ViroPharma Incorporated Q1 2008 Earnings Call Transcript

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 |  About: Shire PLC (SHPG)
by: SA Transcripts

ViroPharma Incorporated (VPHM) Q1 2008 Earnings Call April 30, 2008 9:00 AM ET

Executives

Will Roberts - Vice President of Corporate Communications

Vincent J. Milano – President, Chief Executive Officer

Colin Broom, M.D. - Vice President and Chief Scientific Officer

Richard Morris - Controller and Chief Accounting Officer

Daniel B. Soland - Vice President and Chief Operating Officer

Robert G. Pietrusko – Vice President, Global Regulatory Affairs and Quality

Analysts

Mike King - Rodman & Renshaw

Joel Sendek - Lazard Capital Markets

Liisa Bayko - JMP Securities

Rachel McMinn – Cowen

Brian Rye - Janney Montgomery

Meg Malloy - Goldman Sachs

Thomas Wei - Piper Jaffray

Stephen Willey - Thomas Weisel Partners

Yale Jen - The Maxim Group

Jason Kolbert – SIG

Operator

Welcome to the ViroPharma conference call. (Operator Instructions) I will now turn the call over to your host, Will Roberts.

Will Roberts

Welcome to ViroPharma’s conference call and webcast to discuss ViroPharma’s first quarter 2008 financial results and other business matters. This call is scheduled for approximately one hour.

Certain statements regarding future demand for Vancocin, the timing of clinical studies, data and our ability to receive regulatory approvals in the US and EU and subsequently commercialize our drug candidates and all elements of our 2008 guidance made during this conference call are forward-looking statements. Forward-looking statements involve substantial risks and uncertainties, and actual results may differ materially from those projected in such forward-looking statements.

The development, marketing and sale of pharmaceutical products, are subject to risks and uncertainties, and as a result, our actual results could differ materially from those results expressed in or implied by this conference call.

Please refer to the press release issued this morning, and to our filings with the SEC, for more information regarding the risks and uncertainties that could cause future results to differ materially from the expectations expressed in this conference call.

With that, I’ll turn the call over to Vin Milano, ViroPharma’s President and Chief Executive Officer.

Vincent J. Milano

Welcome to everyone listening to ViroPharma’s conference call today. With me on the call this morning, in addition to Will, are Bob Doody, also of Corporate Communications; Rich Morris, our Controller and Chief Accounting Officer; and my teammates on the ViroPharma management team, Colin Broom, Dan Soland and Bob Pietrusko, who’s joining us remotely.

It is an honor to speak with you for the first time as President and CEO of ViroPharma. It has been a very exciting first month on the job and I am looking forward to many great achievements for our company.

This morning Colin will provide an update on the progress of the pipeline and Rich will discuss our financial results for the quarter. Let me begin by sharing a few things about our progress over the last quarter.

First, we have strong momentum in our Phase 3 studies with Camvia, or maribavir, particularly in enrollment into our Phase 3 stem cell transplant study and preparing for our 2009 NDA and MAA. As you will hear from Colin, we expect to close our first Phase 3 study in stem cell transplant patients to enrollment in May and have had important interactions with FDA and European health authorities that support our filing strategy, which we will discuss today.

Second, we’ve made good progress in our C. difficile franchise. We had another good quarter of Vancocin sales, which positions us to meet our full year guidance of between $210 and $235 million in net sales this year. Our new sales force is now in the field detailing Vancocin. Our work on the non-tox C. difficile program, or NTCD, our preclinical compound representing a unique approach to addressing relapse, continues with the goal of initiating human studies this year as does work to assure the continued safety of patients with clostridium difficile infection or CDI.

Over the course of the past two years one issue that has increasingly become paramount is that of patient safety. While we are addressing many topics in our interactions with the agency, none carry more weight than that of patients’ best interests. It’s why we do what we do. Safe and effective generic drugs are important to today’s healthcare system, however quick, unproven methods that bypass the FDA’s mandate towards patient safety present far more risk than reward.

Finally, the first quarter of 2008 represents our 13th consecutive quarter of profitability and positive cash flows. We ended the quarter with cash and cash equivalents just under $600 million and of equal importance; we continue to invest our cash wisely and safely to withstand the current macroeconomic conditions.

With that, I will turn the call over to Colin for an update on our clinical pipeline.

Colin Broom, M.D.

I will provide a brief update on maribavir today as we have made significant progress over the last quarter. First and foremost enrollment continues to go well. We have two pivotal Phase 3 studies ongoing, one in stem cell transplant patients, which started enrolling in the fourth quarter of 2006 and the other in liver transplant patients, which began enrolling later in the third quarter of 2007.

