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Cempra, Inc. (NASDAQ:CEMP)

BARDA Contract Award Conference Call

May 29, 2013 8:30 am ET

Executives

Robert Flamm – IR Russo Partners

Prabhavathi Fernandes – Ph.D., Founder, President and Chief Executive Officer

Analysts

Eun Yang – Jefferies & Co.

Stephen Brozak – WBB Securities, LLC

Alan Carr – Needham & Company

Edward Nash – Cowen & Company

Brian Lian – SunTrust

Stephen Willey – Stifel, Nicolaus & Company

Operator

Good day, ladies and gentlemen, and welcome to the Cempra, Inc. BARDA Contract Award Conference Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I’d now like to turn the conference over to Robert Flamm. Sir, you may begin.

Robert Flamm

Thank you, Shannon. Good morning and welcome to Cempra’s Corporate Update Call regarding the awarding of a Biomedical Advance, Research and Development Authority or BARDA Contract (inaudible) (0:55) develop Solithromycin for Pediatric and Biodefense uses. Well, today’s call management will be making forward-looking statements including the progress of the BARDA Contracted Programs. The value of the BARDA Contract, results of the BARDA funded studies and other statements that are not historical fact. Such statements may include the words plan, will, expect, believe, may, could, would or similar words.

You are cautioned to not place undue reliance on these forward-looking statements, which are only predictions and reflect the company’s belief, expectations and assumptions based on currently available information and speak only as of the time they are made.

Risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements include the cost, timing, regulatory review and result of our studies funded by the BARDA Contract, our ability to develop and manufacture pediatric dosing formulation for solithromycin. Our ability to reach the milestones required by the contracts unable continuation of funding filed with first two years of guarantee funding. Our need to obtain additional funding, our ability to obtain future funding, our acceptable terms, our anticipated capital expenditures, and our estimates regarding our capital requirements. The possible impairment over inability to obtain intellectual property rights and the cost of obtaining such rights from third-parties and other risks identified in our SEC report. For a discussion of these and other factors, please refer to the risk factors described in our filings with the SEC. For forward-looking statements inclined protections of Private Securities Litigation Reform Act of 1995.

I will now turn the call over to Prabha Fernandes, President and CEO of Cempra. Prabha?

Prabhavathi Fernandes

Thank you, Robert. Good morning everyone, and thank you for participating on today’s call. Giving us an opportunity to share with you, the exciting news about the contract awarded to Cempra by BARDA. This is worth up to $58 million as you have read. I will cover three topics this morning. First I’ll provide a brief overview of the agreement. Second, I will describe the pediatric CAP program, our community-acquired bacterial pneumonia program, and why it is important and the advantages of running the pediatric studies concurrently with a Phase 3 CAP program in adult, which we’re currently running. And third, I will discuss why solithromycin is a promising candidate to be used against Biodefense organism. Following my brief comments, we will open the floor to questions.

Cempra was awarded a five-year contract worth up to $58 million for the development of solithromycin to treat CAP infections in pediatric populations, and for the treatment of infections caused by certain bioterror threat pathogens. The upfront contract is for a two-year base period with a guaranteed funding of $17.7 million and it is extendible up to five years bringing the value of the total contract to $58 million. The contract will fund a variety of activities plan to lead to both Pediatric and Animal Rule New Drug Applications or NDAs. This includes the development of the pediatric oral suspension, support for clinical trials, designed to obtain regulatory approval of solithromycin for pediatric use of oral suspension, oral capsules and the intravenous formulation of solithromycin for CAP, and fund non-human primate pilot and pivotal studies to demonstrate activity against two biodefense pathogens, anthrax and tularemia. These studies will be designed to obtain regulatory approval to application of the animal rule for using the event of a bioterror emergency. Full funding of the contract will depend on reaching contract milestones, which has not yet been disclosed.

Most of you are aware of an emerging crisis of an antibiotic resistant pathogens and the need for new antibiotic. Cempra as well as a number of other innovative companies has taken up the challenge to develop new antibiotic that can address this problem. However, these candidates are in development mostly for adult and for hospital intravenous use. There are no antibiotics in development that we are aware of that can be used orally, and also has a potentially for broad application in pediatrics and special populations.

