Neurocrine Biosciences Inc (NBIX) 2003 Q2 法說會逐字稿

My name is Hyaline (ph.); I will be your conference coordinator. If you need my assistance at anytime, please press the star and "0" on your touchtone phone. I will now turn the meeting over to your moderator, Mr. Gary Lyons, please go ahead.

Good morning everyone. Thank you for joining us this morning. Let me begin by introducing people who will be participating in the call on [RN]. I addition to myself, Paul Hawran, EVP, Chief Financial Officer will review financial results for the second quarter and year-to-date mid-year. Also, with me to answer questions Henry Pan, Chief Medical Officer as well as Mag Jensen, General Counsel. So, let me begin by first apologizing for the length of this press release, it is probably our longest, but it has been custom along with quarterly earnings result to take opportunity to update on all of our clinical programs and I guess they have expanded, so has the content of the press release. But we will go into detail indiplon where we stand as well other development programs and then open the call up to questions. So let me begin with a review of financial results with Paul Hawran.

Paul Hawran. Thank you Gary. Good morning all. For the quarter, we have recorded a loss of 10.2m on revenues of $44.9m. The 44m primarily consist of Pfizer reimbursement cost of about 32m and license fees amortizations of around 11m, primarily from the Pfizer collaboration. In regards to R&D expenses, we've recorded a expenses of 52.3m, of that 35.6m relates to the clinical development program of indiplon and 4.1m is other development costs. As far as G&A is concerned, we have actually increased G&A from the previous quarter by only $300,000 or 6% and most of that is related to marketing and business development expenses. Accordingly, we've recorded a loss of $10.2m for the quarter or $23.6m for the six-months.

At the end of June 30, we've recorded cash and current receivables from collaborators of over $300m and we are quite pleased with that. In addition to the cash, we have also mentioned on our press release that we have consolidated Science Park LLC, which was actually a company holding the -- building our current facility and accordingly, we've consolidated or we've included $14m in assets, which is the book value of our building and also a $14m liability, which is our first mortgage on this building.

As far as guidance for the rest of the year is concerned, we've guided the street to a $45m loss this year and as we've mentioned in our press release, we are expecting to record a gain of $17m on the sale of our current facility. And offsetting that would be about $7m additional expense related to the indiplon development program coming down to the loss of approximately $35-40m for the year. And with that I will turn it back over to Gary Lyons.

Gary Lyons. Okay, thank you. Let me now review clinical programs beginning within indiplon and as you can see, it's been a very busy quarter. Today we completed 40 clinical trials with about 10-15 left to go. We have now treated over 57,000 patients, which I believe is probably twice the size of the package of an [incentive] [inaudible] that has been evaluated to-date, which shown system efficacy and are delighted that no matter what the next-day residual sedation measurement is using all three available scales, given that a timely point post dosing have consistently shown no evidence of next-day residual sedation.

The indiplon program will be bolstered this year by an additional budget standby as agreed to. These moneys will be directed towards marketing towards enhancing enrollment advertising incentives and the initiation of, what we call, Phase IIIB trials to enhance label and to bolster the overall submission. None of these trials are required for a submission, but we think would be useful as far as further differentiating the product and expanding the label. We also expect to be conducting our pre-NDA meeting with FDA in the third quarter. We are scheduling third quarter perhaps having that meeting end of quarter or very early in the fourth quarter. And purpose of that meeting is to agree on the format of our submission more of administrative meeting to make sure the electronics submission, the single NDA, two package inserts etc. are all acceptable and in the format that the FDA would require, so there would be no delays in the review or ultimate approval of the product.

We are also very pleased to have completed four important trials that is to complete enrollment in four trials during the quarter. The first of those is the one-year safety study. This is a study where we evaluated the immediate release formulation at either 10 or 20mg, no placebo patients were able to take the drug on an outpatient basis and to take up to 30 pills or whatever they considered necessary over that period of time. And this is a study required by FDA to assure there are no unexpected safety findings that didn't appear in smaller efficacy-based trails, and we are delighted to say that we have exceeded the 100 patient target and exceeded our expectations with 211 patients having completed treatment over this period of time, which satisfies FDA requirements for a long-term safety trial. And as stated in the release, indiplon was safe, well tolerated and there were no unexpected safety findings, very consistent with every trial we've done today.

