Jazz Pharmaceuticals' (JAZZ) CEO Bruce Cozadd on Investor Update - Call Transcript

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Jazz Pharmaceuticals, Inc. (NASDAQ:JAZZ) Investor Update Conference Call March 31, 2016 4:30 PM ET


Kathee Littrell – Vice President, Investor Relations

Bruce Cozadd – Chairman and Chief Executive Officer

Nelson Chao – Duke Cancer Center

Paul Richardson – Dana-Farber Cancer Institute

Karen Smith – Global Head of Research and Development and Chief Medical Officer

Russ Cox – Executive Vice President and Chief Operating Officer

Mike Miller – Senior Vice President-U.S. Commercial

Matt Young – Executive Vice President and Chief Financial Officer


Kathee Littrell

Good afternoon and thank you for joining us this afternoon for our Defitelio Investor Update. We’re pleased to have received FDA approval for the use of Defitelio in treating patients, who develop veno-occlusive disease with renal or pulmonary dysfunction following hematopoietic stem-cell transplantation.

With me for today's webcast are Bruce Cozadd, Chairman of the Board and CEO; Matt Young, Chief Financial Officer; Russ Cox, Chief Operating Officer; Mike Miller, Head of U.S. Commercial; Karen Smith, Global Head of R&D and Chief Medical Officer; Dr. Nelson Chao from Duke Cancer Center; and Dr. Paul Richardson from Dana-Farber Cancer Institute.

At the end of the webcast, we will have a Q&A session, but please submit your questions as we progress through the presentations via the console and we will try to answer as many of these as possible at the end of all presentations.

Before we begin the webcast, I will point out that we will be making forward-looking statements today including statements about our plans and expectations for the U.S. Defitelio commercial launch and Defitelio net product sales. Our forward-looking statements are subject to risks and uncertainties described in our 2015 Annual Report on the Form 10-K and our other SEC filings and actual results may differ materially. Finally, although we will provide Defitelio net product sales guidance in this presentation, we are not confirming or updating any other guidance and the actual results may differ.

And now, I will turn this over to Bruce Cozadd to provide today's agenda and opening comments. Bruce?

Bruce Cozadd

Thanks, Kathee. So those of you looking at the webcast will see our agenda on the screen. I’ll make just a few opening comments and then we’ll spend some time learning about the disease itself, clinical evidence supporting Defitelio, we’ll then hear comments both from an R&D perspective as well as market perspective, Mike will walk us through our commercial initiatives, access and reimbursement; and Matt will finish up with financial guidance before we move to Q&A.

Just to start, let me make some key points. Defitelio is the first and only FDA approved treatment for adults and children, who develop a serious often fatal complication of stem cell transplantation. A small subset of patients, undergoing stem cell transplant, develop a life-threatening complication known as hepatic veno-occlusive disease, VOD, which can rapidly progress the multi-organ dysfunction and abruptly derail a patient’s recovery and which leads to death in 84% of these patients.

We were pleased to receive full FDA approval on March 30th for the treatment of adult and pediatric patients with VOD also known as sinusoidal obstruction syndrome with renal or pulmonary dysfunction following HSCT. Defitelio has FDA destination as an orphan drug with orphan drug exclusivity through March 2023. Defitelio is a clinically significant therapeutic advance because it is a potentially curative intervention for patients with VOD, with renal or pulmonary dysfunction following HSCT, which may save lives with a single course of therapy.

So, on this slide, you'll see our strategy for sustainable growth, this is something we've been talking about for years. Applying our biopharmaceutical expertise to core products, including Xyrem, Erwinaze, and now Defitelio both in Europe and in the U.S. then using the strong cash flows on our balance sheet to add new products to our portfolio, whether those new products come through acquisitions and corporate development or whether they come through our own investments in an R&D pipeline and to make all of our investment decisions based on disciplined resource allocation to ensure we're focused on good returns for our shareholders over time.

On this slide, we talk about our corporate development criteria. And I put this up as a reminder of why we acquired Defitelio in the first place. If you look at what we said we're looking for, drugs that can be efficiently commercialized to a targeted prescriber audience, certainly through in the case of Defitelio. We've talked about our commercial efforts, which Mike then goes through a little bit later; a clinically meaningful and differentiated products.

As I just talked about, this will be the first and only product approved for this indication. Good exclusivity, opportunity for continued development and we're going to talk later in this call about what we are going to do and might continue to do with defibrotide moving forward. This is a perfect fit to build our hematology/oncology presence, which we continue to focus on.

And on the next slide, let me just remind you of how we got to today and where we're going. As a reminder, we closed our acquisition of Gentium, bringing us the rights to defibrotide in January of 2014 and launched the product in the EU two months later. Later in 2014, we acquired America rights to defibrotide from Sigma Tau. And later that year began our rolling NDA submission for the product. That submission was completed in July of last year and in September FDA filed our application and granted priority review. That brings us to yesterday with the approval of our product. Later this year, we expect to enroll our first patient in a Phase 3 study of prevention of VOD in high risk patients.

Okay, so with those introductory remarks, let me now turn the call over to Dr. Chao and let me provide a brief introduction. Dr. Chao is the Donald D. and Elizabeth G. Cooke Professor in Cancer Research and professor of medicine and immunology and Chief of the Division of Cellular Therapy and Bone Marrow Transplant at Duke University. He is also Director of Global Cancer in the Duke Global Health Institute.

Dr. Chao received his medical degree, with honors, from Yale University, and completed his residency in internal medicine and his fellowship in oncology at Stanford University Medical Center. Dr. Chao serves on the editorial boards of Blood, Journal of Immunology, and is Associate Editor of Biology of Blood and Marrow Transplantation. In addition to participating in today’s event, Dr. Chao has served as a consultant and advisor to Jazz Pharmaceuticals.

Thank you Dr. Chao for joining us today and now I’ll turn this over to you.

Nelson Chao

Thank you, Bruce. I'm going to start by giving a brief overview of where we've been with transplantation and how this drug is quite important for us, who take care of patients. So, on this slide, you will see that there is about over 20,000 transplants a year. The blue graphs are the allogeneic transplants, the green are the autologous; so autologous is when we use the patient's own cells, allogeneic when we use donor cells and they vary depending on the type of disease.

But if you look at the next slide, you’ll see that both forms of transplants have increased the – the autologous has increased the most, but within the donor type transplants, the myeloablative, which uses high doses of chemotherapy, have remained relatively stable, but the non-myeloablative has increased significantly over the last decade.

The survival of patients is related to how early they are treated in their disease and the time we choose to transplantations is a factor of the high risk of the disease they have at the time of presentation of their underlying leukemia or lymphomas or myelomas and whether they have a donor. So, on the left hand panel, you'll see what the outcomes are in acute myeloid leukemia for patients who have an unrelated donor and the right panel are those who have a related sibling donor. And you can see clearly that those with early disease – who had immune disease do reasonably well compared to those patients with more advanced disease.

Now, what happens with both the autologous and the allogeneic transplant recipients is that they need to be conditioned or prepared for this transplant usually with radiation and chemotherapy or high doses of chemotherapy alone. And we're beginning to understand better and better what the outcomes are of the use of these types of treatment regimens. And we've come to realize with increasing data that endothelial cell damage is the primary cause for many of these complications that we see clinically and the net effect many times is multi-organ dysfunction.