The last antibiotic approved for pediatric use for respiratory inspection was azithromycin including Z pack and that event occurred in 1991. Doctors are generally limited to Z pack and amoxicillin to treat pediatric CAP, drugs that many of you probably were administered when you a kid. In the case of bioterror pathogens, there is a need for oral antibiotics to provide entire therapy against a variety of bacteria for use in adult, as well as special populationincluding pediatric.

In 2012, (inaudible) (0:11) was passed, which renews in sentence three essential laws improve the safety and effectiveness of pediatric drugs in biological products et cetera, which is used in children. The Best Pharmaceuticals for Children Act the BPCA. The Pediatric Research Equity Act, which is PREA, this law is effective against in since January of 2013 and require the pediatric plans resubmitted within 16 days after the end of Phase 2 meeting ensuring that drugs were develop a pediatric earlier than after the NDA.

Now this is no longer something a wish to have, it’s a must do at this time. Waivers must be requested, if these studies cannot be done until safety and efficacy approving in adult. The BARDA contract is designed to provide us the funding for pediatric use in CAP up to the sNDA submission concurrently with our Phase 3 CAP program in adult.

Basically it’s a parallel fast to two approvals. This would means that both drugs and pediatric indications could be available if the development program is successful. The differentiating advantage of solithromycin as a drug should provide the same advantages for pediatric patients and we believe that BARDA recognize this.

These are the right spectrum of activity. Note I don’t say broad, I don’t say in aroid, I say the right spectrum, which means targeted activity against CAP evidence including pneumococcus, humaculous, atypical pathogens for desmoteplase mainly Janelle. It has a favorable safety profile. It has the right tissue distribution, intracellular activity in both the lysosomal and cytoplasmic compartment strong anti-inflammatory effect, stability at room temperature oral by availability, but intravenous formulation if needed. If successfully developed solithromycin will be the first orally administered antibiotics approved in decade with broad applicability, which would extend the special populations including for Pediatric Use. The emphasis on Pediatric Use by the current government showed the importance, which the government has relied on the use for special populations and pediatrics today, because there has been no drug approved in a long time in this area.

The third topic I would like to discuss is a potential of solithromycin as a Biodefense antibiotics. We and our collaborators have done some individual work categorizing solithromycin’s activity against bioterror pathogen. We have demonstrated in vitro activity against a number of pathogens. Therefore BARDA has agreed to our plan to trust solithromycin against two of the bioterror pathogen, Bacillus anthracis, which causes anthrax, and Francisella tularensis, which causes tularemia. And to get approval through the Animal Rule NDA process for use in the event of a bioterror threat.

In addition, to having using the adult population against bioterror pathogens, solithromycin could be a useful antibiotic to protect special pathogens and children in the event of the threat. Antibiotic options to treat pediatric populations against these two important pathogens are few. FDA approved antibiotics to treat anthrax include ciprofloxacin, doxycycline and penicillin, again antibiotics, which were used when you were young. All have potentially significant tasty or efficacy issues for pediatric populations.

In addition, these pathogens could be resistance through the older antibiotics either naturally are could also be engineered, and therefore new oral antibiotics that is active against these pathogens is urgently needed. Result from the studies conducted under this BARDA Contract should determine where the solithromycin fix those criteria.

So this is our brief overview of our BARDA Contract, and the need to develop solithromycin for Pediatric Use.

We would now like to open the floor to questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from Eun Yang of Jefferies. You may begin.

Eun Yang – Jefferies & Co.

Thanks. Congrats on the award. Just a question on the $17.7 million, is that [half order] that amount is going to be booked into first year, and the other half it’s in the second year?

Prabhavathi Fernandes

So, hi Eun, and thank you for joining us today, and thank you for your good wishes. The way these budgets are set of is based on the work we do. So as we do the work it’s not by the year, but it’s really booked by the work we do. So if you get most of the work done in the first year, then you’d get paid in the first year. If you get most of the work done in the second year, you get paid there. So it could be even the split depending on what we want to do, what we want to do is to move these programs as fast forward as possible. So we would finish it when the work is done, and not necessarily by the two-year period.

Eun Yang – Jefferies & Co.

So in terms of a booking we don’t know yet how is going to flow sort of revenue each quarter for the next two years?

Prabhavathi Fernandes

So, Mark do you want to address that?

Mark Hahn

All right, we have not [going to] granular you in how we’ve been talking about the contract.

Eun Yang – Jefferies & Co.

Okay.

Prabhavathi Fernandes

Most important though is that that is guarantee. The $17.7 million is guarantee.

