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Executives

Francois Nader – President and Chief Executive Officer

Luke Beshar – Senior Vice President and Chief Financial Officer

Susan Mesco – Investor Relations

Analysts

George Former – Canaccord

John Stevenson – Summer Street Research

Marco Kozul – Thinkequity

Leah Hartman - CRT Capital

Ryan Martin – Barkley’s Capital

Lucy Lung – Citi

Alan Carr – Needham & Company

NPSP Pharmaceuticals, Inc. (NPSP) Q3 2010 Earnings Call November 2, 2010 8:30 AM ET

Operator

Good day, ladies and gentlemen, and welcome to third quarter 2010 NPS Pharmaceuticals earnings conference call. My name is Modesta, and I will be your operator for today. At this time, all participants are in a listen-only mode. (Operator instructions)

I would now like to turn the call over to your host for today, Ms. Susan Mesco, Senior Director of Investor Relations. Please proceed.

Susan Mesco

Thank you, and welcome to today’s our third quarter conference call. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties. Please refer to our filings with the SEC, which are available from the SEC or our Website for information concerning the risk factors that could affect the company.

Joining me on today’s call are members of our management team, including our President and Chief Executive Officer, Dr. Francois Nader; and our Chief Financial Officer, Luke Beshar and Roger J. Garceau, Chief Medical Officer. In addition, we also have Dr. John Bilezikian, our primary investigator in the US for our phase III REPLACE study joining us today to share his insights on hypoparathyroidism. To begin, it is now my pleasure to turn the call over to our Chief Executive Officer, Dr. Francois Nader.

Francois Nader

Good morning, and thank you for joining our third quarter conference call. Before I begin, I’d like to welcome Dr. Bilezikian on today’s call. As many of you know, Dr. Bilezikian is a recognized expert in hypoparathyroidism. He’s also the Chief of the Division of Endocrinology, Director of the Metabolic Bone Disease Unit, and Professor of Medicine and Pharmacology at Columbia University’s College of Physicians and Surgeons. As our lead investigator in the US for NPSP 558 REPLACE study, we are happy to have Dr. Bilezikian join us on today’s call.

To begin our business update, I’m happy to report that 2010 continues to be marked by strong execution. Our two Phase 3 programs are progressing as planned, with a number of key milestones on the near term horizon, including top line results from our step study of GATTEX in short bowel syndrome, and the randomization of the last patient in our REPLACE study of NPSP558 in hypoparathyroidism.

We also further strengthened our cash position with another very successful financing transaction that brought in more than $44 million. We ended the quarter with $154 million in cash, leaving us well equipped to advance our pipeline.

Turning now to GATTEX, as a reminder, STEPS is our Phase 3 registration study that was designed to confirm previous findings, that GATTEX safely reduces paranteral nutrition requirements of short-bowel syndrome patients. I’m pleased to report that STEPS is on track for last patient, last visit very early next year, and top line results as soon as possible thereafter.

We continue to experience a high level of interest in STEPS 2, our two year continuation study that is open to patients who have participated in STEPS. As of today, of the 54 patients who have completed the 24 weeks of dosing in STEPS, 52 patients have elected to roll over into STEPS 2. In addition, 10 patients went directly into STEPS 2 after completing the optimization and stabilization phase of STEPS. As you may recall, we continued to enroll patients into STEPS until 86 patients were randomized.

Recent market research underscored the favorable market dynamics for short bowel syndrome. We completed a survey of more than 450 US Gastroenterologists and gastrointestinal surgeons, that indicated the leading etiology of short bowel syndrome was Crohn’s Disease, accounting for 35% of the cases, followed by ischemia, at 28%, cancer at 20%, trauma at 9%, bariatric surgery at 8%, and all other accounting for the remaining 8% of the cases.

Over 80% of the physicians surveyed believe there are unmet needs in the treatment of short bowel syndrome. The highest scored unmet need were improving absorption capacity and reducing parenteral nutrition complications. In addition, more than 70% of physicians surveyed confirmed that weaning patients from parenteral nutrition is an important treatment goal.

