BioCryst Pharmaceuticals, Inc. (BCRX) Q1 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the BioCryst First Quarter 2015 Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Rob Bennett, Vice President, Investor Relations and Operations. Sir, please go ahead.

Thank you. Good morning and welcome to BioCryst Pharmaceutical's First Quarter 2015 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. At this time, all participants are in a listen-only mode. Later, we will open up the call for your questions and instructions for queuing will be provided at that time. Joining me on the call today are CEO, Jon Stonehouse; CFO, Tom Staab; and Bill Sheridan, our Chief Medical Officer. Before we begin, I’ll read a formal statement as shown on slide two, regarding risk factors associated with today’s call. Today’s conference call will contain forward-looking statements, within 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. We continue to make steady progress building our rare disease oral drug company off the foundation of our structure based drug design discovery research platform. Our primary focus is on the development of oral kallikrein inhibitors for the prevention of hereditary angioedema attacks or HAE and our goal is to bring normalcy to the lives of HAE patients and transform the treatment of HAE. Our oral kallikrein inhibitor programs are moving forward according to plan. The ongoing OPuS-2 trial for 4161 continues to enroll HAE patients and it remains on track to reach completion and report out results by year end. We currently have over 30 sites up and screening in the US and Europe. In addition, we continue to work on improving the 4161 formulation to reduce the capsule count. New formulations to reduce the count to three or two capsules per dose are currently on stability. If all goes according to plan, we’ll use one of these formulations in our next 4161 trial. Our second generation kallikrein inhibitor program also continues to progress as planned. As a remainder, the goal of this program is to wipe out attacks by getting adequate kallikrein inhibition to replicate the normal phenotype with one pill once a day. BCX7353 is the most advanced molecule and will be entering the Phase I clinical trial this quarter and we look forward to reporting safety PK and PD results during the third quarter. In addition, our discovery team has generated a dozen structurally diverse compounds that will serve as backups to 7353 and provide broader protection of our intellectual property. Our goal is to have a small number selected for pre-clinical development later this year. On March 31, we announced HHS/BARDA awarded our Company a new contract for the continued development of BCX4430 as a potential treatment for diseases caused by RNA viruses, including phyllo virus. The award included a base contract of $12.1 million to support 4430 drug manufacturing as well as $22.9 million in additional development options that can be exercised by the government bringing the potential of the contract to $35 million. As I stated in the past, since the government is likely the only customer for medical countermeasure antiviral treatments, continued government funding is a good sign of continued interest. Now, I’d like to turn the call over to our CMO, Bill Sheridan. We received several questions regarding the interpretation of HAE clinical study results and how baseline attack frequency may impact results. Bill will review some of the published literature on attack frequency to help address this topic. Bill?

