Penwest Pharmaceuticals Co. Q1 2008 Earnings Call Transcript

Penwest Pharmaceuticals Co. (PPCO)

Q1 2008 Earnings Call

May 2, 2008 11:00 am ET

Executives

Jennifer Good - President and CEO

Ben Palleiko - SVP and CFO

Analysts

Bert Hazlett - BMO Capital Markets

Ken Trbovich - RBC Capital Markets

Angela Larson - Susquehanna International Group

Larry Neibor - Robert W. Baird & Co.

Arthur Freedman - Freedman Assets

Wayne Rothbaum - Quogue Capital

Presentation

Operator

Good morning. My name is Matt and I will be your conference operator today. At this time I would like to welcome everyone to the Penwest First Quarter 2008 Financial Results Conference Call. The matters discussed herein contain forward-looking statements that involve risks and uncertainties which may cause the actual results in the future periods to be materially different from any future performance suggested herein.

For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, intends, potential and similar expressions are intended to identify forward-looking statements.

Important factors that could cause results to differ materially include risks relating to the commercial success of Opana ER including our reliance on Endo for the commercial success of Opana ER, and risks of generic competition; the need for capital; regulatory risks relating to drugs in development, including the timing and outcome of regulatory submissions and regulatory actions; uncertainty of success of collaborations; the timing of clinical trials whether the result of clinical trials will warrant further clinical trials; warrant submissions of an anticipation for regulatory approval of or warrant the regulatory approval of the product that is subject of the trial, whether the patient and patent applications owned by us will protect the Company's products and technology and prevent others from infringing it.

Actual and potential competitions and other risks as set forth under the caption risk factors in Penwest's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 17, 2008, which risk factors are incorporated herein by reference.

The forward-looking statements contained in this press release speak only as of the date of the statement made. Penwest disclaims any intention or obligation to update any forward-looking statements.

TIMERx is a registered trademark of Penwest. All other trademarks referenced herein are the property of their respective owners. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I'd now like to turn the call over to Jennifer Good.

Jennifer Good

Good morning, everyone. Welcome to our review and discussion of Penwest results for the first quarter of 2008. Joining me on the call today is Ben Palleiko, Penwest Senior Vice President of Corporate Development and Chief Financial Officer.

I'll begin by providing an update on progress the Company made during the first quarter of 2008 and outline our priorities for the balance of the year. Then we will then review the financial results for the quarter and provide our financial guidance for the full year. After our prepared remarks, we will open up the call to answer any questions you may have.

During the first quarter, we continued to make progress on multiple fronts. Let me begin with an update on Opana ER. When Endo released its earnings earlier this week, it reported quarterly sales for the Opana franchise of $40.3 million. This number includes approximately $10 million of stocking for the three new strings of Opana ER launched in the first quarter.

As a reminder, we are involved with Endo only on the extended release product in this franchise, which according to recent IMS numbers represents about 81% of the underlying prescription demand.

We are pleased with Endo's commitment to Opana ER. Opana continues to be a priority for its sales force and Endo has stated publicly its intentions to extend the brand through a lifecycle management plan that includes both patent prosecution and product development.

On the IP front, during the first quarter, we filed lawsuits against both Impax and Actavis for patent infringement in response to their generic filings and related paragraph 4 certifications against our Orange Book listed patents.

We believe that we are entitled to a 30-month stay under the Hatch-Waxman Act against Impax beginning on December 14, 2007, and against Actavis beginning February 14, 2008. Both patent litigations are in the discovery phase. In addition, Opana ER has a new dosage form exclusivity granted by FDA until June 22, 2009.

Importantly and parallel with the patent infringement litigation, Penwest and Endo continue to prosecute several additional patent applications related to Opana ER and hope to make progress on several applications this year.

As I have mentioned before, successfully prosecuting additional patents to protect Opana ER is a top priority at Penwest.

Finally, Endo made progress during the quarter toward securing a European partner for Opana. We believe that Europe offers an exciting market opportunity for this product and we will share equally in the proceeds and economic benefits of any deal that is signed.

