Oruka Therapeutics Inc (ORKA) 2005 Q4 法說會逐字稿

Welcome to the fourth quarter and year end 2005 Nuvelo financial results call. [OPERATOR INSTRUCTIONS] As a reminder, today's conference is being recorded for replay purposes. On the call today we have Dr. Ted W. Love, Chairman and Chief Executive Officer; Gary Titus, acting Chief Financial Officer and Chief Accounting Officer; Dr. Michael Levy, Senior Vice President of Research and Development; Also on the call to participate in the Q&A session is Lee Bendekgey, Senior Vice President, General Counsel.

Before we begin our conference call today, the Company has asked me to read the following statement. Presentations by Nuvelo management on this conference call will include statements on our anticipated use of cash and financial results in the fiscal year 2006. The success of our collaboration with Bayer Healthcare AG, the timing and progress of Nuvelo's clinical stage and internal research programs. The potential markets for our clinical stage compounds and the expenses, revenues, and potential for profit from sales of any drug product resulting from such programs which statements are hereby identified as forward-looking statements for purposes of the Safe Harbor provided by the Private Securities Reform Act of 1995. Such statements are based on our management's current expectations and involve risks and uncertainties.

Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors including without limitation uncertainties relating to drug discovery, clinical development processes, enrollment rates for patients in our clinical trials. Changes and relationships with strategic partners and dependence upon strategic partners for the performance of critical activities under collaborative agreements, SEC review of registration statements that we filed to authorize public offerings of our securities. Stock market conditions. The impact of competitive products and technological changes. Uncertainties relating to patent protection and uncertainties relating to our abilities to obtain funding. These and other factors are identified and described in more detail in Nuvelo filings with the SEC including without limitation Nuvelo's annual report on Form 10-K for the year ended December 31, 2004, and subsequent filings. We disclaim any intent or obligation to update these forward-looking statements. I will now like to turn the conference over to your host for today's presentation, Dr. Ted W. Love, Chairman and Chief Executive Officer. Please proceed, sir.

Thank you all for joining us today. We are very pleased to share with you our recent accomplishment. Today's call will follow our usual format. Following my introductory comments, Gary Titus, our acting CFO and Chief Accounting Officer will provide an overview of our 2005 quarterly and year end financial results as well as guidance for 2006. Michael Levy, our Senior Vice President of Research and Development will then discuss our clinical programs. And I will conclude with an overview of the significant corporate and clinical milestone that are ahead of us in 2006.

Over the past year we have made excellent progress on our efforts to lay the foundation for Nuvelo's transformation into a fully integrated bio-pharmaceutical company with a U.S. commercial organization. Our lead candidate alfimeprase in two Phase 3 programs that are now well underway. We executed a financial strategy that has put us in the strongest financial position we have ever been in and we formed a global alliance with an ideal international pharmaceutical partner who recognizes the value of committing significant development and commercialization resources to the success of alfimeprase. Our mission at Nuvelo is to build a valuable business through the discovery, development and commercialization of life improving therapies for human disease. Each of our goals in 2005 was thoughtfully executed with this mission in mind. I will now review our quarterly and early 2006 accomplishments which reflect our hard work over the past few months.

This month we successfully completed a secondary offering with gross proceeds of approximately $120 million. We experienced very strong support for our stock during the offering period leading us to upsize the offering by 1 million shares and pricing the offering at the market value of $16 per share. In January we entered into a global collaboration agreement with Bayer Healthcare to optimize the worldwide development and commercialization of alfimeprase while maintaining rights to alfimeprase within the United States. As a consequence, we received an up front payment of $50 million and will receive up to an additional $335 million in milestone payments. Our agreement with Bayer also provides for them to share 40% of spending on global development programs. Finally, Nuvelo will receive up to 37.5% in royalties from Bayer for X U.S. alfimeprase sales.

We are excited that we have chosen the ideal partner in Bayer as they share our vision of alfimeprase as a transformational therapy for a wide range of thrombotic conditions. They have significant development and commercialization capability outside the U.S. And our complementary capabilities in the cardiovascular space will allow us to develop in commercial alfimeprase to its full worldwide potential.

