Columbia Laboratories, Inc. Q2 2008 Earnings Call Transcript

Columbia Laboratories, Inc. (CBRX)

Q2 2008 Earnings Call Transcript

August 7, 2008 11:00 am ET

Executives

Melody Carey – IR, Rx Communications Group

Bob Mills – President and CEO

Jim Meer – SVP, CFO and Treasurer

Analysts

David Moskowitz – Caris & Company

Derek Taller – Benchmark

Tom Shrader – Rodman

Ralph Labriola [ph] – Wachovia

Presentation

Operator

Ladies and gentlemen, please stand by. Your conference is about to begin. Good morning, ladies and gentlemen, and welcome to the Columbia Laboratories 2008 second quarter conference call. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session following today's presentation. Please note this call is being recorded. At this time, I would like to turn the presentation over to Melody Carey, Investor Relations. Please go ahead Ms. Carey.

Melody Carey

Good morning and thank you for joining us for Columbia Laboratories second quarter 2008 financial results conference call. This is Melody Carey of Rx Communications Group, Columbia’s Investor Relations firm. With me today are Bob Mills, President and Chief Executive Officer, and Jim Meer, Senior Vice President, Chief Financial Officer and Treasurer of Columbia Laboratories.

If you have not received the financial release that Columbia issued this morning, please call Rx Communications at 917-322-2568 and we will send it to you. During the course of this call, management will make projections and other forward-looking statements regarding future events and the company’s future performance These forward-looking statements reflect Columbia’s current perspective on existing trends and information and can be identified by such words as expects, plans, will, may, anticipates, believes, should, intent, estimates, and other words of similar meaning.

Any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including those noted in Columbia’s filings with the SEC on Form 10-K, 10-Q, and 8-K. Actual results may differ materially from those projected in the forward-looking statements. Columbia disclaims any intent or obligation to update these forward-looking statements.

For the benefit of those who may be listening to the replay, this call was held and recorded on August 7, 2008. Since then Columbia may have made announcements relating to the topics discussed. So please reference the company's most recent press releases and SEC filings.

With that, I’d like to turn the call over to Bob Mills, Columbia's President and CEO.

Bob Mills

Thank you, Melody. And good morning everyone. The second quarter of 2008 marked another quarter of record revenues for Columbia. We achieved revenues of $9.3 million, which is $2 million higher than second quarter ’07 level and $3.8 million or 69% higher than second quarter ’06 revenues. Our compounded two-year annual growth rate for the second quarter revenues is 29.5%.

I will discuss the factors underlying this growth, my views on the quarter, and our progress on the PREGNANT Study and vaginal lidocaine for dysmenorrhea after Jim Meer reviews our financial results. I’ll now turn the call over to Jim.

Jim Meer

Thank you, Bob. Good morning everyone. For the second quarter of 2008, net revenues were $9.3 million compared to $7.3 million in the second quarter of 2007, which represents a 27% increase.

Our progesterone gel franchise includes CRINONE 8% and PROCHIEVE 8% that we sell in the US; PROCHIEVE 4% sold to Ascend Therapeutics in the US market and CRINONE 8% sold to Merck Serono for the foreign markets. Net revenues from the progesterone franchise increased 59% to $6.8 million in the second quarter of 2008 compared to $4.3 million in the second quarter of 2007. The increase was primarily the result of higher sales of CRINONE 8% in both foreign and US markets, and PROCHIEVE 4% in the US market.

Our other products included STRIANT testosterone buccal system, which we sell in the US and our marketing partners sell in Europe. Other products also include Replens vaginal moisturizer and RepHresh vaginal gel, which our partner, Lil' Drug Store sells worldwide.

Net revenues from other products including royalties were $2.5 million in the second quarter of 2008 as compared to $3.0 million in the second quarter of 2007. The reduction was primarily due to the timing of RepHresh orders, which were ordered in full batch quantities.

Gross profit grew 41% from $4.5 million to $6.3 million. This growth in gross profit is all due to unit volume growth. During the quarter, gross margin increased from 62% to 68%. This 6 percentage point increase reflects the impact of increased sales of CRINONE, a higher margin product.

Moving to expenses, selling and distribution expenses increased to $3.3 million in the second quarter of 2008 compared to $2.2 million in the prior year period. This increase in selling and distribution expense was primarily driven by the increase from 20 to 32 sales reps and sales management, as well as marketing and market research expenses to aid the company in selling CRINONE 8%. This increase also included development costs for speaker programs and increased distributor service fees.

General and administrative expenses increased to $2.4 million in the second quarter of 2008 compared to $1.9 million in the second quarter of 2007. Key expense increases were in professional fees and compensation expense.

