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Executives

Will Roberts - VP of Corporate Communications

Vincent Milano - President and CEO

Colin Broom - VP and CSO

Charlie Rowland - VP and CFO

Dan Soland - VP, COO, and CCO

Bob Pietrusko - VP, Global Regulatory Affairs and Quality

Rich Morris - Controller and CAO

Tom Doyle - VP, Strategic Initiatives

Bob Doody - Manager

Analysts

John Newman - Oppenheimer

Joel Sendek - Lazard Capital Markets

Scott Hirsch - Credit Suisse

Liisa Bayko - JMP Securities

Stephen Willey - Thomas Weisel

Philip Nadeau - Cowen & Company

Thomas Wei - Piper Jaffray

Yale Jen - Maxim Group

Jason Kolbert - ThinkEquity

ViroPharma Incorporated (VPHM) Q1 2009 Earnings Call April 29, 2009 9:00 AM ET

Operator

Welcome to the ViroPharma Teleconference Call. (Operator Instructions).

And I will now turn the call over to your host, Mr. Will Robert.

Will Robert

Good morning and welcome to ViroPharma’s conference call and webcast to discuss ViroPharma’s first quarter 2009 financial results and other business matters. This call is scheduled for approximately one hour.

Certain statements regarding the progress of our commercial launch of Cinryze; the timing outcome of the FDA review of our BLA related to the acute treatment of HAE; Future demand for Vancocin; the timing of any FDA actions related to the potential approval of generic versions of Vancocin; the timing of clinical studies and all elements of our 2009 guidance made during this conference are forward-looking statements.

As you know, forward-looking statements involve substantial risks and uncertainties and the actual results may differ materially from those projected in such forward-looking statements.

The development, marketing, and sale of pharmaceutical products are subject to risks and uncertainties. And as a result, our actual results could differ materially from those results expressed in/or implied by this conference call.

Please refer to the press release issued this morning and to our SEC filings with SEC, for more information regarding the risks and uncertainties that could cause future results to differ materially from the expectations expressed in this conference call.

As you no doubt are aware the Financial Accounting Standard Board accounting pronouncement are important, in that they allowed direct comparisons of financials between companies. However, as you have seen from other reporting companies, the compact nature of accounting entities pronouncement that they are making more physical for external parties to access the company’s actual operations.

So our goal in this call is to provide you not only our GAAP results, but also to provide the information in the manner that reflects the reality of our business, and the business is strong.

In this call, we will discuss the non-GAAP measures when talking about our company's performance. And you can find the reconciliation of these measures to GAAP measures in our press release issued this morning.

With that, I’ll turn the call over to Vincent Milano, ViroPharma’s President and Chief Executive Officer. Vince?

Vincent Milano

Thanks Will. Good morning to everyone listening to ViroPharma’s conference call this morning. With me on the call this morning, in addition to Will, are Bob Doody, also of Corporate Communications; Rich Morris, our Chief Accounting Officer, and my management teammates, Colin Broom, Tom Doyle, Bob Pietrusko, Charlie Rowland, and Dan Soland.

As we will share with you today, the first quarter of our Cinryze launch has been a very successful one. This call represents the first look into new our chapter, the Cinryze chapter. We have exceeded our own expectation with regards to doses delivered and consequently revenue.

We are focused on execution to build on our early launch success and look forward to sharing with you the progress on our continuing momentum in bringing this life restoring therapy to HAE patients. And we want to make sure that we are providing you with the information that you need to evaluate the progress of our business going forward.

We reported for the first time an adjusted net income, which reflects our GAAP result, adjusted for non-cash items and discrete non-recurring items.

We chose this quarter to start providing this information primarily because of the amortization related to our acquisitions and the non-cash expense related to the change in accounting for our converts. The complexities of the goodwill write-off only increased the need to provide a more meaningful measurement that reflects how management views the operation.

I'll provide an overview of our results for the quarter and discuss the performance of Cinryze and Vancocin. Charlie, will then take us through the details for the quarter and walk through the various accounting that is affecting our P&L and balance sheet. And then I will return for some closing remarks.

The first quarter operating results were strong for ViroPharma. Overall, we had net sales of approximately $60 million, our best first quarter revenue performance ever.

First, regarding Cinryze, the launch of the drug has exceeded not only your, but even our expectation. Cinryze net sales were $6.7 million during the first quarter of 2009. In addition, we have $1.8 million in deferred Cinryze revenue on our balance sheet at March 31st.

Importantly, reimbursement is going very well. We currently have 116 plans reimbursing Cinryze for prophylactic usage, including large national plans, strategic regional plan and high control staff models.

In addition ViroPharma has completed the CMS Rebate Agreement and is had various state Medicaid programs pay for Cinryze, in addition to Medicare Part B and Part D plan. In general, we are seeing a high degree of acceptance by the payer community, which is consistent with our pre-launch plan and expectation.

Regarding potential label expansion from the drug, recall that in February of this year, the FDA granting priority review for Cinryze as treatment for acute attacks of HAE. Our PDUFA date for the supplemental BLA is June 3rd just five weeks from today.

