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Chelsea Therapeutics International, Ltd. (NASDAQ:CHTP)

Q3 2011 Earnings Conference Call

November 2, 2011 16:30 ET

Executives

Dr. Simon Pedder – President and Chief Executive Officer

Nick Riehle – Chief Financial Officer

Dr. Bill Schwieterman – Chief Medical Officer

Keith Schmidt – Vice President, Marketing and Sales

Analysts

Liana Moussatos – Wedbush Securities

Alan Carr - Needham & Company

David Moskowitz – Roth Capital Partners

Operator

Good day, ladies and gentlemen and welcome to the Chelsea Therapeutics Third Quarter 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 is being recorded.

I would now like to introduce your host for today’s conference, Ms. Kathryn McNeil, Director of Investor Relations. You may begin.

Kathryn McNeil – Director, Investor Relations

Good afternoon and welcome to Chelsea Therapeutics third quarter 2011 conference call. We announced our third quarter results this afternoon just after the close of the U.S. financial markets and our press release can be found on our website at www.chelseatherapeutics.com.

Joining me from Chelsea is Dr. Simon Pedder, President and Chief Executive Officer; Nick Riehle, Chief Financial Officer; Dr. Art Hewitt, Chief Scientific Officer; Dr. Bill Schwieterman, our Chief Medical Officer; and Mr. Keith Schmidt, our Vice President of Marketing and Sales.

Now, before I turn the call over to Dr. Pedder, let me note that some of the remarks you will hear today may 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 Securities and Exchange Act of 1934 as amended, copies of which are available on our website or may be requested directly from the company.

Now, with that said, I’ll now turn the call over to Dr. Pedder.

Dr. Simon Pedder – President and Chief Executive Officer

Thanks Kate and good afternoon everyone. We appreciate you joining today’s discussion. In addition to the release of our quarterly results this afternoon as Kate mentioned, we were also pleased to share with you the results of our interim analysis on our ongoing Phase 2 trial of CH-4051 in rheumatoid arthritis. As you may have noticed a press release highlighting these findings was also released this afternoon after the market closed. And if you don’t already have a copy you can download it from our website.

While we were looking forward to this opportunity to touch base with you in the following of our new drug application and commercial plans for NORTHERA, we are frankly fairly excited that the timing of this call allows us to share with you the results of our CH-4051 interim analysis. And we are quite pleased what I believe a team so far and increasingly excited about the potential for the higher dose just currently being evaluated. Clearly, we have a lot of ground to cover in today’s call and most importantly we want to make sure that we give you the time to answer any question you might have.

So, I’ll ask Nick to get started this afternoon with an overview of the financial results for the quarter. And then I’ll walk through the highlights of RA data. Before asking Bill to provide you with a clinical and regulatory update and Keith take you through our market assessment in some of our commercial plans. Nick?

Nick Riehle – Chief Financial Officer

Thanks Simon. Chelsea reported a net loss for the quarter ended September 30th of $10.9 million or $0.18 per share versus a net loss of $8.8 million or $0.22 per share for the same period in 2010. For the first nine months of the year, we reported a net loss of $38 million or $0.64 per share compared to a net loss of $25 million or $0.65 per share for the first nine months of 2010.

Research and development expenses for the third quarter were $7.4 million, which was flat over the third quarter of 2010. This reflects a decrease in our clinical cost is a Northera registration programs lying down, but is to offset by additional costs of $1.1 million for the launch of our Medical Science Liaison unmet in related programs along with $0.7 million and expenses in support of our NDA filing.

For the nine months ended September 30th, R&D expenses were $29.6 million versus $20.7 million for the first three quarters for 2010. This year-over-year increase primarily reflects cost associated with the anticipated registration and launch of Northera. Including expenses related to the manufacturing of commercial drug product and Northera QTc study, the preparation and filing of Northera NDA and the launch of our Medical Liaison team.

Selling general and administrative expenses were $3.5 million for the three months ended September 30th reflecting an increase from the $1.4 million recorded in the same period in 2010. The increase is primarily related to compensation expenses for our core sales and marketing team increased market research another initiatives focused on our launch of Northera in 2012. This is consistent with what we see across the first nine months with SG&A totaling $8.6 million compared to $4.4 million for the prior year period.

