Exhibit 99.2
CUBIST PHARMACEUTICALS
HOST: Dr. Scott Rocklage
DATE: February 19, 2003
TIME: 10:30 a.m. EST
Operator: Good morning, ladies and gentlemen, and welcome to the Cubist
Pharmaceuticals fourth quarter and full-year 2002 earnings conference call. At
this time I would like to inform you that this conference is being recorded and
that all participants are in a listen-only mode. At the request of the company,
we will open the conference up for questions and answers after the presentation.
I will now turn the conference over to Dr. Scott Rocklage. Please go ahead, sir.
Dr. Scott Rocklage: Good morning everyone. Thank you for joining us for
our fourth quarter and full-year 2002 conference call. With me today, I also
have Mike Bonney, our President and Chief Operating Officer; David McGirr, our
CFO; Oliver Fetzer, our Chief Business Officer; and Chris Guiffre, our General
Counsel.
As always, let me take a moment to first read a short Safe Harbor
statement before we begin. Forward-looking statements may be made during this
call. These statements are subject to a variety of risks and uncertainties that
could cause actual results to differ materially from those projected or
suggested here. Such risks and uncertainties are detailed in the company's
periodic filings with the SEC.
Second, let me answer the question that's certainly foremost on
everyone's mind. No, we have not yet heard from the FDA on the
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acceptability or review status on the Cidecin NDA filing. The targeted FDA
action date on the filing is February 20th. Keep in mind, however, on average,
the FDA has responded to these filings an average of 63 days post filing. We
therefore expect to hear at any time now.
With that, let's proceed to the content of this call, which is to
summarize our 2002 accomplishments and discuss ongoing programs and upcoming
milestones.
2002 was an important year for Cubist, particularly as a result of the
December 20th filing of the US NDA for Cidecin. We've asked the FDA to approve
Cidecin for the treatment of skin and skin structure infections caused by both
antibiotic susceptible as well as resistant Gram-positive bacteria. We've also
asked the FDA to consider granting the Cidecin NDA priority review, which could
shorten the time to action from the standard ten to twelve months to six. As
I've just stated, we are still awaiting word from FDA as to whether or not the
NDA has been accepted and whether the agency will designate the filing `priority
review'.
Throughout 2002, we were able to present additional clinical data on
Cidecin at key scientific meetings. These presentations included data
demonstrating that Cidecin may have clinical advantages over existing therapies.
Since much of the use of hospital-based antibiotics is based on medical
publications, these data will play an important role in the marketing of
Cidecin, should we receive regulatory approval.
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We've also begun enrolling patients in an important clinical trial. In
September 2002, we began a multi-center open label clinical trial evaluating
Cidecin in the treatment of endocarditis and bacteremia for infections of the
heart and bloodstream respectively. Enrollment is continuing in this trial and
we expect to be able to take an interim look at the study during the second half
of 2002. Mike Bonney will provide more commentary on our commercialization
efforts for Cidecin later in this call.
One last important piece of news for Cidecin came late last year when
we received notice from the US Patent and Trademark Office of the issuance of a
patent protecting Cidecin until 2019 based on its once daily dosing regimen.
This patent is one of a number of patents and pending applications that should
provide market exclusivity for Cidecin well into the future.
In addition to our progress on Cidecin, we also made significant
advances on building our product pipeline through advancements with oral
ceftriaxone and through the acquisition of the novel cephalosporin, CAB-175.
Mike will also provide more detail on our growing pipeline later on.
During 2002 and early 2003, Cubist made significant changes to its
senior management team. At the beginning of last year, we hired Mike who came to
us with considerable experience in the successful launch and marketing of
biotechnology products. Mid-year, we hired both Dr. Oliver Fetzer as our new
Head of Business Development and Bob
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Janosky as our new Head of Manufacturing. Later in the year, we added David
McGirr as our CFO, Dave Schubert as our Head of Regulatory Affairs and Quality,
and earlier this year, Dr. Barry Eisenstein as our new Head of Research and
Development. With their wealth of drug development, marketing and strategic
planning experience, we believe these additions have created an all-star team to
take Cubist forward to its next level, a revenue-generating commercial
organization.