Eun Yang – Jefferies & Co.

Yes, and then another question is in terms of planning pediatric study. You guys have planning to meet with the FDA second quarter of this year to talk about solithromycin for the development. Are you going to be talking about pediatric study design at that point as well?

Prabhavathi Fernandes

So as you know, we will be releasing the information from the FDA meeting by the end of the second quarter and that usually happens 30 days after the meeting, so we will be releasing those shortly. The pediatric plan is a separate meeting it’s called the PSB plan meeting that we will be submitting, and behalf we submit within 60 days after the end of Phase 2. So we will be having another meeting with the FDA specifically related to the pediatric plan, and we will be very happy to be with our partners BARDA on that meeting.

Eun Yang – Jefferies & Co.

Okay. Thank you

Operator

Thank you. Our next question is from Steve Brozak of WBB Securities. You may begin.

Stephen Brozak – WBB Securities, LLC

Congratulations Prabha. This is an exciting moment for your franchise. I want to actually ask granularity on SOLI specifically. You’ve mentioned in the past that it’s a macrolide obviously, but what makes it different from other antibiotics, as far as its intracellular ability and specifically how does that differentiated in terms of what the clinicians and what the users can be versus what’s on the market right now, and why would the government be interested in that. Could you elaborate and I’ve got one follow-up after that?

Prabhavathi Fernandes

Thank you, Stephen. Thank you for your time today and to know the feel that it’s very, very important. So macrolide traditionally has been used to cover many different types of infection. If you can think about a respiratory tract infections of bug, which vitally get into macrophages and hide there, inside the uterus, inside the various types of [Palomar] like Listeria. Legionella is a very big pathogen, which hides within lysosomal vesicles and the pH is different inside these organs and so on.

So the beauty of macrolide is that they not only are orally by available, they can be injected of course such as ours, but they are in the plasma, so if the bug gets into the plasma, it gets in there, in the blood, if you are in the lung, if you are in the subcutaneous tissue, in the epithelial lining of the gut, in the epithelial lining of the lung, in the epithelial, in the lymph nodes, et cetera. The drug really penetrates and has fantastic tissue distribution, so getting the plasma, getting the tissues. Now when it gets into the cell, various drugs do not work inside the cell, because firstly they don’t get in there, and secondly if they get into the cell they’re not by bioavailable.

Macrolide and especially solithromycin is inside the cell in very large amount. We have demonstrated that in the macrophage in the lung, we have 200 times the already high level in the plasma, and this you must remember indicate safety of its, and they’re in very high concentration. Now not only is it inside the cell, it’s in the cytoplasm which is active, so if the bugs like Listeria, which is the one, which cause death after eating cantaloupes in California or someplace. That bug it will be dead, if it’s in the cytoplasm. Now within in the lysosomal vesicles like Legionella this drug is not only active in the lysosomal vesicle, it’s even more active at an acid pH, which is what the lysosomal vesicles have. So this is a very big feature. I usually say there is no place for the bug to hide, and its keep the activity of the antibiotic as the levels go away.

Now in addition to the activity at all cyclins in all body compartments, it also has the right spectrum of activity. It has a spectrum in the sense of the pathogen, it could be gram-positive, it could be gram-negative, it could be gram-variable, but so if you gut flora, if you gut flora, you have micro flora, we all know that’s very important. Well interestingly macrolide address the pathogens, which are pathogens in your lung, on your skin or in the pelvis and other areas, but it doesn’t wipe out your gut flora, it doesn’t wipe out your skin flora. It preserves what is good for us and gets what bad for us. This is the way we have realize that we cannot cause hard, while doing good.

And that’s what solithromycin is about, it makes a very special. Macrolide have been special in this area, and that’s what they’ve been loved for pediatrics, because we of course cannot cause harm in pediatric viscous. And on top of that solithromycin is different, because it is more potent, it’s got three binding site on the bacterial ribosome by varying tightly and is active on all macrolide-resistant strains we have tested so far and pneumococcus there is no resistant. In Legionella, there is no resistant strength of this drug.

Now if you make it resistant, let’s say (inaudible) decide I want to make this bug resistant to solithromycin. So we can’t use it in the future. Well when we have try to do this in the lab that bug is so sick that is no longer wavelength. And in fact in a lot of cases, it’s no longer buyable, and in lot of cases it just losses its resistant properties as it replicate, because it is not to its advantage to keep these changes on Rivasol. So maybe I should stop there, I’ve get carried away with this Steve.