Now let me turn to the progress we made on the three products under development in our own pipeline. Nalbuphine ER, a drug we are developing for moderate chronic pain completed a Phase IIa trial in the first quarter. We believe that the results of our developments to date supports the trends of the efficacy of Nalbuphine ER across multiple endpoints and patient population, and the drug appears to be safe.

In completing the data analysis of the Phase IIa trial, we believe we learned enough about Nalbuphine ER to move forward with a study designed for our Phase IIb trial. We expect to dose this trial for a three month duration.

We hope that if this trial is successful that FDA may accept it as a pivotal trial. We anticipate that this trial will use a flexible dose titration schedule similar to the trials Endo conducted on Opana ER. Our clinical team is working with pain experts to complete the design of the trial, and we will be prepared to dose this study in the second half of the year.

Given the cost of running pain trials, we are actively seeking a partner who may be interested in co-developing this drug. Our team has had several initial meetings in Europe. The timing of a partnership as well as the availability of our own cash will determine when this Phase IIb trial will actually begin. In the meantime, we are completing the planning and protocol for the study, so we are prepared to dose.

Moving to our next product under development, we believe that A0001, a molecule we license from Edison Pharmaceuticals could defeat defects in the mitochondrial respiratory chain pathway.

These defects are strongly associated with several orphan progressive neurodegenerative disorders that are both chronic and serious in nature, and there are currently no approved therapies for most of them. A0001 has received orphan drug designation from the FDA for the treatment of inherited mitochondrial respiratory chain diseases.

We completed the IND enabling toxicology studies in the first quarter. We had a productive meeting with the FDA recently in which we reached agreement on the requirements of the Phase I program. We plan to file an IND in the second quarter and begin dosing the first study of the Phase I program, a single ascending dose study in the third quarter this year. We expect results for this study by year end.

At the same time, our clinical team is developing the clinical strategy for this molecule. We are working with several of the thought leaders around the world in targeted orphan mitochondrial diseases.

There are very active patient advocacy groups and foundations for many of these diseases that we are currently spending a lot of time getting to know. The groups and foundations can be of significant help on many fronts, including making available an active patient registry to facilitate the recruitment of patients for trials, profiling the progression of the disease, and in some cases, may provide financial sponsorship for drug development work in their patient populations.

We are actively tapping into the expertise of these groups and looking to access available funds to ensure that A0001 is tested in multiple patient groups. We have also been actively working with our colleagues from Edison to identify an additional NCE that we are entitled to under our agreement.

We are excited about the scientific work going on around translational research and development in mitochondrial medicine. While there is still significant development risk, we believe that the science is sound and if successful, these compounds could provide therapy for diseases that today go untreated. Clearly these compounds still have a number of hurdles to clear from a development perspective, but if they are successful they offer an exciting opportunity.

Strategically I like this space or Penwest for several reasons, the opportunity for orphan drug exclusivity in certain patient populations; relatively small patient trials; the potential for priority review with FDA; and the potential to fulfill a significant unmet medical need. Therefore, the development of these compounds remains a priority among our internal programs.

In the first quarter, we also finished the formulation work on a compound we are developing for Parkinson's disease. In April, we completed the manufacture of clinical supply. We will be filing an IND during the second quarter and intend to dose a Phase I pharmacokinetic study over the summer with results expected in the second half of this year. We will share those results with you when we have them.

In 2008, we have to be very smart, aggressive and creative about managing the short-term needs of the business while creating long-term growth potential for Penwest. Clearly the two highest priorities are first, doing deals that generate additional cash and second, strategically investing that cash back into advancing the pipeline.

The deals include out licensing some of our pipeline products including Nalbuphine and Opana ER as well as out licensing our technology to partners. They also include, as I mentioned earlier, accessing the foundation money that may be available to advance A0001.

Progressing our pipeline products at a deliberate but paced tempo with our available cash is also critical for us this year. We are in a fortunate situation in that we should begin receiving royalty payments from Endo later this year.

I am very attuned to the concern of investors that we be responsible with this money and let a good portion fall to the bottom line. That is why we have chosen the pipeline we have, which I believe can continue to advance in a meaningful way with a reasonable R&D investment.