A second very important trial, which completed enrollment actually several months ago now, is a trial in adult patients with chronic primary insomnia. This is a modified released trial and therefore it will be the first trial that will generate data, Phase III [traded] for the modified release formulation. This was two-week outpatient 30 mg versus placebo; end point was improvement over placebo for subjective total sleep time. And we remain very optimistic on the results of this trial given that we have consistently shown with both IR and MR statically significant improvements in total sleep time in all previous trials. This trail is expected to report at end of third quarter. We also completed a sixth-month safety and efficacy extension trial in over 120 patients. These are patients from our elderly trial and patients were then enrolled in an open label extension receiving either 5 or 10 mg. And to remind you, we expect the 10 mg dose to be the elderly dose, but also wanted to test lower doses. FDA is required in addition to the long-term safety study in adults that we also include a population of elderly in this long-term extension. So that trial is now complete and patients will be completing therapy over the course of the year.

Another very important differentiation study for us was also completed during the quarter, and this is what we call the middle of the night dosing study in adult patients with primary insomnia. This is a study that we believe will lead to efficacy claims for the immediate release formulation to be taken in the middle of the night. That is patients who wake at 4 a.m. or so have four hours or more remaining of sleep. Drugs such as Sonata today are used for that indication, but not approved for this indication. There are no [inaudible] approved. In this study, patients who had in the middle of night awakening problems, [on the roll] there were 264 of those patients they received in this placebo double-blind trial, one or two doses of indiplon and the end points were sleep initiation, following treatment. And as we have done in previous Phase I trials, we then assessed next day residual sedation, and we have previously shown the drug causes no significant sedation when taken in the middle of the night. But to date, no one has shown that these drugs are effective when taken in the middle of the night. So, we expect this to be a key differentiating study. And this study will report results in fourth quarter.

So, that leaves us now with five Phase III studies to complete. There are two of those that are immediate release studies. The first is the long-term what we call Restful Trail. This is a 3-6 month long-term treatment trial, which we will believe will allow us to remove the short-term restrictions currently associated with existing drugs. And this trail will allow us for six months treatments. Primary end point will be latency to sleep onset at three months with six month [data] on efficacy an add-on. This was initially scheduled to be a 600 patient trail; and with the advice of Pfizer, we agreed it made sense to increase the trail size to 700 patents that would ensure the right result and robustness of the clinical trail itself. Enrollment is expected to be complete by August. We are well beyond 600 patents and very close to wrapping this up. Given that this is 3-6 month treatment, results in the trail will not be available until early '04. In addition to parallel study, which is a two week study is being done in elderly population. This is 360 patients same endpoint Latency to Sleep Onset in this populations the trials and rolling are very well. And again results were expected at the very end of this year in this trial. And that then we'll wrap up the clinical program to the immediate relief formulation. By this, now it leaves us with three modified release trials in addition to one I just mentioned giving us four. The first is what we call the sleep trial again 3-6 month treatment, 3 months being the primary endpoint, 6 month extension for efficacy in this population. This assesses two doses of indiplon versus placebo and the endpoint again is subjective total sleep time and endpoint we feel very good about having achieved in multiple trials. This trial is nearing its original projected enrollment and we will add a 100 patients to this, so part of the funds that Pfizer and Neurocrine dedicating to the overall program will be directed towards -- in putting new study centers on this study and enrolling more impressively through advertising and other incentives to make sure we get this trial wrapped up and it doesn't become rate limiting.

We also have a 35 day inpatient outpatient elderly study, this is enrolled 200 of 300 patients, is enrolling nicely. This is a PSG study or sleep lab study and we will be looking at a primary endpoint of WASO, which is Wake After Sleep Onset measured by PSG, again modeled after our Phase II trail, which showed a very robust signal in WASO. And finally, a two week efficacy safety trial in elderly populations in the outpatient setting 220 patients again it was subjective total sleep time is the endpoint, this trial is enrolling nicely as expected to be announced in January or very early of '04. So, that wraps up a very comprehensive indiplon program. We are pleased with the results, pleased with the effort being put forward by our partners and look forward to rolling data beginning in third quarter through first quarter of next year. The -- let me move on and through the rest of the pipeline. GnRH small molecular antagonist for endometriosis and fibroids, we got some very nice data in the second quarter, to remind you we previously have committed -- completed a Phase I trial of single dose postmenopausal women and showed a significant reduction in luteinizing hormone or estrogen in this population, which is the surrogate marker for efficacy of this compound.

