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Cempra, Inc. (NASDAQ:CEMP)

Q4 2013 Earnings Conference Call

February 27, 2014 4:30 pm ET

Executives

Robert Flamm - IR, Russo Partners

Prabha Fernandes - President &CEO

Mark Hahn - CFO

Analysts

Steve Brozak - WBB Securities

Alan Carr - Needham

Stephen Willey - Stifel

Morgan Haller - Robert Baird

Operator

Good day, ladies and gentlemen, and welcome to the Cempra Fourth Quarter and Year-End 2013 Financial and Operating Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

Now, I would like to turn the call over to Robert Flamm of Russo Partners. Mr. Flamm, you may begin.

Robert Flamm - IR, Russo Partners

Thank you, Kevin. Good afternoon and welcome to Cempra's fourth quarter and year end 2013 financial and operating results conference call. Joining me on the call are Dr. Prabha Fernandes, the President and Chief Executive Officer and Mark Hahn, the Chief Financial Officer at Cempra.

Before I turn the call over to Dr. Fernandes, I would like to point out that management will be making forward-looking statements during this conference call. Such forward-looking statements, include statements about the timing of the completion of announcement of results of the Solithromycin Phase 3 Clinical Trials, Solitaire-Oral and Solitaire-IV and Community-Acquired Bacterial Pneumonia, the timing of the completion of announcement of results of Phase 2 Clinical Trial of Taksta for prosthetic joint infections or PJI and or the initiation timing of completion of a Phase 3 trial of Taksta for PJI, the timing of completion announcement of results of Solithromycin Pediatric Study and bio-defense pathogens, the current plans for commercialization for Solithromycin and Taksta, financial guidance and other statements that are not historical facts.

Such statements may include the words, plan, will, expect, believe, may, could, would or similar words. You are cautioned to not place undue reliance on these forward-looking statements, which are only predictions and reflect the company's beliefs, expectations and assumptions based on currently available information, and speak only as of the time they are made.

Risks and uncertainties they could cause actual results to differ materially from those described in our forward-looking statements, include the cost, timing, regulatory review and results of our settings in clinical trials, our anticipated capital expenditures and our estimates regarding capital requirements, a need to obtain additional funding and our ability to obtain future funding on acceptable terms, the possible impairment of or inability to obtain intellectual property right and the cost that is obtained in such rights from third party and other risk identified in our SEC reports.

For discussion of these and other factors, please refer to the risk factors described in our filings with the SEC. For forward-looking statements we claim the protection of the Private Securities Litigation Reform Act of 1995.

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

Prabha Fernandes

Thank you, Robert. Good afternoon everyone. Welcome to our teleconference presentation on our fourth quarter and full year 2013 financial results and update on our activities at the company. I will provide a brief overview of the events that occurred during the fourth quarter of 2013, some recent events, as well as update on our guidance for our clinical program. Mark will provide a financial overview for the quarter and for the year.

First, we want to update you on our oral Phase 3 study in CABP, which we have named Solitaire-Oral. For those who do not think about CABP, I will emphasize that this is a seasonal disease and the incidents of pneumonia often tracks the intensity of the flu season during the colder winter months. Our Phase 3 oral study was designed to enroll approximately 800 patients. We are well beyond 50% of our enrolments budget. Based on where we are with enrolment today, we now expect to disclose top-line results during the first quarter of 2015, which means we expect to complete enrolment in 2014.

The FDA has strict criteria in their guidance for CABP trial that govern prior antibiotic usage and disease severity, sputum culture, chest x-rays, etc. All these guidelines are required for the determination of the efficacy of that drug and we are following the FDA guidance strictly.

One consequence is that patients with moderate-to-moderately severe pneumonia who were considered for enrolment cannot have received even one prior dose of a long acting antibiotic. As you might realize, antibiotic use varies from country-to-country but overall, prior use of an antibiotic before arriving at the doctor's office or research unit is a common situation and the most frequent reason for not being able enroll as they fail the screening in our trial.

Importantly, in those greater than 50% of the patients enrolled the Study Data Monitoring Committee or DMC that periodically reviews safety data from the study has informed us that these should be placed with the conduct of that study.