Depending on the timing and success of our programs, and our then current financial situation, we may not be able to develop all of these drugs or indications on our own. We will however try to retain the neurology based assets to provide a potential platform for growth. Because a lot of the spending is program driven, we can dial it up or down to match the amount we can afford to invest. These initiatives are a major focus for the entire senior management team this year, and we are working actively on each of these fronts.

I look forward to sharing the results of these efforts as we progress through the year. I am optimistic about our ability to execute on both of these fronts. We have assembled a strong team within the Company that is talented, focused and working hard to drive results.

I will now turn it over to Ben to discuss the financial results for the quarter and provide financial guidance for the year.

Ben Palleiko

Thank you, Jennifer, and good morning. We spent a great deal of effort in the first quarter reviewing our budgets and reducing our cash expenditures to position the Company to be able to fund operations well into 2009, and have a prudent cushion remaining based on our current cash balances and anticipated royalties from Opana ER.

These expense reductions have come from reducing headcount, cutting other operational expenses and adjusting some of the timing for our programs. As I review the first quarter results, I will also update you on our expectations for the remainder of 2008.

Because we implemented our expense reductions late in the first quarter, the actions I described a moment ago had little financial impact on this quarter's results. However, they will become more meaningful beginning with the second quarter, and we anticipate that our quarterly losses will be trending lower for the remainder of the year.

The net loss for the first quarter of 2008 was $10.3 million or $0.41 per share compared with a net loss of $7 million or $0.30 per share in the first quarter of last year. The increase in the loss primarily reflects sponsored research payments to Edison Pharmaceuticals in connection with our collaboration agreement, and a $1 million loan to Edison that was made and fully reserved, as well as increased development expenses, increased stock-based compensation and reduced royalty revenues.

Total revenues for the quarter were $739,000 compared to $842,000 in the first quarter of 2007. These revenues continue to be derived primarily from our royalties on sales by Mylan Pharmaceuticals of Pfizer's 30 milligram generic version of Procardia XL, although an increasing portion of our revenues are derived from sales of bulk TIMERx to Endo Pharmaceuticals for use in Opana ER.

Based upon sales of Opana ER reported to us by Endo for the first quarter, an additional $7.3 million was applied against the royalty holiday during the quarter leaving approximately $14.1 million of royalty holiday remaining.

We continue to anticipate that Endo will begin paying us royalties on sales of Opana ER in the second half of 2008.

Selling, general and administrative expenses in the first quarter were $4.3 million compared to $3.7 million in the year-ago period. This increase was due primarily to the full reserve we established on the $1 million loan to Edison, partially offset by lower facility related costs compared to the first quarter of 2007.

Our expenses in this area should be lower for the remainder of the year. I currently anticipate our quarterly SG&A spend to be closer to $3 million with full year SG&A spend in the range of $13.5 million to $14 million which includes the impact of the $1 million reserve for the loan.

Research and development spending for the first quarter was $6.4 million compared to $4.4 million in the first quarter of last year. The increase is due primarily to increased spending on A0001, payment to Edison for sponsored research, and increased stock-based compensation costs partially offset by lower expenses on other early stage candidates.

Our full-year R&D spending should be in the range of $24 million to $25.5 million, although we may make adjustments to this level throughout the course of the year depending upon our cash situation and our ability to fund these expenses with other potential revenue sources which I'll describe further later.

As of March 31, 2008, we had cash and investments of $37.9 million compared to $23 million at December 31, 2007. During the quarter, we completed our previously announced pipe transaction which resulted in net proceeds to the Company of approximately $23.1 million.

To further bolster our cash position, we are actively pursuing other revenue sources. Jennifer has already touched on these, but just to reiterate, we are supporting Endo's efforts on an Opana ER international partnership, and pursuing a partnership for Nalbuphine ER and foundation funding for A0001.

We also are in active negotiations on several drug delivery partnership arrangements and expect to close at least one deal in the second quarter. Some of the cash from these sources may be retained to increase our cash balance. However, we will likely use some of this cash to accelerated timelines on our development programs.

The end result is that our planned cash burn for the remainder of 2008 is $22 million to $24 million which includes roughly $2.6 million related to debt interest and repayment.

We will aggressively manage our expenses in order to end 2008 with at least $14 million to $16 million in cash which we believe is a prudent level given our current revenue expectations.

