Good day, ladies and gentlemen, and welcome to the BioCryst Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce your host for today's conference, Mr. Robert Bennett, Executive Director of Investor Relations and Communications. Sir, please go ahead.

Yes. Good morning, and welcome, everybody, to BioCryst's second quarter 2013 corporate update and financial results conference call. The operator indicated today's -- [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, our CFO. Today's press release and accompanying slides for this call are available on our website at biocryst.com. Before I begin, I will 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, or 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 for joining us today. At the end of last year, we set a strategy around a core set of assets and the cash to advance them, which would allow us to reach potential value-creating events in the following 18 months. Our execution of this plan has gotten us to the point where we are now driving to a proof-of-concept trial with an oral kallikrein inhibitor for HAE and an NDA for peramivir approval in the U.S. I am very pleased today to highlight the progress we have made in advancing our programs and at the same time, carefully managing our finances and cash runway. I'll start with our HAE program. In late July, we announced that the Phase I trial of our oral kallikrein inhibitor, BCX4161, met all of its objectives. As Slide 4 shows, the bottom line is the safety, tolerability, drug exposure and on-target effect we see on plasma kallikrein strongly support advancing 4161 into a proof-of-concept Phase IIa trial. In the Phase I trial, we studied single and multiple ascending doses in 87 healthy volunteers. The doses tested were generally safe and well-tolerated when administered up to 7 days. There were no adverse events that led to discontinuation of study drug, no serious adverse events, no dose-limiting adverse events, no effects on coagulation assays and no Grade 3 or 4 clinical ECG or laboratory adverse events. Our intensive efforts to improve drug exposure and consistency of exposure through formulation work paid off. In this Phase I, we achieved dose proportional drug exposure up to 400 milligrams and acceptable variability. The drug exposure at the 400-milligram dose exceeds the target we believe is necessary to prevent attacks in HAE patients. This belief is strengthened by a drug effect against…

Thank you, Jon, and good morning, everyone. Today, I will summarize the key elements of our second quarter 2013 financial results and update you on our revised financial guidance. Our guiding principle throughout 2013 has been to focus our cash resources on advancing our key development programs to important value-creating milestones while minimizing noncritical and non-project spending. You have heard this principle before, and now you are beginning to see the results of our focused approach. Since our last quarterly call in May, we have delivered the following positive financial results: one, 2013 operating expenses decreased 45% and 43% from the second quarter and first half 2012 levels; two, 2013 operating cash utilization levels decreased 49% and 35% from second quarter and first half 2012 levels; and three, we completed a very successful and significantly oversubscribed public equity offering, which added over $20 million in gross proceeds and extended our cash runway into 2015. In order to appropriately present the true success we have had in managing expenses, please note we have excluded the write-off of deferred collaboration costs and deferred expenses associated with our PNP agreements. On Slide 7, you will note that revenue for the second quarter of 2013 decreased to $821,000 as compared to $4.2 million in 2012. This decrease is due to a decline in reimbursable peramivir expenses resulting from reduced development activity. Second quarter 2013 R&D expenses were $11.7 million, down 8% from $12.8 million in the second quarter of 2012. This decrease was primarily associated with reduced development activity in the peramivir and BCX5191 programs, which was largely offset by a $5 million noncash write-off of a deferred collaboration costs asset associated with our PNP licensing agreement with Albert Einstein School of Medicine. Second quarter 2013 G&A costs were $1.2 million, decreasing 23% from…

Thanks, Tom. Before we open it up to your questions, I'd like to thank the dedicated employees of BioCryst for their laser-focus, commitment to high-quality work product and tireless effort, and we don't plan to let up. As our milestone Slide 10 shows, our focus for the remainder of this year is to move 4161 into a Phase IIa trial, to select a lead and start the preclinical program for our second-generation kallikrein inhibitor, file our company's first-ever U.S. NDA for peramivir and lastly, to share additional proof-of-principle efficacy results for 4430 and update you regarding government funding for this program. This concludes our prepared remarks. We'll now open it up for your questions.

[Operator Instructions] Our first question comes from Liisa Bayko with JMP Securities.