Thanks, Jon. Our remarks today relates to the variation in phenotype in patients with hereditary angioedema and how this variation might impact studies of prophylactic treatments in this disease. The frequency of angioedema attacks in HAE is well known to cover a very broad spectrum. Some patients had very infrequent attacks, some had moderately frequent attacks, some had extremely frequent attacks. Dr. Bruce Zuraw noted in his review in the New England Journal of Medicine in 2008, untreated patients have attacks every 7 to 14 days on average with the frequency ranging from virtually never to every three days. A lot of work by many investigators has been directed at understanding the biological basis underlying this natural variation in frequency of attacks or more broadly severity of illness and recently, studies by leading groups have provided important insights into this question. One case study from [indiscernible] and published by Susanna Cunningham and colleagues in Clinical Immunology in 2010 looked into the levels of the primary natural kallikrein inhibitor, C-1 inhibitor at diagnosis of 115 patients. At this center, each patient’s plasma sample was assayed with a level of functional C1-inhibitor. In each case, the clinical severity of the illness was also graded according to a scale published by Dr. Agostoni [ph] and colleagues in the Journal of Allergy and Clinical Immunology in 2004 as part of the report from a collaborative workshop in hereditary angioedema. This categorizes the illness from asymptomatic, which is chosen as five to progressively more severe illness accounted as minimal, four, mild, three, moderate, two and severe accounted as one. The parameters evaluated included the impact on daily activities, need for emergency treatment and need for long-term prophylaxis in the disease and the scores are summed over the course of one year. In essence, the resulting category for an individual patient is a product of the average attack score times the attack frequency plus component for medical intervention. And this quarter is heavily influenced by attack frequency as we've confirmed in discussion with the investigators. The laboratory evaluation clearly showed that patients with more severe categories of illness had low levels of functional C1 inhibitor, findings that was highly statistically significant with an overall p-value of 0.0003. Second key study came from [indiscernible] and colleagues in Clinical & Experimental Allergy in 2014. This study evaluated [indiscernible] activity of contact activation pathway including the levels of the large and longstanding fragments of high molecular weight kininogen for HK that are produced to kallikrein digest kininogen and releases bradykinin. This measurement is turned to cleaved HK and is reported as percent of the total HK content. Investigators studied plasma samples from a 162 patients during the routine clinic visit and 81 healthy controls and reported the value of HAE patients categorized by frequency of attacks at angioedema. Patients with more frequent attacks were found to have higher levels of cleaved HK indicating a greater degree of activation at the contact pathway in patients with more frequent attacks. We’ve informed tonight that within each category of HAE patients, whether one uses an overall disease severity score or simply counter attack frequency, there is substantial variation in each of the measures we've discussed today, functional C1 inhibitor and cleaved HK. That’s common for biological assays and to see the reported relationships between assay results and disease activity; you should expect that a large dynamic range of the disease score or attack frequency would be less there in the analysis. We put these two studies together, a reasonable assessment is the variation in phenotypic expression in patients with HAE is significantly driven by underlying biological differences in the amount of natural inhibitor of plasma kallikrein and this shows up also in a degree of activation of the contact pathway. I think biology also suggests that pharmacologic plasma kallikrein inhibitor therapy is likely to be more successful in categories of patients with less frequency attacks or less disease score. It is therefore important to consider the main frequency of angioedema attacks in the population of the study in designing and interpreting studies of investigational prophylactic drugs in this indication. In OPuS-1, we studied patients who had narrow reach of about five adjudicated attacks in four weeks during the placebo period on study in light of 1.27 attacks per week and it showed that BCX4161 reduced the attack rates over four weeks by an average of about 1.8 attacks. In OPuS-2 study, which has a duration of 12 weeks, we don't yet know what the final attack rate would turn out to be in placebo group but we have liberalized the inclusion criteria in OPuS-2 compared to OPuS-2, so we expect it will be lower than in OPuS-1. The OPuS-2 study will help to expand our understanding of the potential of BCX4161 as a prophylactic treatment for HAE patients. We very much look forward to finishing this study and reporting the results. Tom will now review the financial results.

