Cempra's (CEMP) CEO Prabhavathi Fernandes on Q2 2016 Results - Earnings Call Transcript

| About: Cempra, Inc. (CEMP)

Cempra, Inc. (NASDAQ:CEMP)

Q2 2016 Results Earnings Conference Call

August 01, 2016, 04:30 PM ET

Executives

Robert Uhl - IR, Westwicke Partners

Prabhavathi Fernandes - President and CEO

David Moore - Chief Commercial Officer

Mark Hahn - CFO

John Bluth - EVP, IR and Corporate Communications

Analysts

Ritu Baral - Cowen and Company

Kevin Kedra - Gabelli & Company

Bert Hazlett - Ladenburg Thalmann

Eun Yang - Jefferies

Alan Carr - Needham & Company

Jessica Fai - J.P. Morgan

Stephen Willey - Stifel

Michael Higgins - ROTH Capital Partners

Debjit Chattopadhyay - Janney Montgomery Scott

Steve Brozak - WBB Securities

Operator

Good day ladies and gentlemen and welcome to the Cempra Second Quarter 2016 Financial and Operating Results Conference 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 turn the conference over to Robert Uhl, Westwicke Partners. You may begin.

Robert Uhl

Thank you operator. Good afternoon and welcome to Cempra second quarter 2016 financial and operating results conference call. Joining the call from Cempra are Dr. Prabha Fernandes, President and Chief Executive Officer; Mark Hahn, Chief Financial Officer; David Moore, Chief Commercial Officer; and John Bluth, Cempra's newly appointed Executive Vice President of Investor Relations and Corporate Communications.

Before I turn the call over to Dr. Fernandes, I would like to remind you that today's call will include forward-looking statements based on current expectations. Such statements represent management's judgment as of today and may involve risks and uncertainties that could cause actual results to differ materially from expected results.

Please refer to Cempra's filings with the SEC which are available from the SEC or on the Cempra website, for information concerning the risk factors that could affect the company.

I will now turn the call over to Dr. Fernandes, President and CEO of Cempra.

Prabhavathi Fernandes

Thank you, Robert. Good afternoon everyone and thank you for joining our teleconference. Cempra has continued to make outstanding progress in 2016 and we're very well-positioned for the potential U.S. approval solithromycin later this year and the commercial launch in the U.S. in early 2017.

Now that we have our NDA submission accepted for review and the MAA has been submitted, we are focused on obtaining FDA approval by the PDUFA dates which are December 27 and 28, 2016 and launching Solithera in early 2017 to a successful start during the upcoming winter pneumonia season.

The areas of our focus have been on one, MD approval by the end of 2016; two, education of doctors, nurses, pharmacists focused on shortcomings of the current generic antibiotics used to treat pneumonia, and the need for Solithera; three, staffing, training and preparation for a successful commercial launch; and four, having sufficient cash to fund the company with full support for commercial operations through 2017.

In preparation for commercial launch, we shared a lot of details on our plans with you at our recent Investor Day, and David Moore will provide you with an update during this call.

With the references to how we will finance our bold good strategy, we wanted to position the company with enough cash to fund operations through 2017. And as you will hear from Mark Hahn, we have accomplished this very important goal.

Now, to discuss our regulatory submissions and FDA interactions. We believe that we have submitted a strong data package and we have been very pleased with the active engagement of the FDA since our NDA submission.

Importantly, we have been able to respond in a timely manner. We're preparing for the FDA Advisory Committee Meeting which we expect to be in the fourth quarter of 2016. All indications are that we will be currently on track with a late December PDUFA date.

We also submitted our strong regulatory package, the MAA to the European Medicines agency at the end of June. There's an urgent need for antibiotics in the EU just as it is globally, so we do expect regulatory action by the end of the second half of 2017.

We will update you when we hear more about the timing for the reviews as there is no priority date. The process does not exist in the EU. We're talking to potential partners for commercialization in the European Union.

Also during the second quarter, Toyama Chemical, our licensing partner for Japan, announced successful results for its Phase 2 clinical trials in CABP. The study compared treatment with solithromycin to levofloxacin and found that all efficacy outcome measures favored solithromycin with comparable safety and tolerability.

As I mentioned, if the FDA approved solithromycin, we are planning to launch the product during the first quarter of 2017 in order to capture the portion of that upcoming winter pneumonia season.

Let me now summarize how we are getting the market ready. We are having many physician, nurses, pharmacy group meetings to describe and to build awareness of the need for a new macrolide with CABP that can be used as the outpatient and inpatient setting.

The rising rate of macrolide resistance together with the fast and outpatient treatment of CABP now has few good treatments options makes the timing of our NDA submissions optimal.

The need has only been magnified by recent changes in the marketplace. First is increasing macrolide resistance. Macrolides are very well known therapeutic class to the medical community; physicians have been comfortable for many years with using macrolides for pneumonia and respiratory tract infections.

