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The Medicines Company (NASDAQ:MDCO)

Merger & Acquisition Call

December 04, 2013 08:00 AM ET

Executives

Neera Dahiya Ravindran - IR

Clive Meanwell - CEO

Dan Burgess - President and CEO, Rempex Pharmaceuticals

Jeff Loutit - CMO, Rempex Pharmaceuticals

Mike Dudley - CSO, Rempex Pharmaceuticals

Matt Wikler - Vice President, New Business Ventures

Analysts

Louise Chen

Joseph Schwartz

Traver Davis

Adnan Butt

Umer Raffat

Jason Kantor

Joel Beatty

Operator

Good day, ladies and gentlemen and welcome to The Medicines Company Corporate Conference Call. My name is Britney and I will be the operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

At this time, I would now like to turn the presentation over to your host for today, Ms. Neera Dahiya Ravindran. Please proceed.

Neera Dahiya Ravindran

Thank you, Britney. Good morning, thank you for joining us today on this call to discuss The Medicines Company’s announcement of the acquisition of Rempex Pharmaceuticals. Please note that slides will be used during our call today and can be viewed and downloaded on the event page of the Investor Relations section of our website, www.themedicinescompany.com.

Moving to Slide 2, I would like to remind you this call will contain forward-looking statements about The Medicines Company, that are not purely historical and all the statements that are not purely historical may be deemed to be forward-looking statements that involve a number of risks and uncertainties. Without limiting the foregoing the words believes, anticipates, plans, expects, estimates, aims, promises and similar expressions are intended to identify forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are identified in the Company's SEC filings including the Form 10-Q filed with the SEC on November 9, 2013.

Copies of our SEC filings can be obtained from the SEC or by visiting the Investor Relations section of our website. I would also note that during the call we may refer to adjusted net income measures, which exclude amortization of acquired and tangible assets, deal related charges, stock based compensation expense, arbitration awards, changes in contingent consideration, non-cash interest and net income tax adjustments. Please refer to the reconciliation of GAAP to adjusted net income and adjusted EPS statements in our press release for explanations of the amounts excluded and included to arrive at the adjusted net income and adjusted earnings per share. The press release can be obtained by visiting the news and events section of our website.

This morning we are joined from The Medicines Company by Clive Meanwell, Chairman and CEO and Sanuj Ravindran, Vice President, New Business Ventures. We are also joined by leaders from Rempex Pharmaceuticals Dan Burgess, CEO and President; Mike Dudley, Chief Scientific Officer; and Jeff Loutit, Chief Medical Officer.

With this introduction, I give you Clive Meanwell, Clive?

Clive Meanwell

Thank you very much Neera and good morning to everybody and thank you for joining our call. Also thanks to new colleagues who joined us from the West Coast today here in New York. We’re delighted this morning to announce that we’ve acquired what we believe is the leading privately held company for Multidrug-resistant Gram-negative Therapeutics.

Referring now to Page 5. Based in Santiago, Rempex Pharmaceuticals have quickly emerged as the leaders in beta lactamase inhibitors and multidrug-resistant antibiotics. Within the firm the lead development product Carbavance is a combination of a novel beta lactamase inhibitor discovered by scientists at the firm, that is RPX7009 with a marketed carbapenem.

During our discussions and diligence we’ve seen data that firmly underscores our belief that this product is Phase III ready as an IV combination candidate. Obviously this is going to address the well known multi-billion dollar opportunity for MDR gram-negative antibiotics and we will move forward quickly with the potential NDA submission anticipated as early as 2016.

We will also likely present in our view a market leading profile in several dimensions which we will talk about this morning. That product and the associated technologies and follow-on compounds, we will also enjoy intellectual property protection well into the 2030s worldwide. By joining our firms, we also bring together the opportunity to aggressively market and sell intravenous minocycline, a potential life saving and approved product for MDR acinetobacter, another resistant gram-negative bacteria, which is a growing problem worldwide. We are already progressing an improved formulation, RPX602 with a potential launch in 2014 and you will hear more about that in a few more moments as well.

Finally Rempex have been working on a range of exciting novel, follow-on BLIs and BLI that is beta lactamase inhibitor combinations, which we believe will have increasing importance in the years to come. We also believe that this transaction brings immediate, medium and long-term operational and strategic value. We gain almost immediate operating leverage with the Minocin IV sales opportunity and then with introduction of the improved formulation planned as early as next year. This will provide us with the opportunity to advance relationships with the community of anti-infective practitioners ahead of the oritavancin launch which is also planned next year.

In our previous presentations, we’ve indicated our intensions to fully compete in the hospital infection market. With this perfect overlap of frontline buildup for Oritavancin, Minocin and RPX602 we can start doing that. With our now strong Portfolio of novel agents against gram-positive and gram-negative MDR organisms, we look forward to working in what is now a fairly favorable regulatory environment on a worldwide basis, also favorable reimbursement environment and with a set of assets that has intellectual property protection for a long time. We also have the opportunity to forge what I believe will be an industry leading global innovation group including a world class combined team in research, development and marketing.

The deal is valued fairly and offers substantial financial opportunity, from near term revenues, from Minocin and its follow on and obviously from the Carbavance product, which we believe have blockbuster potential planned from 2017. We’ll just have the innovative preclinical portfolio of next generation products and de-risked deal structure based on event-driven payments.

The actual terms of the transaction are summarized on this slide. Initial payment on closing is $140 million of cash. Regulatory and development milestones will be paid over a period of time amounting to a maximum $214 million and commercial milestones will amount to $120 million as the products that rollout successfully, for total potential consideration of about $475 million.

With that I’d like to turn it over to Dan Burgess, the President and CEO of Rempex Pharmaceuticals, congratulate Dan for all the progress so far and welcome you. Thanks Dan.

Dan Burgess

Thanks very much Clive and we’re as a management team thrilled to part of the Medicines Company Organization, we feel it’s going to be a fantastic opportunity for both sides to as Clive said build a power house in the antibiotic space. Just a little bit of background on Rempex and then we can turn it over to some of my colleagues who will take you through the programs in a little bit more detail.

So, Rempex is a company that was formed in 2011 to adders the emerging problem of resistant gram-negative infections. Senior management team at Rempex has been involved in antibiotic drug development for many years and recognized early the scope of the multi-drug resistance problem in these pathogens.

The Company now has several programs in development to address this threat, including Carbavance as Clive mentioned, which is a combination of Carbapenem antibiotic with the novel beta lactamase inhibitor discovered in our laboratories. This combination is highly active against what notice KPC carbapenemases class and this is a resistance threat the CDC considers the most urgent today.

Carbavance profiled very well in preclinical studies and in fact we will believe it looks better than anything on the market or in development and is active against the major gram-negative pathogens that are out there, it’s got very broad spectrum activity.

We also have a very productive research team that identified a number of lead candidates off of this initial beta lactamase inhibitor class that we’ve discovered, including some that we believe will have excellent activity against new emerging threat such as NDM-1, that folks may have heard about.

And then lastly, as Clive referred to we also have rights to Minocin IV which is the only form of Minocycline currently on the market. Minocycline is an underappreciated and uniquely active compound against Acinetobacter, which is a gram-negative pathogen with resistance rates actually greater than 50% in many antibiotic classes. We also have developed a new formation of IV Minocycline that we expect to really launch around and that is expected to be filed for approval next year and hopefully approved next year as well.

