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XenoPort, Inc. (NASDAQ:XNPT)

Q2 2009 Earnings Call Transcript

August 5, 2009 5:00 pm ET

Executives

Jackie Cossmon – IR

Ron Barrett – CEO

Bill Harris – SVP, Finance and CFO

Bill Rieflin – President

Analysts

Eric Schmidt – Cowen and Company

David Amsellem – Piper Jaffray

Michael Yee – RBC Capital Markets

Lucy Lu – Citi

Raghuram Selvaraju – Hapoalim Securities

Yale Jen – Maxim Group

Michael Aberman – Credit Suisse

Operator

Good afternoon. My name is Ellie and I will be your conference operator today. At this time, I would like to welcome everyone to the XenoPort second quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Ms. Cossmon, you may begin your conference.

Jackie Cossmon

Thank you, Ellie. Good afternoon and thank you for joining us on the call. Here with me today are Ron Barrett, our Chief Executive Officer; Bill Rieflin, our President; and Bill Harris, our Senior Vice President of Finance and Chief Financial Officer.

Before we begin our discussion of today’s news, I would like to note that the information to be discussed on this conference call and webcast, including answers to questions asked during this call, will include forward-looking statements that involve risks and uncertainties, including statements related to our current and future clinical development programs and clinical trials, our partners’ clinical development plans, the release of additional clinical trial data and the timing thereof, the regulatory process and the commercial potential for our product candidates. XenoPort can give no assurance with respect to these statements and we assume no obligation to update them.

For a detailed information about the risks and uncertainties that could cause actual results to differ materially from those implied by or anticipated in these forward-looking statements, please refer to the Risk Factors section of our most recent SEC filings, including our discussion of the inherent risks of clinical trials. This webcast is a copyright of XenoPort.

At this time, I will turn the presentation over to Ron.

Ron Barrett

Thank you, Jackie. And thank you all for joining us on the call today. I’ll be reviewing our progress during the quarter, then I’ll turn the call over to Bill Harris, who will be providing the summary of our financial results. We will then take your questions. As outlined in the press release, Q2 was a busy quarter for XenoPort, as we continued to meet our development and business objectives.

The most recent announcement that Astellas will employ a bridging strategy for filing the 512 NDA for RLS in Japan is particularly noteworthy and that it may accelerate the approval for 512 for RLS in Japan. Japan is the world’s second largest pharmaceutical market, and I’ll remind you that there are no approved drugs for RLS in Japan and we will receive a mid-teen royalty on Astellas sales of 512 if it is approved. We are working with our Astellas colleagues to file the NDA in Japan by the end of March of 2010.

We also continue to work with GSK and the FDA on the 512 RLS NDA. While I won’t discuss the interactions with the FDA, we continue to believe that our NDA is complete and provides strong evidence of the safety and efficacy of 512 for treating moderate to severe primary RLS.

We announced today that we completed in Q2 the one year open-label study of 512 in RLS patients. This study allowed patients from a number of placebo-controlled trials to roll over into one year extension study. The study had a target dose of 1,200 milligrams per day that allowed 600 milligrams or 1,800 milligrams per day based on efficacy and tolerability experienced by the subject. 512 is generally well tolerated. 11% of subjects withdrew due to adverse events. And most common adverse events were somnolence and dizziness. We plan to present the full results of this study at medical conferences of the future.

Turning now to arbaclofen placarbil, or AP, we also made some significant progress this past quarter. An important milestone is the successful completion of a human cardiovascular safety study or thorough QTc prolongation study. There is no evidence of QTc prolongation after repeated doses of up to 180 milligrams per day, 90 milligrams BID. The positive control of moxifloxacin provided the necessary evidence of assay sensitivity. This was an important milestone to achieve prior to initiation of large clinical trials in GERD were other potential indications.

At the DDW meeting in June, we presented a more complete set of data from the Phase 2 monotherapy GERD trial. The presentation provided additional evidence, including a new data on complete relief of heartburn and regurgitation symptoms, suggesting that AP maybe an important new potential treatment for GERD patients who remain symptomatic to despite PPI therapy.

