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Executives

Vincent J. Milano - Chairman, Chief Executive Officer and President

John Peter Wolf - Vice President, General Counsel and Secretary

Colin Broom - Chief Scientific Officer and Vice President

Charles A. Rowland - Chief Financial Officer and Vice President

Daniel B. Soland - Chief Operating Officer, Chief Commercial Officer and Vice President

Robert Clayton Fletcher - Vice President of Business Development & Project Management

Analysts

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Robyn Karnauskas - Deutsche Bank AG, Research Division

Mario Vincent Corso - Mizuho Securities USA Inc., Research Division

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Thomas Wei - Jefferies & Company, Inc., Research Division

Joseph P. Schwartz - Leerink Swann LLC, Research Division

Nicholas Bishop - Cowen and Company, LLC, Research Division

Liisa A. Bayko - JMP Securities LLC, Research Division

Rachel L. McMinn - BofA Merrill Lynch, Research Division

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

ViroPharma (VPHM) Q1 2013 Earnings Call May 1, 2013 9:00 AM ET

Operator

Good morning, and welcome, everyone, to the ViroPharma First Quarter 2013 Financial Results Conference Call. Today's call is being recorded and is expected to last 1 hour. At this time, I will now turn the call over to ViroPharma's Chief Executive Officer, Vin Milano. Please go ahead.

Vincent J. Milano

Thank you. Good morning, and welcome to everyone joining us on today's call. I'm joined by the other members of the ViroPharma management team, as well as John Kirby, our Chief Accounting Officer; Will Roberts, our VP of Corporate Communications; and Bob Doody, our Head of Investor Relations.

Before we proceed, Pete Wolf, our General Counsel, will apprise you of our potential to make some forward-looking statements. Pete?

John Peter Wolf

Thanks, Vin. During this call, we will make forward-looking statements. Certain statements such as those regarding our expectations for future financial results, including our own 2013 guidance, final inventory levels of Cinryze held by a SPSDs, the timing and levels of reimbursement achieved in Europe, tax rate, the timing and potential outcomes of clinical studies, our ability to continue to identify additional U.S. Cinryze patients, and our ability to find a partner for VP 20621 are examples of such forward-looking statements.

Maribavir data discussed on this call reflect interim data as the studies are ongoing. There can be no assurance that the interim data is representative of the final clinical data from these studies. As you know, forward-looking statements are subject to factors that may cause our results and plans to materially differ from those expected. Please refer to the press release issued this morning, and to our filings with the 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.

In this call, we will also discuss some non-GAAP measures in talking about our company's performance. You can find a reconciliation of those measures to GAAP measures in our press release issued this morning.

I'll now turn the call back over to Vin.

Vincent J. Milano

Thanks, Pete. So once again, thanks to all of you for tuning in. For today's call, we have a lot of ground to cover, so my opening remarks are going to be brief.

Overall, the first quarter of 2013 represented another period of strong commercial progress and increasing momentum for our development pipeline programs. Impressively, our core Cinryze U.S. business continues to generate consistent demand growth as we begin our fifth year on the market. Our European product contributed nearly $7 million for the quarter. And importantly, on the development side of our business, I'm very pleased with the achievements that have been made so far this year. Our progress with the pipeline is setting the stage for a number of key data catalysts over the next several quarters, which will help define the future and enhance the growth of ViroPharma for the decade ahead.

So as promised, let's dive right into the details. First, Colin will provide an overview of our clinical development accomplishments during the quarter, including an overview of the evolving data for the ongoing maribavir study. Colin will also discuss some of the key pipeline milestones for you to expect over the next several quarters. And then Charlie will provide you with the top line financial highlights, along with some color on related commercial trends, and then I will offer a few closing remarks before opening the call to address your questions. Colin?

Colin Broom

Thanks, Vin. Good morning, everyone. These are very exciting times at ViroPharma as we see the progression of our pipeline and the initial results investment in our development programs to bring potential new therapies to our patients.

Starting with development activities related to our C1 inhibitor franchise, as you're all aware, in December last year, we initiated our Phase IIb multicenter, double-blind, dose-ranging, crossover study, evaluating the safety and efficacy of subcutaneous administration of Cinryze in combination with Halozyme's recombinant human hyaluronidase enzyme PH20 in adolescents and adults with HAE for prevention of HAE attacks.

Subjects are randomized into 1 of 2 8-week treatment sequences, and each receives 1,000 and 2,000 units of Cinryze with PH20 in a crossover design. Each subject will participate for approximately 6 months, including screening, washout between treatment periods and follow-up. The primary endpoint of this study is the number of attacks recorded during each treatment period, which will allow comparison of attacks between doses, relative to historical attack rates. The target enrollment for the study is 40 subjects from both the U.S. and Europe, and I'm very pleased to report that we've completed enrollment of the final subjects into the screening period and expect to randomize the final patients over the next week.

At this point, we anticipate providing top line data from the study in very early 2014, if not, sooner. Also, on the topic of development programs of C1 inhibitor, we also expect to be completing the enrollment of our 20-patient, randomized, double-blind, placebo-controlled study of the treatment of antibody-mediated rejection in kidney transplant patients by midyear. That means data would be available towards the end of this year.

