TherapeuticsMD Inc (TXMD) 2014 Q2 法說會逐字稿

Thank you for joining the TherapeuticsMD second-quarter 2014 conference call. Following remarks from the Company, we will be opening the call for Q&A.

I would now like to turn the call over to Ami Knoefler from Spark Viacom, who is representing investor relations for the Company. Ami, please go ahead.

Thank you, Karen; and welcome this afternoon to TherapeuticsMD's second-quarter earnings call. Please note that a copy of the Company's second-quarter financial results press release was issued today after the close of market. It is available on the Company's website, TherapeuticsMD.com, in the Investor section.

On today's call from the Company are Chief Executive Officer Robert G. Finizio; Chief Financial Officer Daniel A. Cartwright; Chief Medical Officer Dr. Sebastian Mirkin; and Chief Product Officer Julia M. Amadio. Before turning over the call to the Company, we would like to remind everyone that any forward-looking statements made during the call are protected under the Safe Harbor of the Private Securities Litigation Reform Act.

Such forward-looking statements are based upon current expectations, and there can be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of risks and factors, some of which are identified in our press release and our annual, quarterly, and other reports filed with the SEC. These forward-looking statements are based on information available to TherapeuticsMD today, and the Company assumes no obligation to update statements as circumstances change.

An audio recording and webcast replay for today's conference call will also be available online in the Investor section of the Company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 6, 2014.

With that I will turn the call over to TherapeuticsMD's CEO, Rob Finizio.

Thanks, Ami, and good afternoon, everyone. I am pleased to update you on our progress in the second quarter and review why we think the business opportunity for TherapeuticsMD is unique in the women's health space. I would like to start with an update on our Phase 3 trials.

We continue to advance recruitment in the ongoing REPLENISH Phase 3 study for TX-001HR, which is a bioidentical combination hormone therapy product in development for treatment of vasomotor symptoms in postmenopausal women. Our recruitment is currently on track, and we expect to have our last patient enrolled in Q4 of this year.

Moving on to VVA, we are also on track to initiate this Phase 3 study this quarter for TX-004HR, also known as the VagiCap, for vulvar vaginal atrophy, or also known as VVA. I am very happy to announce our clinical research organization is hired and currently performing startup activities related to the VVA trial.

Moving next to our progesterone Phase 3 study, our progesterone-only study, we have had a positive dialog with the FDA regarding changes to the TX-002HR progesterone-only Phase 3 protocol. Later in the call, Dr. Sebastian Mirkin will discuss all three Phase 3 trials in more detail.

As you know, our pipeline features highly differentiated investigational product candidates that are designed to address significant needs in growing and underserved markets. These candidates are in development for indications affecting millions of women and could offer new treatment options in areas where dosing flexibility and safety are of the utmost importance.

The competitive landscape and changing regulatory or legislative atmosphere related to hormone therapy presents us with a compelling business opportunity. On the legislative front, we were also pleased to see that the FDA has published its final guidance in July on pharmacy compounding related to the Drug Quality and Security Act, as compounded drugs are increasingly considered experimental by payers, many of whom have started blocking coverage for active ingredients that were formerly covered.

A clear example comes from Express Scripts, which has blocked coverage for approximately 1,000 active ingredients. In addition to Express Scripts, OptumRx, UnitedHealth Group, Harvard Pilgrim, CVS Caremark, and others have also started placing restrictions on coverage of compounded medications.

Moving on to IP, our intellectual property portfolio also continues to strengthen. In July, we receive notification of allowance for two new patents.

One is a formulation patent and the other is a method patent. The method patent in particular is a significant achievement and forms a new pillar in our patent strategy.

We have also seen advancement from our early-stage pipeline programs which leverage our SYMBODA technology. SYMBODA, as most of you know, is our patented, solubilized, lipid-based hormonal platform.

We are very excited to share new transdermal PK data with our bioidentical natural estradiol and progesterone combination today. Julia will address these data along with our new patent allowances in more detail later in the call.

