DURECT Corporation Q1 2009 Earnings Call Transcript

May. 6.09 | About: Durect Corporation (DRRX)

DURECT Corporation (NASDAQ:DRRX)

Q1 2009 Earnings Call Transcript

May 6, 2009 4:30 pm ET

Executives

Matt Hogan – CFO

Jim Brown – President and CEO

Felix Theeuwes – Chairman and Chief Scientific Officer

Analysts

Dave Windley – Jefferies & Co.

Jeffrey DeSeibert [ph] – KB Advisors [ph]

Neil Gagnon – Gagnon Securities

Matt Hogan

Hi, good afternoon and welcome to our first quarter 2009 earnings call. This is Matt Hogan, CFO of DURECT Corporation. This call will begin with a brief review of our financial results, and then Jim Brown, our President and CEO, will provide an update on our business. We will then open up the call for a Q&A session.

Before beginning, I would like to remind you of our Safe Harbor statement. During the course of this call, we may make forward-looking statements regarding DURECT's products and development, expected product benefits, our development plans, future clinical trials or projected financial results.

These forward-looking statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Further information regarding these and other risks are included in our SEC filings, including our 10-K, under the heading "Risk Factors".

Let me now turn to our financials. Total revenue was $6.2 million in the first quarter of 2009, which compares to $6.4 million in the first quarter of 2008. Revenue from our R&D collaborations was $3.7 million in the first quarter of 2009, as compared to $4.3 million in the first quarter of 2008. Revenue from this source will always fluctuate from quarter-to-quarter, depending on the state of development under the various programs and our role in those programs.

Product revenue from the sale of ALZET pumps and LACTEL Polymers increased by approximately $246,000 or 11% from $2.2 million in Q1 2008 to $2.4 million in the first quarter of 2009. Our gross margin on these products was around 66% in the first quarter this year, compared to 62% in the first quarter last year.

R&D expense was $9.9 million in the first quarter of 2009, as compared to $9.6 million in the first quarter of 2008. These figures included stock-based compensation of $2.3 million in the first quarter this year, and $1.6 million in the first quarter last year. So if we exclude the stock-based comp, R&D expense actually declined by about $405,000.

SG&A expenses were $4.2 million in the first quarter of 2009, as compared to $3.9 million in the first quarter of 2008. These figures included $1.2 million of stock-based compensation in Q1 2009 and $775,000 of stock-based compensation in the first quarter of 2008. Excluding the stock-based compensation, SG&A expense declined by about $29,000.

Our net loss for the first quarter of 2009 was $8.7 million, compared to a net loss of $7.8 million for the same period in 2008. Now probably a more relevant financial metric for us than our net loss was net cash consumed during the quarter; that figure was $5.7 million as compared to $8.6 million last year in the first quarter.

At March 31, 2009, we had cash and investments of $47 million, compared with cash and investments of $52.7 million at December 31, 2008. These figures include a $0.7 million of restricted investments at March 31, 2009 and $1 million in restricted investments at December 31, 2008.

Like many companies these days, we are ever mindful of our spending and our headcount today is down 44 positions or about 25% as compared to our headcount at the start of the year. We took steps late in the quarter across functional areas, and in a manner that was designed to not to affect our major corporate goals for the year.

Thanks again for joining the call and I will now turn it over to Jim traditional non-financial matters in greater detail.

Jim Brown

Thank you, Matt; and hello everyone. The most significant event for the first quarter for DURECT were interactions with the FDA. First off, we have no new news to report on the REMOXY NDA. We did, however, receive feedback from the FDA on POSIDUR, enabling us to put in place our Phase III development plans. Endo completed the Phase II program for TRANSDUR-Sufentanil and held a successful end-of-Phase II meeting with the FDA. Endo then returned the US and Canadian rights to this product. Owning worldwide rights to this program, which is poised to enter Phase III, is a great opportunity for us. We are now in active discussions with potential partners for worldwide commercialization rights to TRANSDUR-Sufentanil and US, Canadian, and Asian rights to POSIDUR.

I will now provide a more detailed update with regard to our lead programs.

Starting with REMOXY. REMOXY is based on our ORADUR gel cap technology, which provides a twice-daily form of oxycodone in a more difficult to misuse and abuse formulation. There really isn't a lot to update with regard to REMOXY yet. As most of the followers of our company know, Pain Therapeutics received a Complete Response Letter from the FDA in December of 2008; and according to Pain Therapeutics, the FDA indicated that additional nonclinical data will be required to support the approval of REMOXY. But the FDA has not requested or recommended additional clinical efficacy studies prior to approval.

