OPKO Health Inc (OPK) 2016 Q3 法說會逐字稿

Welcome to the OPKO Health Third Quarter 2016 Financial Results. (Operator instructions.) As a reminder, this conference is being recorded today, Monday, November 7, 2016. I would now like to turn the conference over to Mr. Bruce Voss. Sir, please go ahead.

Thank you. Good afternoon. This is Bruce Voss with LHA. Thank you all for joining today's call. before we begin, I'd like to remind you that any statements made during this call other than statements of historical fact will be considered forward-looking and, as such, will be subject to risks and uncertainties that could materially affect the Company's expected results, including without limitation the various risks described in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and its subsequent filings with the SEC.

Before we begin, let me review the format for today's call. Dr. Phillip Frost, Chairman and Chief Executive Officer of OPKO, will provide opening remarks. Steve Rubin, OPKO's Executive Vice President, will then provide an update on the Company's various businesses and clinical programs, and Adam Logal, Chief Financial Officer, will provide an overview of the Company's financial performance during the quarter. We will then open the call up to your questions, after which Dr. Frost will close the call with some final remarks.

Now, I'd like to turn the call over to Dr. Phillip Frost. Dr. Frost?

Good afternoon, and welcome to our conference call. This has been a really busy quarter, and there's a lot to talk about, so I'm going to immediately turn this over to Steve Rubin to begin the session.

Thanks, Phil. Thank you all for joining us this afternoon. The third quarter was another productive period for OPKO, as we made significant progress with numerous programs. In addition to growing our core diagnostic business, we closed our acquisition of Transition Therapeutics, announced our entering into the companion animal health market with the formation of a specialty business unit, and continue preparing for the commercial launch of RAYALDEE in the coming weeks. We also made progress advancing a number of important clinical programs.

Turning first to therapeutics, let me begin with an update on RAYALDEE. Our preparations for the upcoming launch of RAYALDEE are nearing completion. We have hired top level talent for our senior sales, marketing, market access, and medical science liaison teams to support the upcoming launch. We have successfully hired and trained 10 telemarketing sales representatives, and 35 regionally-based sales representatives who will be fully dedicated to selling RAYALDEE. We expect to continue building this sales team to mature size, around 70 to 80 reps, most likely by mid-2017.

We have also hired and trained a team of 11 regionally-based medical science liaisons who will support medical education efforts related solely to RAYALDEE. Our marketing and market access teams are fully staffed and are working on pricing strategy, favorable listings in key compendia and formularies, and a comprehensive portfolio of appropriate patient assistant programs. Our marketing team has also assembled a large group of nationally-recognized key opinion leaders into a trained speaker's bureau, which will educate targeting nephrologists and endocrinologists on the appropriate use of RAYALDEE.

As a reminder, the FDA-approved indication for RAYALDEE is for the treatment of secondary hyperparathyroidism, or SHPT, in adult patients with stage three or four chronic kidney disease and vitamin D insufficiency. The FDA defined vitamin D insufficiency as serum total of 25 hydroxy-vitamin D levels less than 30 nanograms per mill.

RAYALDEE is the first product to receive FDA approval for this indication. RAYALDEE fills a void in the available treatment options for approximately nine million American adults, which represents a potential market estimate to exceed $12 billion annually.

The current standard of care is aggressive supplementation with nutritional vitamin D, which is an approach that is neither FDA approved nor demonstrated to be safe and effective in this population. A recently published review of published randomized clinical trials concluded that nutritional vitamin D is completely ineffective against SHPT. The only other FDA approved therapies for SHPT in patients with stage three or four CKD are active vitamin D hormones, namely oral formulations of calcitriol, paricalcitol, and doxercalciferol.

These therapies are not recommended for routine use in this patient population according to the newly revised draft KDIGO clinical practice guidelines, which were recently published for public comment. KDIGO, an acronym for Kidney Disease Improving Global Outcomes, is internationally regarded as the authoritative clinical practice guidelines for the appropriate care of CKD patients.

We continue with our pre-commercial plans for RAYALDEE, and remain on track for launch in the fourth quarter this year, targeted late November, just after the annual meeting of the American Society of Nephrology, where OPKO and RAYALDEE will have a major presence. In addition to the considerable US market opportunity, the global market for RAYALDEE is substantial, and we are working closely with our partner, Vifor Fresenius, to bring RAYALDEE to Europe and other international markets, as well as the development of RAYALDEE for end-stage, or stage five, renal disease.

