Pharmion Q3 2007 Earnings Call Transcript

Oct.31.07 | About: Pharmion Corp. (PHRM)

Pharmion Corp. (PHRM) Q3 2007 Earnings Call October 31, 2007 5:00 PM ET

Executives

Breanna Burkart - Director of Investor Relations andCorporate Communications

Patrick Mahaffy - President and Chief Executive Officer

Erle Mast - Chief Financial Officer

Gillian Ivers-Read - Executive Vice President of DevelopmentOperations

Analysts

Gene Mack - HSBC

Gur Roshwalb - Piper Jaffray

Phil Nadeau - Cowen and Company

Matt Osborne - Lazard

William Ho - Banc of America Securities

Jason Zhang - BMO Capital Markets

Eric Vieira - Majestic Research

Dave - Morgan Stanley

Steven Rosston - Glynn Capital Management

Jim Reddoch - FBR

Operator

Good day, ladies and gentlemen, and welcome to the PharmionThird Quarter Financial Results Conference Call. My name is Akiya (ph) and I’llbe your operator for today. At this time, all participants are in a listen-onlymode.

We will conduct a question-and-answer session toward the endof the conference (Operator Instructions).

I would now like to turn the presentation over to your hostfor today's call, Ms. Breanna Burkart, Director of Investor Relations andCorporate Communications. Please proceed, ma'am.

Breanna Burkart

Thank you, Akiya. Good afternoon and welcome to the PharmionCorporation third quarter 2007 conference call. You should have received thenews release announcing our third-quarter financial results. If not, it isavailable on our website at www.pharmion.com.

As a reminder, this conference call is being recorded andwebcast. Remarks may be accessed live on our website during the call, and willbe available in our archive for the next several weeks.

The agenda for today's call is as follows. Patrick Mahaffy,Pharmion's President and CEO, will briefly review the third quarter and thenear-term milestones associated with our product portfolio. Then Erle Mast,Pharmion's Chief Financial Officer, will review the financial results for thequarter and comment on the Company's outlook for 2007.

Then we would like to open the call for a Q&A sessionwith our call participants and members of our senior management team. Inaddition to Patrick and Erle, joining us today is our Executive Vice President,Development Operations, Gillian Ivers-Read and our Chief Medical Officer, AndrewAllen, to respond to your questions.

Before we begin, please keep in mind that this conferencecall, particularly the discussion of our financial outlook, contains statementsabout expected future events that are forward-looking and subject to risks anduncertainties.

Factors that could cause actual results to differ and varymaterially from expectations can be found in Pharmion's filings with the SEC.Forward-looking statements speak only as of the date on which they are made,and Pharmion undertakes no obligation to update publicly or revise anyforward-looking statements, whether as a result of new information, futuredevelopments or otherwise.

Now, I will turn over the call to Patrick Mahaffy.

Patrick Mahaffy

Thanks, Breanna. Thank you all for joining us thisafternoon. We are extremely pleased with our financial results and our clinicaland regulatory achievements during the third quarter.

Our third-quarter sales of $67.3 million represent our bestsales quarter to date, and Erle will review the detail of the financial resultsafter I give a brief overview of our results for the quarter.

We made significant progress during the quarter toward theachievement of our 2007 regulatory and development milestones, which we expectto contribute meaningfully to our growth in 2008 and beyond.

Highlights of the quarter include our announcement ofexceptionally strong top-line Phase III overall survival data for Vidaza, whichclearly differentiates Vidaza as the only agent that provides the gold standardof clinical benefit survival for patients with higher-risk MDS; thecommencement of our Phase III pivotal trial for Amrubicin in small cell lungcancer.

The acceleration of our launch planning for Thalidomide, forwhich as most of you know, we anticipate a decision from the EU regulatoryauthorities on our marketing application for first-line myeloma within the nextfew months; the initiation of a research collaboration with MethylGene for thedevelopment of sirtuin inhibitors, this will be our third epigeneticanti-cancer program at Pharmion and our second with MethylGene.

We initiated an additional Phase I and II studies for ourHDAC inhibitor, MGCD0103; and finally, received fast-track designation by theFDA for oral Azacitidine for MDS, which is currently the subject of a PhaseI/II MTD study in MDS and AML.

We expect these recent and upcoming events to have ameaningful impact on our long-term growth prospects.

Turning now to our development pipeline, and first toVidaza. Most of you are aware, and as I just announced, we released in Augustthe top-line results from the largest study ever conducted in higher-risk MDS.

This study evaluated overall survival and several secondaryendpoints in 358 higher-risk MDS patients receiving either Vidaza or conventionalcare. Results from this study represent our most significant achievement for2007. I will briefly recap those top-line data.

In the primary endpoint analysis, Vidaza treatment wasassociated with a median overall survival of 24.4 months versus 15 months forconventional care, with a p value of 0.0001; hazard ratio was 0.58.

Two-year survival rates were 50.8% for Vidaza versus 26.2%for patients receiving the conventional care regimen, with a p value of lessthan 0.0001. Importantly, the median number of treatment cycles in the Vidazaarm was nine.

We believe the data from this study will provide asignificant marketing advantage, as Vidaza is now the only therapy to not onlydemonstrate a survival advantage but a survival advantage of this magnitude inthe treatment of higher-risk MDS.

In particular, physicians are particularly enthusiasticabout the 100% improvement in the two-year survival rate, which isunprecedented in this disease. It is not at all clear that other agents inpivotal higher-risk MDS trials will have a similar effect in this patientpopulation.

Full data from this study will be presented at a majormedical conference later this year. Additionally, these data will serve as thebasis for our European Marketing Authorization Application for Vidaza in thetreatment of higher-risk MDS, as well as a supplemental new drug application tothe FDA to include these data in the prescribing information.

We intend to file the MAA in Europe by year-end, seeking anaccelerated review, and the sNDA in the first quarter of 2008. We will fileadditional submissions and supplemental applications in other internationalmarkets throughout 2008 as well.

Turning now for oral Azacitidine, our development of oralAzacitidine remains on track. We were pleased that the FDA recently grantedfast-track status for oral Azacitidine in the treatment of MDS, acknowledgingthe potential significance of this agent. There are centers open and enrollingpatients in the Phase I MTD study, and expect interim data as early as ASCO2008.

