Avanir Pharmaceuticals F4Q09 (Qtr End 09/30/2009) Earnings Call Transcript

| About: Avanir Pharmaceuticals, (AVNR)

Avanir Pharmaceuticals (NASDAQ:AVNR)

F4Q09 (Qtr End 09/30/2009) Earnings Call

November 24, 2009 11:00 am ET


Brenna Mullen - IR

Keith Katkin - President and CEO

Christine Ocampo - VP, Finance

Randy Kaye - SVP, Clinical Research and Medical Affairs and CMO


Carol Werther

Robin Davison

Jim McCamant

Mike King


At this time, I would like to welcome everyone to the AVANIR Pharmaceuticals' Fiscal 2009 fourth quarter and year-end conference call. (Operator Instructions)

Ms. Mullen, you may begin your conference.

Brenna Mullen

Thank you, and good morning, everyone. Joining me on today's conference call is Keith Katkin, President and Chief Executive Officer; Dr. Randall Kaye, Chief Medical Officer; and Christine Ocampo, Vice President of Finance. I will begin the call by addressing our forward-looking statements. Following this, I'll turn the call over to Keith Katkin.

As a reminder, the statements made on this call represent our judgment as of today, November 24, 2009. Our remarks and responses to questions during this conference call may constitute forward-looking statements, including plans, expectations and financial projections, all of which involve certain assumptions, risk and uncertainties that are beyond our control and could cause actual results to differ materially from these expected results expressed in our forward-looking statements.

These forward-looking statements include, among others, statements about our expectations about the likelihood of success in obtaining FDA approval for Zenvia, as well as statements regarding anticipated expenditure levels, future cash balances, clinical development timelines and intellectual property protection.

We encourage you to take the time to review our recent filings with the Securities and Exchange Commission, which present these matters in more detail as well as related risk factors. AVANIR disclaims any intent to update any forward-looking statements made during this call.

Now, I will turn the call over to Keith Katkin.

Keith Katkin

Thank you, Brenna, and good morning, everyone. Thank you for joining us on our fiscal 2009 fourth quarter and year-end earnings call. I'll start today's call by providing a brief overview of our business before turning it over to Christine Ocampo, who will review our financial results followed by Dr. Randall Kaye who will discuss our Zenvia clinical development programs.

Fiscal 2009 has been a very exciting and fulfilling year for all of us here at AVANIR. This marked a year that we turned the corner by transitioning from the clinical development of Zenvia to focusing on regulatory approval to make this promising drug available to the millions of patients currently suffering from the debilitating emotional outbursts of PBA.

In March, we announced that we had completed enrollment of the confirmatory Phase III STAR trial. We were pleased that we had exceeded our target patient enrollment while simultaneously beating our original enrollment timeline. In August, we released top-line efficacy and safety data from the STAR trial. The new product profile that has emerged exceeded our expectations. The new lower dose of Zenvia formulations retain statistically significant and clinically meaningful efficacy while providing improved safety and tolerability profiles.

Subsequent to the end of the fourth fiscal quarter, we received notice from the U.S. Patent and Trademark Office that they're allowing a new patent for Zenvia that will substantially increase the period of commercial exclusivity in the United States into late 2025. The granting of this patent was an important part of our overall strategic plan, and now lays the framework for our commercial launch and up to 14 years of revenue generation, if Zenvia is approved.

Finally, earlier this month, we released the results of the STAR open-label extension study in which Zenvia demonstrated long-term efficacy with favorable safety and tolerability profiles. I've only briefly touched on the results of the STAR trial. Dr. Kaye will discuss the data in greater depth later in our call.

Now that we have completed the STAR trial, our team is busy compiling the complete data set and preparing a full response to the FDA approvable letter, which we plan to submit early in the second calendar quarter of 2010. As Dr. Kaye will discuss later in the call, since completing the STAR trial, we have had a productive dialogue with the FDA and reached alignment on the components of our submission package for the full response. We expect an FDA approval decision approximately six months after filing, and are now taking measures to prepare for a U.S. launch in early 2011.