As I mentioned, we anticipate beginning to receive royalty payments from Endo in the second half of this year which will begin to offset our spending from that point onward. As a result, we expect that our projected end of the year cash balance combined with the royalty payments we currently anticipate receiving, will enable us to fund our ongoing operations into at least the second half of 2009 and possibly beyond. And again, with a prudent cushion remaining, while we continue to watch the growth of Opana ER sales over the next several quarters.

With that, Jennifer and I would now like to open the call up for any questions you may have. Matthew?

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line Bert Hazlett.

Bert Hazlett - BMO Capital Markets

Thanks for taking the question, good morning everybody. Could you just maybe elucidate a little bit better the status of the Opana ER discussions in Europe? And then could you discuss the terms that you're looking for with regard to partnering for Nalbuphone as well? Thanks.

Jennifer Good

Bert, the status in Europe, I mean it is making progress. I can't go into a lot of detail. I mean Endo has got active negotiations going on with a couple of parties; they are working through contract terms. I think it's getting close. There's no issues that I'm aware of that could derail it, it is just taking time. But I think it definitely made progress through the first quarter.

As far as the terms on Nalbuphine, we actually have it -- we are not at the point of talking terms with anybody yet. We're really out more soliciting interest. I think we're pretty open about how that deal looks with somebody.

I think our obvious need is to have a significant amount of that to be study funded, either through sort of their upfront involvement or somehow involved with that trial. But other than that, we are not really too fixated on anything. We just need to obviously minimize our cash into that program in '08.

Bert Hazlett - BMO Capital Markets

Okay. And just on another subject, Ben mentioned I believe the drug delivery partnerships as a potential event in 2008. Could you just talk a little bit more about that, what you mean by that? Are you looking for additional technologies or what is the extent of what you are looking for there?

Ben Palleiko

Yes, it's actually a revenue generator, Bert, as opposed to something you would spend money on. Last year we decided that we wanted to reinvigorate the efforts on doing licensing agreements where people get access to TIMERx technologies or maybe other ones we have for use in lifecycle management of existing products. And so what we've done is we've had our BD team out there talking to a number of companies about doing various different projects.

We signed one last year, as you may recall that was announced where we're doing am extended release version of an existing approved drug. And we continue to be very active in calling on companies and seeking other deals like this to set up. So currently we have several, three or four that are in active negotiations where folks have a need for an extended release version of the drug and they want us to license them TIMERx. And so what -- we get paid upfront in milestones as it develops and we also do the formulation work and then they take and do the clinical trials on them.

Bert Hazlett - BMO Capital Markets

Okay, thank you.

Operator

Nest question comes from the line of Ken Trbovich.

Ken Trbovich - RBC Capital Markets

Good morning, thanks for taking the questions. I guess I'd like to start, Ben, if you guys could go back, I think on the revenue breakout, you had research and development reimbursements. Was this related to work you are doing for Endo?

Ben Palleiko

No. This is related to the -- again the drug delivery partnership that we signed last year. So–

Ken Trbovich - RBC Capital Markets

Okay. And I guess in terms of any ongoing work that you might do with Endo, would there be any studies, and I guess maybe it's a more broadly phrased question I'm curious about with regard to Opana ER. Are there any planned studies as it relates to determining to what extent the existing technology reduces the potential of the product to be abused that you might later be able to go back and incorporate into the pharmacology section of the label?

Jennifer Good

Ken, I will take that. You know we've done work over the years on that. We've actually got patents that are being prosecuted now. TIMERx has very similar properties to a lot of these gelling things that are being pursued by -- in Ramoxy and also OxyContin's latest gelling.

Endo chose not to sort of leverage that in the first version of Opana just because of the state of the world at that time. So that's obviously an option that sits out there. As far as speaking specifically to Endo's lifecycle management plans, I will stay away from that. I will leave that to them to do.

Ken Trbovich - RBC Capital Markets

Okay. As it relates then to Nalbuphine ER, I know obviously you've opened this up to European discussions. Is there any reason if it appears as though those discussions don't progress the way you hope that you might also then consider U.S. partnerships?