I should note that investigator interest in oral Azacitidineis exceptionally high. We anticipate substantially expanding the clinicaldevelopment program in 2008.

Now, to Thalidomide. Based on encouraging progress with theEMEA, we continue to expect an action from the European regulators on ourfiling within the next few months. In anticipation of this timing, we areaccelerating launch preparation activities for Thalidomide Pharmion, includingexpanding our European sales force.

In addition, results from the IFM 99.06 study, the primarystudy in our Thalidomide submission, were published in the October 6 issue ofThe Lancet. This publication will be a key component of our launch materials.

Now, to Satraplatin. Unfortunately, last evening weannounced that the overall survival results from the Phase III SPARC study didnot achieve statistical significance. The results showed no difference betweenthe Satraplatin arm and the control arm, with a hazard ratio of 0.97.

While we are disappointed with these results, as you know,we did not have high expectations for a statistically significant overallsurvival outcome.

Our European filing for Satraplatin, which was submitted inJune, is based on the PFS data from the SPARC trial, and the timing of thesubmission was chosen so that overall survival data could be submitted duringthe review process.

These overall survival results will clearly have an impacton the EMEA's review of our active submissions.

We believe that critical to our submission will be theresults of the prespecified subset analyses, with particular focus on theimpact of prior Taxotere use. In addition, based on our very preliminary reviewof the overall survival data, Taxotere use following the SPARC trial may have contributedto the outcome of the trial. Obviously, we've only had one day to review thesedata, and any further comments would be inappropriate at this time.

Let me turn to 0103, our HDAC inhibitor. It is currently thesubject of a broad Phase II program which includes studies in a variety ofhematologic and oncology indications, both as monotherapy and in combinationwith approved anticancer agents.

During the quarter, it was granted orphan drug designationby both the U.S. and E.U. regulatory authorities for the treatment of Hodgkin'slymphoma, which provides certain incentives for sponsors to investigate aproduct for use in a rare disease or condition.

We initiated a Phase I trial in combo with Taxotere in solidtumors, as well as Phase II monotherapy study in CLL during the quarter, andexpect to initiate a Phase II combination study with Vidaza in lymphomas beforethe end of 2007.

We also reported preliminary clinical data at theAACR-EORTC-NCI meeting from the Phase I portion of the 0103 in Gemzar orgemcitabine study in patients with solid tumors. In addition to reaching theMTD, these data demonstrated preliminary evidence of activity in pancreaticcancer and we are moving forward now with the Phase II portion of the study.

Together with MethylGene, we intend to initiate a pivotalregistration study for 0103 by the end of 2008 most likely in eithermonotherapy in Hodgkin's lymphoma or in combination with Vidaza in ahematological malignancy, and in that case, most likely AML.

So in summary, we're very pleased with the progress of thisprogram and the early efficacy signals that we are seeing for 0103 in solidtumors, as well as in hematological malignancies.

Moving now to Amrubicin, pleased to say that we recentlyinitiated our pivotal Phase III study of Amrubicin in the second-line treatmentof small cell lung cancer patients with either sensitive or refractory disease.

The randomized controlled multi-center study will compareAmrubicin to topotecan, the only approved chemotherapy for second-linetreatment of small cell lung cancer in the U.S. and E.U.

Enrollment of the 480 patient study is underway, patientsbeing randomized in a 2 to 1 ratio to receive either Amrubicin or topotecan.The primary endpoint of the study is survival. The secondary endpoints includeprogression-free survival, overall response rate, duration of response andquality of life.

For this study, we have completed the Scientific Adviceprocess with the European regulatory authorities and reached an SPA agreementwith the FDA. We expect this study, which is being conducted in 135 centers inNorth America, Europe and Australia, to take between 18 and 24 months toenroll.

If successful, the results will lead to a potential filingin the U.S. and perhaps in Europe in 2010. We are extremely pleased with theresults seen thus far and the enthusiasm of the investigator community toparticipate in the trial.

Now, I'll take a moment to comment on our ASH plans. Ourpipeline investment is yielding substantial new and updated data, some of whichI have reflected today. And as a result, we're looking forward to what weexpect to be our strongest presidents at the American Society of Hematologyannual meeting, which is this December in Atlanta.

I'll note that we also plan to host an investor or analystevent on Monday evening, December 10th, from 7:30 until 9:00 to review the keyclinical data presented at the meeting. Invitations will follow next month. Ihope that many of you can join us there.

Now, let me turn the call over to Erle to discuss thirdquarter 2007 financial results and guidance for the year.

Erle Mast

Thanks, Pat. Good afternoon, everyone. Our full financialresults are in this afternoon's press release, so I will direct my comments tohighlights for the quarter, and I'll provide some additional analysis andcommentary, and let me start with product sales.

As Pat mentioned, we had a very strong sales quarter,achieving our highest level of sales to date. Net sales for the third quartertotaled $67.3 million, which represented a 9% increase over total sales for thethird quarter of 2006. For the nine months ended September 30th, 2007, netsales totaled $195.8 million, and that represented an increase of 10% over thesame period in 2006.

Worldwide sales of Vidaza totaled $42.3 million for thethird quarter, an increase of 16% over the third quarter of 2006. For the firstnine months of 2007, worldwide Vidaza sales totaled $120.5 million, an increaseof 14% over the same period of 2006.

Vidaza sales in the U.S. totaled $33.3 million in the thirdquarter of 2007, which were equal to the sales in the third quarter of 2006. Ona sequential quarter basis, U.S. Vidaza sales increased 3% over the secondquarter of 2007.

Many patients in compassionate use sales of Vidaza in Europein certain rest-of-world markets continued to grow, totaling $9 million in thethird quarter 2007, up from $3.3 million in the third quarter of 2006. On asequential quarter basis, EU and rest-of-world Vidaza sales increased $1million or 13% over the second quarter of 2007.

Thalidomide sales for the third quarter of 2007 totaled$20.2 million, which was equal to the Thalidomide sales during the thirdquarter of 2006, and in line with our Thalidomide sales for each of the firsttwo quarters of 2007. For the nine months ended September 30th, 2007, sales ofThalidomide totaled $60.7 million, compared to $58.8 million in the same periodof 2006.

