Neurocrine Biosciences Inc (NBIX) 2005 Q3 法說會逐字稿

Good day. All sites are online in a listen-only mode. [OPERATOR INSTRUCTIONS] At this time I would like to turn our meeting over to your main speaker, Mr. Gary Lyons. Go ahead, please.

Thank you, everyone for joining us for our third quarter earnings call. As you can tell from our press release it was an exciting quarter for us and certainly a standout quarter from a financial standpoint and very productive quarter from a research and development standpoint.

In San Diego joining me is Paul Hawran, EVP and CFO; Bob Little, Senior VP of Commercial Operations; Wendell Wierenga, EVP of R&D; and Claudia Woodworth [ph], IR Manager. The program for the day will be for Paul to review the financial condition, I'll comment briefly on Indiplon regulatory commercial and then most of the presentation will be done by Wendell to provide more color on our R&D activities over the last quarter. So with that, let me turn this over to Claudia to recite our Safe Harbor statement and then we'll go right to Paul.

Thank you. Before we begin, I would like to remind you of Neurocrine's Safe Harbor cautions. Certain statements made in the course of this conference call that states the Company's or managements 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 in or implied by the forward-looking statements is contained in the Company's SEC filings. Included but not limited to the Company's annual report on form 10-K and quarterly reports on form 10-Q. Copies of these filings may be obtained by visiting the Investor Relations page on the Company's website at www.neurocrine.com.

Any forward-looking statements are made only as of today's date and we undertake no obligation to update these forward-looking statements to reflect subsequent events for circumstances.

Well done. Let me turn this over to Paul.

Thanks, Gary. As Gary mentioned earlier we had a nice quarter. And turning out to be a nice nine months for us. I am going to confine my comments to the nine months ending September 30th.

For the nine months we have reported net income of 1.7 million or about $0.05 per share. That's compared to a loss of 25 million for the same period last year. Revenues went up to 110 million as compared to 66 million last year primarily result of license and milestone achievements that we received from Pfizer and in particular the 70 million milestone that we received on the acceptance of our two NDAs in Indiplon. There was a little offset by reduced sponsor development associated with lower expenses associated with the development of Indiplon.

As far as our R&D expenses are concerned, we actually maintained the same expense, approximately 82 million for this year as compared to 82 million for last year.

And then finally, going into SG&A we have reported about a $28 million expense as compared to 16 million, but I would say that of that 28 million, 14 million relates to the sales organization of which 14 million was actually reimbursed by Pfizer. So we are maintaining or controlling our expenses very well.

As far as cash is concerned we have ended the quarter at approximately 292 million that compares to slightly over 300 million at the end of last year December 31, '04.

In records to the financial guidance for the remainder of the year, we are lowering our projected loss for the year from 35 million down to 25 million primarily as a result of lower development expenses as well as milestones which we expect to receive from our collaboration with GlaxoSmithKline.

As far as revenue projections we expect revenues for the full year to be approximately 120 million to 130 million and we expect expenses to be operating expenses which includes both R&D as well as SG&A of approximately 150 million to 160 million. And with that, I'll turn this back over to Gary.

Thank you. The third quarter marked our first full quarter from a -- for our commercial sales organization of 200. We are targeting 200 psychiatrists, high volume prescribing psychiatrists and to date have made over 70,000 calls in this target audience so I think we are well positioned for the Indiplon launch and are actively looking for other opportunities for our sales organization be they co-promote or product to company acquisitions.

Indiplon regulatory is moving according to schedule. We remain optimistic in receiving a first cycle approval on our PDUFA dates which come up the middle of February and third week of March so everything is tracking according to plan in that respect. So with that, let me now turn this over to Wendell Wierenga who'll provide an overview of R&D activities.

Thanks very much, Gary. As we noted in our release we are reporting topline preliminary results from a driving study that we did with two doses of Indiplon 10 and 15 milligram.

This is part of our ongoing and I would say exhaustive safety analysis of the drug in many settings. It's not a regulatory driven study but, in fact, a study to understand all the safety implications of this agent.

And we are very pleased to say that in this four-way crossover study which was also controlled with Zopaclone 7.5 milligram and a placebo that Indiplon showed no impact on next day driving in the simulation upon dosing the evening before. In fact, the study involved dosing four different evenings with driving then the following day 8.5 hours after with the drug and the same, of course, for placebo and Zopaclone.

