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Santarus Inc. Q3 2009 Earnings Call Transcript

November 04, 2009 | about: SNTS

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Santarus Inc. (SNTS)

Q3 2009 Earnings Call

November 04, 2009; 05:00 pm ET

Executives

Gerald Proehl - President, Chief Executive Officer

Debra Crawford - Senior Vice President, Chief Financial Officer, Treasurer, Secretary

William Danby - Senior Vice President, Commercial Operations

Dr. David Ballard - Senior Vice President, Clinical Research and Medical Affairs

Martha Hough - Vice President Finance, Investor Relations

Analysts

Scott Henry - Roth Capital

[Amish Deenerman] - Piper Jaffray

Aaron Mishel - Thomas Weisel Partners

[John Szabo - Feinrich Capital]

Presentation

Operator

Welcome to the Santarus third quarter 2009 financial results conference call. (Operator Instructions)

I would now like to turn the conference over to Martha Hough. Please go ahead ma’am.

Martha Hough

Thank you Cara. Good afternoon and welcome to today’s call. This is Martha Hough, Vice President of Finance and Investor Relations. Joining me on the call today are Gerry Proehl, President and Chief Executive Officer; Debbie Crawford, Senior Vice President, Chief Financial Officer, Treasurer and Secretary; Bill Danby, Senior Vice President of Commercial Operations; and Dr. David Ballard, Senior Vice President Clinical Research and Medical Affairs.

Earlier today, Santarus issued a press release announcing our third quarter 2009 financial results which is available on our website. This call is also being broadcast live over the internet at www.santarus.com and a replay of the call will be available for the next two weeks under the investor relations section of our website.

For today’s call, please keep in mind that risks and uncertainties involved in the company’s business may affect the matters referred to in forward-looking statements made during today’s call. As a result, the company’s performance may differ from those expressed in or indicated by such forward-looking statements and which are qualified in their entirety by the cautionary statements contained in the press release and the company’s Securities and Exchange Commission filings.

The content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast on November 4, 2009. Santarus undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

With that I’ll turn the call over to Gerry Proehl. Gerry.

Gerald Proehl

Thank you, Martha. I’d like to add my welcome to everyone on the call this afternoon. We’re very pleased to report our strong financial performance for the third quarter. Total revenues reached $39.5 million and net income was $5.3 million, a significant improvement year-over-year from our loss of $4 million in 2008 third quarter and our third consecutive quarter of profitability.

ZEGERID revenues grew 12% over the prior year period and Glemetza contributed $6.8 million in promotion revenue, a 20% sequential increase from the second quarter of 2009. We’re taking this opportunity to increase our outlook for 2009. We now expect 2009 total revenues of at least $150 million and net income of at least $10 million, up significantly from our prior estimate of breakeven to net income of $1 million. Debbie Crawford will further discuss our 2009 outlook in her review of our financial results.

Turning to other business highlights, last month we entered into a license agreement with Norgine, a leading European specialty pharmaceutical company granting exclusive rights to develop manufacture and commercialize prescription immediate release ZEGERID products in specific markets in Western, Central and Eastern Europe.

We received $2.5 million upfront payment and we may be entitled to receive up to an additional $10 million in contingent milestone payments. We will also receive a tiered royalty ranging from the mid to high teens on net sales of any products sold under the license agreement. We believe that Norgine is an ideal as a European partner given its focus on GI products and its established commercial infrastructure in many European markets.

We are also very pleased to be ranked 23^rd on Deloitte’s Annual Technology FAS 500 announced last month. This year’s technology FAS 500 ranks technology media, telecommunication, life sciences and cleaning technology companies in North America based on percentage revenue growth from 2004 to 2008.

Our revenues grew from $1.3 million in 2004 to a $130.2 million during this period. Also in October two posters reviewing investigator initiated studies of ZEGERID were represented at the American College of Gastroenterology 2009 Annual Scientific Meeting. These studies were undertaken by physicians at the Mayo Clinic and the University of California, San Diego.