As Clive indicated, the regulatory environment at both FDA and EmA has changed quite a bit over the last several years as a result of this emerging threat and we believe that gives us some flexibility as we move forward with some of our development programs, particularly the Carbavance program. And based on meetings with the FDA and EmA, we expect to be able to move directly from the Phase 1 dose escalation studies we’ve just finished, directly into registration studies next year and those will essentially just be two modest sized Phase 3 studies that we think will be required for approval. We expect a readout on those studies in 2016 and we expect, given the tremendous need out there and the lack of good alternatives, we think there will be an attractive pricing market available leading to the potential for Carbavance to be a million dollar product.

We also have a very strong intellectual property portfolio and in fact expect to have composition of matter claims on Carbavance and a number of the other beta lactamase inhibitors that we had in development and the investor group with [indiscernible] has a long history of backing successful antibiotic on these, knew very much what they were getting into two years ago when they joined us and we believe provides further validation to the science we’re working on.

And so if you look at slide 12, you’ll see that for a Company that’s only two year old, we’ve been able to assemble what we think is a pretty attractive portfolio that’s going to address really the most important gram-negative for us facing Medicine today and with Medicine already on the market, the follow on product coming shortly thereafter, Carbavance hopefully on the market by 2017 timeframe and additional profile based on the beta lactamase inhibitor profile coming in the several years behind it we should be in a very good shape as we move forward here.

And we have a team assembled here at Rempex that The Medicines Company will be absorbing, that has a long history of working together in this space and folks like Mike Dudley and Jeff Loutit, who you will hear from today are known experts in many aspects of antibiotic drug development.

So, with that I’d like turn it over to Jeff Loutit, who will talk to you little bit about Minocin IV and RPX602 program and then he’ll pass the baton to Mike Dudley, who’ll take you through some of the beta lactamase inhibitors combination activities.

Jeff Loutit

Thanks very much Dan. So, I’m on slide 15 and as Clive has already mentioned, we believe IV Minocin and the new formulation of IV Minocin to turn RPX-602 really provide a near term revenue growth opportunity. As Dan already mentioned, Acinetobacter is a gram-negative non-fermenting hospital-based organism which has both high anate [ph] resistance and acquired resistance, and is really associated with increased hospital stay and increased mortality and the CDC recently designated it as a serious threat in their publication in September of this year.

Physicians faced with difficult problems in terms of treating these organisms and the current therapies are certainly inadequate, such as Tigecycline with high mortality rates and toxicity associated with drugs like Colistin. So importantly, we actually acquired the NDA of Minocin approximately a year ago and this approved, FDA approved from treatment of Acinetobacter species and has very high potency both, in vitro and there is clinical data to support its clinical activity in the treatment of subjects with Acinetobacter infections.

We have been developing a new formulation of Minocin when we’re able to - when we bought - we’re able buy the NDA of Minocin and we expect that new formulation RPX-602 to be highly differentiated based on terms of improved local tolerability and certainly dosing convenience for physicians.

With the acquisition of the NDA, we’ll actually be able to use a sNDA regulatory approval process, which will only require manufacturing data. And importantly, as Dan already mentioned from a timing point of view, the launch of the new formulation will be alongside of Oritavancin and we’ve had discussions with the EmA to talk about the small clinical program which would be acquired for approval in Europe.

So just a couple of quick slides, which highlights a couple of those points on Slide 16 is a Kaplan-Meier curve of mortality associated with resistant Acinetobacter organisms and you can see the significant mortality in those that have in this situation Imipenem resistant organisms.

And then on Slide 17 is the test data which is a worldwide surveillance network. And this data looking at over 1600 multidrug resistant Acinetobacter species collected over the last year, which was presented, this data and was presented at ICAAC. And you can see among the other agents which are commonly used to treat gram-negative organisms, the Minocycline has by far and away the most potent activity. In this, we expect this data to portray into clinical success as well. So, overall a very near term and positive opportunity.

So I’ll stop there and hand it over to Mike Dudley, who will talk about Carbavance program.

Mike Dudley

Thank, Jeff. I will begin then on Slide 18 and I’d like introduce you then to Rempex’s lead asset as Clive and Dan have already introduced to you that Carbavance is a combination product of a carbapenem antimicrobial plus a novel internally discovered new class of beta-lactamase inhibitor that is really designed to address these emerging resistance problems.

And Slide 19, summarizes the struggle that we’ve had with preserving the beta-lactam class of antibiotics over the last 50 years or so to a number of strategies which have included both development of beta-lactam antibiotics that evolve from penicillin to the carbapenems, but also then the ability than to make combinations where we develop drugs that are not antimicrobials but are inhibitors, specific inhibitors of theses enzymes and hence be able to restore their activity against these resistant gram-negative bacteria.

And as shown on Slide 20, there have been a number of examples than of using these combinations products, perhaps the best known being Augmentin or a combination of clavulanic acid plus amoxicillin for treating outpatient infections. In the hospital, we’ve had a drug combination with tazobactam and piperacillin known as Zosyn. But now of course with the rise of these carbapenemases that have taken out not only the over beta-lactams like cephalosporins and penicillins and carbapenems, we now have a need for a new compound, which we believe Carbavance will be able to fulfill.

And Slide 21 summarizes a graphical depiction of rise of these KPC carbapenemases over the last decade or so. We have seen this type of behavior in gram-negative bacteria before, particularly from the 1980s where enzymes known as extended spectrums beta-lactamases or cephalosporinases were responsible for basically rendering the cephalosporin class, largely not useful in many setting within the hospitals, and we’re seeing the same types of pictures now with KPC enzymes in the United States and worldwide that is spreading very quickly.

And on Slide 22, there have been certainly examples of this, as recently featured in the PBS series frontline, but also within the financial pages and presses in the United States, where the KPC enzyme within Klebsiella and other gram-negative infection has resulted in what CDC has designated as to be an urgent antimicrobial resistant drug.

So on Slide 23, I’d to like turn that against this backdrop into what we would describe as Carbavance, which is this combination of a carbapenems plus this beta-lactamase inhibitor. We chose to develop this combination product, our first beta lactamase inhibitor based product with a carbapenem antibiotic because we view carbapenems as being the most broadly active drugs. Clinicians have relied on these drugs for many years for treating the most serious infections within the hospital but the problem of course has been now resistance which has spread rapidly in the United States and worldwide.

So Carbavance then is this combination then of a carbapenem with this beta lactamase inhibitor which we call RPX7009. This RPX7009 novel compound demonstrated an excellent preclinical safety profile in I&D enabling studies and that has translated into good tolerability in our Phase 1 dose escalation studies, which have recently been completed, and as has been mentioned we are poised now to move into patient studies with infections and recognize certainly that the regulatory changes that have been made, that recognize these problems with bad bugs and brought no drugs allow us to move forward quickly.

Slide 24 is a summary of any activity now of RPX7009, in combination with a carbapenem. All of these organisms here have the KPC enzyme, as shown along with other penicillin and cephalosporin and hydrolyzing enzymes, all have carbapenem MICs well in the resistant range. But you can see in this dose we start to experiment that increasing concentrations of our beta lactamase inhibitor drive those MICs of the partner carbapenem down to levels of very high sensitivity.

Slide 25 summarizes then some of the extensive profiling that Rempex as well as our collaborators have done in profiling Carbavance. There are other products that are also developed in this area which have the features summarized on Slide 25 but I would draw your attention against this panel of 235 very resistant Enterobacteriaceae where you can see that the potency of Carbavance exceeds that of other products that are in development as well.

Slide 26 then shows you a mouse model infection. This is a neutropenic mouse model of infection with a carbapenemase producing organism which shows no response with the carbapenem alone but then in combination with our beta lactamase inhibitor you see nice bactericidal synergism occurring in these animals.

