XenoPort, Inc. Q3 2008 Earnings Call Transcript

XenoPort, Inc. (XNPT)

Q3 2008 Earnings Call Transcript

November 5, 2008, 5:00 pm ET

Executives

Jackie Cossmon – IR

Ron Barrett – Chief Executive Officer

Bill Harris – SVP, Finance and CFO

Bill Rieflin – President

Analysts

Rachel McMinn – Cowen & Company

Steve Harr – Morgan Stanley

Ram Selvaraju – Rodman & Renshaw

Michael Yee – RBC Capital Markets

Lucy Lu – Citigroup

Davis Bu – Goldman Sachs

Katherine Xu – Credit Suisse

Gene Mack – Lazard Capital Markets

Yale Jen – Maxim Group

Greg Wade – Pacific Growth

Presentation

Operator

Good afternoon. My name is Robert, and I will be your conference operator today. At this time, I would like to welcome everyone to the XenoPort third quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Ms. Jackie Cossmon, you may begin your conference.

Jackie Cossmon

Thank you, Robert. Good afternoon, and thank you for joining us on the call. Here with me today are Ron Barrett, our Chief Executive Officer; Bill Rieflin, our President; and, Bill Harris, our Senior Vice President of Finance and Chief Financial Officer.

Before we begin our discussion of today's news, I would like to note that the information to be discussed in this conference call and webcast, including answers to questions during this call, will include forward-looking statements that involve risks and uncertainties, including statements related to our current and future clinical development programs and clinical trials and the timing thereof, our partners' clinical development plans, the release of additional clinical trial data, future regulatory submissions and the timing thereof, and the commercial potential for our product candidates. XenoPort can give no assurance with respect to these statements, and we assume no obligation to update them.

For detailed information about the risks and uncertainties that could cause actual results to differ materially from those implied by or anticipated in these forward-looking statements, please refer to the Risk Factors section of our most recent SEC filing, including our discussion of the inherent risks of clinical trials. This webcast is a copyright of XenoPort.

At this time, I would like to turn the presentation over to Ron.

Ron Barrett

Thank you, Jackie, and thank you all for joining us on today's call. I'll be speaking today about our clinical development programs, and Bill Harris will spend a few minutes discussing our financial results for the third quarter. We will then take your questions.

As outlined in our press release, there has been significant activity with our development program since the start of the third quarter. Let me start with the disappointing news regarding the Astellas Phase 2 clinical trial of 512 in painful diabetic neuropathy patients in Japan.

This was an eight-week trial conducted in Japan that examined placebo and three doses of 512. The primary endpoint was the change from baseline in pain score rated on a zero to ten scale. The trial included an interim analysis conducted by an independent data review committee, the purpose of which was to recalculate the powering requirements for demonstrating efficacy in the trial while maintaining blinding of the data. The interim analysis indicated that the number of required subjects would be prohibitive, and Astellas decided to terminate the trial. The interim analysis also indicated that 512 was generally well tolerated with no safety concerns.

We are working with Astellas to fully understand these results. From the preliminary analysis, it appears that the baseline pain scores in this Japanese PDN population were at the low end of the range compared to scores in studies conducted in the US and Europe. In addition, the preliminary analysis indicated a high placebo response. These factors may have contributed to the inability to distinguish 512 from placebo, but there may be other factors.

I should point out that there have been no published PDN studies using pain as an endpoint conducted in Japan, so we don't have access to other data against which to compare these results. Astellas will make a decision about whether to continue the development for PDN in Japan after XenoPort and Astellas have reviewed all the data and consulted with experts. It is possible that Astellas could conclude that further investment in PDN in their territory is not warranted.

I'd like to emphasize that 512 is the subject of a broad development program. In mid-September, GSK filed an NDA with the FDA for Solzira for the treatment of RLS based on the full development program conducted by XenoPort. We believe that Solzira holds the potential to be an important alternative to dopamine agonists as a treatment for RLS.

Our clinical trials in RLS patients indicate a number of potential benefits of Solzira treatment. For example, later this week we will be presenting a poster at the International Conference of the Mechanism and Treatment of Neuropathic Pain, demonstrating the positive effects of 512 on pain associated with RLS symptoms in one of our 12-week RLS trials.