With that, I will turn it over to David McGirr to discuss Cubist's
financials. David?
David McGirr: Thank you, Scott. As this is my first call, let me start
by saying how pleased I am to be a member of this great Cubist team. I've
enjoyed meeting some of our analysts and key investors over the past few months.
And I'm looking forward to meeting more of you throughout what promises to be an
exciting period for this company. Now I'd like to address the financials for the
fourth quarter and full-year of 2002. I hope by now you've had a chance to
review the numbers in the press release. Let's target some of the key ones.
For the fourth quarter ended December 31, 2002, Cubist lost $24.7
million, or 87 cents per share. For the 12 months, Cubist lost $82.4 million or
$2.89 per share. Over the past few months, we've received a number of questions
regarding our cash position, our cash burn rate, and issues related to our
outstanding convertible debt instruments. We thought that it might be help to
address these questions publicly here. We have ended 2002 with $151 million in
cash and equivalents, having
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consumed roughly $92 million of cash during the year. That was our net cash
burn.
Already this year, we've taken several steps to manage our cash burn.
First we instituted a stock-in-lieu-of-cash program through which we required
our officers to take their year-end bonuses and merit increases in company
stock. We also offered the remainder of our employees the option to take merit
increases, promotion increases and/or bonuses, if eligible, in company stock.
We've also re-prioritized our research projects. This will result in an
approximate $1 million charge in the first quarter of this year related to
headcount reductions. Taken together, these actions should provide an estimated
$4 million in annual cash savings.
Based on our current operating plan for 2003, which clearly has
assumptions about the timing of the launch of Cidecin, the two INDs we expect to
file in 2003 and a possible Cidecin European partnership, we expect to have
about the same net cash burn in 2003 as we had in 2002. Due to the expected
launch of Cidecin, the components of our expenses will change, moving from
Research and Development towards Marketing and Sales expenses. Mike will speak
more to these marketing efforts shortly. From now on, and to facilitate analysis
of our spending, we will be breaking out our Selling and Marketing expenses from
our G&A expenses, when we give you quarterly earnings reports.
As you can see from our current balance sheet, our shareholders equity
has become a negative number, negative $6.9 million. While it
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may look a little odd, this is not uncommon for a biotechnology company at our
stage of development. The other number that attracts attention is our debt
balance, which is $210 million. This is made up of several parts and it's
important to understand the differences in each part. The first is a $39 million
convertible note sold to John Hancock to purchase our current corporate
headquarters. It is convertible at almost $64 per share, matures in September
2005 and pays an interest of 8.5 percent. After September 2003, we have the
right to call the bonds at 103 percent of their par value. We are currently
assessing our strategic options here, including the possibility of a sale and
lease-back of this facility.
The second piece of our debt is a $165 million note that pays 5.5
percent coupon, converts at $47.2 and is due in November 2008. We believe that
these notes carry an attractive interest rate and that they have a long-term
maturity date. So we are comfortable leaving these convertible notes outstanding
for now. The balance of our debt is bank debt, used primarily to purchase lab
equipment.
In summary, in addressing our balance sheet, we recognize that it is
out of balance. And this will be addressed when market conditions are
appropriate. I would now like to turn the call over to Mike Bonney who will
discuss our ongoing commercialization efforts for Cidecin and our product
pipeline advances. Mike.
Michael Bonney: Thanks, David. This is really a very exciting time for
Cubist, as we await word from the FDA on our Cidecin NDA
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filing. Expecting a launch this year for Cidecin, we're continuing to prepare
our commercial infrastructure and fine-tune our launch strategy. Specifically,
we continue to refine the segmentation of the US hospital market using the
following criteria: sales of other gram-positive IV antibiotics, primarily
vancomycin; institutional familiarity with Cidecin.
