Summit Therapeutics (SMMT) CEO Glyn Edwards on Q2 2018 Results - Earnings Call Transcript

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About: Summit Therapeutics (SMMT)
by: SA Transcripts

Summit Therapeutics (NASDAQ:SMMT) Q2 2018 Earnings Conference Call September 20, 2018 8:00 AM ET

Executives

Richard Pye - Investor Relations

Glyn Edwards - Chief Executive Officer

David Roblin - Chief Operating Officer and President of Research & Developments

Erik Ostrowski - Chief Financial Officer

Analysts

Hartaj Singh - Oppenheimer

Tim Chiang - BTIG

Julie Simmonds - Panmure Gordon & Co

Yun Zhong - Janney Montgomery

Arlinda Lee - Canaccord Genuity

Operator

Good day. And welcome to the Summit Therapeutics' Plc Financial Results for Quarter Two ended, 31 of July 2018 and Operational Update Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Richard Pye. Please go ahead, sir. Thank you.

Richard Pye

Thank you and welcome to everyone joining us on the call to discuss our financial results for the second quarter and half year ended July 31, 2018. Earlier today, we issued a press release summarizing these results. If you have not had a chance to review, they are available on our website at www.summitplc.com.

Joining me on our call today are our Chief Executive Officer, Glyn Edwards; our President of Research & Developments, David Roblin; and our Chief Financial Officer, Erik Ostrowski. We will be using slides to guide today's discussion. These slides are available on our webcast and available for download from our website.

Turning to Slide 2, I'd like to remind listeners that we will be making forward looking statements during this call. I refer you to our filings with the Securities and Exchange Commission for a description of the risks and uncertainties associated with an investment in Summit Therapeutics. While we may elect to update these forward-looking statements at some points in the future, we specifically disclaim any obligation to do so, even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today.

I’d now like to turn the call over to Glyn for an overview of our corporate strategy. Glyn?

Glyn Edwards

Great. Thank you, Richard and thank you all for joining us on the call today to discuss the recent corporate developments and more importantly our strategy moving forward.

During the second quarter, we reported the topline results of our Phase 2 clinical trial of ezutromid in patients with duchenne muscular dystrophy called our PhaseOut DMD study. This clinical trial was set up to provide us with a clear answer as to whether ezutromid could benefit patients with DMD, and much to our disappointment PhaseOut DMD did not meet its primary or secondary endpoints. Therefore we decided to discontinue the development of ezutromid.

So our sole focus is now the discovery and development of new mechanism antibiotics for serious infectious diseases. We’re breaking out of the mold of traditional antibiotic companies to create what we believe will be a successful company, which we outlined on Slide 3.

To do this, we have new science that we believe can identify brand new bacterial targets and discover new drugs against these. We also have a new way of thinking. We're developing our antibiotics to express a specific pathogen or infection. This means we can focus our development plans on addressing the true unmet need of that particular pathogen or infection with the goal of improving outcomes for patients and creating value for the payers and for the healthcare providers.

Together with our innovative science, our new philosophy affords new opportunities that have not been possible for the past several years in antibiotic development and we believe the opportunity here is for our compounds to become the new standards of care with economic and clinical data that supports premium pricing and high-volume usage.

Innovation in antibiotics has been well rewarded in the past, so let's look at Slide 4 now. We can see that it's been 30 years since the last new class of antibiotic was discovered and about 15 years since it was introduced in the clinic. And resistance is a clinical issue as bacteria can develop resistance to new analogs of old classes.

From the 1920s through the 1980s, new classes of antibiotics were discovered on a relatively consistent basis. Each new class provided bacteria with a new challenge to overcome and so resistance was not a major clinical issue. With no fear of resistance and antibiotic innovation at its prime, each new antibiotic saw commercial success.

So Slide 5 shows a recent example of this success and follows the model that we aim to replicate with our pipeline. Linezolid was approved in 2000 as a new mechanism antibiotic for the treatment of MRSA. In the clinic, it demonstrated superiority over the standard of care for MRSA and with additional benefits for patients, payers, and the healthcare providers.

The label and launch, both focused on the treatment of MRSA, which was the clear unmet need and peak sales reached $1.4 billion a year in 2011. These examples show that you can be successful if you are innovative and develop new mechanism antibiotics, specifically for a pathogen or infection and this is exactly what we aim to do.

Please turn to Slide 6. We often hear that new antibiotics will never get used. We believe that this is fundamentally due to a lack of innovative products hitting the market combined with fear of rising resistance, but if we look at the definition of stewardship, it calls for the use of the right drug at the right time. This is not about keeping a targeted drug in reserve. That approach promotes inappropriate broad-spectrum therapy and encourages the development of resistance to the standard of care. We believe that we are developing the right drugs for the right bugs and therefore our strategy is aligned with stewardship.

