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Alexza Pharmaceuticals, Inc. (NASDAQ:ALXA)

Q4 2007 Earnings Call

March 17, 2008 5:00 pm ET

Executives

Thomas B. King-President, Chief Executive Officer

August J. Moretti-Senior Vice President and Chief Financial Officer

Analysts

Charles Duncan, PhD-JMP Securities

Gur Roshwald-PiperJaffray

Jason Kantor, PhD-RBC Capital Markets

Chris Richard-Merlin Nexus

Michael Pollard-Merrill Lynch

Operator

Good afternoon, everyone and welcome to the Alexza Pharmaceuticals Investor Conference Call. (Operator Instructions) Today’s call is also being recorded and if you have any objections, you may disconnect at this time. I would now like to turn this afternoon’s conference over to August J. Moretti, Senior Vice President and Chief Financial Officer of Alexza. Mr. Moretti, you may begin.

August Moretti

Thank you. Good afternoon and welcome to the conference call Before we get started, I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those relating to the potential results of future clinical development, the timing of the commercialization of products under development, our projected expenses and our ability to support operations in future periods. Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risk factors are more fully discussed in our annual report on Form 10-K, which we filed with the SCC earlier today. Alexza disclaims any obligation to revise any forward-looking statement made on this call as a result of new information or future developments. Our policy is to only provide guidance on products, candidates and corporate goals for the future one to two fiscal quarters and to provide, update or reconfirm our guidance only by issuing a press release or by filing guidance with the FCC in a publicly accessible document.

Clinical program guidance is as of today, March 17, 2008 and financial guidance related to the company’s current cash, cash equivalents and investments is as of December 31, 2007.

This call will also include disclosure of non-GAAP financial measure, reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our press release.

I’ll now turn the call over to Tom King, President and CEO of Alexza.

Thomas King

Good afternoon and thank you for joining us. I would like to thank you and all of our stockholders for the ongoing support and confidence you have shown in Alexza. We look forward to these conference calls, where we can update you on our progress.

In the fourth quarter of 2007 and the first quarter of 2008, we continued to make substantial progress on our development candidates. During 2007 and this first quarter of 2008, we moved all of our clinical programs forward. This year is an important transitional year for Alexza as we initiate the Phase 3 clinical trials of our lead program, AZ-004 or Staccato loxapine. In addition, we are beginning the initial AZ-004 commercial planning for manufacturing, regulatory submissions and potential sales and marketing. It is also important to note that we have five additional product candidates in various stages of clinical development in four different therapeutic areas. With our own programs and with our partnerships with Endo Pharmaceuticals and Symphony Allegro, we look forward to solid progress in all of these development programs during 2008.

I would now like to give you a brief overview of our six product candidate development programs, which we also outlined in our press release earlier today. I will then pass the call back to August Moretti to review the financials. After that, we’ll open the call up for question and answers.

So, our product candidate development pipeline, our lead program is AZ-004 Staccato loxapine, which is initially being developed for the treatment of acute agitation in patients with schizophrenia or bipolar disorder. In February 2008, we initiated our first Phase 3 clinical trial that is designed to enroll approximately 300 schizophrenic patients with acute agitation at 25 United States based clinical centers. The trial is an in-clinic, multi-center, randomized, double-blind and placebo-controlled study and will test AZ- 004 at two dose levels, both the 5 and the10 mg level. Patients may receive up to 3 doses of study drug in the 24-hour study period, depending on their clinical status. The primary endpoint for the study is the reduction of agitation as measured by a change from the baseline in the PEC Score, measured at 2 hours after the first dose. The PEC Score is a commonly used endpoint in acute agitation studies and is the abbreviation for PANSS which stands for the Positive and Negative Symptom Scale Excited Component Score. Various assessments of a patient's agitation state will be conducted at serial time points using standard agitation scales over the first 4-hour post-dose time period, with follow-up assessments at the end of the 24-hour study period. Side effects will be recorded throughout the 24-hour period. A second Phase 3 clinical trial is projected to begin in Q3 2008. The design of this second study will be similar to the first trial; except for the patient population will be patients with bipolar disease. AZ-004 is being developed through Symphony Allegro, a product development partnership formed between Alexza and Symphony Capital, LLC in 2006.