I’m pleased to say that the great interest in our stem cell transplant study has driven very strong international enrollment momentum. We have met our enrollment target and have, as of yesterday, notified sites that we will close enrollment at the end of May.

Remember that all patients enrolled will have a six-month total treatment and follow-up period. Once enrollment is complete, we will issue a press release announcing the milestone and we anticipate providing you more information at that time on the expected timelines to availability of top line data and more clarity on the timing within 2009 when we expect to submit our NDA and MAA.

Also of importance on the topic of our filing strategy, I want to elaborate on our intended regulatory submission path. Our goal is to gain approval for maribavir in preventing CMV disease in both stem cell and liver transplant patients. We have often discussed our goal of filing our initial NDA and MAA in 2009. I can reiterate that goal today.

We have now clarified with both the FDA and European regulators the acceptability of submitting for stem cell transplant first and then filing for liver transplant as a supplemental NDA and MAA variation once the initial indication is approved.

Assuming positive safety and efficacy data in our Phase 3 stem cell transplant study, it would clearly be in the best interest of these patients to have maribavir available as early as possible. There is a significant unmet medical need in stem cell transplant patients and to wait longer for a two-indication filing would be a disservice to them. For these patients every month counts.

Remember, there are nearly 20,000 allogeneic stem cell transplants performed globally each year, most commonly for leukemia or cancers of blood. And these patients currently receive no prophylaxis against CMV infection and disease. CMV is the most important and serious viral complication of a transplant and the most common cause of viral induced death in these patients.

The direct effects of CMV are well known to include, of course, serious disease and death, but less known by anyone other than transplant physicians are the indirect effects of CMV viremia, bacterial and fungal infections, worsening of graft versus host disease and reduced overall survival, all major outcome measurements.

And of course today’s transplant physicians when treating CMV have to contend with the toxicities and adverse events associated with currently available drugs including neutropenia, infections and renal toxicity.

Approximately 60% of stem cell transplant patients on today’s standard of care will become infected with CMV in the first 100 days post transplant. And roughly 10% of transplanted patients will develop CMV disease within six months. We believe that these CMV effects, both direct and indirect, may one day be reduced or avoided with new and better antiviral prophylaxis directly targeting the CMV virus. This is very, very good news for patients undergoing stem cell transplant.

Changing topics on a less positive note, we announced two weeks ago that we had terminated development of HCV-796. We regret that were unable to elucidate a clear path forward on this innovative drug candidate. Patients with hepatitis C face limited treatment options for their serious disease and new drugs are badly needed. We would like to acknowledge Wyeth for their partnership that has spanned many years.

However, we will not be discouraged from our mission and ambition to continue to identify and develop innovative new medicines that address unmet medical needs. Our preclinical development program to utilize non-toxin producing C. difficile spores to prevent recurrent CDI is a great example of that ambition.

This program continues to progress towards the clinic and is receiving great interest from key opinion leaders in the field who recognize the therapeutic potential of this unique approach. So there is much to do as we head through the rest of this year and important news to anticipate on the progress of the maribavir Phase 3 program.

I will now turn the call over to Rich Morris for an overview of our financial results for the first quarter of the year.

Richard Morris

First, Vancocin’s contribution in the first quarter of 2008 Vancocin net sales were $51 million compared to $49 million in the first quarter of 2007. While first quarter sales are consistent with our thesis that the incidence of CDI is plateauing, our opportunities for growth going forward lie not in increases in the overall incidence of disease, but rather in promoting the drug to further penetrate the severe CDI market.

Next, our expenses, during the first quarter of 2008 our investments in our clinical pipeline grew as expected over last year’s first quarter. R&D expense for the first quarter of 2008 was $15 million, compared to $6 million in the first quarter of 2007. This increase was driven primarily by the cost, including the cost of increased personnel, associated with our Phase 3 program for maribavir.

Compared to where we were last year at this time, expenses are significantly higher, as we are nearing the end of enrollment of our Phase 3 SCT study and also enrolling in the SOT study, which as Colin previously noted was not ongoing in the first quarter of 2007.

Our selling, general and administrative expenses for the first quarter of 2008 were approximately $13 million, compared to about $7 million for the first quarter of 2007. The largest contributors to this increase were compensation costs, including share-based compensation, which resulted from increased headcount for our European operation and our Vancocin sales force. In addition, medical education activities and marketing efforts also significantly contributed to the increase.