This is also been an exceptionally energetic time for our marketing public affairs and medical affairs teams, as they are launching the drug and working to raise awareness of HAE among physicians, patients and plan.

For example in March, we attended the American Academy of Allergy, Asthma and Immunology or “quad-A-I” (AAAAI), annual meeting in Washington DC, where we featured Cinryze and launched our medical affairs teams, HAE Education Exhibit to the 7,400 attending healthcare professionals.

Moving to Vancocin, net sales were $54 million for the quarter representing the strongest first quarter of revenue since we acquired the product and up from $51 million in the first quarter of 2008.

While we are pleased with the work we are doing in the area of C. difficile and believe Vancocin is being used more often in severe cases of CDI and in the retail settings, it appears clear that the overall incidence of diseases curtailing, thanks in part to improved surveillance and containment work by institutions that has experienced outbreaks of this disease.

Among the predictors of incidence, we track our ways of hospitalizations due to influenza like illness and [cumulative] influenza hospitalization

Flu is one of the leading drivers of hospitalization among the elderly, which leads to antibiotic usage and exposure to healthcare associated issues such as CDI. Excluding any possible impact of the recent influenza outbreak, we have seen decreased rates of flu-related hospitalization impacting CDI disease rate.

While, we are maintaining our Vancocin net sale guidance range, we believe at this point that we will likely be toward the low end of the range. However, we will continue to track these changes in the rates of CDI to evaluate its impact on future Vancocin sale.

With regards to our cost and expenses for the 2009 first quarter, I want to point out that there were approximately $12 million of maribavir related expenses. On our last call we indicated that included in our 2009 annual expense guidance was $25 million related to maribavir. Through further diligence we have reduced the expected total by 16% and have approximately $9 million less of expected expense for the remainder of 2009.

The balance of our combined SG&A and R&D expenses of approximately $32 million are directly related to the ongoing business activities that we expect will drive growth Cinryze, Vancocin and non-toxigenic C. difficile.

Also, during the first quarter we took advantage even opportunity to decrease our debt. Specifically, the $21 million or 47% at par we were able to reduce our debt by $45 million. This debt repurchase also increased our net cash position and reduced our fully diluted share count by approximately 2.4 million shares.

We may from time-to-time consider taking advantage of favorable market conditions to further improve our capital structure. However, of course, we will balance these opportunities against investment that help to grow our business.

We are optimistic about the prospects with Cinryze following an excellent first quarter and continue to meet the needs of severe CDI patients with Vancocin. Notwithstanding the financial statement impact of some of the complicated accounting events that Charlie will discuss in a moment and the wind down of a maribavir activities, the first quarter represents a good start for our new future; a future that will be led by the growth of Cinryze.

I'll turn the call over now to Charlie for a review of our financial results and a discussion of the accounting pronouncements that impacted our first quarter, including the new method of accounting for convertible debts and our bond buying buybacks and the write-off of our goodwill. Charlie?

Charlie Rowland

Thanks, Vin. Good morning everyone. As Vin mentioned, we will provide adjusted net income results for the first time. I will describe our results on a GAAP and adjusted basis. With the more complex pronouncements affecting the quarter, I'll go through them in detail. And I would be happy address any questions later on the call for over the next few days.

Until we acquired Lev Pharmaceuticals in the fourth quarter of last year, we only had two material non-cash items, stock compensation expense and amortization, both of which we disclosed.

With the acquisition of Lev and its related purchase accounting and the change in accounting for our convertible debts, we are attempting to improve comparability of both past periods and future periods, as well as provide a measure of results that is more consistent with how we manage the business by adjusting for non-recurring and non-cash items. As a result, our adjusted net income for the first quarter of 2009 is $11.5 million compared to $22 million for the same quarter of 2008.

I will walk through the P&L and highlight the items that represent the differences between adjusted net income and GAAP net income. This detail is included in our financial release from this morning in the reconciliation of GAAP net income to adjusted net income table.

Let's begin with our record first quarter net product sales is $60.2 million an increase of 18% over the same period in 2008. Cinryze had a successful first quarter with $6.7 million in net sales, resulting from 2,151 doses shipped to patients during the quarter and we had $1.8 million in deferred revenue, which represents the inventory at our specialty pharmacies and distributors.

As we said on our yearend call, we will continue to recognize revenue only upon shipment to patients and/or physicians, until we meet the requirements of revenue recognition in SAB 104 and can determine the commercial success of the product and reasonably predict the payer mix.

This will enable us to estimate the net realizable price. At this point, we expect that we will meet the requirements of revenue recognition during either the second or third quarter of this year.

Vancomycin contributed $53.5 million in net sales, up from $51 million in the first quarter of 2008. This net sales growth was due to our January price increase, offset by a 3% decrease in volume year-over-year.

Inventory levels at the top three wholesalers remain well within normal levels, dropping slightly from yearend. Our combined R&D and SG&A expenses were $44 million for the first quarter and included $12 million of spend on maribavir.

We have excluded $4.3 million related to stock-based compensation expense in our adjusted net income. Our 2008, selling, general and administrative expenses grew to approximately $24 million in the first quarter of 2009, compared to $13 million in the same quarter of 2008.

