Cempra's (CEMP) CEO Prabha Fernandes on Q2 2014 Results - Earnings Call Transcript

| About: Cempra, Inc. (CEMP)
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Cempra Holdings (NASDAQ:CEMP) Q2 2014 Results Earnings Conference Call July 29, 2014 4:30 PM ET


Robert Flamm - IR, Russo Partners

Prabha Fernandes - President &CEO

Mark Hahn - CFO


Alan Carr – Needham & Company

Steve Brozak - WBB Securities

Brian Skorney - Robert W. Baird

Stephen Willey - Stifel

Joon Lee - Cowen & Co. LLC


Good day, ladies and gentlemen, and welcome to the Cempra Inc Second Quarter 2014 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Robert Flamm. Sir, you may begin.

Robert Flamm

Thank you, Candice. Good afternoon and welcome to Cempra's second quarter and first half 2014 financial and operating results conference call. Joining me on the call today are Dr. Prabha Fernandes, the President and Chief Executive Officer and Mark Hahn, the Chief Financial Officer at Cempra.

Before I turn over the call to Dr. Fernandes, I would like to point out that management will be making forward-looking statements during this conference call. Such forward-looking statements, may include statements about the timing of the completion of announcement of results of the solithromycin Phase 3 clinical trials, SOLITAIRE-Oral and SOLITAIRE-IV and community-acquired bacterial pneumonia, the next steps for development of Taksta to treat prosthetic joint infections, the timing of completion and announcement of results of solithromycin and pediatric studies in biodefense pathogens, the timing of initiation, completion and announcement of results of the solithromycin Phase 3 trial and uncomplicated gonorrhea, the plans to expand solithromycin in clinical development beyond anti-bacterial indications and the cost and results of such study, the current plans for commercialization for solithromycin and Taksta, financial guidance and other statements that are not historical facts.

Such statements may include the words, plan, will, expect, believe, may, could, would or similar words. You are cautioned to not place undue reliance on these forward-looking statements, which are only predictions and reflect the Company's beliefs, expectations and assumptions based on currently available information and speak only as of the time they are made.

Risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements, include the cost, timing, regulatory review and results of our studies in our clinical trials, our anticipated capital expenditures and our estimates regarding our capital requirements, our need to obtain additional funding and our ability to obtain future funding on acceptable terms, the possible impairment of or inability to obtain intellectual property right and the cost of obtaining such rights from third party and other risk identified in our SEC reports.

For discussion of these and other factors, please refer to the risk factors described in our filings with the SEC. For forward-looking statements we claim the protection of the Private Securities Litigation Reform Act of 1995.

I will now turn the call over to Dr. Fernandes, President and CEO of Cempra.

Prabha Fernandes

Thank you, Robert. Good afternoon, everyone. Welcome to our teleconference presentation on our second quarter and first half 2014 financial results and update on our activities of the company.

I will cover the following topics during my prepared remarks. First, I will provide an update on the status of our SOLITAIRE-Oral Phase 3 trial. Second, I will describe some of the activities we're undertaking to expedite enrollment in our intravenous trial.

We're also moving the second indication for solithromycin forward for the treatment of gonorrhea. I will highlight the upcoming initiation of the gonorrhea Phase 3 trial named SOLITAIRE-United States for SOLITAIRE urethritis.

We will discuss the status of Phase 1 pediatric trial. We will provide a update on the status of Taksta for prosthetic joint infection. Also I will remind all of you about our upcoming investor event at which we will take a deeper dive on solithromycin's positioning and potential in the marketplace. Mark will then provide a financial overview for the quarter and the first half of the year.

First we want to update on SOLITAIRE-Oral, our Oral Phase 3 study of solithromycin and community acquired community-acquired bacterial pneumonia or CAP. During our last call in April, we stated that we had completed greater than 75% of enrollment and now we are approaching enrollment completion and are at about 90%. We continue to expect to release topline date during the first quarter of 2015.