Research and development expenses increased to $1.7 million in the second quarter of 2008 compared to $1.0 million in the second quarter of 2007. The higher 2008 expenses reflect the combined cost of executing the treatment phase of the fully enrolled Phase II study of lidocaine for dysmenorrhea and conducting the PREGNANT Study, which is currently underway at 15 centers. This compares to the 2007 quarter when the company was winding down its Phase III recurrent preterm birth study. We amortized $1.3 million of CRINONE license repurchases of both 2008 and 2007 second quarters.

As a result, operating expenses were $8.7 million in the second quarter of 2008 as compared to $6.3 million in the prior year period. The loss from operations in 2008 second quarter was $2.4 million compared to $1.9 million in the 2007 quarter.

Other income and expense for the second quarter of 2008 was $1.9 million versus $1.7 million in the second quarter of 2007. The net loss for the second quarter of 2008 was $4.3 million or $0.08 per basic and diluted share compared to a net loss of $3.6 million or $0.07 per basic and diluted share for the second quarter of 2007.

For the six months ended June 30, 2008, net revenues increased 31% to $18.3 million from $14.0 million in the 2007 period. Revenues from the progesterone franchise increased 41% and revenues from other products were up 13% over the same period in 2007. Gross profit increased 37% over 2007 levels. Gross margin percentage improved 3 points from 65% to 68% in 2008. The improvement is due to increased sales of CRINONE 8%, a higher margin product.

Operating expenses for the six months of 2008 were $17.2 million versus $12.8 million in the 2007 period. Selling and distribution expenses increased $2.5 million, primarily driven by increased sales force headcount, market research and marketing expenses for CRINONE, and higher distribution and information service fees.

G&A increased $650,000 primarily as a result of increased professional fees and compensation expense in the 2008 period. R&D expenses were $1.2 million higher in the first half of 2008, reflecting the higher levels of activity on two clinical studies in the 2008 period and cost of our contracted medical science liaison.

The loss from operations for the first six months of 2008 was $4.8 million versus the loss of $3.7 million in the 2007 period. Other expenses were $3.8 million in 2008 versus $3.4 million in 2007. The net loss for the six months of 2008 was $8.6 million versus $7.1 million in the 2007 period. The loss per share was $0.17 in the first half of 2008 versus the loss per share of $0.14 in the first half of 2007.

At June 30, 2008, we had cash and cash equivalents of $10.6 million. This compares to the $13.1 million at March 31, 2008. The $1.9 million of the reduction in cash and cash equivalents was due to increases in working capital for the quarter.

And with that, I’ll turn the call back over to Bob.

Bob Mills

Thank you, Jim. It is a pleasure to post our sixth consecutive quarter of revenue growth and our highest ever quarterly sales. Underlying our second quarter sales was a 59% increase in sales of our progesterone product over second quarter 2007 levels. This includes year-over-year increases in CRINONE US, international CRINONE sales to our partner Merck Serono, and PROCHIEVE 4% sold to Ascend Therapeutics.

Weekly prescription levels of CRINONE in the US have been on a steady upward trend since January. While the launch of a competing product, the effervescent vaginal tablet, did have an initial impact on CRINONE, through the efforts of our fully staffed sales force and ongoing execution of our marketing plan, we have seen our average weekly script level increase almost 32% since the beginning of the year.

In fact, between the effervescent tablet and CRINONE, the use of FDA approved vaginal progesterone has more than doubled in the last year. While our focus is still not convincing the reproductive endocrinologists to switch from their use of compounded intramuscular or IM progesterone injections, which hid [ph] the largest market opportunity.

The fact is once-a-day CRINONE is much more convenient and more likely to encourage patient compliance than the three times per day effervescent tablet. We believe this reality will resonate among current and future users, users of vaginal progesterone as our sales force continues to drive this message. Therefore we also believe we should continue to experience nice prescription growth in the future.

As a part of our marketing education program, we sponsored a brochure on progesterone and its effect on the pregnancy cycle. The brochure was published and it was disseminated by RESOLVE, the National Infertility Association, a highly credible, non-profit group that each year handles over 1.5 million contacts for people seeking information on and help with infertility.

At the Pacific Coast Reproductive Society April Meeting, the second largest infertility meeting in the US, Dr. Brian Berger of Boston IVF presented a retrospective analysis of anonymous egg donation cycles that compared pregnancy outcomes of the patients treated with CRINONE versus those treated with IM progesterone injection. The data demonstrate that CRINONE and progesterone administered via an IM injection achieve equivalent pregnancy outcome.

In fact, 12 additional published studies have established the equivalent efficacy of CRINONE and IM progesterone with four of those 12 studies, including a preference arm, which as you would expect show that the women preferred CRINONE on a highly statistically significant basis. As Dr. Berger highlighted in his presented, the key difference is that vaginal progesterone has the added advantage of avoiding painful IM injections.