Now, let me turn to operating expenses, and I'll begin withR&D expense. We made tremendous progress advancing the development of ourproduct portfolio during the third quarter. As Pat just reviewed, we reportedunprecedented top-line survival data for Vidaza in higher-risk MDS, initiated apivotal Phase III study for Amrubicin in second-line small cell lung cancer andPhase I and Phase II studies for MGCD0103 in solid tumors and CLL, and weenrolled patients in the Phase I dose escalation study of oral Azacitidine. Wealso commenced our research collaboration targeting to 200 inhibitors withMethylGene, our third epigenetic program.

Now, as expected, these and other development activitiesresulted in an increase to R&D costs, as our third-quarter R&D expensestotaled $29.1 million. We were very pleased to see our development programsprogress during the quarter, as they will drive our longer-term sales andearnings growth.

Turning to SG&A expenses, selling, general andadministrative expenses totaled $32.5 million for the third quarter of 2007 and$93.2 million for the first nine months of the year. Now, these amountsrepresent increases of approximately 30% over the comparable periods of 2006.

And as we previously discussed, we expanded our commercialactivities in both the U.S. and Europe to prepare for the potential launches ofThalidomide and Vidaza in Europe and for the relaunch of Vidaza in the U.S.with the survival data.

During the third quarter, we completed the expansion of ourU.S. sales organization, increasing the number of our field-based personnel byapproximately 30. We now have a U.S. field-based commercial and medical scienceteam totaling approximately 140, which we believe provides us with theappropriate resources to reach the MDS market. We reported a net loss of $21.4million or $0.58 cents per share for the third quarter of 2007 and a net lossof $36.4 million or $1.05 per share for the nine months ended September 30,2007.

Now, these net losses include stock compensation expense forthe third quarter of $1.5 million and of $4.1 million for the nine months endedSeptember 30, 2007. Also, the losses for the quarter and the nine months endedSeptember 30, 2007 include an $8 million charge for a milestone paymenttriggered by the acceptance of our MAA for Satraplatin by the EMEA.

We ended the third quarter with cash, cash equivalents and short-terminvestments totaling $257.6 million. As a reminder we have no outstanding debt.Now, let me address our financial guidance for 2007. We now expect to reporttotal sales for the year in a range of $265 million to $270 million, anincrease from our previous guidance of $250 million to $260 million.

Research and development expenses for 2007 are now expectedto range from $95 million to $100 million, an increase from our previousguidance of total research and development costs of approximately $85 millionto $95 million.

Selling, general and administrative expenses for 2007 areexpected to total approximately $125 million, up slightly from our previousestimate of $120 million. And finally, we expect our balance of cash, cashequivalents and short-term investments will range from $235 million to $245million at the end of 2007, an increase from our previous guidance of $225million to $235 million.

With that, I'll turn the call back to Patrick for someclosing comments.

Patrick Mahaffy

I don't really have any. We had a great quarter, and weappreciate you joining us today. All of us now, including Andrew and Gillian,would be happy to answer any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes fromthe line of Gene Mack of HSBC Securities. Please proceed.

Gene Mack - HSBC

Thanks for taking the question. I apologize for the badconnection, but that actually your fault for having this during prime trick-or-treatinghours.

Patrick Mahaffy

I want to apologize to all of you with young kids, or all ofyou wanting to go to a party. So sorry about that.

Gene Mack - HSBC

Can you just give us an idea, in terms of market share, interms of patients, share, where Vidaza is at this point?

Patrick Mahaffy

Yeah, the patient share for Vidaza in the United States isabout 60% Vidaza, 40% Dacogen, maybe 59%, 41%, but that's the patient share.

Gene Mack - HSBC

Okay, great And then on Satraplatin, can you saydefinitively at this point, with what you know right now, whether or not you'regoing to file or not for that drug in EMEA?

Patrick Mahaffy

Well, I can say definitively we're going to file, because wealready have. I cannot say definitively what I think the outcome will be. MaybeAndrew or Gillian can spend a moment on, Andrew; do you want to talk a littlebit about what you think the clinical data mean, and Gillian a little bit aboutjust the regulatory process? Because I think we'll have some interactions withthe agencies certainly by the end of the year. Andrew?

Andrew Allen

Okay. So, the SPARC trial, remember, had two coprimaryendpoints. One was progression-free survival and the other was overallsurvival. As you know, it met the primary endpoint of progression-free survivaland failed to meet overall survival.

Now, as we've discussed previously, the progression-freesurvival endpoint is a composite, and it includes various measures of diseaseprogression, and the major one is pain, which is as you know the major symptomof men with hormone-refractory prostate cancer that has metastasized to thebone.

So, we believe that the PFS benefit is related to a directclinical benefit because of the impact upon pain. That's obviously a discussionthat we're having with the regulatory authorities in Europe. Clearly, it didn'tmeet the overall survival endpoint, but the study was complicated by theintroduction of the approval of Taxotere midway through the conduct of the SPARCstudy.

So, if you recall, SPARC began, the first patient came inSeptember of 2003. Taxotere was approved in the European countries that werepart of the EU at that point in November 2004 and would have rolled out duringthe year thereafter, as reinvestment took place in various countries.

And then the data cutoff for the PFS analysis was in middleof June 2006. So, Taxotere came in halfway through and clearly, if there werean imbalance in use of Taxotere across the arms of the trial that would potentiallyobscure any survival benefit of Satraplatin.

So, as Pat mentioned, the pre-specified subset analysesaround Taxotere use are important and will help really isolate the effects ofSatraplatin upon survival. Those analyses are now underway, but we obviouslyhaven't completed them yet and are unable to give you any output from thatwork. It's clearly important work, however.

So, I think that's all I have to say about the clinical dataand Gillian, on the regulatory issues?

Gillian Ivers-Read

Yes, in terms of the process, we submitted the marketingapplication in June of this year, and so, it's under active review. We expectthe first round of questions, the day 120 questions to come in before the endof November. The process calls for us really not to have any communication withthe rapporteurs until after that time.

So, we would plan to be answering the questions during thefirst quarter to half of next year. At the moment, we will wait to fullyexamine the data that we have and then have some discussion with therapporteurs.

As we’ve said before, the file in Europe, which is based onPFS, with the overall survival data being submitted during the process, theclinical benefit is very important in Europe. We never expected to see really astatistically significant survival advantage. So, as we delve into the data, itwill really depend on what we find in terms of the strength of the data for howwe can address the European questions.