This adds to the growing body of data assessing ZEGERID products in the treatment of patients with GERD symptoms. We are approaching the FDA action date for Schering-Plough’s new drug applications for OTC ZEGERID which is in December. Merck and Schering-Plough announced yesterday that they have completed their merger.

If Schering-Plough receives FDA approval, we are entitled to receive a $20 million milestone as well as low double-digit royalties on net sales of any OTC ZEGERID product. We also may receive up to $37.5 million in sales milestones based on future sales or performance of OTC ZEGERID.

If the FDA approves the NDA in December, we expect Schering-Plough will launch OTC ZEGERID in the first half of next year. As many of you are aware the bench trial in our litigation versus Par Pharmaceuticals took place in mid July. During the trial a Delaware District Judge issued a ruling of infringement by Par of the ZEGERID patents.

Post-trial briefs are filed in mid August and we await the Judge’s final ruling on validity and enforceability of the patent claims. Although we cannot be certain about the ultimate outcome in the case, we continue to believe that the trial went well and remain hopeful for positive outcomes.

Now, I’ll turn the call over to Debbie Crawford to discuss our financial performance. Deb.

Debra Crawford

Thank you, Gerry. Total revenues in the third quarter of 2009 were $39.5 million, a record quarter for Santarus and grew 22% compared to $32.2 million in the third quarter of 2008. Product related revenue was $38.3 million in the third quarter of 2009, a 30% increase compared with $29.5 million in the third quarter of 2008. Product related revenue in the current quarter included $31.5 million in ZEGERID net product sales and $6.8 million earned under our Glumetza promotion agreement.

The components of 2008 third quarter product related revenue were $28.1 million in ZEGERID net product sales and $1.4 million in promotion revenue. The $3.4 million increase in ZEGERID net product sales was comprised of approximately $1.1 million related to an increase in sales volume and $2.3 million related to an increase in average selling price. This reflects our continued emphasis on improving ZEGERID margins through pricing and contracting which Bill Danby will discuss in more detail in a few minutes.

As Gerry stated, we reported net income of $5.3 million or $0.09 per share in the third quarter of 2009, compared with a net loss in the third quarter of 2008 of $4 million or $0.08 per share. We believe these bottom line results clearly demonstrate the positive operating impact of achieving higher revenues with our existing commercial infrastructure.

Our cost of product sales was $2 million in the third quarter of 2009 or approximately 6% of net product sales compared with $1.9 million in the third quarter of 2008 which was approximately 7% of net product sales. The cost of product sales percentage in the third quarter of 2009 benefited from our improved average selling prices for ZEGERID.

Research and Development expenses were $3.4 million in the third quarter of 2009 compared with $2.3 million in the third quarter of 2008. The increase in R&D spending was due primarily to our 50% share of the out-of-pocket cost for the Phase III clinical program for Budesonide MMX.

We continue to expect that timing differences in cost for Budesonide MMX clinical program will result in some expenses shifting into the fourth quarter of this year and into the first quarter of 2010. Selling, general and administrative expenses were $26.3 million for the third quarter of 2009 compared with $28.5 million for the third quarter of 2008. SG&A expenses decreased due to a decrease in advertising and promotional activities related to ZEGERID, partially offset by higher legal fees associated with our patent litigation.

Turning to our year-to-date financial results. For the nine months ended September 30, 2009, we reported total revenues of $110.1 million. Consisting of $103.9 million in product related revenue which increased approximately 36% over the prior year period and $6.2 million in license and royalty revenue.

In the nine months ended September 30, 2008, total revenues were $92.7 million which consisted of $76.3 million in product related revenue and $16.4 million in license and royalty revenue. License and royalty revenue for the prior year period included a $2.5 million milestone and $5.7 million in amortization of deferred revenue representing the remaining balance of an upfront fee received from Otsuka America in 2004.

We reported net income of $7.6 million or $0.13 per share for the first nine months of 2009 compared with a net loss of $8.4 million or $0.16 per share for the same period in 2008. We are pleased to report positive cash flow from operations of $4.3 million in the third quarter of 2009 and $5.3 million in the first nine months of this year.

