XOMA's (XOMA) CEO John Varian on Q2 2014 Results - Earnings Call Transcript

Aug. 7.14 | About: XOMA Corporation (XOMA)

XOMA Corporation (NASDAQ:XOMA)

Q2 2014 Earnings Conference Call

August 7, 2014 4:30 p.m. ET

Executives

Ashleigh Barreto – Head-Investor Relations

John W. Varian – Chief Executive Officer

Paul D. Rubin – SVP-Research and Development and Chief Medical Officer

Frederick Kurland – Chief Financial Officer and Vice President-Finance

Analysts

Jason Kantor – Credit Suisse

Ted Tenthoff – Piper Jaffray & Co

Adnan Butt – RBC Capital Markets

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

George B. Zavoico – MLV & Co

Operator

Good day ladies and gentlemen, and welcome to the XOMA Corporation’s Second Quarter 2014 Financial Results Conference. 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 call is being recorded.

I would now like to turn the conference over to your host for today, Ashleigh Barreto, Investor Relations at XOMA. You may begin.

Ashleigh Barreto

Thank you, operator, and good afternoon everyone. Joining us on the call today are John Varian, Chief Executive Officer; Paul Rubin, Senior Vice President, Research and Development, and Chief Medical Officer; and Fred Kurland, Vice President, Finance, and Chief Financial Officer.

Before we begin, I’d like to remind everyone that this conference call will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will undertake no obligation to revise or publicly release results of any revisions to these forward-looking statements in light of new information or future events.

Factors that could cause our actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and other SEC filings.

I’d now like to turn the call over to Fred.

Frederick Kurland

Thank you, Ashleigh, and good afternoon everyone, we do appreciate you joining us today. Before I review our second quarter financial results, I want to get one item out of the way. As you may seen, we amended our previously filed Form 10-K for the first quarter 2014 to correct an error in the calculation of diluted loss per share reported for that period. As stated in more detail in our filings, the correction is in connection with how we have to account for the warrants we issued as part of the financing that we completed in March of 2012.

As you may know we’re required to account for these warrants as a liability and this estimated liability re-valued every quarter because we reported a gain associated with this liability in the first quarter of this year for the time, we will require to apply an opposite assumption in the calculation of diluted earnings per share that is, we’ll require to assume that the warrants were not a liability but rather were equity. As a result our calculation of diluted earnings per share which was done in a manner consistent with our previously filed 10-Q turned out to be incorrect.

In the amended Form 10-Q for the first quarter of this year, we’re correcting that error. I want to be clear that the correction has absolutely no impact on our previously reported condensed consolidated balance sheet, net loss, basic loss per share of common stock or the condensed consolidated statement of cash flow. Furthermore, the correction does not impact any other previously reported periods. On the face of the financial statements the only thing that has changed is the calculated diluted earnings per share.

Now, I’d like to talk about what really matters that is, how we focused our spending in the second quarter to advance our clinical development programs particularly in EYEGUARD Phase 3 program and the actions we’re taking to ensure XOMA achieve its goal of becoming a commercial operation, selling products to the specialist prescriber in the United States. So, let’s turn our attention to the financial results.

For the three months ended June 30, 2014, we recorded total revenues of $6 million, compared to $7.2 million during the corresponding period of 2013. The revenues for the second quarter of 2014 reflect $2.4 million in lower reimbursements from SERVIER, compared to a year ago.

Under our agreement SERVIER paid the first $50 million of all non-infectious uveitis development cost, after which all costs are shared equally between the two partners. We reached that $50 million spending level during the third quarter of 2013, since that time each partner has incurred non-infectious uveitis costs that are approximately equal to each other, resulting in a reduction in the reimbursement from SERVIER. This reduction in the SERVIER reimbursement this quarter was partially by a $1.1 million increase in NIAID reimbursements.

Our second quarter 2014 research and development expenses were $19.6 million compared to $17.1 million in the corresponding 2013 period. The second quarter of this year had $1.4 million in higher cost associated with gevokizumab clinical and other development activities, and an increase of $1.1 million in personnel costs which include a $0.5million increase in non-cash stock-based compensation.

Our selling, general and administrative expenses were $5.2 million and $4.1 million for the 2014 and 2013 quarters respectively. This increase of $1.1 million primarily reflects an increase in the charge for non-cash stock-based compensation of $800,000.

For the second quarter ended June 30, 2014, XOMA had a net loss of $11.9 million, which included an $8 million gain in the non-cash revaluation of contingent warrant liabilities. Excluding the revaluation, our net loss for the second quarter would had been $19.9 million.

In the quarter ended quarter ended June 30, 2013 we had a net loss of $17.2 million including $1.8 million charge in non-cash revaluations of contingent warrant liabilities. With that the revaluation, the 2013 second quarter net loss would have been $15.5 million.

