Anacor Pharmaceuticals' (ANAC) CEO Paul Berns On Q1 2014 Results - Earnings Call Transcript

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 |  About: Anacor Pharmaceuticals, Inc. (ANAC)
by: SA Transcripts

Anacor Pharmaceuticals, Inc. (NASDAQ:ANAC)

Q1 2014 Results Earnings Conference Call

May 07, 2014, 04:30 a.m. ET

Executives

DeDe Sheel – Director, IR and Corporate Communications

Paul L. Berns – Chief Executive Officer

Vince Ippolito – Executive VP and Chief Commercial Officer

Lee T. Zane – SVP and Chief Medical Officer

Geoffrey M. Parker – SVP and Chief Financial Officer

Analysts

Eric Schmidt – Cowen and Company

Operator

Good day, ladies and gentlemen and welcome to the Anacor’s First Quarter 2014 Financial Results 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. I would like to turn the call over to DeDe Sheel. Ms. Sheel, you may begin.

DeDe Sheel

Thank you. Good afternoon and thank you for joining us for Anacor’s first quarter 2014 financial results conference call. Joining me on today’s call are Paul Berns, our CEO; Vince Ippolito, our Chief Commercial Officer; Lee Zane, our Chief Medical Officer; and Geoff Parker, our CFO who will review our business, clinical and financial highlights for the quarter ended March 31, 2014.

Before we get started, I would like to note that during our call and question-and-answer session today, we will be making certain forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this call. We undertake no obligation to update any forward-looking statements made on this call except as required by law.

These forward looking statements are based on estimates and assumptions by our management team that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. The following represent some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by our forward-looking statements: any delay or failure by the FDA to approve Kerydin; our ability to timely and successfully launch, either alone or with a partner, Kerydin; any issues or delays arising during the course of our Phase 3 studies or other clinical trials relating to AN2728; any delay or failure by the FDA to approve AN2728; our ability to timely and successfully launch, either alone or with a partner, AN2728; and the other risks identified in our periodic filings, including our Annual Report on Form 10-K for the year ended December 31, 2013.

And now, I will turn the call over to Paul. Paul.

Paul L. Berns

Thank you, DeDe. And welcome everyone to Anacor’s first quarter 2014 financial results call. This is a very important and exciting time of the company and everyone is focused on executing on our near-term objective – preparing for the potential approval and launch of Kerydin and advancing AN2728 into pivotal Phase 3 clinical studies to treat patients with mild-to-moderate atopic dermatitis.

I believe we are making important progress and are confident we will continue to advance our key objectives. Our team has discovered and developed a number of novel boron based product candidates that have the potential to offer patients and physicians new treatment options in a variety of potential indications with our lead compounds currently targeted for dermatology and podiatry.

After attending some of the key dermatology and podiatry conferences recently, it’s clear that there is a large unmet need for new treatments for the indications we are targeting with our lead compounds – mild-to-moderate onychomycosis and mild-to-moderate atopic dermatitis. Physicians are very excited about the target product profiles on our two lead product candidates and we are excited to work with them to potentially offer new treatment options to their patients with these diseases.

Our lead investigational product is Kerydin or tavaborole, a topical antifungal product candidate for the treatment of mild-to-moderate onychomycosis of the toenail. We submitted a new drug application to the FDA last July, which is currently being reviewed. It has a PDUFA goal date of July 29th of this year. We had our late cycle review meeting with the FDA in early April and there were no significant issues identified. So we continue to believe that the NDA review is on track.

Let me now provide you with some background on onychomycosis. Approximately 30 million to 35 million people in the United States have onychomycosis, a fungal infection of the nail and nail bed with about 5 million to 6 million people currently being treated. Currently treatment options include prescription oral and topical antifungals, OTC topical and debridement which is a procedure performed primarily by a podiatrist to remove the infected portion of the toenail. Each of these treatment options has limitations which we believe hinders acceptance and used by physicians and patients.

We have surveyed a large number of physicians who treat onychomycosis and they have indicated their desire for an effective topical treatment with a favorable side effect profile and is easy for patients to use. So we believe there is a strong demand for Kerydin’s product profile. If the FDA approves Kerydin, we look forward to providing these physicians with an important and differentiated new treatment option. In anticipation of FDA approval, we are preparing for Kerydin’s launch in the second half of this year which our Chief Commercial Officer, Vince Ippolito will discuss later on in this call.

