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Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX)

Q2 2012 Earnings Call

August 8, 2012 8:30 am ET

Executives

James F. Oliviero – Chief Financial Officer

Ron Bentsur – Chief Executive Officer

Analysts

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

Jonathan Aschoff – Brean Murray Carret & Co.

Charles Duncan – JMP Securities

Michael King – Rodman & Renshaw, LLC

Luca Pancratov – Roth Capital Partners

Ed Arce – MLV & Co.

Stephen Willey – Stifel Nicolaus

Operator

Greetings, and welcome to the Keryx Biopharmaceuticals’ Investor Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded (Operator Instructions).

It is now my pleasure to introduce your host, James Oliviero, Chief Financial Officer for Keryx Biopharmaceuticals. Thank you, sir. You may begin.

James F. Oliviero

Thank you. Good morning, and welcome to our conference call regarding Keryx Biopharmaceuticals’ Second Quarter 2012 Financial Results. I’m James Oliviero, Chief Financial Officer at Keryx, and I welcome you to our conference call today. Following our Safe Harbor statement, I will provide a brief overview of our financial results, and then turn the call over to Ron Bentsur, Company’s Chief Executive Officer, who will provide the business update on the Company.

Before we begin, I would like to remind everyone that various remarks that we make about our future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Keryx cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated.

Factors that may affect Keryx Biopharmaceuticals’ operations include various risk factors and uncertainties that can be found in our SEC filings. This conference call is being recorded for audio rebroadcast on Keryx’s website, keryx.com, where it will be available for the next 15 days. All participants on this call will be in listen-only mode.

Now I’d like to briefly discuss the financial results for the second quarter ended June 30, 2012 as well as the Company’s overall financial condition. Our financial results were released yesterday evening and can be viewed on the Investor Information section of our website at keryx.com.

At June 30, 2012, the Company had cash, cash equivalents, interest receivable and investment securities of $27.2 million, as compared to $39.5 million at December 31, 2011. Of note, during the second quarter of 2012, we received an award of approximately $1.5 million after fees and legal expenses, resulting from a FINRA arbitration against a broker-dealer registered with the SEC.

The net loss for the second quarter ended June 30, 2012 was $1.5 million, or $0.02 per share, compared to a net loss of $3.1 million, or $0.05 per share for the comparable quarter in 2011, representing a decrease in net loss of $1.6 million. The second quarter ended June 30, 2012 included a non-cash extraordinary gain of $2.6 million related to the write-off of contingent equity rights liability following the termination of the license agreement for KRX-0401, and the $1.5 million arbitration award included in interest and other income, net, which I previously discussed.

Other research and development expenses for the second quarter ended June 30, 2012, decreased by $2.6 million, as compared to the second quarter of 2011, primarily related to the termination of the KRX-0401 clinical development program; the second quarter ended June 30, 2011, included license revenue of $5 million related to a milestone payment from our Japanese partner for Zerenex JT/Torii for their commencement in April 2011, of the Phase III clinical program in Japan.

The net loss for the six months ended June 30, 2012 was $10.6 million, or $0.15 per share, compared to a net loss of $9.5 million, or $0.15 per share, for the comparable period in 2011, representing an increase in net loss of $1.1 million. The six months ended June 30, 2012 included the $2.6 million non-cash extraordinary gain and the $1.5 million arbitration award I previously discussed. The six months ended June 30, 2011 included the $5 million milestone payment from JT/Torii.

As I discussed on the last conference call, on May 4, 2012, the Company executed a License Termination and Technology Transfer Agreement with Aeterna Zentaris, whereby the license agreement for KRX-0401 or perifosine was terminated, and in exchange for the transfer of the U.S. IND, development data, IP and contracts to Aeterna, Keryx will receive a royalty on future net sales if any, of perifosine in the U.S., Canada and Mexico. Zentaris has assumed all costs, related to the Perifosine program going forward.

