Molecular Insight Pharmaceuticals, Inc. Q1 2008 Earnings Call Transcript

Molecular Insight Pharmaceuticals, Inc. (MIPI)

Q1 2008 Earnings Call

May 14, 2008 10:00 am ET

Executives

David S. Barlow - Chairman and Chief Executive Officer

Priscilla Harlan – Vice President of Corporate Communications

Donald E. Wallroth – Chief Financial Officer

John W. Babich Ph.D. – President and Chief Scientific Officer

Joshua Hamermesh - Vice President of Commercial and Business Development

Analysts

Adam Walsh, M.D. - Jefferies & Co.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

Aaron Reames, CFA - Wachovia Capital Markets

Ken Trbovich - RBC Capital Markets

Presentation

Operator

Good morning and welcome to the Molecular Insight Pharmaceuticals First Quarter 2008 Financial Results Conference Call. I will now turn the call over to Mr. David Barlow, Chairman and CEO of Molecular Insight.

David S. Barlow

Good morning. I appreciate you all joining us today for our quarterly conference call. I am David Barlow, Chairman and CEO of Molecular Insight. With me today are John Babich, our President and CSO; Donald Wallroth, our Chief Financial Officer; Norman LaFrance, our Senior Vice President of Clinical Development and Chief Medical Officer; Joshua Hamermesh, our Vice President of Commercial and Business Development; and Priscilla Harlan, our Vice President of Corporate Communications.

Before moving forward it is important to let you know that we will be making forward-looking statements on today’s call. Priscilla is going to go over a brief Safe Harbor Statement and then we will proceed with the rest of the call.

Priscilla Harlan

Those of you who are on the webcast may want to turn to Slide 2, Forward-Looking Statements.

This is a reminder that statements on this call that are not strictly historical in nature constitute forward-looking statements. Such statements include, but are not limited to, statements about our anticipated completion date of mid-2008 for enrollment in the Zemiva planned pivotal registration trial, other listed expectations about meeting clinical milestones in 2008, as well as statements regarding the development of Azedra, Onalta, Zemiva and our other product candidates. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results of Molecular Insight to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors include, but are not limited to: risks and uncertainties related to the progress, timing, cost, and results of clinical trials and product development programs; difficulties or delays in obtaining regulatory approval for product candidates; competition from other pharmaceutical or biotechnology companies; and the additional risks discussed in filings with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement, and Molecular Insight undertakes no obligation to revise or update this information to reflect events or circumstances after the date hereof.

For those on the webcast, please turn to Slide 3.

David S. Barlow

At this point Don Wallroth will briefly summarize our financial results for the first quarter. John Babich will then review some exciting recent R&D highlights. And finally I will review some recent updates and what we expect to accomplish as a company through the remainder of 2008. At that time we will open up the call to you all for a Question & Answer period. Don Wallroth, our CFO, will now highlight our financial results for the first quarter.

Donald E. Wallroth

Good morning everyone. As we outlined in today’s press release Molecular Insight’s 2008 net loss was ($19.7) million, or ($0.79) per share, and total revenues for the first quarter were $88,265. At March 31, 2008, our cash and cash equivalents and investments, mainly U.S. Treasury Bills totaled $146.9 million.

R&D expenses totaled $10.0 million in the quarter as compared to $9.7 million for the same period last year. First quarter 2007 R&D expense included $3.4 million in Onalta and Solazed license agreements and technology transfers. Excluding these 2007 license payments, all other key components of R&D spending increased in the first quarter 2008 due to growth in the research and development staff, higher clinical trials spending for Azedra and Zemiva, and increased contract manufacturing costs for trial drug dosages for clinical trials.

G&A expenses were $5.2 million for the first quarter of 2008, compared to $3.1 million in the first quarter of the prior year, primarily due to increased staffing, auditing and consulting expenses required as a public company, including compliance with the Sarbanes-Oxley Act.

Other expense. Net increased $3.7 million to $4.6 million for the three months ended March 31, 2008, for other expense, net of $0.9 million for the three months ended March 31, 2007. During the first quarter of 2007 and 2008, interest expense was $1.4 million and $5.9 million, respectively, partially offset by interest income of $0.5 million and $1.3 million, respectively. The increase in net interest expense of $4.5 million for the first quarter of 2008, compared to the first quarter of 2007, was due to the payment-in-kind interest accrued of $4.4 million on the $150 million Senior Secured Floating Rate Bonds. The increase in interest income in the current quarter was the result of an increased level of invested funds received from the cash proceeds from these Bonds.