Now our second most advanced – investigational drug AN2728 is a PDE-4 inhibitor and non-steroidal topical anti-inflammatory for the treatment of mild-to-moderate atopic dermatitis, a type of eczema. Atopic dermatitis is a highly prevalent disease. The National Eczema Association estimates that approximately 18 million people in the United States are affected by the disease, which includes about 8% to 18% of all children.

Atopic dermatitis is an itchy red rash and although it’s not a life-threatening disease, it can have serious impact on the life of the patients and their family. The itch can cause sleeplessness which leads to tiredness, mood changes and impaired functioning, particularly in school and work. In addition, chronic scratching can lead to secondary infections. Parents of children with atopic dermatitis will often miss work or are unable to work at all due to the burden of caring for children suffering from the condition.

Based on our recent discussions with clinicians who treat atopic dermatitis and the known past success of the most recently approved non-steroidal topicals – these are Protopic and Elidel, and prior to the FDA’s recommendations with black box warnings for these products – now we believe there is a large unmet medical need for a safe and effective non-steroidal topical treatment and we are optimistic that if approved AN2728 has the potential to meet that market needs. AN2728 is currently in pivotal Phase 3 clinical development to treat patients with mild-to-moderate atopic dermatitis.

After demonstrating a promising safety and efficacy profile in four clinical studies treating patients with this disease, we got a successful end-of-phase-2 meeting with the FDA earlier this year and enrolled the first patient in the pivotal Phase 3 studies in March. Our Chief Medical Officer, Lee Zane will discuss the studies in more detail in a few moments. We are excited about our progress thus far and believe AN2728 that has the potential to offer physicians a safe and effective non-steroidal topical treatment for their patients who suffer from mild-to-moderate atopic dermatitis.

And finally, beyond our two lead assets in development, we have several collaborations with partners which support our research in additional indication. Two collaborations we entered into last year form a majority of our current discovery research investments. First, our agreement with DTRA, the Defense Threat Reduction Agency, an agency within the U.S. Department of Defense, provides us the $13.5 million of research funding to design and discover novel antibiotics that target DTRA priority pathogens known to exhibit resistance to existing antibiotics.

Next, our research program with the Bill and Melinda Gates Foundation is funding $17.7 million of research over three years to discover drug candidates intended to treat River Blindness, elephantiasis and tuberculosis. This is our largest collaboration within our neglected diseases program and we are pleased with the progress we are making. The most advanced product candidate in our neglected disease program is AN5568, a boron based compound that was discovered by Anacor and developed in collaboration with SCYNEXIS and DNDi, a drug for neglected diseases initiative.

AN5568 is currently in Phase 1 for sleeping sickness or human African trypanosomiasis, a disease that affects approximately 10,000 people per year, primarily in sub-Saharan Africa. While 10,000 cases per year may seem low, the disease occurs in epidemic and as recently as 1998, the number of estimated cases was 300,000. Without treatment, the disease is fatal and the only currently approved treatments are difficult to administer and have high rates of mortality. There is a clear need for a new treatment and we are pleased to work with DNDi to develop AN5568. We expect DNDi will have results from the Phase I studies later this year and pending those results, DNDi plans to initiate a Phase II, III study. In summary, we are excited to work with our partners in neglected disease and we consistently receive positive feedback from the medical community about our work in this area.

So with that overview, I will now turn the call over to Vince Ippolito, our Chief Commercial Officer. Vince.

Vince Ippolito

Thank you, Paul. I would agree there is a lot of excitement in the medical community around the potential FDA approval of Kerydin. As we prepare for its anticipated approval and launch, we’ve done extensive work to shape our thinking around the onychomycosis opportunity.

The Anacor team attended over a dozen medical meetings and conventions in the first quarter, conducting market research with key opinion leaders in dermatology and podiatry to better understand how a new product with Kerydin’s target product profile might be used in their onychomycosis treatment regimes. We believe a drug with Kerydin’s profile will be met with a lot of enthusiasm from both groups of physicians.