We believe that those folks who have been clinical investigators or
have been on advisory boards and have a deeper understanding of the product will
be advocates and change the shape of the uptake curve. We're also looking at
formulary practices, the sphere of influence of key institutions and sales force
workload requirements. This segmentation will be the foundation for targeting
our sales effort, as well as for the development of sophisticated
institution-specific programs to achieve formulary acceptance and then
pull-through.
Clearly targeted medical education will be a key component of the
launch strategy. Our product positioning and marketing messages to support that
positioning are based on extensive market research conducted over the past
several years. A recent survey of over 150 infectious disease physicians and
general surgeons agree that Cidecin's profile supports the positioning of the
drug for the treatment of serious Staphylococcal infections, whether caused by
antibiotic-susceptible or resistant bacteria. As Scott mentioned earlier, we'll
be using published clinical data to reinforce this positioning.
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Our recruiting efforts are also in full swing. We are finding and
attracting many experienced hospital and infectious disease sales reps and
managers interest in and excited about joining the Cidecin launch team. We're
ready to move on these hires rapidly once we've received more clarity from the
agency on the likely timing of the launch. Beyond the sales force, we're
continuing to build our internal infrastructure as well. These efforts include
the establishment of pharmacovigilance systems and regulatory and legal
processes for promotional material. We are also currently finalizing an
agreement for order-entry warehousing and distribution of product with an
established vendor of these services.
On the reimbursement side, we've confirmed that the vast majority of
Cidecin, like vancomycin, will be covered by DRG reimbursement, that's
Diagnostic-Related Group reimbursement. What that means is, it will not be
reimbursed as a specific line item, but rather as a package of reimbursement for
a given diagnosis. We've engaged additionally a leading reimbursement consultant
to address reimbursement strategy for the small but important portion of Cidecin
sales that will fall outside of DRG reimbursement, specifically, Cidecin that is
used in long-term care facilities, as well as an outpatient scenario. As we get
closer to obtaining final labeling for Cidecin, and timing for the expected
product launch, we'll be conducting final pricing studies and building on the
already high levels of product awareness among key audiences.
Now let's turn to our pipeline. We started 2002 announcing successful
proof of principle in man, delivering an oral version of
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ceftriaxone or OCTX, as we call it, in a liquid formulation. Throughout last
year, we were able to formulate the capsule version that so far looks very good
in animal studies. As a next step, we'll be evaluating our OCTX capsule in a
human study very shortly. Based on this and other ongoing work, we expect to be
in a position to decide whether to file an IND during the fourth quarter of
2003.
In July of last year, we announced the acquisition of a product called
CAB-175. CAB-175 is a next generation, IV Cephalosporin antibiotic, distinct
from other cephalosporins in that it demonstrates activity against
methicillin-resistant staph aureus or MRSA, while maintaining broad coverage of
Gram-negative organisms. Prior to licensing CAB, we had already conducted the
majority of pre-clinical studies. And in fact, have just completed our first
study of CAB in man. Analysis of that study is ongoing and it is our intention
that we will be able to use the study as a foundation for an IND filing in
mid-2003. We will be providing data on CAB-175 throughout the year. In fact,
we've just received notice of the acceptance of several posters and an oral
presentation on CAB-175 for the largest European infectious disease meeting
ECCMID, which is taking place in Glasgow May 10th to the 13th. With that, I'll
turn it back to Scott to wrap up the call.
Dr. Rocklage: As you can see from our update today, we've accomplished
a great deal in 2002 and we are looking forward to an even more productive 2003.
By the end of this year, we hope to have been able to announce a series of
important events for the company: the acceptance of the determination of filing
status on the NDA for
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Cidecin; discussion and clarification of our European filing and
commercialization strategies for Cidecin; the filing of two new chemical entity
INDs; and final marketing approval and launch of Cidecin in the United States.