In addition there was no effects measured by DSST for example on next day functioning with the two doses of Indiplon again as distinguished from Zopaclone itself, which did show a statistically significant effect on DSST the next day. So the program, as Gary noted, is proceeding on track with the agency. And we are looking forward to an expansion of opportunities for Indiplon post approval as we expand the Phase 4 opportunities for the drug.

GnRH has been a substantial and now increasing program for Neurocrine and our lead compound, 418 as we referred to it, has been in a Phase II, 3-month endometriosis trial now for the last two quarters. We initiated this in the second quarter of this year. The enrollment has been proceeding well and we should finish enrollment on the study next month looking for topline results the first quarter of next year.

This is a trial of physicians who understand the dose response relationship versus the regulatory driven end points of the treatment for an agent of endometriosis. We have initiated, or I should say, we are about to initiate a second Phase II trial as we look at the full dose range here in the same population and this then together with our current study will provide the full panoply of dose response relationships here for our longer term six months trials planned in 2006.

In parallel with the activities we are initiating studies in benign prostatic hypertrophy or BPH, and we'll be filing an IND, since this is a different indication we'll be filing an IND shortly with the FDA to do a two-week study here in preparation then for the longer term trials which again will be three month trials in BPH in the latter part of 2006.

Lastly, I would note that as part of our strategy we have a backup compound under evaluation behind 418 and this agent is now in Phase I studies. We have begun dosing in males to understand the Pharmacokinetics tolerability and Pharmacodynamics in specifically testosterone levels upon dose escalation single dose followed by multiple dose with this backup agent in our GnRH program.

The Urocortin program, also moving along this year going now from volunteers in the early part of the year in a site that we were looking at all the hemodynamic responses to the agent in New Zealand at a specialty cardiology clinic there, has now advanced to mild to moderate CHF patients and we finished a cohort of patients here. Again looking at 25 and 100-microgram doses for one hour infusion, looking at the same hemodynamic end points we were seeing in normal volunteers and we're pleased to say, again, preliminary results that this agent is showing a similar response to what we saw in normal volunteers in terms of a significant increase in cardiac health but as well as a reduction in diastolic blood pressure.

There was also a modest increase in heart rate. Probably a bit less than what we saw with the normal volunteers but remember these patients now are on other medications which are controlling their heart rate and blood pressure to some degree. And lastly we did see also a drop in systolic blood pressure, really a very very similar magnitude to the diastolic blood pressure so we're seeing both the positive impact on cardiac output as well as a reduction in pre-load and after-load in patients as we saw in the normal volunteers.

We have had a pre-IND conference with the FDA to lay out our Phase II plan for them and we now have agreement with them on the strategy going forward in 2006, so we'll be extending, under an IND now in the U.S., this program into mild to moderate CHF patients for the first half of 2006 and then moving into acute decompensated heart failure patients in the second half of the year as we understand a little bit better not only the dose, but also the duration of administration which is another variable, of course, in treatments of patients with an agent such as Urocortin 2.

Our APL programs are pretty much on track. We've reported them over the last nine months now that the Phase II studies have been fully enrolled and are proceeding to readouts in the first half of next year. We will be seeing data in the end of the first quarter early second quarter on the multiple sclerosis with APL5788 and then several months later in type 1 diabetes with 6024 -- APL6024.

We are pleased to see from the data safety monitoring board review from both of the programs that the safety profile has been acceptable and, in fact, the dropout rates have been very low. We have been very pleased by that particularly for a trial such as the type 1 diabetes where treatment is for two years in the patient population.

The CRF program under development by GlaxoSmithKline now in Phase I is continuing on with its multiple dose program and should be wrapping that up in the early part of 2006 moving then into Phase II clinical trials and irritable bowl syndrome, depression and generalized anxiety disorders. They also, as part of our collaboration, will be taking forward a backup compound very shortly into the clinic as well. So this program is making good progress as we had forecasted a bit earlier this year and is on track for a Phase II evaluation of the lead candidate in 2006.