In terms of our financial guidance for the remainder of 2012, we expect the cash burn rate to remain well control at approximately $4 million per quarter due to the pending completion of the Zerenex Phase III clinical program under the SPA in the fourth quarter of this year, and the preparation for our expected NDA filings in the first quarter of 2013. We believe that our financial position remains strong and that our cash will be sufficient to take us well beyond the potential NDA filings for Zerenex and hyperphosphatemia for dialysis patients.

I’ll now turn the call over to Ron.

Ron Bentsur

Thank you, James and good morning everybody. In the second quarter, all resources were allocated towards Zerenex, as we continue to focus on the pending completion of the long-term Phase III study and the anticipated NDA and MAA filings, which will follow suit.

We’re also becoming increasingly intrigued by the drug’s potential in the pre-dialysis or chronic kidney disease setting, not just as a phosphate binder, but also as an oral iron supplement. I will elaborate on this later.

I’ll briefly remind everyone that our Phase III program for Zerenex in end-stage renal disease on dialysis is being conducted pursuant to a special protocol assessment or an SPA, and is comprised of two studies, a short-term Phase III study, which was successfully completed in late 2010, and an ongoing long-term Phase III, 58-week safety and efficacy study, which will be completed in October of this year with top line data expected by year-end of this year.

In this long-term Phase III study, 441 end-stage renal disease patients on dialysis were enrolled and randomized 2:1 to receive Zerenex for an active control. Patients are allowed to receive Renvela and/or PhosLo in the active control group, and this would provide for head-to-head comparisons of Zerenex versus the leading drugs on the market today in terms of efficacy, pill burden, safety, and also in terms of iron parameters.

I would like to share with you the reasons as to why we’re very excited about the Zerenex opportunity. What is particularly intriguing about the Zerenex program is first the visibility that we already have into the drug’s activity in the Phase III study. This visibility is by virtue of the two short-term Phase III studies, which have already been successfully completed. One was completed by us here in the U.S. and the other was completed in the second quarter in Japan by our partner JT/Torii. We believe that these two positive Phase III outcomes significantly enhance the probability for a successful outcome in the ongoing long-term Phase III study.

Moreover, there have been several Data Safety Monitoring Committee meetings conducted to-date in the ongoing long-term Phase III study with the most recent one conducted several weeks ago. the conclusions of all the DSMC meetings were unremarkable and that the study should continue as planned and particularly now as we head towards the home stretch, this is of course reassuring.

We know that many of you share our belief that the probability of clinical and regulatory success for Zerenex is high, but you may be struggling with the market potential of Zerenex aim its bundling and the pending introduction of generic Renagel/Renvela expected in the second half of 2014. We believe that these concerns are causing the Zerenex opportunity to be overlooked and misunderstood by many.

As I did on the last quarterly investor call, I will go through our thoughts on potential market share and positioning in detail in order to highlight the key points for people to think about as they try to assess Zerenex’s market potential in dialysis in the U.S. and ex-U.S.

Let’s all keep in mind that the market for phosphate binders is approaching $1.5 billion globally and growing. The growth stems from the increase in dialysis populations worldwide with particularly rapid patient growth expected to come from the emerging markets as their medical infrastructures become more modernized and accessible.

As many of you now, there are three main classes of phosphate binders currently on the market: calcium-based PhosLo, polymer-based Renagel/Renvela, the market leader and lanthanum-based Fosrenol. Many patients in the U.S. will start-off on a calcium-based binder, because it’s already generic. However, because of calcification or hypercalcemia associated safety risk, most patients will typically be switched off to Renagel/Renvela within a relatively short period of time. While many patients can stay on Renagel/Renvela for long period, there is always going to be attrition and rotation amongst patients on Renagel/Renvela. This attrition and rotation is due to patient compliance, side effects, pill burden, patient fatigue or a combination of factors.