We analyze the current physician treatment patterns to help us size and design the sales force. And we completed market research for Kerydin to help us with product positioning and messaging. And then finally, we gathered additional information from payers to better understand the reimbursement landscape.

We remain excited about the market opportunity for Kerydin. We believe physicians will be pleased to have a new treatment option for patients since the branded onychomycosis market hasn’t seen a new topical product entry since 2002. Patients are also excited to try something new to treat their onychomycosis. Most patients will try home remedies prior to seeing a doctor. Many have lived with the disease on average for about six years. These patients are often frustrated and driven to see a physician due to pain or discomfort.

As Paul mentioned, this is a relatively large potential market, overall it’s estimated that 30 million to 35 million patient suffers from onychomycosis. And then only 5 million to 6 million patients currently seek treatment and have been diagnosed by a physician. The annual market growth has stayed around 2% over the past six years, and we expect this trend to continue during the launch time period.

In order to estimate the number of patients that might be treated with Kerydin, Anacor conducted a quantitative physician market research study last year. In that blinded research study, we asked physicians for what percent of their onychomycosis patients they would prescribe a new topical treatment, which included Kerydin and efinaconazole. The adjusted mid-range of their response was 30%. Based on that response, we estimate about 1.5 million to 1.8 million patients, that’s of the 5 million to 6 million diagnosed, would receive one of these two products.

When we described the target product profile for each to the physicians, they allocated about 50% to each product in their prescribing intentions, which lead us to an estimate a patient base of roughly 750,000 to 900,000 for Kerydin. Of the 5 million to 6 million patients seeking treatment for their onychomycosis, many patients speak to their primary care physicians first. However, podiatrist treat the most patients and are likely to see a patient after an initial diagnosis is made from another healthcare provider. So we believe the podiatrist will be the highest prescribing physician, followed by dermatologist for Kerydin.

Currently physicians, and that’s mainly podiatrists, treat onychomycosis in many different ways, ranging from prescription products such as oral Lamisil and topical Penlac to OTCs, debridement, lasers and physician dispensed products. When we surveyed physicians about their potential use of a product with Kerydin’s target product profile, a key takeaway came from podiatrists who indicated that they would add a prescription from the new topical treatment to approximately 50% of their patients who currently visit their offices for debridement only. Debridement is currently the most common procedure used by podiatrist office to treat onychomycosis.

With regards to our current sales force planning, we believe that a field force of approximately 80 full-time equivalents is needed to reach the physicians who have largest number of onychomycosis patient visits, specifically podiatrists, dermatologists and selected primary care physicians. This targeted field force would provide coverage of podiatrists who represent 90% of the prescription volume and dermatologists who prescribe 40% of the prescription for onychomycosis. And lastly, our managed healthcare team has entered in the pricing sensitivity discussions with payers as we work to ensure that patients have easy access to Kerydin assuming FDA approval.

The market is split with 50% of the patients under the age of 65 which represent a large commercial opportunity for Kerydin with payers. Based on typical reimbursement market dynamics of a new approved drug, we anticipate that 60% of commercial lives and approximately the same percentage of Medicare Part D lives will have access to Kerydin soon after launch, but we plan on working with payers to increase access to Kerydin over time.

Now, I’d like to talk about our view of the market opportunity for our second investigational product candidate AN2728. The target product profile of AN2728 is a safe and effective non-steroidal topical treatment for mild-to-moderate atopic dermatitis. Our research indicates a strong demand for this product profile with a high emphasis on head safety.

According to the National Eczema Association, atopic dermatitis affects almost 18 million people in the United States; greater than 90% of the cases are categorized as mild-to-moderate which is defined by the degree of severity of the patient’s symptoms. And as Paul mentioned, the disease is more prevalent in children than adult. It affects between 8% and 18% of the children.

Currently approved treatment options for mild-to-moderate atopic dermatitis are primarily topical treatments, low to mid potency topical corticosteroids and topical calcineurin inhibitors like Protopic and Elidel, which were the most recently approved non-steroidal topical treatments.

Due to the prevalence of the disease among children, safety is most important to both physicians and parents when selecting a treatment for the children who suffer from this disease, and the demand for a safe and effective non-steroidal prescription treatment for atopic dermatitis was seen in the successful product launches of Protopic and Elidel in 2001 and 2002 following their approval by the FDA and prior to receiving their black box warnings.