AZ-001, also known as Staccato prochlorperazine is being developed for the acute treatment of migraine headaches. Alexza reported positive results from a 400 patient Phase 2b clinical trial for this product in 2007. In December 2007, we completed enrollment of a thorough QT clinical trial, in which two doses of AZ-001 (5 and 10 mg) were compared to active control,

which was moxyfloxacin and to placebo. With more than 40 subjects per treatment arm, we found that the active control produced a positive QT/QTc signal that verified the sensitivity of the clinical study trial design. Based on a preliminary analysis of the data from this study, neither of the two AZ-001 doses produced a QT/QTc prolongation that we believe would be suggestive of an increased risk of cardiac arrhythmia. Alexza has also initiated a 28-day inhalation toxicology study in animals and expects to complete this study in Q2 2008. it is our goal to request an End of Phase 2 meeting for AZ-001 with the U.S. Food and Drug Administration during the second quarter of 2008.

AZ-104 (Staccato loxapine) is being developed also for the acute treatment of migraine headaches. AZ-104 is a lower dose version of AZ-004. In March 2008, we announced initial results of an in-clinic, multi-center, randomized, double-blind, single administration and placebo-controlled Phase 2a proof-of-concept clinical trial in 168 migraine patients with or without aura. Three doses of AZ-104 the 1.25, the 2.5 and the 5 mg doses were evaluated against placebo in this clinical trial. Using the IHS International Headache Society 4-point rating scale, the primary efficacy endpoint was pain-relief response at 2 hours post-administration. AZ-104 met the primary efficacy endpoint of the clinical trial for two dose levels of the drug compared to placebo. Statistically significant improvements in pain response were observed in 76.7% of the patients at the 5 mg dose (p = 0.02), 79.1% of the patients at the 2.5 mg dose (p = 0.01) and 67.4% of patients at the 1.25 mg dose (p = 0.18), compared to 51.3% of patients receiving placebo. Using survival analysis for pain relief response, all three dose groups were statistically superior at a level of p < 0.05 to placebo during the 4-hour post-treatment time period that the patients remained in the clinic. AZ-004 is being developed through Symphony Allegro also.

AZ-002 (Staccato alprazolam) is being developed for the acute treatment of panic attacks associated with panic disorder. Alexza is conducting a Phase 2a proof-of-concept clinical trial in panic disorder patients. The primary aim of the in-clinic trial is to assess the safety and efficacy of a single dose of AZ-002 to treat a pharmacologically-induced panic attack. Alexza has completed the open-label, lead-in segment of this study, identifying the 1 mg AZ-002 dose as an acceptable dose in terms of safety and efficacy. We expect the enrollment of this clinical trial to be completed in Q2 2008. AZ-002 is also being developed through Symphony Allegro.

AZ-003 (Staccato fentanyl) is being developed for the treatment of breakthrough pain in cancer and non-cancer patients. In December 2007, Alexza entered into an agreement with Endo Pharmaceuticals to jointly develop AZ-003. Endo is responsible for regulatory, pre-clinical and clinical development, and for the commercialization of the product in North America. We are responsible for the development of the Staccato Electric Multiple Dose device and we have the exclusive right to manufacture the product for clinical development and commercial supply.

AZ-007 (Staccato zaleplon) is being developed for the treatment of insomnia in patients who have difficulty falling asleep, including patients who awake in the middle of the night and have difficulty falling back to sleep. We filed an IND application in December 2007. In March 2008, we completed enrollment in the Phase 1 clinical trial which enrolled 40 healthy volunteers at a single site. The purpose of this trial was to assess the safety, tolerability and pharmacokinetic parameters of a single dose of AZ-007. Using a double-blind, randomized trial design, four doses of AZ-007 (ranging from 0.5 to 4 mg) were compared to placebo. We expect to report initial results of this trial in the second quarter of 2008.

Now I am going to turn the call back over to August, for review of the financials for the quarter.

August Moretti

Thanks, Tom. I’d like to summarize the financial information that’s included in the Form 10-K that we filed earlier today. For the year ended December 31, 2007, we reported a net loss of $45.1 million as compared to a net loss of $41.8 million for 2006. The reported net loss in 2007 reflects a deduction of loss attributable to non controlling interest in Symphony Allegro of $10.8 million. The collaboration with Symphony was initiated in December 2006 and so in December we only operated for the one month period as a result of the loss attributable to non-controlling interest in 2006 was only $1.7 million.