Let me now turn to our diagnostic segment. BioReference Laboratory posted solid revenue during the quarter, with the bulk coming from traditional reference lab testing, along with modest sequential quarter growth with 4Kscore. Our goal is to continue to grow this segment through increased sales in core lab and genetic testing services, 4Kscore, and the Claros 1 point of care test.

Moving on to progress with 4Kscore, our innovative blood test that predicts the probability of aggressive prostate cancer. We continue to work with payors to secure favorable reimbursement, and are making incremental progress. Last year, the American Medical Association granted a CPT-1 code for 4Kscore, which will be effective as of January 1, 2017. We have a number of pricing agreements already in place with payers.

We are continuing to work with Novitas Solutions to reinstate their positive local coverage decision, or LCD. Novitas is the Medicare administrative contractor, or MAC, that governs our BioReference facility in New Jersey, where we run the 4Kscore test. We have submitted a complete clinical dossier to Novitas, which included background information, physician experience, and extensive clinical validation. We expect Novitas to include 4Kscore in its February review cycle for a draft local coverage determination.

In the meantime, Novitas has been, and continues to pay, for 4Kscore Medicare submissions. We remain confident in a positive LCD from Novitas for 4Kscore as there is ample clinical validation to support favorable reimbursement as supported by numerous published peer-reviewed studies and the inclusion in the US national comprehensive cancer network guidelines for prostate cancer early detection, and in the European Association of Urology prostate cancer guidelines panel for 2016 EAU guidelines for prostate cancer.

We are also continuing to work with Palmetto to address their concerns. As you know, while Palmetto does not administrate Medicare submissions for the 4Kscore because our laboratory's not within their region, they nevertheless issued a negative LCD on 4Kscore. As we've previously reported, 4Kscore is currently being marketed by approximately 200 BRL sales reps to both urologists and primary care physicians. We continued to see growing test volume, and remain very encouraged by the increasing physician use of the test.

During the quarter ended September 30, 2016, approximately 16,000 4Kscore tests were performed, a 9% increase from the quarter ended June 30, 2016, and a 365% increase over the comparable period of 2015. Which leads me next to a discussion of our plans for the Claros 1 point of care system, our novel, multiplex instrument system to provide rapid, high performance blood test results at the point of care.

As a recap, Claros 1 is designed to run a wide array of immunodiagnostic tests in the physician's office, or hospital nurses' station, using a single drop of blood, negating the need for a centralized reference laboratory for many common tests. We have ramped up our efforts to advance Claros 1 through the regulatory pathway towards commercialization in the US, and plan to initiate FDA registration studies for a PSA point of care test by the end of the year.

Following successful completion of our studies, we expect to submit a PMA with the FDA in the first half of 2017. We expect to commence an additional study for our testosterone point of care test in 2017, followed by a 510-K submission in late 2017. Upon FDA clearance, we expect to fully leverage BRL's marketing, sales, and distribution resources for the launch of the Claros 1 system in the US.

In tandem with conducting these studies, we are developing additional tests for the Claros 1, including a test for vitamin D. We believe there are many more applications for this technology, including infectious disease, cardiology, women's health, and companion diagnostics.

Moving on to our biologics development, we have made significant progress advancing a number of key programs and have a series of upcoming milestones with our improved long-acting proteins and peptides in development. Let me start with our long-acting human growth hormone product, hGH-CTP, which is partnered for worldwide commercialization with Pfizer.

The Pfizer agreement includes $275 million payable to OPKO upon the achievement of certain regulatory milestones, has double-digit tiered royalties for the sales of adult hGH-CTP, and a profit sharing after the launch of pediatric hGH-CTP, which will include all indication of hGH-CTP and Pfizer's genotropin. Genotropin represents approximately 20% of the global market, with approximately $600 million annual sales. In the overall market, the growth hormone products exceed $3 billion.

We completed the phase three study in adults earlier this year, and had last patient out at the end of August. We expect to have top line data readout before year-end. We have made good progress advancing plans for our global pivotal phase three study in pre-pubertal growth hormone deficient children, and expect to initiate the study by year-end. This study will evaluate a single weekly dose of hGH-CTP versus daily injections of currently marketed growth hormone.