Lastly, I would add that we have plans for filing an IND the fourth quarter of this year for a new drug that has been in research in drug discovery here at Neurocrine for the past 18 months. We we began this program a year and a half ago and are now planning to go into Phase I clinical studies in early 2006. The target indication is treatment of insomnia.

The target for the drug candidate is an antagonist to the histamine type 1 or H1 receptor and we have engineered what we believe is a safe and very selective compound which is targeted exclusively to H1 and should provide for us in the early Phase I studies, of course, the readout of safety, Pharmacokinetics and we will obviously be looking at Pharmacodynamic end points that relate to sleep measures and if appropriately safe and the Pharmacokinetics are correct we will be advancing that into multiple dose studies in the second half of 2006.

So this is a new program for Neurocrine. We are quite excited about this and believe we have been able to engineer a very selective molecule that is against a validated receptor but will not have the liabilities of the well known H1 antagonists that are out there and have been under use for years but have severe limitations such as tolerance and side effects, next day grogginess and the like.

So that's a quick overview then, Gary, of our R&D program to date.

Okay. Thank you, Wendell, and with that we will be happy to entertain questions.

At this time if you would like to ask a question please press star one on your touchtone phone. To withdraw yourself from the queue a at any time you may simply press the pound key. Once again, to ask a question please press the star and one on your touchtone phone.

We'll take our first question from the site of Jim Birchenough from Lehman Brothers. Go ahead, sir.

Hi, guys. Just wanted to follow up with a couple of question on the driving studies. Just to start with, the 10 and 15-milligram doses that were tested, is that for the IR or the MR or was that split between IR and MR?

10 is IR. 15 is MR.

And any reason particular why you focused on those two doses? Do you have data at the higher 20-milligram dose?

No we are limited in the number of ARMs we could do and wanted one IR and one MR and we selected two most appropriate doses. We certainly couldn't span all six doses with placebo and with Zopaclone.

And just finally, is there any thought to inclusion of this type of data in the label or using this kind of data to I guess get rid of some of the restrictive language around driving after use of these drugs?

Certainly that is our longer term intent. At this point in time with our applications in to the agency the only information they have about these studies is in the 120 day safety updates so they have seen the safety information. Certainly longer term we would intend to have that.

Thanks for the question.

Okay. Anything else, Jim?

No, that the' great. Thanks.

Okay.

Thank you. Our next question comes from the site of Sabna Zervascada [ph] from Morgan Stanley. Go ahead, please. Your line is open. Please check your mute switch.

Hi, can you hear me?

Yes, we can hear you. Welcome back.

Thank you so much. Thanks a lot. A quick question again on the driving study if you can tell me the magnitude of difference with the Zopaclone with placebo in the study.

We can't go into the specific details. That is being reserved for publication. All we can tell you is that there was no -- there was a statistically significant difference.

And how do you measure impairment in this kind of endpoint?

Well, we actually have both primary and secondary endpoints that relate to various aspects of driving such that the course that the driver is on as well as speed and collisions and so a lot of this can be simulated very nicely in these driving studies.

So the primary endpoint that we are referring to where we saw no difference in terms of Indiplon 10 or 15-milligram versus the ideal driving course is what I'm referring to in terms of the primary endpoint where as there was a statistically significant difference with 7.5-milligram Zopaclone.

And just the last question following up on the questions asked before what kind of study would you need to conduct to actually get this on your label?

We are also looking at the actual driving type of trial as well. And you could view this as a prelude to that to understanding the dose relationship of the drug. It is not clear at this point in time if the studies as run are going to be ultimately acceptable to the FDA for labeling or if in fact an actual driving study will have to be done.

Thanks so much.

Your next question from the site of Matt Geller with CIBC. Go ahead, please.

Hi, Gary. The GnRH antagonist, first of all is that kind of the compound that we -- should we be focusing a lot on that compound? Talk about what we will be learning in terms of end points from the Phase II study and in terms of the backup compound do you see that potentially taking over for the weak compound and what might the advantage be of the backup compound?

Wendell?

Sure, Matt. The endpoints for this Phase II study in endometriosis are the CPSSF scores which are the combined pelvic size and symptom scoring system that the FDA accepts in this category. And they basically include a measurement of pelvic pain, of pelvic discomfort, dysmenorrhea dyspareunia and really within each of the actual five categories, there's four different numbers that the patient could put down to describe their symptoms and this is done, of course, on a monthly basis throughout the study.