Our media outreach initiatives have generated a very positive coverage for CRINONE. We helped secure an interview for one of our Speakers Bureau physicians, Dr. David Keefe, with Kim Hahn of Conceive On-Air Internet radio show that ran in a segment on easy approaches to infertility treatment. Dr. Keefe discussed the advantages of using CRINONE 8% over intramuscular progesterone injections for infertility treatment. And underscored that CRINONE is a very patient-friendly product, which is one of our key selling message. This show was promoted to listeners of Conceive On-Air and other voice America shows, and also to the 1.5 million readers of Conceive magazine.

In an interview with Pat Farnack of WCBS AM 880 Health & Well Being Report, Dr. George Creasy, our Vice President of Clinical Research and Development, discussed the merits of using CRINONE 8% vaginal progesterone gel for donor egg cycles. This broadcast reached over 60,000 listeners in the New York, New Jersey, and Connecticut metropolitan area and was aired on various CBS Radio affiliate stations nationwide. We continue building relationships with the media and our hopeful of garnering more coverage for CRINONE in the future.

Other news to note is that our primary European marketing partner for STRIANT, Ardana, ceased operations on June 30. Ardana held marketing rights to STRIANT in 18 European countries other than Italy. Ardana sold STRIANT in the UK through its own sales force and in several European countries including Ireland, Germany, Denmark, and the Nordic Countries via marketing partners.

We plan to continue to supply STRIANT to either distributors or marketing partners, and they are all already actively seeking a new partner in the UK. We also intend to partner in other countries where Ardana had not yet launched STRIANT and already have interest from one company for Spain. Mipharm is our partner in Italy who launched STRIANT this past November and is experiencing nice growth with the product. Our forecasted sales of STRIANT to Ardana in 2008 were very low. In fact, they only purchased $60,000 of STRIANT over the past 18 months. So there is no material impact as a result of their closure.

Now let’s move on to our R&D programs, which provide significant upside opportunities for Columbia. Our lead opportunity is PROCHIEVE 8% to reduce the risk of preterm birth in women with a short cervix at mid-pregnancy. PROCHIEVE 8% is already FDA approved and commercially available for infertility. In addition, it has 11 years of solid safety data. We estimate the market for this new potential indication to be between $250 million and $1.6 billion.

We are conducting the PREGNANT Study, which is acronym for PROCHIEVE Extending GestatioN A New Therapy. The study is a randomized double-blind placebo controlled Phase III clinical trial designed to evaluate the ability of PROCHIEVE 8% to reduce the risk of preterm birth in women with a cervical length of between 1.0 and 2.0 centimeters as measured by transvaginal ultrasound at mid-pregnancy.

The primary outcome of this pivotal study is a reduction in the incidence of preterm birth versus placebo at 32 weeks gestation. The most important secondary endpoint will be infant outcomes. Every year, more than 0.5 million babies are born prematurely, which means at less than 37 weeks gestation. Those who survive face the risk of lifelong health consequences such as breathing and feeding problems, cerebral palsy and learning problems.

According to new statistics released by the Center for Health Statistics in late July, babies who died of preterm related causes accounted for 36.5% of infant deaths in 2005, which was up from 34.6% in 2000. Further, mortality rate for infants born even a few weeks early at 34 to 36 weeks gestation was three times the rate for full term infant.

While there are many factors linked to prematurity, a short cervix at mid-pregnancy is now believed by more and more physicians to be the most predictive known and documented risk factor. If our study is successful in reducing the rate of preterm birth in this patient population, we are able to obtain regulatory approval for a label expansion, PROCHIEVE 8% will become the first FDA approved therapeutic to address any aspect of this vexing problem.

12 of our 14 US study centers and three of our five study centers in India have completed the IRB process, including stenographer training and certification, and are screening and recruiting patients. As is customary at this stage of the clinical trial, we are seeing conservative early enrollment levels. To boost levels, we are reminding and encouraging stenographers to conduct transvaginal cervical scan on all pregnant patients, not just those suspected of having a short cervix when scan was abdominal ultrasound scan. The transvaginal scan is the absolute best way to accurately measure cervical length.

We recently established a grant program to incentivize the institutions to screen all pregnant patients initially with the transvaginal ultrasound instead of pre-screening using abdominal scan, which routinely deliver less accurate cervical length measurements. These efforts should increase the patient enrollment and keep us on our timeline. We still expect to report data from the PREGNANT Study late in the first half of 2009 and assuming positive data to file with the FDA for this indication as quickly as we possibly can thereafter.

In the first half of 2008, we hired four medical science liaisons or MSLs, who are scientific resources for influential physicians and institutions. They spend nearly all their time responding to questions about the risks and potential outcomes of cervical shortening in pregnancy, that clinical data is currently available and the products that generated that data. A small portion of their time is also allocated to discussing infertility issues from reproductive endocrinologists.