We understand that Pain Therapeutics, King Pharmaceuticals, and their technical advisors have been evaluating the FDA Complete Response Letter and they plan to meet with the FDA in the mid of this year. That meeting should provide them with a more reliable context in which to make projections about REMOXY. The issue doesn't appear to be 'if the product will be approved' but 'when'. As a reminder, oxycodone is widely used by patients suffering from chronic pain. In fact, sales of oxycontin and oxycodone oral products were over $2 billion in 2008, with further growth expected in 2009.

There is a significant abuse problem in this country and we believe that REMOXY offers a major market opportunity for King Pharmaceuticals. DURECT will receive royalties that start at 6% and scale up to 11.5%, plus a manufacturing mark-up on key selected excipients.

Now I would like to move to POSIDUR. POSIDUR is an injectable product designed to control postsurgical pain for up to three days, using Bupivacaine, a well-established local anesthetic. In our Phase IIb hernia trial, POSIDUR demonstrated a 30% improvement in pain control versus a placebo group over the first two to three days after surgery. In addition, the POSIDUR group took three times less narcotics than the placebo group. These are compelling results that hold the potential to change treatment of pain after surgery.

During this quarter, we have received detailed feedback from the FDA on our proposed Phase III program leading to an NDA submission. It has taken several long communication cycles to get to this point, but we feel good that we finally have a handle on the FDA's perspective on the path forward for this product.

What makes this product groundbreaking is that it is the first time the FDA would be approving an injectable product to provide two to three days of local pain relief, and this product may be used in a wide variety of surgeries. To this end, we are pursuing a target label for POSIDUR that would allow it to be used in a broad range of surgeries.

The results of our dialogue with the FDA are as follows: Whereas previously we expected that we would be conducting two pivotal efficacy studies that would be required in order to achieve our target label, we now anticipate conducting a single pivotal study and several supportive studies. These supportive studies will be conducted in additional surgical models and with different patient groups in order to demonstrate safety in a broader patient population and to provide greater definition for the surgical settings in which the product would be used. We are currently mapping out the details of these supportive studies to address the types of situations the FDA wants to see explored. Certain of these studies are already in Nycomed's plans and will be conducted for EMEA purposes as well as for the FDA.

We are currently conducting a 60-patient shoulder study in Australia. Assuming the study yields the results that we expect, we anticipate shoulder surgery will be the pivotal efficacy study we would use to support our NDA application. We currently envision that the total number of patient exposures that we would submit to the FDA as part of the NDA would be approximately 700 to 800 patients and about 300 patients have been dosed with POSIDUR to date. Assuming that the program progresses as we expect, we anticipate that the Phase III program will take approximately two years from initiation to NDA filing.

During the first quarter, we also engaged an outside market research firm to give us focus group interviews with 63 surgeons from seven surgical specialties. The objectives of this research, which will assess the current knowledge, attitudes, and practices regarding use of analgesics among various surgical specialties. To gauge surgeons' levels of satisfaction with current analgesics, to gain a reaction to the POSIDUR product profile, and to evaluate interest in the use of POSIDUR.

POSIDUR received positive feedback from all the surgical specialties and two highlights from this study were as follows

first, the average overall rating was 8.1 out of 10, which is a very strong rating and as well, the likelihood to describe in the future was a 4.5 out of 5, where 5 is defined as definitely will describe.

The physicians pointed to a multiple positive characteristics of POSIDUR. They liked the longevity of release, the favorable safety profile, the convenience, the ease of application, the fact that it has Bupivacaine is a known drug and was perceived to be safe and efficacious. The potential pharmaco-economic savings a solid fact that it is a non-narcotic and therefore, would not have associated side effects. This research was another confirming piece of data with respect to the market potential for POSIDUR, and is information we are sharing with potential partners.

The major planned activities for POSIDUR in 2009 are as follows: we expect to have data from our approximately 60-patient Phase IIb clinical study in shoulder surgery in 2009. We also plan to conduct a thorough QTc study this year. A QTc study is a cardiac safety test increasingly recommended by the FDA. It should be noted that we haven't seen any differences in cardiovascular or CNS side effects between the roughly 300 patients dosed to date with POSIDUR versus the approximate 150 placebo patients.