On June 30, 2014 we had cash, cash equivalents, and short-term investments of $75.9 million compared with $121.6 million at December 31, 2013. Our second quarter cash burn was on target with our internal expectations and we are on target with our full year guidance of an operating burn of $55 million to $60 million for the full year, which includes the expectation that we’ll receive license and contract related revenues during the year. This expectation is consistent with our history of entering into such agreements regarding our assets and programs at XOMA.

I’ll turn the call over to John for an overview of our operational highlights for the quarter. John?

John W. Varian

Thank you, Fred. I like to thank everyone for joining us today. I want to spend our time together to detail the actions we’re taking to drive XOMA to our first BLA filing for gevokizumab. We await the EYEGUARD-B, Behçet’s uveitis has faced three trials to hit the targeted number of exacerbation that allows our partner SERVIER to unmask the data.

During this time we’re taking some very specific steps all directed toward giving us the most control over our own future. What does this mean? We’ve implemented a number of activities that we believe will allow us to submit our BLA for gevokizumab for the treatment of Behcet’s uveitis. This of course, is predicated upon positive data from EYEGUARD-B. All of these actions bring us closer to realizing our corporate goal to establish XOMA as a commercial operation, selling our own products to the specialist prescriber in the United States.

We’ve been granted orphan designation for Behcet’s disease. Behcet’s uveitis is actually an ultra orphan slaying terms since they’re 7,500 patients who are believed to suffer from this disease in the U.S. Current treatments with corticosteroids or other off label medications need to be approved upon, as they each carry side effects that impact the patient’s quality of life and may lead to long-term complications.

Importantly, the pyoderma gangrenosum indication for which we’ll soon a pivotal Phase 3 program with gevokizumab matches Behcet’s uveitis very nicely in terms of the need for better treatment and the patient population. Between 11,000 and 14,000 patients were treated in the U.S. for pyoderma gangrenosum in each of the past several years.

But let me start by focusing on our plans to move forward with the gevokizumab BLA and Behcet’s uveitis. Last fall we told you we plan to request a pre-BLA meeting with FDA once we have our data in Behcet’s uveitis patients from the EYEGUARD-B study. Our strategy is to meet with the FDA to review the Phase 3 data together with the data from the two Behcet’s uveitis Phase 2 studies conducted by XOMA and SERVIER.

The goal of our planned meeting is to determine what further information is necessary to submit a BLA for Behcet’s uveitis. Based on feedback today, we knew it was likely that we would be required to conduct a small study in U.S. patients to supplement the data of SERVIER and we generated outside of the U.S.

Since last fall our uveitis clinical team has established relationships with specialists in United States which read a significant number of Behcet’s uveitis patients. We’ve listened what each desired in gevokizumab clinical trial and is very small patient population. We compiled the insights generated from our conversations and created a uniquely designed Behcet’s uveitis clinical protocol. The protocol design is in line with feedback we previously received from FDA. We then shared the protocol with the same specialist and solicited their feedback on the design which we integrated into the final protocol.

I’m glad to report that we’re now ready to proceed with the study and Paul and his team designed with these key clinicians. The effort our team put into establishing an open dialogue with these physicians, the ones who see large number of Behcet’s uveitis patients in the U.S. was invaluable. We’ve gotten the sense of the physicians with whom we worked are excited for gevokizumab study to launch. The study will be called EYEGUARD-U.S. in keeping with the franchise.

We expect to open approximately 10 centers and enroll up to 28 patients. Paul will cover the specifics of the study in a few moments. We’ll let you know when the first patient has been enrolled. So, should EYEGUARD-B successfully demonstrate the patients receiving gevokizumab took longer to exacerbate in the placebo treated patients during the tapering of the steroids, we believe we’ll be in position to begin the BLA submission process. We will use SERVIER in our Phase 2 data results to further support our discussions with FDA.

We believe the seriousness of this disease and the very small patient population warrant consideration for approval on a single pivotal study, the significant precedence for regulatory approval based upon a single study for indications of similar seriousness in patient populations. The EYEGUARD-U.S. results are intended to potentially supplement our BLA submission further validating our response.

So, let me be clear by summarizing our regulatory plans. We’ll use the EYEGUARD-B data from SERVIER’s pivotal on Behcet’s uveitis outside the U.S. to request a pre-BLA meeting once we have the EYEGUARD-B data. The FDA typically grants these meetings within 60 to 90 days.

Secondly, Paul and the team at XOMA’s SERVIER have performed an excellent deeper analysis of the Phase 2 data we’ve generated in 28 non-U.S. patients with Behcet’s uveitis. These supportive data will be included with the results from the EYEGUARD-B pivotal study for discussion at the pre-BLA meeting. Again, we plan to ask FDA if we can seek approval in Behcet’s uveitis based on these datasets.

