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Executives

Ted Schroeder - President and CEO

Bill LaRue - CFO

Jim Breitmeyer - EVP, Chief Medical Officer

Analysts

Charles Duncan - JMP Securities

Greg Fraser - Merrill Lynch

Leland Gershell - Cowen and Company

Angela Larson - FIG

Adam Cutler - Canaccord

Patty Bank - Pacific Growth

Cadence Pharmaceuticals Inc. (CADX) Q1 2008 Earnings Call May 6, 2008 8:30 AM ET

Operator

Good morning, and welcome to the Cadence Pharmaceuticals' conference call. (Operator Instructions).

Our first speaker is Mr. Bill LaRue, Senior Vice President and Chief Financial Officer of Cadence Pharmaceuticals. Please go ahead, sir.

Bill LaRue

Thank you. Good morning, everyone, and thank you for joining us today to discuss our first quarter financial result and ongoing clinical developments program. On the call with me today are, Ted Schroeder, Cadence's President and CEO, and Dr. Jim Breitmeyer, the company's Executive Vice President and Chief Medical Officer.

Before we get started, I would like to remind everyone that statements included in this conference call, that are not a description of historical facts are forward-looking statements. These include statements regarding the timeframes in which we expect to complete enrollment and announce the results of clinical trials of our product candidates, the timeframes in which we anticipate filing submissions with regulatory authorities, seeking marketing authorizations; the expected impact of clinical trial results on the market and the clinical value of our product candidate; and the potential for our product candidates to address unmet medical needs.

The inclusion of forward-looking statements should not be regarded as a representation by Cadence that any of our plans will be achieved. Actual results may differ materially from those set forth in this conference call due to the risks and uncertainties inherent in our business, including without limitation; the outcomes of final analyses of data from our clinical trials that may vary from our initial analyses and the FDA may not agree with our interpretation of these results. Our clinical trials may produce negative or inconclusive results or maybe inconsistent with previously conducted clinical trial. We may experience delays in completing our clinical trials or achieving our product development goals or experience problems with the designs or execution of our clinical trial. We may decide or be required by the FDA to expand or modify our clinical trials or conduct additional clinical trials in order to support applications for market approval for our product candidate. The market demand for our product candidates and their ability to compete with new or existing products maybe less than anticipated. Our candidates may have unanticipated adverse side effects or inadequate therapeutic efficacy. We may experience delays and increased costs in completing pre-commercialization manufacturing development activities, and may be required to perform additional pre-clinical or clinical testing as a result of changes to our manufacturing processes. We may require substantial additional funding to complete our clinical development programs and successfully launch our products and we may not be able to raise sufficient capital when needed, or at all; and other risks detailed in our prior press releases as well as in our periodic public filings with the Securities and Exchange Commission.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update the information presented today. This caution is made under the Section 21E of the Private Securities Litigation Reform Act of 1995.

If anyone has not seen our press release issued earlier today you can access it on our website at www.cadencepharm.com. Additionally this conference call is being webcast through the company's website and will be archived there, for future reference.

I will now turn the call over to Ted.

Ted Schroeder

Thank you, Bill. Good morning, and thanks to everyone for joining us today. During this call, we will review our financial results for the first quarter of 2008 and provide an update of our ongoing clinical development programs for our two product candidates Acetavance and Omigard. Following the financial and clinical overviews, we will open to the call to your questions.

Today we announced that our second Phase III clinical trial of Acetavance, for the treatment of fever in adults, successfully met its primary end point of achieving a more rapid onset of action, compared to oral acetaminophen. When coupled with the positive data from our first Phase III clinical trail of Acetavance in fever, which we announced in January this year, we believe, that the results of the study further strengthen the value proposition for this product candidate.

We also believe that there is significant unmet need among patients and physicians in the hospital setting for a safe and affective treatment for pain and fever, particularly, in situations where patients cannot take oral medication or require a more rapid onset of action.

Additionally, we announced that we completed enrollment in our Phase III clinical trail of Omigard, for the prevention of catheter-related infections. If approved, we believe that Omigard will be well positioned to address a rapidly growing need for more affective ways to lower hospitals required inspection rate. Including the dangerous and costly complications from infections related to intravascular catheters.

In a few minutes, our Executive Vice President and Chief Medical Officer, Jim Breitmeyer, will discuss the treatment of this milestone. But at this point, I will turn the call back to Bill for an overview of our first quarter financial results.

