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Dyax Corporation, (NASDAQ:DYAX)

3Q 2010 Earnings Conference Call

October 27, 2010 04:00 pm ET

Executives

Gustav Christiansen – President, CEO

Ivana Magovčević-Liebisch - Executive Vice President, Corporate Development and General Counsel.

George Miguasky - Executive Vice President, CFO.

William Pullman - Executive Vice President, Chief Research and Development Officer.

Rick Berard - Vice President Commercial

Analysts

Mark Monane - Needham Company

Phil Nadeau - Cowen and Company

Brian Skorney - ThinkEquity

Kim Lee - Global Hunter Securities

Michael Smith [ph] - Unidentified

Mario Corso - Harris and Company

Operator

Good morning afternoon and welcome Ladies and Gentlemen to Dyax Corps Third Quarter 2010 financial earnings conference call. At this time I would like to inform you that this conference call is being recorded and that all participants are in a listen only mode. As a request of the company we will open up the call for a question and answer period at the end of the presentation. Before turning this call over to Gustav Christiansen, President and Chief Executive Officer of Dyax, the company will read their safe harbor statement.

Unidentified Corporate Participant

This afternoon Dyax issued a press release concerning its third quarter 2010 financial results. Dyax would like to remind everyone that statements made today reflect current information, estimates and projections, about its products, programs, collaborations, strategies and financial performance in our forward-looking statements. These statements including those relating to Dyax's FDA approved products, KALBITOR, are subject to risks and uncertainties that could cause actual events to result to differ materially. Important information concerning these risks and uncertainties is contained in Dyax's press release today and is scribed or referred to as most recent form 10-K and other periodic reports filed with the SEC. And also available on the company's website at www.dyax.com. I will now turn the call over to Gustav Christiansen, our President and CEO. Gustav?

Gustav A. Christiansen

Thank you, Nicole. Good evening and thank you for joining us on the Dyax Quarterly Conference Call. With me this evening are Ivana Magovčević-Liebisch, our Executive Vice President, Corporate Development and General Counsel. George Miguasky, Executive Vice President and Chief Financial Officer, Bill Pullman, Executive Vice President and Chief Research and Development Officer and Rick Berard, Vice President Commercial. So third quarter was another defining quarter for Dyax, we continue to execute according to plans and as a result we witnessed our patient base grow dramatically.

As of last Friday, October 22nd, we have 419 patients in KALBITOR Access and the (inaudible) 246 patients have KALBITOR placed at the treatment site. So we more than doubled the amount of patients on KALBITOR since the last quarter and had approximately an eight-fold increase over the patients in the first quarter. At nine months into KALBITOR's loss we believed we had the large HAE patient base than any other company in the HAE market at this point in their lives. Based on these positive numbers we are reaffirming our previous guidance that we will have more than 300 hundred patients with KALBITOR placed at the treatment centers by year-end. As we've indicated before building a patient base is our number priority. With this momentum going into the fourth quarter we are well poised for future success. We believe KALBITOR's adoption in the market place can be attributed to several factors.

One of which is the growing realization among HAE patients and their physicians that they need to be prepared for their next attack. Now that there is an acute an option it has been proven to treat all attack locations; patients understand that is possible to have a more effective treatment plan in place. Furthermore reasonable market research indicates that patients would rather treat their disease acutely and prophylactically. To that end we continue to see prophylactic patients taking KALBITOR to treat near break through attacks. Regarding KALBITOR's availability world wide we have made significant progress with our global development and commercially safe strategy, as we have shared with you in the past our objective is to partner outside the U.S. With the company's committed to developing treatments for rare diseases.

Our news collaboration in Japan we chose a partner with that level of dedication. Ivana will tell you more about this after our launch update. With respect to our financials George will provide more detail later in the call and discuss note worthy highlights for the quarter. Then Bill will update you regarding our life cycle management program for KALBITOR. This involves (inaudible) work, a potential pediatric legal expansion, and additional indications for each inhibitor induced (inaudible). Finally, I'll provide an overview of our pipeline and License and Funded Research Program before we conclude the call.

At this time I would like to turn the call over to Rick who heads our commercial team to update you on our commercial launch and our progress in more detail. Rick joined us in 2007 and he has more than 20 years of experience in the biopharmaceutical industry. Throughout his career Rick has been involved in numerous specialty product launches; prior to Dyax he was with Biogen Idec and was involved in the launch of both Avonex and Tysabri, Rick?