We reported net income of $17 million for the first quarter of 2008 compared to $22 million in the first quarter of 2007. The difference is primarily due to the increased investments in both our clinical pipeline and our commercial efforts. This along with 12 million additional diluted shares related to the March 2007 convertible bond offering resulted in earnings of $0.22 per diluted share in the first quarter of 2008, compared to $0.31 per diluted share for the first quarter of 2007.

Our effective tax rate of 28.5% for the first quarter of 2008 was significantly reduced from approximately 39% in the first quarter of last year. This is primarily due to the current estimates of the impact of the orphan drug credit related to maribavir. There was no impact of orphan drug credit in the first quarter of 2007.

For the full year of 2008 we expect our effective tax rate will be between 27% and 31%. Our balance sheet as of March 31 improved over that of December 31. Our cash, cash equivalents and short-term investments reached $599 million and working capital increased to $619 million.

As Vin previously mentioned, we continue to safely invest our cash to withstand the current macroeconomic conditions. Specifically, we have not and do not invest in any asset-backed securities or collateralized debt obligations. Our holdings are in US government backed securities and very high grade, short-term corporate bonds. The primary focus of our investment policy is principal preservation and liquidity.

It is important to note that the combination of the continued reduction in interest rates and our conservative investment practice will significantly reduce our interest income earned in 2008. We saw a slight impact in the first quarter and expect to see a greater impact throughout the year. So by all financial measures, the first quarter was a very good start to the year.

I will now comment on our current guidance for 2008, which was reiterated in February of this year. First, as a reminder, our guidance assumes no generic competition this year. Next, we expect top line Vancocin sales to grow to a range of $210 to $235 million for the full year 2008.

Our combined research and development and selling, general and administrative expenses, excluding the impact of FAS 123R, are expected to be $105 to $115 million. This is primarily driven by all clinical expenses associated with the Phase 3 trial to evaluate maribavir and prepare for the submission of our NDA and MAA, commercial preparation for maribavir in the US and EU, investments into our NTCD program, and continued and new investments into our Vancocin business.

We expect that the FAS 123R impact to the expenses I just described will be between $9 and $11 million. So including the impact of FAS 123R expense, the R&D and SG&A expenses are expected to be between $114 and $126 million. So we expect our very good start to the year to continue through the balance of 2008.

I will now turn this back over to Vin for some closing comments.

Vincent J. Milano

In conclusion, with our CDI and CMV programs and strong balance sheet, we remain a very compelling investment option for biotech investors. In the field of CDI drug development, treatment and education, we have had another strong quarter of Vancocin sales and we believe that the work we are doing in the field today can provide us opportunities for additional growth.

There are new data supporting the use of Vancocin as the drug of choice in patients with severe disease. SHEA and IDSA have proposed draft guidelines, which we expect to be finalized and published in the coming months. The draft guidelines for the very first time define severity of CDI and name Vancocin as first-line therapy for these very sick patients.

We have a sales force, which has been in the field for a little over two months, positioning the drug. Our medical education efforts are being utilized by physicians to learn about the current state of CDI and to control outbreaks on an institution-by-institution basis.

And of course, we have our regional medical scientists exchanging and collecting data on this very significant disease. And we are also moving towards first in human studies with NTCD, a promising therapeutic opportunity to reduce recurrence of CDI.

We are also leaders in drug development for CMV disease. We have a major unmet medical need in our line of sight and a drug in maribavir that may offer the first new advancement in CMV therapeutics in over a decade. We believe that maribavir may save lives and allow physicians to focus on patient outcome rather than on watching and waiting for CMV infection, the most common and dangerous viral infection in transplant patients today.

Our stem cell study is nearly enrolled. We intend to file our NDA and MAA in stem cell transplant next year, 2009, followed by supplemental filings in solid organ transplant.

Many key transplant physicians throughout the US and Europe will already have experience with this drug at the time of launch and, as we disclosed in our 2006 Teach-in on CMV, we believe that peak year sales for this drug could be between $400 and $500 million in global sales. And we are very well positioned financially with just shy of $600 million in cash, cash equivalents and short-term investments.

Thank you very much for your attention today and your continued interest in ViroPharma. As a reminder, available for questions this morning with me are Dan, Colin, Bob, Rich, Will and Bobby.

Operator, are there any questions for us?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Mike King - Rodman & Renshaw.

Mike King - Rodman & Renshaw

I know you took a 4% price increase during the quarter, so I was wondering if you might comment on whether there was any wholesaler buying in anticipation.

Vincent J. Milano

The price increase we took was 9.4% and it was taken in the beginning of February.

Daniel B. Soland

And our wholesaler inventory is in our normal range, so we did not see any additional stock-in by the wholesalers.

Mike King - Rodman & Renshaw

Vinnie, can I just come back to your price increase, because you had a press release that said 3.9%.

