Good day, ladies and gentlemen, and welcome to the BioCryst Second Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce our host for today, Mr. Robert Bennett, executive director of Investor Relations and Communications. Sir, please go ahead.

Thank you, and good morning, and welcome to BioCryst's second quarter 2012 corporate update and financial results conference call. Today's press release and accompanying slides for this call are available on our website, www.biocryst.com. [Operator Instructions] Joining me on the call today are Jon Stonehouse, Chief Executive Officer of BioCryst; Dr. Bill Sheridan, our Chief Medical Officer; and Tom Staab, Chief Financial Officer. Before we begin, I'll read a formal statement as shown on Slide 2 regarding risk factors associated with today's call. Today's conference call will contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information and company performance or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results, performance expressed or implied in this presentation. You should not place undue reliance on the forward-looking statements. For additional information, including important risk factors, please refer to BioCryst's documents filed with the SEC, which can be found on our company website. With that, I will turn the call over to Jon.

Thank you, Rob. Good morning, and thanks to everyone joining us today. BioCryst laid out aggressive clinical and business objectives for 2012. I'm pleased to report that over the first 7 months of the year, we have met or exceeded all of our goals towards advancing each of our 4 clinical and preclinical programs. BioCryst's key accomplishments to date in 2012 are highlighted on Slide 3. Today, we announced the completion of IND-enabling nonclinical safety studies for both our preclinical products, BCX5191 for hepatitis C and BCX4161 for hereditary angioedema. We are on track to file INDs on both of these BioCryst-discovered drug candidates in the fourth quarter. The BCX5191 Phase I program will include patients with hepatitis C, so that we can test antiviral activity. In the BCX4161 Phase 1 program, a novel kallikrein inhibition assay developed by BioCryst scientists will measure activity against the intended target. Our goal is to get data from both Phase 1 programs in the first half of next year. Adequate safety and confirmation of activity against the hepatitis C virus for 5191 and against kallikrein for 4161, should translate into meaningful shareholder value. Our strategy with BCX5191 is to move through development expeditiously, so we can get to combination therapy trials with other oral treatments in -- with hepatitis C. The goal in the field is getting a pan-genotypic interferon free, once daily oral combination therapy. We believe nucs will be the backbone in those combinations and with BCX5191 now about to enter the clinic, we have a very attractive asset. So the next important milestone is to demonstrate in Phase 1 that we have adequate safety data and healthy volunteers and meaningful viral load reduction in patients infected with hepatitis C. As a reminder, our strategy with BCX4161 is to take it…

Thank you, Jon, and good morning, everyone. I'm pleased to share with you some details regarding our strong second quarter 2012 financial results, including some financial and operational achievements discussed in today's press release. I'd like to specifically highlight some progress and achievements made thus far in 2012 as they relate to financial goals we had previously established for the company. First, we have delivered substantial reductions in general and administrative expenses, with these reductions exceeding 50% in both the second quarter and 6-month period ended June 30, 2012, as compared to the same periods in 2011. These savings illustrate our commitment to one of our key operating principles, focusing our cash resources on advancing our development programs, while minimizing noncritical and non-project spending. In addition, we have successfully maintained a solid balance sheet. We closed the second quarter with over $53 million in cash and investments, a balance representing a decrease of $4.2 million from December 31, 2011. Our ability to maintain sufficient operating capital while advancing our 4 development programs is a function of: one, tight expense management and substantially allocating resources to development programs; two, closely managing our working capital requirements by focusing on contractual terms and accounts payable and accounts receivable balance; and three, prudently raising capital with our ATM facility when favorable market and stock conditions exist. For example, we have successfully reduced our receivables balance by over $20 million from the first quarter of 2011 and have raised roughly half of our second quarter operating cash burn through the ATM at a price point 4% above the VWAP for the quarter. Now I'd like to discuss our second quarter financial results for 2012 in detail, which are summarized on Slide 4. Revenues for the second quarter of 2012 were $4.2 million compared to $3.7…