Further, on slide 7, the stewardship argument promotes commercial success for new mechanism targeted antibiotics such as the ones we are developing. The appropriate antibiotic is one that is designed specifically for the pathogen or infection. We believe the results of appropriate antibiotic use is improved clinical outcomes and reduced healthcare costs. It also reserves the older broad spectrum agents for more severe systemic infections, all those infections were the cause is unknown.

So ridinilazole, our antibiotic candidate for C. difficile Infection and SMT-571 our lead compound for gonorrhoea are both exemplars for stewardship, each is being developed specifically for a pathogen. Each development program is aimed at showing a significant advantage over the current standard of care, and if successful in clinical development, we expect that each could achieve market uptake as a frontline agent with premium pricing supported by clinical and economic data.

I'd now like to turn the call over to David, who will outline more specifically how we intend to execute across the drug development pathway and provide an update on our programs. David?

David Roblin

Great. And thanks, Glyn. Can we start on Slide 8. As Glyn mentioned, we are focused on discovering and developing new mechanism antibiotics for serious infectious diseases. Underpinning our discovery and development efforts is our Discuva Platform . This platform uses proprietary mutant bacterial libraries to discover antibiotics against new targets and to optimize antibiotic drug candidates prior to entering the clinic.

To date, the platform has already discovered several new mechanism antibiotic compounds, but we believe this is really just the tip of the iceberg. Our libraries also cover most bacteria on the CDC and WHO’s priority target lists, and we believe the Discuva Platform could allow us to identify and develop new mechanism antibiotics that could serve the medical need that is becoming increasingly acute.

Though in the clinic, we are on track to commence Phase 3 clinical trials of our precision antibiotic ridinilazole for the treatment of C. difficile infection. This will start in the first quarter of 2019. We plan to file for FDA approval if the results of our Phase 3 clinical trials are positive in 2022.

We also expect to enter a Phase 1 clinical trial of the new mechanism antibiotic SMT-571 for the treatment of gonorrhoea in the second half of next year 2019. And commercially, we are seeking to maximize the value of our pipeline. This could include a combination of partnerships, non-dilutive funding, and commercialising products ourselves in key territories.

So, I’ll now discuss our pipeline in a little more detail, so please turn to Slide 9. As I mentioned, ridinilazole is our Phase 3-ready precision antibiotic in development for front-line treatment of C. difficile infection. C. diff infection is listed as an urgent threat by the CDC because of its high rates of disease recurrence, mortality, and cost burden. Most types of the C. diff infection occur after patients have received a course of antibiotics for an unrelated reason.

This causes widespread disturbances to the patient's gut microbiome, and without a healthy gut microbiome to protect against C. difficile, these patients become more susceptible to infection.

To make things worse, the current standard of care for CDI is a broad-spectrum antibiotic called vancomycin. Vancomycin causes further damage to patients’ gut microbiomes leaving them readily susceptible to CDI recurrence.

So we've shown ridinilazole to be highly selective for C. diff in both clinical and preclinical studies. Indeed, in our Phase 2 clinical trial called CoDIFy, we saw that ridinilazole killed C. diff and left the majority of the bacteria in patients’ microbiome undisturbed. We believe this is key and it is this that led to a near 60% reduction in recurrent CDI compared to vancomycin, the standard of care in that trial.

This important microbiome work was recently published in the peer reviewed journal PLOS ONE. CoDIFy further showed the clinical benefit and sophistical superiority of vancomycin and the important measure of sustained clinical response. This measure is a registrational endpoint and it shows whether a patient is both cured [ph] at the end of treatment and remains disease free of 30 days after treatment.

We're looking forward to this year two double blind randomized Phase 3 clinical trials expected to start now within the first quarter of 2019. The aim of these trials is to replicate the results of the CoDIFy trial and we want to show superiority of vancomycin and sustained clinical response.

Each trial is expected to enrol approximately 700 patients at sites around the world. Importantly, we are including health economic measures in these trials. These measures are key to providing the evidence that ridinilazole has the potential to save overall health care costs.

For example, these measures include looking at the impact of length of stay and readmission rates. So we expect to report top line results from the Phase 3 clinical trials in the second half of 2021. With positive Phase 3 results, we would expect to file for FDA approval in 2022 and we believe the package of data we're compiling ridinilazole could be approved for the treatment of CDI and importantly also the reduction of recurrent CDI. This would differentiate ridinilazole in the market.

So all in all, our aim is to show that ridinilazole is better than standard of care, addresses a major unmet need in CDI, and provides overall cost savings. We believe this approach will support frontline use of ridinilazole with the potential for a premium price and therefore provide us with major markets opportunity.

The Phase 3 clinical trials and regulated development of ridinilazole are supported by an award from BARDA worth $62 million. We announced in August that BARDA had elected to exercise an option for this award bringing the total amount of committed funding now for the project to $44 million. We believe that continued support is a testament to the promise of ridinilazole in CDI, but also importantly the work completed so far under the award.