Since it is very possible that supplemental data in U.S. Behcet’s uveitis patient may be necessary we’re launching EYEGUARD-U.S. in advance of our meeting with FDA. The supplemental EYEGUARD-U.S. study may be used in one of several ways. It may not be required for the initial BLA submission so that it merely provides further information as to U.S. physicians and patients’ experiences with gevokizumab. It may be required for FDA’s review of our submission, but for informational purposes without being considered a pivotal study. In this case the study would be unmask at a predetermined time when we’re in a position to submit the BLA.

Lastly, it may be required by FDA as a second pivotal study of U.S. Behcet’s uveitis patients in order for FDA to accept our submission. We’ve designed the EYEGUARD-U.S. study in a way that it can fulfill whatever directive we’re given. So, we’re prepared to respond as quickly as possible to any of the anticipated outcomes from our pre-BLA meeting. Of course, all these regulatory actions can only start once we have the EYEGUARD-B data in hand. We continue to close-in on the exacerbation to let that happen. And as we’ve said, we’ll announce that event.

I know you would anxiously await the results of EYEGUARD-B, but we will not wait. We’re moving forward now to develop the package necessary to seek our first approval of gevokizumab.

I do want to stop and thank Paul Rubin and our clinical team for their dedication to get this program launched in such a thoughtful manner.

Moving to pyoderma gangrenosum, during our first quarter call, we talked about our clinical plan. We’re coming to the end of the FDA’s 90 comment period and our team is ready to submit the protocols to IRBs as soon we hear back from the agency. Should the FDA have further comments, we will address them with the same experience we addressed their initial meeting comments. This is an important indication, the more we talk with dermatologist who is specialized in pyoderma gangrenosum, the more aware we are of how debilitating this ultra (inaudible) disease is.

While our clinical teams gets XOMA closer to submitting its first BLA foe gevokizumab, we’ve built the marketing leadership to ensure we meet the needs of the payers, the patients and the medical staff to treat both Behcet’s uveitis and pyoderma gangrenosum patients. Tom Klein joined XOMA as our Chief Commercial Officer a little over a year ago. He has built a team of several highly talented people. I was impressed that his first hire was a payer relations reimbursements expert. This reflects the importance of that skill base in our space today. I have been working closely with the marketing team and I am confident we will be prepared to commercialize gevokizumab should the FDA grant us approval to bring into the Behçet’s uveitis and the pyoderma gangrenosum communities. All these decisions and steps are directed towards singular goal to put our faith in our own hands as much as possible. If data support it and we execute well we can begin to realize the vision we established for XOMA in 2012.

I will turn the call over to Paul to review the study designs for Behçet’s uveitis supplemental study and give you some more specifics on the PG study. Paul?

Paul D. Rubin

Thanks John and good afternoon everyone. As John stated, I will review the EYEBUARD-U.S. study for you then I will provide a little more color on the pyoderma gangrenosum pivotal study designs. I will also tell you about the expert data we presented at the ADA and in ENDO. As you heard we designed the EYEBUARD-U.S. study as a supplemental study to support our Behçet’s uveitis package and allow BLA submission. It is a randomized double mast placebo controlled trial. We will be enrolling patients whose uveitis has been brought under control either by gevokizumab in open label manner or alternatively by other anti-inflammatory agents. These patients maybe controlled by corticosteroids or infliximab. Patients who present while under controlled by other therapies will be switched to gevokizumab and continued inactivity of disease will be documented over an additional one month period.

EYEBUARD-U.S. will enroll up to 28 patients, 14 per treatment group who will be randomized in a one-to-one ratio. Once patients are documented to be stable on gevokizumab, they will be designated to continue to receive 60 ml of gevo subcutaneously once monthly or a matching placebo control. The primary end point will be the time it takes the patient to exacerbate after randomization.

Patients will be stratified based up on whether active disease was brought under control with gevokizumab or if initial remission has been induced by the use of infliximab or other agents. Once randomized, exacerbations will be measured during the withdrawal phase of the trial. The primary end point of EYEBUARD-U.S. is timed first ocular exacerbation defined with the number of days from randomization to this first exacerbation.

This is an exciting study for the Behçet’s uveitis specialist and for us. When we held our investigators meeting in June, we shared the design and anyone interested in participating as an investigator to see us at the break. We are so much surprised and very encouraged that the shared number of physicians who want to be part of this study.

Now let’s quickly talk about the Phase 3 program for pyoderma gangrenosum. One of the two studies will be conducted only in the United States and the other study will be conducted in the U.S. and several other countries. Each will enroll approximately 58 patients who will be randomized one-to-one to receive 60 ml of gevokizumab or placebo once monthly subcutaneously. The primary end point is complete healing of the target ulcer and approximately day 124.

