福泰製藥 (VRTX) 2002 Q4 法說會逐字稿

Good afternoon. My name is Cheryl and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Vertex Pharmaceuticals conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, this will there will a question and answer period. If you want to ask a question, press star and the in your number one. If you'd like to withdraw your question press the pound key. Ms. Brum, you may begin.

Thank you Cheryl. Good afternoon. This is Lynne Brum, vice president of corporate development and communications for Vertex. On behalf of the senior management team, I thank everyone for joining us today. As we get started, I'll remind you that information discussed on the conference call may consist of forward-looking statements and as such are subject to the risks and uncertainties discussed in detail in our reports filed with the Securities and Exchange Commission, including our 10K.

At this time theyear end 2002 financial press release has been faxed and e-mailed to you. In addition, this release is posted on our website and various web sides including I can't hoo finance and P.R. use wire. You can listen via Power Point presentation on the Vertex website at www.Vertex.com. On the site, select investors center then conference call. In addition the replay of the conference call will be available via telephone and the Internet till February 18 February 18th. In 2002 Vertex set ambition goals for the broad pipeline of novel small molecule drugs. We reported several successes based on the advancement of key programs including VX-908, [Pralnacasan] (ph), VX-148 and VX-702.

On the discovery front we continued to demonstrate our ability to translate science to our valuable drug candidates. In 2002, we counted among our key accomplishments the selection of three new pre-clinical [kinase] (ph) inhibitor drug candidates in collaboration with Novartis. And today we announce the divesture of subsidiary PanVera to invitrogen for $95m in cash. As we enter 2003 with a focus on reaching key development milestones with Vertex driven products, we anticipate the commercial launch of VX-908 later this year and expanded development of Pralnacasan. We also expect to continue to produce an industry-leading crop of new drug candidates in the year ahead. As part of our business strategy, we intend to sign new collaborations in 2003 that will understood fund R&D as we retain rights to compounds in high value specialty areas.

In a moment I will turn the call over to Ian Smith, Vertex's Chief Financial Officer, who will summarize the 2002 financial results and the 2003 financial guidance. Ian is joining us on the call from the PanVera site. Then John Alum will review our product pipeline, and Joshua Boger, Vertex's CEO and chairman, will comment on the strategy for 2003. Vertex's IR team joined by Ian Smith will be available at the conclusion of the call to answer any follow-up questions you may have. I'll now turn the call over to Ian.

Thanks, Lynne. My discussion will focus on the 2002 results and the financial guidance for the full year of 2003. I'll begin by stating that our financial results for 2002 pertain to the Vertex Pharmaceuticals business and the PanVera discovery tools and services business.

Beginning with the net loss. Vertex's full year 2002 net loss was $108.6m, or $1.43 per share, compared to a loss of $44.8m or 60 cents per share for 2001. The 2001 loss is stated before merger- related costings and one-time charges and gains. The 2002 full-year net loss is within the range of the analyst estimates on first call. The increased net loss in 2002 was driven primarily by the company's continued investment in Vertex' drug discovery and clinical development activities. Specifically Vertex has continued to retain economic rights and invest in development activities to advance the leading drug candidates targeted to high-value specialty markets. Additionally, we have continued to invest in innovative drug discovery to add compounds to our clinical pipeline.

2002 total revenues were $161.1m, compared to $167.5m in 2001. Revenues from our pharmaceuticals business were $88.3m compared to $80.1m for '01. And revenues from our PanVera discovery tools and services business with $73.7m in '02 compared to $87.4m in '01.

Looking to our major expenses. Our R&D investments increased from $148.7m in '01 to $204m in '02. As we continued to advance the portfolio of drug candidates and discover new compounds for development. Our SG&A expenses of 2002 were $49.4m compared to $47.3m in 2001. Over the past few years, we've focused tightly on managing ourinfrastructure and have kept SG&A expenses in line year over year. We man to do the same in '03 . For the balance sheet perspective. Vertex ended '02 with approximately $635m in cash, cash equivalents, and available for sale securities. And we expect to enhance the position with cash from disposition of certain assets and liability of our PanVera business. At year end, Vertex had approximately $315m in convertible debt due September 2007.

I'll now turn to a brief discussion of the subsidiary PanVera. This morning we announced the signing of a definitive agreement to divest to invitrogen for $95m in cash for PanVera's leading edge biochemical capabilities as well as its commercial portfolio proprietary reagents probes and proteins. The divesture will further enable us to focus on our core objectives of discovering, developing and commercializing pharmaceutical products. As we focus on the core pharmaceuticals business, the proceeds from the divesture will enhance the financial profile.