Moving on to other C1 inhibitor franchise programs, we're supporting additional development activities focused on neurologic and dermatologic conditions that complement inhibition, is thought to play a significant role, such as neuromyelitis optica, autoimmune hemolytic anemia and refractory paroxysmal nocturnal hemoglobinuria. We expect that we'll learn much more about C1 inhibitor and its effects on these patient populations from the results of these studies in the quarters ahead.

Moving on to programs beyond our C1 inhibitor franchise. The IND for VP 20629, our compound for Friedreich's ataxia, was accepted by the FDA during the first quarter. Friedreich's ataxia is a rare, ultra-orphan, progressive, multi-system disease and represents another very critical unmet medical need in this patient population. We will be initiating a clinical trial in patients midyear.

Regarding Plenadren, as you are likely aware, we had feedback from the FDA earlier this year, indicating that the data package that was successful in gaining approval for Plenadren in Europe was not robust enough for FDA's review here in the U.S. And additional data including another study to demonstrate safety and efficacy would be required.

Our team has formulated a Phase III program and discussed it with several key experts in the field. And our next step is to request a meeting with the FDA to review our proposed clinical development program. We expect to be in a position to provide an update on this program by year end.

Now moving on to programs to which we already have data. You might have seen last week, we announced positive Phase II data from the VP 20621 program for prevention of recurrence of C. difficile infections. We also announced in the same release that because C. difficile infection is no longer a fit within our core focus of rare and orphan diseases, we are seeking a partner to take this program to the finish line and onto commercialization.

As a result, I don't intend to spend any further time today on this data. However, I would like to commend our development team, who have driven VP 20621 to this point and executed a very robust international Phase II trial with this novel antibiotic -- nonantibiotic therapeutic approach.

Proof of concept in patient has been demonstrated and colonization with VP 20621 significantly reduced the recurrence rate and it therefore has the potential to significantly improve outcomes in its very sick patient population and address the unmet medical need of prevention of recurrent disease.

Finally, let's move onto the maribavir data update. As most of you are likely aware, we have 2 ongoing Phase II clinical studies of maribavir, both of which are open to recipients of either stem cell or solid organ transplants. Viral clearance has been attained in more than 90% of the initial 41 maribavir-treated subjects. Including those subjects with virus resistant or refractory to current treatment, for whom there are currently no alternative therapies.

So let me elaborate on this very encouraging data. In Europe, we have an ongoing study targeting an enrollment of 160 patients with asymptomatic CMV viremia. With 3 separate dosing levels of maribavir, head-to-head against valganciclovir. The other study here in the U.S. is targeting 120 patients who are resistant or refractory to prior anti-CMV treatment, including ganciclovir, valganciclovir or foscarnet therapy. This is a very challenging patient population, with a high unmet medical need because of a few, if any, good options for treating these patients. Both studies each have 3 separate dosing arms of maribavir, ranging from 400 milligrams BID up to 1,200 milligrams BID. And the European study also has a valganciclovir arm at the label dosage. The studies are open-label with respect to whether or not patients are receiving maribavir. However, it's important to remember we remained blinded to maribavir dose. For these analyses, all biologic testing was performed by a central laboratory and the lower limit of detection of CMV in plasma is 200 copies per ml.

For this most recent snapshot of these ongoing studies, data were available to at least week 3 of treatment for 36 subjects in the asymptomatic study and in the resist -- and 13 in the resistant refractory study.

Starting with the asymptomatic study, of 28 subjects treated with maribavir, 26, or 93%, achieved undetectable plasma CMV DNA while on study drug treatment. Only 1 maribavir subject did not clear virus while on treatment and 1 other maribavir subject was withdrawn from treatment for nonbiologic reasons before clearing virus.

In the valganciclovir arm, of 8 subjects who started treatment, 5, or 53%, achieved undetectable plasma CMV DNA. The remaining 3 subjects were withdrawn from treatment for nonbiologic reasons.

I should also mention that study drug can continue at the discretion of the investigator for a maximum of up to 12 weeks in this study.

Now let's move onto the resistant refractory study, which represents the most critical unmet need of the 2 approaches. First, we should remind you that this group contains some very, very sick patients who have multiple medical problems. Of the 13 subjects treated with maribavir, 12, or 92%, achieved undetectable plasma CMV DNA while on study drug treatment. One subject was withdrawn from treatment before clearing virus because of progression of underlying post-transplant complications that led to a decision to pursue comfort care only and the subject subsequently died.

In this study, maribavir can continue at the discretion of the investigator for up to a maximum of 6 months. So our experience continues to evolve. To date, we have seen few patients who have had a rebound in viremia when still on maribavir therapy, in fact, 1 patient in the asymptomatic study and 3 patients in the resistant refractory study, which may also be related to the complexity of their condition and the impact on their immune system.

We are also collecting post-treatment data to evaluate the extent to which CMV remains suppressed after stopping study drug treatment, which, of course, is another important component of the efficacy assessment. Also, as a reminder, again, we do remain blinded to the maribavir dose in these studies, so we'll be interesting when we reach the point where dosing is unblinded to evaluate for dose response. All in all, the biologic data to this point are very, very encouraging. Also, so far we've seen good safety and tolerability, which was consistent with our expectations with taste disturbance being the most commonly reported adverse event. And this is very different from the serious adverse effects, including marrow suppression, neutropenia and renal toxicity seen with currently available therapies.

