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Alexza Pharmaceuticals, Inc. (NASDAQ:ALXA)

Q1 2008 Earnings Call

May 12, 2008, 4:30 pm ET

Executives

August Moretti - Senior Vice President and Chief Financial Officer

Thomas King - President and Chief Executive Officer

Analysts

Charles Duncan - JMP Securities

Jason Cantor - RBC Capital Markets

Shivani Malhotra - Morgan Stanley

Chris Richard - Merlin Nexus

Mark

Operator

Good afternoon, everyone and welcome to the Alexza Pharmaceuticals First Quarter 2008 Financial Results Conference Call. At this time all participants are in a listen-only mode for the conference. We will be facilitating a question-and-answer session towards the end of this conference (Operator Instructions). Today’s conference 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 - Senior Vice President and Chief Financial Officer

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, our ability to commercialize products, the timing of the commercialization of such products and our projected revenues and expenses. 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 on the conjunction risk factors and in our quarterly report on Form 10-Q which we filed with the SEC earlier today.

Alexza disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future developments.

Clinical guidance discussed on this call as of today, May 12, 2008 and financial guidance related to the company’s current cash, cash equivalents and investments is as of March 31, 2008.

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

Thomas King - President and Chief Executive Officer

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.

I am going to start with a brief overview of the progress we have made so far this year toward the accomplishment of our operational goals, and then provide a brief summary of the current status of our six product candidate development programs. I will then pass the call back to Augi to review the financials and after that we will open up the call for Q&A.

2008 is also a very busy and exciting year. During the first quarter half month of the year we have met our operational goals. We commence the first Phase III study with AZ-004 our lead program Staccato loxapine for the treatment of acute agitation and schizophrenic in bipolar patient. We’ve released initial positive results of our Phase 2a clinical trial of AZ-104 a low dose version of AZ-004 Staccato loxapine for the treatment of migraine.

We initiated completed enrollment and released initial positive results from our Phase I study with AZ-007 Staccato zaleplon for the treatment of insomnia. We completed enrolment in our Phase 2a proof-of-concept clinical trial of AZ-002 Staccato alprazolam for the treatment of acute panic attacks. We’ve requested in the Phase 2 meeting with the FDA for AZ-001 Staccato prochlorperazine for the treatment of migraine, and we have initiated development within the pharmaceuticals of AZ-002 Staccato fentanyl for the treatment of breakthrough pain. We’ve also completed a number of corporate finance goals. We’ve received a 10 million upfront from Endo Pharmaceuticals for our partnership with AZ-003; we completed a $10 million equity offering with Bio One Capital to support our plan manufacturing operations in Singapore. And we put in place a $50 million line of credit with opportunity limited.

Operationally we completed our move to (Steirlin Court) to our new facilities in Mountain View which include our manufacturing facility. Late last year we received a California State Pharmaceutical manufacturing license with this manufacturing facility,

In April we also completed our first analyst day in New York with the participation of Dr. Carol Tamminga and Michael Allen, who are key clinical leaders in the areas of schizophrenia, bipolar disorder and acute agitation. The afternoon session focused on AZ-004 our lead program along with updates on all of our clinical development programs.

I would like to provide a brief summary of each of our six programs. AZ-004 also known as Staccato loxapine. We are developing AZ-004 for the treatment of acute agitation in patients with schizophrenia or bipolar disorder. In February 2008 we initiated our first Phase III clinical trial which is designed to enroll approximately 300 schizophrenic patients with acute agitation at 25 US based clinical centers. This is trial is an in clinic, multicenter, randomized, double blind Placebo controlled study and will test AZ-004 at two doses both 5 and 10 milligram. Patients may receive up to 3 doses of study during the 24 hour study period depending on their clinical status. The primary endpoint for this study is it changes from baseline in the PEC score majored a two hours after the first dose.

There is assessment of patient education state will be conducted as serial time points using standard agitation scales of over the first four hours post dose time period with a followup assessment at the end of the 24 hour period. Side effects will be recorded throughout the 24 hour period.

A second Phase III clinical trial is projected to begin in the third quarter of 2008. The design of the second study will be very similar to that of the first trial except that the patient population will be patients with bipolar disease.

