OPKO Health Inc (OPK) 2014 Q2 法說會逐字稿

Greetings and welcome to the OPKO Health top line Rayaldee results and second quarter 201 financial results conference call.

(Operator Instructions)

As reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Steven Rubin, Executive Vice President, Administration. Thank you, Mr. Rubin. You may now begin.

Thank you and good morning Before we begin I would like to remind you that any statements made during this call which are not historical will be considered forward-looking and as such will be subject to risks and uncertainties which could materially affect our expected results. Including without limitation the various risks described in our annual report on Form 10-K for the year ended December 31, 2014, and our subsequent filings with the SEC. With that I'll turn it over to Dr. Frost.

Good morning. This is Phil Frost, the Chairman and CEO of OPKO. I'd like to just say a word about the format for today's session. We will start with Charlie Bishop, the head of our renal division, who will provide an overview of the Rayaldee clinical problem program which reported positive top line results from the first of two fibral phase 3 trials yesterday. He'll be followed by Scott Toner, our head of marketing for OPKO's Renal Division, who will then discuss the market opportunity for Rayaldee.

And he will then be followed by David Okongly, the head of OPKO's Diagnostic Division, who will provide an update on our recent 4KScore launch and progress in the development and commercialization of Claros 1. Adam Logal, our Chief Financial Officer, will then highlight our financial results for the quarter, and I will follow that by a very brief wrap-up. This is a very important time in the history of OPKO.

For several years now we have been putting together a group of what we consider to be very important products in several fields, and each of the projects in these fields seems to be coming to fruition in a very positive way. These are projects in the field of chronic kidney disease and urology and endocrinology. And in addition to the products that you'll hear about this morning, our plan is to (technical difficulty) a varied program (technical difficulty) a clear basis (technical difficulty) and additional progress so that we can develop franchises in each of these specific areas.

You will hear about Rayaldee as an example of the (technical difficulty) -- kidney disease, human growth hormone and endocrinology and also Factor VII for hemophilia which is in a related field, hematology. You will also hear about our efforts in the diagnostic field which directly relates to our effort in urology for the moment, but also going forward with the vitamin D test that we are developing will add to our endocrinology business. So with that brief introduction, I will introduce Charlie Bishop who will tell you about the Rayaldee.

Thanks, Phil, good morning. I'm Charlie Bishop, CEO of the OPKO Renal Division. I'm pleased to report to all of you that the first pivotal phase 3 trial with Rayaldee is a success. Top line data showed that the trial met all primary efficacy and safety end points. We expect to un-blind the second identical pivotal trial in September, giving us the required efficacy data to support our forthcoming NDA submission targeted for the end of 2014. Here is a quick rundown on the study design and the top-line data.

The trial was randomized double-blind placebo-controlled design. The main objective was to determine if Rayaldee safely and effectively treated secondary hyperparathyroidism by correcting the underlying vitamin D insufficiency. A total of 213 patients were enrolled, all of whom had SHPT, stage 3 or 4 CKD and vitamin D insufficiency.

Enrollment was stratified to achieve an equal number of patients with stage 3 and 4 CKD or chronic kidney disease. Patients were randomized in a two to one fashion to treat them with either Rayaldee or a placebo, and excellent balance was achieved between the Rayaldee and placebo groups for gender, race, ethnicity and age. The Rayaldee and placebo groups did not differ with regard to mean baseline characteristics including severity of SHPT and vitamin D insufficiency, renal function, routine laboratory parameters and body mass index.

Dosing started at one capsule per day and was increased as necessary to two per day. In the Rayaldee group, each capsule contained 30 micrograms of [calcipidial],a vitamin D prohormone. Dosing continued for six months. The primary efficacy endpoint was the percentage of patients in the Rayaldee and placebo groups who achieved the required PTH lowering response. PTH, of course, is the abbreviation for parathyroid hormone.

The trial was declared successful if this percentage was significantly higher in the Rayaldee group compared with the placebo group, meaning that the probability or P value had to be less than 0.05. The P value for this study turned out to be 0.0002, meaning that this was a highly significant result. The primary safety endpoints included the usual list: treatment emergent adverse events, routine lab parameters, vital signs, physical exams and ECG measurements.

Analysis of the primary safety endpoints showed no significant differences between the Rayaldee and placebo groups. A key secondary efficacy endpoint was the percentage of patients whose vitamin D insufficiency was fully corrected. 96% of patients treated with Rayaldee achieved vitamin D adequacy. Overall, the results of this first pivotal trial demonstrate that Rayaldee can safely and effectively modulate PTH and correct vitamin D insufficiency in stage 3 and 4 CKD.

