Neurocrine Biosciences Inc (NBIX) 2004 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to today's conference. At this time, all sites are on the line and in a listen-only mode. And right now, I'd like to hand the call over to your host, Mr. Gary Lyons. Go ahead, please.

Thank you. Welcome, everyone, to our second quarter earnings call. Joining me today in San Diego is Paul Hawran, CFO, Wendell Wierenga, EVP Research Development, [Phil Jackelson], VP Clinical, responsible for the indiplon development program, and [Meg] Jensen our general counsel.

[Meg] has advised me that it'd be appropriate as a matter of course for us to begin these presentations with a reading of our safe harbor statement, which I will do, briefly. The agenda for the day will be for Paul to review the financials. I will give an update on indiplon development, filing, strategy, et cetera -- and Wendell will run through the rest of the development pipeline, and give you an update on the status of all the development activates, which has been our matter of course in these calls.

So I'd like to remind you that Neurocrine's Safe Harbor cautions certain statements made in the course of the conference call that state the Company's or Management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements, which are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those contained or implied by forward-looking statements are contained in the Company's SEC filings -- including but not limited to the Company's Annual Report or Form 10K and quarterly reports or Form 10Qs. Copies of these filings may be obtained by visiting the Investor Relations page on the Company's website, www.Neurocrine.com. Any forward-looking statements are made only as of today's date, and we undertake no obligations to update these forward-looking statements to reflect subsequent events or circumstances. So thank you for bearing with me with that, and let's move forward with Paul's review of our financial results of the second quarter.

Okay. Great. Thanks, Gary. And good morning from San Diego. We

For the same period last year. And consequently also for the six months we reported a loss of 23.5m as compared to a loss of 23.6m for the same period last year. Revenues of about $31m is about $50m lower than the same period last year. And that's a direct consequence of the lower expenses related to the indiplon development program. As you all know, Pfizer does reimburse us for indiplon development expenses, and our expenses for the current period are down approximately $50m for the indiplon program. So consequently, we see a reduction in revenues of $50m as well as a reduction in expenses for the same period last year.

Of note during the quarter, I do want to mention the fact that we did receive a $3m milestone from Pfizer. Under one of the milestones that we have completed -- and that's the long-term administration of indiplon. That is one of a number of milestones that we expect to receive in the remainder of this year as well as into next year. In addition, we've also received about a $500,000 milestone from Glaxo Smith Kline, relating to the development candidate of a CRF antagonist.

Moving on to G&A expenses, they're relatively unchanged for the period -- just a modest increase. And finally, what I'd like to do is touch on the balance sheet. We have recorded cash and equivalents of about $326m. That does exclude about $4.5m or $5m in receivables due from Pfizer, as well as approximately $18m in a long-term deposit related to a construction loan deposit that we had put on deposit with the bank. That should be freed up by the end of September of this year when we move into permanent financing on our new facility. So we have approximately $350m in cash and I'm happy to say no convertibles.

As far as our guidance for the rest of the year is concerned, we are not changing our guidance that we've offered from the beginning of this year. Namely, we're expecting a loss of between $0 and $20m. We expect to have revenues of somewhere around $135m to $145m, and expenses of $145m to $155m. Again, we're not changing our guidance for the remainder of this year. With that, I'll turn it back over to Gary Lyons.

Thank you. Let me provide a brief update on indiplon development, registration, plan and strategy. Several weeks ago, we issued a press release that was meant to address concerns, rumors and other things that were floating about in the market that I think did a good job of clarifying our position. I will summarize that for you today.

We have, in fact, completed the registration program for indiplon, which now comprises just over 70 clinical trials and over 7,000 patients, undoubtedly the largest and most creative, innovative program yet conducted for the development of a sedative-hypnotic.

The indiplon NDAs -- there will be two. We will file these in fourth quarter. One for adult, one elderly, one IR, one MR. And as previously guided on this subject, we expect that filing to occur in the fourth quarter. Much of the activities over the last several months with our partner, Pfizer, have been dedicated toward evaluating the integrated safety-efficacy data from all 70 studies. This involves over 400,000 nights of treatment, and 70 trials, and we're pleased to announce that the analysis of all of these have in no way differed from the study results of the individual registration trials -- meaning the drug is safe, well-tolerated and effective across all populations. And I think we have now a very thorough understanding of the pharmacokinetics and pharmacodynamics, safety and efficacy of indiplon.

