Good afternoon, ladies and gentlemen, and welcome to the XOMA Corporation's Corporate Update and Full Year 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call is being recorded. I would now like to turn the conference over to your host for today, Ashleigh Barreto, Investor Relations at XOMA. You may begin.

Thank you, operator and good afternoon everyone. Joining us on the call today are John Varian, Chief Executive Officer; Paul Rubin, Senior Vice President, Research & Development and Chief Medical Officer; and Fred Kurland, Vice President, and Chief Financial Officer. Before we begin, I’d like to remind everyone this conference call will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call, we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause our actual results or outcome to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our most recent filings of Form 10-K and other SEC filings. I’d now like to turn the call over to Fred.

Thank you Ashleigh, good afternoon everyone and thanks for joining us. We’re going to have a slightly different structure today since most of you want to focus on gevokizumab update that John and Paul are going to give. We felt we would start by reviewing the financials. I am going to be focusing first on the quarterly results and then going through the year-over-year comparisons. The net revenues for the fourth quarter of 2013 included a $7 million milestone payment from Novartis for an undisclosed product in an undisclosed indication. The Novartis milestone constituted the majority of the $12.5 million in revenue we have reported. In the fourth quarter of 2012, we have reported net revenue of $7.4 million of which $6.3 million was contract and other revenue. Due to the increased number of clinical programs we have ongoing and the fact that we have reached the point where all of the cause of the EYEGUARD program are being shared on a 50-50 basis. Our R&D expenses increased in 2013. This year fourth quarter R&D expenses were $22.9 million compared to $15.8 million reported last year. Selling, general and administrative expenses increased slightly $5 million and $3.9 million for the fourth quarters of 2013 and 2012 respectively. Net loss for the fourth quarter of 2013 was $52.3 million or $0.55 of share whereas we reported $2.4 million of net income or $0.03 of share for the fourth quarter of 2012. These figures are heavily impacted by the non-cash revaluation of contingent warrant liabilities due to the changes in our stock price and the volatility in the trading volume. In the fourth quarter of 2013, the non-cash revaluation had a $35.3 million or $0.37 per share impact. The fourth quarter of 2012 had a $16.6 million revaluation benefit. If you exclude…

Thanks Fred and hi everyone. We probably take this time to give you an update on the overall clinical development program for gevokizumab. We launched our proof-of-concept program for gevokizumab just over two years ago. We wanted to put together a thoughtful plan that would allow data to drive well designed clinical studies using gevokizumab to lead us to the best opportunities to follow our ongoing Phase III studies and non-infectious and Behçet’s uveitis. It is clear that the program Paul Rubin put in place has done just that, rather than having data events that have a binary impact on XOMA each new piece of information informs our next decisions. The data that we and our partner Servier have generated the Behçet’s uveitis, moderate to severe acne, pyoderma gangrenosum and now EOA has allowed our plans to evolve. The data we and Servier are generating and fix additional indications we have disclosed as well as other indications we haven’t yet disclosed will continue light our pathway forward. While the results we just received in EOA were disappointing to us. We are doing the right studies to let us know if modulating IL-1 beta with gevokizumab impacts the disease enough to warrant Phase III development. Fortunately the team’s two Phase II studies were designed and executed well enough that we can make the inform decision not to launch a large, long and expensive Phase III program for the broad EOA indication at this time. Knowing not to pursue EOA is just as important as knowing that pivotal development of gevokizumab for pyoderma gangrenosum is warranted. Today, Paul will provide more detail on the EOA proof-of-concept, Phase II study results. Before we get to that we would also want to hit on our progress and plans for non-infectious uveitis and pyoderma gangrenosum,…

Thanks John. Let me start with a couple of additional comments on EOA. Although, I won’t use too much of our time today, detailing final EOA results. To take away from the analysis of combined results do not compel us to select the broad EOA indication for pivotal development at this time. In brief what we saw was that the Day 84 results measuring pain and function in our low C-reactive protein or CRP study that was Study 162 were not as strong as the Day 84 results we saw on our first study, Study 160, which was in EOA patients with elevated CRP. In this more recent trail although both groups demonstrated improving from baseline, there were no statistically or clinically significant differences between the active and placebo treated groups. Just by way of reminder, C-reactive protein is considered a marker for generalized information, and pain and function were measured using the AUSCAN scoring scale in both studies. Last October, we are very encouraged by our Study 160 Day 84 AUSCAN results. They demonstrated a separation in the aggregate AUSCAN scores for patients treated with gevokizumab as well as in the separate measurements of pain, stiffness and function. Importantly the gevokizumab scores were separating and demonstrating continuing improvement from placebo over the full 84 Day period. This pattern encouraged both us, and the experts with whom we spoke that the day 168 results of the final trial, might show even further separation. This is not what we absorbed. While the gevokizumab treated patients showed an improvement in all our skin measures over their baseline scores after 168 days of therapy and placebo treated patients showed an even great improvement over the final three months of the study. This placebo effect virtually eliminated the separation between placebo and actively treated…

