NeurogesX Inc. Q4 2007 Earnings Call Transcript

NeurogesX Inc (NGSX)

Q4 2007 Earnings Call

March 26, 2008 5:00 pm ET

Executives

Anthony DiTonno - President & Chief Executive Officer

Stephen Ghiglieri - Chief Financial Officer

Susan Rinne - Vice President, Regulatory Affairs

Analysts

Gregory Wade - Pacific Growth Equities

Angela Larson - Susquehanna Financial Group, LLC

Andrew W. – W. Capital Partners

Jason A. - Saks Investment and Research

Vince - HMI

Presentation

Operator

I would like to welcome everyone to NeurogesX fourth quarter 2007 earnings conference call. (Operator Instructions) It is now my pleasure to introduce your host, Ms. Elizabeth Scott, assistant Vice President of the Ruth Group. Thank you, Ms. Scott, you may begin.

Operator

Thank you, operator. Joining us on the call today are Tony DiTonno, Chief Executive Officer, and Stephen Ghiglieri, Chief Financial Officer. Statements in this conference call regarding NeurogesX’s business, which are not historical facts, may be forward-looking statements. For purposes of the Private Securities Litigation Reform Act of 1995 or the act, NeurogesX disclaims any intent or obligation to update these forward-looking statements and claims of protection of the safe harbor for forward-looking statements contained in the act. Forward-looking statements may include, but are not limited to, statements relating to regulatory submissions, including the expected timing of submissions, and the potential scope of indications including in our expected NDA filing with the US Food and Drug Administration, or FDA, or covered by potential Marketing Authorization Application, or MAA approval. The expected benefits of our potential products, including our lead product candidate, NGX-4010, our plans for commercialization of NGX-4010, specialty sales force in obtaining market access tools. Plans for entering European commercialization partnership, plans for additional clinical trials, including with respect two potential programs for Painful Diabetic Neuropathy or PDN, expectations regarding obtaining third party pricing and reimbursement for NGX-4010, expectations regarding expenses and cash rates, and our cash resources to fund our operations for at least the next 12 months. Actual results may differ from these discussed here today. The factor that may affect the outcome of forward-looking statements are explained in the risk facts. Filings with the FCC, including our 10-K, which went on file with the SEC today.

Now I would like to turn the call over to Tony DiTonno, Chief Executive Officer.

Anthony DiTonno

Thanks, Elizabeth, and thank you all for joining us this afternoon. I’d like to start by giving you a brief update on our recent activities in progress, as well as a recap of our accomplishments in 2007. Stephen will then take the financial results for the quarter and year ended December 31, 2007, and then we will wrap up our prepared remarks and take any questions that you may have.

2007 was a pivotal year for NeurogesX as we believe that the events of the year position us well to what we hope to be a transformation in the coming year or two from a company primarily focused on clinical development to a company preparing for potential commercialization of our lead product candidate, NGX-4010.

Starting with our initial public offering in May, we identified a number of key milestones that we expected our progress to be measured by. I am pleased to say that we met those milestones and in many cases ahead of schedule. The first of these key milestone events was the completion of our second Phase 3 study of our lead product candidate, NGX-4010, a dermal patch designed for the treatment of certain neuropathic pain conditions and postherpetic neuralgia or PHN. The subject demonstrated that NGX-4010 successfully met both the primary and secondary end points and confirmed our earlier Phase 3 findings in PHN that a single one hour application of NGX-4010 can result in a significant reduction in pain for 12 weeks.

Shortly after announcing this second successful Phase 3 study in PHN, we announced that our MAA for NGX-4010 had been accepted. This filing was in large part supported by the first two successful Phase 3 studies, one each in PHN and HIV-DSP. As a result of our filing, which contained two models of neuropathic pain, our application seeks approval for a broad label which if approved would allow for the marketing of NGX-4010 across all neuropathic pain indications in the European union. PHN, HIV-DSP, and PDN, among other neuropathic pain indications. The acceptance of our MAA signaled a significant step in our progress toward potential commercialization of NGX-4010 in Europe.