Slide 27, this will summarize then in terms of our development plan, which of course will be evolving and be discussed over the ensuing months but we completed a multi dose Phase 1 dose escalation study and demonstrated an excellent safety NPK profile. As Dan has mentioned we've had great discussions with U.S. and European regulatory authorities and will begin our registration program in 2014 and really be targeting indications for patients who are really suffering from these infections with limited choices. So very quickly then I'd like to then just also as what Clive mentioned earlier is that we have additional follow-on products that would be coming in behind us as well.

Slide 29 summarizes for that this new class of beta lactamase inhibitors have some unique properties, one of which is that it could orally bi-available and that enables us then to develop products that would allow, oral or IV/oral switch therapy when in a hospital, as well as then newer compounds that we have that for the first time have beta-lactamase inhibitors that can inhibit both the serine enzymes like KPC but also metallo beta lactamase as Dan mentioned like NDM, 1 all developed into a single compound, which was previously not thought to be possible, and we're continuing to profile these advanced leads and would be expected to bring forward clinical candidates over the next few years.

The last slide then, this section here on Slide 30 shows you an example of one compound of that latter series, which demonstrates activity against both the serine and metallo beta lactamases as shown there with a single compound, being able to bring these organisms into levels of susceptibility, and as I mentioned we'll be bringing forward additional candidates to really assist our clinicians in their battle against these resistant microbes.

Dan Burgess

Thanks a lot, Mike. If you refer now to Slide 32, you'll see that we structured the transaction itself with an upfront payment plus a series of developmental and sales based milestones that yield a total consideration that we view as quite favorable for the tremendous value that we have acquired. We are at Medicines Company are generally quite fond of structured transactions and believe that the milestones in this transaction are designed to allow us to one, balance risk; two, spread out yield spend as value is created over time; and three maintain a strong alignment of interest between all of the parties to the transaction.

Specifically, as described at the start of the call by Clive, the initial payment at closing is a $140 million in cash. Furthermore Rempex shareholders could receive additional payments of up to $214 million in developmental and regulatory milestones tied to RPX602, Carbavance and the pre-clinical assets that we're just describing. In terms of the commercial milestones that have been structured, Rempex shareholders could receive up to an additional $120 million in payments tied to the commercial success of Minocin, RPX602 and Carbavance.

We move on to Slide 33. We'll describe the financial impact of the transaction. We do expect the deal to have some effect on our fourth quarter financials. These are estimates as of today and are subject to final accounting of the transaction. We estimate $7 million to $10 million in aggregate operating and deal related cost which would result in a net effect on earnings of $5.5 million to $8 million after taxes. Approximately half of this is expected to be recorded in our exclusions for adjusted net income. Those exclusions include onetime transaction costs and deal payment amortization. 2014 guidance will be announced as a part of our next February earnings call. In the meantime we anticipate a collaborative goal-oriented integration of our two teams.

And with that I will hand it back to Clive to summarize the strategic value that has been created by the merger of The Medicines Company and Rempex.

Clive Meanwell

If we please go to Slide 35. Here at The Medicines Company, we are about 530 or perhaps I should now say 560 motivated and committed people with the purpose to serve the needs of about 3000 acute and intensive care hospitals worldwide. Building on the groundbreaking success of Angiomax, in the next three years we expect to launch at least four new products down the same channel, and now we can add at least one more through this transaction and several more be on that. As we have stated before we expect to drive long-term topline growth rate, well in excess of 20% and with Carbavance and Minocin we expect that to improve still further.

Working with our new colleagues, Rempex will leverage and build a unique and highly specialized customer engagement capabilities and as we again demonstrate today, we are adding more products that meet our investment criteria. Also as we described in October, we are getting organized around these three pathways of care, shown on the slide, just like our customers and we just strengthen one of these channels dramatically. We serve them through leadership in pathways of acute cardiovascular care, established in growing contributions to the pathway of surgery and perioperative care, and our emerging work in infectious disease, now enhanced substantially, thanks to the combination with Rempex.

If we could go to Slide 36 please. In these pathways, we have products and development compounds which are or have the potential to become market segment leaders and we certainly believe that’s the case of Minocin and Carbavance, all in the same channel of 3000 hospitals. And as we stressed off late, an investment in Medicines Company therefore is an investment way beyond Angiomax. We are delighted to move forward with our commitment to serving the needs of those 3000 hospitals, who can, we believe have gain great value of benefit from what I think is the leading portfolio of anti-infective compounds and products in the industry, active against both gram-positive and now gram-negative difficult infections.

So with that, and thanks to all my colleagues, we will now open it up for questions.

Question-And-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Louise Chen. Please proceed.

Louise Chen

I had a few. First one on Carbavance, I was wondering, in addition to the efficacy competitive advantage, what else do you see as competitive advantages for this product versus those on the market? Is there a dosing convenience? Is there potentially an oral step down option? And then the second question I had was how much it will cost you to build out your antibiotics franchise? Now that it looks like that you are going to go it alone versus partner with somebody? And then on Minocin, how much are the sales currently? Is there a sales, are there any sales reps in place that sell the product? And then in terms of the IV product, what do you think, that could increase the sales to, given the improved formulation? Thank you.

Clive Meanwell

Thank you so much Louise. We’ll certainly plough through those three questions as best we can. First of all, I’m going to turn it over to Mike Dudley to cover the first of your points. I will speak myself a bit about building out the franchise and the options we still have in front of us and then perhaps I’ll ask Dan to talk a little bit about where Minocin is today and where we think it can go. So Mike, would you want to take first question?

Mike Dudley

Sure.

Clive Meanwell

Clinical advantages and perhaps the economic advantages, other advantages, I will cover that.

Mike Dudley

So you asked about sort of the advantages of Carbavance compared to others. I think the other part of this is we showed information about the efficacy as it relates to studies in animals as well as in-vitro efficacy. But a big part of this is, of course in the serious infections is safety within these patients. And so many of the drugs that are frequently used now to treat these organisms have toxicities associated with them. Those are associated with mortality and morbidity and can run up to the cost of a hospital treatment course within these patients as well.

The other thing that we’re doing also with Carbavance is that we at Rempex had really leveraged a scientific tool known as PKPD, which really then allow us then two dose this in a way that will allow us to maximize the efficacy of this drug and minimize any of the safety disadvantages that might occur with any drugs that might be encumbered upon them as well. So as I mentioned there, before basing this with a carbapenem antibiotic really is a considerable advantage compared to many of the other drugs that are used in the clinic right now with respect to safety.

Louise Chen

And Dan do you want to talk a little bit about with Minocin?

Dan Burgess

So Minocin is kind of a unique case where it's an old drug as you are probably aware, that was actually pulled through the market years ago for just lack of commercial success, because at the time acinetobacter was not a big problem. It was actually brought back on the market at the request of the defense department back in 2009 because of major problems they were having with acinetobacter in troops. And as a result of the company that held the oral rights to Minocycline for dermatology purposes essentially supplied it on as needed basis but never really promoted it. We recognized the unique opportunity in acinetobacter, and acquire the product about a year ago. We have been looking for the right partner to help us launch that product and we think The Medicines Company is absolutely the right partner for that.

It is also an ideal partner product, if you will for both Oritavancin initially and then particularly for Carbavance, because in many cases, when you are in the ICU setting, you are dealing with mixed infections including infections like KPC as well as acinetobacter and cocktail therapy is increasingly common. There is also data out there that suggests that Minocycline is synergistic with carbapenem and so the combinations here we think can be quite powerful.

So while the sales today are only on the order of $1 million, really no one knows it's out there. And so a big part of what we'll be doing going forward is introducing this product to the clinical community and we think the new formulation will also be a big advantage in that as we go forward as well.