Thank you, Paul. Merely not being able to be more specific as to when we will see the EYEGUARD-A and -C studies is frustrating for us. Yet when you step back and look at the bigger gevokizumab picture you will clearly see we are doing the right things for the overall program. The worldwide gevokizumab program is being progressed in a thoughtful and coordinated manner. Gevokizumab has a large and broad potential and we in Servier are working hard to exploit that potential. Servier has made and continues to make a significant investment in gevokizumab. Beyond the EYEGUARD program they have a Phase II cardiovascular study and three proof-of-concept studies open with more to come. They are working hard and has emphatically communicated how important gevokizumab is to them, and specifically how important that NIU and Behçet's uveitis are to Servier’s future. Gevokizumab is their only ongoing Phase III program with the new chemical or biologic entity and this is a priority for Servier. Under our agreement with our partner we have full commercial rights for every non-cardio metabolic indication in the U.S. and Japan. Outside the U.S. Servier will pay us substantial royalties and milestones on their aggregate gevokizumab sales. This is a partnership where our goals and objectives are aligned and the potential clinical and commercial success has a very significant impact on both companies. Collectively, we will get this done and we will get it done right. Now, I’ll now open up the call for questions. Operator, you may proceed.

(Operator Instructions) The first question comes from Jason Kantor from Credit Suisse. Jason Kantor – Credit Suisse Group: Hey guys, sorry about the osteoarthritis. It would have been great if that worked out. The question about your guidance, could you give us some indication of what your expectations are for revenue that underlies that the burn guidance? Because it seems somewhat low relative to or in the ongoing R&D spend. It doesn’t seem like you’re likely to be cutting R&D spend significantly this year. So could you give us some sense of that?

Well the revenue expectations for 2014 are not unlike 2013 Jason and that’s why we’re very confident about the burn and how long it takes us. We have to take into account and we’re taking into account all of the expenses including R&D and we do expect R&D to be a bit higher in 2014 and 2013 primarily because of these new studies, the Phase III study in pyoderma as well as continuation of the EYEGUARD studies. So that’s we’re quite comfortable with that projection. Jason Kantor – Credit Suisse Group: And then, if you could, go on.

Jason just to add that, and we do have the pyoderma study in 2014, but we also had those large pretty sizeable Phase II studies in EOA in 2013. So… Jason Kantor – Credit Suisse Group: And then, as we think about modeling pyoderma gangrenosum, how should we think about it, relative to NIU, in terms of dose, duration, frequency of injection?

Right now, we are studying and exactly the same dose and frequency, what we’re trying to determine is the duration that patients would need to be treated with gevokizumab. As you saw from our pilot trial, patients showed complete healing in – after about three doses, but the question is how long do they need to continue therapy to avoid recurrence? So that’s what we’re going to try to determine as part of our pivotal trials going forward. Jason Kantor – Credit Suisse Group: And then just one last quick question on your shares outstanding. Did you guys utilize any other fundraising mechanisms besides the offering? Did you use an ATM facility or sell other shares this quarter?

No, no and just even though, you didn’t ask that total shares outstanding a 106 million total shares fully diluted, $129 million. Jason Kantor – Credit Suisse Group: As of year end?

As of year end. Jason Kantor – Credit Suisse Group: Thank you.

Thanks, Jason.

The next question comes from Ted Tenthoff from Piper Jaffray. Ted A. Tenthoff – Piper Jaffray & Co: Great, thanks, can you hear me, okay.

Yeah, it’s great Ted. Go ahead. Ted A. Tenthoff – Piper Jaffray & Co: Thanks John, thanks so much. So picking up on Jason’s question about PG – since I never seem to pronounce it right, I'll just stick with the acronym – the initial. How should we think about pricing in that indication? Obviously, it's an ultra-orphan indication – maybe 200 patients in the U.S., if my calculations are right. Is there something that we’re going to be able to differentiate pricing versus gevo to the eye? Or, how should we be thinking about that?

Well, first of all let me speak to the patient population for Pyoderma, because we’ve actually purchased some very good data here recently from, if you were to guess on two companies we purchase it, from it be one of those two, right? So, the patients that were treated, the number of patients treat over the last three years, it was between 11,000 and 14,000. The prevalence is considered to be around 3,500, but the incidence is 3,500, but the treatment is 11,000 to 14,000 a years, right. So when we think about that and we think about the results we’ve seen so far, we believe that we do pretty well in getting a percentage of the patients treated per year, still with that said, your underlying question is exactly right. The pricing for that kind of an indication could be substantially higher than it would be in a broader non-infectious uveitis type indication. So what we’ll have to look to, to help us set our plans for pricing is which indications, do we get to the marketplace with first. And so as you heard us, we talked about the Behçet’s uveitis, which again is probably again, 3 or 4 to 7,000 patients in the U.S., pyoderma is fairly close. So those could be a higher premium pricing, than you see in non-infectious uveitis. So while our product has delivered at the same dose in the same way on the same regiment, we have to have it work across indications. If we’re into some of these smaller indications first in the marketplace, you could see us starting with a higher price than ultimately where we would settle. Ted A. Tenthoff – Piper Jaffray & Co: Okay. Fair enough. And then, if you could just remind me, the six patients that we’ve seen so far – walk us through the data. And is there any update on either durability or, kind of, how they’ve been doing?