Rick Berard

Thank you, Gustav. To begin I'd like to say we are well on our way to making KALBITOR the acute treatment choice for HAE patients. As we have still, in the early phase of launch, the factors we continue to consider most predictive of our future success are the number of patients in KALBITOR Access and the number of patients with KALBITOR placed at a treatment site ready for the next attack and, as Gustav stated, we are extremely pleased to report that we currently have 419 patients in KALBITOR Access and of those 246 patients with KALBITOR placed.

This represents more than double the number of patients on KALBITOR from last quarter and approximately an eight-fold increase in patients on KALBITOR from the first quarter of this year. We are proud of this growth and are confident that we will have more than 300 patients on KALBITOR by year-end. Setting this goal demonstrates our commitment to identify new patients and educating them and their physicians about the importance of being prepared for the next acute attack.

As such, a main component of helping patients be prepared for their next attack is our dedicated KALBITOR Access team of health insurance specialists in nurse case managers. They're instrumental in assisting patients and health care professionals with health insurance issues, financial assistance programs, product education and treatment site coordination. KALBITOR Access continues to run smoothly. In fact, we have been able to streamline the process from prescription to drug placement, reducing the time it takes for patients to move through the system to approximately 90 days.

Also we are standing strong acceptance of KALBITOR by the payer community. All major commercial insurance companies are now reimbursing for KALBITOR. Including the top ten largest payers, such as WellPoint, United HealthCare, Aetna, Sigma HealthCare, and Kaiser Permanente and more than 90% of patients receiving KALBITOR from the specialty pharmacy have little to know co-payment. So how have we been able to steadily grow our patient base? It's been through educating patients and physicians about HAE and generating awareness for KALBITOR, thus far, feedback from physicians and patients is very positive. In less than one year we have identified approximately 800 physicians who are managing more than 1500 HAE patients. As we continue to educate physicians about the benefits of KALBITOR we expect these numbers will significantly increase. Through our interactions with patients and physicians we are finding that KALBITOR's product profile aligns very well with their needs.

Namely, a treatment that is administered subcutaneously is non-plasma derived, and has been proven to treat all attack locations, differentiates KALBITOR among the other HAE treatment options. Even this early in the launch we're learning that of the patients who have treated an acute attack with KALBITOR more than 80% have treated subsequent attacks with KALBITOR. This highlights the fact that patients are experiencing positive results and we expect this number to continue to grow. Next, I'd like to acknowledge our marketing and sales team for effectively generating physician and patient awareness of KALBITOR.

Our educational initiatives continue to expand. To date we have already completed 25 speakers bureau programs and have more planned. We have also hosted multiple webcasts aimed at both physicians and patients. Furthermore, our marketing team is actively planning for our upcoming presence at the annual American College of Allergy, Asthma, and Immunology meeting in Phoenix next month.

Finally, I would like to congratulate our marketing group for winning an award for Best Individual Professional Print Advertisement from Medical Marketing and Media Magazine. The winning campaign “When the Body Attacks Itself” underscores the tools we have to help educate physicians on the importance of preparedness. Congratulations to the team and thank you for your hard work.

Now I will turn the call over to Ivana. She will discuss recent developments in our KALBITOR global commercialization strategy. Ivana.

Ivana Magovcevic-Liebisch

Thank you, Rick. As Gustav mentioned in his opening remarks, we’re making significant progress toward our global strategy of developing and commercializing KALBITOR worldwide. From the beginning, our intent has been to commercialize KALBITOR in the US on our own and partner with others to commercialize it outside of the country. I’m pleased to report we continue to make progress on that front.

In June, we launched collaboration with Sigma Tau to develop and commercialize KALBITOR throughout Europe, North Africa, the Middle East, and Russia. Within that time frame, we also partnered with NeoPharm to market KALBITOR in Israel.

Most recently, we signed an agreement with CMIC in Japan. It will develop and commercialize KALBITOR for HAE and other Angioedema indications. As part of the agreement, we received $4 million up front and are eligible to receive over $100 million in milestone payments. Furthermore, CMIC is responsible for all development regulatory and commercialization cost in Japan. CMIC will purchase direct product from us in a cost fund basis for clinical and commercial supply.

And finally, we’re eligible to receive royalties equal to 20%to 24% of net product sales. We consider CMIC to be an excellent strategic partner. They’re committed to commercializing treatment for rare diseases and have experience in developing orphan products. This is illustrated by their successful development of Soliris for Alexion Pharmaceuticals in Japan. They have also end licensed the rights to develop and market orphan products for Ucyclyd Pharma and Orphan, Europe.