Within three years of launch, almost five million total prescriptions were written for Protopic and Elidel in the U.S. in a year. However, in 2005, the FDA recommended black box warnings for these two drugs and a total prescriptions in the U.S. dropped dramatically. Today, there are less than 1 million combined total prescriptions of these products per year.

We believe the difference between the peak RX for Protopic and Elidel and the current RX-es, represent the opportunity for a product with a target product profile of AN2728. In addition, this an indication treated by specialist physicians, particularly dermatologists, who can be reached by relatively small targeted sales force. Subject to the FDA approval, we are excited about the market opportunity for Kerydin and AN2728 and we look forward to updating you with more information on upcoming calls.

Now, I’ll turn the call over to our Chief Medical Officer, Lee Zane to discuss the clinical development of our lead compounds. Lee.

Lee T. Zane

Thank you, Vince. As Vince mentioned, we’ve been very active at medical meetings this year and after this call, I’ll be flying out to the Society for Investigative Dermatology’s annual meeting where I’ll be delivering a podium presentation tomorrow on the AN2728 news data on atopic dermatitis, which we announced in December and where I’ll also be presenting for the first time the results from an in vitro nail penetration study involving our investigational product Kerydin, tavaborole, which evaluated its ability to penetrate through up to four coats of nail polish.

In this in vitro nail penetration study, human cadaver fingernails were mounted on vertical diffusion cells and randomized to four groups, representing different nail polish application practices, ranging from one coat of a home brand nail polish to four coats of a salon brand, that is one base coat, two coats of polish and one clear coat, similar to the type of nail polish application that one might get with a nail salon manicure and pedicure. Tavaborole topical solution 5% was applied to each nail for 14 days and the amount of drug penetrating through the nail was measured. We believe that this study is going to provide very useful information for clinicians.

On the clinical trial front, we also recently initiated a study of Kerydin to evaluate its efficacy, safety and local tolerability when treating mild-to-moderate toenail onychomycosis in conjunction with debridement as needed, which is the aggressive trimming and thinning of toenails, most commonly performed by podiatrists. The objective of this study is to examine how Kerydin works in hands of podiatrists when they incorporate it into their typical onychomycosis treatment regimen, which may include debridement and other adjunctive treatment, but in our study may not include oral antifungal treatment. This is a multi-center, three-year, open-label trial, in which we plan to enroll about 100 patients at approximately 17 U.S. podiatry sites.

Eligible patients will be no older than 70 years of age and have onychomycosis involving 20% to 50% of at least one grade target toenail. Note, that this is slightly different patient population from what we’d evaluated in our Phase 3 studies, in which we’d evaluated patients with 20% to 60% nail involvement and with no upper age limit. Patients will apply Kerydin once daily to the affected toenail and undergo debridement as needed but may not use the oral antifungal therapy. Patients will be followed by investigators for up to three years. If the patient target toenails clear during that period, we will continue to treat their toenails for the remainder of the three-year period which will allow us to explore Kerydin’s ability to maintain a clear toenail.

The primary endpoints, treatment success, will be assessed at 52 weeks and is defined as clear or almost clear nail, that is less than or equal to 10% nail involvement. The number of supported clinical and mycological secondary endpoints will also be measure across the study period. This phase has been enrolling since the end of the March and if it continues to enroll as anticipated, we expect to be able to summarize that go-forth data for the first year’s treatment including the primary endpoint before the end of 2015.

Moving on to AN2728, I’d now like to update you on our pivotal Phase 3 trials of AN2728 for the topical treatment of mild-to-moderate atopic dermatitis. As Paul mentioned earlier, at the end of the March, we announced that we enrolled our first patient in these studies. The two pivotal Phase 3 trials are currently running in parallel and are multi-center, randomized, double-blind, vehicle-controlled trials. We think to enroll 750 patients in each study. We currently have nearly 90 sites selected across the U.S. and enrollments is underway at activated sites. In addition to our own advertising and recruitment, we are also working with the National Eczema Association and patient advocacy group, which has been very supportive in helping our enrollment efforts in our atopic dermatitis clinical trials.