Vincent J. Milano

No, I believe that was the growth number. That’s not the price increase.

Mike King - Rodman & Renshaw

And do you care to say what the normal inventory level is?

Vincent J. Milano

We think the inventory’s at about 2.5 to 3 weeks, which is about the same as it was at the end of last quarter.

Mike King - Rodman & Renshaw

Do you wait till stem cell transplant is approved before submitting the sNDA for solid organ? And if so, are we looking at perhaps a 2010 filing for solid organ?

Robert B. Pietrusko

The plan is to file for the stem cell transplant indication first and as soon as that is approved to file a supplement NDA or a type 2 variation in Europe as soon as possible thereafter.

Mike King - Rodman & Renshaw

Can you define soon as possible?

Robert B. Pietrusko

Depending on how the enrollment goes, etc. That has not been determined yet.

Vincent J. Milano

Mike, our plan is we’re going to try to put ourselves in the position to be prepared to submit the sNDA as soon as approval takes place.

Mike King - Rodman & Renshaw

So it could literally be the next day.

Vincent J. Milano

That’s our internal target but we’re not in the position today to comment on the enrollment and the timeframe for completing the solid organ study. But I think importantly, from our perspective, the ability to file first with stem cell and have a faster approval is very important in this decision. So we took the decision to accelerate the filing in terms of going with the single study first and then move to solid organ second.

Mike King - Rodman & Renshaw

This is the first conference call you’ve had in some time where you haven’t talked about some strategic asset, in licensing or otherwise, any reason for that?

Vincent J. Milano

You can be confident that we still take our business development efforts very, very seriously here and we are at various stages of diligence with a number of things. However, as a practice going forward here, we don’t intend to comment on our activities in business development until we have something tangible to speak of.

Mike King - Rodman & Renshaw

But it’s still a priority.

Vincent J. Milano

It’s absolutely a priority.

Operator

Your next question comes from Joel Sendek - Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets

So can you give us some sense as to how many patients you will have enrolled by the end of May?

Colin Broom, M.D.

We will, let’s say we completed the targets that we had set in terms of enrollment, but we’ll update you with a press release at the end of the month because then we’ll know specifically the number of patients enrolled in that study. That will give us greater clarity around timelines and our plans.

Vincent J. Milano

The momentum has been quite strong, Joel, the last couple of months so it’s difficult to predict what the exact number will be. But we’re very excited about the enthusiasm both here and in Europe, in both studies frankly, in the recent months.

Joel Sendek - Lazard Capital Markets

You enrolled over 500, right?

Vincent J. Milano

Yes.

Joel Sendek - Lazard Capital Markets

You said before, obviously, you need the 180 days post the end of enrollment to get to the data. But can you give us some sense of, even before that press release comes, of how long it will take you post that 180 days to release the data. Is it going to be a matter of days or maybe months before we actually see the results?

Colin Broom, M.D.

As we wrap up the enrollment into this study, we have to allow patients who have already been screened or about to be screened into the trial. So with these big trials it’s somewhat like stopping a large oil tank. You can’t stop on the dime, so we will allow from an ethical perspective patients who currently don’t get any prophylaxis. There is an unmet medical need. We owe it to them to make sure we follow these patients, allow them into the study.

So at the end of May, you’re correct, it will be six months to follow the very last patient in and depending on the number of patients in this last month will somewhat dictate how much analysis or additional analysis there will be. So we will have a better idea when we firm up on the total number of patients.

To give you some rough idea, six months takes us to the end of November. There’s a substantial amount of data to bring in, clean up, analyze, report out on, and interpret. So it’s sometime in the first part of 2009 when you would expect to see some data. Those are rough timings. We will give you some more information.

Joel Sendek - Lazard Capital Markets

And my final question is with regard to the two trials and when you’re going to file, does that imply that you have definitive word or some guidance from the FDA that they absolutely won’t need to see anything from the stem cell trial in order to potentially grant you approval?

Vincent J. Milano

You mean solid organ?

Joel Sendek - Lazard Capital Markets

Yes, solid organ, right. Before granting you approval for stem cell?

Robert B. Pietrusko

The major focus was for the filing for the stem cell based upon the unmet medical need, the fast-track designation to recognize that and the orphan drug status, meaning that it is a limited population. And also based on the Phase 2 results that were very favorable, that were recently published. Based upon that information and the results that we see, that will be important as we go forward. The other thing is that, for the ongoing trial, safety data is being collected and that is also important in the evaluation process.

Operator

Your next question comes from Liisa Bayko - JMP Securities.