During the quarter we then completed a multiple-dose study. This is a study this time in pre-menopausal women, the target population and patients were dosed with 75 mg a day everyday for 7 days or the same 75 mg given b.i.d. to see whether long or half life led to greater degree or more consistent suppression. And as expected we were delighted to see that at the b.i.d. dosage in this CA patients that were in that specific arm of the study that we've achieve significant suppression throughout the cycle over 7 days and that we believe it is an important endorsement in surrogate of the efficacy that's compound. We will now be moving a back up compound in the clinical development the I&D has been filed in the U.S. and within the month expect to begin dosing.

The next trial -- we think move a little bit more quickly rather than do a separate phase I, single dose and multiple dose, we have agreement with FDA to do a single dose and then all right into multiple dosing and the next step will then be to do a 4-6 week proof of concept trial in the pre-menopausal population with endometriosis. So that will be a great deal of activity next year that generates from and as it has been our custom we will nominate get a third clinical candidate towards the end of the year, which will have different characteristics from the molecules presently in the clinic. And this is a compound that we expect to retain ourselves and bring into phase III development before considering partnering much like we did within the plan. We also pleased in this program to have joined the department of the company Dr. [Sam Yen]. Sam has joined Neurocrine as distinguished clinical scientist and in the press release you can see his bio; he has been in charge of reproductive medicine at UC San Diego for sometimes, and is extremely well know in reproductively in endocrine field and his wisdom and guidance will help oversee this program giving its importance to the company. Erectile dysfunction due to specific [inaudible] compound we are finalizing protocol previous studies with P&U in this compound were directed towards female sexual dysfunction.

Our focus in this next phase to trial will be in male erectile dysfunction. The design of that trial is as I said being confirmed and early next year we expect to initiate that study and that will be a definitive approve of concepts study allowing for subsequent development if positive. And as you may know this program is being funded by P&U and we'll have suggestion forms to complete this trial and then determine whether we move forward and into which direction we move forward. And to see that front we are pretty clinical stage with GSK have several what appear to be exciting compounds that have passed the first phase of safety evaluation. And if all goes well could one of the two or both could be nominated for development later in the year but also something that we haven't talked a lot about is Urocortin II, which is a related CRF peptide. This was licensed by Neurocrine from the Salk Institute, Clayton Foundation earlier in the year and we think it's a very promising drug. It is a peptide. So the drug candidate is in hand and we are now designing pre-clinical studies to allow us to begin Phase I trials and they numbered an interesting indications early next year. So we expect next year this to be yet one more clinical compound in development.

On the APL front two products, we are pleased to announce that our multiple sclerosis Phase II clinical trial is been initiated. 200 patients treated for 9 months, 1 dose 5 mg versus placebo monthly subcu injection with the end points being improvement by MRI in lesion, [load] in brains of patients treated with drug versus placebo. This is expected to complete enrollment in the first half of next year with data to follow. The product for type I diabetes and clinical trial sites have been expanded. This is a 200 patient trial in children with type I diabetes. This trial is now one -- is about 50% enrolled. We expect complete enrollment early next year. Two-year treatment with a 1-year interim look. These compounds are also be retained through peripheral concept phase to data at which we'll decide in our path going forward. So with that great lengthy overview, let me open this floor up to questions.

At this time if you would like to register for a question press the star "1" on your touchtone phone. To withdraw a question press the "#" sign. Again, if you would like register for a question press the star "1" on your touchtone phone. We'll take our first question from Matt Geller with CIBC World Market.

Good morning, Matt if you're there?

Hi. I'm Matt. It's actually on another question. I should call [inaudible] now and we're going to hold back in the queue.

Okay.

Our first question from Katherine Kim with UBS.

Yes. Hi. I have several questions. Regarding the indiplon development program, when do you expect -- which other MR trials will be the last that you'll have results from?

