Aeterna Zentaris' (AEZS) CEO David Dodd on Q4 2015 Results - Earnings Call Transcript

| About: AEterna Zentaris, (AEZS)
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Aeterna Zentaris, Inc. (NASDAQ:AEZS) Q4 2015 Earnings Conference Call March 30, 2016 8:00 AM ET

Executives

Brooke Geiger - Associate Director of Communications and Administration

David Dodd - Chairman, President and Chief Executive Officer

Genevieve Lemaire - Vice President of Finance and Chief Accounting Officer

Jude Dinges - Senior Vice President, Chief Commercial Officer

Richard Sachse - Chief Scientific Officer

Analysts

Jason McCarthy - Maxim

RK Ramakanth - Wainwright

George Zavoico - JonesTrading

Sherry Grisewood - Dawson James

Operator

Greetings and welcome to the Aeterna Zentaris Fourth Quarter and Full Year 2015 Financial and Operating Results Conference Call and webcast. At this time, all participants are in a listen-only mode. A brief 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 your host Brooke Geiger, for Aeterna Zentaris. Thank you. You may begin.

Brooke Geiger

Thank you. Good morning and welcome, everyone. I am Brooke Geiger, Associate Director of Communications and Administration of Aeterna Zentaris. I am the leader of today’s call. With me are David Dodd, our Chairman, President and CEO; Genevieve Lemaire, our Vice President of Finance and Chief Accounting Officer; Jude Dinges, our Chief Commercial Officer; and Richard Sachse, our Chief Scientific Officer.

Please take note that during this call, we will be making forward-looking statements regarding future events and the performance of Aeterna Zentaris that involve risks and uncertainties that could cause actual events and results to differ materially. These risks are described in further detail in the Company's press releases and reports filed with the U.S. and Canadian securities regulatory authorities.

These forward-looking statements represent the Company's judgment as of today, Wednesday, March 30, 2016 and the Company disclaims any intent or obligation to update these forward-looking statements unless we’re required to do so by applicable law or by securities regulatory authority. However, we may choose to update, and if we do so, we will disseminate the updates to the investing public.

It is now my pleasure to introduce the Chairman, President and CEO of Aeterna Zentaris, Mr. David Dodd.

David Dodd

Thank you. Good morning. Thank you for joining us. Today, I would like to update you regarding the state of the company, which I’m pleased to say has vastly improved over the last quarter. As we began the fourth quarter, we faced the prospect of continued massive dilution from the exercise of warrants and highly unfavorable terms.

Our capital structure at the time prevented us from taking advantage of several in-licensing opportunities to expand our portfolio and frankly challenged our ongoing operations in our ability to raise further funding in the future. We ended the year with a significant capital raise on favorable term providing enough cash to support us to the end of our two phased three clinical trials.

Our capital structure has been repaired and streamlined and we are poised to take the company to a new level. I would like to thank my team for their very hard work during the fourth quarter. We accomplished a great deal in repair of a lot of damage. We recognize this substantial progress remains to be achieved and we are committed to successfully building a profitable growth company providing attractive financial returns to our fellow shareholders as we commercialize meaningful products that enhance and improve lives, while enabling our employees to develop purposeful careers.

In addition, we’ve achieved significant progress in our two phase three programs. We’ve added an exciting opportunity at APIFINY to our selling portfolio and we completed an important restructuring of our finance organization, which we believe will better support us as we focus on progressing our company.

Today, I will focus my remarks on three critical developments. Although I have mentioned these developments and their importance to the company before I will highlight them again. I want to make sure the market understands how positively we view our situation.

First, I want to address the improvements in our capital structure and the activities we are addressing in support of delivering growth and shareholder value. As we’ve noted during the quarter, we eliminated virtually all of the toxic warrants that were causing massive dilution to our stock price.

During the quarter, our shareholders supported a successful yet difficult share consolidation, enabling us to maintain our NASDAQ listing. This was followed by strong market support of our share price, which enabled us to raise significant capital on favorable terms.