In September, we were pleased to have a number of oral and poster presentations highlighting the 24-month efficiency, safety, pharmacokinetic, and pharmacodynamics data from our pediatric hGH-CTP phase two study at the European Society for Pediatric Endocrinology. These data affirm that a single weekly injection of our drug has the potential to replace seven consecutive daily injections of currently marketed growth hormone in pediatric patients. Clearly, the hGH-CTP program represents a very large near-term opportunity for OPKO, and we are excited to be advancing these late-stage programs towards commercialization.

Let me now update you on our long-acting factor VIIa-CTP for the treatment of bleeding episodes in hemophilia A or B patients with inhibitors of factor 8 or factor 9. We plan to develop both an intravenous and subcutaneous formulation of factor VIIa-CTP for the on-demand treatment of spontaneous bleedings with the aim of less frequent administrations, as well as for prophylactic use. We have received FDA and EMA orphan drug designation for factor VIIa-CTP, and earlier this year we initiated a phase 2A dose escalation study to determine safety and explore efficiency endpoints.

This study is enrolling 24 patients in the US. We expect to have safety data from the first three cohorts by early next year, and have the top line data from the study in the second half of 2017. By the end of this year, we also plan to initiate a phase one clinical study of a subcutaneous administration of this drug. This will be a single dose PKPD trial in healthy volunteers.

Current treatment options with factor VII require multiple infusions to treat bleeding episodes because of its short half-life. Also, frequent infusions are onerous when used as preventive prophylactic therapy, especially for children. this is a $1.7 billion market opportunity, and is growing by 7% annually, with only 25% of patients currently being treated. We continue to believe that a longer-acting factor VII administered either by IV or subcutaneous administration could change the landscape by permitting children and adults to more easily self-administer at home on a prophylactic basis, and could increase the percentage of patients being treated.

During the third quarter, we closed our acquisition of Transition Therapeutics. This transaction brought us two very exciting late-stage assets that fit well within our development programs. Since the acquisition, OPKO has focused on the development of TT401, a once-weekly administered GLP-1 glucagon dual receptor agonist for type 2 diabetes and obesity, and TT701, an orally active selective antigen receptor modulator, or SARM. In a phase two study of 420 subjects with type 2 diabetes, TT401 demonstrated significantly superior weight loss compared to the currently approved extended release exenatide and placebo, as well as a similar reduction of hemoglobin A1C, a marker of sugar metabolism.

Based on these data, we are now manufacturing and preparing product for a phase 2B study to optimize a dose escalation regimen to increase weight loss and glucose control, as well as refining the formulation and device use for a phase three study. As for TT701, SARM has been shown to be a highly selective agonist for anabolic effects on muscle and bone, and potentially antagonistic to the prostate.

In a phase two study with 350 aging males, TT701 treatment resulted in significant increases in body muscle and physical function, and in decreases in fat mass without any change, and to some degree even a decrease in PSA levels. We are currently planning a phase two study to examine the selective antagonistic effects of TT701 to reduce prostate hypertrophy and provide anabolic therapeutic effects in aging males.

Talk briefly about animal health. Two weeks ago, we announced our entry into the companion animal health market. The US pet product market alone is worth some $60 billion annually, of which more than $14 billion is for therapeutic products. This is an area with a substantial market opportunity, as pets are living longer and develop many of the problems of human aging, such as arthritis, cancer, obesity, kidney disease, diabetes, and heart disease, diseases where OPKO has experience. Our team, including executives from the DVM pharmaceuticals division of iVax, has considerable experience in successfully developing and marketing animal health products.

Our OPKO animal health team will operate as a specialty business unit in cooperation with OPKO Spain, which is already in this business, and OPKO Ireland, which has been developing several oncology products for animals. Importantly, we can launch this offering with minimal investment by using our existing product and manufacture resources. Products will be marketed through a logistics partner and select national and regional distributors. We are building our pipeline and plan to introduce several over-the-counter products for companion animals in the first quarter of 2017.

We have also initiated pilot studies evaluating the efficacy of RAYALDEE in dogs and cats with chronic kidney disease. Chronic kidney disease is a significant problem in companion animals, particularly as they age, and companion animal health market is an exciting opportunity, and given our experience, infrastructure, and product portfolio, we expect this to be a very successful business segment for OPKO.

With that overview of our businesses, let me turn the call over to Adam for a discussion of our recent financial performance. Adam?

Thank you, Steve, and good afternoon, everyone. During the quarter ended September 30, 2016, revenue increased to $298 million from $143 million for the comparable period of 2015. This increase in revenue is the result of revenue generated by our diagnostics business at BioReference.