Fosrenol is believed to be the third line phosphate binder in the U.S. and Europe. it is a chewable and has the risk of lanthanum accumulation. Hence it has two perceived negatives. yet it still sells over $325 million annually. Renagel/Renvela going generic and bundling in the U.S., which are both expected in 2014, will not change the basic need for an additional phosphate binder. Certainly of one with no safety overhangs to address at a minimum the patient attrition and rotation.

it is also important to remind everyone that bundling does not apply in Europe and Japan and the generic Renagel/Renvela is not an expected immediate threat in these two regions. Therefore, the two out of the three biggest markets in the world for phosphate binders are currently unencumbered by these concerns and we believe also represent tremendous potential for Zerenex. We do believe, however, that Zerenex has the potential to become the phosphate binder of choice in dialysis, well beyond the base case of capturing the Renagel/Renvela patient attrition and rotation.

Beginning with convenience and compliance, we believe that Zerenex’s potential for a lower pill burden and what appears to be very good tolerability observed thus far, both could play a key role going forward. As many of you now, we’re currently using a one gram caplet formulation of Zerenex, and we plan to launch with this formulation.

that said, at our recent analyst day in June, we showcased our 1.3 and 1.5 gram caplet formulations of Zerenex, and we intend to introduce those in the future clinical trials, and this should ultimately further solidify the pill burden, which we believe we will have. Incidentally, we have prepared the 1.3 gram formulation to be identical in size to Renvela.

And of course, very importantly, we believe that if we see that Zerenex, an iron based phosphate binder does in fact demonstrate increases in the iron storage parameter such as Serum Ferritin and TSAT and in turn demonstrates an even modest IV iron and/or ESA sparing capability, it could command very significant market share and possibly even market leadership. We’re certainly not oblivious to the generic Renagel/Renvela and bundling issues that are on the horizon. But we believe that it’s somewhat exaggerated, and that with a competitively priced Zerenex, the economic case for the drug is very compelling.

Concurrently with our development of Zerenex for the dialysis setting, we’re increasingly optimistic about the drug’s potential in the pre-dialysis setting, also referred to as CKD stages 3 and 4. Many nephrologists will tell you that they would like to treat increases in serum phosphorus earlier rather than later. They believe that their potential clinical sequelae to not treating serum phosphorus in CKD stages 3 and 4.

Additionally, iron deficiency anemia in CKD is also extremely prevalent. In fact, it’s believed that the number of CKD stages 3 and 4 patients in the U.S. alone who also suffer from iron deficiency anemia exceeds 1.5 million. This is obviously a very sizable patient population, out of which very few receive proper treatment.

On the face of it, one would think that the treatment of iron deficiency anemia in pre-dialysis should be similar to that of the ESRD patients on dialysis. However, in reality, the use of ESAs and IV iron in the CKD setting is very limited for a number of reasons.

One, the FDA warning label that EPO represents potential cardiovascular risk in CKD has significantly reduced the use of EPO in CKD. And two, CKD treatment settings, which are predominantly doctors’ offices as opposed to dialysis clinics, are ill-equipped and/or lack the facilities and staff to administer IV iron type drugs. So, many of the patients simply are left either untreated or eventually referred to a hospital or even a hematologist to receive IV iron and/or EPO injections. Consequently, there are many CKD patients suffering from iron deficiency anemia were significantly underserved, and since it’s a condition for which there are no oral agents approved, we believe this represents a very substantial unmet medical need.

So where do we think Zerenex can come in? While the EMA in Europe has provided us with a roadmap for getting Zerenex approved in the EU in CKD as a phosphate binder, and in due course, we intend to pursue approval in CKD in the EU based on our agreement with the EMA, the FDA to-date has not approved phosphate binders in the CKD setting.

The FDA views serum phosphorus lowering as important, but not important enough to warrant approval in pre-dialysis. We believe that Zerenex could be come the only phosphate binder to offer a two-pronged approach to managing this indication. One is binding to phosphate in order to lower serum phosphorus, the other by virtue of its ferric composition and the high concentration of ferric iron in every caplet to potentially address the iron deficiency anemia that many of these patients suffer from. We believe that this potential approach in CKD represents a very significant market opportunity with no bundling or generic Renagel/Renvela overhang.