As always, we will keep you posted on our progress via press releases and our
quarterly conference calls. Our next quarterly conference call is scheduled for
Wednesday, May 7th, 2003. Why don't we conclude here and open up for questions.
Operator?
Operator: Thank you. The question and answer session will begin at this
time. If you are using a speakerphone, please pick up the handset before
pressing any numbers. Should you have a question, please press star one on your
push-button telephone. If you wish to withdraw your question, please press star
two. Your question will be taken in the order it is received. Please stand by
for your first question. Our first question comes from Thad Strobach from
Quattro Global Capital. Please state your question.
Thad Strobach: Hi, good morning, guys. This is actually Thad Strobach
from Quattro. I had two questions. One, in terms of - what was the cap ex for
the quarter, just kind of break down the free cash flow. And the second question
is can you break out the cash and equivalents a little better. I just wanted to
see what was the long-term cash, what was the sort of marketable securities and
what was the true cash equivalent. Thank you.
D. McGirr: I'll address those. It's David McGirr. Our total cap ex for
the year was about $3 million. It's pretty evenly spread
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throughout the year. So it's not a big number. In terms of our cash, we had $54
million of cash, $94 million of short-term investments and $3.5 million roughly
of long-term investments.
T. Strobach: OK, thank you.
Operator: Thank you. Our next question comes from Joel Sendek from
Lazard. Please state your question.
Joel Sendek: Thanks. Just a follow-up on that cap ex question. Can you
give us projections for this year and any kind of individual expense guidance
for '03?
D. McGirr: Joel, our cap ex expenditure for '03 is expected to be about
the same as last year. We're not a big consumers of cap ex, as you know.
J. Sendek: Yep.
D. McGirr: And in terms of guidance on what other number you'd like,
Joel?
J. Sendek: Just the individual expense items, G&A, Marketing or R&D and
how should we build out the - since you're going to start breaking it out, how
should we start to build out the marketing expense. Is it - should it be, I
would imagine, back-end loaded for '03?
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D. McGirr: Well, of course, part of that, Joel, is when we hear and the
timing of the launch of Cidecin will drive how much marketing expense there will
be. We clearly have modeled it in various different ways. What we are planning
on doing, is we will be giving you the break down when we give you our first
quarter results. So you'll see for the first time actual break down between
Sales and Marketing and G&A. We're not planning at the moment on giving you
guidance on how that break down is coming.
J. Sendek: OK. And then back to the Cidecin regulatory review, if you
do get the priority review, will that, will the starting point be the filing day
or will the starting point - I'm talking about the starting point for the six
months, will it be December 20th or will it be your identification day?
M. Bonney: The starting date, Joel, this is Mike, the starting date
will be December 20th, the filing date.
J. Sendek: OK. And then just real quickly on the patent, obviously
having a patent go all the way to 2019 is pretty good for a new chemical entity
like this. What are the other patents, if you can just talk to us about what the
other most important patents are and what their expiration dates are in the
whole -
Dr. Rocklage: Sure, this is Scott talking. There's a combination of
patents, as you know. And we'd be happy to go through
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them in detail with you, either directly with Jennifer or with in-house patent
counsel, Joel. But the key areas that are covered in those are manufacturing
process, compositions of isomers of daptomycin included in the formulation, as
well as genetics of the strain producing daptomycin. So those are the three core
areas in addition to the once-daily dosing patent that expires in 2019. So our
focus on those three areas and suggest a follow-up as I described.
J. Sendek: OK. Thanks a lot.
Operator: Thank you. Our next question comes from David Maris from
CSFB. Please state your question.
David Maris: Good morning. Couple questions. The first, can you just
tell us what percentage of employees took the bonus in stock and if there's any
breakout for what it might tell, the R&D versus the marketing folks. I'm sure
you don't have that level of detail, but I think it would be an interesting
point to see.
Dr. Rocklage: As we said in the script, David, all officers did take
their bonuses and merit increases that way. And the percent of employees that
elected, David McGirr has that number here.
