Chelsea Therapeutics International Q1 2009 Call Transcript

| About: Chelsea Therapeutics (CHTP)

Chelsea Therapeutics International Ltd. (NASDAQ:CHTP)

Q1 2009 Earnings Call

May 06, 2009 11:00 AM ET


Kathryn McNeil - Investor/Media Relations

Simon Pedder, Ph.D. - President and Chief Executive Officer

J. Nick Riehle, MBA - Vice President, Administration and Chief Financial Officer

Simon Pedder, Ph.D - President and Chief Executive Officer


Juan Sanchez - Ladenburg Thalmann & Co

Liana Moussatos - Wedbush Morgan Securities Inc.

Howard Liang - Leerink Swann & Co

Andrew Vaino - Roth Capital Partners


Good day and welcome to the Chelsea Therapeutics International First Quarter 2009 Financial Results Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I'd like to turn the call over to Kathryn McNeil. Please go ahead ma'am.

Kathryn McNeil

Thank you. Good morning and welcome to Chelsea Therapeutics first quarter 2009 conference call. Joining me from Chelsea Therapeutics is Dr. Simon Pedder, President and Chief Executive Officer; Nick Riehle, our Chief Financial Officer and Dr. Art Hewitt, Vice President, Drug Development.

Before we begin, I'd like to take a moment to remind everyone that during the conference call, members of Chelsea's management team will make certain forward-looking statements regarding the company's future plans and anticipated outcomes that involve risks and uncertainties that may cause the actual results or outcomes to be materially different from those anticipated and discussed on this conference call.

Forward-looking statements made on this call are made pursuant to the Safe Harbor Provisions of the Federal Securities Laws. Information contained in the forward-looking statements is based on our current expectation, is subject to change and actual results may differ materially from these forward-looking statements. Chelsea does not undertake to update such forward-looking statements to reflect any changes, events or circumstances that may materially affect the company's expectations after the date of this conference call.

Factors that could affect actual events or results to differ include our need to raise operating capital, our history of losses, risks and cost of drug development, risks of regulatory approvals, our reliance on our lead drug candidates, reliance of collaborations and licenses, intellectual property risk, competition, market acceptance for our products if any are approved for marketing, and our reliance on key personnel including specifically Dr. Pedder.

These and additional risks are discussed in Chelsea's filings with the SEC. These documents are available on Chelsea's website and we encourage you to review them carefully.

Now with that said, I'd now like to turn the call over to Dr. Simon Pedder. Go ahead Simon.

Simon Pedder, Ph.D.

Well, good morning and thank you for participating in today's call. It has not been all that long since we spoke in detail about the fourth quarter and the full year 2008. However, as I am sure many of you are aware, the first quarter of 2009 has been tremendously productive time at Chelsea and there is much to review for the quarter. And even with all the achievements of the first quarter under our belt, there continues to be much going on at the company and I look forward to detailing both our recent accomplishments as well as our robust agenda for the remainder of the year.

Before I get into this detail however, I'd like to Nick to get it started this morning with a brief discussion of our financials and some rather good news related to our holdings and auction rate securities. Nick?

J. Nick Riehle, MBA

Thank you, Simon and good morning everyone. As Simon indicated, we've had some very positive developments related to our holdings and auction rate securities. So I'd like to begin this morning's discussion with these recent developments.

As we initially reported this time last year, Chelsea held auction rate securities with a total face value of 26.4 million at the point when the market for these securities began to fail. As we reported to you on our last call, 11.6 million of these securities were held through UBS and in the first quarter, we finalized the settlement agreement related to these securities which provided Chelsea with the full face value of 11.6 million through a no-net cost loan that will remain unaffected until the auction rate securities are purchased by certain UBS affiliates.

I am very pleased to report that we now have reached an agreement with Banc of America Securities, under which we will be able to realize cash proceeds of approximately 12.1 million related to our auction rate securities, which combined with our January ARS sales and various redemptions over the past year, means that we have achieved liquidity on the full 26.4 million par value of these assets.

The agreement covers the purchase of our remaining ARS held with Banc of America at their par value of over 11.6 million and a $425,000 recovery related to the discounts on the sale of similar securities on the secondary markets in January. This will bring us to a 100% recovery of the face value of these investments.