We are confirming our previous guidance that we expect to release initial results from this first Phase III clinical trial early in 2009, and that we continue to believe that we are on track for any submission for this product candidate in the first half of 2010. AZ-004 has been licensed the Symphony Allegro Inc. and we have the right repurchase, all rights to this product candidate.

Our next product is AZ-001, also known as Staccato prochlorperazine. Alexza is developing AZ-001 to treat patients suffering from acute migraine headaches. In December 2007, the company completed enrollment of a thorough QT clinical trial, in which two doses of AZ-001 both the 5 and 10 mg dose were compared to both active control and to a Placebo. The purpose of thorough QT study is to determine a drugs affect on Cardiac driven. Based on an analysis of the data from the study neither the doses of AZ-001 produced a QT/QTc prolongation that we would suggest an increased risk of cardiac arrhythmia. As we have previously provided guidance Alexza has requested an Endo Phase 2 meeting with the FDA for AZ-001.

AZ-104 Staccato loxapine is being developed to treat patient suffering from acute migraine headaches. AZ-104 is a lower dose version of AZ-004. In March 2008, we announced positive 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 1.25, 2.5 and 5 mg doses were evaluated against placebo in this clinical trial. Using the IHS 4-point rating scale, the primary efficacy endpoint was pain-relief response at 2 hours post-administration. AZ-104 met the primary endpoint the clinical trial for the two highest doses in the drug compared to placebo. Statistically significant improvements in pain response were observed in 76.7% of the patients at the 5 mg dose with p = 0.02, 79.1% of the patients at the 2.5 mg dose p = 0.01 as compared to 51.3% of patients receiving placebo. AZ-104 was safe and well tolerated by patient in this Phase 2a clinical trial. AZ-104 has been licensed to Symphony Allegro and the company has the rights to repurchase all lights to this product candidate. We are currently working with Symphony Allegro to identify the next steps in the development of AZ-104.

AZ-002 is also known as Staccato alprazolam. We are developing AZ-002 for the acute treatment of panic attacks associated with panic disorder. We were very pleased that we have completed enrollment of our Phase 2a proof-of-concept clinical trial on patients with panic disorder just last month in April. Alexza expects to report initial results for this trial before the end of the second quarter of 2008. AZ-002 has been licensed to Symphony Allegro and we have right repurchase all rights to this product candidate.

AZ-003 also known as Staccato fentanyl, we are developing jointly AZ-004 with Endo Pharmaceuticals for the treatment of breakthrough pain. This partnership is for North America. Endo is responsible for regulatory, preclinical and clinical development and for the commercialization of this product. Alexza is responsible for the development of the Staccato Electric Multiple Dose device and the company has the exclusive right to manufacture the product both for clinical development and commercial supply.

Our sixth type of development AZ-007 Staccato zaleplon we are developing AZ-007 for the treatment of insomnia in patient who have difficulty following asleep, including patients who awake in the middle of the night and have difficulty falling back to sleep. During February and March we initiated a completed enrollment in our Phase I clinical trial that enroll 40 healthy volunteers at a single year as clinical center. The purpose of this trial was to assess the safety, tolerability and pharmacokinetic parameters of a single does of AZ-007. Using a double-blind, randomized dose escalation trial design, four doses of AZ-007 ranging from 0.5 to 4 mg were compared to placebo. In late April we announced positive from this Phase I clinical trial.

We found that AZ-007 delivered an IV pharmacokinetic profile with a median time to peak venous concentration Tmax of 1.6 minutes. Zaleplon exposure was dose proportional across the 4 doses studied, as calculated by power analysis. Pharmacodynamics, measured as sedation self-assessed on a 100 mm visual-analog scale, showed onset of effect as early as 2 minutes after dosing with AZ-007. There were no serious adverse events. The most frequently reported adverse events in subjects receiving AZ-007 were dizziness and somnolence. These data indicate a rapid onset of effect, apparently directly related to the IV-like pharmacokinetics, and showed that AZ-007 was generally safe and well tolerated in this population of healthy volunteers.

Now I will turn the call over to Augi for reviewing the financial for our first quarter.