These third quarter expenses reflect the continuing effort by the Chelsea teams constrains spending as far as possible without jeopardizing our launch capabilities. As a result, we ended the quarter with $57.6 million in cash, cash equivalents in short-term investment. This compares to $47.6 at December 31, 2011. Looking ahead, we anticipate 2011 R&D expenses to remain near the current levels with full year R&D expense of approximately $42 million and SG&A expenses continuing to ramp through commercialization with a 2011 total of approximately $16 million.

Based on these expenses we would expect end the year with approximately $35 million in cash, cash equivalents, and short-term investments. But we will continue to press for opportunities to reduce or delay spending such as we anticipate the actual quarter ending cash good range to the $40 million level. Accordingly, we continue to estimate that are existing liquidity with from the company’s current development programs and launch initiatives to the anticipated commercialization of Northera in the second quarter of 2012.

Dr. Simon Pedder – President and Chief Executive Officer

Thanks, Nick. Before I turn the call over to Bill to review the clinical and regulatory progress during the quarter, I’d like to take you through the top-line results of interim analysis of our ongoing Phase II trial of CH-4051 in rheumatoid arthritis. As a brief reminder, this study is a dose ranging study intended both to establish an effective therapeutic dose of CH-4051 as well as to compare that efficacy to methotrexate. In patients that have previously been considered partial responders to methotrexate therapy.

While we have just recently completed enrollment, this trial remains ongoing and ultimately includes three dosages of CH-4051 across for arms. There are being compared to a standard weekly dose of methotrexate in approximately 250 patients. The four CH-4051 Arms include approximately 50 patients being treated with 0.3 mg with CH-4051, 50 patients being treated with 1 milligram, 50 patients being treated with 3 milligram of CH-4051 alone, and 50 patients being treated with a combination of 3 milligrams of CH-4051 and a folate supplement. Result to these four arms will be compared to those of the 50 patients being treated with 20 milligrams of methotrexate and folate. As I mentioned, this study is now fully enrolled across all cohorts and we expect results from the trial to be available during the second quarter of next year.

Now, in looking at the interim results, our analysis included only those patients that participated in the two lower dose of 4051 arms, the 0.3 the $1 milligram dose arms and approximately half the patients randomized to the methotrexate arm. This provides us with highly informative snapshot of the therapeutic activity. However, it should be noted that results of the interim are impacted somewhat by the small number of methotrexate patients evaluated.

Despite this, the interim data showed us exactly the three things we’d hope to see, which was an indication of the dose response in the CH-4051 arms at least one of the lower dose ships achieving therapeutic benefits on par with methotrexate and a safety and tolerability profile superior to methotrexate. Needless to say, we were quite happy to see the results win in all three fronts, in fact, not only that received the 1 milligram dose of CH-4051 demonstrates similar efficacy in methotrexate. We actually saw a fairly robust response from our lowest dose of 0.3 milligrams.

Now, a lot of you have asked us about our primary endpoints in the study, the hybrid ACR score and why we choose this endpoint? Ultimately, the hybrid ACR evaluates the signs and symptoms of rheumatoid arthritis in much the same manner of the additional ACR’s 20s, 50s, and 70s. However, rather than creating a dichotomist cutoff point such as a 20% response or a 50% response, the ACR hybrid takes essentially the same evaluation criteria that’s caused them in a semi-continuous manner of this being that the analysis provides a great deal of visibility into the magnitude of response, thereby allowing for more discriminating comparison of the two drugs or in this case multiple dosages of the same drug versus another drug.

So, as you can see, the 0.3 milligram achieved a mean hybrid ACR score of 17 and a median hybrid ACR score of 20. This compares to a mean hybrid ACR score of 22 and the median hybrid score of 25 demonstrated in the 1 mg arm of the study. Now looking at this data in combination with the ACR 20 response rate allows us can conclude that not only do more patients achieve at least a 20% improvement in the symptoms when treated with 1 mg of CH-4051. The magnitude of that benefit is greater at 1 mg than it is at 0.3 mg. Similarly, if we compare the 1 mg dose of CH-4051 to the methotrexate arm, we see that more patients treated with CH-4051 achieved an ACR 20 and with a median hybrid ACR score of 25.

