Chelsea Therapeutics CEO Discusses Q4 2010 Results - Earnings Call Transcript

Mar. 2.11 | About: Chelsea Therapeutics (CHTP)

Chelsea Therapeutics International, Ltd. (NASDAQ:CHTP)

Q4 2010 Earnings Conference Call

March 2, 2011, 4:30 pm ET

Executives

Kathryn McNeil – IR

Simon Pedder – President and CEO

Bill Schwieterman – Chief Medical Officer

Art Hewitt – Chief Scientific Officer

Nick Riehle – VP, Administration and CFO

Analysts

Robyn Karnauskas – Deutsche Bank

Jonathan Eckard – Leerink Swann

Liana Moussatos – Wedbush Securities

Andrew Vainos – Roth Capital Partners

David Blaustein – SuttonBrook Capital

Juan Sanchez – Ladenburg

Operator

Good day, ladies and gentlemen, and welcome to the Chelsea Therapeutics fourth quarter 2010 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Kathryn McNeil. Ma’am, you may proceed.

Kathryn McNeil

Thank you. Good afternoon and welcome to Chelsea Therapeutics fourth quarter and full year 2010 conference call. We announced our fourth quarter and full year 2010 results this afternoon after the close of the US financial markets, and our press release can be found on our website at www.chelseatherapeutics.com. Joining me from Chelsea is Dr. Simon Pedder, our President and Chief Executive Officer; Mr. Nick Riehle, our Chief Financial Officer; Dr. Art Hewitt, our Chief Scientific Officer; and Dr. Bill Schwieterman, our Chief Medical Officer.

Before I turn the call the meeting over to Dr. Pedder, let me note that some of the remarks that you hear today will contain forward-looking statements about the company’s performance. Actual future results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in our SEC filings and periodic reports under the Securities Exchange Act of 1934 as amended, copies of which are available on our website or maybe requested directly from the company.

With that said, I’m going to turn the call over to Dr. Pedder. Go ahead, Simon.

Simon Pedder

Thanks, Kate. Good afternoon, everyone. 2010 was a year of both remarkable clinical advancements and significant regulatory progress. The achievements made on both fronts combined with our recent financing activities positioned Chelsea for continued success and meaningful growth in the coming year, as we prepare for our first application for marketing in the US and look forward to expanding the potential therapeutic applications of our fall portfolio of drug candidates.

Over the course of the past year, we’ve successfully completed the clinical efficacy trials for our Northera registration program in neurogenic orthostatic hypotension, or NOH. With the exception of our planned QTc study, we’ve completed our clinical safety studies in NOH, which collectively provide not only a detailed assessment of Northera’s effect on blood pressure, but also a comprehensive look at safety of Northera treatment over prolonged treatment periods. And finally, we had a very successful pre-NDA meeting with the FDA to define the filing strategy for our Northera in our lead indication of symptomatic NOH.

In parallel to the achievements in our Northera NOH registration program, we continue to make meaningful advances on all of our ongoing clinical studies, including initiating Study 306, which we now expect to form the basis for supplemental NDA to potentially expand the future label for Northera to include the prevention of fall in patients who experience NOH in association with Parkinson disease; expanding the Phase II program for droxidopa to include not only our ongoing combination study in fibromyalgia but also several investigator sponsored studies that were initiated in 2010; and advancing our lead antifolate drug candidate CH-4051 through the initiation of a global Phase II trial in rheumatoid arthritis.

To take us through these achievements in greater detail and provide some insight to their impact on our strategic plans for 2011, I will first ask Bill to provide you with a review of the regulatory status and our expectations for the NOH program in 2011 and then have Art update you on our ongoing clinical programs and the data we expect to report in the coming year. Finally, Nick will take you through the numbers and provide you with an updated financial guidance for 2011. Bill, why don’t you go ahead and get us started?

Bill Schwieterman

Thank you, Simon. From a regulatory perspective, 2010 was a defining year for our Northera program. As you are all doubtless recall, we began 2010 with the expectation that we would need to complete two additional pivotal studies in NOH, one of which have not even yet begun, just to meet the requirements for one new drug application or NDA. Now just one year later, we believe we have met all of the filing and approval requirements for our first NDA and are well on our way toward establishing the basis for a second filing that can meaningfully expand the potential clients for Northera. L

Looking first at our primary NDA filing claiming, a symptomatic and functional improvement in the treatment of NOH with Northera, the basis of this application is rooted in the outcome of our pivotal 301 Study that we reported in September of last year. In this study, treatment with Northera demonstrated a highly significant benefit of a placebo in the OHQ composite score with a p value of 0.003.