Well probably -- I think what's happened is everyone time a trial appears to be the one we need to put effort on, we put effort on it and it becomes [non-rate] limiting. So I think this changes over time. Right now I would say the MR 3-6 months trial is the one, but again that's the program that Pfizer has agreed to put more money into both advertising and incentives to accelerate an [inaudible]. But the fact we are adding 100 patents right now we will make this a key study to focus on.

Okay and then in terms of -- you said you would view our increasing the developmental program to optimize the NDA filing and how much will you -- what Neurocrine be paying incrementally.

I think Paul referred to the number -- our budget this year would be $7.5m.

Okay. And then in terms of...

Pfizer's piece of that is obviously much bigger.

Right. And then in terms of the GnRH program -- what are the next steps for the initial compound?

The initial compound and actually some of the backups that we have are undergoing some formulation development to extend the half-life. We could go into Phase II with b.i.d dosing, but we believe the ultimate product needs to be once a day dosing. So, we will be doing something similar to what we did with indiplon with developing a modified release formulation. At the same time the new compound which is the [IND] has been filed on has a much longer half-life and we don't we will require formulation.

Okay, and then going back to indiplon, are the long-term study, when will we get, I mean, do you have any more details in terms of, you know, endpoints and things like that and just when will you have more update -- more data from additional patients?

The first question, endpoints, I think, endpoints are very [inaudible], they have been discussed and agreed to with FDA and as stated in the press release for three of the four trials, the MR trials, the endpoint is subjective total sleep time. So this is the patient's perception of how long they slept versus placebo and is an endpoint that we consistently have met in all of our previous Phase II trials. For the one of the MR trials, this is the PSG study, the endpoint [been] patients are in the sleep lab will be awake after the sleep onset. Also agreed to with FDA.

I asked you were referring to the one-year long-term study?

Oh the one-year long-term study, Phase III study?

Yes.

Yes, that was the endpoint. There were no efficacy parameters in that study. The endpoint was simply safety exposure and would we see side effects with different than any of the trials we have done to-date and since there is no placebo control in this, there are two active arms of drugs. Our preliminary results show us that the side effects reported are no different than any trials seen before.

And you see no residual effects in any of the -- in the trials?

Residual effects as reported by patients no difference than any other trial but these -- this was an outpatient trial, so patients were not brought and given DSST, VAS assessments. It was patient report.

And during the entire -- how many patients have completed one-year and also during the one-year period what basically the [safety] [inaudible] from the beginning to the [end of the] trials were for the patients?

Let me ask Henry to comment on that.

As you mentioned, Jacqueline this is Henry, as you mentioned, we have completed this enrollment and to-date 211 patients have completed one-year of dosing and the results are being -- [cleaned up] are being analyzed. So what we are referring to today are results that we see by just reviewing case report forms, information that we get from the site. And based on everything we have seen, there is nothing unusual in the study. If you look at the [inaudible], they are very similar to what we have seen in the past in earlier in reported studies.

Both types and frequencies.

In both types and frequencies, correct.

Okay, thank you very much.

We will take our next question from Jim Birchenough with Lehman Brothers.

Hi guys. It is a few questions. One, I am just adding up all the studies in the press release and discussed today, it seems like there is 9 studies reviewed and 2 already reported from 11, I thought we were just doing 8 studies. Can you help, sort of, reconcile that for me?

Yes. One is, we didn't report Phase II studies in our Phase III program, and the middle of the night study is actually a Phase II study only because we have never done the Phase II study. The only study we have done in the middle of the night is being a Phase I. So this is the first efficacy-based trial. So, it's a Phase II. Other than that what I can tell you is we have other trials in process that haven't previously being highlighted for variety of reasons. So, you can assume that there are more trials in the works than had being previously reported.

And of those -- so excluding the one on the middle of the night of the 10 other studies. Are the two one -- two studies that we haven't discussed previously? Because again I thought there were just 8 studies.

Oh yes. Okay. One of these is the extension study, as a 6 month extension study we haven't specifically highlighted that, but it is in FDA requirement to do long-term safety in a subset of patients, elderly patients in addition to the 12-month study so that is new. The one that hadn't been reported before which we are very pleased to have completed ahead of schedule is the two-week MR study. This was one designed as the backup study to evaluate the drug in a different population -- the non-elderly population. We put our key recruiters on this. They recruited it very quickly, actually over recruited to 210 patients testing 30 mg versus placebo. So, that was the study we haven't talked about before. We bring it public now because that's completed and in fact will be the first MR trial to report.

