Neurocrine Biosciences Inc (NBIX) 2003 Q3 法說會逐字稿

Good day, all sites are online in a listen-only mode. I would like to turn the call over to your moderator, Gary Lyons.

Thank you. Good morning, everyone. A pleasure to have you on board to discuss the results. Press release went out last night so everyone should have a copy of that. Joining me today in San Diego is Paul Hawran, EVP, Chief Financial Officer who will review the financials for the quarter and nine months of the year. Also joining me is Wendell Wierenga, who is SEC Executive Vice President of Research and Development who will comment on our research pipeline. Henry Pan, Chief Medical Officer who will field questions related to the Indiplon program. And Meg Jenson, our General Counsel.

With that, let me turn the call over to Paul Hawran who will review financial and provide updates, highlights -- highlights of the quarter as well as the clinical update.

Thank you, Gary and good morning all. A special welcome to those hearty souls on the west coast. The third quarter was an extremely successful quarter for us on all fronts including the financial side. As you all may know that we did complete an offering in September. We raised about $190 million in cash and that pretty much solidified our financial condition going forward.

As far as the third quarter P&L is concerned, we revenues of $29 million and most of that -- about $16 million or so is related to the Pfizer sponsored development, essentially reimbursement for development costs. An additional $10 million is related to amortization of Pfizer revenues.

As far as expenses are concerned we reported R&D expenses of $37.5 million, up from the previous same period last year and it's slightly down from the second quarter of this year. And the reason for the reduction is that total Indiplon development expenses for this quarter was about $20 million as compared to about $33 million in the last quarter. We expect that number to actually increase slightly in the fourth quarter and we're very much on track.

As far as G&A expenses, we reported expenses of $5.2 million. Coming down to a loss of approximately $13 million for the quarter. We also reported that for the year-to-date we will have about -- we have a loss of approximately $33 million.

As far as our cash and marketable securities are concerned we did report that we have over $450 million in cash marketable securities. As well as receivables due from Pfizer puts us as I mentioned in an extremely enviable position.

I would also like to give you guidance for the fourth quarter as well as provide you some preliminary guidance for 2004. As we mentioned in the second quarter of this year in our webcast, we are expecting to record a gain of approximately $18 million from the sale of our existing building and the proceeds from the sale of the existing building will be used to fund the establishment of a new building a couple miles up the road. With that, we are expecting that we will have a break even situation in the fourth quarter so consequently we are expecting to have approximately a $33 million loss for the year. That is down from the 40-$45 million guidance that we had provided previously.

As far as 2004 is concerned, and this is subject to us being able to end license any additional programs, but we expect that 2004 we will also be in the break even position. And then finally into 2005 we expect to be profitable with hopefully product sales from Indiplon.

So consequently we are in extremely strong financial position and we will continue that right into commercialization. And with that I will turn it over to Gary Lyons.

Other than the financial condition, obviously the most significant highlight of the quarter was completion of the Phase III program for Indiplon. To date we have completed enrolling in all Phase III and Phase II trials and this leaves us with 11 trials to go. 51 trials under our belt and almost 7,000 patients. The remaining 11 are in process and they are simple Phase I check the box studies which are not (indiscernible) studies and therefore studies that we've spread out to conduct and complete prior to the NDA filing and we remain on track to file in the first half of next year as we have previously given guidance.

The financing which Paul mentioned obviously was a significant accomplishment for us raising almost $190 million, increasing cash to $460 million allows us now to pursue our agenda to aggressively end license Phase II, Phase III or even market products to fully utilize our development effort as well as to advance our agenda to commercialize early. Also (indiscernible) to comment on our Phase III study that was reported a month or so ago, our forced Phase III MR trial and at the time we reported top line data and as you know the product hit its primary and all secondary end points. Did show without showing evidence of sedation or impairment in the next morning.

We always go on and do full data analysis and having now done that with this study, pleased to report the results actually improved. Total sleep time, mean sleep time, after the first week improved to 50 minutes with a P value of .0001. And mean total sleep time in week two improved to 34-35 minutes .0006. So striking results. No difference between results in week one and week two and a very, very robust response. As previously mentioned, no demonstration of significant impairment in the morning .