This growth in SG&A was driven by the commercial launch of Cinryze, including cost associated with the Cinryze field force and medical affairs activities. We incurred approximately $2.50 million maribavir related expenses during the first quarter of 2009.

Regarding our R&D expenses, during the first quarter of 2009 our investments into our clinical pipeline grew to $20 million compared to $15 million in the first quarter of 2008. Approximately $9.50 million of the $20 million were costs specifically associated with maribavir. As a reminder during the first quarter of 2009 we incurred cost related to the recently completed Cinryze open-label studies.

Amortization for the quarter was $7.3 million versus $1.7 million in the first quarter of 2008. this increase was driven by the amortization of Cinryze intangibles of [$521 million]. As this is a non-cash item, we exclude this from our adjusted net income results.

Our interest expense was $3.3 million for the quarter compared to $3.1 million in the same quarter of last year. These amounts include $2.1 million and $1.9 million respectively of non-cash interest expense, which is excluded in our adjusted net income results.

Our other interest expense line now reflect the adoption of FSP APB 14-1, which stipulates the allocation of our convertible debt instrument into debt and equity components using the market rate of a similar bond without the conversion feature. So our interest expense now reflects this 8% market rate. All prior period's interest expense have been retrospectively adjusted to include this additional non-cash interest. Our financial release includes the amounts for each of the restated or recasted quarters that are affected. The total non-cash interest amount for 2008 is $7.9 million.

In addition, 40.1 impacted to gain associated with the first quarter debt buyback of $45 million at face value that Vin mentioned earlier. The allocation of convertible debt into debt and equity components was determined based upon the fair value of debt at the time of repurchase, resulting in a buyback of approximately $29 million of our bonds per book purposes. The balance is $16 million was treated as a reduction of debt discount and has no P&L affect.

The approximate $9 million booking associated with the buyback is reported in our other income and expense on the P&L. We have added back this booking in our adjusted net income results.

Next, for FSP 14-1 we restated our financial statements from the time we issued the bonds onward. Our [business] accounting change was in place at the time the bonds were originally issued. This includes our 2008 deferred tax asset, established under Lev acquisition.

As a result of applying 14-1 we had to update the original purchase accounting for the Lev transaction and release less valuation allowance ultimately creating more goodwill, bringing our goodwill balance as of year end 2008 up to $65 million from $30 million.

Now, keeping goodwill in mind, as we mentioned on our full year call, our market cap during the quarter fell below our fair value, triggered by the announcement of our maribavir data.

This triggering even required us to perform an FASB 142 impairment test on all of our assets, none of which were otherwise impaired, resulting in a write-off of the $65 million in goodwill that I had just discussed.

For adjusted net income we have added back this non-cash write-off of goodwill. Our GAAP financial results were significantly affected by this non-recurring, non-cash charge which flow through our P&L on our operating expense line.

Our reported GAAP net loss of $59 million were $0.77 per basic and diluted share for the first quarter of 2009, was primarily the result of this goodwill write-off.

So to summarize, the adjusted net income for the first quarter of 2009 compared to GAAP results. We had a GAAP loss of $59 million for the quarter. Our adjusted net income number which excluded non-recurring and non-cash items was $11.5 million of income of the first quarter of 2009 compared to $22 million of income in the first quarter of 2008, or $0.40 versus $0.27 fully diluted earnings per share respectively. This decrease in adjusted net income is primarily related to the launch of Cinryze.

Next our balance sheet; we ended the quarter in a strong financial position with $301 million in working capital, including $245 million in cash and cash equivalents. We had a net cash outflow for operations of $9 million, the largest drivers were the increase in expenses to support the launch of Cinryze that I just discussed; credit terms for Cinryze and a reduction in our accounts payable and accrued expenses.

For FSP 14-1, we have to go back and restate our financial statements from the time we issued our bonds onward. Our business accounting treatment was in place at the time we issued the bonds and this includes our 2008 deferred tax assets, which we adjusted by $96 million to $24 million. Also the face value of the $250 million of bonds was reduced to $161 million and the remainder was reflected in additional paid in capital.

Regarding forward guidance, as you can see in our press release issued this morning, our full-year guidance for 2009 is unchanged, from when it was first issued on February 24th, 2009. So, despite some very challenging accounting pronouncements, the quarter is marked by strong revenues with additional opportunities for growth and a strong balance sheet, which positions us to remain acquisitive and build for the future.

And with that I will turn the call back over to Vince.

Vincent Milano

Thanks, Charlie. As you can see, we want to provide information to you that reflects the reality of how we manage and how you likely view our business. For example, while the change in how we account for our debt and the write-off of goodwill, I think we have to do, the substance of our business remains unchanged by either.

Our debt carries only a few percent coupon and does not mature until 2017 and the write-off of the goodwill is a non-cash item. The substance of our business is that, we are positioned to deliver strong growth through continued success of our product.

The Cinryze launch is going well thus far, with great momentum and strong interest in Cinryze solutions, our product support program and excellent coverage by a 116 payers thus far.

Vancomycin too had its strongest first quarter of revenues in its history, and during the quarter we also continued our effort fighting for patient safety by submitting significant data, questions and comments to the Office of Generic Drugs, proposed bio promos guidance for a generic Vancomycin.