Although this is a blinded study, we are able to look at the pathogens isolated and for many of the patients in the study. To share just one case from last week, a pneumonia patient in South Africa, he had a pneumococcus isolated that had an solithromycin MIC of greater than 32 micrograms per meal, which means it is resistant.

While for solithromycin the MIC was 0.015 micrograms per meal or 15 nanograms, which means it is susceptible. Many of you ask what did they manage a solithromycin over erythromycin? In this case, and it may be others, it may have been a difference of a treatment failure in a life threatening infection if erythromycin had been used.

We still believe that this will be a landmark study in CAP and will be the first Oral Phase 3 CAP study since the year 2000 and the first one to use the new CAP guidance. Importantly, these pneumonia patients can be treated on an outpatient basis, saving hospitalization for intravenous therapy with the risk of acquiring hospital acquired infections, which can also add cost and be life threatening in themselves.

Our second Phase 3 trial, SOLITAIRE intravenous is also enrolling. Although we're not providing guidance on when we will complete enrollment in this study as it is dependent on pneumonia in the coming winter months, we can provide you information on what they're doing to expedite enrollment.

We have doubled the number of sited worldwide compared to the oral study. We will be enrolling in many more countries such as Chile, Taiwan, South Korea and other countries that were not in our Oral Phase 3 study.

We know that enrollment is dependent on having access to patient population and this patient access is increased by increasing the number of sites and countries. Also we expect that being in the northern and southern hemisphere will catch -- will help us catch the cold season during the entire year.

In our second indication we will soon be initiating our Phase 3 trial of solithromycin in patients with uncomplicated gonorrhea and chlamydial infection. This is a global study with two centers in Australia and one center in the United States.

The infrastructure of the Australian public health system is being leveraged in this study to decrease our cost in this study. Mark will describe the cost to Cempra later in this call.

Importantly, gonorrhea now has limited treatment possibilities, especially with oral medication. You may remember that we showed 100% efficacy against all culture, proven gonorrhea cases in our Phase 2 trial. So we are very excited about starting the Phase 3 study soon.

Solithromycin could offer an oral alternative in monotherapy to treat gonorrhea, chlamydial and other bacterial urethral infection. The randomized trial will enroll approximately 300 men and women infected with gonorrhea. Patients will receive a single oral 1,000 milligrams of solithromycin or 500 milligrams of intramuscular ceftriaxone plus 1,000 milligrams of oral erythromycin.

Note that we're going up against two antibiotics in combination intramuscular ceftriaxone and oral erythromycin.

The primary outcome measure will be microbiological in the microbial intent-to-treat or MITT population, we expect to complete this study and submit this as an NDA at the same time the CAP indication.

It is one year since we were funded by BARDA, amazing how soon a year goes by. We are pleased with our success as we have completed the required enrollment in the Phase 1A adolescent pediatric study that oral solithromycin was well tolerated. We will let you know the final results when the data have been analyzed.

We have shown in a pilot study in tularemia that solithromycin can be cured in this difficult to treat infection model. They’ve also successfully completed developmental toxicology segment three study, which could enable us to dose patients during pregnancy and we are ready to start such trials.

Most importantly, all these studies add to the already substantial safety database of solithromycin. In addition, we have completed making the pediatric suspension formulation for dosing in younger children. This work was conducted also under the BARDA contract.

It is important to emphasize how important is the pediatric population for solithromycin. There has not been a new oral antibiotic and suspension for pediatric use in about 25 years. Now that is a generation. Our guess is that those of you who have children are receiving the same antibiotics that we have given when we were growing up.

It was estimated in a recent publication by [indiscernible] that almost 50% of ambulatory pediatric visits offer respiratory condition per year in the United States or 31.7% million visits resulted in an antibiotic prescription. The patient population is there and new antibiotics are needed.

Effective treatment initially for children is important. In these days of increasing antibiotic resistance and Cempra is working to provide flexibility of dosing formulations to meet the growing need for infections in all age groups from the youngest of children to adults.