As we projected in our prior filings and conference calls, we had no revenue in 2007 as compared to revenue of $1 million in 2006 which consisted of government grant revenue and feasibility revenue. We do not expect grant or feasibility revenue in 2008.

GAAP expense relating to research and development increased in the fourth quarter of 2007 to $13.7 million compared to $10.5 million in the same period in 2006. For all of 2007 GAAP expense related to R&D increased to 45.6 million from 36.5 million in 2006. Increases in research and development expense are related to increased spending on clinical development of: AZ-004 (Staccato loxapine for acute agitation in schizophrenics and bipolar patients, AZ-104 Staccato loxapine for treatment of acute migraine, AZ-002 (Staccato alprazolam) for the treatment of acute panic attacks, pre-clinical and clinical development of AZ-007 (Staccato zaleplon) and increased spending on Staccato device development and manufacturing scale up and increased personnel related cost due to increased staffing to support our clinical research and manufacturing efforts.

GAAP general and administrative expenses were 3.7 million in Q4 2007 compared with 3.3 million in Q4 2006. For all of 2007, GAAP G&A expense increased to 14.9 million from 10 million in 2006. The period to period increase results from the higher share based compensation expenses in 2007, increased staffing to manage and support our growth resulting in payroll and related expense increase, additional regulatory requirements as a public company including increased legal and accounting fees, as well as increases in facilities costs. We give more detail with respect to these components of the increases in G&A expense in the 10-K filed earlier today.

Let’s talk a little bit about the balance sheet. At December 31, 2007, cash, cash equivalents and marketable securities, including [allowance] held by Symphony Allegro totaled 108.8 million, the break down in cash is $39.4 million in the Symphony account and $69.4 million at Alexza.

I’m happy to report that at year end we had no option-rate securities, we had no mortgage-backed securities, we had in fact one credit-card backed receivable in the amount of $1.5 million which matures in May, so the cash is in good shape.

In January 2008, we received the $10 million initial payment from Endo pharmaceuticals. We believe that our cash resources, along with amounts which we expect will be available under our equipment line, future interest income and cash from option exercise and our employee stock purchase plan will support operations through the middle of 2009.

And I’ll turn the call back to Tom for concluding remarks.

Thomas King

Thank you, August. Alexza filed its’ first IND and dosed its’ first subject using our Staccato technology during the summer of 2004. Since that time, in less than four years, we have completed 11 clinical trials enrolling almost 1,200 subjects and patients and have two ongoing clinical trials targeting another 330 patients and these clinical trials have spanned six different product candidates. We believe that these accomplishments are quite remarkable. Moreover, we have just initiated our first Phase 3 program for acute agitation with AZ-004 and our current guidance is that we are planning to file an NDA for this product candidate in the first half of 2010. We are firmly convinced that Staccato is a powerful drug development platform as exhibited by our successes to date. We move into 2008 with a robust set of milestones as we move our product candidates forward. As has been the practice since the company was founded, we have set aggressive operating goals for the year across our broad and growing product pipeline. Every one of our Alexza employees is working very hard to meet these goals. We look forward to updating you on our progress during the coming months. Thank you again for your continued interest and support.

I would now like to open the conference call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Charles Duncan with JMP Securities. Please proceed with your question.

Charles Duncan-JMP Securities

Hey, good afternoon guys. Thank you for taking my question and congratulations on a good year of progress.

Thomas King

Thank you, Charles.

Charles Duncan-JMP Securities

Tom, I had a question regarding Staccato loxapine, specifically in the 004 format. First of all, I like the fact that you appear focused on that. I think this is a development program with a very good hard end point. But, my question is relative to first of all dosing. Why are you looking at the 5 mg dose? It looks like in your Phase 2 you had pretty clear efficacy at 10 mg, why are you also looking at the lower dose?