This will tell us then, what the correlation is with, frankly pain as the primary driver here in this patient population, with the estrogial levels that we've seen in the premenopausal women where we were treating with the same doses of the drug, that is 50 and 150 milligrams once a day. Where we did see a nice dose response down to the 20 pico-gram per mill level with the higher dose for example on 6 weeks of dosing.

That is the main focus of the study and we have a second study that we want to explore completely than the dose response relationship here again with three months of treatment. We are getting, of course, other data in the study. We're getting pharmacokinetics we're getting other pharmacodynamic data, safety information and so on.

The backup compound at this point in time is very similar in terms of its pharmacological profile. It has a slightly longer half-life and a slightly different potency ratio but otherwise we are viewing it mainly as insurance for the scenario in which 418 would develop some flaw going forward here in longer term trials. We want to have a compound that's closely behind 418, that would be at least as good if not even better at that we could go back to if in fact we run into a problem with 418. It's a full backup. Not a secondary type of agent.

Thank.

Thank you.

Thank you. Our next question comes from the site of Matt Duffy with Black Diamond Research. Go ahead, please.

Hi, guys. Thanks for taking the questions. Just a couple of things on the driving studies to go back to that for just a second. Give us a sense of the timing of the doses. Was it before bed time and then when were the driving tests given? When was the simulator done, how many hours after the dose? And did you fall sleep end points. I realize they were healthy volunteers but did you follow those at all?

We did not. These were dosed at 10 o'clock in the evening and then 8.5 hours later the patient or volunteer as the case would be was woken up and then the driving study was conducted one hour after that. So it was set that way on an every other day basis. We did this over 8 days. One night dosing, driving study the next day, a day off and then repeat that again four times. So that was the protocol the paradigm was the crossover. We had 30 volunteers in the study so every individual saw placebo the two doses of Indiplon and Zopaclone.

And on the Urocortin 2, can you give us a little bit more color on the baseline characteristics of the patients and the degree of their disease and then any sort of color in terms of the magnitude of the changes in blood pressure, heart rate or cardiac output.

Sure. Remind you again that this is a very small cohort. 8 patients. They are Class 2 and Class 3 neuro heart classification CHF patients on beta blockers or inhibitors in most cases here. The individuals are coming into this study with systolic blood pressures generally in the range of about 120 to 130, and their diastolic around 90 to 110 and so.

What we're seeing is a dose related increase in cardiac output of 20 to 40%. Measured during the time and four hours after infusion during the one hour infusion and four hours after. The heart rate increases that we are seeing are relatively modest, 6%. And in several individuals it got up to about 25-30% increase in heart rate. But excuse me. 15%. Sorry. The blood pressure changes were generally in the range of 10 to 15-millimeters.

That's from baseline.

That's from baseline.

Thank you very much.

Thank you. Our next question comes from the site of David Woodburn with Prudential Equity Group. Go ahead, please.

On the DEA scheduling, president doesn't seem to show it, but is there any possibility of getting the DEA to start their process earlier than the February PDUFA date?

Yes, we have already done that. We are already interacting with them both at the federal level as well as at the local manufacturing level. I think the plan would be upon acceptance or approval of the IRs to immediately seek the license which hopefully would come in at around the same time as an MR approval for example so the scheduling would not be expected to stand in the way of launch or delay it.

All right. Great. Then more of a more general question. How is your base R&D expense likely to change over time? And I mean base R&D as essentially R&D that is not reimbursed. I mean, you've go new compounds coming into the clinic that aren't necessarily licensed yet.

Essentially the way that we view our R&D is that we have a steady state group of individuals that can produce one IND per year. And moving that forward. Now, in order for us to maintain the right level of R&D expenses recall that the big expense is really the Phase 2 and Phase 3 external development cost and to that extent we would be looking to partner with external parties, or for that matter to get proof of efficacy before we actually go into partnering. A combination of both driving revenues as well as -- as well as maintaining expenses. Now, as far as internal and external R&D expenses we are looking to hold it at somewhere around $75 million going forward.

Okay great. And then one last one if I can. You mentioned publication of the driving study data. Any chance that would be in a printed form by the time the Indiplon launches?