We will be capturing multiple secondary end points including time to ulcer closure and changes in pain measures. We await the FDA final comments and my team is ready to submit the protocols to the IRBs at the U.S. site and submit them to the non-US regulatory authorities for permission to proceed. Over the past few months I have been meeting with non-U.S. investigators who have confirmed the medical need outside the United States and their excitement to participate in our trial.

Before I conclude my remarks on gevokizumab I will quickly address the status of EYEBUARD A and C. we continue to aggressively support enrollment to the U.S. sites including frequent visits by our executive team to these sites. This outreach is showing good results and has resulted in an increasing pace of patient enrollment in both studies. The team has committed to continue spending time conducting more of these meetings until the studies are completed. At the same time SERVIER is continuing its work to open sites and give patients enrolled in EYEBUARD A and C. Now unfortunately there are still some challenges in getting sites open and enrolling in the critical countries of Argentina, Armenia, Brazil, Mexico and Turkey. All of these sites were supposed to be enrolling several months ago, but only half of albeit. Every day of delay increases the risk of not achieving our goal completing the EYEBUARD study at the end of the year. But we continue to work with SERVIER and got these sites open.

Our results in EYEGUARD A and C are important since positive results either will allow us to expand the Behçet’s uveitis label we are pursuing to the broader and NIU population.

Now let me turn to the XMet program. The data we presented in ADA and ENDO in June. Dr. (inaudible) our senior toxicologist at XOMA gave an oral presentation and a poster at the ADA. The oral presentation was titled XmetA, a Novel Insulin Receptor Activator is efficacious in Glycemic control and Rhesus Monkeys with naturally occurring Type 2 Diabetes. Spontaneous Type 2 Diabetes develops naturally in these non-human premeds and the disease shares similarities to human thus representing the most clinically relevant animal model diabetes. We tested XMet’s ability to treat diabetes in six diabetes Rhesus Monkeys. XMetA was administered subcutaneously at single escalating doses. The study showed XMetA reduce fasting blood glucose level in diabetic monkeys both dose and time dependently.

One day following administration XmetA substantially and significantly reduced 18 hour testing blood glucose value by an average of 30.7%. The glucose lowering effect of XMetA lasted for 15 days. In addition we observed a trend toward the reduction in glucose levels as well. We did not observe XMetA mediate with hypoglycemia defined as blood sugar less than 40 ml per taco liter nor systematic hypoglycemia in any of the diabetic animals up to a dose of 30 ml per kilogram indicating a wide therapeutic index for XmetA.

Based upon the results in these six months we are now investigating the efficacy and the durability of XMetA and weakly dose repeat study which is long term in these diabetic monkeys. Together with our previous results and good knowledge of diabetes our current finding demonstrate that XMetA reduces blood glucose levels without observe hypoglycemia in spontaneously diabetic monkeys. Ultimately we hope XMetA could provide a novel and improve alternative for diabetic patients.

We are using these data generated with XMetA for further partnering discussions such as firm partner can take this antibody to clinical development and commercialize it. Turning to the end though, XOMA presented a poster on our XMetD compound. The poster titled XMetD in an Inhibitory Allosteric Insulin Receptor Monoclonal Antibody is efficacious for the treatment of Hyperinsulinemic Hypoglycemia in Rats. Endogenous Hyperinsulinemic Hypoglycemia disorder such as insulinoma and congenital hyperinsulinism are severe disease of access or inappropriate insulin secretion that often are resistant to current medical treatment. XMetD is an Allosteric monoclonal antibody that selectively binds with IFNE to the insulin receptor and antagonizes insulin dependence signal.

We employed subcutaneously and planted osmotic mini pump secreting insulin which maintains the stained and stable reduction of blood glucose levels in rats. We then conducted a single dose escalating injection of XMetD. The study demonstrated XMetD increases blood glucose levels and a dose in time dependent matter. Serum levels of XMetD showed dose proportionality with the terminal half way on approximately one week. We then used kinetic pharmaco dynamic modeling to simulate the relationship and we expect serum exposure in blood glucose levels.

Additionally an eight week studies of rats and insulin mini pumps we have shown therapeutic administration of XMetD twice weekly increase blood glucose in a dose related fashion throughout the dosing period. Taken together our results suggest XMetD has potential to prevent hyperinsulinemic hypoglycemia a highly morbid state in diseases of children and adults. We are excited to move expertise into the clinic and believe we will file an IND in 2014.

I will now turn the call back to John for closing remarks.