Bill LaRue

Thanks Ted. For the first quarter ended March 31st, 2008, we reported a net loss of $13.7 million or $0.42 per share, compared to a net loss of $9.6 million or $0.34 per share for the same period in 2007. As of March 31st, we held cash and cash equivalents of $91.4 million, which included proceeds from our registered direct offering, completed in February of this year, pursuant to which we issued and sold approximately 9.2 million shares of common stock at a price of $5.34 per share and received net proceeds of approximately $49.1 million.

Operating expenses for the first quarter ended March 31st, were $13.8 million an increase of $3.4 million from the $10.4 million reported for the same period in 2007. This increase was primarily result of increases of $1.7 million of additional research and development costs related to ongoing Phase III clinical trials and pre-commercialization manufacturing development activities for Acetavance and Omigard

Other supporting costs for research and development activities increased $0.5 million, which included $0.2 million increase in stock based compensation. In addition, the increased operating expenses were due to a $300,000 increase in market research and personnel related activities for Omigard. And an increase of $8,000 in general and administrative expenses, including $4,000 increase in stock based compensation charges.

With that, I would like to turn the call over to Dr. Jim Breitmeyer for an overview of our clinical development program.

Jim Breitmeyer

Thank you, Bill. Good morning, everyone. As disclosed in our press release this morning, we have completed patient enrollment in our Phase III clinical trial of Omigard for the prevention of catheter-related infections. This study known as the CLIRS trial is a confirmatory Phase III trial, conducted under a special protocol assignment with the US Food and Drug Administration.

We completed our goal of enrolling 1850 patients in the study, which was conducted in 58 clinical trial sites in the United States and Europe. CLIRS is a randomized evaluator-blinded study in hospital patients, whose medical condition requires a short term central venous catheter, with the primary objective of evaluating the efficacy and safety of Omigard, compared to 10% povidone-iodine in the reduction of local catheter site infections.

The completion of enrollment is a major milestone in our clinical development program for Omigard. And we greatly appreciate the dedication and commitment of the investigators and staff at our clinical trial sites, as well as, our internal project team whose efforts have made this achievement possible. We remain on track to announce topline data from CLIRS in the second half of 2008. And if the results are positive, we plan to submit a new drug application to the FDA for Omigard in the first half of 2009.

We also announced today those results from our second clinical trial of Acetavance for the treatment of fever in adults, which we call Study 303. We enrolled 81 adult volunteers in this study, which was a non-pivotal Phase III, randomized double-blind, double-dummy single-dose study, which compared 1 gram of intravenous acetaminophen with 1 gram of oral acetaminophen for the treatment of experimentally induced fever.

The results indicated a statistically significant difference in favor of the Acetavance, compared to oral acetaminophen, for the primary and efficacy endpoint, which is the weighted sum of temperature differences over two hours, and the p-value was less than 0.01. The mean temperature for patient in Acetavance treated group was significantly lower than the oral subjects, as early as 15 minutes after the study drug was administrated. And the peak temperature observed in the Acetavance group of subjects was also significantly lower. Acetavance was very well tolerated in the study, including no treatment-emergent serious adverse events and no treatment-emergent hepatic adverse events.

We remain on track with our other ongoing clinical trials of Acetavance, which are listed in today’s press release. As we've previously disclosed, earlier this year we requested input from the FDA regarding our overall development program for Acetavance, and we currently expect to receive their guidance in the second quarter.

Assuming the successful outcome of our plan clinical trails, and FDA concurrence with their proposed clinical development plan, we currently expect to submit a 505 (b) (2) new drug application for Acetavance to the FDA in the first half of 2009.

With that I’ll now turn the call back to Ted for his closing remarks, Ted.

Ted Schroeder

Thanks Jim. For the remainder of 2008 our company remains focused on completing our clinical development programs for Acetavance and Omigard. We expect to achieve a number of key milestones in the second half this year, including the announcement of topline results from our Phase III clinical trial of Acetavance for the treatment of pain in patients under going laparoscopic surgery and from our Omigard Phase III CLIRS trail.

We are also working hard to complete the important pre-commercialization manufacturing development activities for both product candidates that will be required to support our anticipated filing of NDAs for Acetavance and Omigard in the first half of 2009.

With that, I'd like to turn the call back to the operator, and open the line for questions. Operator?

Question-and-Answer Session

Operator

Thank you, Mr. Schroeder. (Operator Instructions). And we'll take our first question from Charles Duncan from JMP Securities.

Charles Duncan - JMP Securities

Hi, guys. Thank you for taking my question, and congratulations on a good quarter of progress.

Ted Schroeder

Thank you.

Charles Duncan - JMP Securities

I had a couple of questions on the Acetavance, I wanted to ask Jim if he could provide any more color on the data specifically, not only the time set of action, but also the duration and whether or not there were any breakthrough fever events following the initial observation?