Resistance is now at around 50% in the United States. This resistance rate is no longer just a number as physicians have been turning to fluoroquinolones such as levofloxacin or moxifloxacin and first-line agents for CABP.

There is increasing pressure from infectious diseases expert, CDC and from powerful infectious control -- infection control specialist within each medical center that fluoroquinolones should be reserved for serious gram-negative and hospital infections, but physicians today have few alternatives.

As was discussed at the FDA Advisory Meeting in November 2015, the fluoroquinolones can cause C. difficile colitis and tendonitis including Achilles Tendon Rupture, aortic aneurysm and even retinal detachment and referred to them as a constellation of adverse events.

Since the Advisory Meeting the FDA has issued more restrictive guidelines on the use of fluoroquinolones including label changes to alert doctors and patients to these serious adverse events.

Although CABP is still part of the label for levofloxacin fluoroquinolones, we believe that when provided with an alternative, which we have shown to have the same efficacy as the fluoroquinolones; physicians will go back to using a new macrolide, Solithera.

In the next few months prior to approval, we expect that physicians treating CABP patients who are not already aware will become aware of the urgent unmet need for a new therapy.

Our Medical Affairs team has a large program underway to educate medical staff on the resistance rates concerned about fluoroquinolones and about the data from our clinical trials with solithromycin.

As we get ready to commercialize Solithera for adults with pneumonia, our development and scientific teams are shifting their focus from adult to the unmet needs for children. Solithromycin is the first antibiotic in over two decades that is being developed in IV, oral capsule, and oral suspension formulation for pneumonia in children, which is still one of the most common reasons for a visit to a doctor. It is also the first new oral antibiotic for children with CABP since azithromycin came along in the late 1980s.

Our pediatrics program which is mostly funded by BARDA is making progress. As our Phase 1b clinical trial in pediatric patients is completing the Phase 2/3 solithromycin trial has been initiated and is screening for patients. Pediatric patients from ages two months to 17 years with CABP will be enrolled in this study and it is expected to be completed during 2018.

Solithera for pediatrics will provide dosing flexibility to pediatricians. Cempra has received QIDP for the pediatric suspension product from the FDA adding to all the other QIDPs for the capsules and intravenous formulations.

Cempra's Phase 2 studies that take advantage of the anti-inflammatory effects of solithromycin are also continuing. One of these trials is in chronic obstructive pulmonary disease or COPD, and the other is in nonalcoholic steatohepatitis or NASH. The studies explore longer term dosing with solithromycin.

Since COPD study doses patients orally for one month, while the NASH study doses patients orally for three months. Although three months dosing may be considered short compared to other drugs in development for NASH, the effects even with this relatively short dosing schedule are being determined. The NASH trial is an open label study and we expect to report interim results from our NASH programs by the end of 2016.

We have several manuscripts that have been published, but let me point out the key one that will soon be published. In addition to our oral Phase 3 trial that was published in Lancet Infectious Diseases earlier this year, our Phase 3 trial on IV to oral solithromycin will be published this fall in another peer-reviewed journal.

This will meet the criteria required for the review by the panel set up to write the new CABP ATS guidance. Our expectation is that if approved, solithromycin will be covered in the guidance as a primary antibiotic for use in CABP.

Turning to the next indication, gonorrhea. In the last few weeks, there was a case reported in the New England Journal of Medicine -- of a case of gonorrhea resistant to ceftriaxone azithromycin in the United States. These cases are expected to increase.

The expansion phase of Cempra's gonorrhea Phase 2 trial with solithromycin is being conducted by the National Institute of Allergy and Infectious Diseases. This trial will enroll an additional 60 women and adolescent children in the United States.

You may recall that most of the original 250 patients which completed the first phase of the study in late 2015 were men. The additional diversity in the population mix of the expanded trial could help us obtain a broader label and we're pleased that the NIAID extended the study to include the additional patient population.

There is tremendous need for an effective single dose oral treatment such as solithromycin for multi-drug resistant gonorrhea. Its use in gonorrhea could be an attractive secondary market for solithromycin, in addition to the primary CABP indication that we are seeking.

Finally, let me provide an update on fusidic acid, branded TAKSTA, our second antibiotic development program. Cempra is developing TAKSTA exclusively in the United States as an oral treatment for Acute Bacterial Skin and Skin Structure Infections or ABSSSI, where a Phase 3 clinical trial is currently underway and in refractory bone and joint infections. Its safety and efficacy have clearly established since the product has been available in the EU for many years.

Patient enrollment in the skin Phase 3 trial is proceeding on track and we expect to complete enrollment in Q4 2016. We have also initiated a supportive trial for TAKSTA in patients with refractory bone and joint infection.