Gene Mack - HSBC

Just a follow-up on that, would symptom improvement in termsof pain qualify enough in terms of the European regulators' view of what is aclinical benefit? Or do you need more supportive evidence on maybe some of theother, I think there are 11 perspectives or prognostic indicators for whichthere's subset analysis in SPARC?

Gillian Ivers-Read

They require or well we could submit based on PFS, theyrequire supportive data from the survival information. It's just that withinthe information as you say, with various subgroups and looking at the datathere, there may be something that's enough to support the overall package inEurope.

Gene Mack - HSBC

But, would be the most important thing.

Gillian Ivers-Read

Yes.

Patrick Mahaffy

I think I would acknowledge what is self-evident. This isvery much an uphill battle now, as a result of the results yesterday. We havealways said it would be an uphill battle, but it became probably more uphillafter yesterday. I think many of you don't model Satraplatin into yourvaluation analyses for us; I think that's probably appropriate.

But I will tell you that we will fight to get this approvedfor two reasons. One, we think there really is clinical benefit for these veryadvanced patients from this drug, probably because of the pain relief ordelaying pain progression that you are alluding to.

And secondly, because if we are successful, it has, withthat significant incremental cost, a very significant incremental revenue forus. So, we will try to get it approved. We will probably not spend much timetalking about it over the course of the next six to nine months.

Gillian Ivers-Read

Thanks a lot.

Patrick Mahaffy

Thanks, Read.

Operator

And your next question come from the line of Gur Roshwalb ofPiper Jaffray. Please proceed.

Gur Roshwalb - Piper Jaffray

Thank you for taking the question. What I'd like to getlittle more color on are basically two issues. What has changed in yourdiscussion with the EMEA regarding Thalidomide that makes you accelerate theThalidomide launch work?

And the second question revolves around European and rest ofworld sales of Vidaza, which were better then I had expected. I'm curious as towhat sort of penetration you have seen to date and where do you think it'sgoing to go prior to approval?

Patrick Mahaffy

I will first address the EMEA thing, and then ask Gillian toaddress it further if I don't get it all right and then - which I'm sure Iwill, Gill, so don't worry. Then Erle and I will talk about European and restof world sales.

Thalidomide, what's happened is that we submitted the filein January. We got the 120 day questions in June, we responded to those inSeptember and we now have draft responses to those. All of this demonstrates tous that we're making progress with the regulators.

So, what has happened is that the product is going throughits review. We feel like that review is going smoothly and that we areaddressing any remaining questions that the regulator has.

And so we feel very comfortable that we are in a goodposition with the EMEA and that we would anticipate, based on that progress, aregulatory action from the CHMP within the next few months.

Gillian Ivers-Read

Yes, that's fair enough. Obviously, you never know untileverything is finally signed, sealed and delivered. But everything seems to begoing well.

Gur Roshwalb - Piper Jaffray

Does within the next few months mean before year end orbefore the end of the first quarter? Can you be more specific?

Patrick Mahaffy

One of the reasons guys like us choose things like"next few months" is to give us some room. We clearly would hope tohave a recommendation by the end of the year. It could slip over into January.A lot of this has to do with EMEA internal timelines.

Gillian Ivers-Read

But then, of course, we have to wait for the commissionapproval anyway…

Patrick Mahaffy

That's correct.

Gillian Ivers-Read

Which takes a couple of months. So it's no way the drug willbe approved before the end of the year, given that timing of the commissionapproval step.

Gur Roshwalb - Piper Jaffray

Thank you. And then in terms of European penetration ofVidaza prior to approval?

Patrick Mahaffy

It's funny. I'm embarrassed to say I haven't formally triedto analyze the penetration. But I can tell you that since the market for MDS inEurope, just given demographics is somewhat larger than the United States, andour run rate now is $36 million, right?

Erle Mast

Right.

Patrick Mahaffy

So the penetration is still very, very, very, very low. Andin fact, in an environment where it's not approved, I think that to have a runrate of $36 million for this drug is actually very, very encouraging, and weare pleased to see the growth continue.

Do you have anything to…?

Erle Mast

Yes. I think part of your question is where do we think thiscould go before the approval? I think every time we think it's kind offlattening out and holding steady, then we see another increase like we didfrom Q2 to Q3.

It obviously shows the interest in using this drug in anenvironment where there are no approved therapies, and I don't know where itwill stop. I think, we would probably expect to see a benefit post ASH inEurope.

Patrick Mahaffy

Yes, for sure.

Erle Mast

As we do in the U.S. It's just difficult to quantify.

Operator

And your next question comes from the line of Phil Nadeau ofCowen and Company. Please proceed.

Phil Nadeau - Cowen and Company

Good afternoon. Thanks for taking my questions. The firstquestion is on the expense lines. Could you go into a little bit more detail asto what happened there this quarter?

I think the expenses that you reported were somewhat heavierthan we in the Street were expecting and the pipeline developments that youmentioned and even the progress of South European regulators weren't entirelyunexpected.

Erle Mast

Yes, Phil, I'll address that. You're right and I think theexpense growth relative to Street expectations were predominantly on theR&D line. When we started 2007, if you go back to the guidance we gave, weexpected that our quarterly R&D costs would get up to the $25 million kindof plus range at some point during the year.

The exact quarterly timing of that is sometimes difficult topredict, because so much of it is driven by when studies are initiated. So thefirst couple of quarters of the year were probably lighter than what thoseinternal expectations are.

Then in the third quarter with all the activity that we hadand really the items that we highlighted were the drivers of the expense growthfrom Q2 to Q3. And that's what took us up from that $23 million range that yousaw in the second quarter up to the $29 million range.

Having said that, I think we probably achieved a level now,with the development programs that we have underway that we would sustain. Wehaven't given guidance yet for 2008, and in fact, we're going through ourbudgeting process right now, so it's a little premature to do that.

But when we look forward to next year, while we certainlyhave some programs continuing into or starting new studies, we also have otherproducts, Thalidomide, Vidaza and even Satraplatin that had some thoroughlycostly studies in 2007 that are winding down or will largely wrap up in 2007.

So going into 2008, I think, the trend you see right now notthe growth trend, but kind of where we're settling is what will probably be inthat same range in 2008. But the drivers for the growth from Q2 are really theproducts and the studies that we mentioned.

