Furiex Pharmaceuticals Management Discusses Q1 2013 Results - Earnings Call Transcript

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 |  About: Furiex Pharmaceuticals, Inc. (FURX)
by: SA Transcripts

Furiex Pharmaceuticals (NASDAQ:FURX)

Q1 2013 Earnings Call

May 08, 2013 9:00 am ET

Executives

Sailash Patel - Vice President of Strategic Development

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

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

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

Paul S. Covington - Senior Vice President of Clinical Development and Operations

Analysts

Randall Stanicky - Canaccord Genuity, Research Division

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

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

Gregory R. Wade - Wedbush Securities Inc., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Earnings Release and Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce your host, Mr. Sailash Patel, Vice President of Strategic Development.

Sailash Patel

Good morning. Before we begin, I would like to remind everyone that our comments today include forward-looking statements. All statements, other than statements of historical facts, are forward-looking statements, including any statements concerning research and development and clinical development plans and timelines, regulatory approval timelines, revenue and financing expectations, proposed financing of new or existing projects, proposed licensing or collaborative opportunities or agreements and any statement of assumptions underlying any of the foregoing. Actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including the risk factors described in our Annual Report on Form 10-K and other SEC filings, copies of which are available from our Investor desk and on our website, www.furiex.com.

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

June S. Almenoff

Good morning, and welcome to the call. I'll begin with a brief business update on our pipeline and portfolio of products, and then Marshall Woodworth will follow-up with a the financial update. Then, our Chairman, Dr. Fred Eshelman, will wrap up.

I'll start with eluxadoline, formally known as MuDelta.

As you know, this is a novel, oral, locally active mu agonist delta antagonist that's in development for treatment of diarrhea-predominant irritable bowel syndrome, or IBS-D. We believe that the dual activity on both mu and delta opiate receptors addresses both the diarrheal and the pain symptoms of this condition, without the constipating effects intolerance that can occur in the setting of unopposed mu agonist activity.

We've been conducting 2 parallel Phase III trials that we started dosing in June of 2012. The trials are focused on the U.S. endpoints around stool consistency and pain over 12 weeks, but they also capture data on European endpoints of pain and global symptoms over 26 weeks, which, if positive, could support an EU submission.

One of these studies runs for 52 weeks and the other for 30 weeks, although we collect efficacy data in both studies for up to 30 weeks. We are maintaining over 600 study sites in the U.S., Canada and the United Kingdom. Our target enrollment for the 2 studies is 2,250 patients. And we recruited close to 75% of the patients needed to complete these pivotal studies. We believe we're on track to complete recruitment of both trials during the third quarter of this year, and we expect to have topline results for the 12-week U.S. endpoints for both studies around the first quarter of 2014, and an NDA submission in mid-2014.

On April 11, a full publication of our Phase II study was accepted and published online in the Journal of Gastroenterology. The article is entitled, Eluxadoline Benefits Patients with Irritable Bowel Syndrome with Diarrhea in a Phase II Study. And this article can be accessed online at the journal website.

We're continuing to have partnering discussions for eluxadoline. And we will share additional information, if and when appropriate.

This quarter, there are no updates for our antibiotic Avarofloxacin.

Now, moving to our marketed partner products. We'll start with alogliptin, or Nesina, which is partnered with Takeda. As you know, it's a selective DPP-4 inhibitor indicated for the treatment of type 2 diabetes as a monotherapy, and also in combination with other diabetes therapies. Nesina has been marketed in Japan since 2010 and the franchise continues to grow. Royalties were up from the prior quarter by 8.8%, driven by higher sales and a higher-tier royalty rate, but offset somewhat by unfavorable movement in the dollar/yen exchange rate.

The European regulatory review for alogliptin continues to progress, and we anticipate the regulatory decision from EU about marketing authorization to occur in the second half of this year. Regulatory approval of alogliptin in Europe would trigger a $10 million milestone for us. Takeda is actively preparing for the U.S. launch of Nesina and the 2 combination products, Oseni and Kazano, we believe will occur in the early part of this summer. They have publically indicated that they expect to complete the cardiovascular outcome trial, known as EXAMINE, during 2013.

Finally, wrapping up with Priligy. Priligy, or dapoxetine, is the first and only approved oral drug for the treatment of premature ejaculation. It's currently approved in 58 countries x U.S., and marketed in 16 countries in Europe, Asia and Latin America.