When presented with the GATTEX profile, 75% of the physicians surveyed indicated they will be early adopters of GATTEX. In the coming months, we will continue to broaden our understanding of prescribers and influencers of the short bowel syndrome market, and we will finalize our commercialization plans. Before turning to NPSP558, I would like to invite Dr. Bilezikian to give us an overview of hypoparathyroidism. Dr. Bilezikian?

Dr. John Bilezikian

Francois, thank you very much. I appreciate the invitation to join this conference call. As you indicated in your introduction, I have been involved in this study we are going to talk about, REPLACE. Anti-dating the REPLACE study, my group has been interested and committed to the problems of parathyroid hormones in human subjects for about 35 years. Our interest in a disease, hyperparathyroidism is well recognized, and over the past five to ten years, we have turned our attention to the disease of the moment, namely hypoparathyroidism.

Hypoparathyroidism is a disorder in which the parathyroid glands are no longer producing that important hormone, parathyroid hormone. It is due, often, to a surgical event, namely the removal of the parathyroid glands, either due to thyroid surgery or some other neck surgery. The other major cause of hypoparathyroidism is what we call an auto-immune disease, where the patient’s body essentially rejects the parathyroid glands.

The end result is no parathyroid hormone, and I’ve often asked the question, “What is life like without parathyroid hormone?” And the answer is “Not very good.” Patients are not well. Their blood calcium is low, sometimes to the point where they not only are symptomatic, but the symptoms may be very, very severe. Up to now, the approach to hypoparathyroidism has been the use of calcium and various Vitamin D supplements.

Now, although one can control symptoms of the hypocalcemia with calcium and Vitamin D as supplementation, it is not such an easy task. Subjects have different needs, and within a given subject, there may be wide swings in the control of their blood calcium and their symptoms. These symptoms may range from minimal to very severe, life threatening hypocalcemia.

The REPLACE study is designed to provide the missing hormone, namely parathyroid hormone, to these patients. And I might add, of all the endocrine deficiency diseases, and I think many of you know of them, like hypothyroidism, like diabetes, like Addison’s Disease, we all have replacement hormones for these endocrine deficiency diseases. The only endocrine deficiency disease for which we do not have the replacement hormone, is the disease we are talking about today, hypoparathyroidism.

The REPLACE study is important, because it will hopefully provide that replacement hormone in a way that will allow for a dosing adjustment, namely patients are very likely to need different doses, just like patients need different doses of insulin when they have diabetes, patients need different doses of thyroid hormone when they have hypothyroidism. The principle being that in endocrine deficiency diseases, one dose does not fit all.

The REPLACE study will provide that dose range and we expect this will be important in terms of therapeutic adjustment to patients with hypoparathyroidism. So I think we’re looking at a very interesting frontier. REPLACE will hopefully provide that need for so many patients who are in need of their replacement hormones.

Thank you, Francois, and I’ll turn the program back over to you.

Francois Nader

Thank you, John, and given what Dr. Bilezikian just described, and what we have been hearing from physicians and patients, we are really eager to get NPSP558 to the finish line, as the first approved hormone replacement therapy for the underlying cause of hypoparathyroidism. I’m happy to report that the phase 3 REPLACE study continues to progress as planned.

We have now achieved 85% of our current enrollment objective, and have randomized 79 patients, out of our targeted 110 patients. Based on the current trend, and the study design timelines, we expect to report our next key milestone of completing randomization in Q2 of 2011. As you know, as the REPLACE study design calls for patients to undergo an optimization and stabilization phase. After stabilization, patients are randomized to a 50 microgram dose of NPSP558, or a placebo. If needed, patients are titrated up to a dose of 75 micrograms, or even 100 micrograms over a six to eight week period.

Patients then remain at their final titration level through week 24, with a follow up period from week 24 to week 28. We recently made the decision to strengthen our development program by conducting additional small studies in the US that we believe will enhance our data set for our NDA as well as the market potential of 558. First, along with some of our clinical advisors, including Dr. Belezikian, we are planning an eight week study of US patients who have completed the 24 week REPLACE study to explore a 25 microgram dose of 558.