Thomas King

The 5 mg dose is interesting to us, because of two reasons: one, in the clinical trial in the Phase 2 study it was close, but it didn’t reach statistical significance, but we also didn’t have enough patients in the Phase 2 study to know if there was a difference based on patient weight. I think traditionally in the area I think traditionally in the area of acute agitation, dose response has been less important than just having enough drug to really significantly reduce the episode of agitation, which has been the most important part. But we thought it was important to at least investigate the possibility of the 0.5 working at some sub-group of patients, perhaps smaller weighted individuals. A perhaps more reason is when you think about the way that these drugs are dosed, in this clinical trial, just like you would find with IM Zyprex or IM Geodon, we allow for the redosing of drug anytime past the initial dose. The idea would be two to four hours after the first does, just like Zyprex and Geodon are dosed, but we do allow up to three dosing of the drug. In this clinical trial the dosing doesn’t allow for variance so if you started at 10 mg you could theoretically have up to three doses of the 10 mg; if you start the 5 mg you could have, theoretically, up to three doses of the 5 mg. Having the 5 mg as a potential SKU does allow us to provide a second dose for some patients in the clinical setting or in the commercial setting, where at the 10 mg would seem like enough drug, but maybe four or five hours into the episode you’d like to give a second dose, but maybe not quite as much drug and having the 5 mg makes some sense from a commercial perspective. So, the goal of doing the 5 mg was two-fold. One was to see if there was some dose response as a function of weight; it’s an interesting consideration, it’s not a profoundly important one, but it was something we wanted to investigate. But also studying the safety and efficacy of the 5 mg in the event we want to have a second dosage formed as an SKU as a potential second dose, for patients that needed a second dosing.

Charles Duncan-JMP Securities

Okay, that makes sense. And also, with regard to secondary endpoints in that trial, you saw some effect early on, as I recall in the Phase 2. I know the primary’s at two hours, a change in the PEC score, but are you going to be looking at other measures?

Thomas King

Yes…

Charles Duncan-JMP Securities

That speed to onset is important.

Thomas King

Yes and we believe that to be very true. There are probably three broad areas of secondary endpoints. The first is speed of onset. You know we saw statistical significance at the PEC at the 20 minute mark, good impact at the 10 minute mark, but didn’t have statistical significance, so we’re certainly looking at speed of onset in a variety of ways. We’re also looking at duration of action in terms of how long the drug lasts, how many doses of drug might you have to take, do you need to rescue out, for example. We know that the pharmacokinetics of loxapine are different and longer acting than the currently available drugs; we think that’s a benefit in terms of duration of action. And the third area is looking at overall symptom scores. There’s a clinical global impression of severity and how that improves and some of these other sorts of impact type parameters that we’ve incorporated into the secondary endpoints to give us some additional parameters beyond PEC that we can use both in our label and in the actual commercial aspect of the drug.

Charles Duncan-JMP Securities

Now my last question, I almost hate to, or hesitate to ask it, because I know you can do power calculations, but can you help us understand what you’re anticipating in terms of magnitude of response?

Thomas King

Yes. The strength of the 10 mg dose in the Phase 2 study was very, very strong and from a power calculation perspective, with 100 patients per dose group at that 10 mg dose, it puts us at greater than 99% power. So the value of the hundred patients was more of a, trying to build a safety database of safe exposures to the drug than the need to have that many patients to hit the particular end point.

Charles Duncan-JMP Securities

Okay, good deal. Thanks for your help.

Thomas King

Okay, thank you, Charles.

Operator

Your next question comes from Gur Roshwald with Piper Jaffrey. Please proceed with your question.

Gur Roshwald-PiperJaffray

Thank you. Good afternoon. Basically two questions; one again on the Phase 2 data for AZ-004, could you provide a little bit of color for the primary endpoint on what drove the effect in the PEC score, was it even across all the sub aspects of the PEC score or was there a particular end note driving it?

Thomas King

You know there are five components there and I don’t think we probably have enough data, given the size of that group, to really be able to tell you that Gur. You know, when you look at the entry criteria where you had to have a PEC Of at least 14 and one with a scale of at least a severity of 3 on the 3 to 5, you know there was a whole portfolio of entry points which gave us five potential variables in terms of how patients got into being viable to having this level of agitation. And then when you look at that breadth, looking at the reduction of them over time, we don’t have a particular feeling that there’s one that’s impacted stronger than the other.

Gur Roshwald-PiperJaffray

Were the entry PEC sub scores, so to speak, evenly distributed?