We have completed a Phase 3 clinical trial with a 15mg version of the modified release in the elderly patient population. This was a trial initiated over a year and a half ago, involving 240 elderly subjects -- placebo versus 15 mg. The purpose of this study was to have data in the event that the FDA required a lower dose than doses previously studied.

As with the IR program, we studied the 5 mg dose to answer that question -- 5 mg was very active, and has completed the program, we believe the 15 mg will give us additional flexibility in dosing decisions. And approximately a month when we have the full data from this trial, we'll make the final dosing decisions and submit the applications.

So in total, there have been 14 Phase 3 clinical trials. These are double-blind placebo-controlled and safety studies -- all of them completed, support, safety and efficacy of indiplon. And we expect these in additional trials that may be run over the course of the next year to supplement label and/or expand label.

Based on the analysis of all the completed clinical trials, there are no safety issues of any dose that would preclude filing of these NDAs. And subject to regulatory approval, the alliance is planning for a targeted launch of indiplon in late 2005, consistent with previous guidance.

Also in this press release, we had a clarification that two other subjects -- these are the long-term safety and efficacy trials of indiplon -- as you all know, we've completed in sleep study, enrolling 700 patients in the IR restful trial involving 740 patients in the modified release version of indiplon. Both trials were highly effective, at the three-month end-point of these trials, and patients continue throughout six months of treatment in these trials. And we have data both double-blind, placebo-controlled, safety-and-efficacy data for both IR and MR. And the results during the second three months were consistent with those results in the first three months. And we therefore feel we have two very well-controlled, high-effective trials to support removal of short-term restrictions, which will be part of our application.

And finally, from a safety standpoint, there have been some rumors that perhaps we have not had adequate safety exposure. To dispel that myth, we announced that we have enrolled over 1,400 patients in 4 trials, have extensive experience with indiplon treatment for up to 12 months in both elderly as well as adults, with both IR and MR. Most of these trials -- three of the four -- are complete. The final trial will complete in the next couple of months. This data will be included in our NDAs and/or included in our 120-day safety update, and in no way is a gaining item for filing.

So I believe that adequately covers the status of indiplon, but we'll be happy to answer questions once Wendell completes his brief review of R&D activities. With that, Wendell?

Wendell Wierenga, PhD: Thank you very much, Gary. And good morning. The GnRH program at Neurocrine has been underway for several years now, for the treatment of both women and male health disorders. As you may recall, the earlier [cop] of 40902 has been in about 90 normal volunteers and several Phase 1 studies -- male and female -- in 2003, to explore the relationships of pharmacokinetics with the lowering of hormone levels such as estrogen and testosterone.

The limitation that was seen with that particular compound was really in the pharmacokinetic area on some metabolism issues. Therefore, MDI564018 was advanced into Phase 1 studies in late 2003, and are just completing those right now, examining again, the relationships of pharmacokinetics and pharmacodynamics.

I'm pleased to see that we're seeing [night] pharmacokinetics with 4018 and our single and multiple dose studies in male and female premenopausal women and evaluating the hormone change with the pharmacokinetics and seeing a nice exposure-response relationship. Such that we're now advancing 4018 into Phase 2A clinical studies the second half of this year.

These will be six-week studies, again studying pre-menopausal women as well as women with uterine fibroids. In anticipation of initiating them longer-term, Phase 2 studies in early 2005 in women with endometriosis. We'll be providing some guidance on male indications in the not-too-distant future.

With the CRF program, we are pleased to say also that that has made good progress, of late. It's a partnership, of course, with Glaxo Smith Kline. They have now committed to advancing the first development candidate into clinical studies in the fourth quarter of this year. We have had a mutual agreement with them that we want to evaluate at least two compounds going into the clinic, and to that end, we're advancing a second backup compound to toxicology at the present time, anticipating clinical entry of that -- or a closely-related compound -- in 2005.