Okay and just on the 3-6 month efficacy studies the suggestion is that the three month efficacy will be the primary endpoint, I know when the studies were kicked-off we were talking about six month efficacy in terms of the discussions with FDA was the three month endpoint prospectively defined the primary endpoint?

In our discussions with FDA which I think I previously discussed with investors we have confirmation that efficacy at three months constitutes a successful long-term trial, so therefore guidance, from Pfizer and another experts, we were guide it towards in our statistical analysis plan to make the three month end point the primary end point, yet to continue to track efficacy and report efficacy for a full six months. So it's think it's the best of both worlds; you optimize the chances of getting a successful trial and at the same time, have up to six months' data. One thing that we were concerned about is if, for example, at five months you failed to hit significance but got it back at six that may not be a successful trial. I think by getting it at three months and continuing to track efficacy for the full six months is the best of both worlds. Particularly having increased the power of both studies, I think we feel very comfortable we'll get the right answer.

And then just the final question just on the one year safety study, so if I understand correctly they had 30 doses they could take over one year period. Is that the idea?

Correct. They could take obviously no more than that but up to that. So, they take it as needed which is a real life situation.

Okay and then just if you could put your perspective on that. A retention rate of 220 or so patient out of 500, how that compares against -- what you would expect historically for one year and long term study? And then just a second part to that is there anything with regards to the patient attrition that's guiding you and Pfizer to upsize your longer-term dosing studies?

No. In the projected dropout I think either we have been good or lucky, but we would hit it right on the head every time. So, we hope to get 200 patients out of 500 in -- or 500 projected in all, and did a little better than that. So in long-term safety studies patients come and go, move, we track reasons for discontinuation, we are drawing consensus, lack of efficacy, side effects, change of mind, whatever and so to remind you the 12-month safety study, our first dropout was the analysts from Sterling Financials in Miami who worked his way into our trials -- that kind of gives you an idea of expected dropouts being a little higher but was right on top of what we expected, and our long-term trials have historic projections, experiences shown to expect about a 40-50% dropout rate in 6 month trails and we are doing better than that. So the increase in the power had nothing to do with dropout rate, -- rate we thought we would be actually little better.

Okay great. Thanks for taking questions

Sure.

Okay we'll take our next question from Dennis Harp with Deutsche Bank.

Hi guys and just congratulations on the good outcome for the one-year study. I wanted to ask Gary about the increase in trial size; for these other two studies, if we are not changing or amending the protocol what does increasing the size really buy us?

Henry you want to take this.

Yes. I think Steven has mentioned that with these long-term studies you do loose patients for different reasons and as we practice study we, --you know, we have early termination rate approximately 40%; so I think in order to make sure that the study is most adequately or at, you know, sort of more than adequately powered, which is solid and we're comfortable increasing the sample size by about a 100 and I think that will get us to exactly where we want to be, and as we added a 100 for both the immediate release as well as the modified release long-term studies.

I think from a business perspective Dennis, one thing we became aware that we have [forming at] alone with this program we may not have the luxury of doing this, since the cost is probably in the order of $5m per 100 patients, but obviously with Pfizer's support, I think, their perspective is it's better ensure -- spend a little more now to ensure you have a successful trial than having to spend $20m to repeat it later.

So, the two studies together would be $10m add to the trial cost?

Approximately.

In terms of the timing now of when you would be able to file, it sounds like, you know, may be things are slipping from first quarter of 2004 into may be late in the second quarter. Is that a fair assessment?

Well, all I can say is it depends upon enrolment. So, the increase -- part of the increased expense will be dedicated to any trial that's considered to be like limiting to increased enrolment. One fortunate thing we have as we've completed four studies, we take a high enrolls out of those studies and put them in new studies. So we can affect enrolment. You know, we could be on top of where we expect to be, if enrolment doesn't pick up as much as we would like, then it could be, you know, little later in the quarter. But I think we're talking months and nothing more than that.