As of September 30, 2009, Santarus had cash, cash equivalent and short term investments of $61.8 million. Out cash balance at September 30 did not include the $2.5 million upfront fee received from Norgine in October. For additional information on the third quarter, investors can refer to our Form 10-Q which we expect to file with the SEC later this week.

Before moving on to a discussion of our improved 2009 full year guidance, I’d like to emphasize that our current outlook is influenced by our strong year-to-date financial performance balanced by the rapidly changing dynamics of the PPI markets, including the anticipated introduction of generic and OTC forms of Prevacid this month.

We also expect to report increased license and royalty revenue with the majority of the upfront fee from our European agreement with Norgine being amortized to revenue in the fourth quarter. Based on these dynamics, we are very pleased to increase our full year financial outlook for 2009.

We expect total revenues of at least $150 million versus our prior estimate of $145 million. We expect product related revenue of at least $141 million, up from our prior estimate of $138 million. Product related revenue consist of net product sales and promotion revenue.

We currently expect 2009 research and development expenses of approximately$16 million to $18 million compared with our prior estimate of $19 million to $20 million. We are reducing our R&D expense estimates due to anticipated delays in the timing of expenses associated with clinical development of Budesonide MMX. However, we expect to maintain our previously announced clinical timelines for that program.

As Gerry mentioned, we expect net income of at least $10 million, up significantly from our prior guidance of breakeven to net income of $1 million. Additionally, if Schering-Plough receives FDA approval of its new drug application for an OTC ZEGERID product, we will earn a $20 million regulatory milestone. Therefore, if the FDA approval occurs in 2009, it will have a significant positive impact on our financial results in the current year.

I’d now like to turn the call over to Bill Danby.

William Danby

Thanks Deb. The third quarter also was strong from a commercial perspective. Both ZEGERID and Glumetza achieved all time highs in net sales from product shipments. In fact ZEGERID outperform the branded PPI market with 6.3% growth in total prescriptions in 2009 third quarter compared with the prior year period, and GLUMETZA became the leading branded metformin in terms of new prescriptions.

The fourth quarter is historically strong for branded PPI sales, whether this holds true this year could depend on the impact of the anticipated November deductions of Prevacid OTC and generic prescription Prevacid. We expect to see some impact on all remaining branded PPIs for about six months after the Prevacid brands loses patent exclusivity. We have seen a decrease in competitor’s promotional spending and took this opportunity during the third quarter to shift our sales organization’s efforts to what we believe is a more productive call pattern.

We are maintaining our share voice and by replacing approximately one quarter of our low performing ZEGERID accounts were those that offer a greater potential for both ZEGERID and Glumetza, we expect an increase in our sales force productivity. In addition to our efforts to improve sales rep productivity, we are also aggressively managing our contracted business.

Along with our pricing actions this year, our managed care contracting activities have resulted in the higher average selling price as evidenced by our third quarter net sales numbers. A recent component of this pricing strategy was our decision to terminate participation in the Medicaid program for ZEGERID effective October 1^st of this year.

Although we expect a short term decrease of approximately 8% to 10% ZEGERID prescriptions, we do not expect this decision to negatively effect top-line financial results. In fact, we expect that our Medicaid decision combined with our pricing actions taken this year will have a continuing positive impact on ZEGERID’s average selling price.

If the FDA approves OTC ZEGERID in December we expect that the anticipated launch of OTC ZEGERID in the first half of 2010 will be accompanied by significant consumer advertising and publicity. We believe this consumer advertising could have the added benefit of increasing awareness of the ZEGERID brand.

In addition, if we receive FDA approval of our prescription tablet formulation in December, we expect a mid-2000 launch of the tablet with an associate increase in promotional effort. We believe the ZEGERID tablet launch will work to reinvigorate the ZEGERID prescription brand by increasing our share voice and potentially having a positive impact on ZEGERID prescriptions in the second half of 2010.