In December, we initiated the Solitaire-IV Phase 3 clinical trial in patients with CABP. The data from this trial along with the Solitaire oral will be analyzed in combination to submit to the FDA for the NDA for two products, the oral capsules and the intravenous formulation. While our pivotal trials are enrolling, we are building a tremendous safety database.

Last call, we released the results of our hepatic insufficiency study. Mild, moderate and severe hepatic insufficiency patients were treated with five days of solithromycin and the adverse events were no different than placebo and there was no need for dose adjustment in this population. Note that this is an antibiotic metabolite and excreted by the liver and even in the severely liver compromised patient solithromycin has been well tolerated.

Early this month, we announced the results of our Thorough QT Study. As many of you know, the older macrolides which are generally considered to be very safe drug have been shown to prolong the QT interval, putting patients at risk for fatal arrhythmias, including azithromycin branded as Zithromax or Z-Pak.

We conducted a 48-subject three-way cross over study dosing patients with 800 milligrams of intravenous solithromycin. In 45 minutes they reached their maximum Cmax blood levels possible in order to maximize heart cell exposure. Solithromycin had no effect on QT. Moxifloxacin showed a QT interval increase of about 10 milliseconds as expected in our control. Placebo was negative like solithromycin.

For complete transparency, I want to mention that we had previously reported in our Phase 1 study and gonorrhea study that there are minor heart rate increases at the clinical doses, but again there is no QT effect. This makes solithromycin the first macrolide to demonstrate a negative QT effect.

We also announced that we have started a pediatric trial. We have completed the PSP Pediatric Study Plan and agreed upon with the FDA. And we have submitted the PIP, the Pediatric Investigative Plan to the EMA also. Unlike other recently approved antibiotics, we have also developed a pediatric suspension that will enable us to enroll very young patients. Our PSP includes all ages of children, 0 to 17 years. This study is funded by BARDA, the defense. And if we succeed, solithromycin will be the first new antibiotic in 25 years to be tested in all dosing formulations in all age groups.

This should provide pediatricians with more options and greater flexibility for the treatment of infections in children. Of course, it must be noted that bacteria are gaining resistance in the two most used antibiotic is pediatric, amoxicillin and azithromycin and a new antibiotic to treat children is needed urgently.

Second, I want to reiterate why we are so excited about solithromycin's market potential. Most of you have heard me speak about solithromycin's broad use potential. This is based on solithromycin's right spectrum of activity, multiple dose formulation, its use as monotherapy, the lack of good antibiotic options for certain indication, solithromycin's very promising emerging safety profile and its anti-inflammatory activity which is a property of the macrolide class as a whole.

Most of the attention directed toward solithromycin has been on the CABP Phase 3 clinical program. Even in CABP or community-acquired bacterial pneumonia, solithromycin shows the potential to be highly differentiated from current standards of care. That standard of care intravenous or IV, ceftriaxone or Rocephin plus orally solithromycin require 7 to 10 days of hospitalization. An alternative oral or IV dosing with a fluoroquinolone can be effective but can bring along a number of side effects, some of them being serious.

Solithromycin is being tested in moderate-to-moderately severe CABP as monotherapy with both oral and IV formulation. This dosing flexibility may enable patients to either avoid hospitalization by starting with oral therapy or getting them out of the hospital sooner by shifting to oral from IV therapy. Solithromycin, because of its dosing flexibility and emerging safety, has potential in multiple indications beyond CABP.

In addition to pediatric studies that I just described, BARDA has also funded in vitro and in vivo and we want to test solithromycin for use against biodefense pathogen, such as anthrax and tularemia. Availability of an oral agent if a bio-terror incident occurred would likely enable other and more rapid discrimination of treatment than if patients required intravenous therapy. Studies under the BARDA contract are ongoing today.

Most of you are aware of the growing gonorrhea resistance problem. The one oral antibiotic that was used for gonorrhea, Suprax or cefixime is no longer recommended because of resistance. This leads only intramuscular or IM ceftriaxone as a recommended treatment option. Since infected patients may be asymptomatic, they are not likely -- since infected partners may be asymptomatic, they are not likely to visit a clinic for a painful IM injection. New oral options are needed.