Thank you Bill and good morning everyone. Today, I'd like to summarize the key elements of our first quarter 2015 financial results and to reiterate our 2015 financial guidance. As previously mentioned in our results calls, we vigilantly follow a guiding principle for our operations. That principle was to focus our cash resources on the advancement of our core programs to value creating milestones and to prudently manage expenses. Adhering to this principle was led to the achievement of a number of significant value inflection points in the last two years. Today, I'm pleased to report the details of our first quarter 2015 results which reflect the efficient progression of our programs in the anticipation of additional value creating milestones before the end of 2015. On slide 6, you see revenue for the first quarter of 2015 increase to $6.8 million compared to $3.5 million recorded in the first quarter of 2014. This increase was primarily associated with higher BCX4430 collaborative revenue under our two development contracts with NIAID and BARDA. In addition, we recorded net product sales of $537,000 of RAPIVAB under the sell-through revenue recognition methodology. As a remainder, this methodology represents recording revenue when RAPIVAB is sold by our distributors to hospitals and physicians offices. First quarter 2015 R&D expense increased 86% to $17.1 million compared to $9.2 million in the first quarter of 2014. This increase was associated with increased development activity with our HAE portfolio including the advancement of a multitude of second generation compounds following BCX4161 as well as a higher level of development expenses for BCX4430. The aggressive advancement of our HAE molecules continues to be a primary focus of our drug development efforts with over 70% of our development spend devoted to HAE. In addition to BCX4161 and BCX7353, we also are evaluating a dozen additional second generation molecules as candidates for preclinical development. General and administrative expenses for the first quarter of 2015 increased to $4.1 million compared to $1.6 million for the first quarter of 2014. This increase resulted primarily from higher administrative, distribution and marketing expenses associated with the approval of RAPIVAB as well as unrestricted grants awarded to the US and international HAE patient advocacy groups. Moving below the operating line, we incurred $1.3 million of non-cash interest expense in the first quarter of 2015 and $1.2 million in the first quarter of 2014. We also recorded a mark to market hedge gain of $464,000 in the first quarter of 2015 as compared to a loss of $1.5 million in 2014. Both interest expense and the hedge mark to market adjustments relate to our non-recourse notes and related hedge arrangement enacted in conjunction with the RAPIACTA royalty monetization. Our net loss was $15.2 million or $0.21 per share in the first quarter of 2015 compared to $10.1 million net loss or $0.17 per share in the first quarter of 2014. Moving on to slide seven, I'd like to discuss our cash balance and cash usage. We ended the quarter with cash and investments of $111.3 million, a strong financial foundation. Our cash utilization in the first quarter of 2015 was uncharacteristically low due to the collection of $7.4 million RAPIVAB receivables from our distributors associated with launch docking of the RAPIVAB pipeline. Looking forward to the remainder of the year, we expect our quarterly cash utilization to increase as compared to the cash used in the first quarter. Considering our current plans and expectations, we expect our operating outlook for 2015 to be unchanged from guidance we issued in February. As such, we continue to forecast operating cash usage to be in the $65 million to $80 million range and operating expenses to be in the $75 million to $95 million range. Our operating expense guidance excludes equity-based compensation due to the difficulty in reasonably forecasting this expense. Based upon these expectations, we forecast our existing cash and investments to provide us liquidity beyond the middle of 2016. Now, I'd like to turn the presentation back over to Jon for his closing remarks.

Thanks, Tom. So in closing, the first quarter has been focused on getting things set up, which we believe gives us the opportunity to create meaningful value later in the year. Looking ahead, here are the most important events for the rest of the year; initiation of the BCX7353 Phase 1 trial this quarter and completion of that study, reporting out results in the third; completion of the Opus 2 trial by the end of this year; initiation of a proof of concept study with 7353 by year end; and obtain the US government contract for RAPIVAB by year end. We look forward to providing you further updates as we reach these important milestones. So this concludes our prepared remarks and we will now open it up for your questions.

Thank you. [Operator Instructions] Our first question comes from Jessica Fye from JPMorgan. Your line is now open.

Hey, guys, thanks for taking my questions. On 7353, it sounds like Phase I is starting soon, what are the remaining gating factors to that study starting if any? And then as we think about the Phase I data, I think we’re focused on the safety, it seems like efficacy is somewhat dearest with the anti- kallikrein approach, but what if any kind of side effects should we be thinking about or what are you watching out for in that study? Thanks.

Great. I will take the first part and then maybe Bill can handle the second. So the gating factors in gearing up for Phase I trial are getting the site ready, having the drug supply, making sure you have regulatory approval of the IRB and patients. And so we are in the final stages of that and believe that we remain on track to get that study up and running in the second quarter. With regard to what are we looking for, I think it’s important to confirm or find out in humans what the PK and the PD looks like, so we know what it looks like in rats and we know what it looks like in monkeys, but it’s important to know what it looks like in humans and healthy volunteers. And then the risk we have always said with the program is the off-target toxicity that’s just unknown with an early stage small molecule. But I’ll let Bill elaborate.

You can partition safety risk into on-target and off-target in a simple way. And we know quite a lot about the safety of inhibiting kallikrein. So everybody we have talked to in average of the literature indicates that inhibiting kallikrein is a very safe thing to do and didn’t make sense because what we are trying to do here is simply restore the normal thing to top kallikrein inhibition in anyway. We’re not worried about on-target issues, be it we have enough exposure with a small molecule medicine that you would expect to generate some type of off-target fix, sometimes that will result in toxicity. So at the end of the day, it’s all about the safety margins that’s needed to hit the therapeutic target. And our assessment of the non-clinical evidence is that we have got those safety margins and we will have a substantively increased body of knowledge once we got the Phase I resulting from it.

