Acusphere Inc. Q3 2008 Earnings Call Transcript

Acusphere Inc. (ACUS)

Q3 2008 Earnings Call

November 10, 2008 12:00 pm ET

Executives

Mary Conway – Investor Relations

Sherri Oberg – President, Chief Executive Officer

Larry Gyenes – SVP, Chief Financial Officer

Dennis Bucceri – SVP Regulatory Affairs

Analysts

Jason Napodano – Zacks Investment Research

Winder Hughes – Focus Fund

Heidi Heikenfeld - Oppenheimer Funds

James Hobson – Private Investor

Presentation

Operator

Welcome to the third quarter Acusphere earnings conference call. (Operator Instructions) I would now like to turn the presentation over to Mary Conway, Investor Relations.

Mary Conway

Good afternoon and thank you for joining us for Acusphere’s Q3 ’08 investor conference call. On this call today from Acusphere are Sherri Oberg President and Chief Executive Officer and Larry Gyenes, Senior Vice President and Chief Financial Officer.

Please note that comments on this call by Acusphere representatives are qualified by the disclosures made in our regulatory filings with the Securities and Exchange Commission, including the Form 10Q to be filed later today.

During this call we will be making forward-looking statements within the meaning of the Safe Harbor Provisions of Section 21E of the Securities and Exchange Act of 1934. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. The forward-looking statements we make on today’s call are based on our beliefs and expectations as of today, November 10, 2008 only and are subject to change.

Examples of forward-looking statements include without limitations statements regarding Imagify developments and related milestones and results, qualification of our commercial manufacturing facility, regulatory filings, and approvals, the prospects for market acceptance of Imagify, advancement of our product pipeline including AI-525, levels of expense, cash requirements, commercial potential for our product candidates and partnering prospects.

The company disclaims any obligation to update or revise any statement made today to reflect any change in the company’s expectations of events conditions or circumstances on which any statement may be based or that otherwise may affect the likelihood that actual results will differ from those set forward in the forward-looking statements.

In addition while we believe we have developed a strong NDA submission for Imagify we cannot control or predict FDA approval. We refer you in particular to the company’s annual report on Form 10K for the year ending December 31, 2007 and quarterly report on Form 10Q for the quarter ended September 30^th 2008, in particular the risk factor section of both documents, for further discussion of the company’s risks and uncertainties.

We caution listeners not to place undue reliance on any forward-looking statements as there are no assurances that the matters contained in such statements will be achieved. I now turn the call over to Larry Gyenes.

Larry Gyenes

When we last spoke to you about two weeks ago about our transaction with Cephalon we didn’t anticipate that we would be speaking again today, but frankly in light of the many questions we’ve had from shareholders about the transaction, as well as about upcoming events, we thought that this was a good use of time for all of us.

I’m going to start by quickly reviewing the quarterly financial results and then try to address some of the questions folks have been raising about the Cephalon transaction and the various options it entails. Then I’ll turn the floor over to Sherri who will provide some insights on how we view the upcoming FDA advisory committee meeting on December 10^th since I know many of you are very interested in that and want to understand the process better.

First let me summarize our financial position as of the end of the third quarter 2008. We finished the quarter with cash and cash equivalents of $4.1 million, that’s down from $12 million in the immediately preceding quarter. Our cash burden for the third quarter was $7.9 million, just below the low end of our prior guidance of $8 million to $9 million.

Moving to operating results, in the third quarter we recognized $300,000 in revenue related to the amortization of $14 million in licensing fees previously paid to us by our European partner, Nycomed, and the amortization of the fees received from our agreement with Cephalon to license our HDDS technology for oncology purposes in the first quarter of this year.

In the third quarter last year we recognized a little less than $700,000 under the Nycomed collaboration agreement. Operating expenses for the third quarter 2008 totaled $10.3 million versus $14.8 million in the prior year period, and $11.6 million in the immediately preceding quarter. The decrease largely reflects the cost cutting measures we implemented in July 2008, including staff reductions and expense cuts in the manufacturing, research, and development and general and administrative areas.