We continue to believe, the FDA wants to do the right thing and we remain vigilant in our fight for patient safety. We are also in a very strong financial position with $245 million of cash. We remain well capitalized to weather the current macroeconomic crisis and continue to build the company by prudent clinical development and through additional business development.

We also remain hard at work within our clinical organization. For example, we expect that our non-toxigenic C. difficile or NTCD opportunity for the current CDI, will enter the clinic mid year and of course, our work is ongoing with Cinryze to characterize the opportunities for additional formulations, indications and territories.

In addition, the coming months will be exciting for Cinryze as our PDUFA date for the acute indication is June 3rd.

Our goal is unchanged, to bring innovative products addressing unmet medical needs for the patients with diseases we target and to deliver long-term shareholder value.

We thank you for your time and attention this morning and look forward to speaking with you soon. Lets open up the line now for some questions and answers. Operator, are there some questions for the team?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of John Newman with Oppenheimer.

John Newman - Oppenheimer

Thanks for taking the question. On Cinryze could you tell us what percentage of Cinryze patients currently on drug came from previous clinical trials including the extension trials? Thanks.

Dan Soland

It’s a good question. And we have a good number of patients on drug that are from the clinical trial. But we also have a fair number of that are new patients. The exact numbers we are not planning to disclose today.

John Newman - Oppenheimer

Okay. And you mentioned that the reimbursement is going well for Cinryze. Could you talk about the number that you mentioned, I think was 116. What is that in terms of sort of the total percentage of insurers that you're dealing with now? Is it the bulk of them or is it a sort of mid-level percentage?

Dan Soland

We’re extremely pleased with having 116 insurers now reimbursing for at least one patient each and I can tell you that we think it is probably a very high percentage of the overall number of plans.

Operator

Our next question comes from the line of Joel Sendek with Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets

Hi. Thanks a lot. Also a Cinryze question can you give us a sense of inter-quarter trends in patients and any insight on doses per patient?

Vincent Milano

Joel, I just have to clarify your question, when you say inter-quarter what do you mean?

Joel Sendek - Lazard Capital Markets

I mean, January, February, March and, so far in April what the value like doubling from one months to the next? Is their initial fall list just kind of, at the flat line I mean that sort of thing?

Vincent Milano

So, let me, we won’t comment on April but as far as the first quarter goes as we have discussed in the past this has been a moment of building situation because of the time it takes get reimbursement. So, we have more patients in March than we do in February than we have in January very clearly. And more doses delivered and on this dose question we are not going to give doses per patient at this point.

If we can give factual number but it would not necessary be predictive of the future and we want to guard against the incorrect conclusions being drawn by the math that you could do there. So, that's why we are just sharing with the investment community today, that doses that we delivered to the patients during the quarter, which again we are extremely excited about the progress we have made with $6.7 million of sales and over 2000 doses delivered to patients during the first quarter.

Joel Sendek - Lazard Capital Markets

Why not give one that includes that. I mean it seems like a such a great launch, why not include something in the guidance.

Vincent Milano

One quarter is not enough for us to have that comfort on predictability. We feel, I think the question, if I can turn around Joel is , when will we provide guidance?

Joel Sendek - Lazard Capital Markets

Yes.

Vincent Milano

If we have a little bit better predictability here and maybe that’s next quarter, maybe it’s the quarter after, maybe its not until 2010, we are open to evaluating that every time period. But one quarter, we don’t feel there is enough data to justify that, we've got the variables under control to give a good range. We are very encouraged by the first quarter and it’s a we are off to a great start.

Operator

Our next question comes from the line of Scott Hirsch with Credit Suisse.

Scott Hirsch - Credit Suisse

Good morning, guys. I just have a few questions. On Vancocin, I know you guys had a good quarter relative to the first quarter last year. But a little lower than my number primarily because last quarter, you guys had indicated that there was some de-stocking in a large December shipment that didn’t book in fourth quarter plus 9% or 10% price increase in January.

Does the price increase play out first quarter or should we see the second quarter and then could we -- I know you said a little bit -- looking towards the lower end of the range, but should we see the same kind of trajectory on Vancocin that we saw last year?

Charlie Rowland

So, let me start first with a couple of parts of your question I'll turn it over to Dan sort of give you guidance for the pattern out for the rest the year. So, in terms of cut-off from last year, yes there was a shipment that did not go through, but however that works out through the wholesaler inventory. So, what I signaled on the conference call earlier was that there was a slight work down in the inventory quarter-over-quarter. So that sort of washes out that shipment that we talked about. So that is really not an impact.

In terms of the price increase, remember you can take our price increase as per the red-book and you have to factor that down for the amount that's going through Medicaid and government institutions, because we do not realize any other price there.

So the price is coming through the way we would expect it to, we had a volume decrease of 3% in the quarter and they are really the factors that impacted the quarter. So I'll turn it over to Dan to talk about your sort of future looking….

Dan Soland

Thanks, Charlie. So I think Vin hit on it earlier is that we believe that the disease incidences flat now and we also know if there is a high incidence of flu and a lot of people in the hospital with pneumonia that we see increases in CDI and we have seen to this point in time relatively low rate of flu, and hospitalizations due to respiratory diseases is down from last year.