Here's a quick summary of the phase 3 clinical program for Rayaldee. The program includes three clinical trials which are intended to support FDA approval. The two six-month, double-blind placebo-controlled trials are identical and governed by a common protocol. The protocol and statistical analysis plan governing the conduct and analysis of the two pivotal trials were included in a Special Protocol Assessment, or SPA, established between the FDA and OPKO in August 2012.

In this SPA the FDA agreed that the design and planned analysis of the studies adequately addressed the objectives necessary to support an NDA submission. As we've just discussed, the first pivotal trial is a success. We expect the second pivotal trial, which is identical, to be successful, too, enabling an NDA submission later this year. The top-line data from the second pivotal trial will be available next month.

Patients completing the two pivotal trials are being treated at their election for an additional six months with Rayaldee during a third open label extension study which will provide safety data on 12 months of treatment. More than 80% of completing patients have elected to roll over into the extension study. The extension study will yield sufficient safety data by late September to support the planned NDA submission.

The need for Rayaldee is plainly apparent in the United States. There are approximately 8 million patients with stage 3 or 4 CKD, and at least half of these patients suffer from vitamin D insufficiency and the resultant secondary hyperparathyroidism, or SHPT. Primarily nephrologists and endocrinologists care for these patients, and they can be effectively reached with a small specialized sales force.

Over-the-counter or prescription nutritional vitamin D products are currently used to treat about one-third of the stage 3 and stage 4 patients. It's widely recognized that nutritional vitamin D is safe. But Doctors Kalentar-Zadeh and Kovesdy recently published a comprehensive review of clinical trials conducted with nutritional vitamin D in CKD patients, and the study concluded -- this paper concluded, and I am quoting the article, most of the studies have shown either no or minimal to inadequate changes in PTH levels.

Vitamin D hormone drugs such as calcitriol are used in approximately another third of these patients, but they are cautiously used in subtherapeutic doses to avoid oversuppressing PTH, which causes adynamic bone disease hypercalcemia, which is excessive blood calcium, and vascular calcification. It is well-established that vitamin D hormones and analogues are far more likely to cause PTH oversuppression and hypercalcemia than nutritional vitamin D when used at therapeutically relevant doses.

Therefore, experts caution that vitamin D hormones should not be used to treat secondary hyperparathyroidism arising from vitamin D insufficiency. Given that there are at least 4 million patients with SHPT derived from vitamin D therapy, or about 4 million to 4.5 million patients, if we were to price Rayaldee at the lower cost range of vitamin D therapy, which is $3000 per year, the US CKD market alone represents a potential $12 billion revenue opportunity. Now we are approximately 1.5 years away from launch, so we have plenty of time to sharpen our pricing strategy and to adjust it as necessary. There's plenty of room for adjustment, as you can see.

Why is Rayaldee the solution to the unmet need? Rayaldee is a modified release oral formulation of 25 hydroxy vitamin D 3, the prohormone form of vitamin D 3. This prohormone is a blood-borne storage form of vitamin D and is monitored by physicians to determine the vitamin D status of their patients.

When the blood level is adequate, this prohormone is converted in functioning kidneys to a vitamin D hormone known as calcitriol. When the blood hormone level is low, a condition known as vitamin D insufficiency, the kidneys make and secrete too little calcitriol into the blood.

This situation causes the parathyroid glands to secrete excessive amounts of PTH leading to the development of secondary hyperparathyroidism. The modified release formulation is the key to Rayaldee's efficacy, since slow release of the prohormone avoids up-regulation of the vitamin D catabolic enzyme known as CYP24 which produces resistance to vitamin D therapies.

Rayaldee gradually and progressively lowers elevated PTH by correcting the underlying vitamin D insufficiency. At this point, I'd like to turn the teleconference over to Scott Toner, Vice President of Marketing and Sales for the Renal Division. Scott?

Thank you, Charlie. Good morning, everyone. As most of you can imagine, given that we are still a year or so away from launch, we're spending a considerable amount of time conducting research to understand the current practices for treating secondary hyperparathyroidism and vitamin D insufficiency, particularly among nephrologists, endocrinologists and others of our key stakeholders.

What I'd like to do in the few minutes I have this morning is to give you a glimpse into some of the findings from our research that give us great assurance that we're looking at a very substantial opportunity for Rayaldee. Starting with our primary research with nephrologists and endocrinologists, it's probably not surprising to you that we confirmed, as Charlie said, that both secondary hyperparathyroidism and vitamin D insufficiency are widespread among the CKD 3 and 4 population. But we've also confirmed now that treating both are a significant priority to this group of physicians.