So you see VOD SOS in the center there, but there are many other clinical manifestations of toxicities, which we have to deal with in these patients such as the transplant associated microangiopathy, graft-versus-host disease, capillary leak syndrome, engraftment syndrome, diffuse alveolar hemorrhage and idiopathic pneumonia syndrome. So when we think about patients in terms of selection whether we’re going to take them to transplant or not or whether we need to worry about one particular complication or not, there are risk factors for VOD. They're broken here into two buckets, those which are associated with the patient and those which are associated with the transplant.

So for the patient side, a high bilirubin for transplant confers high risk, probably the highest risk, prior treatment with gemtuzumab ozogamicin, which was Mylotarg, actually still is Mylotarg confers a high risk. Prior treatment with some birth control type pills can actually increase that as well, older age increases risk, pretransplant acyclovir, abnormal liver test, certain genetic factors, sepsis and thalassemia all are related to high risk of VOD.

On the transplant side, the high does myeloablative therapy confers the highest risk type of GvHD prophylaxis as well allogeneic has a high risk than autologous, total body radiation, more than twelve months between diagnosis and transplantation, non-T cell-depleted grafts, acute hepatic/gut GvHD, unrelated donor and peripheral blood over bone marrow. These are all risk factors, which are related to the type of treatment that we’re giving the patients.

So when we see a patient, the diagnosis of VOD really is a clinical diagnosis. And so, what we're looking for are clinical signs and symptoms. So these are predominantly hepatomegaly as you can see an enlarged abdomen, right upper quadrant pain, which is the liver expanding pushing through its capsule, weight gain, which is a reflection of fluid retention; ascites, which is fluid in the abdomen, again, a sign of liver dysfunction and failure, and jaundice show the yellowness around the eye and the skin; again all reflecting the high bilirubin and liver injury.

Because it's a clinical diagnosis, the criteria have been developed through two large transplant centers back in the early 80s and these were described in Seattle as well as in Baltimore. The Seattle criteria suggest presentation before day twenty with two of the following either a high bilirubin hepatomegaly or right upper quadrant pain or weight gain more than 2%. The Baltimore criteria had also higher bilirubin before day 21 and at least two of the following which would have hepatomegaly, ascites and in their case of weight gain more than 5%. These were established, as I said, in the late 70 early 80s at a time where patients were a little bit more uniform, so these do not consider late onset VOD, which can happen after day 50 and doesn't account for presentation of edema and weight gain in the absence of any signs or symptoms, which we do worry about VOD as well.

Now, there are certain problems with the clinical diagnosis and that is that those symptoms can be seen with a variety of other etiologies mainly because of the damage we cause when we treat these patients. So if a patient has a rapid weight gain of more than 2% or more than 5%, it could reflect rather heart failure and not hepatic failure, renal failure or sepsis; enlarged liver with pain can be seen with congestive heart failure with fungal infection, Epstein-Barr virus, lymphoproliferative disease or in fact tumor involvement of the liver and jaundice can be seen with biliary infection. Jaundice is very commonly seen in the cyclosporine/tacrolimus, which causes cholestasis. There are lots of other drugs that can cause cholestasis and including total parenteral nutrition as well as hemolysis. So because it's a clinical diagnosis, these are confounding factors.

We try to turn to some laboratory findings to help us sometimes distinguish what is VOD versus not. So commonly in the laboratory, we do find abnormal liver function tests, at least aminotransferases are elevated. We do see hyperbilirubinemia, which is conjugated bilirubin. And we see a prolonged prothrombin time, which is a coagulation defect. And then we also see low albumins reflecting a low synthetic function of the liver. We do an ultrasound to look at the flow, remember VOD results in the sinusoidal obstruction, so these are little small vessels in the liver, which blocks the normal flow to liver. And so rather than seeing lots of red in that ultrasound of the liver, you're seeing some blue which is reflecting a reversal flow of the normal flow in the liver.

So commonly what we try to do to monitor these patients and we do do this daily is we look daily for weight gain, fluid overload, ascites and hepatomegaly. So this is part of the normal exam the patient receives everyday. We measure the liver function test everyday early on after the transplant. And these are the laboratory tests for the alkaline phosphatase, alanine aminotransferase, bilirubin, and the gamma glutamyl transpeptidase. And then for those, who receive an autologous transplant, we do this also daily with a fluid balance and liver function tests. We usually check this three times a week because they certainly can get VOD as well.

Now, there are many different ways to try to treat this. In the past, these have been primarily case reports of TIPS, which is a transjugular intrahepatic portosystemic shunt, has been tried to reverse the reversal of flow. So what happens is the flow of blood is going backwards, so this is trying to reverse that. This is really something that can work transiently, but it really doesn't solve the problem. Orthotopic liver transplantation has been done in certain cases of VOD. Again, as I said earlier, these are primarily case reports.

Diuretics are used. These patients get very fluid overloaded, so we try to cautiously use diuretics. This is easier said than done because frequently they are intravascularly dry, so meaning the blood flow is low already and if you give them diuretics, their kidneys start to become very unhappy. PGE, prostaglandin, has been used, antithrombin III has been used, TPA has been used, but resulted in a lot of bleeding and multi-organ failure, most of us don’t try that.

And there's two other drugs: N-acetylcysteine and methyl-prednisolone, that’s also been tried without really benefit. And this really leads us to defibrotide, which you will see has really resulted in significant improvement. And this is just to remind you that VOD with multi-organ dysfunction is something when patients get to have multi-organ dysfunction, it really is a terrible outcome for our patients which we very, very much try to avoid.

So I'll stop there and turn this back to you, Bruce.

Bruce Cozadd

Thank you very much, Dr. Chow. Next I'm pleased to introduce Dr. Paul Richardson. Dr. Richardson is the RJ Corman Professor of Medicine at Harvard Medical School and Clinical Program Leader and Director of Clinical Research of the Jerome Lipper Multiple Myeloma Center, Dana-Farber Cancer Institute. He obtained his medical degree from St. Bartholomew's Hospital Medical College in London. He completed fellowships in hematology, oncology and medical oncology at Tufts University School of Medicine, Baystate Medical Center and Harvard Medical School, Dana-Farber Cancer Institute. He's a former editorial board member of the Journal of Clinical Oncology and The Oncologist, and currently serves as Associate Editor for the British Journal of Hematology, having published over 450 peer-reviewed articles.

Among numerous awards and prizes, some of the most notable include the Warren Alpert prize in medicine from Harvard Medical School, and the Ernest Beutler prize from the American Society of Hematology. In addition to participating in today's event, Dr. Richardson has served as a consultant and advisor to Jazz Pharmaceuticals, and was the principal investigator for the Phase 3 defibrotide study.

I will now turn the presentation over to Dr. Richardson, who will discuss the clinical evidence for Defitelio.