Phil Nadeau - Cowen and Company

Okay. And in order to hit the top end of your new R&Dexpense guidance, you actually have do have a sequential decrease in R&Dexpense in Q4 versus Q3. Am I interpreting the numbers right and is thatdecrease something that expect that?

Erle Mast

Yes, I think the decrease is slight. I think it's like $29million to $28 million. But you are correct.

Phil Nadeau - Cowen and Company

Okay. That's great. And then on Second, on oral Azacitidine,in your prepared remarks you mentioned that there will be data from, I think,the ongoing study at ASCO, which suggests that there won't be any data at ASH.Is that, in fact, true that there won't be updated data on oral Azacitidine atASH?

Patrick Mahaffy

It is for sure true, and we have said consistently therewill not be data on oral Azacitidine at ASH. The most recent data was at ASCO2007, and we didn't anticipate and have not anticipated having any data fromthe MTD study until next year.

And I guess, I should note, we said, could be at ASCO. Wehave to submit it, and more importantly, they have accept it. But that's thetiming I think you should be looking toward.

Phil Nadeau - Cowen and Company

Okay. Thank you.

Patrick Mahaffy

You’re welcome.

Operator

(Operator Instructions) and your next question comes fromthe line of Matt Osborne of Lazard. Please proceed.

Matt Osborne - Lazard

Hi, guys thanks for taking the question ahead of queue. Canyou report on the number of cycles that you have seen for Vidaza at this point?

Patrick Mahaffy

You mean commercial…

Erle Mast

Or do you mean in the trials?

Matt Osborne - Lazard

In the U.S. So say from first quarter, second quarter, nowthird quarter, what the number of cycles you perceive to be that's being usedin the field?

Patrick Mahaffy

Five-ish. It's been fairly consistent. I think, we have highhopes that next year it will grow following the presentation at ASH.

Matt Osborne - Lazard

Okay. And what are you allowed to detail with now tophysicians, and if so, how are you detailing that survival data at this point?

Patrick Mahaffy

Well, Gillian is here, so I'm just teasing, Gillian. Wereally are not allowed to do that much. We have provided -- what do we have,Gillian, the copy of the trial design that can provoke questions, and if thequestions come, then they are referred to our medical information group.

It is extremely difficult. I think one of the things thatpeople have to kind of keep in mind is we actually have to be really careful,because all physicians have seen, just like you, is a press release.

There are some physicians, who are experienced with Vidazafor whom that press release means exactly what I thought. I'm going to keepgiving Vidaza. I love this drug.

So we have to be careful not to let it go through a normalacademic and clinical review. That's why we have very clearly stated that the bigmoment for us and I mean big moment is ASH.

As we have seen now, the details of the data well beyond thetop line presented, we are very encouraged by the consistency of the effect andthe meaningfulness of the effect. And I think that ASH is going to be veryimportant and very exciting for Vidaza.

I think then we will probably be more aggressive with theuse of those data in the field, because the abstract will have been peerreviewed and presented at ASH.

Matt Osborne - Lazard

Great.

Patrick Mahaffy

Still we do now, that we -- and you'd be surprised at thenumber of community-based physicians who don't know all this yet. It's not likethey're trolling the Internet all the time for information on drugs.

Matt Osborne - Lazard

Was there any price increase taken for Vidaza in the pastquarter or two?

Patrick Mahaffy

There was not…

Erle Mast

Yes. No, the last one was on October the 1st, so not in Q3,and we had the 2% increase that was effective the 1st of October.

Matt Osborne - Lazard

Last question on Amrubicin. If I'm correct when I heard inthe prepared remarks 8 to 24 months for enrollment, does that seem a littlelong? Or are you considering what seems to be a difficult drug with Topotecanin this setting, given its safety and tolerability and efficacy, lack thereofand dosing and all that?

Are you factoring in kind of a slow enrollment on thetopotecan arm?

Patrick Mahaffy

Go ahead, Andrew.

Andrew Allen

So, this is a nearly 500 patient trial, and we offered up 18to 24 months as the enrollment guidance. Obviously, we hope it will be at theshort end of that, and maybe even beat it. So we've certainly had no problemsenrolling our Phase II trials.

As, one of those Phase II studies is in sensitivesecond-line small cell lung cancer, and that study also randomizes patients toAmrubicin versus topotecan, and that study is just about to fully enroll.

So, we don't anticipate particular problems, and of course,the number of patients is related to the number of sites, which is related toyour budget. So there are many factors driving how quickly a trial will enroll.We don't anticipate problems.

Patrick Mahaffy

Andrew, I might add, too, Topotecan isn't beloved, buteverybody who treats small cell lung cancer in the United States and Europethose are the only appropriate comparator arm in this study is topotecan.

The only appropriate comparator arm in a study in small cell-- in relapsed/refractory small cell lung cancer is topotecan. The attitude ofthe clinicians is because I have been at some advisories advisory meetings.

In fact, Andrew and Gillian were at this same one, was wherea guy actually got up and said, look, we just have to do the heavy lifting,because we have to get this drug approved. It's very important for us, and wehave to enroll in this trial to get it to the FDA. I don't perceive it to be anissue at all.

Operator

Your next comes from the line of William Ho of Banc ofAmerica Securities.

William Ho - Banc of America Securities

Hi, guys. Congratulations on the quarter and on the datathis quarter. Just give us a little bit more clarity on what you're seeing, orif you had any impact at all from the top-line survival data for Vidaza, and ifnot, I guess what will drive that?

Will we not see it in the fourth quarter, or do you think itwill be like in the first quarter or second quarter of next year before wereally see an impact there?

Patrick Mahaffy

What I have said prior to, I mean, within the third quarterconsistently is and I think that this is kind of going to bear out is that I'mnot really expecting to see much of an effect, if any, in the third quarter,and it went up $1 million.

So I think that counts as not much of an effect. I said, Ithink, we'll see a little more of an effect in the fourth quarter, but notanything dramatic. I think the period of time to really look for the effect isin the first half of next year following ASH, the availability of the abstractand the conversations at ASH about the fact that these results completelychange the opportunity to treat your patients with MDS, with higher-risk MDS.

ASH will be the moment when physicians, not justcommunity-based physicians, but all of the opinion leader community can see thedetail of the data, and that will drive their enthusiasm for use of the drug.