We’re currently working diligently with several top KOLs to design a pilot study that will test Zerenex’s utility in the pre-dialysis setting as both a phosphate binder and an oral iron deficiency anemia agent. We envision that such a study will provide us with hopefully important and convincing data with which to lay a path forward towards a regulatory trial in CKD in the U.S. But at the same time a study that is financially manageable such that it will not require us to raise additional capital in order to complete the study while also reaching all of the other expected milestones for Zerenex. We expect to commence this pilot study in CKD by year-end.

To recap the expected timelines for Zerenex, we expect to complete the Phase III long-term study in dialysis in October of this year with top line data expected by year-end of this year. We expect to file U.S. NDA in the first quarter of 2013, and simultaneously with our U.S. NDA filing, we plan to file the MAA in Europe as well.

With regard to Japan, our Japanese partner for Zerenex, JT/Torii, anticipates filing their equivalent of an NDA in Japan also before the end of the first quarter of 2013. The NDA filing in Japan will trigger a high single-digit $1 million milestone payment to the company.

Hopefully this gives you a sense as to why we’re excited about the Zerenex opportunity and now we have been diligently pursuing the value proposition, which we believe Zerenex represents. Importantly, we’re also operating with a well-controlled burn rate, and we believe that our current cash will be sufficient to take us well beyond all of these milestones that I mentioned.

With that, let’s turn it over to Q&A. Thank you very much.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Matthew Kaplan of Ladenburg Thalmann. Caller, please proceed with your question.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

Hi, good morning guys.

Ron Bentsur

Good morning.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

Congrats on the progress.

Ron Bentsur

Thank you.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

A question about the ongoing long-term Phase III study, can you give us a sense? And you did a little bit in your prepared remarks in terms of how the study is going and what you’re seeing in it? I guess in particular attention to safety. And obviously are you getting any sense in terms of the levels of iron storage changes? Do you get to see that or you still blinded to that?

Ron Bentsur

We are still blinded to the iron parameters. All we can say is that, the feedback that we’ve been getting from investigators and also from patients has been extremely positive. And in fact, that has prompted us to provide the one year compassionate extension program to the patients who complete the study and that is something that I also mentioned at the Analyst Day that we conducted in June. This extension program is not a regulatory requirement and we decided to do it simply, because we were receiving feedback from investigators and patients that they want to stay on the drug for as long as possible. So we thought it was the right thing to do.

Regarding safety, obviously the data points that we have are these the DSMB meetings that were conducted and the fact that the dropout rate so far has been very low, certainly relative to what we've seen in packaging inserts as it relates to the long-term studies of our competitors. So when you combine those two facts together, I think on the safety front we are pretty encouraged that there are no safety signals to speak of at the moment.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

And going back to some interesting strategy in chronic kidney disease market indication, does Japan Tobacco, do they have JT/Torii, they have a study ongoing in that indication right now in that patient population?

Ron Bentsur

Yes, they do. They are very close to completing a CKD study of their own.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

And when should we expect a readout on that?

Ron Bentsur

We expect that study to be completed within the next two to three months. But again, I don’t know what their PR strategy around that is going to be, and obviously we can’t control that.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

Do you expect them to file for that indication in Japan based on that data?

Ron Bentsur

I would imagine that they would, although I don’t know for sure.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

And in terms of your pilot study, is it going to track what – I guess depending on the outcome, what JT/Torii has done in their study, their Phase III study in CKD.

Ron Bentsur

More or less, again, I don't want to go on to too much detail regarding the design, because it's still work in progress. But I think it will be fairly similar to basically what they are doing in Japan.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

And then another question, and then I’ll jump back in the queue, can you give us an update in terms of your partnering discussions, I guess particularly in Europe? Where that’s going?

Ron Bentsur

Yes, I mean, we are in dialogue with several companies and again the one thing you can never predict is timelines. And obviously you are talking to very big companies and they all differ from one another, and their procedures are different. One thing I will say is that, with all these data points coming out for us, obviously with the pending completion of the long term study here in the U.S. and some of the studies in Japan as well, we feel that that data is going to be strong and positive on both sides of the ocean. And therefore, those are very important inflection points.