R&D expense, which includes our manufacturing operations prior to the approval of Imagify, totaled $7.5 million for the third quarter of 2008 down significantly from the $11.7 million we incurred in the third quarter last year. General and administrative expenses were $2.8 million in the third quarter of 2008, down from $3.1 million in the prior year period.

Third quarter 2008 expenses also included a charge of approximately $300,000 associated with the reduction in force during that quarter. The net loss available to common shareholders for the third quarter of 2008 was $10.7 million or $0.23 per common share versus the net loss available to common shareholders of $14.6 million or $0.32 per common share in the prior year period.

As of early November, there were approximately 49.5 million shares of common stock outstanding and approximately 17.8 million in additional common stock equivalents including about 2.5 million shares reserved for issuance in connection with our outstanding convertible exchangeable preferred stock and related MACO payments. Another 8.6 million shares reserved for issuance in connection with outstanding common stock warrants, and finally 6.7 million shares reserved for outstanding stock options.

The liquidation preference on our preferred stock is now 15.5 million less than half the level of a year ago due to several conversions to common stock. I’ll speak more to our share accounts in a moment when I review the recent Cephalon transaction in more detail, but first a word about our spending going forward. Following our cost cutting actions in July, we revised downward our total quarterly cash burn forecast from $9 million to $13 million per quarter to $8 million to $9 million per quarter.

The third quarter's results came in slightly lower than that forecast, but we have a great deal on our plate in the next two months, including the all important FDA advisory committee meeting in December, as well as participating in the American Heart Association conference this week in New York. With the additional of $20 million in the funding we received last week from Cephalon, we anticipate that our operations will be funded into the second quarter of 2009.

Now let me turn to the agreement with Cephalon I’m going to try to address some of the questions we have received about it. You recall that this agreement provides Acusphere with $20 million in upfront funding in the form of a $15 million senior secured convertible note, and a $5 million upfront fee for a license to AI-525 our pre-clinical stage injectable formulation celecoxib utilizing our proprietary hydrophobic drug delivery system or HDDS technology.

We closed the transaction on November 3^rd.

The $15 million senior secured convertible note has a three-year term and an interest rate of 8% payable annually at our option in either cash or shares of our common stock. At Cephalon’s option the note is also convertible any time prior to the first anniversary of the closing date into one of the following three options.

First is the license for Imagify, in all territories other than those previously licensed by Acusphere to Nycomed. Second is the number of shares of Acusphere common stock equal to 51% of the fully diluted number of shares of common stock outstanding at the time, or three a $15 million credit against a future milestone payment for the initial approval of AI-525 by the FDA.

I want to emphasize that Cephalon can only exercise one of these options. There has been some confusion on this topic, and one of the reasons this transaction is so attractive to Acusphere is that Cephalon can only exercise one of these options.

If Cephalon chooses to exercise the first option and licenses Imagify, it will pay Acusphere $40 million upon Imagify’s approval by the FDA and a royalty on the net sales of Imagify in all territories in which it is sold. Cephalon would assume all responsibility for the cost to commercialize the product and Acusphere would manufacture Imagify for Cephalon in an agreed upon transfer price that represents our fully burdened cost.

You will recall that initially we were not able to share the Imagify royalty rate. It's pretty typical in biopharmaceutical licensing deals to keep this information confidential. After hearing from many of you of the importance of knowing the rates to effectively evaluate the deal, we went back to Cephalon and they agreed to allow us to share this information.

We noted the royalty rate of 20% in the amended Form 8K that we filled a little over a week ago. If Imagify is approved and Cephalon elects to license Imagify, our shareholders have the opportunity to benefit from a substantial portion of Imagify's financial upside through the royalty rate.

In fact, since royalties are pure profit to Acusphere and industry average operating margins are about 30%, this royalty rate represents about two-thirds of an average products operating profit potential, and if Cephalon chooses to convert into the license agreement they no longer have the right to convert into equity. We are pleased to have retained so much of the potential value for our shareholders in such a difficult financing environment.

Now in the second option, Cephalon can choose to convert into common shares representing 51% of the fully diluted shares outstanding at the time of the conversion. Now if that conversion happened today, there would be approximately 135.7 million common shares outstanding on a fully diluted basis including all options and wards with strike prices less than $8 per share of which Cephalon would hold approximately 69.2 million or 51%, but if the equity conversion option is exercised all rights to Imagify outside the European territorial rights license to Nycomed would remain with Acusphere.