We've also shown that 512 treatment may provide RLS patients with important sleep benefits. GSK has recently initiated a Phase 3B polysonography trial to further study potential sleep benefits in RLS patients. In addition, Astellas has recently completed enrollment of a Phase 2 study of 512 in RLS patients in Japan.

Beyond RLS, GSK is studying Solzira in three Phase 2 neuropathic pain studies, including a PDN study that recently completed enrollment. GSK has advised us that the results from the Astellas PDN clinical trial will not impact the GSK neuropathic pain development program. We look forward to the results of the three ongoing GSK studies in neuropathic pain in 2009.

Finally, this quarter GSK initiated a large Phase 2 study of Solzira as a prophylactic treatment for migraine. Therefore, in addition to the initial FDA action on Solzira RLS NDA, we expect that the next 12 months for 512 will be rich with new data from a number of studies.

Turning now to our other development programs, we believe we have continued to make progress on multiple fronts. We expect to report the top line results from our 986 Phase 2 GERD trial by the end of the year. Our Phase 2 trial of 986 in spinal cord injury patients with spasticity remains on track, and we expect a report of top line data in the first half of 2009.

We announced this past quarter that we plan to initiate an exploratory trial of 986 as a treatment for acute back spasms. Not unlike 512, we believe that 986 could become an important new therapy in a number of disorders, in which currently available therapies are suboptimal.

We believe we've made good progress regarding the development of a new sustained release formulation of 279. We have identified two formulations that improve on a number of aspects of our previous prototype formulation. The Phase 1 trial comparing these formulations with Sinemet started this week, and we plan to report results from this trial in early 2009.

And with that, I'll turn the call over to Bill Harris for discussion of the financial results for Q3.

Bill Harris

Thanks, Ron, and thank all of you for joining us today on the call. As Ron has just reviewed for you, the responsibility for continuing development of 512 has shifted to our partners, and our efforts have increasingly focused on our pipeline programs, a trend that is reflected in our financial results for the quarter.

Through the end of the third quarter, we have recognized approximately $130 million of the $140 million we have received from GSK. Given the decrease in GSK revenue recognition compared to the same period last year simply reflects the fact that we have completed a substantial portion of our activities on this agreement, namely the completion of the Phase 3 RLS program for Solzira. At this point, the outstanding activities are the completion of the open label safety study, which is expected to be completed by the end of the year and, to a lesser extent, continued support of GSK during the NDA review process.

Research and development expenses for the third quarter of 2008 follow the same trend. The $6.9 million increase in R&D expenses compared to the same period in 2007 was principally due to increased costs associated with our 986 GERD, spasticity, and soon to be initiated acute back spasm development programs; increased preclinical development activities and increased personnel costs resulting from increased headcount; and, increased non-cash stock-based compensation, partially offset by decreased costs for the clinical development program for Solzira.

General and administrative expense for the third quarter of 2008 increased by $2.1 million, compared to the same period of 2007. This increase was primarily due to increased personnel and related costs resulting from an increase in headcount, increased non-cash stock-based compensation.

Net loss for the third quarter of 2008 was $24.1 million, compared to net income of $15.6 million for the same period of 2007, again reflecting the decrease in collaboration revenue recognized during the quarter. The net loss per diluted share was $0.96 in the third quarter of 2008 versus net income per diluted share of $0.60 for the same period in the prior year.

Our balance sheet remains strong, with cash, cash equivalents, and short term investments of $125.1 million at September 30. In addition, we expect to receive cash payments of $29 million from our various partners before the end of the year.

With that, we'd now like to open the call for questions. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Rachel McMinn with Cowen & Company.

Rachel McMinn – Cowen & Company

Thanks very much, and thanks, Ron, for talking about the disappointing news first. I think you're probably the first guy I've talked to this year to do that. Can you talk about, a little bit more about the specific doses that were used in the Japanese study, and if you think that – if you do think that there could be any implications here, or there's just not enough experience? I guess I don't understand why pain in Japan would be a problem.