On a standalone basis, a p value of 0.003 serves as sufficient statistical power for new drug approval. This is not unique to Chelsea or to our NOH program. The FDA has often advised sponsors of one study with a p value less than 0.001 is considered persuasive for approval, and p value less than 0.01 could be acceptable if there is good internal consistency, low dropout rates and other supportive data in an area where there is a high unmet medical need.

In this case, we not only have a p value of 0.003 on the study’s primary endpoint, but statistically significant findings, a majority of them at p less than 0.01 on eight of the 10 individual components of the OHQ scale and all three composite scores as well. These findings are also clearly supported by the findings from Study 302, in which the study showed a statistically significant benefit in three of the individual components as well as a statistically significant benefit in a post hoc analysis that the OHQ composite score, which has not previously been prospectively defined as an endpoint.

Factoring in the improvements we see in standing systolic blood pressure, the remarkable safety and tolerability of the drug, and the extensive preclinical and clinical package supplied by Dainippon Sumitomo Pharma, it is clear why during our pre-NDA meeting in December the agency supported the filing of our NDA based on the strength of the existing clinical data. We have a remarkably strong filing package.

In fact, in reviewing our proposed package, the only additional data requested by the agency was from the QTc Study that we agreed to conduct and supply during the 90-day safety review. As I said already, there was quite a lot of progress throughout the year, but in this case, it’s only part of the story. As we have discussed since the first anecdotal safety data emerged in Study 302 suggesting a decrease in the number of falls reported by patients taking Northera, we have an interest in evaluating the potential for Northera to prevent fall in patients with NOH and decided to incorporate this as a key secondary outcome measure in Study 306.

Following the highly significant outcome Study 301 of September, we became increasingly interested in a leverage of ongoing Study 306 to build out a future falls claim for the drug. This strategy crystallized for us following our pre-NDA meeting and agreement with the agency to file for approval of Northera in symptomatic NOH prior to the conclusion of Study 306. Of course, this plan became truly viable a few weeks ago when we got our first glimpse at the falls data being generated in Study 306.

While the regulatory path for a supplemental NDA for falls was not as advanced or nearly as well defined as that for our primary NDA in NOH, we believe the extraordinary 60% reduction in falls we saw in the 52 patients to complete Study 306 demonstrates the remarkable benefit of Northera in preventing falls, as well as a positive threshold for improvement that the FDA would require for a therapeutic claim with such clear-cut patient benefit.

While we have yet to discuss the specifics for claims stemming from Study 306 with the FDA, we believe a 15% to 20% reduction alone in falls would be meaningful and merit in additional claims. As we look ahead to how this takes shape in 2011, we are right now very focused on finalizing our protocol amendment for Study 306. This protocol amendment will effectively split Study 306 into Study 306a and Study 306b and identify falls per patient per week as the primary endpoint for Study 306b. We anticipate filing this amendment in the next few weeks and would anticipate a response from the agency within 60 days or sometime in late Q2.

In addition to the modifications to Study 306, this filing will provide the first opportunity for the agency to provide specific feedback and comment on the suitability of claims of study, Study 306a and Study 306b to service a basis for a falls claim. We also studied 306 protocol and amendment has been submitted. We will again be able to direct our attention back to the preparing of our NDA filing in NOH.

As we have previously indicated, we are currently anticipating filing our NDA during the third quarter of 2011. This slight pushback in filing timeline is primarily the result of having pulled substantially resources away from the NDA preparation work over the past two months since we work both to analyze 306a and make the requisite changes to Study 306b.

Based on this new timeline and our continued expectation for a priority review, we are anticipating approval of Northera in NOH during the first quarter of 2012. Based on the expected timing for Study 306b, which Art will get into in just a moment, we hope to then be in a position to file a supplemental NDA for a falls claim within the first year of launch.

With that said, I’ll now turn the call over to Art for a discussion of our ongoing clinical programs. Art?

Art Hewitt

Thanks, Bill. Of course, as is clear from Bill’s discussion of our regulatory strategy, a lion’s share of our clinical work in 2010 was associated with our Northera program, chiefly the successful completion of our pivotal 301 study in NOH and the initiation and enrollment of more than 100 patients into our ongoing 306 in patients with NOH associated with Parkinson’s disease.

While the efficacy programs tend to be the center of attention, we were also very busy completing Study 303, a long-term oath and label safety extension study associated with Study 302, and continuing to actively transition patients from both Study 301 and Study 306 into our second and final ongoing safety extension study, Study 304.

Between the two studies, 303 and 304, we have been able to monitor safety of Northera in more than 300 patients, including 100 who have been on drug for over a year and 200 who have been on the drug for at least six months. The data generated from these studies will be an integral component of our NDA, and we are very pleased that throughout the program, Northera has continued to demonstrate an enviable safety and tolerability profile that strongly supports the risk benefit profile of the drug in this indication.