Got it, thanks. And then maybe one more just on OPuS-2. So one question we get is, what does the potential percent reduction in attack rate be and it sounds like the base line is going to be very relevant there. Can you talk about just in broad strokes what your expectation is for the base line to be in that study?

Well, we have been conserving in a way we’ve designed it. And you know, the data we have at our hand is OPuS-1, so that’s the way we thought about what we would like to see in OPuS-2 really I think is – I think it’s quite possible that we will have a better result than in OPuS-1, I mean, I don’t want to predict that, but it’s certainly possible. And you know for an oral medicine to emulate the efficacy seen in the Cinryze pivotal study published in the New England Journal would be pretty nice, and we are pretty close to that already in terms of excellent reduction in attack rate. So this is even still about thresholds and I think this is not a case where in people with mild disease if you like you have higher base line kallikrein inefficient levels in the first place that they would be harder to treat, they are going to be easier to treat. And so I think that whether or not the placebo attack rate is a lot lower in OPuS-2 than in OPuS-1, we can’t say it, obviously the study is ongoing. So I think it’s a reasonable hypothesis to think about getting a better outcome in people who have closer to the normal range, C1- Inhibitor levels in the first place, but we have to do the experiment.

Got it, thank you.

Thank you. Our next question comes from Charles Duncan from Piper Jaffray. Your line is now open.

Hey, good morning, guys. Thanks for taking the question and congrats on good cash control and the clinical progress in the quarter. My first question is kind of related to the last one that was just asked regarding OPuS-2. I am wondering if you could give us an update on any of the patient enroll – the patients that are enrolled, any of their characteristics, do you have any blinded read information that you can share with us at this point?

Hi, Charles. Thanks for the question. I am totally allergic to blinded combined analyses, looks like these are misleading, I've had that experience before, I think that what we can say previously on insurance is we’re recruiting in to the study, we've got sites up and running in the US and Europe, I think there is always competition for patients in clinical studies, but we've got, what we do have is an insight into adherence with filling out the electronic diary and adherence with communication, because that sort of information is like operational tracking if you like and using an electronic diary to facilitate that. So that's going quite well and that's a good sign in terms of getting what we need to have an interoperable study, obviously if people don't take the medicine, it can't work. So they seem to be taking the medicine and I think that we did liberalize the inclusion criteria in terms of attack rates required for the study, in other respects, it’s quite similar to the criteria for OPuS-1, but I think it would be pretty much impossible to get 100 patients, like the OPuS-1 patients in any reasonable timeframe, so my expectation is that the attack rate will be somewhat less.

So it sounds like compliance is not an issue at least thus far?

Thus far. That's a fair way to say.

Okay. And regarding the recent data that has been talked about by a mindshare competitor’s candidate, any thoughts regarding the unmet need and future market dynamics, have you updated your views on that at all?

Not really. I mean I think Bill and I were pretty consistent in saying if you can get to the threshold in this disease of kallikrein inhibition, you can do a very good job of eliminating attacks and so that's what gets us so excited about 7353, the way we see this playing out at least from a vantage point we have today is if all we get with 4161 is like numbers and share, that's a huge success for a company of our size and it also gives us ample opportunity to get experience in the marketplace and launching an HAE drug. And then if we are successful with the second gen, 7353 with one pill once a day wipe out attacks, that I can't imagine and I've said this repeatedly how that's not the market leader.

So it sounds Jon, it sounds like to me that still this strategy is you've got a clinical benefit target in mind for 4161 and if you’re within striking distance of that, that’s going to be the go-to market strategy with 7353 being a killer app [ph] follow on approach?

That's a great analogy, yeah.

Okay. And then final question is regarding potential for kallikrein inhibition in general, we've been looking into this and have potentially being a platform, what other indications might you consider? And could some of these be ocular?

We’re always evaluating things like that, but to be honest, the focus is all about HAE right now and so we want to make sure that our resources, our attention everything is going to executing our plan as well as we have possible. We have a dozen backups to 7353 and if there is application, maybe we will explore that, but remember we’re also working on two other targets and so I'd much rather bring forward the next generation of rare disease oral drugs on different targets and have multiple successes like we think we are going to have in HAE.