I just wanted to ask about the upcoming Phase IIa. Can you maybe talk about the duration of the study and sort of what level of sensitivity will you have to detect a difference in attacks? And what are you looking for in terms of what's meaningful? How much of a reduction? Should we expect something comparable to Cinryze? Or like frame up how we can think of what kind of reduction target you're looking for.

Liisa, it's Bill. Thanks for the question. So right now, we're limited to 28-day duration of study drug administration for 4161 because that's what we have from our tox program. We have commenced for longer-duration studies, but they won't be available until next year. So the study is designed as a crossover, so each patient enrolled will get 28 days of placebo and 28 days of 4161, and the order is randomized. Because this is our first experiment in hereditary angioedema, we've designed this as a treatment effect estimation experiment rather than as a pivotal study with power and the typical apprentice statistical approach. So our calculations do indicate that with 25 -- or up to 25 or so patients in a study of this nature, we should be able to see a treatment effect of the drug. And I think, given that this is the first oral kallikrein inhibitor for hereditary angioedema, we'll be very happy to see a treatment effect. Obviously, the more, the better, but we don't -- we haven't established a predefined cutoff percentage reduction in attack frequency, for example, as necessarily a criterion for moving the program into Phase II. So the goal is a safety tolerability for 28 days, confirmation of the PK in patients and the estimation of effect size. And Jon, maybe you want to make some comments, too?

Yes. So if it were similar to the results of the phase -- the pivotal Cinryze study, that would be fantastic. If it's better, I mean, that's super fantastic. If it's a modest effect, given that it's oral, I still think we might have a viable marketed drug. And so -- and we've got a second-generation that we think we can even make improvements on 4161. So I think we're keeping it wide open, and we want -- we designed it in a way to give us a relatively quick answer on what we see in HAE patients.

Okay, great. And then just for the second-generation, can you maybe give us -- are you going to put in preclinical by the end of 2013? And then sort of can you walk us through what happens after that and just basic timing? And that's my last question.

Great. So the main goal of this project is to have much better bioavailability, and with the results that we've seen in the preclinical test basis already, I think we've achieved that goal. So we have a number of compounds that we have to sort through in terms of which would be the most suitable to advance into preclinical development, and we'll definitely do that this year. So by the end of the year, one or more of those compounds will be in preclinical development. So the big tasks, once you start that process, are to develop a process for making kilogram quantities of drug and then doing the IND-enabling talks. So you can think of it as being about 1.5 to 2 years behind where 4161 is right now. It will take that length of time to get to the point where we're in Phase I with something that isn't quite up to preclinical yet.

Our next question comes from Rahul Jasuja with Noble Capital.

So a few questions. I'm trying to get a sense, a better sense of the market that is potentially more amenable to an oral beyond just the Cinryze market. And the question I have here, really, is, is there any information that you guys have on mortality rates or ER visits in the androgen-taking population or even the undiagnosed HAE patient population? Because there is an element of that that is not diagnosed to have acute laryngeal attacks and so on. And then compare that with the mortality rate or ER versus those who are actually on the prophylactic.

This is Bill. Interesting set of questions. So I think with regard to the epidemiology part of your questions, there's a big range of attack frequency. That's well described. I think women with hereditary angioedema tend to have more frequent and potentially more severe attacks than men because of the role of estrogens in the way these various plasma proteins get made and the levels of the plasma proteins. I don't know that there's really solid information out there that directly addresses passing emergency room visits or mortality up between one or other of these different categories. I will say, though, that the way I think about having an oral kallikrein inhibitor and how that might impact on care for these patients is right now, it's a choice of androgens, which is not a very good choice for women or for children, and even for men. There are problems with hepatic toxicity, metabolic toxicity, behavioral toxicities. So everybody wants to get away from taking androgens. So it's choice of androgens or for prophylaxis, IV infusions for life and the problems of IV access. So I think having a safe and effective oral agent would make a big difference on both fronts. So I think regardless of what the ER frequency is or what the mortality rate is, I think it should make a big impact. The final comment is with regard to undiagnosed, I think that's an interesting question. That's all to do with index of suspicion, and there's no doubt in my mind that having companies who are promoting approved products for a disease improves the awareness of disease. The Hereditary Angioedema Association is a terrific organization, and they're doing their best to also do that. So I think we look forward to being able to bring our product to market hopefully and also contributing to raising the awareness of disease and getting more patients onto therapy.

