ZymoGenetics, Inc. Q4 2009 Earnings Call Transcript

| About: ZymoGenetics, Inc. (ZGEN)

ZymoGenetics, Inc. (ZGEN) Q4 2009 Earnings Call February 11, 2010 4:30 PM ET

Executives

Susan. Specht - Director, Corporate Communications

Doug Williams - CEO

Jim Johnson - CFO

Stephen Zaruby - President

Lennie Ramos - Chief Medical Officer

Analysts

Howard Liang - Leerink Swann

Brian Abrahams - Oppenheimer

Paul Latta - McAdams Wright Ragen

David Miller - Biotech Stock Research

Jeff Elliott - UBS

Operator

Greeting and welcome to the ZymoGenetics fourth quarter and year end 2009 financial results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce to your host Susan. Specht, Director of Corporate Communications for ZymoGenetics. Thank you, Ms. Specht you may begin.

Susan Specht

Good afternoon everyone, welcome to our fourth quarter 2009 conference call. Before we begin I would like to remind you that we will be making forward-looking statements as part of our prepared remarks and in answering your questions. These statements are subject to many risks and uncertainties that could cause actual outcomes to be much different than we predict. Please look at our SEC filings, including the Form 10-K for more information.

Now I will turn the call over to our CEO Doug Williams.

Doug Williams

Thank you Susan, and good afternoon everyone joining us on today’s fourth quarter 2009 earnings call. Besides myself I am joined by Jim Johnson, our Chief Financial Officer who will give you a recap of fourth quarter 2009 and guidance for 2010 also here for Q&A are Stephen Zaruby our President and Lennie Ramos our Chief Medical Officer.

Looking back on 2009, we took a number of steps to reshape the company and position us for success going forward; we changed our business model to focus on developing and commercializing a smaller portfolio of assets in which we will maintain a significant ownership stake. Our efforts will be focused on our commercial products RECOTHROM and three immunology assets either in the clinic or moving to IND fillings soon.

This shift in strategy came about after an extensive review of our business and identification of the asset that we believe have the greatest value generating potential in relationship to the investment required. The change resulted in reducing our operating expenses by approximately $40 million annually and reducing the size of the work force by more than 40%. RECOTHROM is an important part of the strategy going forward as you will hear from Jim in a moment, we have more than triple sales of the product from 2008 to 2009, which expected to achieve cash flow positive status by year-end and begin to contribute cash to the rest of the business. This has always been the vision for RECOTHROM a source of capital to be invested in the truly transformational pipeline program, which leads me into our immunology pipeline. PEG-Interferon lambda it’s a potential blockbuster that we believe will become the interferon of choice for use in combination regimens for hepatitis C virus. The preliminary data shows that this molecule has a strong safety profile and has potent antiviral activity across the broad dose range.

Addressing the poor tolerability of interferon alpha how far could have potent well tolerated one is our aim with this program. With our partner Bristol-Myers Squibb we initiated our Phase 2 program in October. ZymoGenetics will have a significant financial stake in the U.S. market and will receive double digit royalties on sales outside the U.S.

IL-21 is also a clinical candidate for which we maintained world wide rights and address as another large underserved market metastatic melanoma. Our preliminary data released in May on the first 24 melanoma patients from our on going phase-II study shows that the drug had impressed activity and was tolerable on an out patient dosing regimen.

Last and certainly not least is an antibody directed against IL-31 and almost by that time discovered at ZymoGenetics? We maintained worldwide rights on this molecule as well and it addresses another very large unsatisfied market severe atopic dermatitis.

Current therapies are limited steroids and topical calcineurin inhibitors and are largely ineffective in the over 5 million patients in the US with this disease. IL-31 shows a striking correlation with human atopic dermatitis and causes the intense itching in the skin that’s the root cause of this disorder. Neutralizing this cytokine is novel and highly-focused strategy to address this significant unmet medical need.

We focused our business and our workforce around the highest value assets in the portfolio. We have a growing commercial product in RECOTHROM and three immunology assets which had significant commercial value to ZymoGenetics. Success with one or all of these will be transformational for our company.

Just to recap the year that was 2009, I thought I had run through what we consider to be the major accomplishments for the year in terms of business transactions and structural changes for the company which support our revised business strategy.