I'm not sure. The data is too new to know. We are working on many publications and have a target number of print publications that are expected to be in place for sales force at launch and I'm not sure if this is one of those or not.

Great. Thank you very much.

Thank you. Our next question or comment comes from the site of Thomas Wei with Piper Jaffrey. Go ahead, please.

Thanks very much. Just a follow-up question on the driving study. When you talked about it being statistically significantly different do you mean relative to placebo or versus Indiplon or versus both?

There was no statistical significant difference between either Indiplon dose and placebo. There was a difference between Zopaclone and placebo.

Did it statistically separate versus Indiplon the Zopaclone ARM.

There was no dig difference between Indiplon and placebo but there was with Zopaclone. So by definition there is a separation, yes.

I wanted to reask the question about the doses in the study wouldn't you be most curious about the maximum dose that you are going to seek approval for on the label? And should we imply from that that the top end of the dose range here is going to be 15?

No, I think it was a decision to select one IR dose and one MR dose. This was the first study that we have done as Wendell said sort of an experiment before we went to an actual driving study and an attempt to see that next day sedation or lack there of didn't correlate with driving impairment which turned out favorable. So, no, you shouldn't imply anything about the dosing selection.

And I would add in the longer term studies where we studied 20-milligram MR and is a milligram MR, of course, with the 20-milligram going out to three months and longer, the 15 at least a month, the differences that we have seen in next day residual effects are not really different and so we think 15 is actually quite representative of what we would see with 20 here as well.

Okay. And do you know in that study if you look at the -- you had mentioned that you did measure some of the next day residual sedation scales like DSST. Does the difference in the driving Simulation scores also reflect a difference in DSST scores with Zopaclone and Indiplon.

Yes, they track.

And then just finally you had mentioned and we are right around the time of the 120 day safety update. Is there anything else that went into the FDA that would be notable new studies or extended follow-up, anything that we should be aware of.

No, we are actually beyond the 120 day safety update and have submitted everything that is ongoing. So no, there is nothing.

Okay. Thanks very much.

Okay.

Our next question or comment comes from the site of Ian Somaiya with Thomas Weisel Partners. Go ahead, please.

Thank you for taking my question. Just a follow-up question for Wendell on the GnRH program. What would be the hallmark or classic side effects that you would expect from the GnRH antagonists?

I'm sorry, Ian.

What side effects you would expect is that your question?

Yes.

What we have seen so far from the six week study was minimal. Everything we saw was mild. There was some GI upset but it was very infrequent. In fact, it was difficult to see separation from placebo. With the doses that we were studying in the 6 week study. At this point in time, of course, our endometriosis study is placebo controlled and blinded so we don't have a dose nor a placebo relationship yet with any sort of the AEs that we are seeing but I can say that globally in a blinded fashion we are not seeing anything new here in the patient population relative to what we saw in the six week study. Remarkably different from given a GnRH antagonist for example.

How often are the patients being monitored for side effects?

They're being actually -- we're doing this with an electronic diary so they're actually measuring their results every day. But we're basically looking at weekly scores and then we set it up from a statistical point of view to look at it from a monthly readout with three months, of course, being the final readout but we are seeing safety data from them every day basically.

All right. And can you just give us a general update on the type of trials that are being conducted with Indiplon and the type of data that we can expect between now and I guess the time of the drug's launch?

Well, all the registration trials are complete and submitted and you have seen the data either at sleep meetings, psych meetings or press releases or publications to be forthcoming. All other studies now ongoing are being run by Pfizer. They're Phase IV studies and I think you can assume what those indications are but that is about as specific as we can be.

What about just the timing of the data from the Phase IV study.

Post launch. The plan is to make sure all the registration studies are published and usable to support launch and Phase IV results will follow.

Thank you.

Thanks.

Our next question or comment comes from the site of Elise Wang with Citigroup. Go ahead, please.

Hi, thank you. Just a follow-up. Are there any other studies that either yourselves or Pfizer are conducting that is a head-to-head comparator type study of Indiplon versus any of the other sleep aids and if so can you tell us more about those studies?

I don't think we talked about that. Pfizer would be conducting those studies so not much I can say about that.

But there are in fact those type studies going on.

I can't confirm or dispel that.