Now for Taksta, now regarding Taksta, after exploring many possible ways to run a trial that could be acceptable for regulatory approval, we've narrowed the possibility with just a couple of options. These protocols are being written for discussion with the FDA.

At this time, we continue to enroll in the compassionate use program. These patients have no other antibiotic options left as they cannot have another surgery and also cannot be administered intravenous antibiotic chronically for the treatment of prosthetic joint infections or other bone and joint infections.

Oral Taksta may be administered for chronic suppressive therapy and we believe that we can improve the quality of life of these patients.

We've announced that David Moore joined us earlier this year as our Chief Commercial Officer. David has been conducting a detailed analysis of the market potential for solithromycin. This will be one of the topics as well as a panel discussion with KOLs at our upcoming investor event, which will be held at noon on August 7 in New York City.

Seating is limited, so please respond to Russo Partners if you received an email invitation. This event will also be webcast live on Cempra's website.

Finally, we will be presenting at three upcoming investor conferences. We will be presenting at the Robert W. Baird Healthcare Conference in New York on September 3 to 4, the Morgan Stanley Global Healthcare Conference on September 10 in New York and at the BioCentury Future Leaders Conference in New York on September 26.

This is the current status of our programs. Now we would like to turn the call over to Mark Hahn, our CFO, to review the financials. Mark?

Mark Hahn

Thank you, Prabha. Our financial statements continue to reflect our focus on our clinical development programs. We believe we are well financed for our studies. In addition to the $68.6 million of cash at June 30, we expect to receive some milestone payments under our Toyama license agreement in the next few quarters.

Additionally, we are continuing our work with BARDA and expect continued receipts under this program. Further, we have recently increased our financial flexibility by amending our venture debt arrangement with Hercules.

Under this amendment, we have extended the limit on our credit facility by an additional $10 million and can borrow that money upon reaching certain milestones prior to June 30, 2015.

We've also extended our interest-only periods from May 2015 and the amortization of principle and interest payments to 36 months, all of which provide increased financial flexibility as we work toward our NDA.

Our revenue under the BARDA arrangement was $1.9 million for the quarter and $4.9 million year-to-date. Last year we had $200,000 of BARDA revenue for both the quarter and year-to-date periods as we had just initiated the relationship in May of last year.

As mentioned on earlier calls, we expect our BARDA activity to continue at a run rate of $2 million to $2.5 million per quarter for the next few quarters.

With respect to the CAP program both Solitaire-Oral and Solitaire-IV are up and running. Both Q2 and year-to-date periods have seen significant activity in these programs and we expect our burn relative to CAP to remain high until we finish enrollment of the oral program, which is expected by the end of this year and then decrease somewhat as we are running just the IV program.

We’ll update you on our future call regarding the plans and cost of moving into a pivotal program for Taksta. Prabha also discussed the plan Phase III for gonorrhea. That work is being done through the infrastructure of the Australian Public Health System, which will decrease our cost associated with this study.

We expect to incur approximately $2 million of total cost, the vast majority of which will occur once enrollment begins.

Regarding our cash runway, we expect to have existing cash and equivalents including interest thereon, continue timely receipts under the BARDA contract, receipt of expected milestones payments from Toyama and the amended payment terms of our venture debt facility will enable us to fund our operating expenses and capital expense requirement through 2015, which includes the completion of enrollment in all trials currently expected to be necessary to support the planned NDA for solithromycin from the treatment of CAP and gonorrhea.

This projection does not include funds from future financing or partnerships beyond the Toyama and BARDA relationships. Prabha?

Prabh Fernandes

Thank you, Mark. Operator we're now ready for questions.

Question-and-Answer Session


Thank you. (Operator Instructions) And our first question comes from the line of Eun Yang from Jefferies. Your line is now open.

Unidentified Analyst

Hi, this is [John] (ph) for Eun. Thanks for taking my question. Prabha are you able to provide any further clinical trial details on the solithromycin and COPD trials slated to begin in the second half?