With these very encouraging data, we're expanding from the current limited number of sites and are opening up additional sites for both studies to help expedite enrollment, and we look forward to providing you with further updates as the study continues to advance.

So in conclusion, our development pipeline is more robust than it's ever been in our company's history. And as you can clearly see, there's a lot to be excited about.

I'm now going to turn over the call to Charlie to provide you with an overview of the financials from the quarter. Charlie?

Charles A. Rowland

Thanks, Colin, and good morning to everyone. Let me begin with some highlights in the quarter, along with updates on trends related to our commercial progress. For the quarter, we achieved net product sales of $107 million. We generated cash flows from operations of $14 million, recorded a GAAP net loss of $0.98, a non-GAAP adjusted diluted earnings per share of $0.15 and we ended the quarter with working capital of $356 million, which includes cash, cash equivalents and short-term investments of $261 million.

As most of you may have noted from our press release this morning, due to a rapid decline in the market price of generic vancomycin during the quarter, we had an impairment of the intangible assets related to Vancocin. Accordingly, we recorded a noncash charge of approximately $104 million.

Revenues for the quarter were $107 million driven by a record $99.5 million of global Cinryze revenues, representing growth of 46% over the 2012 period. The $97 million in U.S. Cinryze net sales includes $91 million of patient demand and the balance represents additional inventory in the channel of about $6 million.

Consistent with prior quarters, Cinryze U.S. growth was driven by steady new patient adds and consistent dosing rates, along with net realized price growth. During the first quarter, we shipped over 23,000 doses to the specialty pharmacies and specialty distributors. Of the patient metrics we've shared with you previously, they've remained fairly steady this quarter. Dosing rates have continued to hover around an average of 1.8 doses per week, roughly 80% of our patients are administering their therapy at home. We continue to see significant prescription generation from first-time prescribers. And in terms of new patient adds during the quarter, roughly 40% represented steroid conversions and nearly 60% of our new patients were either naive to any therapy or had previously tried to manage their disease on an acute basis.

As you may know, during this past quarter, we expanded our HAE field force by 8 specialists. The effect of the additional reps is enabling our team to increase the amount of time spent with target physicians and to be more proactive in following up on new leads. The team hit the ground running in the first quarter and while it is still too early to assess the impact, we can say, anecdotally, that we are very encouraged by the early returns.

So overall, demand growth for Cinryze remains consistent and the early trends on the field force expansion are positive.

One operational item we want to highlight for you relates to the future changes in specialty pharmacy and specialty distributor inventory levels. Let me share 2 facts with you. First, over the last 3 quarters, our SPSDs have built their inventories to the higher end of our contractual levels, which is 4 weeks. And second, we have recently been informed that they plan to improve the management of their working capital, which we expect means they will reduce the amount of Cinryze inventory that they carry.

So what does this mean taking into account our U.S. Cinryze net sales guidance of $390 million to $400 million? While our guidance range remains unchanged, it reflects an increase in our expectation of patient demand and a reduction in our expectation of the channel inventories, which could begin as early as the second quarter.

In the quarters ahead, we will continue to be transparent and we will make clear any differences between patient demand and reported net sales.

Moving next to our European products. Overall, our European business delivered $7 million in net sales during the first quarter of 2013, delivering growth of 152% from the comparative quarter of 2012. Cinryze delivered $2.7 million, Buccolam $2.5 million and Plenadren, $400,000. Also of note, we recorded $400,000 in maribavir sales through our Name Patient Programs outside the United States.

As for our 3 European commercial launches, Cinryze, during the quarter achieved pricing and reimbursement in both France and Italy, and we expect to be fully launched across all big 5 countries by the end of the second quarter. Our team is very engaged with KOLs throughout Europe and in the countries that we have launched such as Germany, we are seeing broader product adoption from physicians who manage patients with HAE.

Regarding Buccolam, the first quarter's results reflect continued progress in pricing and reimbursement and growing awareness of the clinical value of the product, coupled with an ongoing transition to Buccolam away from unapproved products or the so-called specials. Pricing and reimbursement is in place in each of the big 5 countries, and we expect to be fully launched in these countries by midyear.

For Plenadren, we essentially are in the beginning of the launch. And our first quarter results are based upon commercial sales, primarily in Germany so far. While we have achieved pricing and reimbursement at the national level in the U.K., we have yet to do so across the local level and that work continues today. In addition, we do have our Name Patient Programs in Italy and Spain up and running. We are also -- we also are investigating -- or investing in growing awareness and developing advocacy relationships to help support physicians and patients dealing with this serious condition.

Enthusiasm for Plenadren remains quite high among physicians and patients and as we continue to work through the pricing and reimbursement steps across Europe at both the national and local levels for all of the big 5 countries. Once pricing and reimbursement is finalized, we expect this enthusiasm to translate into product adoption.

Overall, our European business is growing. It does remain a great deal of work in front of us. However, we continue to view Europe and these products as important aspects of our future growth.

On the expense side, our combined SG&A and R&D expenses were $60 million compared to $53 million in the same quarter last year. This growth in expense is primarily driven by momentum in our clinical development pipeline, as well as investments in our commercial product efforts.

Onto taxes. For the quarter, we had a tax benefit of approximately 39%, primarily due to the write-down of the Vancocin intangible asset. In the remaining quarter of this year, we expect tax expense on operating income to be between 50% and 55%.