D. McGirr: Yes, we - I mean the total number of shares issued onto this
plan was 129 thousand, David. And of that number, 81 thousand was to the vice
presidents and above. And the balance was to managers and below.
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D. Maris: OK. And separately, can you talk a little bit about the
European partner, which type of companies you're looking at, before it was
Gilead. Are you looking again at a small or midsize specialty player? Are you
looking more at a broader, large pharma participant?
Oliver Fetzer: Yes, David. Oliver Fetzer here. Let me address that
question. I think that it's perfectly fair to say that we're looking at a wide
range of partners. What we want as a partner who can really, in the European
environment, have a very strong presence and to target the hospital audience. So
I wouldn't say that there is a particular focus a priori to say it's only
mid-size companies or only large companies. But I think the criteria is ability
to target the hospital segment expertise and the anti-infectious arena and an
overall very reputable company. And there's actually quite a few companies that
we're in active discussions with on that front.
D. Maris: Great. Thank you -
Dr. Rocklage: David, this is Scott again. On your question of what
percent of the employees elected to take their bonuses and/or merit increases,
it was in the 60 percent area, elected to take it in stock.
D. Maris: That's fantastic. I mean, again, I don't - it's a little
unfair because a lot of folks don't - they need the cash. So
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that I understand. But that's actually a really high number. So thank you.
Dr. Rocklage: It was higher than what we had predicted, but we were
happy to achieve that.
D. Maris: Great. Thank you.
Operator: Thank you. Our next question comes from Mr. Shrader from GKM.
Please state your question.
Mr. Shrader: Good morning. Can you run through, this is a priority
review question. Can you run through your argument for priority review? And then
just give a little background on how that argument is made. Do you fill out a
separation application? Or do you check a box that says, oh yeah, and check for
priority review?
M. Bonney: Hey, Tom, this is Mike Bonney. Let me take that one. First
off, I'll answer kind of the second part of it first. There's a cover letter
that accompanies the NDA filing that summarizes the risk benefit of the product.
In that letter is where we requested priority review. The argument for priority
review goes like this. The single biggest cause of mortality associated with
infectious disease, bacterial infectious disease in hospitals is gram-positive
bacteremia. The biggest single cause of gram-positive bacteremia in the hospital
is the sequelae to a Gram-positive skin and skin structure infection. Clearly
MRSA is the largest single agent, single (unintelligible)
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methicillin-resistant staph aureus, in both skin and - driving the skin and soft
tissue then transition to bacteremia and ultimately mortality in the
institutions. So our argument was built on those premises and based on the data
that we developed in our two Phase 3 skin and soft tissue trials where we did
have a fair number of patients with very serious MRSA skin infections who were
treated very effectively with daptomycin.
Now supplementing the clinical argument is also the in vitro and
pharmacology argument where we've shown exquisite and rapid cidal activity
against all the major Gram-positive pathogens independent of their resistance
profile and demonstrated that with a single daily dose you can translate those
pre-clinical and in vitro tests in a skin and soft tissue environment with
reduced number of days in the hospital, reduced time to defervescence and
frankly more convenience for the treating physician, although convenience isn't
really part of a priority review. It's really the unmet medical need.
The last element of the rationale for this is that with the isolation
of two vancomycin-resistant staph aureus strains in 2002, both of which resulted
from very serious skin infections that were caused by both, or at least cultured
out both MRSA and vancomycin resistant Enterococci and the in vitro cidal
activity that daptomycin shows against that bug, that there's a compelling case
to make this agent available to physicians to address serious Gram-positive
infections and to reduce the incidence of mortality, ultimately, although we
haven't proven that clinically. But the argument goes if
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you can reduce the number of serious infections and reduce the amount of time
patients are exposed in the hospital, based on the results we saw in the skin
and soft tissue trials, and you've got this wonderful in vitro activity
demonstrating rapid kill, that you will ultimately provide a benefit for even
those patients who may be infected with these newly emergent resistant
organisms.