Clive Meanwell

I would add to that Louis, that that allows us to take a gradual buildup of a relatively modest set of resources in 2014 to support the educational work and the access to Minocin. That will allow us to work with healthcare professionals on real problems, not theoretical problems. And we're very excited by that opportunity as we prepare ourselves for the Oritavancin launch.

Now the bigger question you asked, of course is what are our other options? As far as we’re concerned, all our options remain open for how we build a front line organization. Clearly we have a very strong commitment to the U.S. and Europe and it's likely that over time we will build what we hope will become one of the leading frontline organizations in anti-infective care.

However, we certainly don't rule out getting help along the way. At very least in Asia and Latin America we will need help and certainly in the U.S. and Europe, I don't rule out the possibility of co-promotion or other perhaps not permanent but types of arrangements, which allow us to leverage the presence of others in this market already.

So to me, linking up with Rempex in this way provides us with enormous opportunities and if anything likely opens up, even further opportunities in how we choose to build a front line organization. But let me put it very clearly, I did in New York, we’re in infectious disease in the hospital and we're here to stay and we're going to make a win of it. And what you need for that is you need great products and great people and this transaction has overnight created a team that I think, when you looked at our team and Rempex team, which has those great people but also has an amazing portfolio and that's what I am excited about.

Operator

And your next question comes from the line of Joseph Schwartz. Please proceed.

Joseph Schwartz

I was wondering if you could talk a little bit about the Phase 3 plans. You said two modestly sized studies. Are these non-inferiority studies? What would you be using as the comparator, et cetera?

Clive Meanwell

I’m going to ask Jeff Loutit to take that one.

Jeff Loutit

So we have had discussions with both the FDA and the EmA, specifically around the design of those two trials. One will be a large Phase 3 non-inferiority trial in subjects with complicated gram-retraction infections. Comparator is still under some discussion at the moment, but it will be a standard drug that's commonly used to treat those infections. The other trial which I think holds a lot of interest to both clinicians and regulators is a trial specifically in subjects with carbapenem resistant antibacterial ACI organisms. And that will be across several different indications, in providing high quality data in a relatively small number of subjects with excellent PK and PKPD data around the treatment of those patients.

So as Clive, Dan and Mike all said, this is a relatively modest program, which would give us approval for the treatment of serious gram-negative infections where options are limited.

Clive Meanwell

I think -- Joe as you know we’re not shy about Phase 3 clinical trial programs. We know how to do them and linking up with the experts of Rempex, we feel we can do this very efficiently. As we look at the plans that the team has put together, I’m very impressed with the focus and ability to move with sort of raised precision on these resistant organisms and I’m very impressed with the dialogs with the agencies who have really started to think very carefully about how to do these kinds of trials more cleverly and I think that is very, very promising. So as a Phase 3 trial aficionado if you like, I like very much what I’m saying here.

Joseph Schwartz

Sure. And is part of that efficiency due to the targeting of patients with certain resistant profiles? Can you talk about how the resistance profile may compare to other drugs like Ceftolazane, Tazobactam, what resistance have you been able to overcome and then also through your experiments what resistance, what mutations have you been able to induce that, undermined the efficacy of our drug?

Clive Meanwell

I think that’s two part piece. I’ll answer the clinical piece and I’ll hand it over to Mike to talk about the preclinical side of things. Specifically as I mentioned, the trial, the smaller trial and subjects with CRE organisms, that will be really the focus. If you think about what physicians are struggling with at the moment is how to treat these KPC organisms or CRE organisms. So providing them data in subjects that all patients have those organisms I think will be a very powerful to them. So, it really will be a very focused trial, specifically in those subjects.

And now I’ll hand it over to Mike to talk about the preclinical side.

Mike Dudley

Yes. It’s Mike Dudley. So, I think you asked a couple of questions, one about the sort of the comparative spectrums say with the drug like Ceftolazane, Tazobactam and then you asked about also resistance mechanisms as well and I’ll tackle the second part of that first. As you know, when you’re developing these drugs, you lean on them very hard in a laboratory to try to see if you can induce mutations that result in resistance particularly to a new class of beta lactamase inhibitor. We’ve done those experiments and you don’t see any resistance to the beta lactamase or changes in the beta lactamase following exposure to RPX7009 in those experiments, either in-vitro or in-vivo as well.

So, it looks like RPX7009 is particularly very active against the KPC enzyme. It acts kinetically like an irreversible inhibitor of that enzyme and hence is able to inhibit pretty much permanently after the exposure. The other question you asked about was particularly how this stakes up against other agents and we’ve provided an example of studies in slide deck and it was discussed earlier.

Specifically, about Ceftolazane and Tazobactam, I think there is a couple of issues. Ceftolazane of course is cephalosporin antibiotic that it comes from a generation of drugs that are not only susceptible to KPC but also to those extended spectrum beta lactamases that took out drugs like Rocephin and so it has an impact in the 80s and 90s.

Tazobactam is a beta lactamase inhibitor. It’s an older generation beta lactamase inhibitor, does not have very potent activity at all against the KPC enzyme and so this combination does not have any activity against KPC producing strains. Where I think Ceftolazane seems to have some potential usefulness of course is against Pseudomonas and the studies to date showed that about 50% of those strains that would be resistant to say Ceftazidime would be susceptible to Ceftolazane. But we’ve profiled and others well, profiled Carbavance against that and other combination products and we’re very confident that Carbavance stacks up very, very favorably compared to them.

Clive Meanwell

And Joe, it’s Clive again. Just want to stress situating our work with the Rempex team obviously. Here we have in our own shop Greg Mullick [ph] who -- I think he even did his PhD on gram-negative bacteria and Matt Wikler who has been with us now for a while, led a deep dive on this science with some world class external experts and really asked the questions in a fairly profound way and I think the way Mike and the team put it up, an organized information, it was very clear to us that the scientific profile, the biological and microbiological profile of these compounds are absolutely extraordinary.

Operator

And you next question comes from the line of David Amsellem [ph]. Please proceed.

Traver Davis

Just quickly Traver Davis on for David. Just quickly on the transaction and then Carbavance advancing studies next year, how should we be thinking about R&D spend for next year and even do you have any color how we should think about it for 2015, 2016?

Clive Meanwell

We’ll be giving a full range of guidance, as you would anticipate with our first quarter -- full year results. That would be at our conference call in February. Obviously, I think at this stage of this transaction we can get the short term immediate impact that I think [indiscernible] gave earlier but for the time being we’re not in a position to give much more long term guidance. We want to see where 2013 comes out.

I would say in general as a Company we’ve stated and I don’t think that changes substantially here that we think spending 20% of net revenue is a lot of money. We’re going to have a very attractively growing top line. So, I think there is more than enough space if you like in our P&L over the coming years to fund any and all of these exciting programs as they come forward. So, watch this space. I apologize we can’t give too much guidance today but we will do over the coming 60 or 90 days.

Traver Davis

And just a quick follow-up on that. I know, obviously you don’t want to give too much detail on that cost related to the studies yet, but should we be thinking about the cost of the two studies for Carbavance, sort of being similar to what we saw for Oritavancin? I know, you’re saying that these are modestly sized studies. So how should we think about the spend Carbavance viz-a-viz what we saw for Oritavancin?

Clive Meanwell

It is just sort of commencing on this, because obviously this is a big drug of thinking. Obviously, we have Jeff Loutit, who is an expert on running clinical trials and we have our own Matt Wikler, and they have been talking about this. How do you guys see I mean -- with Oritavancin med we got through that fairly efficiently, Jeff, I don’t know what you’re thinking in terms of -- is it about 1000 patients, 10,000 patients? What’s the order of magnitude for Phase 3 that we can provide?