Additionally, Nycomed is doing a Phase IIb study in hysterectomy patients and a Phase IIb study in shoulder surgery patients that are starting this year. We are in discussions with various parties about licensing the US, Canadian, and Asian development rights with regard to POSIDUR. As a reminder, Nycomed became our partner for this program in the fourth quarter of 2006. Nycomed paid us $14 million upfront, another $8 million on our first clinical milestone with regard to the Phase IIb data and we have an additional $180 million in milestones to come. Nycomed will commercialize this product in Europe and other defined territories, paying us royalties that start at 15% and go up to 40%. Nycomed also pays one half the development cost of this program for the US and European markets.

Another significant effort in the first quarter was the successful end-of-Phase II meeting with the FDA for TRANSDUR-Sufentanil, and restoration of worldwide rights to this program. Over the last few years, Endo has conducted an extensive clinical and nonclinical program for TRANSDUR-Sufentanil. This work includes a 74-patient Phase IIb clinical trial that was conducted to explore the conversion of opioid experience patients with nonmalignant moderate to severe chronic pain from current transdermal opioids like Duragesic as well as oral opioids, including oxycontin over to TRANSDUR-Sufentanil. This study met its primary and secondary objectives of establishing a successful dose titation regime and dose potency relationships, demonstrating safety and tolerability at the therapeutic dose, as well as achieving the effective analgesic pain control.

In addition to this recent Phase IIb study, there have been nine additional clinical studies to date with TRANSDUR-Sufentanil, that have involved over 300 patient exposures. The studies include evaluating wearing pharmaco-kinetics, special populations, repeat applications, skin abrasions, drug interactions and dose conversions. In addition, a strong nonclinical package, compromising multiple animal safety studies have been developed, including carcinogenicity studies, long-term toxicology and multiple biocompatibility studies. The Phase II data, the extensive nonclinical and detailed protocols of the Phase II were all reviewed with the FDA at the end of Phase II meeting on February 19, and as a result of this meeting, we believe we have a clear idea of the anticipated regulatory pathway for the Phase III program and approval, which will follow a 505(b)2 process. We are excited to have this Phase II ready product and we are in active discussions with several potential partners about licensing rights to this program and moving it into Phase III.

Our Sufentanil patch targets the market of chronic pain users. J&J's fentanyl patch Duragesic had revenues of approximately $1 billion in 2008, and there were about 7.5 million prescriptions for fentanyl patches in the US in 2008, which represents a continued growth over 2007. That figure underestimates the opportunity, as there were about 23.5 million prescriptions written in the US for extended-release opioids in 2008 and many of these patients could benefit from a superior patch.

Some of the product events of the TRANSDUR-Sufentanil patch are: first off, our patch seeks to provide seven days of pain relief versus existing fentanyl patches that deliver 2 to 3 days of medication, or versus the twice daily oral opioids. Our seven day duration should provide a more consistent blood level of drug and therefore uninterrupted delivery of pain relief. From the standpoint of worry about diversion of drugs, during a 28 day treatment cycle, there would be four of our patches to monitor versus 9 to 14 fentanyl patches and 56 oxycontin pills. Relative to the fentanyl patches, we should have a lower manufacturing cost over a monthly treatment cycle. A patch is roughly one-fifth the size of the existing fentanyl patches, for example, like Duragesic, and during a month, only four of these small poster size stamp sites would be required. Between the longer duration of action and smaller size, our fentanyl patch is clearly more patient-friendly product. We believe that the smaller size and formulation, which drives less chemistry across the skin, offers the potential for improved safety and tolerability.

Lastly, there may be an inherent advantage in utilizing Sufentanil as the active agent. It is a more potent agent than fentanyl and yet there have been a number of clinical papers written that suggest it has a wider therapeutic index than fentanyl and possibly other chronically used narcotics.

So in summary, we think that our Sufentanil patch with a strong clinical and nonclinical data set in hand and a Phase III program plan that has been reviewed by the FDA is a very exciting asset.

The last product I will review today is ELADUR. ELADUR is a transdermal patch containing Bupivacaine, which is designed to provide three days of relief versus the existing market-leading patch, which is indicated for 12 hours of wear. ELADUR is very thin and has an elegant design for superior wearability. Our patch can be even worn in the shower or during exercise. In October, we were pleased to announce to announce our collaboration with Alpharma. The terms of the deal were that Alpharma paid direct and upfront licensing fee of $20 million. There are future possible additional payments of up to $93 million for achievement of pre-defined development regulatory milestones as well as potential additional payments of up to $150 million of sales-based milestones.