Thanks, Tom. Today, I will summarize recent progress and insights related to our BCX5191 hepatitis C and BCX4161 hereditary angioedema programs, as well as the recently announced Ulodesine Phase II results and the steps we are taking for that program to be Phase III ready. In the last 3 months, we've made substantial progress on our hepatitis C viral RNA polymerase inhibitor, BCX5191. In the last call, we described some of the nonclinical PK profiles of BCX5191. This data showed that the drug is very well absorbed, is easily measured in the plasma and liver and rapidly and efficiently converted to the active triphosphate form in the liver. This is important because the drug triphosphate is the form of the drug that works against the virus. Since then, we completed the nonclinical safety program and developed a human PK model and remain on track to file an IND later this year. The human PK model for once daily oral dosing of BCX5191 was developed using the PK data from several nonclinical studies. The overall purpose of this modeling and simulation is to understand the likely dosage range that may be effective in patients with hepatitis C virus infection. Slide 7 describes the main features of this work. The methods are standard and use multi-compartment PK modeling with scaling factors to predict PK parameters in a human population from the animal data. The figure in the top right of the slide illustrates representative output from the model. In this case, a simulation of the drug levels in plasma and liver and the active drug triphosphate levels in liver after oral dosing of 10 milligrams once daily. Also shown in a dotted line is the EC50 level for antiviral effect, a relevant target concentration for nucleoside NS5B inhibitor. With this type of…

Thanks, Bill. So let's wrap up by reviewing the milestones for the remainder of the year, seen on Slide 17. First, the filing of the INDs for BCX4161, BCX5191 and then advancing them into the clinic, Peramivir interim analysis in the fourth quarter and conclusion of the Ulodesine regulatory and partnering discussions by year-end. We'll continue to execute against our plan, and we will carefully manage our financial resources. So that concludes our prepared remarks, and we will now open the call to your questions.

[Operator Instructions] Our first question comes from Charles Duncan of JMP Securities.

I wanted to start with the partnering discussions. Jon, you alluded to them towards the end of your remarks. I guess I'm kind of wondering if you anticipate additional clinical data yet this year from that program and how do you see that process rolling out? As per our diligence, we believe that the end of Phase II meetings, at least with the FDA that you've had in the Phase IIb data that was seen in another program that was eventually acquired was important for them. So how are things going there with those partnering discussions?

So in terms of data, the Phase II program is complete and so there won't be anymore data. And as we said before, we've completed our end of Phase II meetings with FDA. We've got the EMEA scheduled soon. And I guess the bottom line is pretty much we have the package that we need to finish the partnering process. So as I said before, with the acquisition of Ardea by AstraZeneca, interest level picked up, and now that we've got the Phase IIb data and have completed the FDA discussion, the process is very active and we're on track to complete it by year end.

Okay. And when do you anticipate being able to publish or present those Phase II -- full Phase II results? And then also I'm wondering if you could go back, and something Bill said was intriguing with regard to mild to moderate kidney impairment. Can you estimate the market potential at least from a percent of the incidence rate that is represented by those patients with mild to moderate kidney impairment?

So I think most of the action there, Charles, is in mild and moderate is quite unusual in the gout population, in recruiting studies, specifically and in moderate renal impairment is very slow, but I think your point is correct, is that quite a big fraction of gout patients because of hypertension and diabetes and also because of their gout develop a mild degree of kidney impairment. That's important because many drugs are cleared by the kidneys, and I think we've worked out a very safe dosing regimen in that patient population, so we're very happy to include them in Phase III.

And the data?

With regard to publishing the data, I think our focus right now in supporting the partnering. We will certainly write up the data and publish it in full. But right now, we don't have plans for a presentation.