Ron Barrett

Yes. Astellas has not disclosed the doses that they used in this study other than to say they had three dose levels. I think the – we've only had this data a little bit of time and have had limited amount of opportunity to really dig into it. But I would remind people that, as I said in the prepared remarks, that there's no history of conducting these types of pain studies in this population in Japan. So there are a number of factors that could come into play. Because there are no approved treatments in Japan for painful diabetic neuropathy, we don't know what type of patient may enter into a clinical trial and whether that differs from the types of patients that enter into trials in US trials, for instance.

So it's things like disease severity. In painful diabetic neuropathy, that's a very important parameter because, as you know, as these patients, if they don't have good glucose control, their peripheral neuropathy gets worse and their ability to either report pain or report improvement in pain may be diminished. And so these are the types of factors that we're looking at. It's possible there also could be cultural issues with regard to how patients report pain on this 11-point pain scale. So these are things that we and Astellas are looking at. We'll be talking with experts and deciding what to do next.

Rachel McMinn – Cowen & Company

And so is it fair to assume, then, that there's been no gabapentin studies at all in Japan? Or are there any other similar indications where you can look and, I guess, try to understand, as you mentioned earlier, the potential placebo response and whether or not it's perhaps more magnified in this population than what you would see in other, US-based studies?

Ron Barrett

We have been unable to find any published studies in this population in Japan. Astellas similarly has reported that they have not found any published studies. There are ongoing studies with both pregabalin and duloxetine in Japan. Those are still in progress. And so there is very little comparison data that we can point to understand how our results, baseline pain scores, placebo effects, and so on, compare in this patient population.

Rachel McMinn – Cowen & Company

Okay. And then in terms of just a bigger picture question, can you talk a little bit about partnering opportunities, how the current economic environment has impacted your future development plans, if at all?

Ron Barrett

I think, let's take those – break those into two questions. The first is the current financial environment and how we think about that. And then I'll ask Bill Harris to answer that one. And then, Bill Rieflin to talk about the opportunities for partnering for compounds in our pipeline.

Bill Harris

Sure. Hi, Rachel. This is Bill Harris. In terms of the recent turmoil in the financial markets, and more specifically, our cash and cash needs, let me make a few comments. As I reported today, we entered the third quarter with $125 million in cash. With the $6 million that we received in October from Xanodyne and the $23 million in milestones we expect to receive by the end of the quarter, we anticipate adding about $29 million in cash by the end of the year.

Looking forward from there, we've disclosed in our SEC filings that we believe our cash plus anticipated milestones is sufficient to fund our operations into the second quarter of 2010. Now, we believe that this estimate may be conservative in two respects. First, to kind of preview your first question, we do not include any additional partnerships in that cash forecast. And as Bill will explain, there are partnering opportunities which obviously would have the ability to extend our cash runway.

Importantly, the estimate into Q2 of 2010 also assumes full development of all of our pipeline programs, so development stage as well as preclinical programs. So at this point, we don't believe we have any acute need to raise any money. As we've said in the past, we're always monitoring our cash needs, and we'll seek to raise money when we think it's in the best interest of XenoPort and our shareholders to do so.

Rachel McMinn – Cowen & Company

And do your anticipated milestones include an NDA approval for Solzira next year?

Bill Harris

Well, we haven't been able to provide any detail on the additional $210 million of milestones under the GSK agreements. I really can't answer to that. But I will say it does assume anticipated milestones. I can't get more specific than that.

Bill Rieflin

I think we've also said that that's a fairly conventional milestone to have in licensing deals of this sort, without being able to comment specifically on whether our extant collaborations have such a milestone.

But to get to the other part of your question, Rachel, it's an interesting one, because I think that in the wake of some of the dislocations in the financial markets, the pharma partnering activities have actually conspired in our favor, I would say. What we are noticing is an acute interest on the part of pharma companies in late stage clinical assets, and that is something that we have in relative abundance, I would say.

It is also interesting to me that pharma companies who historically had a fairly rigid therapeutic area of focus – in other words, they're in particular diseases and therapeutic areas, and they're not interested in reviewing things in other therapeutic areas or disease conditions – are now saying, "We will look at anything if it is at the proof-of-concept stage and later." So that plays very well to our strengths. I will also say that we have a number of these assets that have value that we can exploit without doing damage to our strategic ambition of being a US focused specialty sales neurology type organization.