Prabha Fernandes

Hi John, thank you for your question. Yes, it's a good question. We thought that this meeting we would focus on the two -- three big trials actually, but I am glad you brought up that point. The COPD trial is going to be starting this year we hope in [London] (ph).

We have submitted all of the paper work for regulatory approval to start the trial and you can imagine it has to go through Empire College London and then to MHRA. Peter Barnes is very excited about starting this trial. He is also doing some in vitro work in the laboratory to additionally characterize why patients would get better with the use of solithromycin and COPD.

So we're looking in this study at about 40 patients of which 30 we hope will be valuable. In this case, we're looking at the anti-inflammatory effect of solithromycin not just as antibacterial properties.

So these 30 patients will not have an infection, but they hope that they will be able to lower their dose of steroids and to be able to go home and understand one of the primary reasons for hospitalization in the U.K. is COPD and if we can send them home earlier, that is fantastic because you are saving so much time and giving them a quality of life back.

Unidentified Analyst

Thank you.

Prabha Fernandes

You're welcome.


Thank you. And our next question comes from the line of Alan Carr of Needham. Your line is now open.

Alan Carr – Needham & Company

Hi, thanks for taking my questions. A couple of them. Can you [imagine] (ph) that you had, you were now blinded to the pathogens and the oral solithromycin trial, wonder if you can comment on the percentage breakdown, the identity of those pathogens and whether or not it's different from what you expected and then also can you comment on your early stage work with alternative compounds for use and non-antibody indications like COPD and NASH, thanks.

Prabha Fernandes

Thank you, Alan and thank you for your time today and listening in. So from the microbiology for CAP, as you know the FDA allows about five different pathogens for CAP enrollment. Pneumococcus has always been the primary pathogen and in this study we find that pneumococcus is the primary pathogen.

We also have other pathogens, the second one is haemophilus influenzae, which is also the second pathogen listed by the FDA and the third one is staph aureus. Now that is surprising and I'll come back about that. We also have Legionella. We also have a lot of Mycoplasma and haemophilus influenzae and moraxella catarrhalis.

Now the most important two pathogens are usually leptocarpus pneumonia and haemophilus and more recently staph aureus. So in pneumococcus what we find is about 40% of those pneumococcus I mean 35% to 45% are resistant to erythromycin.

Our trial as you know is being run up against staph aureus, but if they had to be treated with erythromycin, they would have been treatment failures and that's the key point. So all of those trends are still very susceptible to solithromycin. We have no pneumococcus in our trial visit to solithromycin whereas we have about 40% resistant to erythromycin.

Now in haemophilus, again we have one or two strain resistant to erythromycin which are susceptible to solithromycin, but solithromycin and erythromycin on the susceptible strains are equally active.

If you go to Mycoplasma you know that solithromycin is very potent. We don't have all of the MICs in for Mycoplasma. On staph aureus, that was the most incredible of the information I saw because I did not know staph aureus was that frequent and nobody really knows why they are getting so many staph aureus, but one hypothesis, which I have proposed is that with the pneumococcal vaccine increase is that space, which has been created by the loss of the pneumococcus not only being taken by the [non-traceable] (ph) or other pneumococcus, but if that's being taken over by staph aureus.

Now these staph aureus are not MRSA, they are MSAA or Methicillin susceptible staph aureus and they are very, very susceptible to solithromycin. Every one of those trends is susceptible to solithromycin and every one of those trends have been MIC greater than one for staph aureus for erythromycin.

So really [macro] (ph) are not generally used for staph aureus in pneumonia especially but solithromycin would be quite capable of taking care of those staph aureus.

Now for the second question you had was non-solithromycin backup molecules we have. We are making follow-on compounds for other programs. One is in the anti-inflammatory area to find solithromycin equivalent without antibacterial activity, which would have all of the strong anti-inflammatory properties.