August Moretti - Senior Vice President and Chief Financial Officer

Good afternoon everyone. I’d like to summarize the financial information that’s included in the Form 10-Q for the quarter ended March 31, 2008. Alexza reported a net loss for the quarter of $14.6 million as compared to a net loss of $10.9 million for the comparable period in 2007. Our consolidated results of operations include the operations of Symphony Allegro and loss attributable to non-controlling interest in Symphony Allegro reduced our reported net loss for the first quarter of 2008 by 3.8 million, and reduced net loss for the first quarter of 2007 by 2.1 million. We have not recognized any revenue in Q1 2008 or Q1 2007, we may begin the recognized revenue from the upfront payment we’ve received from Endo starting in the second half of 2008, this revenue recognition is still being discussed with our auditors. GAAP operating expenses were $19.2 million in the first quarter of 2008, up from $13.8 million in the first quarter of 2007.

To look at the breakdown of this increase between R&D and G&A, GAAP expense relating to research and development increased in the first quarter of 2008 to 14.7 million compared to 10.2 million in the same period in 2007. The increases in R&D expense are related to increase spending on AZ-004 and AZ-104 the loxapine program as the company continue the development of these product candidate under the Symphony Allegro agreement.

Increased spending on AZ-003 which is Staccato fentanyl with continued development of this product candidate under the development agreement with Endo Pharmaceuticals. Increased spending development and manufacturing process scale up process and increased personnel cost related, of related cost supporting these efforts.

GAAP G&A expense increased in the first quarter of 2008 to 4.5 million from 3.6 million in the first quarter of 2007. The increase resulted primarily due to increase staffing to manage and support our growth. Resulting on payroll and related expenses increased intellectual property expenses as we continue to increase and maintain our intellectual property portfolio and higher facilities expenses to support our growth.

We expect facilities expense to decline in future period now that we’ve completed our move to our facilities in Mountain View. Our recent facilities terminated in the first quarter and the second facilities which terminate in the second quarter of this year.

At March 31 2008, cash, cash equivalent and marketable securities totaled a 111.7 million, and again we consolidate on our balance sheet the Symphony Cash so that 111.7 million consist of 35.9 million of investments held by Symphony and 75.7 million of our plans. We believe that our cash resources along with amounts which we expect will be available under our equity line of credit which we put in place in March, future interest income and cash from option exercise and our employee stock purchase plan will support our operations through at least the end of the first quarter of 2010.

I will now turn the call back to Tom for concluding remarks.

Thomas King - President and Chief Executive Officer

Thank you, Augi. We are talking a bid on our recent history I wanted to note that a Alexza filed its first IND and dosed its first subject with our Staccato technology only during the summer of 2004. Since that time and less than four years, we have now completed 13 clinical trials enrolling nearly 1,300 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. Importantly, we have initiated our first Phase III pivotal program for acute agitation with AZ-004 and our current guidance is that we’re planning to file an NDA for this product candidate in the first half of 2010, and we expect to see data from our first Phase III study in this program early in 2009.

We are firmly convinced that Staccato is a powerful and potent drug development platform as exhibited by our successes to date in many different drug classes patient disease types and clinical studies. As it has been our practice since the company was founded by Dr. Zaffroni we have set aggressive operating goals for each year across a broad and growing 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 in the balance of 2008. Thank you again for your continued interest and support.

And we would now like to open the conference call for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). Your first question is from the line of Charles Duncan with JMP Securities. Please proceed.

Charles Duncan

Hey, good afternoon gentlemen. Congratulations on a good quarter progress and thank you for taking my question.

Thomas King

It’s my pleasure. Thank you, Charles.

Charles Duncan

Tom, I wanted you to talk a little bit about AZ-004 program for loxapine in schizophrenia, you mentioned in your press release that depended on clinical status patients could get up to three doses in a 24 hour period. Can you first of all give us some insides on how enrollment is going in terms of the number of patients inside timeline, but also tell us how you plan to deal with patients who get more than one sort of the drug in the first 24 hours, how will you control for that in these statistical analysis plan?