In the press release, we outline the remaining studies. All of which have completed enrollment. The middle of the night study will be the next study we will report in the next month or so with the immediate release -- this is in 264 patients demonstrating Indiplon will rapidly put people back to sleep when they wake up at 3:00 a.m. without impairment the next morning. Our open label extension studies are simple patient exposure studies to satisfy FDA requirements for patient exposure in adults as well as the elderly with both formulations and all of these have been enrolled and all of these extension studies have exceeded the enrollment targets.

The long-term restful study finished right on the button. We improved or increased the size of this study from 600 to 700 patients and we enrolled exactly 700 patients ahead of schedule, thanks to some very robust enrollment that came through in the last two months of this enrollment period. Our elderly study of 358 patients has also completed enrollment and reported first quarter. There are three remaining Indiplon modified release studies,. Two in the elderly and the long term study. Both elderly studies enrolled on schedule and the long term study actually enrolled just slightly ahead of schedule. And with 740 patients, you can see it exceeded our expectations of 700. This study picked up significant momentum in the last month or so and we're pleased and believe this these numbers now give us very robust statistical analysis power to demonstrate the results we are looking for. So we will be the only company with two Phase III long term studies to support label addition of long term treatment or removal of short term treatment which is our goal.

Just to comment on the rest of the pipeline, we have initiated and have started dosing the first co-order [ph] patients in our Phase II multiple sclerosis trial, testing 5 milligram weekly and monthly injection versus placebo. This is a nine-month treatment period and enrollment is expected to be complete towards the end of last year with data the following year and if positive will advance rapidly into Phase III development.

On the GnRH front, we've completed Phase I's with our first compound known as 904, our backup known as 418 has dosed in the first two cohorts in a single dose safety and efficacy exposure studies. By year end this will evolve into a multidose study, one week dosing, to replicate the results we've seen with our previous compounds. And we will then select the best of those to go forward next year into proof of concept Phase II trials in endometriosis and uterine fibroids. So far, the compound is performing as expected.

The diabetes program is near complete enrollment. We're actually ahead of schedule. We are enrolling in a Phase II trial 190 patients and will be close to that at year end and in first quarter expect to wrap enrollment up in that study. This is a two-year treatment period so data will not be available for a couple of years although there will be an interim analysis conducted on the study.

Overall it was an exciting quarter, and I guess to me the highlights appear to be, this is a company now with significant cash going into a fourth quarter breakeven or profitable quarter, looking into the next year at least given what we have before us today, envision the company being very close if not break even. And obviously in '05 rolling into product sales. So it is our goal to use this agenda -- to use this money to advance the agenda to secure additional Phase II and Phase III commercial products to accelerate our commercialization the plans and in our next call, Bob Little, our senior Vice President of Commercial Operations will comment on the activities and plans and timing related to commercialization.

So before we go to questions, let me turn the call over to Wendell Wierenga who will update you on research activities at Neurocrine.

Thank you very much, Gary. May I add my good morning as well. Just joined a couple of months ago, September 1 and just getting up to speed. But obviously, even though it seems like a lot of attention is being focused on Indiplon and appropriately so, there's also concomitant energy being invested in the pipeline or portfolio behind Indiplon. I'm pleased to highlight really good progress on a couple of near term objectives.

Gary has already mentioned the one and that is the next generation GnRH antagonist which is in Phase I and targeting ultimately of course indications in both male and female area and we are looking to progress that rapidly during 2004.

The collaborative CRF program with Glaxo Smithkline has yielded a development candidate which we are very pleased about. And in fact we are forecasting that there will be another development candidate likely in 2004 for a really a win-win strategy in that particular area.

As you know, Urocortin II was mentioned earlier this year as an end licensing opportunity that Neurocrine has gotten and originally discovered by Wiley Bale [ph] one of the co-founders of Neurocrine, and this agent is making good progress right now in its preclinical development activities and is still on track for entering the clinic in 2004. It is being targeted for congestive heart failure.

Lastly, two other research drug discovery projects are tracking towards development candidates for 2004. Certainly we expect to get at least one out of these two programs. One is MCH for obesity and the other is the MC4 program for cotaxia [ph] as well as other indications.

All told we looked to 2004 to have three or four drugs in Phase II depending on how quickly the GnRH moves. And one or two drugs in Phase II with three drugs in clinical development. So it's a very robust portfolio in the preclinical to Phase II arena. Our goal for the feature is one IND per year from the Neurocrine labs to be supplemented as appropriately in licensing as Gary has already mentioned.