So we have made a number of compounds, which are being tested currently and we will let you know the next time whether we have anything which is active. We do know from prior knowledge as to how to make things in different parts of those molecules, but finally we have to provide the data and we'll let you know at the next meeting.

We also have a program -- a follow-on program in the gastrointestinal area for motilin for diabetic gastroparesis and GERD and in there again, we have had molecules, which have been made and are being tested in the intestinal strip model to show that they induced a correction -- the contraction of the rapid intestinal strip in the same way as erythromycin does.

Alan Carr – Needham & Company

Great. Thanks very much. Appreciate the update.

Prabha Fernandes

Very welcome.


Thank you. And our next question comes from the line of Steve Brozak of WBB Securities. Your line is now open.

Steve Brozak - WBB Securities

Hey, good afternoon, Prabha. I have one question and one follow-up question after that. Seems like you covered a lot of ground here, but I would like to get some sense of what the KOLs are saying to you, are the three most important areas in terms of bacteria and antibiotics and how solithromycin fits in that?

And after you answer that I got one follow-up question that you have mentioned about resistance.

Prabha Fernandes

So we have had some KOL meetings and on the 7th of August, you will hear some KOL speak for themselves, but I'll tell you the ones which really struck me most. There are cases now, one of the big nightmares of the hospitals is that patients show up at the emergency room, they get a Z-Pak and they go home and guess what, they reappear to the ER sicker than they were in the first place because erythromycin or Z-Pak has failed.

That has become a nightmare because when you have a patient who is a treatment failure, obviously the hospital does not get reimbursed because they’ve been mistreated the first time, so this has become a big problem and for the patient's of view it's even worse because now the sickness is actually worse than it was the first time around and then it's harder to treat these patients and they must hospitalized.

So that is something I heard and I did not realize how common it was and the loss to the hospitals firstly from the hospitalization and secondly because they can also have a chance of getting hospital acquired infection.

The second thing I heard was that there are certain hospitals, which just don't allow the use of erythromycin anymore. So we heard for instance from sincerest of our thoughts but on children that they do not allow the use of erythromycin anymore and it's all because of resistance. So this is rampant and there is a very big need for a new macro light.

The third statement I heard from these panelists was from a hospital list and these are the been nightmares they have is that they are forced to send people home quickly because the hospitals lose money on community acquired bacterial pneumonia.

So if you have to send the patient home in two days, what do you send them home on if they’ve been on intravenous ceftriaxone, it is no oral ceftriaxone. So they cannot send them home on just [that] (ph) because you know those pneumococci could be resistant.

So then they step down to a second generation success for an [oral] (ph) to send them home. So this to them is a nightmare because you are not treating patients optimally and what is beautiful about solithromycin is that you have both intravenous and oral and you can actually switch. No, I don't say step down because it's not a step down. It's a switch to oral solithromycin as you can go home.

And many of our patients in Phase 3 oral study would have been hospitalized, but they went home on their oral product, which is saving them hospitalization as well as saving them any other infections they could get in the hospital.

Steve Brozak - WBB Securities

Okay. Now in keeping with something you said before and something you just said, obviously people are very aware of resistance, but can you give us just a quick example and I'll hop back in the queue of how much -- what greater sensitivity solithromycin has over drugs that are currently being used and how much more effective it is in terms of the reduced amounts and how much more of a response you see versus bacterial and again I'll jump back in the queue. Thank you.

Prabha Fernandes

So on the MIC wide, it is on these susceptible strength in pneumococcus. It is four to eight times sometimes four to 16 times more forked than the existing macro light. On the efficacy it's hard to say on the Phase 3 because the blinded study all I can tell you is that the study is going very well. The DMC has met and they have told us to finish the trial, which means that they know the success is good enough to keep it running, so that's good news for us.

We know the number of treatment failures of few, but the treatment successes and failures could be on either multi faucets in our competitor or erythromycin.

So efficacy wise in vitro is all I can say the in vitro activity and in animal models, but in vivo in the Phase 3 trial, I cannot study how effective it's going to be right now. All I can say is it's a good study, which is running, which we believe will give you good data.