Accordingly, we anticipate recording a gain on the recovery of previously recorded impairment losses of approximately 4.1 million when this transaction is completed in early June.

Turning now to the results of the first quarter.

For the three months ended March 31, 2009, we had net loss of 7.4 million or $0.25 per share, compared to 8.7 million or $0.29 per share for the comparable quarter in 2008. As you may recall, we reported a 1.6 million impairment charge associated with our auction rate securities in the first quarter of 2008. Excluding this impairment charge, our loss for the first quarter 2008 was 7.1 million or $0.24 per share, which is in line with the net loss for the first quarter of 2009.

Research and development expenses for the first quarter 2009 was 6.5 million, which is flat year-over-year and down slightly from the fourth quarter. Compared with the first quarter of last year, we had a 37% increase in a Droxidopa activity, which was offset by reductions in the antifolate programs as the antifolate trials have been completed and related expense net (ph) recognition winds down.

Similarly, while Phase III Droxidopa spending increased over Q4, antifolate and Droxidopa manufacturing related expenses were significantly less. We expect Phase III expenses to peak over the next several months and then gradually decrease as we continue the related safety studies through year end.

Selling, general and administrative expenses were also roughly flat year-over-year at 1.4 million, as we continued to focus our financial resources on completing key clinical programs. As we obtain additional liquidity and as we approach commercialization of Droxidopa, we can see significant growth in marketing and sales spending.

We ended the quarter with 27.6 million in cash and short-term investments, versus 31.8 million at December 31, 2008. For a perspective, if the March 31 balance could be adjusted for the Banc of America settlement, it would have totaled 31.7 million.

Based on current development plans, anticipated timing of clinical activity and our recent auction rate security settlement, we are confident that this liquidity provides us with the necessary capital to fund our core clinical activities into the second quarter of 2010. We are obviously very pleased to be able to report this adjustment from our prior guidance of fourth quarter 2008, as a result of the most recent auction rate security settlement.


Simon Pedder, Ph.D.

Thanks Nick. Not only for that review but importantly, for your efforts to resolve the issues surrounding our auction rate securities and restoring the full balance of this operating capital to our balance sheet.

Now, as for our operational activities during the first quarter, as I indicated at the start of this call, there is no shortage of ground to cover. However, as we have had the opportunity to provide a preliminary update on these activities during our last call and subsequently host a call to discuss the results of our Phase II rheumatoid arthritis trial, I will try and keep this discussion brief and focused as to allow ample of time to answer any questions you might have regarding our ongoing clinical programs or the financial matters just discussed.

To that end, I would like to begin with the discussion of our antifolate program. During the first quarter of 2009, we completed two studies that individually validated and characterized our first two clinical stage antifolate drug candidates. And collectively, highlights the tremendous promise or potential for antifolates as potential paradigm shifting treatment alternatives to methotrexate as first-line therapy for rheumatoid arthritis and in turn the additional autoimmune anti-inflammatory indications for which antifolates have historically demonstrated efficacy and widespread use.

First, early in the quarter, we completed our Phase II proof-of-concept trial for CH-1504 in rheumatoid arthritis and we were pleased to be able to report top-line findings from this study in March. This was the multi-centre, multinational, double-blind, randomized, head-to-head comparison of 0.25, 0.5 and 1 milligram of daily 1504 to a standard dose escalation to 20 milligrams weekly of methotrexate.

The results of this study unequivocally demonstrated comparable efficacy of multiple dosages of 1504 to methotrexate. The study also showed the improved safety and tolerability of 1504 over methotrexate with a nearly two-fold or greater reduction in liver enzyme elevations, fewer GI related adverse events and no GI related dropouts reported for 1504. All-in-all, we were very pleased to see that 1504 emerge from the first robust proof-of-principle study as a differentiated product with an unique profile and improved patient tolerability.

While all these findings were in their own right, exciting and rewarding, they got us really excited about the significant potential for CH-4051, the L-isomer of CH-1504 and the second clinical-stage compound from our antifolate portfolio.

CH-4051 has consistently demonstrated impressive potency. In fact, it has demonstrated the potential for significantly enhanced potency over methotrexate and preclinical RA models and we have recently began our Phase I evaluation of 4051 to confirm the safety and tolerability of the compound in healthy volunteers.