Stephen Brozak – WBB Securities, LLC

I can say that the energy in your voice, actually you’ve almost answered my last question the resistance part. Can you go and give us a couple of examples, because obviously you’ve just gotten a remarkable good housekeeping feel of approval by both the Japanese and the United States government. Can you tell us about what your results have been anecdotally and whatever else you can tell us about dealing with resistant strains, because obviously we don’t need [terrorist] to basically figure out bugs by themselves broad to become resistant. Give us some insight, and again I’ll jump back in the queue after that. Thank you.

Prabhavathi Fernandes

Yes, so in pneumococcus we have tested a lot of strains almost 10,000 strains worldwide in pneumococcus. And there is a not a single resistant strain, including those which are erm, mef, erm A, mef and L22 resistant strains. There is not a strain, which we’ve been able to find. We were – recently tested some strains which we talked about at earlier, where we have strains of pneumococcus which were resistant collections even in Europe, recent resistant collection and solithromycin is the single most acid compound against pneumococcus.

The same is true for Legionella. This was tested at a public held lab in Canada and it’s shown that is active. We just ran a gonorrhea study, where we have a 100% efficacy in clinical trails of strains, including those that are resistant or the macrolide and other drugs. So you can see that in the general population – in the laboratory, we have tried to create resistant, and we can get somewhat higher MICs after multiple, multiple transfer. So I’m not saying you never get a resistant, because bug are very smart, you will eventually have a resistant, but it’s not easy to make a resistant. And when we have made this resistant after, let’s say, 18 transfers or so, those bugs they are not growing very well even in the test tube, which is the most opportune condition for the bugs to grow, and it don’t go very well, and when we try to pack it a couple of times, they actually reverse back to being wild type and it’s acceptable, so that’s why we think it’s very hard for bioterror to make it resistant.

Stephen Brozak – WBB Securities, LLC

Great. Thanks again, and congratulations.

Prabhavathi Fernandes

Thank you.

Operator

Thank you. Our next question is from Alan Carr of Needham & Company. You may begin.

Alan Carr – Needham & Company

Hi, thanks for taking for my questions, and congratulations on the contract. Can I ask you about the $17.7 million, can you give us a sense of where that puts you in over the next couple of years, what specifically which work does that cover?

Prabhavathi Fernandes

The $17.7 million, we have not specifically described which aspects of the studies it covers, but it does help us get going on the pediatric studies, because remember we have to make the pediatric suspension start enrolling in that lessons, first and so on. We have to do the pilot work for showing that it works against anthrax and tularemia in non-human primate, we’ve done this in mice and we have published on that in the past, where it has worked. So we looked on some of these activities in the first three years and then we would of course, be moving into the fluoroquinolone pediatric program.

Alan Carr – Needham & Company

Is it funding exclusively for pediatric or will this be used to a certain extent for adults as well?

Prabhavathi Fernandes

No, so this funding is exclusively for pediatrics as well as for the bioterror threat microorganism such as anthrax and tularemia. But there is crossover, the people we are doing is very similar, so the people in the clinical group here and we use contract research as you know. So there is overlap, because we need adults’ approval for pediatric approval, and we get safety database which gets added on from the pediatric trial hours. So there is a lot of overlap in the program, but there are two independent programs and BARDA has funded the pediatric arm of that program.

Alan Carr – Needham & Company

Okay. And then can you also comment on the, I guess the scale of the opportunities here both for revenue opportunities approved for bioterror and for pediatrics?

Prabhavathi Fernandes

Okay. So for bioterror we hope there is no opportunity, right, so we hope nobody needs to take this drug. It’s just like buying life insurance Alan, you hope you never have to use it. Now, you say you are buying this insurance, so that if there is a problem and somebody, some bad person chose this wind of aerosols and this population that we have something, which looks after our people in the United States and the rest of the world, so that will be one, they’re buying insurance and there will be, I am sure, some amount of products kept apart, so that if there is an emergency or not, they are trying to synthesize this molecule that you have this ready to go.

Alan Carr – Needham & Company

The plan would be to stock pilot, and do you have a sense of how much?