Looking ahead, we have a number of milestones in our development programs during the next several quarters. We have the resources and the team needed to execute.

On the other side of our business, our prenatal salesforce continues to perform very well, providing a scalable infrastructure targeting women's health providers throughout the US.

I would also like to thank all of our current and new shareholders for their support in the close of our $46 million equity financing this week. We appreciate your ongoing investment in our Company.

And with that, let me hand the call over to Dan for some comments on our financials. Dan?

Thanks, Rob. Good afternoon, everybody. I'll provide a brief review of the Company's financial results and then turn the call over to Sebastian Mirkin for a clinical update.

For the second quarter ended June 30, 2014, net revenue was $3.8 million, compared with $2.1 million for the second quarter of 2013. The increase was largely driven by the launch of the Company's prescription prenatal vitamins, vitaPearl and Prena1 Pearl.

Cost of goods sold also increased by approximately $400,000 for the 2014 quarter, compared to the prior year's quarter. Operating expenses for the quarter totaled $13.8 million. The increase over the prior year's quarter was primarily due to higher R&D expenses related to the late-stage clinical trials for our hormone therapy drug candidates.

During the quarter, SG&A expenses were relatively flat as compared to the prior-year period. The Company's operating loss was $10.9 million for the second quarter of 2014, compared with $5.6 million for the second quarter of 2013.

Nonoperating income during the second quarter of 2014 included a modest amount a miscellaneous and interest income, compared with expense from financing costs incurred in the prior year's quarter. As a result, the net loss for the second quarter of 2014 was $10.9 million or $0.07 per basic and diluted share, compared with a net loss of $6 million or $0.05 per basic and diluted share for the second quarter of 2013.

Cash and cash equivalents were $35.6 million at June 30, 2014, compared with $54.2 million at December 31, 2013. Please note that as a result of our recent equity financing, our cash position has increased significantly by approximately $43 million.

Our current shares outstanding are approximately 156 million. We are very pleased with our recent progress including advancements in our pipeline, growth of our current women's health business, and the recent equity financing that significantly strengthened our cash position and available resources.

With that I will turn the call over to Sebastian to summarize our clinical progress.

Thanks, Dan. I would like to summarize the most current developments related to our Phase 3 clinical pipeline. Let me start with our ongoing Phase 3 REPLENISH trial for the TX-001HR, or our natural estrogen/natural progesterone combination product which is under investigation for the treatment of vasomotor symptoms associated with menopause.

As you will recall, this study is targeted to enroll 1,750 subjects at approximately 60 to 80 sites in the US. We remain on track to complete enrollment in the fourth quarter of this year.

In order to ensure our goals, we launched a major national advertisement campaign to support enrollment. I am pleased to announce that we are seeing extremely positive results from this initiative.

As Rob mentioned, we are also proceeding with the Phase 3 study for TX-004HR, or VagiCap, for the treatment of vulvar vaginal atrophy. We have selected a CRO that has experience on the execution of Phase 3 VVA trials; and I have personally worked with this company in the past. We are performing startup activities, and we plan to initiate the trial by the end of September of this year.

We recently received feedback from the FDA on the protocol and have incorporated the input into the trial design. We anticipate enrollment of approximately 800 subjects in this study at 60 to 80 sites in North America.

The study's size and power are robust enough to support the evaluation of potential benefits of the three planned doses, 4, 10, and 25 micrograms of vaginal estradiols, over placebo. We continue to estimate approximately 9 months for enrollment and will expect to have initial results in the third quarter of 2015.

Let me now move on to TX-002HR, our investigational natural progesterone product. As you know, this product candidate is being studied in a Phase 3 clinical trial for the treatment of secondary amenorrhea.

The trial has faced significant recruitment challenges. However, we recently addressed these challenges with the FDA and, given their feedback, we intend to make some changes to our inclusion/exclusion criteria and study design. We have temporarily suspended enrollment in the study until we amend the protocol. We expect to work to update the design this fall and will provide more specific timelines once we review the protocol again with FDA.