Thomas King

Certainly the clinical trial is set up identical to the Phase 2 study, except for the fact that we now allow for two additional doses or drug if the clinical saturation allows for it Charles. When you look at the clinical trial that we’re done with (Ciprex) below 5-mg. If someone doesn’t have enough drug at a two hour time point instead of rest giving out with these of array of Haloperidol they use to drug to dose again and that was an important finding that you could actually reuse the drug to redose if you needed to do so. We didn’t have most of those pharmacokinetic on the drug product at the point we start our Phase 2 study. So we couldn’t say if we recommend that that could be done. Since we completed the Phase 2 study and to the start of Phase 3 study we did conclude a multi dose pharmacokinetic study in patients which allowed us to show them we can give up to 10 milligram three times within a 24 hours time period and the drug didn’t cumulate and could be administered safely. So now in the primary endpoint PEC’s done at two hour, when the primary endpoint is done, in the clinical setting the physician determine that they think they need more reduction in agitation instead of now going to raise time which we had been used the drug in the Phase 2 study, they can simply now redose with a second drug or second dose of AZ-004, its randomize in the same sort of way so they got Placebo the first time, I will get a Placebo the second time, if they had received 5 mg, they will get a 5 mg second dose, and if they receive 10 milligram they will get a 10 mg second dose. So it doesn’t change the statistics whatsoever on the primary endpoint, but it give us some powerful information with regard to the incidents of rescue and if indeed as we believe that the AZ-004 can be use during nicely in that case.

One of the observation that we had if you recall it that we had statistically significant finding with the 10 mg dose that at 24 hours we still at differences from placebo the pharmacokinetics of the loxapine are longer so that we think that the incidents of having to redose, but having to rescue is actually going to be lower than what you would find with the other drugs out there, but we didn’t have a clinical trial to show that per se, and that’s why we added this part of the Phase III clinical trial.

Charles Duncan

Okay, that's helpful. Thank you, for the added information, could I jump over to 003 fentanyl, and ask you if you have a perspective on the recent events of the FD panel. Does the perspective of the FDA with regard to the safety of very rapidly administered treadmill. Can you change your perspective on the market potential for 003, and then secondarily if Augi could tell us little bit more specifically what-- how much is being spend in R&D in terms of developing the multi dose device?

Thomas King

Certainly. I were two take ways, well there was lot of takeaways , but there are two that were-interesting to me I think from the FEA advisory panel. One, there were several comments about looking Santora indicating that they keep target at breakthrough episode that happens in 3 to 5 minutes in the pharmacokinetic inventory that happens in 30 to 45 minutes and was that really the right drugs to free breakthrough pay. I think that came maybe from Dr. Newsmier who is an anesthesiologist and I thought that was initiating comment because we obviously believe that the more rapid you could use the drugs to actually function a tight rate to an end point as opposed to having some dose that kind of normally takes care of episode of that breakthrough pain is probably the better way to treat breakthrough pain, I mean, its’ always been our bias that the small little, what we would help to be safe doses of fentanyl administered to tight rates with specific end point. So I think we certainly can match up from a modeling perspective speed of onset and peak analgesic actually in the case of our technology with that a breakthrough pain very, very nicely. The second takeaway that I had was that, I think the end rightly so would be you know, there is always concerns about our paper system is going to strong and have to keep abuse, misuse, diversion and I think you know, SUP 1 did a very excellent occurring to put together a very broad program, but again its all done with paper, and I think a lot of our view is always been to the real strength of the electronics of Staccato system is that we can actually program a lot of that into it, so you can not only lockout dosing administration based on how many innovations can you take in a period, how many episodes the paying key treated today, what’s the periods between those episodes to treating. But also as importantly and perhaps even more importantly is that you can walk down a device so there could a sign to a particular patient and then it can doubt anybody else. And to certain degree you can make that timing so that if they were once a month that you chose that the device in which set itself down after comeback into a pharmacy to reactivated, you know there are significant numbers of electronic control that can be added into the technology. So, I think you know its always difficult to always read all the TVs, because its product specific at an advisory panel but there were two aspects of that I believe that fit into our bias certainly with regards to Staccato fentanyl on AZ-003. I will let Augi to answer that because I know that in the 10-Q we actually breakout some of that spending in particular of the different program.

August Moretti

Just Charles on that point, w e maintain the reporting in our MDNA that we adopted one, we took the company public, so we breakout expense by program, and that the accounting for that is based on recorded hours in our time recording system and obviously and the extra home expenses are keyed by program. In the quarter expanse for AZ-003 was $3.3 million and that reflex this reinitiation of that program and all parties may recall that's the program that we had put on hold pending Kenny a partner to take that program forward. So reinitiation and also external cause having the due with future designs of the product also reflected in that $3.3 million number.