Jeff Loutit

Yes. Actually, the size of the safety data based we’ve agreed to with the agency is around 600 subjects for the Carbavance program, which is obviously smaller than the Oritavancin program.

Matt Wikler

Right, yes. And the FDA has made it clear -- and is clearly indicated in many public forums that they are looking for more efficiently to develop drugs, which would allow pharmaceutical companies to get products out to patients who really need these new therapies for gram-negatives more efficiently. And clearly a decreased sized program such as this sense, we will provide the adequate safety data which the agency requires and also the way that the program is designed. We’ll give this specific data on patients with these specific types of resistant organism where there is most need for patients and we’ll therefore provide both clinicians and the regulatory agencies with the data they need to help them make these decisions.

Operator

And your next question comes from the line of Adnan Butt. Please proceed.

Adnan Butt

Some questions on Carbavance. First, I’ll start with can you say a bit more about the antibacterial activity for Carbavance? You mentioned being able to going into Phase 3. Is that based on in-vitro data? How much Phase 1 data have you shared with the agencies? How much more you need to do before the Phase 3 trials are finalized basically?

Clive Meanwell

Adnan, thank you. We’re going to get Mike to tackle that one.

Mike Dudley

Yes, good. So let me sort of address the spectrum of activities. So carbapenem antibiotics and particularly the carbapenem antibiotics that are used in the treatment of suspected or documented serious gram-negative infections have broad activity against aerobic gram-negative rods such as Enterobacteriaceae, so E. coli, Klebsiella, Enterobacter are all within the spectrum of those agents. Pseudomonas aeruginosa and Acinetobacter are as well. So very broad spectrum activity against gram-negative organisms. Again that’s why these have been the go two agents for suspected gram-negative sepsis within patients.

I would also add that carbapenems are also very active against anaerobic bacteria, gram-negative anaerobic bacteria. So unlike many of the other products that are in this space right now, one does not have to add a specific anti-anaerobic drug when treating patients that might have mixed infections that maybe coming from the peritoneum as well.

So I think the spectrum of activity is very broad for a carbapenem and what the beta-lactamase inhibitor is doing of course is overcoming the resistance mechanism which is the problematic mechanism in the U.S., as well as worldwide predominately is due to this KPC enzyme.

So we’re restoring the usefulness of this drug against those resistance mechanisms. The other thing that we do of course is that we’re maximizing a tool known as PKPD in a way that we will be doing this agent, which will allow us then to provide coverage against, not only of course by reversing resistance mechanism but we will be able to cover for example Pseudomonas Acinetobacter, that would be in fact considered resistant to existing marketed carbapenem drugs right now.

Jeff Loutit

And just in follow-up to that around the Phase 1 program, it’s a very robust Phase 1 program. Well over 100 subjects have been dosed with either RPX7009 alone or in combination with the carbapenem.

Clive Meanwell

And from that perspective Adnan, without adding any scientific information beyond what Jeff and team talked about, as we went through this, we were able to look at the Phase 1 data the team had developed from it. It was quite hot off the press, and I think we were extremely impressed Matt with the quality of the data and the adverse event profiles and the PK combination of the BLI plus the carbapenem. It looks to be a great match to us. Is that Matt?

Matt Wikler

Yes. The PK data actually was right on what we expected, actually quite predictable. We obviously knew a lot about the carbapenem it’s combined and looking at the carbapenem, plus the beta-lactamase inhibitor actually, we’re very happy to see that the pharmacokinetic profiles match up very nicely which is important to a combination drug. And the pharmacokinetics did not change for the carbapenem, with the addition of beta-lactamase inhibitor which is very important and clearly had all the safety data, had laboratory tests and this was well designed and we saw no surprises in the data and therefore made us feel very comfortable not moving forward with the acquisition.

Adnan Butt

Let me just ask scientist team, when would you like to publish these data? When do you think they are going to come forth in the public domain in a peer review kind of set up?

Mike Dudley

Yes. So we're presently planning to show some of the Phase 1 data for the beta lactamase inhibitor at the European Infectious Disease meetings that would be coming up in the spring of next year and so we'll be presenting the Phase 1 data there and then at ICAC at the upcoming fall infectious disease meetings, we'll have a very full exposition of a lot of the data that we generate in Phase 1 in addition to some other pre-clinical data.

Clive Meanwell

Are there any other follow ups Adnan?

Adnan Butt

Yes, just one follow up. So you touched on safety a bit, but is there any specific safety signal that you would look out for this drug or drug class? And then secondly, how much more do you need to do before you can initiate Phase 3 trials? Do you have everything in hand or are you scheduling discussions with the FDA at this time?

Clive Meanwell

Carbapenem as you know are a very safe class of beta lactamase antibiotics. So there are no specific safety signals associated with the Carbapenems. With respect to RPX7009, as Mike mentioned the pre-clinical profile is very clean and in fact when we looked at the clinical studies, then subjects who received RPX7009 alone or in combination with the Carbapenem, the objective is the study was are we changing the known and very safe profile of the Carbapenem when we add RPX7009 and the answer is no. So very good safety profile.

We do plan a couple of more Phase 1 studies; one in subjects with renal insufficiency; the other in subjects to look at the penetration to lung and epithelial lining fluid. But those are really to help us with including criteria in the Phase 3 program and not gateways necessarily to the actually starting the registration trials.

Adnan Butt

One more question please. So for Carbapenem anything in the pipeline, do you know if there is anything that would target Group 3 beta lactamase?

Clive Meanwell

Adnan you didn't quite come through clearly, could you repeat this?

Adnan Butt

Anything in the preclinical pipeline that might be targeting Group 3 beta lactamase?

Mike Dudley

So are you -- in group 3 are referring to metallo beta-lactamases?

Adnan Butt

Yes I am.

Mike Dudley

So the metallo beta-lactamases are group B beta-lactamases such as NDM1 and VIM so forth, are largely problems that are outside the United States right now, in Europe and also in some areas of Asia such as Pakistan and India and so forth. So those are follow on programs, which I introduced at the very end. We have programs that are addressing those enzyme producing organisms. We’re doing it in a couple of different ways, through combining our beta lactamase inhibitors with molecules specifically that are not susceptible at degradation.

But also as I pointed out, with this new class of beta lactamase inhibitor we have actually discovered compounds now that are capable of inhibiting the so called Class A and Class C enzymes as well as Class B metallo beta-lactamases as well. And so we see that those types of products would come along behind that, because you are always having to think ahead of what you will see in the epidemiology, both in United States as well as worldwide.

Clive Meanwell

I think Adnan we were also impressed with the possibility of an orally deliverable inhibitor. I don't know Mike if you want to comment on that, because that would be a total game changer I think.

Mike Dudley

Yes. We agree and the fluoroquinolones class of course was quite revolutionary in the ability, if we allow clinicians to really switch patients from IV therapy to oral therapy within the hospital and send them home. But we’ve lost that ability and the hospital now because of antimicrobial resistance to fluoroquinolone agents, which in many centers is now north of 50% to 60%.

So this would be a combination product, our class of beta-lactamases inhibitor can be made orally bi-available. Some of these compounds in fact are intrinsically orally bi-available or through simple pro-drug manipulation, which is a technique that chemists use to be able to make drugs orally bi-available. We have compounds now that we believe, that could be a clinical candidate very quickly within an IV oral agent that will be useful for this IV oral switch therapy within the hospital but then of course for treating patients that are perhaps in institutional cares, where IV therapy is impossible.