Paul Richardson

Thank you very much, Bruce and it’s a pleasure to be on the call this afternoon. It’s really a remarkable moment for me personally and for all of us who have been involved in the research around defibrotide over the last 10 to 20 years. And so, it’s a true privilege to be on the call. And again thank you, Bruce, for the kind invitation to present. What I’m hoping to do this afternoon is to outline for you the clinical evidence in support of defibrotide’s U.S. label. And in terms of the first slide I just want to show you here data from our Phase 3 prospective trial, which Bruce alluded to, this was a pivotal study in which we treated 102 patients with advanced multi-organ failure and severe VOD and in the context of defibrotide therapy we show not only an impressive complete response rate but also survivorship of day-plus-100 of 38% with 95th percentile confidence interval of 29% to 48% which compared to our dynamic historical control in that same study was favorable.

Now in terms of other studies these are summarized here and this is the basis for the U.S. label as well as the Phase 3 prospective trial is our Phase 2 prospective study which was a randomized dose-finding trial comparing 28 milligrams per kilo of defibrotide administered daily to 40 milligrams per kilo per day. And in the 25 milligrams per kilo group cohort of patients, 75, we were able to demonstrate a survivorship again in patients with severe VOD and SOS and multi-organ failure, a survivorship of 44% which was substantially better than expected.

And indeed that has been reproduced again highly consistently with the largest experience of its kind which is the expanded access study conducted prospectively in the United States since 2007. And in this trial and the 351 patients with VOD, SOS post-transplantation categorized by multi-organ dysfunction and multi-organ failure we are able to show survivorship of 45% and I think that’s particularly striking because that’s taking the drug into a much wider setting, many additional centers above and beyond the original defibrotide study group that was part of the both prospective study in the Phase 3 setting and the Phase 2. And therefore represents I think, a remarkable reproducibility to the consistency of efficacy that we see as investigators from defibrotide in this setting.

And of course these results have been reproduced in Europe and outside of the U.S. as well. I want to spend a little bit of time expanding on the details of the patient characteristics. In our Phase 3 prospective trial, by virtue of regulatory advice at the time, we were deliberately directed to pick the sickest of the sick for this study. And in that regard not only did they have to have the rigorous Baltimore criteria which Nelson so nicely alluded to in his excellent presentation and introduction, but an important difference between Seattle criteria and Baltimore criteria is that the Baltimore criteria are not only more rigorous in the adult setting in particular but they are validated against a pathology in a prospective fashion, and are associated with severe disease in and of themselves.

That was further strengthened by the requirement in this study for patients to have multi-organ failure entering the study and they had to either be dialysis-dependent, ventilated-dependent, or have a tripling of baseline creatinine or be oxygen-dependent with an oxygen saturation on room air less than 90% and in that context that obviously represents a very sick population in this setting.

In the Phase 2 prospective study, we similarly had patients with multi-organ failure but with less advanced multi-organ dysfunction and here creatinine – baseline creatinine could have doubled versus tripled as required in the pivotal prospective study. In the expanded access study or expanded access trial the patients that we are evaluated for the approval and 351 strong also had to have renal pulmonary dysfunction very similar to the Phase 2 prospective study.

Now in terms of the Phase 3 prospective study design, I did want to spend a bit of time on this because this was an incredibly a challenging study but I think one that really bore fruit. As I mentioned, these patients had to meet the Baltimore criteria so had to have their diagnosis made by day 21 and then had to develop the multi-organ failure by day 28.

For patients treated with defibrotide, the median treatment duration was 22 days with the range of 1 to 60 and in that context, it is important to note that we do believe that the duration of treatment with defibrotide really matters we had 102 evaluable patients in this multi-center trial and as I mentioned they had to be treated for a minimum of 21 days. Now we felt as investigators that, given the strength of the signal from the Phase 2 dose-finding study as well as previous trials, that it was simply unethical and lacked equipoise to offer such sick patients any kind of randomization to a prospective control or placebo.

So on that basis, a novel approach to a historical control or control methodology was adopted it's particularly nice to be talking to you today about this study because it's actually been not only published EPUB in blood, but it's also actually just gone into hard copy I believe today in fact. Anyway, suffice to say that the Phase 2 prospective study design was 151 patients as I mentioned. It was randomized between a lower dose of 25 mgs per kilo per day versus 40 mgs per kilo per day and no difference was seen in favor of the higher dose, so 25 was subsequently taken forward and this 25 milligram per kilo group patients is obviously what was used for the approval yesterday.

As mentioned here, patients received treatment for a minimum in this study of 14 days or until complete remission progression of VOD or unacceptable toxicity or morbidity that precluded them from continuing on therapy. And in the same context I did want to touch briefly on the treatment IND study to sort of emphasize how the patient population that are presented for the approval are very, very similar. These are patients essentially who had Baltimore criteria with multi-organ dysfunction.

And the group that were taken forward for, as I say, the label and the approval were these 351 patients post-transplant and of course the remainder of the expanded access and treatment IND was amended by protocol to include other patients, but for the purposes of the approval, 351 patients were appropriately focused on for outcome, toxicity and otherwise.

I want to emphasize a few points about the baseline demographics for the patients treated with defibrotide at the 25 mgs per kilo per day dose. As you can see in the Phase 3 prospective study, which is the first column, 102 patients, from the median age was 21 with a range of less than 1 to 72. A substantial proportion were under the age of 17 commensurate with this particular importance of defibrotide in the pediatric population.

Race/Rate (0:38:43) distribution was very characteristic of transplant studies in this regard. Slight male preponderance, the median number of days of treatment, exactly as we anticipated were 21 days. The majority of patients were allograft recipients. This is very resonant with what Nelson pointed out, which VOD/SOS is more common in the allogeneic setting. And as you can see, at the study entry at least a third of the patients were either ventilator or dialysis-dependent, which tells you how sick these patients were. In the Phase 2 prospective study, very similar characteristics overall if one things of these patients has been predominantly allografted. Again, a slight preponderance amongst men. The age distribution was slightly older, 32 years as a median. Again, good representation from the pediatric population but what's important in the Phase 2 study is the number of patients entering with ventilator or dialysis-dependent, somewhat lower at 11%.

I think what's particularly exciting, though, and interesting is the expanded access study because if you look here you can see that the median age is actually, again, strongly represents the pediatric group of patients, but there's a good representation of the adult population as well. Allogeneic transplant dominates once more. But what's really interesting is looking at the ventilator or dialysis-dependent patients at study entry, and that was 42%. So, this is a very robust data set. And if you look at the survival post transplant, again the reproducibility of the signal is to us is, as bone marrow transplant physicians and as investigators in this field, very, very convincing, and obviously very convincing to the FDA, as well.

As you can see, day-plus-100 post stem-cell transplants survivorship, 38% in this rigorous prospective Phase 3 trial, incredibly sick patients. In our Phase 2 randomized dose-finding trial, which is 150 patients, strong overall with very similar survivorship in both arms actually, but in the arm that was taken forward at 25 mgs per kilo per day was a robust 44%. And in the expanded access study, where frequently, frankly, when we go to expanded access, and I can speak to this very directly as a myeloma physician when you go to expanded access you can see very different outcomes compared to your [indiscernible] (0:40:51) carefully controlled pivotal trials. What you see here, though, is a robustness of signal that's very similar, a 45% survivorship of day-plus-100 in a much larger setting with a large cohort of patients.