Thomas King

Charles just to answer to that completely, just to be clear, there are two aspects that we have, that we talked about and you are certainly in CPM and scale you have to make CPM for the clinical trails for inbuilt as per the development plan. And that’s one of our responsibilities besides clinical trail material. And the second one is as we think about the second generation commercial advise and we have initiated a project with an outside consulting firm and ourselves and in build on that project.

Charles Duncan

Okay good deal, nice added, good added information. Do you when they’re going to kick off the clinical program with that product.

August Moretti

I do but you will have to get that guidance from, I am sorry.

Charles Duncan

Okay, good deal thanks.

August Moretti

Thank you.

Operator

Your next question is from the line of Jason Cantor with RBC Capital Markets. Please proceed.

Jason Cantor

Hi thanks a lot for taking my question.

Thomas King

Absolutely Jason . How are you doing today?

Jason Cantor

Doing just fine, thank you. So you were trying not to give us a pretty detailed update on at your Analyst Day just recently. So I guess I would ask if there is anything that you can pull out of today's release that might be incremental to what you were talking about just a few weeks ago.

Thomas King

I guess I mean the only pieces that have come out since that point in time, was that we completed enrollment of the appraisal and study. You have been following the stock for a long time, that’s been the one study that has given us some anguish just because it was a hard study to enroll in one that we thought made all the sense in the world. But it was just a difficult prove-of-concept clinical trail design. And so we are wonderfully enthusiastic by the fact that we completed enrollment in that study and that we are going see those data in the very near future. So that’s an exciting point of time. Since the meeting we also Jim Cassella presented at the American Physiatric Association Meeting data from AZ-004 there was not pro-founding new data there but there was a very high degree of enthusiasm with that drug. I mean clinical investigators as well as people outside looking at being able to treat acute agitation I think you know is just a very positive thing for us.

And so those are two other items. The other perhaps item that we launched in our release is that we indicated that we are going to request an Phase 2 meeting with the FDA. We were able to compile the information internal we have indeed requested that in the Phase 2 meeting what the FDA. So we are on target with that goal.

Jason Cantor

And with regard to the FDA meeting. What do you as you prepared for this and I guess it's been a while since you have had a lot of data there to prepare. What are you anticipating the biggest questions from the FDA or the potential stumbling blocks to that program?

Thomas King

Right well it turns out, we just ask the questions, we just hope that they will answer them I guess is the way that set up is normally how that dialog goes. So we prepare a briefing document as well as a data package that goes into them that suggest the agenda and a handful of questions. We did this with AZ-004 last September to give us a good feel for what the clinical plan would be required from an efficacy prospective? What the size of the data base would be from a safety perspective? What sort of animal studies if at any additional ones might be required? And so along those lines for us to have a very thorough dialogue on the actual efficacy end points to make sense to us now. There is some public information obviously from other companies that either have received a recent approval or have had end of Phase II type meetings. So we have read the literature like everybody else has that’s in the public domain. But this gives it a chance to really sit down the FDA and say this is what we think the end points should be, do you agree or disagree. And if they disagree we can find out what there feelings are. What's the size of the safety data base that would be required? So it certainly got around with AZ-004 to a total patient exposure of about a 1000 patients. We expect this to probably be a larger data safety base just because of the different type of indication that being able to look at the types of questions that might be required there. Also talk about some of the issues that have come up in the public domain with regard to potential side effects, the possibility of tardive dyskinesia in some of the other mechanistic issues that have come up as well as talking about our animal studies. What we have accomplished to date, what we think we would require moving forward and have a god discussion on that. Then we also talk about manufacturing and CMC and those issues. I mean those are more straightforward because the guidances and the regulations are more straightforward. But I think this gives us the prefect opportunity to talk about the three major issues or potential issues leading to new growth application your efficacy safety and ancillary types of studies both in humans and animals.

Jason Cantor

And this metaplasia that you are seeing is this an issue?