Adnan Butt

If I can get a commercial question in please, it has broad spectrum coverage but also has activity against multi-drug resistant organism potentially. So how would you expect use to be taken up. Is the space known for empiric use or do you expect patients to be identified? How do you see this drug getting to patients?

Clive Meanwell

Well it's very interesting to me; that commercial question is really a clinical question at heart. So when you start to mouth why and who will get the drug, the first thing is I think as a firm our policy, and this is not just mother and apple pie for us, is we want the right patients to get the drug. We don't want too many patients to get the drug. We want the right patients to get the drug. And so either Mike or Jeff, do you want to comment on this? How, who needs these drugs and who doesn’t need these drugs. And lets talk about it, because that Adnan I think is how you shape the market model.

Jeff Loutit

Well, let me respond, then Mike you can jump in. So physicians are often driven by their biomed that they are working in. So if you are a physician in an intensive care unit that has a significant percentage of the CRE organisms, so maybe above 10% to 15%, you’re going to want to consider using a drug like Carbavance empirically, because the mortality in these gram-negative infections, particularly if you don’t get the antimicrobial right in the first 48 hours is very high. So getting that antimicrobial therapy right in the first treatment is very important.

So 10% to 15% is often sort of the cut off that physicians will start to use the drug like Carbavance empirically. Prior to that they may get used to just as Clive said in subjects who actually have the organism identified. And if you go to -- so there are obviously variations across the country. If you go to a hospital in Wyoming there may be no CRE in this drug -- would not be a drug that they would need. But if you go to almost every large hospital in New York, there is a very high percentage of the Klebsiella pneumonia, which have expressed the KPC gene and were resistant, you would want to use a drug like this empirically right now.

Matt Wikler

Yes, I mean. It’s really and I agree with everything Jeff said. It’s really a matter of playing the odds and if you know you have resistance range in a hospital which, and all large hospitals do -- antibiograms they know the resistance patterns. If you have resistance in your hospital, you have a sick patient, and you know you have to put them on appropriate therapy within the first 24 to 48 hours, are you going to use a drug empirically in order to make certain, that you cover this enough? You are going to use the best drug you can get because you don’t really have the luxury of playing games and trying something that’s not the best drug, in the event you may be wrong because it would be too late potentially for the patient to have a successful outcome.

Clive Meanwell

Couple of other points that’s just coming up.

Mike Dudley

This is Mike Dudley. I think one of the things that I think we were very impressed with in our discussions with Medicines Company is sort of the commitment of the company to try to work with clinicians and hospitals to resolve problems. And with antimicrobial resistance in hospitals, there has been a tremendous movement of what’s known as antibiotics stewardship or antibiotic management to really help to optimize antimicrobial therapy and to really use as was mentioned here the right drug in the right patient as well. And so we certainly believe that that’s one of the real attractions of working with Medicines Company, is having that type of commitment and really helping them identify then and solve these problems with the tools that have been developed at Rempex.

Clive Meanwell

And Dan I think you will go next.

Jeff Loutit

Yes, just one last point. I think, one thing is a little bit different about the gram-negative space is it’s unlike, for example the Mercer space there is not a good generic alternative in the gram-negative space, and so if you’ve got an issue, you have to go to the new proprietary agent essentially. So it really does make a big difference in this space versus the gram-positive space.

Clive Meanwell

And to any of you, I mean, I had the impression that this space is considerably larger than the Mercer space. Do you want to comment on that?

Mike Dudley

Yes, it’s about twice the size of the Mercer space, if you look at hospital though.

Operator

And your next question comes from the line of Cory Kasimov, please proceed.

Unidentified Analyst

This is actually Whitney on for Cory this morning. So relative to the Minocin kind of more official or more robust launch, should we sort of expect that in the near-term or would you be sort of just maintaining supply of the current formulation and then waiting for the new formulation to kind of launch it more robustly?

Clive Meanwell

That’s a great question, Whitney, thank you. I think that we’re going to -- I have been talking around here the last few days about a White Club service. I think that hospitals who are managing acinetobacter are in need of guidance and support as well as just a drug in a box. And I think what we’d like to do with our colleagues Rempex is to make sure we set up the necessary information channels, we have the right education platform, we have the right personal contact to those who are dealing with these very difficult patients.

And we can build all that up slowly with the team here, and with our field based team as we begin to put it together. I think, as we then introduce the new formulation, I think, we’ll probably turn the flame up in terms of resources adding around that because we believe it will be a much easier drug to use, a somewhat safer drug in terms of patient tolerance, and that will be the time to turn up the flame. And that will be the time when of course our resources are coming on board for Oritavancin. So that whatever that frontline organization looks like -- and we add certain amount -- late 2014s of the big surge, at the earliest then we will have a group of people with two important stories to tell, not just one, and whether we choose to do that that with a third party partner or not, we can all address that later. But for the time being we are going to start what I will call the White Club service for Minocin IV.

Unidentified Analyst

Got it, that’s helpful. And then on Carbavance, you sort of mentioned some, I guess, differences in toxin kind of, ramping cost with some of the other drugs. Will you will be looking at pharmacoeconomic data in the Phase 3 trial that might be further differentiating on top of the efficacy and safety.

Clive Meanwell

You must have heard me on calls before. We always look at pharmacoeconomics. We think it's the fundamental driver of healthcare today. We’ve thought that for the last 15 years. One of the things I love about this portfolio is not only does it potentially saves lives, not only just potentially alleviates suffering, but it also has huge potential to improve the economics of healthcare in leading hospitals, as well as smaller hospitals. So yes, we'll be very focused on that right from the get go, as indeed the team in San Diego already has been.

Operator

And your next question come from the line of Umer Raffat. Please proceed.

Umer Raffat

So I am one hour into reading about gram-negative. So my questions will be very basic. Please bear with me on these; very quick ones but a few of them. So number one why RPX7009 only being developed in combination with the Carbapenem. And secondly what do we know about hepatic talks with biopenem? And the third one what is the mid 50 values for Carbavance in Pseudomonas versus Enterobacteriaceae? And finally I had an epidemiology question I can follow up with.

Clive Meanwell

For an hours’ worth of reading, that’s pretty damn good, I got to tell you. You are way out of my pay grade already. So let me hand that over to Mike.

Mike Dudley

Good job there. So let me try to take these if I miss some those as they came by, feel free to fire back here as well. So one of the -- you asked about the question about why is RPX7009 only being developed with a Carbapenem I believe. And I think the short answer is that the current regulatory environment has been one where combination products are developed together. So two drugs being developed together as a single drug. So I pointed out the examples of Ceftolazane, Tazobactam and Minocycline [indiscernible] as well.

Now in doing that and developing in this program, we selected the Carbapenem for the reasons that I mentioned before as to sort of be the anchor for this beta-lactamase inhibitor combination. And it's very important I think as Matt mentioned there is that one wants to match the pharmacological properties of your partner beta lactamase inhibitor with your partner beta lactam. And so therefore RPX7009 was really designed to be used with a Carbapenem antibiotic, as opposed to other beta lactamase antibiotics.

I would add that is in fact what you are asking is exactly what we’re doing with these follow on products where we're looking then at combinations of newer beta lactamase inhibitors in combination then with other beta lactamase, which in this case would not necessarily be a Carbapenem, but perhaps might be a drug with a differentiated profile against other pathogens as well.

Secondly, you asked about a partner Carbapenem. We have evaluated a couple of different Carbapenem partners, because as I mentioned we designed RPX7009 to work with several different Carbapenems. Biopenem is one of those compounds that has been evaluated both pre-clinically as well as within the clinic as well. We're leaning actually away from Biopenem presently now and we'll go forward with a really best in class Carbapenem in our clinical trials going forward.

