Aerie Pharmaceuticals, Inc.
Q2 2015 Earnings Call Transcript

Published: 6 Aug 2015

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by. And welcome to the Aerie Pharmaceuticals’ Second Quarter 2015 Earnings 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. Today’s conference call is being recorded. It is now my pleasure to turn the floor over to Aerie’s Chief Financial Officer, Rich Rubino. Please go ahead, sir.

[Richard Rubino:]

Thank you, Michele. Good afternoon and thank you for joining us today. With me today are Vince Anido, our Chairman and Chief Executive Officer; and Tom Mitro, our President and Chief Operating Officer. Today’s call is also being webcast live on our website, investors.aeriepharma.com and it will be available for replay as indicated in our press release. Now for forward-looking statements and non-GAAP financial measures. On this call, we will be making certain forward-looking statements, including statements and forecasts regarding our future financial and operating performance, the success, timing, and cost of our clinical trials, the clinical effectiveness, commercial launch and potential future sales of our product candidates, the potential of our new preclinical research findings as well as other statements related to future events. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our earnings release as well as the risk factors included in our filings with the SEC. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. Please note that we expect to file our 10-Q on or about August 6, 2015. In addition, during this call, we will be discussing certain adjusted or non-GAAP financial measures. For additional disclosures relating to these non-GAAP financial measures, including our reconciliation to the most directly comparable GAAP measures, please see today’s press release, which is posted on our website. As a quick financial update for the quarter, our second quarter 2015 GAAP net loss attributable to common stockholders for the three months ended June 30, 2015 was $18.8 million or $0.73 per share. The net loss for the quarter also includes non-cash charges for stock-based compensation expense of $3.5 million. When excluding the non-cash stock-based compensation expense, adjusted operating expenses for R&D and G&A totaled $10 million and $4.6 million, respectively, for the second quarter 2015. Total adjusted net loss was $15.3 million for the second quarter 2015. The $15.3 million in adjusted net loss or $0.59 per share compares to $9.4 million for the same quarter in 2014. Importantly, our balance sheet remains very strong. At the end of the second quarter 2015, our cash and marketable securities totaled approximately $163 million. With that, I’ll turn the call over to Vince.

[Vicente Anido:]