So while we’re going to be obviously very pragmatic about business development, and if any offer comes across our desk before the data points, we obviously will seriously consider it. But the fact of the matter is, there is really no urgency right now to do a business development deal, because we’re going to have all these very important data points and the subsequent NDA filings. So all of those we believe are going to be very important value creation types of milestones.

Matthew Kaplan – Ladenburg Thalmann & Co. Inc.

Okay, fair enough. Great, congrats in the progress again, and look forward to seeing the data I guess in the fourth quarter.

Ron Bentsur

Thank you.

Operator

Our next question comes from Jonathan Aschoff from Brean Murray. Caller, please proceed with your question.

Jonathan Aschoff – Brean Murray Carret & Co.

Thanks. Good morning, Ron.

Ron Bentsur

Good morning.

Jonathan Aschoff – Brean Murray Carret & Co.

I was wondering in addition to the CKD study from JT/Torii what else could we expect more sort of the timing of it and if they would allow you to be any clearer than you were in April regarding how much you can say about it.

Ron Bentsur

So the three studies that are ongoing in Japan that are going to be completed within the next two to three months. There are long-term study in dialysis, which is the last piece just like we’re doing here. They also did a short-term study and are about to complete a long-term study in dialysis. So it's the last piece that they need in order to file their NDA in end-stage renal business, so that’ one study.

The second one is the CKD study, which I alluded to in Matt’s question. That also is expected to be complete in the next two to three months. And finally, they are also doing a peritoneal dialysis study. Because in Japan, the regulator requires two separate studies for dialysis patients, standard dialysis and peritoneal dialysis. In the U.S., you don’t have to do that. So, they have to do a separate study for peritoneal to get an approval specifically for peritoneal. But keep in mind, peritoneal is only about 10% of the market anyway.

So, all those studies are going to be completed within the next few months. But one thing I can’t commit to is what their PR strategy is going to be around that, and obviously it’s out of our hands. So, hopefully, they will announce a successful completion of these studies and we will be able to talk about those studies and perhaps even more so, if they will allow us to share some data.

Jonathan Aschoff – Brean Murray Carret & Co.

At a bare minimum, you would be able to say the kind of things you said in April that it worked?

Ron Bentsur

We certainly hope so.

Jonathan Aschoff – Brean Murray Carret & Co.

Okay, thanks a lot.

Ron Bentsur

Thank you.

Operator

Our next question comes from Charles Duncan of JMP Securities. Caller, please proceed with your question.

Charles Duncan – JMP Securities

Hi, guys. Thanks for taking my questions. I know that Ron, you don’t really want to talk about the CKD study that you intend to start by the end of the year. But you did refer to it as being capital efficient, so similar words. I’m wondering if you can provide us with any more detail on the design or kind of rough order of magnitude and then the costs.

Ron Bentsur

So, we’re looking roughly, then again, this is kind of broad strokes. We’re looking roughly to enroll 150 patients into probably a placebo control type of study and we don’t expect that a study like that will cost more than $3 million.

Charles Duncan – JMP Securities

Okay. That’s helpful. The other thing is, I’m wondering you’ve talked now for a couple of quarters and we’ve been doing diligence on this as well, regarding the market potential for Zerenex and its value proposition. I guess I’m wondering where you drive derive the greatest confidence. Is it through the literature? Is it through direct and recent feedback from KOLs? Can you characterize them if you have that, or is it through prospective commercial partner feedback?

Ron Bentsur

It’s probably a combination of all those to some extent. We do feel that Zerenex could be a very unique phosphate binder. Certainly, if we are able to repeat the iron story that we’ve seen in pretty much all the previously clinical trials that makes it, we believe a very unique from a value proposition perspective. And there are various strategies to basically try to attack the market penetration question and obviously we’re still thinking about that and what the best strategy would be.

But for example, one potential strategy could be – to be very price competitive and kind of make it a no-brainer for people to choose your drug, because it’s the only drug that can provide potentially these added benefits of increases in iron storage parameters and obviously, possibly the lowering of [IVR and DSA] use. That’s one strategy that one can think of and obviously there are other strategies as it relates to premium pricing and obviously trying to split the economic benefit. But again, we’re still trying to get our hands around where we think we may want to go with that.