The third question I think that you asked about was around MIC90 for Pseudomonas and so forth as well. One of the things that we'll be talking about going forward is how we'll be dosing the Carbapenem and as you know, potency is only one leg of the stool that describes the usefulness of a drug in the treatment of infections.

The other part of that is the pharmacokinetics and dosage regiment and what we refer to as PKPD and we'll be rolling out data showing that with the dosage regiments that we'll be using at Carbavance, that we'll be able to cover organisms that are current resistant to current Carbapenems in the clinic according to their FDA and CLSI breakpoints, we'll be able to treat those organisms with Carbavance. I think I hit them all?

Umer Raffat

Yes great, and then my follow up was on the epidemiology side. So outside of any outbreaks how many Carbapenem resistant cases do we see in U.S. every year? And what percentage of those cases are KPC based resistant?

Mike Dudley

So that is a question that one always wants to know and I think order for me to really answer that question, I have to sort of explain that KPC production or Carbapenem producing organisms are not reportable cases, believe it or not. So the way that we actually track resistance particularly in the early stages is to sort of setting all types of sites. And what I mean by that is that state health departments will often times detect or have strains sent to them that often times demonstrates these very stain’s susceptibility profiles within the hospital.

So what we can really do is we can often times really estimate this based upon what we see relative to other organisms, such as ESPLs. And some of the recent data that CDC has placed for us is that the ratio between a Cephalosporin resistant organism and a Carbapenem resistant organism is now narrowing. So it's only a ratio now of around 3:1. And if you look at that ratio 10 years ago, it was probably over 10 to 20:1 as well. So the epidemiology and all the trend lines which we try to show you there are showing very similar prosperities to what we see ESPLs. 25 years ago, if you ask me that questions ESPLs were very uncommon in many hospitals. Now many institutions now are reporting 40% to 60%. If you are Europe basically 100% of many of institutions in large European cities are now resistant to Cephalosporin.

So the trend lines are all there, that the resistance is spreading. And an important point I think that Dan also I think mentioned and alluded to is that because these are serious infections, because if you get antibiotic therapy wrong in very ill patients, the mortality rate is very, very high. And so once you’re actually incidence of resistance is north of say 10% to 15%, you don’t want to be wrong because if you don’t give an active antibiotic against these very ill patients, the mortality rate is very, very high. And so you can talk about what’s the significant number, the threshold for how physicians and hospitals behave differently is really only around 10% to 15% resistance.

Operator

And your next question comes from the line of Jason Kantor. Please proceed.

Jason Kantor

So a couple of questions on Carbavance. Will you take at SPA for this Phase 3 program and it wasn’t clear from what you were saying about your CRE study. Will this be comparator study? Will you actually get some sort of comparative clinical data and so what kind of end points will you be looking at?

Clive Meanwell

It’s Clive. I think the second part of the question came over clearly but the thing you said at the beginning where you said something about the FDA, can you repeat.

Jason Kantor

Are you planning to get an SPA?

Clive Meanwell

Yes, sure. Jeff?

Jeff Loutit

Yes. We’ve obviously had a lot of discussion about whether that would be appropriate or not. And in general in this area of changing regulatory environment, the FDA has steered us away from going through a SPA just because it locks them into a more conservative approach and so we think it makes much more sense not to enter into a SPA with these programs.

I think your second question was related to a comparator. So, in the CRE specific trials, so yes we will have a comparator on. As I mentioned, that trial will be relatively small, compared to a standard non-priority [ph] trial but we will have comparator arm and we looking at descriptive statistics, comparing the data between arms.

Dan Burgess

The challenge of course as there is no agent but it’s approved for use against CRE and so we’ll have to be whatever their best cocktail therapy. That’s part of the challenge here and any trail design and frankly is one of the reasons the FDA is being so flexible here is because you can’t put a comparator in there that you’re going to be comfortable.

Mike Dudley

And I think the other point this too is that these are not powered statistically, like what you’ve been used to seeing for other types of drugs and again that’s rooted in the idea that these need to be doable trials. There is no comparator that is a standard that you can really do this, on which to power these types of things. And so these are -- these types of trials and these are the types of studies draw your attention to some of the recent European guidance that has recently have been published, the final guidance for developing antimicrobials for these programs that are directed against these pathogens that are discussed and FDA and EmA are very much aligned in terms of their thinking, in terms of how to approach these types of products and these types of infections.

Jason Kantor

And Mike, if I may, you’ve been involved in a lot of industry reforms and industry academic and regulatory collaborative discussions. I think we’re all very impressed with the enthusiasm and leadership that we’re seeing out of both the European and the U.S. regulatory groups. Is it something that can be turned into practical advantage for everybody or is it little bit, well we got to go this way. I mean are people enthusiastic about it or are they just sort of, well we have to.

Mike Dudley

I think that Ed Cox [ph] says, has who heads up the office of antimicrobial products at FDA has summarized is that that the FDA recognizes that in the past where insisting on a high degree of certainty -- they recognized that they drove a lot of industry out of this area in terms of discovery. Rempex has been one of the few companies in the United States that’s been engaged in antimicrobial research and development and as Dr. Woodcock [ph] has stated a few years ago at a bookings forum is the FDA recognized that they really needed to reboot antimicrobial development and regulatory science that associated with that and then we think that we’ve been fortunate with our program to be really well poised with the spectrum that Carbavance has to really take advantage of these types of programs that are going to accelerate the availability of these drugs very soon to patients.

But also more importantly is that we would foresee that in the future that additional trails, more traditional trials, if you will that would be done on the back end of this in the post approval area, which would then garner additional indications and more widespread use, which we would anticipate with increasing resistance that would be taking place in more patient populations.

Clive Meanwell

That’s great and I think I can echo from The Medicines Company side, our experience with the Oritavancin program, and SPA wasn’t a good idea there either because we were in such close dialogue with the agency, and they were very helpful, and I agree with the team that it’s not necessary here either and in fact may even inhibit some creativity as you see that. So Jason I hope that.

Jason Kantor

Yes, that was helpful. If I could just ask a follow-up here. So if you reduce your activity in CRE, what is your update -- your antibiotic would be basically reserved only for that, given the way that these docs tend to deal with drugs that they have for the most resistant and then Clive are you planning to provide detailed estimates for these new products that you have for other products in your pipeline as we look to your guidance in 2014?

Dan Burgess

Why don’t we talk about the clinical questions again. I think it comes back to -- some other things that you said earlier but those we can emphasize at or.

Clive Meanwell

I think it comes back to what we discussed earlier, which is the antibiotics stewardship. So every new antibiotic now falls under antibiotic stewardship because of the concerns about broadly use of drugs and resistance development, and that’s sort of why we are where we are, and the problem with resistance at the moment.

So all drugs will be under the stewardship group, but I think it comes back to the issue that we’re going to be talked about that; if you do not have any problem with CRE in your hospital, there is not a need for a drug like Carbavance. If you do have a problem with CRE in your hospital, then obviously you can use it in two ways, you can use it in those patients who you know an organism, have the organism, but importantly, as you have a higher percentage of those strains, you’re going to want to use it empirically. So in that setting this stewardship program may well say, this ICU who has more than 10% incidents of CRE is able to use Carbavance empirically, and I think that that’s how all new antibiotics are being looked that and cared for at this time.

Mike Dudley

This is Mike Dudley. I think I would like underscore also something that Dan said earlier. So if you’re going to talk about reserving something, that implies that you have an alternative and the problem here is we do not have suitable alternatives. The point that FDA makes, the point that we make here is that these are drugs for patients for which the existing choices are either limited i.e., because of resistance or inappropriate. So for example, the last thing that you want to be using in a patient who has had a renal transplant that now has a resistant infection due to carbapenem-resistant infection is Colistin, which is a highly nephrotoxic drug as that makes it difficult.