Okay, thanks

Sure.

Okay, we'll take our next question from Matt Duffy with Black Diamond Repair (ph.).

Good morning and thanks for taking my question. Just a couple of quick questions; are all the trials all 11 that we did, previous question asked about it, they're all required, do you want to have all of those in the NDA?

No.

Okay. Which once are not critical to the NDA?

It's probably hard for me to say right now. I mean, I think, it's probably proposed information, I guess.

Okay; also, just going forward couple of things. What are your thoughts at this point in doing trials to specifically differentiate from current and future competitors? Is that something you consider or you're just, sort of, lean on the placebo-controlled trials to promote?

And something we don't consider important to do now since the goal standard really is Ambien and Ambien goes generic in October of '06. So to do trials again for generic product now don't make a whole lot of sense.

Okay.

We have done three or so in Phase I, Phase II, so again with Ambien the result took long. In the future, if there are viable competitors in the market then obviously as part of the Phase IV program with Pfizer's direction we'd design trials to differentiate, but right now it's not -- not necessary in our plan.

Great. Thanks. One last question; in your discussions with the FDA, I guess, it's a broader regulatory question, but what's your feeling at this point on their feelings about a chronic indication for hypnotics? Is that something that you think they'll consider in the short-term or possibly the medium-to-long term?

Yeah, I think it is a change in thinking I believe the people they look to as advisors, Jim Walsh (ph.), Tom Roth (ph.), and others in the sleep community overall is very supportive of now using these safer sedative hypnotics for long-term treatment. Many patients characterize as having insomnia by definition have a long-term sleep problem, not a short-term sleep problem. In the early days of Ambien being developed in the shadows of Halcion, barbiturates, and Valium, I don't think we had the drugs that one would want to use long term. I think we now do. So we expect a consensus paper to be put together within the next year and that guidance given to FDA that again will allow for long-term treatment assuming these drugs show sustained efficacy.

Okay, thank you very much.

Sure.

We will take our next question from Jay Vegtikessen with Brookside Capital.

Yeah, hi. Thanks for taking the call. Just two questions following up on the following up on the three-six month trial on the MR. The first; are you going to wait until you have the six-month data to add it to the submission or would you submit with just a three-month data?

Three-month data because there will be a sufficient pool of six-month patients at that point.

Okay. And the second, they will remain blinded during the entire course of the six months?

Correct.

Okay thank you.

Okay. We'll go to next question from Phil Nadeau with SG Cowen.

Good morning, and let me add my congratulations on the good results from the 12-month safety study. I have a question on the meeting you're going to have with the FDA during the third quarter given that most of your Phase II results won't be available at that time. What will be discussed at that meeting?

Let me take a shot at it then Henry can add to this. The purpose of the trial isn't -- well, first we've had end of Phase II meeting a while ago and the purpose of that meeting was to review our Phase II data, to review our Phase III plan, and to seek agreement that the Phase III plans or trials if successful would lead to the label that we expected, so we discuss label with them. This meeting is more of our organizational format meeting, where we want to seek agreement that the submission and the format of the submission that we make is exactly what they want to see, for example, the useful example, we don't want to surprise them with the paper NDA when they expected electronic NDA. We want to submit one NDA package in two package inserts, for example. So it's simply to seek -- did show them our plan and to get the agreement if they would like the format change in someway; we will do that now so that increases the review time. Henry, anything to add to that.

No, I think you have covered everything.

Okay, will you have another meeting with the NDA before -- I mean with the FDA before the NDA is filed after the Phase II data is out also?

Well, as far as -- there are always informal communications. Since the end of our Phase II meeting, we have had multiple teleconferences with the NeuroPharm Division for clarification or new issues. So it's continuing dialog, but I don't think there is any formal plan meetings required after that.

Okay, my last question is on partnering. It's my understanding that you guys are looking for -- you always are looking for new products to bring into the pipeline. So, I think, if there is any update on potential partnerships or potential in licensing agreements?

