Incyte Corporation Q2 2008 Earnings Call Transcript

| About: Incyte Corporation (INCY)

Incyte Corporation (NASDAQ:INCY)

Q2 2008 Earnings Call

July 30, 2008 8:00 am ET

Executives

Paul A. Friedman - President, Chief Executive Officer, Director

David C. Hastings - Chief Financial Officer, Executive Vice President

Richard Levy - Senior Vice President of Development

Analysts

Cory Kasimov - J.P. Morgan

Thomas Wei - Piper Jaffray

Katherine Kim - Bank of America Securities

Analyst for Sapna Srivastava - Morgan Stanley

Annabel Samimy - UBS

Liisa A. Bayko - JMP Securities, LLC

Thomas J. Russo - Robert W. Baird & Co.

Soham Pandya - ThinkEquity Partners

Rachel McMinn - Cowen and Company

Operator

Welcome to the Incyte Corporation second quarter 2008 financial results. (Operator Instructions) It is now my pleasure to introduce your host, Pamela Murphy, VP of Investor Relations and Corporate Communications.

Pamela M. Murphy

On the call today are Paul Friedman, Incyte’s President and Chief Executive Officer, Dave Hastings, our Executive Vice President and Chief Financial Officer. Rich Levy, our Senior VP of Development, is also with us today. Paul will begin with a brief review of the progress we’ve made in our clinical program and Dave will follow with a discussion of Incyte’s second quarter financial results. We’ll then open up the call for Q&A.

As you may have seen we issued a separate press release yesterday announcing our intent to offer to sell subject to market and other conditions 9 million shares of our common stock. As you can appreciate this is not something we will be able to discuss during the call today.

Before beginning, I’d like to remind you that some of the statements made during the call today including statements regarding our plans and expectations for our drug discovery and developments including timing of our clinical trials and the potential efficacy of our compounds as well as our expected financial results and financial guidance are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially including those described in our Form 10Q for the quarter ended June 30, 2008 and from time to time in our SEC documents.

Paul A. Friedman

As you saw in our press release, the second quarter was highlighted by presentations at scientific meetings on several of our lead compounds as well as the initiation of additional Phase II trials. The good side to big meetings provided a full description of our progress with the lead compounds. I’m going to limit my prepared remarks today to very brief reviews of what was presented at those meetings and also list for you up-to-date ongoing and planned clinical trial activity for our lead programs.

Beginning with Incyte 18424, our lead JAK inhibitor, it continues to demonstrate efficacy in the ongoing Phase II trial in patients with myelofibrosis. Results from the trial were presented at ASCO and also at the European Hematology Association meetings. In summary, 424 produced unprecedented reductions in splenomegaly which affects the majority of patients with myelofibrosis and rapidly improved quality of life measures including clinically meaningful reductions in fatigue, night sweats, and pruritus. Importantly, it also improved cachexia that’s commonly seen in patients with this disease is demonstrated by improved appetite and weight gain.

Enrollment of the study is being continued now that we have IRB approval for several amendments that we have put in to continue. We’re continuing to confirm an optimal dosing regimen and select the co-primary endpoint for the registration trials. Later this year, once we’ve completed these two objectives, we plan to file a Special Protocol Assessment with the FDA. If they agree with the proposed design of the registration trials, we should be able to begin two Phase III trials late this year or more likely early next year. We intend to present the data from the ongoing Phase II study at the ASH meeting in December, the American Society of Hematology.

Based on the efficacy we’ve seen in the myelofibrosis patients treated with 18424, we’ve now initiated a Phase II trial in patients with two other myeloproliferative diseases, polycythemia vera and essential thrombocythemia. Many of these patients share a number of common clinical signs with those patients who have myelofibrosis including splenomegaly and the constitutional symptoms associated with what is referred to as the cytokine storm, very high levels of pro-inflammatory cytokines seen in many of these patients. While we expect to have top line data to share later this year, we believe at this point that ASCO may be a more appropriate form to formally submit and present the PBET results.