Now, what about the safety summary? Well, I think it's important to remind the audience that the reason we went to defibrotide in the first place was because it had this remarkably benign safety profile and appeared to have all these endothelial (0:41:15) active effects in terms of endothelial stabilization, profibrinolytic effects, but without causing systemic bleeding, which had been such a challenge for other drugs tested in this setting. And so, in that regard, when you look at the safety summary here in terms of adverse reactions occurring with a frequency of 10% or more, or any grade 4 or 5 adverse reactions, you can see that the safety profile of the drug remains very favorable, particularly in such a critically ill patient population who are essentially in intensive care.

And, again, this has been a really consistent feature both in studies in the United States and, indeed, in Europe and elsewhere with the drug. Now, in conclusion, I would therefore say that, as Nelson pointed out, VOD/SOS with multi-organ dysfunction is, indeed, an uncommon and rare complication of transplants. It's a very important one, though. It's a true barrier to cure, as Bruce so nicely pointed out with his introductory statements. It's a very much feared complication of transplant and it limits what we do in seeking to provide curative therapy for our patients.

We think defibrotide provides an important improvement in survival at day-plus-100 post transplant based upon these data and a robust experience now that is really substantial and international. There may be some increased risk of bleeding in patients, but I would emphasize that in this context, in my clinical experience, this has been very manageable and is not a meaningful barrier to the use of this drug in this setting. And I think in terms of the adverse reactions that were seen and reported in the context of these respective studies, they're very much what would be expected in this critically ill population, and again consistently manageable in the hands of experienced BMT clinicians.

We'll close there and hand back to Bruce. Thank you very much for your kind attention.

Bruce Cozadd

Thank you very much, Dr. Richardson. Now let me hand it over to Karen Smith, our Head of R&D and Chief Medical Officer.

Karen Smith

Thanks very much, Bruce. Defitelio, as Bruce has mentioned, received NDA approval yesterday. The label is indicated for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, VOD, also known as sinusoidal obstruction syndrome, or SOS, with renal or pulmonary dysfunction following hematopoietic stem-cell transplantation.

In terms of the pathogenesis of VOD, the pathway is thought to be caused by a complex progressive cascade, which for those VOD patients who progress to VOD with multi-organ dysfunction is fatal in 84% of cases, approximately. Experimental models suggest that VOD begins with activation of and damage to sinusoidal endothelial cells in the liver as a result of the conditioning regimen. This triggers a series of events that includes activation of inflammatory and coagulation pathways, impairment of fibrinolysis, and the release of heparinase, which then leads to the breakdown of the cytoskeletal structure. This in turn leads to disruption of the endothelium and accumulation of red blood cells, leukocytes and cellular debris, resulting in sinusoidal narrowing.

These events lead to a reduction in hepatic venous outflow and post-sinusoidal hypertension. As a result of this, clinical signs and symptoms become evident. The proposed mechanism of action for defitelio is thought to act at multiple points across the VOD cascade. Upon injury, endothelial cells shift to an activated and prothrombotic exenatide. There is an increase in PAI-1 and von Willebrand's factor.

As a result of this, the endothelial cell protection occurs. So upon treatment with defibrotide you see an increase in TPA and thrombomodulin expression, and a decrease in von Willebrand's and PAI-1 expression. Therefore, there is a decreased level of endothelial cell activation and an increase in endothelial cell mediated fibrinolysis.

In terms of the actual molecule itself it is a mixture of oligonucleotides derived from porcine intestinal mucosa. It is prepared by controlled depolymerization of DNA, and is approved in the EU for the treatment of severe hepatic VOD in patients over one month of age undergoing hematopoietic stem-cell transplant therapy. In the U.S. it is now approved for the treatment of adult and pediatric patients with hepatic VOD following stem-cell transplant.

For life cycle management we are looking at defibrotide prevention of VOD in a high-risk patient population undergoing stem-cell transplant. This will also satisfy the FDA post-marketing requirement and is also a label expansion strategy for the company. The study will be a Phase 3, randomized open-label, multi-center study. It has an adaptive design comparing the efficacy of defibrotide a best supportive care in the prevention of hepatic VOD in adults and pediatric patients undergoing stem-cell transplant. The proposed primary endpoint is a primary outcome measure at day-plus-30 and the secondary endpoint is a VOD-free survival at day-plus-100. There are several sites planned around the world and it will be a global study.

Lastly, in terms of future life cycle management, we are assessing opportunities for the treatment and prevention of diseases with endothelial cell damage. As I have just mentioned there is a VOD prevention in high-risk patient study that will be commencing in the next quarter and we will look to first patient ending Q3. There are other stem-cell complications that we are also looking at, and evaluating the potential in other post stem-cell transplant complications such as TMA and GvHD. We are also considering non-hematopoietic stem-cell transplant conditions, and these include investigating potential utility in other serious life-threatening conditions such as sickle cell.

With that, I will hand back to Russ Cox, our Chief Operating Officer.

Russ Cox

Thank you, Karen. Let me take a minute just to talk about the market opportunity with defibrotide in the U.S. First off, know that VOD is an ultra-rare disease with a high unmet medical need. And there's about 20,000 hematopoietic stem-cell transplantations that take place on an annual basis in the United States. That compares to a little over 35,000 in Europe. That's driven primarily by just changes in population. If you take those 20,000 stem-cell transplantations in the U.S. and you then say, which of those patients are at high risk for VOD that's about 3,000 patients. If you then move on to say, which of those will progress to incidents of VOD it's about 1,000 to 2,000 patients in the U.S. And then if you take the percentage of transplantation it's about 55% to 60% of those patients that are autologous.

Transplant use in the U.S. continues to increase. If you go to the early 2000s to current times you can see there are a number of factors that are driving that increase. Donor sources have expanded. Patients almost all patients are nearly eligible to receive transplantation. The survival rates have increased and that enables transplant for older patients today. And we can see that that is for both types of transplantation. We see that increase happening over time from early 2000s to current times. The majority of these allogeneic transplantations use myeloablative conditioning regimens. If you look at the percentage of patients who are getting myeloablative conditioning, it's really unchanged, for the most part, over the years.

You can see that there's some breakdown in terms of patients over 50 and under 50, but the overall percentage has been relatively consistent over time. At the most recent ASH meeting the results of Phase 3 randomized trial supported high-intensity conditioning with myeloablative regimens prior to allogeneic stem-cell transplantation as standard of care for patients with myelodysplastic syndrome, or MDS, or acute myeloid leukemia, or AML. These are the types of patients who are candidates for such treatment.

If you then take a look at the overall annual stem-cell transplantation that was performed in the U.S. you can break it down into adult and pediatric. You can see that over 8% of those were in fact adults, the balance being pediatric. If you then go down and look at the breakdown of adult and pediatric, whether that's allogeneic or autologous. You can see the majority of those high risk patients are in the allogeneic group.

And so if you really step back and you look at where you can expect a lot of the early use, you can expect to see those allogeneic pediatric patients being picked up most quickly.

Now we’ve had the opportunity to take a look at the use of defibrotide in Europe and we've learned a quite a bit from that. And some of the things that became very obvious to us early as there is a fair amount of education that is required in helping physicians understand VOD and actually look for VOD.