Yes, okay. I mean, so that's helpful. And really, the question really was trying to address as to how difficult would it be for a successful oral HAE drug to tap into the androgen market, so to say. And that's really the question.

Rahul, this is Jon. I think, at least the conversations that we've had with physicians and patients, if it's generally safe and well-tolerated and effective and it's oral, they're going to use it. That's the sense, that they're dying for it. I mean, I'm getting e-mails from patients before we even finish the Phase I, so -- telling us to go faster. So there's clearly a desire for better treatments here. And Bill said it. You look at the side effects associated with Danazol, and they're horrible. And so having, again, a generally safe and well-tolerated and effective oral will make a big difference.

Okay. So the next question that I have is just regarding -- I guess this is probably addressed to Bill. So Bill, we've seen really good Phase I data, and the next set of patients are going to be patients who -- then the next set is going to be patients as opposed to be healthy volunteers. If you look at or understand the innovation of kallikrein, are we safe in assuming that the innovation of kallikrein is such that the ultimate factor you want to stop or block is bradykinin is sort of a direct correlation. So in these patients that you're going to be looking at, we should have similar efficacy and safety? Because -- is there a feedback loop for bradykinin or something that we should be looking at that could change the efficacy going forward?

So the short answer is no. So I think that the only way that you can make bradykinin in human plasma is by kallikrein digesting high-molecular weight kind of antigen. That's it. There is no other pathway. And bradykinin is the bad actor in this disease, so this is -- what's so fantastic about this project is that the level of scientific validation of the pathophysiology and what really matters in hereditary angioedema is so deep. It's a massive literature, very high quality, backed up by both human and animal model data, and so there's no doubt that the kallikrein -- bradykinin access is absolutely validated. And so we should be very, very confident that if we can achieve enough kallikrein inhibition, that we'll get efficacy in the disease. So I think another way to think about it is most of us don't have hereditary angioedema. It's an orphan disease. It's pretty rare. So everybody else in the world has normal amounts of naturally produced kallikrein inhibitors in their blood, the main one of which is C1 inhibitor, and we never get an attack of edema of this nature. So I think that's a very, very strong evidence. So I think we very much look forward to seeing the results of our PK and efficacy estimates in patients.

Okay, and then one final question. There's a chart from your last time's presentation showing that with BCX4161, you had at 400 milligrams and even 800 milligrams about 70 -- 70%, 75% inhibition, and that's pretty nice. But the question that I have is that, how much kallikrein inhibition do think you need to better the next generation? I mean, by increasing bioavailability, which you can with the next-generation, assuming significantly better bioavailability compared to 4161, are you going to have better efficacy, a larger decrease in kallikrein? Are you looking for decreasing the frequency of dosing or the number of tablets and tolerability? How should I look at that?

Yes, so great question. So I think that we're very, very happy with the PK and the PD effects we saw in the Phase I with 4161. And if the next-generation compounds replicate that degree of kallikrein inhibition, I'll be perfectly satisfied. What we're mainly looking for in the second-generation compounds is much broader dosing flexibility. So what better bioavailability does for you is gives you a much better chance of having a once-a-day single tablet, for example. And we expect that we'll learn as we progress the second-gen program in animals exactly what are the PK characteristics. And better bioavailability is always a good thing.

Our next question comes from Christian Glennie with Edison Investment.

Just talking -- looking at the target patient population for the Phase IIa, can you just categorize the sort of the nature of these patients in terms of whether sort of minorities are there and what proportion of HAE patients have the sort of 1 attack per week?

Sure. Thanks for the question. So the minority, I'm not sure that we have a good handle on exactly what proportion, but in our discussions with the investigators who will be conducting the study, they're quite confident that they'll be able to recruit patients with this type of attack frequency in a reasonable time frame. You always have to be cautious about how that's going to go. So for that reason, we haven't put a definitive time frame on when we'll complete the study. We'll start it this year, and then we'll see what the enrollment looks like. But to give you some sense of is this doable at all, I can refer you to the live [ph] study that was published in the New England Journal, which was the pivotal study for Cinryze. And the main attack frequency in the placebo period in the prophylactic study that they reported was 1.06 per week, which is about the same as what we're targeting here. And that study had, I think, 26 patients who enrolled and 22 who completed, and that was a 12-week crossover. So it's a much more onerous type of study than the one we're looking at. So those patients do exist. They're in the minority, and indeed, partly for that reason, we'll be doing the study in Germany, where care for hereditary angioedema patients is centralized into several big centers, and we'll be in most of those centers in Germany. And that will give us our best chance to attract this minority population.