In January of 2009, we announced an alliance for development and marketing of PEG-Interferon lambda with Bristol Myers-Squibb. This is the largest Phase 2 deal by value ever executed and provided ZymoGenetics with $200 million of signing in milestone fees in 2009. Also in January of 2009, we regained the ex-North American right to IL-21 from Novo Nordisk in a cashless transaction.

In April during the first phase of our restructuring, we reduced the work force and our expenses by approximately $30 million annually and focused research and development on immunology programs. In May we presented final data from our Phase 2 renal cell carcinoma trial with IL-21 in combination with Nexavar showing that the drug appeared active and tolerable as an outpatient regimen. Preliminary data from our melanoma Phase 2 study results were presented in May and shows that IL-21 appears to be active against this tumor as well. Accruals for the study was completed in August and final results will be available later this year. In October, we initiated a Phase 2 dose-ranging PEG-Interferon lambda in treatment-naïve HCV patients. This triggered the receipt of a $70 million milestone payments from BMS. Our final Phase 1b study results of PEG-Interferon lambda were also represented at the AASLD meeting in November.

In December of last year, a lot of activity took place. First, we concluded our corporate restructuring effort and further reduced expenses in headcount to eliminate another $10 million of annual expense. We focused our activities on RECOTHROM sales and marketing and on the support of the three immunology programs mentioned previously are most valuable assets.

Second, we finalized an agreement with Novo Nordisk to grant them North American rights to our anti-IL-21 monoclonal for auto immune and inflammatory conditions. Novo already had ex-North American rights and this transaction consolidated the rights with a committed partner. We received a $24 million upfront payment for this preclinical molecule and expect to receive another $10 million in 2010. The deal also allows ZymoGenetics to decide whether to co- fund Phase 3 development based on Phase 2b proof of concept data for an increased royalty rate and the option to co-promote the product in the US, thus preserving future upside value without added near-term cost.

Finally, in late December, we announced restructuring of our relationship with Bayer for RECOTHROM. We regained sole control of marketing and sales for the US and reduced our expected payments to Bayer. We expect this change will result in greater profitability for RECOTHROM and a more rapid achievement of cash flow positive status for the franchise. Bayer also returned the rights to RECOTHROM outside the US with the exception of Canada to us. The product is approved in Canada and will receive royalties on Canadian sales as well as have the opportunity to find new committed licensees for the products outside the US and Canada.

2009 was a year of fundamental change and significant accomplishments, 2010 will be a year focused on execution. With PEG-Interferon lambda, we plan to present results from our Phase 2a study with PEG-Interferon lambda at the AASLD meeting this year including RVR, EVR and safety data on all patients enrolled. I am pleased to say that enrollment is now complete to the lambda Phase 2a study and we are on track to initiate the blinded Phase 2b study mid year.

For IL-21, we’ve submitted an abstract to ASCO with the results from our Phase 2a melanoma study. Assuming the abstract is approved we will present the data at that meeting. We will also initiate a randomized Phase 2 study of IL-21 versus DTIC in the second quarter of this year working with the NCIC in Canada. We will continue to search for a partner to commercialize IL-21 outside the US.

On the RECOTHROM front, we continue to gain market share and in January we published pooled safety and immunogenicity data across 8 different clinical studies in the Journal of the American College of Surgeons. This data further supports the safety and differentiation of RECOTHROM as a topical hemostat; we have recently been notified by FDA that they will require more time to analyze the mix of the citizen petition we filed in August which was inline with our expectations for their actions. Less visible but no less important will be the GMP manufacturing of the IL-31 monoclonal antibody and the initiation of IND enabling toxicology studies to support a first half 2011 IND Filing.

So I’m pleased with where the company is today, similar plan going forward and now let me turn it over to Jim Johnson to discuss our financial performance in Q4 and guidance for 2010. Jim?

Jim Johnson

Thank you, Doug. The company proceed of $13.6 million profits for the quarter which resulted from a one set of recognition at differed revenue related to restructuring of the their agreement. It was the positive quarter financially was increased RECOTHROM sale further reductions in ongoing operating expenses. A $94 million of cash inflow is from milestone payments.

