cancer vaccines that are in trial appear to present significant opportunity. The 1106-MT vaccine for melanoma is especially exciting. In the Phase I trial involving 18 stage four melanoma patients that have failed all other therapies, patients were classified by whether they had visceral tumors or whether the metastasis were confined to the lymphatic system. All four of the patients that were without visceral tumors had durable clinical responses with remission or stabilization in all cases. These results will help to define the patient population that will benefit most from this therapy. With the 1106-PP vaccine, we've also seen objective responses in a variety of cancers, especially in hormone resistant prostate cancer. But we cannot yet conclude how significant this will be.

So now, let me turn to AFRESA. Hakan has spoken about the partnership situation so I'm not going to comment further, except to say that our overlying objective has not changed. Further, at the recent meeting of the European Association for the Study of Diabetes, just as at the ADA, MannKind did very, very well. We had a total of 15 accepted presentations. That is truly very unusual. For those of you the question whether there is interest in AFRESA, clearly this is but another example of such interest. But perhaps the more clear example of interest was the marketing study that was conducted for us by BioVid. That study included 303 physicians in the United States, almost equally divided between endocrinologists and PCPs, plus another 308 doctors in the five major markets in Europe. That study clearly supports the interest of physicians in AFRESA. We earlier spoke of the US results of that study, in which the physicians expressed virtually the same preference for AFRESA, for about 25% of their patients. In both type one and in type two. The European results were quite consistent with the United States, with close to the same preference share in the UK and in France, somewhat lower in Germany, and much higher in both Italy and Spain. One fascinating finding from that survey is that for type two patients, physicians were more inclined to add AFRESA to other therapies rather than converting patients from existing medications. Among other things, it seems that physicians contemplated prescribing therapy with AFRESA far earlier in disease progression. Well before they would have prescribed conventional insulin therapy including LANTUS. Interestingly, some new data is evolving that not only supports such earlier use of AFRESA, it indicates that AFRESA could be used very, very early in type two disease progression. In fact, maybe even stopping progression of diabetes, of Type 2 diabetes.

I have long argued that AFRESA does not require complex meal titration. Certainly, there is no need for carb counting and so forth. The basis of my view was derived from the dose escalation studies with meal challenges in which better glucose control was achieved with ever greater doses of AFRESA. Yet, without any hypos. Yet based on decades of battling with the challenges of conventional insulin therapy, some physicians have questioned my suggestion. Therefore, I propose a meal escalation study in which patients would take a fixed dose of AFRESA and then a series of meal challenges. Our clinical team designed a protocol that set a standard meal with 50 grams of carbohydrates. That was the 100% challenge and this was followed by challenges at 200%, 50%, and 0%. When I heard of zero, I was shocked. Surely, there would be severe hypos. The remarkable thing is that with a regular prescribed dose of AFRESA, regardless of carbohydrate intake between zero and 100 grams, the range of excursions was only plus or minus 30 milligrams to 35 milligrams per deciliter from baseline for all of the type two patients in the study. At the meeting ASD I described to Dr. Jay Skyler the finding that in Type 2 diabetes with a fixed dose of AFRESA and even with no food, there is excellent control without hypo risk. I asked him how that was possible. Obvious, he responded. He was basing his comment on our recently reported 118 trial in which we showed rapid and virtually complete cessation of aplastic glucose relief with AFRESA and the common ability of the remaining endogenous influence to maintain control. As is the case for a healthy person without diabetes. Indeed, I have mentioned this result to a number of KOLs who agree with Jay.

So I say to you that AFRESA does what no other insulin has ever done for Type 2 diabetes. AFRESA restores a more physiologic hepatic function, takes a load off the pancreas and avoids the hyper insulin anemia resulting from long persistence of other insulin. It better mimics the normal pancreas response.