Charles Duncan – JMP Securities

Okay.

Ron Bentsur

But in terms of where we think that the drug can sit in. And we want to make this truly a drug where people will – that will change a perception of the way people think about phosphate binders. We want to give them something more than just phosphate binding.

Charles Duncan – JMP Securities

That makes sense to me. And it also makes sense that you might pulled off and trying to value the asset or do partnering until you see that data. But that said, I’m just wondering what your thoughts are now with regard to the U.S.? Is this potentially something that you could introduce to the market yourself? And even before then do you intend to file an NDA by yourself or do you prefer to do that alongside a partner?

Ron Bentsur

So, we believe that and we’ve said it all along. What I’m about to say has not changed. We believe that a small company could market a drug like this on its own, gets into fact that the market is controlled predominantly by just a few players. DeVito, Fresenius and several others control the lion’s share of the market. So you don’t need massive sales forces to address a very fragmented market, it’s in fact a fairly consolidated market.

That said, I never said that that would be our first choice, and regarding your question on timing, whether we want to wait for partner until we file the NDA or not, we want to take an opportunistic approach. And like I said before, we want to be very pragmatic about it. But one thing I said today is that, we don’t feel that there is necessarily urgency to do something ASAP. Because we have all these pending milestones, which we believe can drive tremendous value. So, if something comes across before that, great and it makes sense. Obviously, that would be fantastic. But that doesn’t necessarily have to happen that way.

Charles Duncan – JMP Securities

And then my final question, I know I can review the transcript. But I’m wondering if maybe you or James can just run through the milestone payments that could come from JT over the course of the next, call it 12 months, 12 months to 18 months?

Ron Bentsur

Sure. So in total, there’s about $72 million left of milestones that we could potentially receive in the future. now in the next 12 to 18 months, we have upon their filing of an NDA in Japan, we’ll receive a high single-digit million dollar milestone. and they’ve already announced that they expect to file that NDA before the end of the first quarter of 2013, the first calendar quarter of 2013. and then when they receive PMDA approval that’s equivalent to the FDA in Japan, we’ll receive a lower double-digit million dollars milestone from JT/Torii.

Charles Duncan – JMP Securities

And typically, Japan takes a while, but do you think that there’s any chance sometimes they’re incredibly fast. Do you think there is any chance? Have they shared anything in terms of their strategy with regard to the timelines for regulatory approval in Japan?

Ron Bentsur

No, we’re assuming a 12 months review process.

Charles Duncan – JMP Securities

Okay, good. Thanks for the added color guys.

Ron Bentsur

Thank you.

Operator

Our next question comes from Mike King of Rodman & Renshaw. Caller, please proceed with your question.

Michael King – Rodman & Renshaw, LLC

Good morning, guys. Thanks for taking my question, I appreciate it. Apologies if the background of this stuff has been already out there Ron, but as you know, just still coming up to speed on the story. So with regard to a comparator to Renagel/Renvela, are you speaking about that in terms of the direct comparison during the randomized period or the open-label portion or both?

Ron Bentsur

No, it’s during the 52-week safety assessment period, because what happens after that in the four-week efficacy tail, is that only those patients who are on Zerenex during the 52-week safety assessment period, get randomized one-to-one to either stay on Zerenex or receive a placebo for four weeks. that’s that four-week tail that we had agreed to with the FDA. But the head-to-head comparison essentially occurs during the open-label period that the 52-week safety assessment period.

Michael King – Rodman & Renshaw, LLC

Okay, all right. Thanks for that. And then with regard to CKD, just maybe a couple of follow-up questions, what do you perceive to be the clinical benefit of using Zerenex in that patient population? Would it be related to phosphate reduction? Would it be related to improvement in iron parameters like TSAT and such? Is it kind of a combination of such things or what?

Ron Bentsur

Ideally, it would be both. we already know what it takes to get a drug approved for iron deficiency anemia in CKD. We need to show changes in hemoglobin. and we can certainly always consider doing that. But we believe that what makes this drug unique and possibly could provide it with substantial competitive advantages long-term is the fact that obviously, this is also a pretty remarkable phosphate binder. So, ideally we would test it, basically trying to kill two birds with one stone, if you will.