Eligible patients for these pivotal trials will be aged 2 and up and have mild-to-moderate atopic dermatitis involving at least 5% of their treatable body surface area. Patients will be randomized 2 to 1 AN2728 vehicle and will be treated twice daily for 28 days. Overall disease severity will be measured using the Investigator Static Global Assessment or ISGA which is a scale that ranges from 0 to 4; where 0 to 1 are clear and almost clear respectively, and 2, 3 and 4 are mild, moderate and severe respectively.

The primary endpoint will compare the proportion of subject achieving success in ISGA and AN2728 treated group to the proportion achieved by the vehicle treated group after 28 days of treatment. Success in ISGA is defined as an ISGA score of 0 or 1, clear or almost clear, within a minimum two grade improvements from baseline. So, for example, patients enrolled with a baseline ISGA score of 3, moderate, will have to reach 0 or 1, clear or almost clear for success. Whereas patients enrolled with ISGA score of 2, mild, will need to reach 0, or clear. If enrollment proceeds as anticipated, we anticipate to announcing the results of these studies in the second half of 2015.

In addition to the two parallel pivotal Phase 3 studies, we are also conducting a long-term safety study which will examine the safety of intermittent use of AN2728 for up to one year. Those patients who successfully complete the pivotal Phase 3 trials may be offered the opportunity to roll over into this long-term safety study.

We are very excited about this AN2728 pivotal Phase 3 program and it would seem, so are the investigators in these trial. We held two very successful investigator meetings for these trials at the end of May – sorry, the end of March and beginning of April and in both of them we were met with tremendous enthusiasm from investigators which included many of the top dermatologists – pediatric dermatologists and key opinion leaders in atopic dermatitis in U.S. The excitement for potential new non-steroid treatment for the topical treatment of atopic dermatitis is quite palpable.

I will now turn over the call to our CFO, Geoff Parker. Geoff.

Geoffrey M. Parker

Thank you, Lee. First I will summarize our first quarter financial results. Revenues for the quarter ended March 31, 2014 were $4.2 million compared to $1.7 million for the comparable period in 2013. The majority of the increase is due to the research collaborations with the Bill and Melinda Gate foundation and the Defense Threat Reduction Agency which commenced in April and October of 2013 respectively. This increase is partially offset by a decrease in revenue recognized under our collaboration agreement with GlaxoSmithKline.

Research and development expenses were $15.9 million for the first quarter of 2014 compared to $11.2 million for the same quarter in 2013. The increase is primarily due to a $4.7 million increase in clinical trial and drug development expenses for our AN2728 program as we prepare to initiate the pivotal Phase 3 study and was partially offset by a $1 million decrease in expenses related to our Kerydin program.

General and administrative expenses for the first quarter of 2014 were $8.3 million compared to $4.7 million for the comparable period in 2013. The increase in 2013 is comprised of a one-time expense or $3.7 million in stock-based compensation and benefits related to changes in the executive management team in the first quarter of 2014 and $1.3 million in prelaunch sales and marketing expenses for Kerydin, offset in part by a $2 million decrease in legal fees. Cash, cash equivalents and investments totaled $146.7 million at the end of the quarter.

As we transition from an R&D focus company to a commercial company, we anticipate trends in revenue and expenses will change from historical trends. So for the remainder of this year, we are providing guidance on revenues and expenses based on our current assumption that we will sell commercialized Kerydin. We won’t necessarily provide this level of guidance regularly in the future.

Assuming approval of Kerydin on the PDUFA date of July 29, we currently estimate that net sales for Kerydin for 2014 will be in the low-to-mid single digit million of dollars. Contract revenue related to our neglected disease partnership are expected to continue to be approximately $3 million per quarter for the remainder of 2014.

R&D expense is expected to be in the range of $19 million to $21 million per quarter in Q1, Q2 and Q3. Approximately $3 million per quarter is due to our neglected disease partnerships and is offset by the contract revenue I just mentioned. The increase in the balance of R&D expense is primarily due to the ongoing pivotal Phase 3 study of AM2728.