Prabhavathi Fernandes

No, we would have not stock pilot. So let me finish here and I will come back to that question in a minute. So the pediatric group is very large. I remember when I was at Abbott, we always had this logo, which said Moms’ love Macrolide, because it will be used, I expect, widely in pediatric, if it is taken effective. Obviously, we have to show that and if it’s shown, then it will get used. If you just think, think you have young children and it shows that you would use Amoxicillin and Zpack, and if that fails, you use Amoxicillin and Zpack, that’s all you have. So in the future, there will be Solithromycin, we think, as a suspension as well as for little bit older children, they can have capsules or if they absolutely need IV drug, they would also have IV. So these are all formulations of this available for children to use, to protect them against a variety of different infections.

Now what is the market size of it? Now, you can only judge the market now, if you combine Amoxicillin and these other products, which are currently available. [Oltipraz], one which is used IV in children. Quinolones are not used in children except now when resistance has happened in Japan for instance, quinolones are used in children, because all other drug has now failed and quinolones are not contraindicated in the United States, so you cannot use it in the Western world for children. So the exact market potential, I do not know in the United States. I don’t know if it’s been carved out as to whether adolescence is called pediatric conscience or they go to be the adult doctors, because some of them are older. So it’s a large percent of the population, but what it does for us Alan, it’s really to show that this drug is effective and safe. No one would give a drug, which is unsafe to children. And if you really indicate, we have a macrolide following on what is known about macrolide, which is safe both and then effective.

Alan Carr – Needham & Company

Okay. Thanks for that. Can you comment a bit more on, I guess on, there won’t be stockpilings?

Prabhavathi Fernandes

So we don’t know if there will be stockpiling, we have not gotten that far, obviously you have to get the drug approved before you stockpile. But once you show safety, of course, in case of an emergency, it might become available. And if the government sees that there will be like read back, in every pharmacy in the country and in the world probably. If it becomes widely used, then there is no reason to stockpile in a big way, because it’s available, because then it’s just a waste of money. The important thing about solithromycin is that’s very stable. We’ve had drug substance here in a five to six years and nothing has gone wrong with it. So since it’s so stable, it’s something you can make and keep, which is very good. So you are weary and alert and you can keep it and its rock stable, you can keep it there and use it when you need it.

Alan Carr – Needham & Company

Okay. Thanks very much.

Prabhavathi Fernandes

You’re welcome.

Operator

Thank you. Our next question is from Edward Nash of Cowen & Company. You may begin.

Edward Nash – Cowen & Company

Hi, congratulations. For the markets, it’s definitely great news for you guys.

Prabhavathi Fernandes

Thank you.

Edward Nash – Cowen & Company

Wanted to ask, I guess maybe just basically following the pool a bit on some of the previous questions that were asked, put maybe in a different way just with regard to market size here, I know that you said it’s difficult to kind of maybe figure out maybe on the dollar side, but maybe – are you able to even figure out or the numbers out there or on a percentage basis about how much the pediatric indication would add or what percent of the pediatric indication is of the total CABP outcome throughout there?

Prabhavathi Fernandes

Yeah, I believe it’s about 30% of all of the respiratory tracts of pediatrics and you know, it’s – 50% of the entire respiratory tract market is taken by macrolide. It’s a very large market. Now, as to what percentage is quite CABP insurance versus respiratory tract is very difficult, because you cannot get sputum cultures from young children. That’s quite very difficult.

Edward Nash – Cowen & Company

Yeah, okay. And then my second question was just with regard to the studies would have to be run, I know that you had mentioned that would obviously be able to have the safety data from the adult study being able to be used also for the pediatric. So with regard to the rest of the trials, mainly focus obviously on efficacy, can you give us an idea of the size of this trial would have to be run as compared to what you are doing right now with the adult trial?

Prabhavathi Fernandes

So that’s a very interesting question. So, there are pediatric guidelines, and we have designed Phase I and Phase II/III for safety and then efficacy study. The question is, we will be showing efficacy in adult populations, it’s the same bug, which caused pneumonia in the children versus pneumonia in the adults. So we would have as you know two trials 800 apiece that we will have those results plus the whole Phase II results and other things. In children we have to show safety, which we will do that, but then efficacy, I already told you, you can’t cut sputum, you can’t meet some of these endpoints in CABP, because you just can do all these things to young children. And so safety plus efficacy in adult is what we will pursue.

Edward Nash – Cowen & Company

Okay.

Prabhavathi Fernandes

The safety in children and efficacy and safety in adult is what we will pursue.