Jennifer Good

No, there is no reason. As a matter of fact, we've had U.S. pain companies reach out to us showing an interest. We've also had some of the European folks interested in worldwide deals. So as I mentioned to Bert, we are really not fixed on any certain deal at this point. I think we are trying to see interest and sort of evaluate what the best partner is to move that program forward. So, no, there are no limitations around that.

Ken Trbovich - RBC Capital Markets

Okay. And I guess maybe a different way of asking the question, is there any reason to think that the program would be stalled if you haven't found a partner on the European side? Would you essentially go ahead and concede U.S. rights in order to advance the program or would you sit on it and let it just not advance at all?

Jennifer Good

No, we wouldn't sit on it. I think importantly because we're not trying to be a pain company, the most important thing for us is that program is moving along. Trying to retain U.S. rights for us doesn't sort of trump progress on the program.

Ken Trbovich - RBC Capital Markets

Okay. And last question really is for Ben. I guess the numbers you gave out as it related to the cumulative payments; did that include the benefit of the stocking orders? Because clearly IMS prescription data doesn't show or track at all the stocking orders that would have been received in the current quarter?

Ben Palleiko

You mean the royalty holiday numbers?

Ken Trbovich - RBC Capital Markets

Yes.

Ben Palleiko

That is based upon net sales as reported to us by Endo.

Ken Trbovich - RBC Capital Markets

Okay. So it does include the stocking then that occurred during the quarter?

Ben Palleiko

Yes.

Ken Trbovich - RBC Capital Markets

Okay, thank you.

Operator

Next question comes from the line of Angela Larson.

Angela Larson - Susquehanna International Group

Ben, thank you for giving those royalty holidays numbers. I really appreciate gaining that kind of insight. Could you remind us that there's this initial $41 million royalty holiday that you experienced and then, am I correct in thinking there is still another $28 million, but in that period you receive half of your royalty until the 28 is paid off?

Ben Palleiko

Correct. So what happens is, the first $41 million as you said, they don't have to pay us anything. And that dates back to the product launch in July of 2006. So the number that we've been burning off is that $41 million, and as I said, there's roughly slightly more than $14 million left.

Once that is burned off, there is another $28 million that we owed them for development expenses that they funded on our behalf during -- up to the approval period of Opana ER. And so the mechanism that we negotiated in our revised agreement with Endo was that when they start to pay us royalties, they only have to pay us have half the royalties until the half they keep adds up to that $28 million.

Angela Larson - Susquehanna International Group

Okay, great. Thank you for that. And could you just give us a little guidance on where we should go with shares outstanding? I don't know how you want to handle this because you did the deal in the middle of the quarter, so maybe you want to look at the year end number or something like that?

Ben Palleiko

So, for the financial statements, it's on the weighted average number. And so in terms of the -- you mean for the rest of '08, what we would expect?

Angela Larson - Susquehanna International Group

Yes.

Ben Palleiko

Well, so that will obviously roll into the second quarter, we’ll have all those shares outstanding. So I think it will just be roughly 31 -- slightly more than 31 million shares starting in the second quarter.

Angela Larson - Susquehanna International Group

Thank you.

Operator

The next question comes from the line of Larry Neibor.

Larry Neibor - Robert W. Baird & Co.

Thanks, good morning.

Jennifer Good

Good morning, Larry.

Larry Neibor - Robert W. Baird & Co.

When you gave R&D guidance of $24 million to 25.5 million, next you mentioned that if you got some partnership deals you might accelerate timelines because you'd have the cash to accelerate things. Would that mean that your R&D spend for the year might exceed the guidance?

Ben Palleiko

Yes. Yes, and just to be clear, Larry, I think depending on the cash situation, our R&D spend may also come in below that guidance. I think I was trying to make it clear that we will be open to adjusting it both ways depending where our cash situation sits.

But, yes, to the extent we brought in additional cash, there will be a debate internally about how much of that to allocate toward funding development programs now versus adding to the cash balance. In which case -- and to the extent we spend more obviously, our R&D spend would go up.

Larry Neibor - Robert W. Baird & Co.

Okay. Next, you mentioned that you hoped the Phase IIb trial for Nalbuphine ER would be considered a pivotal trial. Do you mean that in the sense that it would be sufficient to file a 505(b)(2)?