Sure, so if you recall, we enrolled six patients that initially had a diagnosis of active pyoderma gangrenosum and they enrolled in the trial and as you recall it was 60 milligram subcutaneously once per month per three doses. So in retrospect one of the six patients by review of experts, there was a general feeling that they probably do not have active disease, of the five remaining patients that were approximately confirm to have pyoderma gangrenosum, four out of the five patients received the full dose. And all four patients completely responded with in two to three months they had a 100% closure of their look. So the fifth patient started to show improvement after 28 days but then develop secondary infection which is very common through this open non-protective wound. So they only received a single dose and then went to steroid. Eventually that patient also completely healed within three months, which is faster than typically seen according to the literature. So in fact of the five patients that are diagnosis of pyoderma gangrenosum, four received all full doses. All four had very dramatic improvements, not only in the wound itself but the pain. The fifth only received a single dose but in conjunction with the steroids also had complete healing within about three months period of time. So and we actually saw signs of decrease information with in about one week of receiving the dose. Ted A. Tenthoff – Piper Jaffray & Co: Excellent. Very helpful. And, looking forward to incremental data this year. Thanks so much.

Sure.

The next question comes from Biren Amin from Jefferies. Biren Amin – Jefferies LLC: Yes, thanks for taking my questions guys. I guess, maybe start on the pyoderma indication. What type of trial are you forecasting? Clearly you've baked in some expense for this study, so you must have some patient number in mind that you would need to be required for a Phase 3 trial. Thanks.

Okay that’s a great question and thank you for asking it. First of all what we initially did was, we looked at the FDA guidelines for the treatment of cutaneous ulcers. And within those guidelines they suggest as a primary end point complete epithelialization or complete closure of the wound. Now, when we initially spoke with FDA, that concerned us because we thought for pyoderma gangrenosum that would be a very high hurdle. But then we saw the data we thought that’s a perfect end point for us because we saw at least in the patients that we treated to date quite a dramatic rate of complete healing. And when you look at placebo response in the few placebo-controlled trial, it virtually doesn’t happen in that period of time. So in fact the fact that we’re seeing quite a higher rate of closure versus very low rate of placebo to just that the stastical power for a study like that would not require very many patients. So in fact if you look for example that say it 60% or 50% or 60% of improvement versus a 10% or 20% improvement in the placebo. And that’s actually fairly conservative. That would only require a total of about of 50 patients. So that’s kind of the range that we were thinking about that. We would have even in perhaps even a little lower response rate that we’ve already seen, will have enough statistical power with that type of a trial size. Biren Amin – Jefferies LLC: And then, Paul, how long would you need to follow these patients for, as far as, you know…

Again the guideline suggests you have to follow them for two weeks after wound closure. So because we saw closure in a three month period of time, we wouldn’t have to go much longer than the three month period and then two weeks after they actually showed healing. So in fact we’re thinking about the design and again all this has to get confirmed with FDA. So, this is just kind of proposal right now. But because of – what we seeing in terms of time to response in our first patient trials and the time we think placebo which would be pretty much infinity. We could do a time to response trial that the actual treatment time should be relatively short.

And just to repeat what Paul that’s the reason we are having our meeting with FDA to get confirmation on the size and duration of the study. And so as we know that we’ll be able to be more specific. But baked into our budget as you said, baked into our budget is some assumptions that are quite a bit higher than what Paul just described as the size of the study when it comes to the spend. And so what we will be able to adapt to whatever we hear from FDA we think. Biren Amin – Jefferies LLC: Okay. And then if I could ask a question on the EYEGUARD program – you've indicated that you're going to start a supplement study in Behcet's patients. Is it going to be a similar-size study to EYEGUARD-B similar design? And with the intent to file in early 2015, why not just wait for the EYEGUARD-A and C programs to read out, and use those as supplement trials? Thanks.

Yes so just to start, I will turn it over to Paul, but just to start. There is the supplemental study we’ve been doing at Behçet’s uveitis would be much smaller and much different than the EYEGUARD-B study. What we really need to show is that U.S. patients do respond like patients outside the U.S. we hopefully see respond in EYEGUARD-B. So it would be a very, very abbreviated study with a very small number of patients, they enable to match our timing. And Paul, turn it over to you.

Yes, again what we’re hopeful in that especially taking advantage and we’ve reported on our response rate for active Behcet's of somewhere in the range of 70% to 80%. So if that – we can use those numbers to power a trial, that even to get statistical significance would not require a high number. So again those are the conversations we have to have with FDA, but if we can duplicate in the pivotal program, what we’ve seen in our Phase II programs, then statistical power can be achieved without very large number and then the safety database is driven from all the other indications. Biren Amin – Jefferies LLC: So would you wait for the EYEGUARD-B to read out before you initiate the supplement study?

We’re going to go ahead, we’re making all the plans to go forward with it as we speak, obviously again we’ve to get concurrence with FDA before we initiate anything. Biren Amin – Jefferies LLC: Great. Thank you.

Sure.

Your next question comes from Simos Simeonidis from Cowen and Company. Simos Simeonidis – Cowen & Co.: Hi, thanks for taking the questions. Paul, can you help us understand the disconnect between the reduction in inflammation that you seem to observe, and it’s – you know, it’s shown that the reduction in CRP and the lack of improvement, or significant lack of improvement, in clinical symptoms – the pain especially?

