BioCryst Pharmaceuticals, Inc. (BCRX) Q2 2015 Earnings Report, Transcript and Summary

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

Thank you. Good morning and welcome to BioCryst second quarter 2015 corporate update and financial results conference call. Today's press release and accompanying slides for this call are available on our website, at 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 Jon Stonehouse, our Chief Executive Officer, Tom Staab, Chief Financial Officer, Dr. Bill Sheridan, 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, 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 corporate website. With that, I will turn the call over to Jon.

Thank you Rob, good morning and thanks to everyone for joining us today. During the second quarter, we continued to build our company by diligently executing our plan. While we have set aggressive timelines, steady progress has been made in advancing both our clinical and discovery stage programs. In addition, we secured a commercial partner for our approved influenza treatment RAPIVAB through a collaboration with CSL, a well established global leader in the treatment of flu. The upfront cash we received from the partnership extends our runway into 2017. So, all-in-all it was a very productive quarter. I'd like to start by reminding everyone of our strategy of how we plan to be the leader in the oral kallikrein space and ultimately bring normalcy to the lives of HAE patients. We start with our most advanced program of avoralstat, previously known as BCX4161. OPuS is a clinical study of approximately a 100 patients evaluating 2 doses of avoralstat versus placebo for 12-weeks and we expect to complete this study by year end. If we’re successful, our current plan of filing an NDA in 2017 would make avoralstat the first oral kallikrein inhibitor in the market. Avoralstat will be an important new choice for physicians and patients who want an oral prophylactic treatment option. In parallel, we are investing in the development of more concentrated dosage forms of avoralstat with the goal at launch of having 3 or 2 capsules or tablets per dose. In addition, we are conducting exploratory formulation research with the goal of achieving higher exposure in twice daily dosing of avoralstat. The next part of our strategy is to further improve the effectiveness and convenience of oral kallikrein inhibitors with our second generation research program. Our target profile is one pill once a day, wipe out a tax. This profile will dramatically transform the lives of HAE patients. The most advanced of our second generation molecules is BCX7353 currently under a valuation in a Phase 1 healthy volunteer study. This study is well advanced and we’re not able to answer specific questions about it today. We will share the details and provide a complete view when the study is finished. We had originally project completing the study by the end of the third quarter. However, as we had previously mentioned as a possibility, we now know that in order to properly characterize the steady state pharmacokinetics of 7353, we need to add a 14-day treatment cohort to the study. This will cause the study to extend into the fourth quarter. As a matter of prudent drug development, our discovery team has been working on second generation backups using structure based drug design and has succeeded in inventing several uniquely different plasma kallikrein inhibitor molecules from distinct structural classes. Today we are announcing that we have selected additional drug candidates that have suitable pharmacologic properties to advance into preclinical development. Development of these candidates is approximately two years behind 7353. So, in summary, we have a portfolio of oral kallikrein inhibitors of avoralstat, potentially improved formulations of avoralstat, 7353 and backups to 7353. Pursuing this portfolio is a comprehensive strategy to achieve our goal and one that we will execute with the knowledge that patients are waiting for an oral drug that has the potential to dramatically change their lives. Switching gears now to RAPIVAB. We're excited to have CSL as our commercial partner. CSL is a leading influenza company and following the recent completion of its merger with Novartis influenza vaccine business. CSL is the second largest influenza vaccine company in the world, having an antiviral to treat influenza is a perfect complement to their vaccine business. Here's the highlights of the deal. CSL has the exclusive commercial rights to RAPIVAB in the U.S. and all it territories that we had not previously licensed. BioCryst received a $33.7 million upfront payment and will receive royalties from CSL on commercial sales of RAPIVAB in the U.S. and from other territories when it is approved in those regions. CSL is responsible for ex-U.S. stockpiling and pays BioCryst royalty on those sales. BioCryst is responsible and retained the full right to U.S. government stockpiling. BioCryst is responsible and will pay for the post approval commitments agreed upon with the FDA. This includes the plan to obtain a pediatric invitation. BioCryst is also responsible for filing marketing application in Europe and Canada based largely on the U.S. application and we have the potential for a total of up to $12 million in milestones for a successful pediatric approval in the U.S. and for EU in Canadian approvals. All-in-all this is an excellent deal for us as it puts the commercialization of RAPIVAB in the hand of a flu expert and allows BioCryst to focus its development and commercialization efforts on HAE and other diseases. It provides important non-dilutive capital to us and thereby extends our cash runway in a meaningful way and it comes in advance of the North American flu season allowing CSL to prepare to launch the product and reach more influenza patients with RAPIVAB than we could otherwise do on our own. Finally, we have completed the single ascending dose portion of the Phase 1 study using the IM formulation of BCX4430 a broad spectrum antiviral. The independent data monitoring and safety committee for this study has concurred with our recommendation to move forward with the multiple sending dose phase of this study. We expect to complete this study in the fourth quarter. That completes our second quarter program update and I will now turn it over to Tom to review the financials.