The key here is to get to them early and so their early timeframe for VOD and conditioning regimen is the timeframe in which they would be looking for it. Second timeframe is VOD around engraftments. One of the key learning’s that we had is that we have to increase physician awareness around the proposed mechanism of action. Educating on the importance of VOD to improve outcomes and increasing culture professionals recognition of the importance of treating the full course of therapy in severe VOD.

We have also learned that it does take a fair amount of cross functional work between commercial and medical to be very successful in most of our key accounts. Now it is also important to recognize that this is not the first time we’ve done something like this. We actually approached Erwinaze in a similar fashion where we had a Erwinaze Master Treatment Protocol or EMTP. And this was used in accounts prior to approval. And you would expect that given the fact that patients with Erwinaze are treated for acute lymphoblastic leukemia while the large majority of the patients who should receive therapy are getting therapy.

Our experience is quite different and that once we have launched this in November of 2011 we saw a significant increase in the use of Erwinaze in U.S. We actually went from a number of 200 centers to 400 centers doubling the number of total centers we are using Erwinaze. We think the same holds true in terms of our overall experience of how we have had some success in treating narcolepsy and hypersensitivity reactions in our ways. A lot of this is driven by the fact that we need to help physicians really understand what the disease is look for it and treat it accordingly.

So given that we feel that our experience is quite high in taking something from a treatment IND into a successful commercial launch. We are excited about the use of defibrotide in the U.S. We also know that we have some catching up to do. There is about a 100 centers that have experience in the U.S. That is compared to a larger number in Europe. We think we have a fair amount of education to do in VOD.

So with that I will turn it back to Bruce

Bruce Cozadd

I think next we are going to have Mike talk a little bit about some of our specific plans for commercializing the product.

Mike Miller

Thanks Bruce. Let me first say that we are thrilled to be able to launch this life saving therapy for this unmet and important patient need. We could gain and this process with a lot of preparation months ago. For this launch, which included actually expanding hem/onc sales force from 25 to 35 late last year. When we look at the launch we have three important imperatives.

First is around diagnosis and Russ touched on this as did Dr. Chao. And this is really we want to reduce the time to diagnosis and really get the transplant team to proactively look for the symptoms. And eloquently presented by Dr. Richardson is establish Defitelio as the only proven treatment with a survival benefit for VOD with MOD. And last and most importantly is to provide access to the drug for patients, providers and institutions. VOD is a rare often deadly and a very costly condition.

We believe our health economic and outcome research data is compelling and demonstrates the value of the drug. So on the VOD disease awareness efforts this has been our campaign our unbranded campaign. We have also learned a great deal, as Russ touched on from the EU experience and I think that we will continue this effort in an unbranded way but we will also now with the approval step up our branded education around VOD.

Just to illustrate the diagnosis challenge in front of is an example of the fact that there is latent treatment guidelines and two different sets of diagnostic criteria you get an inconsistent diagnosis of VOD. This is an example of many different lab values on the day of a VOD diagnosis by a healthcare provider. And you can see that the lab values are interpreted very differently in for a definitive diagnosis. And our goal again is to get a consistent diagnosis and get those patients treated.

In the U.S there are about 70 transplant centers that’s performing 80% of all the stem-cell transplants in the U.S. We have high overlap with active Erwinaze accounts and that’s really because the hem/onc departments are very closely related and almost adjunct to many cases with the transplant facilities.

We felt very good about the knowledge of these institutions and our sales forces ability to navigate them. Let me touch on the reimbursement landscape and look at it in two ways one is terms of government program paid transplants and another in terms of commercials. So in terms of government programs a stem-cell transplant is about 45% of the time paid for by public funds. And how that is done is that these hospitals are reimbursed on a DRG case rate and that rate is adjusted based on either geography and this minor adjustments to it. A DRG value for an allogeneic transplant is $68,000 unadjusted.

So that is what the institution would receive for a patient getting a transplant for a patient under a government program. Now keep in mind that these patients are pre-approved for stem-cell transplant. And carefully scrutinized, so let’s look at the commercial pay.

So on the commercial side which is about 55% of stem-cell transplants it’s that a bit different, so it is actually done on an annual negotiated hospital specific case rate. So what happens is that the commercial payer and the institution negotiate a case rate per transplant. When this is worked out in comparison to a Medicaid or Medicare case rate, it's about 150% to 200% higher. So, that puts it around $100,000 to $150,000 per transplant.

Now again government and commercial payers will not have a formulary review or approval. This is a medical benefit, not a pharmacy benefit. So, what these payers will do is they'll develop criteria within their BMT coverage policies and guidelines around the treatment of VOD and the use of Defitelio.

Now these commercial payers also have stop-loss arrangements or catastrophic drug coverage provisions in these case rates. So, if a patient were to run into a complication as a result of the transplant, the case rate then is superseded by this provision in the agreement, and all, such as intensive care unit costs, things of that nature, are then also reimbursed on top of the case rate.

So let me touch a little bit around VOD and it is a very costly complication of stem-cell transplants. As we all touched on this is a condition that has a high mortality rate. These patients that develop VOD with MOD result in 2.5 times greater cost to the transplant center, than patients that don't develop VOD. And the reason why the driver of these costs are – is the length of the hospital stay for the most part usually up to twice that of a patient that does not contract VOD, on average 47 days as tested by both Dr. Chao and Dr. Richardson, these are very, very sick patients. In addition patients with VOD and MOD are twice as likely to be in the ICU than those patients without VOD.

So in terms of cost of treatment, we – I think touched on by Karen earlier the recommended dose of Defitelio is 6.00 milligrams per kilogram every 6 hours given as a two hour IV fusion, the recommended duration of treatment is 21days and the cost per patient per course of treatment will vary on weight and the size of the patient. We touched on that this is indicated for both pediatric and adult patients. The WAC for Defitelio is $825 per vial. And I think to touch on a couple of points on what this means to the institutions. As I said earlier VOD with MOD is a costly condition for these transplant centers.

When you look at our budget impact model that we will be using in these institutions and in P&P reviews the additional cost per stem cell patient when Defitelio is made available in the transplant center will be about $7,000 in the adult and only $1,000 in the pediatric patient as additional costs. So keep in mind this is again a small population that has a high impact on overall hospital budgets as a condition. But as in the drug treated population, when you put that over the entire transplant universe, it is a small incremental amount per stem cell patient. Defitelio is a cost effective intervention. We have a very good cost effectiveness ratio of $48,000 per QALY, which compares very nicely to many other drugs right out there now and well covered in good access.

My last point is really what we will do this to further facilitate the patient access and we're going to touch on a couple of things first is payer support. As I said earlier, it's about education. And we have to make sure that payers really understand that the severity of VOD and the value of Defitelio. And we'll be doing that through the distribution of the AMCP Dossier, which completely gives a great clinical overview of the product as well as the health economic outcome data. And the institutional level, which is extremely important. We want to drive rapid formulary review. Educate clinical pharmacists on ordering administration logistics.