In terms of communications with the scientific community, earlier during this quarter I presented a poster which highlighted the design of the REPLENISH trial at the World Congress of Menopause. The presentation generated a lot of enthusiasm and engagement of key opinion leaders worldwide.

I am also pleased to announce that we have received notification that our VagiCap [estradiol] that includes Phase 2 and PK data for the VagiCap product has been accepted as an oral presentation at the coming North American Menopause Society meeting this October. This meeting will provide important visibility for our VagiCap development program within the medical community and raise awareness of the Phase 3 clinical trial that we are starting this September.

Finally, I would like to echo the excitement of the Company and the potential of our Phase 3 product candidates. You will recall that I joined TherapeuticsMD last year, having been the global head of women's health clinical research and development at Pfizer. In that role I led development of Pfizer's recently approved hormone combination product, Duavee, and previously led the execution of three different VVA clinical trials.

At TXMD we are developing a strong team with experience in the design and execution of clinical trials for hormone therapies. I have hired some of my former colleagues from Pfizer, including the clinical project lead for Duavee. In addition to that I recently hired a [former] (inaudible) clinical team leader (inaudible).

I believe that TXMD is applying the industry best practices and we have a strong prospect of success. Now I would like to turn the presentation over to Julia, who will review our early-stage pipeline and IP development.

Thank you, Sebastian, and good afternoon. Since the Women's Health Initiative results were announced more than 13 years ago, hormonal research efforts in the women's health space have been extremely limited. TherapeuticsMD is working to fill this void, with exciting new opportunities that our SYMBODA technology can enable.

As Rob mentioned, we were quite excited by the recent patent allowances. The first is significant, as it covers the method of treating menopausal symptoms using our combination natural progesterone and estradiol formulation.

As we have been saying, the idea and need for an FDA-approved natural bioidentical combination has been wanted for decades; but the ability to successfully combine these two hormones and demonstrate threshold levels of activity has not been done before. Our SYMBODA technology has enabled this combination to become a reality and is protected by these new patents. We believe these patents will provide important competitive advantage.

Moving on to our new transdermal PK data, we have new data from our transdermal program, which you can see under the Investor section of our website, actually show the pharmacokinetic result of our new topical formulation of a combined estradiol and progesterone. These data demonstrate an 8-hour sustained 3- to 4-fold increase from baseline in progesterone concentration in lymphatic and capillary compartments. Estradiol concentrations show a similar pattern.

What we found most interesting was that while prolonged increases in lymphatic and capillary systems were obvious, the blood serum levels were negligible or undetectable. These data are exciting from a number of standpoints.

Number one, the lack of blood serum levels could create potential clinical advantages and significant generic barriers. Number two, new dosage forms may be possible with sustained lymphatic and capillary increased levels. And number three, a potential opportunity exists for a new layer in our IP strategy for progesterone.

We may in the future engage with a partner to advance our transdermal patch projects. Subsequent preclinical studies that are ongoing will further enhance these programs and direction, with additional scientific and IP support.

Now let me turn the call over to the operator for our Q&A session.

(Operator Instructions) Annabel Samimy, Stifel.

Hi, thanks for taking my questions. Congratulations on your progress. I had a question about the VVA trial and the design that you have agreed to -- or you have discussed with the FDA. I think I was reading that in order to have one trial you had to achieve statistical significance at the 0.01 level.

Is the fact that you have increased the trial size to 800 because they are holding you to that 0.01 level? Or is it because of the addition of the 4-microgram arm?

And how confident do you feel about hitting those p-values? And then I have some follow-ups. Thanks.

Thank you. This is a great question. Certainly, the sample size of the trial is related to the p-value that we would like to achieve; so therefore the sample size was calculated given the statistical power that we would like to observe over placebo and to allow the lower dose of 4 micrograms to show a statistical difference over placebo.

Given the Phase 2 clinical data that we have in our hands, in which 10 micrograms behaves much more potently than other VVA products, I am very confident that the 4 micrograms will show a separation over placebo in a clinically meaningful way.

