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Furiex Pharmaceuticals (NASDAQ:FURX)

Q4 2012 Earnings Call

March 07, 2013 9:00 am ET

Executives

Sailash Patel - Vice President of Strategic Development

June S. Almenoff - President, Chief Medical Officer and Director

Marshall H. Woodworth - Chief Financial Officer, Principal Accounting Officer, Treasurer and Assistant Secretary

Fredric N. Eshelman - Executive Chairman, Vice Chairman of PPD and Chief Executive Officer of PPD

Analysts

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Randall Stanicky - Canaccord Genuity, Research Division

Operator

Good day, ladies and gentlemen, and welcome to Furiex Pharmaceuticals' Fourth Quarter and Full-Year 2012 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce your host, Mr. Sailash Patel, Vice President of Strategic Development.

Sailash Patel

Good morning. Before we begin, I would like to remind everyone that our comments today include forward-looking statements. All statements other than statements of historical facts are forward-looking statements, including any statements concerning research and development and clinical development plans and timelines, regulatory approval timelines, revenue and financing expectations, proposed financing of new or existing projects, proposed licensing or collaborative opportunities or agreements and any statement of assumptions underlying any of the foregoing.

Actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including the Risk Factors described in our Annual Report on Form 10-K and other SEC filings, copies of which are available from our investor desk on our website, www.furiex.com.

I will now turn the call over to our President and Chief Medical Officer, Dr. June Almenoff.

June S. Almenoff

Good morning, and welcome to the call. I will begin with a business update followed by a financial update from Marshall Woodworth and then a wrap-up from our Chairman, Fred Eshelman.

We announced our decision early last year to prioritize the development of our IBS-D candidate, MuDelta. Over the past year, we've executed on a strategy that focuses on value creation that is progressing MuDelta into Phase III while exploring potential partnerships in parallel. We have been able to finance this work mostly with royalties and milestones from our marketed partner portfolio supplemented with limited, non-diluted financing.

Now, before I review the past quarter, I'd like to mention the key accomplishments and highlights of 2012. First, we initiated Phase III dosing of our MuDelta IBS-D program in mid-2012; second, for Priligy in the early part of the year. The product received European Commission endorsement for marketing throughout Europe. Also we forged a commercial partnership for Priligy with a new partner, Menarini, and we received $10 million of regulatory milestones at the time this deal was closed in Q3. Finally, for alogliptin we saw Takeda's EU submission of the Marketing Authorization Application of which we received a $10 million milestone in Q2, and also success with the U.S. NDA just at the turn of 2013, which triggered a $25 million milestone to us.

Also in fiscal year 2012, our revenue from all royalties was $20.5 million, which represents a dramatic increase, more than $16 million or over 350% over fiscal year 2011.

Now looking ahead into 2013, we anticipate completing enrollment of our Phase III studies from MuDelta, and also to receiving milestone payments for Priligy and Nesina, as we continued to explore potential partnerships for MuDelta.

Now, moving to our recent updates on the pipeline and portfolio. I'll start with JNJ-Q2, which now has the USAN adopted generic name of Avarofloxacin. Avarofloxacin is a novel broad spectrum fifth generation fluoroquinolone that we believe is Phase III ready for both skin and pneumonia-related indications, including MRSA. In February 2013, we were notified by FDA that Avarofloxacin has been granted Qualified Infectious Disease Product, or QIDP, and Fast Track designations. These designations should enable Furiex and/or any other future collaborator with respect to the compound to benefit from certain incentives for the development of new antibiotics, including priority review and an additional 5 years of market exclusivity as provided under the GAIN Act, which is incorporated into FDA's Safety and Innovation Act of 2012.

However, as you know, last year, we made a decision to not progress this after the Phase III development without a partner, and that's still our position. We'll continue to seek a collaborator to out-license or divest this asset, but the partnering environment for antibacterial agents remains challenging. So accordingly, we've funded -- budgeted minimal expenditures for Avarofloxacin in 2013.