In summary, we continue to look for ways to optimize the ZEGERID brand. We have taken appropriate pricing actions and aggressively managed our contracted business to increase average selling prices and we have made changes to increase the productivity of our promotional efforts.

Although the next few quarters may be challenging due to market dynamics including the anticipated introduction of generic Prevacid prescription products and that Prevacid OTC product, our goal is to continue to grow ZEGERID sales while carefully managing our promotional expenses.

Now, turning to Glumetza, which we began promoting late last year, we have been very successful in returning this product to sustained growth. We are now the market leader in branded metformins as measured in terms of both new and total prescriptions. In the 13 months we have been promoting Glumetza, our new prescription share of the branded metformin market has increased 13 percentage points to a 38% share and total prescription shares increased by 11 percentage points to 34%.

Total prescriptions in the third quarter of 2009 were 74,000 and new prescriptions were 30,000, up sequentially 9% and 10% respectively for the second quarter 2009. In recent months, we’ve been recording new highs in total prescriptions for Glumetza. Interestingly, we have been driving approximately 45% of our new prescriptions from patients who are new to metformin therapy.

We believe that this is due to Glumetza’s profile. As the formulation incorporates an advanced polymer technology, which leads to better GI tolerability and in turn enables more patients to get their maximum effective dose and achieve their A1c goal. The 1000 milligram tablet adds convenience by minimizing pill burden, and Glumetza is covered by a majority of managed cared plans and PBS.

While we have increased our sales force productivity with ZEGERID e we’ve also increased productivity with Glumetza during the third quarter. As a result of mid year sales productivity analysis, we’ve increased the number of called on doctors who received dual promotion by more 20% to 17,000. We have also significantly increased our coverage of Glumetza writers by 70%, which we believe will support and possibly accelerate Glumetza growth.

In summary, ZEGERID prescription growth continued to outperform the banded PPI competition in the current quarter, compared with the prior year, by proactive management of contracted business and pricing actions, we’ve been able to increase ASP and net sales. We’ve increased the productivity of our promotional efforts without increasing expenses Glumetza appears to be on a sustainable growth trend which we believe positions us well for a strong fourth quarter and beyond.

I will now turn the call over to David Ballard for an update on the MMX clinical product candidates. David.

David Ballard

Thanks, Bill. As an update on our late stage lower GI clinical programs under our Cosmo collaboration, we are reporting continued progress with enrollment in the US and European phase III clinical trials with Budesonide MMX. Budesonide is an oral cortical steroid with potent anti-inflammatory activity and lower systemic absorption than other oral corticosteroids due to its high first pass metabolism in the liver which reduces the systemic bio availability of the drug.

In addition, the MMX extended-release technology allows the Budesonide to be released only when it reaches the colon. Releasing throughout the entire colon at a controlled rate. We are developing Budesonide MMX in the US for the induction of remission in patients with mild or moderate active ulcerative colitis. Total enrollment of 492 patients is expected in each of the US and European trials.

As of November 2, we were approximately 50% enrolled in the US trial, working with the contract research organization we have recently activated a number of sites in India and we continue to expect complete enrollment in the first half of 2010 and to report top line data in the second half of 2010. The European trial was approximately 95% enrolled as of November 2^nd, and we continue to expect top-line data to be available in the first half of next year.

The 12 month extended use trial requested by the FDA is expected to enroll up to 150 patients and to be completed in the first half of 2011. Given these timelines and assuming positive clinical trial results, we plan to submit a new drug application for Budesonide MMX to the FDA in the second half of 2011.

Turning to Rifamycin SV MMX we continue on track to file an investigational new drug application for Rifamycin SV MMX and initiate a phase III clinical program in patients with traveler’s diarrhea in the first half of 2010.

Rifamycin SV MMX is a broad spectrum antibiotic with low systemic absorption and has been used for more than 20 years in Europe in both intravenous and intramuscular dosage forms and has a good safety and tolerability profile. It has never been developed in an oral form and it has not been commercialized in any form in the US. Therefore, the FDA considers Rifamycin SV MMX a new molecular entity in the US, which we believe will entitle it to five years of marketing exclusivity if approved for marketing.