All of our financial goals for the year ending with the strong cash position strengthen further by the additional $91 million rate of last month. Net sales of RECOTHROM increased $10.6 million for the quarter including 1.4 million (inaudible) to try the clinic launch in Canada. For the year sales of (inaudible) firm within our range of guidance further in asset sales to be included. At the hospital level we continue to see increasing demand in Q4, we estimated the growth that approximately 18% compared to the third quarter. Cognition and license revenue for the quarter were $51.2 million and the largest component of this total was the acceleration of $34 million related to their agreement. This represents full recognition of all preferred revenue related to those agreements. We recognized approximately $9 million under our Interferon Lambda collaboration with Bristol-Myers Squibb and another $5 million related to the IL-21 monoclonal anti-body deal with Novo Nordisk that we'd find during the quarter.

On the expense side cost to product sales totaled $3.5 million and of this amount $1.3 million related to the products sold there and the remaining $2.2 million related to US sales. R&D expense for the quarter was $24 million which included $3.9 million of cost related to the December head count reduction. Excluding this one-time charge, we saw a continuing declining trend in R&D expense from quarter-to-quarter. Stock-based compensation expense is $2.9 million for the quarter, $1.5 million was R&D and $1.4 was in SG&A:

We ended the year with $174 million of cash and investments, during the quarter as Doug mentioned we received a $70 million milestone payment for BMS related to the start of phase 2 for Interferon-Lambda plus we got another $24 million of upfront money in the IL-21 monoclonal deal with Novo Nordisk.

For now lets look ahead to 2010 and our financial guidance for the year. These estimates reflect our current expectation based on the information we have available to us today. We expect to continue to build the market for the week] of in 2010 much like we did in 2009 converting existing users of bovine thrombin to RECOTHROM. We project that net sales for the year will be within the range of $48 million to $54 million. Total revenue for 2010 should be in the range of $125 million to $140 million. And besides RECOTHROM sales the other major components of this amount are revenue recognized under our Interferon Lambda collaboration with Bristol-Myers Squibb and from our license of the IL-21 monoclonals to Novo Nordisk. As the total we expect to recognize $45 million to $55 million of revenue under the VMS lambda collaboration.

None of these represents cash in inflow in 2010, a fully reorganization of amount that were recorded as deferred revenue or collaboration obligation when you receive the cash in 2009. And the amount we recognize for the year can vary depending on the amount of expenses we incurred during the year. We expect to recognize approximately $31 million of revenue from a Novo Nordisk IL-21 monoclonal license transaction.

$20 million of this amount was received in 2009 and deferred into 2010. $10 million is from milestone payments that will be my IND filing and initiation of Phase I testing which we currently expect to occur in the second half of this year. The $1 million balance is reimbursement for a tech transfer cost. Royalties will be minimal in 2010, we haven’t assumed any licensed in milestone revenues from the transactions.

Now turning to operating expenses, we expect cost of product sales to be 28% to 30% of net product sales in 2010. Over the course of the year we expect cost of product sales to trend upward for two reasons. First we expect to begin selling product in the second half of the year that will include all related cost. Recorded certain manufacturing cost primarily for both active drug to extend prior to FDA approval. Up until now we have been selling product without this bulk drug cost element. The second reason is that we have minimum payment obligations towards fill and finish contractor and these are impacting the cost of product that would be sold in 2010.

R&D expense for the year is expected to be within the range of $75 million to $85 million. The 15 to 25% reduction versus 2009 reflects cost savings from our 2009 restructuring effort partially offset by an increase in the cost of the Interferon Lambda program. In fact we expect lambda program cost to be at least half of the total 2010 R&D expense.

SG&A expense should be in the range of $55 million to $60 million approximately half of this amount represents sales and marketing expenses and the other half S&A, just to clarify SG&A expense will not include any commissions table there, we will pay there a maximum of $12 million in total commissions over the two years 2010 and 2011. But we have established the liability that will be released when those payments are made accordingly there will be no impact.

Overall, we expect our net loss for the year to be in the range of $20 million to $35 million or from $0.23 to $0.41 per share. Fees per share amounts are based on approximately 86 million outstanding shares which includes the 16.1 million shares issued last month. And we've strengthened our cash position significantly, taking into account the $91 million of net offering proceeds our pro forma beginning cash investment balance is approximately $265 million, it's important to note however that about $76 million of this amount is earmarked for the Lambda program that is this amount is earmarked for the lambda program. That is the amount remaining on our $100 million funding obligation as of the end of 2009. We expect to satisfy most of this obligation in 2010 with a small amount carrying over into Q1 of 2011. Capital expenditures are expected to be minimal in 2010 and our total inventory should be fairly flat over the course of the year.