As we previously stated, we have always considered Japan to be a vital market in which to establish the product. This is due to the fact that based on the prevalence of one and 30,000 Japan, the estimate is that there are approximately 4,000 HAE patients and the majority of Japanese physicians the density steroids and antihistamines and the available drugs indicated treatment of HAE. We see an opportunity to change this treatment paradigm.

Equally important, we believe patients in Japan strongly desire a non-plasma derived treatment. Since KALBITOR is a recombinant product, it has the potential to offer HAE patients an option that better fits their needs. Establishing partnership with CMIC in Japan so soon after agreeing last quarter with Sigma Tau and NeoPharm, reinforces the growing value of KALBITOR worldwide.

Additionally, we continue discussions for partnering in other regions and are pleased with the level of interest we have received. We will continue to execute on our global strategy to develop and commercialize KALBITOR outside the US. By doing so, we will be able to make a difference in the lives of HAE patients as well as build our business.

With respect to our marketing authorization application in the EU, we recently received a 120 consolidated list of questions from the European Management Agency. These questions were within our expectations. We are pleased to say that a comparative study will not be needed for EU approval. We’re working closely with our partner Sigma-Tel on this submission. We’re confident regarding our Passover and remain within our timeline for an EMA decision by year-end 2011.

I’ll now turn the call over to George for financial highlights, George.

George Miguasky

Thanks, Ivana. This afternoon’s press release contains the full financial results for the third quarter and I’ll begin by highlighting some of the note worthy financial events of the quarter.

As was previously discussed on the call, HAE patients currently in KALBITOR Access expanded to 419 as of last Friday, the 22nd and patients with KALBITOR placed at their treatment site more than doubled to 246 from the second quarter and had an approximately eight-fold increase from Q1 2010. So building the KALBITOR patient base is essential to us and these patient numbers are the important leading indicators for establishing and growing a product sales base.

As released this afternoon for the third quarter of 2010, total revenues increased to $7 million as compared to $4.5 million in the same quarter last year. For the nine-month period, revenues increased to $42.1 million from $15.3 million.

We’re pleased that our total revenues of $7 million for the current quarter are equal to or exceed the street’s expectations. And this increase in revenue for the quarter was directly due to net product sales of KALBITOR, which were $2.6 million.

Regarding KALBITOR revenues, it is premature for these sales to directly correspond with the number of patients who have KALBITOR placed at their treatment site. Keep in mind that even with KALBITOR is placed, the initiation treatment and treatment frequency varies significantly among patients. As I mentioned, our main goal is to expand our patient base, which will result in more attacks being treated. And as Rick stated, of the patients who have treated an acute attack with KALBITOR, over 80%have treated subsequent attacks with KALBITOR. Based on this rate so early in the launch, we expect these treatments to continue to grow. As our patient base expands and the treatment frequency increased, sales will follow. That’s why we’re encouraged by the growth in the patient base that was announced today.

Now moving on to our operating expenses. The operating expenses for the third quarter were $15.7 million as compared to $14.4 million in 2009. And for the nine-month period, operating expenses were $48.6 million in 2010 as compared to $60 million in 2009, a decrease of 19 percent. Within operating costs, our research and development expenses, which include several major elements and these are medical affairs and pharmaco vigilance activities supporting KALBITOR. There are post approval studies and commitments. There are the KALBITOR life cycle management costs, which Bill will address in a moment and costs associated with conducting research on our preclinical pipeline.

And in Q3 these are indeed costs for $7.9 million and for the nine-month period they decreased by approximately 37% to $23.7 million. In the 2010 decreases in research and development were primarily related to cost savings resulting from a restructuring in March of 2009, KALBIOTR manufacturing costs and other reduced external research and development expenses.

Selling general and administrative costs which include commercial costs for KALBITOR increased in the third quarter to $7.7 million as compared to $5.9 million for the same period last year and for the nine-month period SG&A costs increased to $24.6 million as compared to $18.9 million in 2009. In the higher selling, general and administrative costs in 2010 were primarily due to increased infrastructure to support the commercialization of KALBITOR including the addition of sales and marketing personnel and other external marketing activities.

For the third quarter of 2010 Dyax reported a net loss of $11.3 million or $0.11 per share. This compared to a loss of $12.2 million or $0.17 per share for the same quarter in 2009 and for the nine-month period net loss was $15.6 million or $0.17 per share as compared to $51.5 million or $0.78 per share for the comparable period in 2009. Now with respect to our cash resources as of the end of the quarter September 30th, Dyax had cash, cash equivalence in short-term investments totaling $87.5 million and that's exclusive of restricted cash.