Okay, great. Then if I can move on to the progesterone trial, I think you -- if I understand correctly -- you have a path forward now. You're expanding the inclusion criteria.

Can you just give us a little bit more detail on the doses that you are going to be looking at and what you need to do before you can reinitiate that trial?

Sure. Hey, Annabel; this is Rob. Thanks for the question.

Just to be clear here, we have had a really, really positive -- what we feel is a very positive dialog with the FDA, and the path forward is promising. We do have to -- we do have a considerable amount of dialog in writing; but we do want to finalize our protocol and put it forward before we make any clear commitments to the Street.

That last piece has not been done yet. The second it is done, we will give everyone clarity on it within three business days.

So, I am very positive on it. And I will turn it over to Dr. Mirkin, but I cannot say to you this is exactly what it is going to be -- and I feel like that is what you are looking for -- from a dosage standpoint.

We do see potentially the ability to have smaller arms. And we do see the ability to remove most of our inclusion barriers that we currently have with the trial today.

So I am promising, but until it is finalized I really can't give you anything to hang your hat on. Does that answer your question?

Yes, okay, that's great. I don't know if Dr. Mirkin had something else to add, but I had one more question.

Well, the whole idea, as Rob was mentioning, is to -- a trial of a shorter duration with lower amount of subjects in the trial.

Okay, all right. If I can direct one more question to maybe Julia, with regard to the compounding legislation. Have any -- I understand that the PBMs are starting to block coverage of certain compounded drugs.

At what point does the FDA put these drugs on a do-not-compound list? Is it only after approval or does it start right away?

Do you want me to address it?

Go ahead.

That is more in my area than Julia's, Annabel. So I will address it as best I can.

Sorry, didn't mean to ignore you.

Thank you. (laughter) (multiple speakers) I'm the CEO, so I will just keep going, right?

So anyways, the do-not-compound list. This fall -- in fact, we expect in the next 4 to 6 weeks the Advisory Committee we expect to be announced by the FDA. Okay? That Advisory Committee will be responsible for both 503A and 503B, so sterile and nonsterile do-not-compounding lists.

Now, remember this change in coverage by the PBMs and some direct payers is not related to that. That is related to the fact that these are considered now categorically experimental drugs, in what I have been told; and in that situation, it changes the premise in which doctors prescribe it and pharmacies fill it from a number of different venues. Okay?

Typically, just like PBMs, insurance companies, will not reimburse for our clinical trial subjects, it is very similar. These are experimental medications, thus they don't have to cover them.

So in the event that we are able to achieve estradiol and progesterone in combination approval, that would make the next piece of the legislation kick in, which is the piece that we feel is the strongest. Regardless of the do-not-compound list, it would be a violation of Food, Drug and Cosmetic Act to compound estradiol and progesterone. All right?

So with that being said, there will be a do-not-compound list that will be put in place; we expect it this fall. The AdComm committee should be announced in, I would say the next 4 to 6 weeks. And we will see how that shakes out.

But I just want to make it clear that that is not pivotal to our structure. It is pivotal, though, that we execute on our trial and get approval, and everything else will fall into place.

And the last piece is -- the only reason we highlighted the payers and the PBMs is we did not expect that to happen. We did not expect it to happen this fast. And it is all pivoting on -- and again, in our opinions and in our professional advisors' opinions -- on the change in the classification of compounded drug.

Okay, great. Thank you very much.

Bill Tanner, FBR Capital Markets.

Thanks for taking the questions. Rob, had maybe a couple for you and then I had one for Julia. As it relates to IP, obviously you have touched on it; you got a couple more patents, a notice of allowance, and I know you had more applications filed.

Just curious if you could speak to maybe the anticipated pace of other notices of allowance, and then how they would either broaden or support what is already out there in terms the patents that you have issued or allowed.

Absolutely. As a CEO -- and I will talk a little bit about this on closing. We are executing -- I don't know if you guys can hear our enthusiasm, but we're -- it is so seldom you have a quarter when all six departments are challenged with milestones that are critical to execution, and we are able to execute simultaneously on all fronts. So we are really excited.