On the commercial front, we are committed to making Zenvia a success and believe that we have the core senior commercial leadership already in place to maximize the potential of Zenvia. Many members of our senior team have significant commercial experience at both large and small pharma and biotech companies with numerous successful product launches in their pasts. We were prepared back in 2006 to launch Zenvia and are now updating all of our plans, infrastructure design and tactics to ensure a successful launch.

In addition, the team here has previously demonstrated that their commercial abilities at AVANIR with the successful acquisition and relaunch of FazaClo, an atypical antipsychotic. As some of you may recall, we acquired FazaClo in early 2006 after it had been unsuccessfully marketed for a number of years. After less than nine months under the leadership of the AVANIR team, FazaClo sales showed a dramatic improvement and we achieved an over $20 million annual run rate. Fortunately, as many of you know, we needed to divest FazaClo in order to fund the Phase III STAR trial with Zenvia, but we will take the same approach that we have with FazaClo to Zenvia and make it very successful in the marketplace.

On the financial front, we continued to closely manage our cash throughout the year and we were able to keep our cash burn below projections. We exit the year well funded with 32 million in cash on our books. This cash is sufficient to fund our operations into mid fiscal 2011, beyond the expected timing of the FDA approval decision.

This is a very exciting time for everyone at AVANIR as we see the efforts of the past few years becoming to bear fruit. Before I turn the call over to Christine, I would like to take a moment to thank all of the STAR investigators and especially the PBA patients that participated in our trial. Without their commitment and support, we would not be in this favorable position today.

With that, I'll now turn the call over to Christine Ocampo who will review our financial results. Christine?

Christine Ocampo

Thanks, Keith, and good morning everyone. My comments today will cover our financial results for the fourth quarter and 12 months of fiscal 2009 as well as our expected cash burn for fiscal 2010. In addition to the results summarized in the press release issued earlier this morning, you can find additional information in our upcoming 2009 annual report on Form 10-K.

I will begin with the discussions of our results for the first quarter. Total net revenues were 1 million for the fourth quarter of fiscal 2009 as compared to 1.2 million in the same period of the prior year. Fourth quarter fiscal 2009 revenues consisted of the recognition of deferred revenue of 770,000 and licensing revenue of 250,000. The decrease in revenue is primarily attributed to a one-time milestone payment earned from our license agreement with Emergent BioSolutions in fiscal 2008.

Total operating expenses for the fourth quarter of fiscal 2009 were 7.7 million compared to 6.7 million in the same period of the prior year. Fourth quarter fiscal 2009 operating expenses consisted of research and development expenses of 4.2 million compared to 4 million in the same quarter in the prior year and general and administrative expenses of 3.5 million compared to 2.7 million in the same quarter in the prior year.

Research and development expenses in the fourth quarter of fiscal 2009 consisted primarily of costs attributed to the confirmatory Phase III STAR trial as well as costs attributed to the preparation of the full response to the approvable letter. The increase in general and administrative expenses is primarily attributed to non-cash share-based compensation expense of approximately 700,000 resulting from a decrease in the forfeiture rate assumption utilized in our quarterly calculation of share-based compensation expense.

The net loss from continuing operations for the fourth quarter of fiscal 2009 was 7 million or $0.09 per share compared to a net loss of 5.2 million or $0.07 per share for the same period a year ago. Importantly, cash used in operations for the 2009 fourth quarter was 4.3 million.

The increase in net loss is primarily attributed to non-cash share-based compensation expense of approximately 935,000 resulting from a decrease in the forfeiture rate assumption utilized in our quarterly calculation of share-based compensation expense and other non-recurring non-cash expenses of approximately 715,000.

Now, moving on to our results for fiscal 2009. Total net revenues were 4.2 million for fiscal 2009 as compared to 7 million in the same period of the prior year. The decrease in revenue is primarily attributed to the presence of two non-recurring revenue sources in 2008. These revenue sources consist of a 1.5 million milestone payment received from Health Brands International and grant revenue from the government funded anthrax antibody program which we licensed to Emergent BioSolutions in 2008.