We expect to initiate this new study early next year, and complete it in time to incorporate the results in our NDA for hypoparathyroidism. We are also planning a small, one year active dosing continuation study, to evaluate the long term safety and efficacy of 558, as well as treatment strategies for hypoparathyroidism patients.

On the commercial side of our business now, we recently completed a number of market research studies, including a comprehensive market assessment of chronic hypoparathyroidism that was conducted for us by a leading commercial research firm. This quantitative survey of 290 US physicians who have treated at least five cases of hypoparathyroidism over the past year indicated the following.

First, approximately 70% of hypoparathyroidism cases were caused by surgeries, mainly partial and total thyroidectomies, parathyroidectomies, and neck dissection surgeries. Second, treating the underlying cause of the disorder was ranked as the most important in terms of unmet need, and was seen as the greatest advantage of a product with 558’s profile. Third, approximately 50% of the physicians interviewed stated that they would be early adopters, with endocrinologists being the prominent specialty. Fourth, physicians categorized mild, moderate, and severe hypoparathyroidism largely based on symptoms, and estimated that 40% mild, 40% moderate, and 20% severe.

With an approached market sizing using two methodologies, first from a claims database of 60 million patients, and 97 health plans, we drew a study sample of 7.8 million patients, and 23 health plans, to estimate the prevalence and incidence of chronic hypoparathyroidism. The claims based data from patients with a diagnosis code of hypoparathyroidism or a diagnosis code of hypocalcemia, with known indicators of hypoparathyroidism support our preliminary prevalence estimate of 60 to 65,000 adult hypoparathyroidism patients in the insured US population.

We also used an incidence methodology to estimate the size of the market. Researchers evaluated claims based data from patients who underwent a variety of neck surgeries and also had a diagnosis code of hypoparathyroidism or hypocalcemia for more than six months post surgery. This methodology indicated that approximately 42,000 US patients have surgery related chronic hypoparathyroidism. This number increases to roughly 62,000 patients when adjusted for the non-surgical patients, who represent approximately 30% of the chronic hypoparathyroidism population.

Given the large coverage of the database, and although these findings are only estimates, they certainly increase our confidence in the market potential for 558 in hypoparathyroidism. So to summarize, our two registration programs are proceeding well and on track. We look forward to reaching a number of key milestones over the next 12 to 15 months, including for the GATTEX program and short bowel syndrome, we will report top line results from STEPS in Q1 of 2011, submit a US NDA and prepare for the launch in 2012, and for the NPSP558 program, we’ll randomize the last patient in REPLACE in Q2 of 2011, and subsequently report top line results.

We look forward to updating you on our progress on future calls, and with that I will turn the call over to Luke to discuss our financials. Luke?

Luke Beshar

Thank you, Francois. Good morning everybody. On the financial front we also continue to make strong progress this quarter. We completed another highly successful financial transaction and closed Q3 with $154 million in cash and investments, which is more than enough to support top line data and our other key catalysts. As reported in today’s press release, we are improving our full year cash guidance.

Now, on specifics, starting with revenue, our Q3 royalties total $21 million versus $20 million last year. Highlights in revenue include Preotac royalties decreased $2.1 million, as compared to $2.5 million last year, due to reductions in reimbursements rates in certain European countries, as well as the negative impact of foreign exchange. REGPARA royalties continue to show strong year over year growth with Q3 coming in at $1.5 million, versus $1 million in Q3 last year.

Nucynta, which remains our unencumbered asset increased to approximately $300,000, as compared to $100,000 last year. And lastly, the large piece of royalties, Sensipar, which came in at $17.2 million for Q3 versus $16.5 last year. With respect to Sensipar, there’s some additional key items I’d like to report this morning. First, for the sixth consecutive quarter, Amgen did not reserve any Sensipar royalties payable to NPS. For any new investors on today’s call, this relates to ongoing manufacturing process patent litigation, related to Cinacalcet filed by Teva against Amgen.

Second, discovery is substantially complete in the Amgen versus Teva, ANDA patent litigation. The trial is now scheduled to begin on November 30th . Third, the repayment of the Sensipar backed Series A notes and the commencement of the repayment of the Series B notes remain on the near term horizon with our current estimate indicating that the balance of the Series A notes will be fully retired very early next year.