Next, moving to MuDelta, which has the USAN adopted generic name eluxadoline. As you know, this is a novel oral, locally active mu agonist delta antagonist that's in development for treatment of diarrhea-predominant irritable bowel syndrome, our IBS-D. We believe that the dual activity on both the mu and delta opioid receptors addresses both the diarrheal and pain symptoms of this condition but without the constipating effect and tolerance the one can see with unopposed mu agonist activity.

As you know, in June 2012, we commenced dosing patients in 2 parallel Phase III pivotal trials. These trials are focused on the U.S. endpoints around stool consistency and pain over a 12-week period, but they also do capture European data -- excuse me, data on the European endpoints of pain and global symptoms over 26 weeks, which if positive could support an EU submission. One study runs for 52 weeks, the other for 30 weeks, although we collect efficacy for only 26 to 30 weeks.

Overall, we've got more than 630 active study sites in the U.S., Canada and the U.K. Our target enrollment for the 2 studies is 2,250 patients, and we've recruited over 55% of the patients that we need to complete these pivotal studies. We believe we're still on track for an NDA submission in mid-2014. We continued to evaluate partnering options for eluxadoline, and we'll share additional information if and when appropriate.

Moving now to our marketed partner product. We'll start with alogliptin which is partnered with Takeda. It's a selected DPP-4 inhibitor indicated for type 2 diabetes both as a monotherapy and also in combination with other diabetes treatments. Nesina has been marketed in Japan since 2010 and that franchise continues to grow. Gross sales were up over 100% in the past quarter, ending December 31, 2012, compared with the same period in the prior year.

Three other important updates on Nesina. First, as you've seen we're absolutely -- and as you know we're absolutely thrilled that Nesina, along with 2 combination products, Oseni, a fixed dose combination of Nesina and Actos; and Kazano, a fixed dose combination of Nesina and metformin, were all approved by the FDA on January 25, 2013. Takeda anticipates that they'll launch all 3 products in the U.S. this summer.

Second, the European reg submission for alogliptin remains on track, and we anticipate the EU regulatory decision about this Marketing Authorization Application will occur in the second half of this year. And of course, approvals for alogliptin in Europe would trigger a $10 million milestone for us.

And the third update is that Takeda has been able to accelerate the timelines for completing their cardiovascular outcomes trial known as EXAMINE. Currently, ClinicalTrials.gov now projects a study completion date in December of this year.

Finally, wrapping up with Priligy. Priligy is the first and only approved oral drug for treatment of premature ejaculation. It is currently approved in over 55 countries, x U.S. and marketed in 15 countries in Europe, Asia and Latin America. In May 2012, we entered into a license agreement with Menarini in which they will commercialize Priligy in Europe, most of Asia, Africa, Latin America and the Middle East. The transition of Priligy from Janssen, our former marketing partner, remains on track. A number of marketing authorizations have already transferred to Menarini and they recently relaunched Priligy in several countries. We anticipate that in 2013, Menarini will be able to launch or relaunch Priligy in its key commercial markets. And as such based on the progress of that transition, we believe we should receive $100 million -- $10 million, excuse me, $10 million in potential launch milestones over the next 4 to 6 months.

This concludes the portfolio and business update, and now I'll turn the call over to Mr. Woodworth for the financial update. Thank you.

Marshall H. Woodworth

Thank you, June. With regard to the 3 months ended December 31, 2012, revenues for the quarter were $9.2 million, comprised entirely of royalty revenue from the sale of Nesina, Nesina combination products and Priligy. Royalties were up over $3.6 million from the level recorded in Q3 of 2012 and up over $7.2 million from the level recorded in Q4 of 2011.

The quarter-over-quarter growth in 2012 was driven predominantly by higher Nesina and LIOVEL sales in Japan. Royalties associated with Nesina and LIOVEL sales increased over 70% when compared to the prior quarter, a result of higher product sales and higher tiers of royalty payments based on cumulative fiscal year sales. Our royalty rates for these products reset each April 1, the beginning of Takeda's fiscal year, and increase during the Takeda fiscal year if cumulative fiscal year net sales reach sufficient levels. There was no deduction for IP cost sharing between Furiex and Takeda during the fourth quarter, as Japanese sales are currently unburdened, as previously discussed in our Q3 earnings call.