We believe TAKSTA provides an oral alternative for long-term use over intravenous products that are currently being used to treat staphs including MRSA in skin and in bone and joint infections.

TAKSTA oral tablets have received QIDP designation as well from the FDA for the ABSSSI indication. We are very excited about our regulatory and clinical progress on all fronts and look forward to the potential approval of solithromycin later this year, which brings us to the commercial launch.

I will now turn the call over to David Moore, our Chief Commercial Officer for an update. David?

David Moore

Thank you, Prabha. It was good to see many of you at our Investor Day in New York where we reviewed our commercial strategy and go-to-market launch plans and had a chance to introduce some key members of the commercial team. We also unveiled the brand name for solithromycin which is Solithera as you heard.

In anticipation of a late December approval and early 2017 launch, we have begun hiring our Regional Sales Managers. These highly qualified managers will now begin recruiting the professional antibiotic sales force.

The caliber of talent and the competition for sales position has exceeded our expectations which were high to start with. And I am incredibly excited about the experienced team we have been able to attract to Cempra to execute the successful launch of Solithera. We are also working to finalize our initial product shipment plans.

We plan to initiate shipments to fill the retail pharmacy channel shortly after approval. We remain very excited about Solithera's potential and the very real need expressed by physicians, pharmacy directors and other healthcare professionals for a new antibiotic for the treatment of Community-Acquired Bacterial Pneumonia. The medical community views solithromycin with anticipation and as a welcome addition to the antibacterial category.

As Prabha mentioned, physicians are very familiar and comfortable with the macrolide class. Our continuing market research and discussions with physicians, support our view that a new antibiotic with the target product profile of solithromycin will be well received.

The market is providing very positive indicators and we're confident with the demand that will exist for Solithera from healthcare providers and the access that will exist from payers. With approximately 10 million CABP prescriptions written annually in the United States, we are looking at a very attractive market opportunity.

As we showcased at the Investor Day, we have launched the CABP counts campaign. The purpose is to highlight the unmet needs that exist in the CABP market such as the problem of growing resistance, the potential consequences of failure, and the serious impact of CABP. To see what we're doing with this educational initiative, please visit CABPCounts.com, that's CABP.

As I turn the call over to Mark for our financial update, I'd also like to note that Mark and I and our teams have been working hard completing the systems and processes we'll need to model, track, and manage our commercial sales flow. We look forward to reporting Solithera revenues on our 2017 earnings call. Mark?

Mark Hahn

Thank you, Dave and good afternoon everyone. As Prabha mentioned earlier, one of our key financial goals for the year was to put the company in a position where we have funding to get us through 2017.

During the second quarter, through our at-the-market or ATM financing program, we sold 2.5 million shares, resulting in net proceeds of approximately $45.8 million. And in July, we sold an additional 1.6 million shares, raising approximately $29.2 million, bringing our aggregate cash raise through the ATM to approximately $75 million since we began the program in May.

We are delighted with the results of the ATM and the level of interest we have seen from institutional investors. I'm pleased to report that Cempra's current cash and equivalents, I now expected to be sufficient to fund continued development of solithromycin and TAKSTA and our commercial launch activities through 2017 including funding the robust launch plan that Dave outlined in our June 23rd Analyst Day Meeting.

This projection does not include any funds from future financings or partnerships beyond the Toyama relationship and the BARDA contract. As of June 30th, 2016, Cempra had cash and equivalents of $250.7 million and 50.7 million shares outstanding. The cash balance at the end of June includes activity related to our ATM facilities through June 30th, but of course, does not include the additional $29 million raised in July.

For the quarter ended June 30, 2016, Cempra reported a net loss of $24.8 million or $0.51 per share compared to a net loss of $25 million or $0.57 per share for the second quarter in 2015.

Efforts in our BARDA program continue with $3.4 million of revenue in the second quarter, which compares to $3.1 million of revenue in the second quarter of 2015. We continue to expect our BARDA activity to run at between $3 million and $5 million per quarter.

Research and development expense in the second quarter of 2016 was $16 million compared to $23.7 million for the same quarter in 2015. The lower R&D expense is primarily due to the timing of payments for the order of active pharmaceutical ingredient necessary to support the launch of solithromycin and a decrease in clinical expenses as the solithromycin phase 3 studies have been completed.

General and administrative expense was $12 million compared to $5.7 million for the second quarter last year, driven primarily by commercial readiness activities and increased headcount to support commercialization.

With that I'll turn the call over to John Bluth who will introduce himself to you. As we continue to advance the company, John will be leading Cempra's Investor Relations and Corporate Communications activity and will work closely with the rest of the Cempra management team and will be supported by Robert Uhl will and his team at Westwicke. John?