Lastly, as you saw in this morning's press release, I'd like to review guidance for you -- with you. For 2013, our expectations are as follows: we reiterate our North American Cinryze net sales guidance of between $390 million and $400 million; we are reducing worldwide net product sales by $10 million to between $440 million and $465 million. This decrease is driven by the price erosion for generic vancomycin; and for 2013, we expect Vancocin sales to be around $10 million for the year.

And finally, we are reiterating our SG&A and R&D combined guidance of between $240 million and $260 million.

With that, I'll turn the call back over to Vin for some closing comments. Vin?

Vincent J. Milano

Thank you, Charlie and Colin. We continue to deliver consistent revenue growth from our commercial business. And in addition, our clinical development programs continue to progress and are setting us up to deliver catalysts over the next 6 to 9 months. These catalysts are the ongoing maribavir data, updates, potential results from our C1-INH new uses programs, our subcutaneous C1 Phase II data, and also in 2014, we should see data from the oral budesonide study for eosinophilic esophagitis, or EoE, which is a critical factor bearing on our final decision to acquire Meritage.

As always, I want to thank our team for their continued devotion to the patients, whom we are already helping take control of their lives, as well as those who are still seeking hope and answers for the diseases they are afflicted by. I also want to thank you all for your continued support of our company. We look forward to continuing our strong momentum and keeping you apprised of all of our progress in the quarters ahead.

With that, we'd like to open up the call to begin to address your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Brian Abrahams with Wells Fargo.

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Cinryze growth seems to continue to be steady. We've seen recently other treatments begin to show declines. You touched on a few of the metrics in your prepared remarks. So I was wondering if you could maybe talk a little bit more specifically about some of the dynamics you're seeing among HAE treatments. Are you starting to see any kind of acceleration in the shift of new patients from on-demand to Cinryze prophylaxis? And basically, just sort of wondering what you're seeing overall? And then I had a quick follow-up question.

Vincent J. Milano

All right. Thanks, Brian. First, thanks for your comments and compliments. We appreciate it. The -- I think the easiest way to answer your question is that in the quarter -- I think in the prepared remarks, we've talked about half of our patients came from -- or 60% of our patients came from either treatment naive patients, i.e. new patients or acute patients. And if we break that into its parts, about 30% of those were off of acute therapies, which is relatively consistent with what we've seen over the last couple of quarters. So our view is that this market continues to evolve. Frankly, every physician works closely with their patient to determine the appropriate therapy for them. And maybe after taking acute therapy, they'd prefer to prevent the attacks than treating them.

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Got it. And then is there any change in the way we should be thinking about your overall tax rate for this year and going forward, given the pace of the ramp in the European business is? Is low-30s percents by 2015 still the right way we should be looking at it?

Charles A. Rowland

Yes, Brian. This is Charlie. Yes, so far, nothing's really changed for our annual tax guidance that we provided back on our Investor Day.

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Okay. One more quick one then I'll hop in the queue. When might we expect inventory for Cinryze to normalize as we get -- as we go throughout the year?

Vincent J. Milano

So Brian, if we could define the word "normal," we can answer that question.

Brian Corey Abrahams - Wells Fargo Securities, LLC, Research Division

Stabilize, I should say.

Vincent J. Milano

It's -- we -- let me just make a comment about that since you raised the point. I want to thank our SPs and SDs who, over the last 4 years, are extremely mostly with us to manage the tight supply situation. And I also want to thank them for being true to their word. They told us when we had industrial scale approved, they wanted to build their inventory for the -- for their contractual levels, which they did over the last 3 quarters, and that's where we ended Q1. We certainly respect that their position now is to not only continue to meet their patient or their customer service requirements for delivery. We're able to do because of the supply, they've also now managed their balance sheet more effectively for them. So it's hard to predict what they're going to do. As you can appreciate, we don't have control over those decisions, but they've been great partners to us. And we'll work closer with them here on out.

Operator

Our next question is from Robyn Karnauskas with Deutsche Bank.

Robyn Karnauskas - Deutsche Bank AG, Research Division

Just real quickly. Two things, do you -- can you give us a sense of where the growth in Cinryze is coming from? I know in the past you've highlighted that you're looking at new markets, like the GI markets, for new patients. And second, for maribavir data, the good response that you saw in the refractor patient, how do we think about the rebound? And how do we think about the bar for breakthrough therapy? You mentioned that maybe looking for a 50% to 60% reduction would be something that might be a bar for breakthrough? I mean, comment a little bit on those items.

Vincent J. Milano

So Dan, why don't you take -- or actually Colin, do you want to take the -- no, I'm kidding. Dan, you take the Cinryze question on growth where we find our patients. And then Colin, you can come back and provide some perspective on Robyn's questions on maribavir.

Daniel B. Soland

And by the way, everything I've learned commercially, I learned from Colin. So I would thank him. I think between Charlie and Vinny, I think what they've got at was about 60% of the patients were either naïve or had come from acute therapy. The other 40% were coming from steroid patients. And interestingly, a very large percentage of our new patients are coming from physicians who have only prescribed for one patient. So clearly, I think between the acute used products and ourselves, we've gone a long way to educating physicians, caregivers and getting more patients diagnosed. And it's a rather broad mix of physician specialties that were gaining these new patients. I don't think one in particular stands out, but it's anywhere from family practitioners to gastroenterologists to OBGYNs.