Thank you, Jon and good morning everyone. Today I'm pleased to report the details of our second quarter 2015 results which reflect the continued progression of our programs and the anticipation of significant value creating milestones in the next six months. On Slide 5, you see revenue for the second quarter of 2015 increased to $25.8 million compared to $1.5 million recorded in the second quarter of 2014. This significant increase was due to the partial recognition of an upfront payment resulting from a recent outlicensing of RAPIVAB to CSL, as well as a significant increase in collaboration revenue associated with BCX4430 development under government sponsored contracts. Second quarter 2015 R&D expense increased to $16.5 million as compared to $11.1 million in the second quarter of 2014. This increase was associated with more extensive development activity within our HAE portfolio of product candidates including avoralstat, BCX7353 and additional second generation kallikrein inhibitors in preclinical development, as well as a higher level of development expenses for BCX4430. The successful advancement of our HAE molecules continues to be the primary focus of our growth development efforts. General and administrative expenses for the second quarter of 2015 increased to $3.5 million compared to $2 million for the second quarter of 2014. The increase is due to expenses associated with the CSL transaction, as well as medical affairs and commercial expenses associated with the approval of RAPIVAB and the company preparing a commercialization of its HAE product candidates. Moving below the operating line, we incurred $1.3 million of interest expense in the second quarter of 2015 and $1.2 million in the second quarter of 2014. We also recorded a mark-to-market hedge loss of $796,000 in the second quarter of 2015 as compared to a loss of $1.8 million in 2014. During the second quarter of 2015, we also realized the currency gain of $1.5 million from the exercise of a U.S. dollar, Japanese Yen currency option within our hedge arrangement. Both interest expense and hedge mark-to-market adjustments relate to our non-recourse notes and related hedge arrangement in active in conjunction with the RAPIVAB royalty monetization. Our net income in the second quarter of 2015 was $4.9 million or $0.07 per basic share and $0.06 per share on a fully diluted basis as compared to a $14.6 million net loss where a $0.23 loss per share in the second quarter of 2014. Slide 6, summarizes our six-month financial results. Revenue for the first half of 2015 was $32.7 million an increase from $4.9 million recorded in 2014. The increase in 2015 was primarily due to recognizing revenue on a portion of the upfront payment from CSL and increase government collaboration revenue associated with BCX4430 development. First half 2015, R&D expense increased to $33.6 million from $20.3 million in the first half of 2014, primarily due to increased spending associated with our HAE and BCX4430 programs. General and administrative expenses for the first half of 2015 increased to $7.6 million compared to $3.6 million in 2014. The increase was due primarily to unrestricted grants awarded to the U.S. and international HAE patient efficacy groups as well as medical affairs and commercial expenses associated with the approval of RAPIVAB and the company preparing for commercialization of HAE product candidate. Moving below the operating line in the first half of 2015 and 2014, we incurred $2.6 million and $2.5 million of non-cash interest expense. We also recorded a mark-to-market hedge loss of $332,000 in the first half of 2015, as compared to a loss of $3.4 million in 2014. Once again, we also realized a currency gain of $1.5 million in 2015 from the exercise of a U.S. Dollar Japanese Yen currency option within our hedge arrangement. Moving on to Slide7, I'd like to discuss our cash balance and cash usage. We ended the second quarter with cash and investments of $132 million, an increase from $114 million at the end of 2014 due to the receipt of $33.7 from CSL. Based upon current plans and expectations, we expect our existing cash to provide us liquidity into 2017. Our operating cash usage through the first half of 2015 was $15.8 million. When including the $33.7 million payment from CSL, the company had cash generation of $17.9 million for the six months ended June 30, 2015. In regards to financial guidance for 2015, we are now forecasting operating cash usage to be in the $18 million to $28 million range upon adjusting our previously guided range for our six month results including the $33.7 million payment from CSL. In addition, we continue to expect our 2015 operating expenses to be in the $75 million to $95 million range. As a reminder, equity based compensation expense is excluded from our operating expense guidance. Now, I'd like to turn the call back over to Jon for his closing remarks.