Jim Breitmeyer

Sure Charles. This is Jim. The way the study model worked is that patients were given a dose of endotoxin, and then they were randomized into the study at the point when the investigator believed that the fever was peaking. But in both study groups it was routine for the patients temperature to rise a little bit higher while in the first few minutes of the study. So, quite a few patients, we didn't see anything that we would have characterized as breakthrough, but quite a few patients did have some temperature measurements, some fever that was little higher on study than when they were first randomized. But this really has to do with the model and the ongoing effect of the endotoxin. What was very important and positive in favor of the drug was that the peak temperature that was observed was substantially lower in the IV acetaminophen group than it was in the oral group. And so, the peak that was seen from the endotoxin was bonded more effectively and more rapidly by Acetavance.

Charles Duncan - JMP Securities

That makes sense to me, but did it last as long as say the oral effect once the fever was broken?

Jim Breitmeyer

The curve is a little hard to interpret that way, and we are still looking at individual temperature curves, but both groups headed down well below there their randomization temperature, and were nearing a normal temperature by the end of a six hour observation period.

Charles Duncan - JMP Securities

Okay, cool. And then, if I could ask about the FDA trial, the plan that was submitted to the FDA, can you outline some of the key elements in that that you are looking forward to getting guidance from the agent?

Jim Breitmeyer

Sure. This is Jim again. What we've done is we have provided the FDA with the results of the successful pivotal study in fever 302, and reminded them that we also have a successful pivotal study in orthopedics, which is the Sinatra hip and knee replacement. And so, I'd say the core of the package is a reminder that for a very well known drug that's been on the market for a long time. That there is now a substantial amount of new data, also including very importantly new 48 hours safety data from the 301 Study. New pharmacokinetic data showing that the drug doesn't accumulate after the first couple of doses. FDA was interested in that. And so, asking a question of, whether there is sufficient information already in hand, once we have completed our studies for the NDA.

So, the primary outcomes are that FDA could indicate that the pivotal studies are sufficient for a well known drug like acetaminophen for the IV formulation. The outcome could be that, they ask us to perform one more pain study. For which, we believe, the ongoing 304 study will be sufficient. And then the third outcome could be that, they ask us for one more 48 hours pivotal study.

Charles Duncan - JMP Securities

Okay. Thanks for that added color.

Jim Breitmeyer

Okay

Operator

And we will take our next question from Greg Fraser from Merrill Lynch.

Greg Fraser - Merrill Lynch

Good morning.

Ted Schroeder

Hi, Greg.

Greg Fraser - Merrill Lynch

When did you complete enrollment in the Omigard study? And can you walk us through the time line from the last patient and to when you could report the preliminary results?

Jim Breitmeyer

Sure. We have announced completion of enrollment in a very timely fashion. It was really in the last few days. And with a multi-national study like this, as you can imagine, it takes a couple of days to turn off the machine. And then what happens now is that there is a substantial period of follow up after the last patient enrolls because a patient can be on study for 28 days. We don't know how long the last patient will be on study. Then there is an additional 30 day follow up, since these patient's are pretty sick we do a serious adverse event follow-up collection point, 30 days after their last study drug treatment.

Then the microbiology, all has to completed, and that is any organisms that are isolated from the blood or catheter have to be processed and the organisms is typed. And then all of that information goes to our blinded evaluation committee. And they look at all of the information to adjudicate the primary and the key secondary end points, and then when all of that is done the data goes through the final cleaning process, and then the database is locked and the data are processed. So, we are expecting all of that to be completed and with the scheduled announcement of topline data in the second half of this year.

Greg Fraser - Merrill Lynch

Okay, that's helpful color. What's the rough split of patient's in centers between US and Europe?

Jim Breitmeyer

It's in the range of 60:40, 60% Europe and 40% in the US.

Greg Fraser - Merrill Lynch

Okay. And then, when you went through the potential out comes when the FDA back to Acetavance, the third option of one more 48 hour pivotal study, if they do come back with that, are you confident that there is way to design a study such that you can avoid issues that you had with your first 48 hour study?

Ted Schroeder

We are absolutely confident that we understand what the factors were in the study design that caused an issue with the primary endpoint for 301 previously. And we are confident that we can conduct a successful 48 hour study if the FDA requests one.

Greg Fraser - Merrill Lynch

Do you think there is still a chance that you could go with the 24 hour study with the similar pain model as the prior study?

Ted Schroeder

We do. We think it is possible that a 24 hour study may be sufficient or that no additional pivotal study may be necessary.

Greg Fraser - Merrill Lynch

Okay. Thank you.

Operator

We will take our next question from Leland Gershell from Cowen and Company.