Robyn Karnauskas - Deutsche Bank AG, Research Division

So Colin, maybe the questions on maribavir were around the rebound and then sort of how we're thinking about the ability in breakthrough.

Colin Broom

Thanks, Robyn. The data on maribavir particularly in this resistance refractory population are really very, very promising. The data is still early. It's evolving, so we follow those patients out for up to 6 months. We're also blinded to the dose, so we don't know how the 3 different doses are contributing to patients. We will see some rebound. We've seen that in 3 patients so far, at various stages on treatment. The reasons why you see rebound may not be related to viral resistance. It may be related to multiple other factors, so this will evolve, but we will see it. All I can say is this is very encouraging. And with this type of data, should it be sustained, we will certainly take advantage of every opportunity opened to us to expedite development of an approval and including breakthrough opportunity.

Operator

Our next question comes from Mario Corso with Mizuho.

Mario Vincent Corso - Mizuho Securities USA Inc., Research Division

One financial question. Gross margin, a tick lower in the quarter versus prior quarters. And I understand the Vancocin effect. I'm wondering if this is kind of a new run rate as we go forward. And then on maribavir, what happens to those patients who experienced rebound? And I'm not -- in the control arm, where there were withdrawals with the recent side effects or -- what exactly is going on there?

Vincent J. Milano

Thanks, Mario. So Charlie, on the gross margin comment?

Charles A. Rowland

Yes. So Mario, on the gross margins, as we've said in the past, our margins on Cinryze are approximately around 70%. So as Vancocin has become less a piece of that pie, we will trend down more into that level. The other thing is, remember, we're in the higher-priced tier, so lower-margin tier in the beginning of the year. And as we hit a certain volume break, we were then in a lower price point the second half of the year. So in the third and fourth quarters, our margins will improve a couple of points, but it'll still stay in that roughly 70% range.

Vincent J. Milano

So Colin, on the maribavir questions?

Charles A. Rowland

Yes. So let me just address the code on valganciclovir. That is a head-to-head comparison and is the control in the European asymptomatic study. So these are patients who are asymptomatic and is really a bit -- don't have as many of the complications as the other population. The common on valganciclovir is that of the 3 patients who did not have opportunity to respond, were a number of reasons why they -- one was due consent, one actually had disease at baseline, or at least within the first week of diagnosis, and the other was due for another nonbiological reason. So as the study continues, we'll have a bigger database upon which to compare maribavir at the 3 different doses, and valganciclovir. So with regard to rebound, there's a very complex patients in the resistant/refractory. So we need to continue to follow these patients. So if you do get rebound in this patient population, there is really no other alternative for them. So what we have seen so far and again, limited data, but these patients have -- we can continue on maribavir therapy. And what is important is symptomatically, the rebound that's occurring that we've seen so far has been relatively low levels and these patients have got -- some of them continued on therapy. So again, evolving data will continue to collect to give a fuller picture of both the efficacy and the viral effect and also the tolerability. So early days, but very promising data, nonetheless.

Operator

Our next question comes from Ed Tenthoff with Piper Jaffray.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

And I just wanted to go back to a little bit more towards the Cinryze kind of patient numbers and the growth in the quarter and your comments around inventory changes at the specialty pharmacy network. So what can you tell us about new patient adds in the quarter? I know you don't always go to that level of granularity, but what kind of level of new patients did you see? We saw one of your competitors and again, this was more in the kind of acute setting have sort of a low -- a lower-than-expected first quarter number and I'm wondering if this is something that's kind of endemic just with the first quarter in the HAE space or if there -- if that was more relegated to the acute market or to them in particular? So what color can you give us on 1Q patient adds?

Vincent J. Milano

Thanks, Ed. I'll start. First of all, you're not calling from the Vatican, are you?

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

No, I'm not. No, I'm back in New York.

Vincent J. Milano

Okay, thank you for sharing that with us. With regards to your question, emphatically, we're seeing no difference in our reduction in our demand during the quarter. Our net patient adds is very consistent with what we expected and is implied in our guidance. We're expecting demand to continue to grow. So can't really comment on the acute market other than to say, that's a very competitive market, right? There are multiple products in the market. The dynamics there are different. In our case, we're the only new therapy for routine prophylaxis and what we see is more and more patients are seeing the benefit of preventing the attacks versus treating them, again, reiterating that in this first quarter, we had about 30% of our new patients have previously tried an acute therapy. So every patient, physician thinks about what's right for them and they go through the process and the journey and what we see is people experiment with the acute therapies and decide that they'd rather prevent than treat. So I can't -- we are obviously very aware of the reference you're making, very aware. But we have not seen any of that in our day-to-day operations in the marketplace.

Operator

Our next question comes from Thomas Wei with Jefferies.

Thomas Wei - Jefferies & Company, Inc., Research Division

On the Cinryze North American guidance, could you help us understand what sort of inventory reduction you've assumed to nod [ph]? Is that 4 weeks to 2 weeks, 4 weeks to 3 weeks? Any sort of numbers there would be helpful.