In 2012, as you know, we entered into a license agreement with Menarini, under which they will commercialize Priligy in Europe, most of Asia, Africa, Latin America and the Middle East. Menarini is continuing to transition Priligy from Janssen, our former marketing partner. Menarini is now marketing Priligy in 6 countries, and we believe that they're on track to launch or to relaunch Priligy in the other key commercial markets this year.

In 2013 -- excuse me, in April 2013, Menarini launched Priligy in France, which is a new territory for the product. This triggered a $5 million milestone payment to us. We remain eligible for an additional launch milestone of $5 million, which we believe we will receive by the end of the year.

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

Marshall H. Woodworth

Thank you, June. With regard to the 3 months ended March 31, 2013, revenues for the quarter were $39.3 million, comprised of milestone payments and royalty revenues for the sale of Nesina, LIOVEL and Priligy. Royalties were up $114,000 or 1.2% from the level recorded in Q4 of 2012, and up $6.7 million from the level recorded at Q1 of 2012.

The quarter-over-quarter royalty growth in Q1 2013 was driven by higher Nesina and LIOVEL sales in Japan and a higher tier royalty, partially offset by the continued decline in the yen/dollar exchange rate and the transition economics associated with the transfer of Priligy to Menarini. Milestone revenue was up $30 million from the level recorded in Q4 and Q1 of 2012 as a result of the approval of Nesina and 2 related combination products in the U.S. in January, which resulted in a $25 million milestone, and the launch of Priligy in France in March, which resulted in a $5 million milestone.

Regarding Nesina, royalties associated with Nesina and LIOVEL sales increased 8.8% when compared to the prior quarter and 24% after adjusting for currency fluctuations, a result of higher product sales and a higher tier of royalty payments based on cumulative fiscal year sales. Our royalty rates for these products reset each April 1, the beginning of Takeda's fiscal year, and increase during the Takeda fiscal year if cumulative fiscal year net sales reach sufficient levels. There was no deduction for IP cost sharing between Furiex and Takeda during the quarter, as Japanese sales are currently unburdened, as previously discussed in our Q4 earnings call.

Regarding Priligy. As previously announced on July 30, 2012, we completed the license and asset transfer agreement with Alza and Janssen Pharmaceutica for worldwide Priligy product rights, and an out-license agreement with the Menarini Group for Priligy commercialization.

Under the terms of the asset transfer agreement, Furiex is obligated to pay up to $19 million in potential costs associated with Janssen's ongoing clinical studies for Priligy, up to $1 million for reasonable out-of-pocket expenses over the transition period, and fees related to the product sales and distribution activities that Janssen is performing on behalf of the Furiex during the marketing license transition period, defined as the period of time it will take to transfer individual country marketing rights licenses from Janssen to Menarini, pursuant to a sales services agreement.

Under the terms of the license agreement with Menarini, Furiex is eligible to receive up to $19 million to fund Janssen's ongoing clinical studies for Priligy, a $5 million launch-based milestone, and up to $40 million in sales-based milestones plus tiered royalties, ranging from the mid-teens to mid-20s in percentage terms.

Payment of the tiered royalties associated with the Menarini license agreement for Priligy will begin on a country-by-country basis following Menarini's launch in each country.

For additional clarification, with regards to the ongoing clinical study costs for Priligy, the company is effectively an intermediary between Janssen and Menarini, and as such, the company has not recorded amounts associated with these costs within the consolidated statements of operations.

Our annualized royalty income, based on Q1 sales of Nesina and Priligy, and using an exchange of rate of JPY 100 to $1, is under $30 million. This calculation assumes that net sales of Nesina, LIOVEL and Priligy for the full year are at the same level as net sales recorded in Q1, and that the exchange rate stabilizes at JPY 100 to $1. Of course, we can't control or predict exchange rates or Takeda's sales, but if you'd like more information about the latter, I would refer you to Takeda's recent quarterly earnings calls and associated sales projections, which can be found on Takeda's website.

Total R&D expenses were $25.4 million for the quarter, including $359,000 in noncash stock compensation expense. R&D spend was on track with the guidance provided in the Q4 earnings call. Our full-year estimate for the total cost of the eluxadoline Phase III study remains unchanged.