As a reminder, we monetized certain of our royalty rights for Sensipar, Preotact, and REGPARA, and these transactions are reflected on our balance sheet as non-recourse debt. The cash flow from the royalties will return to the company after the respective obligations are repaid.

Now, turning to expenses, Q2 R&D expenses increased to $19.4 million versus $9.8 million last year. The increase was driven by the advancement of the GATTEX and NPSP558 Phase 2 registration studies, as well as regulatory (inaudible) and CMC related activities to support our new drug applications. General administrative expenses for Q2 improved to $5.4 million versus $5.8 million last year, mainly due to decreases in legal and other administrative costs, which are partially offset by the cost of the new market research which Francois just described.

Our cash burn was $57 million for the first nine months of 2010. Today we are improving our full year cash burn guidance from 76 to $84 million, compared to prior guidance of 75 to $90 million. The reduction on our cash burn guidance is largely driven by the (inaudible) of certain payments, cost containment, and the favorable impact of foreign exchange.

Our cash burn continues to exclude external financing activities, which to date excludes $136 million of cash inflows related to external financing activities achieved earlier this year, namely the monetization of REGPARA royalties and the two secondary offerings of common stock.

Finally, we are planning a final S-3 universal shelf registration later today. This is not in anticipation of anything specific, but just rather a matter of good corporate practice to maintain flexibility. So to summarize our financial review, our royalty based portfolio continues to be a valuable piece of our business, we remain focused on actually managing our cash and expenses, we’ve improved our cash burn guidance, while keeping our development timelines on track, and our balance sheet is healthy, with more than $150 million of cash on hand as of September 30. We have the financial runway to take us through a number of key milestones.

With that, I’ll turn the call over to the operator to begin our Q&A session. Operator?

Question-and-Answer Session

Operator

(Operator Instructions.) Your first question comes from the line of George Former, with Canaccord. Please proceed.

George Former – Canaccord

Hi, thanks for taking my question. Is Dr. Bilezikian still on the call?

Dr. John Bilezikian

Yes, I am.

George Former – Canaccord

Yes, hi Dr. Bilezikian. I have a question for you concerning the hypoparathyroidism. In your best estimate, how many patients do you think are adequately controlled with Vitamin D and calcium supplementation? And then I have a follow up.

Dr. John Bilezikian

I’d like to answer that question. Do you mean adequately controlled by normal calcium, or by symptoms?

George Former – Canaccord

In your view, what’s most important?

Dr. John Bilezikian

Well, we want our patients to be free of symptoms, and one who knows how to take care of patients in usually an endocrinologist. We can render most of our patients without clinical symptoms. That doesn’t say that they are adequately controlled, though.

George Former – Canaccord

Okay. So how many do you think are adequately controlled, then?

Dr. John Bilezikian

Again, I’m having trouble to answer your questions, because I don’t think you can adequately control patients with hypoparathyroidism without parathyroid hormones. You can certainly normalize the calcium and you can certainly control the symptoms, but there are long term issues related to the amounts of calcium and Vitamin D you need to achieve that control. This is what our field has been concerned over for many years, because of the long term potential complications of that approach, using only calcium and Vitamin D.

George Former – Canaccord

Okay, wonderful. That’s very helpful. And then for Franc, a question on GATTEX and STEPS. You mentioned that 52 patients from STEPS have rolled over to the STEPS2 trial. Does that include both placebo and drug treated patients, and then why did two patients not roll over? Were they treated with drug or placebo, in STEPS?

Francois Nader

Yes, George, actually the 52 patients include all of the above, these patients were either on placebo or on GATTEX. One of the patients that did not roll over was not eligible to roll over and the second one elected not to. As a reminder, the rolling over to 3021 is really elective. These are patients who elect either to roll or not. It’s not mandated by the original program. So we’re really, really very happy that out of the 54, we have 52 patients who elected to continue for an additional two years. That will really provide us with very, very valuable long term safety and efficacy results.

George Farmer – Canaccord

Okay, and at the risk of being too picky, those two patients, were they treated with drug in the STEPS trial? Or were they on placebo?