Yes, that’s also a great question and what I’m going to say is kind of opinion, conjecture and speculation. Unless I can get down on a molecular level, which I can’t do it. There is a couple of possible explanations, the first being that is just as you suggest, we’re looking at subjective end points that are highly variable and this could just be bad luck, that we caught the patients at a time when they’re getting kind of a spontaneous effect or a placebo effect, or as we said there is waxing/waning of the disease and we’re just unlucky. That’s one possibility. The other possibility is that this is an inflammatory condition and there are redundant inflammatory pathways in the body. Where, although IL-1 beta seems to be certainly elevated inflammatory perhaps at least for the full course of the disease, it’s not the total side of kind that’s responsible for the inflammation seen. So though we could control the IL-1 beta driven component of the inflammation, we’re not driving all of the stimuli for inflammation in this particular disease. Every disease we’re trying our best to determine a IL-1 beta’s what I like to refer to as the mother cytokine. But in this case, for erosive osteoarthritis, there could be redundant systems that dominate.

Yes, it’s a question that’s unanswerable I think our study will actually allow the key opinion leaders to look for a long period of time to try to understand this disease better than they’ve ever understood it before. We’re going to – at the end of this call, we’ll be putting up on our corporate website several slides that come out of this recent study. And believe me when you look at them you’ll end up asking yourself and us lots and lots of questions. Its – what’s clear is that we should not go forward broadly in EOA at this point in time, but you’ll see some things within there, and this subgroup that Paul talked about in this CRP, you’ll see some real clear information, too, that again goes – conflicts with what you saw overall in EOA, but what’s clear to us today is this is a disease we can’t go after with them, IL-1 beta modulator today, we do not have evidence that that would be a good thing to do. Simos Simeonidis – Cowen & Co.: So, a follow-up to that – and again, this might be an unanswerable question. And maybe Paul can help us shed some light. But is there a – at least a qualitative way to compare this disease setting with uveitis and PG? Because some investors, at least, will try to see if there’s any read-through. Is there a similar amount and/or level of inflammation in EOA versus the other two diseases? Or, how big of a component of the disease is inflammation in each case?

I’ll give you an example of where you can’t paint this with a broad brush. Anti-TNFs have been shown, they have no benefit in erosive osteoarthritis, but documented benefit in uveitis. So there is an example of where a certain inflammatory pathway works in one disease and not the other. In fact the identical diseases that we’re talking about. So there’s certainly precedent to say that EOA, response in EOA is not related to response in uveitis. So I mean that’s probably the best that we can do and it’s typical that for all inflammatory conditions, I have to yet to see a one size fits all approach to treating these things. So every disease has different dominating components and the only way to find out is by testing the drugs and that’s essentially what we are doing. So, yes I agree that there are people might try to paint with a broad brush. But certainly data from other drugs and data in the way these are treated, don't suggest that that's a relevant extrapolation.

We can’t forget that nothing’s worked in EOA. Right and so we feel probably it is hard for us and we feel worse for these patients. Because just to tell you we said it 240 patients who has who has EOA have gone into our safety extension study. That tells you how desperate these patients are for it anything that might work. So this is a it’s a tough disease to treat nobody is ever been a successful. I think we had a good basis to try, and IL-1 beta modulator in it. But it doesn't seem to be right approach for us. Simos Simeonidis – Cowen and Company: A final question. I know, Paul, you gave the example of RA, where TNF works and its cousin, IL-1 beta, doesn't. However…

No, no. Simos Simeonidis – Cowen and Company: Sorry, go ahead.

That’s not the example I gave.

Because IL-1 beta actually does work in RA for certain patients.

Yes. In fact, Anakinra's approved for rheumatoid. Simos Simeonidis – Cowen and Company: Okay. But my thinking was that you picked these indications because of the involvement of IL-1 beta. So, maybe the better question I should have asked was, is there more evidence of involvement of IL-1 beta in PG or uveitis versus EOA? Or, that's not the case?

No. Not necessarily [ph] the case. And again, it's an imperfect science until you test the drug. The best data we'll have is when we do the clinical trial and see how the drug performs. Simos Simeonidis – Cowen and Company: Okay. Thank you. Thanks.

The next question comes from Ritu Baral from Canaccord. Ritu Baral – Canaccord Genuity: Hi, guys thanks for taking the question. Paul, the cutaneous ulcers guidelines that FDA put out, or the guidelines for treatment of cutaneous ulcers – has there been any product that has designed a pivotal trial following those guidelines – a trial that might serve as a real-world proxy for what you're considering for PG?

Well, not for PG, you know I’m not sure if there has been any because really these guidelines were really written for diabetic ulcers and for venous stasis ulcers. And truthfully, I'm not sure of drugs that are approved and also indications. Ritu Baral – Canaccord Genuity: Got it. And could you give us an update on the scleritis trial? And also, any rough guidance you could give us for proof-of-concept data from, I'm sorry data from the proof-of-concept trials, that Servier is running, when might we see that?

Unfortunately, we can’t talk about the scleritis trial because it’s being done at the National Eye Institute, and we would be in violation of our agreement with them. Except to say that the trial is ongoing and there is enthusiasm for continuing the trial.

And we’ll have point time fairly soon we hope or we can talk about what they’ve seen so far.

So we’re pushing hard to be able do that as to.