During the quarter, we continued to make improvements in the financial performance at BioReference through a revenue cycle management program that was initiated during the second quarter of 2016. The most critical component of this program was the successful implementation of a new billing system which occurred on October 1. This system will provide us with the power to more effectively manage our billing process, as well as our payer relationships, while improving our collection timeline and effectively appeal coverage denials. We believe our revenue cycle management program has the potential to significantly improve the profitability of our diagnostics business, and look forward to providing further updates of our progress on future calls.

The RCM program resulted in an increase in investment in our diagnostics business and resulted in non-recurring SG&A expense of approximately $7 million. We continue to invest in our pharmaceutical and diagnostic research and development programs, and had approximately $24 million of R&D expense during the quarter compared to $19 million for the 2015 period. Loss from operations for the three months ended September 2016 was $23.6 million compared to $8 million for the comparable period of 2015. In addition to the increased investments in R&D and our RCM program, operating loss was impacted by a $10 million increase in amortization of intangible assets principally related to the amortization of our RAYALDEE assets as a result of our FDA approval. Prior to approval, RAYALDEE's intangible assets were classified as non-amortizing in-process R&D assets.

Net loss for the quarter ended September 2016 was $15 million compared to net income of $128 million in the comparable period of 2015. The 2015 period included a number of noncash, nonrecurring items, including a $93 million income tax benefit related to the release of a valuation allowance against our deferred tax assets as a result of the BioReference acquisition, a $17.3 million gain from the deconsolidation of SciVac, and a reversal of expense related to the fair value changes of our derivatives of $32 million.

As I mentioned during our second quarter call, we received approval for a method change with the Internal Revenue Service, which resulted in our receiving a cash refund from the IRS in October of 2016 of approximately $40 million. This amount is in addition to our $144 million in cash, cash equivalents, and marketable securities on our balance sheet at September 30, 2016. Our balance sheet remains in a strong position to continue the development of our ongoing R&D programs, as well as to support the launch of RAYALDEE in the US.

As Steve discussed, we expect to launch RAYALDEE in the coming weeks. I'd like to provide our thoughts around expected revenue recognition over the next several quarters related to RAYALDEE. Accounting guidelines by the SEC impose a high threshold for revenue recognition, particularly for a company that is launching its first commercial product. Key elements of our ability to recognize revenue under US GAAP including having sufficient activity over time to provide visibility into the distribution channel, the payer mix, and any discounts, rebates, and product returns. we expect the earliest we'll have sufficient visibility to reliably make the estimates necessary to recognize product revenues will be in the second half of next year.

After accounting for all fees, rebates, and other discounts, the net sales price that we expect to recognize on sales of RAYALDEE will be around $550 per unit, or approximately 65 of our anticipated WAC. We expect, after factoring in fees to distribution partners, group purchasing organizations, mandated government discounts and the discounts that we expect to be earned on our volume-based contracts with providers, that the net sales price we will realize will be approximately 55% to 65% of the WAC price over the life of the product. However, throughout 2017, as we establish RAYALDEE's position in the marketplace, we expect the net price that we will be able to realize to be at the low end of that range.

We are currently in negotiations with the top eight Medicare Part D plans, the top five managed care plans, and the top four pharmacy benefit managers to have RAYALDEE added to their formularies. While we expect there may be some utilization management restrictions initially, we have a number of access programs to help mitigate any potential impact, including a patient assistance program. We anticipate obtaining coverage and reimbursements from both commercial payers and Part B providers starting in the first quarter of 2017.

I'd like to turn the call back to Phil. Dr. Frost?

Thank you, Adam. Well, as you've heard me say in previous sessions of this sort, the most important part of a company is its people. And during this last period, we have added several people that will be important, going forward. One is [at] the BioReference GeneDx unit, which needed a new Director, and we've hired Dr. Ben Solomon to head this unit. As you know, GeneDx has been a rapidly growing, successful part of BioReference, and under Ben Solomon's guidance, we think that we have a good shot at continuing the growth that we've enjoyed in the past.

We've also had the benefit of adding Jane Pine Wood to our staff. Jane has been widely known around the country as a consultant to other diagnostic companies for her expertise in dealing with compliance issues. As you know, compliance is a very important part of that business because it's very easy to get into trouble, not because you are intending to do anything wrong, but because it's so easy to make a mistake in your billing practices. And so, it's very important to us to be very strong [and] having a good record with the payers in that regard, and Jane will help us immensely.