I will now turn the call over to John Babich.

John W. Babich, Ph.D.

Good morning everyone. I would now like to review some of our recent R&D highlights. For those of you on the webcast, please turn to Slide 4, R&D Highlights.

We remain on track on our planned pivotal registration trial for Zemiva, our lead molecular imaging pharmaceutical candidate, for the detection of cardiac ischemia. Zemiva is planned for use in the emergency department to improve detection and management of the cardiac ischemic patient. We expect to complete enrollment of the current study mid-year, with results expected to be presented by the end of 2008.

We also continued to advance our portfolio of molecular radiopharmaceuticals that treat and detect cancer.

As we announced recently, Molecular Insight initiated a Phase 2a clinical trial for Azedra for the treatment of children with neuroblastoma. Azedra is our targeted radiotherapeutic candidate for the treatment of neuroendocrine tumors and the primary objective of this neuroblastoma trial is to determine the maximum tolerated dose of Azedra in this pediatric patient population.

Secondary objectives are to determine tumor and dose response and toxicity, estimate the normal organ dosimetry, and to describe the affect of Azedra on the overall quality of life on these patients. It is also very important for us to collect safety data during this trial. The trial is being coordinated by a consortium of leading pediatric oncology centers, referred to as NANT, or the New Approaches to Neuroblastoma Therapy Consortium, and will involve approximately 24 children across the NANT’s fourteen members centers.

We believe that the initiation of this trial marks another milestone toward developing Azedra to treat a range of neuroendocrine cancers. As you may know, Azedra is also currently in a Phase 1 true trial for the treatment of adults with another type of neuroendocrine cancer known as pheochromocytoma, or as referred to occasionally, pheo. We are nearing completion of the first portion of the pheo trial and intend to initiate the Phase 2 stage in the second half of the year as previously planned.

As we mentioned on our last call, we will present preliminary data from our ongoing Phase 1 maximum tolerated dose study of Azedra in the pheo population and this will be done at the upcoming annual meeting of ASCO, or the American Society of Clinical Oncology, on June 2.

We are also pleased to announce that the company will have seven presentations at this year’s Society of Nuclear Medicine meeting, or the SNM meeting, which is in mid-June and it covers much of our pipeline.

There will be two Azedra presentations, one on the safety and efficacy data from our ongoing pheochromocytoma dose escalation study, another on the delivery system used to safely administer therapeutic doses of Azedra.

There will be three presentations related to our Trofex program. These will include a presentation of the expanded pre-clinical results, the radiosynthesis of our lead compounds, and the rational behind the design of small molecules for targeting prostate cancer.

In addition, we will have two presentations on pre-clinical aspects of Onalta, which as you may know, is in development for the treatment of neuroendocrine tumors such as carcinoid. These Onalta presentations will include in vivo and in vitro data supportive of our planned U.S. dosimetry trial in carcinoid patients.

There will also be a Solazed presentation on pre-clinical data describing our methods for specifically targeting melanoma.

I will now turn the call back to David.

David S. Barlow

Molecular Insight certainly had a productive first quarter and we look forward to continuing the development of our robust portfolio of targeted radiotherapeutics for cancer and molecular imaging pharmaceuticals.

I will now review our clinical milestones for the remainder of 2008. Those on the webcast may want to turn to Slide 5, entitled Clinical Milestones for the Remainder of 2008.

During the balance of 2008 we plan to complete Zemiva’s planned pivotal registration Phase 2 trial enrollment and report the top-line results by year end.

We also plan to complete Azedra’s Phase 1 dose ranging clinical trial in adults with pheochromocytoma and we are actively working with the FDA on the trial design for Azedra’s planned pivotal trial expected to begin by year end.

We also plan to initiate Trofex’s Phase 1 dosimetry trial for the diagnosis, staging, and monitoring of prostate cancer and we anticipate beginning this trial very shortly.

We also plan to initiate Onalta’s Phase 1 dosimetry trial in the U.S. for the treatment of neuroendocrine tumors. We are developing Onalta primarily for the treatment of a subset of neuroendocrine tumors called carcinoid.