John W. Varian

Thanks Paul. This is an incredibly exciting time for us here at XOMA. We are driving gevokizumab towards first BLA filing. We will have the top line data from the EYEBUARD B data approximately 6 weeks after the study reaches a targeted exacerbation. This will give us the first data from the global phase 3 program in non-infectious uveitis. As I said we are not waiting. We are implementing steps that will allow us to submit gevokizumab BLA in Behçet’s uveitis patients by conducting a small study in the U.S. to supplement the two phase two studies that have been completed and the EYEBUARD B data. We also have a clear path forward in our next pivotal indication for gevokizumab, pyoderma gangrenosum. And we will be launching the phase 3 program as soon as we receive the FDA's final comments to our protocol. We are taking our future into our own hands and we intend to see XOMA become a commercial organization bringing out products to the special prescriber based here in the U.S.

Operator we will open the call for questions now.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Ted Tenthoff of Piper Jaffray. Your line is open.

Ted Tenthoff – Piper Jaffray & Co

Great. Thank you very much. Can you hear me okay

John W. Varian

Yes Ted we can hear you fine.

Ted Tenthoff – Piper Jaffray & Co

Excellent I apologize for the little background noise. When it comes to the PG study, do we know what primary end point might be and how long will be treating for that phase 3 study?

John W. Varian

Yes, the primary end point is one that we have selected based upon the FDA's guidance on the treatment of skin ulcers which is complete at the utilization or complete closing of the wound. We have chosen and approximately four month period for this to occur based on our initial data and some of the guidelines as per FDA guidance. So it's number of patients that completely close their wounds placebo versus active after a four month period.

Ted Tenthoff – Piper Jaffray & Co

Great that’s helpful and obviously with the pretty well characterized safety profile, how many patients you think would need in the phase 3 for BG?

John W. Varian

Well, the Phase three program is strictly based upon the numbers need according to our power calculation to show efficacy. The safety will be provided by this disease and other that include our studies in uveitis, the studies we’ve done on arthritis, so at the time of submission we will have somewhere between 1,000 and 2,000 patients in our safety data.

Ted Tenthoff – Piper Jaffray & Co

Thank you very much.

Operator

Thank you. Our next question comes from the line of (inaudible) of Cowen & Company.

Unidentified Analyst

Hi guys. This is Yadin calling in for Phil. Thank you for taking my questions. I have couple of questions. Could you tell us what percentage of events have already occurred in the EYEBUARD-B? I think the last time your update was 75% have already occurred as of May. Could you give us an update on that?

John W. Varian

Yes. So there is still a handful to go. So that’s exactly right. In May it was about 75%. We continue to close in on the final number and but we still have a few to go and it's going to happen when it happens. We had kind of in between phone call where I talked a little bit about that is lot of things kick myself, I can control in the world and we push SERVIER to control but these are going to happen when they do. So when we look at so let me just be a little more specific, when we look at the event rate and when those events typically happen the months when they typically happen and when we look at the final enrollment that SERVIER the patient final enrollment SERVIER had to complete the target enrollment we are within and we hope weeks of hitting the final exacerbation. So if you really look at the pace of enrollment when those patients enrolled and when typically the exacerbation happen and hopefully in the placebo group as you can imagine, it looks like we are weeks away, but it will happen when it happens. And so again we would love to be able to control it but we are getting closer but we are still not there.

Unidentified Analyst

Okay thanks. And then let’s say the FDA asked you to do the small study that you are planning to do, how quickly you think you can enroll and have the data ready?

John W. Varian

Well, the studies we are going to initiate even before we hear from the EYEBUARD B data. So we’re initiating that trial and it should acutely occur relatively quicker the first patient then. Again we won't know how fast this study enrolled until we get some history in it, what we do know is that we are already topping the positions because of the nature of the trial we can actually start to look through their patient records and identify patient's knowledge so to speak because again this is a study where patient can be enrolled at the time they are controlled. So that’s the majority the patients are in there. So the total numbers of approximately 28 were all – we have talked to the doctors in the United States to see these patients and already identifying patients for enrollment. And once we see how that rolls out we can give you some better estimates as to when we will finish.

Paul D. Rubin

Just one thing to add to that. We actually made this decision last spring when we -- that we were going to supplemental study and you might why did they take a few months to get to nailed down to the point where we really ready to go. Well there is a very good reason. If we get just sat here in Barkley, California protocol and provided the investigators we would not be in position to enroll the study as quickly as we hope we will be able to. But Paul and his team did in very careful manner was go out to the six or eight key clinicians in the U.S. who actually treat Behçet’s uveitis patients and worked with them to come up with the protocol that would let those physicians say yes I am going to put this patient into the trial and so because of that we think they have and we feel strongly they have specific patients they have identified who maybe are on other treatments and maybe controlled today which will be able to be moved over to gevokizumab study.