Furthermore, we have used this opportunity to conduct a rigorous analysis of comparatively high dosages of 4051 with the intention of determining the maximally tolerated dose. In addition to the significant escalation in dose, we opted to conduct a multiple ascending dose evaluation over a 414-day dosing period rather than a somewhat more common seven-day treatment period. We felt strongly that by doing so, we will be challenging the safety and tolerability of 4051 to it's first in this context, thereby getting the best characterization of the drug.

The results from this study ended up exceeding even our high expectations.

The Phase I trial conducted in the Netherlands consisted of two studies. The first a single ascending or SAD study, looking at single oral administrations of 5, 10, 20 and 40 milligrams of 4051 in healthy volunteers.

No serious adverse events were reported during the SAD study and each of these dosages was determined to be safe and well tolerated.

To further explore a wide range of dosages, including an exceeding dose believed to be therapeutically relevant and to determine the maximally tolerated dose, we selected 5, 7.5, 10 and 20 milligrams of 4051 for evaluation in a multiple ascending dose or MAD study for 14 days.

Results from the MAD study demonstrated that 4051 was safe and well tolerated at dosages up to and including, 7.5 milligram, a range that likely exceeds effective dosages for rheumatoid arthritis as well as multiple other autoimmune anti-inflammatory disorders and clearly higher than the 0.25 to 1 milligram dose range of 1504 used in our Phase II RA study, which were as effective as 20 milligrams of weekly methotrexate.

High dosages of 4051 demonstrated mostly mild toxicities with the 10 and 20 milligram dose groups reporting both GI side effects and reversible liver enzyme elevations. No serious adverse events occurred during the study.

Looking at the PK data from the study, we saw plasma concentrations that showed good dose proportionality and were comparable to those seen in animal pharmacology studies in which 4051 demonstrated superior suppression of RA than both the maximally tolerated dose of methotrexate and equivalent dose of 1504.

The study also indicated that 4051 has improved absorption with approximately two-fold improvement in bioavailability, compared to 1504 and appears to better tolerated on the basis of its plasma concentrations to side-effect profile.

All of these findings lead us to strongly believe that 4051 could have a significantly improved efficacy versus methotrexate, while maintaining the same favorable safety and tolerability profile consistently demonstrated by 1504.

As you can tell, I am tremendously pleased by these findings from both of our antifolate studies. This time last year, we were beginning proof-of-principle work and were looking forward to day we could clearly evaluate the potential of our first drug candidate from our antifolate portfolio.

For us now, to be in a position to speak to you about not just one, but two promising compounds in this portfolio, is very exciting for all of us at Chelsea.

Now, in the first quarter results we have a very productive quarter in our Droxidopa development program. We initiated our Phase II trial in fibromyalgia, a combination study that allows us to evaluate the safety and efficacy of Droxidopa alone and in combination with carbidopa. The unique design of this trial should allow us not only to explore the role and the potential therapeutic application of norepinephrine in fibromyalgia, but by pairing Droxidopa with carbidopa to limit the peripheral metabolism of Droxidopa into norepinephrine, this should allow us some insight into essential effect of norepinephrine in this indication.

We initiated this trial in the UK in January and in spite being a highly competitive indication and a wish to recruit patients, we have been very pleased by both the support of our investigators as well as the interest from patients. This has translated into a steady recruitment that has been consistent with, if not slightly ahead, of our expectation so far. So as this study continues to progress nicely, we continue to look forward to the result from this trial late in 2010.

During the quarter, we also concluded our Phase II trail of Droxidopa in IDH and were rewarded with multiple, highly significant findings. In our study, among the numerous benefits, we saw a highly statistically significant reduction in early dialysis terminations. In fact, an 87.5% decrease in session determinations, compared to baseline for patients in the 600 milligram arm. I cannot underscore enough the importance of this clinical outcome as it not only reflects a strong symptomatic response, which we all know the FDA is keenly interested in, but is directly tied to the efficacy of dialysis by allowing the procedures to run as scheduled through the completion thereby providing a clinical benefit with significant ramifications beyond the treatment of symptoms associated with IDH.

This outcome was further supported by statistically significant improvements in two important blood pressure measures; the reduction in the severity of blood pressure drops or nadir experienced during dialysis, and the improvement of in postdialysis blood pressure compared to predialysis blood pressure within five minutes of completing a dialysis session.