As Simon mentioned at the start of the call, we also completed Study 305, which was a 24-hour ambulatory blood pressure monitoring study conducted at the request of the FDA. Here again, Northera demonstrated a very favorable safety profile, with only limited and transient increases in supine blood pressure, which is similar to that we found in the placebo patients. As you know, in this population, there is an inherent difficult in regulating blood pressure and is prone to episodes of supine hypertension with or without treatment intervention.

Though a majority of the clinical work associated with our NDA was completed in 2010, there are a few trials that we will carry forward into 2011. In addition to Study 304, which will continue to enroll and monitor patient safety in the US until approval, we are also set to begin the QTc Study that both Simon and Bill mentioned.

As many of you are aware, QTc studies are increasingly routine in the approval of any new drug, particularly those in the Cardiovascular Renal Division. So it is no particular surprise or reflection on Northera data that we too would be asked to complete a QTc Study, and in fact, this study is as straightforward as you might expect.

The trial will evaluate the acute administration of two single doses of Northera, 600 milligrams and 2000 milligrams, and will include both positive and negative controls. This four-way crossover study will be conducted in 52 healthy volunteers and allow for a three-day wash-out period prior to the continuation onto the next dose group.

We expect to begin this study in the next few weeks, and therefore anticipate that the top line results should be available in July or August. Based on the NDA filing plan, this would put us well ahead of any commitment, provide top line data during the 90-day safety review. So clearly not on critical path for our NDA process.

In addition to these NDA-related studies, we will also be focusing on our ongoing Northera Study 306b in 2011. As Bill just indicated, we do expect to file our protocol amendment in the next few weeks and would anticipate hearing back from the agency on this submission in the back half of the second quarter. However, in the interim, we continue to enroll new patients into the study and treat those that are already enrolled.

At the time of our analysis of 306a, we had 62 patients enrolled in Study 306b. Based on the falls data reported from 306a and out intent to seek a falls claim based on the 306a and 306b data, we have opted to increase the target enrollment of 306b by enrolling approximately 100 additional patients into the study. Historically, recruitment for this trial has gone very quickly. However, we do anticipate that some of our high enrolling sites may taper in their contributions going forward. So we are actively working to identify and bring in new sites that can continue to drive the enrollment.

Of the 74 sites that have been involved in 306, we would expect to bring on approximately 25 new centers over the next few months. That should allow us to complete our target enrollment early in the first quarter of 2012 and provide preliminary data from the trial during the second quarter of 2012. We will, of course, continue to monitor the enrollment rates and update you, should these assumptions change significantly as the study progresses.

Switching gears now to look at other clinical programs. 2010 was a busy year for our Phase II studies, and in the coming year we are looking forward to seeing the results of several of these exploratory trials. First up will be the results of Dr. Adler’s study in adult attention deficit disorder. This study has reached its target enrollment and should be completed during the second quarter with top line results available around the end of the quarter.

You will recall that this is a combination study evaluating the efficacy of droxidopa in combination with carbidopa for the treatment of adult ADD. The purpose of this combination is to limit the peripheral metabolism of droxidopa in order to promote the central effect of restoring norepinephrine, which is believed to play an integral role in the pathophysiology of the disease.

While the study is a double-blind, randomized controlled trial, it is not powered for significance. Our key interest here will be in comparing improvements seen during the randomized withdrawal against the baseline established prior to the treatment. This data should give a good indication of effect size and allow for assessment of the data in the context of benefits seen with other ADD drugs, thereby giving us a basis upon which to determine the syndication merits, continued evaluation in a larger scale Phase II trial. Though the data is not yet available, we are encouraged by Dr. Adler’s feedback so far and are increasingly interested in what this data set may offer.

Turning to the second quarter, we also expect it to complete our first blinded DMC safety review and our ongoing Phase II trial of CH-4051 in RA. A positive outcome of this review will enable us to begin enrollment into the two high dose groups of the CH-4051. Based on the blinded safety monitoring and lack of serious adverse events, we anticipate that there will be no issues during this review and that the enrollment into the remaining arms of the study will be underway by the end of the second quarter. This, however, is just a precursor of the excitement we expect from this program this year.

In the third quarter, we plan to conduct an unblinded interim analysis on patients from the 0.3 and 1 milligrams each 4051 arms and the methotrexate control arm of the trial. While this interim was intended to look at approximately half the patients from these arms, recruitment has been well above expectation for this trial, and we now plan to evaluate a slightly higher percentage of the patients during this interim.

Based on the relative potency of CH-4051 compared to both CH-1504 and methotrexate seen in our preclinical studies combined with the remarkable safety and tolerability of much higher doses of CH-4051 tested in our Phase I study, we expect that data from the 0.3 and 1 milligram arms of the study will provide clear indications of CH-4051’s efficacy in patients that have only a partial or inadequate response to standard methotrexate treatment.