Going forward, we recognize a continued need to strengthen investor confidence in our future, which we intend to achieve by delivering successful commercial progress in our co-promoted products, while successfully completing our two Phase 3 clinical trials later this year.

In summary, our near-term value drivers consist of our commercial activities and the successful completion in progress of Zoptrex and Macrilen. Next, I want to update you regarding the status of Zoptrex, zoptarelin doxorubicin and why we believe this product holds such promise and significant potential for us.

We expect to complete the pivotal Phase 3 trial in the third quarter of 2016 and if the results of the trial weren’t doing so to file the NDA for Zoptrex in the first half of 2017. Recall that during the fourth quarter we received very encouraging news regarding this trial. When the trial was approximately half complete, the independent data of the safety monitoring board conducted a comprehensive review of efficacy and safety data and generated during the trial.

Following this review, the DSMB recommended that we continue the trial to its conclusion. So, what does this mean? It means that an independent group of scientists reviewed our data and concluded that there is enough evidence that Zoptrex has approved efficacy and/or approved safety compared to doxorubicin alone to justify completion to the full continuation rather to the full completion of this trial. To us this is very significant and encouraging.

In addition, at the beginning of the quarter we reported a successful Phase 2 results of Zoptrex therapy admin with advanced resistant prostate cancer. These results were presented at the Annual European Society of Medical Oncology Conference by Dr Jacek Pinski of the University of Southern California, Norris Comprehensive Cancer Center.

More recently we reported successful progress in China by signing Form 8-K, which anticipates initiating their clinical program this year. As I previously noted, Zoptrex is a potential breakthrough in cancer therapy, consisting of new chemical entity believed to cytotoxic agent to tumors associated with LHRH receptors. These receptors are over expressed on many reproductive system related tumors making Zoptrex potentially a powerful new therapy for oncologist and those patients with such relevant cancers.

Endometrial cancer presents a major unmet need, especially for those women with stage III or stage IV cancer. We have previously completed various levels of clinical development of Zoptrex and other targeted cancers such as ovarian, prostate, and breast and bladder. Should our Phase 3 program in advanced, recurrent endometrial cancer be successful, we anticipate significant use of the product and the initial indication, as well as our continued clinical development in support of additional cancer indications.

Because of these recent developments and progress for the Zoptrex, we have initiated planning for the commercialization of the product. This includes developing a core scientific explanation in support of Zoptrex building strong relationships with the gynecological oncology leaders and clearly solidify Zoptrex is a very important new targeted cancer therapy.

Our planning includes the resources will invest a commercially develop product in the U.S., our partner in and other geographic regions and our focus on building a meaningful product portfolio in support of oncology management.

In summary, we're focused on completing the clinical program this summer and should the result support such proceeding as quickly as possible towards regulatory submission and subsequent commercialization. Now, I would like to highlight the status of our conformity Phase 3 trial of Macrilen or macimorelin. During the fourth quarter, we initiated patient enrolment in the confirmatory trial. We expect this study to be completed by the end of the third quarter and a submitted NDA by mid-year 2017.

If the study is successful meeting its primary endpoint we should be able to obtain approval of Macrilen as early as year-end 2017. Let me dwell on macro and for a few minutes because it tends to be a somewhat misunderstood product. This product is a novel orally-active ghrelin agonist that induces a fasting patients growth hormone secretion. If their confirmatory trial is successful it will become the only FDA approved safe, effective, simple to use confirmation of adult growth hormone deficiency. Also having orphan drug status and pattern exclusivity through 2026.

This sounds very exciting. It is a product that clearly fills a critical medical need to gap, resulting in potentially a successful commercial opportunity. So, why is there confusion regarding this product? Well I believe this is misunderstood in two key ways. First, something, it has no chance of being approved. The basis of for this conclusion is apparently our receipt of complete response letter in late 2014 with respect to our prior NDA submission for the product.

