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Executives

John Babich - Interim Chairman and CEO

Don Wallroth - CFO

John McCray - COO

Dr. Norman LaFrance - SVP of Clinical Development and CMO

Deborah Lorenz - Senior Director of IR and Corporate Communications

Analysts

Marco Crosio - Jefferies

Matthew Andrews - Wachovia Capital Markets

Molecular Insight Pharmaceuticals, Inc. (MIPI) Q3 2008 Earnings Call November 13, 2008 ET

Operator

Good morning and welcome to the Molecular Insight Pharmaceuticals third quarter 2008 financial results conference call. My name is Lutrice and I will be the operator on today’s call. We will be facilitating a question-and-answer session towards the end of this conference.

I would now like to turn the call over to John Babich, Interim Chairman and CEO of Molecular Insight. Please proceed, sir.

John Babich

Thank you, Lutrice. Good morning. Thank you for taking the time to join us today for our third quarter 2008 conference call. I am John Babich, Interim Chairman and CEO of Molecular Insight.

With me today are Don Wallroth, our Chief Financial Officer; John McCray, our Chief Operating Officer; Dr. Norman LaFrance, our Senior Vice President of Clinical Development and our Chief Medical Officer; and Deborah Lorenz, our Senior Director of Investor Relations and Corporate Communications.

Before moving forward it is important to let you know that we will be making forward-looking statements on today’s call. Debbie is going to go recite a brief safe harbor statement and then we will proceed with the rest of the call.

Deborah Lorenz

Thank you, John. This is just a reminder that statements made on this call that are not strictly historical in nature constitute forward-looking statements. Such statements include, but are not limited to statements about the development of Azedra, Onalta, Zemiva, Trofex and our other product candidates.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results of Molecular Insight to be materially different from the historical results or from any results expressed or implied by such forward-looking statements.

These factors include but are not limited to risks and uncertainties related to the progress, timing, cost and results of clinical trials and product development programs; difficulties or delays in obtaining regulatory approval for product candidates; competition from other pharmaceutical or biotechnology companies; and the additional risks discussed in filings with the Securities and Exchange Commission.

All forward-looking statements are qualified in their entirety by this cautionary statement, and Molecular Insight undertakes no obligation to revise or update this call to reflect events or circumstances after the date hereof.

I will now turn the call back to John.

John Babich

Thanks, Debbie. Next, Don Wallroth, our CFO will summarize our financial results for the third quarter and nine months for 2008. I will then review our recent corporate research and development highlights. Then I will open up the call to our audience for question-and-answer period. Don.

Don Wallroth

Good morning everyone and thanks, John. As we noted in today’s press release Molecular Insight third quarter 2008 net loss was $24.7 million or $0.99 a share on a basic and diluted basis compared to a net loss of $13.2 million or $0.53 per share on a basic and diluted basis in the third quarter of 2007.

Total revenue for the third quarter of 2008, which to-date represents funding received by the company through various research and development plans was approximately $60,000 compared to approximately $300,000 during the same period last year. The decrease in revenue for the quarter is due primarily to the timing of grant-related activities.

Operating expenses for the third quarter of 2008 reflected a 42% increase for the same period in 2007. R&D expenses representing 60% of total operating expenses were $11.9 million in the quarter as compared to $9.8 million for the same period last year.

Key components of this 21% spending increase were additions to research and development staff and associated benefits as well as growth in program spending and clinical trials for both Azedra and Trofex.

The increase was offset by a reduction in the spending for the Zemiva program as the Phase 2b planned pivotal trial enrollment ended and we entered the data analysis phase of the trial.

Operating expenses also increased included a 90% increase in G&A expenses. G&A expenses were $8 million for the third quarter of 2008 compared to $4.2 million in the third quarter of the prior year.

This increase is primarily due to the increase in consulting costs, outside services to support corporate strategy, financial management and Sarbanes-Oxley compliance and expenses associated with staffing increases required as a public company.