On the other infection [tularemia] (ph), which I just mentioned, it has shown phenomenal activity in my mind because people would never had imagined using a macro light with the treatment of tularemia.

Steve Brozak - WBB Securities

Great. Thank you again and good luck.

Prabha Fernandes

Thank you. Thank you very much.


Thank you. And our next question comes from the line of Brian Skorney of Robert Baird. Your line is now open.

Brian Skorney - Robert W. Baird

Hey, good afternoon, guys. Thanks for taking the question. I guess Prabha may be if you could just kind of walk through some of the expectations you might have for the differences and baseline characteristics for the patients who are getting enrolled on to the Solitaire-Oral study versus and IV to oral study and how you think those differences can play out for the results particularly for Moxi and what can we be looking at when we see the Solitaire-Oral data to help kind of gain insight into what we should expect for the IV to oral study, thanks?

Prabha Fernandes

Thank you. So that is a very interesting question because the pneumonia is classified as I think into post course depending on the severity of the infection, but is also very heavily weighted on the age and the sex of the patient. So if you are mail and if you are 80, most likely you will be PORT III or PORT IV.

If you a female, age 50 you might end up to be PORT II or PORT I and so on. So it's very much weighted on that. It's a severity of infection and you get certain number of points for your fever, your chest x-ray and your dyspnea and your heart rate etcetera, etcetera.

So in the Phase 3 study for the Oral CAP study, you only have 25%, they are allowing 50% as required, only 25% is in our Oral Phase 3 study, or IV Phase 3 study. In our Oral Phase 3 study, they are allowing 50% of PORT II. In the PORT III and four studies, PORT III and four patients are the remainder of the 50 in the Phase 3 oral and they are 75% in the IV study.

So the number of PORT III and four are higher in the IV study. So it doesn’t mean that there is a different category of patients, it's pretty similar except there is about 25% more of PORT III and four in the IV study. So they are a little bit more sicker, but solithromycin is very, very potent against all of those CAP pathogens.

And Moxifloxacin should be let's say as effective, but as you know Moxifloxacin has safety issues, which are already known to it and are on a pathogen search. So one thing I will say is that in the Phase 2 study when we compare ourselves to Levoquin, we thought that in the early response end point Levoquin may turn out to be better, but as you know, we turned out to be comparable to Levoquin. So there is no reasons why we would perform worse than Moxifloxacin even in the sicker patients.

And remember these sicker patients have other comorbidities. So adverse events will have a big role in how they fell better. So Moxifloxacin should not appear to be any better than solithromycin, but of course at the end of the results till now.

Brian Skorney - Robert W. Baird

Great. Thanks.

Prabha Fernandes



(Operator instructions) And our next question comes from the line of Stephen Willey of Stifel. Your line is now open.

Stephen Willey - Stifel

Yes hi. Good afternoon and thanks for taking my question. I jumped on a little bit late, so I apologize if I am being redundant on asking anything, but with respect to the gonorrhea study that's being designed right now, do you intend to cap the number of patients that you are going to be enrolling within any given geography?

So I guess i.e. is there a specific number of patients that you are going to have to enroll out of the U.S. site or sites in order to kind of satisfy any requirements from FDA and then I guess second to that, will you also be targeting a certain percentage of patients who have concomitant Chlamydia infections as well, thanks.

Prabha Fernandes

So we were planning to actually enroll only in Australia first because the number of patients we need is only 250 for the study and we're enrolling 300 patients. So we will -- we could have done it in Australia alone, but we also wanted to enroll in the U.S. because we are a U.S. based company and we want to file the U.S. and foreign data is acceptable, but would be nice to have U.S. patients.

Secondly, in Australia there are fewer women with gonorrhea and we're hoping to capture some of the women in the U.S. study of the one site we -- two actually sites but one investigate we have in the United States.