As to Servier they are moving along and obviously some of these trials I mean going on from months and then have been enrolling and I think we’ll hear about that in a relatively near future although I can’t tell you exactly when. Ritu Baral – Canaccord Genuity: Are the issues that they have been facing with the EYEGUARD trials also impacting their proof-of-concept trials, or are they independent.

No, Servier is a big company I think they’re close to 20,000 employees, 22,000 employees. So they have separate resource a scientific POC’s versus the uveitis trials. Ritu Baral – Canaccord Genuity: Got it.

Yes, they are really broken down by therapeutic area and lot of these fall in different therapeutic areas. So we work with different teams on different indications.

So there is no opportunity cost to them, of working on uveitis, when you’re looking at the other indications that they’re trying to develop. Ritu Baral – Canaccord Genuity: Got it. I mean, one of the things that had been discussed previously was, sort of, certain country-wide resistance to clinical trials being conducted. Is that something that's pretty much in the past now, as they open new centers and look at new countries?

Well, there's examples, where pretty much everyone's walked away from certain countries do clinical trials, if that's what you're referring to. Other ones, they've kind of broken through the barriers and negotiated their way through some of the barriers that people put out. But I'm – I think it's okay for me to say – I mean, one country that we would love to be working in for – because of the patient population, but it just – you can't do it, is India, for instance. I think that’s one where they’ve made it. So difficult that you – it’s prohibitive to try to develop your drug within that – with clinical sites in that country. There’s others where there were initial roadblocks that extended the time, but then [indiscernible] and others are able to negotiate their way through some of those roadblocks. Ritu Baral – Canaccord Genuity: Got it. And were some of those countries one of the – or, some of the five that you mentioned Argentina, Mexico, Turkey, Armenia, Brazil?

Yes, Brazil is a good example.

Brazil was – it was rough going to get its up in running, but I think we’re past all the hard parts. Ritu Baral – Canaccord Genuity: Got it. Thanks for all the color. Appreciate it.

You’re welcome.

Your next question comes from Adnan Butt from RBC Capital Markets. Adnan Butt – RBC Capital Markets: So a couple of follow-ups. First, for the Behcet’s study that's contemplated – since it’s an orphan indication, do you expect PK safety data suffices, or do you think you have to generate efficacy data in the U.S.?

Well, we do have to obtain some efficacy data in the U.S., safety data however, obviously we don’t have to do the full compound of safety in Behcet’s uveitis. And in fact we can use the safety data base from all of the indications providing it’s the same dose, same mode of administration and at least six months and one year of exposure. Adnan Butt – RBC Capital Markets: So, Paul, help me understand the timeline, then. Because if you expect some data, is the endpoint different than EYEGUARD-B in terms of being able to have some data again…

It’s likely to be different than EYEGUARD-B although again we’ve to confirm with FDA, and as I mentioned one thing we can do in the United States is take advantage of our observed response rate for acute disease. If you recall, we reported in our Phase II trials that we’d eight out of a 11 respond within relatively short period of time, when they presented with active disease. So the study duration could be more along the lines or – perhaps even shorter than the EYEGUARD-A study, as opposed to the EYEGUARD-B, or the EYEGUARD-C in terms of time therapy. Adnan Butt – RBC Capital Markets: Okay. Then, for EYEGUARD-A and -C, is it even feasible that they read out this year?

Yes, it’s still feasible, as John suggested it really is a function then – again what we try to do, we know that uveitis trials are hard to enroll. So we’ve attempted to mitigate that by numbers of centers and our target was 140 centers worldwide and some of these centers are in countries that we believe will enroll disproportionately. And those are the studies that – the centers that are just now getting up and running. So we just – we need to hope that they perform in a way that our expectations are and it’s still possible. Those again we’re only looking for – at this stage, it’s less than two patients per center because of – then it’s been ongoing for while.

We’re just at a point where I just – just kind of our – this next four months or so kind of our come-to-Jesus month. We need to really have these centers that are coming up, that should be crucial, these countries and centers are coming up that should be crucial over the enrollment to do well. So we’re fully focused on this as is our partners Servier. Adnan Butt – RBC Capital Markets: A final question on the pyoderma gangrenosum indication. So the next step update will be a pivotal design agreement with the FDA. And at that time, you will let us know if the timing for the Behcet’s and PG efficacy readouts are similar? I guess I’m asking if there was some thinking that you’ll file for those indications at about the same time, or PG could be accelerated? So, is there an update there?

That’s a good question and we just need a little more data to find out the duration and number of patients we need for pyoderma gangrenosum. We made a proposal, but until we get concurrence with FDA, we can’t predict the length of time it will take until we agree up on a study design in a number of patients. Obviously, we believe that smaller trials are should go faster than longer trial. That’s about all we could say right now. Adnan Butt – RBC Capital Markets: Okay, thank you.

Sure.

The next question comes from Liana Moussatos from Wedbush. Liana Moussatos – Wedbush Securities Inc.: Thank you, have you made a decision on whether to take inflammatory acne forward?