On the regulatory front, alfimeprase was granted Fast Track status by the U.S. Food and Drug Administration and has received orphan drug destination from the European medicines evaluation agency for the treatment of acute peripheral arterial occlusion, RPAF. We also received a special protocol assessment agreement from the FDA for NAPA-3 for the treatment acute PAL. Finally, we presented Phase 2a, ANTHEM rNAPc2 study results at the American Heart Association's Scientific Session 2005 showing our rNAPc2 has an acceptable safety profile and is well tolerated at the highest dose tested in patients being treated for acute coronary syndrome. Let me turn the call over to Gary to discuss the specifics of our fourth quarter and year end 2005 financial results and 2006 guidance.

Good afternoon, everyone. Last year we developed a three part strategy to build on the financial strength of our company. First, we entered into a committed equity financing facility that gave us access to as much as $75 million available over a three year time frame to access at our discretion. Second, we pursued an ex-U.S. commercialization partner for lead partner candidate alfimeprase and lastly we put in place a shelf registration statement to enable us to access the financial markets when market conditions and our accomplishments of corporate goals made that a desirable approach to raising capital.

I'm pleased to report that we have successfully executed on all three parts of this strategy. In the fourth quarter of last year, we accessed capital from the financing facility and we continue to have $60.6 million available to us under this facility. In January, we entered into a collaboration with Bayer to brings us the ex-U.S. commercialization expertise we need to maximize the global opportunity for alfimeprase while significantly building our financial strength. And finally, we recently completed a successful public offering that allowed us to raise significant cash from a position of strength.

Now I would like to review our cash balance, burn rate, recent collaboration, and financing events. We began the fourth quarter with approximately $75.5 million and ended the year with $70.3 million in cash and investment balances. Our cash burn was $19.4 million for the fourth quarter, and $64.6 million for the year as a whole being within our 2005 guidance of 60 to $70 million. We define cash burn, a non-GAAP financial measure as the net cash used in operating activities as determined in a accordance with GAAP, adjusted for the effects of purchases or sales of equipment, property, and software, payments on debt obligations and proceeds from the exercise of options, warrants, and under the employee stock purchase plan all being determined in accordance with GAAP.

During the fourth quarter of 2005, we accessed our committed equity financing facility drawing down $14.4 million to strengthen our year end cash position. In January 2006, we received a $50 million upfront cash payment from Bayer upon entry into our license and collaboration agreement for alfimeprase. We also anticipate receiving an additional $40 million from Bayer in 2006 consisting of a $10 million milestone payment for initiating a Phase 2 trial in stroke and a $30 million in global development reimbursements. At February 2006, we raised approximately $111.9 million in a public offering after deducting underwriter's fees and stock issuance costs of approximately $7.7 million from the sale of 7.5 million shares of our common stock. Last year we focused on building financial strength and we have achieved this goal.

Turning now to our 2005 results of operations our operating expenses were $21.5 million for the fourth quarter of 2005, and $73 million for the year. We spent $16.9 million on research and development during the fourth quarter of 2005, and $57.2 million for the year as compared to $8.2 million and $40 million in the same periods in 2004. Our general and administrative expenses which include precommercialization costs increased to $4.7 million in the fourth quarter of 2005, and $15.8 million for the year as compared to $2.5 million and $8.7 million in the same periods last year. The changes were a result of increased expenses associated with building our infrastructure to support our growing development organization and preparations for the planned commercial launch of alfimeprase.

Turning now to our consolidated statement of operations results. For the quarter ended December 31, 2005, we reported a net loss of $20.9 million or $0.49 per share compared to a net loss of $13 million or $0.40 per share for the same period in 2004. Our 2005 full year loss was $71.1 million, or $1.72 per share compared to a net loss of $52.5 million or $1.70 per share in 2004. The number of shares of common stock used for the calculation of fourth quarter earnings per share is based upon weighted average shares outstanding during the quarter and year. For the fourth quarter this was 42.9 million shares and 32.2 million shares in the same period in 2004. For the year, this was 41.3 million shares and 30.9 million shares in 2004. On December 31, 2005, there were 44.1 million shares outstanding.