A lot of these are intertwining, and that is what I am hitting here. So if you look at our transdermal progesterone data, given the fact that the blood serum levels are low yet you have a prolonged 300% to 500% increase in lymphatic and capillary systems, it is suggesting a lot of new here in the research, and a tremendous amount of whitespace on the IP side. That IP whitespace would be potentially an umbrella that would extend to anything that we have progesterone in.

With that being said, as our patent and chemist department and the clinical folks as well create these new IP filings -- and I believe we currently have 47 patents filed for, 30 in the US -- sorry, 33 in the US and 17 international -- I'm sorry, 14 international. So it would be a total of 47.

The key here, Bill, is that we -- one of our head scientists is over 65 years old. And since he is, you are given an accelerated review in the patent office. So we expect the bulk of those that are under examination today to be reviewed in the next 18 months; let's say half, to be fair.

And of course there is a dialog related. So to answer your timetable question, I would expect in the next 18 months to have a dialog on at least 20 to 30 of the 47 patents that have been filed.

Dialog meaning you would anticipate there being some initial office action?

I would expect that a number of those would issue and we get allowances on it. I would expect a number of those will prosecute, and we will have to produce more documentation.

And I don't anticipate any rejections. It could happen, certainly; but given our dialog there, and the strength of the team here, and the fact that we have the method and the formulation patents and the platform patents under our belt, I think we will just add more layers to those three pillars.

Got it. The same question would be as it relates to medical meetings going forward, ones where TXMD would be participating in some fashion, how you would participate. But what are the important ones for us to pay attention to as you maybe raise the awareness of what it is that the Company is doing and, I guess, (technical difficulty)?

That's a great question, because -- it is one of the things I wanted to bring up at the end. We do expect between October 15 and 18 in Washington, DC, this year, the North American Menopause Society is hosting their annual meeting. Not only will Dr. Mirkin be presenting a lot of our scientific findings from VVA in Phase 1 and Phase 2, we also expect to host a small event there as well.

We would encourage any and all shareholders to attend. This is the intersection of practicing physician, thought leaders, and industry. We will have a number of thought leaders on hand to talk to the buy-side analysts or any shareholders that would like more information on our products, our sector, and the overall practice of hormonal therapy for the myriad of indications it could be.

So we hope to see you there, Bill, and anybody else. And again we will certainly set something up where we will have some time where folks can speak to the expert. Julia, do you have anything to add?

No. I know we are also planning -- Bill, this is Julia -- that we are also planning a submission for ACOG for next year and for the other major OB/GYN meetings next year as well. We will be continually updating with both published manuscripts that are in works as well as abstracts and posters.

Okay, perfect. While I have you on, Julia, just curious. If you look in the TV, look at TV ads, seems like there is an increase -- it may just be that I am more observant now, covering your stock -- but it seems like there has been an uptick in DTC advertising for VVA by obviously the companies with the existing products.

I am wondering what your read on that is, if it has really changed or if it is just a new observation for me; or if it has increased, the impetus behind the increase.

You're absolutely right. It has increased. It is a nice thing to see the hormones being advertised again. Both Osphena and Premarin vaginal cream are doing some major direct-to-consumer advertising.

I think part of that is, obviously, the Osphena launch and competition. But also the fact that NAMS and others have really started to focus on the recognition that VVA has been underrepresented, underdiagnosed, and with more and more women, Baby Boomers, coming of age and recognizing it as a problem, vocalizing it, and bring it more to the fore as something that they do want treatment for.

So you definitely are seeing more activity, which is great, and the market continues to grow and address some of the need. We have some -- we believe our product will potentially meet some of the unmet needs, once approved.

Got it. Okay. Thanks very much.

Boris Peaker, Cowen and Company.

Good afternoon and thanks for taking my question. I am just curious. in your discussion with the FDA, specifically in context of bioidentical estrogen and progesterone, have they mentioned or do you have any sense of whether it would be specifically identified as such in the label, or if they would just list it as simply estrogen and progesterone? Or what would it take to actually highlight the distinction between your hormones and some of the other hormones available on the market?