So there are no really other alternatives which allow you to consider these reserved. When I was wandering in hospital wards a couple of decades ago, carbapenem antibiotics were reserved, if you will because we could use cephalosporin antibiotics. That doesn’t occur anymore because how we’ve lost those classes of drugs, and we expect that to happen in the ensuing years with carbapenems.

Clive Meanwell

Jason you’ve known us long time. Look in time and time again, again and again in acute intensive care medicine, which is what we’re really talking about here; this is not an ear infection, we’re talking about. We have the issue of time. If you don’t get patients moving in the right direction the first few hours of therapy, you’re screwed and you won’t get a second shot with a 20%, 30% even 40% mortality rate in young otherwise healthy people even, not just even compromised but also in some others. There just isn’t the time to ditch around with cheap drugs because you think you can get away with it then we’ll see what happen tomorrow. Patient may not have tomorrow. So that’s what the team’s really stressing.

And I think that’s based on your second point, which is how do you make a sale forecast or something like this. So the short answer is you figure out what the value is. And this is a brand new world anti-infective therapy. I grew up selling Rocephin at Roche and doing trials and doing regulatory work, where our aim was to get as broad a label as we possibly could in as many countries as we possibly could as fast as we possibly we could and I think we did a fairly good job with Rocephin.

But here it’s different world now where you’re looking for right patient, the right time, but the value you create for that patient and for that hospital is enormous. I mean it’s huge, off the chart. And so then you start to ask the question, how should you price these products? You should price them less than the value you create. Well, if they value created is enormous, then you have a quite bit of, should we say flexibility on pricing. And then the third component is well volume, what patients are getting appropriately treated. That [indiscernible]. So I think this area we believe is going to evolve into very different kinds of market models and we’re looking forward to that.

Operator

And you next question comes from the line of Joel Beatty. Please proceed.

Joel Beatty

My first question just to clarify, does this mean that partnering for the launch of Oritavancin is off the table? And then also will you still be looking for additional acquisitions going forward and how does today’s acquisition affect your interest and ability to make additional acquisitions?

Clive Meanwell

On the Oritavancin side, I think I may have mentioned this earlier. We don’t think this changed our commercial strategic choices at all. At some point we need to create a very capable frontline organization and we want to drive the strategy but this doesn't prevent us, this isn't saying we're never going to partner anywhere in the world. Certainly Latin America and Asia we need to partner and then in some parts of Europe, U.S we may still partner. It depends on the nature of the launch we finally believe we need to pull off. So I don’t think either Dan or I feel particularly strongly about one frontline model over another as long as it’s really a smart one. So we'll work it through and I think as we see more and more data, as we see how the FDA is going to handle the oritavancin, as we see how Minocin shapes up, as we see how Carbavance moves forward, I think it becomes easier to design the right frontline. Joe, could you help me with the second part of your question, I lost it?

Joel Beatty

Sure, about your interest and ability for additional acquisitions after this one.

Clive Meanwell

Yes, I think that our job as a company is to create a portfolio that can create the most value possible for our customers, and when we do that, we obviously create the most value possible for our shareholders. So, the answer is, we're going to keep looking. Obviously we're not an infinitely large company. We have to be extremely selective. I think in the anti-infective space we've been very, very thoughtful and looked at a lot of opportunities but I think this one stood out, I’d say like a beacon honestly.

So yes, we'll keep looking and by the way in the anti-infective space, we now have an extremely energized and even better team than we had before. So there's lots of ideas around this table I can tell you for new things. So I wouldn't rule out the possibility of further opportunity assessments. Who knows, whether they lead to deals, you never know, but we'll keep looking because we think it's an important area.

Operator

And your next question comes from the line of Steve Burn, please proceed.

Steve Burn

I was hoping I could drill into the mechanism here a bit. Maybe this is a question for Mike. As these pathogens have evolved resistance for beta lactamases, is it fair to say that the pathogens that have a carbapenemase enzyme also have a cephalosporinase and therefore if your beta lactamase inhibitor is effective in KPC organisms, it’s also effective in ESPLs but the reverse is not true.

Mike Dudley

That's a great question. So the first part of that is that yes KPC rarely actually swims alone. It’s often times in Enterobacteriaceae that already have ESPLs, what we could refer to as penicillinases and cephalosporinases as well. And so your, if you are to use a beta lactamase inhibitor, say with a cephalosporin, that beta lactamase inhibitor has to be inhibiting cephalosporinases as well as the carbapenemases as well.

And it’s actually for that reason why we actually chose with the first clinical candidate from this series to actually go with the carbapenem, because carbapenems I think as you recognize are not affected by cephalosporinases and so when you're asking a beta lactamase inhibitor to be inhibiting both cephalosporinases as well as KPC, that puts a high degree of burden in terms of the amount of drug that you need to have. There have been observations already with some of the other combination products using cephalosporin bases, with those beta lactamase inhibitors of actually resistance occurring, because it's not difficult to imagine this multi front enzymatic war that you're fighting here by asking your beta lactamase inhibitor to inhibit all those.

So that's the reason why we started with a carbapenem antibiotic, because essentially then all of the energy on the beta lactamase inhibitor could be really directed towards the carbapenemase and we didn't have to worry about inhibiting cephalosporinases in that setting. Does that make sense?

Steve Burn

Yes it does, and by extension would the metallos also be additive to this group so that if you had a beta lactamase inhibitor that was effective in say the NDM 1, that it would also be effective in these earlier generations of resistance mechanisms.

Mike Dudley

Yes, so again with the compounds that we have been working with right now, the current leads, they're predominantly really carbapenamase inhibitors. So we would see the example compound that I showed you in the, at the end of the slides that I discussed, would be best to be used in combination with a Carbapenem because the current compounds that we have right now, that are really directed against both the metallo as well as the serine carbapenemases would be best of course to be paired up with a carbapenem. That's not to say though that we have other programs and as we explore that space there may be other combinations that one could see, that would involve using drugs beyond carbapenems as part of that. For example you might imagine also as we have looked at, of using monobactam antibiotics as part of these combinations, because monobactams of course are intrinsically stable to the metallo beta lactamases.

Steve Burn

Okay and then I have one question on Minocin, given it's an old drug, is the development of a new formulation intended to give you additional patent protection, assuming there's no barrier to a generic version but does the new formulation also have some meaningful clinical benefits, or is it mostly an IP issue?

Mike Dudley

I think it has clear clinical benefits than carry with it IP extension that we think can be quite significant. And so we think we can build a franchise around Minocin that will be long lasting, and then we think the new formulation will have some important benefits, particularly in the patient population we’re going to be looking at in terms of fluid volume and a variety of other, things that we think in this particular patient population's going to be very important and the new formulation does that in a way that the existing formulation cannot.

Clive Meanwell

And Steve, it's Clive. I think that it's probably known but Minocin is not available in Europe at all yet. And so it would be a new product for Europe which I think is very important.

I think that that brings to the end, I think we have no more questions. If I may just check with you operator that you're not seeing any further.

Operator

And there are no further questions in the queue at this time.

Clive Meanwell

Thank you very much. I'd like to thank everybody for your interest in The Medicines Company and our announcement about joining with our colleagues from Rempex today. We look forward to continued activity in December. There's a number of investor conferences, including today and reporting continued progress in the fourth quarter and beyond. Thanks very much for your attendance everybody.

Operator

Ladies and gentlemen, that concludes the presentation for today's conference. You may now all disconnect and have a wonderful day.

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