At this time I would like to give financial guidance on our cash burn for 2006. We anticipated a cash burn rate of 33.5 to $43.5 million for 2006 as defined previously. Key drivers behind this burn are the continuing ramp up of our clinical development operations for our alfimeprase Phase 3 programs, an acute BAO, and catheter occlusion, our planned Phase 2 trial in is ischemic stroke and costs associated with manufacturing of alfimeprase drug product for our clinical trials and future commercialization. In addition we will continue to incur costs associated with our ongoing programs with rNAPc2, nU206, and our thrombin inhibiting Aptimer program. And now I will turn the call over to Dr. Michael Levy, Senior Vice President of Research and Development.

Thank you, Gary. For the next few minutes I will provide you with an update on our development pipeline. Focusing on our acute cardiovascular programs and on our emerging oncology programs and share with you our excitement about the progress we've made to date. Let's begin with an update on alfimeprase, our lead cardiovascular product candidate. We continue to execute our alfimeprase development strategy making significant progress with our Phase 3 programs in both acute PAO and catheter occlusion. And as recently announced expanding our development plans to include ischemic stroke and deep venous thrombosis.

Let's start with acute PAO also known as the NAPA program. Since patients enrollment has been tracking well, we were able to provide guidance on completion of enrollment in our NAPA-2 trial in January which was earlier than anticipated. We continue to be on track to complete enrollment in our first Phase 3 trial in this program NAPA-2 in the second half of 2006 and will provide top line data as soon as we can after completion of the last patient. Typically the time required to lock a database and then generate top line gain is a few months. Subsequently we expect that one of our investigators would present a more complete analysis of the full beta set at an appropriate medical conference as soon as possible thereafter.

Our second Phase 3 acute PAO NAA-3 is also progressing well. We were currently identifying and activating sites and expect to enroll the first patient in the Napa 3 trial soon. In addition to the progress we are making with our clinical trials, we have also been making progress on the regulatory front for alfimeprase. Obtaining orphan status in both the U.S. and EU, a special protocol assessment for NAPA-3 and most recently fast track designations for the NAPA program as a whole.

In November of last year, we were granted orphan drug designation by the EMEA for alfimeprase for the treatment of acute PAO. The designation provides several benefits including market exclusivity for ten years following market authorization. Note that we had previously obtained orphan drug designation in the U.S. from the FDA. In December of last year we received an SBA from the FDA. We have worked closely with the FDA on the design of the Napa program as a whole and are pleased to receive the FDA's formal approval of the NAPA-3 trial design as adequate in meeting their scientific and regulatory requirements.

As part of the SBA process, we have finalized the details of the NAPA-3 trial including the number of patients participating. This trial will closely replicate the NAPA-2 trial and will also be a randomized double blind study comparing 0.3 milligrams per kilogram of alfimeprase with placebo. It will enroll approximately 300 patients with the primary end point of avoidance of open vascular surgery within 30 days of treatment. We now expect to enroll a total of 600 patients into the acute PAO Phase 3 program as a whole.

Finally in January of this year, the FDA granted alfimeprase fast track designation. This designation is reserved for drugs that demonstrate the potential to address an unmet medical need and are intended for the treatment of a serious or life-threatening condition. In the case of acute PAO, there is no currently available FDA approved drug making it an unmet medical need and the Phase 2 data for alfimeprase has demonstrated that it has a real potential to transform the treatment of this condition. Fast track is designed to facilitate drug development and can lead to a priority review of a biologic license application or BLA. Which according to the FDA may reduce the total review time from the standard 12 months to 6 months. In addition, under the fast track program the FDA is committed to working more closely with the sponsor and the BLA may be submitted as a rolling submission which allow certain sections of the BLA to be submitted and reviewed while other sections are being finalized.