Following these events, in the fourth quarter, we also announced completion of enrollment in our second Phase 3 study in HIV-DSP. As you are mostly likely aware, when we analyzed the data from this trial in early 2008, we found that the trial did not meet its primary end point as a result of a very robust control group response. We did, however, find that the data demonstrated a trend toward efficacy in the 30-minute treatment group and importantly the data reported prior to study results in regards to what we believe to be a favorable safety and probability profile of NGX-4010.

During 2007, we also moved ahead in development of our second product candidate, NGX-1998, a liquid formulation of the high concentration capsation for the treatment of neuropathic pain. In 2007, we completed two phase one studies under an exploratory investigation of new drug application, or EINDA, and have since completed the initial toxicology work that should enable a full EINDA filing in the first half of 2008 and the subsequent commencement of a clinical program with this exciting new product opportunity.

2007 also saw us add key members to our management team and board of directors. With the addition of Bruce Peacock, former CEO of Adolor, and as board member and committee chair, and the addition of Sue Rinne and Russ Kawahata to the management teams as Vice Presidents of Regulatory Affairs and Pharmaceutical Sciences, respectively. In addition, we have begun to build out our marketing infrastructure with key personnel additions that will support our efforts in the reimbursement and pricing arena.

We ended 2007 on a strong note as well, closing the financial transaction which resulted in gross proceeds of approximately $25 million dollars. This financing was key to ensuring a strong balance sheet position to fund the attainment of a number of pivotal events in 2008, including moving thus along our planned path of becoming a commercial enterprise.

With 2007 under our belt, we are looking with great anticipation toward the balance of 2008 and beyond. Most notably, we anticipate an NDA filing for NGX-4010 in 2008. We plan to file an NDA in the second half of 2008 for the PHN indication. In our preparatory work for our planned NDA filing, we have begun analyzing the integrated efficacy data which combines all of our PHN studies, which so far has shown relatively strong statistical significance when looked at by gender, whether or not the patients were around other neuropathic pain meds, or age group. While we will continue to work to build our filing package over the coming months, we remain on track to meet the milestone we originally set during our IPO, which is to file an NDA in the second half of 2008.

In staying with the scene of the regulatory process for a moment, as we mentioned previously, we are continuing our MAA process in Europe. We are currently working to respond to the initial set of questions from the EINDA on our filing and our evaluating the possibility of supplementing our original filing with additional data that became available after our filing was accepted in September of 2007.

Since that time, we have additional long-term safety data and two Phase 3 study results, one in PHN, where we met the primary endpoint and one on HIV-DSP, which did not meet the primary endpoint. As we continue to evaluate what, if any, of these new data may be submitted as part of our MAA, we have requested an extension in the review process to allow time to fully consider this and other elements of our potential response. As a result, we currently anticipate submitting our response to their questions mid-year 2008. This timing would still potential enable a CHNP decision right around the end of this year or early next. It should be noted, however, that our timelines would extend significantly of a resubmission of our MAA as required for potential approval.

With regard to the HIV-DSP indication, we continue to analyze the data from our C119 study. We anticipate that this analysis will help inform us as to the best approach for seeking U.S. approval of the HIV-DSP indication, which could include the potential for conducting another study in this indication.

We are also continuing to evaluate our PDN or Painful Diabetic Neuropathy program as previously discussed. The analysis I just mentioned in regard to the HIV study also may inform our PDN program. We are currently evaluating a number of potential strategies here as we have previously discussed; however, we anticipate continuing our clinical development and PDN this year. The exact timing and nature of those studies we may conduct for PDN is under evaluation.

As we approach our plan NDA filing for PHN, we continue to increase our focus on our plans for commercialization of NGX-4010. We plan to build a specialty sales force for commercialization of the product in the U.S., focusing on a relatively concentrated group of about 10,000 physicians, mainly consisting of pain specialists, neurologists, and other specialists, will treat a significant portion of PHN patients in the approximately 5,000 U.S. pain clinics.