Certainly as we touched on earlier educate the importance of immediate intervention following the diagnosis of VOD with MOD. And establish the value of Defitelio in the context of these health economics. We will provide order fulfillment within 24 hours. VOD is a condition that can progress quite rapidly. And we will also provide the institutions additional reimbursement support in coding assistants. And lastly, most importantly we will provide patient support. We will have a program for patients who either do not have insurance or cannot afford the drug. Every patient that needs a drug will get the drug.

So with that, I’ll turn the webcast over to Matt Young.

Matt Young

Thanks, Mike. And I'll just quickly review some of our financial guidance and metrics that we’ll be following for Defitelio going forward. And I'll start by just reminding you of our overall financial guidance for Defitelio in 2016 between Europe and the U.S. of $100 million to $125 million in sales. I'd also like to remind you that Sigma Tau will receive $150 million milestone in the second quarter as a result of the FDA’s approval of Defitelio yesterday. This milestone will be capitalized as an intangible asset and amortized over the estimated useful life.

Life of Defitelio from a gap perspective and in 2016, the amortization will be approximately $12 million, which also includes the IT, R&D portion of our payments related to Sigma Tau. As it relates to our 2016 guidance roughly 20% to 30% or $20 million to $35 million of those sales are intended to be from the U.S. with 70% to 80% or $80 million to $90 million being ex-U.S. As Russ and Mike previously alluded to we know that there has been less experience and familiarity with respect to both awareness and diagnosis of VOD and limited use of Defitelio through the treatment IND in U.S. And as we discussed our strategic launch initiatives will be focused on increasing awareness and recognition as well as diagnosis of VOD.

And the couple of other observations, as Dr. Richardson alluded to roughly 55% of the patients in the treatment IND were pediatric patients in with respect to VOD and MOD. And we anticipate again early penetration to be in that population, which is a smaller part of the total population that we will get to over time. That said again I remind people of the analog that Erwinaze provide in that, we've seen that medical education raising awareness is a critical aspect to treatment in situations like this and we expect that to be the case with Defitelio as well and anticipate will be able to grow that demand overtime.

Moving to the next slide, just talking about the three key metrics we will use to help measure the progress of our U.S. launch. First, as we just did we will report our U.S. and ex-U.S. split of sales. We will also report on volume growth in vials. So as of the third quarter of 2016, we will provide sequentially over the previous quarter. And after five quarters, we will then start to provide year-over-year volume growth as well.

We will also provide the number of accounts ordering, so centers that order Defitelio in the percentage of total patients receiving transplants roughly covered by those centers. I would remind you that similar to our experience with Erwinaze, we will not have data, number or types of patients treated or duration or volume or therapy with respect to these patients. As we all have data on vial ship to specific accounts and don't have access to that patient level data. So again we believe these metrics will best represent the way to track our progress with Defitelio in the U.S.

And now with that, I think we’ll begin the Q&A portion of the webcast. So Kathee, do you have any instructions for the audience.

Question-and-Answer Session


Yes. Thank you, Matt. So before we begin the Q&A, I’ll remind you that if you do have a questions, please send in your questions by the console. And for the sake of time we will limit the questions to today’s topics. Thanks for submitting your questions so far. We have lots of great questions and we’re going to try to address many as we can. Bruce, I’ll turn it over to you.

Unidentified Analyst

Yes. So I’m going to be reading some of the questions we received and directing them. I'm going to prioritize the KOL questions first both because I think this is a unique opportunity to have a couple of very distinguished guests on our call and also because I believe they have limited time and I'll just say, to the two doctors on the phone, if you need to leave the call we understand you have other things to do with your schedule. Don't feel bad, but I’m going to come to you first with questions.

First question for Dr. Richardson, what does he believe caused the improved survival in the Expanded Access Study?

Paul Richardson

Thank you very much, Bruce, and that's a great question. I think the bottom line is obviously the Expanded Access program provided drug to transplant centers broadly. And I think that I have to say speaking to our own experience, because we're one of the lead enrollers to that trial. In addition to the fact that compared to the pivotal trial patients were allowed to enter the study and be treated sooner, it led to better outcomes.

I think the fact that they were as sick, if not sicker as reflected by the multi-organ failure characteristics I alluded to is relevant. But I think it's important to recognize that we've clearly shown in study after study that earlier intervention with defibrotide results in better outcome. And the most compelling evidence for that actually is provided by the high risk pediatric children prophylaxis study from the EBMT in Europe published in the Lancet a few years ago now, couple of years ago in fact, in which the EBMT group demonstrated the superiority of prophylactic defibrotide in high risk.

And I think that's led to early intervention being a key metrics for transplanters with the drug.

So even though these patients were very, very sick has reflected by the ventilator dependence and dialysis dependence I touched on, the fact is rapid access to the drug early use. And I think that resonates very nicely with the comments from Matt and Russ where and of course comments from Karen too earlier that we really do believe that the earlier use of this drug matters. And I think that’s where the expanded access signal comes from in terms of better outcomes.

Unidentified Analyst

Thank you, Dr. Richardson. A couple of questions for Dr. Chao. Number one, how quickly can VOD develop into severe VOD? And second is severe VOD as difficult to diagnose as VOD or by the time the disease has reach the severe phase is it a clearer or simpler diagnostics?

Nelson Chao

Those are both great questions. The pace of change varies quite a bit. So it can change within two to three days to go from nothing to very severe VOD in some patients. In other patients, the bilirubin may slowly increase over the course of seven to ten days or more even. So, it varies quite a bit in what the phase is in different patients. In general, it’s – we worry about severe VOD when the bilirubin is doubling every day that’s sort of a rule of thumb.

And the second question was whether the diagnosis is easier when it’s severe? It is somewhat easier. Usually the things that cause cholestasis like drugs and even graft-versus-host disease tend not to change that quickly. So when things change within three to four days, we certainly worry about VOD. But it’s not that much easier because as I mentioned earlier, there are many things that cause the spectrum of clinical findings. So it still is an iterate process, probably the best way to describe it as we go through this algorithm every day, sometimes twice a day and we see the patient to try to determine whether this is VOD or not.

Unidentified Analyst

Great. Thank you very much. And back to Dr. Richardson, many – this is somebody else typing this question, these are not my words. Many physicians we’ve spoken to believe the therapeutic benefited to defibrotide is greater when treating less severe patients. How do you plan to prescribe to defibrotide, EG, which types of patients and what duration of therapy?

Paul Richardson

That’s an excellent question, Bruce. And I think the questioner is absolutely correct that earlier intervention matters as I alluded to a moment ago. In terms of the label, the label actually I think is quite favorable in that regard because it speaks of multi-organ dysfunction. Remember multi-organ failure is a more advanced form of multi-organ dysfunction. And we’re actually in the process of crafting our own guidelines for the on-label commercial use of defibrotide here Dana-Farber Brigham and MassGeneral in children’s and also at the Beth Israel.

And in that context, we’re going to be as liberal as we possibly can because we recognize that the sooner you intervene the better, the outcomes improve. However, the drug’s safety profile is excellent in our view. But obviously if you’re introducing it late into a patient’s course, when there are so unstable and incredibly sick, you’re missing the boat proverbially. So I think earlier intervention will be our guiding line. But I think the label allows us to do that, which I – and this is my personal view because it speaks to multi-organ dysfunction and that can be I think relatively liberally interpreted at the bedside.