Fiscal 2009 revenues of 4.2 million consisted of the recognition of deferred revenue of 2.3 million from our license agreement with GlaxoSmithKline for sales of Abreva and royalty revenue in the amount of 950,000 related to the same agreement. In addition, we earned royalty revenue from our license agreement with Azur Pharma in the amount of 395,000 and a milestone payment of 250,000 from our license agreement with Emergent BioSolutions.

Total operating expenses for fiscal 2009 were 26 million compared to 24.7 million in the prior fiscal year. Operating expenses consisted of research and development expenses of 15.9 million compared to 14.1 million in the same period in the prior year. General and administrative expenses of 10.2 million compared to 10.6 million in the same period in the prior year.

The increase in research and development expenses is primarily attributed to costs for the confirmatory Phase III STAR trial as well as other supportive studies for the full response to the approvable letter. The increase in general and administrative expenses is primarily attributed to non-cash share-based compensation expense of approximately 700,000, resulting from a decrease in the forfeiture rate assumption utilized in our quarterly calculation of share-based compensation expense.

The net loss from continuing operations for fiscal 2009 was 22 million or $0.28 per share

The net loss from continuing operations for fiscal 2009 was 22 million or $0.28 per share compared to a net loss of 15.9 million or $0.27 per share for the same period a year ago. The increase in net loss is primarily attributed to non-cash expenses of 1.9 million, increased research and development costs and the presence of non-recurring revenue sources in 2008.

We've kept our cash burn at a moderate level in fiscal 2009 as a result of our managing expenses and negotiating favorable payment terms with our vendors. We ended the fourth quarter with total cash of 32 million and cash used in operations of 20.3 million in fiscal 2009 versus 16.5 million in fiscal 2008.

With the equity proceeds of 10.8 million raised in August of 2009 and our ability to closely manage our expenses and contain costs, we expect that our current cash on hand will be adequate to fund continuing operations and the clinical development of Zenvia for PBA beyond the anticipated FDA approval decision date, which is expected in the second half of calendar 2010.

Looking forward to fiscal 2010, we currently anticipate that our cash burn will be between 23 and 26 million, including cost for commercial readiness.

Now, I'll turn the call over to Dr. Kaye, who will provide an update on the progress of our Zenvia clinical program.

Randy Kaye

Thanks, Christine, and good morning, everyone. As Keith described, this is an incredibly exciting time for all of us at AVANIR, given the completion of a STAR trial and data results from both the double blind as well as the open-label component.

Today, I'd like to take this opportunity to review with you the STAR trial double blind and open-label results, as well as share the process moving forward regarding FDA review of Zenvia for patients with pseudobulbar affect.

As we've described previously, PBA episodes are frequent, are unrelenting and unpredictable emotional outbursts, and these may occur in progressive neurological conditions such as ALS, MS, dementias including Alzheimer's, stroke and traumatic brain injuries. An estimated 10% of patients with these neurological conditions are thought to suffer from moderate to severe PBA as a comorbid disorder. Given the involuntary and unpredictable nature of PBA, it can be quite debilitating to both, patients as well as their families and their caregivers.

Previously, we reported the results of the STAR trial that indicate that the new low-dose formulations of Zenvia can dramatically reduce the debilitating episodes of PBA. We were thrilled with the Zenvia clinical profile that emerged in the STAR trial, and this data demonstrated a profound treatment effect across multiple efficacy measures in PBA combined with an improved safety and tolerability profile, relative to the previous formulation.

In October, we presented the full data set from the STAR trial at the American Neurologic Association's Annual Meeting. This was the first time we presented the full data set including additional analysis of the primary endpoint as well as all of the secondary endpoints in the study.

Key highlights from the full data set were that both the Zenvia 30 and 20 milligram groups met the primary efficacy endpoint, by demonstrating a significant reduction in daily PBA episode rates relative to the placebo group. The proportion of patients with complete remission of PBA episodes, and this was defined as no episodes during the last two weeks of the study, was significantly greater in both Zenvia treatment groups versus placebo with approximately 50% of Zenvia patients achieving remission.