So we have the cash to support the KALBITOR launch and the rest of our business but having cash is one thing, managing it well is another, and it's worth reiterating that despite having those new KALBITOR commercial launch expenses our overall 2010 operating costs was still lower by 19%. These lower operating costs demonstrate that we remain committed to disciplined cash management.

So I'll now turn the call over to Bill for updates regarding KALBITOR's life cycle management. Bill?

William Pullman

Thank you, George, in line with our commitment to make KALBITOR available to HAE patients worldwide our attention is also focused on maximizing the products life cycle. We're currently developing a more concentrated formulation and are working on an expansion of the label to cover a broader pediatric age range.

We're also pursuing an additional indication for KALBITOR for ACE inhibitor reduced Angioedema. First we're exploring the possibility of developing a concentrated one-mil formulation which will make for more convenient KALBITOR administration. We're also moving forward with our assessment of KALBITOR for the pediatric population.

We've discussed with FDA our proposal for evaluating patients 10 to 15 years of age to an expanded access program. And the objective of the program is to expand the label for pediatric use. We expect to begin this program in the first half of 2011. Our program to evaluate the use of KALBITOR in patients with ACE inhibitor induced Angioedema is also on track. This is a condition that affects thousands of people each year.

In 2008 approximately 97,000 patients reported to emergency rooms in the U.S. with a diagnosis of Angioedema. Based on published data we estimated that one-third present with ACE inhibitor induced Angioedema per year. And approximately 20% of these patients get admitted to hospital including the ICU. Furthermore, in no approved treatment for ACE inhibitor induced Angioedema, patients are given standard allergy drugs which are non-effective for bradykinin induced Angioedema.

As we previously stated we intend to initiate a Dyax sponsored trial for this indication in early 2011. We are planning a Phase II Placebo Controlled dose ranging study to evaluate efficacy and safety. We intend to study to several dose levels and the trial will sized to provide for a statistic and significant outcome.

Our time dosing the first patient is an early first quarter 2011 and we expect to read out from this study in the second half of 2012. Finally, we continue to implement an active and multi-faceted medical education program to support KALBITOR use our medical affairs department has collaborated with several physicians toward the peer-reviewed articles. In the August issue of the New England Journal of Medicine, edema III trial findings were published. Just yesterday, our time to response manuscript was published in the Annals of Allergy of Asthmas and Immunology. So in this last quarter alone seven KALBITOR related articles were published which focused on clinical data and the impact of HAE on patient's quality of life and productivity thus, as you can see KALBITOR's life cycle management continues to evolve and we'll update you as we progress.

Our now turn to Gustav to update you regarding our licensing and funded research program or LFRP and pipeline. Gustav?

Gustav A. Christiansen

Before I discuss our LFRP and pipeline I want to share that Bill has been appointed to the position of Executive Vice President, Chief Research and Development Officer. In addition to currently overseeing clinical, regulatory, and program management he will now be responsible for research as well. Bill brings considerable medical basic research and pharmaceutical experience to Dyax, before joining Dyax, he held positions as Pfizer, Eli Lily, (inaudible) Aventis and (inaudible).

I'd like to discuss our strategy for the pipeline as well as progress being made with our LFRP. We have realigned our business strategy to focus on discovering developing and commercializing drugs and its indications which we can develop and commercialize on our own.

Leveling our expertise in this area we believe can make the greatest impact. Ultimately we'll have or this will allow us to successfully bring (inaudible) drugs to market and provide more value to our shareholders. Regarding our licensee pipeline, accruing at $17K in clinical development, of those 17 there are two compounds and antibody to KDR and an antibody to EDF receptor that are in five different Phase III trials.

So multiple indications in oncology, both are available by (inaudible) Eli Lily, five other candidates in Phase II trials, of those I like to note MD386, for oncology is entering Phase III, in Q4 2010 this quarter. While there are other candidates, the MD479 also an oncology product is scheduled to do so in the first quarter of 2011. Ten candidates are in Phase I, one of which is (inaudible), we continue to actively license our technology.

This year, alone, we have signed four agreements the most recent of which is, Arisen, a Spanish technology company focused on discovering and validating disputing antibodies. The (inaudible) innovated approximately $20 million in 2009. And it is a significant revenue source for us in the first nine months of this year, it has already generated more than $20 million of revenue.