Now behind ridinilazole is our lead candidate for the treatment of gonorrhoea SMT-571. And gonorrhoea is becoming a major problem worldwide due to the bacteria's ability to rapidly develop resistance to all known classes of antibiotics.

The current recommended treatment by the CDC is approaching levels of resistance that would typically trigger a change to guidelines. Unfortunately there is no next available treatment for gonorrhoea. So SMT-571 was identified using our Discuva Platform. Unlike all the candidates in our pipeline, SMT-571 has a brand new mechanism of action. And in vitro studies that have shown high potency for a range of gonorrhoea strains including multi-drug resistant ones.

We are developing SMT-571 specifically for the treatment of gonorrhoea and what this means is that both the design of SMT-571 and the development program will be entirely aimed at addressing the unmet need in gonorrhoea and so doing - produce a product with characteristics that are desirable for patients and treating physicians. SMT-571 has now entered investigational new drug enabling studies and we expect to initiate the Phase 1 clinical trials in the second half of 2019.

We announced in July that we've received an award from CARB-X with up to $4.5 million. This is supporting SMT-571’s development through to the end of Phase 1 and we get that money if certain development milestones are made along the way.

We also have a second series of antibiotics for gonorrhoea. These have a new mechanism distinct from SMT-571. As gonorrhoea is such a high end need we believe there is merit in developing both.

Throughout the second quarter, we have presented data on our gonorrhoea programs at major scientific and medical meetings. I encourage you to look at these publications in this section of our new website www.summitplc.com.

When we acquired Discuva as platform [ph] there was already an ongoing collaboration with Roche for discovery and development of new antibiotic compounds. Roche is solely responsible for the further development of the compounds identified and we are eligible to receive milestone royalty payments based on the successful development and commercialization of any compound that results from this collaboration.

And further to that, we've recently announced the addition of an ESKAPE program. ESKAPE with a group of six pathogens that together make up the biggest cause of hospital acquired infections. These pathogens are also seeing increased drug resistance and mortality. Many of the pathogens are on the CDC and WHO priority list, so as ones that urgently need new antibiotic.

Through our program we've identified new targets for these pathogens which we are currently working on. We plan to unveil more details of these programs at scientific and medical conferences over the coming year, but I think it speaks to the promise of the Discuva Platform to sustain antibiotic innovation for the future.

And through these remarks you will notice a theme that our programs are supported by non-dilutive funding. In addition to the funding from BARDA and CARB-X, we’ve received awards from the Wellcome Trust that supported the development of ridinilazole through Phase 2 and Innovate UK for early stage work on the Discuva Platform.

We think this speaks not only to the urgent need for new antibiotics in the areas we are pursuing, but also to the quality of our science and the promise that our programs have to treat these infections. We are proud that we’ve been successful in receiving these awards and we believe they add value for our company and shareholders.

So with this breadth in our current pipeline and the potential of the Discuva Platform, we are a leader in antibiotic innovation. And as shown on Slide 10, we believe we have the antibiotic experience and expertise on our team to execute across the drug development pathway.

Together members of the Summit team have brought eight antibiotics to the market in various positions at Pfizer, GSK, Bayer and AstraZeneca. We are also fortunate to have an in-house team which includes the scientists that are responsible for the discovery of all new mechanisms antibiotics in our portfolio. They're making great progress and I look forward to updating you on this progress and the advancing of our work and antibiotic candidates toward the market.

And now back to Glyn.

Glyn Edwards

That's great. Thank you, David. As David outlined, with several exciting programs in our pipeline. On slide 11 we'll show you some of the key planned milestones for ridinilazole and C. diff infection and SMT-571 in gonorrhoea. So ridinilazole we expect to initiate the Phase 3 clinical trials in the C. diff infection in the first quarter of next year with topline data expected in the second half of 2021. And with positive data a new drug filing with the FDA in 2022.

For SMT-571 we plan to initiate a Phase 1 clinical trial in the second half of 2019 with top line data expected in the second half of 2020 and with positive Phase 1 data we could look to initiate a Phase 2 clinical trial in the second half of 2020 as well and would expect top line data from that trial in the second half of 2021.

As we advance our ESKAPE programs and second programme in gonorrhoea we’ll be adding to these milestones. Our pipeline provides us with programs across the development spectrum from early stage development to late stage clinical trials and we believe there are multiple value inflection points on the horizon.

And with that, I'll turn the call to Erik, who will discuss the important financial results in more detail. Erik?

Erik Ostrowski

Great. Thanks, Glyn. I'll now provide an overview of our financial results for the second quarter ended July 31 2018 on Slide 12. We present Summit results in accordance with International Financial Reporting Standards in pounds sterling, but for convenience purposes, I'll give US dollar equivalence for certain key numbers. I'll begin with the income statement highlighting some of the key items.