Francois Nader

I don’t know, because the blind is still there.

George Farmer – Canaccord

Okay, thank you.

Francois Nader

Thank you.

Operator

Your next question comes from the line of John Stevenson, with Summer Street Research. Please proceed.

John Stevenson – Summer Street Research

Thanks, good morning. I just had a question for Francois, and also one for Dr. Bilezikian. Just first, on the choice of doing the eight week study with the low dose, could you kind of walk through what precipitated that decision, and then as I mentioned, I have a follow up for Dr. Belezikian.

Francois Nader

Nothing really precipitated it, per se. What we always said is that we will continue with the programs to do the studies that are required for administration, but also being as conservative as we want to be. Whenever we seen an opportunity to strengthen our submission, we will do what it takes, so we certainly don’t want to cut corners and we want to do probably more than needed and enhance our prospects of success when we come to the NDA filing. At the same time, and as you might have heard from the discussion between George and Dr. Belezikian a minute ago, the field of hypoparathyroidism is very wide and we are continuing to do our best to try and understand this field. So all this being said, is the feeling that some patients might benefit from a lower dose, and we made the decision to explore the lower dose through a small study, which we will conduct in time for the NDA filing. With that, I have really two objectives in mind. The first is to make sure that we offer the hypoparathyroidism patient the widest spectrum, if you will, of dosage as possible, of 558. But also the low dose might enable to tackle a patient for whom a 50, 75, or 100 might have been too much. This could be, possibly, the more moderate or mild patient. So it was not a single event as much as a desire on our part to strengthen our NDA filing and broaden the market.

John Stevenson – Summer Street Research

Okay, thanks. And for Dr. Belezikian, I was wondering if you might discuss – you mentioned symptoms in the last caller’s questioning. Would you comment on the rate at which people end up going into the emergency room for calcium infusions, or the rate of kidney stone formation, or other types of kind of less frequent symptoms of hypoparathyroidism?

Dr. John Belezikian

Yes, thank you Mr. Stevenson. I don’t know the rate at which patients are admitted for an emergency room for acute hypocalcemic events. It does certainly occur. In my experience, these patients tend to be the younger patients, but that doesn’t mean that even older patients can’t have that. Much more likely, however, are the symptoms of hypocalcemia, as you may or may not know, they can be as mild as just not feeling right. One of the things that we’ve been particularly interested in is the quality of life of these patients. In my earlier studies, we were impressed with how much better patients felt when they were provided with a parathyroid hormone, and this REPLACE study will try to get at this by assessing some parameters with psycho-metrics. But it can be very subtle and not really appreciated until the patient is actually treated. And then much more classically, of course, patients can have the numbness and the tingling. In my experience, I would say even when I have controlled the serum calcium, I would say still about 30 to 50% of these patients have something to complain about, that I believe might be related to their underlying disease.

John Stevenson – Summer Street Research

And actually just one last follow up on this. During the day, in patients for control, in a normal, healthy patient, how much do their parathyroid levels change during the day? In a healthy individual?

Dr. John Belezikian

Thank you, Mr. Stevenson. There are three elements to that dynamic. One is that parathyroid glands continuously produce a very low level of parathyroid hormone, just like our pancreas’ produce a low level of insulin. As is true for many hormones, there is what we call a diurnal or a circadian rhythm. Levels tend to be a little bit higher in the morning, a little bit lower in the afternoon, and then there’s the last component, which is the classical endocrine piece, and that is what we call random or stochastic pulses to parathyroid hormone. So that’s what happens during the day in the usual patient, but if you get to the measurement of parathyroid hormones in a given person, that doesn’t vary very much, from day to day.

John Stevenson – Summer Street Research

Okay, thank you.

Francois Nader

John, to add a comment maybe to Dr. Belezikian’s comprehensive answer, in our market survey, it appears that around 30% of the physicians surveyed – let me rephrase that. Of the physicians surveyed, 30% had patients who would need to go to the –to get IV calcium. So within a period of 12 months, when we asked the physicians how many of your patients need this IV Calcium, the answer was 30%. Again, this is market research and certainly that is by physician.