William Ho - Banc of America Securities

Are you getting many questions about a comparison betweenyour survival data and what they have seen thus far with Dacogen?

Patrick Mahaffy

We like those questions. We like those questions an awfullot, given the history of Dacogen in every trial looking at survival on aprospective basis, which has, as a top number, 15 months. Andrew, do you wantto talk about that for a second?

Andrew Allen

Sure. So the only Phase III randomized controlled study ofDacogen and MDS in a very comparable population gave results of the mediansurvival best supportive care of 14.9 months and median survival Dacogen recipients,14.0 months.

The Phase II programs from Dacogen reported by theEuropeans, both as a single Phase II study with 66 patients and then a largeranalysis that included 177 patients, including those 66, all suggested thatagain, in the MDS higher-risk population, sometimes adding in a few -- onepatients, which might actually improve the outcomes of all those trials withDacogen demonstrated a median survival again of 15 months.

So, we see a very consistent message from the publishedliterature that Dacogen in the treatment of MDS is associated with 15 months'survival outcome. That is exactly the same as the control in their Phase IIItrial, and interestingly and reassuringly, exactly the same as the control inour Phase III trial that Pat described earlier.

As you know, the EORTC are running another Phase III trialwith Dacogen in the treatment of MDS using exactly the same dosing schedule aswas used in these prior studies, and using the same patient mix as was used inthese prior studies. So we have seen nothing to suggest that Dacogen will doother than show median survival of around 15 months.

Obviously, if that is true, that raises a very interestingscientific question as to why, and we can perhaps talk about that lastly. Butthere are clearly important differences between Dacogen and Vidaza, and theimportance of those may become much more subject to scrutiny if their survivalstudy doesn't show findings similar to the data.

William Ho - Banc of America Securities

Right. Yeah, I would love to talk about that separately.Just to clean up one thing, can you give us the breakouts for stock-basedcompensation in R&D and SG&A?

Erle Mast

I'm just trying to do this in my head. I think the numberfor Q3 was like $1.5 million, and I'm going to guess one-third R&D,two-thirds SG&A. Something close to that.

William Ho - Banc of America Securities

Thank you.

Erle Mast

Thanks, Will.

Operator

And our next question comes from the line of Jason Zhang ofBMO Capital Markets. Please proceed.

Jason Zhang - BMO Capital Markets

Thanks. I have two questions. One is on Satraplatin and oneis on Thalidomide. At what point you would decide not to even bother? I guess,if you got the 120 day responses from EMEA and they say because a drug didn'treally show a survival benefit, and we think it might be not in the bestinterest for the EU to approve this drug, if you got that kind of question,would you just say very unlikely you will go forward and you will make a decisionat that point?

Patrick Mahaffy

I think you answered the question. I mean, we think we havegood evidence of clinical benefit that goes beyond survival. Expectations ofmeaningful survival in very, very advanced second-line hormone-refractory prostatecancer should be relatively modest to begin with.

The focus, I believe, by the regulators and particularly inEurope, who I think have an understanding of this, is going to be as much onclinical benefit, for example, the impact on pain, as was discussed earlierthan on solely on survival.

We will fight to get it approved until it becomes if itbecomes evident that it cannot be approved. But it would be foolish of us tohave a drug that has provided some benefit to patients with a clean safety profilenot be given a chance to go through the regulatory process.

Jason Zhang - BMO Capital Markets

Why do you think, in the case of MDS, they insist onsurvival?

Patrick Mahaffy

I think that that was always misinterpreted. What they insistedon was data from another trial, and they knew that we were running a trialwhere survival is the outcome.

So I think that was always misunderstood. It was never thatthey said you have to have survival; it was they said your trial wasn'tsufficiently robust. As you may remember, 9221 was our submission was based ona reanalysis of a cooperative group study.

So it wasn't so much they said you must have survival; itwas they said you must have another prospectively designed GCP trial. Somethinglike 65% or 70% of the oncology drugs approved by the EMEA over the course ofthe past five years have not had survival data.

So it's hardly unusual for them to approve a drug withoutsurvival data. This case, however, is harder, I will acknowledge because it failedto show a survival advantage or even a trend.

Jason Zhang - BMO Capital Markets

Okay, I will leave that to you. The question on Thalidomideis you said you are going to relaunch the drug, and given that Thalidomide isalready there, you have price agreement with most of the countries.

Trying to figure out how quickly can you actually get thedrug launched in kind of formal launch between you've got EMEA approval and toreally launch the drug in some of the individual countries.

Patrick Mahaffy

It would vary by country, because reimbursement believe itor not, even though there is an agreement in countries like Spain and Italy forour compassionate use or named patient sales, you still have to go through theprocess of getting it formally reimbursed in this case, by a different branchof the government, albeit related.

So if you were planning a rollout for Thalidomide, I wouldplan on a German/U.K. and kind of Nordic territories launch right awayfollowing the approval, a French launch within a month or two of the formalapproval not the recommendation, but the formal approval. And the Italian,Spanish and Greek and Portugal launches occurring four to five months after theformal approval. That's around the timeframes we would anticipatereimbursement.

There are some confounding circumstances here. Particularly,I believe certain of these countries, if not all of them, would like to see theelimination of the alternative providers. So they may be indented to give usthat reimbursement faster, so that we can launch and eliminate thosealternative providers.

Jason Zhang - BMO Capital Markets

Finally, could you remind us the price difference betweenThalidomide and Revlimid in Europe these days?

Patrick Mahaffy

Well, we anticipate that a course of therapy for Thalidomidewill be somewhere around $12,000 to $13,000. And a course of therapy forRevlimid in Europe is between $80,000 and $100,000.

Jason Zhang - BMO Capital Markets

Thanks.

Operator

(Operator Instructions) And your next question comes fromthe line of Eric Vieira of Majestic Research. Please proceed.

Eric Vieira - Majestic Research

Thanks for taking my call. It's really a follow-up to Matt'squestion earlier regarding Vidaza. You gave us what you thought sort of thecurrent clinical practice is for number of treatment cycles. So how are wesupposed to look at this median of nine? Do you have information on what themean number is, and does that vary significantly from the median? I know youmay not have this, or be able to talk about this.

Patrick Mahaffy

I won't talk about it. We can certainly present it at ASH,if you think that's relevant. We've always presented it based on the median,including in the 9221 study, where the media was seven, not nine.