We believe that Onalta and Azedra are complimentary radiotherapeutic candidates which may have the potential to offer patients and physicians a range of options to treat neuroendocrine tumors such as pheo, neuroblastoma, and carcinoid.

As you may recall we in-licensed Onalta last year from Novartis, where it underwent three Phase 1 and three Phase 2 clinical trials in more than 300 patients. We are currently designing the protocol with potential trial sites for Phase 1 dosimetry trial in the United States. We are working with one of the world’s foremost cancer institutes and anticipate initiating this trial in the second half of this year.

There is also a rapidly emerging potential opportunity for Onalta in Europe. Following Novartis’ early clinical work there, the compound began, and continues to this day, to be widely used throughout Europe under physician-sponsored protocols, primarily in carcinoid patients. It is estimated that Onalta’s use has expanded to several dozen European centers providing an estimated 3, 700 treatments per year. We are currently working with European regulatory authorities to plan the appropriate development program for the commercial approval and wide-spread availability of Onalta in Europe.

Beyond Onalta, we also plan to initiate Solazed’s Phase 1 dosimetry trial in patients with malignant melanoma. As you may know, we in-licensed Solazed from Bayer as a small library of compounds. As we began to work with the lead compound, ZKVA, we found that it was unsuitable for manufacturing scale out. We then screened other compounds in the library to identify more optimal candidates. The selection process for this new lead compound has moved the planned initiation of Solazed’s dosimetry study into the second half of 2008 rather than the first half, as we had previously guided.

In summary, our key clinical milestones for the balance of 2008 are to complete Zemiva’s planned pivotal registration Phase 2 trial enrollment, report Zemiva’s planned pivotal registration Phase 2 trial results, complete Azedra’s Phase 1 dose-ranging trial in pheo, initiate Azedra’s planned Phase 2 pivotal trial in pheo, initiate Trofex’s dose Phase 1 dosimetry trial for diagnosis of prostate cancer and complete the Trofex dosimetry trial, initiate Onalta’s dosimetry trial, and finally, initiate Solazed’s Phase 1 dosimetry trial in patients with malignant melanoma.

We anticipate making meaningful clinical progress for the remainder of 2008 and we believe that Molecular Insight will continue to move significantly closer to achieve our mission to advance molecular medicine through innovative targeted molecular radiopharmaceuticals.

This now concludes our prepared remarks so I would like to open up the floor to questions from the audience.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Adam Walsh with Jefferies & Co.

Adam Walsh, M.D. - Jefferies & Co.

My first question is do you happen to know which day you will be presenting data at ASCO?

David S. Barlow

June 2. It’s a poster session from 2-5 p.m.

Adam Walsh, M.D. - Jefferies & Co.

On Azedra for pheo, your analysts, Drs. Goldsmith and Coleman, had talked about some of the dosimetry trials and they had mentioned surprise that you had been able to get up to 9 millicuries at that point in time that cohort was enrolling. I am wondering if you can give us a little bit of an update on whether or not we’ve seen DLT in that cohort and whether or not you’ve actually been able to go beyond 9 millicuries.

John W. Babich, Ph.D.

We had to repeat that 9 millicurie cohort and we are currently observing that group. So right now we do not have another DLT in that group but the observation period is not completed.

Adam Walsh, M.D. - Jefferies & Co.

In some of the earlier cohorts there had been at least one DLT and a couple of cohorts that was low platelets. Is that what you’re seeing at this point in the 9 millicurie cohort.

John W. Babich, Ph.D.

That’s correct. That’s the standard toxicity associated with MIGB therapy and that you wind up with thrombocytopenia and potentially also reduction in white cell count. But these we cover spontaneously.

Adam Walsh, M.D. - Jefferies & Co.

And on Onalta, at what time would you anticipate launching into a pivotal 2-3 trial for pancreatic neuroendocrine tumors?

David S. Barlow

What we have to do first, particularly in order to complete some open issues with the FDA is complete our dosimetry study. And that will actually then be a jumping-off point for initiating any therapeutic trial.

Adam Walsh, M.D. - Jefferies & Co.

I know it’s hard to predict with these dosimetry trials, but do you have a ballpark guestimate of how long you think it might take the dosimetry trial to play out before you could get into a pivotal situation?