We expect to end 2010 with at least $140 million of cash in investments and looking beyond to 2011, the amount of cash needed to fund our operations will be significantly less than in 2010. We expect the substantial decline in lambda R&D expenditures as we transition through funding 100% of the overall program cost to 20%.

Furthermore, RECOTHROM should reach higher sales levels that will generate more cash flow toward funding of operating expenses. And assuming we are successful in moving lambda into Phase 3, we will receive a substantial milestone payment from BMS. So in summary our financial outlook is solid. The expense reductions we have made in 2009 together with the added cash we brought in have strengthened our financial position significantly.

We have the resources we need to get through the critical data points that have the potential to generate substantial value for the company and its shareholders in 2010 and 2011. So with that I’ll ask the operator to begin the Q&A session.

Question-and-Answer Session

Operator

We will now be conducting a question-and-answer session. (Operator Instructions). Our first question comes from the line of Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann

First question on RECOTHROM sales in Q4, if we take out the sales to Bayer for Canada, it seems like ramp] is maybe little bit slowing; I was wondering is that the real trends or is that a quarter-to-quarter bump?

Doug Williams

I think it's an 18% quarter-over-quarter increase in actual hospital demand versus 24% in Q3. I think you have seen a little bit of the seasonality take place obviously with Thanksgiving and with the Christmas holidays occurring when you are looking at actual hospital demand which is what that number represents, certainly the number of elective surgeries is going to drop off during that period, so I think that has something to do with the sort of modest change in the growth rate and we don’t expect that to continue.

Howard Liang - Leerink Swann

In your full year guidance, was there any sales to Bayer for Canada included in that?

Doug Williams

No, there are not.

Howard Liang - Leerink Swann

Jim, regarding R&D expense guidelines, it almost sounds like you are going to spent most of this 76 for the lambda program in 2010. I just don’t quite understand why the R&D is only 75 to 85?

Jim Johnson

It’s a complicated issue, but I guess the simple answer is that what flows through our P&L is R&D expense, are the amounts that we actually spend in the program and the money that BMS spends, we reimburse them for it and that just comes directly out of the liability we accrued on our balance sheet. So, if you look at our balance sheet as of December 31, I think the current amount that we have estimated for the collaboration obligation is about $62 million. So that’s how much we will expect to pay in total either to BMS or for our own costs.

Operator

Our next question comes from the line of Brian Abrahams with Oppenheimer.

Brian Abrahams - Oppenheimer

Should we expect to see any data for lambda topline prior to AASLD?

Doug Williams

It’s a possibility. I think we are still discussing that with Bristol Myers, our partner. We are certainly going to initiate the Phase 2b study prior to the AASLD meetings and we haven’t made a final decision yet. That’s obviously based on determination of the materiality for us and discussions with BMS as to whether or not we will have a topline release before that. Certainly our expectation will be full data release at the AASLD meetings as I said that would include RVR, EVR and safety data for patients through that point in time. So I think there will be a very large body, a very meaningful data at AASLD, and we want to preserve in whatever we do, our ability to have a presentation at that meeting and wouldn’t want to do anything to stand in the way of that with any prior release of information.

Brian Abrahams - Oppenheimer

Is there any reason we might not see the RVR data. It seems like its enrollment being completed in the Phase 2a, at least the four week data should be available in time for easel abstract.

Jim Johnson

Yes, we made the determination that we didn’t have a sufficient number of patients enrolled at that point to get an abstract in. We never really expect that we be in a position to have an easel abstract from the 2a study and that’s in fact the way it turned out. We’ve actually just completed the accrual literally this week and with the last patients being randomized to the study. So the study is very much still in process right now and we don’t have the RVR data on all of the patients at this point.

Brian Abrahams - Oppenheimer

The one last question regarding RECOTHROM, can you just give us a sense as to the status of the sales force, how it’s currently structured and whether you have seen any impact at all during this quarter of the transition with the Bayer sales force leaving and you guys building up your own sales force.

Stephen Zaruby

As we indicated in December we are in the midst of scaling up our sales force to cover the market place and our projection is that we will have everything filled in place and up and running at the close of the first quarter. We do have some people in line and in terms of the number we are scaling up accordingly to satisfy the market and to cover the opportunity and we are on track to do that, so we do not see any deficits or deficiencies, but they are stepping out the way we were structured before geographically we had overlap between the Bayer reps and the ZymoGenetic’s reps. So we do have people on the ground, so in effect, there is no wide space and there has not been any quite space.