Boris, welcome. This is Rob Finizio; I know we haven't spoken before. So a number of points here.

I will let Dr. Mirkin talk about the FDA correspondence in his experience there, because it is very significant. But at the end of the day, we all get a black box on anything that has systemic exposure in estrogen, right? So we are not claiming that our product is better, safer; you're never going to get that in a label without another WHI 125,000-person 10-year study.

But what we are claiming is that with the compounding legislation and lots of very, very large underserved bioidentical need for an FDA-approved, highly available, reimbursed, consistent, content-uniform, safe and effective drug -- which is what you would get if you achieve approval -- you will be able to take that compounding market, a significant portion or all of it.

So that is number one. That at our price point is in the billions on the opportunity side.

On the other side of that, we are trying to achieve new lower effective doses. Two of our doses are lower effective doses than anything on the market in the trial today.

That black box warning now becomes a sales aid, where it starts off with -- start with the lowest effective dose is the advisory on the black box warning. So to have a lower effective dose or two for a woman to titrate down to, or to start on and move up with -- whichever way a doctor prescribes -- is a huge sales advantage.

But as far as the term bioidentical goes, currently the FDA on their website does not recognize the term. And the FDA has a lot of skepticism toward compounded bioidenticals because no one has gotten FDA-approved combination in a single pill today.

So what we do know is that these are hormones that are endogenous to the body. That means your body produces them naturally, and these are exact molecular copies of that.

With that being said, I will turn it over to Dr. Mirkin. I just wanted to separate the business issues from the FDA or medical issues here, because we will have a black box warning, but we feel it is a very large untapped market.

Thanks, and I appreciate the detailed explanation as well.

Thank you, Rob. Certainly we didn't have any label discussion yet with the FDA. But importantly, the data will tell; right?

And we would expect if this compound is approved certainly we're going to have the description of the two components, which are the natural estrogen and the natural progesterone, and also graphically it's going to be a description of what they are. So one way or the other, it is going to be covered within the label.

Again, it is a little premature to discuss data, but data will tell. And we may have some surprises, particularly on the lower doses that Rob was referring to.

Interesting. My next question is just from the competitive landscape. Obviously, there is a lot of the legislature closing down on compounding. Given how big the female hormone space is, are there any competitors that you see or any kind of major developments that we should just be aware of?

This is Rob speaking, Boris -- we do not

-- we are not aware of any other vasomotor Phase 3 trial going on in the US with any compounds that is estrogenic. In addition to that, we are not aware of anyone with estradiol and progesterone working on any treatment for vasomotor symptoms anywhere in the world in any phase of development.

So that is where it is today. I am sure as the laws change and the market size is publicized -- I know a number of data analytics firms are working on numbers, medical societies as well, and they are forthcoming -- I think it will be a lot of copycats that try to come after us. But just to be honest with you, the scientific hurdles here to get these two to work together are significant.

And this is a first-mover advantage game. If someone were to jump in the game today, and somehow get around our IP and get things to work, we've got a good 5- to 7-year jump on them. And since you really have a first-mover game here because of the new law, I think we're in a great, great position to execute, given we can get the trials done successfully, on time, and yield good data.

Well, great. Thanks for taking my questions and I look forward to connecting off-line at some point

Oren Livnat, JMP Securities.

Thank you. Making me dig deep here for some more questions. I'll try.

Let's talk about the PBMs, and I guess you had that surprise news that they are really going after or trying of cut off reimbursement in the near term, it seems, for compounded products. Maybe this is a tough question, but help me understand.

If that happens well before you guys come to market with your approval, and if that hits the hormones, do you envision that that could push between now and then, in a couple years, a lot of people out of compounding and into what are just currently generic alternatives that are FDA approved? Which aren't bioidentical, but that is all that is available.

In which case, some of those people come out of compounding, fall off of your low-hanging fruit or the windfall that you're hoping to reap, and then just get lost in the sea of generic drugs, and go on with their treatments, never to be seen again by you.