So it's a little bit too early to predict, but we think that the pattern on for this year for CDI disease is going to be flat or perhaps even a slight decline to last year.

Vincent Milano

This is Colin, one additional comment to what Dan and Charlie shared is just the second quarter has always been the biggest quarter and the most predictive quarter of how the year ultimately turns out. At least since we bought and owned the product, which we bought in the end of '04.

So this will be an important quarter for us as we look, which is again consistent with the past. But I think today, what we're sharing with you is that it does look like its flat or maybe slightly down in the beginning of 2009.

But next quarter or this quarter that we are in now ,second quarter will be a very important quarter to predict whether we will come in to the lower end of the range of our guidance or higher. And we will be looking forward to updating our guidance as we move into the second quarter call.

Scott Hirsch - Credit Suisse

All right. On Cinryze how would you price it, if you did get the acute indication in June. Would there be a pricing difference for the acute versus prophylaxis how would you pull that off?

Charlie Rowland

I think we have said in the past that we would see the same price whether its patients being dosed for acute prophylaxis, same price per dose.

Scott Hirsch - Credit Suisse

Okay. Then one or two on the housekeeping; can we expect the remaining $9 million maribavir R&D in second quarter or does that play out, sort of amortized across the remaining quarters?

Vincent Milano

Lets say 60-20-20.

Scott Hirsch - Credit Suisse

Fair enough. And on the interest expense are we comfortable saying 8% now versus the total debt of 134ish?

Charlie Rowland

Yes.

Operator

Our next question comes from the line of Liisa Bayko with JMP Securities.

Liisa Bayko - JMP Securities

Do you expect any increases or anticipate any changes in the usage of Vancocin should this flu outbreak become more of an issue?

Vincent Milano

To the extent it leads to more hospitalizations absolutely.

Liisa Bayko - JMP Securities

Okay.

Charlie Rowland

And again as we said in the prepared remarks Liisa you know its what we're not predicting growth on Vancocin because of this outbreak but certainly we'll be prepared to provide the product if as a result of this outbreak hospitalizations increase, the use of antibiotics increases and consequently more CDI occurs. We'll be there to support those patients with the drug.

Liisa Bayko - JMP Securities

Okay. And then for Cinryze can you talk about the implications if or if you are not get approval for the -- whether or not you get approval for the acute indication on June, on or before June 3rd?

Vincent Milano

The implication, so I am sorry, can you specify what you mean.

Liisa Bayko - JMP Securities

Yes, just strategically do you expect there to be any impacts in terms of the way the product is used, maybe, different kinds of patients coming on board. Or is it really relevant of whether or not you get approved on June 3rd.

Dan Soland

So, today we're approved and with prophylaxis it tends to be the sicker patients who either have a higher instance of attacks or they have attacks that are life threatening or their quality of life is severely reduced to the disease and with acute patients, you would see less sicker patients using the drug.

So, it's likely that there will be a larger number of patients in that acute category their overall usage of the drug they use is significantly less than prophylactic patients.

Liisa Bayko - JMP Securities

Okay.

Vincent Milano

The other point Liisa just again I am sure everyone is aware of this but the competition is different with the approval versus without it. If we were to receive approval on June 3rd for acute we are essentially would be have the entire C1 market both acute and prophylaxis in United States all to ourselves. And if we receive a complete response letter, the process and future of how that plays out will continue to be uncertain until either [associates] itself make a path opposed for acute.

Liisa Bayko - JMP Securities

And so does that imply than the CSL has not filed their response.

Vincent Milano

No we don’t know. Liisa, we certainly don’t have any information that says one where the other. So we are moving in proceeding along focused on our own situation, working with the agency as much as we can to increase the probability that we're getting to approval on June 3rd. But we are not aware of what's going on specifically in the CSL front.

Operator

Our next question comes from the line of Stephen Willey with Thomas Weisel.

Stephen Willey - Thomas Weisel

Hi, good morning guys. Thanks for taking my questions. Just looking at cost to goods sold here about $2 million attributable to Cinryze I think that implies about 70% gross margins. Is that kind of fair to imply that, that’s how we should be expecting I think going forward?

Charlie Rowland

Yes. Remember there is a couple of things impacting gross margin there, one is, is that the step up in inventory on the purchase accounting is working through there. So the margins are less than what they would be without that step-up in inventory. That will take us probably in other two quarters or so to work that out.

Stephen Willey - Thomas Weisel

Okay.

Charlie Rowland

And then, there are free goods in there as well for the patient assistance program.

Stephen Willey - Thomas Weisel

Okay. And, what kind of traction are you making into newly identified patients? I know that you don’t want to give any specific numbers you have, but just a perspective outside of the clinical trial patient convergence and outside of the Lev registry that you guys inherited. What kind of traction are you gaining in patients outside of those two areas?

Charlie Rowland

Very good question and I think as Vini and others have mentioned there earlier on the call that we are very pleased with the launch of Cinryze thus far and I was trying to suggest earlier also that the success is not only due to the patients from the clinical trails, but it's also new patients, in fact, patients that we did not know about prior to the launch of the product.