Regarding Priligy. As previously announced on July 30, we completed a license and asset transfer agreement with Alza end Janssen Pharmaceutica for worldwide Priligy product rights and a license agreement with the Menarini Group for Priligy commercialization. Under the terms of the asset transfer agreement, Furiex is obligated to pay Janssen a total of $15 million for transaction services, with $7.5 million paid in Q3, $3.75 million paid in Q4 and $3.75 million paid in January of 2013. In addition, Furiex will be obligated to pay up to $19 million of potential costs associated with Janssen's ongoing clinical studies for Priligy, up to $1 million for reasonable out-of-pocket expenses over the transition period and fees related to the product sales and distribution activities that Janssen is performing on behalf of Furiex during the marketing license transition period, defined as the period of time it will take to transfer individual country marketing licenses from Janssen to Menarini, pursuant to a sales services agreement.

Under the terms of the license agreement with Menarini, Furiex received a $15 million upfront payment and $10 million of regulatory milestone payments in the third quarter, and is eligible to receive up to $19 million to fund Janssen's ongoing clinical studies for Priligy, up to $10 million in launch-based milestones and up to $40 million in sales-based milestones, plus tiered royalties ranging from the mid-teens to mid-20s in percentage terms.

Payment of the tiered royalties associated with the Menarini license agreement for Priligy will begin on a country-by-country basis following Menarini's launch in each country. The $10 million of regulatory milestone payments received from Menarini in Q3 was recorded as revenue within the consolidated statement of operations.

For additional clarification with regards to, one, the $15 million payment of Janssen for transition services; two, the $15 million upfront payment from Menarini; and three, the up to $19 million to fund potential ongoing clinical study costs for Priligy, including potential payments to Janssen and potential receipts from Menarini, the company is effectively an intermediary between Janssen and Menarini. As such, the company has not recorded amounts associated with the $15 million and up to $19 million payments within the consolidated statement of operations. However, certain portions related to these amounts are reflected within the consolidated balance sheets. As of the end of the fourth quarter the company had recorded within accrued expenses the remaining amounts due to Janssen associated with Priligy transition services of $3.75 million, in addition to recording approximately $1.7 million in both accounts receivable and accrued expenses related to the ongoing Priligy clinical study costs being performed by Janssen that were incurred during the fourth quarter and are effectively being funded by Menarini.

In summary, as of the end of the quarter, there's approximately $1.7 million in accounts receivable that do not relate to royalties due Furiex and approximately $5.45 million in accrued expenses that do not relate to ongoing research and development costs associated with our development pipeline.

Priligy royalties were positively impacted by the transition economics of the various agreements covering this transaction. These transaction economics added incrementally to the royalties that were reported and will only continue during the marketing license transition period of the agreements. After launch of Priligy in a country, Furiex will record tiered royalties based on net product sales by Menarini from the mid-teens to mid-20s in percentage terms.

Our annualized royalty income based on Q4 sales is just under $30 million. This calculation assumes that net sales of Nesina, LIOVEL and Priligy for a full year are at the same level as net sales recorded in Q4, and that the exchange rate remains stable at JPY 90: $1. Of course, we can't control or predict Takeda sales, but if you'd like more information, I would refer you to Takeda's recent quarterly earnings calls and associated sales projections, which can be found at Takeda's website.

Total R&D expenses were $14.6 million for the quarter, including $371,000 in noncash stock compensation expense. R&D spend was below the guidance provided in the Q3 earnings call by approximately $10 million, which reflects a shift in spending from Q4 2012 into subsequent quarters.