David S. Barlow

I think you’re talking about 6-9 months maybe for recruiting and collating all the data that we need to then go back to the FDA.

Operator

Your next question comes from Debjit Chattopadhyay with Boenning Scattergood.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

Interest expense, is that likely to remain at these levels for the remainder of 2008?

Donald E. Wallroth

They should stay at about the same levels. Again, this is picked interest so this is capitalized, it’s not a cash item. And that should be approximately what this is for the first quarter. Yes.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

And looking at the communicable program, which is back and loaded for 2008, any projections for the R&D expense for 2008?

Donald E. Wallroth

Not specific projections. We simply maintain on plan.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

Could you just remind me what the expected loss is for this year.

David S. Barlow

At the last call we guided that we expected to have cash burn at or below last year’s level of $57 million.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

Could you also walk me through the Onalta opportunity? What could be the potential steps there, since it’s being used more extensively in Europe than here?

David S. Barlow

We believe this is a compelling opportunity. And what I would like to do is turn the description of that opportunity over to Josh Hamermesh.

Joshua Hamermesh

We have in-licensed Onalta from Novartis who conducted several Phase 1 and Phase 2 clinical trials in Europe. After Novartis stopped their clinical development program, several hospitals in Europe began treating patients with Onalta on a physician-sponsored basis, by which they would order in the chemical, the edotreotide, from chemical supply companies and the yttrium 90 isotope from isotope suppliers. This physician-sponsored activity has been wide-spread.

There are several papers in the literature reporting that experience and it’s really as a result that the benefit that patients have derived from this therapy. Right now we are in active discussions with health authorities in Europe, as well as key opinion leaders and leading institutions in Europe, to commercialize this product and have a clinical development plan that would result in wide-spread consistent supply and availability of the product throughout Europe, as well as the United States.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

Any kind of time lines here?

David S. Barlow

We don’t care to present any time lines. As Josh mentioned, we’re in active discussions with the European regulatory authorities. Suffice it to say there is an obvious interest in meeting the needs of Onalta with a regulated product.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

So you wish to conduct a pivotal trial, or would there be any [inaudible] method over there?

John W. Babich, Ph.D.

I think what we are trying to accomplish in our discussions with the European regulatory authorities is a path forward and a strategy that will allow us to move as quickly as possible to get a product approved in Europe. So right now it’s a lot of discussion and strategic discussions in particular about how we would develop that program and open it up in Europe.

So right now we don’t have the details of that but that’s our plan in the short term, is to engage regulatory authorities in order for us to understand the path forward.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

And the final question, for pheo patients, in your conversations with the FDA right now, any clarities regarding the trial size or is there going to be an interim look that you might speed up the process?

David S. Barlow

Right now all we can say is we are in discussions with the FDA regarding the design of that trial. And we’re really not at liberty to discuss any more details than that.

Debjit Chattopadhyay - Boenning & Scattergood Inc.

But you still think it’s going to be a Phase 2b type of trial? Will it need a trial after that?

David S. Barlow

I think we prefer not to get into any more detail because the conversations are ongoing.

Operator

Your next question comes from Aaron Reames with Wachovia Capital Markets.

Aaron Reames, CFA - Wachovia Capital Markets

Regarding the European experience with Onalta, is that experience getting put into a registry at all? So is that data that is easily accessible?

John W. Babich, Ph.D.

That’s a good question. There are a number of censors that are collecting data on their own. And we are working with these censors to access that data. Other than a group of German physicians, there is really no unified activity that is going on. There is an Endocrine Society within Germany that is trying to pull all that data together, based on their several-year experience with the drug.

But we are actively engaged with several leading censors that have the vast majority of experience in trying to help them put databases together so we can actually use that information for our own strategic planning, as well as a registry of how the drug performs and the safety profile, from that registry.

So there’s a lot of work going on, but nothing formal outside of the German Endocrine Society, that we’re aware of.

Aaron Reames, CFA - Wachovia Capital Markets

And based on those conversations, can you provide some anecdotal data as to how they’re using the compound and kind of what line of therapy and then is that going to be guiding information for the trial designs as well?