With regard to correction of vitamin D insufficiency, we found that both nephs and endos are routinely checking for vitamin D insufficiently -- insufficiency, and typically they attempt to normalize it very shortly after it's diagnosed. What we found even more interesting, though, is that although over-the-counter and prescription nutritional vitamin D products work for certain patients, there's a substantial proportion of patients that are unable to achieve the targeted levels of 25 D regardless of the dose regimen or formulation of the nutritional Ds that they are used -- that are being used with them. So with regard to vitamin D insufficiency, we've been able to confirm that there is a clear unmet need in a substantial portion of these patients.

Turning now to secondary hyperparathyroidism, the most commonly used hormonal form of vitamin D in this population is calcitriol, and it's reported to be quite effective in suppressing PTH. However, as Charlie said, there's widespread concern among clinicians, particularly the nephrologists, that it can lead to oversuppression of PTH and contribute to adynamic bone disease and mineral metabolism disorders. And in fact what we're hearing, that many, if not most, of the clinicians actually end up switching their patients from nutritional therapy or from hormone therapy when they develop SHPT rather than adding it to the nutritional vitamin D.

Of course, not surprisingly, when they do this, this usually leads to declining levels of circulating 25 D. Basically in a lot of cases we are hearing that they are choosing to treat either SHPT or vitamin D insufficiency but not both. And while it would seem irrational on the surface to stop treating vitamin D insufficiency in favor of treating only SHPT, it actually makes sense from the standpoint that hormonal products tend to exacerbate mineral metabolism disorders, and this leads to clinicians having to try to titrate phosphate binders, nutritional and hormonal forms of vitamin D in order to maintain control over calcium phosphorus [in] PTH. And it simply becomes too complicated for many clinicians to actually want to deal with.

So now in addition to asking about their current treatment practices, we went on to share with them a product profile that represented what we believed could be the Rayaldee clinical study results. And the response, based on the Rayaldee product attributes that we presented to them and the way that they are currently practicing, they expressed a high degree of interest in trying Rayaldee.

In summary, our early qualitative research with nephrologists and endos has shown that there is a clear unmet need for a product that could simultaneously correct both vitamin D insufficiency and SHPT, and there's a high degree of interest in trying Rayaldee once it's approved. In addition to the research with clinicians I just outlined, I can tell you that we are also recently initiated research with both payers and patients, and we expect to have something to share with you with regard to those findings on a future call.

And at this time I'd like to turn the teleconference over to David Okrongly, the President of OPKO Diagnostics.

Thank you very much, Scott. I'm David Okrongly, President of OPKO Diagnostics, and I'm going to talk about three things today. First is a launch update on the 4Kscore test which is the only blood test for identifying high-grade aggressive prostate cancer. Then I'm going to talk about the reimbursement progress we're making with the 4Kscore test, and then I'll conclude with a discussion about the Claros 1 and our preparation for FDA submission on the total PSA and testosterone assays. The 4Kscore test was launched in March 31 of 2014.

We had a highly enthusiastic reception at the AUA, at the EAU prior to that, the Spanish national conference we had a plenary address there in June. And we continue to have strong interest -- we'll be presenting in Brazil at the Congress for Brazilian Neurology in November and also in Mexico at the Mexican Urology Society meeting where we have plenary addresses as well. So a lot of enthusiasm for the test. People are really seeing this as a way to help reduce the overdiagnosis and overtreatment associated with traditional prostate cancer screening.

We now in the US have over 170 neurologists that are ordering the test, have ordered the test. We are seeing a very strong ramp in sales. We expect that to continue over time, especially as we work further and further into the reimbursement, and also with a boost that we've now put into place which is our medical affairs team.

We've added Dr. Mitch Steiner, Dr. [Jane Newmark] and Dr. [Granham Sant] to our team of medical affairs people that will now be working directly with urologists across the United States and really educating them about the 4Kscore test and how this will improve not only the situation for their patients but also help to convince the primary care physicians that there is a new test available in the marketplace that will help to manage those patients that are now not being referred to the urologist.

We've also extensively renovated our website, both the physician and patient sites, and now we've now begun to social media to get the word out about the 4Kscore test. On the reimbursement side, the reimbursement process in the United States requires us to get a -- what's called a CPT code. This is a reimbursement code that is issued first through the AMA CPT committee and then used by both the Medicare payers and private insurance payers to code for our tests.

We submitted that application on July 3. We expect to have the -- a unique CPT code issued to us early in 2015 which will then give us the ability to start billing for the test. Also ongoing with various members of Congress and with the healthcare agency involved in healthcare, veterans affairs and men's health issues. We think it's very important to have the support of the [guild] and also the agencies to really educate them about the issues that are facing us in abandoning prostate cancer screening which is what the United States preventive service task force has recommended doing.