Let's turn now to catheter occlusion our second development program for alfimeprase. For our Phase 3 catheter occlusion program we achieved our milestone of initiating the first catheter occlusion trial SONOMA-2 in the second half of 2005 and as announced today, we have just initiated enrollment in the second trial, SONOMA-3. The SONOMA-2 trial has been enrolling well, enabling us to share completion expectations earlier this year. And we continue to be on track to complete SONOMA-2 in the second half of 2006. We will provide top line data as soon as we can after enrollment of the last patients and full data will be presented at an appropriate medical conference by one of our investigators.

Having made progress on our initial clinical programs in 2006 we will begin to implement our label expansion strategy for alfimeprase. We have always known that alfimeprase holds the potential to treat a wide range of clot disorders and that acute PAO and catheter occlusion represented the most rapid and low risk market entry strategy for us. Now that we've advanced both of these initial programs, we are able to pursue follow-on opportunities for alfimeprase being ischemic stroke and NDBT. We believe that alfimeprase has the potential to transform both of these markets where currently there is little penetration by existing agents.

Given alfimeprase's speed of action and safety profile, we believe it could be an ideal treatment for ischemic stroke providing the opportunity to decrease bleeding and expand the treatment window beyond the current three hour time frame. Both of these factors would enable a larger segment of stroke patients to receive treatment than is currently the case. We expect to initiate a Phase 2 trial with alfimeprase in stroke in the second half of 2006. For DBT the safety profile of plasminogen activators limits their use in its patient population. DBT is a significant but rarely life-threatening condition. So physicians are reluctant to administer plasminogen activators which expose patients to a significant bleeding risk. Given alfimeprase mechanism of action and safety profile to date we believe it has the potential to treat this patient population with a reduced bleeding risk. We plan to begin a Phase 2 trial in DBT in 2007.

Now, let's turn to our second cardiovascular candidate, rNAPc2. In November of last year, results from the Phase 2a dose escalation trial with rNAPc2 were presented at the American Heart Association meeting. The data showed that rNAPc2 has an acceptable safety profile and was well tolerated at the highest dose evaluated in patients being treated for acute coronary syndrome or ACS. In its Phase 2a trial, rNAPc2 was added on top of heparin as well as other standard antithrombotic therapies. The data show that treatment with rNAPc2 resulted in a dose rated inhibition of Thrombin generation with elevant increase in clinically significant bleeding.

In addition to the safety data from this trial, we are currently finalizing review of the efficacy data we have generated based on surrogate end points which we expect to present at an appropriate medical meeting later this year. Currently, we are enrolling patients in a Phase 2 heparin replacement trial where we are progressively decreasing and ultimately eliminating the use of heparin in patients with ACS. This study should give us a good indication of rNAPc2s anticoagulation will activity and its potential ability to replace heparin in this patient population. This trial is going well. And we expect to complete enrollment the first half of 2006.

I would like to now take a moment to discuss our emerging oncology pipeline. Our approach in oncology is based on solid and exciting science as exemplified by our first oncology candidate Nu206. In August of last year. Nu206 was featured in science. And subsequently November of last year the "New England Journal of Medicine," we are developing Nu206 a novel growth factor that is a highly potent and specific stimulator of the epithelial cells that line the gastrointestinal tract to reduce cancer therapy induced mucositis. Gastrointestinal mucositis is a condition that causes extreme discomfort in patients undergoing radiation therapy or chemotherapy and there are few treatment options available. We are currently focusing on the preclinical development program for Nu206 including toxicology studies and expect to initiate a Phase 1 study in the second half of 2006.

Finally, our most recent oncology candidate actually comes from the expansion of one of our cardiovascular programs. RNAPc2. The factor 7a and tissue factor Proteus complex has been shown to play a primary role in the cellular signalling of both metastasis and angiogenesis in a variety of cancers including colorectal carcinoma and melanoma. We are currently finalizing our development plans with our oncology advisors and look forward to elaborating on our plans with this program as the year progresses. I will now turn the call back over to Ted.