Vincent Milano

I would add to that, Steve just again, to put a little bit of a finer point on it is, the interest level now, which we measure through the entrance in the Cinryze solution, there is more patients that are new than there were in the open-label study.

So again, we are not today commenting on what the ultimate convergence rate is with Cinryze solutions attract the patients that gets ultimately treated, but the numbers now are skewed in favor of new patients.

So tremendous enthusiasm from patients and physicians to get involved with this program and we work diligently to get them on drug as soon as we can.

Stephen Willey - Thomas Weisel

Okay. And do you have any kind of indication as to what percentage of patients that are on drug are infusing at home?

Vincent Milano

No, as mentioned when we originally brought the product, the patient really has a number of options as to how they would receive the drug. One option is that they self infuse at home, and second option is that they have a home healthcare nurse to administer the drug in their home. The third option there is a third group that our patients who still want to go a physician's office and have the physician or nurse administer the product.

It's too early to tell how these percentages are going to play out, but we can't say that all three of those options are in play today with the patients. It really is a patient-physician sort of specific issue, it's what are they most comfortable with? And we have patients in all three of those.

Stephen Willey - Thomas Weisel

Okay. And maybe just one quick housekeeping here. A little bit of an up tick in stock comp. Can you just give the breakout between SG&A and R&D?

Charlie Rowland

Sure. The breakup of R&D is about a million and the remainder was in SG&A or excuse me -- yeah so $1 million in the first quarter in R&D and then the remainder of $3.3 million in SG&A.

Operator

Our next question comes from the line of Philip Nadeau with Cowen & Company.

Philip Nadeau - Cowen & Company

First is on the conversion of clinical trial patients into commercial patients. I think the answer to the last question suggest that you are still in that process. But could you give us some idea of how far long you are in converting those patients on to paying patients?

Dan Soland

This is Dan. Philip, it’s a good question. We are not going to give you the exact patient numbers there but we can tell you that a very large percentage of those patients who are in the clinical trials have converted over or are in the sort of last stages of converting over to commercial growth.

It always takes time and each of these patients is really done is a one off with the payer. So there is a tremendous amount of work that has to go on to get the patient, even from the clinical trial onto commercial product.

Philip Nadeau - Cowen & Company

Okay. And second question is on the identification in new patients. Can you give us some idea of how long it takes to get reimbursement approval just from the time you identify a patient who maybe appropriate for prophylaxis since we get drug in their hands. Is that a several day process or several week process?

Dan Soland

This quarter what we said is we believe the average is going to be about 90 days think we've also said there are some patients that is going to take less and there are some patients who are going to take more. And we believe the average to be approximately 90 days. As we get more data points moving forward through the year, and we will able to update you, but right now I would say that we would stick with that sort of 90 day average.

Philip Nadeau - Cowen & Company

Okay. Great. That's helpful. And on the Vancocin generics, can you give me some idea of what's next. Is there any milestone that we are looking forward just from the FDA or is it just that we will hear something when we hear something?

Vincent Milano

Well, sort of them between Phil, we are continuing our efforts with the FDA Capitol Hill. All the things that we've been doing now for over three years, we will continue to do that and the way we will characterize it is the event, the timeframe of March 19 towards the --was the new beginning of the process since we now have guidance to comment on and if I am sure you have the opportunity to read our questions and comments and look at out data.

So, there is no specific next steps that we can anticipate or expect from the FDA because there is no prescribe timeline but we will continue to work diligently within our own practice of how we are doing stuff to see what we can learn and to the extent that we may do anything that is meaningful to update, we will do that.

Philip Nadeau - Cowen & Company

Okay. That's fair enough and then last just two kind of questions. First on the write-down of the goodwill it's still unclear to me why if goodwill is written down, if it wasn't impaired. Could you go through that maybe one more time?

Colin Broom

Just ask the question one more time.

Philip Nadeau - Cowen & Company

Yes, so you mentioned that $65 million in goodwill was written down after an impairment test, I thought you said that the goodwill or that the asset wasn't impaired in the impairment test. So, just, I am just little confused why the goodwill had to be written down if the asset wasn't impaired?

Colin Broom

Yes. So, because our market cap drops below our book value we had to go through an impairment test or all of our assets. So basically the, Vancocin intangibles, Cinryze intangibles, etcetera. All of those values were substantiated, so none of those were impaired. So as a result the only thing that was less than in our books for which you can't substantiate is goodwill at that point and so we wrote the value goodwill off.

Philip Nadeau - Cowen & Company

Okay. That makes more sense. Thanks. And the last one on R&D and SG&A, I think you said that there was $12 million in the quarter for -- is it fair to assume that going forward if we just deduct $12 million expenses from what you saw in R&D and SG&A this quarter that’s a realistic run rate or is there any other increase or decrease in expenses that we can expect?

Charlie Rowland

Well. As Vin, mentioned a little bit earlier, yeah, you can back that out, but then you have got to allocate the remaining spend number of your 60,20,20.

Philip Nadeau - Cowen & Company

Right but, aside from that there is no other increases in the sales book?