In addition, Rifamycin SV MMX is covered by a patent that expires in 2020 and has a patent application pending which we believe provides coverage to 2025. Cosmo’s European development and commercialization partner Dr. Falk Pharma will also be starting a European Phase III trial in the first half of 2010; we and Dr. Falk Pharma, which we’ll share data from our respective Phase III clinical programs.

Due to its new molecular entity status, the FDA has requested a safety database of at least 700 patients to be exposed to Rifamycin SV MMX and this request has been considered in our planning of the Phase III program with Dr. Falk Pharma.

We’ve decided to conduct two consecutive Phase III clinical trials each with up to 300 patients rather than one large study. This decision was made after assessing the pool of potential patients available for enrollment in a traveler’s diarrhea study during peak travel times in Latin America. We anticipate that these two clinical trials along with the European Phase III clinical trial will support the required safety database.

With that I will turn it back to Gerry. Gerry.

Gerald Proehl

Thanks David. We’re actively executing on our strategy to build Santarus into a premier specialty biopharmaceutical company by leveraging our expertise in drug development and commercialization of prescription pharmaceutical products.

We expect annual net sales of ZEGERID and Glumetza to continue to increase. Our Schering-Plough and GSK agreements have the potential to start producing meaningful accretive revenue in the near to medium term. These agreements require no additional investment and will provide us with additional cash that can potentially be used to expand our pipeline and drive future growth.

Our business development group is actively seeking other marketed products and product candidates that can overlay well with our current sales call patterns or in smaller specialties easily addressed by our sales organizations. In the coming years we believe that the successful development of Budesonide MMX and Rifamycin SV MMX will allow us to further leverage our commercial organization and focus our efforts on the GI specialty market.

Operator we are ready to take some questions.

Debra Crawford

While we are waiting for questions I would like to mention that we will be presenting at the Lazard sixth annual healthcare conference on November 17 at the St. Regis Hotel in New York City. Should you be attending the Lazard conference we invite you to meet with us in person. A webcast of a corporate presentation will also be available on the Santarus website. Okay Cara, we are ready for the first question.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Scott Henry - Roth Capital.

Scott Henry - Roth Capital

You certainly covered a lot in the prepared remarks, but just a couple of questions on the R&D side. First on Rifamycin, when do you expect to file the NDA for that product given the consecutive phase III study?

Gerald Proehl

Scott this is Gerry, we haven’t given that guidance at this point in time. I think we are probably slightly behind where the Budesonide filing will take place by anywhere between maybe 6 to 12 months is what I would say. Obviously we would like to get the first trial up and running to see how enrolment actually goes, but I think that’s probably a reasonable timeframe to expect us to file the NDA for the Rifamycin.

Scott Henry - Roth Capital

Does it tend to take one travel season per trial, I mean is that the gaining factor here or it would take two years to do each trial or one year per trial.

William Danby

Yes, one year per trial. We think that there is a fairly defined time period to recruit patients in different territories and location. I think David might want to comment on this. We’ve made a decision that because of the types of the traveler’s diarrhea, the bugs that are affecting patients in different parts of the world, what we would like to focus on is in Latin and South America for both studies if at all possible to get most of our patients. So, we’ll do that over a two year period.

Scott Henry - Roth Capital

Then staying on Rifamycin, I guess this is kind of thinking out loud, but some big news on rifaximin to treat IBS, and these are similar but they deliver in different places in the gut. Would you consider going back to Cosmo and perhaps looking for a line extension that may release in an area that could be more conducive to treating IBS given what we learned recently, how do you think about that potential expanded indication?

Gerald Proehl

We certainly had some early discussions with Cosmo about their technology and what they could potentially do. I think I would say it’s still early stages of discussions. Certainly, we’re looking at a number of potential indications to pursue as we’ve mentioned including diverticulitis cecum facile and some other things and including potentially IBS. So, it’s something that we’re focused on at least initially discussing with Cosmo and what’s the best pathway for us, we haven’t made any final decisions on that though.