Jennifer Good

So, Larry, I think this is obviously a question for FDA. Nalbuphine has been on the market for a while, although my opinion is much like we experienced on Opana, the FDA I think is going to look at Nalbuphine like it's an NCE because it was only given early as an injectable.

So I think that it's probably going to require two pivotal trials. We will power it to be statistically significant. We will meet the three-month duration period and I think if you hit statistical significance, you have a reasonable chance of having FDA accept it as a pivotal trial. But, we will of course ask the question.

My estimate is we will likely have to run another pivotal trial as well though.

Larry Neibor - Robert W. Baird & Co.

Okay. And then do you really see Penwest developing more of a central nervous system drug development company or a mitochondrial respiratory pathway disease development company?

Jennifer Good

Well, I think they are one in the same. I mean essentially the target audience for a lot of these mitochondrial respiratory chain physicians are neurologists. So these are orphan neurodegenerative diseases. So I think they are one in the same.

At the point in time we ever did have more money and we started to look to in license, whether we would pursue more mitochondrial stuff or get broader, I think that probably depends on what is available in the marketplace at the time to make sense. But these all target neurodegenerative type disorders.

Larry Neibor - Robert W. Baird & Co.

Okay, thank you.

Jennifer Good

Yeah.

Operator

Your next question comes from the line of Arthur Freedman.

Arthur Freedman - Freedman Assets

Hi. Good morning Jennifer and Ben. In the last -- excuse my voice here -- on the last conference call, you discussed your cost management program and reductions in headcount. And we also discussed a roadmap and strategy for the Company. And I noticed that there were -- I noted there were a number of investor companies participating. So what I wanted to ask you about this morning if you can provide a comment on is the registration statement. I was a bit caught off guard by this. And a couple of things I noted, I was surprised that there were 13 companies by my count that are closing out their positions. And there was another company that increased their stake in Penwest, and then 21 days later seemed to be selling through the registration statement the position that they had just bought, 21 days before. That seemed very unusual. So I'm curious about this.

Ben Palleiko

So Arthur, just to be clear, that S3 registration statement was to register the shares we sold in the pipe. And so those entities you see listed are – well, there's actually six high-level purchasers which broke down, which all of have sub funds underneath them. So those 13 purchases you are talking about are merely funds that fall under the heading of the six larger investors. But what all that registration statement was designed to do was to register those shares and make them freely tradable by the buyers. It didn't necessarily have anything to do with their intent obviously to sell or take any other action right out of the gate.

Arthur Freedman - Freedman Assets

Okay, okay, thank you very much, because I was very concerned about it.

Ben Palleiko

Yes, I mean they may or may not sell but just to be clear, all that was to do was to make those shares publicly tradable.

Jennifer Good

And to be clear, none of those investors could be selling because the shares aren't effective yet. So none of those buyers actually have sold yet.

Arthur Freedman - Freedman Assets

Okay. Okay, thank you very much.

Operator

Your next question comes from the line of Wayne Rothbaum.

Wayne Rothbaum - Quogue Capital

Thanks for taking my call. Just a quick question on the lifecycle management with Endo. Can you just -- I know new Jennifer you said you didn't want to talk -- you really didn't want to get in specifics of that. But can you just refresh us in terms of the economics and if there's any difference in terms of the economics, if Endo is using TIMERx or not using TIMERx technology?

Jennifer Good

Yes, sure, Wayne. So the way our current agreement reads, that as long as Endo is doing lifecycle management with oxymorphone that essentially we stay in the same economics. So they will have to fund the development work, and we’ll stay in our same royalty calculations, more of a straight licensing deal at this point. If Endo goes off and does a combination product or does a patch, for instance of oxymorphone we wouldn't be involved. But if they are doing oral oxymorphone, then we are tied to each other for that.

Wayne Rothbaum - Quogue Capital

And when you say the same economics meaning the same royalty stream, are there any holiday, royalty holidays or anything along the lines like that are in the current product for Opana ER?

Jennifer Good

No, that is a one-time deal. The payoff is sort of past things and that doesn't repeat itself.

Wayne Rothbaum - Quogue Capital

Okay, great. Thank you.