Now, when you look at the median hybrid scores, we do see a bit of a jump in the methotrexate arm with these patients reporting a mean hybrid ACR response of 37 compared to a mean hybrid ACR response in the 1 mg CH-4051 arm of 22. We believe the differences here reflect both the comparative few numbers of patients evaluated in this arm and the effect of the few patients demonstrating an above average response to methotrexate treatment. It will be interesting to revisit this analysis once the study has completed and we have more detail on individual patient response. Of course, all this doesn’t mean much if the safety and the tolerability profile of the drug worsens significantly across the dose range or by comparison to existing therapies. So, we were happy to see that CH-4051 was not only safe, but extremely well-tolerated at both dosages and showed significant improvement in tolerability as indicated by the adverse events compared to methotrexate

Looking at all this data collectively you can appreciate we are getting also excited to see the results of our remaining high dose arms of the study as we expect to see increased potency at 3 milligram dose level and frankly don’t expect to see a significant change in the safety and tolerability profile at these levels since as we will recall dosages up to 5 mg were equally as well-tolerated as placebo in our Phase I trial and dosages up to 7.5 mg appeared to be both safe and well-tolerated. So, we must now be a bit patient as we wait for all the patients currently involved to complete the study and we look forward to the full dataset during the second quarter of next year.

Now with that offset, I will turn to Bill to run through the remaining clinical and regulatory developments since our last call. Bill?

Dr. Bill Schwieterman – Chief Medical Officer

Thanks, Simon. I’ll start out by adding just how excited I’m by our results we announced today. We must help in our keyword have the pleasure of revealing some of the findings that the RA buys the board in some detail and we excited about certainly shared by the group and really peak everyone’s interest to see the full dataset next year.

Of course that have been in the only excitement around here, during the third quarter, we submitted our first New Drug Application to the FDA seeking authority review and approval to market Northera for the treatment of Symptomatic NOH. This is a very labor intensive process to say the least and certainly occupied the vast majority of our time and FX during the last quarter.

In the end, we believe this was timing effort we’ll spend has focused on everyone including the FDA becomes on the strength and quality of the efficacy data, the reality is there the enormous number of other components that go into a successful filing package. Many of them are spending as do all our your links actually, we directed to the right table. So while it’s not all pride is grammars exciting checking these length, say Phase III data analysis and so forth.

NDA submissions have been denied for some brilliant grammars reasons and it was really worth it to ensure that both the data and the document were in good shape before the submission. There are particularly through given our expectation for priority review of our filing as most of you know our priority review is intended to show in the update review and provide to an approval decision at six months rather than the customer to 10 month review cycle.

Already review is generally given the drugs that down the medical need and in light of our existing faster designation at specifically identifies our medical need. We really we have a good shot of a priority review and just as a quick point of clarification priority review is different from accelerated review despite with a name item applied. Accelerated approval review allows for the approval of a drug using a certain market of efficacy, which is condition upon the successful completion at post marketing studies verifying the clinical benefit.

We are simply seeking a priority review for a shortened review cycle based upon the timing of our filing we would expect here from the FDA regarding our part of the new status as all the acceptance of our NDA product review by the end of November. And the interim we begin internal preparations for potential advisory committee meeting while we have received no indications in the update one where the other. We believe it’s likely update will convenient in advisory committee to review and provide independent extra guidance on that as related to our filing.

This appears to be almost common practice with new chemical entity is seeking approval in the U.S. This is largely on the store count examples in the timeline implied by an anticipated part of the review. We’re currently guessing that some advisory committee be convenient, it will likely be sometime during the first quarter of next year.

That said we would not will they expect to now hit for lender (indiscernible) would be held and sales say about 90 days or so before the actual meeting itself. So, as said that in the interim we are preparing. In addition to the regulatory process made during the third quarter result, a couple of significant milestones achieved in our broader reduction of development program.

In July, we are very pleased to see the result of (Dr. Adler’s) exploratory study looking at the effect of droxidopa in the treatment of adult attention deficit disorder while the study was limited in part by a size in fact quite interesting and suggestive of a pretty meaningful treatment effect. We are also happy to share with you the (Dr. Adler) was recently another notify that his abstract detailing the result of the study has been expected for the American Professional Society of ADHD disorder’s meeting this month in Philadelphia.