So for example, we have 986. That's obviously a very prime partnering candidate. 279XUS, that's a very attractive candidate for reasons that we've discussed with you in the past in terms of how the PK advantages have historically translated into therapeutic advantages.

Another asset that people often overlook is 510. You'll recall that we did a deal with Xanodyne last year in the US. Xanodyne this quarter announced positive data on their formulation of tranexamic acid, XP12B, that's helped us in several ways. It de-risked the target, it increased the probability of technical success of our compound, and it also increased the value of the right that we retained. So I would say that the things that are going on broadly in the marketplace are creating a positive tailwind for our partner discussions.

Rachel McMinn – Cowen & Company

Thanks very much.

Ron Barrett

Thank you, Rachel.

Operator

Your next question comes from the line of Steve Harr with Morgan Stanley.

Steve Harr – Morgan Stanley

Just to jump back to Japan, are there any data with Neurontin in terms of differing PK or PD outcomes with either – is there any Japanese patients versus either European or United States patients?

Bill Harris

Sure. You can assume that prior to initiating studies in Japan with 512, we did comparative pharmacokinetics between Caucasian subjects and Japanese subjects. And there were no differences in pharmacokinetics there.

With regard to gabapentin, gabapentin was only recently approved in Japan for epilepsy. And my recollection is that the recommended doses in Japan are not different from the recommend doses in the US. There's no history in painful diabetic neuropathy. We were unable to find any history in post-hepatic neuralgia, even in Japanese subjects. So I do believe that this will be a learning experience, and it's possible that we may go forward. It's also possible that the conclusion could be that Astellas wants to focus on RLS.

Steve Harr – Morgan Stanley

When do you make your decision in licensing versus co-promotion with Solzira and GSK? And does anything about the current marketplace alter that decision? And finally, just when you give your Q2 2010 number, what is the assumption with that guidance?

Ron Barrett

So, Bill, you go first.

Bill Harris

Yes, sure. That is the currently planned operation. So since the agreement is drafted at the net sales royalty, unless we opt for the co-promote, it assumes a net sales royalty.

Ron Barrett

And Steve, with regard to the timing again, we haven't disclosed that, but I will simply say it's coming up. And we will be giving–once we make that election, if we do–we will be giving greater clarity on the financial impact of that decision.

Steve Harr – Morgan Stanley

And how much of a buffer do you have here if you decide to go ahead and exercise your co-promote, then you run into some modest regulatory delay? What's the, what can you do to increase the size of that buffer?

Bill Harris

Hi, Steve. This is Bill again. As I indicated, in terms of the assumptions in the estimate that gets us into 2Q '10, we've assumed full development of all of our pipeline programs. So obviously, as we move along, we can choose to slow down, delay, or even stop some programs as conditions warrant. At this point, we don't think we need to make any significant changes to our operating plan, so I don't want to speculate on what those decisions might be. But you can be certain that we have thought thoroughly about what those decisions are, when those decisions would need to be made, and the impact on our ongoing cash burn.

Steve Harr – Morgan Stanley

Great. Thank you.

Ron Barrett

Thanks, Steve.

Operator

Your next question comes from the line of Ram Selvaraju with Rodman & Renshaw.

Ram Selvaraju – Rodman & Renshaw

Hi. Can you hear me?

Ron Barrett

Yes. Hi, Ram.

Ram Selvaraju – Rodman & Renshaw

Hi. So a couple of questions, first, Bill Harris, if I could ask you to just clarify a couple of things on the P&L for me. With respect to what you expect in the fourth quarter with respect to collaboration revenue, I believe you said you have already received $6 million from Xanodyne and that you would also expect to receive an additional $23 million in association with the agreement with GSK. Is that correct?

Bill Harris

The $23 million is with GSK and Astellas combined, but yes, those are correct numbers.

Ram Selvaraju – Rodman & Renshaw

So you would have a total of $29 million in collaboration revenue in the fourth quarter?