Vincent J. Milano

Thank you, Thomas. We're not get into that level of detail. Suffice it to say, we provided a range. We've reduced -- or we assumed a reduction in the levels. But again, really important, we don't have control over what they ultimately order. The contractual levels for, I think, one of our SPs is 1 to 4 weeks; others, 2 to 4 weeks. So again, we're not going to give you the -- all of the secret ingredients of how we calculated our guidance. We did think it was important to highlight this for you as you're thinking about building your quarterly models, but not for us. And I think what's important, though, again on that topic, Thomas, we want to keep emphasizing demand, right? We see increasing demand and we maintained our guidance the same because of its inventory -- potential for the inventory to go down in the channel.

Thomas Wei - Jefferies & Company, Inc., Research Division

Are you able to say on maribavir -- with the expansion of the sites, when are you projecting the data from the 2 studies, I guess, in particular, the resistant/refractory study to be complete? Or when could you actually unblind this data and take a look at the dose response?

Vincent J. Milano

So let me give you some color. I think everyone on the phone knows and many of you may remember that in 2009, our prophylaxis study with maribavir didn't work and both studies didn't work. And so we've been cautious in the investments around this program. And as a result, we've taken this position where we're doing open-label studies and providing ourselves, first and foremost, additional information to help us to get more confidence in this -- the viability of this drug to treat. And again, on the resistant/refractory, it's a very sick population where there are no alternatives. That being said, until we are fully committed to the program, we're not going to actually tell you what the exact data that we don't know, right? And so your second question, Thomas, would be, when are you going to know that you're all in? It really depends on when we see -- maybe the next 40 patients will be the answer. So frankly, it's premature for us to tell you that. We are -- what we're -- where we're investing now more in the enrollment is because we want to get to that answer sooner. We would like to tell you that this data is being confirmed with more and more patients. We'd like to tell you that we're all in and we'd like to be able to tell you that we're planning on finishing the studies ASAP. But today, we're not in the position to do that yet.

Thomas Wei - Jefferies & Company, Inc., Research Division

And then just one last question related to the original failure in the prophylaxis studies. Can you give us a sense right now for each of the trials? What is the, say, the longest duration of dosing or the average duration of dosing? And when we go back to the original failure from maribavir, I seem to recall -- it was a long time ago, but I seem to recall that there was no difference in the viremia rates that were -- from those studies. Maribavir didn't even look like it was really working as an antiviral. Was that a function of kind of the -- over the course of dosing? There was some resistance development that occurred late. And so really the question here in these studies is not what happens, say, in week 1 or 2, but what happens after somebody's been on maribavir for 6 or 12 or 24 weeks?

Vincent J. Milano

So let me just start and then I'll ask Colin to chime in. The -- I'm going to be straight. You don't remember the data actually well, Thomas. There actually was antiviral activity of maribavir in those studies. Where the study failed is that the clinical endpoint, which was reduction of tissue-invasive disease, we did not meet the endpoint there. But clearly, there was antiviral activity, which is what kept everyone that was interested in maribavir at ViroPharma still interested. So the antiviral data was actually pretty good. The safety profile is pretty good in those studies. But on a clinical disease endpoint, which remember again, prophylaxis is very different than treatment. We're talking about a very different approach to treating these maribavir patients. So Colin, maybe you can make -- answer the other question?

Colin Broom

Tom, I'll give 1 or 2 points that the dose used in prophylaxis -- and remember, prophylaxis even achieves what you believe is probably the minimum effective dose. That was used, 100 milligrams BID for treatment. We are going to 400 milligrams BID or considerably higher. With respect to the antiviral activity, maribavir was effective in those studies when it was given. Within the resistant/refractory population, we are allowing dosing up to 6 months. Like any antiviral, the resistance will develop at some point in some patients. And we have -- we've seen very limited data, in fact, a limited evidence of resistance. They will occur at some point. However, we have to emphasize that many of these patients in resistant/refractory are already resistant to current therapies and are very complicated patients. There are other immunosuppressed factors as well and just -- so with that, it continues to evolve. We've had full-time course to fully digest to Phase III. We're not going to go off to replay it in any way. But we did fully evaluate it there and the data then. There was no evidence of resistance in those Phase III studies, by the way.

Operator

Our next question comes from Joseph Schwartz with Leerink.

Joseph P. Schwartz - Leerink Swann LLC, Research Division

Great. That's actually a good segue to my question on maribavir in terms of the regulatory pathway. Going forward, how are you thinking about whether you will be able to use viremia as an endpoint for approval versus having to use something like, in the past, I think they were FDA-required CMV disease?

Vincent J. Milano

Colin?

Colin Broom

Yes, a very good question, and something that we've given a substantial thought to. As to where the treatment of viremia, disappearance of viremia can be linked to or considered a closely relevant endpoint. And 2 things, first of all, looking at viremia could be a potential for -- as a surrogate at the moment, and we're going to continue to look at whether we'll discuss with the agency whether that would constitute essentially a clinically relevant endpoint that could lead to approval. It can well be for breakthrough. It's possible that some confirmatory studies may be required, however, to support it subsequently. [Indiscernible] available.

Vincent J. Milano

So, maybe just also on that point, the relationship between a clinical endpoint like virology and how we view ultimately how the payers in the marketplace may view it. Dan, do you want to make an observation or 2?