SG&A expenses were $3.9 million for the quarter, included $2.1 million in noncash stock compensation expense. The $1.3 million increase from Q4 2012 was primarily a result of higher stock compensation expense incurred during the quarter, as a direct result of the higher quarter-end stock price and those unvested stock options that are mark-to-market at each period end. We expect our level of SG&A, which includes all of our public company costs, to run between $2.5 million and $3 million per quarter on an ongoing basis.

At the end of the quarter, we had total current assets of $52 million and $7.5 million in long-term investments for a total of $59.5 million in cash, investments and accounts receivables. The account receivable balance includes a $700,000 receivable from Menarini related to ongoing Priligy clinical trials. Current liabilities, excluding current portions of long-term debt, were $18.1 million. These were comprised of accrued expenses and payables related to the development of eluxadoline as well as $700,000 related to ongoing clinical study costs to Janssen, as previously discussed.

I'll now provide limited forward-looking financial guidance. Our forecasted total R&D spending in the absence of a partner for eluxadoline, for the remainder of the year, is expected to run between $65 million and $75 million, comprised almost entirely of Phase III study costs, manufacturing, non-clinical and Phase I costs related to the eluxadoline compound.

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

For Nesina, upon FDA approval for Nesina, we were entitled to receive a $25 million milestone. This event occurred in late January, when the FDA approved Nesina and 2 combination products. We received the payment of this milestone at the end of February.

In addition to the $25 million milestone, we're entitled to receive a further $10 million milestone based on approval in the EU, as well as global sales milestones of up to $33 million. Sales milestones are based on aggregate worldwide net sales of all products in a 12-consecutive month period.

In addition to the potential milestone revenue, we're entitled to receive continuing royalties from sales by Takeda in Japan and, when launched, from sales by the Takeda in other countries, including the U.S. and Europe. We don't make or endorse any other party's estimates, but if you want, you could read the various disclosures by Takeda and a number of analyst projections as far as what sales from Nesina might be. As previously disclosed, our royalty rates in Japan and Europe are 4% to 8%, and 7% to 12% in the U.S.

For Priligy, per the out-license agreement, we were eligible for up to $10 million in launch milestones, up to $40 million of sales-based milestones and tiered royalties ranging from the mid-teens to the mid-20s, in percentage terms, at the completion of the marketing license transition period. The first of these launch milestones took place in late March and resulted in a $5 million milestone, which was received in April. Based on our current forecast, including the expected receipt of various milestone and royalty payments, we expect to have sufficient cash to fund the business for at least the next 12 months. However, if one or more of the milestone events, and/or the expected growth in royalty payments fails to come to fruition, or if expenses increase because of slower-than-expected enrollment rates or other factors, we will likely need to find additional sources of financing to support our Phase III efforts in the absence of a partner. We will, of course, closely monitor our cash balances and might seek to obtain funding from additional sources including, but not limited to, partnering income, royalty financing, debt or equity, as we believe necessary and desirable. This concludes my remarks and I'll now turn the call over to Dr. Eshelman.

Fredric N. Eshelman

Thank you, Marshall. I'd like to take a few moments to review the progress we've made in the short 3-year history of being an independent public company. At the outset, we told you about our compounds and that we would use fast and furious development to advance these through Phase II to decision points. We also said that we would do our best to become a profitable, self-funding company, without diluting shareholders with secondary equity offerings. We promised you that we would run lean and mean. We also laid out the possibilities and realities of the more advanced compounds. So what has happened since that time?

We ran development programs on time and within budget for a novel statin and quinolone antibiotic with good MRSA coverage. We did not reach the myalgia endpoint with the statin. Although it was very efficacious, development was terminated. The antibiotic with at least equivalent to a major comparator in a head-to-head trial, but due to shifting commercial realities in the anti-infective marketplace, we stopped development. Thus, we are quick to develop, but we are also quick to kill. We completed the Phase II program for MuDelta ahead of schedule, and based on the results, a Grade A Phase III program with the FDA. Enrollment for the NDA program is now almost 75% complete, and we continue to explore partnering the compound.

In the meantime, we regained the rights to Priligy from Janssen and re-licensed it to Menarini for all territories, except the United States and Japan. Relaunching under their label and their plans continue.

Nesina sales are running nicely in Japan. We expect Takeda to launch in the U.S. this summer, and hopefully, expect E.U. approvals in the second half of this year. All of this has been accomplished with fewer than 25 full-time employees and very small capital spending. Shareholders have not experienced any dilution from equity financing.