The percent of days that were PBA episode free at all time points was significantly higher in the Zenvia groups versus placebo. Zenvia 30 demonstrated statistical superiority in time to onset of a clinically meaningful effect. Both Zenvia groups demonstrated a greater proportion of patients versus placebo that achieved certain response thresholds, 50%, 75%, and 90% reductions of PBA episode rates.

Mean reduction from baseline in the CNS-LS score was significantly greater for both Zenvia treatment groups than in the placebo group, and Zenvia 30 demonstrated significantly greater mean improvement in the SF-36 Mental Health Summary and Social Function sub-domain scores compared to placebo. Finally, Zenvia 30 demonstrated significantly greater mean improvement in the Beck Depression Inventory scores compared to placebo.

Also in October, we presented detailed STAR results from the small subset of PBA patients that had underlying MS at the Controversies in Neurology meeting in Prague. A very exciting finding from the MS subgroup was Zenvia's potential effect on MS-related pain. In a post hoc analysis, MS patients with moderate to severe pain at baseline that received Zenvia 30 reported a statistically significant improvement in their pain scores compared to placebo. This is the second study in which we've observed an efficacy signal in MS patients suffering from pain.

As such, we are conducting a strategic assessment of our plans to develop Zenvia in pain. Relative to the diabetic peripheral neuropathic pain, MS-related pain offers several potential advantages to AVANIR, including a lack of approved therapies, a significant unmet medical need, and good alignment with sales and the marketing organization that builds around the PBA indication. We will continue to provide updates on our thinking around the best path forward for Zenvia in the pain market.

Earlier this month, we announced efficacy, safety and tolerability results from the 12-week open-label extension phase of the confirmatory Phase III STAR trial. These long-term STAR data suggest that the new low dose 30 formulation of Zenvia provides sustained efficacy by reducing the frequency and severity of PBA episodes over a six-month treatment period. This is the first time the efficacy of Zenvia has been studied beyond three months, and we were very pleased to see the durability of response over a six-month period.

Furthermore, the new low dose 30 Zenvia formulation demonstrated favorable long-term safety and tolerability profile with a low overall rate of reported adverse events. Of importance, again, there were no cardiovascular serious adverse events observed in this open-label extension. Three patients with ALS died during the open-label extension, which represents a 2.1% mortality rate during the open-label extension. This is consistent with historic norms that are reported in the medical literature that would suggest an expected ALS mortality rate in the four to 6% range over that three-month time period. All of the deaths appear to be consistent with ALS disease progression and none were deemed to be possibly drug related.

Overall, Zenvia was generally safe and well tolerated in this open-label study. A total of 92.9% of patients completed the 12 weeks of treatment in the open-label study. The most common reason for early withdrawals was due to adverse events. Early withdrawals due to AEs occurred in 4% of patients and the reported AEs were generally mild to moderate in nature.

With the STAR trial data in hand, our team is now working to expeditiously assemble and submit our full response to the FDA approvable letter. In preparation for our submission, we've requested a Type C meeting with the FDA to ensure agreement with the FDA on the components of the complete response.

Included in the meeting request were topics such as the adequacy of the clinical and preclinical data being submitted to assess safety and efficacy, the integrated safety summary and size of the safety database, the requirements for additional clinical or non-clinical studies in advance of a filing, and finally, the chemistry, manufacturing, controls-related issues. Based on the feedback we received from FDA, we intend to file with the existing data as planned and submit our full response in the early part of the second calendar quarter of 2010.

In summary, 2009, we've made considerable progress with our Zenvia clinical programs. In 2010, we are shifting our focus to obtaining regulatory approval and we remain committed to making Zenvia available to patients as quickly and as safely as possible.

Thanks for your attention and I'd like to turn the call back to Keith.

Keith Katkin

Thanks, Randall. We are very excited to be so close to filing our full response with the FDA and potentially securing regulatory approval to make Zenvia available to the millions of patients currently suffering from PBA.