John Stevenson – Summer Street Research

Okay. Thanks.

Operator

Your next question comes from the line of Marco Kozul with Thinkequity. Please proceed.

Marco Kozul – Thinkequity

Good morning, and congratulations on your progress. Dr. Belezikian, a question for you. What are your expectations on when we’ll see data from the REPLACE study?

Dr. John Belezikian

I think Francois can answer that question better than I can.

Francois Nader

I will take that answer here. As we said, we will complete the enrollment by the end of the year. We’re planning to complete the organization by the early Q1, but we cannot be more specific because the optimization/stabilization phase goes over a period of nine weeks. However, the protocol allows patients to recycle one more time, and with that the period could go up to 16 weeks, so our case would very much depend on the last patient and the time that patient will take to get to the randomization phase. Now, the study itself will be 38 weeks, so we will add say seven months to Q2. So based on this map, we are looking at top line results toward the end of 2011 or early, very early 2012. And as we did for STEPS, actually we made a decision to continue enrolling patients until patients number 110, is randomized. Again, this is in an effort not to miss the target by one or two patients, because as you know, the enrollment number is very much dependent upon the number of dropouts between screening and randomization. All this to say, Marco, that you are looking at top line results, as I said, toward the end of 2011 or very early 2012.

Marco Kozul -- Thinkequity

Okay, great. Thanks for that answer. Also, a quick question about GATTEX, and when you might launch additional market expansion studies, such as (inaudible)?

Francois Nader

This is something that we’re looking into, and we will report more on next year, when we have top line results. You can imagine given our resources and given the portfolio that we have, we thought it would be well advised to defer any additional indications until we have anchored, if you will, the GATTEX with the short bowel syndrome adult indications. So stay tuned, this is something we’ll be talking about next year.

Marco Kozul -- Thinkequity

Perfect. And just a last one on the (inaudible) study, if you have any update for us.

Francois Nader

Nothing more than the public information available, that the study would be completed in 2011. That’s all we have here.

Marco Kozul -- Thinkequity

Okay, thanks for taking my questions.

Francois Nader

My pleasure.

Operator

Your next question comes from the line of Leah Hartman - CRT Capital. Please proceed.

Leah Hartman - CRT Capital

Good morning everyone. Luke, you know what my question is.

Luke Beshar

Good morning. Yeah, I can guess. Total debt at the end of Q3 was $344 million. $43 million represented current portion of the A bonds, and on the balance for long term was $251 million, of which 50 was the five and two-quarters convert, $161.4 is the B bonds, $3.1 million is the A bonds, and then we have $86 million between Preotec and REGPARA.

Leah Hartman - CRT Capital

Then I have a question, you mentioned that the A net should be gone in Q1 of ’11. Do you have an option to pay the series B in cash, and if so, at a lower rate? I don’t remember.

Luke Beshar

You know, I’d have to check. I don’t know if there’s an option for pre-payment. There probably is, but I’d have to look at that.

Leah Hartman - CRT Capital

Okay. And then following on to just a reminder, on the relationship – maybe this is for you, Luke, and maybe for Francois. I’m not sure. With respect to your partnering, if you will, for GATTEX, is there a right of – or first look on the part of the partner for taking GATTEX into other indications? Or is that all retained by an ownership standpoint by NPS?

Francois Nader

The way the agreement reads, Leah, is the agreement entertains the options of having additional indications for GATTEX and identified the two or three indications that were the most plausible when we signed the agreement with Nycomed. The way the agreement works is every company can separately decide to go their own way, with different indications. However, if we and Nycomed decide to collaborate on one specific indication, they would pay 50% of the development cost, so it would be a co-development. So far, our relationship with Nycomed has been excellent, and frankly, we are in daily contact with them on short bowel syndrome, and also on other opportunities. So again, stay tuned. I think they and us are waiting to hear about the top line results for short bowel syndrome before embarking on any additional new development. This being said, just to complete my answer, the European authorities require any new chemical entity filing to have a pediatric investigative plan, and this is something that Nycomed took care of, and has filed to EMEI, so they have a plan for a pediatric SBS.