Revenue is £38 million for the second quarter ended July 31 2018, as compared to £4.8 million for the second quarter and to July 31 2017. Revenues in each of these periods relates primarily to our licensing collaboration agreement with Sarepta Therapeutics.

The increase in revenues during the second quarter of 2018 was driven by the recognition of all remaining deferred revenue, primarily related to the upfront and milestone payments associated with the Sarepta agreement. The recognition of this deferred revenue was triggered by our decision to discontinue the development of ezutromid for duchenne muscular dystrophy as these revenues are recognized over these ezutromid development period which is now concluded.

Other operating income for the second quarter ended July 31 2013 was £2.7 million, as compared to zero for the second quarter ended July 31 2017. This increase relates primarily to income pursuant [ph] to our funding contract with BARDA for the development of ridinilazole which was £2 two million during the quarter.

Turning to expenses, research and development expenses increased by £2.9 million to £9.5 million during the second quarter ended July 31 2013 from £6.6 million for the second quarter of 2017. This increase reflects increased expenditure related to our DMD and CDI programs, as well as our antibacterial research activities and R&D related staffing costs.

General and administration expenses increased to £2.7 million for the second quarter ended July 31 2013 from £2.5 million for the second quarter of 2017. This increase was due to a net positive movement in exchange rate variance offset by increased staff related costs, legal and professional fees and overhead and facility costs.

I'd also like to point out a couple of non-cash items in this quarter's income statement related to the discontinuation of the development of ezutromid for DMD. First, we incurred a £4 million impairment charge related to intangible asset and goodwill associated with our utrophin modulation program. We also recognized £2.8 million of finance income related to the release of financial liabilities associated with our DMD charitable funding arrangements, as royalties - ezutromid made in the future associated with these arrangements are no longer anticipated.

We reported a net profit for the second quarter ended July 31 2018 of £26.6 million, as compared to a loss of £3.3 million during the second quarter of 2017. This net profit was driven by the previously discussed release of deferred revenue associated with our Sarepta agreement.

Turning to other items following the negative ezutromid trial outcome, we reduced our headcount by approximately 23%. As these cost savings measures were enacted in the July, August timeframe, their financial impact will not be seen in our financials until starting next quarter.

On a related note, as previously stated, we are in the process of winding down PhaseOut DMD our ezutromid clinical trial. Expenses related to this wind down we expect for the most part will conclude by the end of the year.

I’d now like to discuss our current financial position and cash runway guidance. We ended our second quarter with cash and cash equivalents of £17.1 million or $22.5 million compared to £20.1 million at January 31 2018. This cash balance does not reflect the approximately £5 million in payments we have since received or expect to receive during our third quarter from our R&D funding arrangements.

In addition, we expect to receive an approximately £5 million UK R&D tax credit payments this quarter. In total, these payments will bring in approximately £10 million or $30 million [ph] of additional funding.

As discussed in today's release, we have extended our cash runway as a result of our cost savings measures and business realignment to focus on antibiotics. We are now guiding that our existing cash resources, along with funds from our R&D cost sharing arrangements will be sufficient to fund the company through September of 2019.

I will now turn the call back over to Glyn for closing remarks. Glyn?

Glyn Edwards

That's great. Thank you, Erik. We really believe that now is the time for new antibiotics and we believe we have the recipe for success with a new science and with a new philosophy. And we're excited for our future about the prospects of bringing much needed innovation into this space. And we thank our shareholders for their continued support in our new mission.

And with that, I'll open the line for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We’ll now take our first question from Hartaj Singh [Oppenheimer]. Please go ahead sir your line is open.

Hartaj Singh

Hi. Can you hear me?

Glyn Edwards

Yes, Hartaj we can.

Hartaj Singh

Hello. Great. Thank you, Glyn. So just a couple of questions and again, first of all apologies on ezutromid, I think you gave it a really, really good shot about as good as any company can give a project in Phase 2. For ridinilazole, your Phase 3, can just talk a little bit about your endpoint. I believe it's a core primary endpoint and sort of how is that structured to sort of either mimic or be analogous to your Phase 2?

Also the second question for that would be you know, your patient population, how the inclusion, exclusion criteria is structured, are they any different from what your Phase 2 looks like? And then lastly, do you expect any sort of interim looks potentially aside from just safety and efficacy, but interim looks specifically for superiority in your Phase 3s for ridinilazole? And then I’ve just got a quick follow up after that. Thank you.

Glyn Edwards

Thanks, Hartaj. So let's just get clear. There is not a co-primary endpoint, it's a single primary endpoint of sustained clinical response. But if you like, it's a composite endpoint because it's made up of – to meet end point, you have to be cured at the end of treatment test and then remain free of recurrence for the next 30 days, so it's a single endpoint but it is a composite of those two.