Mr. Shrader: Thank you. Synercid got a priority review. Do you off hand
know other antibacterials that have recently?
Dr. Rocklage: Zyvox did as well.
Mr. Shrader: Zyvox did as well?
Dr. Rocklage: Yep.
Mr. Shrader: OK, great, thank you very much.
Operator: Thank you. Our next question comes from Eun Yang from Needham
& Co. Please state your question.
Eun Yang: Yes, I have a few questions. Could you give us update on the
number of patients enrolled in the Phase 3 trials in VRE and Endocarditis?
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M. Bonney: Generally, Eun, this is Mike, generally we don't provide
specifics on enrollment figures, for any trial, VRE or Endocarditis.
E. Yang: Are we seeing some data from VRE study this year some time?
M. Bonney: We have not yet made the decision whether we will publish
data from the VRE study in 2003.
E. Yang: OK. The second question is regarding CAB-175. I'm just
wondering if this drug, if it's successfully developed, actually compete against
the compounds in the carbapenem class.
M. Bonney: So the second question here is why is CAB an appropriate
agent as opposed to a carbapenem?
E. Yang: Right.
M. Bonney: Let me address that one, but I'd like to come back too to
the VRE question. You know, with the positioning that we've heard from the
marketplace, based on the profile of this drug, I think that the VRE trial in
general takes on less importance for us. This is going to be positioned very
clearly as a drug for serious staph infections. While we have very good activity
against VRE, it is clear that that is nowhere near the market opportunity that
serious staph infections are. So let me come back to CAB-175 versus a
carbapenem. I
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think that, you know, carbapenems in general are used as kind of a last line of
defense. And they don't really have very good activity against MRSA in general.
They are often used for pseudomonal infections. So I don't think it's really a
major issue of positioning against the carbapenem. Where the struggle will be
positioned for the clinical trials that support the early profile is as an
alternative to a drug like Rocephin, has a very similar spectrum of activity on
the Gram-negative side to Rocephin, but adds nice coverage against MRSA. And as
you know, even from reading lay press recently, community-acquired MRSA
infections are becoming a major concern, public health concern. There have been
outbreaks recently in a couple cities on the West Coast, and some other areas of
the country. And so being able to provide the safety of the Cephalosporin with
the breadth of coverage and pick up MRSA empirically, I think defines really the
positioning for CAB-175.
E. Yang: OK, so does the CAB-175 have Gram-negative coverage?
M. Bonney: Yes.
E. Yang: OK.
M. Bonney: Especially, Eun, it has the same - generally it has the same
profile on the Gram-negatives in vitro as Rocephin.
E. Yang: OK.
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M. Bonney: There are some minor differences, you know, ups and downs,
but in balance it covers the Gram-negs like Rocephin does.
E. Yang: OK. My last question has to do with FDA panel meeting. I
assume that since Cidecin is a new class of agent, it probably needs a panel
meeting at the FDA. And looking at the schedule, one is in March and the second
one is in June and the third one is in October. So my question is, if you
receive, if Cidecin receives priority review status, I'm just wondering which
panel it could attend. I mean, if it goes to June panel, I don't think they can
really shorten the time, as a priority review designation claims. So I'm just
wondering whether you think the Cidecin needs a panel meeting at the FDA or they
can set up a special meeting for the drug.
M. Bonney: Well, certainly the FDA will make the determination of an
advisory committee meeting and they certainly have the ability to set up a
special meeting, if that's required. But I would also refer you to the history.
In the case of a priority review, it's actually quite unusual to have an
advisory committee. It's not unprecedented, but it's unusual, because of the
tight timelines of both the sponsor and the agency are working on to review all
of the data in the NDA. But I don't believe that simply because daptomycin is
the first in a new class of agents that there is, for that reason, a
requirement. And in the case of priority review, the history is that it's a bit
unusual for the agency to schedule an advisory committee meeting. That said,
they always have the right to do that should issues of safety or efficacy come
up.