The two Phase 2 programs in multiple sclerosis and type 1 diabetes are proceeding. These are with the altered peptide ligands. And as we indicated on our last conference call, the type 1 diabetes program is fully-enrolled, and we'll be getting a readout of that in 2005. The multiple sclerosis study is slightly behind, in terms of enrollment projections, and we're adding some additional sites to increase that. So we pushed back the expectation of a readout on that until the latter part of 2005.

Lastly, our pre-clinical programs have made excellent progress in the past six months, such that now we're indicating three [I&D]s in the next 6-9 months, in the programs identified in our press release -- MC4, MCH and a sleep disorders program. And that means that in 2005, we will have upwards of 9 compounds under clinical study -- excluding indiplon.

Obviously, it'll be a very exciting and busy year for Neurocrine, with the indiplon NDAs and this number of compounds under clinical study in our overall portfolio.

Thank you, Wendell. With that, we'll be happy to entertain questions.

Thank you very much, sir. At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may withdraw your question at any time by pressing the pound key. And let's pause one moment for the first question to queue.

Okay. We'll take our first question from Matt Geller with CIBC World Markets. Go ahead, please.

Right. I had two questions. First of all, could you just go over what the different milestones are -- as specific as you can be, in terms of dollar amounts and timing? And the second question is a more general question for Gary, which is not to spoil a surprise element -- but in terms of the marketing campaign, what do you think the focuses are going to be for the indiplon marketing campaign? These are the advantages over competing compounds.

Sure. Starting with the second question -- the overall marketing thrust -- obviously, this will be a Pfizer-led program that we participate in with our 200-person sales force. But we view this as a very large, under-penetrated market, and the principle focus, of course, will be on expanding the market beyond its present penetration of 5m patients receiving Ambien drugs when there are in fact 80m patients that do suffer from insomnia.

As always, we view the advantages of indiplon being two formulations -- the ability to customize treatment to address various sleep disorders, rather than force the single compound upon all conditions. So our label, we expect to be sleep initiation, middle-of-the-night dosing for immediate relief formulation, sleep-maintenance, sleep-initiation or modified, and both available for long-term treatment. So that is the principle focus. And I think our Phase 3 program now gives us the data to support that.

As far as milestones, I don't think we're given specific guidance. I think what we always have said is that there are certain milestones that relate to completion -- successful completion. The final study reports related to sleep-maintenance and related to long-term treatment, and then more sizeable milestones related to acceptance of NDA filing, and finally approval in the US and the rest of the world. Of the $300m in the remaining milestone, $200m approximately relate to US activities, and $100m x-US.

Was there every any breakdown at all in terms of filing -- approximately how much on filing and approval?

I don't believe. Paul?

No, we've never given that out. But Matt, you know in some of the analysts' reports that I've been reading, people have speculated about 50/50 for milestones relating up to the acceptance of the FDA, and then another 50 percent on the approval. I would say that that's probably within a close-call.

Is that in terms of what's left? Or in terms of what originally was promised?

The original was $200m in pre-US launch milestones. And $100m for rest-of-the-world milestones.

Okay.

Thank you, Matt.

Thanks a lot.

thanks very much. We'll take our next question from [Mark Augustine] with CSFB. Go ahead, please.

Mark E. Augustine Thanks very much. I wanted to ask, Gary, at this point, what do you anticipate to be the final dosing strategy for indiplon?

Well, final dosing strategy is to be determined. We now have three doses for IR, three doses for MR, and I'd expect with the completion of the 15 mg trial, we will select obviously file data on all doses. But that I'd recommend perhaps two doses for each. That's been our strategy. But that's a decision that will be made shortly.

Okay. One follow-up. For Wendell. You've completed a Phase 1 study with 418, and studies of this nature might be fairly straightforward. Do you believe at this point that you have demonstrated proof-of-concept?

Mark, yes. We believe we have. We've seen, as I said, nice exposure-response relationships measuring in premenopausal women, wherein the treatment has been timed to cycle. So that we get good baseline measurements going into the treatment. We're seeing nice reductions in LH and in estrogen. And the same thing is true in male volunteers. We've been looking at LH and testosterone.