Scott Henry - Roth Capital

Okay, and then with regards to the ZEGERID tablet should we still be looking for PDUFA date December 4, ‘09, is there anything new to report on that?

Gerard Proehl

Nothing new to report, the PDUFA date is still December 4^th and we feel good about where we are right now in our discussions with the FDA and we remain hopeful that we can be five for five in getting NDAs approve within the 10 month PDUFA timeframe.

Scott Henry - Roth Capital

All right, that sounds good. And then shifting over to the marketed products, I think looking at revenue prescript I think you addressed this a little bit in your comments. Revenue prescript seemed to jump from around say 94, 95 up towards the 106, 107 range. I guess my understanding is not only is that a good number but you think if could go higher going forward, is that a fair statement and was there any stocking on either ZEGERID or Glumetza?

Gerald Proehl

There wasn’t any additional stocking that we have certainly seen on ZEGERID. Obviously Depomed are the ones that ship Glumetza, we don’t think that there were any incremental stocking on GLUMETZA at least nothing that we have heard from the folks from Depomed.

As we mentioned before, I think the combination of moving out of Medicaid and the fact that as we have looked to renegotiate some agreements with managed care plans we have looked to go to a situation where we are getting a percent off of the wholesale acquisition, cost versus a net price to the managed care plan.

So, as Bill mentioned when we take pricing increases we actually see that coming back to us versus if it’s a net price to managed care you don’t see any of that coming back to the company. So that is why we think there is still potential for increasing the ASP on a go forward basis.

Scott Henry - Roth Capital

Okay, and just final question, Gerry, on the strategy side. Could you comment about kind of the environment for acquiring potentially new products to put in the bag, marketed products, do you see anything near term or is it just kind of you are always looking and you hope to find something?

Gerald Proehl

Yes, I think I would say we are actively looking for things. I think we look at it from a perspective of if we could find a great marketed product we’d love to acquire that. If we can find a product that could be on the market in let’s say 12 to 18 months that would certainly be of interest to us also, and it really depends on the type of product it is, what the cost is for acquiring the product and what the potential opportunity is to drive sales.

So, we are pretty opportunistic from the standpoint of the products we are looking at, but as we said Scott, we are really focused on our products that are either targeted to our current specialty groups which are gastroenterology and endocrinology or potentially other specialty areas that have a fairly small target audience such as rheumatology, allergy, where we think we can get to those physicians with our current commercial organization.

Scott Henry - Roth Capital

Okay, and I’m sorry I forgot. Just one quick question, the $2.5 million Norgine payments should that show up as a one time full $2.5 million benefit in Q4?

Debra Crawford

Hi Scott, it’s Debby. The upfront payment we expect to record the majority of that perhaps $2.2 million in the fourth quarter and remainder in first quarter.

Operator

Your next question comes from David Amsellum - Piper Jaffray.

Amish Deenerman - Piper Jaffray

Hi, this is actually [Amish Deenerman] for David. We’re just wondering if you can give us a sense of how you think ZEGERID will respond when generic Prevacid comes. Will be similar to [Proton] or what?

Gerald Proehl

Yes. I think what we’ve said is we believe that there is typically about a six month period of time where you see introduction of a generic whether that was pantoprazole or generic lansoprazole where it will affect the entire PPI market for about a six month period. And then things start to settle back out and start to move in the direction that we think will be positive for us.

One of the things that we’ve mentioned in addition is there is certainly a lot of dynamics happening with regards to the shear voice in the promotional dollars are being put towards PPIs.

We know that Astrazeneca is pulling back on their promotion of Nexium. We think there is certainly, as Prevacid goes generic, you could indicate to start to look to pull back on some of their overall promotion. And so, we think by the middle of next year, the PPI market might look quite different from the standpoint of who’s out there promoting their products at a time when Schering-Plough will be putting a lot of dollars behind the ZEGERID brand name from an OTC perspective.

So it certainly will increase brand name awareness of ZEGERID and we will be putting an effort behind launching our ZEGERID tablet formulation.