And so although the NPV on it is a positive, it’s not as positive, or as high as the other opportunities that we’re looking at where we can invest. And so we actually, literally do the full commercial analyses. we do all sort of projections. We calculate NPVs. and again, while acne is positive, it’s not as positive as some of the other choices that we have to make. So what we’ve decided in acne – and I have Paul add to this. We’ve decided in acne is, with the data we generated in acne, and looking at this whole umbrella of neutrophilic dermatoses where pyoderma is one of the indications underneath that umbrella. There are also some acne related indications within – underneath that umbrella that we think could be opportunities where the acne is serious enough and the patient population is small enough that our pricing for those indications in the acne broad world would fit with the other pricing that we need for the other indications. So, there’s a couple examples of that, Paul may want to… And so although the NPV on it is a positive, it’s not as positive, or as high as the other opportunities that we’re looking at where we can invest. And so we actually, literally do the full commercial analyses. we do all sort of projections. We calculate NPVs. and again, while acne is positive, it’s not as positive as some of the other choices that we have to make. So what we’ve decided in acne – and I have Paul add to this. We’ve decided in acne is, with the data we generated in acne, and looking at this whole umbrella of neutrophilic dermatoses where pyoderma is one of the indications underneath that umbrella. There are also some acne related indications within – underneath that umbrella that we think could be opportunities where the acne is serious enough and the patient population is small enough that our pricing for those indications in the acne broad world would fit with the other pricing that we need for the other indications. So, there’s a couple examples of that, Paul may want to…

First I can’t pronounce.

I’d be afraid to.

There are some.

I could say PAPA syndrome as a…

PAPA syndrome is one. That’s actually a crossover syndrome with the acne and pyoderma gangrenosum. And there is something called acne conglobata, which is a severe form that might fall into this category and even severe nodular cystic is one that fits into all this. So it becomes more strategic once we start rolling out these various neutrophilic dermatitic indications that we’re going for [indiscernible]. Liana Moussatos – Wedbush Securities, Inc.: Are these acne-related neutrophilic dermatoses – would they add to the patient population number that we – you guys estimated a while back? Or, are they already integrated into that number?

Yes, they actually are incremental, what we’ve been talking about previously. That’s probably an important point, when – we’ve talked about pyoderma as a very singular indication, our plan is, I think you’ve heard us talk about a little bit. Our plan is to kind of move through other indications under that umbrella of neutrophilic dermatoses and pick other indications for small studies like the one we did in pyoderma gangrenosum this last year, that could lead us to those next indications that are related and under this umbrella of neutrophilic dermatoses. Liana Moussatos – Wedbush Securities, Inc.: And so, how many patients do you estimate, including all these with acne for neutrophilic dermatoses now?

Well, it’s an interesting question, especially if you include pustular psoriasis. So we’re working on that, but it’s certainly north of 100,000 in total. Liana Moussatos – Wedbush Securities, Inc.: In the U.S. or worldwide?

No, the U.S. only. And that doesn’t include another indication, which is a related syndrome that is – it’s called a hidradenitis suppurativa, which isn’t a skin condition per se, it’s an inflammation of the sweat glands under the arm. But that is a very related severe syndrome. It’s a crossover syndrome with pyoderma gangrenosum, and we’ve heard estimates of as much as approximately 1% of the population. So it’s also very related. So I think there was a question previously asked about trying to paint with a broad brush. I think one thing; we can say is, that all these neutrophilic dermatoses are related. And these are hot diseases mediated by neutrophils, and we know that initial neutrophil infiltration is very strongly correlated with IL-1 beta, it’s probably of all the underlying causation, that’s probably the strongest link. So as we knock these off, each one becomes – the risk it’s medicated for each one of these subsequent indications. So the actual total patient population, we’re still working on it. but it’s quite substantial, I mean it’s certainly as I meant, at least north of 100,000, could be substantially more than that just of the inflammatory skin conditions that we’re talking about. We do this work in a very systematic way. we have a portfolio management committee here at the company and we look at each of these opportunities with kind of three legs to a stool. What’s the technical opportunity? what would the clinical development, risk in the cost look like and then what’s the commercial opportunity? and that’s all work we’re doing on each of these. so we can decide which ones to approach next. Liana Moussatos – Wedbush Securities, Inc.: Okay. So, you’d have similar pricing for neutrophilic dermatoses, because it’s 100,000 plus in the U.S. and 150,000 for NIU. So, similar pricing?

Well, if they both worked, and we got all the indications. I mean, again, what we would do is model the price point that would give us the biggest revenue.

We actually have a system that actually does that. We can plug in a price and have all the different NPVs rollout. So it’s actually kind of fun, for Fred at least, I think. Liana Moussatos – Wedbush Securities: Okay. Thank you.

You’re welcome.

The next question comes from Matt Kaplan from Ladenburg Thalmann.

Hi, Matt. Matt Kaplan – Ladenburg Thalmann & Company Inc.: Hi, Matt guys thanks for taking the questions.

Sure. Matt Kaplan – Ladenburg Thalmann & Company Inc.: I want to dive in a little bit more to the EOA study – just could you provide us a little bit more color on the MRI/radiographic results that you saw? And you indicated in the press release and your comments that there was no real difference from placebo and treatment groups. And obviously that's something you can't really take a placebo response less than.