Thanks, Tom. So in closing, we made great progress in the second quarter. Looking ahead, here are the important events for the rest of the year. Complete the 7353 Phase 1 and report out results in the fourth quarter. Finish the Phase 1 for 4430 and healthy volunteers in the fourth quarter. Complete and report results for the OPuS-2 trial by year end. Initiate a 7353 HAE proof-of-concept Phase 2 before year end. And obtain U.S. government RAPIVAB procurement contract by year end. So this concludes our prepared remarks. And we will now open it up to your questions.

[Operator Instructions] Our first question comes from the line of Jessica Fye from JPMorgan. Please proceed.

Thanks for taking my questions. I really can't give specifics, but I think the update on 7353 and when we might that Phase 1 as sort of focus this morning. I guess there are two ways of interpreting that update, one is you aren't seeing any out to 7-days on a toxicity side unless you feel comfortable dosing longer. And then the flipside is, maybe we aren’t seeing enough indications of potential efficacy over 7-days. Do you want dose longer to see if you feel find something. Can you maybe just elaborate on the rational for adding that 14-day cohort?

Thanks, this is Bill. It's all about PK, and the monkey - we saw the drug had a slow clearance in a long half life. He did know what we would see in humans and when we might reach steady state. So to get steady state and to fully characterize the PK characteristics of the molecule, we need a 14-day cohort. That's what it's all about.

Is there anything you can say about toxicity thus far, is it fair to interpret dosing longer as a sign you are not seeing anything concerning over the 7-seven days in this cohort.

In call clinical studies, the way I would interpret being able to dose longer is that it’s a good thing because it means you're anticipating that that will be safe and well tolerated. And so the way that this program will evolve is we will complete the study, we will be able to share with you the details of safety, tolerability, drug exposure, and the effect on the target enzyme and what we’re looking to see there is what’s the pattern of that over 24-hour period. So we’ll be using exactly the same PDSA that we have used throughout the program for avoralstat and you’ll be able to make head-to-head comparison with the Phase 1 data that we put out for avoralstat in healthy subjects too. So I think the next step there is to choose the dose for dose to take into a proof-of-concept of study that Jon mentioned. Our intention is to stop that by the end of the year. So moving forward with longer dosing is a good thing and we want to make sure that we take our opportunity in Phase 1 healthy subject pharmacology study to thoroughly and completely characterize the PK as a drug.

This is Jon. I will just add that remember that the goal of the second-gen program is to get to one pill once a day and typically a long half life is a good thing if that's the profile you are shooting for.

Got it. And just going back to that assay. When you provide the Phase 1 topline results, are you going to hold that up next to the 4161 data so that we can get some indication of potential efficacy?

We will be able to provide a head-to-head absolutely.

Yes I think that’s an important thing for people to remember is the predictive value that we have here right. We have an assay, we then interpreted what doses we needed to use based on the Phase 1 PK with avoralstat. And then we had clinical results in OPuS-1. You now take that comparison with 7353 and the PK that we see there and the affect on the enzyme and it should give you really good predictive value what kind of efficacy you are going to see with 7353.

Got it. And is it possible to just - may be to find a little bit when in the fourth quarter we could hear the update?

Yes. I am never comfortable giving months as the specific time frame, so I’d like to stick to the fourth quarter.

Got it. Thank you.

Our next question comes from line of Charles Duncan from Piper Jaffray. Please proceed with your question.

Hi guys, thanks for taking my question and congratulations on the RAPIVAB monetization and partnership. So my first question is like the last color on 7353, I understand that you are not going to give a lot of details today, but could you help us understand a little bit more about how operationalize that additional cohort. It seems like it should be a big deal, it seems like you had pointed to that previously, as well perhaps it seems like with 14 days you are getting perhaps a little bit longer duration and therefore how does that rethrough on the potential for once a day or even twice a day dosing seems like it should increase probability of success there.