Thomas King

We don't believe it is. We believe its something that if seen at higher doses, it’s obviously seen when you give a drug to a dog everyday for 28 days have such a different exposure than you would see with giving it to three to four times a month if somebody having a migraine headache. But that’s exactly sort of questions that we will have with the FDA.

Jason Cantor

Thank you.

Operator

Your next question is from the line of Mark (Inaudible) Asset Management. Please proceed.

Mark

Hi good afternoon guys. Just a follow up on the metaplasia question. What doses were you using on the dogs in that 28 day study? And how do you think that realistically changes the tone of the meeting with the agency and potentially affects the program going forward?

Thomas King

We know the doses that we are at were not as high. I don't have the data right in front of me. But the doses weren't as high as the really original studies which were maybe a 100 or 200 times higher than what you would expect to see. But there are orders of magnitude multiples higher than what you would expect to see. And the way we do this Mark is that we give a dose to a dog by having them rebreathe a high concentration of inhalation vapor for about 10 to 12 minutes. And based on the concentration that we administer, we do pilot studies that then give us a feel for what the plasma kinetics, plasma toxico kinetics will be. So we have both what I would call peak exposures that are at multiples higher than what you see in a human. In this case you got time order magnitude in terms of area under the curve that are even at higher levels of magnitude. I think the findings are very similar to what we have seen before. We see upper airway changes that are I guess indicative of irritation because of the breathing of the drug back and forth across the airway and because you are breathing this over the course of 10 to 12 minutes. When you look deep into lung we had like we have seen before no findings which we think is indicative of the drug even do anything in the lung. And that has always been our position. So we think that this 28 day study confirmed what our biosis were about this drug and how you see or don't see the hyperplasia and metaplasia. And so, the findings were confirming in our view as opposed to being anything different than what we have thought about prochlorperazine.

Mark

Okay. And when you note in the release that the changes were partially reversible at the end of the 28 day post interim period. What exactly do you mean by that and just will add a little bit more color?

Thomas King

Yeah so some animals do and some animals don't. I mean when you start doing these sub division groups you have got three or four animals per group. So these aren't studies that are huge as compared to like the human studies that we do where we have the item per groups. We just can't do that in these Tox studies. And so partially irreversible in this particular case meant that some animals recovered and some didn't.

Mark

Got you, thank you.

Operator

Your next question is from the line of Shivani Malhotra with Morgan Stanley. Please proceed.

Shivani Malhotra

Hi guys thank you for taking my question.

Thomas King

Sure Shivani, how are you doing today?

Shivani Malhotra

I am well. So I hate to kind of go on about AZ-001, but I guess my question was related to this product. In terms of the end of Phase 2 meeting with the FDA, I was just wondering what is it you are expecting to hear from the FDA that would possibly give you - or what are the key factors you are looking at that would give you more confidence about taking this program forward into Phase III. And can you just remind us how you are thinking about AZ-001 versus AZ-104 both of which are for acute migraine. Are you planing to develop both or is there going to be a point where you would choose to progress one versus the other?

Thomas King

Right. Well both compounds are actually on different pathways to a certain degree because AZ-104 is partnered with Symphony Allegro and so, the pathway forward for it is dictated by certainly our influence but by the Symphony Allegro development committee. And the most probable next step for low dose loxapine is to take it into an out patient study which we haven't done yet. Let patients take it home used that drug and we have the study that’s of similar size to what we did from the Phase 2b study with AZ-001 towards the safety and efficacy in that patient population at home. Now interesting to add a benefit I think of having a FDA meeting before we start that Phase 2b study is that we actually have had the opportunity to talk about primary end point, you know, what would be the FDA's desired primary end point in terms of pain relief that also coupled up with the symptom management of nausea, vomiting, photophobia, phonophobia, I think we -- all the studies we’ve done have been nicely sized and nicely looking at safety and efficacy based on our biases of what the FDA is giving guidance to, but we have not have that particular conversation and this gives us the opportunity to do so.

AZ-001 is a program that is under our control and we said in both cases the also commercialization of the migraine program has to be done with the partner. We just have no aspiration nor the ability to think about commercializing these products. And so, wouldn’t see partnering these compounds individually. And so, while we have our biases about how AZ-001 and AZ-104 completed their different drugs and they have different sort of efficacies and they have different sorts of side effect, even though they generally worked under the same mechanism, we would weave the differentiation or the choice if you will of moving them forward to the partner, because it would our plan to partner Staccato migraine as an entity and not product specific, because we would never find it to be an advance if we were to set two different companies you have to compete with each other and certainly the conversation that we’ve had with potential partners today have been such they would want to take Staccato migraine on as a broad platform and not a just a product specific platform.