We continue to believe that we can address this market with our own specialty sales force. I personally have a lot of experience building specialty sales forces as well as other members of our management team and we believe that NGX-4010 is well suited to this selling model.

We have recently conducted patient and physician market research at a medical director advisory board and frankly, we are pleased with the response we have had from all constituencies. The unique clinical and safety program of NGX-4010 with the prospect of protracted relief from a single administration is seen as truly different and important. Initial feedback from the medical director advisory board appears to support our belief that NGX-4010, if approved, might be eligible under the medical benefit. We view this as important as the medical benefit allows for reimbursement for both the pharmaceutical product and services associated with administering a product. We continue to work with our advisors to ensure that we have all the market access tools available to us at launch.

Partnering remains significant focus for us, particularly for commercialization of NGX-4010 in Europe. We are currently in discussions with potential European partners and anticipated advancing those discussions and signing a deal before receipt of potential European approval.

With that, I’d like to turn the call over to Stephen Ghiglieri, our Chief Financial Officer, to review the financial highlights for the quarter.

Stephen Ghiglieri

Thanks, Tony. Our fourth quarter and year end financial results are summarized in today’s earnings release that you should all have or have access to. I should also point out that our 10-K was filed earlier today. For the three month ended December 31, 2007, we recorded total operating expense of $8.1 million versus operating expenses of $9.3 million in the 2006 period. After factoring out non-cash stock-based compensation expense, which totaled approximately $0.3 million for the three month ended December 31, 2007 and $2 million for the same period in 2006. Our adjusted expenses for the three month ended December 31, 2007 were $7.8 million compared to $7.3 million for the same period in 2006.

For the 12 month ended, December 31, 2007, total operating expenses were approximately $32.8 million compared to $27 million for the same period in 2006. Again, after factoring out non-cash stock-based compensation of $1.8 million in 2007 and $3.8 million in 2006, our adjusted operating expenses were $31 million in 2007 and $23.2 million in 2006. The higher annual operating expenses in 2007 were primarily attributable to cost associated with the clinical development of NGX-4010, including the number, size, and scope of our Phase 3 studies in PHN and HIV-DSP, as well as an increase in regulatory and costs in preparation for our regulatory filings, including our MAA, which was accepted for review in September 2007 and our planned NDA filing later this year.

Our net loss totaled $7.9 million for the three month ended December 31, 2007 compared to a loss of $12.8 million for the same period in 2006. Net loss for the 12 month ended December 31, 2007 was approximately $32 million compared to $30.1 million for the same period in 2006.

The difference between our operating expenses and our net loss in 2007 related to our interest income from investments offset by our interest expenses related to our debt facility. In 2006, the difference is also due to variable accounting for certain warrants related to our preferred stock, which became warrants for common stock when we completed our IPO.

Our net loss per share attributable to common stockholders for the three month ended December 31, 2007 was a loss per share of $.58 cents and the full year was a net loss per share of $4.06. In 2006, our net loss for the three month ended December 31 was $41.85 and for the full year total $116.20. As a reminder, these earnings per share numbers, particularly in 2006, are a little hard to understand for two reasons. The first is that prior to becoming a public company, we were required to accrete our convertible preferred stock to potential redemption value under U.S. GAAP and consequently, the accretion charge is included as an expense in all period prior to our becoming a public company.

Secondly, again, prior to our becoming a public company, the shares of convertible preferred stock were gained under our accounting rule to be common stock equivalence and, therefore, as their effect on EPS was anti-dilutive, they’re not included in the shares used to determine EPS. Hence, the unusually high loss per share numbers in 2006.

The shares used in the EPS calculation are included in both the earnings release and in greater detail in our 10-K filing, which we filed today. Our outstanding share count as of February 29, 2008, totaled $170 million, 483 thousand, 575 shares, which included the shares we issued in December and January as part of our private placement of shares. The proceeds of which totaled about $23.8 million after offering cost.