And it's exactly the same endpoint that we used in our Phase 2, and it's also become the de facto endpoint for these studies of antibiotic treatments in C. diff. So it's an endpoint that's completely understood and accepted by both the FDA and the EMA.

And your second question about inclusion/exclusion criteria. To a broad approximation, it's exactly the same criteria as our Phase 2. So what we're trying to achieve in Phase 3 is a repeat of the Phase 2, and as you know in antibiotic studies, they have a high chance of success where the Phase 3 is a repeat of the Phase 2 with inclusion/exclusion criteria being very similar. Where they can slip is where you move to a different site or whether you change the inclusion or exclusion criteria, and that is not the case here. We are recapitulating in Phase 3 what we saw in Phase 2.

Now, your question about interim look, much as we would love to have an interim look, our key priority here with this study is to ensure that we have great powering in the study to be able to meet the endpoint of statistical superiority in the primary endpoint of sustained clinical response, because that not only gets us – passed through regulatory approval, it's also really powerful in terms of the commercial positioning of the product. And so, there is no interim look for any of the efficacy endpoints. We will be keeping all the power we can into the - into the final analysis.

And that's important, not just for the primary endpoint, but also the key secondaries because as we said in the general introduction part of our philosophy here is not just to get the information required for a regulatory approval, but it's also to get the health economic outcomes data, which will allow us to go to payers and show them that if this drug is used widely in the first line use there will be considerable savings for their particular healthcare system.

Now one of the downsides of having no interim, look it might be that there is a lack of near-term catalyst, and that's where the beauty of the Discuva Platform really comes in, in that we have the programs that David indicated including in this key period, key clinical data from our lead gonorrhoea program, but we also expect to be making progress with the other programs. So I think - you know, I think we're in a really good position to have a high chance of success with our Phase 3, but also to have good news flow during this period.

Hartaj Singh

Yeah. No, that's a great Glyn. And actually you must have read my mind about near-term catalyst in the next 12 to 24 months. So Discuva Platform, you know, there's a lot of infectious disease development in the last 5 to 10 years has blown up, and I used the term mildly as companies have pursued Me2 [ph] projects, they've done non-inferiority trials, you know, because Congress has created an economic incentive with various programs here in the United States for them to just get a project going.

And my question specifically is in those two regards, I mean what is it specifically about Discuva Platform that a, that you know, you're not going to be coming up with Me2 sort of projects and then b, are you going to consciously look for superiority trials like the ridinilazole as opposed to non-inferiority because I think even FDA and EMA are actually getting tired of these non-inferiority programs/infectious diseases. And again, thank you for taking my questions.

Glyn Edwards

I'll hand over to David to answer those two questions. So what is it about the platform that allows us to develop these new mechanism, and would we look for existing mechanism ones, and then the second question David about superiority studies?

David Roblin

Yes. So thanks, Hartaj. I mean, the platform essentially looks really deep into a specific bacteria - the bacteria genome and what is essential and also conserved in that particular species. What we're not afraid to do is to keep that look quite narrow within the species. So, I think the last 20, 30 years, I would add one thing to what I think you described quite accurately is, there was also a focus on more broad spectrum agents. We are happy to look at narrow spectrum agents and design not just the microbiology, but also the chemistry of the molecule in a way in which it absolutely addresses the specific infection and the specific bug, and in that way a much more precise approach.

And on this call I would like to promise that I will never do a non-inferiority trial. And I think that will be challenging. I think we can do superiority in several areas, C. diff is one of them. But what we will do we will have development plans that really clearly differentiate from standard of care. And that's the plan really is to look at the opportunity based on the science that we can do in the Discuva Platform, the commercial potential and the ability within the development program to clearly differentiate.

Hartaj Singh

You know, that's fantastic and I really applaud your thinking about superiority trials because I think from all the commentary from regulators and even physicians as we've talked to in infectious disease area that's the real need now to have things that are better than expected. So I applaud that. We look forward to seeing updates. Thank you.

Operator

We will take our next question from the Liisa Bayko [JMP Securities]. Please go ahead. Your line is open.

Unidentified Analyst

This is John on for Liisa. Thanks for taking the questions. Just one quick one for me on ridinilazole, I'm wondering if you can walk us through what exactly needs to be done from today till the start of the Phase 3 as far as steps internally and anything that might be rate limiting for starting the trial?

Glyn Edwards

Yeah. Thanks John. I thought Liisa's voice had gone down to octave [ph]. So I'm glad you introduce yourself. So as we announced previously that we had some manufacturing issues and that's why the trial is due to start in Q1. Whereas if you go back to our presentations of a year ago we were expecting to be starting in this calendar year and having had that snafu with manufacturing, we've really gone into the whole CMC in a big way and taken a relatively big hit if you like in terms of timing, which is to push that start out till Q3, but in the process trying to ensure that we now have a very robust manufacturing train from sourcing raw materials through to making the API through the tablet formation and also all the assays and things that go with that.