So is North America going to disappear? It's a great question. If you look at it from a couple different ways, I think you can get a good sense of what probably will happen.

If you look at the price point for a lot of these hormones and you look at the prescribers -- so you have two types of prescribers. You have what we in our research, as well as inThought, Symphony Health, their research says -- as well as some others that are coming out here shortly that I have seen -- they all see that the antiaging or wellness physicians that are treating menopausal symptoms are probably 66% to 75% of the market. That type of physician, in all the research we have, is they are indoctrinated with bioidenticals; and I don't think they would prescribe a progestin if their life depended on it.

On the other side, the OB/GYN might be more malleable to prescribing Premarin or progestins or trying the new Duavee. But they certainly are compensated to change a woman's mind when they walk in, and they've done the research on the Internet, and they believe that the bioidenticals are a better option for them.

So could some of the markets, if it gets really tight and they can't get bioidenticals at a reasonable price point, move in the other direction? Sure.

Do I think it would be a significant amount? Enough to impact our valuation? Absolutely not. I think we are talking single-digit percentages potentially.

Then the other side of it is our research, which is about 350 pharmacies that we have personally called and shopped price points, the average price point was about $47.98. If you look at inThought's research, I know it is a little bit higher, but it is only about $50.

So I don't believe the price point for cash out of pocket is going to stop the vast majority of people taking these drugs. But we will see how it goes. See how it goes.

Remember, this law, the pivotal crux is when there is an FDA-approved version compounders are not supposed to make illegal copies unless medically necessary with an exception in a case-by-case situation. You can't mass-compound it.

So once we have approval, that would really be the trigger. If you read the UHC see as well as the Express Scripts in their memorandums they just sent out -- they are on their website -- they both mention bioidenticals. But they also say they would stop reimbursing if there is an approved version. That is the main crux of this stuff.

So with that being said, it is a lot of data points. If you take a look at it, I would be interested to see what you think, off-line.

All right. If I could just follow up on the Advisory Committee panels a bit. It sounds like pretty near term we are finally going to get a look at.

Do your Washington consultants give you a good sense of what will actually be maybe the crux of the content of those early meetings? Do you think we are going to be having a vetting publicly by these guys over what is on the first initial do-not-compound list?

Is that list going to be done by the first meeting? Or are we just maybe having big-picture? Hey, welcome, this is the kind of stuff we are going to be dealing with over the next several years, and let's just shake each other's hands and not really talk about anything substantive.

I expect, since the OIG is holding the FDA accountable -- and again, this is me personally speaking -- I expect it to be a real committee. I expect it to be put together with vigor. And I expect that the FDA will hold this advisory panel to their timelines or dismiss them. That is what I would expect as a public citizen and in the industry.

Oren, If you look at the progress here, there is no way they can have their first meeting, in my opinion, and just put up a list. I think the FDA will prioritize -- and again, this is Rob speaking here -- they will prioritize steriles first, because that is the started the New England meningitis outbreak.

I think once they work through the do-not-compound list for steriles they will move on to nonsteriles. My guess is it will take a couple of meetings to get through that, at least.

I believe they are having six meetings a year -- I am recalling that from memory, not from notes. So my guess it will take a full year to work through the nonsteriles.

So probably this time next year, they will be starting to -- I'm sorry, they will work through the steriles first over the next year, and then the subsequent year look through the nonsteriles. We will see how it plays out.

Great, thanks.

(Operator Instructions) Ryan Martins, Jefferies.

Hi, thanks for taking the questions. I just wanted to bring the discussion back to the VVA trial that you are planning to initiate soon. Just want to clarify here.

If you don't hit the 0.01 statistical level on all four primary endpoints, is that what the FDA is holding you, to that you have to hit 0.01 on each primary endpoint for the doses you're planning?

No, that's not correct. The trial is powered to detect a difference -- robust enough to show a p-value of 0.01. Nowhere in the regulations, or there are no precedents, that we have to that be valued in order to get an approval.