In 2013, we tested a single oral dose of solithromycin in patients with genital, anal and oropharyngeal gonorrhea and demonstrated 100% success in a Phase 2 trial in culture proven gonorrhea cases. In the Phase 3 trial, solithromycin and a single oral dose of a 1000 milligrams will be tested in monotherapy to treat gonorrhea and Chlamydia infections, compared to IM ceftriaxone plus oral azithromycin.

Because of the significant public health need, we are requesting public health funding for a pivotal trial in this indication. That said this is another example of solithromycin's broad use potential and dosing flexibility as evidence of efficacy with a single dose.

Back in November, our research collaborator presented in vivo data demonstrating that solithromycin may provide an effective approach to prevention and treatment of intrauterine infections during pregnancy. Pregnant women are typically tested for Group B Streptococcus. However, agents such as azithromycin that are effective against this and are the intrauterine pathogen such as urea plasma do not adequately penetrate the placenta, fetal plasma and amniotic fluid. Intrauterine infections are a significant risk for preterm birth and very significant resistance to existing antibiotic. It was demonstrated that solithromycin reaches clinically significant concentrations in a sheet model in each of these compartment suggesting that it could be useful in this indication.

We are currently working with our Australian collaborator to design a small study to test this in pregnant women. Again, no new antibiotic has been developed for infections in pregnancy in more than 20 years. We will be able to provide you with more data on this study when we are able to do so.

One last example, macrolides due to their anti-inflammatory activity are often used as anti-inflammatory agent to treat exacerbation in chronic obstructive pulmonary disease or COPD. Solithromycin has demonstrated significant anti-inflammatory activity in, in vitro and in vivo models of COPD. Because of Solithromycin's anti-inflammatory property, we are currently in discussion to conduct a small Phase 2 study. COPD is a common reason for hospitalization in the UK and we will be monitoring the clinical effects on inflammatory cells and also reduce hospitalization in the solithromycin treated patients. In this study, the use is over and above the use as an antibiotic.

As you can see, we believe solithromycin is not likely to be a single indication antibiotic. We have covered a number of possible uses but there maybe others such as cystic fibrosis, ophthalmic infection and helicobacter pylori gastritis. We look forward to keeping up update our work in these and other possible indications as they progress. We would be happy to answer questions on these topics following our prepared remarks.

Last year, the FDA granted us two through IVP qualified infectious disease products for Solithromycin oral, capsule and IV formulation for use in CABP or community-acquired bacterial pneumonia. This year, in January we received one more through IVP for the use of oral Solithromycin capsules in gonorrhea. So we have three through IVPs for Solithromycin today.

In addition to our study, our partners the Toyama at FUJIFILM is proceeding and Solithromycin is progressing in Phase 1 trials in Japan. The fourth quarter of 2013 and the first quarter of 2014 have been very busy, and 2014 will also be bus for Cempra.

In October, Cempra obtained orphan drug status for Taksta for use in prosthetic joint infections or PJI. Orphan drug status grant an additional two years of statutory exclusivity in addition to the five years of Hatch-Waxman exclusivity at the time of NDA approval.

In addition, based on the drug's most activity, we expect to get an additional five years of exclusivity through the GAIN Act making it 12 years of statutory exclusivity.

Finally, Cempra has a US patent on our dosing regimen which extends to 2029 plus patent term extension. In addition to exclusivity, orphan drug designation has advantages of being able to get 50% of clinical trial cost as a tax credit and also to PDUFA fee waiver.

In December, we have updated you with our interim data on our Phase 2 trial for PJI, a complicated study where we have had to work with the FDA closely as there is no guidance for this indication and no approved antibiotic. Based on what we have learned from our Phase 2 study and from the orphan designation that was granted, in January, 2014, we submitted our Phase 3 plan for Taksta in PJI or prosthetic joint infection to the FDA. We expect to receive a response from the FDA during the first half of 2014. We will update you when we learn more following our meeting with the FDA.

In the mean time, our Phase 2 trial in PJI is ongoing and we now have trial patients who had infected PJI who are enrolled and being treated.

If our meeting with FDA is successful, we will stop our Phase 2 trial and roll into the Phase 3 trial. If we are successful in taking Taksta to approval for PJI, it will be the only oral antibiotic available for chronic oral use in treating PJI and would compete with intravenous Vancomycin and multiple surgeries that is the current standard of care.

