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GTx Inc (NASDAQ:GTXI)

Q4 2008 Earnings Call

February 17, 2009; 09:00 am ET

Executives

Mitchell Steiner - Vice Chairman and Chief Executive Officer

Marc Hanover - President and Chief Operating Officer

Mark Mosteller - Chief Financial Officer

McDavid Stilwell - Director of Corporate Communications

Analysts

Eric Schmidt - Cowen & Company

Howard Liang - Leerink Swann

Joel Sendek - Lazard Capital Markets

Simos Simeonidis - Rodman & Renshaw

Aaron Reames - Wachovia Capital Markets

Operator

Good day, ladies and gentlemen and welcome to the GTx fourth quarter and year-end 2008 conference call. My name is Ann and I’ll be your coordinator for today’s call (Operator Instructions).

I would now like to turn the presentation over to Mr. McDavid Stilwell, Director of Corporate Communications. Please Proceed.

McDavid Stilwell

On behalf of GTx, I’d like to welcome you to our fourth quarter and year-end 2008 conference call. We released our financial results earlier this morning through the newswires. If you do not have a copy of the release, you will find it on our website at www.gtxinc.com. We’ll have a replay of this call available on our website until March 3, 2009.

With me today are Dr. Mitchell Steiner, Vice Chairman and Chief Executive Officer; Marc Hanover, President and Chief Operating Officer, and Mark Mosteller, Chief Financial Officer. Following this introduction, Dr. Steiner will highlight fourth-quarter and full-year 2008 corporate developments and our plans for 2009. Next, Mr. Hanover will briefly review our financial performance. Dr. Steiner will then make some closing remarks before opening the call to questions.

Before we begin, I remind you that information discussed on this call may include forward-looking statements and such statements are subject to the risks and uncertainties we discussed in detail in our reports filed with the Securities and Exchange Commission, including in our quarterly report on Form 10-Q filed November 5, 2008. We expressly disclaim any obligation to release publicly any updates to forward-looking statements made during the call

Now I’ll turn the call over to Dr. Steiner.

Mitchell Steiner

Thank you, McDavid. 2009 will be an exciting and busy year for GTx. There are several major events that we anticipate from our four clinical development programs. As with the toremifene 80 milligrams dose to prevent fractures and treat other estrogen related side effects in men with prostate cancer and androgen deprivation therapy (NYSE:ADT), we submitted the new drug application on December 30, 2008.

By early March we expect to hear from the FDA whether the NDA has been accepted for filing and whether it will have priority or standard review. We expect our European partner, Ibsen to file its marketing application with the EMEA this year.

GTx is planning a late 2009 launch with toremifene 80 milligrams if approved by the FDA. After our clinical study achieve its primary end-point and many of the secondary endpoints early last year, we initiated our pre-launch plan to hire the senior levels of the commercial and medical affairs teams to ensure a successful launch.

Today our key commercial and medical affairs senior management teams are now in place. In fact, the commercial team has conducted extensive marketing research on the toremifene 80 milligram opportunity. This independent research has reaffirmed our confidence that estrogen deficiency side effects of androgen deprivation therapy is a serious unmet medical need and has provided even greater insight into the market opportunity.

The market research shows that urologists are indeed the primary physicians who treat men with hormone sensitive prostate cancer with ADT. In the United States, there are approximately 700,000 men with advanced hormone sensitive prostate cancer on ADT and about 100,000 new patients initiate ADT each year.

In contrast, medical oncologists are the primary physicians who treat men with hormone refractory prostate cancer, sometimes called Castrate-Resistant Prostate Cancer, a population of approximately 40,000 patients on ADT. Therefore, our research suggests that over 90% of prostate cancer patients on ADT are being treated by urologists.

Over the past 10 years, GTx has had the privilege to work with approximately 1000 urologists through our toremifene 80 milligrams and toremifene 20 milligram Phase II and Phase III clinical trials. The awareness of the clinical significance of fracture risk has come far over the last decade among, both physicians and patients. More than 40% of urology key opinion leaders agree that bone fractures in men with advanced prostate cancer are a serious side effect of ADT, which can reduce the patient’s life expectancy by more than three years.