Nothing that I could announce today, but we are very active in looking for two different types of things. First, best would be are there marketed products that we could source from either existing collaborators or other companies so that we could accelerate building a commercial organization sooner. We previously have announced hiring Bob Little as our VP of Commercialization and that along with Kevin Gorman, our Business Development VP, is their top priority. So, that could come about through, again pulling products that may be don't fall within the strategic interest of a Big Pharma partner post merger or could be European Biotech or others that have [inaudible] product assets may be required to buy a company to get a product, and so we have no constraints in that regard. The other thing that we are looking at, but I think will be a lot more successful with sooner is finding Phase II compounds that we could put into this organization so that when our NDA is filed with indiplon, we can use our development group to move one to three of those compounds into Phase IIIs. So, I think we will show success within 12 months on one or both of those fronts.

Great. Thank you.

Okay. The next question from Matt Geller with CIBC.

Hi. Thanks. Actually the most questions I get on indiplon have to do with the modified release trial results, the Phase III results and the chronic usage trial results. What are your -- when you think about those trails and look at them in perspective of the Phase IIs, what would you say would be the basis for, you know, prognosticating how those trials are going to go? What kind of confidence level do you have on them based on the Phase II; and what -- you know, and looking forward, what would be your biggest concerns about that -- the results of those trials?

Well, I just have -- I always answer this question. I think my biggest concern is just execution. Just making sure we get these trials done on time, get the data analyzed and submit it. I think they are saying that mitigates risk for us is having done seven Phase II trials, we kind of know the drug, we know the dose, and know the study design. The thing that enhances my confidence, personal opinion, for the modified release is that in three of the four trials, the primary endpoint is subjective total sleep time. And, in every trial we have ever done with either an immediate release or a modified release, we've hit that endpoint in the statistically significant and clinically meaningful way. So, what are the chances in these three trials we wouldn't do the same and if our [betting] then I wouldn't expect to see a difference. The only other trial, the modified release trial that has a different endpoint, is the elderly study, which is a PSG sleep lab study and the endpoint is wake up to sleep onset, which one could say is a more difficult endpoint to hit. But if you look at our phase II results with the modified release formulation, I think we showed some of the most robust data ever we decided to hit not again hitting [inaudible] so this Phase III trial has been designed with the right dose in the similar fashion with the large enough end to show that response. So, these are not new endpoints, we are not paving new frontiers here.

And was the chronic usage, can you talk a little bit about that about prognosticating that and what kind of label you might want to be seeking with respect to that?

Yeah, good question. Often -- it comes up often. The label, the misnomer is that we are looking for a label that says indiplon should be approved for a long-term use for the rest of your life, and that's not we are looking for. We are only looking to remove the short-term restriction. So to remind you Ambien has recommended for seven short-term treatment defined as 7-10 days with a lot of cautions put in. Only because the drug was never studied for more than short-term period. So what we are looking for is indiplon has approved the treatment of insomnia -- period. And the long-term trials -- I think looking at risk reward here, I think the only thing we would be concerned about going into these trials is if dropout rates in the trial were higher than expectations, but as Henry mentioned we are right on top of -- or to the good side of dropouts. You worry about patients in the long-term trial in the placebo group. We are not benefiting from exiting the trial. So I think we'd call this one well and by adding 100 patients to it, it only enhances the power and gives me more confidence we will hit the endpoint that we want.

Terrific. Thanks a lot Gary.

Sure.

At this time if you would like to register for a question, press star "1" on you touchtone phone. To withdraw a question, press the "#" sign. If you would like to register for a question, press the star "1" on your touchtone phone. We will take our next question from Michele Park with CSFB.

Good morning. Question here is how is the timing of the anticipated indiplon filing in Europe changed? And has it changed or is it still your plan to file simultaneously and at about the same time in Europe as well as Europe -- as well as the US?

Yeah. We are no involved outside of the US and so Pfizer is the responsible party in the European community as well as and so I actually couldn't comment on where we are with that submission and what their plans are.

Okay. And Pfizer hasn't publicly stated what their plans are in your understanding?

No. Not to my understanding and my suspicion would be that they don't typically report on those things.

Okay. Thank you.

We will take our next question comes Thomas Wei with Piper Jaffray.

Thanks. I had a question about the two package inserts here. Am I correct in remembering that before you had potentially been targeting a strategy where there would be a single package insert for both formulation?

No. A single NDA for both formulations but always two package inserts.