Furthermore, we expect the primary analysis using the ACR hybrid score will allow for a far more sensitive and informative evaluation of efficacy than the traditional ACR 20, 50 and 70 scores, which although capable of identifying a treatment effect fail to adequate discriminate the magnitude of the therapeutic benefit.

So just to give you an example of how to be thinking about the ACR hybrid in the context of our study, based on post hoc analyses of prior clinical studies, we would expect approximately 30% of methotrexate partial responders in our methotrexate control arm to be considered ACR 20 responders and perhaps 10% to be considered ACR 50 responders. This would likely translate into a minion ACR hybrid score of about 15%, which would reflect 10 swollen or tender joints going to nine and a similar 10% to 15% change in score on pan and global assessments.

Therefore, in addition to achieving meaningful ACR 20/50/70 response rates in the study, we would hope to see a more dramatic improvement in the ACR hybrid scores in those patients taking the 1 milligram dose of CH-4051, if not also demonstrated by those on the lowest dose of 0.3 milligrams, and believe that would be indicative of greater improvement in the 3 milligram dose group at the end of the study.

Finally, in the fourth quarter of 2011, we are also expecting to complete our Phase II trial droxidopa in combination with carbidopa in fibromyalgia. You will recall that in 2010 we reported the outcome of a planned interim analysis conducted by an independent data monitoring committee tasked with determining if efficacy data supported dropping underperforming arms in order to increase the power in those arms most likely to demonstrate a clinically relevant therapeutic benefit.

Following their assessment of each of the original 12 arms using the study’s primary endpoint for reduction in pain as measured by their Short Form McGill Pain Questionnaire, the DMC recommended that seven of the 12 arms of this trial to be continued to completion. This recommendation was based solely on their efficacy analysis as there was no observed safety concerns associated with any arm of the study. As a result of this recommendation, this study will now focus primarily on multiple doses of droxidopa in combination with 15 milligrams of carbidopa. Simon?

Simon Pedder

Thanks, Art. Obviously, quite a bit going on last year and as much or more next year. So at this time, we’ll have Nick walk you through how this translates to our financials for 2010 and update our guidance for 2011. Nick?

Nick Riehle

Thanks, Simon. For the quarter, we had a net loss of $12.4 million or $0.25 per share versus a net loss of $6.0 million or $0.18 per share for the comparable period in 2009. Net loss for the full year ended December 31, 2010 was $37.3 million or $0.91 per share compared to a net loss of $25.8 million or $0.82 per share for the prior year.

Research and development expenses for the three months ended December 31, 2010 were $10.2 million compared to $4.0 million for the same period in 2009. For the year ended December 31, 2010, research and development expenses were $30.9 million compared to $24.0 million for the prior year. This increase of approximately $6.9 million was due primarily to increased clinical activity compared to 2009, specifically the increase in the size of the 301 study, the addition of Study 306, and expenses related to the ongoing extension studies.

R&D expense was further impacted by cost related to our ongoing Phase II trials for droxidopa in fibromyalgia and ADHD and a Phase II trial for CH-4051 in rheumatoid arthritis, including costs for manufacturing, packaging and the labeling of clinical trial materials. And finally, R&D expense increased in 2010 as a result of cost related to the initial manufacturing work for Northera validation material.

As we look ahead, we expect to see 2011 R&D expense increase to the $43 million to $46 million range. This estimate reflects a number of additional activities as we move the Northera program towards commercialization. Specifically, we see direct program costs related to Study 306 of about $8.5 million in 2011, an increase of approximately $6 million over earlier forecast, due to the addition of 100 patients in part B of the study.

We expect our QTc study to cost about $3 million and we will spend a similar amount completing the manufacture of Northera API for commercial validation activity. NDA related consulting and support for NOH and the supplemental falls claim is expected to total $3 million while our milestone payment to DSP upon NDA filing will cost us a $150,000.

We expect to spend over $2 million for the deployment of medical science liaisons and associated initiatives later in the year, with just under another $1 million to establish the distribution and medical affairs infrastructure needed for commercialization. Of course, we also have ongoing costs for fibromyalgia, antifolate, and other clinical programs.

Turning now to selling, general and administration, FDA expense was $2.3 million for the three months ended December 31, 2010 compared to $2 million for the same period in 2009. For the 12 months ended December 31, selling, general and administrative expenses remained relatively flat at $6.6 million compared to $6.4 million for 2009. The increase resulted primarily from cost associated with certain market research expenditures late in the year.

Looking at 2011 SG&A expense, we anticipate an increase to a range from $15 million to $20 million, with over two-thirds of this in the second half of the year as commercialization programs ramp up. This is reflected in the overall spending trend, which moves from expenses in the low teens for the first quarter to high teens in Q4.