At EULAR we presented data on the [inaudible] first cohort of rheumatoid arthritis patients who were treated for a month with 15 milligrams twice a day of 424. The drug was very safe and very well tolerated. We achieved improvement in all individual parameters of the ACR score with overall responses reaching 50% and 25% for ACR 50 and 70 scores respectively. We’ve completed enrollment now of the three additional cohorts and expect to present results of the entire study at the American Rheumatology meeting in October.

We’ve recently completed the three and six month toxicology studies for 424 and thus we’re prepared to move into a double-blind placebo-controlled Phase IIb three month trial later this year. This could change if Incyte 28050, the follow on compound, looks as good as 424 after it completes Phase I. The single dose arm of the Phase I program is done and thus far the compound looks very promising. The multiple dose portion of the trial should be done by September at which point we can decide if 28050 will become our JAK inhibitor for the oral inflammatory programs. The three and six month tox studies have already been initiated for 28050 which means we’d be prepared to begin a three-month Phase IIb trial in RA patients in the first half of next year.

Turning to our JAK topical program for psoriasis, we’ve completed three doses in the subtotal inunction study. Patients in the third dose level applied the topical formulation of 424 on up to 20% of their total body surface area. 424 continues to be well tolerated and improves quite obviously and dramatically the treated psoriatic lesions. We expect to present data from our topical studies at the European Association for Dermatology and Venereology in September. Based on the safety and efficacy we’ve seen thus far, plans are to begin a three-month topical Phase IIb study in psoriatic patients in the fourth quarter with top line data excepted later next year, most likely early in the third quarter.

Turning to diabetes, results from our Phase IIa trial with our HSD1 inhibitor INCB13739 were presented at the ADA meeting in June. This 28-day study showed that 13739 significantly improved hepatic insulin sensitivity, decreased plasma LDL and total cholesterol levels. Improvements in peripheral glucose uptake and lowering of blood pressure were also seen. A three month dose range in Phase IIb study in patients with Type 2 diabetes has been initiated in which once-daily dosing of 13739 is being adding to failing metformin therapy. We’re looking at five different once-daily doses compared to a placebo arm and expect to involve 300 patients at clinical sites in the US and abroad. The primary endpoint of the trial is the change from baseline to week 12 in hemoglobin A1c and we expect to complete the study in mid-09.

We completed a single and multiple dose Phase I trial with a structurally distinct HSD1 inhibitor INCB 20817. In this study 817 was well tolerated and demonstrated appropriate pharmacokinetic and pharmacodynamic properties to support its role as a strong backup molecule to 739.

In our other diabetes program which targets the adiposity localized GPCR HM74a to lower free fatty acids, we’ve initiated a 28-day dose ranging Phase IIa trial with our lead compound INCB 19602. Just to remind you, HM74a is an [inaudible] acid receptor. The study is expected to involve 120 patients with Type 2 diabetes and we expect to have top line proof of concept data from this study early next year.

For our Sheddase inhibitor INCB 7839 we continue to enroll her to positive breast cancer patients in a Phase II trial being carried out in India. The trial is designed to evaluate 7839 in combination with Herceptin with results expected late this year.

I’ll now turn the call over to Dave who will provide a brief description of our Phase II financial results.

David C. Hastings

I’ll start my brief overview this morning by discussing our cash position. We ended the second quarter with $188 million in cash and investments. So far our cash use for the year has been $69.3 million. This performance is on plan and our cash use guidance for the year remains unchanged at $132 million to $142 million.

Another area I would like to briefly discuss this morning is our operating expenses, particularly research and development costs. Thus far operating expenses are in line with our expectations. R&D expense totaled $71.1 million and although our R&D expenses can vary from quarter to quarter due to the timing of our clinical activities, we’re on track to incur between $140 million and $148 million for the year. Our R&D spending reflects our commitment to invest in the clinical pipeline which you saw today continued to make excellent progress.

So with that I’ll turn the call back to Paul.

Paul A. Friedman

Let’s just move along and open the call for questions at this point please.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Cory Kasimov - J.P. Morgan.