SG&A is expected to be in the range of $9 million to $10 million in Q2 and increase to $17 million to $19 million per quarter in Q3 and Q4 subject to the approval and launch of Kerydin. This increase in Q3 and Q4 is based on our current assumptions of expenses associated with the build-out of our own commercial operations to support the company’s launch of Kerydin or would be significantly lower in the event we engage a partner to commercialize Kerydin.

Assuming no material changes to our current launch plans for Kerydin or our ongoing pivotal Phase 3 trials for AN2728, we currently expect that we will have at least $60 million in cash at the end of 2014. Consistent with prior guidance, we still estimate that our current cash is sufficient to take us into the second half of 2015 which is when we currently expect our Phase 3 results from AN2728 pivotal trials.

As we continue to analyze the peak sales opportunity for Kerydin, there are a number of variables that impact this analysis including, one, the number of patients who seek treatment for onychomycosis and their behavior related to drug application and prescription refills. Two, Kerydin’s potential share of prescription is written for patients diagnosed with mild-to-moderate toenail onychomycosis including potential competition from efinaconazole. Three, the managed care environment, including coverage of the drug and level of co-pay. Four, pricing and five, the level of gross sales to net sales adjustments. We expect to provide you with an update on our view of the peak sale opportunity after approval when we have more clarity on some of these variables, most likely on our Q2 quarterly call in August.

With regards to AM2728, as we described, we have initiated our pivotal Phase 3 clinical trials in patients with mild-to-moderate atopic dermatitis. Based on our current estimates for enrollment in these trials, we expect to have a read out on these trials in the second half of 2015 and assuming no unexpected development to file our NDA for AM2728 in the first half of 2016. As Vince mentioned, we believe there is a significant market opportunity for AM2728 and we are focused on its continued development.

I will now turn the call back over to Paul for some closing remarks.

Paul L. Berns

Yeah, thanks Geoff. I think we are through with our (indiscernible) and I think we’ll just turn it over to the operator to queue up the Q&A

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from Eric Schmidt of Cowen and Company. Your line is now open.

Eric Schmidt - Cowen and Company

Thanks for taking my questions. Good afternoon. Maybe for Paul, it sounds like you guys are still contemplating a potential partnership here though. I guess as we near the PDFU date you have to be close to making a decision, can you give us an update on your latest thoughts of whether to partner or not?

Paul L. Berns

Eric, thanks for the question. And I’ll invite Geoff and Vince to speak about this as well. But frankly the plan hasn’t changed at all. The strategy has always been from day one to prepare a commercialization plan that look to optimize the launch of Kerydin. The organization has been committed to doing that as a base plan, as a go along commercial opportunity for the company. And I think as you’ve heard in prior updates and prior discussions with management, there has been inbound interest early on in this program and in particular as we move through the various phases of development going into Phase 3, we have inbound interest from outside counterparties that are established in the dermatology and podiatry. Well, they had an express interest in having us understand their capabilities on what they can potentially do with the product in the U.S. marketplace. So we’ve had a purposeful dual track – one preparing for our own commercialization and two finish hearing these counterparties and these interested parties and figure out their capabilities and make the assessment in the best interest of our shareholders. So Geoff.

Geoffrey M. Parker

Yeah, Eric, I would add that first, we’re very focused and Vince is working day and night putting in place the full teams to self-commercialize. So everything we’re doing internally is focused on that, and frankly all of that work could potentially be utilized by a partner if we went that path. I would emphasize as well that we continue to view this as a market that is acceptable and addressable by an 80% field force. And so again, it’s something that is very – continues to be very achievable by our group. And so that’s what we’re focused on building out, that’s the expense guideline I just provided. That being said, the level of interest in Kerydin as a novel specialty pharmaceutical is incredibly high and we owe it to our shareholders to continue to evaluate that option but we don’t anticipate this will affect our timing at all.

Eric Schmidt - Cowen and Company

Okay. And is there a point in time in which you just have to kind of make up your minds because it might delay or undermine the launch, what point of time might that be?

Geoffrey M. Parker

Eric, the short answer is no. We don’t expect it to delay in any way or launch. And as you know, companies have even launched on their own and then partnered a year or two out. So we first and foremost want to focus on making sure that we launch this drug in the most successful way and that’s our goal. So, no, it shouldn’t affect timing.