And Bill, if my memory is correct, these patients had to come in for their infusions, right, because there was IV for that study. And our patients will be able to take the oral medication home with them, so that's a big plus when recruiting patients from a convenience factor.

I would just add one more comment, which is I think the usual sort of pharma industry division of patients into mild, moderate and severe really doesn't sort of apply in hereditary angioedema. So you only need one laryngeal attack, right, and you've got a really bad news attack that's life-threatening. So whether you have -- whether you never have another attack or not, or what your background attack frequency is, having something like that or having a severe abdominal attack with abdominal obstruction and ascites, it's more to do with life-threatening and disabling and disfiguring nature of the disease rather than it is the attack frequency. So I think the way I look at an oral, safe and effective kallikrein inhibitor, should it come to market, is you got the disease, then you need this therapy because you can prevent these disabling, disfiguring and potentially life-threatening attacks.

Sure, good perspective on that. Just one more. Just to confirm the expected kind of baseline therapies, if any, or sort of background therapy that these patients might have already received, helps you thinking about whether they would definitely be C1 and HAE?

I think -- so we've taken the approach that it would be impossible to prevent or exclude patients from receiving whatever marketed therapies there are prior to enrolling in the study. Obviously, if you're doing a study in measuring attack rates and it's a placebo-controlled study, then for the duration of the study, they have to be off prophylactic medicines. So there's a -- it doesn't take very long for those medicines to clear from the body.

[Operator Instructions] Our next question comes from Ed Arce with MLV & Co. Ed Arce - MLV & Co LLC, Research Division: Just one question on the longer-term timelines here. If you look out on your own projections, you're targeting that this IIa study by end of this year and likely would commence a IIb study at some point next year. When do you think is a reasonable timeline to expect submitting a pivotal study to the FDA and other agencies and reaching the market?

So I think at this stage, it's a bit hard to predict exactly when that's going to happen for the reasons we discussed earlier. We really need to get our hands dirty running studies in -- in clinical development, it's the same rule. Until you actually do the studies in the patient population you're targeting, you're skating on thin ice making predictions on timelines. So once we've got the IIa under our belt and have started the IIb, I think we'll be in a better position to understand how quickly the program unfolds. I think we're very excited that we've got this opportunity, and I look forward to putting it through this process.

Yes, and we'll work with the agency to understand what the requirements are. Clearly, we'll need to have and end of Phase II discussion with the division to understand what's required for the Phase III. But trust that we're going to move as quickly as is possible. The IIb will likely be constructed in a way that it may meet the requirements of an adequate and well-controlled trial. So we'll look at ways to go as fast as we can, but we also want to make sure that we do this in a high-quality way. Ed Arce - MLV & Co LLC, Research Division: Okay. And then one other follow-up. You had mentioned, Bill, I think, something about your current tox program limiting the current studies at 28 days. What do you need to do to be able to expand that so that you can move forward with, say, the IIb at some point?

Sure. So as is typical at this stage, we've got the IND-enabling tox that supported the first study. That was a 28-day program in 2 species. And we've now commenced the next step, which is a 12-week program in 2 species, and so we look forward to seeing the results of that next year in the early part of next year sometime. And that will enable longer studies to be done in humans up to a duration of 12 weeks. As the program unfolds, you keep extending the tox to the regulatory guidance around what do we need for a chronic therapy in man. And so there will be -- there will need to be additional toxicology studies done at a later date informed by the one we're doing now of longer duration.

And I'm not showing any further questions at this time. I'd like to turn the conference back over to our host for closing remarks.

Yes. So we just -- we thank you for your interest, and we look forward to keeping you updated as things unfold over the remainder of this year. Have a great day.

Well, ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.