In early January, 2014, David Moore joined us as Chief Commercial Officer to manage the commercialization of both Solithromycin and Taksta. David has spent over 15 years developing and management pharmaceutical commercial programs including antibiotics. He has implemented reimbursement strategies for both primary and acute care setting. Currently, under David's direction we are conducting the broad strategic work towards better understanding in identifying positioning an appropriate pricing strategy. He is engaging key opinion leaders and peers to identify the urgent need and the unique place in therapy for these two differentiated products.

Although, we cannot go into more specific we will aim to keep you updated on our commercialization activity.

Our current plans to develop for sales and marketing infrastructure for the U.S. hospital market while evaluating a partnership for the U.S. primary care market as well as a European hospital and community market. In Japan, Toyama FUJIFILM is expected to commercialize Solithromycin in that large macrolide market.

The European Congress of Clinical Microbiology and Infectious Diseases or ECCMID will be the busy one for Cempra. We had eight abstracts accepted for presentation at the conference which will be held from May 10 to 13 in Barcelona, Spain. Unlike in past years where a majority of the studies presented by non-clinical research presentations at this year's ECCMID will include results from worldwide susceptibility and resistant surveillance, animal infection model study, clinical data and also pharmacoeconomic data that could support for use of Solithromycin. We cannot provide specifics at this time as the abstracts remains under embargo. We will inform everyone at the proper time on our presentations and we look forward to seeing many of you there.

Finally, we will be presenting at five upcoming investor conferences. We will be presenting at the Cowen and Company Health Care Conference on March 3rd in Boston, The Barclays Global Healthcare Conference on March 12th in Miami, at the ROTH Conference in Dana Point, California on March 10th, at the BioCentury Future Leaders Conference on March 28 in New York, and the Annual Needham Healthcare Conference on April 8th or 9th in New York.

That is currently the status of our program. Now we would like to turn the call over to Mark Hahn, our CFO, to review the financials. Mark?

Mark Hahn

Thank you, Prabha. The busy 2013 in our clinical development programs was clearly reflected in our income statement as our net loss increased by 86% to $45 million for the full year and by 158% to $16.8 million for the fourth quarter.

As you know, our net loss is driven largely by our R&D spend. In 2013 though, we did have $4.3 million of revenue from our licensing agreement with Toyama and $3.5 million of revenue from our work under BARDA contract which helped offset our expenses.

Since our R&D spend is driven primarily by the activity under our clinical programs, I want to share how we look at the major cost drivers. We generally look at spend in four broad categories: Solitaire-Oral, Solitaire-IV, Taksta Phase 2 for PJI and BARDA. Throughout 2013, we had two clinical trials the Solitaire-Oral and the Taksta PJI trial for running the entire year.

Additionally, in the early part of the year, we were preparing for the Solitaire-IV trial which was initiated in December, 2013. Mid year we also began our efforts under the BARDA contract. We increased clinical staffing throughout the year as well to manage the increased work of these programs.

As a result of all of these programs, our R&D spend increased throughout 2013 from approximately $7.4 million in Q1 to over $15 million in Q4. Because our spend is largely driven by clinical program, the level of spend will be somewhat tied to enrollment. Looking forward to 2014, we expect R&D spend to be uneven on a quarterly basis as the enrollment of the various programs varies based on the seasonality in the different areas of the world where our clinical sites are located.

In addition, we expect increased activity under the BARDA contract, which should increase both revenue and R&D expense. Our final contributor to anticipated R&D expense is the Taksta PJI program. We recommend that you assume fairly steady spending on this program based on the Phase 2 trial until we have more clarity from the FDA on the next steps.

Regarding our cash run rate, we expect that our existing cash and equivalent including interest there on will enable us to fund our operating expenses and capital expense requirements through 2015, which includes the completion of our enrollment in our two clinical trials and completion of the two ancillary clinical studies currently expected to be necessary to support the planned NDA for Solithromycin for the treatment of CABP. This project does not include funds from future financings or partnerships beyond the Toyama relationship.

I will now turn the call back to Prabha.