Chelsea ended 2010 with $47.6 million in cash and cash equivalents. This compares to $22.3 million at December 31, 2009. Of course, this $47.6 million excludes the proceeds from our recently completed public offering, which after deducting related expenses resulted in net proceeds to the company of $37.8 million. We also added $8.4 million from the exercise of warrants that would otherwise have expired on February 13.

With our year-end cash plus the recent infusion of over $46 million, we are well positioned to fund our development programs and launch initiatives through commercialization and into the second quarter of 2012. Simon?

Simon Pedder

Thanks, Nike. Hope your discussion has provided a meaningful summary of the events of the past year and given you some insight into how we anticipate our programs to advance in 2011. I know that all of this at Chelsea are committed to meeting the regulatory and clinical goals we have established for 2011. Each of us look forward to sharing the fruits of this labor with our shareholders.

With that said, I would like to turn the call over to the operator so we can take any additional questions you may have. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Our first question comes from Robyn Karnauskas of Deutsche Bank.

Robyn Karnauskas – Deutsche Bank

Hi, guys. Thanks for taking my question. I guess first of all, could you walk us through on the financial side a little bit of how much cushion you have for cash used given that you plan higher sales force? How much cushion do you have, say, if there is a delay in the filing or delay in FDA approval or delay in the data? That’s my first question.

Simon Pedder

Robyn, I’ll start. And actually I’ll get Nick to add. I mean, for us, we look at this very much as a step-wise procedure. This is something where we’re going to bring in people, when is the appropriate time to bring them in corresponding to obviously the feedback and the acceptance of the filing and moving ahead with the standard kind of movements and discussions we have with the health authorities. And therefore, we do plan to be very conservative about when we bring in the appropriate people at the appropriate time. Nick, please add.

Nick Riehle

I would just emphasize that, as discussed in the text, we have over two-thirds of the marketing expenses for the year out in the second half. And tying back to what Simon said, there is an opportunity obviously to delay those depending on the situation we have with both the clinical program and more importantly, the regulatory situation. Further than that, we have the sales directors being added in the fourth quarter, which could be delayed as appropriate, and we have the actual sales reps in the first quarter, which again not only can be delayed but concentrates a significant spending in the first couple quarters of the year. So that certainly gives us an opportunity to push the spending out probably a quarter.

Robyn Karnauskas – Deutsche Bank

That’s actually very helpful. I guess then the next question is on the clinical side. So if you are getting feedback from – it sounds like your initial feedback, if I understand it correctly, is going to be on your proposal for – to get a label for falls from the FDA. What kind of color are you going to get do you think at the end of 2Q when you get color on that regulatory strategy on your current filing or your initial filing for the NOH claim?

Simon Pedder

I’ll start and I’ll get Bill to jump in. We’re going to ask the agency very specific questions about the suitability of 306a and 306b for a falls claim. We’ve always had a very open and direct relationship with the FDA, specifically the Division of Cardiovascular Renal. And I think we’re very naked, very clear with what our plans are and get their buy-in with the way that you normally do with very specific questions. Bill?

Bill Schwieterman

No, I guess I’d just add to that that we are already in the process of development and in the process of submitting this and have the questions all entered. Clearly, our past relationships with the FDA have allowed us to have their particular dialogue, and we anticipate it here and so there will be an opportunity for them to come in on the falls claims as well as anything else they want to comment on. And we look forward to that. Quite honestly though, we don’t anticipate any sort of real issue with regard to the NDA given our discussion just 60 days ago when we were actually down in DC and talking to them about all the data. We’re very clear that the positioning of 306 as now part of the original submission. We’re also very clear that the purpose of 306 was for a falls claim. And we are also very clear about the fact that in that falls claims that we will be proposing to them, because we had submitted the statistical analytic plan for 306 even before that maybe how we are going to evaluate that. So we have already had a lot of discussions about 306 in general, both with regard to their original submissions in falls claiming. I don’t anticipate that changing.

Robyn Karnauskas – Deutsche Bank

That’s helpful. I guess my final question if I can. It sounds like it actually have a lot of catalysts coming up throughout the year, pretty spread out. Can you help us understand when we’re going to see the next data set that would be new to investors regarding this 306 age file, like when are we going to see the next maybe statistical analysis comparing the UPDRS scores to the falls and dizziness?

Simon Pedder

Robyn, it’s Simon. I’ll start it and Bill and Art can jump in. That’s very key for us obviously because we think it obviously is quite exciting to report a falls benefit. We are doing a full analysis. We are going to be working with Bob Hauser, who is the PI for that study, who is a well known movement disorder expert at the University of South Florida. It’s our plan to submit for a presentation at the movement disorder meeting in June and in Toronto. And obviously, we’ve already given a lot of flavor about what that data says. We obviously want to work with Dr. Hauser. So there is still some level of interest obviously and it’s our presentation.