Edward Nash – Cowen & Company

Okay, okay, that’s helpful. And then, I guess, one last thing, my follow-up, it’s not, just with regard to the primate pilot studies, can you give us some idea of just what studies or how many are required to be able to get you to the point where you can actually get to where you will be running the Animal Rule NDA or submitting that, I mean, is it – with the money they are giving, exactly what are they looking to get out of that?

Prabhavathi Fernandes

Okay. So in the first two years, we will show in pilot study, so basically we do dose-ranging studies with infection levels, which will be similar and blood levels, which will be very similar in human and non-human primate. And we would see infection is cured in the land of either anthrax and/or tularemia. As long as it works on one, it is fine, because these animal models, as you know, Alexander Pope said the proper study of mankind is man.

No animal model is strictly exactly like human, so you expect to get the similar results in monkeys. So then, if it will work in those systems, then in the following [10 years], we would test it in the GLP study where you will have the fixed dose as you would do in people and treat an infection, which would simulate a human pulmonary infection of either anthrax or tularemia. And you basically look at the lung and see if the lung is cleared and if there is any infection left in the lung. So you wouldn’t do – conduct one study for anthrax and one in tularemia, that’s makes it two animal – two infection, and you need a single animal test as the rule. We would probably repeat that a couple of times till we get – able to get statistically significant results. But it’s not a comparative trial up against Cipro or something like that because there is published result on animals. We do protect animals and will treat them right, and so we do the minimal amount of work necessary to get the FDA approval.

Edward Nash – Cowen & Company

Okay. Perfect. That’s great. Thank you very much and congratulations again. Well deserved.

Prabhavathi Fernandes

Thank you very much, Edward

Operator

Thank you. Our next question is from Brian Lian of SunTrust. You may begin.

Brian Lian – SunTrust

Hi. Good morning and congratulations on the contract.

Prabhavathi Fernandes

Thank you, Brian….

Brian Lian – SunTrust

Just a question on the market size again following up on some of the earlier question, in the pediatric setting, how should we think about the opportunity given the presence of some of the vaccines out there, I think you just mentioned that about 30% of the market is pediatrics, but how does the vaccine options impact that addressable markets?

Prabhavathi Fernandes

You’ve got my favorite subject Brian, this is great. So I’m glad you are able to ask that question. The pneumococcal vaccine, there are 97 some known strains of capable pneumococcal, okay. There also many more hundreds of non-capable pneumocephalus and also pneumococcal, okay. So you have pneumocephalus vaccine and pneumococcus vaccine against some strains of pneumococci up to 23 strains of pneumococci, and I already told you there were 93 capable strains of pneumococci. So all that other strains you don’t have any protections right, same thing with pneumocephalus, it protect against Type B, but not against the other types.

So in children the lung infection, the respiratory tract infections and also in adults is not protected. What you do protect is against blood stream invasive pneumococci disease, but it does not protect – vaccine does not protect against infection in the lung, which is pneumonia, okay. So the number of deaths will go down, because the bug cannot kill by getting into the blood stream, but certainly expect.

Now, in children upper respiratory tract infection, lower respiratory tract infection can cause fever and also otitis media or mid-ear infection is a big problem. If anyone has young children in this audience, you will know that it’s a big problem. And more recently the government has said, the NIH has declared that in the past we used to treat then it became – we do not need to treat. Now, the consensus is, we have to treat, because a lot of children cannot hear anymore, because they had mid-ear infection and that’s why they are not doing well in school.

So now we must treat and there are no drugs which work mid-ear infection, because firstly, they are nontypeable Haemophilus, nontypeable pneumococcus, which infect these mid-ears, and they are sometimes together as two pathogens and there are no drug which work and get there. Macrolide do get in the middle ear and Solithromycin, we expect to get there very well and is active against all of those strain. So in pediatrics, the vaccine is useful in preventing death, is also preventing certain known types of pneumococci and type b Haemophilus, but is not universally protective against all strains of haemophilus and pneumococcus.

Brian Lian – SunTrust

Okay. Great. That’s very helpful, thanks. And is there any reason to expect any differences in PK or safety or efficacy in younger patients?