Both offer a sound physiological rationale for symptomatic improvement demonstrated by both the 400 and 600 milligrams arm of this study and offer meaningful benefit to patients, physicians and dialysis centers.

Based on the findings from this study and our interest in advancing Droxidopa in this indication, we are in active discussions with the FDA to determine the most appropriate clinical path forward, including appropriate end points and size of the trial given the extensive body of clinical data generated by Dainippon Sumitomo during the development and the subsequent commercialization of Droxidopa and this indication.

We hope to be able to provide details regarding the next clinical steps for IDH by the end of the third quarter.

Finally, but before I open the call for Q&A, I would like to provide you some updated data from the open label titration phase of our NOH trials, briefly highlight the program that was made in these programs during the first quarter, and outline our expectations for the remainder of the program.

In mid-February, we reported data from the second analysis of titration data from Study 302. Significantly, this data was remarkably consistent with our first analysis reported in November. Droxidopa continued to demonstrate a robust effect with a mean reduction in symptomatic score of 4.2 units on the OHSA score and an increase of 25 millimeters of mercury in standing systolic blood pressure for responders during titration.

At this time, we also conducted the preliminary analysis of similar data from Study 301, which was also highly favorable and supported our decision to tighten the standard deviation from 3 to 2.5 units, thereby reducing the target number of randomized patients in Study 302 from 118 to 82 patients.

As both studies progressed substantially during the first quarter, we opted to take another look at this data recently. And I am happy once again to report highly consistent and favorable findings from both studies. As of April, responders in Study 302 show a mean reduction in symptomatic score of 4.9 units on the OHSA score and an increase of 26.7 millimeters of mercury in standing systolic blood pressure at end of titration.

Similarly in Study 301, responders show a mean reduction in the symptomatic score of 4.8 units and an increase in standing systolic blood pressure of 21.5 millimeters of mercury at the end of titration.

Both, the robust effects demonstrated during the titration as well as a tremendous consistency of these findings as both trials progress, make us very confident that we'll be able to demonstrate the 1.6 improvement on the OHSA scale during the blinded study that both studies have power (ph) to show.

With respect to the progress made during the first quarter, I am very pleased to report that we saw solid recruitment with enrollment rates up substantially from the fourth quarter and which have had ... which have continued to remain steady for both studies.

During our last call, I shared with you our considerations surrounding a possible interim analysis that could serve as a potential early stopping mechanism for Study 302. We have now exceeded the number of patients that we believe would be necessary to comfortably achieve a statistical significant finding in an interim analysis of Study 302.

However, at this junction, since we are on track to complete full recruitment by the end of this quarter, and the substantial time required for data monitoring, cleaning, review and analysis for an interim would not result in a significant timing advantages. We have decided not to conduct an unblind interim analysis. Thus, we are opting to let the study run to completion and allow for the most robust possible outcome providing the FDA with enhanced safety numbers and efficacy data for the NDA.

Given the very short duration of Study 302, this should allow us for top-line results from the study to be available in Q3. This approach still allows us to execute a timely and controlled transition of select sites from Study 302 to Study 301, while maintaining the very low risk profile for Study 302, in that it would not require any adjustment to our acquired p-value for the study.

To this end, we have already identified to 15 high enrollment centers currently participating in Study 302 that will become active requirement sites for Study 301. We are currently working with each of those centers to finalize the logistics and expect that each should be ready for a seamless transition in July.

With added participation from proven centers and anticipated adjustments to sample size, we continue to expect Study 301 to complete enrollment in Q3, again, with top-line data available shortly following study completion.

While we continue to be very focused on completing enrollment in both study 301 and 302, with the completion of both studies in sites, we have begun the process of preparing for a NDA filing later this year.

As you know, we have been granted Fast Track status for this indication and one of the chief benefits of this designation is allows us for a rolling submission of an NDA. This is particularly advantageous to us and that in a substantial portion of our submission package consists of data previously generated and prepared by Dainippon Sumitomo in conjunction with their approval of the drug in Japan.

I am also pleased to announce there is also additional data from a two-year extension study conducted by Dainippon Sumitomo that follow up the European Phase IIb trials which will be filed as part of our NDA, further bolstering the already robust safety data and strengthening our filing.

We are currently preparing to have this data ready and initiating our NDA submission in the fourth quarter of this year. The rolling NDA submission process should allow us to move forward expeditiously with our filing and allow us to drop in the final study reports for our Phase III trial shortly after they become available.