Moving forward the (inaudible) continues to build value for Dyax as additional candidates (inaudible) and others reach the market. Throughout this process, Dyax, will receive milestone payments and ultimately relative revenues for example two of the most advanced compounds in our life's chief pipeline. (Inaudible) Eli Lily's Phase III candidates have substantial market potential. Currently the market antibody against ADF, Avastin, and EDF receptor (inaudible) generated $6.2 billion and $1.7 billion respectively in worldwide revenue in 2009.

So these products have the potential to generate significant future payments for Dyax each year. To conclude I would like to thank all involved for making the third quarter such a success as we continue to follow KALBITOR's matrix closely we are pleased with all aspects of the launch we're especially proud to have 419 patients in KALBITOR Access. And of those 246 patients in – with KALBITOR placed at their treatment site.

Again, we are confident that by year end, we will have more than 300 patients on KALBITOR and of note again is that the patients who have treated an acute attack with KALBITOR more than 80% have treated subsequent attacks with KALBITOR you know relatively (inaudible) a few at time.

Beyond that we are encouraged by the clear interests that we are seeing and meeting from physician's patients and payers. We continue to deliver on our promise to make KALBITOR available world wide so our comprehensive global commercially (inaudible). Within the last nine months we have established partnerships to develop and commercialize KALBITOR in major markets such as Europe and Japan, this allows us to further leverage our resources and find new indications for KALBITOR.

In summary, we are well positioned to grow our core business and continue our successful KALBITOR launch. At the end of the day we remain dedicated to finding therapies to patients with unmet medical needs as well as providing value to our shareholders with that I'll close the call and turn the line back over to the operator to begin the Q&A period of the call. Thank you very much.

Question-and-Answer session

Operator

Ladies and Gentlemen, if you would like to ask a question please key star one on your telephone. If your question has been answered or you would like to withdraw your question please key star two. Questions will be taken in the order received please press star one to begin. Your question will come from the line of Mark Monet from Needham Company.

Mark Monane - Needham Company

Thank you and good afternoon and thank you for reviewing all your progress in the quarter. I have – right now with – cloudy with a bit of rain in New York City I have a two-part meteorology report and that leads me to a two part question.

On the forecast for KALBITOR going forward. Part one is asking the question $2.6 million in sales is that good? How would you evaluate that and how do you – is there a (inaudible) more of a connection between the patients in the system as well as in relation to product sales and then part two, is the launch being effected either positively or negatively by any other products which are now available for the management of HAE?

Unidentified Corporate Participant

George?

George Miguasky

Okay, so Mark, on part one sales are always important for all companies and as we discussed on the call for Dyax today, and at this point in the initial launch period it's really about building the patient base. And this is essential to us and these patient numbers that we reported are really the important leading indicators for establishing and growing product sales. And also as we reported today and really during each of the first two prior quarters as well we're already successfully building that patient base and so at this stage of the KALBITOR launch it is premature for sales to directly correspond with the number of patients who have KALBITOR placed at their treatment sites and also we need to keep in mind that even when KALBITOR is placed the initiation of treatments and the treatment frequency varies significantly among patients so ultimately as our patient base expands and then the treatment frequency increases the sales will follow and it's also worth noting that as we stated on the call today that of the patients who have treated an acute attack with KALBITOR over 80% have treated subsequent attacks just in the short period of time. So based on this rate and again so early in the launch we expect that these treatments and thus revenues will continue to grow and so that's sort of a long way of saying, yes, we're pleased with the sales in this quarter.

And on part two maybe I can just add a couple of comments, Mark, the benefit of having a competitor in this space is of course that we allocate (inaudible) doctors and patients at the same time. So we reach broader and deeper, faster. We do believe strongly that KALBITOR has advantages which will allow us to make it the treatment of choice for acute attacks.

And as you know currently there's only one other product approved for treating acute attacks and we believe that our profile alliance we believe that our profile alliance (inaudible) with the characteristics that are important to patients and physicians. Since this being the product that's approved for all acute attack locations, the product is administered subcutaneously and it's a non-class federal act products and coming back to the comparative picture you talked about that we had not only had patients choosing KALBITOR to treat acute attacks but many of those who were on prophylactic treatment who are experiencing break through attacks are also using KALBITOR to treat those break through attacks. So again I guess maybe you just want to finish reemphasizing what George said that we are seeing those patients who are not treating their first attack with KALBITOR and in a very short period of time we sort of have we're already seeing 80% of those have come back to treat subsequent attacks. So we strongly feel that the number of patients are truly the lead indicators that predict sales as we move forward.