Shivani Malhotra

Okay. Can you update us on partnership talks for the migraine program? What your expectations are?

August Moretti

Yeah actually we are giving no spectacular guidance to specific quarters on partnering, but we do talk broadly and we have partnering going on and partnering discussions going on in four different areas broadly defined certainly migraine, then some of the discussions are US only companies and some are US and EU based companies and some are EU only. So we have conversions and migrant that can expand both sides of the Atlantic or in either of those two markets. The second area of partnering discussion that we have ongoing or what we simply call the Symphony Allegro basket of assets. So those would be companies that are focused in CNS that would have an interest in acute agitation and the panic since those drugs are available outside the United States but we have client keep AZ-004 and AZ-002 in the United States.

Shivani Malhotra

Okay

August Moretti

AZ-003 since we have partnership already in United States we have ongoing discussions for that product outside the United States, and in the fourth area we were having ongoing discussions is the Staccato platform in general, in markets that wouldn't want us to do product specific deals, and examples of that are China and India and Japan. So these are countries or areas where, it doesn't make sense for us to try to say we’re going to do a different product partnership with each different product candidate, and we’ll be seeking a Staccato based partner that wants to have access to all of the staccato technology for that particular territory.

Shivani Malhotra

Okay and sorry this is my final question on AZ-001 based on what said about partnership, is it said to assume you would take this product to the Phase III without a partner or it should be expect that would wait for a partner before moving to forward beyond phase II?

Thomas King

Well some of that would on what we would we hear back from the FDA, I think we know this is going to be partnered family of compounds, and we would only do clinical research if we thought we can enhance the partner ability of this particular off set. Something that was very straightforward that there was no ambiguity about what you should or couldn’t do and we felt hat would enhance the partner ability, we could contemplate taking it forward. But I think we have answered to lot questions on AZ-001 but I would like to refers all back AC 004 which is something at a) as further advanced, b) something that we are going to take the market ourselves and c) the NDA plan is incredibly well articulated. And so, with that, you know you are going to see an increasing emphasis at least over the next year as we are getting out to our Phase III data, our focus on that program because we think that's the primary value driver.

Shivani Malhotra

Absolutely.

Thomas King

I mean we are excited about migraine, we’re excited about our panic, we’re excited about pain, we’re excited about – we have this incredible portfolio of products which we think have shown good results on so many fronts of the clinic that we do believe being knocking on the door of Phase III data and an NDA that is prudent for us and really implies all of the activities based on that particular compound.

Shivani Malhotra

Okay, thank you very much.

Thomas King

Thank you, Shivani.

Operator

(Operator Instruction). The next question is from the line of Chris Richard with Merlin Nexus. Please proceed.

Chris Richard

Hi Tom, hi Augi thanks for taking the questions. I have two questions first about Augi’s comment at the beginning of the call that you have cash till Q1 2010, what are those assumptions beyond that?

August Moretti

I am sorry assumptions beyond the first quarter of 20 no…..

Chris Richard

That you enough cash to get to Q1 2010.

August Moretti

Alright, Chris we’ve never given quarter-to-quarter cash burn, I will just sort point it out what we anticipate the cash out date would be, and this assumes development of the programs that we have on our plate during that period of time and reflects an average cash burn of about 14 million a quarter for the next eight quarters…..

Chris Richard

Okay.

August Moretti

And I think there will be variability quarter-to-quater but in terms of kind of average burn that’s where we would be.

Chris Richard

And that’s assumes a total draw down of the like 50 million?

August Moretti

That if you would have take all that 50 million, we would be able to run the business out through the first quarter of 2010.