Liisa Bayko - JMP Securities

About Vancocin, can you just comment a little on what’s going on with CDI, incidents versus hypervirulent strain and severity? And then maybe just comment on what early read you’re getting on the impact of your sales force and then finally, how much you think the new SHEA guidelines will drive sales.

Daniel B. Soland

Overall the instance of C. diff is plateauing as we suggested for the last six to nine months. And the future growth of Vancocin will be with market share increases and it’s too early exactly to tell the impact of our sales force but we’re hoping to know in the next, perhaps in the third or fourth quarter of this year the impact.

And we think that we’re set up to take additional market share with the fact of two successful Phase 3 trials that suggest Vancocin is superior to existing standard of care in these severe patients. Along with the sales force we have a very active promotional program, significant medical education programs that are ongoing. And finally, as Vin mentioned earlier about these draft guidelines, we’re hoping that they’ll become final and published in the next few months.

Liisa Bayko - JMP Securities

Are those guidelines already widely known or would that be new information? Will your sales force use them in terms of promoting and detailing?

Daniel B. Soland

The guidelines are not widely known. They are by the thought leaders, so we have to get down into that next layer of treating physicians. And I think there’s really two parts to the guidelines, one is the discussion about this new severe strain. I think that’s important. I think there’s another discussion that talks about finally saying what is a severe patient, and clearly describing that. And I think third is, is that the recognition that Vancocin is a superior product in these severe patients and it should be used as a first-line agent.

Liisa Bayko - JMP Securities

Is this the overall disease that’s plateauing or is the hypervirulent strain that’s plateauing? What’s driving that overall?

Daniel B. Soland

We believe that the overall disease is plateauing, that the hypervirulent strain, I think the CDC now suggests that they’ve found it in 38 states. It may in fact be in every state if you actually do culturing in all states, but at least we know for a fact that it is in 38 states.

Liisa Bayko - JMP Securities

So if you look at the overall disease, is it flat and then you see a shift towards more severe patients or is the breakout between mild, moderate, severe, stable or is that changing?

Daniel B. Soland

It’s difficult to know but we see the overall rate as being flat but that there is more severe disease.

Vincent J. Milano

I’d say another point, Dan, to add to that is that anecdotally from the feedback that we’ve gotten from both the sales force efforts as well as the medical education efforts, the sales force and of course our education efforts have been very well received by these physicians. There’s a real thirst for knowledge information by physicians who are dealing with this disease day to day.

So anecdotally it doesn’t appear, when you get that feedback, that the severity issue is still not an issue for them to deal with. But Liisa, is it difficult, as Dan said, because the disease is not reported to be clear on what the incidence is and whether it’s migrating between mild, moderate and severe.

But anecdotally we do believe that the severe portion of the disease is still a relatively unmet medical need for which Vancocin needs to be used more frequently and the combination of the sales force, medical education efforts, the new guidelines with the data, for the first time that substantiates the superiority of Vancocin over metronidazole should be helpful in allowing us to realize the benefits of growing market share.

Operator

Your next question comes from Rachel McMinn - Cowen.

Rachel McMinn - Cowen

I’m curious if you could comment, if you have a sense on the baseline CMV disease incident rate ongoing in the stem cell transplant study and if it’s consistent with your powering assumption.

Colin Broom, M.D.

Obviously we look at an ongoing basis on the study and things are, shall I say, on track for expectations so that’s why we closed the study down and complete enrollment end of next month.

Rachel McMinn - Cowen

What I’m wondering is are you letting it over-enroll because you think that it’ll help your powering because the CMV disease rate is a little but under what you had been projecting?

Colin Broom, M.D.

Well, you certainly don’t want to under-enroll. Let’s just say that because you are pressed in that way. Your really have to make the targets. Remember we put a lot of diligence into empowering the study. But naturally you don’t want to under-enroll and as I said earlier on, when we close enrollment to the last patient, we have to allow these patients to continue to receive the benefit of being in this clinical trial.

Vincent J. Milano

Colin, that on that point, as you mentioned, Rachel, we definitely have a way to estimate the endpoints in the study, which was obviously an important element of our analysis of when to complete enrollment.

As a reminder, in the fourth quarter of 2006 we said that we would take 18 months to enroll this study. We’re on track to complete the enrollment in the exact timeframe that we set. As a matter of fact, we achieved the initial target sooner than that 18 months so we definitely feel like the endpoint numbers are going to be consistent with what our powering suggestions would be. But we’ll see when the data comes out.

Rachel McMinn - Cowen

You on a blinded basis have access to the CMV disease incidence rate, is that right?

Vincent J. Milano

Correct.