At December 31, 2007, cash and cash equivalents and short term investments totaled $52.9 million. We used approximately $31.5 million cash in 2007, including about $2.4 million in the repayment of debt. We expect that over the next year, our cash burn rate will average approximately $9 per quarter, although individual quarters will vary. As such, we currently expect that our existing cash resources will be sufficient to fund our operations into 2009.

As we look forward, we anticipate that our quarterly development expenses will remain consistent or perhaps even decline in coming quarters. The decline is most likely to occur in the middle of 2008 as we wrap up our expenses related to our recent Phase 3 studies in both PHN and HIV-DSP and focus our efforts on our planned NDA filing, the MAA process in Europe and the planning and initiation of our clinical programs in PDN and NGX-1998. Toward the end of 2008, we would expect our development cost to return to recent historical levels as we progress those clinical programs.

With regard to our GNX expenses, we expect they will continue to increase both in absolute dollars and as a percentage of total expenses over the coming quarters and possibly years as we continue to build infrastructure and prepare for the potential product approvals in the U.S. and Europe.

With that, I’ll turn it back to Tony to review our projected outlook.

Anthony DiTonno

Thank you, Stephen. As we look to 2008 and beyond, we see an exciting period ahead for NeurogesX. We remain on track to meet several very key milestones over the next year, bringing us closer to the completion of our transition to a commercially operating specialty pharmaceutical company. In the near term in 2008, we anticipate filing an EINDA for NGX-1998, which should enable the continuation of our clinical program for this liquid formulation product candidate.

We also expect to move forward with our clinical program in Painful Diabetic Neuropathy, the single largest market opportunity in the arena of neuropathic pain.

Most significantly, we believe that 2008 will see the filing of a new drug application, or NDA, with the FDA for NGX-4010, for the PHN indication. This is a major undertaking requiring dedication from all aspects of our business, but a challenge that we are eager and determined to meet.

Similar in importance, we anticipate that a decision on our MAA filing may be rendered by the end of 2008 or in early 2009. This decision if favorable will enable the commencement of NGX-4010 marketing in Europe. As I said earlier, establishing the commercial partnership is a high priority for us and is something we expect to complete prior to obtaining European marketing approval.

Finally, we believe that 2008 will see continued development of our strategies related to the potential commercialization of NGX-4010 in the United States, including continued development of the data, strategies, and relationships that we expect to support pricing and reimbursement for the product upon approval.

In closing, I hope you agree that we have much to look forward to in 2008. We look forward to updating you on our continuing progress and developments in the next quarter and with that, I’ll turn the call back to the operator for questions.

Operator

Thank you. We will now be conducting the question-and-answer session. (operator instruction) Our first question comes from Gregory Wade with Pacific Growth Equities

Question-and-Answer Session

Gregory Wade - Pacific Growth Equities

Good afternoon. Thank you for taking my questions. With respect to the obligation for the submission of additional data to the EINDA and what rises to the level of a resubmission, I was wondering if you could provide us with more detail of these two things. Thanks.

Anthony DiTonno

There’s actually no obligation to augment the initial application that we made. One of the things that we want to discuss with the EINDA is what their interest is in that additional information and how actually they would want it. So, for instance, if they just were interested in looking at the final study report, that’s one thing. If they were looking at looking for us to integrate all of that data into our already existing integrated tables of safety and efficacy, that would be something different, but there really is no obligation on our part that we’re aware of or that our consultants described to us that we need to add that data to our file.

Gregory Wade - Pacific Growth Equities

With respect to where you are now in the process, I guess about midway, there’s a formal set of questions that come from the agency there. Have you reached that point yet?

Anthony DiTonno

Yeah, we have. We have those questions. We’re in the process of responding to those questions, and as I indicated, we would expect to make our response some time mid-year.

Gregory Wade - Pacific Growth Equities

Run through what the questions were, please.