Okay and if--

Let me explain why because the drug had some common indications but for example, the immediate release can be used or whatever package inserts it says is say for effective to use in the Middle Of The Night. You wouldn't want to say that for the modified release, for example.

Right and with the two package inserts, how do you expect -- beside that Middle Of The Night dosing claim, how do you expect that they would be different and do you therefore need to fulfill the ICH guidelines for long-term treatment exposure for each of the formulation?

Henry.

Yeah. First off, we do have a long-term exposure information. We do have long-term studies and the indications are slightly different with the immediate release and we have targeted it for patients with sleep initiation difficulties. With the modified release formulation to target patient population would be both sleep initiation difficulties as well as sleep maintenance difficulties. Exposure wise, I think the both formulations dealing with the same product. It's indiplon. So a lot of exposure data we gather from one formulation will crossover to the other formulation and we fulfill ICH guidelines.

Yeah. Also correct me if I am wrong, but in the modified release trials, patents are eligible go into the open label long-term extension studies which more than satisfy ICH guidelines.

Okay. And the FDA requiring long-term dosing for elderly patients and thus this 6-month extension trial, I noticed that for you are doing that in the IR formulation. Do they not have that same requirement for MR?

Yeah. So we are doing that as well.

Okay. And then--

But the core study is the 12-months study reported here that as Henry said that is the base compound in 10 and 20 mg and that's the core of the long-term exposure. So we will supplement that with the subset or elderly in a subset of MR.

Okay. I will follow you offline on some of the other label-related question.

Okay.

But I had question about the middle of the night dosing study, is that an inpatient study and is there one of those artificial studies where you are waking people up at a certain point, and if not, how are you controlling for the randomness of people waking up in the middle of the night?

Now, let me make a comment, then I will turn it to Henry. The first Phase I we did was artificial where people were put into sleep [lab], they were woken up at 3 a.m., given drug, a placebo, efficacy was not tracked. We woke them up 4 hours later and tested them for impairment versus zopiclone and Ambien, where Ambien and zopiclone showed significant impairment in the morning and indiplon did not. So that was the basis on which we believe we have the safety to pursue this compound in this trial. And in this trial then is one in which it is not artificial, it is real, and Henry will tell you how it was done.

Yes. This was an outpatient study. The inpatients are discharged after the initial screening with a four-week supplied of indiplon and if they wake up in the middle of the night, as long as they have another four hours of sleep to go, they can take indiplon if they have difficulties in falling asleep. And like any outpatient study, results attract the patients' diary or enter into the diary. So there's no different from any study dealing with the sedative-hypnotics to deal with sleep initiation, to deal with sleep maintenance. The only difference is these patients will wake in the middle of the night and they have to ensure that they have at least four hours of sleep left.

You may mention the implanted [inaudible] analysis.

Yes, we have actually taken a look -- this is in our statistical analysis plan. Since this kind of study has never done before, even though the study was targeted to enroll 264 patients, we took an early look at the results. Obviously, we are not pretty to the results, but it was examined by a group of outside consultants and statisticians and what they looked at is whether we have power of study adequately to show the results that we would like to see. And the good news for us when the results were looked at quite a few months back, the response we got back from the consultants was that we are well on target. And they told us to continue and complete enrolling in the study with 264 patients at the target.

Okay.

So, this is the only study we have ever taken in the interim [locate] only because we want to make sure the design works.

All right, that's helpful, and then one last question on the 12-month safety study, did you see any imbalances in the side effects in between the arms and can you comment at all the pill count trends over time?

Well, the first response since we haven't done final data analysis, we are just pooling the 10 and the 20, but reminding you that two-thirds of the patients are on 20. So despite that, there is nothing we have seen that is different from any other trial we have done, either incidence or frequency or types of side effects. As far as pill count, all we could say is it appears as though from preliminary data that where people started is where they wound up. I think, it's hard to make a conclusion to say that [inaudible] has absolutely no tolerance, but we would be concerned that pill consumption had to escalate during the trial to maintain efficacy and it didn't.

All right. Great. Thanks.

Okay.

It doesn't look as though we have any more questions. I know there are other earnings calls that people need to get to. So, thank you once again for participating and if there are any follow up questions, feel free to give me or Paul Hawran a call. Thank you.