Operator

Our next question comes from Paul Latta with McAdams Wright Ragen. Please proceed with your question.

Paul Latta - McAdams Wright Ragen

Thanks for taking my question. Actually just a little kind of follow-up on the legal term just trying to look at the shape of 2010, it sounds like there is not really any reason to believe that for the (inaudible) that there will be perhaps a soft patch in Q1 and I guess on a related matter, we saw maybe a little bit of seasonality in Q4. Is that something to think about for Q4 of 2010 or should we just sort of straight line 2010?

Doug Williams

Well, I think there is a number of different ways that you’ll own, and we certainly forecast and we do look at the mark of the number differently maybe speaking what personally we try not to respond to and look at fluctuations week-to-week or month-to-month. Yes, sometimes in the market you’ll see it come up in a it's entirety a little bit in the fourth quarter. But we are looking at growth trends as we go right down to say through four prior quarters. And that we stand by our guidance and think it’s a good direction in terms of where we should hit by the close to this year.

Paul Latta - McAdams Wright Ragen

Great. Let me ask the question just on the Lambda. It sounds like in enrolment just finished up here this week, can you comment, was that inline with your expectations, ahead of your expectations? How do you feel about the overall process?

Doug Williams

Actually it was little bit ahead of schedule so I think we are feeling pretty good about investigator enthusiasm for the molecule and our ability to get patients into the study, either as quickly as we think we are faster.

Paul Latta - McAdams Wright Ragen

I guess the big presentation at AASLD later this year, that predominantly would be on the Phase 2a, I would assume. The Phase 2b is probably next year?

Doug Williams

I think that’s right I think the Phase 2A study is what you can expect to see with RVR, EVR and a full dose of safety data as well for all of the arms of the study.

Lennie Ramos

(Inaudible) just like to add on to that, (inaudible) is a blinded study so we need to preserve and try to give that study. So (inaudible) would like be on the 2A portion of the side.

Operator

Our next question comes from the line of David Miller with Biotech Stock Research; please proceed with your question.

David Miller - Biotech Stock Research

First question is can you give us some of the delta and the product margin between nine and ten given that there's quite a bit of movement between with Bayer gone and some additional expenses your way?

Doug Williams

I am not I have got the question completely David can you elaborate a little more on that?

David Miller - Biotech Stock Research

Yeah I mean can you just talk about what the differences between the margins you saw in '09 and '10 for RECOTHROM?

Doug Williams

You are talking about just the gross margin?

David Miller - Biotech Stock Research

The biggest factor is really the kind of a anomaly of the accounting treatment for the drive that would manufactured prior to our FDA approval so basically we will require to expense that current cost and if you want to think about it this way, what we have been selling in 2009 was sort of an incomplete cost of goods because we were including both drug in the vials that had already been expensed through the P&L, so that’s the biggest difference in 2008, 2009 and 2010. I think the second half of 2010 that will be in their in-fall.

David Miller - Biotech Stock Research

Okay. So, let me ask this a different way. What would you expect the direction of the cost to the hospitals of RECOTHROM to go flat, up or down in 2010?

Doug Williams

Yeah, we are basically assuming that improved pricing perspective that there will not be any changes, we don’t intend to change our pricing and as far as the other element of our net sales computation would be the discounts that we are providing. We believe that as of the fourth quarter of 2009 the current discount program is fully reflected in the net sales number and we don’t expect a higher realization of those discounts. So I think basically we expect it to be a good base point for 2010.

David Miller - Biotech Stock Research

Okay. Can you give us some additional data on the IL-21 randomized study design? Or would you consider this an approvable design for accelerated approval or are you going to do it under an FDA and function of everything.

Doug Williams

I think it's unlikely that it would have that sort of power associated with it as we are envisioning it right now. Again, I think we see it as a study design that’s fairly straight forward, its going to be a head-to-head comparison between DTIC] which is the current standard of care on those of IL-21, single agent in both arms. But it would a head-to-head comparison study that from our perspective would significantly derisk the molecule and there is a substantial amount of manufacturing cost that would be incurred to take this molecule forward to commercialization and so we are looking on 80 patient study, head-to-head comparison that will give us additional comfort and a randomized setting to really move forward and to spend that additional incremental 100 million to get the product approved.