Thomas King

I’m sorry. In terms of the data, in terms of, even distributed between…

Gur Roshwald-PiperJaffray

The various sub scores, of those was there one particular part of the agitation sub score that most people were getting into the trial on?

Thomas King

The answer is no, they were evenly distributed across; there wasn’t one heavily waiting on one of those five sub components.

Gur Roshwald-PiperJaffray

Alright and I guess my second to last question, just to follow up the earlier question. If the trial of you know 200 people, basically 100 in each arm, is significant enough to give you 99% power, are you at all concerned that the additional patients entered into the trial may simply over power the trial and the FDA may basically question the clinical significance of the findings?

Thomas King

I don’t know, is the answer. When we talked about the size of the trial, we used before we went to the FDA the size of the trial that Geodon, Zyprexa and Abilify, had used. And so when we thought about the overall size of the pivotal trials in terms of safety and efficacy, we went in with a proposal that we thought would give adequate coverage as a safety consideration and also still have good feel on the overall efficacy point. If you look at the power calculation at the 5 mg dose it’s in the high seventies at that hundred. I mean, you know, Charles had asked a question about the 5 mg dose, so given the differences that we had seen in the Phase 2 study it gives us some reasonable chance of seeing that with about an 80% power.

Gur Roshwald-PiperJaffray

Alright, thank you.

Thomas King

Okay, thank you, Gur.

Operator

(Operator Instructions) Your next question comes from the line of Jason Kantor, with RBC Capital Markets. Please proceed with your question.

Jason Kantor-RBC Capital Markets

Thanks for taking my call.

Thomas King

Hi, Jason.

Jason Kantor-RBC Capital Markets

Hi, how are you?

Thomas King

Fine, thank you.

Jason Kantor-RBC Capital Markets

I wanted to see if you could provide a little more clarity on, you know the wording around the QT study? Will you or can you provide us with the, you know, the numerical values for the QT prolongation with your drug? You say that you don’t think that the results are suggestive of any risk of arrhythmia, but what were those results?

Thomas King

The results will be published at some point in time in the future at a scientific meaning, is our plan right now Jason. We feel very strongly that there is not a QT prolong issue with those two doses of drug, given the way we gave them, compared to moxifloxacin or placebo. In today’s world where you can’t say anything unequivocally, you added the appropriate words about “we believe” and “is not suggestive” but given what historical norms for drugs with and without, we think we clearly have no issue with regard to QT with prochlorperazine at 5 and 10 mg.

Jason Kantor-RBC Capital Markets

Okay great and can you give any update on your progress in terms of moving forward with your new partner Endo and having had group meetings or transfer technology, anything to that extent that might suggest that things are moving along as they should be?

Thomas King

Certainly, there won’t be much specificity which may not necessarily get you all the answer that you want, but we have spent significant time with them on many fronts, on good to quality front, transferring the IND to their name from our name, the clinical team has been working with their clinical team on the development program, the manufacturing team has met several times both looking at current manufacturing as well as beginning to work with a design firm. The agreement contemplated having the first draft of the development plan in place about 90 to 120 days after the agreement was signed, so we’re coming up to that point. The group is planning a key opinion leader meeting with both regulatory and clinicians to add additional flavor into that. So if anything, even in the sense of Endo not having a CEO for some period of time, I’ve been impressed with how hard and how diligent the group has been on the Endo side, reaching out and pushing this program forward very nicely in terms of getting all the pieces in place very early for the partnership.

Jason Kantor-RBC Capital Markets

Okay, thank you.

Thomas King

You’re welcome, Jason.

Operator

And your next question comes from the line of Chris Richard with Merlin Nexus. Please proceed with your question.

Chris Richard-Merlin Nexus

Thanks for taking the question gentlemen.

Thomas King

Certainly, Chris.

Chris Richard-Merlin Nexus

I guess, not to over pars Augi’s statement on the burn, but it sounds like it’s going to go up significantly. Can we anticipate, it looks like 65, 70 million a year or is that…?

August Moretti

Chris, we have been saying consistently over the last couple of quarters that the burn is obviously going up from our historical level. I mean we have never given sort of quarter to quarter burn numbers, but we’ve been consistent on this mid 2009 number and what we’ve said in the past is, if you just do the math it’s about 16 or 17 million a burn a quarter between now and then.