Daniel B. Soland

Sure, I think actually Steve Villano, back in September, I think, spoke to a number of these issues. I guess from a payer's standpoint, today in the NPP program, 400 milligrams BID costs about $400 per day. I think the overall population of stem cell patients and the overall population of cell organ transplant patients plays a role. And then we believe that physicians will use our product preemptively. And it's likely we're going to get a share of those preemptive patients. And remember, for preemptive patients, it's about 28 or 30 days of therapy. And then you're going to have nonresponders and intolerances, the more difficult cases that Colin said, and there is likely that you're going to see treatment of 90 to 120 days. And frankly, the payers -- these patients don't have a -- they don't have any good options. So we don't see much resistance here from the payer's standpoint.

Joseph P. Schwartz - Leerink Swann LLC, Research Division

It's great to see. Could I ask one question sort of related as it regards Plenadren? Based on your feedback from the FDA and KOLs, what do you think the FDA wants to see for approval of Plenadren in the U.S.?

Vincent J. Milano

Colin?

Colin Broom

Yes, I mean, at this moment, we're planning to get our ideas with the KOLs and it will likely -- it's like to be additional data such as a Phase III trial. Remember, we do have the European data, which is robust and sufficient to get approval in Europe, but until we have a dialogue with the FDA, we'll be -- we will need to have a dialogue with FDA to see if -- or what the path forward could be.

Vincent J. Milano

Yes, we have our own ideas that we're going to run by the FDA before we comment further, Joe.

Operator

Our next question comes from Nicholas Bishop with Cowen and Company.

Nicholas Bishop - Cowen and Company, LLC, Research Division

Just a few details on maribavir data. So first on the U.S. study, I wonder if you could elaborate on the kinetics you're seeing, both in the time to reaching the lower limit of detection of viremia and also the time to rebound. And if you could also mention the average time that patients have been on drug so far. And then just secondly, I guess, in the EU trial, where you're dealing with a control arm standard of care, what kind of rebound rates would you expect on the standard of care? And how does that compare to what you're seeing so far in maribavir?

Colin Broom

Well let me just comment on your last point on rebound in standard of care. And I think you're going to expect to see a rebound in at least about 1/3 of patients on average. The most difficult question is certainly around the resistant/refractory patients because there are so many multiple factors here. So these are data that, of course, new. There's no current treatment, so it's a blazing new experience here with maribavir. So comments so far on that -- of the patients that responded, and I did refer to 3 patients who rebounded. And that varies after when we see that out surpassed a number of months and delay that. Time to response seems to be really quite rapid in terms of dropping the viral counts with the first few weeks of therapy generally. And the average duration of therapy in the study at the moment, after I think it's about -- the study is still ongoing, so we're out a number of months on average, but the study continues to evolve. Patients are allowed to be on, up to 6 months. So some future updates with more data, expect that in the future.

Operator

Our next question comes from Liisa Bayko with JMP Securities.

Liisa A. Bayko - JMP Securities LLC, Research Division

Most of my questions have been asked already, but maybe if you could just tell us a little bit more about the oral budesonide program, what you're looking for there in order to acquire the company? What's -- just give us a perspective.

Vincent J. Milano

Clayton, you want to take that question?

Robert Clayton Fletcher

So as you know, we have an option with Meritage and they are currently conducting a Phase II study to try to assess the clinically meaningful endpoints for a potential Phase III study. We expect that data will be available in 2014 and the combination of the data, as well as Meritage's ability to negotiate a pivotal endpoint with the agency, are our key points to finalizing the option and potentially acquiring the company. It can probably take place some time second half of 2014.

Operator

Our next question comes from Rachel McMinn with Bank of America Merrill Lynch.

Rachel L. McMinn - BofA Merrill Lynch, Research Division

I was hoping you could talk a little bit more about your outlook for Europe on your European products, whether we should expect sequential quarter-over-quarter growth throughout the rest of the year. If you could give us any more color on some of the, I guess, problems, thoughts that you have seen with the various products. And then just secondarily on Plenadren, if you could give us a little bit more color on the outlook for orphan drug status because I think that was another piece. It wasn't just a clinical requirement, but there is also some -- a pathway for exclusivity that was important for you in order to proceed in the U.S.

Vincent J. Milano

Sure. Thanks, Rachel. So Dan, you want to take the questions? So I think Rachel, if I could summarize your questions. One, is do we expect to see quarter-over-quarter growth? I can -- I mean I'll take the easy question. Yes. And Dan, you could take the harder question. Some more colors and details on each -- maybe each of the products, how they're evolving.

Daniel B. Soland

Sure. So I also think Charlie mentioned in his earlier response that, I guess, over first quarter of last year, Europe's up 152%. I think the key drivers has been the -- getting pricing and reimbursement for Buccolam and Cinryze now in all of the big 5 countries. I think that's a critical milestone for us and we'll be launching in those last 2 countries for each of those products before midyear. So that's going to, I think, help to drive both Cinryze and Buccolam. I also believe that Charlie mentioned about the specials that we were facing when we launched Buccolam in the U.K. and in The Netherlands and we seem to be gaining very good ground on the specials in the U.K. and in the Scandinavian countries. And I guess, as it relates to Plenadren, for Plenadren, it is early days. We are still excited about the product. We have essentially had a launch in Germany where we have pricing and reimbursement. We have got the product on the market in the U.K. and we have a price at the English level. But the next step is cascading that down to the local level and the local level is -- they're now called clinical care groups. In England, there's over 200 of these and you essentially are working to get your product on each of these formulary, so that your primary care physicians can use the product. So we're not as far along yet in England. We're making good progress, but we're really at sort of a blocking and tackling stage of achieving formulary for Plenadren.