So as I said, we're basically ready to go with that one, in terms of some Phase 2A studies, based on that information. It's been good exposure-response relationships, and nice and predictable.

Thanks very much.

Thank you very much. We'll take our next question from the site of Jim Birchenough, with the Lehman Brothers. Go ahead, please.

Thanks. Just a couple of questions. First, just on the supplemental studies that are going to be used to augment the label -- could you give us more details on the nature of those studies? And as it pertains to safety data, is there requirement for driving performance studies?

No, first on safety, the 1,400-patient, 12-month exposure is more than adequate. It exceeds FDA guidelines. The driving studies are planned, as I think people have known. These are simply planned to be complete at FDA's labeling discussion time, if needed. Which is to say if the agency were to want to put cautionary language around these products, we believe it would be useful to have driving data that shows no impairment. So those are planned, and would begin and would be available at labeling time.

And then just with regard to the 6-month efficacy data -- you mentioned some cohorts that went out with controlled data for six months. What is the size of those cohorts for the IR and MR? And were they prospectively defined cohorts?

Yes, they were. This was a six-month treatment period for both IR and MR. And patients were treated throughout, in a double-blind placebo-controlled fashion. The statistical analysis end-point was at three months, in that FDA suggested to us that three-month difference from placebo would be adequate to remove what is a long-term labeling. So it's prospectively to find six-month trials, and the patients are completed six months -- had exactly the same response as those at three months. Which to us, again, it was expected -- but demonstrated patients don't develop tolerance to therapy.

And just one final question. Beyond labeling and restrictive labeling language, what's the biggest barrier that you understand a physician prescribing a sedative hypnotic? And how does indiplon address that barrier more than currently-available drugs or those in development?

If I understand the question correctly, it's what are physicians looking for that they don't have now with Ambien?

Yes. In terms of an under-penetrated market, what's the biggest barrier on the part of physicians besides labeling? And how does indiplon address that better than Ambien?

Yes. Well, I think there are many. First, at the patient standpoint, many patients -- as many as 2/3 who have insomnia don't do anything about it. Meaning they just feel it's a condition they need to live with, or go to the pharmacy for OTC medications or to the liquor cabinet for another kind of medicine. So we think outreaching to patients would be very appropriate in this market, to make them aware that sleep is a problem and it is a condition you can do something about, and there are now new, safe and effective medicines that can be used for treatment.

on the physician's side, more than 50 percent of those arrive at the physician's office are not treated. And we think this is a ripe market for physician education, to make them aware that there again is now a new, safe drug.

Many physicians grew up in the days of barbiturates and valium and halcyon and are not aware, frankly, that there are safe, effective drugs. I think if we combine directly with consumer advertising with marketing and physician education that we can cultivate this market in a way that Pfizer has very successfully done with many of their products.

Great. Well thanks for taking the question.

Certainly.

Thank you very much. We'll take our next question from Hugh Demayo with the Thomas Weisel Partners. Go ahead, please

Thanks for taking my question. A question on the NDA. Could you just walk us through what components of the NDA have been completed, and what you would construe as rate-limiting, at least? And what remains to be done?

Hard to answer that specifically, other than to say it is simply work-in-process. All trials have been done with Pfizer. What we have done is conducted what's called immersion meetings -- which is to review all of the final studies to review and agree upon final study reports. All of that's been completed. Most all, I believe -- correct me if I'm wrong, Wendell -- the CFC sections -- pre-clinical sections -- are all complete. So right now, it's simply brute force and putting together the applications. As you know, they're separate -- one for IR, one for MR.

In the case of either one, about 70 percent of the IR, for example, NDA covers the MR. So it's a matter of putting these together, going through final review and signoff with Pfizer and Neurocrine, and then file. So we're really not waiting for any more data, at this point.

Okay. Thanks.

Great. Thank you very much. We'll take our next question from Thomas Wei with Piper Jaffray. Go ahead, please.

Thanks very much. I had a follow-up on a previous question. Just to be clear, my understanding was that this sleep-and-restful studies -- the three-month studies -- were originally six-month, double-blind, placebo-controlled studies that were modified partway through to become three-month, placebo-controlled studies, with a three-month open-label follow-up that had no placebo control.