As we're waiting for our first question, I'd like to remind everyone that we have two upcoming presentations. First, we will be presenting our ALS cohort data at the 20th International Symposium on ALS and Motor Neuron Disease in an oral presentation on December 9, and second, be presenting at the Piper Jaffray Healthcare Conference on December 2 at 2:30 PM. Operator, are there questions available?

Question-and-Answer Session


(Operator Instructions)

The first question is from Carol Werther.

Carol Werther

Thanks for taking my question. Clearly, you'll have to raise money once more before you launch Zenvia. Do you plan to keep the arrangement you have with Cantor Fitzgerald in place indefinitely?

Keith Katkin

Great question, Carol. As everyone may be aware, we suspended any use of the Cantor Fitzgerald facility about a month and a half ago. Right now, we're currently evaluating both the best timing and the best instrument in order to raise capital in the future. I think we're in a very good position right now in that we don't have to raise money in advance of our expected FDA approval date. Given our current cash position, we can certainly manage the company beyond the expected approval date early in the fourth quarter of calendar 2010.

That said, we're continually evaluating if it might be the right time to do something in advance of that. I think on the benefits side, some people have expressed that they'd like to see us top off the balance sheet and maybe further our commercial efforts in advance of the launch. On the flip side, waiting until after approval, the cost of capital, I would expect to go down dramatically as well as the number of options open up on the other side of approval. So, we're carefully monitoring the environment. As it stands right now, we don't have plans to turn the Cantor Fitzgerald facility back on, but we do have it there. After we do our thorough analysis, if we do decide that it would be optimal to have additional capital in advance of our FDA action date then we will put that into the mix of options, turn that back on.

Carol Werther

Keith, you didn't mention anything about a potential partnership.

Keith Katkin

We typically don't comment on partnership discussions. I think as I've said in the past, there was a substantial partnership interest before we announced the Phase III STAR trial results. Subsequent to announcing those results that interest has just increased. We are in discussions with a number of company.

That said, in my talk today, I tried to focus on our commercial readiness and the team's abilities within the commercial arena, because we absolutely believe we can do this ourselves. We've demonstrated commercial success with FazaClo in the past, and we have many of those same people here at the company. So, while we're happy to talk to companies and engage in dialogue about a potential partnership, they're going to have to pay as if this product is approved, because we believe that it's going to be approved.

We believe that there is significant revenue potential, not only within PBA, but within all of the other potential indications for Zenvia, whether it's MS pain, diabetic peripheral neuropathic pain, agitation and irritability secondary to dementia. We really believe that this is a portfolio drug in and of itself, and as such, given our expectations, the hurdle rate for us to consider any type of partnership is extraordinarily high.


The next question will be from Robin Davison.

Robin Davison

Hello there, greetings from London. I just had a couple of questions. First of all, the upcoming data in ALS, the ALS subset; I haven't had time to look at the MS subgroup in relation to the overall patients. I mean, if we even presume that you will have or could achieve statistically significant result in this subset?

Keith Katkin

I'll let Randall take that one.

Randy Kaye

Robin, it sounds like you're asking what data we're going to see in a month and unfortunately you're going to have to wait -

Robin Davison

Well, yes. Precisely, yes, okay.

Randy Kaye

It does give us an opportunity to look a little more closely at that population. One of the advantages in the ALS population we're studying is that there were more patients with ALS in the study than MS, so you certainly get more power to detect a treatment effect in that subgroup.

Robin Davison

I think I just wanted to follow-up really on the last question as well. I mean the possible additional indications. Obviously, you've in the past looked at diabetic neuropathic pain. What do you think is the best opportunity there for additional indications?

Keith Katkin

We really see multiple opportunities for additional indication. On the pain front, as I've mentioned, we're considering both, MS-related pain and diabetic peripheral neuropathic pain. Then beyond pain, we see opportunities in agitation, irritability, secondary to dementia. I should add that back in 2006, as we were preparing for what we thought would be the launch of Zenvia, we had numerous investigator-initiated studies that we were considering in-house, because there's tremendous interest from the physicians out there in the community to use Zenvia for a number of different disorders.