Leah Hartman - CRT Capital

And has that already been approved for the study parameters?

Francois Nader

The pediatric, the test has to be approved before filing.

Leah Hartman - CRT Capital

Okay, got it. Thank you very much for the clarification.

Operator

Your next question comes from the line of Ryan Martin with Barkleys Capital. Please proceed.

Ryan Martin – Barkley’s Capital

Good morning, and thanks for taking the questions. First one, on GATTEX, you’ve reported typically reductions based on the actual patient use data. Just curious, from the prior study if you have looked back and seen what the correlation is between the actual patient use data and the physicians prescription data?

Francois Nader

What we have – we did not report the specifics, but fair to say that the data that you have seen are indeed patient use data. However, we also captured the prescriptions, more often than not, unfortunately, there was a delta between prescription and actual use. In general, if you will, when we look at the data from the first study, it appeared to us that in general patients tend to be more aggressive than the physician when it comes to reducing parenteral nutrition. So that was really what we saw the first time around. We cannot report on the current data, but fair to say that given the close relationship we have with the different sides, given the fact that we have more experienced investigators now, given the fact that we have in our protocol the opportunity, or the option, if you will, to reduce parenteral nutrition by up to 30% at each monthly visit, we believe that physicians might be more aggressive this time around reducing parenteral nutrition, and therefore there might be a closer correlation between prescription and use. But time will say; too early for us to know at this stage. So that’s what we think will happen, but the data will speak.

Ryan Martin – Barkley’s Capital

Thanks for providing that color. Next question I had, I just had something on Sensipar’s evolve data. How do you see the evolve data in any way changing or impacting your long term focus for Sensipar?

Francois Nader

Based on third party market research, evolve data might I would say enhance the market potential of Sensipar. We believe, again, based on the market research that was conducted that negative evolve will not affect the Sensipar structure of sales. So it will be an upside, if the data’s positive. We don’t believe, again, according to third party, that this will be negative if the data does not show what was intended.

Ryan Martin – Barkley’s Capital

Okay, thanks. And then finally, just on the preclinical (inaudible) packaged for GATTEX, I believe you have a second rat carcinogenity study ongoing. Maybe if you can just give us an update on your preclinical (docs package)?

Francois Nader

Yes, more specifically, we have a second carcinogenity study in mouse, the FDA requires two carcinogenic study for any new MC and they require these studies to be conducted in two different species. We conducted the first one in Wistar rat, we communicated the results to the FDA, and then worked with the FDA for the second carc study, and this was done back in ’09. The study was initiated, the second study was initiated in ’09. It will take probably three and a half years to complete, by the time you initiate the study and you have the study report. But the study dosing itself is two years. But also, what we felt was really positive was in discussing with the FDA, they accepted that the second study be a post marketing commitment, so it is not a pre-requisite for filing, which was very, very good news for us, from an execution perspective. So we will be filing hopefully by mid next year, and we’ll report the results of the second carc study when it will be available, which probably will be after the product is approved.

Ryan Martin – Barkley’s Capital

Yeah, thanks for taking my question.

Francois Nader

Sure, thank you.

Operator

Your next question comes from the line of Oyun Tou (sp) with Citi. Please proceed.

Oyun Tou – Citi

Hello, this is Oyun Tou calling in for Lucy Lung. My first question is actually for Dr. Belezikian. Of the 60,000 or so patients who have hypoparathyroidism, what percentage would you say are candidates for 558?

Dr. Belezikian

Thank you for the question. That question has been asked many times, and I don’t want to be glib in my answer, but I think 100% are. I mean, everybody needs what they’re missing, and obviously that’s an unrealistic answer. Not 100%, there are, I would say – and this is based on not very well substantiated data, but there is a minority of patients, I would say around 20% or so, who are actually quite well controlled on Calcium and at modest doses. Not the doses I was alluding to earlier, where there are long term concerns. So of that number, 64,000 or whatever the number is, I would say the vast majority of those patients would benefit from this drug.

Oyun Tou – Citi

Okay, great. Thank you so much for that. And actually, in terms of the market research that you’ve done, how many patients actually carry the diagnosis of hypoparathyroidism versus hypocalcemia and what percentage of these patients had prior neck surgery?