In conclusion, I would just like to say that 2009 has clearly started up strong, with the achievement of a number of major clinical milestones and a significant amount of progress made in our ongoing development programs. We expect this to be just the beginning as we continue to have much work ahead of us for the remainder of this year and are eagerly looking forward to the completion of our pivotal Phase III trials and the submission of our first new drug application.

I'd also like to add that this month marks Chelsea fifth anniversary and is somewhat remarkable upon reflection just how far we have come in the last five years. I am particularly pleased to be celebrating this anniversary during such an exciting time in our corporate history. This near-term excitement is also balanced by the prospects of several long-term initiatives, such as the expansion of our Droxidopa development program to include fibromyalgia and initiation of several investigator-driven studies that will further characterize the potential applications for Droxidopa.

All of this is of course the results of hard work and commitment demonstrated by everybody at Chelsea and I would like to thank them all for their significant contributions. This is truly a pivotal year for Chelsea and I look forward to updating you as our progress continues throughout the year.

With that said, at this point, I will turn the call over to the operator to Q&A.

Question-and-Answer Session


Thank you. (Operator Instructions) And we'll take our first question from Juan Sanchez with Ladenburg.

Juan Sanchez - Ladenburg Thalmann & Co

Good morning guys and congratulations on the cash situation.

Simon Pedder, Ph.D.

Thanks Juan.

Juan Sanchez - Ladenburg Thalmann & Co

Two questions. In the update, in that you did announce on the titration phase of the NIH trials, how many patients are you incorporating in this April analysis versus the analysis that was made in February?

Simon Pedder, Ph.D.

I can't give you specifically the number. We are still on track to finish the patient recruitment at the end of this quarter in 302. There are clearly at least twice as many patients in 302 as there are in 301. But clearly it's more than half the patients that have been in 302. The exact number I can't tell you.

Juan Sanchez - Ladenburg Thalmann & Co

Okay. And the second question is about cash. I mean once you're done with the trials in Q4 and just consummating (ph) the NDA, what's going to be the actual cash burn let's say Q1 or Q2 2010?

J. Nick Riehle, MBA

Juan, it's Nick. The actual amount is that ... as this sort of typically varies from month to month. But it certainly in that timeframe, it's reduced drastically from where we are particularly, in the current quarters. In Q1 we were completing the Phase II, Q4 where we're working heavily with all the trials. And so we do see that winding down. We will obviously spend more money in that timeframe with the ongoing safety studies however.

Juan Sanchez - Ladenburg Thalmann & Co

The last question is on 1504 ... actually 4051. Where do we expect... what's the (Inaudible) range of this dose. I know that you already identified the MTD. But if you actually do your own calculations and go back to previous data, what kind of dose range do you expect to be active in RA?

Simon Pedder, Ph.D.

Well, we take a very simplistic approach and look at the data generated with 1504, knowing that 4051 is the L-isomer therefore at least half of 1504 and 0.25 of 1504 was clearly active since it was one of the dose groups that was very similar from an efficacy viewpoint compared to methotrexate but that are tolerated.

We could probably go to lower ranges than that, lower than 0.25 with 4051 and probably show some level of activity. What was flawed (ph) about with 4051 from the Phase I that was the 14-day dosing regimen, 7.5 milligrams was extremely well tolerated and when we talk about 7.5 being the maximally tolerated drug, that is clearly talking about an RA drug or a psoriasis drug. In fact, if we were talking about an oncological drug, we'd probably say that 20 milligrams was well tolerated and therefore what 4051 allows us is a huge range to test in the Phase II program that we'll be developing against methotrexate and allows us a much bigger range to look at safety advantages and in fact, efficacy advantages.

Juan Sanchez - Ladenburg Thalmann & Co

Thank you very much guys. Thank you.

Simon Pedder, Ph.D.

Always a pleasure, Juan.


And we'll take our next question from Liana Moussatos with Wedbush Morgan Securities.

Liana Moussatos - Wedbush Morgan Securities Inc.

Thank you. You mentioned starting the rolling NDA filings for Droxidopa in Q4, when do you think you'll finish that submission?

Simon Pedder, Ph.D.

We haven't given any guidance to that, but we are keeping with our guidance that we hope to have the drug approved in second half of 2010.