Thank you, Mike. Now we would like to focus on 2006. There are several significant milestones to watch for in our Phase 3 registration programs for alfimeprase and acute PAO and acute catheter occlusion. The first phase three trials of alfimeprase and acute PAO, the NAPA-2 trial is on target to complete patient enrollment in the second half of 2006. Likewise, completion of patient enrollment in the first Phrase 3 alfimeprase trial, in catheter occlusion SONOMA-2 is anticipated in the second half of 2006. We expect to enroll the first patient in the second Phase 3 alfimeprase trial in acute PAO NAPA-3 soon and as announced today we achieved our goal of enrolling the first patient in the second Phase 3 trial for catheter occlusion SONOMA- 3 in the first half of this year. As Michael mentioned, we also have plans to expand our alfimeprase development program.

Our partnership with Bayer is predicated on a belief that alfimeprase has the potential to transform treatment for the more than 10 million people in the western world who suffer from blood clot related conditions each year and that the market opportunity extends far beyond acute PAO and catheter occlusion. The Bayer partnership allows us to aggressively move alfimeprase into additional and higher value indications like stroke and DBT. Accordingly, we plan to initiate a Phase 2 trial of alfimeprase in ischemic stroke in the second half of 2006. And we are also preparing for a Phase 2 trial in DBT that will begin in 2007.

After our announcement with Bayer in January, we have moved swiftly to kick off the partnership. We are off to a great start and have been working to establish the appropriate joint committees between our companies. In other words, we've already started to put a solid foundation in place for our very successful collaboration and we continue to make excellent progress with alfimeprase development. Now turning to the rest of our pipeline, we expect to complete a Phase 2 rNAPc2 heparin replacement study in patients with ACS in the first half of 2006. And to present efficacy data from our previous Phase 2a, rNAPc2 trials sometime later this year. Finally we plan to initiate a Phase 1 study of Nu206 for the treatment of cancer, therapy induced nicositis in the second half of 2006.

In closing, 2005 was an important year for us. We hit our clinical milestones, we began to build a strong commercial organization, and significantly strengthened Nuvelo's financial position. We will continue to make execution of our milestones a priority in 2006 and we look forward to reporting our progress throughout the year. Operator, can you please poll for questions.

Thank you very much, sir. [OPERATOR INSTRUCTIONS] Our first question comes from the line of Jennifer Chao, Deutsche Bank.

Congratulations to your team on a highly productive 2005. Just to help us see the forest from the trees, specifically on the NAPA-2 and 3 trials wondering if you could give us a little bit more of an appreciation for the status of the NAPA-2 enrollment. Is there any issue also with announcing top line results by year end if that is in fact still your guidance given the ongoing NAPA-3, in other words does that infringe or compromise your ability to enroll that trial in any way. Also, is your confidence on the timing based on the current run rate plus a little bit of margin? How are you thinking about that?

Hi, Jen, it's Michael Levy calling. How are you?

Good, how are you?

Fine, thanks for your questions. The guidance we've given on the NAPA-2 trial is that it's progressing well and that we anticipate finishing it second half of this year and we feel confident in that projection. I don't think that announcing top line results for NAPA-2 would impact on Napa 3 because they stand alone trials. Each parrot in and of itself can give a significant answer so I think that's not a problem for us. And we haven't given guidance at this point as to which quarter or how we anticipate highlighting those results. What we have said is that typically it takes several months to clean and close and lock a database. And then do the initial analysis and we anticipate that these trials will fall within those guidelines.

Okay. Just with respect to the regulatory strategy then, would you think that there is any reason why -- let's assume positive NAPA-2 results, is there any reason why we may want to anticipate a potential accelerated regulatory review based on those positive NAPA-2 results? Meaning, could you file some kind of accelerated rolling filing that would be then contingent on positive NAPA-3? Also, what is the frequency of DSMB checks at this point for NAPA-2 and should we expect that to be consistent for NAPA-3?

Well, you ask a number of good questions. The first thing to say is I think it's prudent to plan for both trials being required in the ultimate regulatory submission. That's certainly the way we are thinking about it. There is always the possibility of an upside that we are thinking that both of these trials together will form a very strong package for approval of alfimeprase in acute PAO. You will have to refresh my memory on what your second question was.

DSMB checks, realtime reviews, and is that --.

Right. The DSMB is looking at the data roughly every quarter and we anticipate they will look at the NAPA-3 data according to the same sort of time frame.