Eric Vieira - Majestic Research

Basically, how is that relating to current clinicalpractice? That's what Matt sort of got that out of you guys.

Patrick Mahaffy

One of the things that we have struggled with for threeyears is helping physicians understand two critical elements about Vidaza. Oneis you have to stay in therapy for at least four months, and maybe longer,before you see a meaningful impact on the disease.

Two is it's harder in the absence of evidence of why youshould do this. You should stay on therapy not until you succeed; you shouldstay on therapy until you progress. That's the difference in treatment practicerelative to numbers of at least chemotherapy agents, although it's changing forcertain other agents -- targeted therapies that have been recently introduced.

We now have the value proposition for clinicians thatjustify why you should stay on therapy until you progress and these data willbe presented in all their robustness at ASH that clearly correlate time ontherapy to clinical benefit, and most relevant of all, survival.

And I think that finally in the field, and finally inmeetings and through presentations, we'll be able to help educate physiciansabout the fact that this drug demonstrates for the first time a meaningfulsurvival advantage for patients with MDS. To achieve that survival benefit, youneed to stay on therapy, and that's how the trial was designed.

So I think that what I would do if I was modeling is I wouldnot model achievement of nine. It's interesting, but almost never does clinicalpractice achieve that same type of number as does a very well controlledclinical trial, which is always populated with very motivated patients whoshould demonstrate their willingness to participate in a trial.

So I wouldn't take it to nine, but I would take it to sevenor seven and a half over the course of some period of time following ASH, ayear or around there.

Andrew, would you add anything to that?

Andrew Allen

No, I think it's all about the biology, as you say, of thenewer agents. Unlike cytotoxic chemotherapy, which obviously is usedintermittently and carries dramatic toxicity, these agents are believed to beeffective on a continuing basis to slow the momentum of disease.

Even if the patient is progressed, the data emerging frommany different agents suggests that often it's advantageous to remain ontherapy to keep that particular break on the disease. You may try identifyingother breaks on top of it, but it's just that conceptual switch that Patalluded to.

Eric Vieira - Majestic Research

Thanks. It was very helpful.

Operator

And your next question comes from the line of SapnaSrivastava of Morgan Stanley. Please proceed.

Dave - Morgan Stanley

Hi, this Dave calling in for Sapna. Just a quick questionabout Satraplatin. Do you have any other indications that are currently in theworks for the drug, and are you going to wait until an EMEA decision to try andmove forward with anything?

Patrick Mahaffy

Andrew?

Andrew Allen

We are going to wait and discuss with GPC, obviously. That'sthe appropriate thing to do at this point. We obviously have other clinicaltrials running. Some of those are near completion, and clearly time is right tolook at the results across the program, and establish whether we haveconvincing signals of activity and acceptable tolerability in otherindications. So it's early days, but that process is underway.

Dave - Morgan Stanley

Is there any one indications that seems to be more promisingat this point, or still too early?

Andrew Allen

I think a little early to judge. We will obviously sharethat information once we feel that we have a good handle on it

Dave - Morgan Stanley

Just one quick question on Thalidomide I know you are in theregistrational process, but is there any indication as to what type of riskmanagement program you would need to put into place upon approval? Is it goingto be sort of STEPS-like, or something less or more?

Patrick Mahaffy

It will be exactly the same as for Revlimid.

Dave - Morgan Stanley

As for Revlimid in Europe?

Patrick Mahaffy

Correct.

Dave - Morgan Stanley

So it won't be as strict as the STEPS program in the U.S?

Patrick Mahaffy

It will be exactly the same as for Revlimid in Europe, andtherefore have some differences related to both STEPS in United States and ourown PRMP program in Europe.

Dave - Morgan Stanley

Okay. All right, thank you.

Operator

And your next question comes from the line of Steven Rosstonof Glynn Capital Management. Please proceed.

Steven Rosston - Glynn Capital Management

Pat, can you flush out a little bit more what you weresaying about how ASH is going to be such a big turning point, and how thatrelates to the two points you made earlier in terms of the challenges you havehad with physicians, in terms of getting acceptance, in terms of duration oftherapy?

Then secondly, can you talk a little bit about what yourfield force who's out there now, with the information that you'll bring, atleast some of the information you bring to ASH, what kind of feedback they'regetting from their work?

Patrick Mahaffy

To the extent that they have conversations about survivalthat is, if a physician brings it up. The basic attitude is these data seemamazing; I really want to see them at ASH. These data seem unbelievable; Ireally want to see them at ASH. I don't know how many times I've heard peopleare really excited about seeing the data at ASH.

And again, I have to reiterate, we all know from a pressrelease that there is a meaningful impact. But physicians rarely makeprescribing decisions based on a press release, and they certainly don't wantto admit that they make prescribing information decisions based on a pressrelease, frankly, because a patient wouldn't want them making prescribinginformation decisions based on a press release.

The reason ASH is a turning point is because I believe thatthe data will be presented; I believe that they will be accepted with thetremendous amount of enthusiasm, because it completely changes the opportunityto treat higher-risk patients. And as I told you, they will be presented in farmore detail than were presented or described in that press release, all ofwhich demonstrate a remarkable consistency of effect.

So the reason it's a turning point is it will have beenthrough a peer-reviewed presentation at a major medical meeting. There willhave been buzz, I believe, created around it, and therefore people will go backto their communities and be more enthusiastic about using the drug, includingin those patients for whom they have not used any chemotherapy, because 50% ofhigher-risk patients do get primarily, if not solely, a best supportive careregimen.

And if this trial does anything, and it does a lot ofthings, it demonstrates that best supportive care is not an appropriate regimenfor this patient population. Does that, Steve?

Operator

(Operator Instructions) And your next question comes fromthe line of Jim Reddoch of FBR. Please proceed.

Jim Reddoch - FBR

Thanks and good quarter. Most of my questions have beenanswered, maybe I'll just add one along the lines of that last question, whichit seems to me that your main potential competitor is more like doctor apathyor doctor inaction or watchful waiting than it is necessarily another drug.

I'm just wondering what really kicks it into gear for theseguys? Is it publication, or is it actually just the ASH literal presentationitself, or is it publication after then, and when might you expect that? Or isit some change in the guidelines, or any sort of NCCN references that maybeinfluences practice that they maybe need this place? Thanks.