Shortly after announcing these results, we reset target enrollment in our Phase II trial droxidopa for the treatment of fibromyalgia having now completed enrollment in the study for the authority getting the top-line results in this trial later this quarter.

Of course, it’s important to keep in mind that intensive study is the largely identified suitable for potential doses alone are in combination with carbidopa for future evaluation. So while we will certainly be looking for indications of therapeutic benefit, the structure of the study is not really intended to generate a statistically significant result. Are related now, we are granted the new patent during the third quarter related to methods of reducing pain associated with fibromyalgia by administrating droxidopa alone on a combination with other specified medications to patients diagnosed with fibromyalgia. This March, the first new patent granted to Chelsea covering expanded indications for droxidopa. In fact, ADHD and fibromyalgia are just of two of many compelling potential indications for droxidopa. We continue to hear from potential investigators interested in evaluating droxidopa new indications.

And we are currently working with a few. They implement some additional investigator-led studies, unfortunately one of our existing investigator-led study is the chronic fatigue study led by Dr. Lau ho will be shutdown over the next two weeks, prior to completion despite dedicated effort on the half of Dr. Lau, but the study proved difficult to enroll and as the single center study as not able to support the enrollment requirements.

I’d now like to turn the call over to Keith for an update on our sales and marketing strategy. Keith?

Keith Schmidt – Vice President, Marketing and Sales

Thanks, Bill. We all submitted our new driver application for NORTHERA and in light of our continued expectation of the priority review of our filings we are starting to get down to that fast on our marketing sales efforts.

Before I get into some of the detail surrounding our anticipated launch plan, I’d like to spend just a few minutes reviewing with you what we have learned about the current market for NOH. Right now, the market consists primarily of two drugs used to treat NOH, midodrine and fludrocortisone. We estimate that of the approximately 180,000 patients that suffer from symptomatic NOH in the U.S., about 80,000 to 85,000 of them take midodrine and our another 80,000 to 90,000 take fludrocortisone, a synthetic adrenal corticosteroid that works by increasing sodium retention, enhancing plasma volume, and thereby raising blood pressure.

Over the past few years, we used several different approaches to the current number of patients receiving treatment and has consistently come to very similar conclusions. These conclusions were validated more recently both by statements made by the FDA regarding the number of patients currently taking midodrine as well as our own market research efforts.

Our most recent estimates are derived from historical NPA, IMS unit data for fludrocortisone and midodrine. NPA or national prescription audit data from IMS is a mechanism from measuring the flow of prescriptions from physicians to pharmacies and to patients. It is useful in offering visibility into distribution channels and offers fairly precise patient segmentation and targeting information by keep patient age and gender groups, utilization, and treatment profiles.

We also used IMS NDTI or national disease and therapeutic index data. The NDTI is a monthly audit which tracks epidemiological trends and treatment patterns among private practice physicians in the United States answering questions such as what are the latest physician prescribing trends and how the physicians prescribing habits vary by indication for a product, etcetera. But because there is no ICD-9 code for NOH, we develop a surrogate of related ICD-9 codes at Chelsea and we used ICD-9 codes of syncope, hypertension unspecified, and orthostatic hypotension. And we then matched all midodrine and fludrocortisone usage to those who surrogate ICD-9 codes.

And based on this data, along with some internal assumptions for concomitant diabetes in Parkinson’s patients, we now assume that 58% of the total midodrine and 51% of total fludrocortisone prescriptions are used for NOH. And by the way, there will be an ICD-10 code for NOH in the future.

What we have learned about compliance rates we used the compliance factor of 79% for fludrocortisone and 51% or midodrine to account for patient compliance. We then end up with our current estimates which as I mentioned continued to support our historical thinking about this market. Of course we are doing far more than simply expecting who is currently describing and who is currently taking existing therapies, we are also actively conducting research intended to provide us with much more information regarding possible opportunities for market expansion.