We think the answer is to screen smarter, use PSA to screen men, but then take these men that are at higher risk for prostate cancer and run a test like the 4Kscore test to determine appropriate next step. Lots of conducting various meetings with private insurance payers as well as some of the [macs] that can make local coverage decisions to basically take away the major headwind we have with the 4Kscore test which is the fact that it's out-of-pocket pay right now.

I'll conclude now with the Claros 1, which is our physician in office analyzer for doing rapid finger-stick blood sample testing. The machine is actually well done, we've been using the instrument as it is for now several years. We've been actually developing the test for both total PSA and testosterone to really build out our urology franchise and provide them with two of the highest volume tests currently conducted in the urology office setting. We've submitted our pre-submissions to the FDA for both those assays, and we are expecting to begin on our clinical trials in the third quarter or early fourth quarter and to complete those rather quickly since these are both 510-K submissions.

We have also made, as I alluded to in some earlier calls, major improvements in volume and quality of our manufacturing. And we've now just added an entirely new robotic system which is now undergoing its final validation for producing 6 million cassettes per year in our manufacturing facility near Boston, Massachusetts. So, great progress on Claros and, at this point, I'm going to turn it over to our CFO, Adam Logal.

Thank you, David, and good morning, everyone. We ended June with approximately $134 million in cash and cash equivalents providing sufficient liquidity to complete the development of our ongoing late stage clinical programs. We strengthened our balance sheet during the quarter by retiring $70 million of convertible debt through a privately negotiated exchange transaction which also resulted in over $2 million in annual cash savings through the avoidance of future interest payments.

Cash used by operations during the first six months principally reflects our ongoing investments in Rayaldee phase 3 clinical trials as well as our ongoing human growth hormone development programs. Turning to revenue, OPKO's pharmaceutical operating unit showed positive results during the three- and six-month periods with 15% and 21% increases in year-over-year product revenue growth. Total revenue for the three and six months of 2014 was $23.5 million and $45.8 million, compared to $23.8 million and $55.2 million for the comparable periods of 2013.

These decreases were the result of nonrecurring license revenue recognized during the three and six months of 2013 of $2 million and $14.5 million. The nonrecurring revenue was partially offset by our increased pharmaceutical product sales driven by our Israeli API business FineTech, our European business at OPKO Spain, as well as our Mexican operations.

As David outlined, as we continue to see increases in the option of the 4Kscore test and the launch of the 4Kscore test in Europe next month, and elsewhere shortly thereafter, we expect to see revenue build over the coming quarters. We also anticipate receiving the first milestone from Tesaro upon the acceptance of their NDA on filing in mid-September.

Our net loss for the three and six months increased in comparison to the 2013 period as the result of our significant investments in our development programs for Rayaldee and human growth hormone along with our other earlier stage programs. Research and development expense increased $6.7 million to $16.2 million for the three months and increased $16.7 million to $37.2 million for the six months ended June 30, 2014.

In addition, we recorded nonrecurring process research and development expense related to the acquisition of Inspiro during the second quarter of 2014. As a result, net loss was $25.5 million for the three months ended and $70.0 million for the six months ended June 30, 2014, in comparison to $3.4 million and $38 million for the comparable periods of 2013. I would like to turn the call back to Dr. Frost for some closing remarks before opening the call for Q&A.

Thank you, Adam. I'd just like to finish by emphasizing a few of the products in the pipeline that are slightly earlier stage. Yesterday we announced -- or a few days ago we announced that we are expanding our Rayaldee program to evaluate its possible efficacy in the treatment of cancer and other diseases such as multiple sclerosis. The literature is replete with data indicating that vitamin D insufficiency is important in the development of these as well as several other diseases. Factor VII was mentioned.

The product that we are developing possibly can be in human trials by the end of the year, and it is a -- again a possible game changer for the people who suffer from hemophilia and require this product. Normally these patients come to the hospital after a bleed to get a replenishment of Factor VII, which they are missing, and they have to get it by intravenous infusion.

Our product, being long-acting, first of all, can be given with a subcutaneous injection, and, because it's long-acting, we hope to provide a new paradigm for these patients by having it used prophylactically in which case they can take it at home and avoid the bleeds. It's important to avoid these bleeds, because they do damage to the joints and to the cardiovascular system and often lead to chronic disease and even death.