This past quarter we also met with the FDA to discuss our GERD development program. We believe it was a productive meeting. Importantly, there was clear recognition of the unmet medical needs of GERD patients and an agreement in principle on how to approach development of a new therapy for patients with incomplete response to PPI. For competitive reasons, we are not going to describe all that we learned in the meeting and the specific FDA responses to our proposals.

Although one outcome of the meeting is that we have modified the protocol for our upcoming Phase 2b adjunctive therapy trial, in a way that increased the total cost of the trial. We are on track to initiate this trial later in the year, and this trial will include AP added to PPI in subjects with any complete response.

Beyond GERD, this past quarter, we also reported positive results from a Phase 2 trial of AP in spinal cord injury patients with spasticity. The most notable results of the trial were the prolonged efficacy and good tolerability of AP in this patient population. We are formulating our next steps in order to meet with the FDA by the end of the year to discuss potential development paths for treating patients with spasticity.

Meanwhile, we await the results of the Phase 2 clinical trial for the treatment of pain associated with acute back spasms of neuromuscular origin, which completed enrollment in the second quarter. The primary objective of this trial is to understand the safety and tolerability of AP in the patient population where doses about the 40 milligrams twice a day are administered with no titration. We expect to get a sense of the efficacy in the trial, although the trial was not powered to show physical significance on any of the efficacy assessments. We expect top line results from this trial later this year.

Also during the quarter, we initiated a repeat dose pharmacokinetic study comparing 279 to Sinemet in Parkinson’s disease patients. Result of this study should come around the year-end or early next year. Another important event in Q2 is our election of the co-promoter option in our agreement with GSK. Since the election, we’ve been working closely with GSK planning for the launch of 512 for RLS, assuming it receives FDA approval. We’ve made good progress building the organizational foundation to create 50 to 100-person sales force that we will put in place following the approval of 512.

On July 8, we completed an equity offering that resulted in net proceeds of $51 million. Proceeds will be used to further invest in multiple indications for AP to increase the probability of successfully bringing a second product candidate to the market behind 512. We are pleased that our internal research efforts have delivered a series of product candidates that address important medical needs and provide potential growth engines in addition to 512.

For the rest of the year, we look forward to the results of trials that have already completed enrollment, a Phase 2 acute back spasm trial with AP, the two Phase 2 GSK trials on 512 in post-herpetic neuralgia, and a Phase 3b polysomnography trial of 512 in RLS. And most importantly, we expect the response from the FDA on the 512 RLS NDA in November. We look forward to sharing our progress with you later this year.

With that, I’ll turn the call over to Bill.

Bill Harris

Thanks, Ron. And thanks to all of you for joining us today on the call. I’ll spend a few minutes reviewing our financial results in the second quarter and we’ll then take your questions. As we indicated in our press release, with the election of the co-promotion option, our collaboration agreement with GSK now falls within the scope of EITF 07-1.

Accordingly, we have changed the presentation of revenues such that all revenues resulting from the GSK agreement, including our share of pre-launch operating losses, is now presented as net revenue from unconsolidated joint operating activities. This new presentation has no impact on net loss or net loss per share for any period presented. Collaboration revenues decreased $1 million for the second quarter of 2009 compared to the same period in 2008 due to a decrease in revenue recognized under our agreement with Xanodyne.

Net revenue from unconsolidated joint operating activities decrease $8.7 million for the second quarter of 2009 compared to the same period in 2008, primarily due to a decrease in the recognition of milestone-related revenue and to a lesser extent, the recognition of our share of pre-launch losses as a result of our election of the co-promotion option.

Research and development expenses decreased $3.4 million for the second quarter of 2009 compared to the same period in 2008 due to decreased net cost for the 512, AP and our other development programs, partially offset by increased net cost for the 279 program and increased personnel cost resulted from increased headcount and increased non-cash stock-based compensation.

Selling, general and administrative expenses increased $1.5 million for the second quarter compared to the same period in 2008, due to an increase in personnel and related costs reflecting increased headcount and increased non-cash stock-based compensation.