So because of the way that the team built the protocol with the people who are actually going to execute on the study, we think there is a good chance that pretty quickly we see a good enrollment of patients. But as Paul says we don't know how long it's going to take until we actually see that pace but we do think that with the work that’s done we work with the key men and women how are going to be the ones who are going to identify the patients and stick them in into the study.

Unidentified Analyst

Great. Thank you very much.

Operator

Again the next question is from the line of Jason Kantor of Credit Suisse. Your line is open.

Jason Kantor – Credit Suisse

Hi! thanks for taking my question. Couple of them have been asked, but I am just listening to the EYEBUARD-U.S. trial design I am just wondering if the idea here is take someone who is stable on another drug and just show that you can switch them and then do this discontinuation what’s – how do you make the case to payers to that this should be an orphan type drug pricing unless you are showing sort of a benefit above what they were already on just showing that someone on steroids who is stable can be stabilized on your drug or someone who is on Remicade and stable can be – can be stable on your drug. Why would people choose to pay more I guess, I assume you are going to charge more?

John W. Varian

Well, I think it's our belief and the belief of all of the care wells that we speak with that long-term high dose corticosteroids is an unacceptable therapy from the toxicity perspective the cost of the toxicity and the lack of acceptability to patient justifies a premium price which is true for virtually every biologic. Almost every biologic that’s on the market today is a steroid alternative and they continue to adjust premium prices for providing replacement for steroids. In Infliximab which is used (inaudible) is not approved and as far as I know they are not doing pivotal trial. So just obviously reimbursement is an issue but (inaudible) requires intravenous infusion on a regular basis. And as what we hope will be a safety profile that we have to show some improvements on as we get our higher numbers. So I think certainly the justification for gevokizumab is a treatment for Behçet’s uveitis we believe is very justifiable and we get agreement from the experts that we speak with.

Jason Kantor – Credit Suisse

And given that you have gone and spoken to all these docs and lot of the patients may already be identified what percentage of those do you think would be coming on the study with, in each of those two groups the (infusmab) and steroids and now you are going to stratify for that when you do the --?

John W. Varian

Yes, we are going to stratify for drug use for what they are at for the therapy that they are at. And not sure what the percentage is, it's difficult to know because a lot of this is off label so it's hard to appreciate that but I would say that majority of the patients that are stable would be either on corticosteroids or (inaudible).

Jason Kantor – Credit Suisse

Got it. Okay thank you.

Operator

Our next question comes from the line of Adnan Butt of RBC Capital Markets. Your line is open.

Adnan Butt – RBC Capital Markets

Hey thanks for taking the question. I am sorry to hop on this but for the Behcet’s study does it have to be U.S. only study, could it be U.S. ex-U.S. study would that help enrollment in any way and then secondly in terms of patients being on corticosteroids, how longer they are – do they have to be on steroids for certain amount of time? How would you determine when somebody is eligible basically? Thanks.

John W. Varian

Yes, they don't have to be on steroids for certain amount of time but obviously if they are on background corticosteroids, we want get them dosed down to what we think will be sub therapeutic dose by the time we switch them to gevokizumab. So the idea being that while they are maintaining the only active therapy that’s maintaining their disease is gevokizumab. So withdrawal makes sense. And in fact we have previously reported on gevokizumab withdrawal in our first cohort of 7 Turkish patients where if you recall that design, these patients had active disease were given doses of gevokizumab and then followed and they were followed approximately two months. The gevokizumab eventually fell to a sub therapeutic level and when no drug was on board, five out of seven exacerbated within about six week period. So we have some data which kind of model how this will go in terms of certainly the patients that are on placebo. So that gives us some encouragement that we can see a reasonable response with these 28 patients based upon that data. And to answer your question about the U.S. versus non-U.S. I mean one of the goals in this trial underlying everything is to show the drug works on Behçet’s uveitis patients in the U.S. But with that said, we will consider potentially once SERVIER is done with EYEGUARD-B potentially asking them to be able to use some outside the U.S., but the core of the study one of the core purposes of this study is to show U.S. patients who have Behçet’s uveitis respond in similar matter to non-U.S. patients.

Adnan Butt – RBC Capital Markets

Okay thanks.

Operator

Our next question comes from the line of Matt Kaplan of Ladenburg Thalmann. Your line is open.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

Hey guys. Thanks for taking the question.

John W. Varian

Sure.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

So what I am trying to get a sense of is can you talk a little bit about the time line to the Behçet’s BLA and also the time line for the PG program? And potentially two BLAs there, are these programs really kind of moving in parallel with respect to time line to BLA or is one before ahead of the other? Where are we with both of those?