I'll turn to the outline of the '03 financial guidance. The financial guidance for the full year '03 is based on the evaluation of the core business objectives, our strategy for achieving those objectives and our financial strength. The gains are certain key, specifically the timing of new collaborations, the timing of clinical development of key products, and the timing of the close of the PanVera transaction. We believe that many, though not all, of these factors with within our control.

We enter '03 in a financially strong position. With the anticipated completion of the PanVera transaction, we had approximately $95m of cash to our year end position of $635m, therefore giving it a pro forma cash position in excess of $700m. Vertex believes maintaining a strong cash position will be increasingly important as we pursue the objective of driving Vertex products to commercialization.

In the year ahead, we will continue to make strategic R&D decisions with our portfolio vertex-driven candidates, while at the same time we will continue to leverage our strengths with our pharmaceutical partners. Based on our strategy for 2003, we anticipate a 2003 net loss in the range of $140m to $160m. Excluding the gain from the completion of the PanVera divesture, we expect to be in excess of $75m. The '03 loss guidance of $140m to $160m is comparable to the loss from the pharmaceutical segment of the business in '02 of approximately $140m. Such segment information will be provided in our 10K filing and has been provided in our past 10Q filings.

2003 total revenues will consist of pharmaceuticals business and our PanVera discover tools and services business for the period of time until the PanVera divesture closes. Pharmaceutical collaborative and royalty revenue is forecast to be in the range of $90m to $105m. Pharmaceutical collaborative and royalty revenue includes approximately $65m in forecasted funding from our existing collaborations. Approximately $10m in royalty and product sales, and the remainder in anticipated revenue from potential new collaborations.

There continues to be high interest from pharmaceutical companies in our research capabilities and our drug candidates. And we are highly focused on signing collaborative agreements in '03 that would support our long-term objectives. In addition, '03 total revenue includes revenue from our PanVera business. We expect that prior to the close of the PanVera transaction, which we anticipate will occur at the end of the first quarter or earlier the second quarter, we will record revenues of less than $10m from this business.

With more than 15 drug candidates advancing in our product pipeline and a highly productive drug discovery platform that is generating a continued flow of novel candidates in our pipeline, we will continue to expand our investment in R&D in the coming year. Based on the current trajectory of which we finished '02, and the R&D goals for the coming year, we anticipated '03 R&D expenditures will be in the range of $215m to $230m.

For our other major expenses, such as selling, general, and administrative expenses, we will continue to assess our infrastructure needs and focus on managing such expenses prudently. We plan on managing SG&A expenses to $38m to $43m in '03, which is in line with the '02 pharmaceutical results.

From a balance sheet perspective, we expect to complete '03 in a financially strong position with a cash and cash equivalents of marketable securities position in excess of $600m. Assuming the successful completion of the PanVera transaction. This place its Vertex in a similar position that we ended '02. For shares outstanding we anticipate that we will have approximately 77m shares outstanding at year end '03.

In summary, I'd like to say that Vertex is financial sound as it enters '03. We're focused on investing in our core business to achieve our long-term objective of becoming a major drug company. I'll now turn the call over to John.

Thanks Ian. During '02, Vertex took significant steps toward the development and commercialization of a number of drug candidates in major therapeutic areas. By the end of '03, our goal is to commit to two drug candidates from the portfolio of Vertex-driven drugs to move forward on the path for approval launch and commercialization by Vertex. I'll now briefly review the key milestones for some of the drug candidates we are moving forward independently.

With our orally administered [p38 MAP Kinase] inhibitor, VX-702, we we have completed Phase I clinical development and on track to begin Phase II in the second quarter of '03. As a novel p38 MAP Kinase inhibitor, this compound will be expected to benefit in a variety of diseases where inflammation plays a significant role. Vertex intends to explore the potential of VX-702 in more than one disease setting. And has made a strategic decision to advance clinical development of VX-702 in both acute and chronic conditions. We have reviewed and prioritized these indications based on a number of considerations including fit with our long-term objective of developing commercializing VX-702 independently.

While we have not finalized our indication choice in the chronic disease setting, as a result of our analysis, initial phase 2 development VX-702 in an acute setting will be in acute coronary syndromes, or ACS. ACS isa broad term that includes unstable [angina] (ph) and myocardial [infarctions], (ph)or heart attacks. The start of phase 2 development in VX-702 in either an acute or chronic setting will be a key milestone for Vertex in 2003.