Net loss for the second quarter of 2009 was $20.9 million compared to a net loss of $12.4 million for the same period in 2008. Basic and diluted net loss per share was $0.76 for the second quarter of 2009 compared to $0.49 for the same period in 2008. And finally, at June 30, 2009, we had cash, cash equivalents and short-term investments of $123.5 million.

With that, we will now open the call for questions. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Eric Schmidt of Cowen and Company.

Eric Schmidt – Cowen and Company

Good afternoon. Thanks for taking my questions. Ron, has the FDA received the open-label expansion data for 512?

Ron Barrett

At the time of the data cut for the 120-day safety update, we had about 376 subjects who had completed nine months and 269 who had completed a full 52 weeks of treatment in the study. So that more than exceeds the ICH guidelines, and we think that again it provides sufficient evidence of the safety – long-term safety of the drug to support the NDA.

Eric Schmidt – Cowen and Company

I guess my line of thinking was more along the lines of if you have to make amendment in your package, whether that might allow the FDA to postpone the PDUFA date or whether you think they are still working strenuously to get the stuff by November?

Ron Barrett

No, it’s very common to have continued studies ongoing at the time of NDA submission as well as 120-day update, and as I said, we think that this more than surpasses the ICH guidelines for chronic therapy and the agreement that we had with the FDA for filing the NDA. I don’t believe that that will lead to any delay.

Eric Schmidt – Cowen and Company

Okay. Your latest thoughts on whether a panel will be called to review the program?

Ron Barrett

Well, as you probably know, the new FDA legislation and the draft guidance states that all MCV [ph] should go to an advisory committee and we consider ourselves to be an MCV based on all of the discussion we’ve had with the FDA. If there is no advisory committee, the FDA is to provide a reason why that comment not required in the approval letter. I’m aware of a couple of products that recently have been approved without advisory committee; lacosamide, (inaudible). There probably are several others. So that’s about all I can say at this point, and we look forward to continue to work with the FDA and GSK on the review of the file.

Eric Schmidt – Cowen and Company

Okay. And the press release mentions the – one patient I guess from the open-label who had the serious adverse event of mental status change. Could you just give us a little bit more background on what happened there, what does serious mental status change relates to, and whether you’ve seen anything similar –?

Ron Barrett

Yes, it’s a complicated case. The subject had confusion with incoherence. The workup with the patient despite the patient’s assertion that they were compliant with the drug, there was no gabapentin in her blood at the time of this incidence. And despite the patient’s assertion that there were no other drugs that she was taking, there were two other prescription medicines found in high concentration in her blood. And the assessment of the physician was possibly related to the drug, but obviously it’s a very confounded case.

Eric Schmidt – Cowen and Company

Thanks for that. Last question, you have so much going on. I may have missed it, but did you talk about when we expect to see the PHN data on 512?

Ron Barrett

GSK’s guidance is that both the studies will report out by the end of this year. That’s all we have provided at this point.

Eric Schmidt – Cowen and Company

Okay, thanks a lot.

Ron Barrett

You’re welcome, Eric.

Operator

Your next question is from David Amsellem of Piper Jaffray.

David Amsellem – Piper Jaffray

Hi, thanks. Just back to the open-label extension, can you talk about the tolerability profile specifically for patients whose dose increased to 1,800 milligrams? And was there anything tolerability related that was different at that dose from what we’re seeing at the lower doses?

Ron Barrett

No, there was no dramatic difference in tolerability at the different doses. Just to give you a sense of where subjects ended up in terms of dose, and obviously there are some flexing that’s going on, but the dose at the end of their treatment, whether they terminated earlier or completed the study, 18% of them were on 600, 52% of them were on 1,200, and 30% were on 1,800. And most of the adverse events were dizziness and somnolence occurred in those patients who had been on placebo in the parent study. So this is as expected. We typically see adverse events early in treatment. And as we saw in the study, the dizziness and somnolence predominantly occurred in those subjects.

David Amsellem – Piper Jaffray

Okay, that’s helpful. And then can you just go back and clarify how the protocol of the PPI-refractory study for 986 has changed and specifically what is new about the design?