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E. Yang: OK. Thanks a lot.
Operator: Thank you. Our next question comes from William Slattery from
Deerfield Partners. Please state your question.
William Slattery: Thanks, Scott. Bill Slattery. Two quick questions.
First off, understanding that you're not giving an update on the Endocarditis
bacteremia enrollment numbers, can you let us know your sense of the
distribution of patients with Endocarditis in the bacteremia enrollment so that
we get an idea of whether or not we are hitting the target or if we're somewhat
ahead of the target expectations for the numbers of patients you were shooting
for mid-summer.
Dr. Rocklage: We are getting somewhere around 30 percent of the
patients in the trial with confirmed Endocarditis, Bill.
W. Slattery: And if it's not - if I'm not mistaken, we were looking for
roughly 20 to 25 percent or am I -
Dr. Rocklage: That's exactly what we were looking for, Bill, correct.
W. Slattery: OK. Second question, earlier, I should say late last year,
the FDA spent a couple of days reviewing antimicrobials and wondering from a
practical perspective, has there been any progress in
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dealing with the agency around some of their expectations, how they're looking
at this class and lessons that came out of that meeting that have been
integrated into the development plan. Thanks.
Dr. Rocklage: Well, the meeting that you're referring to, I believe, is
the November meeting that we attended. And Frank Tally actually gave a
presentation at. And at those meetings, there were a number of topics discussed,
all under the rubric of what's the most efficient pathway for the appropriate
development of drugs to treat serious, life-threatening infections. At the time
those meetings were being held, we were in the final throes of completing the
Cidecin NDA that was filed, as you know, on December 20th. So we'd had no direct
impact on that particular filing.
I think, however, it has an impact in terms of moving forward in time
with additional clinical trials for additional indications, as well as
potentially even in the review process of the NDA and for future indication
because coming out of those meetings, of course, I think was a further
understanding on the part of the agency that a more careful, thoughtful process
into the design and the statistical analysis areas, particularly for these
clinical trials, is probably what's best for these kinds of drugs, and not to
automatically rubber-stamp a clinical trial with a 10 percent delta, five
percent delta or even a 20 percent delta.
To be more thoughtful about it, regarding exactly what are we trying to
achieve out of a particular indication, what is the
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morbidity, mortality, what are the current treatment alternatives and therefore
include all those factors, come up with an appropriate statistical plan. I.E.,
the short way of saying what I just said, include more medical input into the
design and ultimate approval of these additional indications. Do I think that
will affect going forward plans? Yes, I do.
W. Slattery: OK. Well good luck tomorrow, we'll be keeping our fingers
crossed for you all.
Operator: Thank you. Our next question comes from Steve Harr from
Morgan Stanley. Please state your question.
Steve Harr: Thanks, good morning. A couple of questions. Number one, I
just want a little bit of clarification. It's my understanding of the FDA review
process is they have an internal meeting on day 45 to make a decision on
priority reviews. And it just seems a little late that they haven't disclosed
that to you yet. Is that correct? `Cause that's my reading of the FDA website or
am I a little confused?
M. Bonney: Steve, I think that is correct from a codified standard, if
you will, but also the codified standard is that acceptance of a file occurs by
day 60 and in fact the average is 63. It's my understanding that the internal
process of the FDA, after they have this meeting, does require that internal
work to insure that all of the affected groups, this is beyond the meeting, are
prepared to
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execute on a priority review. As you know, it puts tremendous amount of pressure
on the agency. So while they have the meeting, it is not necessarily the case
that they would notify the sponsor immediately following that meeting. They have
to get their internal house in order with things like field audits and things
like that, before they actually provide communication to the sponsor.
S. Harr: My general perception is if we were to compare this call to
one a month ago or so, or after, in December, is that you guys are feeling a
little more confident on the priority review. Is that a reasonable assessment or
is your guidance still that you are more likely to get a conventional 10 or 12
month review?