John W. Varian

So let me start with a general comment then Paul can add. Absolutely the Behçet’s uveitis BLA is on a time line in advance so is the pyoderma gangrenosum BLA time line. As to the separation we do not know and we – the reason we don't know is because no one has ever done a Phase 3 study in pyoderma gangrenosum in the past. We are now at the point where we are actually contacting and identifying centers and actually getting ready to go since we have the FDA agreement, have the finalized FDA comments. But until we start enrolling that study we will not know what the pace of enrollment is going to be. And so, we know there is a separation, we would like the separation to be as small as possible, but we won’t know how quickly pyoderma gangrenosum those studies won’t roll until up and running in the centers and trying to get a pace now. Paul and the team have done great job of identifying not only centers in the U.S. but centers outside the U.S. where he and our head of regulatory she going out and actually met with the pyoderma gangrenosum physicians in places like Mexico and others.

And so, we’re pretty excited about the level of excitement they have, but until it starts enrolling we’re not going to have much of the sense. So, what we do like with the two indications fit together very nicely when it comes to patient need and size of patient population, but at the same time with BLA and Behcet’s uveitis should be in advance of the BLA and pyoderma gangrenosum. Paul, anything you want to add to that.

Paul D. Rubin

Recall that we are making the case there is a good basis for it that we can submit BLA for Behçet’s for single pivotal trial. So, in fact U.S. trials, supplemental and as John said one of the main reasons for it and obviously we will have continued dialog with the FDA is to show that patients respond in a similar manner to the pivotal trial. So again, the first foray and the first conversations with FDA will be to submit a BLA on the basis of the EYEGUARD-B trial and the present phase 3 trials that we have already completed.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

Yes right. So, I guess maybe another way to ask question if you are to take conservative approach EYEGUARD of the BLA and Behçet’s could be when and more aggressive as you just noted just on the single phase 3 when could that be and also PG program conservatively when could you, I understand there is not much moving parts but when could you be in position for BLA there?

John W. Varian

So on the Behçet’s uveitis BLA if we win the argument which we think we deserve to but doesn’t mean we will that the EYEGUARD B results plus the phase two data that we have generated is enough. We could BLA in the first half of next year. If we need to complete the full supplemental study to get a pivotal result, it would be later but we don't know exactly how much later until as Paul said we start getting this steady up and running. When it comes to conservative time line for PG, I am just unwilling to give one until we actually have a phase three enrollment. So I am not willing to just guess without any information. So once we have some enrollment incurring then we can start narrowing on some estimates for you but I am sorry that we just not in a position to do it today because I don't have enough information to forward the guess.

Paul D. Rubin

There is no historical precedent.

John W. Varian

What we know is we got six patients in three months Paul, but that doesn’t mean that – that doesn’t mean much.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

58 patients in each study?

John W. Varian

58 patients need to study and we will have sites both in U.S. and ex-U.S. and it will be at least 35 to 40 sites.

Paul D. Rubin

What I can say with confidence is, we will do it as fast as it can get done, how long that takes is what I don't know yet.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

Great. And then with respect to the XMet program can you give an update I guess on your licensing discussions for the XMetA and then in terms of did I miss your comment in terms of when you would be filing the IND at the end?

John W. Varian

So maybe Paul if you talk a little bit about what the XMetA package partnering package would look like we can start with that.

Paul D. Rubin

Our objective for XmetA was to prove that this compound was capable of controlling fasting blood sugar in spontaneously diabetic nonhuman primates. And what we intend to show after doing our studies with single and multiple doses that this drug works single doses and the effect lasts for at least a week that we see fasting blood sugars with subcutaneous dosage that occur rapidly and also are consistent over a long period of time that it works at an acceptable dose and that there is low potential for hypoglycemia other words the therapeutic index will be superior to that of insulin. So we think that we can have that data as part of our package and say we are in the process of completing these trials now and the studies represent at ADA proved that this drug does a lot of things that we were talking about.

And so, where we are in the process itself is, this a program we had in place and discussion over couple of years and if you remember we were having conversation on XmetA couple of years ago with some of these companies and we realizes, we weren’t been get the value that we think it’s worth without more definitive data and it became clear to us that what people needed to see was data in nonhuman primates.

So, we pulled it back, we are now generating these data in nonhuman primates we’ve got some of the early data which has been shared and again a nonhuman primates with same companies we were talking to a couple of years ago, they are excited about this final data to come. So BD team has got everybody queued up very well but we will do the deal when we get the right terms to do the deal. So I think we’ve got all the right people that we were talking to, I think we’ve got and fully engaged. I think we’ve generated the data that they really wanted and needed to be able to make a decision and it’ll happen the time when we get the right value to pull the trigger. So but the package itself is really almost completed this point in time.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

And then the XMetD IND.

Paul D. Rubin

Oh we said that that is this year. We’ll do that this year. I’m sorry, I forgot to answer that.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

And just one final question in terms of EYEGUARD-A and EYEGUARD-C in a new insight in terms of completing enrollment list?