Ron Barrett

Yes. The design hasn’t changed dramatically. As I said in my comments earlier, I don’t want to be drawing a blueprint for others on what the FDA’s thoughts on the design of the study. One thing that did increase the size of the cost of the trial had to do with the FDA wanting us to assure that the subjects were compliant on their PPI. And so we have to have a longer running period as well as more extensive monitoring of compliance. Because of that higher compliance monitoring and the possibility that they may have a higher screen failure rate due to compliance, we have upped the number of subjects going in to the study. And so that’s resulted in an increase in cost of the study.

David Amsellem – Piper Jaffray

And can you specify how much bigger the study is in terms of number of subjects?

Ron Barrett

No, we are not giving that detail at this point.

David Amsellem – Piper Jaffray

All right. Thanks.

Ron Barrett

You’re welcome.

Operator

Your next question comes from Michael Yee of RBC Capital Markets.

Ron Barrett

Hello, Michael.

Michael Yee – RBC Capital Markets

Yes, I’m here. Sorry about that. Couple questions, Ron, on the neuropathic pain studies from GSK. Can you remind us whether you guys think that study is – those two studies are fileable? And then can you remind us what GSK’s plans are for Europe at this point given RLS is so far into the regulatory path here in the US?

Ron Barrett

With regard to the PHN studies, there are two studies. The first one is a 14-week study, parallel design, uses endpoints that would – based on historical practice, would be acceptable for registration. So I think it’s going to be dependent on the results of the study. It is powered. There is a statistical hypothesis this being tested. And so in principle, it could be used a registration study. The other study is more of a proof-of-concept study, taking subjects who still have a pain score greater than four, while on Nurofen or gabapentin and then randomizing to a high dose and a low dose of 512; the higher dose presumably creating greater gabapentin exposure and the lower dose being a non-effective dose. That would not be a registration study. It’s more of a proof-of-concept study. With regard to plans for Europe, GSK has not given any guidance on that, obviously because there are multiple indications here, and there are potential pricing differences in Europe, the requirements for doing comparative studies. The European strategy is not straightforward, and GSK hasn’t given any guidance on that at this point.

Michael Yee – RBC Capital Markets

But just to be clear on that, on the 14-week study, you would be able to file depending on very positive results that you could file with one –?

Ron Barrett

No, I’m sorry, I wasn’t clear on that. It’s potentially a registration study that would require replication.

Michael Yee – RBC Capital Markets

Okay. And then lastly on the GERD program and at least thinking about partnering, would your business plans or financial structure allow you to be prepared to take that all the way through Phase 2b? What do you think you need to partner at some point along the way and that would be the ideal situation?

Ron Barrett

We are fully prepared to take this through the Phase 2b study. We did the financing that provide us with additional capital to continue to invest in our pipeline aggressively. And with regard to partnering, we are in constant discussions and we will partner when we think the best deal comes along, but we are not needing to partner for financial reasons.

Michael Yee – RBC Capital Markets

Okay. Thanks.

Ron Barrett

You’re welcome.

Operator

Your next question comes from Lucy Lu of Citi.

Lucy Lu – Citi

This is Lucy Lu. Going back to the one case of adverse events, could you please indicate what triggers that event for the mental status change and was it reversed?

Ron Barrett

No. As I described, it’s a complicated case with confounding facts – the fact that there was no gabapentin detectible in the blood suggests that the patient was not compliant with the study medications. The fact that there were other drugs found in blood suggests that there may be other contributors to the confusion and incoherence that occurred. And I don’t remember whether the patient withdrew from the study or not. But I don’t – it's always the physician’s judgment as to whether it’s related to the drug, but this is obviously a complicated case.

Lucy Lu – Citi

Thank you. I guess what I was trying to get at was, was the condition reversed?

Ron Barrett

What condition are you talking about?

Lucy Lu – Citi

The incoherence. Did the patient –?

Ron Barrett

Yes, the patient recovered, yes.

Lucy Lu – Citi

Okay then, thank you. And also in this trial, I noticed that the dropout rate is – the total dropout rate was higher than the 11% that you mentioned in your prepared comments that were due to adverse events. What were the reasons for the other dropouts briefly?