As our research into the market becomes more comprehensive, we continue to see to pull things in market as our most significant growth opportunity. While some of these patients do receive treatment, we believe that the efficacy, and in particular, the side effect profile of current drug safety has limited both the utilization and compliance which in turn in its efficacy. Further, as more attention is paid to the non-motor features of Parkinson’s disease and our own awareness initiatives ramp-up combined with the knowledge of the Parkinson’s patients now survive well into their 70s and 80s. We believe as an increasing number of Parkinson’s patients will be seeking treatment for NOH.

Now (indiscernible) released to have all this information, it really comes out to what to do with the best we start getting into the specifics of our loan strategy. As we discussed during our last year, we’ve already got our core leadership team on board and those services had been working with me to map out our plan of attack. Among the first one you plan to do some higher 10 regional sales directors very early next year and then we will look to recruit and secure approximately 85 specialty sales reps on a conditional basis meaning they were not be roll-on Chelsea employees and so, we have efficiently been proved by the FDA.

We are currently working with the vendor who will be able to provide the logistical support in sales force operations needed not only the transition into our commercial organization, but to do so successfully over a relatively short period of time. These folks will be responsible for things like we’ve added information technology and we required sales force automation, sample accounting systems to comply with the prescription debt market act. And we are assuming resource associated with this type of growth.

As well as day-to-day operations, our fleet management compliance reporting in fuel support. We feel this approach offers us the ability to scale up rapidly well look at the internal infrastructure and headcount costs providing us with access to a deep operation experience on the part of the vendor and ultimately the flexibility to internalize in Chelsea some or all of these functions and personnel at our discussion and at a measured phase.

Now once more clearly is proved things are really kick in to drives as we work to get the sales team fully operational and prepared to launch Northera within about 60 days. Now when I say we’re trying to launch the drug within about two months of approval that compensated sales will begin just what early is a primarily driven by keeping a leaders that we anticipate will be early adopters and prescribers of Northera along with some pent-up demand from patients who have not been treated effectively with current products.

For change of that, it was going to deploying, I look forward to reporting results of our first full quarter on the market during next year’s third quarter call in the meantime I’ll turn the call back to Simon.

Dr. Simon Pedder – President and Chief Executive Officer

Thank you, Keith. Now while over the last several months have been down the busiest in Chelsea’s history along with a filing of our NDA substantial progress in our RA program and the Phase II droxidopa studies, it’s really the next several month to promises to be the mostly awarding.

We are eagerly looking forward to the anticipated approval and launch of Northera for the treatment of NOH. This transition from our clearly development stage company to a commercial organization as one we have been working towards for sometime. It will not be overnight and it will not be without some challenges along the way. But I’m confident we have a team uniquely capable of successfully executing this transformation. We obviously look forward to keeping you posted on our progress and now we’d like to open up the call for questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from Robyn Karnauskas from Deutsche Bank.

Unidentified Analyst

Hey guys, it’s (indiscernible) in for Robyn. Thanks for all and great color on the market dynamics. A quick question on FDA timelines, we think that the FDA has been delaying review times for many drugs something like that are come to mine like the general in view (indiscernible) level. I’m wondering do you have any sense if it delay with happened with Northera NDA and it so how should we think of cash burn in that time period.

Dr. Bill Schwieterman

Yeah. Hi, this is Bill. It’s true, the FDA is in some instances delaying applications and so forth and I think in many cases at resource issue and so forth. But in our experience is sort have been just the office that we’ve had a pretty attentive audience with FDA now for quite some time and that continues even through this last quarter. So with every expectation that what we’ve had in the past will be prolog and that I’ll review continue as we anticipate a priority review with a six month review clock and there is no reason I think otherwise.

Unidentified Analyst

Okay, thanks. Quick follow up on the RA program, I am just curious of kind over response rates during need at the three made RM for due to Phase III trial or partner to face moving to Phase III trial. And any color on ACR 50 or ACR70 data?

Unidentified Company Speaker

Well, when it comes to what we need we always wanted to have it advantaged against methotrexate and clearly that we think we have that already with the 1 milligram on which is equal efficacy, but the appearance of significantly better safety, I mean, the side effect profile is relatively striking between both arms that we have versus methotrexate and we don’t expect anything different with the 3 milligram, but may in fact see greater efficacy. We have always said that we have to have an advantage over methotrexate. So far I think has already been identified with the safety aspect is to clearly at least in a relatively smaller number of patients strikingly has the better risk benefit although driven by the safety reported the adverse events.