Michael King – Rodman & Renshaw, LLC

Right. And would you expect to get a specific claim for phosphate binding? Or would it just be sort of in the data – on the data chart that might be included? I mean, I know we’re hypothesizing.

Ron Bentsur

It would be certainly nice to get a claim that would be the goal, but keep in mind that the study that we’re doing now would be a pilot study. So we certainly don’t envision that this study that’s going to start by year-end to be a regulatory study.

Michael King – Rodman & Renshaw, LLC

Yeah. Now I understand, but I’m just trying to think about how I square the circle with your comments about doing these, I understand the pilot study that being capital efficient. But I’m just trying to think about, if you’re going to do a registration study, how that would be capital efficient, because that seems to me like it could be fairly expensive?

Ron Bentsur

Look, obviously it’s a little early to talk about the scope of potential regulatory type of a study. but typically again, this is kind of 20,000 feet, typically these studies would be 300 to 400 patients randomized study like that would probably cost around $10 million. But again, it’s not something in the near future.

Michael King – Rodman & Renshaw, LLC

Just with regard to JT/Torii, their CKD study, is that a study that could be used as supportive and is it conducted according to U.S. Good Clinical Practice?

Ron Bentsur

It’s certainly conducted based on good clinical practice. And it can certainly – it’s certainly and adequate and well-controlled study. The only difference is the necessity of the patients and the FDA may not necessarily recognize it.

Michael King – Rodman & Renshaw, LLC

Right.

Ron Bentsur

…as adequate and well-controlled study, but as a supportive study, definitely. But one thing I will say Mike is that we’re going to start this pilot in a few months, but keep in mind that our main foray right now is obviously to get the drug approved in dialysis. And once we have the approval in dialysis, a positive data from a pilot study can only do good for the drug. And obviously, any regulatory strategy beyond that will be determined at that point in time.

Michael King – Rodman & Renshaw, LLC

Right, right. Okay, great. And then finally with regard to manufacturing, we have announced about that, I’m just wondering are you squared away with your manufacturing supply and whatever validation needs to happen, is it happening, so that you can launch out of the same facility that provided your clinical product? Thank you.

Ron Bentsur

We’re validating the manufacturing facilities, and we’re scaling up. and one additional thing I mentioned about manufacturing and production is that we feel that with the cost of goods that we envision for the compound. we can be price competitive even with a generic Renagel/Renvela and that’s very important.

Michael King – Rodman & Renshaw, LLC

Right, all right. Thank you for taking my questions.

Ron Bentsur

Thank you.

Operator

Our next question comes from Joe Pantginis of Roth Capital Partners. Caller, please proceed with your question.

Luca Pancratov – Roth Capital Partners

Yes, hi good morning. Thank you for taking the question. This is Luca Pancratov in for Joe.

Ron Bentsur

Hi, good morning.

Luca Pancratov – Roth Capital Partners

Yes. So I have a question regarding one-year compassionate safety program. Could you speak please about the dosing of Zerenex caplets that you plan to use it for the study?

Ron Bentsur

So essentially, again this is a study just to reiterate that is not required for regulatory approval. This is something that we voluntarily decided to do, again, simply because we thought that ethically, it was the right thing to do, because many of the patients and the doctors wanted to stay with the drug. So, we feel that it’s a positive. And in terms of the dosing for the study, obviously, we’re going to start off with the 1 gram caplet formulation, which is what we have now. but in due course, we want to introduce the 1.3 gram and the 1.5 gram formulations that we already have prototypes for, into this compassionate extension. And therefore, get clinical experience with the 1.3 gram and the 1.5 gram caplet formulations whereby when the time comes, we would be able to introduce those into the market. and obviously, that could be very powerful in terms of further enhancing the pill burden advantage that we think we’re going to have regardless with the 1 gram caplet formulation.

Luca Pancratov – Roth Capital Partners

Thank you very much. Well, congratulations with the progress, and I’m looking forward to a steady readout by year-end.