Cory Kasimov - J.P. Morgan

Two questions here, both relating to the JAK II program. Could you please discuss the difference if any in the burden of proof between the MF indication and PV and ET in terms of most relevant clinical outcomes? And then the second question relates to the developments yesterday in acknowledging that, it’s obviously early but discuss what you learned from the FDA panel meeting for Actemra for the RA indications?

Paul A. Friedman

The PV and ET patients that we are enrolling are those who are farther along in their disease and these are people who have the same issues that myelofibrosis patients have but they still have a hyperproliferative marrow and with one of the blood cell types predominating in its elevation. With PV it being the red cell and with ET it being the platelet. So what we’re hoping to be able to do, and I actually have a reasonable amount of confidence we’re going to be able to do this - I know we will shrink the spleens and I know we will improve the constitutional symptoms in the same manner that we’ve seen with myelofibrosis. That in its own right would be of huge benefit to these patients because they suffer from the same kind of debilitating issues that the myelofibrosis patients have. But beyond that, in these patients we should be able to take advantage of the myelosuppressive properties of the JAK II inhibitory mechanism to bring back to normal or toward normal the elevated counts that these patients have. That in a nutshell is what we’re trying to do in this study that we’ve just started in PV and ET patients which will involve about 100 patients.

With respect to the Actemra FDA advisory meeting yesterday we were very, very encouraged by that because it means that both the FDA, based on the comments that they made, and the vote and the discussion that went on amongst the physicians that people are open to these types of mechanisms having an important role in systemic inflammatory diseases with RA being one but there obviously are quite a few others. The really encouraging thing is that when you look at what Actemra does and you look at the PK of a monoclonal antibody, with something like the 8 milligrams that they give, they’re taking the Interleukin 6 receptor out all day long completely.

Our PK is one where we have a peak of activity and then it falls off and we have off time from the receptor. Additionally, we take out other pro-inflammatory pathways such as the Interleukin 12, Interleukin 23 pathways for example, so I think when you couple all of that with where we are and the efficacy that we’ve seen so far in the rheumatoid patients and with what Pfizer has reported and we expect them to report in October, I think it augers very positively for oral JAK inhibitors as a breakthrough type of mechanism for systemic inflammatory diseases, obviously including RA.

Operator

Our next question comes from Thomas Wei - Piper Jaffray.

Thomas Wei - Piper Jaffray

Also two questions here. One is just on the cash that you’re raising. Was the plan here to raise enough money to be able to complete the Phase III trials for the myelofibrosis indication? And maybe you could describe where the potential cash position could get you to as far as data read-outs go? And also on the Actemra discussion, are there animal models that predict these side effects with Interleukin 6 inhibition? Would you expect to see a similar side effect profile with 424?

Pamela M. Murphy

Thomas we can’t really directly answer your questions regarding the offering. Dave can give you a top line view of what he said before but we can’t respond to specific questions on the offering.

Paul A. Friedman

Do you want to say anything about it Dave?

David C. Hastings

My answer to Thomas’ question on the -

Thomas Wei - Piper Jaffray

Maybe a different way to ask it is, have you given us a sense of the cost of the development programs for myelofibrosis, the Phase III trial?

David C. Hastings

We haven’t given that exact guidance although given the number of patients Thomas, it’s not a significant capital intensive trial.

Thomas Wei - Piper Jaffray

And that is true across the range of co-primary endpoints that you might involve in the trial?

David C. Hastings

Yes. It’s really driven by the number of patients in the trial as well as the type of testing those patients require. I guess in terms of our cash position, really our guidance hasn’t changed at all Thomas in terms of amount of capital required to potential launch in MF. So there are really no updates there.

Paul A. Friedman

So with respect to your question about animal models and Interleukin 6, I’d say not really with one possible exception. And just let me run through. First of all, I don’t know what the GI perforations mean. There were three; they were in different parts of the GI tract. That could be a statistical fluke. You do see that sort of thing in rheumatoid patients who are getting steroids or getting [ensades]. You can see for example perforation to adrenal ulcers. I don’t know what that means and I’m not sure it has anything to do really with blocking the Interleukin 6 receptor pathway.