Anything extra we get with the 3 milligram and of course it’s three times the dose that we have given with the one is going to be an additional benefit. So, our overall product profile of having superior molecule to methotrexate, we think we have established that albeit in small numbers. If we could establish greater efficacy along with that greater safety, well that’s just a own run from our viewpoint. We had always limited the discussion about all the endpoints, so there is obviously an interim analysis. We thought we were being pretty fair giving you means, medians of the hybrids on the ACR 20s snapshot of what’s going on with the safety and tolerability, but this was all predefined before we look at the data and we suggest that the data was looking pretty good.

Unidentified Analyst

Okay. If I can ask just another question on expenses, R&D was pretty lowest quarter and I am wondering if your guidance is too high for R&D and also for an SG&A if you like doing much of the hiring in the sales force until Q1 next year in anticipation of approval in your SG&A burn guidance too high as well? Thanks.

Unidentified Company Speaker

Well, a lot of the – speaking first of the SG&A, the SG&A increases that we have coming up relate to program preparing for the marketing and so most of that first quarter relates those programs. And also the beginning of the recruiting process as well as the full recruiting process of course for the regional sales directors of key alluded to but then also in the preparations for the full recruiting of the sales force. So those you major SG&A items that were looking at in the fourth quarter. In terms of R&D, the R&D continues to move with the clinical program remaining modest were actually declining in some cases but we are stepping up in couple areas and those are medical affairs area. Our primarily with medical science on team, but also on the operation side as we do more work and the Nick more expenses with distribution process in putting infrastructure in place that area, which is categorized is the development for the launch.

Unidentified Analyst

Okay, thanks very much guys.

Unidentified Company Speaker

I would just like to add one thing that we think to we said up underneath to structure is that will quite flexible. This is our plan presently but of course can be adapted based on discussion and the nature that we have with the agency over time. And as Bill commented we’ve had very good relationship with the FDA we’ve had very transparent discussion and we expect those to continue during the review cycle. And based on how we feel those discussions are growing of you reserve to the right obviously adapt clearly looking hopefully that we could adapt from the positive to point on that to hiring our plan as it is right now.

Unidentified Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the Liana Moussatos from Wedbush Securities.

Liana Moussatos – Wedbush Securities

Thank you for taking my questions. And congratulations on the 4051 data on do you plan to partner 4051 before you would Phase III and then is there fibromyalgia data that we’re expecting later this quarter interim or top line full data with all the patients and were there be any more data releases from the next year?

Unidentified Company Speaker

Hi, Liana. Our plan has always been to partner this prior to a large Phase III program. That being said you can appreciate the large amount of pre marketing spend that would be needed to enter into the RA field even with the compound exciting as we think 4051 is, is the best to do the global Phase III trials and Bill here is the card-carrying rheumatologist who have been involved with a major design of these trials, he is sitting here, not in his head. So that’s the plan going forward that’s not to say that we wouldn’t be interested and potential partners wouldn’t be interested and possibly keeping other indications for ourselves once they may not require the huge pre market spend that in URA compound. With regard to fibromyalgia there will be the complete Phase II data there will be the final data from our Phase II.

Liana Moussatos – Wedbush Securities

Thank you.

Operator

Thank you. Our next question comes from Alan Carr with Needham & Company.

Alan Carr – Needham & Company

Hi thanks for taking my question. Couple of – do you have any – can you share with us any data around (labor) function any impact or – difference in impact on liver function test between these CH–4051.

Unidentified Company Speaker

Especially when we get the final data set with the 3 milligrams we might able to teach some of the stuff out, but Simon is quite right that there is issues with the patient population so forth in general. That’s not enormous with anything plus or minus here so stay just the fact wide of the designer so, and I think overall the safety is really quite great.

Alan Carr – Needham & Company

Anything with this point, okay, and then also you’ve highlighted in your press release that there might be some sort of prolonged effect after suspending dosing like four weeks. There is more profound what you saw with methotrexate where do you things going on there is that real did you see anything like that preclinical work.