Okay. And then just to follow up in terms of release of data at upcoming meetings could you give us a little more detail as to what -- what studies we could expect to be seen at some of the medical meetings coming up in the spring time or even near term.

Yes. Bob?

We have a number of we don't go into specifics but we next year are expanding our congress and symposia presence quite significantly of course with Pfizer as we are moving now, out into the primary care arena as well around launch. I can't go into the list it's quite exhaustive but we have actually over 50 abstracts being submitted next year to around 20 congresses.

We will be present at the ones we have previously at APA and APSS as well as -- we should also add that we just recently are bringing on board a scientific team or medical information team so we will be present at some of the other congresses during 2006. So this will be a very broad and obviously as you know we have a huge database to draw from both not just the primary but secondary analyses of 5,000 patients, 16 Phase III studies so there will be a long list of abstracts that will be rolling out during next year. As well as, of course, a number of primary publications that we will have available at launch.

Okay. And then in regards to the sales force that you now have in place I know the intent has been to find other products that you could leverage that team in. Give us an update on how you are progressing on that front?

We are progressing but slowly. Haven't made any announcements but the idea would be to be opportunistic. We are having various discussions with potential of the co-promote partners and also looking at Company and/or product acquisitions. Doing this both in the U.S. and Europe and Japan so when we can find the right fit that makes strategic sense and we are convinced can positively impact earnings in the first three year period that is, you know, we are certainly not constrained by cash or currency or willingness to do the deals. A matter of finding the right opportunity.

One question to follow up on that. What type of terms are you looking to construct around those product type of deals?

I think we are totally flexible. I have no preconceived notions of terms. Would have to be a deal that made sound financial sense and also made strategic sense so we wouldn't be going too far astray from our customer base.

Okay. Thank you very much.

Um-h'm.

Thank you. Our next question or comment comes from the site of Phil Nadeau with S.G. Cowen. Go ahead, please.

Good afternoon. Thanks for taking my question. My first question is on Medicare Part D. Do you know how Medicare is handling sleep drugs? Are the current offerings being included on formularies and if so, in what position?

In terms of offerings, do you mean such as Lunesta, Ambien, CR, at this point we don't have the information as to where they are on formulary and whether they will be on formulary in the future. We are obviously heavily engaged with Pfizer's managed care organization, looking at the implications around the Medicare reform and we'll obviously have strategies in place to address that.

Do you expect Indiplon to be included on formulary?

Couldn't comment on that at this time.

Okay. My second question is on the FDA approval. Gary, I think it was you in your prepared remarks you said things seem to be on track for approval around the PDUFA dates. What gives you confidence that the approval could come around the PDUFA date? An absence of problems from the FDA or is there anything positive that is going on and could you also remind us whether it is you or Pfizer that is handling the day-to-day discussions with the agency. Thanks.

It is Indiplon the Indiplon NDA is held by Neurocrine. Our interactions with regulatory agencies are from Neurocrine but with total alliance support from Pfizer and whatever that strategy is. The confidence is simply I think we have done the most comprehensive registration trial and program, have submitted a complete package, have obviously tracked other submissions that have gone to the neuropharm agencies that we don't think are as robust as the Indiplon data package, so we remain optimistic that we have identified and done the necessary trials to over come any obstacles.

Thank you.

Thank you. Once again, if you would like to ask a question press star one on your touchtone phone. To withdraw from the queue at any time press the pound key. We will take our next question as a follow-up from the site of Jim Birchenough from Lehman Brothers. Go ahead, please.

Hi, guys. A couple of follow-up questions. On the CRF program, could you just let us know what the gating factor has been in moving from Phase I to Phase II. Is is safety and can we assume in Phase II any theoretical safety concerns have been ruled out?

We deliver in the three year research phase. That program went through preclinical testing and went into extended Phase I testing in what you would expect to be the reasonable amount of time so the transition to Phase II is now anticipated to happen in early '06 after having completed multiple dose Phase I.

So this program has gone nicely also the selection of the backup compounds that will start Phase I's has gone relatively quickly. I think what you may be referring to is that this has been a difficult target, our prior experience with Johnson uncovered liver enzyme elevations in Phase II other programs encountered different types of toxicity. Perhaps we are all looking to do a better job preclinicly in Phase I is to ensure we don't lose compounds in Phase II. I think this has been very quickly with GSK.