And just to wrap up on alfimeprase, is the game plan still to include -- to file alfimeprase on both CO and PAO indications at the same time? Or should we expect that the filings will take place on whatever finishes first?

Both of these packages are stand alone packages. And each will be submitted to the FDA when they complete. Right now our thinking is that because the trials are going well in both cases they will finish roughly the same time and be submitted roughly the same time.

Okay. Just lastly on rNAPc2. Perhaps you can give us an appreciation for the strategy there. Let's assume that the heparin de-escalation study is positive. How are you thinking about positioning rNAPc2 from a regulatory and commercial standpoint? Would Nuvelo take the lead to initiate further studies or should we anticipate that a partner would be expected to move things forward?

Jen, this Ted. What we said all along is that with regard to rNAPc2 going into a pivotal Phase 3 trial we would not undertake that without a corporate partnership in place because of the expense of that trial. And our obvious focus on making sure that we have the resources to fully support all of our activities with alfimeprase. And we are early on in that process. So I didn't want to -- I don't want to set any expectations about the timing of that kind of partnership. With regard to rNAPc2 and cancer, we have not tied any requirement about moving forward there with the corporate partnership. So as the year goes forward you can expect to see some announcements about moving rNAPc2 into cancer.

Okay, great. Just lastly, Ted, on rNAPc2, the heparin de-escalation study, let's assume just based on the way it's designed and let's assume it hits your end points, is that enough to really demonstrate proof of concept and right dosing and safety profile to in your view really elicit the kind of partnership that you would be looking for? Or would you need to do another Phase 2 to help refine those findings?

Well, I that I lot of it depends upon the perspective and also the way that a corporate partner may think. I think many of us who look at the mechanism of how rNAPc2 works have a lot of understanding of the coagulation cascade fully expect the drug to work and everything we have seen has been what we would have predicted. I think corporate partner who thinks that way may not need very much beyond what we've already demonstrated. It is I think likely to expect that the potential positive findings from the rNAPc2 study, the heparin withdrawal study, will give a lot of people an additional level of confidence. But at the end of the day, we want to make sure that we do the job of getting those days done, presenting that data to you and to others, and then seeing where it takes us.

Great. Thanks a lot.

Thank you very much, ma'am. Ladies and gentlemen your next question comes from the line of Clay Wilson of Needham. Please proceed.

Thanks for taking my question. I appreciate it. I just -- a lot of questions have been asked. I was wondering if you could just speak a little bit more to the -- going forward the expenses, operational expenses going forward and guidance on that score especially in light of some of the new help that you are getting from Bayer right now.

Hi, Gary Titus, how are you?

Fine, thanks, Gary.

In terms of operating expenses we haven't provided direct guidance on operating expense we sort of focused on our burn rate. We have given guidance today that we anticipate our burn rate being somewhere between 33.5 and $43.5 million in 2006. That is -- includes operating expenses that we anticipate will be significantly higher than what they were in 2005. But they are offset to a large extent by the proceeds from Bayer that we'll be receiving this year including the one-time up front that we've already received, the $50 million we anticipate receiving other ongoing expenses including reimbursements including $10 million for starting a stroke trial before the end of the year. And $30 million perhaps this year for the 40% cost sharing from Bayer for the global development program.

Ladies and gentlemen your next question comes from the line of Caroline Stewart of Morgan Joseph, please proceed.

Just a little bit more clarity on the financial guidance there. The $50 million up front that I'm supposed to look at it for amortization schedule?

We haven't provided final guidance on how we will amortize the proceeds coming from Bayer, but I can give you some general thoughts right now subject to revision as we -- these were first quarter events and so they won't be released as part of our year end numbers. The current thinking on the milestone is that it would be amortized over the development period which is somewhat to be determined as you can imagine with four indications covered under this collaboration. We aren't quite clear on what those exact terms will be. It is a fairly lengthy period of time. The $50 million will not be reflected in total in 2006. As it relates to other milestones such as the $10 million that we were hoping to receive before the end of the year for initiating a stroke trial, that will probably be recognized as it's received. And the third component that cost sharing 40% will be recognized in the period that the Company incurs the expense. Those are the three components hopefully that helps clarify how we will recognize those as best as I can today.