Lastly, I would add that Neurocrine has 8 publications that are highlighting some of this work at the neurosciences meeting next week in New Orleans. So it is a good opportunity for Neurocrine to invest for the future and I think that we are well on track for doing that. Thank you, Gary

Thank you, Wendell. At this point I would be happy to open up the call for questions.

Good morning, Gary. Bob Little here. I don't know if you realize I was on the call but I am here if you need any questions on the commercial side.

Bob Little, our SVP of Commercial Operations on the east coast. So, we'll be happy to open this up for questions.

At this time if you would like to ask a question press star and one on your touchtone phone. If your question has already been addressed withdraw by pressing the pound key. To ask a question star one on your touchtone phone.

We'll first go to Michael Caine of Bank of America Securities. Please go ahead.

Good morning, thanks for taking my question. Two quick questions, gentlemen. I just wanted to know, when are are we going to see the full repertoire of data from the various programs? Will we see any of that at any of the sleep society meetings before filing or sometime after that? And then can you just remind us of the middle of the night protocol and whether that is -- I presume that is a sleep lab but just remind us if that is the case. Thank you.

Let me handle the first and Henry will handle the second. We have a publication team with Pfizer and have recently but not quite finalized the plan but the publication plan calls for 60-80 publications peer review in '04 and '05 and the first slug of those will be in the spring at the psychiatric and sleep meetings. And I believe we will showcase about two Phase II trials and the three previously completed Phase III trials. So it will be a pretty robust presence and the balance will come due as the data's available.

Henry, design of the middle of the night study?

Good morning Michael. The middle of the night dosing is an outpatient study. It's a full week dosing study and we test 10-milligrams and 20-milligram doses of the immediate release formulation. All 264 patients have been enrolled. The way the study is conducted in patients who have at least four hours of sleep left and they wake up in the middle of the night, they would take Indiplon or a placebo. And we do the same as we've some of our other outpatient studies, we track the efficacy and safety based on a diary reporting system.

How predictive have those studies been before? In other words, how well has the inlab data translated to the outpatient study in this type of study?

First, I don't think a study of this content has been done with Ambien or Sonota or any of the other sleep compounds. How well do they track? I think they should track very well because when you compare studies using the transient model with what we have -- information that we generated from the outpatient studies, the results always track extremely well when you use LPS as an end point in the inpatient and LSO as an end point for the outpatient studies. So I think we are very confident there. I think those numbers will track very well.

One other comment about the middle of the night dosing study . We also did a very preliminary interim analysis on the study back in December of -- well, actually probably November or December of last year. And I think the interim analysis results indicate to us that the study was tracking in the right direction. And that was the reason why we continued with the program and that was the reason why we are confident that the results will come out positive.

Okay. Thank you very much.

Thank you, Michel.

The next question comes from Ian Somaiya of Thomas Weisel and Partners. Please go ahead.

Two quick questions. The first relates to timing of the Phase III data. When do you expect to complete the dosing in the Phase III study, and particularly in the two long-term trials. And the second question relates to FDA requirement for the two long term. Do the FDA want two Phase III trials and what end points are they looking for?

Let me handle this and Henry can add his two cents. In early October both studies completed enrollment and, therefore, three months after that, so November, Decemberish will be last patient and last visit for both of those studies. There are two drugs here, the first the immediate release end point is latency to sleep onset so this is sleep initiation is the primary end point. And for the modified relief, the end point is subjective total sleep time consistent with the other Phase III studies that were reported. In our interactions with the FDA, they were very clear in that they wanted three months sustained efficacy data, they wanted two placebo controlled trials that were prospectively defined as efficacy trials not safety trials changed to become efficacy trials. So we think both of these combined, if positive, will support the label that we are seeking. Anything to add, Henry?

No

Thank you.

Thank you. Our next question comes from Caroline Kopethorn with Morgan Stanley.

Thank you. And sort of a follow on to that. I understand Cepicor [ph] is starting additional 800 patient, 6 month study of Estora [ph] and that also given that they evidently expect to get an approvable letter rather than approval on their Producet 8 [ph], just curious about if there was any take away that we could have from either of those points and what trials you would need or how they would look at your data?