Anthony DiTonno

Greg, we’re really not getting into the nitty-gritty of the individual questions. What we have said publicly is that if there were anything in the questions that would take us off a course of our gaining approval by the end of the year or early next, we would update the market at that point.

Gregory Wade - Pacific Growth Equities

Alright, and can you lastly characterize your negotiations with partners what their interest would be and with the questions you have in hand, do you think you’re on a more firm path to concluding that partnership?

Anthony DiTonno

The partners that we are discussing to has seen the 120-day questions and I think that they had been helpful in helping us shape our strategy in terms of responding to those questions. I really don’t know, I really don’t want to speculate on whether the questions have changed their motivation to the plus or negative, because it would be speculation on my part.

Operator

Our next question comes from Angela Larson with the Susquehanna Financial Group.

Angela Larson - Susquehanna Financial Group

Good afternoon. Thanks for taking questions. If you can give us a little more color on in responding to the EINDA questions, would you need to access any additional data that’s been generated or can you answer the question without bringing in the new data?

Anthony DiTonno

Well that’s pretty similar, Angela, to the question that Greg just asked. We think that we can adequately, and by the way, when we’re talking about these questions, it’s not only clinical questions that they’re asking. The questions that come about are questions that the repertoire and co-repertoire have asked about the entirety of the application. So this question is about our pre-clinical work. There’s questions about C&C and of course this question is about clinical. Our approach is that we think we can adequately address the questions that they have with the data that was in the original package. Our clarification, what we’re trying to get clarity on, is how the agencies want to deal with supplementing our file. Whether they want to do that now as a matter of routine, whether they want to do that over the course of the filing, which goes some 210 days on the official clock or potentially even a post approval. We don’t know the answer to that question. We’re in the process of having our clarification meeting with the repertoire and co-repertoire and we would expect that as we have that meeting and distill the advice that we get that we’d be able to be a little more specific about what we might have to do or not have to do.

Angela Larson - Susquehanna Financial Group

Those three different timing scenarios of giving it now, giving it in the process, or giving it after the process is already completed, which would work to your advantage?

Anthony DiTonno

They all could work to our advantage. It really depends on how they want to see the data. So, for instance, the clinical, the complete study report for the latest trial is probably a couple months away. So obviously, we might want to supply that to them later in the process. Whereas the complete study report for C1-17 already is available, so we could supply that to them now. So it’s hard to answer your questions specifically until we find out from them exactly how they want to deal with new data or I should say data what was subsequent to the original file. If you think about it, in any pharmaceutical company, any clinical development program, there’s always new data. There’s always clinical trials that are going on. Even post-marketing surveillance trials, safety studies, and it really is a question of how do these two particular repertoire and co-repertoire want to review that data as they make their recommendations to the entire CHMP.

Angela Larson - Susquehanna Financial Group

How soon do you think you’ll have some clarity?

Anthony DiTonno

Within the next couple months.

Stephen Ghiglieri

But again, Angela, this is Stephen, I think as Tony said at the outset, our view on this and certainly I understand the interest in getting more clarity, but as you appreciate this is an iterative process with the European agencies and our stance on this is that we’re going to continue to work through that process and we will come back and update the markets if things look like they’re going askew with our expectations, but don’t expect us to come out let’s say after we have this interaction with those agencies and provide additional data. We’re focused on trying to get the CHMP decisions toward the end of the year, early part of next, and that’s the process we’re on.

Angela Larson - Susquehanna Financial Group

If I could switch subjects and talk about your partnership negotiations, could you give us an idea of what are some of your priority characteristics you’re looking for in a partner?

Anthony DiTonno

Absolutely. Obviously one of the biggest priorities for us would be somebody that has domain experience. Somebody that is already showing pain products. I guess secondary to that would be somebody that’s already sort of in the CNS area that’s calling on neurologists, but our prime goal or objective would be to find a partner who understands the pain market and know how to sell pain products. Maybe as importantly is somebody that understands our product and understands what’s necessary to get the job done. Obviously another characteristic is we want somebody with a European footprint. We’d rather do this with one company rather than put together a patchwork of three or four or maybe even five different European distributors, but those would be the two or three principle advantages that somebody would have to be a partner with us.