David S. Barlow

I think the comment to that is if you look at carcinoid patients in general, they are put on sandostatin for symptomatic relief of the symptoms that are generated from these tumors that produce a lot of hormone. Unfortunately for the patients, most of those patients become resistant to the effects of sandostatin over a somewhere between 9-18 month or 9-24 month period, once they’re on the drug. So these patients are then looking for an alternative therapy to mitigate the actual tumor-related side effects, or tumor-related symptoms, as well as a possibility of actually affecting tumor volume.

So that’s essentially the sort of profile of patients going in for treatment. We know that there are a number of censors with slightly modified protocols from that. Some people will be going straight to somatastatin early on, some will go for de-bulking through surgery, then follow on with yttrium 90 dotatoc therapy. So I think it’s really in general, after sandostatin is no longer helping patients maintain symptomatic control that they be actually enlisting into these therapies.

Aaron Reames, CFA - Wachovia Capital Markets

And with the prior experience with Novartis, what form is the Phase 1 and Phase 2 data in? Is that something where you could pull a med analysis together for publication and do you have any plans to do that?

David S. Barlow

We do have plans to do that. We are evaluating that data set. We are searching through that, we are evaluating it. There are papers that are actually being prepared from that data set and we continue to explore what’s in that data set. Right now we have strong safety data, essentially. If you look at that data set, we understand the drug in terms of its safety profile and it’s preclinical safety, as well. And we’re looking also for clinical benefit. The data set originally showed a significant stabilization of disease and symptomatic control and symptomatic benefit.

Aaron Reames, CFA - Wachovia Capital Markets

Given the experience that is available with Onalta, why weren’t you able to take a more accelerated path in the U.S. Why do you have to start with a Phase 1 dosimetry study. Were they looking at varying doses? Are you just trying to get a more complete picture of what the dosing regimen should look like?

David S. Barlow

It’s a relatively simple question that the FDA answered that Novartis failed to answer. The FDA asked to really lock down the dosimetry to normal organs and it really required that we validate the dosimetry in patients using the indium dotatoc peptide, which would be the indium version of Onalta, which is an imaging radiopharmaceutical and cross compare that to another yytrium version of Onalta.

So we’ve done that in animals and we are planning to do that in man, as well. And that would then validate that our indium imaging would actually allow us to do dose treatment planning and maintain acceptable limits to normal organs.

That’s an issue that was really stalling moving forward with the FDA. So once that’s off the table we already have the design of a Phase 2 or Phase 3 sketched out.

Operator

Your next question comes from Ken Trbovich with RBC Capital Markets.

Ken Trbovich - RBC Capital Markets

As it relates to Azedra, you mentioned the initiation of a neuroblastoma trial but it doesn’t show up in terms of any expectations for rolling throughout the year. Could you give us a sense as to how those trials are progressing? Is this a similar situation to what we see with pheo where you’ve got to determine what the maximum tolerable dose is? And so we’re going to see several iterations?

John W. Babich, Ph.D.

Essentially that’s what the plan is. This will be a dose-escalation study, looking for maximal tolerated dose for the ultratrace MIGB. Again, we are starting at a dose that is at a level that is known to be therapeutic and will be dose escalating in a similar modified Fibonacci approach where it will have three patients per dose cohort and then move up accordingly.

And this is in keeping with previous experience that NANT has with the MIGB product that has co-contaminates in which they have published on over the last couple of years. And so we’re following that stair-step approach so it will be similar in terms of the dose escalation pathway.

Ken Trbovich - RBC Capital Markets

And as it relates to that dose, if I understand correctly, do these patients have to donate themselves prior to treatment or how does that work in terms of the timing?

John W. Babich, Ph.D.

Just to give you a little background, neuroblastoma is a much more aggressive neuroendocrine tumor than the pheos or the carcinoids we mentioned earlier and in children this is a sort of very emergent situation. You don’t have a lot of time to treat these patients. So we are looking to be very aggressive, as per our NANT colleagues’ approach to the treatment of this disease.

And so we are starting at a relatively high therapeutic dose, again, that they have published on, and it’s important for us to have stem cells harvested prior to therapy. And that’s a standard now that they have developed in their many-year experience with the previous version of MIGB that contained co-contaminants.

Ken Trbovich - RBC Capital Markets

So if it’s known that it’s going to cause that sort of reaction, what then becomes the dose-limiting toxicity that we’re looking for in this particular trial?