Liana Moussatos - Wedbush Morgan Securities Inc.

Okay. And can you... on the antifolate program, will there be any antifolate data released in 2009 and with the added liquidity from the ARS, will you do any more trials this year with the antifolate program?

Simon Pedder, Ph.D.

We certainly, if we start trials, won't be in a position to release any data in 2010. As you can appreciate ... sorry, in 2009. As you can appreciate, we're in lots of discussions about what the design of the Phase II should be. We're looking obviously at different possible populations here. We could see ourselves doing another similar Phase II as we did with 1504, but also due to the attributes of 4051, we also see significant potential in doing a trial against methotrexate non-responders, whether that's non-responders due to efficacy or non-responders due to the tolerability.

Clearly, that the methotrexate non-responders due to tolerability, that's a very strong argument due to the lack of metabolism like 4051 may perform well in that population but also due to the preclinical benefits that we've seen with the drug not just when it comes to the CIA model but all of the preclinical tests what we've done have shown the potency of 4051. We are very interested in seeing what the efficacy advantages could be and in fact, our patient population that did not respond well to standard dosages of methotrexate.

Liana Moussatos - Wedbush Morgan Securities Inc.

And do you anticipate any data presentations at medical meetings this year?

Simon Pedder, Ph.D.

Yes, we will plan on presenting the ACR, the data at ACR and Dr. Keystone, the principal investigator from the University of Toronto was planning to present that data.

Liana Moussatos - Wedbush Morgan Securities Inc.

Okay. And what about Droxidopa?

Simon Pedder, Ph.D.

Droxidopa, we are planning on giving some presentations later this year. We are presenting the IDH data at the World Congress of Nephrology in Milan. It's actually later this month. We've been expected for late breaking presentation. And, we will also look to present the NOH, the 302 data at a meeting later, symposium later this year, we haven't decided which one, there are several candidates.

Unfortunately, as you know Liana, we can't present the same data at multiple conferences, so we're trying to pick the one that we think is going to have the best bang for the buck.

Liana Moussatos - Wedbush Morgan Securities Inc.

All right. And can you talk about the status of partnership discussions for the antifolate program?

Simon Pedder, Ph.D.

Well, if you can appreciate, two things happening with a relatively our narrow range of 1504 showing comparative efficacy with a better safety profile with 1504 and being allowed to get up to what we consider quite surprisingly high levels in our Phase I single ascending and multi ascending that has kind of reenergized, reintegrated the kind of discussions we're having with partners and subsequently we'll continue to have discussions but the important thing is not doing a deal, it's doing the best deal.

Liana Moussatos - Wedbush Morgan Securities Inc.

That's right. And do you think, based on where you are in those discussions that something could be announced this year or next year?

Simon Pedder, Ph.D.

Certainly, our viewpoint is that we'll make some major decisions on that sometime during 2009.

Liana Moussatos - Wedbush Morgan Securities Inc.

Okay. And my last question is, for cash additions based on the liquidity and the balance sheet, it's a 400,000 plus 4.1 million?

J. Nick Riehle, MBA

Yes, the 4.1 million reflects the combined amount that we will be able to reverse our prior impairment. So, where we had $8 million in short-term investments for our Q1 ending balance sheet, we essentially will be able to realize over 12 million.

Liana Moussatos - Wedbush Morgan Securities Inc.

Okay. Great, thank you very much.

Simon Pedder, Ph.D.

Thank you, Liana.


Our next question comes from Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann & Co

Thanks very much and congratulations on revolving the auction rate security issue. So, if can get a bit of clarification on the data that you just told us about, from the Droxidopa trial, the interim data from the screening phase, are these data on all of the randomized patients available at the time, I think it was April?

Simon Pedder, Ph.D.

It's all the patients who ended up going for the titration became classified responders. So they had to have both blood pressure improvement and the systemic improvement that ended up being enrolled into the trial.

Howard Liang - Leerink Swann & Co

Okay, good. And then regarding the, you said you mentioned you're going of switch from the centers on 302 to 301, can you just talk about the logistics of switching centers, or sort of some another new trial? Does this require an IRB approval and typically how long does it take for this switch to occur?

Simon Pedder, Ph.D.