So our critical path you know, it has been for the last six months all related to ensuring that we put a manufacturing process that is suitable not just for the Phase 3, but given our optimism and the statistics about the probability of success in Phase 3 for antibiotics to ensure that we've now got you know a process that is suitable for the market as well.

So its the manufacturing things on the critical path right now we feel comfortable with our guidance on starting in Q1. One of the benefits of the delay caused by manufacturing is that actually the clinical start up as - you know, has had longer and therefore there are going to be more centers ready to go, more countries ready to go when we do have drug available.

And so well we've not changed our guidance on finishing the study, we're actually in a whole lot better place once the study starts to really hit the ground running with a large number of sites from day one.

Unidentified Analyst

Got it. And sorry, just one more, with the recent update on kind of the ESKAPE targets, when should we expect to get some more granular details on those programs, next steps, anything along those lines?

Glyn Edwards

I think you know, that the ESKAPE programs is really quite exciting because we've already identified several new targets and we've got antibiotic programs against those targets, a new chemicals space that showing up - that hits the gene products of those essential genes.

Exactly when we'll update the market or the scientific community on those, I can't promise at this stage, but what I can, I would like to get across is that actually several products are going to come out against these ESKAPE pathogens all of which are going to be against targets that are currently has no other antibiotic against and that you know, as you know the ESKAPE targets - the pathogens are chosen because they are bacteria that are really causing significant problems to the healthcare system.

So we're hugely excited and it's going to be a cascade of things, but I don't want to promise you know, that the week after next is going to be announcement because I think it's better that we – that when these happen we make those announcements and so they keep coming out.

But to the interactions we're having with scientists in the community with physicians and actually with the people who are keen on funding these programs has been immensely positive. I just like to reiterate what David said is, if you look at that picture of when the last new targets were announced, it's been a long time and we are now working on several new targets. It's just a hugely exciting area and we you know we're sure that there's going to be huge, but medical and commercial success out of this platform.

Unidentified Analyst

Great. Thanks for the update and for taking the questions.

Operator

Thank you. We will now take our next question from Tim Chiang [BTIG]. Go ahead. Thank you.

Tim Chiang

Thanks. Glyn, could you just provide a little bit more detail on how many sites you planned to have for the two pivotal Phase 3 studies for ridinilazole. Also how long do you think it will take to enroll both studies?

Glyn Edwards

I'll answer the second question and I'll hand over to David for the first question on the approximate number of sites. But our guidance has been that we expected to take two years to fully enrol both studies, which will be taking place in parallel. They'll both start at the same time and we expect them to finish at the same time.

And the feasibility for this, we're very fortunate in that - you know, if we look back over the last two to four years there have been three major Phase 3 programs in C. diff, the Merck monoclonal antibodies, the Cubists serrata Miocene [ph] and Actelion with [indiscernible] and those both were recruiting the same groups of patients that were recruiting. So we can use the recruitment rates from those studies as a proxy for our recruitment, although we've won big caveat which is during that time period there were three big studies going on each recruiting you know large numbers of patients, where as in this forward looking period we are likely to be - certainly the only Phase 3 program in this patient population with this type of treatment.

So if anything you know, that - the environment for our recruitment should be more favorable than for theirs. And so long answer, but the short version of which is we are planning on a two year recruitment period and for the approximate number of sites, I'll hand that over to David.

David Roblin

Yes. So Tim, the other - the only thing I’ll add to what Glyn has just said, is the Phase 2 CoDIFy data we published in Lancet ID is stellar data. The community love it. They are excited by the potential of the drug and they want to work on it. And consequently we've had no difficulty finding sites that want to be involved in the clinical trial. We'll have circa 300 sites worldwide active on the program when it's - when it's going - going full bore.

Tim Chiang

Okay, great. Maybe just one follow up maybe for Erik. You know, obviously you're getting BARDA funding for running the study. I mean, how much of the – how much does BARDA actually cover of the cost of these two pivotal studies? I mean, looks like a substantial investment you guys are making here. And how does how does the timing of the BARDA funding sort of work in relation to the cash here up on your balance sheet?

Erik Ostrowski

Sure. So you may recall the total of BARDA award is for up to $62 million. And so we have committed from BARDA a total of $44 million of that $62 million to date. So we recently announced the $12 million award, just about a month or so ago.

The initial $32 million, which is the base period of the contract is more front end loaded if you will. And so to date we've received about $10 million of that $32 million. So there's still a fair amount of that left.

Tim Chiang

Okay. And - so I guess you really don't need to do any sort of fund raising until the second half of next year based on the BARDA funding that you have there right?