Even though the appreciation for fracture risk in men on ADT is growing, few patients on ADT are being treated for bone loss today because there is currently no FDA approved treatment for this indication. Even today with limited disease awareness education and no product promotion, we were excited to learn from our market research that 31% of urology KOL survey has stated they would likely prescribe a drug with a similar profile as toremifene 80 milligram even in the competitive market.

We have also conducted market research among the nation’s largest payers controlling reimbursement for a large portion of ADT patients and in this market research pairs have indicated that they regard toremifene as a cancer care drug. After obtaining FDA approval for toremifene 80 milligram, we anticipate hiring, 65 sales consultants to commercialize the product.

We are in an opportunistic market environment for hiring talented sales personnel. We are already identifying the strongest potential candidates. Again, while we are preparing for the launch late this year, we will not hire the sales consultants until after we have received a complete response letter from the FDA.

As for our toremifene 20 milligrams Phase III high grade PIN clinical trial, to prevent prostate cancer in high risk men with high grade PIN, we expect to conduct the efficacy analysis this summer. This single large Phase III clinical trial is being conducted under an SPA from the FDA. 1590 men with prostate biopsy confirmed high grade PIN were randomized to receive placebo or toremifene 20 milligrams and are receiving a prostate biopsy years one, two and three.

The exact timing of the efficacy analysis is driven by the number of cancer events in the trial. In addition, we are working with several diagnostic companies to identify high grade PIN patients using a non invasive test. Moreover, we are exploring another important molecular marker called TMPRSS2: ERG, an estrogen regulated oncoprotein that has been shown to be associated with aggressive prostate cancer. To further identify patients that are particular high risk of developing prostate cancer and may benefit from toremifene 20 milligrams.

On the partnering front for rights to toremifene asset, GTx has seen a recent increase in interest as we move towards commercialization. Next I’d like to turn our attention to the SARM program. Our SARM collaboration with Merck is making strong progress on multiple fronts. GTx and Merck are excited by the potential of SARMs to treat sarcopenia, which is defined as the severe muscle loss of aging resulting in increased mortality and morbidity.

Cancer cachexia and other musculoskeletal loss conditions are also being evaluated. GTx is working closely with Merck at the basic research, clinical and commercial levels to develop and commercialize SARMs. We plan to provide more clarity on the GTx/Merck SARM partnership programs as the year progresses. Some details that we can share now are as follows.

There are Phase I clinical trials testing multiple SARMs and a Phase II clinical trial currently evaluating MK-0773 for sarcopenia. The Phase II sarcopenia clinical trial is expected to be completed late this year. GTx announced last October that the Phase II MK-2866 also known as Ostarine cancer cachexia clinical trial met the primary endpoint of lean body mass and a secondary endpoint of performance.

The next steps for developing MK-2866 for cancer cachexia will be determined, following a meeting with the FDA. GTx and Merck are planning to initiate a cancer cachexia clinical trial later this year and we will provide more details soon. The clinical data from the Phase II MK-2866 cancer cachexia clinical trial will be presented at a scientific meeting this year.

GTx and Merck will are evaluating another muscle loss indication for SARM clinical development, and finally our discovery teams are continuing to make further advancements to enrich the pipeline of SARM candidates. In summary, we are pleased with the progress of our collaboration with Merck, and GTx and Merck are very much aligned in our objectives and goals.

The GTx/Merck partnership is leveraging the strengths of both GTx and the Merck SARM programs to maximize the value of these assets, to officially develop drugs so that we can generate near-term revenue. The GTx pipeline continues to supply important new drugs. Within the next several days, GTx will initiate a Phase I clinical trial of our newest product candidate, GTx-758. This product candidate was discovered at GTx. It is an oral LH inhibitor to treat advanced hormone sensitive prostate cancer.