M. Bonney: We think that there is a strong case to be made for priority
review and that we have made that case in the filing. But ultimately, of course,
as you know, this decision is the agency's. And so we hesitate to speculate
either positively or negatively until we hear from them directly.
S. Harr: That's fair. And then on the operating expenses, did I miss,
did you guys give any guidance there or we just take what you said on the burn,
which is basically consistent with last year, subtract out the cap ex and assume
minimal revenue for right now. Is that - how are you looking at that?
D. McGirr: That's for 2003, Steve?
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S. Harr: For 2003, yes.
D. McGirr: Yeah, I think that's a fair thing. I think minimal revenue
is a good idea and I think a burn around the number that we talked about and you
can make your own adjustment for cap ex. We're comfortable giving you that type
of guidance. For obvious reasons, we don't want to give you more detail at this
stage.
S. Harr: And then on the R&D front, is there anything in the fourth
quarter, have you guys started to build inventory for the drug? Is that in R&D
right now?
D. McGirr: Yeah, we have obviously been spending more money on the
whole manufacturing segment, which to us is getting the third parties ready and
also the whole issue of inventory and supply chain and logistics. And so there
is money being spent there. Does this mean we've got vials of drugs sitting on
shelves ready to go, we're not quite there yet. But it's in plan.
S. Harr: All right. Thank you very much and I reiterate what Bill said,
will be rooting for you tomorrow.
M. Bonney: Let me just address this, rooting for you tomorrow. Tomorrow
is the 60 day timeline for the agency. So we're hopeful that we will hear
directly tomorrow. But remember also that their average is 63 days. It's further
complicated by the weather this week, frankly, in Washington, where the agency
was closed yesterday. At
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least, non-essential personnel were discouraged from being there. So while - I
just don't want to leave people with the impression that if we hear nothing from
us tomorrow that it means anything other than we've heard nothing.
S. Hart: Fair enough. Thank you. Have a good day.
Operator: Our next question comes again from Thad Strobach from Quattro
Global Capital.
Thad Strobach: Hi, guys. I had just two follow-up questions. The first
is just kind of beating the Cidecin NDA review horse to death. Has the FDA asked
for any clarifications or have they come back to you asking for any sort of
procedural follow-up questions that would cause the delay? I know sometimes
they've done that and so it's more a bureaucratic bookkeeping issue than
anything in particular. Have they done anything on that? And then my second
question is have you examined or thought about an exchange for your convertible
securities? Have you looked at that, given that Cell Therapeutics and Alkermes
both had successful exchanges. Have you looked at that or thought about that as
a way of addressing your debt? Thank you.
D. McGirr: This is David McGirr. I'll do the convertible issue first.
Yes, we've done a lot of work, we've done a lot of studies, we've run the
numbers multiple ways. And we've concluded that we don't want to do an
exchangeable for the debt due in '08, because we like
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that maturity and we like the 5.5 percent coupon. We are looking at the other
aspects of our balance sheet, but that work was done.
M. Bonney: In terms of the first part of your question, Thad, we have
had some back and forth with the agency, but it hasn't been issue-specific. It's
basically they've been looking for things like CD's with the summaries of the
various elements of the NDA so that reviewers can take it home and look at it,
and that kind of thing.
T. Strobach: OK.
M. Bonney: So nothing (unintelligible).
T. Strobach: OK. Thank you.
Operator: Thank you. Just a reminder, ladies and gentlemen, if you do
have a question, you may press star one on your push-button telephone at this
time. Thank you. If there are no further questions, I will turn the conference
back to Dr. Rocklage to conclude.
Dr. Rocklage: Well, thanks everybody for joining us today. And please
feel free to call me or Jennifer LaVin, in the meantime, if you have any further
questions between now and the news event. And hope you have a great day today.
Operator: Thank you all for participating and have a nice day. All
parties may now disconnect.
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