With regard to the rationale for a p38 MAP Kinase inhibitor in ACS, inflammation plays a central role in many cardiovascular diseases. And is becoming a key component of the overall cardiovascular disease process. In fact, last week the American Heart Association and the Centers for Disease Control issued new recommendations that doctors consider testing patients at risk for heart disease for signs of inflammation, using the blood test reactive protein as a way of judging are whether people need aggressive treatment to protect their hearts.

The p38 MAP Kinase enzyme regulates production of key pro-inflammatory [psytokines] implicated in the pathogenosis of ACS including tumor necrosis factor, or TNF, [interluken] one beta, or I0 one beta, or interluken six, or I0 6. I0 6 is of particular interest because it is a major regulator of the production of C reactor protein. Additionally, proof and principle has been demonstrated by an industry player that P38 MAP Kinase inhibition is beneficial in animal models of [ineschemia] and reperfusion of the heart.

In phase 1 clinical studies, VX-702 has shown an excellent pharmical kinetic and pharmical dynamic profile. As a potential once daily therapy, VX-702 could provide a significant first-in-class therapeutic approach to complement current therapies for ACS which affect nearly 1.9 individuals annually in the U.S.

I'll turn to the [IN PDH].inhibitor, VX-148. We are currently conducting a phase 2 study of VX-148 in patients with psoriasis. The clinical trial has been designed primarily to evaluate the safety tolerability and pharmacal kinetics of VX-148. In addition, certain biomarkers of clinical and pharmacologic activity will be evaluated in this study. We believe the safe oral therapy such as VX-148 could provide an important new treatment option for patients with psoriasis. We expect to complete the study second half of '03.

I’ll now briefly review the first human study starts that Vertex anticipates in '03. We announced today that patient enrollment and screening have begun for a phase I clinical trial of VX-563. That is a small molecule modulator of gene expression with potential application in sickle cell disease and other genetic disorders. The primary objective is to evaluate the safety tolerability and the pharmical kinetics of VX-563 compared to placebo. We expect to be able to provide the top line response of this study in '03.

We also expect to begin phase I development of VX-765 in the first half of 2003. This is Vertex's second orally active interluken one converting enzyme, or ice inhibitor, in development. The first, Pralnacasan, is partnered with [inaudible] while Vertex is developing VX-765 independently. Regular lights production of IO 1 data or interluken 18, or I0 18. Key pro-inflammatory psytokines that initiate and sustain the progression of inflammation. With our first ice inhibitor Pralnacasan, we demonstrated inhibiting ice can be a useful strategy for the treatment of rheumatoid arthritis and potentially osteo arthritis. We are now looking at ice inhibition and additional inflammatory processes common to a number of acute and chronic disease conditions.

The third compound we expect to enter phase I development in '03 will be our hepatitis C virus protease inhibitor VX-950. We recently announced we restructured our collaboration with Eli Lilly and hold worldwide rights to the drug candidate. Pre-clinical results for VX-950 reveal that it is highly potent and has good oral bioavailability. We look forward to begin phase I development of VX-950 later this year.

Turning now to our partner-driven programs. I will begin with our most advanced product in the clinic, our HIV protease inhibitor VX-908. We accomplished all the milestones for the product in '02. All phase 3 trials met their end points and submitted regulatory filings in the U.S. and European in '02. We anticipate that clinical data from VX-908 will continue to be presented in peer reviewed forums throughout '03 including a major medical meeting next week. As we work with our partner GSK to achieve the objective of U.S. market approval and launch for VX-908 this year. We're also working closely with our partner to [Aventis] to advance the phase 2 development of Pralnacasan, our leading oral therapy for the treatment of inflammatory diseases including rheumatoid arthritis and osteo arthritis.

We believe it will be a pivotal year for the development of Pralnacasan. And we announced in early January that Aventis began a large study of Pralnacasan in patients with osteo arthritis. We are delighted to be able to check off this important 2003 milestone in our ice program. The phase II osteo arthritis studies are evaluating 400 patients treated with Pralnacasan or placebo for twelve weeks. The study in intended to enable the company to evaluate the safety of Pralnacasan in osteo arthritis patients and to obtain proof of concept. We anticipate it that Aventis will begin a phase 2-B study of Pralnacasan in patients with rheumatoid arthritis in Q2.