John W. Varian

Sure, so we are not changing any of our guidance on that, July was actually the best we’ve ever had, alright? So it’s going okay but we’ve got deemphasize in today’s conversation because we are singly focused around doing what we have the most control over which is again getting towards this BLA in the Behçet's uveitis but we do need, we do need to SERVIER to continue to do better and getting sights open in these countries that matter a more, so what I can say for sure is everything that can be done in the U.S. by our team is absolutely being done. We are spending even is exactly there was a company, so in a great deal of timeout meeting with the clinicians and it’s having in effect. But for us to really get to the date that we targeted and again we think we can, SERVIER really have to kick it in these next several months. So the dates are at risk but if SERVIER can perform the way that we’d like them to we think we can achieve what we like. But what we were trying to do is the thing that we can control the most is around the Behçet's uveitis indication and that’s where really driving the company right now.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

And just remind us of those Behçet's targeting.

John W. Varian

So what we said is that we think we can get to the end point in EYEGUARD-A with a data to follow soon or after we hope by the end of this year but again this could that was really dependent upon SERVIER having some very good months coming up here and then with EYEGUARD-C we said early next year.

Matt Kaplan – Ladenburg Thalmann & Co. Inc.

Great. Thank you.

John W. Varian

Sure.

Operator

Thank you. Our next question comes from the line of George Zavoico of MLV & Company your line is open.

George B. Zavoico – MLV & Co

Hi and good afternoon everyone. A question about the PG itself, it’s kind of a heterogeneous disease but I’m not familiar with it to know exactly how heterogeneous with regard to conditions that are associated with it. Are you taking all PG or you preselecting to some extent?

John W. Varian

Yes, I think we are trying to look at classical PG, so you that you are right there are three forms of the disease, one is classical PG there’s an atypical form that includes kind of a postural or bullish form and there is also pyoderma gangrenosum that’s around stoma from gastrointestinal surgery. So we are limiting it to classic PG, we are trying to standardize the size because you don’t want too small because that’ll be difficult to show differential too large because of wouldn’t heal in the prescribed time that we are observing. And we are also making sure that the disease itself, it’s photographed and the diagnosis, the concurrent diagnosis may not only by the investigator but by experts in the area. So we are doing whatever we can to make it as imagine as is possible.

George B. Zavoico – MLV & Co

Sorry to interrupt. I was just going to say, treated corticosteroids too and some amount of immunosuppresses I mean in terms of homogeneity with regard to on treatment or off treatment or what treatment, are you selecting for that as well or you withdrawing current treatment and just going with gevo?

Paul D. Rubin

Yes, in all cases there could be an underlying therapy, but they have to show evidence of active inflammatory pyoderma gangrenosum. So essentially they fail with the drug. If they are on medication it has to be a stable dose, it can't be altered through the course of the trial but they have to have documented evidence of active disease despite being on other therapies.

John W. Varian

And one of the point when you ask about the three different forms Paul correct if this is incorrect but I believe it’s about 85% of the patients --

George B. Zavoico – MLV & Co

Yes that was going to be follow-on thank you for that. And by active disease do you mean the ulcer is actually enlarging?

Paul D. Rubin

There has to be evidence of enlarging and also evidence of inflammation includes the typical features of redness in duration and pain. So all those thing have to present. So it has to be viewed as being active as opposed to indolent when we look at.

George B. Zavoico – MLV & Co

Yes, okay, I see. So okay, great. And then I guess a question maybe for Fred, I noticed that you have like a doubling of your license in collaborative fees for last year? Is there, could explain little bit and whether that’s a continuing trend or what?

Frederick Kurland

These license fees come in on an irregular basis. So there is not much of a pattern that one can discern there, they are based on the totality of a whole lot of existing licensing arrangements and so sometimes milestones are met sometimes it’s just regular fees. So it’s, I don’t think it would be a good idea to draw the conclusion that it’s that there is a trend lying.

George B. Zavoico – MLV & Co

Okay but there also aren’t any new licenses formed or collaborations form, is there also some existing ones?

Frederick Kurland

That is correct.

George B. Zavoico – MLV & Co

Okay. Great. Thank you very much.

John W. Varian

Great. Thank you.

Operator

And I’m not showing any further questions at this time. I’d like to turn the call back to John Varian for closing remarks. You may begin.

John W. Varian

Oh great, thanks operator. So, you can tell from our comments that we are fully committed to this goal that we believe that we have the most control over and that’s driving ourselves to a BLA and Behçet's uveitis. When the EYEGUARD-B data come and the supplemental study is in place and up and running we think we will be in a position to do that.

So thanks everyone for listening today, we look forward to speaking with you again soon, thanks.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect, everyone have a wonderful day.

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