Our estimate for total cost of the MuDelta Phase III study remained unchanged. SG&A expenses were $2.5 million for the quarter, including $983,000 in noncash stock compensation expense. The $700,000 decrease from Q3 2012 was primarily a result of lower consulting expenses incurred during the quarter. We expect our level of SG&A, which includes all of our public company costs, to run between $2 million and $2.5 million per quarter on an on-going basis. At the end of the quarter, we had total current assets of $37.8 million and $7.5 million in long-term investments for a total of $45.3 million in cash, investments and accounts receivable. The accounts receivable balance includes a $1.7 million receivable from Menarini related to ongoing Priligy clinical trials.

Current liabilities excluding current portions of long-term debt were $16.8 million. these were comprised of accrued expenses and payables related to the development of MuDelta, as well as $5.5 million related to transition services and ongoing clinical study cost to Janssen, as previously discussed.

I'll now provide limited forward-looking financial guidance. Our forecasted total R&D spending in the absence of a partner for MuDelta for the full year of 2013 is expected to run between $90 million and $100 million, comprised almost entirely of Phase III study costs, manufacturing, non-clinical and Phase I cost related to MuDelta.

Although we have chosen not to provide guidance on revenue due to the variable nature and timing of milestones and royalties, I do want to summarize information previously disclosed in our 10-Qs and 10-K, as well as in various 8-Ks and press releases and on this call.

For Nesina, upon FDA approval for Nesina we're entitled to receive $25 million milestone. This event occurred on the 25th of January when the FDA approved Nesina in 2 combination products. We received the payment of this milestone at the end of February 2013. In addition to the $25 million milestone, we're entitled to receive a further $10 million milestone based on approval in the EU, as well as global sales milestones of up to $33 million. The first of these global sales milestones could occur as early as Q4 of 2013, given the current sales trajectory of Nesina in Japan. In addition to the potential milestone revenue, we are entitled to receive continuing royalties from sales by Takeda in Japan, and when launched, from sales by Takeda in other countries, including the U.S. and Europe. We don't make or endorse other party's estimates. But if you want, you could read the various disclosures by Takeda and a number of analyst projections as far as what sales from Nesina might be. As previously disclosed, our royalty rates in Japan and Europe are 4% to 8% and 7% to 12% [ph] in the U.S.

For Priligy, as I indicated earlier, we're eligible for up to $10 million in launch milestones, up to $40 million in sales-based milestones and tiered royalties ranging from the mid-teens to the mid-20s in percentage terms at the completion of the marketing license transition period.

Based on our current forecast, including the expected receipt of milestone and royalty payments, we expect to have sufficient cash to fund the business for at least the next 12 months. However, if one or more of the milestone events and/or the expected growth in royalty payments fails to come to fruition, or if expenses increase because of slower-than-expected enrollment rates or other factors, we will likely need to find additional sources of financing to support our Phase III efforts in the absence of a partner. We will of course closely monitor our cash balances and might seek to obtain funding from additional sources including, but not limited to, partnering income, royalty financing, debt or equity as we believe necessary and desirable.

This concludes my remarks. And I'll now turn the call over to Dr. Eshelman.

Fredric N. Eshelman

Thank you, Marshall. We are very pleased with how things are going at Furiex and trust that you are as well. The company now has a solid base of a true approved drugs, generating royalties and milestone payments, which will hopefully increase going forward. We have a Phase III compound in an indication that is both prevalent and underserved. We believe that we can continue to self fund the remainder of the NDA program and thus not dilute existing shareholders with an equity offering. At the same time, we are continuing to engage in out-licensing discussions for MuDelta. Our team continues to work hard and produce results. Thank you.

I'll now turn the call back to Dr. Almenoff.

June S. Almenoff

Thank you, Operator we can now open the line for questions and answers.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Brian Lian from SunTrust.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Can you just remind me of any timing around a potential MuDelta publication for the Phase II study?

June S. Almenoff

We are in the process of revising a manuscript with a particular journal. And we are hopeful that this round of revisions will lead to a finalized manuscript. But obviously, we need to wait to hear from the editorial board.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And then on the ongoing Phase III program, there's no DSMB, I understand, but there is an adjudication committee. Can you provide some insights to how they -- how regularly they meet and what sort of a hurdle might trigger announcement if there was an imbalance and any side effects?