Rachel McMinn - Cowen

And then just a question on the filing strategy change here, since the timelines of your NDA filing in 2009 are on track and the 18-month target for completion of enrollment of stem cells is on track, should we just interpret that liver is a little bit slower than you would expect it? Is that really why you’re changing it, that it’s not really meeting your original internal guidelines?

Vincent J. Milano

Let me start by saying the answer to your direct question about is that why we’re changing, the answer is no.

Colin Broom, M.D.

Yes, in the solid organ and liver transplant study, we actually started that later than the stem cell transplant study and the initial enrollment into that study was less than I would like to have seen. We had some ambitious targets, however that slow initial enrollment we’ve now seen ramp up quite rapidly, particularly over the last few months to levels where we now where I would like to see it. So we continue momentum. We focus on that study. It’s a large international study. We have almost all the centers now up and running so, and I look forward to seeing a very good enrollment rate over the next few months.

Vincent J. Milano

And I would add to that that importantly in this discussion and decision was that the most severe or meaningful unmet medical need is stem cell transplant and from a patient’s perspective, if we’re in a position to be able to submit a file for that first and it’s acceptable by FDA and the European regulators, which in our interactions they’re confirming that it is, we’re very much interested in doing that first and foremost. So it was a combination of all those points, Rachel.

Rachel McMinn - Cowen

And so in terms of when we should be expecting liver to complete enrollment, is it fair to assume by the end of the year?

Vincent J. Milano

We’re not in the position to answer that question today.

Operator

Your next question comes from Brian Rye - Janney Montgomery.

Brian Rye - Janney Montgomery

The stem cell Phase 3 study is obviously, I believe a placebo-controlled trial and I think the last update I saw on the NIH’s clinical trials website, the target enrollment was 613 patients. But moving over to the solid organ study, I believe that starts with ganciclovir, so could you maybe talk about the powering assumptions and the statistical basis of that study and remind us of what you’re trying to demonstrate, if that’s in fact a superiority or non-inferiority trial?

Colin Broom, M.D.

You’re absolutely correct. The stem cell study is a superiority study compared to current standard of care, which happens to be placebo, so a very, very powerful robust design. The liver transplant study is also a very robust design, but is a non-inferiority study where we compare prophylaxis with maribavir to prophylaxis with a currently approved agent for liver transplant, which is oral ganciclovir, so non-inferiority study.

Generally non-inferiority studies represent a somewhat lower bar for regulatory approval so allow you to go usually with a smaller sample size than with a superiority study. The powering assumption that went into the liver transplant study assumes that the incidence of CMV disease at the six-month time point in the control or ganciclovir arm is around 12%. That’s based on really quite robust data in the public domain.

Our assumption is that with maribavir, we believe that the CMV disease will be lower, around 8%. So empowering a non-inferiority study, that gave us a target number for that study of 348. So yes, the liver transplant study is non-inferiority compared to the stem cell study, which is a superiority study.

Brian Rye - Janney Montgomery

I presume, given the patient population, that obviously both regulatory agencies in the US and Europe will be very focused on the safety aspect coming out of that study and what specific safety oriented endpoints might be in that study?

Colin Broom, M.D.

Well, first of all, let’s talk stem cell, and there’s some similarities with solid organ transplants in terms of safety, but let’s talk about stem cell. First of all, we will have a very robust safety database. Remember randomization is two to one. So for every one patient that goes on the control, we have two patients on maribavir, Camvia. So there’s over 400 patients who will be treated with Camvia in that study, supplemented by supportive data from our very robust Phase 2 study, which has recently been published. So we have a very strong safety database.

Key things to look at, in that study from the safety perspective, are the incidence of neutropenia, incidence of infection, and incidence of graft-versus-host-disease. And we believe in that stem cell study because you prevent viremia, there will be fewer indirect adverse effects from cytomegalovirus and believe that Camvia should provide a safety advantage, if you like, or tolerability and safety advantage compared to the current standard of care.

There are multiple other safety endpoints that we’ll look at, which will need to be looked at but those are the key ones. Remember our key secondary endpoints include overall survival, which is obviously vitally important.

Brian Rye - Janney Montgomery

Could you remind me, are there any interim analysis built into these studies for either a safety or efficacy prospective?

Colin Broom, M.D.

No. There are no interim analyses participated or planned for these studies. We do however have an independent and unblinded safety monitoring committee that looks regularly at the safety data for both studies.

In addition to that we do have an independent endpoint committee that is blinded but that actually looks objectively at the data to adjudicate whether indeed there has been CMV disease. The endpoints for CMV disease are pretty robust, however, so one doesn’t anticipate losing many patients in that independent review, but no interim analyses.