Over the last 12 months, our collaborations have generated $77 million in milestone and royalty revenue, and our share price has advanced nicely. In summary, our team has delivered as advertised, and continues to build the basis for future success and shareholder return. June, I'll turn it back to you.

June S. Almenoff

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

Question-and-Answer Session

Operator

[Operator Instructions] and our first question comes from Randall Stanicky of Canaccord Genuity.

Randall Stanicky - Canaccord Genuity, Research Division

I just have 2 questions, one for June and one for Marshall. June, the stock price is going to be more levered as we go forward to MuDelta, which is, obviously, a very big opportunity for you, just given the potential for that product. Can you provide us just some color as to how you're viewing the market and what the commercial opportunity potential is, as you see it? Then, I have a follow up.

June S. Almenoff

I think, the fact that we are in a very advantageous position from a competitive point of view, not much out there, and we have 2 parallel Phase III trials that could potentially allow submission in mid-2014, puts us in a very favorable situation. I can't comment specifically on precise forecasts, but I think there are some benchmarks you can think about, one of which is the sales that have been recorded for the use of the antibiotic rifaximin may, in some part, be relating to the use in IBS-D. Additionally, one can try to benchmark to the sales of some of the IBS-C drugs, both historically, the Novartis compound, as well as the forecasts for the Ironwood compound. But with that said, I'm actually even more bullish on a product such as this because, I think from a medical point of view, the inability to control one's bowels, to have chronic diarrhea that really constricts one's life, that unmet need is extremely high, and it may actually be more bothersome to folks than those with chronic constipation. So while [ph] we have to wait and see, but we're certainly bullish that the forecast could be as good or better than what you're seeing with IBS-C.

Fredric N. Eshelman

Yes, Randall, this Fred Eshelman. To add to June's comments, as you might expect, we have gotten, and are getting, updates from independent third-party sources on what we expect to be the commercial realities around this compound to aid us in our decision-making. So we do believe that we have a reasonable handle on this asset.

Randall Stanicky - Canaccord Genuity, Research Division

No, that's helpful. And given the size of the opportunity, is it fair to say -- and I don't want to put words in your mouth, but that you may now be looking to partner post the data read early year? Or is it still possible that we could see an arrangement announced before then?

June S. Almenoff

Both are possible. We are continuing to have discussions and we need to just simply evaluate the economics.

Randall Stanicky - Canaccord Genuity, Research Division

Okay. And then one for Marshall. With respect to the cash burn and color, that's very helpful. As we think about the R&D spend commitments, assuming that you don't partner the product before the data read, as we move into early '14, how do we think about the quarterly spend on R&D, as we think about perhaps the first and second quarter?

Marshall H. Woodworth

Randall, I think we said on the Q4 earnings call that the spend for 2013 was going to be fairly linear. So that's still the case. And the guidance that I provided, $60 million to $75 million, when your modeling it out and thinking about it, it should be fairly linear in terms of what we spend. It's going to drop off rapidly after Q4. As you heard from June earlier, the enrollment is going to complete later on this year. And as such, the Phase III cost, as well as the non-clinical aspects of the programs, will drop off significantly in 2014. So when you're modeling it, you should ramp down significantly after Q4 of this year.

Operator

[Operator Instructions] Next question is from Matthew Kaplan of Ladenburg Thalmann.

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

Good morning, guys. Just a little bit of a follow up on the last question, in terms of -- the last couple of questions. Can you talk a little bit about -- maybe a question more for Fred, kind of the strategy for MuDelta in terms of when to partner, to harvest the most value from that compound? And, I guess, are you also considering going it alone or -- and, I guess, is it really realistic to be able to partner pre-Phase III data at this point, and harvest the most value from the compound?

Fredric N. Eshelman

Well, as June has said, we are evaluating all of the potential ways forward, strategically and pragmatically, with this compound. We are getting outside evaluations on it and we believe that, at the moment, that any of the 3 pathways forward are viable, i.e., potentially licensing this in advance of the Phase III readout, out-licensing post-Phase III readout, or going it alone. And we are cognizant of the expenses that would be involved with a launch and probably DTC and all the rest of that, that comes along with it. But my personal view is that, post readout on these data, if we have a very solid compound in terms of benefit/risk and cost of goods and so forth, funding a commercialization of this is the least of our worries. So I just have to say at this point, it's fluid, but we, knock wood, are in the fortunate position of having some leeway with which way we go.