Erik Ostrowski

Yeah. So what we said today earlier in the call and also in the press releases that we've been able to extend our cash runway guidance. And so you know, with the BARDA funding that's committed so far, along with our other R&D cost share arrangements the company is funded through September of 2019, so about 12 months out from now.

Tim Chiang

Okay. Great. Thanks very much.

Glyn Edwards

Thanks, Tim.

Erik Ostrowski

Thanks, Tim.

Operator

We will now take our next question from Julie Simmonds [Panmure Gordon & Co]. Please go ahead, Julie. Your line is open.

Julie Simmonds

Just another question on the ridinilazole Phase 3 please. Just looking at the 300 or so sites that you are looking at recruiting again the patients, presumably each site is going to be involved in one trial. And are you looking to spread them out geographically so there's a broadly geographic similarity between the two trials is that not how it works?

Glyn Edwards

Yeah, that's exactly how it works Julie. So there'll be - there'll be a spread across a number of countries both trials will actually involve North America and the primary number of sites will be there, but it will be a large number throughout the rest of the world. Inside those – and there will be no who can do a really good job and that can identify C. diff patients and run them through in a high quality way.

Julie Simmonds

Okay…

David Roblin

Julie, I’ll just add to that, that obviously we have in Latin America a partnership with the Eurofarma and actually a key part of both our decision making in their interest was that they have relationships and you know, we've already had successful meetings with sites in Latin America and actually beat having more of those at ID [ph] week in a couple of weeks time in San Francisco. So yeah, I think while we estimate that about half of the patients if not more in each study will be recruited in North America, there is a pretty wide geographical spread.

Julie Simmonds

Brilliant. Thank you. And just touching on commercialization, which is something that David mentioned in his part of the presentation. I mean, clearly you've got Eurofarma, there's potential for other sort of commercialization opportunities with ridinilazole. But looking at the early part of the portfolio in a sense the rate at which you're creating novel antibiotics through Discuva would appear. I mean, is it something where you'd look at doing some earlier licensing on some of those earlier products or is there sufficient non-dilutive funding out there from grants and whatever to allow you to take that further forward?

David Roblin

I mean, I don't want to be too definitive, but it looks to us like the funding available for early stage products will effectively allow us to develop quite a large number of those with a relatively small contribution from ourselves. But when we look at ridinilazole the key market that we want to ensure that we're getting participation in the U.S. market. But that then leaves quite a lot of the world that is still available for partnering discussions.

So Europe, Japan and China are actually areas where we have ongoing discussions right now. But our aim is to ensure that we retain North American rights for these - certainly ridinilazole. And I think your comment, I think for the earlier pipeline we can move that forward at a fair rate with a relatively small contribution from ourselves compared with you know what it cost to do Phase 3s and with very considerable support from various sources of non or less diluted funding.

Julie Simmonds

Excellent. Thank you very much.

Operator

We will now take our next question from Yun Zhong [Janney Montgomery]. Please go ahead. Your line is open.

Yun Zhong

Hi. Thanks for taking the question. And first a follow up question on the BARDA funding and is there other any specific milestones that you will have to meet to be able to get the rest $88 million committed by BARDA.

Glyn Edwards

Yes. Hi. I’ll take that first question first and then you can - if there's a follow up we'll take that next Yun. So yes, and there is further milestones that we have to meet. So effectively there were four parts to the BARDA agreement. And the initial one which we started and on our way through which is for the first part of the clinical trial and preparation for it, and we are on that and that that's underway. There is a milestone you have to meet before we move to the second half the clinical trial but provided the trial doesn't stop you know, that's just effectively a recruitment point. So that's a reasonable chance of success once that we start.

The second part, we've already announced that we've received, so that was largely around CMC, so that project started, so that's definitive and the first part of the second part made up the 32 and approximately you said there's $18 million, that’s approximately half of that is the second part of the clinical trial and the other half of that is the regulatory and pre-filing work. So yes there are milestones that have to be met.

If we look at BARDA relationships on Phase 3 programs in the past and in general if the program proceeds BARDA continue to support it and make their payments, but obviously they need to ensure that you know, it's public money that it's not being wasted. So that if trials fail, lost there are safety problems that cause products to stop in development then they will make further payments and that seems to me to be totally reasonable. So we're very optimistic that we will receive the balance of the grants, but it is dependent on us meeting milestones. But you know you have to do that in a project anyway.

Yun Zhong

Okay. And then on the ESKAPE program. Are you able to share any thoughts on in terms of which indications you might be able or you might be interested in pursuing and or more likely you would take a pathogen focused approach?

And also I think you made the promise of superiority design. Does that also apply to ESKAPE program, as well?