John W. Babich, Ph.D.

That’s an interesting question. I think what we’re, what they’ve looked at in the past, they’re only giving, they’ve been looking at other [inaudible] they will also be looking at other organ toxicities. So monitoring renal function, liver function, etc.

Ken Trbovich - RBC Capital Markets

Just a final question on Azedra. If you don’t come back with a DLT in this 9 millicurie, the second 9 millicurie cohort, the potential to escalate once again and have to test once again at a higher dose, would that delay at all the timings that you have planned for initiating the save-view portion of the trial?

John W. Babich, Ph.D.

We don’t believe it will delay significantly that portion of the trial. I think one of things that’s coming clear, I think Adam mentioned it earlier, Dr. Goldsmith and Dr. Coleman at the Analyst Day were talking about that we were probably on the brink of defining our maximal tolerated dose. I mean, we’ve been pleasantly surprised that we can actually increase the dose from what they expected. That gives a patient a better chance of having actually more of Azedra accumulate in their tumors and hopefully have a better outcome.

So, we were pleasantly surprised in maximizing the dose to the tumors, obviously the be-all-and-end-all therapy. So we think we are close and again, I don’t want to predict that it’s going to be the next round or the current round, but I think we’re very close and I don’t think we would be overly delayed in translating that. 9 may be the dose where we’re at right now, but we have to collect the data.

Ken Trbovich - RBC Capital Markets

As it relates to Onalta and the European experience, did you say there were 3,700 treatments per year.

John W. Babich, Ph.D.

That’s right. Our estimate right now is about 3, 700 patients in several dozen centers and as Josh was mentioning there has been a sort of ground swell of activity over the last ten years based on the initiation of those Novartis trials and the overall general acceptance by the nuclear medicine community and the endocrine community that this is a viable and effective treatment for patients that are no longer responding to somatastatin.

Ken Trbovich - RBC Capital Markets

So should we view those 3,700 treatments as discrete patients or are some of these getting multiple cycles in the course of a year?

John W. Babich, Ph.D.

Most of them are getting multiple cycles, depending on the center. It could be anywhere from two to four cycles, with an average of probably around three cycles.

Ken Trbovich - RBC Capital Markets

Does that tell you anything of about what the sort of relative rate of penetration this treatment has already in that patient population. I mean carcinoid tumors aren’t necessarily the most common tumors to begin with. Even at three cycles you’re still talking about over 1,000 patients.

David S. Barlow

It does inform us. And it’s also encouraging because of the logistics by which the institutions have to go through to ultimately treat the patients. So they receive the peptide and then it has to be combined with the radioisotope so there has to be a formulation at the institution site. There’s no active marketing by any companies, so this is now spreading by word of mouth. We expect it will continue to grow and again, it’s underscoring the strong interest in not only Europe but in the United States to have an approved Onalta.

We are directly aware of patients from the U.S. who actually fly to Europe to be treated.

Ken Trbovich - RBC Capital Markets

And what sort of a sense would you have in terms of the penetration rate? I don’t know the relative size of the patient population for the European carcinoid market versus the U.S. Could you give us a sense of what that looks like?

David S. Barlow

There’s an established market but the penetration we estimate to be below 10% of the potential patients who would be candidates. So while there is a significant established market of several thousand treatments a year, it’s still a relatively low penetration of the potential for the product.

Ken Trbovich - RBC Capital Markets

You mentioned earlier that the interest expense is being capitalized. Can you help us understand, then, the change in the carrying value of the bonds? Because the bonds themselves, it looks like on the balance sheet, went up about $5.4 million and you’re saying that the accrued interest that was capitalized was $4.5 million. What accounts for the difference?

Donald E. Wallroth

Actually, the $4.5 million was net of interest income of $1.3 million, so the actual interest expense was $5.879 million.

Ken Trbovich - RBC Capital Markets

So the entire amount is payment-in-kind?

Donald E. Wallroth

Yes, that whole $5.87 million.

Ken Trbovich - RBC Capital Markets

Tying that back into David’s comments about cash burn, I am assuming then that this is not included in the $57 million or less burn that you anticipate. So in other words, for total loss for the year we should be looking for should be in the range of $70 million-$75 million?