While the equity option represents a lot of shares at a low price, a transaction with the potential financial investor would have involved many more shares and almost none of the potential value of Imagify would have been retained by our current shareholders. Under this option with the Cephalon transaction Acusphere shareholders retain almost 50% of the potential value of Imagify and our other potential products and technologies, as well as the potential for very significant appreciation in value from where we are today

With that I'll turn the call over to Sherri.

Sherri Oberg

I’d like to take some time today to prepare everyone for one of the most important upcoming developments for Imagify which will occur next month. As most of you are probably aware on December 10, 2008 Imagify will be reviewed by the Cardiovascular and Renal Drugs Advisory Committee of the FDA.

The product is proposed for use as an ultrasound-imaging agent indicated for patients with stable chest pain, being evaluated for inducible ischemia, for the detection of coronary artery disease, based on assessment of myocardial perfusion and wall motion. I want to take a few minutes to walk everyone through the advisory committee process so you know what to expect from the meeting.

The FDA convenes advisory committee meetings for a variety of purposes. Due to FDA guidelines, advisory committee meetings are convened for almost all applications for novel new drugs such as ours. So this advisory committee meeting represents a normal part of the FDA review process. Questions regarding the approvability of a new drug application are typically put to a vote of the committee. Any question to be voted on must be clearly and collectively understood by those voting, following discussion of the issues at the heart of the question before the voting takes place.

The FDA guidance on voting also recommends that voting be cast simultaneously rather than sequentially. This is intended to avoid voting momentum, in which voters may be influenced even subconsciously by the votes of those who precede them. Prior to the meeting, both the drug sponsor and the FDA submit briefing documents addressing any and all matters critical to the committees review and recommendations requested by FDA.

We have not seen the FDA briefing documents for Imagify, but the briefing document prepared by FDA is often quite critical and challenges many of the assertions or conclusions made by the drug sponsors. While this negative tone can be alarming to those in the business community, it is important to remember that it is FDA's job to view the data with a critical eye and their mission is to protect the public and that it is helpful to the drug sponsor when FDA expresses its concern candidly and directly, as it gives the drug sponsor and the advisory committee an opportunity to address those concerns.

Since the advisory committee meeting happens before FDA has completed its review and the advisory committee recommendations are an important part of this evaluation, negative opinions expressed before or at the advisory committee meeting can be resolved and/or reversed based on the advisory committee feedback, as well as additional conversations with the direct sponsors subsequent to the advisory committee meetings. It is the usual practice of FDA to post both the sponsors' and the agencies' briefing materials on FDA website no later than two full business days before the committee meeting.

I would like to highlight for you today some of the issues that our document will address so you are not surprised by anything given that you will be seeing or hearing for the first time a lot of information presented at the advisory committee meeting. I want to emphasize that these comments are about information in Acusphere's briefing document, which we have sent to FDA and are not about FDA's briefing document which we have not yet seen.

I will give you an overview of the NDA, a summary of our Phase II trials that set the stage for our Phase III trial design, our Phase III advocacy results and a summary of some of the sensitivity analysis we have done which support our overall conclusions that Imagify with ultrasound is clinically equivalent to nuclear stress testing, our safety results and our risk management plan.

I know that many of you are not familiar with the technicalities of these types of studies and my remarks may be more than some of you want to hear; however, this summary is at the heart of the evidence we provide to FDA in support of our proposed claim and may be helpful for those of you who want to take a deeper dive into our briefing document once it becomes publicly available.

Let's start with an overview of the NDA for Imagify or AI-700 as it is referred to in the filing. The NDA summarizes data from 11 studies including over 1,200 subjects who received either Imagify or placebo. Of these almost all received some level of Imagify. Over 900 were patients with suspected coronary artery disease and a recent history of chest pain.

Let's discussion [inaudible] results first, especially since our Phase II results have not been discussed for some time. Both of our Phase II trials, although including a small number of patients, suggested that Imagify with ultrasound had improved diagnostic performance versus stress ultrasound alone, that is without contrast.