Preclinical data has shown that GTx-758 rapidly lowered testosterone concentrations to castrate levels by feedback inhibition. In addition, GTx-758 may directly inhibit the enzymes responsible for production of androgen by the adrenal glands and even by the prostate cancer itself.

In non-clinical studies GTx-758 has demonstrated the ability to induce medical castration without causing bone loss, hot flashes and adverse lipid changes. We believe that GTx-758 has an oral drug and with the potential to treat and induce castration without certain estrogen deficiency side effects has the potential to replace LHRH agents, both agonists and antagonists, as well as androgen receptor antagonists for the treatment of advanced prostate cancer.

The regulatory and clinical development pathways for GTx-758 are well-defined. The primary endpoint of the clinical trials for androgen deprivation therapy is maintaining castrate levels of testosterone, which is easily measured in the blood. The market for ADT drugs is large. According to IMS data, in 2008 annual sales in the US for drugs for androgen deprivation therapy exceeded $1.7 billion.

GTx is very excited about GTx-758, which we believe has the potential to be the best-in-class ADT drug for men with advanced prostate cancer.

I’d now like to turn the call over to Marc Hanover for a discussion of our financial results.

Marc Hanover

Good morning. We released complete financial results in this morning’s press release. The net loss for the quarter and year ended December 31, 2008 was $13.9 million and $51.8 million respectively compared to $12.8 million and $40.4 million for the same periods in the prior year. Revenue for the quarter and full year was $3 million and $13.5 million respectively compared to $1.9 million and $7.1 million for the same periods in 2007.

Revenue for the fourth quarter of 2008 included, collaboration income of $1.3 million and $1.5 million related to our collaborations with Merck and Ibsen respectively and $242,000 of net sales of Fareston. Revenue for the year ended December 31, 2008 included collaboration income of $5.1 million and $7.3 million from Merck and Ibsen respectively, and $1.1 million of net sales of Fareston.

Research and development expenses for the quarter and full year ended 2008 were $10.6 million and $44.3 million respectively compared to $12 million and $38.5 million for the same periods in 2007. General and administrative expenses for the quarter and year ended December 31, 2008 were $6.3 million and $23.1 million respectively compared to $3.6 million and $13.5 million for the same periods in 2007.

Our balance sheet is strong. At December 31, 2008, GTx had cash and short-term investments of $97.7 million, which includes the first of three $5 million annual payments from Merck related to cost reimbursements for research and development activities under our collaboration agreement.

We have the potential to further strengthen our balance sheet through milestone payments from Merck and Ibsen, as well as through the potential licensing of the toremifene asset. GTx has no debt and no warrants. We are not issuing formal 2009 financial guidance until we have further clarity regarding the toremifene 80 milligram NDA approval and timing of potential launch.

Without including costs associated with the potential launch of toremifene 80 milligrams, we expect our 2009 annual net loss to be consistent with the loss we incurred in 2008.

I’ll now turn the call back to Mitch.

Mitchell Steiner

We have built GTx to be a company with multiple opportunities for success. I’m proud of the GTx team for making this a reality. We have shown that we can discover and synthesize new drugs. We can take these new drugs from Phase I through Phase III clinical trials and we can submit an NDA. We now look forward to toremifene 80 milligram for the prevention of bone fractures in men with prostate cancer and ADT to prove that we can also successfully commercialize products. 2009 will be an exiting year for GTx and I look forward to updating you in our progress. Operator we are now ready to take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Eric Schmidt - Cowen & Company.

Eric Schmidt - Cowen & Company

Good morning thanks for taking my call. Mitch, I think at one point we were expecting Ibsen your European partner to file for approval of toremifene for ADT in early 2009. I know you can’t necessarily speak for them, but what have they’ve told you with regard to the delay?

Mitchell Steiner

What they have told us is that they are planning to file this year and the reason we said sometime this year is because we can’t really talk for our partner. It may be early, it may be late. It is really up to them and we are working very, very closely to give them all the information and we have provided them the entire NDA that we submitted here in the US.