So, we're very excited to be in this position again. We plan on having an investigator-initiated study program available, so doctors can explore the therapeutic utility of Zenvia in a number of different indications. Specifically, though I want to comment on pain. Randall touched on really what we think are provocative and exciting results from the MS subset using the new dose formulation of Zenvia and that's just is a 30/10 dose formulation twice daily. So, there are a lot of attractive components of the MS pain market, and I think, Randall, covered them.

No approved therapies, significant unmet medical need, and MS pain affects about 50% of patients that have MS. Commercially, if you think about how it aligns with a PBA indication, it could be a very good first pain indication for a company like AVANIR, something that we could develop ourselves and really provide significant relief for these patients. So, we're very excited about that data, and as Randall said, we're conducting an internal analysis right now to determine then which pain indication makes the most sense for our company in its current state.


The next question will be from Jim McCamant.

Jim McCamant

Hi, thanks. Wanted to ask about what's happening in Europe, you could market it in the U.S., but going to Europe and rest of world would seem be beyond your capabilities right now. What kind of response are you getting over there?

Keith Katkin

In terms of Europe, Jim, that's high on our priority list, right after completing our program here in the U.S. So, what we plan on is after we file the complete response to the FDA early in the second calendar quarter of 2010, we're going to prepare our eCTD submission for the EMEA and either submit it or ask for an EMEA advice meeting, and then we think with that data and information in hand, we'd be well positioned to talk about potential ex-U.S. partnerships.

Jim McCamant

So have you had any initial discussions with the Europeans?

Keith Katkin

We have. As, Carol, had asked before in terms of business development, many of the people that were in conversations with have expressed global interest rather than in any particular part of the world. So that is something that is appealing to us and its part of the reason that we're having these discussions, because clearly we don't have the infrastructure or the expertise to get Zenvia approved within Europe. So stay tuned more as it relates to our European plans in the future.

Jim McCamant

For the Europeans, it's less important to have the U.S. approval in hand, I would think.

Keith Katkin

I don't know if I necessarily would agree with that only because, I think having a complete response filed and accepted in the U.S. and having a U.S. approval is I think meaningful for everyone across the globe. So, I think, demonstrating success and approval in the U.S. certainly demonstrates to all potential partners that there absolutely is a path forward. This is an important new therapeutic. I think it will resonate well with potential European partners when they see that that path has been determined here in the States.


(Operator Instructions) We do have a question from Mike King.

Mike King

Thanks for taking the questions. Couple that I just wanted to see if you could walk me through to the greatest extent possible. Just regarding, Randall's, comments about the steps that need to be taken before the submission to the complete response goes in. Again, the extent you can, talk to us about which sort of tick the box items you have checked off as opposed to what yet needs to be done beyond sort of submission of the clinical data from the STAR trial?

Keith Katkin

Sure. Randy, you want to take that one?

Randy Kaye

Sure. Most of these are actually not tick box. They actually all run in parallel. There is of the order of about 500 different items that need to be compiled and put together as part of the full response. Some are dependent on one another, some are not, but by and large they sort of move together.

Mike King

Well, I guess I would ask about the ones that are not dependent, Randall. So, such as preclinical, such as CMC, that kind of stuff. Are those done already or those yet to be completed?

Randy Kaye

Sure. The relatively easiest ones to do are things like a CMC section and the preclinical work, especially given that we announced quite a bit of time ago that that work had been completed. So it was easier to get those done. The ones that tend to be gating I think is more of your question.

That sort of slow us down a little bit is the integrated safety summary. That's the one component where you have to take data from the open-label where we just released top-line results. Merge that with the data from the double-blind study, and then merge it with all previous work that's been done with different formulations. While it might seem like it's easy, kind of a click of a button, because there are different databases, I mean there are differences, it does take a substantial amount of time to merge that data and to merge it correctly.