Mark Monane - Needham Company

Okay, that was helpful, thanks for that information. I'll go back in the queue and let my colleagues proceed.

Operator

Your next question will come from the line of Phil Nadeau from Cowen and Company.

Phil Nadeau - Cowen and Company

Good evening, thanks for taking my questions, first actually a question on the EU, Ivana, in your prepared remarks you mentioned that it was clear from the 120 day questions you're not going to need a comparative study for KALBITOR, you didn’t mention whether you needed any other study. Could you give us some idea of whether the 120-day questions are addressable just by the data you have on hand or do you need to do anything else in the (inaudible) to address that?

Ivana Magovčević-Liebisch

Yes, I can certainly address that and we're not going to need have any other clinical studies done but I'm going to turn it over to Bill if he has any additional comments.

William Pullman

Just to reiterate that and say that questions are well within our expectations and certainly no additional clinical trials are required.

Phil Nadeau - Cowen and Company

Okay, great second is a question on KALBITOR and it does seem like you guys have a good number of patients to KALBITOR Access during the quarter and just to play devil's advocate why isn’t that number higher? It's seems like what you said no patient's have been turned down for reimbursement, the co-pay seems to be virtually minimal for most patients and so wouldn’t it be a good idea for every patient who has HAE to have some drug on hand somewhere. So I guess what’s the barrier to getting more patients to sign up for this and at least have a couple of vials stocked in some doctor’s office.

Gustav A. Christensen

Thank you, Phil. I think I can help you with that. This is a patient population that has been very late in being diagnosed, has not been treated by their doctors because they’ve had no treatment available to them so they’ve really been used to going to the Emergency Room when they couldn’t take it. So what you are finding in the market place is that doctors are not often connected to their patients. So there really is a fair amount of work and we are very successful in doing so I think in identifying doctors who have seen patients or who actually have patients. So in fact we have identified 800 allergists who are now treating 15 or who are involved with 1500 patients, I think is a testimony to the systematic work we are actually doing out there. And as you can imagine moving into '11, we will continue to work on education, physician sponsored speaker series, recognized, etc, that gives us access to these patients. I think what I can say in the closing remark on this is as you find a doctor and the patient, they are really buying into the concept that they need a treatment plan in place for the next attack when they realize they really don’t have one and in that sense you're actually right that is a key thing that they understand quite readily after you get the doctor and the patient in the same place.

Phil Nadeau - Cowen and Company

Okay, that’s helpful. And another question along those same lines is there anything relatively common among the 300 patients that – give or take – that you’ve been able to place the drug with today or these patients who are currently being prophylaxed and so are known to physicians or are they people who are not being prophylaxed and need a treatment plan in place. Have they all been diagnosed for a while or they need diagnoses? Any characterization of that patient will be helpful.

Gustav A. Christensen

Rick, do you want to cover that?

Rick Berard

No, I think for right now it’s too early to tell. It’s safe to say that there’s a wide variety of patients that have been treated both prophylatically as well as patients that have been – need any prophylactic treatment.

Phil Nadeau - Cowen and Company

Okay, and maybe one last set of questions, and that’s on patients actually accessing the drug once it’s in placed for them. I do agree with you that getting patients to sign up is key but ultimately the patient's going to have to pull the product through in order to generate revenue.

So along those lines, one, have you come upon any hurdles for patients to actually access the drug once it’s put into an ER like are the ER’s aware that the drug is there for the patient. And then two, do you have any sense of those patients that accessed more than one does of the drug, what the average time is between the effects.

Gustav A. Christensen

No, that’s still too early to actually correlate these things. I think what we are seeing is we of course have a very large focus on getting the patients, getting them reimbursed, and getting the drug placed. What we are also seeing is that the patient can then take the next step in going in to get treated for their attack that they have not been used to be able to do. They come back for treatment. So moving forward, we’re obviously adding the component of education and I will stress here that we put in the work to make sure that the hospital Emergency Room works for the patient. That means that there is a patient plan .There is a patient ID card. So we have a number of cases where patient shave entered the hospital, shown them the ID card, seen the doctor, the doctor has been brought down, they have been treated, they’ve been observed as they should for a severe attack, and they have left the hospital and been home within four hours. Now on the east coast, you sometimes experience to see the doctor. So we’re very proud of the training we are doing in these hospitals to make sure they work for the patients.