These results supported our thesis that the addition of Imagify, which enables the evaluation for perfusion and wall motion, will improve the performance of stress ultrasounds alone, which evaluates wall motion without perfusion. After our Phase II trials, we met with FDA to discuss the design of our Phase III trials and agreed that our Phase III trial design should focus on comparing Imagify with ultrasound to nuclear stress testing, the current standard for evaluating perfusion.

The two pivotal Phase III studies, called ramp one and ramp two, where non-inferiorities studies comparing Imagify with ultrasound to nuclear stress testing for the diagnosis of coronary artery disease patients with recent history of chest pain.

In both trials we used three different diagnostic statistics as endpoints, accuracy, sensitivity, and specificity. Because accuracy is an objective measure of diagnostic performance, both studies were designed specifying accuracy as the principle primary endpoint. Unlike the diagnostic statistics of sensitivity and specificity, calculations of accuracy incorporate data from all patients in the efficacy population.

In contrast, sensitivity and specificity are calculated using a subset of patients and are more highly influenced by the readers bias which is the tendency to over call or under call disease. For all of these reasons, accuracy was the principle primary endpoint in our statistical analysis plan and was the statistical measure that determined that both trials were successful in accomplishing the predetermined statistical objective of the trial.

Our Phase III trial results have been previously reported so I won't repeat them here, other than to remind you that our overall efficacy conclusions from the Phase III program were that when compared to nuclear stress imaging, Imagify is just as good at determining whether a patient has disease or not. That's the accuracy endpoint.

Next, in one stuffy Imagify was superior to nuclear in ruling out disease in patients with a lower disease prevalence. That's the specificity endpoint, and lastly, in the other study Imagify was superior in detecting disease in patients in a higher disease prevalence population. That's the sensitivity endpoint. Let's be clear, however, of the three endpoints addressed in the two pivotal trials, one endpoint was missed in each trial.

The inability to achieve consistent results for sensitivity and specificity was neither unexpected, nor do we believe it is compelling evidence of inferior diagnostic performance with Imagify for Imagify with ultrasound as compared to nuclear imaging. To explain or overcome any potential concerns about missed endpoints, wee prepared several integrated efficacy analyses. I will share two of them here.

The performance of Imagify with ultrasound in nuclear stress testing were evaluated using multi reader/receiver operating characteristics, or ROC curve. This statistical test is commonly used in imaging to evaluate the tradeoffs readers make between sensitivity and specificity, and as a way to look at data without these reader biases. In this analysis the performance of all of the ultrasound readers in both trials were measured in one curve, and the performance of all of the nuclear readers in both trials were measured in another curve.

When viewed on this basis, the shape of the Imagify with ultrasound curve was almost exactly the same as the shape of the nuclear stress curve, and the areas under the curve were exactly the same for both ultrasound and nuclear. What this means is that variation in reader bias is similar for ultrasound and nuclear, thereby supporting the concept that both ultrasound and nuclear readers make the same degree of tradeoffs between sensitivity and specificity.

More importantly, it means that when the two trials are viewed collectively, the diagnostic performance of Imagify with ultrasound is similar to nuclear stress. One of the limitations of a non-inferiority analysis of sensitivity and specificity is the tradeoff that both nuclear and ultrasound readers make because of their own preferences is wider than the non-inferiority margin allowed in the statistical analysis.

To address this limitation of the non-inferiority analysis, we did a second integrated efficacy analysis performing pair-wise comparisons to determine where superiority exists for each diagnostic parameter. In a pair-wise comparison you look at all combinations of ultrasound readers and nuclear readers on each of the diagnostic parameters.

Data for accuracy and specificity were similar for Imagify stress ultrasound versus nuclear stress. However, for sensitivity Imagify stress ultrasound was more often superior to nuclear stress. This analysis provides further evidence that Imagify with ultrasound is at least comparable to nuclear stress and suggests that it may even be better than nuclear stress in measuring sensitivity.

Next let's talk about safety. In total, 72% of the chest pain patients undergoing rest and stress imaging in our trials reported at least one adverse event. Most adverse events were mild in intensity, short in duration, and were resolved without treatment or residual affects. Remember, all of our patients also underwent pharmacological stress, and the pharmacological stress agent dipyrimidol is well known to cause adverse events.