Also in the second quarter, we provided educational grants to support Continuing Medical Education or CME on the prevention of preterm birth in women at risk due to the cervical length. Demand for the CME program has been high. Invitations to the program were sent out in early July, and already ten requests to host a program have been received. As many as 26 of these CME programs are expected to occur in the third and fourth quarters of this year. These programs will cover risks and benefits of treatment options, discuss available data including data for progesterone therapies like the data for PROCHIEVE 8% in women with a short cervix from our earlier study.

As many of the listeners knows, physicians are free to use a marketed product for any purpose they believe to be medically necessary. The physicians attending these CME programs may begin to use PROCHIEVE 8% in this high risk population. We do not expect significant revenues from this potential off-label use in our forecast for 2008, but we may begin to see an impact on revenues in 2009. And with more programs planned for 2009, even more of an impact in 2010 as these types of programs continue to grow.

Another high value opportunity for Columbia is vaginal lidocaine to prevent and treat dysmenorrhea, a very common condition characterized by severe uterine cramps and debilitating pain. In the US, approximately 5.6 million women in the 20 to 45 age range suffer dysmenorrhea to the point where they frequently miss work. Based on this 5.6 million alone, we estimate the total market for this patient group could be between $1.7 billion and $3.4 billion.

Our clinical program for vaginal lidocaine has advanced on schedule. We finished recruiting our Phase II crossover study of this product candidate in early April and all patients completed both courses of treatment and all follow-up in July. The amount of data that was collected in this trial quite large and the database cleanup and query cleanup is underway. We remain confident that we can report study results near the end of August, assuming each side is diligent in responding to the queries which must be completed in order to conduct that analysis.

Assuming positive Phase II data, we will likely meet with the FDA and begin designing the Phase III program for lidocaine in 2008. This should keep us on track to meet our ultimate goal of an NDA filing in late 2010. We also believe positive Phase II data will benefit partnership discussions for vaginal lidocaine for the pediatric general medicine in other markets that fall outside our OB/GYN focus.

Our investment in these R&D opportunities is carefully measured on a risk-reward basis. Costs of the PREGNANT Study will continue to rise throughout the year as patients enter the study and begin treatment. This will be offset to some degree by reduced lidocaine related expenses since the study has concluded and the data analysis will be complete shortly.

To quickly touch on the Investor Relations front, we maintain an active program to build and maintain relationships with targets and contacts on the buy and sell side. While much of this ongoing work is intangible, we are very pleased to garnered research coverage from two sell-side analysts. Analyst David Moskowitz of Caris & Company initiated his coverage on Columbia Labs in the second quarter, followed Dr. Dr. Derek Taller of Benchmark Capital in mid July. Please note that Columbia is not at liberty to disseminate research reports and our stated policy is not to comment on opinions and projections expressed by analysts. We thank you for respecting these policies.

In concluding, we continue to estimate 2008 company revenues in the range of $35 million to $40 million, an increase of 18% to 35% over 2007 levels, which were already 70% higher than 2006 levels. I am also extremely excited by the opportunity to receive the analysis and share the lidocaine Phase II results with the public near the end of this month. My management team believes the next 12 months will be an exciting time to be with Columbia.

With that, operator, please open the call to questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator instructions) We will take our first question from David Moskowitz with Caris & Company. Please go ahead.

David Moskowitz – Caris & Company

Thank you. Good morning, everyone.

Bob Mills

Good morning, David.

David Moskowitz – Caris & Company

So, first question I have is on the top line, a very strong top line in the second quarter, certainly above our estimates. Can you tease that out a little bit in terms of what you saw internationally from Merck Serono versus US, in particular if there was any strength overseas, what was that due to if there was any?

Bob Mills

I think, David, I’ve mentioned this a number of times in the past that we’ve seen consistent growth in the CRINONE foreign markets, or at least many of the markets for two reasons. There are more and more countries that are getting into and having reproductive endocrinologists conduct more of the infertility treatment. And we know that because at the last ASRM meeting we had a number of – in fact, probably at least half of the participants were from outside the United States, and they all came up to our booth and talked about how great CRINONE was. I think – so, Merck Serono is doing a very nice job of growing the product outside the United States, especially in what I'll call the developing our emerging countries. And they are continuing to get approvals in other countries. So every time there is an approval, it obviously helps add some volume to what they are moving. So I think that that’s pretty much. And in the United States, now that we are fully ourselves, as I've mentioned, we see our scripts up nicely. It's on a nice trend. I mean, obviously the money that we are putting into our marketing programs are to try and create the little bit of hockey stick there and that we have a fully staffed sales force now. We have great marketing programs in my mind. And we are starting to see the impact of that. So, that helps in the CRINONE US side. And then also, Ascend Therapeutics, we turned over promotion of the 4% to them because the number of doctors that they call on is much larger than the number of doctors that we call on in the OB/GYN frame because we're mostly focused with doctors that spend a lot of time doing infertility work. And that was – the sale for 4% were never really large, but they are growing, and that's exactly what we hoped would happen.