So we are just trying to be safe and we can’t hold their feet to the fire like we can hold our own company’s feet to the fire, but don’t read into there that there is any issue beyond the fact that we are letting our partner do what they need to do to be successful with their filing and to go out with the NDA.

Eric Schmidt - Cowen & Company

Thanks for the clarification. Are we still going to see some more Phase III data in ADT at the ASCO GU meeting later this month?

Mitchell Steiner

I do not think so. I think there will be additional data, but I don’t know if its the ASCO GU, but I do know that for the AUA and for ASCO, there may be additional data related to some of the things that we learned in the placebo group and some of the other observations that we made on the underlying PSA, which as you know depending on the patient population.

If the patient population came in with undetectable PSA, if the PSA remained undetectable, if the PSA was detectable and they were progressing, there were fewer progressers on the toremifene group than the placebo group. That kind of data may show up at ASCO and AUA, but I don’t believe there’s anything that is going to be presented at the ASCO GU.

Eric Schmidt - Cowen & Company

A question on the QT prolongation side of things. Do you know what the integral prolongation is for the marketed dose, the 60 milligram dose? I know you have given us the 80 milligram --.

Mitchell Steiner

When we did the study, we did the 20 milligram, 80 milligram and the 300 milligram and so we didn’t do the 60 specifically. So, I can tell you at least the European EMEA or the EMEA’s view is that the 60 is pretty close to the 80 from a standpoint of [two, two] prolongation.

The more important point is that women are about two times more sensitive to QT prolongation than men are and so in some ways, you can argue that the 60 milligram dose in women is like giving 120 milligram dose in men. So that kind of gives you a sense of why we were excited that the EMEA was basically saying in women in Europe that the clinical benefit outweighs the risk and that the theoretical risk of dosage should be weighed in patients that may be sensitive to QT prolongation.

Eric Schmidt - Cowen & Company

One last question, the study that you might begin with Merck or the study that you intend to begin with Merck on the SARM side in cancer cachexia, could that be a pivotal trial this year?

Mitchell Steiner

The answer is, it could be, but we are being cautious about saying what it exactly is until both parties agree. It really the input of both parties plus the agency and our positioning all along when we did the Phase II cancer wasting trial was to have enough information to move forward into a pivotal and GTx still believes that is the case, but now we are in a partnership.

We have to be respectful, and it’s a process that we go through, but the expectation is that we will be starting another cancer cachexia trial this year and we will do whatever we need to do. Merck is aligned in this regard to move the asset along, to get them to patients that need it and so the importance is getting these drugs to patients. So if all possible, I think that both companies will be aggressive in moving it forward, but we want to be cautious until we have sort of final signoff.

Operator

Your next question comes from Howard Liang - Leerink Swann.

Howard Liang - Leerink Swann

I assume you provided the results of the QTC study to the FDA for Fareston. When do you expect to hear from the FDA on any action on Fareston?

Mitchell Steiner

That is a great question. So approximately seven months ago when we notified the EMEA through [Inaudible] and we notified the FDA, so during that period of time, essentially we’ve been working with the agency. We continue to work with the agency to come up with labeling changes for Fareston 60 in the US.

We expect and again there’s no real clock on this. The safety alert has already been sent out. So what we’re waiting on is just an agreement on language and we have already proposed language and our goal is we hope to hear from the agency between 30 and 60 days about what the actual labeling language will be for Fareston 60.

We do believe that this will be sort of a window into what the agency is thinking about toremifene in general, but it will probably be about 30 to 60 more days before we hear anything more definitive.

Howard Liang - Leerink Swann

So what you would expect will be label language change?

Mitchell Steiner

That’s our company’s expectation and that is what we expected to happen in Europe and it did and our expectation is that in the US, but again the agency has to make their decision and all we can do is provide them with the data and it comes back to where do we go from here?