Glyn Edwards

I think David would have liked to have made his promise of superiority design. But I think he just stopped a millimeter short of committing that every trial would be superiority, it just curled up in a ball in the corner of the room you need to knock. The - but to be serious we will do superiority trials where possible, but in any case we will ensure that the data shows - in any trial shows a distinct advantage over existing treatments and we wouldn't be developing treatments unless there was a higher met need and we could satisfy that need.

On the ESKAPE pathogens, actually we have a large number of opportunities here then we will be taking forward. And so actually right now we're starting to try and evaluate which are the most promising ones. And that's a combination of three things really that David his team look at.

The first is scientific you know, is it feasible, can you actually develop and you actually support it with the features. The second is development which is partly down to the question you just asked about superiority trials, can you develop a clinical program that will deliver strong data for an approval and strong data to encourage uptake.

And then the third is commercial and marketing, now there are some indications where there's a lot of current activity in clinical development and it's crowded and there are other indications where there's a high unmet need and not much development. And we are - we're looking at all three of these things as we decide what to prioritize.

So I don't want to flag up any indications yet. We will make announcements about what those are once those that those emerge from the promising research. David would you like to add anything to that.

David Roblin

No, I think you've captured well Glyn.

Yun Zhong

Okay. Thank you for taking the questions.

Operator

[Operator Instructions] We will now take our next question from Arlinda Lee [Canaccord Genuity]. Please go ahead. Your line is open.

Arlinda Lee

Hello. Thanks for taking my questions. I think most of my question is been answered, but on the ESKAPE program maybe you can talk – can you talk of a little bit about what - those are quite interesting, is there are a number of programs that you cannot take forward with – do you to think that there will be interesting [indiscernible] or what might you do with those. And then also you alluded to potential regulatory changes. And I was wondering if you could provide any additional color on those? Thanks.

Glyn Edwards

Yes. So I think only the large number of opportunities we've got in coming out of the Discuva Platform with ESKAPE and others. Our priority is to be developing products where there's a big opportunity and great scientific advances and those will be the things we take forward. The things that are of less important. There are probably going to be a less important from a partnering point of view. So I would not be looking for partnering on any sort of secondary targets.

I think you know if you look at our market cap, our opportunities what we can do, the biggest thing we can do to generate shareholder value is defined you know, two or three more great programs with big opportunities and that's what our focus is going to be.

On the regulatory front, I don't think there are any big changes that we're expecting there. I think the regulators have moved forward quite a long way. So you know, I think what we're trying to do is develop products in the current regulatory environment.

I think in terms of you know, not regulated for approval, but the political climate. And I think there is a sense in the developed world in Europe and the U.S. that the world needs new antibiotics. And while it's been quite a lot of activity and real programs in the push incentive, so its helping to fund R&D and we are big beneficiary of that with CARB-X, with Wellcome Trust and with BARDA.

There is quite a lot of discussion and builds have been going through Congress and discussions being held in Europe about rewards for innovative new antibiotics and those seem to be focused on things like priority vouchers [ph] or even cash payments or in the FDA starting to talk about, well should there be a subscription model for these things.

So our business plan is not dependent on these, but we could see a big change in the environment for antibiotics in the next few years from these big financial incentives to encourage the development of new antibiotics. And of course, with our technology we're right at the forefront, we're not developing Me2 [ph] antibiotics. We're developing new mechanism antibiotics that are going to have a big impact for patients. And so if these incentives come through we should be in prime position to benefit from them.

Arlinda Lee

Great. Thanks.

Operator

We will take our final question from Joseph Hedden. Please go ahead Joseph Your line is open.

Unidentified Analyst

Good afternoon. Thanks for taking my questions. I've just got one on the numbers. And with the $5 million research and development funding agreements expected to come in in Q3 and ezutromid program winding down to close in Q4. Could you please give us a steer on the level of R&D funding you expect coming in in Q4 and perhaps if there's any remaining in the first part of next year? Thank you.

Glyn Edwards

Erik, that's a question to you.

Erik Ostrowski

That is a question for me. So yeah, in terms of Q4 funding I mean, that's not something we're guiding on per se. But the funding from our R&D arrangements is captured in the cash runway guidance, which again goes through September of 2019. You know, as a reminder the various sources of R&D funding include BARDA, which we've talked about, Sarepta who you know, I'd note is funding the wind down costs associated with the PhaseOut study on ezutromid side and then as we've talked about today CARB-X is funding a lot of our gonorrhoea related work. So that is up to $4.5 million arrangement that could support that program through the end of Phase 1.

Unidentified Analyst

Okay. Thanks very much.

Operator

It appears there's no further questions at this time. I would like to turn the conference back over to your - my speakers. Thank you.

Glyn Edwards

Well, thanks very much operator. Thank you all for some really good questions. And we look forward to providing you with updates. And you know, I'm just hugely excited that we're going to be at the forefront of the new antibiotic era.

Operator

This concludes today's call. Thank you for participation. You may now disconnect.