If ELADUR is commercialized, DURECT will also receive royalties on product sales. Alpharma, now King, will control and from the development program going forward. In December, King acquired Alpharma, so now the rights and obligations of our agreement carry over to King. Our main activity since that time involves the interaction with the King team on this program, such that specific decisions can be made with respect to the program.

Just in closing now, we occasionally get requests from some of our shareholders to say a bit more about other programs that we may be pursuing in our research efforts here at DURECT and in an attempt to respond to this request, I have asked Felix Theeuwes, DURECT's Chairman and Chief Scientific Officer to make a few brief remarks on that topic.

Felix Theeuwes

Thank you, Jim. I would like to make some closing remarks and comments on the status of our drug developments and business development capabilities and where we are and sort of where we are going in the long run. To date, I think it is fair to say we have built significant staying power in our business with multiple technologies in the oral area, the transdermal area, and now recently also in the (inaudible) implantable area. We have established a first-rate team with our senior staff that have multiple decades of experience developing successfully marketed products to various places where we have drawn on that experience. We have successfully executed a product assessment process, to select products and to develop them, just like the products like POSIDUR, ELADUR, TRANSDUR-Sufentanil, the other products including REMOXY, and I think we have had remarkable success in licensing these products at very attractive deal terms. That process of product selection and licensing is continuing and we can expect more announcements on that front.

As you know, there is a very big argument brewing in the biotech fields on biosimulus or biogenetics and some of those have already come into the market overseas. I think we can expect to see the same evolution going forward in the United States and I think what we saw in the 70s and 80s, where the pharmaceutical community woke up to the fact that they were losing franchises, they licensed in from companies like (inaudible) products with superior drug review profiles as an attempt to hang on to those franchises and extend them with product lifecycle management. I think we're going to see exactly the same situation going on in the biotech area with building so-called biobetic [ph] products.

We are in a particularly strong situation with our (inaudible) play a major role in delivering those biotech molecules. Compared to conventional depots such as Microdur or such as microparticulate products and by the way, we can also make those, but they say that depot can carry 10 times the drug loading, which means that we can make them 10-times smaller injection volume, which has a significant impact on pain on injection. We have a very simple manufacturing process. We can load the drug burst and constantly deliver those drugs for periods of weeks to months. So I think this is a very important area for us for drugs and we are investing more in those areas. We invested $4.6 million in the depot area in 2008 and we already have collaborations with select partners, for example, in 2007, we had co-investments of $1.7 million and in 2008, $1.5 million. So this area will become more permanent as time goes on.

So in conclusion, I think we can say that we are well situated with multiple technologies for the pharmaceutical as well as the biotech industries. We have a strong pipeline with one NDA on file, three programs in Phase II, two announced in Phase I and with our small-sized company, any one of those products can have a transforming impact on our market cap. So I think that with the investments in research and the status of our product developments, we are very well positioned to capitalize on the opportunities today and for the pharmaceutical industry and the biotech industry in the future to come.

We thank you for your support and we are happy to answer any questions that you may have.

Question-and-Answer Session

Operator

Our first question comes from Dave Windley with Jefferies & Co.

Dave Windley – Jefferies & Co.

I have a couple. I was wondering, Jim on the Phase III program for POSIDUR, is the two-year timeframe, is that basically the – is the rate limiting step there the pivotal trial and enrollment assumptions around that or will some of the supportive trials be clinical path limiters, just wondering what the two-year time span is dictated by.

Jim Brown

That is a good question and it is an estimate, as you might expect. We expect that the longest duration setting would be the pivotal study because that has the most patients compared to other studies with smaller groups of patients, but we're still right now just mapping out exactly which model we will use in those studies. So I think your assumption is correct, the pivotal study is a long duration.

Dave Windley – Jefferies & Co.

Okay.

Jim Brown

But we had built in time also at the end of that for you know typically more like six months for an NDA and all that. So we have allocated all of that into that.

Dave Windley – Jefferies & Co.

Okay, and you have done, while you have been waiting on the FDA to give you some clarity on this, you have been doing some, you should call them exploratory studies and Phase IIb studies. To what degree could they be used supportively or if not that, are those studies in then dictating the supportive studies that you will do?