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

Just not to put words in your mouth, but it seems like you're, from a harvesting the most value point of view, leaning towards a post-Phase III type of partnership of decision, [indiscernible] or not.

Fredric N. Eshelman

I wouldn't necessarily read that in, because we also have to balance the benefit/risk and, let's say, just for the sake of an argument, that we said internally, "Okay, we're going to do anything until we get a readout on Phase III." Well, if that works then you've created some value to that. If it doesn't work, that's a little bit problematic. And so we've got to balance what the value would be at any particular time, alongside what is the risk associated with that. And hopefully, come to the right conclusion.

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

I guess the [indiscernible] to quantify the risk is the investment that you have to make to get to that value inflection point is?

Fredric N. Eshelman

Well it's not just the investment, it's -- in drug development, you don't ever know what's going to happen the next day you come to work. And while we're not, again, not [indiscernible] expecting anything untoward here, either on the efficacy side or the safety side, the fact that the matter is you don't know. And in the past, whereas we would associate a certain probability of success with a compound in late Phase III, I'm not sure that those probabilities hold anymore because of the vagaries associated with regulatory review these days. I mean there again, you really don't know what's going to happen to you until the fat lady sings, so to speak.

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

Sure, fair enough. In terms of your cash position, you ended the quarter with about $36 million in cash. And your R&D is going to continue, I guess, in the $25 million range, at least until -- plus or minus, at least, per quarter, at least until the end of the year. As -- what's your sense in terms of the ability for the Nesina royalty revenue ramp to impact your cash needs, to offset your spend on the Phase III programs for MuDelta? And, I guess, in 2013?

Marshall H. Woodworth

Well, you raised the point about where our concentration risk is around cash inflows. We certainly have a very good handle on the cash outflows, which we discussed. The cash inflows are highly dependent, both on receipt of milestones, which includes the Priligy launch milestone, the Nesina milestone for Europe, as well as potentially some sales milestones along the way. But the majority of what we have coming in is highly dependent on the Nesina royalties, both out of Japan and out of the U.S., if the U.S. launches, as Takeda has indicated, in the summertime. So the risk around the Japanese royalty rates, the ramp has been going very strong for the last year or so. And we are very thankful to that -- or for that and very appreciative of that. We have been negatively impacted by the yen. It's hard to tell exactly where the yen is going to go. We're doing our modeling, our internal forecast based on where we are today, which is a JPY 100 to the $1. Hopefully it will stabilize around that number. But I'd say the risks that we see, and Takeda is announcing, I believe they will be announcing, their midterm financial forecast for 2013 at the end of the day tomorrow, but our risk around that is more around the risk of the yen/dollar exchange rate rather than the ramp of Nesina itself.

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

And then just another question with respect to Nesina. There's a recent paper that was out discussing potential risks for GLP-1s and DPP-4s in terms of pancreatitis and potential carcinogenicity or cancer risks. Could you talk about that and kind of how that could potentially impact the launch in the U.S., or will it, and what's your sense in that?

June S. Almenoff

Thanks, Matt. I'm actually glad you opened the question the way you did, because I think it's very important that folks understand that there's a lot of stuff out there, if you will, in the lay press about various medical conditions, pancreatitis acute, pancreatitis chronic, pancreatic metaplasia, 2 different types of pancreatic cancers, some the ducts, malignant adenoarcinoma, some benign tumors of the islets. And I'll tell you something, there seems to be a tendency from some folks particularly, perhaps the folks who don't truly understand the medical implications, but there seems to be a tendency to kind of lump all these things together and even imply that one condition could be linked to or could lead to the other. I think it's really, really important that folks understand that these entities are generally not related. And it's unlikely that, for example, acute pancreatitis is likely to lead to adenocarcinoma of the pancreas. Now, chronic pancreatitis that you see in alcoholics does have some association, but these are 2 very different entities. That's a simple example. So I think it's very important to caveat all of the thinking on this with the fact that there's a lot of discussion about the pancreas and these things are all over the place, if you will. We have read the paper that you're referring to, and certainly, it's a provocative study that should lead to further research, but we believe there are limitations. I think the best discussion of the limitations that we've seen and that very much represents our own independent assessment of the data is a piece by Dr. Steven Kahn, a professor of endocrinology in Seattle, who published a detailed commentary in Diabetes on April 17. Just to highlight some of the key issues that he makes: the autopsy study, published in Diabetes by Dr. Butler, has very small numbers. The type 2 patients receiving incretin mimetics are not well matched to the other diabetic population, which Dr. Kahn actually speculates may represent type 1 diabetes. It's very hard to tease out the impact of Januvia specifically, versus multidrug therapy that some of these folks are on. He also makes the point, and I've seen this in other literature as well, that the pre-terminal status of patients who are very, very ill, and in these cases have passed away, has been shown to increase replication of pancreatic cells and that could have actually impacted, to some degree, on the past findings. But I think it's very important to keep in mind that the proliferation that is being described in some of these animal experiments that he's done, as well as this autopsy study, doesn't necessarily equate to pancreatic cancer. The other very important point to consider, and I'll close my remarks with this, is that there is a real absence of pancreatic pathology in long-term carcinogenicity studies, with all members of this class. And that's got to be meaningful, particularly since Merck has done studies with Januvia in diabetic rats. And finally, Dr. Kahn points to the very obvious extent of clinical experience with this drug, with this class, particularly the DPP-4s, there has been extensive meta-analysis both of Januvia as well as of the entire class. So I hope that's helpful and, obviously, we wait to hear what both regulators and industry have to say at the NIH meeting in June.