Vincent J. Milano

Thanks, Rachel.

Rachel L. McMinn - BofA Merrill Lynch, Research Division

All right. And in the U.S.?

Vincent J. Milano

I'm sorry. Yes, thank you for reminding me, Rachel. So on the orphan status, you reminded us that the orphan status is an important part of the equation for plans in the U.S. We would say that, that's still true, and as a consequence of the agency asking for, say, more clinical data, it's our belief that the Phase III study that we would propose and ultimately execute will deliver data that's very consistent with what an orphan drug designation would confer. So we believe that the silver lining, if you will, in not having an NDA filing is that the orphan drug status should be, let's say, easier to confirm with the clinical data that we would generate from the Phase III study that we're going to discuss with the agency. But we'll keep you up to date on that as well.

Operator

Our next question comes from Stephen Willey with Stifel.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

First on the maribavir, with respect to the inclusion criteria for the relapse refractory study that's ongoing in the U.S., I know that patients either have to have documented genetic mutations or b, refractory i.e., prior treatment failure. So I guess I'm wondering if there's any kind of intolerance component to that refractory status that comprises that salvage patient population that you're enrolling right now?

Vincent J. Milano

Colin?

Colin Broom

No, there's no element of intolerance. These are patients who are either genetically resistant or have failed from a biological perspective. No intolerant patients were included in this, which will obviously be a different population.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

Okay, and then just with respect to it, you have kind of indicated that you're not married to the data at this point. But as you kind of think about Phase III, it's obviously becoming a bit of increasingly crowded space, both with vaccines and antiviral therapy, and I know a lot of that is kind of playing out in the stem cell transplant setting. I'm wondering if you would think about trying to emphasize a path forward within the solid organ setting?

Vincent J. Milano

Well at the moment, let me just emphasize that maribavir does have a different mechanism of action than the currently available agents in development. And we are looking at treatment, not prevention of CMV. So these are patients who actually have viremia and folks in resistant/refractory. So still plenty of opportunity and very much differentiation from maribavir.

Stephen D. Willey - Stifel, Nicolaus & Co., Inc., Research Division

And I guess, just lastly on Plenadren in EU. Are there any additional NPP plans besides, I guess, the programs you're initiating in Italy and Spain? And are you capping the number of patients that you're allowing to enroll in each of those programs?

Vincent J. Milano

No, we haven't added any new NPP programs for Plenadren. It's still Italy and Spain. And there's no cap on the number of patients who can benefit from the product.

Operator

Our next question is from Geoffrey Meacham with JPMorgan.

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

I joined a bit late, so sorry, if these have been asked, but Colin, on the subcu Cinryze study, what's your assumption for the background attack rate? And how should we think about what's meaningful in terms of the 2 different doses? And then beyond that, what are the gating factors moving forward for a registration study? And then I have a follow-up.

Daniel B. Soland

So Colin, do you want to take that question, or those questions?

Colin Broom

Yes, we have specified a background number of a 10-monthly attack rate where we haven't divulged that publicly. And yes, we do have an idea. We have 2 different doses that we're comparing here, relative to what the historical attack rate is. So a very robust study ongoing as we mentioned earlier completed the screening and about to finish the randomization over the next week or so. In terms of Phase III, well, it depends now from the data. The data is going to be critical because we -- the first time there's been an opportunity to potentially correlate C1 levels with efficacy. Both data is going to be very important to take, assimilate and take and discuss with the FDA and discuss a Phase III -- a robust Phase III program.

Vincent J. Milano

So Geoff, if it sounds like we didn't answer your questions clearly, that's because we're intentionally not answering your questions so clearly. You can imagine very competitive space for us, and we are highly confident somebody from the competition is on the phone listening to our call. So I'd stay tuned. And we really look forward to generate the data from this Phase II study. And as Colin said in his prepared comments, very early 2014 or maybe sooner.

Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division

Okay. And then a commercial question. For U.S. Cinryze, I know you guys said earlier in the call, it's obviously early to assess the impact from the new reps. But maybe help us with what you've seen historically to new starts or share when you do add resources? And are you assuming an uptick in both of those when you factor in your guidance for this year?

Vincent J. Milano

So I'm smiling because I've got one of my sandbag colleagues looking at me, grinning at me, so I'm not sure how to answer that question, Geoff. But I'll tell you, historically -- I'll take this because I don't want to put Dan on the spot. But I'd say, historically, it's 6 to 9 months we start to see them get to know their marketplace well and start to make an impact, let's say, let's call it their own versus sort of a carryover effect from maybe someone they replaced. And as it relates to your guidance question, we're not going to get into our -- the ingredients of our gravy. But suffice it to say, it is an ingredient in our gravy.

Operator

There are no further questions in queue at this time.

Vincent J. Milano

Ladies and gentlemen, we, again, appreciate your time and attention this morning. We very much look forward to updating you quarter-over-quarter on how things are going here. As you can hear, not only are we executing on our commercial business, but we're also executing on our pipeline business, which we believe bodes well for long-term growth prospects for ViroPharma. So again, appreciate your time and I'm sure we'll be seeing many of you in the next several weeks at various conferences and such. Have a great day and we'll speak soon. Bye-bye.

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