Chris Richard-Merlin Nexus

Alright and the burn rate goes up really as a function of…

August Moretti

Continuing to support the clinical programs; we’re going to have two pivotal trials under way this year in the AZ-004 program and we’re continuing to bring forward the rest of the development candidates, so the burn rate does go up significantly.

Chris Richard-Merlin Nexus

Alright great, thanks Augi.

August Moretti

Thank you, Chris.

Operator

Your next question comes from the line of Charles Duncan with JMP Securities Please proceed with your question.

Charles Duncan-JMP Securities

Hey guys, thanks for taking my follow up question. I actually wanted to get some insights on when you anticipate data and what will the governor be to the progress with AZ-004 trial?

Thomas King

Certainly, so we anticipate this year is starting three or four clinical trials with AZ-004. The first one, of course, is the one we started several weeks ago, the first pivotal study. The second pivotal study we are giving guidance to begin late summer. We would expect data from that first trial that we started already to be about a year from now, so we’re looking to see data about 12 to 14 months after the initiation of that first trial. The third trial that we’ll start later this year is one of the four supporting studies, we don’t know which one is exactly going to come into the queue first, they each have a bit of different pathway to the start of those. Just as a reminder, or perhaps for those that we haven’t had a chance to talk to, we have four supporting trials for AZ-004; they are all in normal volunteers: the first is a smoker versus non-smoker pharmacokinetic study; the second is a asthma/COPD versus a healthy lung pharmacokinetic study; the third is a thorough QT. The fact that we’ve just completed a thorough QT using our technology and having the amoxi-foxacin in dealing with all the blinding issues and having had that protocol thoroughly reviewed by the FDA I think gives us an edge up on doing yet a second one, it’s very, very similar in its size and design; and the fourth is fourth is an upper airway tolerability pulmonary function test. It’s a 24 hour study, again in normal volunteers looking at drug versus placebo. We have seen nothing to date; we don’t expect to see anything. It was a good discussion with the FDA, we asked them specifically what sort of pulmonary safety studies they wanted to see and we came away with this 24 hour pulmonary function test. So the goal is to start one or two of those later this year. Start the second ones beginning early next year with all those data getting completed late in 2009, early 2010 which gives us, again the target of filing our NDA for AZ-004 in the first half of 2010.

Charles Duncan-JMP Securities

That’s very helpful Tom. The second follow up question I had is when that people asked on the ITO on this product candidate, clearly you’ve completed the Phase 2 well. But what is your sense about the kind of risk of being able to get patients to use this therapeutic modality versus getting tackled and getting a shot to settle them down. What is your interest by the physician community as well as the patients to do that cooperate with that?

Thomas King

Yes, well certainly your comment is a good one. There was a healthy dose of skepticism about the potential for patients to use this product during our IPO and our retort was always that it would be better to learn it from a clinical study than to have some expert try to tell you whether they could or could not. We’ve been working very closely with Dr. Michael Allen from the University of Colorado Health Sciences Center and Dr. Carol Tamminga from the University of Texas Southwest. And if you look at where emergency psychiatry and in-clinic psychiatry is going, it is more of a patient relationship as opposed to just you know, darting and tagging one of these patients when they come in. And I think that one of the things that we maybe didn’t communicate as well as we could have was the actual clinical setting. So this initial indication is not for the emergency room, when someone comes in that is highly, highly agitated, that we kind of think about either from the movies or what we’ve heard from our friends. But, if you move past that point of triage and we figure that about 50% of patients actually move through that point into an in-clinic setting, usually what happens is they’re admitted for one to two weeks. Now, their long-acting agitation is being treated by an escalation of their long-acting drugs and their underlying schizophrenia. But during that period of time, they may have one to six episodes of agitation and it’s in that market that we feel there’s an excellent opportunity for a drug that has the convenience of oral and the speed of IV. You know, we presented it to 129 patients in the Phase 2 study, none of those patients turned it down, so all 129 took it very simply. And, that initial trial we had anticipated would take almost a year to enroll and we enrolled it in only 15 weeks. So, I mean the data aren’t in at one, but we are highly convinced, given that experience and what we hear from this group of clinicians, that this can be a very valuable tool in their arm of interim of treating these agitated patients.