John Bluth

Thanks very much, Mark, and hello everyone. As you've heard from Prabha, Dave and Mark, Cempra is it an incredibly exciting point in its history with an abundance of clinical, regulatory, and commercial milestones lined up in the near-term for multiple products, indications, and geographies and I'm very excited to add my experience to the outstanding team that's driving our progress.

I've had the opportunity work together with many of you during the 10 years I have spent leading Investor Relations and Corporate Communications in the healthcare industry for Aviron and for CV Therapeutics, where we took multiple products through the FDA and European Medicines Agency and made the successful transformation into a fully integrated commercial company, which is exactly the transition underway now at Cempra.

I've spent the last several years leading Investor Relations and Corporate Communications for two global companies outside the healthcare space, and I'm extremely excited to get back to my biotech roots and to join alongside such an accomplished team as we work to deliver the strong execution that drives value to patients, physicians, investors, and employees.

We've got a healthy calendar of upcoming conferences and investor meetings and I very much look forward to meeting you in person and to working with you. I'd now like to hand the call back to Prabha.

Prabhavathi Fernandes

Thank you, John, and David and Mark. Our NDA submission to the FDA for solithromycin have been accepted for filing and our MAAs has been submitted to the EMA is what we believe is a strong and compelling data package.

Our clinical development programs for solithromycin traditional potential indications are moving forward. In addition to the FDA Advisory Committee Meeting and approval for Solithera, we also expect two other milestones this year, completion of patient enrollment for ABSSSI Phase 3 trial for TAKSTA by the end of the year and also interim results from solithromycin NASH exploratory trial.

As David had explained, our commercial activities have also advancing as we prepare for the launch of solithromycin in the U.S. next year pending FDA approval. And as Mark had said, we now have additional cash to fund our operations through 2017, which covers the launch and commercial rollout for Solithera.

I am convinced that Cempra is well-positioned for future success and for the successful commercialization of Solithera and additional products in the future. Operator, we're now ready for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]

The first question is from Ritu Baral of Cowen. Your line is open.

Ritu Baral

Hi, everyone. Hi Prabha, hi team.

Prabhavathi Fernandes

Hi, Ritu.

Ritu Baral

And hi John, looking forward to working with you. My first question is on the NASH data, the interim data Prabha that you mention. What will constitute this interim data? And do you having it on hand for the Advisory Committee Meeting or the approval date?

Prabhavathi Fernandes

Yes, that's an interesting question because we will have data on patients treated -- a small group of patients, a handful, who are being treated for three months and we will have seen their biopsy read out before they got treated and posttreatment.

And they have to be cared first as truly having NASH with fibrosis before they got on our drug. So, we will the effect those three months. We also have safety data on these patients for three months and all of this data will be submitted and known at the FDA Ad Com, but you will note this particular piece of data beforehand of course.

Ritu Baral

Got it. That's very helpful. Do you plan on communicating any mid-cycle communications with FDA with The Street [ph]?

Prabhavathi Fernandes

Yes, so -- which is typical of a priority review, we don't -- we will not be communicating with the Street [ph], but we do have frequent communications with the FDA. We get that in writing, we just flaunt, we've had verbal communication, we'll continue to have it. As you know we have a very good relationship with the FDA. And they've helped us develop and move this drug forward.

So, we will continue to having those discussions, but we will have no other communication with The Street related to that because these are fairly complex questions. Also they may pertain to some particular line or section of the document.

Ritu Baral

Understood. And last question is a little more open ended, Prabha, what does your ideal EU partner look like? What's your best case scenario for an ex-U.S., ex-Japan partnership?

Prabhavathi Fernandes

Money is always important and Mark will reiterate that. And we all know that the more money we have, the more salespeople David can have. But in addition to money, the quality. We want somebody with Cempra's quality over there.

And then the question of course is, is it the same person going to be selling in China, Latin America, et cetera. So, the one easiest to manage is of course somebody who would be global others than Japan and the U.S., but there may be other options also and we're just looking at all of them at this point.

Ritu Baral

Is it -- would you rather have somebody with an incredibly established hospital-based presence or respiratory presence, anything in particular you are looking for?

Prabhavathi Fernandes

Both of the above, but also the knowledge of patients who get treated for respiratory tract. If they had some other experiences doesn’t help you.

Ritu Baral

Great. Thanks for taking the questions.

Operator

Thank you. The next question is from Bert Hazlett of Ladenburg. Your line is open.

Prabhavathi Fernandes

Hi Bert. Anything?

Operator

Actually we'll go to our next question from Kevin Kedra of Gabelli & Company. Your line is open.

Kevin Kedra

Hi, thanks for taking the questions.

Prabhavathi Fernandes

Hi Kevin.

Kevin Kedra

Hey Prabha. Just wondering if you could maybe give us any update on the timing and when we might be seeing some of the data from the gonorrhea trial?