People who have formed this conclusion appear to have overlooked the fact that the basis for the CRL related a significant part to the lack of complete and verifiable source data from a prior study conducted by a licensee, rather than a determination that the product was not safe or affected. The previous study was initiated by a licensee and that ultimately went into bankruptcy prior completing their Phase 3 trial. Also the comparator in that trial was removed from the market.

After we reacquired the product and negotiated with the FDA for a completion trial building on the results of the previous clinical program, we learned that two patients from the previous clinical program were misdiagnosed as having adult growth hormone deficiency or AGHD on those specified criteria. When the misdiagnosed patients were included in the analysis, which we believe and continue to believe was in appropriate, the study did not meet its primary endpoint.

However, in the end, the FDA found that the lack of complete and verifiable source data for determining whether patients from the licensee study were accurately diagnosed from AGHD in the failed primary analysis including the two misdiagnosed patients led to the conclusion that the NDA cannot be approved in its present form and then new confirmatory clinical study will be required.

Regardless our belief in the product along without of our external endocrinology advisors was remain so strong that we met with the FDA as quickly as possible, agreeing to the new confirmatory program, in which patient enrollment was initiated in fourth quarter. I can assure you that we believe that the confirmatory study is being done very rigorously and according to the protocol agreement we have with the FDA.

We’ve also reviewed the protocol with the EMA, which has agreed that the current protocol will support their registration review. I’d like to underscore our confidence in Macrilen and are positive anticipation of the future for this problem, which brings me to the second way in which macro and is misunderstood. Many apparently believe that the commercial market for this product is very small. But it is true we don’t think it is $1 billion blockbuster. But we believe it has the potential to generate significant annual revenue throughout the markets, in which it is commercialized.

In the U.S. alone, we anticipate the opportunity to initially be a minimum of $30 million annually. With the expanded use, one could see this product generate annual U.S. revenues excess of $50 million. Remember that if Macrilen is approved it will be the only FDA approved test for the evaluation of adult growth hormone deficiency.

Its advantage is compared to other methods of evaluating the condition, which we’ve highlighted elsewhere are compelling. Certainly revenue in the range I mentioned would be very significant to our company. Following completion of the clinical program later this year, we anticipate regulatory submission during the first half of 2017, followed by approval and commercialization.

To summarize, we repaired and streamlined our capital structure, regained NASDAQ compliance, concluded a very successful capital raise during the fourth quarter, enabling us to end the year with approximately $41.5 million in cash and supporting the completion of our two promising Phase 3 programs. In addition during the quarter, we enhanced our portfolio with the addition of APIFINY, the only cancer-specific, non-PSA blood test for the evaluation of the risk of prostate cancer.

Our sales force is now promoting this product in all of our territories in early indications of promising. I am intended to provide a much deeper dive into commercial operation during our discussion of first quarter results. However, for now sufficed to say that I am encouraged by our progress.

Now I would turn the call over to Genevieve Lemaire, our Vice President, Finance and Chief Accounting Officer who will provide more information about our fourth quarter and full-year financial results.

Genevieve Lemaire

Thank you, David and good morning everyone. I’ll be providing a brief summary of some of the financial highlights for the fourth quarter, as well as for the full-year 2015. Most of what I’ll be covering has been presented in more detail in our consolidated financial statement and in G&A for the fourth quarter and full year 2015, which were filed yesterday.

First, as David indicated, we did a capital raise of approximately $15.4 million net in December, which enabled us to end the year with $41.5 million of cash and cash equivalents. Our capital structure is now more stable. Following the share consolidation, as well as the [indiscernible] [0:14:29] over 97% of the Series B Warrants were exercised prior to the end of the year.

From an operating expense standpoint, our main operating activities during the most recent quarter included ongoing efforts associated with our clinical development initiatives, as well as to a lesser expense with our commercial operations and general and administrative activities. Total operating expense amounted to $10 million and $35.4 million for the three months and for the year ended December of 31, 2015 respectively. Of this $7 million, $8.1 million pertained to ongoing operation cost, and $1.9 million is related to growth restructuring charges and transaction cost allocated to the warrants issued in December 2015.