Robyn Karnauskas – Deutsche Bank

Great, thank you.

Operator

Our next question comes from Jonathan Eckard of Leerink Swann.

Jonathan Eckard – Leerink Swann

Thank you very much for taking the questions. I had a question on the commercial build-out. So I think you guys indicated that some of the steps will be based on the kind of regulatory and clinical situation at the time. Could you describe some of the regulatory events that could provide you with the comfort to move forward? And for example, hiring a sales force, what kind of regulatory event or trigger would provide that comfort?

Simon Pedder

Let me quickly jump in and say, Jonathan, sure, we’re going to abide by what happens with the normal type of interactions with the FDA. But we’re also going to approach this from a common sense, to your point. We know the appropriate amount of time that’s probably required for medical liaisons to get on board, how many people we’re going to want them to see, how many business they can do in a day, an appropriate backdate that from what we expect the launch date to be. The same thing obviously with the sales. We look at having the salespeople in a couple months before the launch to get them trained up and ready to go out and talk about the benefits of the drug, both from an efficacy and a safety viewpoint. But clearly, for whatever reason, if we had any delays on our side or there are any delays from the FDA viewpoint, we would obviously adjust that. That’s part of our plan as it is flexible. Unseen problems do come up.

We have the benefit here that we are getting the manufacturer of the drug has been manufacturing the drug for a long time. We’ve enabled to go in and out of that facility. So a lot of times the kinds of things that come up unfortunately late in the development program before registration are manufacturing problems. We don’t expect that. This is not a new drug. But we’re going to coincide with obviously the normal type of regulatory or filing time, the normal 60-day period that you wait to see if there is a refusal to file a letter. And of course, whether or not we get – as we expect, get an expedited review for – because we already have faster access. So we will tie that into all of the kind of timelines but also using that common sense approach.

Jonathan Eckard – Leerink Swann

That’s great. Thank you. And then jumping to CH-4051, it sounds like the enrollment went well. And based on the previous design, this interim would have been about 25 patients in each of those arms, the lower-dose arms, if I'm not mistaken. What would be – one, is it enough patients or the new kind of analysis of greater than 50%? Is there a chance of seeing a statistical difference between the methotrexate arm? And then, the second kind of follow-up to that would be, what would be – the initial hurdle, I’m guessing, would be superiority to methotrexate. What would be really like a kind of the homerun situation with this drug with regards to maybe a competition with other oral agents being developed in inflammation?

Art Hewitt

This is Art. We are currently projecting that we’ll have – all of the patients are very close to enrolled into each of the two arms of the low-dose groups of CH-4051 and approximately half of the methotrexate arm. So that would be close to 125 patients or so in that study at that time of the analysis. Sorry – yes, that’s correct. As to the potential for superiority, yes, I think based on our preclinical data, and so we do expect that there is a more than good chance of demonstrating superiority, especially using the ACR hybrid that gives us a lot more delicacy, if you will, to discern a difference between the treatment arms. Ultimately, do we believe the 3-milligram arms will even be better? Yes. So the ultimate outcome for the trial will await the full analysis at the end of the study. But I would not be surprised to see a statistically significant benefit to the interim analysis. As to a homerun, I would argue that beating methotrexate would be a homerun. No other drug has actually been able to do that. So I would say, if we beat methotrexate, homerun for sure.

Bill Schwieterman

This is Bill. As you know, Jon, this is how I got involved with the company in the first place. I’m a rheumatologist and was really – I was on the Scientific Advisory Board and have continued to really – this is sort of my an interest near and dear to my heart. We have a drug here that is the (inaudible) we’re assuming mixture of it as twice as powerful just by virtue of doubling up the potent ingredient. When you couple that with the animal studies, which show that it’s twice as potent, coupled with the in vitro studies that have five times inhibitory effects of methotrexate, all then coupled with the fact that we’re dosing this at at least in the high-dose threefold that you start to get multiples of five to seven, maybe 10 above what methotrexate potency is. So I think Art is right. I think beating methotrexate is a homerun, but I think the sky is the limit here. We could see ACR 50s and 70s that are high, and at the end of the day, really begin to see evidence that this could be something that would even prevent structural damage down the road just by virtue of the biologic activity that’s there. So I have high hopes for this.

Jonathan Eckard – Leerink Swann

Very helpful. Thank you very much.

Operator

(Operator instructions) Our next question comes from Liana Moussatos of Wedbush Securities.

Liana Moussatos – Wedbush Securities

My question – what was the stock-based compensation expense in Q4 and full year? What's the total number of patients going to be in 306b? And can you talk about the FDA's comments on using the ACR hybrid versus ACR 20 in respect to – with respect to approving an RA drug?

Art Hewitt

I’ll let Bill answer that last question first and then we’ll backtrack.