Ron Bentsur

Thank you.

Operator

Our next question comes from Ed Arce of MLV & Co. Caller, please proceed with your question.

Ed Arce – MLV & Co.

Hi, Ron. hi, James. Thanks for taking my question. Just wanted to ask on the CKD pilot study, so you’ve said it’s probably going to be about 150 patients, less than $3 million in cost, I’m wondering about the timeline that you think it's reasonable, and do you think that you have developed the formulation prototypes sufficiently to be able to introduce those two new sizes for this pilot study.

Ron Bentsur

So for the pilot study, we don't necessarily believe that we want to introduce the 1.3 or the 1.5 into that setting. We want to introduce those formulations that in the long-term or in the compassionate extension program. In terms of the timeline or the treatment horizon in the CKD pilot study, again we’re still putting pen to paper. But it probably will be around three months treatment period something like that. So it will be a relatively quick type of litmus test to see what kind of – essentially what kind of data we can generate in CKD

Ed Arce – MLV & Co.

Okay. And I realize that you are coming up on some pretty important milestones here, and that’s important in terms of thinking about filing and beginning to prepare for commercial launch. But what preliminary activities have you started if any within that regard?

Ron Bentsur

Actually we’ve been doing quite a bit in terms of the NDA preparation front, as you know the clinical part of it is only one section. The other sections are obviously preclinical, tox, CMC, et cetera. So there’s been a lot of work on that front, basically trying to finalize all the missing pieces putting to dossiers in place, once the data is out, we want to be ready to file in the first quarter. And there’s been – the work that’s been done on that front has been quite extensive.

Ed Arce – MLV & Co.

Okay thanks,

Ron Bentsur

Thank you.

Operator

It appears, we have time for one more question. Our last question comes from Stephen Willey of Stifel Nicolaus. Caller, please proceed with your question.

Stephen Willey – Stifel Nicolaus

Hi, good morning guys.

Ron Bentsur

Good morning.

Stephen Willey – Stifel Nicolaus

Just going back to the JTT milestones, can you just remind us, how much of those of what’s remaining are actually tied to the end-stage dialysis setting, and how much of what is remaining are actually noncommercial based in nature?

Ron Bentsur

Well, after the high single-digit million-dollar milestone for the filing the NDA, and in the low double-digit milestone for first approval in Japan, it’s all sales-based milestones thereafter, so any sales and any indication would [play].

Stephen Willey – Stifel Nicolaus

Okay. And then just Ron maybe a bigger picture question just kind of as you look out to next year 2013, maybe give some color on what the company’s level of confidence right now with respect to getting it front of the FDA with the potential Advisory Committee meeting, and whether or not that would be a process, where you would look to maybe bring an additional help from a partner? Thanks.

Ron Bentsur

So again, we don’t know obviously what the FDA is going want to do in terms of the review process. They are, may or may not choose to put it in front of an Advisory Committee. We feel that with the level of KOLs that we have involved in the program with the investigators and basically the pedigree of the investigators that are involved. In particular, I’m speaking about, for example Dr. Julia Louis, who is the PI of the Phase III program in dialysis, and folks like that. These are people that FDA is very familiar with. They carry a tremendous amount of credibility.

So, I think we have the firepower, certainly necessary to get in front of the committee, if we have to. Again regarding partnering, we’re going to be opportunistic. I think, again we never said that commercializing the drug on our own would be our first choice. But like I said the few minutes ago, giving all these milestones that are just around the corner, there is really no urgency to do anything right now just for sake of doing the transaction. I hope that make sense.

Stephen Willey – Stifel Nicolaus

It does thanks.

Ron Bentsur

Thank you.

Operator

It appears no further questions at this time. I’d now like to turn the floor back to management for closing comments.

Ron Bentsur

Thank you. Thank you all very much for joining this morning, and we look forward to very eventful next few months, and again thank you for your support, and we look forward to interacting with you in the future. Thank you.

Operator

This concludes today teleconference. You may now disconnect your lines at this time. And thank you for your participation.

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