Am I correct in that understanding? And I think I'll re-ask a question from before that. Can you tell us how many patients actually made it all the way through six months of placebo-controlled treatment in the MR study before the design was switched? And what the data showed on that cohort of patients [inaudible].

Right. Yes. I'll ask Phil to address this, but I think that is one of the misconceptions. This was a 6-month placebo-controlled, double-blind study, which it has been. The design was not modified. But Phil can elaborate.

Okay. Also, to get your question of the numbers that completed -- between the two studies, we had approximately 300 patients who actually did the complete six months, and the data's consistent, regardless of which study that they were in. [inaudible] significant improvements in [inaudible] the baseline, and the prudence was sustained for the entire six-month duration. With the same effect that was seen at one month was observed at six months.

So we've got approximately 300 patients with a six-month exposure from an efficacy point of view. And as you know, from the safety point of view, we've got studies showing in excess of six months out to a year at similar doses.

Actually, just to follow up on that, can you give us a MAR formulation in particular? How many patients you're going to have at 6 months and at 12 months, and how many of those are elderly?

I don't have those exact numbers, but what I can tell you is that we exceed the [inaudible] guidelines, which require 300 patients at 6-month exposure, and 200 patients -- I mean 100 patients after 1 year of exposure. So we have actually exceeded that with a unique individual's program. And we have adequate [in neopathy], as well. We needed only a dozen. We have in addition to that, approximately very close to meeting a [toximeniopathy]. We're not required to meet them, both the adults and the alpha [inaudible] combined data set is way in excess of the ICA chair requirements.

All right. Thanks very much.

Thank you. We'll take our next question from Heather Slovik with Smith Barney. Go ahead, please.

Hi. This is actually Elise Wang. If you could just clarify the filings for the IR and the MR. Is that simultaneously you'll be doing those?

No. The plan is to file, and the second shortly thereafter.

But the target is still the fourth quarter?

Right.

Okay. And then in terms of data releases from the Phase 3 studies. When may we actually say one -- first of all -- the 15 mg dose for MR and two -- when actually will we see these at peer-reviewed medical conferences?

Yes. The 15 mg study, I'd expect within a month. And the peer review forum has always been the American Psychiatric and the sleep meetings which were held in the spring. And therefore the next ones coming up are obviously not until next spring. So many of the Phase 3 trials we've talked about here will be reviewed, presented either abstract or presentation form at those meetings.

Phil, are there any other forums?

No.

No. Those are them.

That's the two major ones. Yes.

Okay. And then just a financial question for Paul. In regards to your guidance for revenues and also for the losses, can you just give us a little more detail as to the timing in the next two quarters? Presumably, the revenue levels since your target is $135-145m as guidance for this year -- given which you've reported to date, obviously there's going to be a fair amount coming in now in the next two quarter. And given the milestones that you might be receiving -- are we to expect this is really going to all come in the fourth quarter? I don't know if you can give us more color on the details related to that. In addition to the expense side.

Elise, I think your trend is absolutely right on. I think that you're going to see some of those milestones coming in the third quarter. But the bulk of them are actually going to be in the fourth quarter, as we file and receive approval for the NDA packages.

Okay. Thank you very much.

Great. Thank you. We'll take our next question from [Matt Duffy] with Blacks Diamond Research. Go ahead, please.

Good morning. Thanks for taking my question. I just wanted to see what you guys have heard and what your expectations are for the National Institute of Mental Health consensus meetings planned for next June. Are you guys planning to participate? Do you have a sense at this point of what the topics of discussion would be and how will you fit your data into that?

Yes, we do. And Phil will handle that.

Yes. What I can say is I don't think industry is actually [being nice] to participate, and the National Institute of Mental Health I think really prefers to have a handoff approach. What I can tell you is the people who are on the organizing committee and who have selected the faculty of people who for the most part are familiar with the sedative-hypnotic arena and the changes that probably would benefit the sedative-hypnotic arena if those changes are accepted. There are several key people who are on that board. I'm not going to name who they are, because giving out this information is confidential. Until it becomes public, I can't share that. But I'm confident that the people who are in the organizing committee, as well as who will be making presentations are the appropriate people to implement changes that will be favorable to the treatment of and use of sedative-hypnotics for long-term et cetera, and issues around that.