Bill Harris

No, I didn't say that. We'd have $29 million in cash received. The $6 million from Xanodyne will be recognized when received, so that will be a fourth quarter. As you may recall, the revenue recognition for milestone payments is different between the Astellas and the GSK agreements, given our differing obligations and responsibilities under those agreements. Since that's a lump sum number, I really can't provide more detail other than I can say a substantial portion of that $23 million will be recognized in the fourth quarter.

Ram Selvaraju – Rodman & Renshaw

Okay. And then just to come back to the Japanese study and the outlook for the GSK Phase 2 trial. So at this point, there's really no way to assess what the comparison might be between the baseline pain scores of patients in the Japanese study versus patients in the GSK study? Or can we make an assumption that the patients in the GSK study who have been enrolled did at baseline have significantly higher pain scores than the patients enrolled in the Japanese study?

Ron Barrett

Well, the entry criteria is similar in both studies – a pain score of 4 or greater. What I indicated for the Astellas study on this preliminary analysis that we've done is that the baseline pain scores at the low end of the range, it's lower than any study that I've seen of this size study. And we don't know how that might have impacted the potential results. Obviously, if you have a lower pain score, you have less room to improve, so that could be a factor.

With regard to the GSK study, that study is still blinded and GSK, they're running that study. We don't have access to that blinded data. I will say that it is being run in the US. It's being run with sites that are highly experienced in conducting these types of studies. One of the factors that can impact these studies is the interaction of patients with the investigators. And so if there is – for lack of a better word – too much attention paid to the subject, that can lead to an enhanced placebo response. The investigators participating in the GSK study are all experienced investigators.

Ram Selvaraju – Rodman & Renshaw

Okay.

Ron Barrett

The other difference between the studies is the Astellas study was an eight-week study, and the GSK study is a 12-week study.

Ram Selvaraju – Rodman & Renshaw

Do we have any data with gabapentin and pregabalin, a clinical experience, to suggest that the impact of a drug like Solzira would be significantly greater over a longer period of time?

Ron Barrett

If you look at the historical gabapentin and pregabalin studies, the magnitude of the change from baseline does drift over time. However, so does the placebo response. And so the delta between the two generally don't change much between eight weeks and 12 weeks. So I don't necessarily believe that is the big difference between the studies. The eight versus 12 reflects the differences in the regulatory requirements between Japan and US.

Ram Selvaraju – Rodman & Renshaw

Okay. When do we expect the GSK study to report data?

Ron Barrett

So they have allowed us to disclose that the study has completed enrollment. It's a 12-week study and there's follow-up visits and yes, they haven't allowed us to disclose anything beyond 2009. But you can kind of triangulate to when we might see it.

Ram Selvaraju – Rodman & Renshaw

Okay and then just a couple of confirmations on other milestones. You are still expecting top line data from the Phase 2 GERD study this quarter, correct?

Ron Barrett

That's correct. I confirmed that in the press release as well as the prior statement.

Ram Selvaraju – Rodman & Renshaw

Okay. And then when do you expect to hear something from the FDA regarding the Solzira NDA, some formal notification of acceptance?

Ron Barrett

Yes, we'll announce that when it comes, in one way or the other. And it can vary from 45 days is when they have to have initially responded with questions, and then beyond that, it can range up to 60 days or beyond. But obviously, GSK is responsible for these regulatory interactions, and we'll let XenoPort investors know as soon as we can.

Ram Selvaraju – Rodman & Renshaw

Has anything been heard within that initial 45-day window that you can disclose at this time?

Ron Barrett

No. GSK has a very specific policy of not commenting on regulatory discussions, and so I'm going to stick to that.

Ram Selvaraju – Rodman & Renshaw

Okay. Thank you very much.

Ron Barrett

You're welcome.

Operator

(Operator instructions) Your next question comes from the line of Michael Yee with RBC Capital Markets.

Michael Yee – RBC Capital Markets

Great. Thanks, a couple of questions on Solzira. In regards to the open label safety study, are you going to give some sort of update or press release when that's complete to disclose data? Or is that going to be at a conference and we'll have to wait for that?