Eric Schmidt - Cowen and Company

And if you were…

Paul L. Berns

I’m sorry. I’m just going to say – and then just to reiterate Geoff’s comment. We’re planning – you know, I’ve given Vince the direction and organizationally we’ve agreed that we are planning, we are operating under a parallel plan if you will, but certainly committed to doing this launch and planning for success in that capacity. And as Geoff mentioned, we understand that what we are doing can easily be transferred to a partner.

Eric Schmidt - Cowen and Company

And to what you could approve that…

Paul L. Berns

Eric, that being said, with the July 29 PDUFA, we don’t expect to have sales August 1, right. There is a transition period as we get our field force trained up. And that’s why frankly I provided that guidance for 2014. We would – we certainly aspire to have sales as soon as possible which is potentially a modest amount of sales in Q3, but frankly the real first quarter of launch will be Q4 for ourselves.

Eric Schmidt - Cowen and Company

Okay. That’s where my next question was heading, but maybe one last question. In terms of the debridement trial, it was a little unclear to me what the need commercially is for that study, do you think that debridement is so entrenched within podiatrist practices that you need to have more data there or is it so competitive in fact that you want to build it into your label with this or specially go into the products label?

Paul L. Berns

Well I’ll have Vince speak into that first Eric and let me ask him to lead at before my commentary because it – the answer is yes to some of those questions you just mentioned.

Vince Ippolito

Yeah, thank you, Eric, this is Vince. So the first part of that is that we see that physicians treat onychomycosis in many, many different ways in their practices. As a matte of fact, if you look just at the prescription market today and just isolate that particular market, it only represents about 30% of all the treatments. I mean how physicians view onychomycosis and treat it today. So in that realm, they’re doing many, many different things, debridement is one of the largest treatment that a physician who is a podiatrist will do to treat onychomycosis. It’s upwards of 35% of all patients who represent themselves to a podiatrist we see debridement only for that treatment and debridement is the most used treatment for onychomycosis in a podiatrist office. So having understood that, that there are many different ways to treat the disease and we felt it would be clearly necessary to replicate what a physician does every day in their practice when they see a patient, and that is just treat it the way that you normally do, but add Kerydin on to that. And I’ll let Lee talk a little bit more specifically about the study itself.

Lee T. Zane

Yeah, Eric, I’ll echo Vince’s comments there which is really – you know, as a prescribing physician myself, I understand that there are limitations to how well, how much you can infer from Phase 3 data into your actual practice. The idea here is to let podiatrist use tavaborole or Kerydin in the scope of their normal practice, what’s the actual kind of experience they’re going to get in their hands as part of a comprehensive regimen that they’re actually going to implement in the clinic. And the idea there is really just to get what is that experience, how well does it work, what kind of synergy you’d see with our Kerydin and the other adjunctive therapies that they might employ.

Eric Schmidt - Cowen and Company

And in terms of the label, will it eventually get there Lee?

Lee T. Zane

Well, we – you know, we don’t anticipate that these data will be available for filing through an NDA, but you know I think the information will certainly be helpful for prescribing physicians.

Eric Schmidt - Cowen and Company

Thanks a lot.

Paul L. Berns

Thanks, Eric.

Operator

Thank you. Our next question comes from Steven [Schiemberg] of Jefferies. Your line is now open.

Unidentified Analyst

Thank you very much. Couple of questions. I know that you indicated when you talked about collaborations; this would be for Kerydin and not 2728. Would, would this be important to you and pursue your corporate collaboration would you also want to have your own sales force as well as win from a larger partner in order to set the stage for the launch of 2728. And secondly, you know do you think if you are going to pursue a collaboration is there a chance it could be delayed simply because it seems like every major pharma company, every large specialty pharma company is either divesting, buying parcel bidding for invading tax conversion, is that – do you actually have term sheets in front of you or could there be some delays part due to these ongoing events?

Geoffrey M. Parker

David, its Geoff. The discussions with partners have had a very long history. So, the short answer is yes, we have multiple term sheets in front of us. So that’s that part of the relationship building is behind us. So and again, I just want to emphasize that our plans right now are focused on self commercialization given the attractive opportunity there, but infact we felt it was prudent to highlight the fact that we continue to have inbound interest for Kerydin.