Just to follow up on that -- do you think there's a chance that much of the longer-term -- 3- and 6- and 12-month data -- may be published? Do you think you might have a better chance of having it receive solid consideration next June?

I think that's a fair assumption. I think we've been working very hard to make as much long-term data available in the public domain. Because the more that these obviously -- those groups -- the data-driven group and I think we're asked to do, we'll be happy to provide. And we'll see [inaudible] to get that in the public domain as soon as possible.

And just one last point of clarification. I don't mean to beat a dead horse here. But all the studies that you plan to put in the initial filings of the NDA -- for both the IR and the MR -- all those studies have completed enrollment and you're just crunching data? Are there any that are ongoing at this point that you need to finish up for the filing?

No. They're all complete.

Great. Thanks.

Great. Thank you very much. We'll take our next question from [Bob Parente] with [Lyring Swan]. Go ahead, please.

Thank you very much. Two quick questions. One -- just if we can go back on that 15 mg MR study. Will the results be released prior to next spring? If the study's expected to be completed in about a month?

Well, the study is complete. We're doing a blinded review of the data, now, and expect to have efficacy safety data to release within four weeks.

Okay. Great. And then my second question -- previously you suggested that the NDA's both IR and MR would be submitted in early Q4. Is that still the case? And any more specific than that?

Well, we don't think December's a good time to file an NDA. So that narrows it down fourth quarter, I think.

Yes. And Gary, I'd like to be a stickler on this. I'd assume it's early Q4 due to the milestones being based on acceptance of the filing.

Right. Early Q4.

Thank you so much.

Thank you very much. We'll take our next question from [Sadna Shivlava] with Morgan Stanley. Go ahead, please.

Thank you. Gary, one question just with the ongoing study -- even if it's not required for the NDA filing. Could you just let us know what studies are ongoing and if there's a 15 mg and adults, which is starting?

Yes. It's been our custom not to comment on studies that are ongoing, because there are many either label-enhancing studies or Phase 4 studies. So the only one I can comment on is the only one that I guess people have uncovered that is ongoing, and that is a 15 mg MR trial in adults. And that is enrolling. You can assume that there are other studies, as well. These studies are, in the case of the 15 [MR] adult study, it's simply intended to give us more exposure, more experience with 15 mg overall. If necessary, it could be used as part of labeling discussions. But it's not a registration filing study, nor are any of the others that are planned.

And just a question on the milestones. Would you be able to [inaudible] for the milestones based on any acceptance for only one formulation? Or does it have to be both formulations?

Separate milestones for each.

Separate for each?

Right.

And just the last question. Your guidance for the '05 launch is, I guess, roughly based on a review period of 10 months?

12 months.

12 months. Okay. Thank you.

Okay.

Thank you. We'll take our next question from Phil Model, SG Cowan. Go ahead, please.

Good morning. Thanks for taking my question. First question is on ICH guidelines. Are there any guidelines for specific dose levels? Do you need to have a certain amount of patient experience with the 15 mg dose?

No, I think you have to have exposure at the highest dose that you've had to commercialize. As many of you know, we have conducted the safety studies at the highest doses that we put into the [inaudible] Phase 3. So there would be 30 mg for the MR and 20 mg for the IR. So we're well-covered along the spectrum of anything between 0 to 30 mg.

Okay. So giving it with just one 15 mg MR trial in the elderly and one in the adults? You think you have enough patient experience to get any label for the 15 mg dose?

Yes. You really don't need more. And on the safety side, we're covered, as I've mentioned, on several studies which have more than 15 mg. So it will not be an issue for 15 mg MR.

Okay. And my last question is when you look out to obtaining a label, do you anticipate having the three month data from the sleep-and-restful trials on your label, or will you try to get the six-month data on the label?

I think [inaudible] in six months.

Okay. Thank you.

Thank you. We'll take our next question from [Keith Marky] with [Value Life]. Go ahead, please.