So what does all this mean? First, let me say that we will need to follow these findings with much larger trials. If the results of the larger trials support the earlier findings, then I say to you that AFRESA should be used very early, certainly after failure of metformin and as first sign therapy for a significant portion of patients who are not candidates for metformin or who do not do well with metformin. It should be used well before fasting glucose is out of control. And as we have seen, AFRESA even leads to lower fasting levels by eliminating the excessive gluconeogenesis. Of course, we'll have to repeat some of these findings with specific trials, but we have already seen the possibilities for AFRESA as we evaluate the timing of hypos in our already completed trials to date. From what we have seen in our extensive clinical program, AFRESA should benefit the entire progression spectrum of Type 2 diabetes with a very simple therapy and the experts tell us that it could even stop the progression of the disease. Most of the analyst community fail to understand that AFRESA is not just for use in basal bolus therapy, but will contribute to much better therapy for the entire spectrum of type one and type two diabetes. For late stage type twos and all type ones, AFRESA would be used as a more typical, but superior, cranial insulin in the basal bolus therapy. For earlier type two patients, AFRESA alone or with metformin, seem to be all it would needed to provide better control compared to other current therapies. This means that AFRESA could have value for a large segment of the 25 million diabetics in the United States and for the enormous diabetes population worldwide. To be sure, with the breadth of the market opportunity to be realized in the near future, we'll have to demonstrate the benefits to new and larger trials and then develop an appropriate message to educate the market.

So what is the take home message today? First, MannKind's pipeline in both technology and oncology are showing important promise. Second, for AFRESA, although FDA action can never be certain, we are pleased with the way our NDA for AFRESA is progressing with the agency. Third, partnership discussions have slowed while we all wait for visibility on the label. Fourth, the more we learn about AFRESA, the more we see that this is not just a cranial insulin, but rather a diabetes drug therapy for all phases and all types of diabetes. Indeed, more than ever, I believe that AFRESA will become a major product in diabetes therapy. With that I would like now to invite any of your questions.

Thank you. We would now like to open it up for question-and-answers. (Operator Instructions) One moment while we wait for the first question. Our first question comes from Michael Tong, Wells Fargo Securities. Sir, your line is open.

Good afternoon. This may be a question for Peter. Can you give us some insight as to what you think the time line for AFRESA and Dreamboat will be, how far they might be separated from each other in terms of approval?

Clearly, our goal is to accelerate Dreamboat as quickly as we can. We had discussion with the agency in terms of what our strategy should be here and we want to see the approval of MedTone with a PDUFA date of January the 15th, which I think you all know, and then be in a position to submit as [justly] as possible, a file supporting the approval of Dreamboat, which will be largely a technical file. We've well characterized the device and as I said in this conference call, I think we've got a good feeling for what we need to do in terms of bioequivalents and waiting for the formal feedback from the agency, the moments in terms of that specific design. And also getting their agreement in terms of what exactly we will do, for instance handling data and some other information which will be normal for a device in that area. So it's hard to give an exact time when we'll be able to submit that file at the present, but as soon after approval of the NDA would be our goal with this which we would hope would be a matter of months.

The FDA asked us not to amend our NDA filing but rather to submit the Dreamboat as a supplemental. I shouldn't say they asked us. They suggested it.

Next we have Simos Simeonidis. Sir, your line is open.

Hi. Thanks for taking the question. Could you tell us when the last time you spoke with the agency was and was it during that communication or any earlier ones that you got any indication that the PDUFA might be pushed back, whether it be for a panel and I know Hakan said that they told you don't need a panel or for backlog of work. Do you still expect them to reply by January 15th?

We speak with the agency probably every week or more at the present time. We're answering as I say, the expected questions that we have, we've been facilitating their arrangement for the inspection and audit of our sites where we conduct the clinical studies, all of which have been progressing according to plan. We've seen absolutely no indication in terms of the agency anticipating anything that would lead us to believe that there would be a diversion from that PDUFA date. We've seen a great deal of energy and diligent review as I would expect from the agency on this and we have had a variety of questions to clarify and to deal with the things that one would expect to find in an NDA review. But nothing that has come to date which has been anything that would give me an indication around that and the information on the advisory committee has been entirely consistent with what the discussions we've had with the agency since the beginning of this review and although we are well prepared, would have been well prepared should we have had an advisory committee, the indication has been that they are going to progress this without them.

Okay. Peter, you mentioned --I think it was Peter, mentioned about your plans about going to a pediatric population. Could you elaborate on your rational and motivation in going after this population?