With the efficacy and safety profile we have described previously, Pralnacasan has potential to be competitive therapy in the rheumatoid arthritis market with 6 million patients affected worldwide. Osteo arthritis is a 240 million patient market for which ice inhibition may provide benefit in an acceptable oral dosing format. We look forward to working aggressively with Aventis in the development of Pralnacasan in both rheumatoid arthritis and osteo arthritis.

Thus far in '03, we have continued to build on our strength of developing and commercializing novel drugs for major diseases. We look forward to continuing to report our progress to you throughout the year. I will now turn the call over to Joshua.

Thanks, John. As you just heard, Vertex is entering '03 in a strong position. Our financial fundamentals were strong in '02 and we're making thoughtful and strategic investments in '03. We expect continued advancement of the pipeline of novel small molecule drug candidates to the market throughout the year. And with the announced with PanVera are a we're achieving our long-term core business objectives.

With the pending divesture of PanVera, our business model is now fully aligned following the acquisition in 2001 of Aurora Biosciences. And focused on pharmaceuticals across each of our global sites. In the past two years, we defined and distinguished two separate businesses that we obtained through the acquisition. The drug discovery business and the tools and services business. With the Aurora technology and personnell base, we created a drug discovery site in San Diego. This is formation that site has led the company's drug discovery efforts in target-rich areas such as ion channels and GPCRs. And has contributed innovative technologies now incorporated at Vertex research sites worldwide.

At the same time, we also grew and enhanced the PanVera tools and services business, making it attractive to an industry leading buyer. The divesture of PanVera will provide Vertex with $95m in cash. It will enhance the financial profile and further enable us to make strategic investments in the core pharmaceuticals business. Vertex is maturing in terms of our experience, capabilities in proximity to the long-term objectives. We have a drug discovery and development organization that is capable of advancing novel drug candidates through the clinic and ultimately to the market. We announced yesterday we named Louise Henry as the vice president of quality. We believe that Louise’s nearly 30 years of experience at Eli Lilly will be a valuable addition to the team as we pursue our clinical and commercial goals.

We have a broad portfolio of drug candidates in clinical and preclinical development that we are moving forward independently. In '03, we will focus on developing clinical information on at least five Vertex control programs with a goal of determining which programs offer best opportunity to achieve maximum near term commercial term in a targeted specialty market. We'll prioritize the programs based on the analysis and initially select and commit the two programs to independently take to the marketplace. This will accelerate Vertex's path to the goal of becoming a major drug company and represents a value creation step for shareholders in '03.

At the same time, we'll continue to focus on maintaining momentum and innovation in our drug discovery engine to continue the flow of drug candidates into the pipeline. In the past three years, we have selected 12 drug candidates for pre-clinical development, including three novel Kinase inhibitors. This is compelling evidence of the small molecule drug discovery capabilities which we believe are unequaled in the industry.

As you know, Vertex has a dual strategy of bringing drugs forward independently and with pharmaceutical partners. Through the years this strategy has benefited Vertex as our productive drug discovery engine has generated more novel candidates than we could have possibly developed on our own. Pharmaceutica collaborations will continue to play an important role in our business in 2003. We are highly focused on signing collaborative agreements this year, and our recent hiring of Mark Enyedy as a senior level edition to our business team demonstrates the commitment to the goal.

A Novartis/Kinase collaboration is an example of how we can leverage our productive drug discovery organization to form a collaboration that provides Vertex with valuable R&D support while at the same time providing Novartis with novel small molecule drug candidates to complement its pipeline. We are happy with the progress but not complacent. We anticipate increasing momentum in our Kinase program in the next 18 months as we advance many more Kinase inhibitors through discovery and early development.

We believe the progress we're making across the organization will position us to succeed with our long-term corporate and commercial goals. We expect to have a steady stream of accomplishments in '03 and look forward to updating you throughout the year. We have designed our financial strategy to support these long-term goals and look forward to making thoughtful and focused investments in our pipeline in '03. Now I'll turn the call back to Lynne.

Thank you Joshua. We'll now open the call to your questions.

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. The first question is from Phil Nadeau.

Hi. The first question is in regards to VX-908. Have you been informed by the FDA whether that's going to be a six-month or ten-month review?

We have not been informed.

And second, in your guidance, you said that the guidance did assume additional collaborations. And according to my math, about 20% of the R&D revenue will come from new collaborations. Could you talk a little bit more about expectations behind that? How many collaborations are assumed and is that something we should model as being relatively constant over the last three-quarters of the years? Is there a big milestone payment we can expect?