David Moskowitz – Caris & Company

What I’m trying to tease out, Bob, is can you talk about the growth of the product in the US? I mean, on a year-over-year basis, did you see an increase? And then I guess my other question – the point I’m making on the international sales is, would you expect that to abate a little bit in the third quarter, given that Europe generally shuts down during that period of time?

Bob Mills

That’s a very accurate statement. Typically the third quarter from an international standpoint, everything tends to fall off slightly because most everybody takes August off. So there is not a lot of people trying to get pregnant during that month. So they could abate somewhat. But for the year, we still see overall growth in that 10% to 15% range for the CRINONE foreign. We actually, from a US standpoint, and if you add up all the numbers, we are looking for an overall increase in sales of between – somewhere between 18% and 35%. So it’s either 35% – somewhere between 35% and 49%. And if we are looking at our – the growth, if you listen to what Jim said, that other products grew at about 13% this year. That basically means that we’re planning on seeing some nice growth from the CRINONE US market side this year. And that’s – and I guess that – does that answer your question, David?

David Moskowitz – Caris & Company

Yes. I mean, I’m just trying to get a little bit more accurate of – try to pin down what the US grew. So, 18% to 35% on that continuum, what do you think it did on a year-over-year basis in the US? Hello?

Bob Mills

Well, I’m just looking at some numbers here to try and get that for you.

David Moskowitz – Caris & Company

Sure, I appreciate you. I can actually continue on if you would like. I guess, and Jim had mentioned the increase in working capital of little over $1 million in the period. Could you talk about what that investment was in, Jim? And if that is in fact an inventory build, which it looks like in the statements, is that something that will come back as that inventory works through? Thanks.

Jim Meer

Yes. Again, because we talked about the European shutdowns, one of our key intermediary suppliers shut down in July. So we needed to get product moved out of that location into the finished goods area so that we would be able to supply product during the third quarter. So the answer is, that’s more than likely to come down during the third quarter, that inventory build. And of course, receivables are up for the same period of time.

David Moskowitz – Caris & Company

That was your $1 million – I mean, that’s –?

Bob Mills

It was $1.9 million.

Jim Meer

$1.9 million, yes.

David Moskowitz – Caris & Company

1-point what?

Jim Meer

$1.9 million.

Bob Mills

$1.9 million.

David Moskowitz – Caris & Company

And so you would expect that to come back in subsequent quarters?

Jim Meer

Well, part of it would be – because again if we're hoping to grow our business, receivables are not likely to come down.

Bob Mills

Right, hopefully not.

Jim Meer

Yes. Inventory levels will sort of flatten out or come down.

Bob Mills

But not much.

Jim Meer

Not much.

Bob Mills

Yes.

David Moskowitz – Caris & Company

Okay. And I guess while you are stilling looking for the US growth enrollment in the PREGNANT Study, can you talk about that and whether or not you're on track to complete that enrollment? I think by year-end was the previous guidance?

Bob Mills

The guidance is the same, whereas we believe that we are still on target to complete enrollment by year-end. And let me go back and answer the other question because the numbers I have here aren’t helping me much. We are – if you looked at the quarter-over-quarter growth that Jim talked about, I think he mentioned we were up 59% quarter-over-quarter for progesterone.

David Moskowitz – Caris & Company

Yes.

Bob Mills

And a nice portion of that has to be related to the United States sales. We really have never given out breakout by numbers, and I’d really prefer at this point not to do that. So –

David Moskowitz – Caris & Company

Okay. And just lastly on the R&D costs, $1.7 million in the period, and you mentioned now you don’t have the expense of lidocaine trials until you meet with FDA. So, what does R&D look like in the third and fourth quarter, given that you are ramping up on the PREGNANT Study relative to this $1.7 million base of the second quarter?

Bob Mills

It’s definitely up. I think on an annualized basis, we’d probably be in about $8 million range.

David Moskowitz – Caris & Company

Right, got you. Okay. I’ll get back in queue. Thanks.

Bob Mills

Okay. Thanks, David.

Operator

We will take our next question from Derek Taller with Benchmark. Please go ahead.

Derek Taller – Benchmark

Thank you for taking my questions, and congratulations on a great quarter.

Bob Mills

Thanks, Derek.

Derek Taller – Benchmark

Regarding the lidocaine trial, can you draw any parallels between the way the pain scores were conducted in the pilot study versus the randomized Phase II study for lidocaine BDS? And then specifically, how many pain scores are recorded in the randomized study for each patient and when are they recorded? And I just wanted to – maybe you can just highlight some of the salient points about why you believe this trial may succeed?