Other expenses, net was $4.9 million for the three months ended September 30th, 2008 as compared to $400,000 of other income for the same period in 2007. The increase in interest expense for the third quarter of 2008, compared to the third quarter of 2007, was primarily due to the $4.5 million in payment-in-kind interest accrued on the $150 million Senior Secured Floating Bonds.

For the nine months ending September 30th, 2008, the company reported a net loss of $65.4 million or $2.62 per share on a basic and diluted basis. This compares with a net loss of $39.5 million for the same nine-month period in 2007.

Included in the net loss for the nine months ending September 30, 2008 is revenue of approximately $200,000, which to-ate represents grant revenue from various Research and Development grants and compares with approximately $600,000, from the same source, during the same period last year.

Operating expenses for the first nine months for the year increased by 33% to $51.5 million, up from $38.8 million for the same period last year. R&D expenses, which accounted for 62% of the company's operating expenses for the nine months ended September 30, 2008, increased 18% to $32 million from $27.1 million in the same period last year.

This increase was primarily due to manufacturing and clinical trial costs associated with the Zemiva program, as well as increases in spending for the Azedra program, including a clinical trial.

This increase in expenses, year-over-year, was offset by a one-time license fee for Onalta and an acquisition fee for Solazed. The 67% increase in G&A expense to $19.5 million for the first nine months of 2008, as compared to $11.7 million for the same period in 2007, is attributable to consulting costs and outside services, as noted previously, and expenses associated with increased staffing, as required as a public company.

This increase in other expense net for the nine months ended September 30, 2008 is principally attributed to the $13.4 million payment-in-kind interest accrued on the $150 million senior secured floating bonds as noted previously.

At September 30, 2008, the company had approximately $118.5 million in cash, cash equivalents, and short-term and long-term investments, which are invested in US Treasury Securities with maturities over 90 days.

We continue to review our operating expenses and have recently taken a series of steps to adjust, in particular, our G&A expense to a level that is more appropriate to our position as a development stage company, in line with other companies of our size.

We are focused on the categories of legal, consulting and accounting, where we had in some instances one-time expenses related to the $150 million Senior Secured Floating bonds, put in place just a year ago, and actions taken to become a publicly traded company.

We have brought some of the works previously outsourced to consultants and CRO’s in-house, without compromising the benefit to the company in the near and long-term. We have taken a hard look at budgets across the board given the current economic conditions in both the US and abroad.

We anticipate that these prudent actions will save us 10% to 20% on our cash burn in the coming year and we will continue to see additional efficiencies going forward. We believe that our cost cutting actions will enable us to fund our development program now, till the end of 2010.

With that, I will now turn the call back to John Babich.

John Babich

Thank you, Don. I would like now, to review some of our recent research and development highlights and begin by reiterating that our lead clinical programs remain on track.

This week, we reported positive data from a perspective analysis of a previously completed Phase 2b study for Zemiva, our lead molecular imaging radiopharmaceutical candidate.

In the study, we compare the incremental value of adding quantitative Zemiva imaging to the initial standard diagnosis of chest pain patients arriving at emergency department to evaluate the ability of Zemiva, to rapidly produce an improved diagnosis in acute coronary syndrome, the most severe form of cardiac ischemia.

This analysis is to test the algorithms that will be used to determine the key end points of our ongoing planned pivotal Phase 2 registration trial for Zemiva. Top-line results from that trial, which are expected by year end, will include Zemiva’s performance in the detection of cardiac ischemia.

Data from the analysis presented at AHA last weekend, suggested that the addition of quantitative spec imaging of Zemiva to clinical information obtained in the midst of pharm setting has significant clinical value in rapidly identifying chest pain patients at high-risk for acute coronary syndrome or severe cardiac ischemia.