Hi Charles this is Bill. Thanks for the question. So I am really pleased with the progress that we are making all that clinical programs. So on the Phase 1 7353, the opportunity to complete the job and to look at a 14-day cohort and to use that information to help make the best and small choices about doses for the proof-of-concept study is a good thing. And the way we operationalize that as you say is totally straightforward. I mean the protocol was always built flexibly enough so that we don’t have to have a protocol amendment in order to do that. You try to anticipate what might happen, give yourself room so that you don’t have to go through a bunch of loops in order to do something as simple as this. This is a completely simple straightforward and typical thing to do in a Phase I study, there’s nothing magical about it, give the drug 14 days and measure the things we need to measure and that’s the end of it. And then we’ll be able to wrap up the study, analyze the results and report them. So, I’m really looking forward to being able to go into all of the details on the safety tolerability, PK and PD of the drug. I think it’s very, very important to us that we’re shooting for a goal of one per once a day that we can then test in patients with HAE that’s our goal here.

Yeah and that Charles I would add that the purpose of the Phase I is to really understand the characteristics of the drug, the PK and being able to understand what doses you want to take into the next study. And if you rush and you don’t understand the steady state, you cannot have the whole picture and then your next study could be at risk. And so we're being prudent here and we’re encouraged by what we see thus far and we’re looking forward to giving you the results in the fourth quarter.

Okay. That’s helpful and then as we move into the other second-gen compounds or maybe even third-gen compounds. Would you see these as backups or fundamentally different opportunities relative to a more or less stand for 161 and 7353 could those actually open up new indications beyond HAE?

Yes. Let me start and then I’ll pass it over to Bill. So I think the thing I was trying to stress in the prepared remarks is we have one however, comprehensive strategy to be the leader within oral kallikrein inhibitor, to have an oral prophylactic for HAE. Right, we've got avoralstat, we've got -- we’re working on improved formulations, I mentioned that we’re looking at higher exposure and twice daily dosing of avoralstat and some formulation research. We've got 7353 and then we got backups to that, that doesn’t mean that we see some signal of 7353 that worries us, it’s just prudent drug development to make sure that you've got a comprehensive strategy, so you can reach your goal. And so that’s what we’re doing here and I’ll let Bill add to that.

Your question on the backup is very interesting. In general when you've got a suite of compounds that designed with structure based drug design to be high potency inhibiters of a target enzyme and you’ve chosen one from a particular chemical class forward into the clinic. The point of the backup program is to create an insurance policy, as Jon mentioned in the call. So the best way to do that is to maintain potency because that’s the number one characteristic that limits the drug dose and limits the opportunity for unwanted affix. Second is to match at least the qualities that you saw in your first compound, because it's no point putting us second competitive to clinic, it has worse characteristics than the first compound. So you want to match or exploit T type profile 7353 and finally we want to have chemical diversity, because that’s the second way that we can improve their chances of having the best possible safety and tolerability profile is and insurance policy. So all of that being said, I think your other question was around other indications. I think I would reiterate two things. One is, right now the clinical program is focused on HAE and it’s focused, focused, focused. However, we’re not ostriches with our head in the sand, and once we have these tools that could be used in laboratory research to probe other diseases that might have significant contributions from the contact activation system and kallikrein and bradykinin pathway that would be very good tools to use to interrogate those diseases. So we’ll have those tools.

Yes. And I think the beauty of having multiple molecules is you don’t make it a messy situation where you've got one drug that’s for bunch of different indications and there could be pricing issues and all those other stuff. We have distinctly different molecules which makes that a little bit easier.

That's helpful and, yes, no ostrich. Just one last one for Tom, regarding the cash having cash into 2017, could you help us understand Tom what that assumes in terms of any kind of cash flows from the RAPIVAB, our partnership as well as -- do you think that that cash flow be sufficient to at least complete pivotal trials for 4161 oral-stat?

Yes. So Charles, we out licensed the drug and generally I take a very, very conservative view about our cash runway and so it says as short and so there is very little assumed from the CSL transaction about revenue coming in, other than the $33.7 million that we’ve already received. And so the cash runway and going into 2017, we had previously disclosed with the oral-stat that we planned to file the NDA in 2017, we haven’t given month guidance on either of the cash runway or the NDA. But I think you can tell from my comments that we’re in a very financially sound position and very comfortable with our current balance sheet.

That’s helpful. Thanks for the added color.

And our next question comes from the line of Tazeen Ahmad from Bank of America. Please proceed.

Hi, good morning. Thanks for taking my questions. Just follow-up on 7353. You said a few times already on the call that your goal is to be a one pill per day, I’m just wondering is after you get to the end of this study, if for whatever reason it looks like 7353 might work better, let’s say as BID, would that be a non-starter for you to move forward with this molecule?