Ron Barrett

We don't intend to issue a press release on that. It will be included in our 120 update to our NDA, and with regard to when we would present it in conference, that has not been determined at this point.

Michael Yee – RBC Capital Markets

Okay. And on the 986 GERD study, can you give us some better information in terms of what you will disclose in regards to top line with efficacy and safety? And specifically on the safety, are you going to get into enough detail to determine percent rates of sedation and somnolence and certainly compared to placebo?

Ron Barrett

As we've historically done and I think is good practice, we'll, on the safety side, we'll talk about any SAEs–the withdrawal rate due to adverse events and then the incidence level on any adverse event that's above 5%, for instance. And on the efficacy side, the primary endpoint in this study is a change over the four weeks of treatment from baseline in the number of heartburn events collected by an electronic diary. We'll definitely report that. We'll have to see what the other secondary endpoint results are to see whether they add additional color to the top line results. We don't want to–first of all, we don't get all, we just get the top line results. And then we disclose if there is additional results to come later. And then we're also cognizant of not stealing the thunder from any potential publications in the future.

Michael Yee – RBC Capital Markets

So while there may be sedation or somnolence above 5%, we may not get exact rates and/or compared to placebo?

Ron Barrett

What I said was any SAEs of incidence above 5% we'll likely report.

Michael Yee – RBC Capital Markets

Okay, thanks.

Operator

Your next question comes from the line of Lucy Lu with Citigroup.

Ron Barrett

Welcome to the team, Lucy.

Lucy Lu – Citigroup

Thanks. I can't wait. Thanks. Just on the Japanese PDN study, I'm just wondering, was the interim analysis conducted only when a portion of the patients were enrolled, or was it done at a time point before the eight weeks (inaudible) treatment duration?

Ron Barrett

No, it was done when about a one-third of the patients had completed eight weeks of treatment. And the target, the initial target was 360 patients. This was an adaptive design in which a decision was going to be made about whether, which dose groups and what the powering requirements would be for the rest of the study. And unfortunately, the data analysis indicated that that was a large number, and Astellas felt that this study was not worth continuing.

Lucy Lu – Citigroup

Okay. And then is there an interim analysis on the Phase 2 Japanese restless leg syndrome as well?

Ron Barrett

There is not.

Lucy Lu – Citigroup

Okay. And then the last one, I was just wondering if you could talk about the Phase 2B design of the migraine prophylactic study?

Ron Barrett

Sure. I think the details are in clinicaltrials.gov, and so you can consult that. But it is a study that is being conducted in the US. It's about 450 patients is the target. There is a five-week flexible titration period followed by a twelve-week maintenance, and the primary endpoint is change from baseline in the number of migraine headache days during the last four weeks of treatment compared to baseline. It is of sufficient duration and uses endpoints that are appropriate for registration if the study is positive.

Lucy Lu – Citigroup

Okay. Thank you.

Ron Barrett

You're welcome.

Operator

Your next question comes from the line of Davis Bu with Goldman Sachs.

Davis Bu – Goldman Sachs

Hi. Thanks for taking the questions.

Ron Barrett

Hi, Davis.

Davis Bu – Goldman Sachs

So the first question, just wanted to see if I can get an update on your tax positions, really how to operate that and the different types of securities and the quality of the securities that you've invested in.

Ron Barrett

That's a very good question these days, so I'll turn that over to Bill.

Bill Harris

Sure. Hi, Davis. Yes, just a general statement. We have been focused on the primary goal of capital preservation in our investment policy, and so we've steered clear of the types of security that today have led to either loss of capital and/or liquidity. So on that front, we stand in good shape. In terms of the breakdown, I can give you a general sense that you're going to see in our 10-Q.

We really don't go much beyond that. But generally, we have about 5% of our portfolios in cash or CDs, about 8% in a money market fund, about 43% are in agencies, and about 44% are in corporate debt, primarily commercial paper and that's A1/P1 grade. So it's all quality investments at this point.

Davis Bu – Goldman Sachs

Okay. So primarily A1/P1s, then.

Bill Harris

Yes, commercial paper. In terms of the corporate debt, there are a few bonds, but A or AA quality.