So we will have sites in both, but there is no requirement to have patients in the U.S. or Australia. We would like to get some patients in the U.S. just because we are U.S. based company.

Stephen Willey - Stifel

And then with respect to the targeting of patients of concomitant Chlamydia infections?

Prabha Fernandes

I don't know but a quarter of those patients are expected to have Chlamydia. We don’t know exactly how many are going to have it, because these are different types of population groups.

But we do expect to see Chlamydia in our Phase 2 study, we saw about a quarter of the patients did have Chlamydia. So, we do expect to see it. It's one of their end points. Chlamydia is the secondary end point. But it’s not primary required for the approval for Chlamydia.

I have one correction. Our CMO just gave that to me instead of Pinnacle. He said I have made a misstatement to say that the DMC looks at efficacy. Of course they don’t look at efficacy. They look at safety. And I think all of you know that the DMC looks at safety and have said to go on with the study.

But obviously if there is a lot of treatment failures, which is what I meant by efficacy they would certainly not allow the study to continue.

Stephen Willey - Stifel

And then maybe just one other question just on the collaborator front, I think outside of the U.S. and obviously [extra pan] (ph) where you already have a collaboration in place, do you think that window between oral data and the IV data is I guess de-risked enough to get a partnership done say in Europe and I'm just trying to get a sense as to whether or not we could potentially expect anything strategically to occur within that window or do you like you would need to have data from both formulation to move forward with that, thanks?

Prabha Fernandes

As you know we will – we have said that we’ll be looking for a partner for the community market for the retail sector because Cempra just gave it more -- can certainly set up the team to sell in the hospital area.

Now we will plan to find both the retail as well as the hospital partner in Europe. Now the data, so Oral data, we’ll tell you that it work in PORT-II, PORT-III, PORT-IV Pneumonia. The intravenous also looks at PORT-II, PORT-III, PORT-IV Pneumonia as I just defined.

So it’s going to show more the same. Will it show that it works better because you have better blood level? Well it might. But as long as it works in oral, it should work intravenous because you’re getting better blood levels.

Certainly we would be looking at safety intravenously, because you’ll bleeding higher blood levels and we have all those safety records in the Phase 1, given on sick patients, give us healthy subjects but we’ve seen that it’s safe.

So periodically the oral and IV should work as well maybe the IV should work a bit better. But we don’t expect as a company that the IV will work any worse than the oral.

Stephen Willey - Stifel

Okay. Thanks.

Prabha Fernandes



Thank you. And our last question comes from the line of Joon Lee of Cowen & Co. Your line is now open.

Joon Lee - Cowen & Co. LLC

Hi thanks for taking the question Prabha. It was very interesting to hear the breakdowns of microorganisms that caused pneumonia -- pneumococcus being the most predominant one.

And based on the 35% to 40% resistance rate and what you know about the breakdown of these pathogens, could you just remind us what the powering assumptions are in the Phase 3 study? And based on this how confident are you that the study will succeed?

Prabha Fernandes

The FDA has said that in the fold MITT populated you have to 27% microbial laid among all those five pathogens I named earlier. And they don’t specify that you have to have 10% of pneumococcus or anything like that. It's that pool is microbial. They know that 80% of cap is caused by pneumococcus.

So we know that. So we have gotten more than 27%. I think I have said this at previous meetings and since then we are still collecting them. We will be simply better than the 27% the FDA requires for success in the cap study and this includes all the pathogens I mentioned.

We have also been allowed to use some of the diagnostics methods by the FDA but just microbial isolation plus urinary antigen for pneumococcus and Legionella, they will be over the 27% the FDA requires.

Joon Lee - Cowen & Co. LLC

Great. Thanks.

Prabha Fernandes



Thank you. And I'm showing no further questions at this time. I would now like to turn the call back over to Dr. Fernandes, for any closing remarks.

Prabha Fernandes

Thank you very much for listening to our call. Appreciate your time and we look forward to updating you on the future events. Thank you very much and good night.


Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may all disconnect. Have a great day everyone.

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