Patrick Mahaffy

A couple of things, and thank you. What I have said is thatthere are kind of three stages to the impact of the Vidaza survival study. Sothe first stage is from the period of time between the press release in ASH,where we expect not a whole lot of impact, although some beginning in thefourth quarter.

The second period is post-ASH, where we anticipate areasonable impact, as the data have been presented, discussed and I thinkgenerate quite a bit of enthusiasm. And as you know, there are many MDSsessions at ASH, including a presentation or a super Friday presentation by theMDS Foundation. So there will be a lot of MDS activity at ASH this year.

The third phase is that period of time where it's beenpublished in hopefully a leading medical journal, and the data are in our labeland we can vary assertively and aggressively promote from it, and that willhave another impact on sales.

That period of time will probably begins in the June/Julytimeframe. No one can predict exactly when something would be published. Ithink that's about right for an FDA action, given the timing of our submission.

But we would think six to nine months for publication, sopretty similar, because we'll submit that publication in December.

Jim Reddoch - FBR

What about guidelines? I mean does ASH have guidelines?

Patrick Mahaffy

I think guidelines are more likely to, in many cases, thoseguidelines will, I think there will be guidelines of change. Some will proceedan FDA approval, many will wait until they see the FDA approval.

But you will see it, a number of changes in the MDSenvironment following the presentation of these data in December.

Jim Reddoch - FBR

Okay. Thanks. And one more if I could. You're taking adifferent approach with Amrubicin than another company out there, with yoursmall cell trial. Pat, you've commented on this a little bit, but yours hasanother active comparator, and theirs is against best supportive care. Again,was that chosen because of speed of enrollment of having all arms withpresumably an active versus some without an active?

And secondly, how is it powered again? What are theassumptions for what topotecan is going to show, and what are you trying to dobetter than?

Patrick Mahaffy

Andrew?

Andrew Allen

The simple question on powering, we’ve not disclosed a greatdeal of information about the design of this study Jim. But the power is -- orrather, the hazard ratio that we're looking to detect is less than 0.75.

So given that general guidance, and that is very consistentwith what we are seeing from our Phase II program. So we're very comfortablethat the drug has a substantial effect against the Vidaza survival whencompared to topotecan.

And obviously, we also get some inferential data from oursingle-arm study in relapsed/refractory patients.

In terms of the choice of control arm that the standardapproach, of course, is to randomize patients to your agent of choice versusstandard of care. And this standard of care, as Pat described, from aregulatory perspective is unambiguously topotecan.

Now its not terribly popular, because it doesn't have muchefficacy, carries significant toxicity, but it is the most commonly usedsecond-line regimen in small cell lung cancer. That is a fact and it’sobviously regulatorially the appropriate comparator to use.

We've used it in our Phase II trials. We've seen data thatwe are very encouraged by. And so it's an easy and obvious choice to design apivotal trial with topotecan as the comparator.

I think the better way to ask the question is why would younot use topotecan as your comparator, because it presents you with a couple ofproblems. Number one, for many IRBs there's an ethical issue about.

I’m randomizing a patient who is clearly a candidate forcytotoxic chemotherapy to receive either cytotoxic chemo or best supportivecare, when there actually is an approved alternative agent.

Now, that can be done, but I think you have to go to certaincountries where maybe topotecan is less widely available, for example, toprovide real opportunity to enroll patients in such a study design.

It also means, of course, that at the end of the day, if youhave a positive study, your claim is against best supportive care as opposed tobeing against another cytotoxic agent. So I think if we're positive in ourstudy and our competitors are positive in their study, then the obvious modelto follow if you are a physician is you would then use combination therapy witha platinum and a topicide front-line. Then you would follow on with Amrubicin,and then you would follow on with the platinum agent.

That would be the sort of rational way to apply the variousdata emanating from these trials.

Jim Reddoch - FBR

Thanks Andrew. And the historical survival that you used fortopotecan?

Andrew Allen

Some of it is historic, and some of it, as I say, isgathered real-time in our controlled randomized Phase II study. If you look inthe relapsed/refractory patient population, the median survival patientsreceiving topotecan is around four to five months.

If you look in the sensitive population, as you wouldexpect, it is longer at around seven to eight months. Those are the data thatwe used as we kind of looked at designing our study, and as I say, we have seena very convincing survival benefit in our Phase II programs with Amrubicin,such that we have designed the study to detect with good power -- remember thisis a pivotal study.

So with good power, we're detecting a hazard ratio below 0.75,but we haven't disclosed more information than that.

Jim Reddoch - FBR

What's the expected split between sensitive versus resistantor refractory?

Andrew Allen

It will be something like 50/50. The hazard ratio that we’vehave seen in our trial, the comparative trial and the hazard ratio we imputewhen we compare our simple-arm study with historic controls suggest thatactually the efficacy of the drug is very similar.

The hazard ratio is very similar in those two diseasecontexts. So we were happy to put both patient populations into the pivotalstudy, and obviously it's a stratified randomization and a stratified analysis,to allow for the fact that you have these two populations.

It is, of course, a pretty artificial distinction intosensitive and refractory that we only apply to small cell lung cancer. The sametheoretical distinction probably exists in all tumors.

If you respond to any cytotoxic drug and then you relapsequickly, you're going to do worse than if you have a response that lasts forlonger. So it's a somewhat artificial distinction that I think will erode asthe Amrubicin data become better known.

Jim Reddoch - FBR

Okay, great. Thanks a lot.

Operator

At this time, I would like to turn the presentation backover to Breanna Burkart for closing remarks.

Breanna Burkart

We thank each of you for your interest in Pharmion today. Ifyou have any follow-up questions, please call us at 720-564-9150. We apologizefor those of you who joined us late to the call due to problems with access tothe webcast.

According to our current service provider, ThomsonFinancial, the problem was an error with their feed to the website. As of yet,they have not been able to assure us that it has been corrected, and that thewebcast and podcast replay, as well as the transcript, will be complete.

Please contact me if you need a transcript or replay, and Iwill provide updated information as I receive from Thompson. Again, weappreciate your interest and time. Thank you, and have a good evening.

Operator

Thank you for your participation in today's conference. Thisconcludes the presentation. You may now disconnect, and have a great day.

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