In fact, many of the adverse events in our trials occurred while patients were under the affects of the dipyrimidol used to induce stress, and were consistent with its recognized safety profile. The most common adverse events observed in the Imagify trials were headaches, chest pain, nausea, flushing, and chest discomfort. Some additional short-lived symptomatic decrease in blood pressure and oxygen saturation were occasionally observed after Imagify dosing during rest. These were transient and usually mild in intensity.

If treatment was required they were promptly managed by standard medical care with no apparent life-threatening risks in stable cardiac patients. No death or life threatening adverse events were reported. Eleven patients or less than 1% of patients receiving Imagify experienced 14 non-life-threatening serious adverse events.

The lack of mortality or occurrence of any life-threatening serious adverse event suggests that Imagify is tolerated in the intended patient population, which is stable patients with recent chest pain who can undergo a pharmacologic induced stress test. These patients are at lower risk for coronary artery disease than patients with acute myocardial infarction, or patients with unstable angina.

These higher risk patients have not been studied with Imagify because stressing with the pharmacological stressor used in our studies in contraindicated for such patients. Stressing with this same agent is also contraindicated for patients with compromised pulmonary function. Our proposal to FDA and the NDA is to carry similar contraindications for Imagify in these patient types.

Let me now summarize our risk management strategy. We believe the data we have generated suggests that Imagify is well tolerated; however, there are limitations to our data. First, only stable coronary artery disease patients our intended patient population has been exposed to Imagify in our clinical trials. Our trials have not included sicker patients that may be exposed to Imagify as it is used off-label. To address this risk we have proposed that certain types of patients become contraindicated.

A second limitation of our data is that we have only exposed about 1,000 subjects to Imagify. This number of patients in our trials may not be large enough to predict safety issues in the larger number of patients that will ultimately be exposed to Imagify upon its commercialization. We have conducted studies in pigs as a very sensitive model for cardiopulmonary safety issues, and have seen the same kinds of adverse reactions to Imagify as have been reported by the currently available FDA approved ultrasound agent.

How the pig model will correlate to human experience, however, is still unknown. Therefore, we have proposed in our briefing document, Post Marketing Safety Studies to further examine Imagify's safety profile in a much larger sample of patients in the intended population. Based upon all the data generated to date, we believe Imagify is well tolerated, has comparable performance to nuclear stress testing, and has an attractive risk benefit ratio compared to nuclear stress testing, which carries risks associated with radiation, which is well known to be associated with cancer risk.

Our risk management plan should ensure we continue to generate data to see adverse events that require a larger sample side, and finally that we do everything we can to ensure Imagify is used in the patient population that we have studied, rather than the potential sicker, unmonitored, off-label patient population that we have not studied. At the actual advisory committee meeting, we will make our presentation then FDA will make theirs. The advisory committee members will then ask questions and discuss the data.

This meeting lasts about a full day, enabling all parties to have a chance to make statements and address any issues. In addition to the company, we anticipate that some clinicians may also attend the session and make statements. Members of the public are welcome to attend, as I've noted before, but are not allowed to participate in committee discussions. Right now, we anticipate that we'll be able to share our thoughts and insights on the meeting in a conference call with investors most likely the following day.

We'll want to debrief fully and evaluate what we've heard so that we can share our perspectives with you, as well as what we hear from some of our regulatory advisors who've been through this process many times before. Before I close, I do want to note that the American Heart Association Conference is ongoing as we speak this week, and while I cannot pre-announce anything about any presentations there, I can say that Acusphere representatives are attending.

Certainly, as soon as we are allowed we will announce any news from the conference. So before I open up the Q&A, let me summarize the key points that I've made today. We have the needed funding to see us through Imagify's productive target action date of February 28, 2009. We remain very excited about our progress with Imagify, continue to work with FDA on the NDA review, and we look forward to our upcoming advisory committee meeting.

At that meeting, we will review our clinical data and discuss how it supports that Imagify stress ultrasound is clinically equivalent to the current standard of care nuclear stress, and is therefore a cost effective and radiation free alternative with the potential to address a significant public health need. We plan to share our thoughts on the advisory committee meeting soon after it concludes with another call with our investors. We appreciate your continued support.