Jim Brown

Actually both, I mean, some of those will be readily used and as I also said earlier, some of the Nycomed what they are doing (inaudible) be doing will also be used to answer some of these questions and also, you know we're doing that Phase IIb shoulder study down in Australia, that will help us in the construct of that, should we use that model, should we believe that we are in this point of time in the Phase II pivotal study. But the nice thing is that it is one, and not two, right, which is what we were thinking before.

Dave Windley – Jefferies & Co.

Okay, on the comments, Felix, that you just made, can you talk about the IP protection around the SABER depot and perhaps you know, even bring that into kind of the current litigious environment and how strong do you think that will be in an environment where you know non-composition amount or patents are challenged left and right and some hold and some don't, maybe more don't?

Felix Theeuwes

Yes, the whole SABER area, we have first of all, ORADUR and then there is the SABER depot and we filed a series of what we feel are going to be very strong patents to protect the order of business and at the same time, as you have heard, we are consistently in testing in that area, and based on our own research work, we are capturing all of intellectual property and our exclusivity on patents that we are building on top of it, at this point, we expect that will run us to 2025.

Dave Windley – Jefferies & Co.

Okay, thank you.

Operator

Thank you, Mr. Windley. (Operator instructions) Okay, we now have a question from Jeffrey DeSeibert [ph] with KB Advisors [ph].

Jeffrey DeSeibert – KB Advisors

Good afternoon. Coming back to the POSIDUR Phase III, you have given us a guesstimate timeline of two years from start to filing an NDA. Could you give us any further clarity on when you might expect to begin a Phase III?

Jim Brown

Yes, we are working on all that right now, but I think the work in front of us is the work we are looking at the 2009 and that is to complete the Phase IIb study that we're doing down in Australia. Most likely, we will also be completing the QTc work this year, and then at the end of those things, we anticipate we will be starting Phase III program, most likely early in 2010.

Jeffrey DeSeibert – KB Advisors

So to be clear, you wouldn't expect POSIDUR Phase III to begin until the first half of 2010?

Jim Brown

That would be an estimate right now. I mean we could certainly, at risk do something and start it sooner, but that has not been our mode for this. We typically are taking a fairly conservative approach and just making sure that we lay down our tracks on a firm foundation.

Jeffrey DeSeibert – KB Advisors

Right. And so to extend the logic to make sure I have understood this, we couldn't expect to see an NDA filing until the first half of 2012?

Jim Brown

No, it would depend on how things go. I mean, we are giving an estimate right now of a couple of years. Could we beat that? Who knows, possibly, might extend beyond that, possibly as well. So, I think these are just estimates and that's the best we can do at this point in time.

Jeffrey DeSeibert – KB Advisors

Could you characterize a little more your discussions regarding both POSIDUR partnerships and TRANSDUR partnerships? On the first one, Asia has been something you've been looking at for some time, there was a change in policy towards North America, you know in the last six months, is there a little activity, a lot of activity, can you try and help us get a sense for in the current environment, you know how much interest is this generating?

Jim Brown

I think that is a great question. The reason, one of the reasons we are talking to people now in the United States for the US market in particular is because we’ve had so much interest from people on the outside. You know there are a lot of small companies trying to sell themselves and their wares to exist. Like to continue to exist in this environment, but then behind all of that background noise, there are just few true products and I don't think too many foreign companies are interested in early-stage dreams and ideas. But they are interested in later stage projects. And we have the good portion of that both of these are poised to enter Phase III and so to that end – and they are both large potential products. They could be blockbuster inside and so there is a lot of interest from big companies, many potential partners on each of these.

Jeffrey DeSeibert – KB Advisors

All right and as follow-on to that, in the past as you have spoken about financial guidance and the financial needs of the company, you had an approximate use of cash of $30 million odd a year, which in the past you've been able to substantially fulfill by some type of a deal. Do you expect that to be the case again this year? Is your – without predicting where it would come from, do you think you will once again be able to do some type of a deal that will mean that you will finish the year with, you know give or take something the same amount of cash you began it with?

Matt Hogan

Well I'll take a stab at that, Jeffrey. I think a couple of comments. One is whenever we give our cash guidance at the beginning of the year, as you have picked up, that assumes no milestones and no new deals. So, we try to put that forth as kind of a most conservative base case, because it is always hard to predict the timing of doing one of these licensing transactions that are kind of lumpy by nature and how large will they be in terms of upfront versus downstream returns. But a key part of a strategy in fact as you've heard is to work on more of these licensing transactions.