On the marketing and sales side, we've brought in Tom Nusbickel, who in my opinion is one of the best marketing people I've come across in the industry, but more important, he's thoroughly familiar with the nephrology business, knows the important players, knows the distribution channels, and knows the subtleties of making a business like that successful. And helping him to achieve that success, we've hired Jim DeMarco, who has also had strong experience primarily in selling products for the nephrology market. So, together, they have succeeded in putting together a significant team, the likes of which I haven't seen before. So, I'm very optimistic, as everyone in OPKO, about the future for RAYALDEE, and hats off to Charlie Bishop for having made all this come about.

Finally, I'd like to expand a little bit on the animal health unit that we've created, because to me this is really interesting in that it makes use of assets that we've already had in different parts of our company. As you know, we have a unit in Ireland called EirGen, which is specially equipped to make very potent chemicals that need to be handled in special ways. And examples of these are chemotherapeutic drugs. Now, there are a couple of chemotherapy drugs that are in common usage in animals that they have developed, and we're in the process of getting them approved.

Our Spanish company has a large line of products for animals that are sold over-the-counter, and we are preparing to market these in the United States. So, we expect our first sales for our animal health division to be early in 2017, and I can tell you, talking about people, that directing this unit and actually responsible for its conception is Jane Hsiao, who was extremely successful in building a veterinary business for our iVax Corporation in another life.

And there she took a business that had $10 million in sales and was losing money, and took it all the way to a business that was doing hundreds of millions of dollars in revenues, and profitable at every stage. So, we're very optimistic about this unit, and as I say, it's all about the people, and I think we are very well positioned for success in just about every area in which we're dealing.

So, I want to thank you for joining us, and we look forward to your questions.

(Operator instructions.) Dana Flanders, JPMorgan.

Just my first one on the 4Kscore, so just with the local coverage decision from Palmetto now finalized, what are your steps forward there? is that just you're going to try to provide additional data to try to get them to reverse the decision, or just some additional clarity on what you can actually do?

And then, secondarily, would you expect that decision to impact Novitas at all, or are those relatively independent, in your eyes? And then, I have a follow-up.

So, with Palmetto, the idea is to provide them with new information. The literature is continuing to evolve on 4K in a very positive way. As you recall, one of their issues was PSAs greater than 10, and in the Journal of Urology in September this year, there was a [FINE] paper published about the 4Kscore and its use in men with a positive DRE, or PSA between 10 and 25. And obviously, the conclusion of that paper was that the test performed very well there, as it had in our prospective clinical trial in the United States.

We also have another paper that came out. It's a retrospective study, but it's a very important cohort. It's the prostate, lung, colorectal variant group, and again, the 4Kscore test performed exceedingly well in this group of men, which was actually, coincidentally, a group of men that was part of the intervention arm of that study. And that was a very important study for looking at PSA as a screening test.

We performed very well in that study, as well. All this new data is going to be presented to Palmetto so that we can continue to provide additional evidence to get them to overturn the negative coverage decision.

With Novitas, we're working with them, and as Steve mentioned, we expect the February review cycle to be the next time we'll hear from Novitas, and we've provided them with lots of information that we think more than adequately demonstrates the reason why Medicare is, and should continue to pay for the 4Kscore test.

My second one, in terms of just the 3Q revenues, can you just talk about the pushes and pulls there? I think we were expecting a little bit of a stronger quarter from BRL services, so was that just seasonality, or something else we weren't factoring in?

I think from a quarter-over-quarter basis, BRL went from $266 million last quarter to $260 million this quarter, not a substantial swing one way or the other. I think we did see lighter volumes, but I don't think there's a trend forming there. It's just more of a late summer seasonality issue more than anything.

And I think as we continue to think about BioReference, going forward, the double-digit patient volume growth on an annual basis is really what we're expecting to see, going forward.

Yale Jen, Laidlaw & Company.

First question is that, given your new endeavor in the animal health space, could you elaborate more in your strategic intent, and [some time] more specifically, regarding what do you anticipate this operation to potentially achieve in a two- or three-year timeframe?

We have Jane Hsiao with us to respond.

Our OPKO Spain, we have roughly about 50 different products for the companion animal use. So, this first wave in first quarter of next year that we have work out all the labelings and things like that for the US market that will be introduced is only portion of that 50-plus product. So, we'll continue to import directly from OPKO Spain to the US market.