Howard Liang - Leerink Swann

You have mentioned that there is more partner interest in toremifene. Is that in for a PIN or for ADT or both?

Mitchell Steiner

I am glad you asked the question Howard. The QT finding, which is a theoretical risk, is understood in the pharma world mainly because there are many drugs out there as you know that prolong QT that are not associated with [TUCSON] and there are many drugs out there in the market today, that prolong QT and are slightly associated with TUCSON and it is all about clinical risk and benefit.

We have got several inbound inquiries and discussions recently. This is post-announcement of QT and even discussions that we were in during the QT announcement have not changed. So I do believe that we’ve gotten the increasing interest from folks outside the US and even some discussions inside the US and so from our point of view, the focus is on the fact that we do reduce fractures by 54% in this patient population, the fact that the real risk is VTEs, which is about 1.2% to 1.4% above placebo and theoretical listing of QT in a cancer population has to be put into focus.

With that said, yes there has been increased interest mainly because we filed the NDA, and because with the public data out there and with the known data out there, people are interested in late assets and there are very few late assets. I think also what is happening, because of the market being competitive that people are recognizing that this may be a real market.

We did not get much credit for this 10 years ago when we started thinking about going into the space of cancer treatment induced bone loss and now all of a sudden it’s taken on its own term and there are many people trying to get into this space with Novartis blazing the trails with skeletal related events, and now a large competitor plus ourselves being in this space, and we think that a profile of our drug is going to be very favorable compared to what is out there because it is not a bone drug only.

So we’ve done our market research, and we feel pretty good that we kept coming in a completely different way that is setting us apart from either an osteoporosis drug or a bone drug only, and that has played well. I was at a recent meeting in Vail, Colorado; it was a scientific meeting where they had a panel discussion on toremifene versus the other drugs in the marketplace.

They have this real time where you pushed the button, and they actually can survey the audience and there is no question that an oral drug and the drug that treats multiple side effects of androgen deprivation therapy is what the urologists are looking for.

Howard Liang - Leerink Swann

Are you open to sharing the US rights with the partner?

Mitchell Steiner

Looking at all options on the table, I think as a prudent business approach there may be reasons why we want to get as much penetration as possible early, especially in a competitive market. With that said, it is not a big sales force, you are talking about 65, and we have already put in all the senior management that come from the -- of big pharma that have done this before and have launched in the urology space and that, coupled with independent market research.

We’re feeling pretty good and confident that this, as I said in my call when we did our conference call, we believe we can sell this drug. We believe that the numbers that we have talked about before are achievable.

Operator

Your next question comes from Joel Sendek - Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets

A couple of follow-ups. First of all on your filing, are that tied or the acceptance and the status of that filing tied to the Fareston label revision or should we think of those two things as distinct?

Mitchell Steiner

Yes, think of them as completely separate because Fareston 60 milligrams are already on the market and that’s just a completely separate deal, a different patient population, a different dose. So the NDA stands on its own and it’s independent of Fareston.

Now with that said, the Fareston label contains all of the information about Fareston, which the molecule is toremifene 60 milligrams. So there is going to be a lot of similarities in the labels mainly because it is the same chemical entity, but with that said they do stand separate and that the FDAs evaluation of our NDA for the indication of treating fractures or preventing fractures in men on ADT is a separate indication that is viewed as a separate filing. Everything that happens with that is independent and separate. So I hope that answers that question.

Joel Sendek - Lazard Capital Markets

Yes, it does. Follow on to that is, a lot of people are trying to figure out some of the more fine details of the QT prolongation study. For example, the percentage of patients over 38 milliseconds and things like that. Will that come out on the revised label either in the EU or in Fareston, and if not when might we be able to see that data?

Mitchell Steiner

Yes, it is a great question. Let me see if I can answer it. Every QTC, there are data that are in common and there are some data that are different. So some of the data that people may be looking for may not exist only because a thorough QT study was done to today’s standards and it couldn’t be more recent than how we did it.