Prabhavathi Fernandes

The gonorrhea trial unfortunately is under the control of the National Institution of Allergy and Infectious Diseases. It's not -- when like Cempra ran a study, we finished all 250 patients within the year we said we were going to and we said that was finished at a very timely manner.

When a government entity takes over, they have to get certain town agreements, city agreements, and various other agreements which take time. So, once it starts to enroll, we expect the enrollment to go reasonably fast for women, but for adolescent children maybe a little bit slower as you would expect. So, we don't know roughly [ph] when. We hope before the end of the year.

Now, the most important thing is, Kevin, this is not a program, we are aggressively pushing to ask for enrolment to finish because our focus at the FDA meeting has to be solithromycin for CABP. We do not want any distractions about gonorrhea. We want it to be approved for CABP; we get our patent term extension for CABP and then gonorrhea come second. We want a clear distinction in timing.

Kevin Kedra

Okay, great. And just a follow-up question on the EU partnership, wondering would you consider partnering the full rights to soli in Europe or would you do it on kind of a CABP basis with maybe some sort of opt in for NASH and some of the other indications?

Prabhavathi Fernandes

I'm going to let David take the question.

David Moore

Yes, it's a great question as you've heard Prabha mentioned many times Solithera is basically a pipeline in a compound and there are future potential indications. And so the way we would approach it Kevin is, you can structure deal in terms to potentially include other indications and certainly milestones that would go along with that and maybe a bit of a change in the structure of the agreement.

I think from our perspective, that is -- if that goes into, how we're selecting and being very careful, how we select the right partner, because we don't think about it as just Community-Acquired Pneumonia in 2017, we do think about it in terms of the whole molecule and what the future potential would look like.

Kevin Kedra

Great. Thanks.

Operator

Thank you. And the next question is from Bert Hazlett of Ladenburg. Your line is open.

Bert Hazlett

Yes. Thank you. Can you hear me now?

Prabhavathi Fernandes

Yes, Bert, we can hear you.

Bert Hazlett

Thanks. My apologies. So, -- thank you for the color on NASH and gonorrhea and the other indications. My question, first one is assuming success with CABP, how much do you expect to be focused on additional respiratory indications with soli moving forward?

And that relates to the R&D spend. R&D has been a little bit lumpy as you mentioned it might be Mark, I guess how should we think about that during the rest of 2016?

Prabhavathi Fernandes

So, I'll mentioned indications and then I'll let Mark take over on the budget. On the respiratory indications, we will certainly look at we think -- after approval, we look at perhaps chronic bronchitis in COPD because those patients will be treated. They usually treat it for seven days and we can go ahead and treat those.

So, we could do a smaller study, that's the beauty of having add-on indications. The big safe database is already there. If you use the same dosage regimen, you can do smaller trials and get those labels, especially the good publication.

Now, we can do that at a relatively inexpensive price. It's not like doing big Phase 3 studies. So, Mark, you want to take?

Mark Hahn

Sure. So, hi Bert. Yes, so, on the R&D expense, you should expect to continue to see it a bit lumpy. A couple of things are kind of driving that. One is the timing of when we get and pay for API. We're at a low point in Q2; there will probably be more of that in Q3.

And then in Q4, as you know if we get approved, we will have a $9.5 million milestone payment due to Optimer/Merck. So, that will hit the expense line in one shot.

Bert Hazlett

Okay, that's helpful. And just one quick follow-up with regard to the ATM. Congratulations on the impressive additional cash raise. How do we think -- I think the ATM, as I'm doing my calculation, was -- the dilution was about the size of the offering in January. And I guess as we move forward in terms of our models, how much additional tapping of this ATM should we expect?

Mark Hahn

We're very happy with the cash we raised. We set out with a specific goal to get the cash we need to get through 2017 and we have gotten there. So, from an expectation of future use, we'll be very thoughtful if we use it again, but where we stand right now is we're very happy with what we've raised so far.

Bert Hazlett

So, we shouldn't expect much more during this 3Q than what we've seen already through July and today?

Mark Hahn

We felt pretty good about where we are right now is the best I can say.

Bert Hazlett

Okay. Thank you very much. Congratulations on the progress.

Mark Hahn

Thank you.

Operator

Thank you. The next question is from Eun Yang of Jefferies. Your line is open.

Eun Yang

Thank you. Now that you have completed regulatory filing for Solithera, do you expect your dissuasions for potential partnerships to be more active?

Prabhavathi Fernandes

Eun, do you mean in Europe or here in U.S.?

Eun Yang

Yes, in Europe.

Prabhavathi Fernandes

In Europe, they are active already. So, they are not become more active. They have been -- our data is now available as we had mentioned our full data packages on the server, so those who we think could be good partners have been looking and we're in discussion.

And as you can imagine we are in no hurry to run and do that deal because you know that the Ad Com is right on the corner and when that's done, maybe what we talk about as a real macrolide will become known to others.