Okay. Thank you. Just a minor issues, I guess I thought also that there was a loan from Amgen Metrics that was either due -- that you're either due to pay back or shares in November of this year, I think it's only worth 5 million. But I didn't see it in your guidance. Was that correct or--?

That is correct. We haven't given any guidance on what we will do with that, but you are exactly correct. It's a $4 million loan with accrued interest that will be due in November of this year. We will pay that in -- possibly in two different ways. One is in cash and the second is in stock. We have the discretion -- full discretion to decide exactly how to pay that. But we will resolve that before November.

And then, I'm switching gears just a little bit, the Nu206 I believe came out of the high seek gene work and I believe you were working with Kirin on it and I thought that that collaboration ended in December. Was that extended or does Kirin have a part in it going forward? Could you remind us where that stands.

You are right. That collaboration actually has ended. But Nu206 was discovered during the course of that collaboration. In addition, I think we sent out an announcement that defined exactly the specifics of how we will share the cost and the economics of Nu206. Specifically it is a 60/40 split where we, Nuvelo, will be responsible for 60% of the costs. Kirin will be responsible for 60% of the cost. We will receive 60% of the commercial benefit, and we will lead both the development and the commercialization.

Okay, thank you very much.

Thank you very much, ma'am. Ladies and gentlemen, next question comes from the line of Mark Monane of Needham Capital.

It's Mark Monane. Again, let me add my congratulations to you, Ted, and the team, all the work you did in 2005.

Thanks, Mark.

Couple questions. Let's start with the financials information. How do you plan to recognize the moneys you are receiving from Bayer in terms of the compensation for research expenses? Will you incur the research expense and then there will be a revenue line from Bayer? Or will there be just one consolidated line on research and development?

Hi, Mark. Gary Titus. To answer that question I believe you are talking about the 40% reimbursement.

Yes, thank you, Gary.

And that will be not beyond the revenue line. That will be an offset within the R&D expense line. And so you in fact won't see that as a separate amount.

Terrific. That should help. On the DSMB, can you tell us, please, if the plan is to look for a utility analysis while they are there? Will they also look at a towering analysis? At the same time that they are looking at that safety intolerancy?

Hi, Mark, Michael Levy here. The mandate of the DSMB is put primarily at a safety analysis and to make sure that the patients are progressing well through the therapies as we anticipate they will. There is not a utility analysis in place. As you know, we are pretty confident that the studies are overpowered to detect the differences we are looking for so we wouldn't really see the need for a futility analysis.

And how about powering new opportunity to upsize the trial if it turns out.

Well, we don't believe that that will be necessary. As you know, the trial is highly overpowered. We have 90% power to detect a very small difference and we are looking for a large difference between placebo and alfimeprase. And really the size of the trial is more predicated on putting together a good size patient safety database to go forward to BLA with so that we have experience with several hundred patients having received therapy.

That makes sense. Last question is, the drug portfolio that Nuvelo was preparing for dealing with life-threatening illnesses and real diseases, has to be evaluated by the FDA in general as a single entity. Meaning they have to show their independent effects. However, in the real world it's likely that many of these products if they make it to the real world will be used in combination with current therapies. Can you talk about that paradox that exists today and maybe talk about how Nuvelo might be dealing with that in the future.

Yes, I will take a little bit of a stab at that. I mean, if you look at the current products obviously alfimeprase being a clot dissolver many times would require anticoagulation therapy after its administration. In our trials, heparin is primarily the agent that is being used, but one could potentially envision in the future that rNAPc2 would be an appropriate therapy. The short acting Aptima program that we have in collaboration with Archemix is really a drug product that the we envision being used in the setting of medical procedures. So it's probably less likely to be used in combination with rNAPc2 or alfimeprase. Obviously that could occur but we really see that as a product that would be used to facilitate a medical procedure where rapid reversal of anticoagulant effect is what one wants to achieve.