In closing, I will mention one product that the people around me know is one of my favorites, and it's called oxyntomodulin. Oxyntomodulin is a naturally-occurring hormone that is produced in the gut in response to a meal. It is the designed -- it's nature's way of, I should say, of controlling our appetite so that we avoid overweight and obesity. Now, what it does is goes to the brain after a meal, and it goes to the [sytogy] center and makes you feel full. It also goes to the liver and goes to a receptor that controls sugar metabolism.

We have wonderful animal data showing that in two mouse models that it -- that it can control the appetite, and these animals wind up looking -- after birth they eat a lot, and they get enormous and develop type 2 diabetes. Our product, given once a week -- and this is a big issue because a problem with this product, although it's been known for a long time, is that it's very short acting. Given once a week, makes them eat normally, they shrink back to their normal size, and the type 2 diabetes goes away.

We hope to have this product in human trials sometime around the end of this year. You may know that overweight and obesity is a crisis around the world. Mexico, for example, has declared overweight and obesity a natural -- a national crisis and needs to be attended to. So the number of patients around the world is so huge that I think that this has the hope of offering relief to the many people who need it, especially since these problems lead to chronic diseases which are the main causes of health spending, health care spending around the world.

So from an economic point of view as well as a personal health point of view, I think a product like this can be -- make a huge contribution, and we're all, I think, very enthusiastic about this as an example of our whole array of products, all of which have big potential. With that, I think we will open the floor to questions.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Charley Jones, Barrington Research.

Good morning. Thanks for taking my questions. I was hoping you can start with Rayaldee. One of my first questions is whether or not this product is -- how big this product could be for the MS and metastatic bone cancer market. To go little bit further than that, I'm curious -- whether or not this is an appropriate drug or some formulation of this drug would be appropriate for people in general with vitamin D deficiency? Or whether or not it's really more appropriate for just the CKD SPHT product group.

Hi, Charlie, thanks for the questions. At this point we only know enough about Rayaldee to say that it is suitable for use in the chronic kidney disease population to treat secondary hyperparathyroidism. But, as Dr. Frost, mentioned just a little while ago, we are beginning plans to expand our clinical studies to examine the potential utility of Rayaldee in other disease indications.

We have on the line our CSO, Dr Martin Petkovich, who is a professor at Queens University, who can comment briefly on the application of Rayaldee to metastatic bone disease. Marty, can I pass it to you for a minute?

Sure, Charlie, thanks. Good morning, everybody. Maybe it's worth just mentioning the indication itself. We are very interested in using Rayaldee to treat patients with advanced cancer, because they often have metastases to bone. For example in breast cancer the vast majority of breast cancer patients with metastases do have metastases to bone. And bone metastases can modify and enhance bone metabolism resulting in skeletal -- what are called skeletal related events. And these include hypocalcemic episode, bone pain, breaks, [ripple] compressions, these all make quality of life very poor. So these morbidities needs to be addressed.

As well the increase in bone metabolism can also accelerate cancer progression. And currently SREs, or skeletal related events, are managed by shutting -- basically shutting down bone metabolism. And this is accomplished using antiresorptive therapies which include denosumab and zoledronate. Although these agents are effective and very important for managing bone metastases, and they are certainly growing in use over the past few years as an important tool for oncologists, they can also cause hypocalcemia which can be fatal. And they also cause increased PTH which has been shown to be associated with very poor outcomes in this patient group. So there is clearly an opportunity for Rayaldee to address these issues.

So we think it would be very -- Rayaldee would be very effective at normalizing calcium and reducing risk in these patients of hypocalcemic episodes, and as well it would be very effective in reducing PTH as Charlie has shown very nicely in the results of the Phase 3 trial in CKD. But I think what will make Rayaldee even more important in oncology is that we know from numerous non-clinical studies that vitamin D has very important anti-cancer effects. And these include the ability to suppress epithelial to mesenchymal transition of circulating tumor cells, and this is a critical process that allows tumor cells to become metastatic, to find a place to settle down like bone and continue to grow. They can also -- vitamin D signaling can also reduce the inflammatory response, and inflammation is becoming very critical or at least we are understanding that it's very critical for circulating tumor cells to take hold in bone as well.

So these work together, inflammation and epithelial to mesenchymal transition, and vitamin D seems to act on both of these processes. In addition, vitamin D can also suppress angiogenesis which is important for tumor growth, and can suppress tumor cell proliferation. And furthermore, it can suppress bone metabolism by reducing PTH as I mentioned. This will increase the effectiveness of the antiresorptive therapies which as I mentioned are growing in use, and they may also decrease tumor progression by suppressing PTH. So we think that there's a very potentially great market not only for use of Rayaldee in -- as an adjuvant therapy for the use of bone sparing agents or antiresorptive therapies, but also because of its anticancer properties, we believe that it will be very important for other forms of cancer as well.