Operator

Our next question comes from Andrew W. with W. Capital Partners.

Andrew – W. Capital Partners

Hi guys, how you doing? Could you give us the skinny on any more information on your NDA application. I understand you’ve consistently been guiding it would be in the second half of this year. I wonder if there’s any chance that the events with the ESP trial are going to make it possible to move that up a little bit.

Anthony DiTonno

We really can’t at this point in time be any more specific than getting it done by the end of the year. Again, an NDA, any regulatory filing has more than just clinical information and the way that we’ve gaited our spending and cash burn around making the final validation runs for both the API and the patches, all of that was gaited around certain activities over the past six or eight months. I think that as we get comfortable with all of the bits and pieces of the filing, we might be able to be a little more specific within the next quarter or two, but right now what we said was we would get it done by the end of the year and we’re still confident that we can.

Andrew – W. Capital Partners

Just to touch, because you mentioned the issue of validation. I’m assuming that there are no problems with stability batches or anything like that.

Anthony DiTonno

None that we’re aware of at the present time. Again, it’s a question of when you’re running your validation batches, it’s an expensive cash burden and you want to do that in a time where it’s timely for your submission potentially so that there’s still a lot of shelf life on the product, but potentially at launch. So it’s not a question that there’s any manufacturing issues that we have. It’s just a question of cash preservation and being expeditious in achieving the milestone.

Andrew – W. Capital Partners

Just remind me. What are the storage conditions of these batches.

Anthony DiTonno

Normal room temperature.

Operator

Our next question comes from Jason A. with Saks Investment and Research.

Jason A. - Saks Investment and Research

Hi. Good afternoon. Thanks for taking the questions. Tony, in your prepared remarks, you talked about a specialty sales force targeting 10,000 physicians and 5,000 pain centers in the U.S. Was that just for PHN or within that market is there some opportunity for potential off label use in the HIV market, assuming you just filed for PHN to get approval for PHN.

Anthony DiTonno

Obviously, any discussion of our sales force and off label use would be, you know, we would put a pretty thick wall in between those two thoughts. We would never promote for an off label indication. The sales force that we’ve contemplated, which would top out at somewhere between 80 and 120 people would be sufficient to cover the 5,000 pain clinics that are out there right now. We do suspect that those pain clinics do see HIV-DSP patients, but again, it would not be our intention to obviously promote something that would not be in our label.

Jason A. - Saks Investment and Research

The second question, on 1998, how quickly can that candidate move through clinical trials given the similarities to 4010 and what you’ve learned in developing the patch versus a liquid formulation?

Anthony DiTonno

Well there are probably some efficiencies that we will be able to take advantage of perhaps on the pre-clinical side, but the product in and of itself is even though it’s still capsation, it’s obviously different than the patch. Number one, it’s not a patch. Number two, the formulation 1998 that we’re using is a different concentration that has different penetration enhancers. We have to develop a whole new strategy with regard to a control patch, whether that’s a true placebo or some lower concentration. So it’s hard to pin down how much efficiency there will be in the overall program, but we do intend to start the program. Some of the earliest work will be in terms of making sure that we’ve done a good job of those ranging and in this case I mean potentially concentration differences as well as time of residence differences. So that’s about as specific as I could be.

Operator

Our next question comes from Vince with HMI.

Vince - HMI

Good afternoon, guys. Thank you for taking the questions. My concern is given your current burn rate, how you become revenue positive. Do you have enough money to finish the programs and maintain your operational overhead?

Anthony DiTonno

I wouldn’t expect that with the cash that we have available today that we would be able to launch the product and take it through the profitability. Absolutely not.