That makes sense. And how about rNAPc2 in terms of the drug in combination with other ACS therapy. Would it show an incremental benefit or how will we evaluate the success of rNAPc2?

The way we've always viewed rNAPc2, is as a drug that would have superior efficacy. As you know, primarily the efforts when people have brought forth alternative antithrombin molecules is to look for either improvement in bleeding or a different regimen or getting rid of the heparin induced thrombocytopenia. rNAPc2 is very different. We expect that because of where it works in the coagulation cascade for us to provide a superior anticoagulant effect, that should translate into reduced cardiac events that you are trying to prevent, specifically death, recurrent infarction, recurrent ischemia, and I think our goal would be in a pivotal program to demonstrate exactly that. And I think if we do that, that would make it the dominant agent for anticoagulant therapy but obviously there would likely continue to be some use of anticoagulant therapy -- anti-platelet therapy in appropriate patients.

Thanks, Ted, thanks, Michael, thanks to Gary, and thanks to Lee out there. Congratulations again. Thank you.

Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Liana Moussatos of Pacific Growth Equity. Please proceed.

You gave us a little teaser in there about rNAPc2 and cancer mentioning colorectal cancer and melanoma. Were there specific reasons why you mentioned those two? Do you have any preclinical data and sale lines or something that caused you to mention those or you were just mentioning them?

There's a number of reasons for mentioning those particular cancers. If you look at the human cancers, those particular tumor types over express tissue factor several orders of magnitude. Greater than healthy cells and in fact very advanced cancers, either in terms of staging or grading tend to express tissue factor more than less advanced cells. That's good indirect evidence that tissue factor plays an important role here. And in some of the preclinical models that we run or are currently running, we focused on those two types of tumors as well with animals unigraph models for example and have been encouraged by the results.

Thank you very much. And will you be presenting any of this preclinical data at a meeting this year?

We are currently putting together a package that we intend to share with our oncology advisers. And the regulatory agencies of course. Then secondary determine what's the best way to share this data with you and with others who would be interested to see it and I think it's safe to say we are still looking at a number of potential ways in which we could share that data in the months to come.

All right, thank you very much.

Thank you very much, ma'am. Ladies and gentlemen your next question comes from the line of Shiv Kapoor of Montgomery and Company.

Thanks for taking my question. I am wondering what the study design for alfimeprase and stroke would be. Can you go where what number of patients and perhaps primary outcome that you are looking for.

Thanks for the question. We can't give you a precise answer to the questions you asked because we are still in discussion with our partners Bayer and also would want to discuss this more thoroughly with the FDA and other regulatory agencies but I can give you a general overview and tell you that we would expect this to be a relatively small trial with less than 100 patients. And we would expect to look at several doses, say for the sake of argument three or so doses of alfimeprase in patients with acute stroke. Having suffered a stroke in the last three to nine hours. And then would look at surrogate end points rather than clinical outcomes, look at surrogate end points that determine whether or not blood flow has been restored to the occluded vessel.

So this is beyond the three hour time window that TPA's have?

Yes, we would be focusing on a greater time window. We think that's one the really exciting and wonderful things about alfimeprase is that it has the potential to expand the current treatment window of TPA which is obviously only up to three hours. For a variety of reasons. We think it will have greater efficacy, faster acting, and of course a reduced bleeding profile. For those reasons we are interesting in looking at a greater window because commercially that will be very important, the window currently limits number of patients who can access therapy and I must add that of course this is all speculative and we haven't dosed the clinical patients yet. We expect to begin the trials later this year and look at these important questions.

Great. Thanks a lot.

Thank you very much sir. That concludes our Q&A session today. I would like to turn the call back over to Dr. Love for his closing remarks.

Thank you. I would like to conclude by thanking you all for taking the time to join us today and remind that you will have several opportunities to hear more about Nuvelo over the next month. I will personally be presenting at the call in conference in Boston on March 8 and at the Lehman Brothers conference in Miami on March 9. Information on all of these events and others can be found on our website. Thank you again and good afternoon.

Thank you very much, sir. And thank you ladies and gentlemen for your participation in tonight's conference call. This concludes our presentation and you may now disconnect. Have a good day.