Donald E. Wallroth

Correct. That would be on a GAAP basis. Your guess is under $57 million.

Operator

Your next question is a follow up from Adam Walsh with Jefferies & Co.

Adam Walsh, M.D. - Jefferies & Co.

David, do you have any additional granularity on the timing for the reported Zemiva pivotal Phase 2 trial results and then as a follow up to that, how prepared are you in the design of your Phase 3, the confirmatory trial? Do you think, given the timing of the pivotal Phase 2 data, you will actually be able to launch into the Phase 3 trials by year end?

David S. Barlow

We are expecting to be presenting that data in the fourth quarter. And we have the added benefit, relative to the Phase 3, that we expect then to roll into several of the sites that are currently involved in the pivotal Phase 2. So it’s quite possible that we could initiate that by year end. But we would also like to leave a little room into the early part of the next year simply because we’re less certain about the precise availability of the FDA for some of the meetings. We’ve experienced a few delays in scheduled meetings based on FIDUFA.

But direct to your question, I think that we’re confident that we are on schedule to complete the Phase 2 enrollment, tabulate the data, prepare for the initiation of the Phase 3, certainly informed by the Phase 2, and have that launch either at the end of the year or very early part of next year.

John W. Babich, Ph.D.

Adam, this is John. I think that Dr. LaFrance, our Chief Medical Officer, and his team are doing a great job in pulling the Phase 2 together and in regards to the final roll up of that trial and I think we’ve got a very strong overall design for Phase 3. Again, to David’s point, I think that design has to be presented to the FDA and we’ve got to get their buy-in on that trial as being a sort of final confirmatory Phase 3 trial.

Adam Walsh, M.D. - Jefferies & Co.

Can you just mention offhand any differences in terms of the protocol of the design, the end points, the conduct of the Phase 3 that you would anticipate versus the pivotal Phase 2?

John W. Babich, Ph.D.

It’s going to be very similar to the Phase 3 trial. We’re really are looking at this as a replicate of the Phase 2. There’s really no reason to change any of the operational components of the trial at this point in time.

Operator

Your next question is a follow up from Ken Trbovich with RBC Capital Markets.

Ken Trbovich - RBC Capital Markets

John, just as a follow up to the comments about the Phase 2 design going into Phase 3, is there anything that can be done or has been learned about enrolling these high-risk patients? Whether it’s certain treatment centers or the number of treatment centers that you are using perhaps to overcome that challenge as you look forward to Phase 3?

John W. Babich, Ph.D.

Well, we learned a lot. We learned that they’re very difficult to get ahold of and that’s because the standard of care for people that are at high-risk is such that they get skirted off to Cath relatively quickly.

But to your point, the answer to the question really revolves around numbers and cherry-picking sites that have the ability to move high-risk patients through to radiology and nuclear cardiology to have those scans done. So a big part of this is really being able to select sites.

If you remember what our target market is in the equivocal chest-pain patient, so this is not the high-risk patient but really the intermediate-to-low risk, we have no problem in enrolling that strata, that population, which actually bodes very well for the product itself in the future.

And the issue has always been around getting the high-risk patients, and when I say high-risk, these patients basically have a troponin bump for an ST depression, something that is indicating that they are at high risk and needs to be watched carefully. So moving those patients through to a nuclear cardiology scan has always met with some resistance in some institutions. It’s more possible in others.

So it’s a combination of picking the centers that have that capability and driving the numbers of those centers up in order for us to meet our expected enrollment time lines.

Ken Trbovich - RBC Capital Markets

So would there be new centers that were not used in the Phase 2 that you would then use in the Phase 3 based on the experience you have had?

John W. Babich, Ph.D.

Absolutely. We would probably make sure that we didn’t bring in some of the centers who had poor enrollers and we would probably focus on the high enrollers and we actually have profiles developed accordingly, and be out seeking other centers that had a similar profile in terms of being able to bring those high-risk patients through.

David S. Barlow

Ken, we also have the benefit of being able to model the practices of the high enrollers and so that will be certainly used in the training of new sites and also existing sites.

Operator

There are no more questions at this time.

David S. Barlow

Once again, we appreciate you all making time during your busy day on this call and we look forward to sharing our continued progress with you during the weeks and months ahead.

Operator

This concludes today’s call. You may now disconnect.

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