Francois Nader

Very good questions. I don’t have the data in front of me. This is something we can follow up with you on. Obviously we have the numbers, but I don’t have them in front of me here. We’ll be happy to follow up with you on this question.

Oyun Tou – Citi

Okay. And then in terms of REPLACE study, can you tell me what percentage of patients develop the hypercalcemia, and does the trial design allow you to dose down?

Francois Nader

A couple of answers. The first is the fact that the study is blinded, and yes, we can dose down. So the way the study works is we have a patient up between each step, if you will, takes about a couple of weeks, the study is titrated up. But then if we feel that the level the patients will be at is too high, the study allows for a titration down. That’s how I can answer the question. Roger, do you have any additional information that you might want to share?

Roger Garceau

Again, this is where there’s a target calcium of eight to nine that the patients are titrated to, and the calcium – the institution of PTH is done simultaneous to the withdrawal of both calcium and active Vitamin D that Dr. Belezikian talked about. Of course, you do that over the course of several weeks with a goal of hitting the serum calcium of about eight to nine, which is slightly lower than you or I’s normal calcium range. That’s how you would titrate the dose of PTH, after you titrate the calcium and Vitamin D, depending on response.

Oyun Tou – Citi

Okay, great. Thank you so much

Operator

Your final question for today’s event comes from the line of Alan Carr with Needham & Company. Please proceed.

Alan Carr – Needham & Company

Hi, thanks for taking my question. It’s actually for Dr. Belezikian. I’m curious whether or not there’s any difference in need between hypoparathyroidism in patients that – in other words, surgical origin versus autoimmune. Is there any difference in need there, for replacement therapy?

Dr. Belezikian

Mr. Carr, thank you. That’s a very good question. I used to think there was, I used to think that patients with post surgical hypoparathyroidism, which is the majority of our patients, have more disease, if I can put it that way. They are harder to control, measuring very low parathyroid hormones. They’re even lower, if they can be lower, than the autoimmune form. But I don’t think this is holding up. In fact, I’m sure it isn’t holding up, anymore. So I think the current answer is I don’t think – and the data support this, that there is a clinical distinction to be made between the post surgical hypoparathyroidism patient and those who have hypoparathyroidism due to autoimmune disease.

Alan Carr – Needham & Company

Okay, thank you very much. You seem to be a pretty big advocate for widespread use. How realistic is that?

Dr. Belezikian

Francois, you want to take that one?

Francois Nader

Well, it would be as realistic as our effort to communicate and educate the patients. It will be as realistic as having a product that works and if they – and frankly, it will be as realistic as the effort to have patients that understand their condition, but also having physicians that will diagnose hypoparathyroidism. I can tell you that in the field of hypoparathyroidism, Dr. Belezikian is one of the exceptions, because when you talk to other physicians, even endocrinologists, many of them do not understand hypoparathyroidism, many of them do not diagnose hypoparathyroidism early enough, and many patients wander from physician to physician, different specialties and many years before finding someone who really understands their condition. As you might recall, there is a neurological component to this condition, and patient characterize it as brain fog, and the most advance cases, these patients suffer from psychosis, and unfortunately we’ve seen patients that could go to the route of being treated by psychiatrists before one physician one day uncovers the hypoparathyroidism diagnosis. So all this will rely a lot on what the product could be delivered, as always, but we are in a data business. But also to rely on our efforts to maximize the market through education, through awareness, through training, and that’s what we are up to doing.

Alan Carr – Needham & Company

Alright, great. Thanks for taking my questions. I appreciate it.

Operator

I would now like to turn the call back to management for closing remarks.

Francois Nader

Alright. Well thank you for a very, very interesting and very key questions. This was a very interesting interactive session, and again, thank you Dr. Belezikian for joining us on today’s call. Your insights were, as usual, very, very valuable. In closing, let me just say that NPS continues to be very well positioned with multiple shots on goal, and multiple value drivers on the horizon. We look forward to providing you additional updates on the business in future quarterly calls, and thank you again for your participation today and have a great day.

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