With that operator, let's open the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Jason Napodano – Zacks Investment Research.

Jason Napodano - Zacks Investment Research

I appreciate the update, you actually answered a lot of the questions that I was going to ask, but I’ve got a couple here. The comment in the press release about the potential off-label concerns by the FDA, you spoke on that in your prepared remarks, Sherri, but I’m wondering do you think that the FDA is more concerned with the patient population and the patients that are contraindicated or the potential use of the drug for alternative diagnostic uses?

Sherri Oberg

I’m trying to be very careful to keep my remarks limited to Acusphere thoughts rather then FDA thoughts on this topic and that’s for obvious regulatory reasons, but I think if you look at the June advisory committee with other agents and just look at other meetings that FDA has with other drugs that aren’t in our class, off-label usage is always a consideration. We’re focusing more on off-label usage within the cardiology field because we think that's where the more likely risk is. We’ve never studied this drug in radiology applications or in fields outside of cardiology so there’s no publication on dosing or how to do this, and so that’s really not the risk we’re focused on. We’re more focused on other types of cardiology patients that cardiologists would be treating, that we have not studied.

Jason Napodano - Zacks Investment Research

What kind of post approval commitment do you think that the FDA would potentially be looking for in terms of either a Phase IV study, or an open label study, or a long-term safety program?

Sherri Oberg

It’s premature for me to comment on that because I just really don’t know the answer to that. It was clear from the advisory committee meeting in June with the other agents that there's post marketing studies that the FDA is working with those agents on, and so, as a part of that they’re developing their thought process as to what they want those post marketing studies to look like. We don’t know what that is yet, other then very high level information.

I’d say on the positive side of this is that given the changes in FDA guidelines, these risk management plans and post marketing studies are new ways for the FDA to look positively at drugs because they now have the authority to enforce these types of studies it creates a reason to say, okay, I can say yes to this because I know that there is a plan forward to address risks that in the past when they haven’t been able to enforce this it was of a bigger concern, so we’re hopeful this is going to work to our favor, but we really don’t have any input from FDA. I don't want to comment for FDA on this. This is really just our view.

Jason Napodano - Zacks Investment Research

Maybe switch gears a little bit. The R&D expense in the third quarter, $7.5 million, maybe a question for Larry, can you break down either the dollar amount or percentage wise, how much of that is for the manufacturing facility, and then how much is underlying R&D?

Larry Gyenes

Yes, of the total $7.5 million, let me carve out two pieces. One, $2.5 million of that is depreciation on leasehold improvements and equipment. So you’re looking at a cash cost of about $5 million. Second is facilities related costs, that’s about $1 million for the operation of the predominantly the manufacturing of facilities.

Of the remaining $3.5 million, the vast majority of that is related to manufacturing including the completion of the processed validation runs in the third quarter, as well as ongoing facility maintenance in preparation for the FDA’s pre-approval inspection. There is small amount in there for the staff that we have in regulatory and clinical support that’s working on the NDA and obviously on the ongoing preparations for the advisory committee meeting.

Jason Napodano - Zacks Investment Research

So a good chunk of that expense, the manufacturing of facility validation, will go away after the inspection or the manufacturing costs will then be moved to another line after the approval?

Larry Gyenes

Well after approval, the manufacturing costs will begin to get capitalized as inventory, so it’ll be put up onto the balance sheet once approval of a project has been obtained.

Jason Napodano - Zacks Investment Research

Has the number of shares the number of shares been authorized up to 250 or is that still in the works?

Larry Gyenes

No, those were authorized the day before the transaction closed.

Jason Napodano - Zacks Investment Research

So now the total amount of authorized outstanding now is $250 million?

Larry Gyenes

That is correct.

Jason Napodano - Zacks Investment Research

Any update on the timing of the MAA filing? Are we looking early next year or second quarter next year?

Sherri Oberg

We really don’t know anything more specific then what we’ve said publicly which you said it'll be in 2009. It really depends. Nycomed is working through with the European authorities right now as to whether they can get a waiver on the pediatric requirements, or whether they need to provide a pediatric plan as part of the MAA filing and depending on where that ends up will determine whether it’s earlier in the year or later in the year. We just don’t know yet.