I would just add one thought, which is HAE disease that has the luxury of having 100%, well updated pathway all about kallikrein and Bradykinin and there is certainly lot of literature in other entities that implicates Bradykinin as playing a role from what I can tell, none of those other entities are as simple as hereditary angioedema and the pathophysiology is probably quite multifactorial and none of them have the depth of research with regard to the role of Bradykinin in playing a very important role in those diseases, that doesn't mean to say that our kallikrein inhibitor wouldn't be of some benefit, but I am completely aligned with Jon that the energy for our kallikrein inhibitor program is about HAE and the research target discovery and indications beyond that are -- we are developing to really make huge difference in the unmet medical need in similar types of disease that have very, very, very well validated targets.

That's helpful, Bill. Jon, thanks for the added color.

You are welcome.

Thank you. And our next question comes from Mario Corso from Mizuho. Your line is now open.

Good morning/afternoon. Just wanted to ask a couple of things. So on the HAE development overall and as we think about 4161, so you complete OPuS-2 and you go the FDA, what are your thoughts on development programs, yours, Dyax’s, whoever is, I mean is it standard at this point, is it going to vary from molecule to molecule, what is required and if you test one population versus another and have greater success, I mean does that shorten your pathway and obviously that's important competitively, but also informs you decisions on how you would bring 7353 forward. So just interested in your thoughts there. Thank you.

Sure. So I think that's a complex question. At the end of the day, the regulatory agencies in the US and other countries are tasked with evaluating the efficacy-safety balance and the quality of manufacturing and consistency of manufacturing of new drugs that get proposed for marketing. And when all of those factors come into play, over time, in a disease base, if things evolve in terms of standard of care, you could certainly expect that there might be changes in attitudes in the regulatory agencies that what's required to demonstrate efficacy. I doubt that any of that would change, what's required to demonstrate safety on an individual basis for quality. There is a spectrum of medical need in one sense because some patients are doing fine obviously on intravenous therapies, but it's IV, it's lifelong IV. Other patients are not doing so fine and they get thrombosis in their veins or they get [indiscernible] infected or other complications happen. People still die of hereditary angioedema even in the United States despite the availability of modern therapies. So it's hard to predict and I think that I've learned over the years not to predict regulatory discussion outcomes, you just got to go through -- got to put your best foot forward with your development plan and have the conversations with agency. They are also tasked with creating a level playing field, so they cannot play favorites. I think that our plan that we have stated before hasn't change. We will complete OPuS-2. If the results are great, we will have discussion with the agency in the United States and the regulators in other regions and propose. If it's really great then the question that will arise is what we have to do in our efficacy study at this stage. We get that that we have to show long term safety. Even if we do have to do another efficacy study that shouldn't be a rate limiting step because long term safety would be a longer duration study than an efficacy study? So in terms of such a patient population that's a discussion point with the regulators. So I think it's been hard to predict, but we like every other sponsor, we have to show a safety efficacy and quality of our product in order to get approved.

Thank you. Our next question comes from Serge Belanger from Needham & Company. You line is open.

Good morning.

Good morning.

Just a couple of questions on the HAE programs. First on OPuS-2, I think you began enrollment back in December of last year, just I guess trying to get an update on enrollments. Would you say you are past the half-way point at this time? And then on 7353, you mentioned a small number of backups for that molecule, just wanted to know whether you plan on advancing these backups to early clinical developments or not?

Serge, I will take a shot at this. So I think a lesson I’ve learned over the years is never give up dates on enrollment because it’s constantly changing and so all I can say is we’ve got over 30 sites up and screening and enrolling patients in both the US and Europe. And from where we sit today, our expectation and what we know, we’re going to complete this study and report our results before the end of the year. So that’s all that I can say on that front. With regard to the backups, I think I mentioned in my prepared remarks that at some point this year, we are going to make a decision on which of these would be candidates for pre-clinical development. So remember what the strategy is here. I mean, this is another reason to bring 4161 forward. The backups are an insurance policy number one for 7353 because we believe that one pill once a day wipe out of tax is something that the market needs and as far as we can tell, we are one of the only ones that are able to do that. And so these molecules, these 12 that our chemists have come up with are structurally diverse from 7353 and each other. And so the goal then is to do a certain number of tests with these molecules to get a sense of which one seem to be most different and – but yet have the same selectivity and potency that we see with 7353 and then move those into preclinical development. And then as I also said in the prepared remarks, all of this continues to build a fortress of IP, which we think is very important as well.