Bill Schwieterman

Liana, we actually have had virtually no objections at all to any element that the 4051 studies say for the dosing issue, which temporarily delayed the high dose. They have been keen on the overall program. They have been keen on the primary endpoint. As you know, the ACR has through the outcome measures in rheumatoid arthritis, clinical trial group has endorsed the ACR hybrid. The FDA, Jeff Siegel, in particular has had an editorial on this. I don’t know if you’ve seen the recent Cimzia data, but there is a lot of new data out there on the ACR hybrid itself. We’re actually quite excited to be using it because it’s a very sensitive outcome measure and it’s one that the FDA themselves to the ACR has opined upon already. So we’ve had no objections is the answer and I think it’s going to be quite useful for us.

Art Hewitt

I think your second question was the question about how many patients will actually go into the second part of 306 study, the part we’re calling 306b, Liana?

Liana Moussatos – Wedbush Securities

Yes.

Art Hewitt

Sure. As we mentioned earlier in our remarks, we currently have a little over 60 patients enrolled. We had those patients enrolled at the point we did the 306a analysis. And it’s our intention to enroll approximately another 100. So the total N for 306b at the end will be in the range of 160.

Liana Moussatos – Wedbush Securities

Okay. Stock-based –? Yes.

Nick Riehle

Yes. In terms of stock-based comp for 2010, it was about $2 million. And for 2011, it’s about – starting off about 650 per quarter and going up slightly from there as we add people.

Liana Moussatos – Wedbush Securities

Okay. And so Q4 – 2010 was $2 million?

Nick Riehle

Yes.

Liana Moussatos – Wedbush Securities

Okay. All right. Thank you.

Nick Riehle

You’re welcome.

Operator

Our next question comes from Andrew Vainos of Roth Capital Partners.

Andrew Vainos – Roth Capital Partners

Hello. Thank you for taking the questions. Two quick questions. First off, how many shares did the exercise warrant in February add to your share count? And secondly, has the SPA for droxidopa been formally amended by the FDA after your meeting in December?

Simon Pedder

The question about the FDA, we had the meeting with them back when we asked them to on the basis of the 302 data to switch the endpoint of 301 to the composite score. At the end of that meeting, in a follow-up memo we did receive from the agency, it did state that the FDA was still in place.

Andrew Vainos – Roth Capital Partners

But I thought at that point you guys still were planning to include the 306 data in the NDA filing.

Simon Pedder

No, the FDA is only based on Study 301.

Andrew Vainos – Roth Capital Partners

301, okay.

Simon Pedder

And Nick?

Nick Riehle

Yes. In terms of the warrant-related shares, there are about 2 million shares exercised that doesn’t – that adds to the share outstanding, but we actually have a handful abandoned, so it actually is slight – very slight decrease in fully diluted shares.

Andrew Vainos – Roth Capital Partners

Okay. Thank you.

Nick Riehle

Thank you, Andy.

Operator

Our next question comes from David Blaustein of SuttonBrook Capital.

David Blaustein – SuttonBrook Capital

Hi, thanks for the call. So two quick questions. One is for Bill. Kind of the routine question about 0.03 versus 0.01, 0.001. Just your confidence that 0.003 can get you there with the single trial, with the other studies as backup. So, a 0.003 question. And then a QT question to follow.

Bill Schwieterman

Yes. You know, David, the answer is, very confident. The FDA standards are obviously to have rigorous data usually in the form of replicative data of p less than 0.05 in two studies. When you actually can produce that kind of robustness in a single trial, down to the level of a p value of 0.0025, which is 0.5-squared, you are in fact duplicating the replication and establishing rigor through that single endpoint. Our value of 0.003 is five 1000s away from 0.0025. But when you think about the robustness of OHQ with regard to the individual parameters of which we are statistically significant 8 out of 10 in 301 (inaudible) the statistically significant albeit post hoc analysis on Study 302 with the OHQ of 0.026, all coupled with the dramatic safety profile of droxidopa. It’s really a pretty compelling case, and that’s the reason for my answer.

David Blaustein – SuttonBrook Capital

Got it. Yes. Very helpful. Thank you very much. Second question is QT, last question. Anything in the experience within the drug that leads you to think there could be an issue, either IKr or HERG channel, and are you going to look at QTc I versus F? That seems to be the question everybody is asking these days. So, just a quick question on QT.

Simon Pedder

I’ll start and let the other guys jump in. I mean, obviously we look at this from a clinical trials perspective. And in fact, it was our viewpoint going into the meeting with the agency that we were quite comfortable that the data suggests there wasn’t any significant QTc or prolongation issues. That being said, the agency made it very, very clear that this is now something that is almost mandatory for everything, especially in the Division of Cardiovascular Renal. But Art and Bill should comment a little bit more in terms of the preclinical data of that (inaudible).