Jason Napodano - Zacks Investment Research

Okay, and that’s a centralized filing for all the EU member states?

Sherri Oberg

Yes, this is a Euro specific issue and it’s a requirement for all drugs in Europe.

Operator

Your next question comes from Winder Hughes - Focus Fund

Winder Hughes - Focus Fund

Sherri, I have several housecleaning questions and then maybe two that might be longer. On the briefing documents by the FDA, when would those be filed relative to the meeting on December 10th?

Sherri Oberg

It’s our understanding that they’ll be published on the FDA website within two business days of the advisory committee meeting.

Winder Hughes - Focus Fund

So, no sooner, let’s say then December 8th, I guess?

Sherri Oberg

I think it might –

Winder Hughes - Focus Fund

Okay, but in that time sense.

Sherri Oberg

Yes, it might be sooner but it’s our expectation that at least with two days notice.

Winder Hughes - Focus Fund

And on the 10th will they vote that day, and that vote be disclosed?

Sherri Oberg

Yes, the vote will happen that day and it’ll all be done in public, so it will be known immediately.

Winder Hughes - Focus Fund

Okay, then once and if this is approved in February, is there a reimbursement code established?

Sherri Oberg

The question is, is there reimbursement for Imagify upon approval?

Winder Hughes - Focus Fund

Yes.

Sherri Oberg

There are reimbursements codes that exist that will cover Imagify immediately upon approval, but a big part of our reimbursement strategy is to go out there and get additional codes that will provide even better reimbursement than what currently exists, but unlike what happens to many new drugs where there’s no reimbursement immediately. There will be the reimbursement for Imagify upon approval.

Winder Hughes - Focus Fund

And to get the full amount of reimbursement the codes that you want, how much work is that involved? Is that some real commissionary type work or is it procedural in nature and therefore you just have to do it, but it’s not that difficult?

Sherri Oberg

I would say it’s more procedural in nature because of the way we designed our trial. Our Phase III program is basically the perfect trial for reimbursement because we went head-to-head with nuclear and nuclear is so much more expensive and we demonstrated clinical equivalents, and that’s the claim that we’re going after with FDA.

So again, unlike many other new drugs where you often have to, sometimes what happens with new drugs is the sponsor focuses more on what does it take to get regulatory approval and that metric can be very different than what the requirement for getting reimbursement. In our case, the requirements for approval are very much aligned with the reimbursement objectives and all of that will be subject to publication, etc. and that will support our case with the various payers.

Winder Hughes - Focus Fund

Last question and I’ll jump back in the queue and this is kind of the longer winded one, but it’s fairly basic but I think that it’s a re-familiarization process. What is the ASP out there today, do they have like a nuclear test done, and so what is your expected ASP and once again, just review briefly the market size opportunity here that would be net addressable for you guys.

Sherri Oberg

Sure, so the ASP meaning the average sales price?

Winder Hughes - Focus Fund

Sure, yes.

Sherri Oberg

We haven't stated publicly what our pricing strategy is going to be for Imagify simply because that's going to be the subject of a much more sophisticated analysis. So what we've done is we've been using a $200 price assumption, which I think is very conservative relative to what we will actually charge once this drug is approved and we use it primarily to size the market, and to look at the cost benefit of ultrasound versus nuclear, the nuclear procedure costs about $870, only a very small portion of that is the drug price.

A lot of it is fixed costs, whereas the average price of the procedure of a stress ultrasound alone is $270, so if you add the $200 price for our drug, that brings the total procedure cost to $470. So you can see it's about half the total procedure cost for ultrasound with Imagify will be about half the cost of nuclear and that's why the arguments are compelling for the pair.

Now, in terms of the overall market size, just to remind you, there's over 10 million stress imaging procedures. The vast majority of those are nuclear stress procedures, about a quarter of them are also stress ultrasound procedures.

Winder Hughes - Focus Fund

Ten million per year, right?

Sherri Oberg

Ten million per year in the United States, so at the $200 price that's a $2 billion market just in the United States.

Winder Hughes - Focus Fund

Okay, one more, if the FDA says yes in early '09, how long would Cephalon wait until they notified you what their decision will be because they don’t want to leave you twisting in the wind there if everything goes well?