And again I just want to come back to the fact that when they have gone into the first treatment, that even though it’s a short period of time, we have more than 80% that come back for re-treatment and they do that because it has worked for them.

Phil Nadeau - Cowen and Company

Great, that’s very helpful. Thank you for answering my question.

Operator

Your next question will come from the line of Brian Skorney from Bank Equity.

Brian Skorney - ThinkEquity

Good afternoon guys. Thanks for the question. Just a start, you talk about having greater than 300 patients would stock KALBITOR by the end of the year. I’m just trying to get a feel. Is that number – are you guys being very conservative there? I mean it seems like a fairly easy hurdle given the increase in patients of about 130 patients in the third quarter and given that you have quite a robust number of patients seeking treatment. Is there anything we should read into that, that 300? Does it seem like only another 60 patients by year-end or could it be significantly up by then?

Gustav A. Christensen

No, you shouldn’t read anything into it. I mean we made this outlook number a month and a half ago, whenever it was, and we feel very comfortable going to beat it and I think you’re right. Yes we are very confident we’re going to beat it. We just didn’t feel that we should update it actually. I think with the numbers we have in the KALBITOR system with the success we have in bringing the patient’s proof. Yes, we will be close to 300.

Brian Skorney - ThinkEquity

Got you and then can you give us any color on what percentage of revenue is due to initial stocking versus reuse from the installed base? When I kind of look at the quarter, if I make some assumptions it appears the percentage of sales due to initial stocking is actually increasing over second quarter. I’m just wondering is that directionally where we want to be going at this stage and at what point should we start to look for that to reverse and see the installed base contribute in the majority of revenue.

Rick Berard

To you question, Brian, the revenue comes from both places but there’s no clear trends and too early in the launch to clear those definitive types of trends and really premature for us to then break that down. So we’ll stay tuned but it’s really premature for us at this point.

Gustav A. Christensen

Well, Brian, I may just add to one thing he said. We have an increasing number of (inaudible) with buy-in built, it’s not a straight line as to if you place product or you do not place product when you put on a new patient.

Brian Skorney - ThinkEquity

Okay, and then just a last question. Have you found any inventory concerns regarding Cinryze and having any conversion to KALBITOR at all? Is that a concern in patients or is that just kind of a Wall Street thing right now?

Gustav A. Christensen

I think what we can say is we are seeing patients on Prophylactic Cinryze who are having their acute attacks treated with KALBITOR. Whatever their reason is I mean, and some of them obviously have to because it’s what worked the best. So we’re also seeing patients on Steroid Prophylactic clearly who are treating their breakthrough attacks with KALBITOR.

Brian Skorney - ThinkEquity

Great, thanks Gustav.

Operator

Your next question will come from the line of Kim Lee from Global Hunter Securities.

Kim Lee

Good afternoon, a couple of questions for you here. First, can you remind us of how your revenue is booked? Previously you mentioned that there was a disconnect between the patient numbers and your patient base and revenue because of the way you book revenue. Is that also still a reason that comes into place for those disconnects?

Rick Berard

So when we spoke about disconnects previously we were talking about it really being premature for the sales reported and then the usage to directly correspond and then the usage by patients to directly correspond. So again, we keep in mind KALBITOR place the initiation of treatment and then the treatment frequency varies very significantly among the patients. So with respect to eh first part of your question, we book the sales at the time we ship to our specialty distributor, EBSG, and with that being said, EBSG maintains a very small amount of inventory in their channel.

Kim Lee

Okay, great. And moving on to I guess the number of patients from the past, what have you seen is the average number of attacks per patient?

Gustav A. Christensen

Well, it’s simply too early to call that completion because it actually varies, and so I think what I said in the first question a few minutes ago is really the key that there is the lead indicator for treatment and therefore sales is to have patients on KALBITOR. And when they go in and get treated the first time and find out this system works, you know 80% have already been back to treat subsequent attacks. So that’s what we would like.

Kim Lee

Okay, and as far as patients who have converted from Cinryze, how many patients do you estimate that have actually gone off Cinryze and taking KALBITOR now?

Gustav A. Christensen

So I did not say they had been off Cinryze. They have just found that those patients have found that their acute attacks are better treated with other acute gracial attacks, they’re beyond the prophylactic treatment and are better treated with KALBITOR. Therefore, has written prescriptions for KALBITOR. But that is for the gracial attacks.