June S. Almenoff

Right. So I think what we have said is that the committee would be reviewing adverse events of special interest, and they are reviewing or would review the data only in a blinded fashion, unless the case was unblinded for regulatory reporting. So they're actually not looking at the overall rates in the program. They're simply reviewing potential adverse events of special interests and adjudicating them on a blinded basis.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And that's a regular quarterly review or is it a rolling review?

June S. Almenoff

Yes, the way we've set the system up is that they would review any events of interest on a rolling basis.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And then real quickly, can you just remind me the economics back to JNJ on net sales for MuDelta?

Sailash Patel

Yes. So for the royalty, it's mid-single. And then we have milestones of up to $45 million, royalty milestones, and then we have up $75 million in sales-based milestone.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And then the last question. Marshall, could you maybe help us understand how to think about R&D expenses moving forward? So at the end of 2014, it wouldn't appear that there will be a lot going on, so maybe just some color on how we should think about your out-year expenses or programs?

Marshall H. Woodworth

Yes, Brian. So the numbers through 2013 we just discussed. In 2014 program, the MuDelta program will be ramping down quickly. We will pick up additional cost associated with NDA filing and post-filing cost. But as far as the MuDelta program itself, I think what you're hitting at is that the MuDelta program will be ramping down in the first and second quarter significantly from what we expect to see in 2013.

Operator

And our next question comes from Matthew Kaplan, Ladenburg Thalmann.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Few questions. With respect to just digging a little bit more to the timeline for MuDelta now and with, I guess, more than 55% of the patients enrolled in the Phase III studies. What's your sense in terms of completing enrollment? And I know you said a little about that in the prepared remarks. But more importantly, when do you think we could see a readout in data for the Phase III?

June S. Almenoff

First of all, as the studies get closer to close, we'll be able to provide you a lot more granularity on dates because as you know, our trial recruitment can be somewhat dynamic particularly at this stage. With that said, we believe that both studies should be fully recruited in the second half of 2013. And also be advised that the 2 studies are not exactly recruiting -- they're actually not exactly equal, at greater than 55. So one will likely finish recruiting prior to the other but we will have them both recruited, we're very confident in the second half of the year.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And then in terms of reporting out because one study is longer than the other, in terms of reporting out the data from those studies, how will it work?

June S. Almenoff

Right. So our goal will be to get the 12-week FDA endpoint data out. And we are targeting the first quarter of 2013 -- 2014 excuse me.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And then correspondingly, the European endpoint that would be a few months later or how would that work?

June S. Almenoff

Yes. So for one of the studies, we believe we would have data on the European endpoint relatively early in 2014, and the other would be later on.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

So that could be first quarter as well, then?

June S. Almenoff

Yes, first or second quarter, right.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Okay. Great. Just turning a little bit to the Nasina program. I guess, now with approval in the U.S., can you talk a little bit about the launch here in the U.S.? And I guess will there be a major kickoff at ADA in June of this year for that product that you have?

June S. Almenoff

Good questions. Unfortunately, I'll have to refer you to Takeda for any details on the launch.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

What does Takeda say public in terms of their plans for launch and any new revenue guidance that they have provided for the U.S.? Are you aware of this?

June S. Almenoff

What they'd said is this summer. And that's what they disclosed in their announcement about the approval.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And in terms of -- I know they've said $200 million -- given about $250 million of revenue guidance, roughly the first year in the market in U.S. I think previously. Have they updated that at all?

June S. Almenoff

Yes, I think it's quite early. I think that certainly there are a number of estimates out there from various analysts, so we look forward to seeing how the launch goes this second half of the year and extrapolate from there.

Sailash Patel

Yes, Matt, this is Sailash. Yes, that guidance was a little while back, but they haven't updated it recently.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

They have not, okay. And then just in terms of, just going over the milestones, again, that you expect for 2013. Obviously, you got -- you already got the $25 million from the approval in the U.S., and you expect another $10 million roughly in the third quarter, second half, for EU approval. In terms of the timing of the Priligy milestone and the potential, I guess, sales-based milestones for Nesina, could you help us quantify that, and also give us a little more detail in timing.