Yes, well, the first thing, I think that the reason we had discussions with the agency as to when would be an appropriate time to embark on pediatric studies and we had agreed that we would wait until we demonstrated safety and efficacy in a large adult population and I think at that time as the time when we submitted the NDA, so we then looked at what our plans should be in terms of developing a plan which would be normal for the submission to the agency to cover the pediatric role and the changes that have been in terms of the requirements that is in the pediatric population. So this is something that is a normal part of an approval to have the pediatric plan laid out and it would be part of the agreement with the agency in the United States. And of course, around the world in Europe, there is an interest in pediatric studies and how we do that, so again, having a plan in place that we can discuss with authorities there is something that is required.

With regard to our thinking as well, we've also been looking now in terms of how we might -- the Dreamboat device which because of the improvements of the device in actually reducing some of the complexity of using it, it's really a very simple device and actually has a low resistance to air flow which is well suited for the children to use. We believe that there would be a significant advantage of the product in that and so we've also been looking in terms of our own plans as how we would study for the Dreamboat device in light of the fact that it's possibly well suited to a pediatric population. We have to do the handling studies and the definitive studies to show that.

Okay. Then, Peter, another question for you. You spent some time describing the new findings about the new diabetes settings and meal titrations and different trials. I'm assuming this is something that you would do in support of a post marketing approval, correct.

The new indication is clearly assensing what one would hope to do in a post marketing as we expand the knowledge base around the product. Filing, as you know, has been based in really in terms of a regulatory package which has left us the use of AFRESA in type one, type two patients with a limited number of studies using AFRESA on its own as a single agent but using instead AFRESA combined with a long acting agent. I think the data we're seeing indicates that for some patients, as would be expected, given the pharmacokinetics and the results that we've been seeing that Al alluded to, that this is something that really deserves study and positioning in a type two population to understand how to take advantage of the fact that really the kinetics of AFRESA are ideally suited for those patients who still have endogenous insulin reserve, but with conventional insulins you actually suppress that and one of the things that we've seen as you know is the improvement in terms of the early post cranial response and the lack of weight gain. I think this is all pointing to what we've been talking about for some time now which is the fact that conventional insulin therapies really don't take advantage of being what AFRESA can do which is replace the physiologic insulin pattern and allowing those type two patients for their own insulin to work later in terms of the later response to a meal and that I think is where we may see important benefits in the longer term and those are things that Al was talking to in terms of whether he could see effects in long-term progression. Those are things you would normally do in a post market, post approval situation, but they offer some really fascinating opportunities that I think will be very important studies in terms of using and optimized cranial therapy.

Thanks. The reason I brought that up is when I was reading the last paragraph of your press release, which reads while we continue to be fully engaged, blah, blah, blah, every time I see that or a lot of times companies use such language to de-emphasize the importance of significant upcoming events. So please feel free to call me paranoid but that's not what the case is here right?

No, I think reflecting enthusiasm for the product going forward and certainly in terms of future events, anticipating, and remain anticipating that we will see progress in terms of the review of the MedTone and also how we can develop the studies to optimize the use of Dreamboat.

Since it was my quotation you're referring to, let me say that more than ever, I'm excited when I see the data and some of the you new trials, it is truly exciting.

Okay. Great. Thank you.

Thank you. Next we have John Newman from Oppenheimer. Sir, your line is open.

Hi, guys. Thanks for taking the question. I just had a question about some of the data that's been previously presented. For the TI009 study, I'm just wondering if you've ever presented the full analysis for the primary statistical analysis for that study? I know that you presented a poster, I believe October of this year, perhaps earlier, where the MMRM analysis was discussed in detail, which I believe was the secondary statistical analysis. So I just wondered if you've ever presented the primary statistical analysis in the same type of poster form. Thanks.

Absolutely, we presented at ADA, NDA, SC in posters.

Okay. And I believe the confidence interval for the ITTLOCF was close to 0.4 but it was not over lapping, is that correct?

It was at the margin. It was 0.04.

Thanks.

Next we have Joshua Schimmer from Leerink Swann.

Thanks for taking the question. Congrats on the progress you're making bringing AFRESA closer toward commercialization. Assuming you do get the AFRESA approval around the PDUFA date, what happens to your commercial plans, do you launch ahead of the partnership, do you put the launch on hold until you sign a partner, and are you in the process of gearing up to launch on your own? Maybe you can give us a bit of color around there.