Bob Mills

I wish I had Dr. Creasy with me, but let me try and answer as much of that as I can. One of the ways that we measured pain in the pilot was on a 11-point basis, one to 11. We use that – that is one of the two measurement tools in this trial as well. So there is going to be some way to correlate between the pilot and this trial. The other pain measurement is the classic validated that’s used in a lot of migraine headache pain studies. It’s on a one to four basis. And that’s a pretty well validated pain measurement. I believe George told me that they are measuring – they are recording their pain levels at least four times per day. So during an average waking day they're awake about 16 hours, let's say, so they are recording them about every four hours in their diary. That’s why I mentioned why while trying to clean up this validation and the queries, we collected a lot of data even though there were only 71 patients. So it’s a little interesting watching that process take place. Now why do I think it should be successful? It’s a clinical study. We have a very interesting pilot study. I don’t know if everybody is aware of this, but just a real brief recap. We had 24 patients who were infused. They took part in a stimulated dysmenorrhea model that is a well accepted model for studying dysmenorrhea, so you don’t have to wait for all these women who have their period. If we took 24 women who were already very severely – had severe dysmenorrhea, they understand what it feels like and we infuse them with vasopressin. The body naturally releases vasopressin, which starts the cramps or the contractions of the uterus, which pushes the blood out that if a women is not pregnant. The vasopressin, we actually measured the intensity and the number of cramps that occurred in the uterus through the probe, so the mechanical measurement, and then we had two pain scores in which they recorded their level of pain from the cramp. We then let that wash out of their system. We split the group in half. We took 12 and put them on placebo – actually we get – we took 12 and put them on placebo. We took 12 and used a concentration, a 5% concentration of lidocaine. The lidocaine, we then five hours later, we reinfused vasopressin and then recorded the same measurements and then adjusted for baseline. And then after that adjustment, the two pain scores as well as the number of contractions – the differences were statistically significant. The intensity of the cramps was a strong trend. It just was not quite statistically significant. So out of 24 women to get that kind of statistical significance was pretty impressive. So the fact that both pain models showed statistical significance in a small group like that, as well as the number of cramps. In my mind, I mean this is my own – that it should translate over into a real study in which the women are their own controls in that one period – one month they are on drug, and other month they are on placebo, they just don't know which is which. So I mean, we are feeling good about the study because the pilot study was good from a standpoint of – but again, I have to bring up. I mean, it’s a clinical trial. So, until we have the data, we won’t know for sure.

Derek Taller – Benchmark

Also what conference would you expect to present that data at?

Bob Mills

Well, we’re going to – we'll actually press release the results. We are expecting to be at the UBS Conference in September, and I would imagine that would be the first time that we would be able to talk a little bit more broadly than a press release about the results.

Derek Taller – Benchmark

And regarding the short cervix market, outside of the CME program, are you able to make presentations at the Maternal-Fetal Medicine Annual Meeting that’s upcoming in January?

Bob Mills

We have some plans to do some things there, but again everything that we do prior to receiving an approval on a label indication has to be done in the realms of the medical education. We cannot promote for anything off label. All we can do is through the right channels in which case we are doing that one program through Penn State is to educate the physicians and let them know. Now what the medical science liaisons can do is –especially we’re really focused on what those folks – on calling on the academic institutions where scientists really created where adoption of new things is probably the first to occur. And the MSL meet with the institutional physicians, and these are pretty influential people, and the process is to educate them on just the category of preterm birth. And then what happens is the MSLs, they can’t hand anything out, they can’t do any type of promotion, and they are very cognizant of that. But they can if one of the physicians says, can you share with me the data that’s available? Can you share with me what’s known? They do have a lot of information. There is a lot of different resources now that are becoming available with regard to just demonstrating that short cervix is very highly related to preterm birth. I mean, that was (inaudible) study. If the doctor asks, they can share the data from the New England Journal with them or our study with them. So that's kind of how – but as far as the MFM, I don’t – at this point, I don’t know exactly what is planned for that meeting yet, but there will not be any direct promotion.

Derek Taller – Benchmark

Okay. One final question. Jim, might we expect an uptick next quarter in other product revenue due to the timing of recent orders, particularly RepHresh, others?

Bob Mills

If there is an uptick there, it’s going to be small. What happened – when we say those are the orders, if the other products were up about 13% over – for the first – they were down in the second quarter for the first quarter, they were up a little larger. If you look at the overall six months, I think Jim reported that we were up 13%. I would consider that that’s probably about where we will stay in other products. It’s about 13% over the last year.

Derek Taller – Benchmark

Okay. Thanks. That’s all my questions.

Operator

(Operator instructions) And we will take our next question from Tom Shrader with Rodman. Please go ahead.