I think again my -- no idea what Cepicor [ph] is nor what their dialogue with FDA has been, so we can only basis our own experience. And this would tell me that it's a requirement to have two long-term successful efficacy based trials for approval for a long term label. So to have one, we don't think does it. But having said that, I think we're encouraged that this trial probably is one of the first that is a Cepicor [ph], one of the first trials done in a long-term treatment and has told us what we have believed all along, and that is with any of the drug , Ambien, Indiplon, et cetera, in the right design trial should continue to work over time and support long-term treatment. So, if anything, this encourages us that our two trials will be positive. We think think they were both designed and enrolled and powered to give us the right answer.

If they run a 6 month study, that wouldn't give you any disadvantage only having three months in your view in any kind of labeling issues?

For FDA approval, it's very clear that they wanted 3 months efficacy data. That would constitute a successful long term trial. Now to remind you, in both trials they originally were designed as six months so when patients completed three months, they were allowed to continue for up to a year. So we will capture efficacy data beyond three months that will be used for label. But for approval three months, two controlled trials, so we have done what FDA has required.

The second question is for Paul with regard to the breakeven guidance for '04. I know it is early but I was curious since I think that is much newer than a lot of the street expectations what you were looking for in terms of either kind of R&D rate or payments coming in from Pfizer because it sounds like that is a lot -- I guess, narrow loss or a obviously a higher number than what people were expecting. And we are getting I assume the $40 million co-promote from Pfizer and significant milestones or something in from.

There are some milestones that we would be getting on the filing of the NDA, Carolyn, but I think for the most part, what we are looking at in the breakeven scenario is again assuming there we would not spend any additional funds on major end licensing activity and that is a big if, Carolyn. Right now, the way the forecast would enroll is that it is breakeven. If you take what is coming from into Pfizer and our other collaborations and just tying that in with our expenses. And, frankly, that is our goal actually to be profitable if you will in '05. So '04 to us is still -- it is a breakeven based on early view, but if we are successful in bringing in additional products that may drive that negative.

And you will record your milestones as a lump sum and not amortized over any period?

Again, still up in the air with the SEC but right now I believe the guidance that we are getting from the accountant says that we would actually amortize that out but, again, it's subject to what the SEC final conclusions are.

Okay, great, thank you.

Just to expand on that, too, the guidance given forward is or we are giving now is based on what we have on our plate today and it is clearly our intent to end license clinical candidates Phase I, Phase II, Phase III, and as we do that we will then readjust guidance to take into account any fees associated with acquiring those assets and more importantly the development costs. But to take a guess at that time now we don't think it is appropriate. A phase three program would cost us a lot more than a Phase I program. We clearly have the plans to do that and with $460 million in cash in a breakeven scenario have the financial flexibility to do that. So we will readjust guidance as we announce deals.

Our next I can comes from Dennis Harp with Deutsch Bank. Please go ahead.

Hi, thanks for taking questions and congratulations and a good quarter. Gary, when the trials are all complete for Indiplon, what role, if any, will Pfizer have in the review of those trials and in the preparation of the NDA?

We have a joint operating committee of equal representatives on both sides who oversees the process. The committee has equal vote, although if we don't agree it is Neurocrine's decision. To date, there have been no disagreements so the NDA will be in our name. We will make the filing and Pfizer will support that filing both from a biostaff standpoint, clinical standpoint and provide other incremental expense or assistance as we get to that point.

So we are not in the position where we are turning over part of this package or program to Pfizer to run separately. It is all being run by Neurocrine. We continue to rely heavily on COOs who have conducted the studies to help complete the data analysis to get our final tables and listings to make the submission. So they're there to support us. They have the resources, people, financials to do i. But the job is in our hands. So I feel we control the timeline in that regard.

How much of the NDA is already, in fact, written and you are just waiting to drop in remaining clinical trial data?

A fair amount it. Obviously all of the preclinical is done. The CMC section for the most part is complete. The earlier Phase I studies are done. Phase IIs are in process and templates for the Phase III trials are being written so that when the data are available we can plug those in. I think we are ahead of the curve right now. The good thing is when you're enrolling in studies it is not totally in your control. Those studies are now done so everything going forward is within our control. And it is simply resource constrained. And in this case I don't believe we are resource constrained either financially or from an expertise standpoint given Pfizer's experience in this.