Prabha Fernandes

Thank you, Mark. Operator, we are now ready for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from Steve Brozak of WBB Securities. Your line is now open.

Steve Brozak - WBB Securities

Hey, congratulations on all this great news. I will jump down into my two questions and then I will jump back in the queue. You mentioned, I mean, there is a great deal of enthusiasm in involving the (inaudible) macrolide. Can you tell us why a macrolide antibiotic is so important and how it's different than all of the current antibiotics out there? What are the advantages? And then I will have a follow up on Taksta please.

Prabha Fernandes

Okay. So not only is this a macrolide, this is the first fluoroketolide, which has made it more potent all levels of resistance and just has the right spectrum. Many of this antibiotics used currently have enough of activity against intestinal microflora which we know are exceedingly important to the health and well-being of an individual. And solithromycin has what I call the right spectrum. So if you have let's says five or six different sets of bacteria which can cause pneumonia, well those bacteria are attacked by solithromycin, but not that goes in the gut. And so there is very minimal effect on the gut, on the skin microflora and so on. So it is very important that you focus and treat targeted treatment to those infecting pathogens.

Secondly, the bacteria do not just lie in the blood. So if you get something intravenously or if you give it orally, it's got to get to the sites in the body where the bacteria are. So solithromycin, we have shown, gets into the lung where the pneumonia is at 200 times the plasma concentration. So it's in the plasma, it's in the lung, it's in the macrophages in the lung, it's in the epithelial lining fluid, in any other site of the body, it gets into the tissue intercellularly, it's in the phagolysosome, in the cytoplasm. There is no place for the bugs to hide and go become resistant. So that's very important, the spectrum is just right. Then safety, so macrolides have been traditionally used in children, has been used in pregnancy and so on and both have become, but we need a new macrolide for this very delegate population, children and pregnancy. What solithromycin so far has accumulated is tremendous safety database, which we can now use to treat children in our trials as well as pregnancy and when we do that of course this will then be the first macrolide or first antibiotic in 20 or 25 years to be approved for those indications and we hope to get there.

Steve Brozak - WBB Securities

I mean, it's obviously something that obviously we're all waiting for. Let's go into Taksta and there are two parts of this question. The first one is Taksta does have a long history, so it's not as if you're just working with something where you have no idea of how it works. Can you describe that briefly? The second part is I know that you can't talk about pricing on Taksta, but can you talk about what the associated costs and treatment protocols are for the patient's that are unfortunately exposed to bacteria during these joint surgical procedures and/or when it gets into their joints and after you answer that, obviously thank you and I'll hop back in the queue.

Prabha Fernandes

Thank you very much. So there is a history of use of fusidic acid gas, actually we brought them both Taksta fusidic acid we brought it on from overseas it is being used successfully both effective and safety successfully in Western European countries and Australia these are countries, which know how to use antibiotics and have used it in bone and joint infections as well as in skin.

Now, we decided we would not develop it for skin, but would develop it where there is a very belief. This has been successfully used meaning that in one study it was 19 out of 20 patients and another one also it was very high levels of success. But these patients who are terribly complicated patients and they are older patients so that many of these patients have different things and on many drugs, they're able to take this drug orally sometimes save the joints from replacement and go stay at home successfully and take these drugs. It is quite a bit of difference when you treat these patients with intravenous drugs.

So let's talk about the current cost, which you asked about. The New York Times have written up that nobody really knows the cost of a bone and joint replacement nor an infection, which is of course many times more than just a replacement. So it's because there are so many pieces to it. So patients when they get a bone and joint infection they first get (inaudible) treated with vancomycin six weeks, sometimes 12 weeks.

Now, the lucky few about 50% or 60% may actually be fine and save that joint, but what about the other unlucky 50%. So these patients go back in for surgery, all this time on vancomycin, they get their joints taken out, their prosthetic is taken out and they get a spacer put in and all this right now on antibiotic. So six weeks more of intravenous vancomycin, so you can imagine older people who cannot drive now because of joints somebody has to take them, they may be having a pick by; they may get a nurse to come home all those costs.