By that I mean, the requirement renal dysfunction et cetera, multi-organ dysfunction is an interpretation and I think that allows us the bandwidth to intervene early. So we’ll be moving in quickly because we know that that matters. We’re very pleased with the safety profile of the drug. So that’s not a concern. And then what we see of course and I’m speaking now with my clinical hat on and strictly so, we’re very struck by other potential benefits from the drug that we see in the context of a very interesting signal regarding GvHD and other secondary endpoints in various trials that have been positive. So, we’ll be very active in our use of the drug.

Unidentified Analyst

Great. Next question for Dr. Chao. As the incidence of VOD declined with better conditioning treatments or will physicians start becoming more aggressive now that there is a potential rescue for complications?

Nelson Chao

Again, I think these are great questions. The answer to both is, yes. So, the non- myeloablative regimens are less intense and by the fact that we’re using less drugs and less toxic drugs, the incidence tends to be lower. The flip side of that is that since we are still doing allogeneic transplants, we are actually treating sicker patients to start with. So the reason we can’t use the ablative regimens in these patients tend to be because they have significant other co-morbidities.

And so in one sense, overall the incidence is slightly lower, but because we’re treating older and sicker patients, the risk of VOD or the worry that we’re going to cause VOD is still there. As far as treating patients earlier I think that I would totally agree with Dr. Richardson that is really the way to go. And I think once the drug becomes available, I think that’s what we will see across the larger transplant centers is that we will reach for the drug earlier and patients who are not so severely ill.

Unidentified Analyst

Great. And back to Dr. Richardson, does the data you have seen indicate to you that defibrotide has potential to effectively prevent severe VOD?

Paul Richardson

I am quite convinced of that, Bruce, not least because of the very large perspective trial in Europe, the EBMT study. As I mentioned earlier, published in the lancet by Selim Corbacioglu and colleagues from the EBMT. That was over 350 patients strong and it was a randomized study comparing the impact of defibrotide prophylaxis versus control with the ability to crossover for patients who developed VOD. And there was a significant reduction in VOD incidence in favor of the defibrotide prophylactically treated arm. There was a significant reduction in ICU stay and multi-organ failure type characteristics seen.

The safety profile was remarkable and strongly in favor, I would say it was remarkably favorable for defibrotide. And I think in that context, when you have a trial of that quality illustrating that point, I think that we’re confident we’ll see that with defibrotide more broadly. I should emphasize that beyond Selim’s paper to Dr. Corbacioglu’s paper there are other studies as well in prophylaxis that have been published from reputable centers and they show again a consistent signal.

So I’m struck that we have an agent that used earlier. We really hope is going to be a game changer and I think Nelson touched on this. I think it’s going to be a very important addition to our therapeutic, our moratorium to make transplants safer and more efficacious for patients broadly. In particular children, in particular certain high-risk settings, but I also believe and I think the prevention study that Karen touched on is really going to get to this. We’re going to be able to expand the way we use this in an earlier and preventative setting as the drug is further developed.

Unidentified Analyst

Great, thank you. And I think the last two questions we have at this point for the KOLs, I’ll direct to Dr. Chao. First how accurately can you predict, which patients will develop VOD at transplant? And second, given the children tend to receive more myeloablative regimens do you expect that the ratio of children treated to adults to be greater than the incidence of transplants, the ratio of incidence of transplants?

Nelson Chao

So for the second question, first, I do – I think I know the pediatricians are very excited about this. They have been waiting for this for a long time. They do use a lot more myeloablative regimens. They have I think a keen awareness of VOD. So I do think that it will be used more frequently in the pediatric patients. Only in the ratio I think that once drug is available, it will become – it will be used quite often in the adult patient population as well.

I think the model that I see is what happened with AMD3100, which was quite restricted in the beginning and I know today we use this not quite like water, but we use a lot of it. And we’ve sort of – it was very restrictive early on, but I think when you have a niche where there’s really nothing else to do it becomes comforting even if you’re just treating the doctor to treat this disease. The first question, Bruce, remind me again, it was…

Unidentified Analyst

How accurately can you predict which patients will develop VOD at transplant?

Nelson Chao

You can’t pretty much predict of the high-risk. So, one of the slides I had the risk factors on the patient side, so certain patients, for example, those who get TBI, those who, for example, had Mylotarg, would have done Mylotarg. Those patients are clearly at a higher risk. And you – or patients, for example, get a second transplant, they come in and you are looking for VOD from day one. And so, when they bump their bilirubin or when they start to gain weight, your risk – your suspicion of VOD is quite high.

Bruce Cozadd

Great. Okay, I just want to acknowledge Dr. Richardson and Dr. Chao for taking time to do this call and for answering the questions, very much appreciate it. We now do have a couple questions that were directed at members of our team and maybe I'll just continue on the medical side with Karen. I think Karen’s got a list of questions in front of her and Karen why don't you take a couple of the questions that were directed at you.

Karen Smith

Thanks. I perhaps would like to start at the top [indiscernible]. Does the risk of VOD decrease over time? So VOD actually presents or can present within hours post stem-cell transplants and typically within the first 21 days of their recovery and as Dr. Chow alluded to that's why it's critical that physicians monitor these patients on a daily basis to understand. So that's why they will require continual Defitelio if they do encounter VOD. But obviously this does decrease over time throughout their recovery. Questions?

Unidentified Company Representative

Can you talk about enrollment timelines for the Phase 3 prophylactic study? And what proportion of the HSCT population meets the high risk characteristics you plan to use the study inclusion criteria?

Karen Smith

So for the prophylaxis study, the Phase 3 study, we're looking to start that study in Q2. We're looking for an FPI in Q3. It is an adaptive design. So there is an interim analysis step that will take place once we’ve enrolled the first 400 patients. It will be overseen by an independent data management committee. Once we have 70% of valuable patients of that 400 and then there will be an evaluation in accordance with the primary efficacy endpoints, which is VOD free survival by day plus 30 post stem cell transplant.

Unidentified Analyst

Okay. And then there was a question about timing of prevention study enrollment at N equals 390 and also at N equals 595?

Karen Smith

So that's pretty much as I was just explaining. So we'll have the 400 patients enrolled. We'll do the interim analysis once we have 70% valuable and the decision will be made at that time as to whether or not we need to continue, study continue enrolling. And it will take around four to six years for us to complete and have preliminary data from that study. And then in terms of the high risk portion of that question, as Russ touched on, there's around 20,000 stem cell transplants in the U.S. The patients at high risk, the VOD numbers around 3,000 of which the incidence of VOD is about 1,000 to 2,000.

The planned prevention study that we have does have a very defined set of inclusion criteria for adults and peds for high risk and for very high risk patients. That inclusion criteria could be narrower than perhaps the population that has been identified in this graph because the incidence of VOD varies widely in the published literature that is available today and we also believe that VOD is either misdiagnosed or currently underdiagnosed, so these incidence numbers may evolve over time as the diagnosis rates change.