Moving fine. They are getting pharmacokinetics along about the safety information and will be doing challenge studies to understand the drug a little better before initiating the Phase II program but no doubt about it safety will be the primary hurdle here given the history of this area of research.

And just to digress one more time to the driving studies just so I understand the four-way crossover. Is that to say each patient received placebo, Lunesta and each of the two doses of Indiplon is that how is worked?

A volunteer on night one will get drug X or placebo Y and then two nights later the next and then happens four times. A four-way crossover.

So every patient gets every dose of a placebo, but they get Zopaclone, not Lunesta.

Okay. Understood. Thanks.

Thank you. Our next question or comment comes from the site of Tim Ackerman with SAI [ph]. Go ahead, please.

Thanks for taking my questions. First question for you from what I understand the 10 milligram capsules are being studied for sleep maintenance. Will this still enable you to get a middle of the night dosing indication if the capsules are being studied for sleep maintenance. The second question is whether or not the capsule formulation with data only slowing four hours of sleep maintenance will actually be enough for the FDA to approve the product for that indication?

Bob, you want to take the first one?

Yes, first of all, yes, we have data in both use of the 10-milligram capsule during the night as well as for sleep maintenance and I think the data we presented shows a robust schedule for the 10-milligram as well as the ability to use the dug during the night when there was four hours sleep remaining.

In the studies with the IR primary endpoints have been sleep onset, secondary endpoints have been maintenance and based on two positive studies where the IR showed both onset improvement and sleep maintenance beyond four hours. I forget what the actual numbers were but added is sleep maintenance then we think that would immediate the regulatory requirements and labeling as approval. Okay. Did I answer the question?

Yes, thank you.

Okay.

Thank you. Our next question or comment comes from the site of Shankar Basu with Basu Capital. Go ahead, please.

Thank you for taking my question. Regarding the age group where you studied the 10 and 15-milligram dose, the IR and MR and new driving study what age groups did you study and I'm wondering if expand that into other age groups as well to broaden the label?

These were healthy male volunteers.

Of age below 45 below 65 or doesn't matter?

Below 45.

Thank you very much.

Thank you. Our next question comes from the site of Eun Yang with Jefferies. Go ahead, please.

In terms of the launch plan does Pfizer plan to launch the two formulations at the same time or are they planning to launch each formulation sequentially?

No, the way we collectively the alliances looked at this is to launch both, they have a full product offering capsules and tablets.

In the event that hypothetically with the MR is being delayed further then you going to hold on to Pfizer is going to hold on to the IR?

Would we launch one without the other. That would be an alliance with Pfizer decision and we are right now planning for launching both together.

Okay. Thanks.

Through thaw. A follow-up question from the site of Thomas Wei with Piper Jaffrey. Go ahead, please.

Sorry, I thought that I had taken myself out of the queue.

It's all right, you don't have to ask a question if you don't want to, Thomas.

I'll ask one other question. The split in the division to division of psychiatry products and the new acting director of that division, can you give us any color around how that's changed your review process at all?

It hasn't. It hasn't changed. We are -- we are with neurology and, Doctor, Katz division and Thomas Lundgren [ph] as you know is in charge of the psych division.

I see. So you are under the neurology products?

That's correct.

All right. Thanks very much.

And everything has been and there has been no impact. I think we have one more question and then I'll offer up individual calls if any would like to follow up with Paul or I directly.

Thank you. The final question comes back from the site of Tim Ackerman with SAI. Go ahead, please.

Given that the sleep trial involved 20 and 30-milligram doses of the tablets, will those three month trials be sufficient enough for the 15-milligrams to essentially get removed off the 7-10 day restrictions associated with the current sleep meds?

We fully believe it will. Obviously we have three and six month data on 10 and 20 IR also. We have one month data on 15 and 3 and 6 month on 20 and 30 so we think we spanned all eight the appropriate time spans with the appropriate doses.

What are you doing to prep the marketplace for the introduction of Indiplon?

I'll to defer on that in -- we'll be ready.

Okay. Good.

Okay. And thank you very much for joining us. A lot to talk about this quarter and look forward to doing this again end of the year. Feel free to call Paul or myself directly if there are any follow-up questions. Thanks and good day to you.

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