Vincent Milano

In the range that we have and one of the reasons we have the range that we provided Phil is -- one of the uncertainties in terms of spend is on the acute indication, to the extent we get the acute indication, we made decide that we want to add some more sales reps to tackle that particular side of the market. So, that is sort of embedded in the range and then also we have a early stage development program in non-tox c.diff in our range.

We also have assumed that program moves into clinical trials and we invest the money that we planned to invest and hope to invest in that. So, these are the sort of the items that are reflected in our guidance range that probably are the most variable in the near-term.

Philip Nadeau - Cowen & Company

Okay. It seems exactly what I was looking for. That’s very helpful. Thank you.

Operator

Our next question comes from the line of Thomas Wei with Piper.

Thomas Wei - Piper Jaffray

Hi, thanks. I have couple of Cinryze questions here. For the patients during in the acute open label trial, should we assume that they largely remained on that study and are not being converted into commercial drug.

Dan Soland

Thomas this is a good question. And what we're seeing is that many of the patients in the acute trial have converted over to commercial drug, many as part of prophylactic therapy.

Colin Broom

Thomas this is Colin. I understand that both of those open-label trials which includes a prophylactic and the acute trial enrollment, once it was stopped and patients were actually converted off those type of trials they both closed at this point.

Thomas Wei - Piper Jaffray

And so it sounds like maybe its maturity of the patients from the open-label acute trial who probably are now on commercial drug?

Colin Bloom

I would say more than 15%, yeah.

Thomas Wei - Piper Jaffray

And they are getting acute resale?

Colin Broom

That's between the patient and the physician and the payer.

Thomas Wei - Piper Jaffray

When a patient enrolls in Cinryze solutions, do you know if the prescription reads PRN?

Colin Broom

We do have prescriptions that read PRN.

Thomas Wei - Piper Jaffray

Can you give us a sense as to whether or not that rate versus those who are getting it twice a week is in line with your expectation have you seen a greater PRN prescription rate than you had expected?

Colin Broom

It's a little bit too early to predict, I mean I would go back to our opening statements, we are really pleased with the number of new patients who have signed up with Cinryze solutions, but to give you a percentage or proportion of patients who are on PRN prescription, its really too early to tell, to give you a percentage.

Thomas Wei - Piper Jaffray

How many doses you said had been delivered during the first quarter, what was that number that you gave?

Colin Broom

It was 2,151 doses and it's in our release that went out this morning.

Thomas Wei - Piper Jaffray

Okay. And remind me the price again is 3,900 is that right?

Colin Broom

Correct.

Vincent Milano

Correct.

Thomas Wei - Piper Jaffray

And so the delta between that and the $6.7 million that you're actually reported is that what we should be thinking of as the average discount rate or gross -- all thing considered, that would be a good run rate to you going forward?

Charlie Rowland

No. its probably not a good rate going forward because included in there is all of the free drug in the first quarter for the patient assistance program and its for bridging some of the people on the open-label study over for insurance coverage. And so when you factor that stuff in, its how you get to our number that’s not necessarily going to be predictable in the future quarters.

Vincent Milano

Yeah. I think Tom just to add to that is as we've been saying since we bought the product there is a lot of variability here and we need more data and experience before we can have some predictability. Our objective of giving the absolute number was so that you know how many doses patients are taking.

So it certainly maybe, but it would be only by chance that it the predictive is rolling on in the future. Well, its too early to say whether this is going to carry forward. It could get better. It could be more discounts. Could be less, who knows its too early to say.

Thomas Wei - Piper Jaffray

Then just one last question on, going back to what Joel had asked on kind of the ramp during the quarter, I understand makes a lot of sense that you would have seen a progressive rise in the number of patients receiving drug because of the reimbursement factor.

What about the number of patients who are going into Cinryze solution has not been ramping progressively from the time that the product launch occurred until now?

Colin Broom

Its interesting that the number of new patients going into Cinryze solutions since the launch remains relatively flat. In fact I think we may have got that it should have declined by now.

Vincent Milano

It's actually going. The early days was -- it's better now than it was in the early days, with a lot of 60 to 90 days, it's been a very consistent number of new patients entering in every single week.

Charlie Rowland

And that number too is higher than we have originally anticipated. Yes, so, that's why we are excited about how this has gone.

Operator

Next question comes from the line of Yale Jen with Maxim Group.

Yale Jen - Maxim Group

Thanks for taking my questions, gentlemen. The first one is about the Cinryze. First of all is that, they are moving forward you were and probably used to the script and the dose the way to communicate to the street in terms of the growth of the Cinryze?

Colin Broom

Yes, at least until we are prepared to give more definitive guidance on Cinryze, we will be giving doses shift to patients or physicians as our number.

Yale Jen - Maxim Group

Okay and in terms of the Cinryze that are used, I remember in that HAE [disease] there is some proportion of so-called seasonal use in the patient which according to me do a test or events to use that. Have you seen any of those usages as early so on the first quarter so far?

Dan Soland

Yes, this is Dan, it's a just a little bit too early for us to really give you any guidance there. As we continue to move forward and as we continue to do our sales overtime and be able to follow our prescription and usage patterns, we hope to be able to give you a better idea as to the usage in that area.