Thanks, Rich and good afternoon everybody. Thanks for joining us today. Typically we take advantage of these calls and chat a little bit about what’s going on or what happened during the quarter. And we spend so much time and energy walking through all the different events that occurred in Q2, and really we want to take today’s call and use that as an opportunity to focus on what’s some of the key events that are still going to happen in the third quarter of this year. So there’s three significant events that we’re looking forward to as this quarter plays out. The first one of those is, as you know, we expect the 90-day efficacy results from Rhopressa Rocket 2 later this quarter, it’ll be happening in September. And again, as a reminder, we did receive agreement from the FDA to change the range for the primary endpoint and we decided to change the range from below 27 millimeters of mercury, which is what the range was for Rocket 1, and the original primary for Rocket 2 to now the new range is below 25 millimeters of mercury, where Rocket 1 would in fact been in successful trial. If Rocket 2 is successful in achieving non-inferiority to timolol, we will commence preparations for an NDA filing by the middle of 2016, with Rocket 2 representing the pivotal trial and Rocket 1 as supportive. Since it did not only achieve the pre-specified secondary endpoint of below 24 millimeters of mercury, but it showed great efficacy again non-inferiority to timolol at pressures below 26 millimeters of mercury. And so we do think that that is something we want to move forward with very, very quickly, again assuming positive results coming out of Rocket 2. Secondly, as we expected, we will launch the Rocket 4 trial, which is an additional Phase 3 trial for Rhopressa by the end of Q3. We’ve already had our investigators meeting, so we’re moving forward towards dosing that first patients in the month September. I call this trial our insurance policy to get Rhopressa approved. This trial is being structured to avoid the recurrence of some of the issues we encountered in Rocket 1. The range for the primary endpoint is below 25 millimeters of mercury as it is for Rocket 2 and we also have a secondary endpoint, there the range will be below 27 millimeters of mercury. We will enroll patients up to 30 millimeters of mercury to create a safety net above that 27 millimeters of mercury to allow us for a fair result at that below 27 millimeter range. The primary efficacy endpoint will be measured in 90 days and will have all of the different nine time points that we had before that you became familiar with in Rocket 1. Rocket 4 will be of six-month duration, will do the 90-day for efficacy, but we’ll continue to trial on for six months and that will include a secondary endpoint of efficacy at that six month measure. And also it will give us six month of safety on a fairly sizable patient population. Now, with this additional safety data, we’ll have more than enough data to file for approval in Europe. Obviously, the US will be taken care of by the patients that we’re following in Rocket 2. But in Europe, not only do we need the 100 patients on our drug for one year as we do here in the US, but in Europe also we’re required to have 300 patients on drug for six months. The three-month efficacy data for Rocket 4 is expected in the summer of 2016. So again, these trials take roughly about a year or so away and that timeline also coincides with the expected NDA filing for Rhopressa. So the results of this trial, Rocket 4, might prove useful in helping respond to any potential FDA review issues and questions down the road. The third significant event that we expect will occur in Q3 as we expect the launch for Mercury 1, our first Roclatan Phase 3 trial towards the end of this quarter. This trial will be structured similarly to our very successful Phase 2b trial, which we reported out in 2014, where we compare the combination of Roclatan to each individual components, latanoprost and Rhopressa. And the key measure there was superiority, again at the nine various time points. This will be a one-year safety trial with a 90-day interim read-out for efficacy. The efficacy read-out should also be expected sometime in the summer of 2016. So as you can imagine, we’ll be pretty busy a year or so from now as all these trials unveil. I do want to correct something that I said just a little bit earlier, the trial that we did have the investigators meeting on was actually the Mercury 1 trial, the one that I just finished talking about. I incorrectly stated that it was the Rocket 4, both of those will start in September of this year. Now, for the Roclatan series, we will also have some additional trials that will start later on in – over the next six months or so. The current plan is to start Mercury 2 in the US in early 2016. This will be a 90-day efficacy trial, with the same comparators as Mercury 1, meaning superiority of the combination over each individual component. Later in 2016, we’ll plan to start Mercury 3 in Europe. There, we will be comparing Roclatan to a currently marketed combination product in Europe and this will be a non-inferiority trial. Speaking of Europe, as you saw last quarter’s filing, we did transfer all of our non-US and Canadian intellectual property offshore. We have opened an operating headquarters for our ex North American activities in Dublin, Ireland. And we’re currently adding staff there, the primary staff that will be initially to allow us to conduct a clinical trial, so we want to start in Europe, as I mentioned, sometime in early 2016. In addition to that, we are evaluating setting up our own manufacturing facility in Ireland, in Europe, in Ireland in the future. And it should prove beneficial down the road from a cost of sales as well as a net profit perspective, given where the intellectual property currently resides. So certainly it’s been a pretty busy quarter for us and Q3 is turning out to be the same way. And as we think about Rhopressa findings that we have discussed with you over the past few months, including the very significant synergistic effect that we saw on patients who had been on prior prostaglandin therapy that we covered as part of the Rocket 1 analysis as well as the preclinical disease modification potential where we shared with you the information regarding Rhopressa [indiscernible]. We continue to see Rhopressa as having significant market potential, particularly as an add-on drug to patients who are already on prostaglandin therapy. Remember, now, about half of the prescriptions in the US are prostaglandin that are used first line, typically about 80%, 90% of the patients that come into a doc’s office actually walk out with a prostaglandin prescription as the initial therapy. But there is an entire other half of the market which is currently comprised of multi-dose per day beta blockers and alpha blockers and carbonic anhydrase inhibitors. These are old drugs that have no known synergies with prostaglandin. And in fact, as we look at the development pipelines of the companies out there today that are studying the drugs for glaucoma, we don’t see anyone reporting the synergistic effect that we saw with patients who have been on prior prostaglandin therapy as we did with Rhopressa. The add-on market size in the US is currently about 16 million prescriptions as we talked about over the last year or two. And if successful in the clinical trials, we believe Rhopressa can potentially gain a meaningful market share of that secondary market. And again, it could make a very, very large drug, just simply here in the United States. Now, further on Rhopressa, along with our continued preclinical work on the disease modifications effect, we’re currently studying the neuroprotective effects of the drug. On that, I’ll say just simply stay tuned for results sometime later on this year. If Rhopressa shows neuroprotective benefit, as an example, down the road, we would need a delivery mechanism to get that drug to that portion of the eye where it can benefit the most. Roclatan obviously remains very exciting to us, shown potential to be the most efficacious eye drop in glaucoma. And when you consider this synergy of Rhopressa and latanoprost in one bottle and one drop per day, plus all of the other benefits that we’ve just talked about, with Rhopressa you can understand how this product has the potential to be a game-changer in the treatment of glaucoma. Now, in addition to focusing on the programs for Rhopressa and Roclatan, we continue to spend quite a bit of time and energy in building our pipeline. We have talked in the past that we are planning on continuing to conduct research on our preclinical product, which we’ve designated AR-13154 in animal and rat study. So we actually reduce the lesion size [indiscernible] model. And in fact, the effects there, we’re actually better than the comparator drug, which at that point was Eylea. And so we’re very excited about the prospects with this product. It is a small molecule that targets Rho Kinase, the Janus Kinase 2, as well as the platelet-derived growth factor receptor beta. Since it is a small molecule, this is an example where we need to be exploring drug delivery technologies, it might help us deliver that small molecule to the back of the eye over an extended period of time. We’ve been talking about this for several months. And as you saw in today’s announcement that we made about an hour ago, we’re very, very excited about announcing our collaboration with GrayBug, Inc. And as you might have read in the press release, GrayBug is a venture-backed company that is developing microparticle controlled release drug delivery technologies for both front and back of the eye that we believe very promising for AR-13154. We will need that long term sustained release to the back of the eye in order to treat the disease that we’re targeting. There may be other opportunities for Aerie’s other products in the future, such as Rhopressa or for compounds selected from our library where we need the delivery of the drug over a sustained period of time, both not only for back of the eye, but also for front of the eye as well. Our teams, meaning our team along with GrayBug’s will begin working together as quickly as we possibly can to move this collaboration forward. As we’ve said in the past regarding building of our pipeline even further, we are looking for potential product opportunities through acquisitions or in-licensing. Most of these happen to be in back of the eye where a lot of work is been done and happens to be among the largest markets that we see in ophthalmology and we’re looking at earlier stage products with novel mechanisms of action that do have those large market potential. Our goal is to have at least a couple of new products in the clinic by the time we launch Rhopressa in the 2017 timeframe. So with that intro, what I’d like to do is now turn it over to the operator for Q&A.