Now, how can you add all those cost for weeks and weeks and weeks and then probability vancomycin is not the safest drug. So you will have those things and then they go in for another surgery, they take out the spacer and they culture there and if it's negative, they wait for a while until they prove it's negative that joint heels, they go in for one more surgery, now that's annoying. I lost count of the number of surgeries but I think it's about four so far for these old people and they are all IV vancomycin, on intravenous drugs for those many months. All we are saying is bring to the U.S. what people in Europe have, people in Australia have oral treatment twice a day morning and night and preserve your joints.

So it's a lot of cost saving for chronic use. So unlike other antibiotics that you only use for a few days, this is for weeks and weeks and weeks, months, sometimes for years.

Steve Brozak - WBB Securities

Great. Again, good luck, best wishes, and I look forward to the next call when you start to give us the data back again. Thank you.

Prabha Fernandes

Thank you very much.

Operator

And our next question comes from Alan Carr of Needham. Your line is open.

Alan Carr - Needham

So one can you give us a sense of whether or not the -- this prior use of antibiotics is having a similar effect on the second trial, the IV trial? And then, the other question is, what's next with the pediatric program, it looks like it's relatively small trial, I'm wondering when you might have data from that and what else is needed in order to get pediatric patients on a label? Thanks.

Prabha Fernandes

Yes. Well, thank you for that question. It's actually quite interesting. What you are seeing is really the effects, as azithromycin is a very popular antibiotic and is listed as a long acting antibiotic even though it's very little available as you know in the blood and in the tissue. So anybody who has got the defect in their mouth or anybody who has got the pediatric suspension of azithromycin and the pediatric population cannot enroll in our trial. Some patients for the intravenous trail, which you're asking about could even have had Ceftriaxone as a one intravenous dose in the urgent care setting when they come in and that's a long acting antibiotic, so they cannot get in.

Now, we have been very careful to follow the FDA rule. We want to pass every audit later and get our drug approved. So we have asked these patients and we have asked the investigators and we monitor to ask those question very seriously have you taken anything. And if they are on it they will nod and go. Now, we have taken this into account, we know that these are very azithromycin is a very popular antibiotic, we have taken that into account. And with that accounting we have opened many sites globally both in the oral study and in the intravenous study. So this way we will have adequate enrollments in both our studies.

Yes it is hard to enroll, but we are enrolling and as I mentioned we have enrolled more than half the patients we need in the first trial and the second one is enrolling.

Alan Carr - Needham

Does it make sense to assume that the second whether the IV or oral trial would take the same amount of time to enroll as the oral only or would you expect that to happen in a little bit less time and then I guess also have you been opening more sites and will you continue to be adding more sites for the two trials?

Prabha Fernandes

Let's talk about the oral trials first. Oral trials, yes we always will be finding new sites, which we think is good after having discussed with them, we do open sites and yes we are continuing to open new sites in both trials. At some point we will stop that because obvious the oral study is expected to end in 2014.

Now, the second trial is opening site as we speak IRVs take a while to approve their drug for use in the clinical trial, so we are waiting for many more which we will be opening. There will be more study centers in the IV study than in the oral, okay, globally. Because we want to speed up that enrollment and bring it on. So yes, we had the same number of sites it would take either the same amount of time or maybe even a bit longer to enroll, but if we have more sites, they use the proportional to number of sites, we should be able to finish it earlier.

Now, having said that I will also say it is seasonal. So this winter we are very happy with enrollment. We all know we've had lots of cold days; we've had lots of snow next figure I don't know. I can just pray for the polar vortex next year.

Alan Carr - Needham

And then also for that pediatric label, what more would you need to do after this trial did?

Prabha Fernandes

Yes, so the pediatric is a very clear guidance from the FDA. It's a very clearly received plan. So you first dose adolescent children and unlike other phase I in adults you treat sick children even in a phase I trial. So that's different. So it's a antibiotic use and it has to have some efficacy even in a phase I. So the first trial is smaller. The adolescent, it's a very small trial say about 800 much, much smaller numbers and I don't think we have disclosed how many patients I do not tell you, but it's very small.