Unidentified Company Speaker

Well, it’s as it relates kind of give the limitation is relatively small numbers, but interestingly it seems that the efficacy outcomes that we’ve discussed to continue to get better with the patients on 4051 with four week follow–up where they tend to follow–up with the methotrexate. And things that was in treating to us as we saw the exact same thing would be CH-1504 our previous development to candidate that was actually a rate in the next year of (DNDL) of course it’s 4051. So, we’ve seen a twice now we could probably speculate – speculation with probably only identified good attributes of the drug and I think it will be results need to speculate but it is very interesting that we’ve seen it now with two different molecules although the two molecules are obviously clearly related, Bill.

Unidentified Company Speaker

Yeah I agree I think speculation here as may be a little bit premature the only thing I wanted to share we’ve had conversation with our advisory committee exactly the mechanism of action here and I think it’s we’re pointing out these experts have pointed out it’s not just that have a (indiscernible) is whole series of enzymes transfer enzymes and so forth that are imply with this drug. And at the end of the day I think we’re seeing is not just the same mechanism is not methotrexate, this just is in the more (indiscernible) molecule because our different anti and inflammatory pathway and that’s why our advisors have been telling us that this is exciting because of that and I think to me this is sort of evidence of that you’re seeing a different (indiscernible) effect with the drug and I think it’s probably flex a different mechanism.

Alan Carr – Needham & Company

Okay thanks very much.

Operator

Thank you. (Operator Instructions) And our next question comes from David Moskowitz of Roth Capital Partners.

David Moskowitz – Roth Capital Partners

Hey good afternoon and thanks for taking the question. I guess first question is can you talk to us about any subsequent dialogue that you have with FDA since you from submitted the NDA order discussions ongoing simply in waiting period for the acceptance of the without the application?

Dr. Bill Schwieterman

Yeah, hi, David this is Bill. We have had – like I said earlier we have had a good discussion with the FDA on a number of fronts and we continue to have the discussion in the normal course of that. Yes, we have been in touch with the FDA and the usual sort of question that coming forward it’s sort of business as usual, they are moving had. I think it’s still relatively early and the scheme of things and obviously we are going find out within 60 days of the filings which is coming up here in the 30 days about the filing itself and the (indiscernible) and so forth. But yeah, we have had continued discussions in the normal course of that year and so everything is going well.

David Moskowitz – Roth Capital Partners

Okay. And I am just switching over to 4051, could you talk a little bit about what you so with durability of these ACR 20 results, that looks pretty interesting, that we had the continuation of benefit, which looks superior to methotrexate. Can you just kind of go over that a little bit and how to interpret that?

Dr. Bill Schwieterman

Yeah, sure. I mean the trial was 12 I mean just sort of spell I would looking at here the data after the 12 week and despite a periods of the patients did the drug for three months after we called and then if we 16 data that were really discussing here. And as we reported in the press release it was in tweaking now that for the second time are receiving really a differentiation between 4051 in that state the patients on that (indiscernible) intended to lose the response have quickly and not so much with the 4051 in fact they continue to best quite a bit as ours same to Alan earlier I think as $0.02 speculate on what that might that be or think we need to see more data from the study before stat to really that but it is consistent were some with are advisors been saying. And I think actually its one of the most starting elements as well, because not only do we see thus effect policy and confirmation of mechanism to different and obviously its certainly early days in the interim analysis but I think its based to the possibility that when we do see a 3 milligram data and its going really show increased that sale on number ways.

Unidentified Company Speaker

Yeah, we think its quite exciting because the main differentiation we’ve always has we expected due to the lack of metabolism with our compound to get this better safety and tolerability profile which we really think we’re seeing now. This is another can differentiating profile but have and it something we want to explore obviously in future trials. The other benefit of courses we having seen what’s going happening with 3 milligram and this some threshold needed to be (indiscernible) once we reached we have this continued benefit. It should be even be more with the 3 milligram and that’s why would so happy of that due to Art and Bill collective scientific part we’ve double by double. So we think its be with exciting to look at the data second quarter of next year.