Marshall H. Woodworth

So the Priligy milestones, I think June indicated in her response that it was sometime over the next 4 to 6 months, and that's the timeframe we're looking at, so sometime between now and Q3. Then the global sales milestone that I alluded to in my script was related to a high likelihood in Q4 if we continue to see the same sort of ramp as we've seen in the past for Nesina sales in Japan. We've got the and had disclosed the overall milestones, but we've never broken out the overall total of the milestones, but we've never broken out the specific milestones, in terms of what that looks like, Matt.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And in terms of the Priligy, well over the 4 to 6 months, will it be choppy in how that comes out in terms of the milestones or will it be kind of a couple lump sums or how will it?

Marshall H. Woodworth

So that's broken up into 2. There's a 5 and a 5, and those are approval milestones based on obviously, different countries.

June S. Almenoff

No, those are launch milestones.

Marshall H. Woodworth

I'm sorry, launch milestones based on different countries.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Okay, great. And then thank you for the R&D guidance that you provided as well and it seemed like, obviously, the $10 million, you came in a little bit lower than expected for R&D. In terms of 2013, should we see kind of a quick ramp up in those expenses from '14 significantly in the first half of the year? Or how will that -- how will it work out over the year?

Marshall H. Woodworth

Well, I think the best way to think about those and model those, if you will, is roughly to take the total number that I've talked about, $90 million to $100 million, and divide it equally over the 4 quarters. There's going to be variability because many of these payments are tied to discrete milestone events with vendors that are work-related. And so the problem we get into is obviously, some of those events are calendarized in terms of our forecast, very close the quarter ends. So we don't hit those milestones by even a matter of days. Sometimes that expense recognition gets pushed over in the next quarter. And that's a big driver of what we saw in Q4 that we did not hit those milestones, those vendor activity milestones, if you will, at the timelines that we wanted to, and those got pushed over into 2013. So I think for now, and until we have more granularity about how all of those activities are taking place, the best way to think about that spend is fairly uniform over the 4 quarters.

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

Okay, fair enough. And then just one question with respect to, I know it's hard to predict, but in terms of 2014 and the ramp down of the R&D spend, should we expect to see that well of spend remain for the first half of the year and just kind of really ramp down rapidly in the second half or what's your sense now?

Marshall H. Woodworth

The ramp down will take place in the first half of the year, Matt.

Operator

[Operator Instructions] Our next question comes from Randall Stanicky from Canaccord.

Randall Stanicky - Canaccord Genuity, Research Division

Just a couple for Marshall and a couple for June. Marshall, just to clarify, the $30 million run rate on the royalties off of Q4, I mean, that obviously doesn't include a U.S. ramp-up that Takeda launched in this summer and any boost from Priligy that we could see in the back half as that continues to expand, is that correct?

Marshall H. Woodworth

Randall, that is correct. And the other piece to think about is the global sales milestone that I've talked about and the potential of that was based purely on ramp up of sales of Nesina out of Japan. So there would be a positive knock-on effect, both of those activities, both the royalty stream as well as the likelihood of getting that global sales milestone based on a strong launch in the U.S

Matthew L. Kaplan - Ladenburg Thalmann & Co. Inc., Research Division

And my understanding of the $33 million I understand that you can't get into too many details, but that's a global sales milestone that you collectively have, the $33 million. Should we think about this as sort of wherever sales numbers trigger, first that's going to be the source of that payment? I'm just trying to understand, of that $33 million, how much could be driven by Japan versus how much should we be thinking about for the U.S. launch and trajectory?

Marshall H. Woodworth

So the $33 million is based on global sales milestones, as you've indicated. Those are tiered and it's cumulative. So as soon as we hit that cumulative number, which would include all sales both out of Japan and out of the U.S., we will get to that. And those are annual sales numbers.

Randall Stanicky - Canaccord Genuity, Research Division

Okay. No, that's helpful actually. Okay. And a couple for June. Just to be clear on MuDelta, the 2 studies that we have going on right now, would we need to do an additional EU study or are you suggesting that we could file in the EU based off of the current studies that are ongoing right now?