Charles Duncan-JMP Securities

Okay then your experience in Phase 2 with the enrollment rates, it seems like you’re being conservative on time lines, but we’ll let you be that and…

Thomas King

I appreciate that and my only foot note was it’s three times the size of the study, so we just simply took three times the duration of the study just as a simple approximation.

Charles Duncan-JMP Securities

Okay, cool. Thanks.

Thomas King

Okay, thank you Charles.

Operator

Your next question comes from the line of Michael Pollard with Merrill Lynch. Please proceed with your question.

Michael Pollard-Merrill Lynch

Thanks. You delivered the Endo partnership on time; prior to that you had been talking about having some other business development opportunities on the go. I wondered if you could comment on the progress there.

Thomas King

Yes, certainly. We have partnering activities in four broad areas and while we work very hard and we would tell you that it’s incredibly important to us to do partnering, we are not giving specific guidance on an outcome at a specific time. But those four areas are fairly straight forward. Certainly with the AZ-003 partnership completed in the United States, we can now move aggressively to try to find a similar type of partnership in Europe. We wanted the United States to lead that because it the design of the device would be important and so we are working in that area. We’re certainly working on migraine. We have some incremental data, so we have discussions ongoing on migraine, kind of on both sides of the Atlantic. If you look at the entire basket that comes along with Symphony Capital, the CNS drugs, agitation, panic and migraine, we’re going to sell two of those three drugs ourselves in the United States. So we are working on ex-US potential partnerships, starting first in Europe, on that portfolio of compounds. And lastly we had a new initiative late last year; we were looking at a technology partnership in territories we wouldn’t go compound by compound. So the countries or areas like China, India and Japan, we have an initiative looking at finding Staccato based partners across the entire portfolio and that’s the fourth of our initiatives during 2008.

Michael Pollard-Merrill Lynch

Okay are any of those initiatives a leader?

Thomas King

No, they’re not; actually they’re all frothy and ongoing.

Michael Pollard-Merrill Lynch

Okay we need the 002 study, where you’ve rated your guidance of Q2 completion of that study. How would you characterize the enrollment phase there?

Thomas King

It is such that we sustained our guidance in the second quarter. I mean it’s always hard to know exactly, but we’re making good progress there. We have four clinical sites up and enrolling and we believe that there’s some reasonable chance, enough to give guidance that will get that trial done by the end of the second quarter.

Michael Pollard-Merrill Lynch

Great and finally, I wondered if you could characterize from the AZ-104 study the somnolence you saw in the treatment group?

Thomas King

Certainly, that’s a good question. We are concerned about somnolence because of the potential histamine blockade that comes along with loxapine. We think that one of the reasons that you don’t see any akesthesia or some of the side effects you might see with some of the other dopamine blocking drugs is because it’s a potent binder of histamine, but as a result, you potentially get the side effects. We also, so we looked at side effects in the area of sedation somnolence in two ways: one was just the overall coating and that is somewhere, in the clinical trial someone says “I feel sleepy”, “I feel tired” and you dose code for somnolence and they code for fatigue and you’ll see the incidence of that specific in the side effects that we release with the data. We also did a 100 mm simple visual analogue scale tracking from very sleepy to very awake and we posted that at every 15 minutes during the first couple of hours of dosing and what we found looking specifically at sedation was that there was no difference between the 2.5 mg dose and the placebo dose. So there was a little bit of sedation in both of those groups, but there was no difference between placebo and active, 1.25 was maybe a little bit less; the 5 mg was maybe a little bit more. Probably not statistically significant given the fact it’s a relatively small study. But looking at those two points of data, we don’t anticipate sedation being an issue in treating these types of patients.

Michael Pollard-Merrill Lynch

Okay, thank you.

Thomas King

Thank you.

Operator

(Operator Instructions) Please hold briefly for your next question. There are no further…

Thomas King

We have no further questions today. Thank you very, very much for your time this afternoon. We look forward to a very exciting year in 2008, both on the operations side and as also the clinical development side and we look forward to updating you on our progress for the balance of the year.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect.

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Source: Alexza Pharmaceuticals, Inc.Q4 2007 Earnings Call Transcript
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