With respect to the lipid increases that were seen, I think that is mechanism based and I think if you significantly block Interleukin 6 pathway you will see in some people increases in their lipid profile.

With respect to the liver, there are multiple mechanisms that were hypothesized for the changes that were seen with Actemra. One of them would be a direct effect in blocking Interleukin 6 where Interleukin 6 has been shown in animals to be important in liver regeneration in an injury models. So depending on how completely you take out that pathway, you would see in rodent models an effect on liver regeneration after different types of injury. Whether or not we would see it since we have a significant amount of off time during the day, we don’t know at this point and we have not investigated that in animal models but we will going forward.

I would just add one other thing before we go to the next question. It just crossed my mind. Pfizer is looking in a three to six month study at multiple different doses of their JAK inhibitor and none of those dosing groups have been stopped and we certainly have heard nothing about a significant liver signal. We may learn more about that at ACR but I think no news of that type up until this point I think is probably pretty encouraging and again may be reflective of the off time that you have with this mechanism during the day.

Operator

Our next question comes from Katherine Kim - Bank of America Securities.

Katherine Kim - Bank of America Securities

My question has to do specifically with the timing of the pivotal trials for 424. Will you be able to have agreement with the FDA before ASH so basically at ASH you’ll be able to look at the different endpoints that you have studied? And right now as you currently know it, are you fairly certain that the endpoints you’re looking at, that you’re testing with enrolling additional patients, that you’re comfortable that that’s going to be one of the endpoints done, are you going to have agreement with the FDA?

Paul A. Friedman

What we’ve done is we have seen in the first few cohorts of patients changes that have guided us to make amendments to the protocol to prospectively from zero time do quantitative evaluations of these parameters. So from what we’ve seen in the first cohorts where the measurements were not done in a prospective quantitative way, because we were trying to see what we would see in the first cohorts, all indications are that all those parameters should show improvement when done in a prospective way now that we have IRB approval for the amendments that are now enrolling in this new cohort. We had to wait. It takes a while with these IRBs to get approval to move ahead. So we’ve just begun to move ahead in July. We have to have more interaction with the FDA but all indications from the discussions we had with them in the first meeting are that the things that we are looking at are things that they would be receptive to as co-primary endpoints. But we will have to get the results, we’ll have to show them the results, and we’ll have to get agreement at that point in time. When you say, am I confident, I’m as confident as I can be before we actually get the prospective data and then we’ll talk to the FDA. I don’t think I can be any more precise than that.

Katherine Kim - Bank of America Securities

So there is a possibility then that we might see the data in ASH and you may not have agreement in terms of getting an SPA at that point; that’s a possibility?

Paul A. Friedman

I think there’s that possibility. I think there’s a possibility that we won’t present all the data at ASH for competitive reasons. We haven’t decided that yet. If we had data that it made sense to present, we’d present it at ASH but we may not. We’ll have to see.

Katherine Kim - Bank of America Securities

In terms of the RA data, so far you’ve enrolled all the patients. Can you make any comments on any safety signals that you’ve seen at the high doses?

Paul A. Friedman

We haven’t seen any safety signals. It’s profoundly safe in this population over one month of treatment.

Operator

Our next question comes from Analyst for Sapna Srivastava - Morgan Stanley.

Analyst for Sapna Srivastava - Morgan Stanley

Just a quick question on the diabetes program. I know that’s something that you guys have said you’d be open to partnering. Have you had any change in the types of discussions that you may be having around this given the perception that diabetes drugs may be more expensive and more risky to develop with some of the things that have been going on at the FDA?