Thank you. A simple question, but I was wondering if you could give us at least directional guidance as to how your R&D expenditures will trend from this year into next, and within the year 2005?

Sure. I'd be happy to. As far as the R&D expenses are concerned, going forward, you could probably see those trending down as we complete the indiplon phase 3 program. However, at the same time, you're going to see a bit of an offset as we start bringing forward other development programs into more developed phase 2 type programs like GnRH and the like. So as far as our guidance is concerned, we're expecting to track R&D expenses at the end of the second quarter, with about $22m. We expect that number to probably go up to about $30m or so in the third and fourth quarter, and kind of continue along that track into '05. As we've also said, as far as our guidance is concerned, we're looking to actually break into profitability into '05, and we're still looking to do that, based on [sales] of indiplon.

Great. Thanks very much.

Yes. One of the factors that impacts that of course are the number of programs going into clinical development, as Wendell mentioned. Our goal is 1 new [I&D] and it looks as though we may have as many as three. Therefore, the choices are, perhaps, to selectively partner. To keep these products in development, but not exceed our internal R&D objectives.

Oh, great. Thank you.

Thank you. We'll take our next question from Jim Birchenough with Lehman Brothers. Go ahead, please.

Yes. Hi, guys. Just to follow up on the milestones for filing and acceptance. In terms of the IR and MR -- should we assume equal payments for both of those formulations, or is it preferentially weighted to the MR?

Jim, we've never actually broken that out. I prefer to keep that confidential.

And then within what timeframe of filing for the IR do you anticipate you could file the MR?

I think it would be shortly thereafter.

Is that to say weeks rather than months?

Absolutely. It think it's weeks.

Okay. And then just finally, just to clarify on the 6-month data for the MR formulation. How many patients out of the restful study completed the 6-month control portion of the study, and can you place statistical significance versus placebo at the 6-month period?

Yes. On the restful study, there are 150 patients completing the 6-month portion of that. And the analysis that we conducted, which is [looking to change from baseline] [inaudible]

But versus placebo? Was it specifically significant?

We didn't actually test for if it was placebo.

Okay. Thanks for taking the question.

Thank you. We'll take our next question from [Danny Frank] with [Sira Brus]. Go ahead, please.

First of all, my question is on the timelines. You're talking about an '05 launch. Could you take me through what your anticipated timelines are, given the acceptance period, the actual review period and then the designation for labeling discussion?

Well the plan is obviously the 10-month [fidufidate]. We think that to give guidance, it'll be a 10-month review cycle and approval. It's probably optimistic. So by saying 12 months, we'll have built in a couple of extra months for labeling discussions.

So if you submit in November, how do you get to an '05 launch? You're going to go through the [fidufidate] and then you're going to not have any Tier 1 or Tier 2 review?

12 months later.

And you say you're not going to have any review period? You're just going to go through the [fidufidate] and then you're not going to have any Tier 1 or Tier 2 Review?

I think in 12 months, we'd say we'd have a Tier 1 review, I believe. That's 2 months. Right? So if all goes well, and this is as complete an application as we believe it is, then it is unrealistic to assume we couldn't in fact get a 10-month [fidufa] review. But we're giving guidance to say, "Don't expect that. Expect 12 months." That still puts it in '05.

Why wouldn't we expect 14-16 months.

You never know. I think just for planning purposes, this is middle-of-the-road. It's not 10 months. I think the intent has been to take the time to file a very complete application that meets or exceeds all requirements.

And you're in a new divisions at that FDA, and it's a non-priority drug, and you're saying you're going to get a Tier 1 review.

I'm saying we're planning on 12 months, and we'll see if we do better than that or not as good as that. But I think what we're focusing on right now is filing, and filing in fourth quarter. And filing a complete application.

My second question is, would you explain to me the logic and rationale between two filings of the same drug with two different doses?

That's what the FDA asked for.

The FDA asked for that?

Correct. We would file one if they wanted one or two if they wanted two. They asked for two.

Why did they do that?