And continue on that, the opportunity we see oncology product coming from EirGen, actually it's kind of interesting situation. The oncology product for the veterinary use, FDA have a system, it's very similar to orphan drug, but the beauty of that, FDA's regulation, as long as you have shown that the molecule -- by the way, all these molecules are generic, off-patent molecule.

So, once you show that there's a use, a utility in the animal healthcare, you can apply for a minor species, minor use. It's basically once you get FDA to agree it is indeed a minor use, meaning orphan, you can actually start selling the product while you are doing the clinical efficacy trial. So, we have identified couple of product like that that we plan to have a clinical study initiated next year, and possibly selling it at the same time.

So, those are the type of opportunity we see that, and the market, or the product portfolio from the OPKO Spain, actually cover different area. There are a group of product for joint, there are a group of product for the (inaudible) use, and then there are group of products for general supplement. So, plenty of opportunity for us in the [older] DVM product line, and basically we can recreate it overnight.

The way the business work in the United States basically relying on distributors, they all have their sales force, which we still maintain the close relationship with them. That's why we were able to introduce the product in a relatively short time.

I wonder whether there's any comment potentially regarding what you think, for revenue perspective, what will be (inaudible) more optimal outcome in two, three years' timeframe.

Well, it's too early to tell now, but we're looking at millions of dollars, for sure. And I'll give you an example. There's a product in the market for oncology. For companion animal, if the size is in the tens of million, like $20 million, it's a big product, and we do see opportunities like that.

On the drug development side, for the two products acquired from Transitions, could you give us a little bit more color in terms of the timeline to start these clinical studies, and maybe more specifically on the indication and the expected endpoints (inaudible) some of the studies?

Well, the TT701 for diabetes, which is a dual agonist, that, as mentioned earlier, went through a phase two where it showed good data in terms of weight loss, as well as [HB1C]. the plan now is to take it to a phase 2B study, where we're going to look at a dose escalation, which is traditionally used with this class of molecules to improve weight loss and also HB1C, but as well as also reduce things like nausea and vomiting in this particular class of molecules.

And so, we expect that right now we're manufacturing material, as well as also looking at the device that we would use, and we expect that work to be done by mid-2017. And so, we do expect that to move into the clinic around that time, although we're just now initiating the manufacturing.

For SARM, similarly, we did work on a phase two in elderly males where we showed significant increases in muscle, as well as in physical function and a loss in fat, and really with no changes in PSA or slight decreases. And the key to this molecule is that it also shows a relatively potent antagonistic feature towards the prostate.

And so, the plan here is to develop a phase two, or to start a phase two study, to examine its selective antagonistic effects to reduce prostate hypertrophy, as well as at the same time provide the anabolic therapeutic effects that aging males often have, which is decrease in muscle, as well as increase in fat. This study is also expected to begin in mid-2017.

(Operator instructions.) Kevin DeGeeter, Ladenburg.

I want to follow up on the earlier question with regard to volume trends at BioReference. Did you see generally similar type of growth trends throughout the third quarter? Did you see different level of activity in July and August, perhaps a return closer to trend line in September, and just general thoughts to what kind of volume trend you're seeing as we move into Q4?

So, we did definitely see a rebound in volumes in October compared to the July and August timeframes. It was a slight pick-up in September, but we're turning back to our kind of expectations to support that double-digit patient volume growth.

Charlie, as we begin to think about potential mechanisms payers can use to at least initially control access to RAYALDEE, should we think of those as primarily relating to step therapy, where patients will have had to have failed a given therapy? If so, what therapies should we think of as more germane to building (inaudible) step therapy, or should we think about other mechanisms for prior authorization, other tools for controlling initial access?

We think the most likely type of control that payers would use would be a step edit with the requirement that patients fail on nutritional vitamin D prior to moving to RAYALDEE. We don't think this is going to be a significant barrier for RAYALDEE because surveys show that about 75% of patients for stage three or four chronic kidney disease are on nutritional vitamin [D]. And we know that almost all of these patients fail quickly, or fail eventually, so we don't think this is going to be a significant barrier for us.

Our research with the payers would indicate that prior authorizations may not be imposed, but we won't know until we've lowered our price into the (inaudible).

And we have no more questions in queue. Dr. Frost, do you have any closing remarks?

I just want to thank again everyone for attending the conference, and we're extremely excited, as you could tell, by the upcoming RAYALDEE launch, and stay tuned.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your lines.