Our total R&D costs were significantly lower in 2015 both in the fourth quarter and for the year as compared to last year most of that were as a result of scaling down of our R&D activity expected in connection with our Resource Optimization Program, which we initiated in June 2014 and most completed in Q1 2015.

Our pivotal Phase 3 trial of Zoptrex continues to be the primary driver of our third-party R&D expense for the fourth quarter and for the full-year as compared to the same period last year. Although our recently initiated Phase 3 reprogram for Macrilen saw an up-tick in efforts during the last two quarters and we expect that trend to continue through the next two quarters as related development initiatives continue to ramp up.

For 2016, our expectation is that total R&D cost will range between $19 million and $20 million. Switching now to our G&A expenses, general and administrative expense were $1.5 million higher than those incurred in the same period last year and this is largely due to the recording of a provision in the fourth quarter for severance payment and other directly related costs associated with a closure of our Quebec City office that was announced in October 2015.

For 2016 our expectation is that total G&A costs will range between $6 million and $7 million, which exclude any restructuring program and transaction cost that’s greater in relation to potential financing activity. From a commercial operation standpoint we continue during the quarter to incur cost to our contracted sales force and our own management passing support of our co-promotion agreement for EstroGel and Saizen.

On December 3, we announced that we will be promoting another product called APIFINY as also mentioned by David. We are using the same work force to promote all three products. Overall our 2015 selling cost were approximately $3 million higher than last year, which is due to the fact that the majority of our current sales force has been put in place since late 2014 and therefore not for the equivalent number of period in both years.

For 2016, our decision is that total selling costs will range between $7 million and $8 million. This is higher than the total selling expense for 2015 as we expanded the number of sales rep to support our efforts related to the promotion of Saizen during the year. Higher net finance costs contributed significantly to a higher net loss for the fourth quarter and for the year ended December 31, 2015, as compared to the same period in 2014. These costs are comprised in large part of non-cash fair value adjustments that result from the periodic mark-to-market of our outstanding share purchase warrants, which are classified as liability in our statement of financial position.

From a cash flow standpoint, we saw higher comparative cash using the operation in the year ended December 31, 2015, resulting in large part from higher severance payments made in connection with our Resource Optimization Program and with the closing of our Quebec City office.

For 2016, we expect that our average monthly cash flow used in operation will range between $2.6 and $2.8 million. Again, we need the year - we ended the year with a comfortable level of cash and cash equivalent at $41.5 million.

And now I will turn the call back over to David, who will entertain questions.

David Dodd

Thank you, Genevieve. Our colleagues and I will now answer your questions. I'm therefore turning the call over to the operator for instructions on the question-and-answer period.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Jason McCarthy with Maxim. Please proceed with your question.

Jason McCarthy

Hi, David. Congratulations on all the success, it’s exciting to have two pivotal studies with data on the horizon in 3Q. Could you just take a minute and just review with us the powering assumptions and the endpoints in Zoptrex study and what the company is expecting?

David Dodd

Sure. Jason, I’m going to turn it over to Richard Sachse who will address that. Thank you.

Richard Sachse

Yes, thanks for this question, Jason. The Zoptrex study as you may be aware is a fully enrolled Phase 3 study in endometrial cancer, this overall survival is the primary endpoint. We compare in this study Zoptrex with the standard doxorubicin therapy and the studies powered to show a difference in overall survival between these two treatments. The studies conducted under a special protocol assessment with the FDA and as such if study turns out to be positive being the basis for approval for FDA.

Jason McCarthy

Okay, great. Thank you. And just briefly could you walk us through what you’re expecting in the Macrilen study and just the endpoints, and some of the change – I know you reviewed it briefly before what we could expect in that study as well?