This is a discussion that we're going to have with the FDA with that data in our hands, and will be a much easier discussion to have. In other words, if one of the doses will be statistically different than placebo, I don't foresee any issues in order for us to get an approval.

Okay. So you mean if it is more than 0.01, you still feel confident you can get approved?

Right. Up to what is considered a statistically significant, which is 0.05.

Okay. Then in terms of your safety data, obviously you won't have that when you file, the 12-month endometrial biopsy. How many patients do you need to get a biopsy from out of the total 800, in order to meet the FDA's requirements for a certain number of biopsies? And what is your confidence in being able to get that number of patients?

Right. Let me clarify this important point you are raising. We are not conducting an endometrial safety study of 12 months of duration per the FDA advice. We are conducting an efficacy study of 12 weeks of duration only.

We are obtaining endometrial biopsies after 3 months of treatment. And every participant with uterus will provide safety data to endometrial safety profile.

So you will have a biopsy at 3 months, not at 12 months?

That's correct. And we agreed that with the FDA.

Okay. What proportion of patients do you need to get a biopsy from?

Still [mandated]. This is a vaginal product, so normally you wouldn't expect to need to do an endometrial safety study for this particular product. Anecdotally, I can tell you that most of the compounds approved, they have something around 100 to 150 patients exposed to different products which obtain endometrial safety data.

Okay. I was asking mostly because I saw that Vagifem actually did a separate 12-month endometrial safety open-label study. That is (multiple speakers)

That's correct. That's correct.

Do you know why they did a 12-month study?

I can't speak to the why Novo conducted the 12-month (inaudible) study.

Okay, okay. That's fine. Then in terms of the dyspareunia endpoint, I guess you haven't looked at that in the Phase 1/2 studies that you have done, because it was obviously on your 2-week endpoint. But what gives you the confidence, especially on the low-dose, the 4-microgram, that you will be able to hit that particular endpoint?

That is a great question. Let me try to explain why we are using dyspareunia as one of the co-primaries, efficacy endpoints. The major reason is that when the FDA issued the draft guidelines in 2003, they installed the concept of the most bothersome symptom. Right?

And for years, while doing several clinical trials on VVA, we learned that the most bothersome symptom for postmenopausal women suffering VVA is dyspareunia. Therefore, doing these trials we are using all lessons learned from previous trial, and we are targeting the endpoint to only patients that would present dyspareunia.

Therefore, it is an easier endpoint to hit with estrogenic compounds. So I am expecting that our three different doses will show efficacy for the endpoint of dyspareunia.

Okay. Then in terms of R&D, just wondering what you'll expect in terms of R&D for the second half of the year, given you are going to obviously initiate the VVA trial? Just in terms of expectations of where -- is the 2Q run rate something we should work off of? Or you'd expect it to increase from there?

Ryan, this is Rob. You should know I will never forecast a burn. I can't. The faster we burn it means the faster we are enrolling patients.

You know our milestones. I'd love to forecast for you, but it doesn't do anybody any good.

We've got plenty of money to get over the finish line. I think we are in great shape, and we are hitting on all fronts here.

So I hope that helps. I would love to give you more, but I can't.

Okay, thank you.

Thank you. That concludes our question-and-answer session. At this time, I would like to turn the conference back over to our host for any closing comments.

Great, thank you. Thank you, everyone, for joining the call today. We've just had a fantastic quarter.

As CEO, you are always testing your Company's internal ability with strategic execution. I think to see all six of our departments from the Phase 3 clinical, early-stage clinical, IP department, sales, regulatory, as well as a few others hit simultaneously and execute on key goals simultaneously is a real challenge and showing some maturity here and gelling of the team internally here. I am just really proud of everyone.

I hope you can feel our excitement. We feel very strong. We had a great quarter, and I hope we have other quarters like this where a lot of things come together and we have a very positive result.

I want to thank you all for taking the time and joining us today. If anybody has any questions for us, you know how to contact us. Thank you.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a great day.