David Miller - Biotech Stock Research

Okay and what would the end points on the study be?

Lennie Ramos

It's regarding (inaudible).

David Miller - Biotech Stock Research

How should we think about the chances or timing for any new ex-US RECOTHROM deal?

Doug Williams

I think the reality is having just got in the product back in the not too different path, we are really just beginning the process of having discussion with potential licensees its hard to predict how those discussions will go but I think as you know it takes time to identify a partner and get a contract written I will say however that there has been interest expressed in terms of cold calls that have come to us as a result of the announcement so I think there is interest out there and we certainly think there is an opportunity to license right to another third party that will be committed to moving a program forward in whatever territory their license is for. So that’s going to take us some time to actually line that up.

David Miller - Biotech Stock Research

Alright and last question is do you have any new dates from the on the FDA on the further transportation?

Doug Williams

No, other than the fact that they won't make the deadline for the sort of 180 days statutory requirement and they have simply indicated that they need more time which candidly is what we expected would be the response from them.

Operator

(Operator Instruction) Our next question comes from the line of Jeff Elliott with UBS; please proceed with your question.

Jeff Elliott - UBS

Thanks can you tell me again what your strategies of IL-21 and when you would optimally like to partner that with the Ex-US rights?

Doug Williams

Yeah I think what we are doing right now Jeff is having some conversations with XUS], potential partners in those territories, our expectation is that under any circumstances we would be looking for an ex-US licensee and as far as the timing of that, I think we put ourselves in a position with the recent cash infusion from our equity offering to carry forward through the Phase 2b program.

I think that data will provide a basis for a strong partnership deal of the structure that we are gravitating towards which is something more akin to the structure we have with BMS around lambda where we can maintain a substantial commercial presence as far as the US market is concerned. So I think our view is that the likely scenario is that barring and ex-US deal that the likely timing of a partnership would be when we have the Phase 2b data in hand.

Jeff Elliott - UBS

When are we expecting the Phase 2a data from IL-21again?

Doug Williams

Should be at ASCO, we have submitted an abstract hopefully for presentation at the upcoming ASCO meeting this year.

Jeff Elliott - UBS

And you are going to have progression for your survival and overall survival data from that range?

Doug Williams

Yes then an estimate of overall survival, so again I think suffice to say that we are sufficiently encouraged by the data we have seen so far that we have decided to initiate the Phase 2b study.

Jeff Elliott - UBS

If you have relatively robust data from that progression-free survival and I think there is a relatively robust data set for DTIC at least from the (inaudible) trial. What does the Phase 2b get you that you are not sort of already going to have in hand?

Doug Williams

I think what it does is it significantly de-risks the program in a direct head-to-head comparison fashion. I mean I think as you know single-arm studies are notorious for providing some guidance, but perhaps not the level of comfort that one would want to pull the trigger on $100 million commitment for manufacturing and clinical study.

Jeff Elliott - UBS

And what happens if something, some data comes out between now and when you want to start that trial, does that maybe suggest DTIC isn’t the frontline standard anymore like what if the Ipilimumab data turns out to be good or something like that?

Doug Williams

That again I think is a strong rational for running the Phase 2b study because it assures that when it is time to start a Phase 3, we will actually be running against the appropriate comparative agent at that point in time. So it was another factor that went into our thinking about running the 2b study rather than launching directly into a Phase 3 program that may or may not have an appropriate comparative on it.

Jeff Elliott - UBS

Okay, you are not concerned about enrolling if that happens; it will be tough to enroll in a DTIC arm or even an IL-21 arm if something out is out there that’s reasonably approved to positive?

Doug Williams

I think the timing that we are expecting for accrual in this 2b, we will get through that window and accrued to prior to what we would expect to be an approval for that Ipilimumab under even the most aggressive of circumstances. So I think we have a window of opportunity here that we can take advantage of.

Jeff Elliott - UBS

I think you said your guidance doesn’t include any other milestone from lambda this year, are there any potential milestones from lambda, you do have anything on the start of the Phase 2b or anything from the Phase 2a?

Doug Williams

Phase 3 initiation is the next milestone.

Operator

There are no other questions in the queue; I would like to turn the floor back over to management for closing comments.

Doug Williams

I would just like to say thank you for everyone participating today and we look forward to speaking with you again in our next quarterly call.

Operator

Ladies and gentlemen, this does concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.

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