I think your math is approximately correct on the number. I'll say that we have a large number of discussions underway. They involve different kinds of collaborations. And our financial guidance is based upon a modeling which we've been reasonably accurate with through years on how that will shake out. So I really can't -- it's really not dependent upon one or two specific ones, but rather a composite of all the opportunities we have in front of us. And it's not principally driven by back-end milestones.

Okay.

This is Ian. I'll comment from the last piece of your question. You talked about the timing of the revenue. I think we don't provide financial guidance on a quarterly basis, but there is an expectation that this new aligns revenue will be moved towards the mid to end of the year.

Okay. Great. And one last question on VX-702. I know you said that you hadn't determined which chronic indication you would go forward in. But I guess I'm wondering why RA isn't on the top of that list.

Well, rheumatoid arthritis is certainly amongst the top players in the list, and it's part of the discussion. From, I think, -- your implicit comment is that from a biologic rationale and clinical validation rationale and standpoint for p38 MAP Kinase. Certainly rheumatoid arthritis comes out at the top that we've presented data with p38 MAP Kinase inhibitor that there is clinical activity in that setting.

But that's one amongst several considerations that go into our final decision as to which indication we go forward with. But rheumatoid arthritis is certainly not excluded.

Great, those are all my questions. Thank you.

Could we have the second question please.

The next question comes from the line of Edward Kim.

Hi. The first question is about the PanVera transaction. [Invitrosen] (ph) said earlier today that they expect about $22m to $24m in revenues this year. And that’s about three quarters worth. But last year you booked between $74m in products and services. I understand they aren't getting instrumentation, so you still have that as well. I guess what I was expecting to see is some sales going forward of instrumentation, but it looks like it's falling off. Is that accurate? How do you account for the discrepancy of what they’re guiding to and how much you booked last year?

Thank you Ed. I’ll ask Ian to start off in answering that 2-part question.

In response to your question, it’s difficult to comment on the items that invitrogen has provided to the market this morning. What I can tell you is the business that they have acquired is going to be operated differently than how Vertex is operated. And there are some key distinctions between that. As you correctly point out, instrumentation is a line of business they're not acquiring and that's something we record in our revenues in '02. Other areas of revenue, specifically screening activities. We had revenue recorded in '02 relating to screening activities on behalf of our partners. That, again, would be retained by Vertex, although Vertex did not provide screening activities anymore. That is not a line of business that Invitrogen taking on. Then there's certain license activity in 2002 that was a one-time nature as we focused more on pharmaceutical product development. We did not commercialize certain technologies, and we chose to retain those within the Vertex drug discovery operation. So that was one-time license revenue that we have retained within Vertex farm pharmaceuticals. And I think those account for the major differences between our recorded revenue and the guidance they're providing.

So you’ll be exiting the instrumentation business and keeping going forward?

Well not be completely exiting the instrumentation business. That's decreased significantly since say 2001 of the former Aurora days. Instrumentation is a platform business for us that consists of inhouse. There's a modest business ongoing and we'll continue that in '03.

Just to enlarge upon Ian's comments from another perspective. As you recall, in '02, we really accomplished the goal of building the drug discovery organization as a fully-functional organization in San Diego with the very strong biological assets and personnel of Aurora Biosciences. And adding to that a variety of chemistry and computation technologies. So that side is fully functional now.

That shift of resources really involved shifting of the majority of the resources in San Diego to drug discovery. So we really transformed what was Aurora Biosciences into a drug discovery site in San Diego and, at the same time, focused and enhanced the PanVera business in a way that was attractive to a buyer like Invitrogen.

So without getting into enlargement of the numbers, that accounts for how the businesses were not the same as they were 12 months ago, and that was our plan.

Okay. One other question. About VX-497. Previously, you got into potential results in the first half of '03 in the Phase II in combination with [peg and tron A] (ph). Is there any update to the timing there?

I think John Alam will take your question here.

That study is still ongoing. And what we have guided to is that within the first half of this year, we would have the first set of analysis internally to make a decision on how we're going forward. And that is essentially still on target. If you recall, this first study was very much a safety study. It's a relatively small study. And we needed to get through to a certain point in the study in order to make a decision on moving into larger-scale studies, which would really be the ones that would provide insight into the triple combination there's activity relative to the standard regimen.

Thanks. Congratulations on a good quarter and a great transaction.

Thank you, Ed. Could we have the next question, please?

The next question comes from Hari Sambasivam.