Now your initial question was would it be as antagious if we had partnerships to have a co-promotion option. And we think it could be, but you know our focus is on value. And we think that with regard to 2728, there is going to be a great opportunity to launch that drug as well with our own sales force and that may lever off of our Kerydin sales force or it may not have to lever off our Kerydin sales force. So I would say there is a lot of good option there.

Unidentified Analyst

Right. And then Geoff, given that you have your term sheet sitting on your desk, any thoughts on what type of company you are looking for for example a larger pharma company you know may offer some you know items, but on the other hand it may give us focus on versus sort of a smaller or mid cap player. Are you talking to mostly big pharma companies or large or mid especially pharma companies, what kind of commitment would you prefer?

Geoffrey M. Parker

Without the specific for obvious reasons David, I would characterize that the parties we are discussing happen to all have significant natural capacity i.e. there are large robust companies and happen to have a acute need for a drug like Kerydin. So, I realized that a perfect mix, but we happen to have it in all parties with (indiscernible).

Unidentified Analyst

Okay and just two follow ups, if I may. First, you know when Novartis launched Lamisil, I know it was well over a decade ago, but the key ingredient in their success was direct consumer advertising. Could you talk assuming you promote yourself, could you just talk a little more about your plans for direct-to-consumer advertising after all you know nail fungus is the most self diagonisable indication that probably is.

And then secondly, do you have you already made [contingen] highest, are you in the process of that right now?

Paul L. Berns

Yeah, David this is Paul. I’ll just give three comments and then turn it over to Vince. So I don’t think we need to go, turn the clock back and do the older traditional large spend, large media buys from a DTC perspective as you saw 10, 12 years ago. I think in the advent on the efficiency of targeted social media, in particular and we’ve seen examples of that with other brands in the market place and frankly think we could be affected there in and frankly clearly we have contemplated that as part of our tactical mix and we would invest in that in a very cost effective manner to get the reach of frequency on a targeted basis to patients as treatment seekers in particular for this category. With that, I’ll turn it over to Vince to give you some more color and to speak to your second question.

Vince Ippolito

Yeah one comment on that even when you look back at the DTC campaign that Lamisil ran during that 2002 period. That was a number of years after the brand have launched and that spend was right for that time period. So I would agree with Paul that as we are looking at our marketing mix today and how we will enter the market place. There is a much more efficient spend in reaching our target audience that we see today, but that person who has onychomycosis is internet savvy, they seek their information on the internet today and so the social media aspects of this are engaging them, getting these people to hop in and have a dialogue with us is one of the key targets that we will look for. A lot of treating onychomycosis is about educating patients that this disease takes a while to cure. It takes a full year for that nail to grow back out, you’ve got to stay diligent on your medications in order to do that and then you could achieve what the patient is looking for and that is the clear nail.

So a lot of our efforts are going to be around education, raising that level of dialogue again in the physicians’ office because the noise level for onychomycosis has been quite, has been very quite for the last brand with generic in 2006. So relatively speaking for the last approximately seven years there hasn’t been promotion in the market place. So efficient spend such as patient education targeted at the offices engaging patients in social media and ofcoure getting them to often engage with us is where we see a lot of our mix happening.

As it relates to your second question about hires or contingent hires, as was mentioned earlier we were in full swing drawing now in terms of all of our efforts to go alone if you will if that’s what it ends up being. So in that mix of identifying our sales leadership, the proper profile of our sale representatives, all of that is taking place right now at this time and your question around the contingent hire is a tactic that’s used many times that surround a PDUFA date in which if approvers you are bringing your field sales organization on board and it is a tactic that we make choose the employee here as we did process.

Unidentified Analyst

Very helpful. Thanks very much.

Paul L. Berns

Thanks [David].

Operator

Mr. Berns, I am not showing any further questions at this time. Please proceed with any further remarks.

Paul L. Berns

Okay. Thank you, operator. In closing, I would like to thank all of you who have joined us for today call. We certainly appreciate your interest and look forward to updating you in the future. In addition, I just want to take a moment to recognize the efforts in commitment of my fellow team members here at Anacor and across our full organization. We are certainly focused on creating value for patients, healthcare providers and shareholders. We wish you a good day.

Operator

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

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