Richard Sachse

In the Macrilen study, actually this is quite an interesting study because it’s really a simple study. It’s a two-fold crossover study in which we compare Macrilen with the insulin tolerance test which is the gold standard in the diagnosis of growth hormone deficiency and just you are aware which is a very stressful test to the patient and maybe even harmful to the patient and neither doctors’ know nor patients really like the test. What the endpoint is in this study is the overall agreement between the outcome of the two tests well accepting that the gold standard insulin tolerance test might not be correct in some of these instances. And so in essence we really compare the outcome and then make conclusion based on the outcome of the results from both tests.

In a subset of patients, we also investigate the reproducibility…

David Dodd

Operator?

Jason McCarthy

Operator?

Operator

Yes, you’re still in the call.

Jason McCarthy

Sorry, there may be a cut-off from my end, I just lost it. Great, thanks for the responses. Congratulations. Looking forward to data in Q3.

David Dodd

Thank you, Jason.

Operator

[Operator Instructions] Thank you. Our next question comes from the line of RK Ramakanth with H.C. Wainwright. Please proceed with your question.

Ramakanth

Good morning, David.

David Dodd

Good morning.

Ramakanth

So I have a few questions. Can you give us an update in terms of patient enrollment in Macrilen study and were you are and how confident you are that you can get to the data by the third quarter?

David Dodd

Sure, RK. Again, I’ll ask Richard. He’ll give you full effect.

Richard Sachse

We are very happy about the start up of this study and we are just in line with our target enrollment that was laid out together with our CRO. So we are very confident that we complete the study within the proposed timeline. We will have the results before the end of the year and we expect that the study is concluded probably by the end of the third quarter.

Ramakanth

Thank you, Richard. On Zoptrex, you talked a little bit about the data in prostate cancer. What are the development plans for that indication by AEterna Zentaris?

David Dodd

I’ll comment and then if Richard wants to add anything, when we entered this Phase 3 program for the advanced, recurrent endometrial cancer, as you know we had resources were supported only of ensuring that we could complete this study and be able to do it according to protocol. And we had always said because of the successful outcome in the ovarian cancer as well as what was ongoing in prostate and then also the limited but some clinical data in both triple negative breast cancer and bladder cancer that we would decide about going forward as it – based on the time of success in this first Phase 3 of [indiscernible]. So our plans are that – if this program is successful, then we and more than likely along with some of our collaborators who may have already outlined for certain geographies, they are interested in additional indications of the product. So we would proceed into next stage development and we would make a decision whether that would be ovarian cancer or prostate.

In a ideal world, the way we would approach it is we would launch a Phase 3 program that would include both educations but that obviously is driven by the resources necessary to support that. So we have an interest certainly in ovarian and in prostate and we would hope to also be able to reactive some of the clinical work that was underway in some of the other indications, RK. So right now I can’t distinguish on whether we would select ovarian versus a prostate going forward if we are only focused on one for the next one, but that would be determined with some discussions both from a scientific standpoint and a commercial review.

Richard Sachse

Yeah. This is Richard. There is actually not a lot to add except that we really believe strongly in the efficacy of Zoptrex in either of these indications. So it will be really as David said a question of resources available, a question of line extension plans and commercial opportunities before we make a decision here.

Ramakanth

Okay, thank you. David, both in your press release and also in your opening statements this morning and you are confident about your commission revenue growth from the three products as [APIFINY] going into 2016, could you give us a little bit more color as to what makes you confident regarding growth in the commission revenue?

David Dodd

Sure. Yes, I’ll make a few comments. I’ll turn it over to Jude Dinges. Last year, we sold EstroGel for the full year and although we saw significant growth within our specific territories versus competitors, we grew the brand 17.4% in total prescriptions versus competitors’ total decline of 0.5%. Based upon that, it did not generate meaningful revenue commissions or commission revenue at all. In August, we launched Saizen and recall we’ve gone to the process of vetting and building from around 400 validated targets to where now we have between 800 and approaching hopefully 900 more. And then we’ve now launched APIFINY. So with that as a backdrop and certainly selling all three for the full year, we expect significantly more revenues and certainly what was reflected in last year’s with just the EstroGel. But I’m going to turn it over to Jude who can give you some input in terms of what we’re seeing certainly from continued progress EstroGel but perhaps more importantly Saizen and then also more recently with one month selling of APIFINY.