Sherri Oberg

Right, I don't think it would be appropriate for me to speak for Cephalon. They're under the agreement they have until November to make their decision. So if the drug is approved in the first cycle approval they have to decide, would there be benefits to waiting until November to make their decision, or do they have all the information they need to make their decision because they can exercise early if any time within the 12-month period.

Winder Hughes - Focus Fund

So, it's conceivable that this is approved let's say in March, and you're kind of held up from launching this until November?

Sherri Oberg

That's possible.

Operator

Your next question comes from Heidi Heikenfeld - Oppenheimer Funds.

Heidi Heikenfeld - Oppenheimer Funds

I'm just wondering, in your upcoming FDA panel, who is going to stand up for Acusphere? Who's presenting for the company, and then you mentioned other clinicians. Can you give me an idea of who those may be, or how many will there be?

Sherri Oberg

That information hasn't been made public yet and as part of an advisory committee preparation process, you plan for every contingency imaginable, including somebody getting very sick on the day of the advisory panel and not being able to be there. So we have a Plan A of who's going to be presenting, and from our group, internally, the Plan A is our Head of Regulatory Affairs, Michael Slater will make some opening remarks, and our Head of Clinical Research, Rick Walovitch will focus on the clinical efficacy data.

We have multiple cardiologists who are preparing to provide background information on what the value of perfusion and wall motion imaging is, and the value of this procedure relative to currently available techniques who are going to talk about the safety data. So, who actually is going to be the one that ends up making the advisory committee meeting we'll be making public at a later date.

Heidi Heikenfeld - Oppenheimer Funds

Do you have any color as to who is going to be sitting on the panel yet?

Sherri Oberg

The panel members that are on the advisory committee are available on the FDA website. I don't have their names in front of me, but you can look that up on the FDA website. There are some vacancies on the panel, and it would not be surprising to see FDA put some people on to fill those vacancies either with full time committee members or with temporary voting members that have some imaging background, some echo cardiology background. We don't know anything other than what's on the website, and we may not know until right before the meeting.

Heidi Heikenfeld - Oppenheimer Funds

Since one of the issues that you faced was the training of the actual readers, have you answered some potential questions that you're likely to get from the FDA in your filings? Can you talk about what you've said about the training of your readers?

Sherri Oberg

Well, we have a very specific training protocol that we used as part of our clinical trial design, and that was filed prospectively with the agency before we even unblinded the trial. So, all of that was discussed with the FDA as part of our clinical trial design and is available to FDA.

Heidi Heikenfeld - Oppenheimer Funds

Have you made any changes to that?

Sherri Oberg

I don't believe so but I'm not close enough to it to know for sure.

Operator:

Your next question comes from James Hobson - Private Investor.

James Hobson - Private Investor

I just have a quick, because I don't know what I'm hearing, a question. The gentleman on the focus fund was talking about reimbursement codes. Could you explain what he was talking about there?

Sherri Oberg

I think he was just asking general questions about the economics behind ultrasound and nuclear, and what our plan is for getting reimbursement for Imagify post approval.

James Hobson - Private Investor

And those reimbursements, is that part of the fully funding of the costs that we've been hearing?

Sherri Oberg

I'm not sure I understand your question.

James Hobson - Private Investor

I'm having a hard time understanding what the reimbursement costs, why would you be reimbursed for anything post approval? Is that part of the cost base?

Sherri Oberg

Okay, I understand your question. He's talking about Medicare, Medicaid, and private insurer reimbursement. So these would be revenues for the company from commercializing the drug after approval rather than a reimbursement of expenses, which I think is the line of questioning that you're asking.

James Hobson - Private Investor

Yes, it is, I just didn't understand what he was referring to. By the way, we really appreciate Larry's availability and accessibility in the last couple of weeks. He's done a great job fielding questions, and we all appreciate you putting this special meeting together.

Sherri Oberg

Great, well I'm glad it's been helpful.

Operator

There are no further questions in the queue. I would now like to turn the call back over to Sherri for closing comments.

Sherri Oberg

Thank you everybody for joining us today and we look forward to speaking with you again soon.

Operator

Thank you for your participation in today's conference. (Operator Instructions)

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