Paul A. Friedman

We actually were somewhat relieved after that panel discussion because we were concerned that it was going to be a more onerous discussion that it turned out to be. I think if you have no CV signal, you should still do pretty well. The size of the trials may be somewhat larger than they otherwise had to be. I think people who play, big pharma companies that play in this arena are not going to be dissuaded by that. It will probably cost a bit more for them to get from start to finish. It has not changed the discussions that we’re having with people. We’ve had people who have said they want to wait and see the Phase IIb data. We’ve had other people who have told us they were very impressed with what we presented at ADA and we have ongoing discussions with those folks. The tone of those discussions has not changed in any significant way based on everybody learning what happened at that panel discussion.

Analyst for Sapna Srivastava - Morgan Stanley

Have you guys probably during the Phase I part of the development for this program, did you do any measurements of any cardiac parameters like EKGs or QT, I know you measure cholesterol, but any other things that people might want to make sure has been measured before they would step in?

Paul A. Friedman

We certainly have done that. We’ve done some not halter monitoring but where you record heart rates overnight; blood pressure which actually went down both systolic and diastolic; and it’s small but the numbers look pretty significant; the lipids go down, they don’t go up; we don’t gain any weight. The mechanism should be cardio protective mechanism and I think that is one of the attractive features of the mechanism for people who are in discussion with us.

Operator

Our next question comes from Annabel Samimy - UBS.

Annabel Samimy - UBS

You just answered my question, but just on that same data regarding the diabetes compound, in the Phase IIb study are you going to be measuring all these various cardiovascular parameters on top of the HBA1c?

Paul A. Friedman

Sure. We’re going to do glucoses, blood pressure, lipids, the whole ball of wax, but the primary endpoint is hemoglobin A1c.

Operator

Our next question comes from Liisa A. Bayko - JMP Securities, LLC.

Liisa A. Bayko - JMP Securities, LLC

One question on the diabetes and then one on psoriasis. Can you just talk a little bit about the follow on compound, how it differs from the first compound for the HSD1? And then just on psoriasis, could you maybe please elaborate a little bit more on what your plans are for Phase IIb in terms of study design?

Paul A. Friedman

For 20817 it’s a structural distinct compound. There’s some relation to the lead. It’s a more potent compound but other than that it’s just a structurally distinct backup that has a potency advantage. But it’s turned out that with what we’ve seen with 739 in men that it’s more than potent enough and the daily milligram dose with 817 would be even lower than what you see with 739 but we’re anticipating a relatively low milligram daily dose for 739. So at the moment we’re not planning to take 817 beyond Phase I but it’s there as a very viable backup for discussions in partnering where a partner would have the confidence that should something happen to 739, you’d have a structurally distinct compound as a backup.

With respect to the study design for Phase IIb psoriasis, if Rich Levy is on the line and can address that, I would ask him to do so.

Richard Levy

Yes, I’m here. It’s a fairly straight forward dose ranging study looking at three different concentrations of the cream formulation as well as vehicle. So it would be essentially a four-arm study with a fairly large number of patients. I don’t think we’ve said how many yet but more than enough to look at efficacy which would be quite simple, but also to help be able to distinguish between the concentrations and to look further at safety over a three-month period where patients will be treated with disease up to 20% of their body surface area. We’ve already seen great efficacy. In a month we expect to see greater improvement as you treat for longer than a month. We’ve seen great safety for a month. We don’t believe that there are likely to be significant safety problems with the topical that would come up after a month but this will answer those questions. And then hopefully from this study we’d be able to go on and start your registration studies.

Operator

Our next question comes from Thomas J. Russo - Robert W. Baird & Co.

Thomas J. Russo - Robert W. Baird & Co.

I just wanted to clarify first with 424 and MF from some of the language in your Q. Is there a scenario at all where you would proceed into Phase III without an SPA?

Paul A. Friedman

It’s conceivable but I think it would be unwise not to try very, very hard to get an SPA. So that is our current plan.

Thomas J. Russo - Robert W. Baird & Co.

With regard to the PV and ET trials, it sounds like there’s going to be top line data before the end of the year. Can you talk about the plans for Phase III there, whether you’d be looking for an SPA as well and whether that potentially could be rolled into maybe one large trial or two large trials maybe concurrently with the MF work?