Jude Dinges

So, thank you, RK. Momentum was size and is picking up significantly. We finally got our fully vetted physician list. In first quarter this year and we’ve noticed that our reps have had a significant impact. And as a result, we’ve far exceeded our statements of medical necessity and our new patient starts over the fourth quarter of last year. We continue to work very closely with Serono to expand their call desk and we expect our commissions for Saizen to continue to grow throughout 2016. Regarding APIFINY, this is an opportunity with a huge unmet need with almost 20 million PSA test roughly used in the U.S. last year, or each year and although it is declining many physicians are frustrated a little bit over the use of PSA because as you know it’s not a great marker indicator for prostate cancer risk.

So APIFINY measures the immune response to prostate cancer [indiscernible] non-PSA-based and we believe it has significant attraction in both urology and select primary care physicians which we’re targeting. The other thing we liked about it frankly is there is no baseline that we’re inheriting with it. Unlike EstroGel and Saizen there is a baseline, with APIFINY there is no baseline. So, we're very excited about it and we anticipate all though we are very early in the process of launching it, but there is a lot of interest by the physicians both primary care and neurologists and it’s its utility. So, we are excited about it.

David Dodd

I will just add. I think it takes some very important steps with our initiation of the selling and with the progress and demonstration that we achieved during the latter part of last year. EMD Serono has increased their commitment to the brand assigning of managed care person to work with us on ensuring access reimbursements, so it’s joining some new plans. Also, more recently steps were taken were on a self-paid patients now Saizen is the lowest cost product in its category, and also that provides another opportunity in support of our selling and all. So there is a commitment from the EMD Serono to work with us very closely to ensure us of the greatest axis reimbursement and opportunity to build this brand and reignite it in a very exciting category, one in which they hadn’t been selling actively in for the last several years.

Ramakanth

Thank you both. One last question from me David, does your commercial structures still have capacity to add more products to their bag, if that is true what sort of products would you envision adding to it?

David Dodd

Sure. The answer is yes it does, and we are focused in products that in general have nice value to them. The challenge to Estrogel is, it basically represents $110 a month per patient and the average length of use of patients is only around three months. So that’s a challenging, although it’s an important product, it’s a challenging area now. So we're focused obviously on products that provide a certain sort of monthly value or annual value, but also once that it requires concentration and not a lot of physicians to call upon. So in the therapeutic areas, those areas we’re looking for fit with what we're doing and we're looking certainly for opportunities in oncology. Certainly, if it relates to gynecologic oncology or urologic oncology that support urology [and general word was] endocrinology in women's health. Those are the four areas that we concentrate on, but as we are talking to companies we also raise the specter that if there is a product available that is in a very targeted group of specialist and all, we would like to at least evaluate it and consider it, now there is some categories we probably would not give much consideration, but those four areas of what we are focused on and we are quite active on trying to find product because our number one goal is to have a product for which we are fully managing and not simply go promoting.

Ramakanth

Thank you, gentlemen. Thanks.

David Dodd

You're welcome.

Jude Dinges

Thank you.

Operator

Our next question comes from the line of George Zavoico with JonesTrading. Please proceed with your question.

George Zavoico

Hi and good morning David, Jude and Richard. Thanks for the update and congratulations on getting out of the whole that was dug for you guys there. A quick question about patent situation with zoptarelin, you are talking in the beginning development programs and completely new indications. Clearly the development path might be a little bit shorter for them then for the current indications. What is the patent situation now? How many years of proprietary holding do you have?