Ron Barrett

There were a whole host of reasons for withdrawals due to adverse events. And none of those were very high to add enough in total to the 11%. If you are talking about dropouts other than adverse events –

Lucy Lu – Citi

Yes.

Ron Barrett

This is a one-year study. So patients are lost to follow up, patients drop out just because they don’t want to stay in the study. It’s not unusual in a one-year study to have a less than 100% completion rate.

Lucy Lu – Citi

Okay. And the last question is, for the commercial preparations, where are you in the process for building the commercial infrastructure? And when would you start hiring the reps and how do you identify other than neurology drugs if you’d like to in-license and stuff [ph]?

Ron Barrett

Bill, you want to take those?

Bill Rieflin

Sure. In terms of the first part of the question, we are testing various consumer and professional concepts. We are preparing to build the sales team that involves assessment of territories work on fleet, sales force automation, plans for sample distribution, et cetera. Your second question, I believe, was when we would start the process of hiring the sales reps. And the answer to that is in the wake of the renegotiation of Requip with GSK that we announced earlier this year, we would not plan to commence the process of hiring sales reps themselves until after the FDA approval is received. And the last question, I believe, related to in-licensing of neurology-type products to feed into the neurology sales organization, that is something that we would consider. As you are aware, the economics of a sales force are substantially more compelling when there are multiple products in the bag of that sales force. For a period of time, you may remember that we have the ability to detail a second product in addition to 512. That’s Requip XL. And longer-term we have a portfolio of products that could have applicability to physicians who prescribe CNS drugs, and there may be some opportunities in that intervening period for us to have in-licensing. But it’s still ways off where that would be required.

Lucy Lu – Citi

Thank you very much.

Ron Barrett

You’re welcome.

Operator

Your next question comes from Raghuram Selvaraju of Hapoalim Securities.

Raghuram Selvaraju – Hapoalim Securities

Hi, thanks very much for taking my questions. Can you hear me?

Ron Barrett

Yes, we can.

Raghuram Selvaraju – Hapoalim Securities

Okay. Just very quickly with respect to this mental status change adverse event. You mentioned that there were other drugs found in the blood of the patient. Can you tell me what those were?

Ron Barrett

No, I’m not going to go into that detail. I’m just trying to point out it was a complicated case.

Raghuram Selvaraju – Hapoalim Securities

Okay, understood. With respect to the migraine prophylaxis study, has GSK provided any additional guidance as to when we might expect that data? And is that something that could potentially be used as a registration quality trial, if positive?

Ron Barrett

So – GSK has not provided any guidance on when that study will be completed. They haven’t said it’s this year. I think you can assume that next year. With regard to whether it’s registration quality, it is of a duration, of a design, uses endpoint. It has been used historically in registration studies. If the study is successful, obviously they would need to be meeting with the FDA to get agreement and only one confirmatory study would be required.

Raghuram Selvaraju – Hapoalim Securities

Okay. And then with respect to your plans for AP in acute back spasm, assuming that you see a signal in the Phase 2, would you seek to carry AP forward independently in that indication as well?

Ron Barrett

We have not made that decision, and I think it will rest on a couple of things, what the data looks like from the efficacy side and also what kind of feedback we get from the FDA with regard to development path or spasticity. We have had a pre-IND meeting with the pain division regarding acute back spasms, we think we have good clarity on what would be required there. We won’t make that judgment until we have the data, and we understand what the path is for specificity.

Raghuram Selvaraju – Hapoalim Securities

Okay. And then just very quickly, you mentioned the stratification of the patients in the open-label extension by dose. Could you give me those percentages again?

Ron Barrett

For 600 milligrams, this is the final dose when they left the study or finish the study. The 600 milligrams was 18%, 1,200 milligrams was 52%, and 1,800 milligrams was 30%.

Raghuram Selvaraju – Hapoalim Securities

Okay, thank you.

Ron Barrett

You’re welcome.

Operator

Your next question comes from the line of Yale Jen of Maxim Group.

Yale Jen – Maxim Group

Thank you for taking the questions and most have been answered. Just want to get a little more details in terms of the Astellas’ strategy filing for approval in Japan.