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

Yes, and I had a chance to read that paper, and obviously, he was very critical of the rigor of that study in terms of the size and the patients who looked at it more as an anecdotal, some anecdotal findings. Great, no, thank you for your comments and the added detail.

Operator

The next question comes from Brian Lian of SunTrust.

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

I just had a question on the eluxadoline NDA. Do you not expect to complete the NDA with the 52-week and 26-week treatment phase data? Or is that not required for completion of the NDA?

June S. Almenoff

Right. I'm actually going to have Dr. Covington, who's with me today, actually comment on the logistics of safety versus efficacy collections.

Paul S. Covington

So the 52-week study is a long-term safety follow up. The efficacy data from that study will have finished many months before, and patients will still be ongoing later on, after we even take a look and may still be even ongoing at the time of the NDA. We will do a 120-day update, as is standard, with the data that's collected after the submission occurs. Both studies have 3-month and 6-month endpoints. So the FDA's endpoint is only 3 months. And the answer to your question is a little bit vague right now about what we will include. Our requirement for the FDA is 3 months, and that's what we will include. Depending on timing, we'll determine whether we include the 6-month data or not.

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

I see, okay. And can you just remind me on eluxadoline. Is the systemic exposure high enough to result in any appreciable binding to mu or delta receptors found elsewhere?

June S. Almenoff

I think that's a bit of an abstract question, but I think we should just emphasize that the bioavailability is extremely low. We don't detect amounts of this product, for example, in places we tested, like the heart, the pancreas -- I'm sorry, not the heart, the brain, the pancreas, the kidney and so on, the major organs. Beyond that, there are -- there's a very low-grade systemic exposure that's pretty transient and, certainly, very low levels could briefly interact, but we don't expect that to be a very major feature of the drug's safety profile.

Operator

The next question is from Greg Wade of Wedbush.

Gregory R. Wade - Wedbush Securities Inc., Research Division

Fred, I was wondering if you might comment on your evaluation of using a fee-for-service or risk-based sharing arrangement with someone to help you sell MuDelta on the other side of the positive data and approval.

Fredric N. Eshelman

You're talking about a rent-a-sales force?

Gregory R. Wade - Wedbush Securities Inc., Research Division

Yes. With some risk sharing to incentivize them as well. Where do you guys come out on that?

Fredric N. Eshelman

We don't right now, because we haven't modeled it and we haven't put out any RFPs on that subject, so we don't actually know what the economics would be surrounding that, nor how many reps we would contract for and so forth. Although we do have some preliminary data around how many reps we think we would require in given territories, if you thought that the majority of the scripts were coming from gastroenterologists rather than, for example, GPs, FPs, whatever. Some of that, of course, also has to do with the nature of the patient for whom the drug is being prescribed, i.e. in other words, is it a severe patient, a moderate patient, a mild. We believe most of the mild patients are probably handled with OTC products and/or diet, and/or other things. So as you go up the severity scale, it probably pushes these folks more into the gastroenterologist's office, which, of course, cuts down on the number of reps and the number of calls that you would need. But in summary, we just don't have the data to make a lucid comment on that right at this moment.

Operator

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

June S. Almenoff

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

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference, and you may now disconnect. Everyone, have a wonderful day.

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