And your guidance for first half '04 filing, does that anticipate the amount of time that Pfizer is going to need and is Pfizer on board with that timing?

Yes, they are. We have a joint goal which started with a date to complete enrollment. That was done. The next date plays off of that and we are in agreement on a date in the first half of the year for the filing. As a way of accommodating Pfizer's need and desire to participate in this, we are trying to give them adequate time upfront to review and comment on documents rather than do so after the fact so that none of this becomes rate limiting.

Okay. And then just a question for Henry. When the in interim analysis of the middle of the night dosing study was completed was there any change in the protocol? And if so, what was it?

Yeah. In the interim analysis [indiscernible] to see whether we had the right sample size. As I mentioned earlier, there has not been a study of this nature done in the past. So a lot of times, you're not quite sure whether you have the right end point numbers to compare to the active group versus the placebo group. So we just wanted to make sure and we took a look at the results from a -- on a committee in review and, you know, the review came back to us and said we had the right sample size calculation and proceed as planned. And we completed enrollment with 264 patients.

This was a blinded date that safety monitoring board review. Neurocrine is not privy to the data.

But there were no changes in inclusion, exclusion, criteria, times when patients could take the dose?

No, there were no changes.

Nor was there a change in the sample size. I think the sample size was adequate to give us the answer and we were enrolling the right patients.

Great. Thanks.

Thank you. Our next question comes from Matt Geller with CIBC World Markets. Please go ahead.

Hi, thank you. When you look at the different trials that can potentially distinguish Indiplon from other drugs, can you talk about which ones are most important for you, in what way they distinguish it. And can you talk about how the different indications are important in terms of can you quantify in any way how you see the market evolving in terms of different indications and different benefits of Indiplon.

Sure. We are in the final stages of completing very extensive market research run and funded by Pfizer to -- the most comprehensive market research ever done in insomnia to really understand this market inside out and then to make sure the product offerings put forward address those needs. And preliminary information is that there are no surprises. Clearly the market value sleep maintenance for which Ambien is not approved as being a significant unmet medical need and one of the most common complaints. And therefore all of the modified release trials are focused on either objective PSG improvements in total sleep time or outpatient subjective improvements in periods of time extending from two weeks to one year. So we think we have that one fairly well understood. One positive study under our belt, four more running. So one more gives us, we think, the label for that indication. It would adequately differentiate this drug from existing products.

The second key factor is obviously removal of the short term restriction of 7-10 days which we think holds back Ambien sales. And as said earlier, the clear direction from FDA has been, show us three months sustained efficacy versus placebo and in labeling discussions we can talk about removing short-term restrictions and referencing later in the package insert the experience with the drug. So, for example, Indiplon has been shown to be safe and effective in up to X months of clinical trials.

So both of those key market differentiators, niche market opportunities relate to the middle of the night dosing for which no product is approved. And Indiplon is undoubtedly already approvable today for sleep inititiation having completed two Phase III trials that the data are, I think superior to Ambien and we have shown a more robust effect on LSO and LPS. And at the same time showed no impairment in any Phase II trial using all objective measurements. So a clean compound that is more potent than existing therapies. We think office physicians and patients numbers of alternatives to treat the condition.

Great, thanks a lot. And really congratulations on doing such a great job on clinical tries. So many other biotech companies have gone awry.

Thank you, Matt.

Our next question is a followup Michael Caine with Bank of America Securities.

Actually two quick followups. The first is when will we start to see evidence of your precommercial activities? And I assume that your spending on that front is already into baked into the financial guidance that Paul gave. And then second, just editorially just curious if you think that the Ambien sales have been held back by the short-term language on the label or do you think that's more of a function of lack of promotion on the part of Synopi [ph] because patent expiration is coming up?

Starting with the second question first, I think it's combination of both. Clearly, there has been a withdrawal or pullback of promotion of Ambien of it going generic, we have seen evidence of that. I don't think Synopi [ph] and the predecessor companies who have marketed Ambien have really put the kind of horsepower behind this product to really make physicians comfortable with the drug. And therefore physicians are stuck with going to the package insert and trying to interpret the drug's usage on their own. And they see schedule four, they see short-term treatment and that holds them back.

I think in the psychiatric area where there has been more promotion, these physicians are much more savvy with the drug. They understand they are not addictive, they don't cause rebound and liabilities and more liberally prescribed.