Ron Barrett

Well, there is – relatively recently the Japanese regulatory authority put in place a mechanism in which companies could utilize study information that was conducted within Japan in conjunction with studies that were conducted outside of Japan. And this is a bridging study. So, as you remember, they did a Phase 2b or less study in Japan with success. They tested multiple doses. And the information from that study very much agreed with the information that came from our studies that were conducted in the US. Another important requirement is that you show pharmacokinetic equivalency in the Japanese subjects versus non-Japanese subjects. And we conducted that study in the US to facilitate Astellas’ filing using this bridging strategy. So that was in extensive discussion as to whether the data supported the bridging and based on the interaction with the PMDA, Astellas feel confident that they can file the NDA with the data that’s available today with no additional studies.

Yale Jen – Maxim Group

And would that filing be expected early next year? Typically, the Japanese regulatory agency reviewing, would that take more than a year? What’s typical timeframe people sort of could expect?

Ron Barrett

Yes. There is no equivalent to the US in terms of PDUFA ten-month review. However, the recent changes within the PMDA, they do have targets. And their targets, from what is currently available, is to review 80% of NDAs within 12 months. Now, that doesn’t mean approve; that means complete the review.

Yale Jen – Maxim Group

And so would that possible timeline that – so by 2011, maybe end of – let's be a little conservative and maybe by the end of 2011, the process may be completed and the product can go do the market in that market? Would that be a reasonable sort of assumption?

Ron Barrett

Well, I think you’re going to have to decide on what the reasonableness is. We hope to file the NDA before the end of March 2010. As I just said, the goal of the PMDA is to review 80% of files within 12 months.

Michael Aberman – Credit Suisse

And given there is no proof of the product in the market, was any specific aspect Astellas has considered to be able to promote a drug or sell a drug? What’s their vantage point to look at this product at this moment?

Ron Barrett

I think that they are very excited about the opportunity in RLS. The prevalence of RLS is depending on the study roughly in range with what’s been seen in Western countries, the one big difference is the diagnosis and treatment rate is considerably lower than in the United States in particular. And based on the response that Astellas got when they were soliciting subjects for their clinical trials, I think they believe that there is a substantial opportunity within Japan for this project.

Yale Jen – Maxim Group

Okay, great. Thanks a lot for the clarifications.

Ron Barrett

You’re welcome.

Operator

Your next question is from Eric Schmidt of Cowen and Company.

Eric Schmidt – Cowen and Company

Thanks for the follow-up. Just one question on the AP spinal cord injury study. Ron, if I heard you correct, I think you said the trial completed and the drug was well tolerated. Were there any powered efficacy endpoints in that study?

Ron Barrett

Yes, we reported those results a month ago. We had a very robust treatment effect on using the Ashworth Scale on the 20 milligram and 30 milligram twice a day. And we have remarkably good tolerability with the dizziness and somnolence rates below 5% and with no withdrawal due to adverse events. So that was a great result we had and I guess it was about a month ago.

Eric Schmidt – Cowen and Company

So in terms of steps forward, you are waiting for the back spasm study?

Ron Barrett

Correct. And also the development path in spasticity is not entirely clear based on our previous interaction with the FDA. We have had some discussion with them about trial designs for pivotal studies. Particularly in the spinal cord injury population, patient recruitment is challenging because to ask patients to go on placebo for extended period of time is difficult. In addition to spinal cord injury, there is the possibility of studying this in spasticity due to other nerve damage, specifically multiple sclerosis, stroke, brain trauma. And so we want to get clarity on about the trial design and what type of label we would get if we did one study in spinal cord, one study in MS, for instance, would we get a broad label if we did that, or is the preferred path to do replicate studies in, say, spinal cord injury.

Eric Schmidt – Cowen and Company

Okay, got it. In terms of the accounting change with regard to the joint operations and Glaxo, the profits from the joint operations be also recruited on that same line or a different line? And I guess I’m wondering what happens if in some period of time, the early launch, that there is actually negative revenue. Could you be recording negative revenue on that line or would that be a separate line on the expense side?