Davis Bu – Goldman Sachs

Great. Secondly, moving on to the – I don't know if you've said this already, but on the Phase 2 migraine prophylaxis study, do we know what the time, have you disclosed what the time line is on that program?

Ron Barrett

No, GSK has not disclosed the time line. It did initiate in August of this year, and as I mentioned earlier, it's a US study, 450 patients, around 50 sites in the US. And it's five-week flexible dosing and 12-week maintenance dosing. So 17 weeks on treatment.

Davis Bu – Goldman Sachs

Great. And I think most of my other questions actually have been answered. Thanks.

Ron Barrett

Okay. Thank you.

Operator

Your next question comes from the line of Katherine Xu with Credit Suisse.

Ron Barrett

Hello, Katherine.

Katherine Xu – Credit Suisse

Hi. Can you hear me?

Ron Barrett

Yes.

Katherine Xu – Credit Suisse

Okay. So what neuropathic pain drugs are used in Japan? What kind of studies have been conducting, have been conducted there, and how have you compared this Astellas study to those studies?

Ron Barrett

So there are no approved drugs for treating pain associated with painful diabetic neuropathy nor post-hepatic neuralgia. There are drugs that are in the mechanism of L-dose reductase inhibitors, though, that were approved in the '90s for, on the basis of improving certain aspects of peripheral neuropathy. But they were not pain studies per se. So, as I indicated earlier, there's really no comparison to which we can make an assessment of these results versus other drugs in this population.

Katherine Xu – Credit Suisse

So you're saying that a pain score instrument was not really validated or used in Japan at all?

Ron Barrett

In this population, there are no published studies that we are aware of.

Katherine Xu – Credit Suisse

Okay. And with regard to the migraine prophylaxis study, do you think this is for a registrational study, is it going to be against placebo, or is it going to be head-to-head style with toperimate?

Ron Barrett

This study is a placebo-controlled study.

Katherine Xu – Credit Suisse

But for a registrational study going forward, from a regulatory perspective, what is your view on that, or have you or GSK talked to the FDA about it?

Ron Barrett

I can't comment specifically on any interactions on this project, but the FDA has not made a strong movement toward going to comparator studies. They believe there is value in placebo-controlled studies, and that part of the rationale is, is that different patients may respond to different drugs, and so having the drugs available is in the best interest of the population. So we think that for approval, placebo-controlled studies remain appropriate. Not always the case, maybe, but in many cases for the US, and that compared to toperimate, we think that Solzira's safety profile certainly, we would hope, would be an improvement over toperimate.

Katherine Xu – Credit Suisse

All right. Thank you.

Ron Barrett

You're welcome.

Operator

Your next question comes from the line of Gene Mack with Lazard Capital Markets.

Gene Mack – Lazard Capital Markets

Thanks for taking the question.

Ron Barrett

Hi, Gene.

Gene Mack – Lazard Capital Markets

Hi, how are you? It sounds like from your comments that GSK is fairly comfortable chalking up the Japan experience to one that's based on a clinical trial glitch, and you see this all the time with pain trials. But just wondering, first, how long do you think it will take as far as to do their full analysis, and then to what level will GSK–how much data has GSK seen so far, and how much more might they see?

Ron Barrett

So GSK does not see Astellas data, nor vice versa. And with regard to Astellas, they have not disclosed when they will complete an analysis and make any decision about what to do going forward. I mentioned earlier that we have had a chance to talk in broad strokes to GSK about the results of the Astellas trial, and they were not surprised, nor does it impact their plans for neuropathic pain in their territories.

Gene Mack – Lazard Capital Markets

Okay. And then on the migraine, I apologize if you've gone over this already, but can you talk a little, or can you disclose any of the dosing around that trial in terms of when patients, how patients are going to be dosed? Based on symptom, or is just going to be chronic dosing?

Ron Barrett

Since it's a prophylaxis trial, it will be everyday dosing. And it will be looking at reduction in the frequency of migraine attacks. So it will be chronic dosing and it will be every day. GSK has not disclosed the particular doses in that study.

Gene Mack – Lazard Capital Markets

Okay. And then just finally, on 279, in terms of how fast following the results of the Phase 1 trial would you be able to move that forward? And then is this a program that we might expect might wind up on the slower boat if capital markets continue to slip?