I don't know. But rather than debate that, we've always found it prudent not do what they've asked us to do. It takes a little bit more time. As I mentioned earlier, each application covers 70 percent of the other products. So for example, 70 percent of the IR NDA covers the MR and vice versa. And we've agreed at our pre-NDA meeting with electronic format the design, et cetera. And both will be filed as separate applications.

Thank you.

Thank you. We'll take our next question from Ian Somayo with the Thomas Weisel Partners. Go ahead, please.

Thanks. Just two follow-up questions. Would you expect the approvals to be sequential, as well? One after the other? Or would you expect the FDA to act on the two applications at the same time?

Two different [pedufidates].

Okay. And the other question is just related to the GnRH program. If the Phase 2 data's positive, I think you indicated you might release it in the first half of next year. Would you move forward with the Phase 3 trial in the premenopausal and uterine fibroids? Or would you wait for the endometriosis data?

I'm sorry. Can you repeat that again? I didn't' quite understand what you were linking to uterine fibroids to the...

Right. I mean I think you stated in the release that Phase 2A data in the menopausal and the uterine fibroid patient population would be available sometime in the first half of next year. Would you move forward if that data's positive to a Phase 3 trial? Or would you wait to get results from the endometriosis study before deciding on which program to move forward with?

Yes. I think the primary focus is endometriosis at this point in time. Uterine fibroids would provide us additional information, in terms of other potential indications. It's premature really to commit to how far we would go with uterine fibroids at this point. But clearly, we're putting endometriosis as our priority one on the female side. And as I said, we'll be moving forward in some male indications in parallel with that.

The only reason frankly that we're waiting on starting endometriosis until early 2005 is we need to finish the longer-term talks. Because that's a longer-term clinical trial program.

Right. What would the length of the [in-vista] study be?

For endometriosis?

Yes.

It'd be three months.

Three months. Okay.

We'd be studying the usual end-points of pain -- pelvic pain -- pain associated with menstrual cycle and then other secondary end-points, as well.

So is it safe to assume that data would be available by the end of next year?

Definitely. Yes.

Okay. Thanks.

Thank you. And we'll take our next question from [Jeffrey Wright] with [Merlin Biomed]. Go ahead, please.

Yes. Hi. I'm just a little confused, so maybe you can just clarify. First of all, what are the end-points for this 15 mg MR study? And what exactly is contingent on the data for this new study?

I'm not sure what you mean by "contingent," but the end-point... This is the same trial we've done two or three times -- two-week outpatient treatment, 15 mg versus placebo. 240 patients. End point is total sleep time, measured by patients daily recording in a sleep diary. Therefore, we mean the total sleep time data for the first week and again for the second week, and compare that to placebo.

I guess what I mean by "contingent," is, is the filing waiting for this data? Or is the final dose selection waiting for the outcome of this trial?

No. The filing isn't waiting. Most of our activities related to the filing that have been complete related to analysis of all the studies. The data, the PK, PD, bioequivalent studies. Other things which have all been completed. So this study is done. Data is in-hand -- it won't delay the filing.

But you also said that you're waiting for final dosing selection as part of the filing for this study.

Right.

Did I have that right?

Yes. So it's based on the results of this study. We'd consider either filing or recommending a 15 mg dose or not.

I see. So if the study is not positive, then you'll go with the 20 and 30 mg dose.

Yes. Or some other versions. Which in either case is a win -- FDA obviously wants to find a no-effect or a minimally effective -- so this is to explore that. As I've told others in our Phase 2 program, we have evaluated 10 mg MR formulations and have found that to be minimally effective. What we haven't studied is anything between 10 and 20, and this study will round out that. Just like we did with the 5 mg IR.

Okay. So if this is negative, then again, you'll just go with the 20 and 30 mg.

Yes. Or some version thereof. A decision will be made with Pfizer.

What other version?

Of 20/30. It sounds reasonable for MR, because they're also various dosing selections related to IR.

Okay. Okay. All right. Thank you.

Yes.

Thank you very much. And there are no further questions, so I'd like to turn it back over to Management.

Okay. Well thank you everyone for participating. And again, if there are any follow-up questions, feel free to give me or Paul Hawran a call. And thank you once again. Bye.

Thank you for joining us, ladies and gentlemen. This conclude today's conference, and you may disconnect.