Yale Jen - Maxim Group

Okay also is there any off-label used for acute -- probably of note during the first quarter -- acute kind of treatment versus -- instead of prophylactics?

Vincent Milano

It is really hard to comment we don’t really know at this point in time.

Dan Soland

Yeah. We obviously are unfamiliar for prophylaxis, so.

Yale Jen - Maxim Group

So, are you getting any indications or suggestions that there might be some script written for that purpose?

Vincent Milano

Its really hard to tell.

Dan Soland

It could be again some of these prescriptions are written PRN as Thomas suggested earlier.

Yale Jen - Maxim Group

Okay. And, what’s the current development or plans to develop for other indications that you started try to explore? Would that be something to start this year or will it be something pushed out to next year?

Colin Broom

Again this is Collin let me, it is common, the first thing to say of course the -- we hope to get an additional indication for acute with an action day just coming up very quickly in 3rd of June.

Yale Jen - Maxim Group

Right.

Colin Broom

Otherwise to look at opportunities include, in this we referred to new formulations, such as subcutaneous administration, which we are looking at and then planning. Additional indications, the consumption of C1 if there occurs a lot of serious diseases. So we are assessing and prioritizing where our interest might be in that area and then thirdly look at the potential for additional geographical geographies, where we could make Cinryze available. So, we think that is formulation, new indications and geography.

Yale Jen - Maxim Group

Okay, great. Lastly, just a housekeeping question that moving forward would you start to offering the non-GAAP financial result starting in next of the few quarters or this would be only few times you offered a non-GAAP analysis?

Vincent Milano

Yeah. We plan on using the non-GAAP analysis on a go forward basis because it is more closely aligned to the way we looked at the business internally.

Yale Jen - Maxim Group

Okay. Great, thanks for taking the questions.

Operator

Our last question comes from the line of Brian Skorney with ThinkEquity.

Jason Kolbert - ThinkEquity

Hi, good morning, thanks guys. It's Jason Kolbert actually for Brian this morning. Can we talk a little bit about Vancocin. Can you talk a little bit about what the prescription growth was in the quarter versus price increases and also from a marketing point of view, if no generic arrives, what are your plans in terms of specialized sales force and kind of marketing battles going forward with new products entering in CDAD?

Dan Soland

Good question. First on the number of new prescription, I guess, because of the level of variability in how that prescription data is calculated, we see it as more directional than absolute, but there was a slight decline over the first quarter of 2008. Again, because of the variability it's hard to know if that's true or not. But we did see a slight decline. And your next question was…

Jason Kolbert - ThinkEquity

Well, I think that the new compact competition entering the market in CDAD and I know that several months ago you were talking about kind of a specialized marketing plan that ramp up the effort. So given the generic threat going forward, do you still plan to do that?

Vincent Milano

Well, we hope that we are competing against some of these other branded products overtime and its our ongoing effort to be able to do that, Colin do you want to comment on that?

Colin Broom

Let me just say, our medical phase in educational activities continue. We have regional medical scientists at the field but also they continue to do educational activities to prescribe the long anticipating guidelines to recommend or indicating the use of Vancocin particularly in sick, most severe patients. Its still well anticipated even though they are on available online. We hope those will occur over the course of the year and what potentially drives some increase in market share. But as Dan said as far as we observe at the moment it’s the incidence, the overall incidence of CDI is relatively flat at this point.

Vincent Milano

So Jason let me if I can add to what Tom and Dan said the answer to your specific question is right now we do not intend on expanding the Vancocin sales force. Two things, one retrospective and one perspective because I think you're making, you're remembering a conversation that we probably have had in the past.

When we were moving forward with maribavir the thought was that with the we would be preparing to be in the [transplant] market across the United States and that made perfect expense to build that team in advance of maribavir’s launch and take advantage of the fact that Vancocin has an opportunity to do that width. Obviously that's different now however we have the good opportunity and the good fortune with an acute approval for Cinryze we may be in a very same situation because once that acute sales force very meaningfully target the hospital and emergency room.

So we may consider expanding the sales team driven off of from the acute indication for Cinryze but we would certainly look to leverage that team to take advantage of opportunities for Vancocin. But that's not in our current plans specifically yes, because we don’t have the approval yet.

Jason Kolbert - ThinkEquity

Perfect. That's exactly what I was asking. And let me just kind of ask one last question here which is, what kind of plans do you have in place in case there is news that Vancocin goes to [market] is there a different marketing strategy once if that were to happen?

Vincent Milano

Well, we spend lot of time taking through that possibility and as we said we don’t foresee a generic therefore, we have not forecasted generic or at least end of this year.

We have many options open to us but we don’t choose to disclose those due to competitive reason at this point in time.

Jason Kolbert - ThinkEquity

Okay. Thanks guys I appreciate it.

Vincent Milano

Thank you, Jason.

Operator

We have no further questions at this time.

Vincent Milano

We appreciate your time and attention and questions this morning. We hope you share the enthusiasm we have for a great first quarter with Cinryze that we have. And we look forward to sharing with you the progress we make not only with Cinryze but with the rest of our business going into Q2. Thanks everyone and have a great day.

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