Thank you. Just a quick clarification on the PanVera transaction. What happens to the GPCR and the RN channel programs with this disposition? The second question I have is the annual loss is now moving to a higher number -- at least, I mean, it's similar to what you burnt last year in the pharma business, but it's now exposed with the disposition of PanVera. And I'm wondering, is that something we should see continuing going forward, or is there some plan to take that burn down? I'm just kind of wondering how you plan to work through that type of burn. It's a fairly significant one.

I think Joshua will jump in here.

I'll take the first question, and maybe have Ian comment on the financial side. Just to remind you, Harry, that what we actually accomplished over 2002 was to distinguish the PanVera business and the drug discovery business in San Diego. In fact, the [ein] channel and GPCR and other programs in San Diego are part of Vertex Pharmeceuticals San Diego and have been for many months now. So that operation has no connection to PanVera. And, of course, it's not part -- it's not affected by this transaction except by having the benefit of the cash received.

So that those programs are going very well in San Diego. We're making tremendous progress at these intermembrane target. And we expect to be taking about that progress in the coming months. So that part of -- as you know, the establishment of the research operation in San Diego, and particularly to take advantage of the ground breaking [assay] technology developed by Aurora, was actually the main driver for the acquisition of Aurora. So we've executed on that plan. And I'll maybe turn the financial side over to Ian. I think we believe we're actually being quite prudent with our expenditures, but I'll let Ian comment on that.

Hi, Harry. In terms of commenting on our guidance, you are correct that of the $108m that we did in 2002. That does include a significant contribution from the PanVera business. In terms of making the disposition of PanVera, it was the choice of Vertex whether to continue to operate the business and could we provide the return to ourselves. It was a difficult business to operate given our core focus of pharmaceutical products. We chose to realize the value of the business and to strengthen our financial profile. What we believe it does is underlies and supports our strategy of being core focused in pharmaceuticals. And allows us to invest the levels that we've chosen to invest in '03.

As far as the levels of investment we choose, so it guided to $140m to $160m in '03, that has really driven up the number of opportunities that we have and we believe Vertex is at the stage of development where we have significant opportunities in the product pipeline in some of the products that John has profiled on this call. I think you can see we have a number of drugs coming up to key data points in '03. And we believe that it's worth the investment, specifically in the development area, to continue to push these drugs through the pipeline.

We continue to invest in research because our research has been shown to be productive. Josh specifically talked about 12 drug candidates over the past three years. So with those kind of opportunities and with a cash profile on a pro forma basis of over $700m, we believe we have the right financial profile to invest $140m to $160m to continue to drive Vertex forward.

As far as the outyears, each year will be reviewed independently in terms of what are the opportunities of both research and development, and then comparing that to our strong financial profile as of today. It will always be a dynamic decision on how we invest to move the business along.

Your next question comes from the line of Steve [Rostin].(ph)

Yes, please. First of all, good progress in focusing the business. Could you go into a little bit more detail the criteria you're going to use for these new research collaborations or development collaborations as you move forward. And what we might expect in terms of the mix. Obviously, you don't want to give too many details out. But some flavor would be helpful in terms of covering the development costs that are uncovered at this point in time. Thanks.

Joshua.

Well, I think we have a number of areas that are under active discussion. We certainly have received a lot of interest in our discovery capability, and research collaborations would form a basis for either expanding our discovery capability or offsetting some of the costs of our present discovery capability.

So that's an area of interest and an area of discussion. Perhaps a new twist for us or a focus for us is that over '03, we have several drug candidates that are developing extensive data. And particularly data sets that we believe will allow us to make decisions about prioritizing our commercialization activities forward. We do not expect, frankly, that that decision will be easy. We don't expect the decision will be one that we will take the drug candidates that work forward, because we expect them all to work. So we expect through '03, we'll actually have quite a bit of positive data. And that and the decision to focus and prioritize will open up some business development opportunities where we bring in partners, perhaps, to take over some of the drug candidates that are in very attractive areas but ones that are, perhaps, not suited for us to commercialize through specialty markets. That, as we always do, will retain some financial interest in the downstream. But this could provide significant business development revenue for us in '03 and inward.

So those are the two main buckets. And as I say, we have numerous discussions in each of those ongoing.

Thank you very much.

Thank you, Steve. Next question.

Again, I'd like to remind everyone, press star and the number one on your telephone keypad. There are no other questions at this time.

Great. Thank you everyone for joining us tonight. We will be back in our offices to take any additional follow-up questions you may have. Thank you very much.

This concludes the conference call. You may disconnect.