So once the adolescent oral is finished, we will also be dosing adolescent with the intravenous because we want both products, right for children because both has to available. In the meantime, we have made as I mentioned, the pediatric suspension that will get tested for bioavailability in the adult. And then, we will start dosing children less than 12, so we have several age groups, so you have 8 to 12, six to eight, four and above that and then two to four and so on. And then, of course you go all the way down to zero in new borns with the pediatric suspension IV, as well as the oral suspension and IV.

Operator

Next question comes from Stephen Willey of Stifel. Your line is now open.

Stephen Willey - Stifel

Just two with respect to enrollment. Can you actually characterize the stream failure rate that you're seeing for us?

Prabha Fernandes

Well, that will depend on the site and on the country because some antibiotics are used -- like in the U.S. azithromycin is extremely popular, it may not be used so much let's say in Bulgaria or something like that. So it depends on the country, the size or even depends on which part of the United States, which antibiotic is used. So it's very hard to say exactly how many. But we do have the exact count, but I don't know exactly how many had failed. But this was an expectation and we had put that into the equation as we came on. But I must say that it is more popular than even I thought, mucolite was popular and now we thought mucolite is popular.

Stephen Willey - Stifel

Okay. I guess also with respect to just the recent FDA draft guidance that's been initiating CABP and I know that they are now looking and trying to CABP the number of PORT-II patients at 25%. And so, I'm just wondering if of the more than 50% you have currently enrolled, how close are you to that 25% ceiling that FDA instituted?

Prabha Fernandes

Well, thank you. Yes, it's a very important question. The FDA did many things during this new modification of the CABP guidance and they're in our favor actually. They not actually decreased that PORT-II as you mentioned, but they actually increased their non-inferiority margin to 10.5% and they decreased therefore the safety database needed to 635 or so. So in discussion now, what we have decided is that, we will fix with the approved minutes from the meeting we've had with them for the older trial because it is -- as I mentioned, and we're more than half of what we need. So we're going to stick with that for the oral. We will have about 50%, will be PORT-II in that study as was originally defined and signed off by the FDA.

Now remember, we are enrolling about 800 some patients, so if you want to take away that 25% of extra PORT-II patients, you still have a sufficient number of PORT-III and PORT-IV patients. When we reach those numbers we will stop enrolling PORT-II patient. When we have the very cold winters, very severest patient you get more and more PORT-III and PORT-IV patients.

Now, in the IV trial, we will certainly be the limiting the PORT-II patients and we had already agreed to doing 25% in that, so that is no change. Now, in the IV study, we have currently said we will do 800 patients but because this new guidance has come, we will go back and talk with the FDA if we need to modify and perhaps, what's not a trial. I do like the safety database being larger, so we may do the large or we may change to small. But right now, we are sticking with our enrolment plan with the IV study also.

Stephen Willey - Stifel

Okay. So the plan is just to continue enrolling the remaining less than 50% of the oral study without necessarily being overly concerned about the number of PORT-II patients that are coming into the study?

Prabha Fernandes

Yes. And so for those who do not know, who are listening to us let's define those. So let's say a woman who is 50 years gets pneumococcal pneumonia and even has pneumococcal in the blood, so you would think this person is pretty sick and needs a very good drug. That patient may end up to be PORT-II, okay because of the age. If you're female and you get very few points. So when we see the microbial isolates -- now, once to couple your question to what is your rate of microbial isolation that is exceedingly important, if you tell the FDA this PORT-II patient has pneumococcal in the blood and might even be macrolide resistant and we cured her, well I don't know if anybody would exclude that PORT-II patient. So you have to look at these things as a whole, as a group and that's how the FDA has done this in the past. They will do subset and have subset analysis on the PORT-III and PORT-IV, but not all PORT-II's are simple PORT-II, some of them are fairly complicated, especially if they are women.

Stephen Willey - Stifel

So I guess when you think about the reduction in the non-inferiority margin from the widening of the non-inferiority margin, from 10% to 12.50%, is there any kind of approximate reduction in patient numbers that you can point us to that you could say that IV oral may be reduced by X amount of patients? And then, along those same lines how does that then triangulate with the NI margin that's still required in Europe? And would you be comfortable in potentially reducing a targeted enrollment for the IV oral?

Prabha Fernandes

It's an excellent point actually Steve. So we are sticking with a 10% margin. We are very confident that our drug Solithromycin will be within the 10% non-inferiority margin for master drugs. So we are sticking with that.