And then if I could ask one additional question with regard to the HCV or 5191 program. I like that you're moving into Phase I. It seems like a key value inflection point could come with the completion of that study. What do you think about the modeling that you discussed and its predictive value for clinical benefit there? And secondarily, I believe there is some news out of BMS in the HCV space and I'm wondering if there are any implications in terms of your thoughts on the commercial opportunity and/or development strategy.

Okay. So let me take the modeling piece. I'm very pleased that we've been able to conduct really pretty extensive PK studies in nonclinical species and develop this model. And we have a handle now on what the liver triphosphate levels of the drug are likely to be on the basis of all of that information. So it's very useful to be able to measure the drug levels in the plasma and be pretty confident about what sort of levels of the triphosphate we're getting in the target organ. So that's been a difficulty with the nucleotide prodrug compounds because they disappear so fast from the blood. So I think having that model is a definite advantage in proceeding into the clinic.

And then Charles, with regard to the news from BMS last night, I think the main message is, it's not over till it's over. This is a gargantuan space for those people that were out there saying, Gilead and BMS haven't tied up and why are you bothering -- it's not over till it's over, and it's a big market and that's why we're moving as quickly as possible to get into the clinic because we think we have a very attractive asset, and we think there's a place to play in this big, big market.

Yes. With regard to the component of the question on, does it change our clinical strategy? No. We want to be very careful in introducing new drugs into the clinic, and we want to learn from everything that's already known about the development of direct acting antivirals in hepatitis C, so we'll be fast followers, but we will maintain top-quality safety.

Our next question comes from Ed Arce of MLV & Co. Ed Arce - McNicoll, Lewis & Vlak LLC, Research Division: I was just wondering, as you now first of all, congratulations on completing the toxicology and overall safety on the preclinical assets. I was just wondering, as you look to start enrollment on Phase I in the clinic with both of these assets, 4161 and 5191, when could we expect to get results from these trials?

So the average Phase I program has 2 different components. There's individual doses, that's called a single outstanding dose, and then there are doses over several days called a multiple ascending dose. And typically, an average program will take between 6 and 9 months after you start. And sometimes it goes slightly faster, but I think that's a decent range.

And in my prepared remarks I said, we're expecting data in the first half of next year. The gas pedal is to the floor, but we're not going to compromise quality by trying to go fast. So it's important that we do these studies properly, but I think the other thing, Ed, is typically, Phase I data isn't super important in a program. I think in these 2 programs, it's incredibly important because of the fact that you'll be able to test viral load reductions in the hepatitis C with 5191. And with this assay, we'll get a really good idea as Bill said, it's like proof-of-concept to be able to identify the impact on the target. So these are unusual events, I think, in your typical Phase I data. Ed Arce - McNicoll, Lewis & Vlak LLC, Research Division: Right. And could you go over again how it was that you were -- you worked through the bioavailability hurdle that you had seen earlier with 4161?

So when you talk to the formulation experts, the art form here is really an art form and you can't -- you just have to step through the work and test different formulations and use the accumulated knowledge in the field to make the right choices. So we put a lot of effort into developing a formulation that would improve solubility and permeability of the drug with the goal of increasing the absorption and we got to a point that we were happy with the results and invested in the preclinical program, and we're happy with the results of the preclinical program and now we going to invest in the Phase I. So it still remains an issue, of course, because in general, drugs that have lower bioavailability until you've got them in humans, you don't know what you're going to get. So the key for us in the Phase I are the drug levels, the safety and the PD effect on the target and we'll know that soon.

Our next question comes from Steve Byrne of Bank of America.

A couple of questions on the 5191 design. Can you just provide specifics on how many doses you want to take into that days of treatment, target genotype, anything along those lines?