No. Because it’s an improvement over oral-stat. Right, so if it’s got the efficacy that we’re expecting which would be the mimic to normal phenotype and wipe out attacks, I think twice a day would be fine. Our goal and the way we chose 7353 and the way we chose the backups was for one pill once a day, but if we ended up with twice a day, I think that's still a highly attractive drug.

Okay. And then have you started recruiting patients, is this additional cohort or is that something that’s going to happen later?

Later.

Okay. And I guess just shifting back to 4161 for a second, where are you in being able to feel confident that you will be able to reduce the pill burden for the drug by the time you launch presumably in 2018?

So, we’ve been working a while on a more concentrated liquid. And I would say that Bill and I are relatively confident that we’re going to be able to launch with either three or two capsules or tablets per dose. And so, right now we’re at five, so that’s a pretty big shift. But beyond that, I said in the prepared remarks that we’re also doing formulation research that could actually get higher exposures of oral-stat and potentially make it a BID drug instead of three times a day. And so that’s earlier stage, but certainly that’s a much better profile than we currently have and so certainly worth investing in.

So for this BID dosing, would this come on board after you launch just like a follow on or would you potentially be able to launch as BID?

I think it’s unlikely that we would launch with BID, obviously we want to get to market as quickly as possible. But we’re working through the plan and we’re working to see how quickly we could get this kind of formulation improvement in the trials as quickly as possible.

Okay. Thanks and then last question is on, these pre-clinical compound such you’re planning on starting studies for, is it for the intention of looking at them for HAE or for other indications?

It’s primarily for HAE. And as Bill, described, we’re looking at structural diversity from 7353, so same profile, one pill once a day, wipe out attacks, but structurally different from 7353 as a backup to 7353. But as we just mentioned in Charles question, if we don’t need them for HAE then we can look at them for other indications, other areas.

Okay. Thank you for your time.

You’re welcome.

Our next question comes from the line of Serge Belanger from Needham & Company. Please proceed.

Hi, good morning. I guess my first question will also be on the topic to zero here. You mentioned you're adding a cohort to the Phase I study for 7353, are you looking at different doses or just one dose for 14 days?

Probably not the way the Phase I studies typically go, is you go through a progression of escalating doses both when you study single doses in cohorts of healthy subjects and also when you're studying repeated doses or whatever duration you choose. I think by the time we get to doing a 14 day cohort, we'll - what's typically done in this circumstance is, you would have your dose ranging done and your 14 day cohort is an opportunity to be clever about dose selection and look at all of the PK safety tolerability and phamacodynamic data from your dose escalation, and pick a dose that you would like to study in people with the disease, and measure it PK and PD profile. So, there's nothing unique about that. We're not inventing anything new here. It's just straightforward Phase I drug development principles and, so you would - each cohort is a single dose to whatever duration it is, but we'll already have the experience from the 7-day cohorts before we do that.

Okay. And how many 7-day cohorts was there?

We haven't disclosed all the final points of the details, but you can typically assume for an average Phase I study, that you would have three or four cohorts dose escalation in your multiple ascending dose, part of the study.

Okay. And each of them consist of 10 patients?

This is again not rocket science here. So, I think that a good sized study would be either between 6 to 10 actives and two placebos per cohort, you make individual choices about how to do that and we want to thoroughly characterize this drug. So, we're not skimping.

Okay. And, question for Jon. On Slide 4, we described the terms and structure of the CSL agreement, you mentioned that BioCryst is on a hope for funding executing the post commitment, I know there is pediatric study on clinicaltrials.gov, beyond that are there any additional commitments?

Yes, there is some workaround the elderly and high risk patients and then some virology work that we have committed with the FDA.

Okay. So these will get underway –

In a lot of cases they already started, in the cases of virology I think where you know almost completed.

And then for seeking approval in Europe and Canada, can you do that with the existing data?

There is no plan to do additional studies for that.

Okay. All right, that's all I had. Thank you.

Thanks, Serge.

Our next question comes from the line of Christopher James from FBR Capital Markets.

Hi, good morning. And thanks for taking my questions. So, just based on what you said, in light of the Dyax's drug. How competitive would 7353 be if it's BID or twice a day drug, and how do expect the market dynamics to play out?