We hope that in the phase I study that we plan to conduct very shortly, that we will be able to demonstrate what levels of 25D are essential to see these anticancer effects in these patients.

Thank you very much. I got a little bit more than they bargained for. That was great. I appreciate it. I guess the next question on that -- well, I have a few questions. Maybe the next one to go to is on a diagnostic, maybe David or whoever could talk a little bit about the timing related to vitamin D diagnostic tests in general and maybe one related to Claros as well. And I have one more follow-up, and I'll jump back in queue.

Okay, hi Charlie, it is Dave. The vitamin D test is actually going to be coming right behind testosterone, and that has a lot to do with -- we need to overcome the same pre-treatment step with testosterone that we need to use to test for vitamin D. Both testosterone and vitamin D are actually bound up to proteins that circulate in the blood. This pretreatment step is something we've actually now got working very well for testosterone. And as soon as the resources that are working on testosterone and PSA are freed up, we're going to be applying them to vitamin D. We actually did quite a bit of the groundwork for the vitamin D assay back in 2013 and the early part of 2014.

So we are anticipating very quickly moving that into clinical trials in 2015 and having it in plenty of time to support the launch of -- in the US of Rayaldee. And on the PSA and testosterone, as I alluded to, we're moving on all fronts to bring this into clinical trials later part of this year, both the regulatory, our manufacturing validation and our closing out of development activities on the cassettes.

Thanks, Dave. Charlie, sorry if I missed this. But can you discuss how many of these 4 million CKD patients with SHPT and vitamin D deficiency are treated currently, and how big that market is? And I was hoping to get your thoughts on whether you think this percentage changes drastically with Rayaldee. And maybe to throw one more in there for you because I am curious. How long does it take for these other therapies calcitriol and vitamin D hormone to have the negative effects such as hypercalcemia, and how long does that take for to result in a clinical notable change?

Okay, great questions. I'll answer really quickly, because I know there are other folks that want to ask questions, too. About a third of the CKD patients stage 3 and stage 4 are treated with nutritional vitamin D. About a third are treated with vitamin D hormones. And a large third, nearly half aren't treated at all, because neither one of these treatment options are great. Rayaldee can move into all three of these sectors I think with vigor. Actually I think Rayaldee will become the product of preference by far. You asked about how quickly vitamin D hormones can exert their negative affects. They are highly potent, and they can exert negative affects within weeks of starting treatment.

Rohit Vanjani of Oppenheimer.

Hi thanks for taking the question. Charlie, do have any sense of the percent reduction in the 30-microgram versus the 60-microgram dosing for the PTH levels?

Hi, Rohit. It's a great question. I can tell you we unblinded the first pivotal trial late on Tuesday night. We've had essentially four business days to review the data, and we don't even have the download of the [R2] data yet from [IVR ASM] I'm sorry to admit, so I don't have an answer for you yet, but we will have that very shortly. (technical difficulties)

Okay and then, Scott, I missed your commentary. You said you had started conversations with payers, is that right? Any sense of tiering there, or how are those conversations going?

Very early on, and as we started with the general landscape of published policies, published policies revealed nothing of significance. I think what's going to be much more important at this point in time is getting are one to one qualitative interviews with representative payers, and those will be starting in the next couple of weeks. (technical difficulties)

Okay, when will we see the second, Charlie, I guess when will we see the secondary endpoint?

Probably by the end of this month is our working timetable to have all of the analyses completed.

Is that part of a press release or some kind of publication or anything?

We won't have a publication that quickly, but we certainly will present both of the pivotal studies together in granular detail at a major symposium upcoming later this year. And whether or not we will issue another press release regarding secondary endpoints is to be determined. I can't answer that yet.

The trial design I guess was 71 receiving the 30-micrograms, 71 receiving the 60-micrograms, 71 receiving the placebo, and then it was split 106, 106 between stage 3 and stage 4 CKD patients. What was the breakdown of people -- stage 3 patients receiving 30-microgram and stage 4 receiving 30-microgram do have that?

Yes, just for clarity, every person assigned to active in the first pivotal trial, and this is true also of the second pivotal trial which is ongoing, started dosing at 30-micrograms per day. And they stayed on 30-micrograms per day which is one capsule for 12 weeks. At the end of 12 weeks, if the PTH level was not dropped to the normal range, then the dosage -- and if the safety parameters indicated that it was safe to do so, the dosage increased to two capsules per day or 60-micrograms. So I don't yet have the breakdown as to how many patients titrated at week 12. But we know that some patients ended the 26 week treatment period on 60-micrograms, and some ended on 30-micrograms. And I'll have those data fairly soon.