Eun Yang

Yes. So, I mean -- but then is your object to complete the deal for ex-U.S. before MAA approval?

Prabhavathi Fernandes

So, the MAA does not have a timeline. We think it will get done the next year and we could get a deal done before that, we just don't know. We're keeping all of our options open.

We just don't know when we really want to do that deal and which country and do we want to do the whole world, do we want to include China, do we want to include Latin America, do we want to do that separate. Something which looks good today may not look that great next year when we'll be there with we think a good drug.

Eun Yang

Okay. Quick question on NASH, I think initially there were like about 15 patients you were planning to enroll in the study. Can you give us an update on how many patients have been enrolled? And the interim data that we're expecting in 4Q, how many patients data will that be? Thank you.

Prabhavathi Fernandes

So, as I mentioned, we will have a handful of patients who have been enrolled. We will reveal all patients who have finished their three months' dosing as well as the histopathology. So, those who haven’t finished the next three months, of course, we will not review because we won't know the data.

It's only when you read the histopathology can you say how did the drug perform, right. So, we need that reading from the pathologist and then the comparison with the pretreatment to be able to talk about it.

Eun Yang

So, is it fair to say we're looking for about half of 10 different number of patient's data?

Prabhavathi Fernandes

You'll get a handful.

Eun Yang

Okay.

Prabhavathi Fernandes

I can't tell you exactly how many because they are finishing right now and we'll have to wait for the pathologist.

Eun Yang

Okay. And the COPD, you were expecting data by year end, is that still on track?

Prabhavathi Fernandes

No, we wanted to try to finish, but this study -- no, we didn’t want -- we were going to enroll as much as possible in the COPD. Now, that's a blinded study and it's running in the U.K. So, we are not -- and that's not -- the efficacy is not in COPD in the sense of is the patient clinically better. We're looking at immune target, looking at inflammatory target in the lung which would perhaps help us in the other indications. It's a very much a science-driven type of project.

We're -- it was slowed little bit due to various regulatory things in the U.K. and now with Brexit, it will probably even go slower, but we will see how that moves. That is not fast, we like our NASH study better.

Eun Yang

So, initially you said that you were examining goal scores and the rate of COPD exacerbation. Today, it's not the one that we are looking for when the data comes out?

Prabhavathi Fernandes

Yes, we will be looking at those scores in that, but you must remember just one month worth of treatment, may not be enough to modify that. So, yes, we'll be measuring that, we have to being a clinical trial. So, we look at those. But the determining factor will be changes in the inflammatory markers which is the focus of the study.

Eun Yang

Okay. Thank you.

Operator

Thank you. The next question is from Alan Carr of Needham. Your line is open.

Alan Carr

Hi, thanks for taking my questions. Mark, I guess can you clarify -- I have a follow-up to the previous one. It sounds like there will be a somewhat new lower level for R&D, but a bit of a bump in fourth quarter from a milestone payment assuming approval. Is that a fair characterization?

Mark Hahn

Yes, that's true. There also probably be a little bit more in Q3, Q4 inventory purchases. But the overall level of clinical expenses you can imagine has been dropping.

Alan Carr

Okay. And then David, I guess can you give us a bit more of update on the disease awareness and how you track your progress? And I'm wondering if you can differentiate between I guess a doctor understanding that there is greater macrolide resistance and we have these obviously some issues with fluoroquinolone in terms of safety, but do you get a sense also whether or not that leads to -- it's getting through to them in the sense that they would use Solithera.

David Moore

Well, it’s a great question. I'll answer -- two different ways, remember on the one hand, our educational initiative is non-branded, right. So, it's just about the market and resistance and your question is timely because we just received some new results of our tracking. We have metrics set up against it.

And I think you may remember during the Investor Day that we're targeting our future called on physician list. These are the customers that we're reaching out to right now with the CABPCounts Campaign. I'm really happy to let you know that almost a third of all of our future called on universe has come into the campaign and participated.

I can also tell you that their number one recall is that there is a resistance problem and starting to quote the numbers that we have been sharing as you've seen in our resistance map and getting close to 50%.

The other good news is that they recalled the CABPCounts Campaign unaided just as much as they recalled the No Pneumonia Campaign which is from Pfizer and has been out for quite a long time. So, we're very happy with the early term metrics that we're seeing with the CABPCounts Campaign and those that are coming in and watching a video and participating in it.

As your question related to Solithera, I have to separate that and suggest that comes from other market research, it may come from Advisory Boards and the work that we're doing with our Medical Affairs team.