So I think you can take guidance from what others have done. As I said before, we'll be fast followers, the days of treatment for drugs in this class are often up to 7 days. The FDA guidance in general is 3 days in hepatitis C subjects. But because there's a very high barrier to resistance 5b active site inhibitors, typically, that can be longer, but I think that you can take guidance from what other people have done. In terms of the number of cohorts and the drug dosage, I'm not going to get into details. And during the first Phase I, you often make adjustments on the basis of what you see in the exposure anyway. So it's done. These studies are very actively managed and you look at the data in real-time.

And jumping over to the Ulodesine Phase III design, the stopping rules for lymphocyte is now -- will only include total count, not CD4, that's correct?

That's correct.

And so at the same, stopping role for the total that you had during Phase II?

CD4 count is about half of the total. So it's a different number, but it represents the same physiological parameter.

Okay. But if you applied the -- if you only use a total lymphocyte count as a stopping rule, would you have had any patients discontinue in Phase II?

So, yes, the goal here is to maintain the same safety standard moving from Phase II to Phase III. I think there are 2 things to emphasize. One is that this is simpler, so that's good. The second is that we have 2 strategies in the Phase III. And one strategy is a typical randomized cohort design. You have to have that. The second strategy is quite important, which is a dose escalation study because that's the way the label for urate-lowering therapy are written. And in that circumstance, people will only get -- gout patients will only get the 10-milligram dose if they've already declared they can tolerate the 5-milligram dose. So from the safety perspective, I think that, that reduces even further the chance of dropouts. Ultimately, the results of the Phase III are what counts and that's what's going to determine what will be in the label.

And I think if you go back to what we said all along, we tried to design the study in a way that would get as close to the design of the Phase III as possible to reduce risk, right. The more changes you make from Phase II to Phase III, the bigger chance you have of getting a different answer. And so length of treatment 52 weeks, that's what it's going to be for a decent size of the population in the Phase III and points the same and now we've got agreement that we can use a simpler test to be able to track the effect on lymphocytes. So this is really important and I think it gives us high degree of confidence that the risk going from 2 to 3 is lower than average.

And then just lastly, what's your confidence level that the interim analysis for the Peramivir Phase III program will indicate that your target patient number will be adequate?

That's hard to answer. This is a cutting-edge study, the first ever randomized controlled study done in the field of hospitalized influenza patients. That's really the reason for having interim analysis there and if this was a hypertension study, we probably wouldn't be doing it.

And I think the goal here was to remove risk, right? So a horrible outcome would have been that -- if we were off by, I don't know, pick a number, 40 patients and we missed hitting a P value, that could get the drug approved because we were off slightly on our assumptions. So the whole purpose of this is to take a look to see if our assumptions were adequate to get us to the trend that will get us a positive P value or do we need to adjust. And the penalty for it was really low, and so we thought it was a good move, a safe move in terms of risk to benefit and that's why we're doing it.

[Operator Instructions] Our next question comes from Rahul Jasuja of Noble Financial Capital.

Just a couple of questions here. I want to follow up on the gout partnering that was initially asked. So one of the questions I had, Jon, was that, as you discussed with partners, the obvious discussion is obviously regarding the data. But are there -- are there any discussions that relate to the long-term use of these serum uric acid lowering agents given the fact that the literature is increasingly discussing the utility of serum uric acid as a potential risk factor or indicator of other comorbidities -- cardiovascular disease and metabolic syndrome and diabetes, et cetera.

Yes, that's an interesting question, right. Because you're right, the growing body of evidence that uric acid is -- plays the role in something bigger than just up a pain in the big toe is -- the data is growing. And I think it's becoming a more prominent part of our discussions with potential partners because our mechanism is unique from everybody else's, right? And it's not like PNP inhibitors have been used in the marketplace for decades. This is a unique mechanism of action, and we think there's some potential differentiators beyond kidney stones and drug-drug interactions that in the right hands of a sophisticated partner could really be big if we can link it to the effects of metabolic syndrome and cardiovascular disease and maybe even inflammation. So these are tougher things to prove, no doubt about it. But I think the mechanism of action is a real advantage here and something that has been a part of the conversations with potential partners.