So there were just two treatment groups. One group was treated with Rayaldee starting at 30-micrograms possibly moving to 60-micrograms or staying on 30-micrograms per day, and the other group received placebo and the breakdown is this. There were 141 patients out of the 213 assigned to active, and there were 72 patients assigned to placebo making a total of 213. There was equal balance between the CKD stages, because that was the stratification, so we had 36 stage 3 patients on placebo and 36 in stage 4. We had 71 active patients in stage 3 and 70 active patients in stage 4.

Okay and the my last question is for Dave. Do you have any numbers of how many tests have been done on the 4Kscore or how is that pace going since you launched on March 31? Any sense of how many want to do in 2014?

We are not forecasting numbers or talking about numbers. We are really -- right now we are in an awareness building mode, and 170 physicians ordering the test is a great start. We are actually going to be building a sales force in response to how reimbursement discussions go. We right now have eight people dedicated in the field and a couple of field managers. And also we are going to be looking at the medical affairs impact on our sales. So we are going to be growing in proportion to how much we see, and the sales -- like I said for the sales force we have out there right now we are very pleased with what we are seeing on the ramp. It's a very, very nice increase since the AUA, which is really when we started the formal marketing of the test.

Okay. That's it for me. Thanks, everybody, I appreciate it.

Kevin DeGeeter, Ladenburg.

Good morning, guys. I want to add my congratulations on some nice data. Charlie, can you talk a little bit about the statistical plan for the Rayaldee program, really two questions I'd like some clarification on. I know there's an opportunity to look at both pooled analysis of Phase 3s and each study independently. Can you remind us whether the primary analysis for the SPA is the pooled analysis or do you had to hit on both studies independently?

And on a related question this ultimately gets to label, can you do a pooled analysis of stage 3 patients across the two studies and look to that in label, or should we look for alternately the primary analysis moving forward into a potential label being driven based off of each study standalone?

Yes, Kevin, thanks for the question, and it's a complex question. There is one statistical analysis plan for the two pivotal trials. That SAP as we call it was covered by the special protocol assessment that was established in August 2012. So the analysis of these two pivotal trials was preset with FDA in August of 2012.

So to answer your question more precisely, there will be a separate analysis of the first pivotal trial and the same separate analysis for the second pivotal trial. And there will also be a pooled analysis which will be conducted according to the same statistical analysis plan with the exception that some additional secondary endpoints have been included in the analysis of the pool's data from the two pivotal trials. The additional secondary endpoints are those that can't be addressed readily with the smaller end, so its appropriate that these are added to the pooled analysis, because in order to see the effect of Rayaldee on these particular endpoints you need a large number of subjects.

I will give you an example. One of the things that we will be looking to see in this study is, if there is efficacy determination at 30-micrograms at the end of 12 weeks of treatment. Right now efficacy is determined at the end of 26 weeks, but we are interested to know if we can declare on the basis of a pooled analysis that Rayaldee works as soon as 12 weeks. And that requires a larger end, so that just gives you a sense for the secondary endpoints that we will be looking at in the pooled analysis. This pooled analysis has been submitted to the FDA prior to unblinding the first pivotal trial.

Great. Maybe just two more quick questions from me. Can you just comment on what is the gating factor at this point for potential FDA submission? It looks like actually your -- you are a bit of ahead of schedule at least for what I was looking for. Looks like we are going to have the end of the clinical 12-month safety data by the end of September. Following that what is what are the additional items outstanding?

So there are three main activities at OPKO that are gating the NDA submission. I'm happy to report that the two pivotal trials are really not gating items. So as you know obviously from what I have said, we will have top line data from the second pivotal trial next month. And our NDA submission is not planned until mid-December.

So the gating items are ongoing carcinogenicity study which we will get a final report in late November. That is on schedule. The second gating item is our CMC efforts, our one-year stability data on three registration lots we will finish up in October. So that's on schedule. And the third gating item is we need sufficient safety data from our ongoing open label extension clinical trial which show that Rayaldee is safe in patients treated for a year and we will have sufficient safety data from our ongoing extension study by the end of September. So with regard to the three critical path items, we are fully on schedule for submission of the NDA by the end of the year. We had previously said that it would be later than this, but we've been comfortable now enough to accelerate the announced timing of the NDA submission.

Terrific and then lastly for me is it appropriate to think of the ASN meeting in November as a potential placeholder for discussing some of this Rayaldee data, or is that too soon in your view?

No, that would be appropriate Kevin.

Okay, great. Thanks so much.