I guess another comment I would make is, you know we would try to be low key about it, but we took some action to reduce headcount pretty substantially in the first quarter – late in the quarter. So that was an attempt to ensure that we had even more breathing room, if you will. And I guess another comment I will make is if you very superficially took the first quarter burn rate of $5.7 million and you happen to just very simplistically multiply that by four, what you would see is a number that is much lower than the guidance that we gave at the beginning of the year. Now we don't want to just frequently be changing that guidance around, but I think we are trying to do everything we can to make sure that the guidance we have given is, in our mind conservative and in fact, our strategy is to try to bring in more resources through partnering. And we've got a couple of multiple assets that are sort of in play to help us to pull that off.

Jeffrey DeSeibert – KB Advisors

I think you have no, as of early May 2009, you have no degree of comfort that anything might happen this year?

Jim Brown

No I wouldn't phrase that that way. I think I would just say, we always hate putting a timetable on when we are going to deals because we feel like, all you are doing is setting yourself up negatively because they're not only Wall Street, but potential partners feel like, oh, they said they're going to do a deal by such and such a date and as the clock gets closer, they feel like they have some leverage over you. And so we never want to put ourselves in that position. You know, we could do multiple deals this year. But we just are a little uncomfortable being too precise on the timing of any of these transactions.

Jeffrey DeSeibert – KB Advisors

Thank you.

Operator

Thank you, Mr. DeSeibert. We now have a question from Neil Gagnon with Gagnon Securities.

Neil Gagnon – Gagnon Securities

Question for Matt. Of the $5.7 million cash loss, how much was severance cost which might not be repeated?

Matt Hogan

Well, from a negative standpoint, you are saying, let me see if I follow your question, I will try to answer it.

Neil Gagnon – Gagnon Securities

How much was severance cost in the first quarter?

Matt Hogan

Well, we accrued about a little over about $400,000. The actual cash used was a really small number, like $25,000.

Neil Gagnon – Gagnon Securities

Okay.

Matt Hogan

So about in April, the other $400,000 went out the door. Now the offset to that is, how much do we reduce our future salaries and benefits, and all the associated employees costs, and –

Neil Gagnon – Gagnon Securities

Good.

Matt Hogan

I don’t think we want to say that, but 25% of your headcount makes a reasonably large number.

Neil Gagnon – Gagnon Securities

Matt, normally you put about $100,000 a person, 41 people, thus $4 million, plus probably a little higher in your case. So I think that your spending would go down at least that much.

Matt Hogan

I think that’s an annualized figure and it depends on the mix of the employees, but your logic is not radically off. And then I follow the kind of thing you are trying to do and that’s reasonable.

Neil Gagnon – Gagnon Securities

Good.

Matt Hogan

It’s not unreasonable. Let me say it that way.

Neil Gagnon – Gagnon Securities

Good, thanks.

Operator

Thank you. And we have a question from Dave Windley with Jefferies & Co.

Dave Windley – Jefferies & Co.

Thanks for taking the follow-up. Just wanted to come back to TRANSDUR-Sufentanil, the kind of knew a lot of what you said, but the one thing that’s jumped out at me was rights not transferred until I believe it was August, and I wondered why the delay?

Jim Brown

That actually is a very good question. It is really is just a legal aspect with regard to the agreement. The product has already been transferred, but the rights are already back to us, but there is a tail in the agreement that allows us to make sure that we get all the data and all the information we need and that’s a six month tail, so that extends into August.

Dave Windley – Jefferies & Co.

So they have that amount of time to gather data and get it back to you. Is that –

Jim Brown

It’s just a transition period, it’s not like an – it’s not for both parties and it’s just because you can’t transfer it overnight in one day. It has – I would not read anything into it and they have been very professional and cooperative in transferring everything back. I mean they have been really wonderful to work with. We pretty much have almost everything in right now, but there will be a few of them that needs to get in.

Dave Windley – Jefferies & Co.

I guess what I am thinking about is, do you have to wait or have to, but would you be hindered from having further partnering discussions because you didn’t have everything in hand until August?

Jim Brown

That’s a great question, but no, that’s not the case. We actually have an electronic data (inaudible) in place, it has been populated with data from the various clinical trials and the like. And the information is there. We are in active discussions with people, but as you know these take a long time to close.

Dave Windley – Jefferies & Co.

They sure do. Thanks.

Jim Brown

Okay.

Operator

Thank you. It does not appear that there are any further questions at this time.

Matt Hogan

Okay. We would like to thank you for all participating and your interest and take care, and we will look forward to communicating with you in the future. Take care.

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