Paul A. Friedman

I would say there may be some data by the end of the year but I don’t think there’s going to be that much. I think there’ll be data on spleen reduction and improvement in constitutional symptoms but you can take that as a given today that we’re going to see improvement in both of those. It doesn’t make sense that we wouldn’t. The real key is whether or not we can in addition to that lower or bring down for example in PV the elevated hemoglobin. And while we’ll have [verticulicite] signals and we’ll probably see movement toward normalization of the red count, the lifespan of a red cell is 120 days so you’re going to have to keep these people and you’re going to have to have a reasonable number of them on drug for a reasonable period of time to come to whatever the new study state is for their red count. I think we will have some data by the end of the year. I think it’s going to be well into 2009 before we have the, I think we have 100 people that we’re planning to put into this study, we’re going to have long enough term data on enough of them to be in a position to finalize plans for pivotals and also whether it would be one or two and exactly how that program would go forward. I think it’s a little premature without that data to know precisely what we would do and how soon we could do it.

Thomas J. Russo - Robert W. Baird & Co.

The diabetes compound 739, I’m just wondering how conservative you’re being in terms of data reading out from the IIb study? And if it’s a three-month endpoint, is there anything that you can do from an enrollment standpoint to accelerate the data from that program?

Paul A. Friedman

The one thing that we think might help us but we’ll have to see whether it actually does is the fact that a number of the sites that we’re using had patients lined up to go on to studies for the Pfizer inhaled Exubera product and when those studies fell through, the indication was that they thought that they would have more people available sooner. But the proof is in the pudding there. We’re going to have to see whether that does accelerate enrollment. I think we may be being somewhat conservative but I would just like to see whether that bears out as the people at those sites have indicated it would. It’s early days for that but there is some hope that we’ll enroll more quickly.

Thomas J. Russo - Robert W. Baird & Co.

With 424 and MF, have those patients that have continued on now in an additional couple months since the meeting, are there any patients where the durability of affect has been lost while they remained on drugs?

Paul A. Friedman

It’s pretty remarkable actually. We now have three people who’ve been on the drug for more than a year. We have I think 18 who have been on the drug for nine months or more. There are a number of those who are approaching a year. It’s a durable response. It’s pretty remarkable.

Operator

Our next question comes from Soham Pandya - ThinkEquity Partners.

Soham Pandya - ThinkEquity Partners

Most of my questions have been answered, but just one question. Is there any data to show that some of the endpoints that the international working group assigned just recently have any correlation with survival in the MF population? I know it’s early days but is there any studies on that front?

Paul A. Friedman

I’m going to ask Rich to address that question. I think the short answer is probably no but there are some parameters that if the patients have those parameters their life expectancy is less long and since we are affecting them, you might have some degree of confidence although it is early days that there could well be a survival benefit. But Rich, can you elaborate on that a bit?

Richard Levy

There are two ways of looking at survival. One are the characteristics that the patient has when they present to you so things like severe anemia, increased spleen size, and things like that can be measures of poor survival. So there are a number of survival indices that predict which patients are going to do well and which are not going to do so well. Some have been around for several years. Some new ones are likely to be published within the next year.

It’s a slightly different question to then ask, “Well if you improve those parameters with a drug therapy, will you improve survival?” The logic of it says yes but the proof is in the pudding. Now because there have not been any effective drugs in myelofibrosis yet, those things really haven’t been tested. So it’s known for example that actually successful in doing a bone marrow transplant which has a relatively low success rate in part because of the danger of the procedure itself in these usually elderly patients, if you improve those things you can improve survival. So we expect based on the profile of the drug that several of the attributes of the drug could improve survival but there’s no data out there specifically saying that a drug that does X will improve survival yet because it’s just too soon, because we’re kind of the first ones to be there and have that chance to see.

Soham Pandya - ThinkEquity Partners

One question on the HSD1 program. Can you just comment on some of the data you presented in terms of the increase in plasma ACTH levels and then the corresponding sort of downstream effect in the treatment group and then the downstream effect in terms of cortisol coming back? Is that a potency issue or is that a selectivity issue? Can you help us understand that?