With that said, probably a better way to look at it is that; one is QT prolongation, we know the drug prolongs QT, not a surprise. What is more important is it doesn’t cause TUCSON, but the metric that you need to look at after you correct a QT, is really how many patients went outside of 500 milliseconds QT, and in other words, what are the outliers?

As I mentioned in my conference call, they were 0% at 20 milligrams, and they were 0% at 80 milligrams and there were about 8% at the 300 milligrams. With that said, that gives you a sense of how many patients would be greater than 30, because that gives you sort of the feel for where the competence interval may be.

The shorter answer is that the actual details will appear in a table both for the EMEA filing for Fareston 60 and also in the US when we agree upon language with the FDA for 60, and certainly it will be in the label for the 80 milligram dose if it is approved.

Joel Sendek - Lazard Capital Markets

Okay, great and then my final question is in a worst-case scenario, let’s say you get an approvable letter or something like that on ADT. What are your financial contingency plans? because you don’t have guidance right now or you are just effectively guiding to the same as last year. Maybe we can go both directions, what are the best case and the worst case for your financial outlook for 2009, if you can help us with that?

Mitchell Steiner

Yes, the base case is that we are not spending any money right now except what we said in our call for the pre-launch and launch activities. Even with the pre-launch and launch activities, even though we cannot give guidance on what launch costs will be until we launch, what we basically said it will be similar to 2008. So with that said, that does not take into consideration milestones that can be paid for trials that will begin with our relationship with Merck.

So we have mentioned in the past that GTx can be paid milestones based on certain trials that start this year. Then in addition, it does not take into consideration the milestones that Ibsen would pay to GTx as well. Finally, it does not take into consideration any of the licensing deals that we’re entertaining now that can also put un-dilutive cash into our balance sheet.

In the best case scenario is that the SARM program continues to progress nicely as it is, and just those milestones alone could easily add significant dollars to our balance sheet that will allow us to continue in the event that there is a delay on the ADT approval. We have got PIN right behind it, and so we’re looking for a summer release of data on PIN.

Certainly we are looking at the data because it is event-driven. So once we get the data and shortly thereafter we will announce that and so we’re kind of moving ahead. That is the best-case scenario.

The worst case scenario is we don’t see milestones from Ibsen, we don’t see milestones from Merck. We are seeing it $97 million now and we think we gave the comment that we are only going to spend about the same kind of money that we spent last year, which means we’ll be okay for that period of time.

Joel Sendek - Lazard Capital Markets

My last question is. Can you tell us how you defined summer? Some people look --

Mitchell Steiner

First of all, let me tell you why I say it that way. It is because we have been burned before with cancer events. So as cancer events are not like okay, February 15 we are going to pull the trigger and it be done. Cancer events happen when patients get biopsied and once they get biopsied a certain number of patients will have cancer and a certain number of cancers will get you to that number that we’re trying to get.

So summer can be anytime between July and August, but what we hope will happen is, we will know as we get closer. So as you know from our company, as we get closer to a milestone the then we begin to sharpen what that guidance will be.

Right now looking into the future, it does look like we are going to be able to announce something in the summer. Will it be sooner? It may be. Will it be later? Possibly, but I think summer is our best projection at this point.

Operator

(Operator Instructions) Your next question is form Simos Simeonidis - Rodman & Renshaw.

Simos Simeonidis - Rodman & Renshaw

Thanks for taking my question. Mitch correct me if I’m wrong, but I think you said earlier that post the announcement of the QTC prolongation data, the partnership interest at least remained the same or maybe you said increased, I’m not sure if I heard you correctly.

Mitchell Steiner

I said the same for the ones that we are in discussions and increased in the sense that additional parties have come to the table.

Simos Simeonidis - Rodman & Renshaw

So is it a fair assumption that these parties you are talking to have had the ability to look at the full data under a CDA?