Again, this is early days. So, unfortunately, the only analysis we are able to do upfront were the standard analysis which in fact may or may not be relevant to this disease for example standard analysis looking at hand arthritis essentially includes all the joints involved. And you get a three point score for each joint. So the denominator becomes around 30, now for erosive osteoarthritis you can get severe disease with only a single joint. So the standard analysis now we look at it probably is not the relevant way to look at it. We have to look at it and what we call kind of non-parametric analysis looking at things like shift tables, which haven’t had an opportunity to do. So all we can say is that we look at the standard analysis it’s hard to discern a true drug effect, when we compare active to placebo. Now it could be that we’ll find more when we try to determine more relevant ways to analyze the data. So from an overall response rate, to say nothing came off at first blush, we are continuing to look at it. The other thing that we want to look at is and we haven’t had a chance to thoroughly exploit this is does the baseline MRI and or radiograph predict those responders that we did say and as we mentioned we’ve seen some data suggesting there might be subgroups that did had a benefit from this we need to further analyze that. But all I can say is when you are looking at radiographs we saw nothing and we didn’t really expect to see anything in erosions because there is really six months there isn’t enough time to prevent worsening of the disease. We're hopeful on the MRI. But at least on first blush using standard analyses we didn’t see any difference between active and placebo. But we’ll continue to look at that and try to find if we can’t find a more disease specific or a disease appropriate way to analyze it. Matt Kaplan – Ladenburg Thalmann & Company Inc.: Okay. Okay. Thanks. And then, in terms of your thought process now – I guess it's early in your analysis in the subgroups and everything else. But, at this point, what do you think the chance is that you'll continue development of gevokizumab in an EOA indication, whether it's a subgroup or not, at this point? What's the probability there?

No at this point based upon what we know and don’t know, we don’t know enough to assign any probability to at this point of time. So we expect that what we are going to focus on is NIU on pyoderma, and these other indications is worth driving through the data that we have to see if there is another answer for that, as we sit here today, I think we have our answer on EOA. But again we’ll look to see if there is another opportunity as we sit here and say there is not enough information to tell us there is a clear subset to go after. Matt Kaplan – Ladenburg Thalmann & Company Inc.: Okay. Fair enough. And then a follow-up in terms of the NIU program. It seems like, obviously, you're guiding us to somewhat more of a delay in the timing of the data, perhaps to later than 2014 at this point, for the A and C studies. What's just another probability question, in terms of, what do you think the chance is that you actually have a readout this year for either of those studies at this point? I know it's hard to say, but it seems like you're guiding us to 2015, more so.

We are not guiding to 2015 what we are saying is that things need to break our way over these next several months and we are focused on trying to make sure we do everything we can control to have those things break our way, this is what’s difficult about this topic is, it is difficult is the hardest thing in this business right, there is things you can control, there is things you can’t control. And so the parts of this that we can control we are doing everything we can to control to make sure things break our way and we hit the targets that we have set out. We are working really hard with our partner Servier, and they're working really hard to get their things done. But there’s things we can’t control, there is things we can control. So we still feel we have a very good chance of having the data in 2014. But things are going to break our way. But just to say whether it’s November 2014 or January 2015 is not going to be that substantial, when it comes to the overall success of our company. So what we are doing is getting it done as fast as we can, but not undermining the quality of the studies in order to just to get it done quicker. So we are not changing our guidance we think our guidance is still achievable but we got to work hard and things have to break our way in order for us to meet that guidance at this point. Matt Kaplan – Ladenburg Thalmann & Company Inc.: Okay. Fair enough. And then, in terms of the PG program, you've had terrific data to date. It's really remarkable what you've seen there. In terms of the patients, there seems to be some relationship to with PG and underlying diseases such as Behcet's and inflammatory bowel disease. Can you give us a sense, in terms of the patients that you – six patients you've treated so far, did they have – was there underlying Behcet's or other diseases that were related to the PG? And did you see any impact on the underlying disease with the treatment with gevokizumab?

We didn’t really capture that because the patients weren’t, there was no entry criteria that they had to have active signs or symptoms of their underlying disease. So it is impossible to tell but we did see in our patients that we did treat I think half of them had either an underlying inflammatory bowel and I think one had underlying rheumatoid arthritis. Matt Kaplan – Ladenburg Thalmann & Company Inc.: And did you didn't capture, though, if there was any impact?

We didn’t capture if there is any response in those as I mentioned because it wasn’t designed to show that and they didn’t have to have active underlying disease as an entry criteria. Matt Kaplan – Ladenburg Thalmann & Company Inc.: Okay. Good. And can you tell us a little bit more about the durability of the results you're seeing in these first patients?

Yes all we can say is that these patients now have been followed but all the ones that have completed we stopped therapy after three months and none of the patients that were fully healed and non-recurred. Matt Kaplan – Ladenburg Thalmann & Company Inc.: Great. Great. And then, just one other question, in terms of PG and the market opportunity there. Help us understand, in terms of what you're thinking in terms of the timing for the launch, I guess, potentially in this indication, if it all breaks your way and the FDA lets you do your proposed study, which sounds reasonable. And then, from a dollar point of view, what's the size of the market opportunity?