Unidentified Analyst

Okay. Let me direct a couple questions to Russ and Mike that are of a similar theme, so I'll group them together and these all really go to duration of therapy. There was a question, Russ, about – where is it go here – what we’ve learned in Europe about duration of therapy and then, Mike, any expectations for what that might be at start and what it might gravitate to over time in the U.S.?

Russ Cox

I can read the question specifically. It says – the label says the Defitelio treatment is for a minimum of 21 days and up to 60 days. What is the average duration of treatment now in the EU, in the U.S., and is that expected to change dramatically over time. So in the EU currently, what we have observed is about 14 days. Now, understand that these are very sick patients and many of them don't get the entire course of treatment. But 14 days is about the average.

If you look at the U.S. label of being 21 days, we do believe that historically in the U.S., you see people tend to go more towards what the label says. While we haven't launched yet it's difficult to say whether that's exactly what we'll see, but the label does say 21 days. And the only change that I think will happen that could be dramatic in time is to what Dr. Richardson says. I think that people as they have more experience, they look to treat earlier and I think that we'll see that trend continue.

Bruce Cozadd

I'll just on a data point mention that Russ is referring to data we got from doing some market research, we don’t actually get ongoing data for each time we sell vials. So that was at a moment in time based on research we did. Mike, do you want to talk a little bit about expectations in the U.S.?

Mike Miller

Yes, I think just to add on to what Russ said, I think that one of the important messages for us to communicate to the transplant team is to make sure that these patients do finish treatment with Defitelio to get the fullest benefit. So that will be an important effort by our team to make sure that the transplant team as well as the institution and the payers understand how best to use a drug for the best outcome.

Unidentified Analyst

Okay. Mike, we've got another question that I think we'll direct to you. Can you talk about the resources and expertise required to provide the necessary support to effectively and efficiently launch the drug and Jazz's level of preparedness to launch the drug given the resources required across multiple areas?

Mike Miller

Sure. We have an established heme/onc commercial team that has been fully trained on VOD and now trained on Defitelio. Today hitting The Streets that we’re very excited about. We’ve had a lot of presence at Congresses and meetings to raise the awareness around Defitelio and the understanding of the science of the drug and I think that has gone quite well. And I think importantly and I touched on earlier, the health economic and outcome data that really communicates the value of the drug and that is something that's really, really important to understand why this condition is so costly and to really understand the value the drug can bring. We also have a dedicated heme/onc medical team in the U.S. that works in partnership with the reps. And then lastly, we have a field reimbursement team just dedicated to the heme/onc specialty that knows the cancer centers well and knows the clinical pharmacist as well.

Unidentified Analyst

And then Mike, one more question for you. What reimbursement hurdles do you see for stem-cell transplant centers and do you see that impacting the pace of launch?

Mike Miller

Well, I go back to our imperatives for launch, and the first is the education around a diagnosis of VOD. And I think that is probably the first and most important hurdle we have to clear. We have to get people to really understand what this condition is, how to look for it, and then obviously how to treat it with Defitelio. But it’s that initial educational push that will really, really have to execute well on to I think elevate the awareness and the proactive looking for these symptoms to really be aware of the patient's condition right after transplant. And as I said earlier, VOD can progress very rapidly. So we want to have the drug in these institutions and ready to be used at a moment's notice in case a patient gets diagnosed.

Unidentified Analyst

And maybe last one for Mike for at least now. Does the FDA label allowing for max 60 days of therapy provided basis for more flexible reimbursable number of days in the U.S.?

Mike Miller

Yes to be honest with you, I don't know. I think when we have those discussions with payers and understand a little bit more about how they will view the condition and the guidelines around treating VOD with Defitelio, I think we'll have a better read on that. But at this point I would think that they would stay with the label.

Unidentified Analyst

Okay, we had a question come in for Matt. How should we think about the discount off of the VAC price for modeling purposes? What are you assuming for average cost of treatment n the U.S. sales guidance?

Matt Young

Yes, I guess just as it relates to gross to net, so one thing to note is this is definitely in-patient, so we wouldn't anticipate 340B utilization here and I think in general gross to net as a result are likely to be in the high single-digit range for this product over time.

Bruce Cozadd

Yes. And then on the average cost per patient, again, we've given you some sense for how much drug would be used per day for different size patients and obviously we'll have to see how actual duration of therapy plays out over time.

Unidentified Analyst

We did get a question for Karen. Are CAR-T treated patients at risk for VOD? If not, why not given the cellular therapy and condition in chemo?

Karen Smith

Great question. We actually believe that newer treatment therapies that are coming through in CAR-T could quite likely actually increase the patients eligible for transplant and by doing so increase the complete responses, which allows patients to become eligible for transplantation and therefore there's obviously the risk associated with VOD.

Unidentified Analyst

A question came in to me, can you talk about the potential to extend the protection for Defitelio beyond orphan exclusivity in 2023 either through product improvements or otherwise. Can we think about the complexity of this product and it refers to another product where generic approval was slow?

Bruce Cozadd

So, we do have the regulatory exclusivity. We do have granted and pending IP. We have trade secrets, complex manufacturing process and the potential for a product improvement. So I would say everything you mentioned and then some. How that will play out over time we’ll have to wait and see, but our view certainly when we announced the Gentium deal at the end of 2013 and when we acquired the Americas rights in the summer of 2014 was on our view remains that this will be a product with good exclusivity. You can see that in the decisions we’re making to continue investing behind continued development of the drug and other indications. This is what we believe will be a very long-lived asset worthy of our efforts to make sure we can get the benefit of this drug across a number of indications.

Unidentified Analyst

Okay. And let me see what Kathee, if we have any others left.

Kathee Littrell

One for Russ.

Unidentified Analyst

One for you Russ. Please compare and contrast treatment for VOD in Europe versus the United States. Is one set of doctors more likely to add Defitelio to their treatment paradigm than the other or perhaps adopt it quicker?

Russ Cox

I think there are some differences that exist between Europe and the United States and say the big thing that we see more often than not is that typically it’s an academic center that you see in Europe and they’re fairly well concentrated whereas in the U.S., there’s about 200 centers about 80 of which control the majority of the treatment of bone marrow transplantation in the U.S. In the U.S., they are in fact more commercial. They’re much more I’d say competitive than they are in Europe. And so I think the number of patients that you see being picked up quickly are those that are the large, established, very competitive U.S. centers and I would say the pediatric population will probably be treated the fastest.

Unidentified Analyst

Okay. And then we got one other question. I just found in another in box. Were you able to apply for a J code yet or will this not be obtained until 2017? Mike?

Mike Miller

We have applied for it.

Bruce Cozadd

So, yes, we have applied.

Bruce Cozadd

Okay. And I believe that ends our questions, so just before I pass it back to Kathee I’d like to again thank our physicians, who participated in this call, very much for their time. Thank all of you, who called in, for your time and for the thoughtful questions we got. And we as a company certainly are very excited about the prospect of the work we have to do ahead of us to make sure, we do a good job educating on recognizing this disease, proper use of this drug to I believe bring real benefit to transplant patients at risk of worse outcomes without this intervention.

So, Kathee, let me hand it back over to you.

Kathee Littrell

Thank you, Bruce. And I join Bruce in thanking each of you for joining us on the call today and this now ends our webcast event.

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