Mitchell Steiner

Yes, depending on the region the answer is yes, because we are in different points in our discussions with different entities, but the answer is this data is out there in the CDA and they have reviewed it and the answer is yes.

Simos Simeonidis - Rodman & Renshaw

Okay. So I guess the question that I’m getting to is. Would you consider releasing the full data in a meeting or in a press release and the reason being to alleviate some of the concerns --?

Mitchell Steiner

You are asking us to put out regulatory information before the FDA has a chance to determine what they want in the label and what they don’t want in the label. So our feeling is that the label we have done is public as public can be and there will be a table in the label for Fareston 60 milligrams that will lay out the information that is important for patients and for their physicians that prescribe the drug.

So that is probably the best way to look. We want to make sure that everything our company does, we do it in concert with what the FDA wants us to make sure that patients know. So with that said, you could look for the following stages of information. One, the label for Fareston 60 milligrams in Europe has been agreed upon and all the QT information related to that should be in that label.

Two, the label when agreed upon in the US with the FDA will then also reflect the QT data, and then that will give you sort of a window of what the QT data is.

As I said before, QT prolongation occurs. There has never been a case of TUCSON associated with the drug. So the actual versus theoretical risk is what we are defining. So if you look at other labels of other drugs in this class like tamoxifen, they never did a formal QT study, but QT prolongation is in their label and women have been on that drug for as long as toremifene --.

Operator

Your next question is from Aaron Reames - Wachovia Capital Markets.

Aaron Reames - Wachovia Capital Markets

Thanks for taking my question. I just had a follow-up question on cancer cachexia indication. I was wondering what additional questions you would be looking to answer if you ran a non-pivotal trial for that particular indication with Ostarine?

Mitchell Steiner

That is a great question. So the question basically is what the hesitation of moving into a pivotal? The answer is I think the Phase II cancer cachexia trial that we performed was done with the understanding that we wanted to answer as many questions as we could.

So, for example we picked a heterogeneous group of cancer patients and the question is, should we have picked a more homogeneous group of cancer patients and would that give us more useful information? Well, it turns out the heterogeneous group did just fine, but with that said, we’d like to do even better with the homogeneous group. So that question was sort of answered by looking at that data.

The next question is what kind of performance measurement should we use and the third question is what kind of quality of life measurement should be measured? We learned a lot of things about patient dropouts and effect size that the whole purpose of that Phase II was to prepare for potentially a pivotal trial.

The big question right now is understands from a regulatory standpoint what the next step should be and when we talked to the FDA, we being GTx. Initially they had told us that we wanted to see lean body mass increase and that has to be coupled with performance, and that is what we achieved in the Phase II.

So right now both parties GTx and Merck are exploring what would be the next questions that we would consider in the next trial and whether or not that the Phase II that was just done could that be a basis for using the same question, so that the next trial ends up being a confirmatory trial and that’s kind of how we’re leaning.

I mean you’ve already hit on lean body mass nicely, we have already hit on performance nicely and just to put it into perspective we also hit on the same two parameters when we did the Phase II in December 2006 in otherwise postmenopausal women and elderly men. So now we have two Phase II trials.

If you add both patient populations, roughly almost 300 patients will be able to show an increase in lean body mass, increase in performance. So we have a lot of data behind us. We are just trying to be smart because we are going to continue to advance this towards an approval. We now need to engage and make sure we are answering the questions that are going to be required of us as we move towards the market.

Operator

Your next question is from Howard Liang - Leerink Swann.

Howard Liang - Leerink Swann

Thanks very much for taking the follow-up. I asked the question regarding GTx-758. Can you talk about how you envision this product to be positioned eventually on the market? Is it to compete with Lupron, if so how would you develop for that?

Mitchell Steiner

Howard, thank you for the question. We are very excited about 758 and the reason we are excited about it is because being involved as urologists in this business both as a professional and now involved with company research. Testosterone reduction is the main stay treatment for prostate cancer and Lupron has been around now for 20 years, going on 25 years maybe a little longer and what we’ve learned is that when you decrease testosterone, you decrease estrogen and the side effects of estrogen are a problem.