Leland Gershell - Cowen and Company

Good morning. Thanks for taking my questions. I just want to ask, in terms of the upcoming development for Acetavance given that you could use the laparoscopic data from the 304 study, and not have to repeat a 48 hour trial. Given the pain levels in that trial are probably going to be a less severe than what was in the abdominal gynecologic, can you comment just to if there is any importance to FDA as to what the overall pain levels are between the two trials? Thanks.

Jim Breitmeyer

This is Jim, I will take that. We believe that the amounts of pain in the two trials are both in the range that the FDA considers to be the right, the right kind of pain for a pivotal study for acute pain. The new trial, the 304 study is the ongoing one. Patients have to have at least moderate or severe pain when they enter the study. And so, we think it’s in the appropriate range. A number of our consultants have told us that Bob Temple at FDA often says pain is pain for studying an acute pain drug. And so, we haven’t had any indication that the exact range that used is something that is a factor for concern

Leland Gershell - Cowen and Company

Okay, great. And then one question on the fever trial you reported today, could you provide any numbers around absolute values or are you taking those for a presentation later on?

Ted Schroeder

We are looking for a venue right now to try to get the results out as soon as we can. And so, we had a, we think a clinically meaningful difference between the two groups, as we said, a very good p-value and we will get more color out at the earliest available venue, probably for a poster presentation.

Leland Gershell - Cowen and Company

Okay. Super, thanks for taking the questions.

Operator

And we will go next to Angela Larson from FIG.

Angela Larson - FIG

Good morning. I was hoping if you can give us a little update on the timing, I know that you are still enrolling, but what you are looking for completing the laparoscopic and adult and pediatric Phase III.

Ted Schroeder

Yes the environment for the laparoscopic study 304 is we are predicting complete enrollment in the third quarter of this year. And the safety studies are scheduled to complete in the patient enrollment in the second half the year.

Angela Larson - FIG

Do plan to give a press release or a public update after you get feedback from the FDA on whether you will be filing the 505 (b) (2) for both indications or just for fever?

Ted Schroeder

We do expect to give guidance on the feedback we receive from FDA, yes. And the specific question you raised would be something that would certainly be included in the guidance. And, I think, what we can't say for sure is whether the first communication from the FDA will be clear enough or whether we may have to go a couple of rounds with them to get to a level of clear clarity that is sufficient to provide guidance.

Angela Larson - FIG

And last question, just following up. Do you expect this to be a communication between letters with you and the FDA or is there the possibility of a sit down meeting and kind of hashing that out of that?

Ted Schroeder

Right now the FDA has said that, given how busy they are, and apparently that the issues are straight forward, that exchanging letters is their preferred approached to this. And we like that, because then we have clear communications on both sides.

Jim Breitmeyer

But, I think there is always the possibility Angela, that they may at some point recommend the conference call to resolve any final issues, but we don't really anticipate that at this point.

Angela Larson - FIG

Great.

Ted Schroeder

I'd also just add, just to be clear that we do not anticipate filing fever as a separate indication, because if we were to file fever first, we would not be able to file pain until after fever was approved. So, unless there is some substantial delay that would be beyond the approval period for the pain indication we wouldn't file fever first.

Angela Larson - FIG

Thank you for that color.

Operator

(Operator Instruction) And we'll take our next question from Adam Cutler from Canaccord.

Adam Cutler - Canaccord

Thanks for taking the question. I'm wondering if you can just let us know in your guidance about filing the Acetavance NDA in the first half of '09, does that timing include or take in to account the possibility that you may have to do one more study?

Jim Breitmeyer

This is Jim, Adam. That timing includes the possibility that the 304 study might be included. I think if the FDA asks for an additional 48 hour study, we need to know a little bit more detail about what it would look like to. And then we might have to make some adjustments, but I think that will depend on the FDA feedback. We are proceeding to pre-launch what we think is the most likely 48 hour study, as of backup. So that if the FDA wants that, we won't be starting from a stop but would have for example investigators and the CRO lined up, so that we don't loose much time if they do go in that direction.

Adam Cutler - Canaccord

Okay, great. And then if you do, if you are allowed to file list of data that you have without 304, even if that includes 304, do you think there will be any kind of implications for the product label given that you won't at that point have a 48 hour efficacy study?

Ted Schroeder

Yes, probably we at this point difficult to speculate on the label, and so, we have communications with the FDA, but we would clearly believe that it's sufficient to support an acute pain indication in the hospital study.

Adam Cutler - Canaccord

Okay. And I know you shared with us the ratio of patients from Europe and the US in the CLIRS study, is there any notable difference in infection rates in two geographies?