David Dodd

Certainly. With the composition of matter of patent expired at the end of, during last year. So, what we are working also is the five years exclusivity for having a new chemical entity, which if one looks at that that actually translates to about 7.5 years before one would deal with the generic and then the other element is the pattern that we announced last year for which we are in pursuit of for the manufacturing of the API where we ended up with a significant cost advantage reducing our cost of manufacturing that by over 50%. So, we feel quite strongly from the standpoint of being able to maintain from appropriate exclusivity and having opportunity to really build this brand. And in terms of developing it, the indications we have targeted ovarian cancer is one for which there was a successful Phase II program run by the company, managed by an independent group very similar to the Phase II program for endometrial cancer and a very strong and compelling results in there. And then we have the more recently prostate cancer. So, we feel that what we have put together is what we would simply refer to as a life-cycle management of continuing to develop basis for utilization of this very exciting therapy, targeted therapy.

George Zavoico

Thanks for that and pretty much same question for [indiscernible] because having entered the new Phase III trial, it is about I suppose about a one or two year delay from original expectations back two or three years ago.

David Dodd

Yes. Originally, we had anticipated with approval in November 2014. Had that occurred we would have been launching in first quarter of 2015. So we would be coming up on our second-year of selling now. Now, we are anticipating the possibility of a launch in the second half towards the latter part of the second half of 2017. So, we know that that is a painful delay and a disappointing one. Keep in mind the cost as we previously reported of the Phase III trial is $2 million to $3 million, so it is not a very expensive trial, but there we have patent exclusivity through 2026 plus we have orphan drugs test. So that product is very well protected and was supported a lot of selling and commercial development and basically market development not just in the U.S., but should we end up with partners elsewhere they will have that opportunity.

George Zavoico

Okay. Thanks David. That sounds good. Looking forward to some, you achieving some important milestones this year and next. Thank you, very much.

Jude Dinges

Thank you.

David Dodd

Thanks, George.

Operator

Our next question comes from the line of Sherry Grisewood with Dawson James. Please proceed with your questions. Sherry your line is live, perhaps you have your line on mute.

Sherry Grisewood

I am sorry. Good morning David. Thank you very much for taking my question. I wanted to follow-up on the APIFINY products, first of all is that a laboratory developed test or is it FDA approved?

David Dodd

Laboratory developed test.

Sherry Grisewood

I am sorry.

David Dodd

It is a laboratory developed test.

Sherry Grisewood

Okay. You know that there is going to be a migration to regulation of those tests under FDA, so is there a plan in place to move it through an FDA approved process?

David Dodd

So that debate, the war is going on for some time between the FDA and CMS regulates those tests. And the owner of the test Armune BioScience is well versed in handling that so they are in charge of that, they manage it et cetera, but that is influx as we speak amongst all the laboratory developed tests.

Sherry Grisewood

Okay. And how many tests did they run last year?

David Dodd

Around 6000 without a sales force. So we were -- they launched and they had some independent distributors to help get it off the ground, but the product needs and response to the promotions, so…

Sherry Grisewood

And what is the average reimbursement for that test?

David Dodd

Well that, I’m not sure that that's been released by Armune. I can tell you the price is 705.

Sherry Grisewood

705.

David Dodd

Yes. And reimbursement as you might imagine is all over the board. Some insurances pay it full, some the patient has to pay for it, some would say between et cetera.

Sherry Grisewood

And do you know whether they have submitted the CMS utility study?

David Dodd

Not to - the FDA do you mean?

Sherry Grisewood

No, to CMS for CMS reimbursement.

David Dodd

They are meeting with CMS now. They have a partner that’s helping them with all that.

Sherry Grisewood

Okay. All right. Congratulations. Thank you so much.

David Dodd

Thank you, Sherry.

Operator

Thank you. It appears we have no further questions at this time. I would now like to turn the floor back over to management for additional or closing comments.

David Dodd

Thank you. And thank you everyone for your continued support of interest in the transformation of AEterna Zentaris. I’m sure you will agree that we made significant progress during the fourth quarter. I look forward to updating you regarding further progress when we discuss first quarter 2016 results. Again thank you and have a wonderful day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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