So let me put a couple of caveats and then give you a little bit of comment. So, we don’t know how quickly this study will enroll, first thing we have to find out is how many patients we have to enroll and that will be a important data point. This is a study where nobody else has ever done a study for this indication. Okay and so nobody has ever done a pivotal study for this indication. So for us to start to predict three patients a month for and whatever it is we would be guessing. So what I would expect is we’ll be able to declare of course upfront how many patients we need in total. But we are going to have to get the centers open which we’re already actually working on and finding those centers and having them prepare, we are going to have see what kind of rate of enrollment we get right. And I think what we’ll do is just reports to you how many patients we are getting in those early months and then be able to predict with you when the study could be done. So I think for us to make a prediction of how quickly the study could be done even once we know the number of patients needed, we be guessing pretty much right. And so I think what we are going really direct you to is let’s get it up and running. Let’s see how many patients we are able to find early on. And then we’ll able to predict better, okay. When it comes to the pricing for an indication like this because of the small patient population going back to something retired earlier, you could end the severity, you can be pretty damn aggressive on the pricing or something like this so. Again if you look at the 11 to 14,000 patients were treated in the U.S. every year today. And you use a pretty believable percentage of those that you think you could get too, if do have the kind of results that we are hoping to get with pricing of a biologic. And this could be biologics plus, plus right because small population, you get that pretty sizable number pretty quickly. So we like this indication a lot because of the effect we’ve seen because the patients are concentrated tertiary centers with the experts that we’re already working with and the fact that we believe you can charge a pretty sizable price for a product that works like we hope ours does. And the umbrella of related diseases.

Which allows us to expand piece by piece, right? So we like this indication a lot for both the development path that we think is in front of us and the commercial opportunities. Matthew L. Kaplan – Ladenburg Thalmann & Company Inc.: Then just maybe put some brackets on that. So, sizeable – you’re thinking 500 million? A billion?

No. No, that’s a bracket today – I don’t know that bracket. When I fill out my brackets for the NCAA Tournament, I – that’s not a bracket – no, that’s too high for just this one indication, absolutely. Yes, and I don’t want to try to answer any other breadbox questions on it. So that’s definitely not good place to start. Matthew L. Kaplan – Ladenburg Thalmann & Company Inc.: Okay, thank you.

Sure.

The next question comes from Graig Suvannavejh from MLV. Graig C. Suvannavejh – MLV & Co.: Thanks. Sorry about the EOA data. I'll keep my questions relatively short, since it's getting a little late in the evening, at least here in New York. Just thinking about CRP for a moment, I mean, how do we, or how do you guys think about CRP now, on a go-forward basis, as a marker, as it relates to the mechanism of action for gevokizumab, and how you can employ CRP in a way that's prognostic for you?

Well, obviously, for EOA we can’t employ – at least from what we’re seeing right not within the period to correlate at least in the way that we monitored response criteria. We may do continued analysis and see a stronger correlation. C-reactive protein is a validated marker of inflammation. It falls under the umbrella of acute phase reactive and I think nobody argues that the present evaluated CRP is a measurement for the active inflammation. So I think we can certainly pick some salve from the fact that in this therapy, in this study treatment of IL-1 beta had a clear anti-inflammatory effect. We also know that IL-1 beta can cause an elevation in CRP indirectly through secondary increase of IL-6, just what IL-1 does at the tissue level. So we know that CRP at least in part it’s both – it’s a marker of inflammation and it’s presence is at least in part do the supraphysiological levels of IL-1 beta signaling. So again what this study tells me this undoubtedly had anti-inflammatory effect – there was modulated IL-1 beta, but the inflammation that was measured in these patients may or may not have been due to their erosive osteoarthritis. Graig C. Suvannavejh – MLV & Co.: Okay. And then, maybe I will ask a question that probably no one has focused on in this particular call, but I know in earnings calls in the past you've highlighted XMet D and XMet A and S. And I think – I just wanted to get a sense of whether you guys are still on track to file an IND on XMet D in the middle of this year?

Yes we’re still on track and nothing has changed with XMet D we’re making good progress in advancing XMet D into clinical trials. XMet A as we said, we are doing preclinical what we think will be definitive preclinical trials and we’ve cumulated quite a bit of data in that we’re hopefully we’re accumulating that data. And we’re starting to present this to other companies. And as we said before, the objective there is because it’s in type 2 diabetes is to try to find a commercial partner to help us with the final development stages of that compound. And we made good progress there, as well. Graig C. Suvannavejh – MLV & Co.: Okay. I'll stop there with my questions, but thank you.

Sure, thanks a lot.

At this time I am showing no further questions. I would now like to turn the call back over to John Varian for closing remarks.

Thanks operator. And thanks everybody for doing this call so late in the day. With it being our earnings season, we thought it’d be helpful to schedule this a little later than we normally would, so that more people could join us. Two years ago when we laid out our proof of concept program we said, we’re going to do studies in a way that would allow us to get definitive information, and let the data drive us to where we should go far next pivotal development. And we said to ourselves and to you that it’s not always going to work. And that’s part of clinical development that’s how you do proof of concept. At the same time it’s always disappointing when it doesn’t work it’s disappointing for us and disappointing for these patients who really need an effective therapy and EOA. At the same time we’re using the data that we’re generating across this proof of concept program lead us in the right direction. And I think we’re doing that well. And I have to compliment both Paul on design of our overall clinical plan because it’s doing exactly what he set out for to do for us, and I have to compliment our team on getting these studies done and getting them done so well, so we actually have clear answers, because with clear answer you can make good decisions. And we think that we’re doing that. So again thanks for joining us and we look forward to speaking with you all again soon. Bye, bye.

Ladies and gentlemen that does conclude the conference for today. Again thank you for your participation. You may all disconnect. Have a good day.