Okay. And I guess moving on to the 4430 and the new contracts funding, just wanted to know what kind of activities should we expect with this new contract? And I guess also how would this flow through to P&L for the rest of the year?

So I will take what should you expect from this contract and Tom can take the financial side of it. But what’s really important about this contract is manufacturing drug. The focus is making drug antox [ph], but the critical path item is making drug and so that will be the focus of this contract and will be the importance of this contract, and I think, all the way to that drug to file an NDA, which I think is important. And then the other thing I would say is, I said one of the ways to sit through the imposters and the real companies in this space claiming that they have something for the nasty viruses like Ebola is who is getting money from the government and I think this just reinforces that there is real interest in 4430 as a medical countermeasure.

Okay. And does this funding allow additional clinical development or additional animal studies, I mean how far can you fund development with this additional contract?

So we’ve got the Phase I funded through by NIAID and then the manufacturing antox to NDA from BARDA which what we still need is additional animal studies for the animal rule approval and then human safety, large scale human safety beyond Phase I once we know the dose, the human equivalent dose. So that’s still money that we don’t have in the contract, but we now have the manufacturing capability, so that continues a continuity from Phase I, we will need to -- after we complete the Phase I sometime in the third quarter, we will need to have additional funding for the rest of it.

Okay.

Hey Serge, in response to your – how do these contracts look through or how do they correlate to revenue this year, I would answer with two general statements. One is for the development of 4430, remember it’s under two contracts now, a NIAID contract and the BARDA contract. When you look at those, each contract has effectively a base and then has options on top of it. So in regards to the P&L, it depends on how quickly we advance through the aggregate contract amount, and each option is based on a stage gate process that’s reviewed by the government. And so it’s hard to predict the volume of expenses and revenues that are going to go through the contracts. So we don’t give that guidance because the other thing you have to remember and this is my second statement is, if the development was totally under BioCryst jurisdiction, we would make a decision and go forward and execute that very quickly. However, the government is funding these programs and so, they need to review to their satisfaction the results and then go through the appropriate approval process to exercise the next option. So, the end result of that is it goes a little slower than if we had it at our -- totally under our [indiscernible] and so, it’s very hard to predict not only how quickly the program will advance at least when you’re looking at quarterly data as well as to how many options and when those options are executed as far as pure volume perspective.

Okay, thank you.

Thank you. And our next question comes from Tazeen Ahmad from Bank of America. Your line is now open.

Hi, thanks for taking my questions. Bill, just to go back to the comment you made a few minutes ago about 4161, what results would you consider to be really great that you think will justify needing to do another efficacy trial? Would it be simply just being a little bit better than Cinryze or would you need to show a meaningful improvement over that?

That’s a great question. I don’t think there is a simple answer. What we showed in OPuS-1 with only 24 patients in a very short study we got a very robust effect. So, there is no doubt that the drug works. So, I think in a 12-week study with biggest amplifiers, we’re testing two different doses versus placebo so, that’s a first question is if -- let’s say both doses worked, is the higher dose substantially better than the lower dose, that’s an important question. And for a lot of medicines, some people respond extremely well to a lower dose. So, it’s also rather important to know for the commercialization of the drug. So, I think that ultimately we’re not in the decision-making seat in terms of answering the question. Trying to be a regulatory interpretation of how good is the data. So, I will be thrilled if we have a robust fee value coming out of the study.

I think that’s the entry to going back to the FDA.

And the treatment of [indiscernible] and the secondary endpoints and safety profile all come into play, the fact that it’s an oral medicine, first-in-class all the medicine, I mean, BioCryst is the first company that has tested at all kallikrein inhibitor in any disease whatsoever. So, I think that we’re cutting new ground here but provided the subjects type of medicine when they have HAEs and we have a pretty good shot at having a successful study here.

Okay, and then to follow on with what you just said about getting to market and preference, how long do you think it would realistically take to institute a shift from Cinryze to 4161 because even though this would be a first-in-class drug, you would also be in the bit of unusual situation of being a rare disease drug that’s launching into a market where options already exist?