Operator

Your next question comes from Meg Malloy - Goldman Sachs.

Meg Malloy - Goldman Sachs

Just want to follow-up on the experience you’ve had in the market in terms of what clinicians are typically understanding as severe disease and how that might differ from what you anticipate in the guidelines?

Daniel B. Soland

So I think it’s just a function of it being clearly described. I think obviously many practicing physicians think that they know by just looking at the patient. And most of the time, they’re not doing a culture on the strain, but I think with the new guidelines, we have something clear. It should be easier for the average practicing physician to make an assessment.

Colin Broom, M.D.

We had number of advisory boards and even amongst the experts when we asked them what severe disease is there’s no consensus. Nobody knows, but generally when you talk about severe disease, what they think of is a patient who is near to death’s door. They look sick. They’re bad, so but there has been no consensus around that, even amongst the opinion leaders.

One thing that’s very important about these guidelines is an objective definition of severe disease that isn’t complicated by clinical observation. And that objective test is a white blood cell count of 15,000 or above, so it is a simple test. The other aspect is if creatinine levels, that’s an indication of dehydration or liver impairment, if that goes up by 50%, is the other component, potential component of that definition, a very clear objective and a simple blood test.

If you use that criteria, when you look at the most recent large clinical study that’s been done, which is the study of [inaudible] in the US, about two-thirds of the patients in that study would be classified as severe. So this is a much larger potential population than currently is in the mindset of most treating physicians and experts.

Meg Malloy - Goldman Sachs

And do you think that having this new guidance would have an impact in terms of hospital formulary decisions as well?

Daniel B. Soland

Obviously, we think that it’ll be easier for physicians to prescribe Vancocin in the hospital and also for the patient to leave the hospital with a Vancocin prescription.

Colin Broom, M.D.

And these guidelines are very important. Anti-infective guidelines are adhered to. It’s not like other therapeutic areas where we take it under advisement. Anti-infective guidelines are adhered to and usually very well enforced. Of course, it takes time to get them out there.

Meg Malloy - Goldman Sachs

Do you think there has been any relaxation in terms of some of the concerns that used to be out there in terms of developing resistance to vancomycin?

Colin Broom, M.D.

There were concerns around as it were keeping vancomycin, oral vancomycin in reserve. And one of those, Meg, was concern around it’s an outstanding antibiotic, and you don’t want to run the risk of increasing resistance to it. However, we have very sick patients who are near to death with severe disease. So that has been a hurdle previously for prescribers that has been inappropriate and has been too high.

These guidelines set to reduce that hurdle and use Vancocin the way it should be used, to treat patients appropriately. So this concern around potential resistance has now and will fade as these guidelines come into use. This is not a concern anymore. It’s all a matter of benefit-risk.

Operator

Your next question comes from Thomas Wei - Piper Jaffray.

Thomas Wei - Piper Jaffray

On the Camvia filing strategy, I’m still a little bit confused about what precipitated this change in the filing strategy. And Vinnie, you mentioned in response to Rachel’s question, but can you just say have you specifically discussed this change with the FDA and the EMEA and they’ve agreed that you can file with the single trial in stem cell transplant?

Vincent J. Milano

Yes.

Thomas Wei - Piper Jaffray

And the way that the guidance documents read would suggest that if you are going to file with a single trial, you usually need to have a P value on the primary endpoint of your study of .01 or less. Does that apply to you in this case and can you remind us what the powering assumptions are for the stem cell transplant trial?

Robert B. Pietrusko

As far as the guidance goes, it’s not a specific P value. It has to have robust data. So in other words, all the parameters have to be going in the right direction. So in other words, if there is a P value of .051, and you had a second study where the P value was .49 that may be more favorable.

However, if you have one study where it was just above that value and the other parameters were not in the same direction that could be problematic. However, with a single study, if you meet your primary endpoint and the secondary endpoints all go in the same direction and it’s robust and the robustness is not necessarily defined by specific P value.

Vincent J. Milano

And I think, too, Bob, the point about the Phase 2 study?

Robert B. Pietrusko

Yes, and the other part of that is our Phase 2 data were very strong and were considered robust, and that was recognized by the FDA and the other regulatory authorities as we go forward in saying that that particular study is very supportive of the next Phase 3 study that would be submitted.

Thomas Wei - Piper Jaffray

And can you just remind us what the powering assumptions are for the CMV disease endpoint in the stem cell transplant trial?

Colin Broom, M.D.