And what I can tell you Alan is what we get right now in terms of a response is I'm doing the best that I can with what I've got in real simple terms. And we're getting indicators that if a new macrolide were available and it was able to show efficacy close to a fluoroquinolone or similar to a fluoroquinolone, that's the ideal combination from a provider's point of view. They like the efficacy of a fluoroquinolone, there's no question. But they're more comfortable prescribing a macrolide and that's really where our value proposition lies and we believe that there is going to be pent-up demand and there's going to be a high level of interest in Solithera when we bring it to market.

Alan Carr

Great. Thanks for taking my questions.

Prabhavathi Fernandes

Thank you, Alan.

Operator

Thank you. [Operator Instructions]

And the next question will come from Jessica Fai of J.P. Morgan. Your line is open.

Jessica Fai

Hey there. Thanks for taking my question. Another one for David and I recognize that most scripts were CABP -- covered by commercial insurance, but my question specifically about initially at launch. Do you believe or do you have any data either supporting or against the idea that physicians might be more biased to use soli in older patients where they may really want to be sure that the patient is getting a drug that will work in the event they have a resistant infection?

I guess what I'm getting at is it possible that your initial patient mix will skew more towards government pay at the start. Just kind of trying to think about what that means for your ability to keep co-pays down as you work to building the Tier 2 coverage.

David Moore

Yes, thank you. Jess, it’s a great question. Jess, we haven't been given the indication from providers that there is a different preference market share or use or demand based on age and we really haven't been shown any preference based on comorbidity and we specifically asked about age, we asked about is there COPD patients, is there otherwise immunocompromised and I have to say that the preference share is the same. I can't tell you exactly, but what we're seeing across age groups and populations is very similar.

We're certainly mindful that the government pay -- whether that be Medicare Part D or whether it be Medicaid, something that we have to work proactively with insurers which we will, just like we will commercial, we will also be working with Medicare.

Our position on that is to work as early and quickly as possible since we believe we'll be launching the product during the pneumonia season. But certainly as we go out and speak to clinicians, we're certainly going to be positioning this first one use for pneumonia period.

Prabhavathi Fernandes

So, I have one comment Jess, on that, it's sort of interesting because I hear this even among people we know, young people are getting azithromycin, in fact I believe some of my staff sitting at this table may have had it, got azithromycin and they say and then they're waiting for another drug and they are worried about levofloxacin as a second drug, which they getting.

So, in many cases, -- and young people may be they will get it as a second drug, but it will get used because this is the one which will work against the macrolide resistant pathogen.

Operator

Thank you. The next question is from Stephen Willey of Stifel. Your line is open.

Stephen Willey

Yeah. Thanks for taking the questions.

Prabhavathi Fernandes

Hi Steve.

Stephen Willey

Hi Prabha. I guess one on TAKSTA, so it sounds like you're going to have an enrolment complete before the end of this year and presumably that could get you into a topline announcement maybe sometime in late 1Q 2017 certainly first half of the year. So, from a filing strategy perspective, should we expect that you're going to file first in ABSSSI and should we expect the prosthetic joint infection to be a subsequent filings that a separate?

Prabhavathi Fernandes

So, unless the [Indiscernible] the law, Cures Act or the PATH Act passes, there will be a possibility of getting an NDA out of one trial. It's just not allowed. We're hoping and counting on the Cures Act or the PATH Act to pass in which case you could get approval for skin and we assume that doctors will then use it for bone and joint infections, which is the same passage. It starts also at the skin.

We will, of course, publish our data. We don't know if we will get BJI, bone and joint infection on label just because there is no guidance for such a trial. So, we would have to talk to the FDA if we could get that on the label based on the result and it all depends on how many cases we have four BJI, how many resistant strains do we have and so on. So, it's all depends on the data.

But there is a fast approval. So, as we finish this trial and the PATH Act -- and the Cures Act has not passed, then we would run through another trial and get it done. This way we would get the drug approved. So, we will not wait for the people on the Hill to act. We will move forward if it has not passed.

Operator

Thank you. And the next question is from Michael Higgins of ROTH Capital Partners. Your line is open.

Michael Higgins

Thank you. Hi, guys. Thanks for taking the question.

Prabhavathi Fernandes

Hi Matt.

Michael Higgins

Hi, Prabha. A lot of good updates this afternoon. Speaking of TAKSTA, can you give us an update on the enrolment Roman so far in your refractory bone and joint section study? How many you've got in and when you think you may have enough that you'll release the results from?

Prabhavathi Fernandes

Yeah. We have quite a few patients, but they are all different. We also have two types of enrollment. We have patients we get the drug to compassionate use if it's from a center which is not part of investigator trials. So, we have those patients including and there many hospitals including Penn, John Hopkins, et cetera.

We, also then have the study which we started I guess November, December last year which is the real -- the controlled study with the refractory bone and joint which we manage the study very closely. Now, that trial is running. I cannot reveal the number of patients so far because there are patients who get screened literally virtually every week. I know we had a number of them being screened last week, but there has been sufficient.