Our goal is to move the total number of pills given from present state of about 70 per year per patient to over 100 per year per patient which would represent a significant improvement in the overall market without even treating an additional patient. So the kind of marketing effort that a Pfizer can put forth obviously will build market as they have done with Viagra and Zoloft and the cholesterol lowering area.

The other question was commercialization. Bob Little is on the phone but I'll ask him to hold his comments until the next quarterly call at which time I think we will be in a position to be a lot clearer on commercialization. Suffice it to say we are making plans now. We are interviewing and about to hire sales management and are in the process of working out a procedure to hire up to 200 sales representatives that will be trained by Pfizer that will be deployed next year. The timing of that is to be determined but our goal is to commercialize as soon as we can to get the sale is force trained on the street well in advance of Indiplon approval. And I think we're tracking well on that.

One other point on that. [Indiscernible] the commercialization aspects of built into the guidance, the financial guidance.

Thanks very much.

Operator, any other questions?

We do have a question from Thomas Wei with Piper Jaffray. Please go ahead.

I wanted to ask, were we expecting a pre-NDA meeting during the third quarter? And if so, what was the outcome of that and any modifications to the clinical plan?

Yeah, we received confirmation in third quarter of our acceptance of a pre-NDA meeting and that meeting takes place later this month. That is a meeting really to discuss the document, the NDA itself and to make sure that the formats of the document is consistent with the way that they want to see it. Our end of Phase II meeting with FDA and other subsequent offline meetings have clarified all the key points which are end points, power, package insert, and other issues. So this meeting will be in the next three or four weeks.

Okay. The long-term efficacy trials, are patients on the placebo arm rolled over on to drug after three months or does it continue to be placebo controlled through the 6 month time point?

Thomas, they are rolled over into active treatment. Okay and then.

Okay. And then just one last housekeeping question on the amortization schedule of the milestone payments, how do you envision -- how should we be modeling that?

I'm not sure. How do you mean, Tom?

To what point is this to the end of the contract or to some point of commercialization?

As far as amortization is concerned, it's actually to the point of NDA approval so we are expecting that to occur sometime in the first or second quarter of next year.

All right.

Of '05, sorry.

Thanks very much.

Once again you would like to register for a question please press the star and one on your touchtone phone. Once again, to ask a question press the star and one on your touchtone phone.

Our next question comes from Phil Meadow from S. G. Cowen. Please go ahead.

Congratulations on a productive quarter. Two questions. The first is on any extension studies going on for the MR version. I think you mentioned there was some here in the prepared remarks but there is none in the table in the release. When would we expect to see data from those studies?

Let's see. That's a good catch. Actually, there is.

There are two extension studies. An extension study for the elderly patient population and also an adult population. Those are 6-9 month studies so assuming that the last patient out for the elderly study is sometime last month. so plus 6 months or 9 months, most of the studies will be completed around the time of the NDA submission.

And my second question is also just a house keeping question. You mentioned that there's about 20-$30 million in Indiplon R&D spend per quarter now. Will you still be spending money developing Indiplon after the NDA filing is complete and about how much should we expect or should we model?

Those expenses undoubtedly won't show up in the financials. The Phase IV program has been designed but not finalized. It is an extensive program and that would be fully funded by Pfizer, at least as it stands now. They will conduct the studies so they won't flow through our P&L.

Great, thank you.

Yep.

Your next question comes from Jim Birchenough with Lehman Brothers. Please go ahead.

Hi guys. Just a couple of questions. Just in terms of thinking about '04 and the break even assumptions. For the R&D rate that we should assume, if you strip out the $20 million for Indiplon, is $17.5 million an appropriate run rate for the rest of the pipeline, (a), and (b) how does the Indiplon expense ramp down to trial completion?

Jim, as far as the run rate is concerned, about 17-20 would probably be the right range. But as I mentioned to you, we are still in the preliminary stages of developing that budget so I can't really hone in on it. The only thing that I do know is that we will probably be breakeven in '04.

As far as the ramp down is concerned, in the last quarter we did spend around 20 some odd million on the Indiplon program. In the fourth quarter, I expect it to be in the upper 20s, and then it'll start ramping down considerably in the first and second quarter of next year. And then might be a tail off in the third quarter of next year. But then finally probably nothing in the fourth quarter.