Yeah. So, I’ll take a shot at it, Tazeen. I mean, we’re still -- I told you that we’re -- we’ve got Lynne Powell on board and she is doing market research now to put a finer point on that question for us, but I can tell you one, I don’t think you should assume that Cinryze is the market leader in prophylaxis when we come to market. That could change and so we’re keenly aware of that. Two, anything that’s injected multiple times a week I think could be problematic from a convenience perspective versus capsules three times a day and that’s clear from some of the early market research we’ve received. There is just a preference for people that want oral, period, and don’t want to inject even if it’s less frequent than twice a week. And then there is an androgen patients as well. Bill and I have told the story of when we’ve been at patient meetings and people have come up to us that are on androgens but they don’t like the side effects that they encounter and can’t wait to either get into our trial or have the drug come to market. So, I think there is multiple places where we can pick up market share and my point that I stressed earlier is that it doesn’t take a lot to have meaningful value for BioCryst, right, with this first generation compound. I think that’s the point that’s most important here.

Okay, and then and one last one. Just given what you've seen with the 7353 compound so far and what you've hypothesized about its potential potency, do you think that for a drug for this caliber that the baseline attack frequency will matter as much as it does for a trial that evolves 4161?

That's an interesting question. I think what we're trying to do here with a drug like 7353 is take a population of patients with HAE that might have quite a broad range of C1 inhibitor levels in other words kallikrein inhibitor levels. The other -- by the way, the other protein in the blood that inhibits kallikrein is alpha-2-macroglobulin so that's not affected by HAE, it counts for only a minority but it's out of the noise in the data I guess, that there is something that's not being measured that also contributes to kallikrein inhibitory total activity in the blood. So we're going to take a population of patients with some distribution from low to some sub-normal range but a lot higher than zero of total kallikrein inhibitory activity in the blood and what we want to do is get them into the normal range of trough of our once a day drug, or twice a day it turns out that it needs to be even twice a day, which would still be fine in my mind. So we have a standard dose, the technical way of addressing your question would be with a standard dose of a drug, can you shift the entire population reliably into the normal range at trough level before the next dose of the drug at steady state. So we'll have a lot more inside into that with the human PK obviously, I mean I'm extremely pleased looking at the non-human primate PK profile because we've got lots of coverage of the inside of trough and the variability and exposure is pretty tight. So I think the variability in the baseline total kallikrein inhibitory content in the blood and the variability and exposure, you combine those two variabilities that's what's going to determine the probability of patient getting into the normal range of trough. On top of that, of course, there is a dose; I think the way I'm looking at that drug is that, provided it is safe, it has an excellent chance of being a highly effective therapy.

Okay, thank you. Operator Thank you. And our next question comes from Christopher James from FBR & Co. Your line is now open.

All right, thanks for taking my questions [Technical Difficulty] really good quarter. Most of mine have been asked but just a quick one on 7353. Maybe can you review the development pathway after Phase 1, just trying to get a sense of how quickly this could go into a Phase 3 pivotal study?

That’s a really interesting question. I think that, when you look across the landscape of drug development, if you have a safe compound, then the bigger the treatment effect and the higher the medical need, then the greater the opportunity to make the development time as fast as you can make it go. In addition to the clinical program there is a bunch of other things that has to be done including -- this is true no matter what the molecular platform is, you have to do scale-up process development, have to understand the impurities and control them, have to complete animal non-clinical safety program. You have to get your manufacturing to commercial scale and do the validation lots and all of that takes time as well. So I think that you know that being said though, I think that there would be -- from our perspective, every reason to go as fast as possible if the Phase 1 is extremely encouraging with pharmacokinetics, safety tolerability and phamacodynamic that we get out it. As Jon said, we intend to start a proof of concept study in HAE patients before the end of the year. I think if the PKPD looks great and we get superior exposure and superior kallikrein inhibition of trough compared to what we saw with 4161 that would encourage us to design the appropriate proof of concept study and get that done as fast as possible. I think every program has to have an element of dose ranging at some point in the program, every program has to have definitive efficacy studies and every program has to generate sufficient safety data for long enough to give the company and the patients and physicians, let alone the regulators, sufficient confidence in the drug. One of those things has to be done, but I think that there might be room for some very interesting studies if there is very big treatment effect.