Prabhavathi Fernandes

So these drugs are metabolized by CYP3A4, up to the age of four, CYP3A4 can change and so there maybe differences. We don’t expect too much. I believe there may not be much because of the history of the macrolides. This is one nice thing, but working with a known class of drug like macrolide, we know erythromycin is used very nicely with very young babies and on. We know telithromycin is used in very young babies and on. And yes, they address, they can adjust the dose depending on those metabolism and have been stated effective. So yes, we have to examine it and show that it’s good, but on the other hand, I personally do not expect and don’t believe there will be anything which cannot be handled.

Brian Lian – SunTrust

Okay, great. Thanks very much.

Prabhavathi Fernandes

Very welcome.

Operator

Thank you. (Operator Instructions) Our next question is from Stephen Willey of Stifel. You may begin.

Stephen Willey – Stifel, Nicolaus & Company

Yeah. Hi. Good morning and congratulations on the contract. Just a couple of questions, I guess, on the Biodefense fronts, what would be the dose that will be tested in terms of the human therapeutic equivalent, is this something that we should think of as kind of a high single gonorrhea like those?

Prabhavathi Fernandes

No. So it’s very interesting, the question, because we are hoping to use the same drug, which is in the shelf at [Walgreens or CBS], in which case we should be testing the same dose. 800 milligram IV oral loading dose with 400 milligram maintenance dose for up to 5 days, you know, that we have three-month stock ecology, which is already completed in both rat and monkeys. And therefore, we could be safe for very long periods of administration although with humans we have safety up to 5 days in this study.

Now, the second aspect is intravenous. We would do 400 milligrams if necessary, but no higher, because that’s what you will be using, and that’s enough to take care of all of the bioterror pathogens we have tested, because we have very good blood levels and very, very good tissue levels and intracellular levels.

Now, in the case of anthrax, it is well known that you have to have long duration of therapy, because these bugs had spores. Spores I think which survives, they’re not replicating cells, they are dormant cells, so when you throw an antibiotic on them, they get sits there and wait for the antibody to go away then they grow, they germinate, they’re like seeds.

So that’s why for anthrax what you do normally is, you give long cares of treatment. And if you have to do that with solithromycin, we know it’s very safe for three months in two animal species, so it would not be a big problem in the case of anthrax to do that. In animal models we won’t be testing for weeks to two weeks and to show that it works. But in the real life situation, if that drug is safe as we believe then it should be able to be used as long as we know that there are spores internally which can be tested for.

Stephen Willey – Stifel, Nicolaus & Company

Okay. And I know you mentioned about you will be showing safety and efficacy in adults and you really only need to show safety in children, but I am guessing with the overall suspension, which will be a novel formulation, I’m guessing, that there is going to have to be some kind of efficacy that’s demonstrated. So I’m just wondering what that trial might need to look like?

Prabhavathi Fernandes

Not at all, not at all, so in suspension or any changes that’s you make tablets instead of capsules, what we do is bioavailability; we show that the same blood level will occur with the suspension. So we do smart BE studies or bioavailability studies, bioprevalent studies, and in those, there are definite guidance to show bioavailability any time you change a formulation. That’s all you have to do and as long as it’s there in the right amount in the blood as shown with other efficacy studies, that’s all you have to do. Now let me correct you, on the pediatric, we know we have to show safety and we will count on the adults’ efficacy results to meet the CABP guidance, but we will treat children with CABP, because you don’t do Phase I in uninfected children like we do in uninfected adults and normal volunteers. Every child in the safety study will have pneumonia.

Stephen Willey – Stifel, Nicolaus & Company

Understood. Thanks.

Operator

Thank you. Our next question is from John Looney of Duke University. You may begin.

John G. Looney – Duke University

Well, all my questions have been answered. I just want to say I am really pleased and this is really great. Appreciate it.

Prabhavathi Fernandes

Thank you very much, John. We’ve enjoyed your support. Thank you very much.

John G. Looney – Duke University

And listening to your answered questions, I think we are going to write you over to teach microbiology to medical students. You may clear what other people don’t may clear, pretty impressive. Thanks.

Prabhavathi Fernandes

Thank you very much, John.

John G. Looney – Duke University

Okay. Bye.

Operator

Thank you. I’m showing no further questions at this time. I’ll like to turn the conference back over to Prabha Fernandes for closing remarks.

Prabhavathi Fernandes

Thank you all and for taking the time this time in the morning, I know you have a busy schedule and we look forward to working with you and updating you on upcoming events. Thanks and have a great day.

Operator

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day. Bye-bye.

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