Rick Berard

I think if I can add in, Gustav, it’s important to understand that even though patients may be on a prophylactic treatment, whether it’s Cinryze or androgen steroids, they still need to have an acute treatment plan in place. Many patients that are on prophylactic treatment are choosing also to have KALBITOR as their treatment of choice. There are also some patients who choose to treat their attacks directly with KALBITOR as they have each attack.

Kim Lee

Okay, that’s very helpful. And what would you estimate is the market share right now for KALBITOR or is that too early to say?

Gustav A. Christensen

I don’t think that. I do believe that nine months into our launch with 419 patients in the system, we probably have as many or if not more patients than the other people had when they were nine months into their launch but there are not really known numbers out there. So we are very, very happy with the way our launch is going and the pace by which we are adding patients.

Kim Lee

Okay, thanks. And how many docs targeting? I know you identified 800 now treating 1500 patients, but how many more docs do you think you can penetrate and target and how are you going to increase your penetration to be able to treat all of those patients and more?

Rick Berard

Well, so we have a number of educational outreach activities to reach to the entire allergy community. The number 800 is what we said we found today that are currently managing patients but as more allergists begin to see more patients, we find out about that and that 800 number will continue to grow, but we’re targeting the larger allergen community. In addition to that, we had a presence at the Emergency Physician Conference Meeting and we think that that may be another source to be able to find new patients who are diagnosed with HAE.

Kim Lee

Great, thank you.

Operator

Your next question will come from the line of Michael Smith [ph] from (inaudible).

Michael Smith

Hi, good evening. Thanks for taking my question.

Rick Berard

Hello Michael.

Michael Smith

So of the 130 new patients this quarter, how many of those did they initially place at their treatment sites on average?

Rick Berard

Rather than on average, it can answer that as a range, and that ranges anywhere from two if they have one treatment site and potentially four if they have four treatment sites and if they have potentially also zero if they’re going to a site like a hospital with these that already have drug stock on a buy and build basis, in which case they don’t’ need to stock drugs for a new patient. So anywhere from zero to four is the answer there.

Michael Smith

Which of the revenue reported, what proportion you say is from the binder factor and what proportion is from ordering products?

Rick Berard

Yeah, I think the only thing we’d say there is that the majority is what’s called AOB, assignment of benefits, where it’s in the patient’s name. But that’s the majority of the placements in the sales.

Michael Smith

Okay, and so looking at the average HAE attack frequency in the population, I think one would assume that some fair proportion of patients would start reusing or reselling after having an attack. You said there were some patients that had an attack and most of them used more than one refill. So how many of the 246 patients on treatment have used product actually rather than placid.

Rick Berard

So I think what we said is that if the patient’s have treated an attack with KALBITOR, than more 80% of them have treated a subsequent attack. And so I mean that’s the data that we have. Other launch trends, it’s really premature on the information. We’re following all those metrics very closely but it’s really too clear to see a trend.

Michael Smith

Right, and then I was wondering were you able to make observations in terms of Anaphylaxis rates maybe and now that the product has been out for a few quarters?

Gustav A. Christensen

We have an on-going and active commitment to following safety in the post market environment with our product vigilance group and I’m pleased to say there are no new cases of Anaphylaxis reported. So the safety profile is unchanged.

Michael Smith

Okay, great. And when are you coming out with the revenue guidance at some point for KALBITOR?

Rick Berard

So we'll – there's a lot of factors that effect guidance and so to that end we're not providing sales guidance at this point.

Michael Smith

Okay, great. Thanks for taking my questions.

Operator

Ladies and Gentlemen as a reminder please key star one to ask a question. And your next question will come from the line of Mario Corso from Harris and Company.

Mario Corso – Harris and Company

Yes, thanks for taking my questions. Just wanted to ask what type of viewer feed back you've received about Type III patients receiving KALBITOR. Do you see that as a trend? Thank you.

Gustav A. Christiansen

Again, it's too early to you know provide any numbers or information on that but it's important to note that in the field of Angioedema that those that are Bradykinin mediated include conditions like Type III recognizing that that is not necessarily an agreed diagnosis. Include other Angioedema's such as idiopathic and acquired and all of those are areas that we are interested in pursuing and we'll study in due course but they are not on our current label.

Operator

There are no further questions at this time. I would now like to turn the call over to Gustav for closing comments.

Gustav A. Christiansen

Well, I want to thank you for dialing in and listening to our quarterly call and we look forward to updating you on the quarters ahead. So thank you very much and have a good evening.

Operator

Thank you all for your participation in today's conference. This concludes the presentation. You may now disconnect, have a wonderful day.

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