Yes, Thomas, the assumptions that we used to power the stem cell study included the disease rate in the control standard of care arm of 9%. However, based on our analysis, we believe, and the information in the public domain but also access to databases, we believe it’s probably more like 10%, but we were conservative and marked it down to 9%.

In the maribavir arm, our assumption is that it will be around 3%, so that was used to produce 80% power, which actually gives you about 500 or so patients. We increased the sample size based on, because we knew we wanted to do some protocol analyses, not as a primary endpoint but within the protocol, so we did increase that target number to 613.

Operator

Your next question comes from Stephen Willey - Thomas Weisel Partners.

Stephen Willey - Thomas Weisel Partners

Can you talk about what’s going on in Europe a little bit, maybe in terms of where we are with headcount, what percentage of G&A spending is being allocated over there, and then maybe just elaborate on if you have any early plans in terms of your Camvia strategy over there?

Vincent J. Milano

So let me take the first couple of parts of that question and then maybe Dan can elaborate on how we’re working together globally on the Camvia launch preparations and actually development as well. There’s less than 10 people in Europe today on the ViroPharma team, and it’s a small percentage of G&A frankly and R&D as well, because there’s some development folks over there, so it’s a very small percentage of our business in 2008.

Daniel B. Soland

Part of the attractiveness of the transplant opportunity in Europe is that structurally it’s very similar to the US in the fact that you have a very small number of centers that do 80% of the overall transplants. So the size of your commercial infrastructure is very limited.

And as a follow on to that, most of the messaging, the marketing messaging and the development of the marketing campaigns, is going to be very similar between the US and Europe. There will be, when you get down into individual countries, some differences, but we’re able to do this globally, and so it’s a very efficient commercial infrastructure that’s required to do both US and Europe, and that’s really the attractiveness.

Stephen Willey - Thomas Weisel Partners

So the dynamics of each of the markets are fairly similar.

Daniel B. Soland

They’re more similar than they are different, except I would say with the exception in Europe, once you are licensed then it’s necessary to get reimbursed for your product and to get pricing for your product. And the level of data that’s needed on a country-by-country basis is more significant than what is needed in the US. But that work is underway and has been underway for probably six months.

Operator

Your next question comes from Yale Jen - The Maxim Group.

Yale Jen - The Maxim Group

First one is that the pace of patient enrollment for the solid organ or for the liver transplant, do I anticipate that will be the similar overall to that of the stem cell transplant study?

Colin Broom, M.D.

Obviously we’re earlier in the stage of this study. We announced, as I mentioned earlier, seeing it ramp up. The number of centers are similar but the number of available patients are somewhat lower than in stem cell so whilst I expect to see the overall profile enrollment increasing momentum as you get later in the study, the numbers will inevitably be less.

Vincent J. Milano

Which is our target.

Colin Broom, M.D.

Which is our target, so that’s also, remember, 348.

Yale Jen - The Maxim Group

Since you reiterate your revenue guidance for the year for Vancocin sales, just curious whether you have say increasing confidence on, as for the revenue, is not at risk. Do you see it or how is your sentiment feels for that?

Vincent J. Milano

So Yale, if you’ll allow me the latitude to interpret your question, you’re asking the OGD question. As Rich mentioned in his prepared comments, our guidance assumes that Vancocin remains exclusive for 2008 and for all the reason that we’ve discussed in the past, we do remain confident that for patient safety, science, process and all the arguments that, I’m sure, many if not all of you on this call have read and heard, we still remain confident that the FDA wants to do the right thing. That patient safety is of vital importance to them and we’ve raised serious, meaningful, important questions on the topic of the approach of not having in vivo bioequivalence tests as part of their solution for generics. So our confidence remains that Vancocin will remain exclusive for 2008.

Operator

Your next question comes from Jason Kolbert - SIG.

Jason Kolbert - SIG

I wondered if you could touch on what the standard of care is for treating solid organ transplants in Europe and how that differs from the US.

Colin Broom, M.D.

Jason, in terms of CMV prophylaxis, it’s very similar between the US and Europe. These populations of physicians and transplant surgeons are very, very close in terms of their adherence to practice.

If I was to generalize, however, I would say that Europe there’s even less prophylaxis done as standard of care. Sometimes even the highest risk patient population is to observe, take blood samples once or twice a week and only treat when viremia occurs. So I’ve often said it’s a bit like closing the stable door after the horse has bolted. So a little bit more conservative in Europe, but generally, generalizing, very similar.

Vincent J. Milano

So ladies and gentlemen, we are finished with our call here. We appreciate your patience and interest in the call today. As you hopefully have heard from us, we’re very excited about the things that are in front of us for 2008 and beyond and we look forward to the next time that we speak. Thank you and have a great day.

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