Jim Breitmeyer

Well we don't have visibility to the infection rates, because those come through the blinded evaluation committee.

Adam Cutler - Canaccord

But I guess in general, sort of separate from your study, just on a general basis is there a difference?

Ted Schroeder

We don't think so. We think that the standard of care in the European countries where we are working is very similar to the United States. And in particularly in the ICU's that the measures that are taken in the two areas are very similar to try to prevent infections. We do think that the reporting, there may be some differences. If you look at survey date and things of that kind, there may be some differences in reporting. But for example, right now there is lot of incentives to hospitals in the United States to report low infection rates. But those may be collected and reported in a manner that is different than the way that they are reported in a clinical trial. So we are really waiting to see, what the actual observed infection rates are in the trial.

Adam Cutler - Canaccord

Okay. And then can you tell us how many patients you actually enrolled in that study? Did you end up with a little bit more than 1850 and then if you could also just remind us of powering of the clear study?

Jim Breitmeyer

Sure, we went a little bit over 1850. We are actually waiting to see what the final number is, because we have to validate each of enrolled patients, and that takes a little bit of time. But ran a little bit over and the powering is at the 0.05 level to detect a difference in local catheter site infections between the two groups. So it's 80% power, and it's a difference between the Omigard group and the Betadine group at 0.05.

Adam Cutler - Canaccord

Okay. Thanks.

Operator

And we will go next to Patty Bank from Pacific Growth.

Patty Bank - Pacific Growth

Good morning. I was just wondering if you did have to run another study for Acetavance, has that model been fixed yet? And I thought at one point you had talked about may be doing another orthopedic study as oppose to soft tissue? And then, also, I think initially you had cost $5 million to $6 million for that studies is that still potentially good a number?

Ted Schroeder

Yeah, last question first. That is still a good number. $5 million to $6 million is the cost range for the 301 study, and we think that's the reasonable estimate to use. We are keeping a couple of models open and would need to interact with the FDA to get a feel with them about what model would be best to use for an additional 48 hour study.

Patty Bank - Pacific Growth

Are there been other products approved onto orthopedic studies?

Ted Schroeder

Well, interestingly J&J has a package in right now that has bunionectomy plus patient's waiting for orthopedic surgery, as the two studies. And so that's a quite contemporary example where there are two pivotal studies that do have an orthopedic flair to them. And so, there are some advantages to the orthopedic models in terms of the amount and duration of pain. So, it might be a favorable model if the FDA would accept it for us to use in orthopedic study for an additional one.

Jim Breitmeyer

The other point that I would add to that is let's keep in mind that this a 505 (b) (2) application and there are several examples of other drugs been approved with the single efficacy trail, so I think it's different than in [NCA].

Patty Bank - Pacific Growth

Okay. The part of my second question was you talked about the possibility of not having to do another study, just trying to get clarity as to whether that's based on precedence in this area or based on any initial feedback you've gotten from the FDA or combination of both?

Ted Schroeder

I wouldn’t say that we have explicit feedback from the FDA on that point. We do have a lot of feedback from consultants that indicate that there it's a reasonable avenue to take. And there have been reformulated opioid medications approved by the FDA fairly recently with single pivotal studies.

Patty Bank - Pacific Growth

Okay. My last question was, is there any update on the business development front? And now you have some cash there, what you are seeing there and how many things are active versus previously?

Ted Schroeder

Yeah, Patty, we have as you know an ongoing business development activity we have been very active over the last year. We looked at a number of different compounds. Currently, I said we have about a half a dozen opportunities that are active that we are making our ways through the evaluation process. In the past, last year just to give you some flavor we actually saw a number of opportunities that were attractive, but as we look strategically, as they set with Cadence, where we are in our development and the degree of risk we will be taking, either because of the compound itself or the therapeutic area. We decided to pass on those opportunities.

And several of them were actually later picked up by other companies. So, we have a pretty high hurdle right now, and as we move toward filings and approvals I think that our appetite for risk will increase. But we are trying to say at least in the ballpark with where we are today. Can't give you more specifics than that, but we are active. I'd say we have a business development discussion at Cadence's at least three times a week about the ongoing programs. And some folks in the company are working on it everyday.

Patty Bank - Pacific Growth

Great thanks.

Operator

(Operator Instructions) At this time, there are no further questions. I'd like to turn the conference back over to Mr. Schroeder.

Ted Schroeder

Thank you. And thank all of you for attending this morning and thank you for your questions and look forward to interacting with you, as we meet at conferences. And appreciate your participations.

Operator

Ladies and gentlemen, this concludes our conference call. All parties may now disconnect.

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

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