Operator

Your next question comes from the line of Angela Larson.

Angela Larson - Susquehanna

Thank you for taking a follow-up. When you think about the R&D flexibility and where you want to spend, it sounds like A0001, you have a program and you have goals and timelines for that, and for the Parkinson's, the results by the second half of the year. So was it really the timing of Nalbuphine where you're looking at your cash flow and flexibility on whether you start that one or not?

Jennifer Good

I think that -- not really, Angela. Honestly I think Nalbuphine is going to be somewhat tied to I think finding development partner along the way. I think what additional funds would free up is -- there's a lot of different patient groups we could be exploring A0001 in. We're also entitled to another NCE out of Edison that I think we would bring in and actually start detox work around. So, no, I think actually we might be able to accelerate some of the timelines around our program some of the tox work for instance being done. But I think Nalbuphine really kind of stands on its own around the partnership.

Angela Larson - Susquehanna

Okay, great. That is helpful. Thank you.

Operator

We have a follow up from the line of Bert Hazlett.

Bert Hazlett - BMO Capital Markets

Thank you. Could you just remind us of the IP that would potentially be granted to Nalbuphine ER and Opana ER in Europe? Thanks.

Jennifer Good

So Opana ER, we have all the same patents we're prosecuting here. We actually have a patent granted already in Europe. But Europe is a little bit different animal because Opana, as you may or may not know, is actually an NCE in Europe so it's going to get that 10 years of data exclusivity there. So not that patents aren't important but it certainly -- that's certainly better exclusivity than we get in the U.S.

With regard to Nalbuphine ER, we have had a very active effort internally to identify multiple avenues that we think we can actually patent around that because you are back to a similar Opana kind of situation. Actually we’ve structured some of our clinical trials to abstract some of that data.

For instance in the last trial we did, we actually measured PK/PD correlations to patent blood levels etc. So we do have about three different pathways on Nalbuphine that we are pursuing for patenting formulations, sort of the whole clinical side and then some of this abuse resistance. And we will prosecute those both here and in Europe.

Bert Hazlett - BMO Capital Markets

Thank you. I guess just a follow-up on abuse resistance, you've touched on it a little bit, but, is there any mandate now between you and Endo to pursue any of the abuse resistant characteristics of your technology? And if so, where does that stand?

Jennifer Good

Yes, Bert, I will speak globally. Clearly the market is sort of speaking here. These abuse resistant forms are coming, they are sort of early first generation things but you are starting to see it around a lot of the molecules. So I think that is a real trend. Again, I'll sort of fall back to my Endo colleagues and let them express their life cycle management plans when they are ready to do that.

Bert Hazlett - BMO Capital Markets

Okay, thank you.

Operator

(Operator Instructions). Your next question comes from the line of Arthur Freedman.

Arthur Freedman - Freedman Assets

Just another quick follow-up. Have you heard anything back from the FDA like when they may be meeting to go over the generic?

Jennifer Good

[The cases]?

Arthur Freedman - Freedman Assets

Yes.

Jennifer Good

No. So, FDA won't give any information. I think those generic applications typically take 18 months to review although they will not issue any kind of final approval on that drug until the earlier of 30 months or a final court decision. So I sort of think based on the court trials, it is likely to be the 30 months. So you may hear of a tentative approval at some point if FDA makes its way through quickly but likely you are not going to have a final FDA action until the end of the 30-month clock.

Arthur Freedman - Freedman Assets

So that would be in your favor right, in a sense?

Jennifer Good

Oh absolutely. I mean triggering that 30-month stay is very helpful and remember any additional passive patents we prosecute along the way will also have to work our way through. We got lots of room here around this drug to move.

Arthur Freedman - Freedman Assets

Okay, thank you very much.

Jennifer Good

You bet, Arthur.

Operator

At this time, there are no further questions.

Jennifer Good

We appreciate your joining us this morning to discuss our results for the first quarter of 2008. Ben and I will be at two investor conferences this month, the Banc of America conference in Las Vegas and the Baird investor conference in Chicago. We hope to see some of you there. Thank you.

Operator

This concludes today's Penwest Pharmaceuticals conference call. You may now disconnect.

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