And then just this may be a question for Henry but just in terms of how the FDA thinks about that 7-10 day restriction in terms of dosing. And whether your sense is that they are prepared to on a one off basis amend that for various products as they produce data, or do you think they will need a panel to really review the issue as a whole for a sedative hypnotics and look at amending that labeling for all products like Ambien, [indiscernible].

Let me take a shot at it first and Henry can add comments. I think the state of the art now is really based off the experience with the benztropines. So in light of now information when Ambien was approved nine, ten years ago, they just adopted class labelling for benztropines. There was no other contradictory supportive data, no long-term studies longer than 35 days to support that. So FDA's guidance to us has been long-term or lack of short-term labeling is a function of you being able to demonstrate as a sponsor that your product continues to work for up to three months. And now how that translates into labeling discussions is another point.

I do think something that will help us is not only experience from the store and others that tend to support longer term treatment, but also an NIH consensus paper that we expect will come from sleep experts early next year, I believe Henry, and most of these experts, if you talk to them, will tell you that to treat a chronic sleep problem 7-10 days makes no sense. It is like treating depression for a week. It doesn't work.

So I think that group and resulting white paper from that group early next year will help give FDA some comfort that approval or removal of short-term restriction is the state of the art in treating insomnia problems. And that if the sponsor can put forth two prospectively defined Phase III trials that answer that question, I think this is an evolving process that will wind up in the right place.

Okay, great. One final question. I just want to confirm that in fact in the long-term studies that patients are rolled after three months where all of them receive active treatment. And, therefore, at 6 months we shouldn't expect a placebo adjusted improvement in total sleep time or sleep initiation.

What we have is two different programs as you recall. The immediate release program I think that started off a little earlier. So in that study a lot of patients actually entered a study into the original 6 months study. And some of these patients actually completed 6 months of dosing placebo or active treatment. With the modified release program, that study is a little bit later following the [indiscernible] release program and there are less patients exposed to six months of treatment but certainly some patient s exposed to four months or maybe five months of treatment. In terms of rollover all these patients roll over into active treatment when they complete three months or four months or five or six months of treatment in both these programs.

Okay. And then finally when should we expect to see the six month data?

Well, all that will be included in the N.D.A. submission. As we point out in the press release, the information should be available in the next quarter first quarter of next year.

For the IR and early second quarter for the MR.

Okay. Great. Well, thanks for taking my questions.

Thank you.

The next question comes from Michele Park with Credit Suisse First Boston Corporation. Please go ahead. Michele, your line is open.

Can you hear me?

Yep, we can hear you.

Okay. If you could go over for us the next steps that you are planning to take with the GnRH program?

Sure. The plan has been -- since we believe in phase ones we can measure endocrine effects which is a nice surrogate for efficacy. So with the original compound 902 we've showed robust suppression of luteinizing hormone and estrogen both following single dose and suppression over a seven-week period of time. The second clinical program which is now underway with a compound we call 418, is a combination single multiple dose trial so we are dosing patients looking at safety and increasing single dose exposures. And at the same time measuring the LH suppression. After we've dosed the first three groups we then have defined our first dose for going to 7-day dosing. And, again, hope to and expect to replicate what we've seen. That is either partial or complete suppression of estrogen over the 7-day treatment period.

The next step from there is to go to a proof of concept study which would be a 4 to 6 week treatment in the same patient population but patients who are premenopausal and have either endometriosis or uterine fibroids or both. Ad that study will begin about mid-year and hopefully have data next year. And what that will show us is what level of endocrine suppression do we need to achieve to alleviate pain or shrink tumors. Right now our prediction would be 60-07% suppression will do the job and will spare bone loss and not put women in menopause and offer an alternative to the superagonist that exists today.

Okay. One quick last question. The $18 million that you're going to recognize for the sale of the existing building, will that be recorded as revenue in the fourth quarter?

It will be recognized as gain on the sale of the building, a nonoperating profit.

Okay. Thank you.

At this time there are no further questions and I would like to turn the call back over to management for concluding comments.

Thank you for joining us this morning and look forward to doing this again end of fourth quarter. And good day. Any further questions feel free to give Paul or myself a call directly.

Good evening.

That does conclude today's conference call. Thank you for your participation. You may disconnect your line at this time.