Paul A. Friedman

Rich, do you want to answer that?

Richard Levy

The cortisol that’s made in the body, a lot of it is made in the adrenal glands and as is newly appreciated about a third of it is made in places like fat in the abdomen. So when you use a drug like 13739 which inhibits HSD1, it has no affect on the production of cortisol in the adrenal glands but it’s basically depending upon the dose shutting down the production of cortisol. The way it works is it blocks the conversion of cortisone to cortisol in certain tissues including the visceral fat so that in the end the net effect, the first initial effect is that your total body cortisol is going to go down. So what happens is the hypothalamus and pituitary sense that there’s decreased cortisol so it’s normal physiologic function is to put out more ACTH at least temporarily to get the adrenal glands to put out more cortisol. So what you see is at least in an initial increase in ATCH in some patients to maintain a completely normal cortisol level, and not only is it normal when you look at it in the average point in time but there’s also a diurnal rhythm. Cortisol levels are higher in the morning than they are at night. Those rhythms from the adrenal glands are also maintained normally. This is exactly what you would want to see and it’s what we’re seeing.

Operator

Our next question comes from Rachel McMinn - Cowen and Company.

Rachel McMinn - Cowen and Company

I wanted to clarify your comments on the PV and ET enrollment criteria. Are patients in the study, do they need to have splenomegaly in addition to [hightownsen] on the red or their platelet cell count?

Paul A. Friedman

I believe that’s right. That is correct, right Rich?

Richard Levy

Yes, they have to have some degree of splenomegaly but not the massive splenomegaly that is seen and required in the myelofibrosis study going forward.

Rachel McMinn - Cowen and Company

On the metformin comment that you made with the Phase IIb 739 study, you mentioned that patients need to be failing metformin. Does that mean that they’re going to have to be on maximal doses of metformin or just have an uncontrolled A1c in whatever entering dose they have?

Paul A. Friedman

Rich.

Richard Levy

We had considered both of those designs and eventually settled on allowing them to be on whatever dose of metformin that they’re on so that you don’t have to titrate them all the way up to the highest dose which is not tolerated in most people. If this were a registration study, you would most likely have to demonstrate that you could show benefit over the maximum dose of metformin. But it has become the industry standard for Phase II that’s not necessary at this stage to (1) be able to demonstrate that your drug is an effective therapy for diabetes and (2) to help you select a dose.

Rachel McMinn - Cowen and Company

So at this point you’re just kind of looking for directionally what level of efficacy you’re going to see on top of metformin and then from there you would do further exploration to look at maximal metformin doses?

Richard Levy

Yes. In the likely registration study with metformin, patients would have to have shown that they couldn’t accomplish the same thing by just increasing the dose of metformin. Now obviously if they couldn’t tolerate a higher dose of metformin, you wouldn’t have to force the patient to do that. But this is a fairly standard design at this stage and we’re very comfortable with it.

Rachel McMinn - Cowen and Company

In terms of the current MF study, I’m not sure if you’ve mentioned this before, but can you mention how long you’re going to be evaluating patients? So once you get those additional 50 patients enrolled, is it just four weeks and then at that point you’ll be able to prospectively evaluate these various endpoints?

Paul A. Friedman

We will be evaluating them at one month but we will certainly keep people on the drug, just as we’re doing now. I hope we’ll be able to keep many of these people on the drug right up through registration so that we might be able to get some survival data even though it would not be done in a controlled way. We will continue to make measurements of those parameters at intervals beyond a month but we’re hoping that within a month at least some of the parameters will give us what we’re looking for.

Rachel McMinn - Cowen and Company

Just to be clear then, the one month is what you’re hoping will be sufficient to submit data to the FDA for an SPA?

Paul A. Friedman

We’re certainly hoping that, yes.

Operator

There are no further questions at this time.

Paul A. Friedman

I appreciate everybody who called in since we changed the day and the time for doing so. And we look forward to updating you again at our next quarterly call. With that I think we’ll terminate the call. Thanks again.

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