Great. And I've asked this question before, but I'm going to ask it anyway again. You're preparing for this to be a Phase III ready asset. That is a Phase III ready asset, but you're going on with other preparations, so that the partner can take it over in streamlined manner, but have you considered any thoughts about -- sort of developing it yourself or codevelopment? Or is that still -- or was never on the table, but is it still not on the table?

Yes. I think that's a tough one. So the goal remains that we want to put it in the hands of another partner for a couple of reasons. One, we think the proper investment in this molecule requires some resourcing capability that we just don't have. So we could do the Phase III program with the capability that we have, but we'd like somebody that's really excited about this asset to invest even further, and so we want to see that. I think the other piece is that we've got other assets right, and limited capital. And so something like 4161 and 5191 actually fit into what we can do. A big primary care drug is something that's more challenging for biotech company. So while I'd love to do all of it, we have to make choices and set priorities, and the priority right now is to get this in the hands of a partner.

Okay. And then the other question that I have is regarding the NS5b and a better 5191. So obviously, the BMS news changes things a little bit for the next set of nucs on -- potentially on the market. Bill, you had spoken about a prodrug, a nucleotide that needs to be a prodrug, sort of a covalent linkage that needs to blunt the charge versus a nucleoside which is what BioCryst drug is. Can you sort of comment on that? If that has any ramifications as to the dosing or potential tox issues down the road. Add some color for me if you can on that issue.

Okay. So I think the news from BMS just is a reminder that investigational drugs are investigational for a reason and you have to step through the Phase I and Phase II and Phase III programs to build the safety data and understand the drug. I think 5191, as you said, is a nucleoside. It's not charged. It does not have a prodrug modality and that's the reason that we can measure it in the plasma and develop a model that we discussed today. I think that all of these drugs work ultimately by getting -- taken into the liver cells and converted into the triphosphate. And for the prodrugs, what that means is they have to get metabolized and the prodrug modality you cleaved off and -- before the drug will work. I think that both approaches can work and we've clearly got very encouraging clinical data that's already been generated without the compounds. And this is a very attractive class of compounds in general. So I think it's probably impossible to speculate on which part of the molecule or, might be a safety issue. I think that our job is to get our drug into the clinic and testing safety in PK and PD.

Okay. And you guys showed the data comparing it with G-799 preclinical data. Was there data done that compared 5191 with Inhibitex's drugs or previously 189R or Idnetix's nuc?

No. I think that the 7977 compound is the most advanced and you'll notice therefore, the clinical data is the most interpretable and just as a reminder, that study was done by working back from the clinical dose and then giving a 10-milligram per kilogram dose in rodents of our drug and their drug and looking at the PK of the triphosphate in the liver. So the results of that experiment to us were very encouraging that we could easily make lots of triphosphate with our drug, given that we know that 7977 compound is clinically very active. So with that, plus the modeling, I think that we have a reason -- we can be as confident as you can be at preclinical stage about being able to get virologically active exposures in people.

Thank you. At this time, I'd like to turn the call back over to Mr. Stonehouse for any closing remarks.

Thank you. So I hope you get a sense from this call that we're really excited about our future, maybe never more excited than we have been since we've been with the company because of the things that we're doing and the things that we see ahead. We've got a great plan in place and we're investing very carefully in what we believe as an attractive set of assets. We're executing extremely well. This is a well-oiled machine, and we're managing capital very carefully as Tom noted with some of the reductions in expenses on non-core, nonprogram expenses. The bottom line is, this is a very different company, period. And if you don't believe it, keep watching us continue to execute and keep watching us advance our programs because we think we're approaching some really important milestones in the company's history, and we've got attractive assets to get us there. So as always, thank you for your interest in our company, and have a great day.

Thank you, sir, and thank you, ladies and gentlemen, for your participation. That does conclude your program. You may disconnect your lines at this time.