[Natasha Ashmen, Spheric Fund]

Hello. Thank you for taking my question. Congratulations on the results. I was wondering if you could remind us the IP surrounding the drugs and also if you have any data in terms of the hypercalcemia events during the trials. Thank you.

Hi, Natasha. Thank you very much for the question. I'll answer the IP question. I also have on the line Joel Melnick, our VP of Clinical Research and Development, and he can comment on the safety question. Regarding IP, Rayaldee is covered worldwide by about six issued or pending patents. And the coverage is really very comprehensive. It goes far beyond just coverage of the Rayaldee formulation. It covers any modified release delivery of calcifediol, which is the active in Rayaldee. It also covers immediate release calcifediol if its used in such a fashion to try to mimic what you could achieve with a modified release formulation. For instance, giving multiple immediate release doses over the course of a day to try to achieve the same pharmacokinetic effect that you would get by administering once daily modified release formulation.

And there are other pending patents as well which we believe will strengthen our IP position even further. I know we are short on time so pass it over to Joel to comment on the safety data. I guess Joel is not on the line. We had in this first pivotal trial no difference in the safety parameters of interest between the Rayaldee treated group and the placebo treated group, and we looked very specifically at hypercalcemia. We looked at elevation of urine calcium. We also looked at hyperphosphatemia which is too much phosphorus in the blood, and there was no breakout at all there between the treatment groups.

If I could ask one follow-up, do you plan to do any comparison trials versus the existing drugs that are currently on the market? And if I could ask one more about commercialization, how will you compete versus the generic market? Thank you.

Okay, good questions. I sketched out what our Phase 3 program from a clinical standpoint was to support the NDA submission, but I didn't sketch out other clinical studies which are in our Phase 3 program to compare Rayaldee against other products that are currently being used by CKD patients. We do have comparative studies in planning right now, and these studies will be completed before we launch Rayaldee. We'll have more information on those trials as we go through this year and the early part of next year. With regard to the commercialization question I'm going to pass it over to Scott.

I first want to follow-up on that. I think its important when we look at the comparative trials, we could go off and execute lots of comparative trials with different endpoints, but I think it's really important for us to know very precisely what the payers are going to want to see, what the nephrologists and endocrinologists are doing. And so we decided internally that we'd wait for the results of these very exhaustive studies that we are doing right now. So we can deliver the kind of comparative study that they really want and will have meaning for them.

I'm sorry going back to your question on commercialization, could you repeat that one?

Natasha are you still on the line?

So as I remarked in my opening comments, the generics are very good at what they do. But they have singular actions, and they leave quite a gap of unmet needs clinically, the nutritional Ds in terms of what they do. And so we are carving a new paradigm here. We're basically -- this product can achieve a clinical result that right now does not appear to be achievable with the two generic products individually. So from that perspective I think we are on very solid ground that we have a branded commercialization strategy for a unique product profile.

Eun Yang of Jefferies.

Good morning. This is John in for Eun. Thanks for take my questions. First how should we think about the added benefits of Rayaldee versus a combination regimen of over-the-counter vitamin D plus a generic form of Hectorol or ZEMPLAR? And as a quick follow-up are, you breaking out revenue from 4Kscore in the second quarter, and when would you expect meaningful revenue flow from 4Kscore? Thanks.

This is Scott, let me take the first part of it, and then I'll hand it over to David. It goes back to my comments. So what we've been able to determine so far is, although its logical that clinicians would put the two products together, put the nutritional on top of a hormonal product, we are finding the vast majority are consciously avoiding doing that. Because in putting them together they are actually finding tremendous challenges in terms of trying to manage all the different parameters, managing the titration between not only the vitamin D but the phosphate binders and trying to get an optimal mineral metabolism profile. And so it's literally -- they are opting out of doing what might on the surface seem like a logical profile. So I think we are quite unique now.

As I mentioned, the 4Kscore test is -- we're about three months post AUA right. We expect revenues to be continuing steadily for the next several years. Reimbursement is really going to be a key event for us, and as I mentioned earlier our CPT code is now underway. And that's going to be the trigger for I would say meaningful revenues. I think we can certainly be talking about significant pre-CPT code pre-reimbursement numbers. But to really start getting at that market the CPT code is going to be critical for us. We also have revenues that will be starting to be generated in Europe beginning in September, so that's going to be another fold into the 4Kscore commercial activity. And we have plans that are now incubating for launching in Chile and Mexico. I'd look for that to start coming into 2015. (technical difficulties)

Thank you all for participating in this morning's session. And of course if you have questions on an individual basis, we are all here to try to answer them by telephone. Thank you all for participating once again.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.