Now, if you look at the numbers for the United States 635 may be enough with our number and if you say that's enough safety with those trials at 635 to be able to get approval. But as you said we want approval, it's a global drug, we want approval in EMA and in the U.S. and so we have already presented to several countries in the EMA and presented our fourth plan of 800 patients is still appease. They have accepted our program and so we will take with our program and as I mentioned, we have many sites enrolling with the IV and it's really confident we will get it done.

Operator

And the next question comes from Brian Skorney of Robert Baird.

Morgan Haller - Robert Baird

Hi, good afternoon. This is Morgan in for Brian. I just have a quick question just a kind of follow-up on the IV and oral study. I saw that last thing I saw was that the study is expected to be completed in July 2015. I'm wondering that still the target right now?

Prabha Fernandes

No, I don't think we've ever announced the conclusion just because we just started the study. People generally say a couple of winters may be a summer, may be two summers depending on how the second winter was and so on. So we believe just as we did with this study we will wait possibly let's finish the next winter and then we will give you an estimate of where it is.

Generally, those I think estimating to be mid-2015, in my mind may be a little bit too close, I don't know. We may have two whopping polar vortexes and maybe we will be fine. I don't know. So we will give you a good estimate this time next year, but certainly tell you when they're going to finish.

Morgan Haller - Robert Baird

I was just trying to clarify just based on what I've seen on clinicaltrial.com that's all.

Prabha Fernandes

I don't think that's there. We will check.

Robert Flamm

And our next question.

Operator

The next question comes from Phil Karbowski(ph) from TFC Financial.

Unidentified Analyst

Hello, Dr. Fernandes, and congratulations on the progress you're making on the quarter.

Prabha Fernandes

Thank you very much.

Unidentified Analyst

Have you given us any guidance on when top-line results would come out for the phase II Taksta trial? I know you are in negotiations with the FDA for phase III, but what about the data for the phase II.

Prabha Fernandes

Okay. So phase II is an open-label study and we gave some results out in December that was on nine patients. And as I've mentioned we have 12 patients as I said a couple of compassionate used cases which are open and when we close that study we don't know what the FDA is going to say. So it's being an open designation we assume that it's not going to be a huge study and we can quickly shutdown the oral study and start the phase III. At the time we shut it down we clean up the data, we will make it known it's an open-label study. So it's not going to be very difficult to make knowing the data. I can tell you just based on European data there is no way it's going to be bad. This is 40 years, I mean, not many drugs have 40 years worth of success.

Unidentified Analyst

Okay. And my other question you might have answered it but this time we have delayed our guidance on when you are going to release the oral top-line results for Solitaire. Would that because of the issues you talked about regarding your enrollment and patients at previous antibiotics?

Prabha Fernandes

That is one reason. So let's talk about when that mid-June was set, we set it at the time we had not even started the study. This is at the time we did our IPO two years ago in December/January when we wrote the S1 after that we had to make our tablets and start to study and all that and the winter -- the first winter was not as good as this year for us. It was a milder winter the previous year with the flu and you can look at the National Statistics.

And the studies always take a little bit longer to get started and we remain extremely careful, because of all this guidance which we just talked about to be sure they had the right force, they had the right x-rays and drug enroll the reason to have patients enroll get them to out of our database.

So that was all very good and we know that we are delayed by may be four to six months on what we have said, but that was over two years ago before we started the study, but it's going very well now and the quality of the data I must emphasize is exceedingly good as I mentioned the Safety Monitoring Board has looked at both it for safety and efficacy and they complemented us on a very good study being run. So we are pleased with the quality it takes time and we will get it done. A delay of a few months in a cap trail being a seasonal disease is not a big thing.

Unidentified Analyst

Okay. Thank you very much and I hope you can complete the trials without meeting another polar vortex.

Prabha Fernandes

Thank you. And when we get to know in Capitol Hill, right.

Operator

Dr. Fernandes, I'm not showing any further questions at this time. Please proceed with any further remarks.

Prabha Fernandes

Thank you very much. Thank you all very much and we look forward to updating on our upcoming events as well as to the next conference call. Thank you very much.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may all disconnect. Have a great day.

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