Yes, I can speak to that one. First of all, please remember what we said earlier today is that we're looking at a complete approval that would include the Dreamboat. And we will -- we would submit in the SNDA immediately upon approval of AFRESA hopefully by the PDUFA time in January. From that point of view it gives us still some time to continue our discussion, particularly with the clarity of the label in hand at the time in pursuing what we still believe to be a good approach which will be a global partnership on sales and marketing activities.

Okay. So there is no launch or you don't plan launch until Dreamboat is basically what you're saying?

That's correct.

And what kind of discussions have you had with the FDA so far regarding the AFRESA label and the post marketing study commitments and the rems if any.

Peter, do you want to speak to that?

I call it the pre-NDA meeting, one of the things in the (inaudible) in terms of an expectation of what the label would be, we presented the label in the NDA and the indications in terms of day 74 (inaudible) that the agency would move to have discussions with us around that. We of course presented our plans for the rem requirements as we would expect and we have not really got into the stage of further discussion because that wouldn't be normal at this stage of review but we anticipate moving to that fairly shortly.

And amongst the -- some of the earlier clinical data that Al you highlighted during your prepared remarks, what are you expecting that you could have in the label and as you think now about Phase III programs that you can run in the post-approval setting, what are you thinking of doing there and again, are those programs that you would run on your own or do you wait for a partner to include that in a commercialization deal to have them fund some of the Phase IV commitments?

First let me say that we are planning those trials, we will do them either ourselves or funded by the partner. Depending on the -- when the partnership is finally signed. On the other hand, let me address your more basic question, what do I see in this. What I see is that in Type 2 diabetes, what we're seeing is that for a huge range of meal composition from at least from even zero food intake, all the way through to 100 grams of carbohydrate in a meal, and we will look to see if that even goes higher, we see absolutely no risk of hypoglycemia and yet I would I would use a very modest depression below baseline and XO post cranial control and what's happening is we're turning off gluconeogenesis. We're turning off hepatic glucose from the liver and we are also energizing the endogenous insulin release from the pancreas that still remains until you get to late stage type two and the body itself using AFRESA to offload the pressure on the pancreas is -- the pancreas is able to control glucose levels exceptionally well. That means that this could be an ideal drug throughout the entire spectrum of diabetes from the beginning or even pre-diabetes to insulin therapy at the end of the disease.

I guess it does sound like that's a very differentiated profile so I'm wondering whether that's something you think you'll be able to have on your label to actively promote at the time of the Dreamboat launch or whether that's something you need to run additional clinical trials to get on the label as a marketing feature.

Well, it's probable that we won't get it on the label even with Dreamboat, although we will have some more data at that point, but there will be trials that will be conducted and peer reviewed findings that will make this very compelling. You're not going to -- you're going to change with this the entire concept of diabetes therapy. That's not going to happen overnight. And we couldn't supply the number of patients even if we could. So we need to progress this at a reasonable rate and we'll have plenty of time to get the message out, but the message that we see in our studies is very compelling. And by the way, when we look at the earlier studies and look at the timing of hypoglycemia, I have to tell you that most of the hypos, certainly most of them, if not almost all of them, are not caused by the AFRESA. They're caused by whatever other drugs are being given along with AFRESA.

I think when it comes to the label, very important factors that will be clearly able to describe and have well characterized the pharmacokinetics and once you understand the unique pharmacokinetics, most of the other things fall into place. So being able to communicate that in the label will be one of the clear differentiating factors.

Got it. Thanks very much.

(Operator Instructions) Our next question is from Doug Dieter from Imperial Capital. Sir, your line is open.

Thanks for taking my questions. I guess my first question, in your discussion with the FDA, has there been any sense of the need for additional data, any additional data requested that could potentially postpone the PDUFA date?

No, to date, the questions that we've had have been mainly clarification and some further representation of data that we've already made available. We've had no request of additional data to date.

Regarding the bioequivalent study that you submitted and are waiting to hear from the FDA, you mentioned that a small trial to be done by -- I can't remember if you said year end or for January. Will there be two bioequivalent studies necessary or are you just expecting one that will be done by January?