The combination of Zemiva imaging with initial clinical information resulted in an improved sensitivity of 84% that was statistically significant with the P value of 0. 0.003 compared to the sensitivity of the initial clinical diagnosis alone, which was 54%.

The quantitative Zemiva imaging alone, provided an increased sensitivity for the diagnosis of definitive or probable ACS over the initial clinical diagnosis. This was 76% for Zemiva alone versus 54% for the clinician alone, with the P value of 0.06. There was a slight reduction in specificity for the diagnosis of definitive or probable ACS, but that reduction was not statistically significant.

The negative predicted value increased to 89% for patients with definitive or probable ACS, when Zemiva was added to the diagnosis, up from 76% with standard diagnostic techniques alone. The negative predicted value for patients with definitive ACS was 100% when Zemiva was added to the initial clinical diagnosis.

This analysis provides a compelling case for Zemiva’s used in the triage of the emergency chest pain patient. In the emergency department, the most urgent priority for the physicians is to identify patients with serious cardiac events and to be able to send home safely those patients whose chest pain is not cardiac in origin.

The potential of Zemiva to enable a more sensitive and rapid diagnosis of the chest pain patient should allow more timely intervention, provide a physician the information needed to safety send home non-cardiac patients with confidence.

In addition to Zemiva, we also initiated a Phase 2 clinical trial for Azedra for the treatment of children with high risk neuroblastoma, Azedra is our lead targeted radiotherapeutic for the treatment of neuroendocrine tumors. The primary objective of this trial is to determine a maximal tolerated dose for Azedra in this pediatric application.

This trial has been conducted in collaboration with the New Approaches to Neuroblastoma Therapy Consortium we commonly refer to as NANT. One cohort has been completed and has tolerated the treatment well without toxicity. The next cohort has been identified and dosing for that cohort is expected to begin within the fourth quarter.

Azedra is also being developed for the treatment of pheochromocytoma. We have completed dose escalation trial and have to find the therapeutic dose for the adult population for this disease. The agreement with the FDA on our trial design, we expect to initiate a pivotal Phase 2 trial in the first half of 2009.

Running the pheochromocytoma trial and the neuroblastoma trial concurrently will afford us significant savings on drug manufacturing costs for both of these programs. Rounding on our list, we continue the enrollment of patients in our Phase 1 dose symmetry trial for molecular imaging radiopharmaceuticals, we refer to as Trofex. This is for the detection and staging of metastatic prostate cancer.

Trofex is a small molecule. It is an inhibitor of prostate specific membrane antigen or PSMA, which is approaching that, is highly expressed on all metastatic prostate cancers. The trial is designed to establish proof-of-concept for the molecular targeting of PSMA for the visualization of prostate cancer.

The study is close to being completed. The evaluation of the two candidate compounds and the selection of the lead for further clinical development and commercialization, we hope to see by the end of the year.

Trofex may fulfill the unmet need of enabling the specific and sensitive detection of metastatic prostate cancer, which will be an advantage over current prostate cancer imaging techniques that are unreliable and non-specific.

Research shows that, in the United States, approximately 1 in 6 men will be affected by this disease in his lifetime. Appropriate staging and disease detection is crucial for the optimal disease management of maintenance of quality of life in this ever increasing population.

Our goal then is to focus on our robust product line under development. As Don mentioned in his remarks, we have taken steps to ensure that we will continue to be able to fund our critical path of development out to the end of 2010.

While the majority of the cost cutting has been done, we will continue to look for other opportunities to pair back expenses, where it makes sense and while we will be able to maintain critical mass to ensure the completion of our programs.

We have made significant progress over the last quarter and in closing, I would like to review our upcoming clinical milestones. We expect the following to report top line results for Zemiva's planned pivotal Phase 2 registration trial for the detection of cardiac ischemia and the emergency department setting before the year end 2008.

We expect to complete Trofex's dose symmetry proof-of-concept trial for the detection of non-specific metastatic prostate cancer and to initiate a planned Phase 2 pivotal trial for Azedra in neuroendocrine cancer. This now concludes our prepared remarks.