Chris Richard

Okay. And then my second question…

Thomas King

I am sorry Chris, I was just add, when we started in 2008 we had several goals on the operational side with all products and serving. But we also felt it was really important strategically to allow us to have enough cash on both our balance sheet and the potential to bring it into the balance sheet to get our first Phase III study reported out. And if you will recall the first of the year we had cash until the summer of 2009, and we are looking at seeing data on our first Phase III study in early 2009, and didn't give us enough run way in between those two events. So in addition to continue to work really hard on the clinical front and the operational front we also worked on the financial side. Looking at both our budgeting and our planing but also we’ve got cash, we did the investment in Singapore which I thing that we need to do from the commercial perspective and we did the x3 line of credit which gives us a insurance policy to give us that a period of time if we were to need it. But at the same time the goal was to be sure that we could get our Phase III data out, because we think that’s an important milestone.

And I think that’s where we are today. We’re going to see those data early next year, we have cash that runs at least a year beyond that plus minus taking down the Azimuths transactions or not. So, I think we very nicely look form a corporate finance perspective, put us to be able to see those data and have investors have a chance to weigh in on that before we have to come back to the market in some sort substantial manner.

Chris Richard

Okay Thanks Tom. And my second sets of questions are on this metaplasia signal. Do you think this some thing specific – did you see this with multiple doses with 004. Is there something with prochlorperazine and also where there any physiologic signs that were associated with this metaplasia?

Thomas King

Right this is a phenomenon that we have not seen with other drugs that we only had one other drug has gone to a 28 day study and that’s loxapine. So loxapine given 28 days and to repeat those manner at concentrations is about the same because we looked at higher than 10 mg human dose there are 5 and 10 human dose of prochlorperazine. So it is a function of the drug itself, but I think it is also a function of just the administration methodology. But we do know that prochlorperazine is a more irritating drug. I mean when you look into our human studies the incidence of cost is a little bit higher, the incidence report to be provided throat irritation is a little bit higher. And so, PCZ reacts differently in humans in the upper airway and animals in the upper airway than the other drugs that we study today. We didn't see any physiological sign, again the volumes in the vulvar airways were all fine, I mean, we’ve always had the hypothesis that the drug hit the deep lung, its resonate time there is incredibly short and it makes it into the blood stream which appears to be exactly what we are seeing in the lungs here, but we do see you know in the upper airway and the mouth you know this changes that are secondary to what appears to be irritation. And when you look at some of the literature or something other inhaled drugs Albuterol is a really good example and some of the higher doses Albuterol you see exactly the similar sort of findings in their tox study. So you know, that gives us some previous guidance if you will of drugs that have gotten approved, that did have these findings at higher doses because of the some of the administration issues or some of the drug findings based in these animal toxicology studies, because they are just so differently done that when you will do in human study.

Chris Richard

Okay, alright, just a couple of follow up questions if I could—you said its multiple orders of magnitude over what you expect in the clinic, is that 10 times or 100 times, is that -- you know what is it?

August Moretti

It between 10 and 100 times. You know, we don’t have the ability to dose it precisely we have range of what we dose these and so, we do in times because again you cant have a dog breathe one deep breath and you get the plasma levels results of that. So we calibrate the aerosol concentration and the amount of times that the dog breathes, but we do get some variability in the animals over the course those 10 minutes and so, it’s the target range and then you don’t know until after the animal is dosed in back into the lab actually on what the overall toxicokinetics are of that animal.

Chris Richard

Okay. And is it though beyond the epithelial layer, does it get below that, is it just where the actual drug hits the most of the epithelial layer or we go into a little more detail in that?

Thomas King

Well, I would like to be able to but I know you got me beyond my area of knowledge. So I guess the best way to be able to do that, since I don’t know that answer to be to have you chat with Jim Jim Cassella.

Chris Richard

Okay. Thanks Tom.

Thomas King

Okay. You are welcome.

Operator

(Operators instruction). At this time there are no more questions in the queue I would now like to turn the presentation back over to Mr. Thomas King for any final remarks.

Thomas King

Very well thank you again so much for the time today. I know it takes some time to go through our broad pipeline now that we have so many products and development that is always please feel free to reach out to us. We’re always here to answer questions as you have them. Thank you for your interest and we are looking for to a very exciting back half of 2008 as we continue to advance our programs. Thank you.

Operator

Ladies and Gentlemen, this concludes your presentation. You may now disconnect and have a great day.

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Source: Alexza Pharmaceuticals, Inc. Q1 2008 Earnings Call Transcript
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