I think an oral drug that has perfect or near perfect efficacy is a highly attractive drug. And once a day is always better than twice a day, but to get an oral drug with that kind of efficacy, twice a day, I think it's still very, very, very competitive. But that's not what we're shooting for, we're shooting for once a day. We're trying that with 7353 and with the backups and so that's the goal we're pursuing and we won't hear from that unless we need to.

Great. That's helpful. And then on the proof-of-concept study, how should we think about that in terms of attack rates. Do you think this will look more like an OPuS-1 or more like an OPuS-2 study?

That's a great question. I think the first thing is, once the duration of the study, and as it's typically the case, at this stage, drug development program, the duration of the animal safety that you have limits you to a 28 day study which is perfectly fine, because that's the way we did OPuS-1 and then we've done highly successful experiment. The attack rate criterion that we had for OPuS-1 was a minimum attack rate of one per week, at that stage we had less experience in the field and we based that on the average attack rate on the placebo in the SCENESSE Phase 3 published in the New England Journal of Medicine. What we actually got on study was an attack rate in the placebo of 1.27 and more apples-to-apples comparison would be a patient reported attack rate of 1.43. So, if you said a minimum, then of course the average on the study is going to be higher than that. We now have substantial experience with this and I don't want to go too much into the finer details but the evidence published in the literature suggests that benefit from avoralstat not even better with lower attack rate. I think that - I'm not really worried about attack rate as a parameter for 7353. The main thing is to make sure that – in a short study that you avoid the risk of having a lot of placebo patients have no attacks because you set it too long. So you can be assured that we have taken extreme pains to understand all of the statistics around that and that we will make a choice that we believe balances the appropriate need to recruit patients and doesn't take on to risk on that front.

Great. That's helpful. I look forward to the data in the fourth quarter. Thanks.

[Operator Instructions] Our next question comes from the line of Rahul Jasuja from Noble Life Science Partners. Please proceed with your question.

Hi, good morning guys. Just a couple of questions on 4161, first really a clarification. So Jon, you talked about lowering the pill burden, just want to clarify, so there's an approach wherein you can actually concentrate the current formulation, and in that case you do not need any additional studies I assume. But if there is a change in formulation, if there is a BID dose or change in formulation, I guess that will mean additional trials. Is that the right way to think about the options compacting the pill burden with the same formulation and then getting a novel formulation?

Hi, this is Bill. That's generally reasonable way of thinking about it. And I think that, the other aspect of that is relative by availability. So if you catch your mind back how we move from the first in human hand filled hard gel capsule type of formulation to the liquid formulation in the soft gels for that program, we need a relative bioavailability study and pick the dose that matched the exposure at the 500 milligram dose compared to the previous 400 milligram dose. At this stage of the program, the formulation refinements that Jon is talking about for increasing the concentration, the goal here is to match the exposure and under those circumstances, you've seen a similar types [XEPN's] [ph] exposure, what we'd like to do there is substitute that formulation into the ongoing clinical program and file that in the NDA, that would be the ideal outcome. I think that you're right, if you go to a brand-new formulation, that's radically different, which has more exposure than that could demand new studies, and that was the reasoning behind Jon's previous comment that it has been unlikely that that would be in the first NDA.

Okay, got it. That makes sense. The other question I have pertains to 7353, and just trying to get a bit understanding of the clinical trials there. So, I'm assuming and we may have discussed that it's a different chemical class to 4161, and the presumed improved pharmacokinetics really relate to the difference in the chemical class and not really a formulation. Can you comment on that?

Absolutely, sir. You're absolutely right. It has nothing to do with formulation at all. And it's all to do with the unique characteristics of the molecule, and a common statement that you'll hear in the drug development world is, once the scientist has invented the molecule, it's characteristics are set forever and the rest of the program is simply the discovery process of finding out what they are. So, it is totally different molecule to evolve that. Has no structural relationship. So it’s a different chemical class but beyond that it's just a unique molecule. So the monkeys and the rats we saw are really great viability with this compound. Was simple to formulate and we saw excellent PK profile so we are very happy advancing that into the clinic and as I said before, we are very pleased with the progress we are making there and look forward to raping up the study and sharing the results. So it's all about the molecule.

Great. Thanks for the explanation and the clarification. I look forward to the fourth quarter.

And this concludes today's question and answer session. I would now like to turn the call back over to today's speakers for closing remarks.

Yes. So, as always we appreciate your interest in our company and we look forward to continuing to update you on our progress over the course of the rest of the year. Have a great day.