And what is interesting is, not how many we treated, it's how will we treated and what we treated. These are patients who had no choices, no alternatives and we saved their lives, that's the most important point and the fact that there was more so resistant to everything now was incredible.

Some of the stuff we're isolating from them because these patients have been on everything and you have -- the people who have gone to the end of the road and we have restored the quality of their life, they are back with their families. That's the point and that's the data we will show and that's the data we will publish and that's the people we will have at the Advisory Committee for fusidic acid.

Operator

Thank you. The next question is from Deb Chatt of Janney. Your line is open.

Debjit Chattopadhyay

Hey, good afternoon. A just a couple of [Indiscernible]. Number one in terms of your pediatric launch plans is that -- should we think of it more in terms of 2019? And for the launch in the first quarter, are you in a position, first of all, 2017 forecast, are you in a position to launch this in January or is this is going to move towards the middle of the quarter? Thank y so much.

Prabhavathi Fernandes

So, let me put some of the pediatrics program. Remember the enrolment has just started. So, I can't tell you when it's going to finish, we'll give you some sort of guidance in between, as to who how -- it could go very fast, it could go slower.

So, at this point, on the BARDA timeline, we had asked for the budget to 2018 and we expect to finish it and then submit it. I want to draw one more thing to you right now. If solithromycin gets approved for adults, it will be available in the hospitals in both intravenous and oral and all other antibodies have been used in children with a specific pediatric approval. The suspension is then been added on and that's get used.

In the hospital, it will be available for pediatrics. So, I do want to make that clear, because every antibiotic including [Indiscernible], has never been separately tested in children and adjusted not even in Cubicin in more recent days. So, David?

David Moore

The question I just want to make sure I heard you correctly, was your question whether or not we plan to launch in January versus sometime later in the first quarter?

Debjit Chattopadhyay

Yes.

David Moore

The answer is yes, as soon as possible. So, if our PDUFA dates are December 27th, we certainly plan to launch the product in January and we will shift and start selling as soon as possible after approval.

Prabhavathi Fernandes

As a mentioned there is no indication there should be a delay our interaction is going very well. Our data feedback has been good and right now we see no delay to the PDUFA date.

Debjit Chattopadhyay

Great. Thank you so much.

Operator

[Operator Instructions]

The next question is from Steve Brozak of WBB Securities. Your line is open.

Steve Brozak

Hey, guys. Thanks for taking the question. Since most of the questions have been asked I do have one, given I guess this is a positive question. Given all of the releases on fluoroquinolones and their side effects, the resistance that we're seeing in all antibiotics, your price advantage, you've got a lot of advantages. Are there any other advantages that you would like or that you think you might want to see, or are there any other things that we should start to think about and how clinicians will look at this? and I've got one follow up after that.

Prabhavathi Fernandes

Steve you can be singing, let us know, let us know this winter.

Steve Brozak

Okay. So, you're telling me also going to hit major pneumonia weather.

Prabhavathi Fernandes

Yes, we hope to have a good pneumonia season as long as I stay healthy.

Steve Brozak

We won't put it in quite those terms but looking at what the clinicians are now, what are you -- and David can you look at -- looking out clinicians are basically having to make drastic decisions and using multiple drugs, what are they saying to you when you start to make those outbound calls and say, hey, listen, are they saying how soon? Is there like a pent-up interest or pent-up demand? And then I will hop back in the queue.

David Moore

I would say that there is. So, for those clinicians that we are -- through Advisory Boards and through research, we're able to share the target profile were able to share data. There is absolutely the question, how soon is it going to be here or are you going to be sure that you have it available for the next pneumonia season?

And I think the thing that strikes us on the positive side most is that it's just a very simple message and a simple takeaway and that is, I don't have to trade-off between safety and efficacy anymore which is exactly what's happening today. And so it's a very clear, tight message and the takeaway is exactly what we hoped when Dr. Fernandes put these trials together a few years ago.

Steve Brozak

Great. Well, everyone likes simple, I look forward to obviously your simple launch and people receiving product. Thank you guys.

Prabhavathi Fernandes

Thank you very much.

Operator

Thank you. And at this time, there no further questions in the queue. I'll turn it back over to Dr. Fernandes for closing remarks.

Prabhavathi Fernandes

Thank you all for participating in our call today and for your continued support of Cempra. I am pleased with the addition of John Bluth to our Executive team to lead Investor Relations and Corporate Communications.

John is a biotech industry veteran, an outstanding scientific, financial, commercial experience and I think you will enjoy working with him. We will be participating in the upcoming Baird, Morgan Stanley, and Ladenburg Healthcare Investor Conferences in New York in September. We hope to see many of you there.

If you have any additional questions, please feel free to contact John. Thank you very much and have a good evening everyone.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect. Good day.

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