No, we anticipate one bioequivalence. Bioequivalence is usually done on one, relatively small. The specifics of bioequivalence is something that is pretty well worked out and standardized so you usually avoid doing two studies. You do one and you do it defensively.

I assumed that but I want to make it clear from what was said. Regarding liquidity, Matt, based upon your burn this quarter, it looks like if you were to keep that run rate you would have six additional quarters of liquidity remaining based on the 256.6. Can we expect additional cash burn to go down a little bit further here or are we at a steady state where we are?

It's possible it might come down a little further but not a whole lot. I think you're seeing most of it at this point. You're seeing it -- in some ways it's a little deceptive this quarter because we paid down some of our payables and used up a little more cash than would have been applied by our operating expenses, but you can see the operating expenses continue to climb pretty significantly this quarter and we're getting there. I think it's going to continue to go down but it's mostly because frankly some of those payables we're paying are still some of the costs from the Phase III trials. So we probably put out close to $10 million recently in closing out all those studies. So there's still trickling costs coming out of those but we're mostly out of it now. I think we may see the last of that in this quarter. There's not a whole lot left and we're getting down to a more constant run rate. All that is absent what might happen with partnership commercialization efforts and so forth.

My last question would be since the -- the partnership did not occur by the end of September, the question would be can you characterize the discussions you're having with that same partner and potential other partners in getting them up to speed and where you feel you stand right now?

You want to do it? Okay. I'll do it. We are continuing to have discussions with that partner that we were so heavily involved with but as Hakan said, we would like to get better -- a better handle on the kind of studies that might be important, given the label, as we discussed today, there are a number of studies that will expand the use of this product and we don't know how many of those will be necessary, given the fact that we haven't seen the agency's response to the label proposal. So that's really the major issue that we're trying to resolve so we get sort of a synchronization of our needs and the partner's needs. We've also had conversations with other partners who were also anxious to see what the label is before we sit down and try to work out details.

Thanks. Just one more question from potentially Peter here. There's been a lot of discussion around the relevancy of having and not having an FDA advisory panel just shortly you ahead of the PDUFA date. I know you've had commentary on that in the past. I'm wondering if you could make this comment again on your view of what it means to not need the FDA advisory meeting.

I think I'd like to answer that one. First, I don't understand the basis for some of the people having a negative interpretation regarding the FDA's decision not to call an advisory panel for AFRESA. Some time ago, we were told in a telephone conversation with the agency that the FDA did not believe there was any question about AFRESA that would justify an advisory panel. Because the agency could later decide on a meeting, we didn't share that comment. However, now that it's official, we can say that the FDA is not calling a panel meeting for AFRESA and that is certainly not a negative thing. That should be interpreted as a very positive fact. We continue to have interactions directly with the agency on various subjects regarding AFRESA. So far, there have been no difficult questions and we're pleased with the depth of the FDA's review and evaluation. And while we were sort of looking forward and preparing for the advisory panel, we're sort of relieved that we don't have to do it.

Thank you. Thanks a lot.

Next we have Michael Tong, Wells Fargo Securities. Sir, your line is open.

Hi, just a quick follow-up question for Matt. How should we think about R&D spend going forward for the next two, three quarters?

It's gone down. It may decline a little bit further. We're kind of getting down to where I expected it would be by the end of the year so I think you're going to see some continuing slight declines in R&D and frankly in G&A spending. Where it gets a little less certain is things that as we get closer to launch and so forth you might see spending coming up in fixed assets and so forth. But the basic kind of cost categories, you should see at worse steady state and maybe some continuing slight declines.

Great. Thank you.

Thank you. I am showing no further questions at this time. I will now turn it back over to Mr Alfred Mann.

Well, thank you all for joining us today. We're certainly very pleased with our progress. We're looking forward to the PDUFA date and we have no reason to believe that the FDA will not meet that date. They're certainly working diligently towards that goal and the more we see of AFRESA, the happier we are and the more convinced we are that it will be a very significant product. Thank you all. We'll see you again in the next quarterly meeting.

Thank you all for participating in today's conference. You may disconnect your lines.