Bill Harris

Yes. This is Bill Harris. The answer to all your questions is yes. The operating results from the joint P&L will be recorded in that line. If the aggregate net amount is a negative amount, it will be shown as a negative amount. And then in the footnote to the financials, there will be a breakout of the components under the collaboration that total up to the amount on the face of the income statement.

Eric Schmidt – Cowen and Company

Thanks a lot.

Bill Harris

Yes.

Ron Barrett

You’re welcome.

Operator

(Operator instructions) Your next question comes from Michael Aberman of Credit Suisse.

Michael Aberman – Credit Suisse

Hey, guys, how are you?

Ron Barrett

Hi, Michael.

Michael Aberman – Credit Suisse

Couple quick questions. First, can you expand on Astellas’ decision not to pursue the diabetic neuropathy aspect, and whether or not that was in consultation with you guys, does GSK involve in those decisions at all? And from a commercial standpoint, in the pain market, how big diabetic pain versus the other aspects?

Ron Barrett

So – with regard to your question, does GSK get involved, the answer is no, these are separate discussions. Why Astellas made this decision? They conducted the study. They have very high placebo response. As I’ve indicated in the past. There have been no successful PDN studies that have been conducted in Japan. There are some ongoing trials for both pregabalin and duloxetine. I think until someone shows that you can control placebo response and that there are no kinds of cultural issues about how the pain scores are reported by these patients. Astellas’ decision was to not continue at this time. And so that was done in consultation with GSK. With regard to the breakdown of neuropathic pain by indication, painful diabetic neuropathy is one of the larger categories, but obviously there is others. There is post-herpetic neuralgia, there is drug-induced neuropathy, there is injury-induced neuropathy, there is drug-induced neuropathy. So what’s happened historically is that when drugs have been shown to be effective in one or more of these indications, they are used more broadly. Not that we would ever promote. It’s not our intention to ever promote for indications other than for which we labeled, but that it has been true historically.

Michael Aberman – Credit Suisse

Do you think that’s going to continue? I mean, not the label, I know you can’t promote it. But are times different or do you it’s just important to get at least one pain indication? And even if RLS has improved, what is your anticipation for use off that RLS label?

Ron Barrett

Yes. We don’t comment on any anticipation that we have. We are very cognizant of the regulations with regard to promotion. With regard to whether off-label use in neuropathic pain conditions will continue to the extent it has in the past, I think you’re right to say that this is being paid more attention to, and it’s something that we certainly and GSK certainly will have to take into account when we work on our estimates of penetration of the product.

Michael Aberman – Credit Suisse

Okay, that’s great. In terms of our somnolence and side effect associated with 512, what should we be looking for in terms of – or what do you think the FDA would be looking for, I know you did a driving study, maybe to sort of talk about those results and what they mean in terms of level of confidence there, what that population was like, and perhaps whether or not that could be a topic of discussion at a panel if you get one?

Ron Barrett

Let’s say, our data, which in my view is more extensive and exist for gabapentin or pregabalin, in fact in the – because we have done specifically the driving study, I think, supports that there is not a major problem with this affecting people’s ability to function. I’ve said repeatedly that dizziness and somnolence occurs earlier in the treatment, is short in duration, it’s generally mild to moderate; very few withdrawals due to the adverse events. And our anticipation is that we will have a warning with regard to driving or operating heavy machinery the same way that gabapentin and pregabalin have on their label. The other piece of information I would point to was, in both the 52 study and the 53 study, we disclosed the results. When you specifically probe for daytime somnolence, you need either the Moss Sleep Score or the Epworth Sleepiness Scale. I’ve got two patients that actually do better than placebo when you specifically look at and measure daytime somnolence. So we don’t think that this is going to be a problem with the NDA.

Michael Aberman – Credit Suisse

Great, thanks. I appreciate the answers.

Ron Barrett

You’re welcome.

Operator

There are no further questions at this time. Do you have any further remarks?

Ron Barrett

Yes. I’d like to thank you for your participation on the call today. And if you have any further questions, please call 408-616-7220 and again – have a great day.

Operator

That does conclude today’s conference call. You may now disconnect.

Ron Barrett

Thank you.

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Source: XenoPort, Inc. Q2 2009 Earnings Call Transcript
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