Ron Barrett

With regard to how fast, it really depends on what the PK results are from this trial. It was in vitro in animals, from manufacturability, from a kind of tablet image, trade dress image for the product. We really like one or both of these formulations. We'll need to see what the PK looks like, whether we want to take one of these and then move forward aggressively. The next study likely, what we said is we would like to be in Parkinson's Disease patients in 2009.

With regard to slowing things down, we have three indications ongoing for 986, and then we have the 279. We think all of these are value creating for us and our shareholders, and we definitely want to see the results of these ongoing studies before making any decisions. And I would say that we're not in a panic mode here. We have sufficient cash to get us through the next period of time, and we have the potential for partnering as well as milestone payments coming down the line.

Gene Mack – Lazard Capital Markets

Good, good. Thanks a lot.

Ron Barrett

You're welcome.

Operator

(Operator instructions) Your next question comes from the line of Yale Jen with Maxim Group.

Yale Jen – Maxim Group

Hello. Thank you for taking my questions.

Ron Barrett

You're welcome.

Yale Jen – Maxim Group

Most questions have been answered so that I only have two here. The first one is that for the Astellas prior Phase 2 study, is there a time line to anticipate for them to release the data?

Ron Barrett

They've disclosed that the enrollment in the study has been completed. It's a 12-week trial, and there's obviously some follow-up visits that need to be taken into account. But they haven't given any detail on when they expect to release top line results.

Yale Jen – Maxim Group

Or should I say that, what are they, typically will release the data or they not necessarily will do so at this particular point?

Ron Barrett

Right. We'll have to work with them, but as evidenced by today, we released the results of the PDN study in a timely manner.

Yale Jen – Maxim Group

Okay, great. And the second question is that there's the three studies conducted by GSK right now. You indicated that they will be released in '09. Is there any venue we can think of those data will be released in each respective study?

Ron Barrett

No, we have not disclosed that at this point, and we think that these are going to be material to XenoPort, and we would probably announce results through a press release.

Yale Jen – Maxim Group

Okay. Okay, great. Thanks a lot.

Ron Barrett

You're welcome.

Operator

Your final question comes from the line of Greg Wade with Pacific Growth.

Greg Wade – Pacific Growth

Thanks for taking my questions.

Ron Barrett

Hi, Greg.

Greg Wade – Pacific Growth

Hey, Ron. With respect to the migraine prophylaxis study, there's a multitude of potential endpoints in this indication, including days of work missed, duration of migraine, obviously, frequency of migraine. Do you have an opinion, based upon your knowledge of the drug's mechanism of action and the setting, whether the endpoint that's being tested in this study is the one that's most likely to work? If you had a choice, would you have picked something else? And obviously, the FDA's opinion about this probably means the most.

Ron Barrett

I think your last comment is spot on. The endpoint of headache days in the last month has been used in previous studies. We haven't disclosed the secondary endpoints that are being assessed in this study, but several of the ones that you mentioned are being looked at. And so we think that GSK has made a good choice here, and we're looking forward to the results of this study.

Greg Wade – Pacific Growth

Okay, great. And am I correct in this is the first Phase 2 study for any, the first study of any of your drugs that hasn't worked with

the Astellas result?

Ron Barrett

Thank you for reminding me of that, Greg. Yes, you are correct. This is the first study that we've done that has not given the desired outcome. But I will, as I commented on, this was a study that was in a patient population that had never been explored in this type of study. So in retrospect, maybe it's not so surprising. But it will be a learning experience, and this is clinical research, and we have plenty of other things that we're doing that we think will add value to both the Solzira program and the rest of our pipeline.

Greg Wade – Pacific Growth

Thanks for taking my question.

Ron Barrett

You're welcome.

Operator

There are no further questions at this time. Do you have any closing remarks?

Ron Barrett

Yes. I'd like to thank you all for joining us this afternoon. And if you have any further questions, please feel free to call us at 408-616-7220. Again, thank you for participating on the call, and have a great day.

Operator

This concludes today's XenoPort third quarter financial results conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!