The second thing that has happened and not only a problem, but a life threatening problems including fractures that kill, hot flashes, gynecomastia which are bothersome and then finally lipid changes that may be related to cardiovascular death.

So those are serious issues that occur with estrogen. With that said, the other issue that’s happening in prostate cancer, advanced prostate cancer is that with Lupron as an injectable and all of the LHRH agonists and antagonists as indictable, are falling out a favor from a standpoint of reimbursement and holding inventory in the urologist office.

Unlike the medical oncologists that has pharmacies set up and they actually do a very good job at dispensing drugs and giving drugs in the office, urologists now that Lupron is not the same as it was in the past are looking for ways to either use less Lupron, move towards [Inaudible] or there was another drug that could be given orally as a prescription that had a profile better than Lupron, that would be great.

Our position is with 758 is to show proof of concept at the end of this year in a MAD trial and then use those data next year as we meet with the FDA to basically do head-to-head studies against Lupron, that we maintain testosterone castration similarly to Lupron, but without the estrogen-related side effects and by doing that head-to-head, it will allow us to definitively discuss what our drug does compared to Lupron. Since Lupron and other hormone therapies is a $1.7 billon market in the US by IMS data and some people would say it is as much $3 billon worldwide.

With a defined regulatory path and with a defined market and going head to head with Lupron this is a real opportunity for us to take advantage of positioning this drug as an oral LH inhibitor without hot flashes, bone loss, adverse lipid changes and if the data supports that then this drug could be a best-in-class drug.

Operator

Your final question is from Simos Simeonidis - Rodman & Renshaw.

Simos Simeonidis - Rodman & Renshaw

Just a quick follow-up. Assuming a really good scenario where you get approved for both the 20 and 80 milligram. Would the same sales force be selling both products?

Mitchell Steiner

Yes, it is a great question and our market research has shown there are 700,000 patients on ADT hormone-sensitive disease versus 40,000 patients on ADT with hormone refractory disease that our most efficient and maximal use, optimal use of our sales force is the focus on the urologist.

So consequently the sales force that we create will primarily focus on the urologist. The reason that’s important is because the 20 milligram dose, which is the prevention of prostate cancer in men at high risk, men that have a pre-malignant lesion of the prostate called high-grade PIN, those pre-malignant lesions are found by the urologist.

So, the patient that wants to come in with a high risk lesion to be treated will be treated by the urologist, and the patients that we are focusing on which have hormone sensitive prostate events, prostate cancer on ADT will be the urologist. So yes, the urologist is going to be the primary physician of focus and the sales force that we build will be strategically focused on urologists.

Simos Simeonidis - Rodman & Renshaw

It will be about the same size? You’re not going to --

Mitchell Steiner

We’re not going to make a separate sales force. We will use the same sales force to sell both drugs.

Simos Simeonidis - Rodman & Renshaw

No, what I meant to ask was assuming 80 milligram approval comes first, you are not going to have more than 65 people for the second indication --?

Mitchell Steiner

What we said in the conference call today was 65 sales consultants and that same 65 sales consultants can sell a second product.

Simos Simeonidis - Rodman & Renshaw

Is that a CSO, are you hiring these people as part of the GTx employees?

Mitchell Steiner

So the concept would be after we hear our complete response on ADT, that we would hire 65 sales consultants that are 100% GTx employees, and they would have the ADT 80 milligram to sell first, establish the relationships with the urologist in front of the high grade PIN opportunity and then when the high grade PIN opportunity follows approximately a year later, they will be ready with their established relationships to now have a second product to offer to urologists.

Operator

There are no further questions at this time. I will now turn the conference over to Dr. Steiner for closing remarks.

Mitchell Steiner

We would like to thank you all for your interest in GTx and I look forward to sharing our progress in the future.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.

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Source: GTx Inc Q4 2008 Earnings Call Transcript
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