Tom Shrader – Rodman

Good morning. Thanks for taking the question. Congratulations on a nice commercial quarter.

Bob Mills

Thank you, Tom.

Tom Shrader – Rodman

I had a question about – you keep commenting that the sales force is complete now. Given the nice commercial uptick, given the fact that there is a competitor, why do you think you are done? Do you think more sales people could help even more? It seems like the last time you added, you got quite a nice response.

Bob Mills

That’s a good question. A lot of people ask us. If you look at the 1.2 million cycles that are infertility cycles every year, about 800,000 of those come in the area of clomiphene citrate that are primarily prescribed by OB/GYNs. Then there is about 300,000 IUIs or insemination where the doctor actually inseminates the sperm or puts the sperm into the fallopian tubes. And then you have about 100,000 to 150,000 IVFs [ph]. There is about – if you look at the top 80% to 85% writers of those 800,000 clomiphene citrates, you’re talking at about 2,300 doctors. If you then look at the doctors that are doing the other 400,000, there is between 600 and 700 reproductive endocrinologists in the country. So you add those two together, it’s about 3,000. We have 30 sales reps. 30 reps, that’s about 100 doctors worth of coverage. So we don’t necessarily believe at this point that adding a rep is going to make any huge difference because they really are covering the doctors that they have right now fairly well. Now, we will be starting to add reps as we get closer to the potential launch of PROCHIEVE for short cervix, assuming that all of that data and everything works out to our – but that won’t be until probably in the year – late ’09 or early 2010.

Tom Shrader – Rodman

Okay. If I can ask – if I can switch to the lidocaine program, do you feel like you have to partner that before you go Phase III? Is the expectation you would need two good sized Phase III trials of somewhere around, I don’t know, 1,000 patients in the database before you could apply for approval on that drug? Is that kind of the lay of the land for – or because lidocaine is used so much, is it maybe less?

Bob Mills

Yes. Well, obviously the data that we receive from the Phase II will help us decide what’s the right number for the Phase III, but I think 1,000 would be on the high side. It’s probably 50%, 70% of that number that will actually be required. But again, the data will tell us that. Now actually we’re going to – do I think – what my intent is, and I think I mentioned this may be my last call. I think if the data is strong, I mean we will immediately set up to go and meet with the FDA and figure out what is it we need to do to get going on a Phase III. The likelihood of finding – I mean, we’ll be actively looking for a partner, but again the type of partner I’m looking for is to cover the young women who are not yet going to the OB/GYN. My intention would be, if we’ve already expanded – and this is assuming everything goes the way we hope, we plan it would, would be to expand our sales force somewhat to cover for the short cervix because there’s about 8,000 doctors that are delivering babies today in the United States. Now, with a – if the lidocaine works to our advantage and everything works in these clinical studies and we could get an approval for that, then now you’re going to talk probably closer to 20,000 to 25,000 OB/GYNs, so you could expand again. I have no intention of going after the young women who are not going to OB/GYN or some women who just don’t go to OB/GYN, they still go to their family practice doctors. So my intent was to try and partner what could be almost as equal size market as what we have in the OB/GYN side and general practitioners, possibly pediatricians because younger, older, they get to be 12 and 13, maybe they haven’t switched over to a family doctor yet, they still want a pediatrician. But I will go out there if somebody puts an offer on the table and says, we want the whole thing, and that offer is advantageous to the shareholder, we will certainly entertain that as well.

Tom Shrader – Rodman

Okay. And then one technical question, what are you basing your dose on? What kind of data do you say, because you expect additional dosing, or are you pretty sure you have the dose?

Bob Mills

I think we will know that very well in the next couple of weeks. Yes, we’re pretty confident that we have the right dose, but the data will tell the story. We had really great response from the 5% and we ended up studying with this study, the 10%. So I think we are – Tom, like you said, the studies will – we also in the PK studies, we saw the right amount of safety from higher dosage form. I mean, it was significantly less in the blood stream than even with the approved product that’s on the market now for – I guess these are lesser [ph] back pain and nerve pain. It's called Lidoderm put out by Endo, and our levels are well below their levels. So I think we’re in good shape, but again by the end of this month we should have a pretty good clarification if we've done everything the right way.

Tom Shrader – Rodman

And one remedial question. How are you dealing with planned cerclage in the PREGNANT study?

Bob Mills

If there is a planned cerclage, the person does not go into the study.

Tom Shrader – Rodman

So it's an exclusion. Okay. Thanks a lot.

Bob Mills

Okay.

Operator

We will take a follow-up question from David Moskowitz with Caris & Company. Please go ahead.

David Moskowitz – Caris & Company

Thanks. Just one question. So, 71 patients in this Phase II trial for lidocaine, would you be able to comment on whether or not this trial is powered to show statistical significance?