Vince - HMI

Okay, so given the performance of the stock, what it’s trading at trade levels, how easy is this going to be to raise money if the stock continues to perform the way it has performed?

Anthony DiTonno

Well if it continues to perform the way it has performed, it would probably still be possible to raise the money, but it would be a pretty painful event.

Vince - HMI

It would be a painful even in terms of its dilution effect.

Anthony DiTonno

Yeah, exactly. That’s what I meant to say.

Vince - HMI

What is going to change the performance of the stock? I mean that’s my biggest concern. The stock has been pretty much in disaster in terms of its performance from the IPO. I’m not being critical, but when the results of the trials where you didn’t meet the end point became available, you know, I felt that the silence of the company in terms of issuing a statement for the lesson formed stockholders and for the media in general who follow the stock, I felt that a statement should have been forthcoming. It didn’t seem the end of the world if you knew what was going on, but certainly if you were a less informed investor or advisor, it was not good news.

Stephen Ghiglieri

A couple of comments on that. So first of all, with regard to addressing the broader investor group, when that data became available, we issued a press release, which was also filed on form A-K and we held a conference call, which was available to any and everyone who wanted to participate, whether they were a small retail investor to the largest institution. So we would take exception with the prospect that we didn’t disseminate that information broadly. With regard to the performance of the stock, probably not surprisingly we are as disappointed in the performance of the stock as it sounds like you are. That being said, all we can do here is operate this company to try to make it a success and the stock market will do what it’s going to do. I know that may not sound very satisfying. Tony and I regularly try to get out and speak with investors and help them to understand the story. We believe that there is a tremendous value in this company and that the market currently isn’t appreciating that. That being said, we’re going to continue at it. There are a number of catalysts we believe over the coming 12 months that would hopefully build value into the issue, not the least of which is our potential for an NDA filing later this year and as we said earlier, we expect that we would see a decision from the European on our marketing application late this year or early next. So there are a number of very critical events, very key events, which should drive value and that all is said without the concept of the potential partnership in Europe as well. So there are a number of events and coming back to your original statement or question regarding how we’re going to finance this through to launch of the product, that’s an evolving thing. We’re very happy that we were able to raise $25 million at the end of the year, which gives us the ability to not have to address the capital markets, if that’s the path that we choose. We would not have to address the capital markets for quite some time. Hopefully, that would be enough time for us to obtain a number of these value-creating milestones, which would enable us to potentially raise money at a higher evaluation and we are looking at alternative strategies for funding our launch as well. Of course, a partnership in Europe would bring some economics into the company, but that alone would not fund a launch in the U.S. So this is on our mind. Make no mistake about that, but we feel right now that we have sufficient balance sheet strength to see ourselves through to the ability to raise the money in whatever fashion we choose at a reasonable evaluation. Sorry for the long-winded answer.

Operator

Thank you. Next we have a follow-up question from Angela Larson with the Susquehanna Financial Group.

Angela Larson - Susquehanna Financial Group, LLC

Could you remind us what the patent situation is on 4010?

Anthony DiTonno

Sure. There are a number of patents in play here. The primary one is a patch patent, which was licensed from the University of California. It has an initial patent term which expires in 2016; however, we will seek term extension on that, which would allow us to extend that patent term out to 2021. There are some other patents, both another patent licensed from the University of California as well as patents that we’ve licensed from our patch manufacturer, Loman Therapy Systems, which support this product and we also have a number of other patent applications which are currently on file and working their way through the PTO, which we would find as supportive or protective type applications.

Angela Larson - Susquehanna Financial Group, LLC

Thank you.

Anthony DiTonno

Sure.

Operator

Thank you. I’d now like to turn the conference over for any closing remarks.

Anthony DiTonno

Thank you, everybody, for joining us today. As said in our remarks and as I hope you know, we plan to be as transparent as we can going forward as our plans evolve. Any questions that you have at any point in time, please don’t hesitate to ask, but again, thank you for taking the time out of your day to join us.

Operator

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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