Great, that's helpful. Thanks a lot.

Thank you. [Operator Instructions] And our next question comes from Rahul Jasuja with Noble Life Science. Your line is now open.

Thank you. Good morning, guys. Most of my questions have been answered, but I got a few at the bottom on my list here. So talking about androgens, Jon mentioned the androgen population, so I think it's a given that those androgen users that needed to get on to Cinryze have already got on to it, it has been several years. But there is probably a bunch of androgen users that have a high baseline – sorry, a low baseline of attack rate. Is it possible that 4161 at a lower dose, a lower pill burden could potentially work in that population? And have you thought about that at all, or is that not a consideration?

Well, I think given the fact that we're testing a lower dose with the 300 milligram three times a day, we should get an answer on that and see if there's efficacy in any population that's treated with that dose and then how does it differs, as Bill said before, from the 500 milligram three times a day. That's an important part of this study that I certainly want to know the answer to. So I think your question, though, is an interesting one. Where would a drug like 4161 get used? And I think it would be in the milder patient population, right, people that is less likely that they'd have breakthrough attacks and want to be on the convenient oral administration. I think that makes a lot of sense and that's by the way the larger part of the population too. So that's what gives us quite a bit of confidence that if we are shooting for Cinryze-like numbers it appears to us to be very achievable.

Okay, got it. And then you wonder – any question that I have and it's been discussed in different ways on this call. Clearly the fact that given the Dyax has had -- it's really obvious that differences in HAE patient population namely the baseline attack rate directly impact clinical benefit. And then potentially is there any thinking behind designing clinical trials that are based on this differential population or having prospectively defining these population so that there is a market advantage or are the regulators not ready for that at this time?

That's an interesting question. I think we will be in a better position to understand it once we've got the OPuS-2 results in hand. We are working with leading laboratory in terms of measuring function to see an inevitable level at study entry so to be able to look to see whether that baseline variable is a co-variant in the clinical outcomes that we are measuring. It's an interesting question. I think we had a reason to stand today, I'm not sure I would have the confidence to design a study along those lines. As we accumulate more data, if it's crystal clear that people are falling into different groups, that’s a strong co-variant, that will help us design other studies for sure.

And we are already thinking about different studies that we could run, because remember we've got to do the safety study next year. And so we have the opportunity to explore certain populations and having Lin onboard and what's most competitive and what makes most sense we're having those conversations as we speak.

I think the key thing here is that this is a threshold disease. So there is a threshold of the normal range of total kallikrein inhibitory content. That's what we are trying achieve. And if you are closer to that already, it just makes intuitive sense that it's easier to get there. So as Jon said a few minutes ago in relation to the question about androgen use, people who are dissatisfied with their androgen therapy because of side effects or whatever other reasons might be a very attractive population. And a vast majority and this includes the US, the vast majority of patients with HAE are not taking prophylactic C1-inhibitor intravenously and not – but there is definitely room oral kallikrein inhibitor like 4161.

I think the practical side of all this, the likelihood that there is a biomarker and then you couple that with their attack frequency that identifies patients is really low by the time these drugs get to market.

I mean, that’s the issue. The particular value of an individual test might not be there, so a trial or therapy on the other hand.

That’s how it’s going to be used. So a doctor is going to say, hey, this is a patient that I think is an appropriate candidate for this drug, I am going to try him on it, if they don’t have breakthrough attacks, I am going to keep them on. That’s how these will be used.

So potentially you’re looking at use without any formal clinical trial for these sub-populations that clinicians will be happy to test and low…

I think an important thing in the development program that we already started to do this is to make sure that we don’t restrict the clinical trial just to one group of patients. You run the risk of having your restricted label if you do that. So if we don’t want to study people just with very low attack frequencies or very high attack frequencies. But by the time we file, we would like to have experience across the board and that’s exactly what we will do.

Great. Thank you, that’s very helpful, and I am looking forward to the second half.

We’re too.

Thank you. I am showing no further questions at this time. I would now like to turn the call over to Jon Stonehouse for any closing remarks.

Great, thank you. As Rahul said, the second half of the year is going to be really interesting for BioCryst. So we look forward to giving you updates and as always we appreciate your interest in our company. Have a great day. Thanks.