Bob Mills

Well, if you look at – that’s a hard one to answer because we think it should show statistically significance, but there is a lot of unknown when you're doing a Phase II trial study. Powering is always a function of did you have all the right assumptions in there. So if we don’t (inaudible) get statistical significance with this really, really, really strong trend, I mean, that’s not going to stop us from moving forward. Again, it’s just going to be what did the data say. So can I – when we designed it, did we design it to hopefully see statistical significance, the answer is yes.

David Moskowitz – Caris & Company

You did design it for statistical significance.

Bob Mills

Yes. But again, yes – David, you’ve been in this business for long. The assumptions are really keys to how powered this study is or not.

David Moskowitz – Caris & Company

Okay. And just back to the partnership question from before, I'm sure partners out there would like to see data that’s pretty much the way things are working today. Do you think if you don’t achieve statistical significance, but you do see a good trend that the dialog that you plan to have with partners will be able to progress pretty much the same as if you did see statistical significance?

Bob Mills

Absolutely I do.

David Moskowitz – Caris & Company

Okay. Can you give us an indication of the interest level on a product like this?

Bob Mills

You mean, have we had interest yet?

David Moskowitz – Caris & Company

Yes.

Bob Mills

Well, we had a number of folks that when we talked to have expressed a great interest in seeing what our Phase II data looks like.

David Moskowitz – Caris & Company

Got you. Okay, thanks.

Operator

And we’ll take our next question from Ralph Labriola [ph] with Wachovia. Please go ahead.

Ralph Labriola – Wachovia

Hi, Bob, congrats on a good quarter. Topline looks wonderful. I’m interested only because we’ve gone through the trial in a sense before on the PREGNANT Study, and I’m wondering if this is completed, let’s say, by March of next year, is there some sort of an expedited NDA process only because we’ve been there in a sense or am I way off base there? What can we expect in the way of an NDA process?

Bob Mills

On the timing, we expect and our current plans are to have this being fully enrolled by the end of the year, which means that the last baby would likely be born in April-May. So the data is probably going to be, the earliest we’re going to have the data available for public review is going to be in May-June. That’s – I just want to make sure that that was clear. Yes, I think this product, if all of the data is supportive, would clearly get an expedite review, not because of all the work we’ve done in the past, but because there will – we’re the only ones right now that are studying a drug with an intended purpose of filing an application for the use of progesterone in women with short cervical length at mid-term. Now what does an expedited review mean? If the FDA grants an expedited review from the day that you’ve filed and they have accepted your application, they will give you an answer in six months versus what usually turns out be ten months or longer. So it is quite a bit quicker. And so does that answer your question, Ralph?

Ralph Labriola – Wachovia

It does. The only other question that comes to mind is, between now and a year from now, do you see revenues coming up or net more importantly relative to current cash position and obviously bringing a partner in after lidocaine, after we get through the clinical too is an important piece to that puzzle, but what do you see happening and maybe this is more a question for Jim with the cash position and getting through the next, let’s say, three, four, five quarters?

Jim Meer

I think what we’re trying to say is that, we’re trying to manage the burn rate as best as we can. We know our expenses are going to go up a little bit between now and year-end. That's why we're focusing in very tightly on our working capital levels, etcetera. So we should have enough money for the next several quarters.

Ralph Labriola – Wachovia

And if lidocaine, assuming it does work going forward, obviously a partner would bear the significant amount of this expense of the clinical, or is that incorrect?

Bob Mills

No, I think that – if you take the two different scenarios, one scenario would be that we keep the product for the OB/GYN market and we find a partner that is interested in the pain side with relation to general practitioners and pediatricians and whatever. The intent would be that we get a nice something upfront, we get some milestone payments, and they split at least half the cost of moving forward in the Phase III and any other work that we’re required to do. If somebody – as I mentioned, if somebody came along and I think this is in the – and they came along, they said, “Look, we just want the whole product. We already call on OB/GYNs, we call on general practitioners, it’s a big company. Here’s what we’ll give you.” Then I would expect that they would pay the rest of all the cost to take the product from where we are today to approval.

Ralph Labriola – Wachovia

Okay. Looking forward to it, and certainly wish you guys the best of luck.

Bob Mills

Thank you.

Operator

At this time, there are no further questions. Mr. Mills, I will turn the conference back over to you for closing comments.

Bob Mills

Thank you, everyone, thanks for listening on this call. I hope to see many of you once the fall conference season begins. As I mentioned – we hadn’t mentioned yet but I did today, we're going to be at the UBS Conference. We don’t have the date and times yet, but we will put that up when we have that locked in. And until then, enjoy the remainder of your summer and have a good day. Thank you.

Operator

Ladies and gentlemen, this will conclude the Columbia Laboratories 2008 second quarter conference call. We thank you for your participation. And you may disconnect at this time.

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