June S. Almenoff

Yes. So we've had scientific advice with the EU. And in response to some of their comments, we've modified the study design so that we actually have separate statistical analyses plans, one for the FDA, one for the European Union, so that the study designs could support -- the same study design with slightly different endpoints could support those kinds of applications.

Randall Stanicky - Canaccord Genuity, Research Division

Well, and then what about timing? We understand a next year NDA submission. How quickly could we see an EU filing from MuDelta?

June S. Almenoff

I think that we just need to keep in mind that our priority is the U.S. NDA. That is what we did the study design around based on our Phase II data, again, focused on the FDA guidance. So that will be our main priority, that's the most significant market to get that out the gate. We should have data for both European endpoints in 2014, but we have really -- did not plan around the submission times. But clearly, my projection would be that based on where we are now, certainly European submission could be done later in the year.

Randall Stanicky - Canaccord Genuity, Research Division

Okay. That's great. Let me...

June S. Almenoff

2014.

Randall Stanicky - Canaccord Genuity, Research Division

2014, correct. Let me just step back. There's been just a lot of specific helpful numbers in the call. But June, as you think about Furiex and the platform and obviously with the discussion with the board and Fred and others, as you think with the next 3, 4 years strategically, is there an appetite to ramp up business developments further or should we be thinking about the platform right now more about MuDelta plus a number of royalty streams? I'm just trying to think about the bigger picture more than a couple of years out.

June S. Almenoff

Yes, well, right now, we are 100% -- 1,000% focused on getting MuDelta through the finish line, and we're really putting all of our force and energy there. Certainly, historically, our model has been to bring in kind of pre-IND assets or Phase I assets. But I think at this time, we'll really need to look at the data, see where we are with partnering and so on before we make further strategic decisions. Fred, would you like to comment further?

Fredric N. Eshelman

Yes, Randall, I think that's exactly right that we are 100% laser focused on, a, getting the MuDelta program completed, getting the NDA and other filings submissions made. We are spending next to no time on business development at the moment: a, because we don't have the resources; and b, we don't have time to do that. So I think in terms of at least near to medium-term valuation, if that's what you're thinking about, the way I look at it is we've got a bucket of approved compounds around the world that will hopefully generate at increasing rates of royalties and milestones. And then we have a separate asset, which is a Phase III compound, as I said, and the indication is both prevalent and underserved. And if we are successful with that compound, we believe we have a significant asset there. But at this point in time, of course, they're very different. One, you could look at as annuities. The other one you have to continue to look at as high-risk but potentially high reward, but also one that is at least at the moment, draining of cash assets. And so that's kind of the way I look at the board as we speak now, and that's kind of the way we would I think approach strategic initiatives certainly within the next 12 months. Very difficult to predict what would happen subsequent to that because it would be more event-driven than plan-driven, I believe.

Marshall H. Woodworth

And Randall, let me just clarify and make sure that for you and for everybody else on the call you understand the global sales milestone because I had referred to it as cumulative and then changed that to annual. It is annual over the year and it is across all countries. So it is a global sales milestone, and it's based on sales, annual sales, as they occur.

Randall Stanicky - Canaccord Genuity, Research Division

So that gets reset in a way then each year?

Marshall H. Woodworth

Yes. So the milestones are only hit once, and they are reset each year, so it's an annual basis.

Randall Stanicky - Canaccord Genuity, Research Division

And is that a fiscal April, Takeda's year or is that on your year?

Marshall H. Woodworth

It's a trailing 12-quarter calculation -- 12-month calculation.

Operator

I'm not showing any further questions at this time. I'll turn the call over to Dr. June Almenoff, President and Chief Medical Officer, for any concluding remarks.

June S. Almenoff

I'd like to thank everyone for joining our call today and for your interest and support for Furiex, and we look forward to speaking on our next quarter conference call. I will now turn the call back to our operator.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect, and have a wonderful day.

Sailash Patel

Thank you.

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