Operator

(Operator Instructions) Your next question comes from Aaron Mishel - Thomas Weisel Partners.

Aaron Mishel - Thomas Weisel Partners

Can you provide any clarity on kind what you’re expecting for the timing of the decision in the ZEGERID patent trial may be based on how long this judge has taken in other patent cases.

Gerald Proehl

This is Gerry. The only thing we can say is from a more recent ruling, a patent ruling that Judge made, the trial was held in March and the ruling took place in October. So, it was about seven month period from when the trial actually took place to when it rolled. That’s probably the best we can give you.

So, again, maybe in the six or seven month timeframe is what he seems to be moving in, but some of that may just have to do with other cases that he is dealing with. We do believe that the Delaware Judges are pretty good about ruling within the 30 month timeframe and for us that means it would be early February of 2010, that’s their average is right around 30 months.

Aaron Mishel - Thomas Weisel Partners

Okay. Next question is can you find a little more clarity on the decrease in R&D guidance and kind of what changed there?

Gerald Proehl

Let me provide a little comment and Debbie might want to jump in. The way the contract is set up with our CRO, there are some milestone enrollment numbers that end up either moving into a quarter or moving out of a quarter. I can’t say in our current agreement there was a milestone payment that we just missed at the end of the third quarter and hit within the first day or two of the fourth quarter.

So, we assume that that payment would actually have occurred in the third quarter. I think the other thing that we certainly had mentioned before as we look to open up sites in India to get additional new patients, the cost of patients in India is considerably lower than the cost of recruiting a patient in the US, and certainly we think that could help us from the standpoint of overall average cost per patient in the trial.

Debra Crawford

This is Debbie, I would just add that at this time Aaron we really are looking at it as timing differences, as Gerry said we might see some absolute savings if we have more patients enrolled in India, but it really is just a function of timing, and unfortunately it crosses over calendar years for us, that’s really how we are thinking about the change.

Aaron Mishel - Thomas Weisel Partners

Okay. So no program is getting cut, just getting pushed into 1Q?

Debra Crawford

That’s right.

Aaron Mishel - Thomas Weisel Partners

Yes, okay. A couple of questions on ZEGERID commercial strategy, if and when Schering-Plough launches OTC, will you discontinue selling the 20 milligram and then, if so, what percent of sales is that currently?

William Danby

No, we won’t discontinue selling it, it’s a very small percentage of the total sales. I can’t remember exactly what it is. Somewhere 2% or 3%, something like that. So, to your point I think there is not much exposure there, but we wouldn’t discontinue selling it. We primarily promote the advantages of the higher dose.

Aaron Mishel - Thomas Weisel Partners

Okay. And then can you give a little more clarity on your plans or expectations for the tablet, I mean do you just see that as another formulation option or are you planning to kind of switch patients over time from the capsule to the tablet?

William Danby

Well, those are good questions and we are in the midst of planning the launch of the tablet. I think right now we see some advantages to the formulation that we currently can’t disclose, but we would actively be launching that product to try and make it a significant portion of the ZEGERID brand.

Aaron Mishel - Thomas Weisel Partners

Okay, and then one last question related to the Norgine deal, and you may have said this in pervious conversations, but can you just remind us how big is the PPI market in those geographies?

Gerald Proehl

The market in the European areas that they have rights to, is probably in the area of about $5 to $6 billion in sales. As we mentioned before, a number of the countries that they will be going after has generic omeprazole, and a little bit different than in the US where in Europe you have national pricing authorities that once you get approval you have to get to the pricing authority and they will decide on the final price you can charge for a product.

We think that while Norgine can be very competitive certainty the price that they are going to be able to get is going to be significantly less than what we are able to get in the US market. That being said, we still think it is a very attractive market, Norgine has a lot of experience competing in the GI space in Europe and they are a very good company with very skilled sales reps calling on the gastroenterologists. We think they are ideal partner and we will do a good job with the product.

Operator

Your next question comes from [John Szabo - Feinrich Capital].