Well, clearly we are doing in countries. The main country of course is the U.S. where we have both trials approved. So we don't have to worry regulatory approval, it's already approved. What they're required to do, if they are doing 302, they have to file 301, obviously with their ethics board. The ethics boards have already obviously approved 302. So they are knowledgeable about the drug, obviously the trials are very similar. We already have contracts in place for 302 it's very similar in design as 301. So we think some, the main kind of timeline for this, the critical path is getting the IRB approval which in most cases is anywhere from 30 to 60 days. So we think we'll be in fine shape when it comes to 302 completing switching these sites over to 301.

Howard Liang - Leerink Swann & Co

Okay, great. And may be a question for Nick, just on your cash guidance moving from going Q4 this year to Q2 next year, I guess what ... can you just give us some color on what has changed ... it's probably more then just the format and there so (ph) that your gaining back, I mean are there other changes in the guidance?

J. Nick Riehle, MBA

Well, there is always a little bit of changes forecast quarter-to-quarter, but certainly overwhelming change is the four million and that's reflective of the fact that we anticipate a lower level spending. As you know, we don't have a large definite, these trials lying down. We are in a situation to spend money as needed on the remaining safety programs. So, that is certainly the primary impact against other miner changes, but very miner.

Howard Liang - Leerink Swann & Co

Okay. Great. Thanks very much.

Simon Pedder, Ph.D.

Thank you, Howard.


And our next question comes from Brian Abrahams with Oppenheimer & Company.

Unidentified Analyst

Hi, guys this is Ryan (ph) in for Brain today. Just a quick question, I guess with the changes, what the getting the new sites online from Droxidopa, do you guys still think you guys can file an NDA on track by the end of this year?

Simon Pedder, Ph.D.

We look from ... between now and we will rollover the 302 sites, 301 site is still actively recruiting. And as I mentioned during the call, we've certainly seen an increase in recruitment for both drops.

I think a lot of that is obviously we're getting the additional sites up and running, but I think some of that is the fact that these investigators are seeing a very robust effect in patients and that's obviously stimulating them to get more patients into the trials since they're actually seeing individual nice responses both from a symptomatic improvement, but also a blood pressure.

And there's nothing that helps recruitment like physician seeing a very active and well tolerated drug.

Unidentified Analyst

Great. Thanks a lot guys.


And we'll take our next question from Andrew Vainos with Roth Capital Partners.

Andrew Vaino - Roth Capital Partners

Hey thanks for taking my call. I guess if the hurricanes perform as well as your stock has last couple of days they'll have no trouble tonight. My first question is, I assume for the RA stuff that the 1504 is going to get pushed aside in favor of the 4051. Is that might be correct?

Simon Pedder, Ph.D.

Well, Andy, I think there is some interest in because there are so many indications that the antifolates have shown activity in that some companies are very interested in different molecule for different indications because that obviously benefits them from marketing and a pricing strategy. That being said, there is still the possibility that 1504 may in fact be studied in methotrexate non-responders to see what the benefit of that drug is. Clearly, that is something that we'd be interested in the 4051. But I wouldn't declare 1504 dead but yet. I think that we've two interesting molecules. I think companies are looking at them both very, very closely and decisions will be made in due course.

Andrew Vaino - Roth Capital Partners

Okay. And also any possibility that you guys would enter in some type of partnership for Droxidopa?

Simon Pedder, Ph.D.

Well, you can appreciate. Everything's on the table during difficult conditions such as we're living through now. But we would only proceed with a Droxidopa partnership if we thought it was a very good deal for Chelsea and the Chelsea shareholders.

Andrew Vaino - Roth Capital Partners

Great. Excellent. Thank you.

Simon Pedder, Ph.D.

Thank you, Andy.


And it looks like this concludes the question-and-answer session for today. So at this time, I'd like to turn the call back over Dr. Pedder for any additional or closing remarks.

Simon Pedder, Ph.D

Well, just first of all thanks to all of you for your interest and support of Chelsea over the past five years. We certainly recognize we've had some highs and some lows. But now clearly in the very difficult market conditions Chelsea's prospects has turned to look very favorable. With Phase III data in the second half of 2009 and with finances to last into second quarter of 2010 and with significant assets on board, we now look forward to providing significant benefit to our shareholders.

Thanks for participating in our call. Have a great day.


And this does conclude today's conference. And we thank you so much for your participation.

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