I would like to open up the floor to questions and turn the call back to the operator.

Question-and-Answer Session

Operator

Thank you, Mr. Babich. (Operator Instructions) Our first question comes from the line of Marco Crosio with Jefferies. Please proceed.

Marco Crosio - Jefferies

Good morning.

John Babich

Good morning, Marco. How are you?

Marco Crosio - Jefferies

Great. Thank you. So my question is pending positive Zemiva results, can you outline the subsequent steps and your thoughts on the pivotal trials?

John Babich

Sure. What our plan is assuming positive results is for us obviously to take a good hard look at what those results are telling us in terms of performance of the drug to obviously at that time for the plan to go down to the FDA.

We have already described or internally crafted what we think a Phase 3 would look like. Obviously, we have to incorporate the results of this trial into the fine tuning of that design and then pursue discussions with the FDA to get their buying on Phase 3 program.

Marco Crosio - Jefferies

Do you have any sense of size of trial and maybe length as well?

John Babich

The size of the trial will be probably at least the size of the current trial depending on our primary endpoints that number could go up from 500 to 700. Again, it depends on the results that we have; we find from this trial. The primary endpoint is likely to be clinical benefit, which I think drives the power of the study somewhat.

Don Wallroth

In terms of the overall time of the trial, we have learned a lot going through this current trial and we will be trying to make efficiencies everywhere we can predominantly in the area of sign enrollment.

We had a broad spectrum of institutions many of these institutions have done a great job for us. Some of them, where unable to deal with the protocol efficiently and will be looking to profile the high performance and seek out those institutions till we can get this study done as fast as we can.

Marco Crosio - Jefferies

Great .Thanks for taking my question. I am looking forward to the data at the end of the year?

John Babich

Thank you, Marco.

Operator

Our next question comes from the line of Matthew Andrews with Wachovia Capital Markets. Please proceed sir.

Matthew Andrews - Wachovia Capital Markets

Yes. Hi, good morning. Thank you for taking the question. I am calling in for Aaron, just two. Dr. Babich, first of all, can you remind us what your market research has revealed in terms of the commercial opportunity for MIBG in Europe with the revenues for compounding to treat neuroendocrine tumors and then I have a follow-up question on BMIPP.

John Babich

Well, certainly, I am going to ask John McCray, our COO to jump in here. We do not have strict numbers on the MIBG market in Europe and certainly John would have more information on that.

John McCray

Yes, that has not been our focus for us particularly for MIBG. We have been looking in Europe much more for Onalta than for Azedra.

Matthew Andrews - Wachovia Capital Markets

Okay. Thank you. Second of all, on BMIPP, could you remind us what current revenues are, as well as number of patients using the therapy in Japan and also what the peak number of patients was for using the therapy in Japan in the past? Do you have any of that information?

John Babich

We do not have any public documentation. I mean, it is a very difficult thing to find in terms of a published document. We are in communication with Nihon Mediphysics. My understanding in Japan is that they have about 16% market share of the nuclear cardiology market place. We have extrapolated that in the US population and those numbers are significant. Right now there is about 15 million nuclear cardiology studies done in the US alone.

So, in regards to there implementation, slightly different in terms of the population, different in terms of the cardiovascular risk profile in the Japanese population, but it is 16% market share, and that is on unit basis. The market is significant in terms of the Japanese market place.

Matthew Andrews - Wachovia Capital Markets

Okay. Great. Thanks very much.

Operator

There are no more questions at this time. I would now turn the call back to Mr. Babich. Sir?

John Babich

Thank you, Lutrice. Once again, thank you all joining us on the call. We appreciate your time and look forward to speaking with you in December to report the Zemiva trial top line results.

Operator

This concludes the call today. Thank you and have a great day.

John Babich

Thank you very much.

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