Art Hewitt

I’ll just add one comment to our pre-NDA meeting. We shared with the agency all of the QTc data that we have collected during our clinical Phase III program, and they agreed with us that there was no evidence of a QTc problem. However, as Simon said, it was made clear to us that this is a standard requirement now for any drug in any program, and we would and did not expect to not be asked to do that as well. When QTc protocol was actually written prior to our pre-NDA meeting, that’s how much we expected to be asked to it, and it was filed within a week or so post that meeting. As to the various analyses, this will be a state-of-the-art QTc study that we’ll analyze the data in every appropriate way required.

David Blaustein – SuttonBrook Capital

Great. Thanks very much.

Simon Pedder

Thank you, David.

Operator

Our final question comes from Juan Sanchez of Ladenburg.

Juan Sanchez – Ladenburg

Good evening. Just one quick question. The way you measure falls, I mean, there’s number of falls per patient per week. That’s the last week versus the first week, or you are incorporating a means or an average of each one of the weeks?

Simon Pedder

It takes away the bias that in the – we look at cumulative falls. There are actually 27 patients on placebo and 24 patients on droxidopa. And therefore, if the number of falls is the same, you would still see a slight advantage to placebo just because more patients got randomized in the first 51 to placebo compared to droxi. So, by standardizing it as per patient per week falls, we can standardize it so it’s an accurate comparison between the two dose groups. And when we do that, the number of falls per patient per week on placebo was 0.93. So almost one fall per week on the placebo whereas 0.4 for the droxidopa patients.

Juan Sanchez – Ladenburg

And the proposed endpoint is going to be basically a similar analysis or it’s going to be basically the last week of the trial versus –?

Simon Pedder

We are going to use the patient per falls per week, the mean score as the primary endpoint throughout the study. Obviously, it’s important to capture all the data from the beginning to the end. And that’s the way we did it in 306 there as well. So we are replicating what we’ve already shown.

Bill Schwieterman

Because these studies will have the same design, the only thing that changes the endpoint will also allows us to do a meta analysis between the two studies very easily between the two.

Juan Sanchez – Ladenburg

Thank you.

Simon Pedder

Thank you, Juan.

Operator

Our final question comes from Jonathan Eckard of Leerink Swann.

Jonathan Eckard – Leerink Swann

Thank you very much for the follow-up. I was just going to – wonder if you could talk about the rate or kind of partnering discussions ever since the signal, the falls signal, came out of the 306 interim? And also, could I confirm – I believe it’s in the EU for an orphan drug you only need one trial. Is that right?

Simon Pedder

Well, let me add to the first question first. Obviously we’ve been interacting with a lot of companies about droxidopa for the treatment of NOH in primary autonomic failure. We’ve always been very happy with the level of interest we’ve had. Obviously there’s a lot of companies who have changed their mind over the last five years or so about orphan status drugs. They see the potential. And they see the benefit in meeting a great unmet medical need. And all of a sudden the need publicly becomes more important than just the number of patients which exist. That as an orphan status drug, we are very happy that this is a drug whereby we’re not talking about a tumor type where there’s only 40,000 patients and they may get three cycles and then unfortunately they regress. This is the population in the United States we think may be in excess of 150,000, and our idea is when we get them on drug, we’ll keep them on drug for a very long period of time chronically. That’s how it’s used in Japan. So that’s certainly how we expect it to be used here in the US and the other areas that we have as it is in Japan.

But what has happened with the interesting data albeit in small numbers, if people are kind of tying in to the fact that if you do prevent people from having orthostatic hypotension, if you do stop them from getting dizzy, you may in fact stop them from falling, which has a huge healthcare cost in this country and globally. And subsequently to that, they see perhaps increased demand for the use of this drug. And clearly what we’ve done albeit with small numbers is show a dramatic effect in the biggest population that have NOH, which is Parkinson’s disease patients. And so it’s probable that some companies are looking at this drug with a little bit more homerun potential than they did the first time they looked at it, but it certainly doesn’t change the way that we’ve always looked at it. This is a drug that’s going to help the population that it’s going to treat, and it’s not just the fact of stopping them from feeling dizzy, it’s going to give them better quality of life. And if we can prevent the falls, the hospitalizations, the broken bones, we’re obviously doing a good thing to this patient, and the drug will serve itself.

Jonathan Eckard – Leerink Swann

That’s very helpful. Thanks.

Simon Pedder

Thank you, Jon.

Operator

This concludes the question-and-answer session. Dr. Pedder, I’d like to turn the conference back over to you for any closing remarks.

Simon Pedder

Thank you, operator. And I’d just like to thank all of you for participating in today’s call. We obviously, as always, look forward to keeping you updated, certainly, as we move through an exciting 2011 for us and for the company and hopefully for the patients. Have a great day.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Thank you, and have a great day.

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