Mike King

I guess that was my question because obviously top-line was released some time ago, then you had the follow-up. So just trying to figure out the path between now and early in the first, second quarter of next year.

Keith Katkin

Mike, I'd just add too. I know we've touched upon this in the past but the size of the complete response and the patient exposures. One thing that we are really pleased with is, if you think back to 2006, the original NDA, we had about 800 patient exposures. Over the last two and a half years plus we've actually doubled that number to over 1,600 exposures. So we need to include things like the successful Phase III study in diabetic peripheral neuropathic pain. A lot of the PK work that we had done over the last two plus years, the STAR trial, the double-blind portion and the open label. So we're feeling really good about the submission in terms of exposures now given the size of the database. We think that a very nice safety profile has emerged here and that will give the agency the confidence that they need in order to really make Zenvia approvable.

Mike King

Is the number of patients in the database going to be, did you agree upon that as far as the SPA was concerned to be able to detect any occurrences of QT prolongation?

Randy Kaye

The SPA, as you know, has talked about the study conduct and the analysis. So we did agree with the agency on the size of the double blind study, which actually we've got 270 patients, and then we committed to doing the open-label portion of the study so that we would have six months of exposure for a good number of those patients. As a reminder, at the end of the study, we actually over enrolled by 20%. So we ended with 326 patients, which was a sizeable amount more than the FDA had deemed required in the special protocol assessment.

Again, what we've tried to do at every step of the way in this program is over deliver on the FDAs expectations. I think part of your question is in terms of patient exposures as Randall talked about in the type C meeting request that was one of the questions that we had for the FDA. Do we have adequate patient exposures for the safety and efficacy, and they said that they believe that we did.

Mike King

Obviously that could fall in the category of rare occurrence and whether you have enough patients and enough exposures over time to detect those rare occurrences.

Keith Katkin

Which is exactly why we ask that question is to make sure nothing had changed.

Mike King

Then, just remind us of the commercial presentations of dextromethorphan, obviously one of the questions that comes up when we talk about Zenvia's, the ability to sort of make it in your backyard or in the kitchen at home. How is the formulation create obstacles in commercial competition?

Keith Katkin

Sure. There's actually significant obstacles for trying to do a as you called it make your own Zenvia. There has been some interesting changes in formulation design here within the U.S. just over the past year. Dextromethorphan is no longer available in a powdered form, formulation. Now it's only available in a liquid formulation. The highest dose formulation is 15 milligrams that we've been able to find. Typically it's included with a number of other components like guaifenesin and other components over the counter. In addition, if you think about the quinidine component, the quinidine component.

The smallest commercially available, dose available by prescription is 200 milligrams. So for someone to be able to score a 200 milligram tablet in twentieths, and take just 10 milligrams is not really a possibility. We think that given the FDAs position in the approvable letter on 30 milligrams of quinidine, no payer in their right mind and no physician in their right mind that would take the legal liability of trying to prescribe quinidine by itself and instruct patients to score a tablet.

Mike King

What about a compounding pharmacy?

Keith Katkin

On the compounding pharmacy, we've got our new IP which is certainly something that was critical to our overall business plan. What it does is it gives us protection in terms of both of these new dose formulations for both the 30/10 and the 20/10. It actually also describes a ratio in it, so that people can't do any combination there with. I should add that the cost too of compounding pharmacy trying to make these products and get the bulk API dextromethorphan and quinidine, it's not inconsequential.

It would be very expensive for these pharmacies to try and do that, and it really wouldn't be a significant profitability relative to the price points. So between our patent protection and the cost and our willingness to really prosecute anyone that tries to violate our patents, we think that we are very well situated, and we don't have a concern about any type of compounding or making your own Zenvia at home.


(Operator Instructions) We'll pause for just a moment to compile the Q&A roster. It's showing no questions at this time.

Keith Katkin

Great. Well, thank you everyone for joining us on our fourth quarter and year-end conference call. We look forward to providing you a progress update in our first quarter conference call. Thank you.


Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.

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