David Moskowitz – Roth Capital Partners

Okay. And just can looking at I would call the low spot in the data, yes, this mean on the hybrid (indiscernible) the 37% versus the 22%. Again can you talk about that I mean when you look at median it actually demonstrates with 4051 looks better than it actually on the mean doesn’t look us good. I know you guys explain that are few basins from arms and squiring of the data but can you give us a little bit more color on that in away doesn’t sort take it us.

Unidentified Company Speaker

Sure. I mean with (indiscernible) ACR its performing exact was we hoped that’s really sensitive marker of those effect and which was see was small number and we after remember we’ve only and will have the patients into our methotrexate because we graduated trial design where we have the initial randomization to lower doses and now higher doses. So we have fewer patients in the methotrexate all would takes such a sensitive outcome measures for one or two patients to drive that up in means just is a little overview it means of sensitive single out layer, double out layer patients that median to not. Median reflects middle of the pack.

And so if you look at the middle of pack with the median just see relative to the same across that what that means higher so, I don’t think if you’re reading too much into these –this mean values that this interim analysis at this early stage with the relatively few number of patients. The reason we did both the hybrid ACR and the more traditional ACR twice in 50s and 70s you get to look at the data from several different directions obviously these are same data the hybrid ACR and ACR 20s, 50s, 70s use the same data. When you look at the ACR twice the figures in 70s you see the results showing that we have this dose effect and the equivalent effect in methotrexate. So, we think we’re in the trials done and completed with the 3 milligram dose we’re really going to see the efficacy in all the end points.

Unidentified Company Speaker

Yeah I would add we’ve gone about a highest week and go with the comparative with methotrexate. I mean 20 mg is about as high as you can go. We have no idea about higher, high week ago with 4051. Obviously we are excited about 3 milligrams coming out were based on the side effect profiles indicated by the adverse events with 0.3 and 0.1. There is a chance we won’t (ph) reach methotrexate tolerated dose with 3 and subsequent trials we could examine even higher dosages which we know in fact we can’t do it methotrexate.

David Moskowitz – Roth Capital Partners

I just have a one last question. Maybe I need some clarification but it seems to me that the methotrexate arm is including fully and the other two arms point 3 and 1 milligram did not include fully in dosing. So if that the case how do you think about that in terms of the results you seem so far.

Unidentified Company Speaker

Well, there is been lots of study to look at the effects we’re giving folate and methotrexate. And it hasn’t really been showing that folate had eliminates any of the efficacy in methotrexate, what is supposedly does as (indiscernible) of our tolerability issues with folate issues with GI. And we’re giving standard of care here which methotrexate with folate and you can see by the data we been analysis told some significant GI side effect issues probably due to the fact we’re giving 20 milligram. The webcasting this high sponsors because with the 3 milligram it’s a double dose if two arms they are three by itself and three with folates we will be able to do with direct comparison with our two arms of three to see what the role of folate is, but I think it’s been heavily we search that’s why all investigators give fully with methotrexate it doesn’t take away the efficacy to help the patients tolerate the drug which is drug tolerated by itself.

David Moskowitz – Roth Capital Partners

I’m getting that is – is it fair to say that the data in terms of safe and tolerability here would look better if the patients on the 4051 in the interim results had fully along with there therapy?

Unidentified Company Speaker

Well, I think we always believe based on the fact that we’re not producing the 7-hydroxymethotrexate, which is clearly a more toxic compound in methotrexate itself. We don’t know how much (indiscernible) may play a role, but the fact that we don’t produce those metabolize could play a role and the cytotoxicity and the tolerability issues with methotrexate its always been our belief that we don’t need folate on board but that’s why we’re testing it 3 milligram dose.

David Moskowitz – Roth Capital Partners

Excellent. Okay thanks for taking the question. Appreciate it.

Unidentified Company Speaker

Thank you.

Operator

Thank you. And I’m showing no further questions. I would like to turn the call back over to Dr. Pedder for closing remarks.

Dr. Simon Pedder – President and Chief Executive Officer

Well, I just like to summarize by thanking all of you for your interest and your continuing support. As always we look forward to keeping you updated and I think that we can look forward and hopefully look forward to lot more questions about our anti-folate program and CH-4051 in the future. With that I’ll wish you all pleasant evening.

Operator

Ladies and gentlemen, this does conclude your conference. You may all disconnect. And have a wonderful day.

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