[Operator:]

[Operator Instructions] Our first question comes from the line of Adnan Butt with RBC Capital Markets.

[Adnan Butt:]

First on maybe Rocket 2 events, could you tell us how many patients in the target range and if you have the information, how many were PJA versus non-PJA exposure?

[Vicente Anido:]

We don’t have the final number in terms of – and the breakdown obviously of how many patients were on prior prostaglandin therapy versus not. But we’ll have just shy of 800 patients in the study by the time it’s all said and done. And obviously as we clean up the queries, prior lock in the database, that number is going to vary, so it’ll be somewhere between that 750 and 800 number. We expect that we should see – if it’s a normal distribution, roughly 80% or so of those patients should be on prostaglandin. But you never know until you unblind the data.

[Adnan Butt:]

And then perhaps on Rocket 4, I don’t recall, but is there a washout period? And if there is one, can you extend the washout period so perhaps [indiscernible] of PJA has a more diminished effect?

[Vicente Anido:]

We do have a washout period in all these trials and it is the four weeks that we had in all the other trials. And the reason for that is simply that we’re trying to limit the number of changes that we make in all these clinical trials. The fact that we now have – we’ll have two different results, Rocket 1 and hopefully here soon Rocket 2, all showing the same effect, i.e., the synergistic effect with prior prostaglandin therapy, it’s not going to be an unexpected finding if we see it. And so we just didn’t feel the need to change the washout period for Rocket 4. So we left it at four weeks.

[Adnan Butt:]

On this collaboration with GrayBug, could you tell us how you selected the partner? And then what’s the scope of the partnership over the course of the year term? And for Rhopressa, if you were to develop a long-acting, what could be the regulatory process there?

[Vicente Anido:]

We’ve actually been looking at and talked to quite a few folks who have drug delivery technologies. And so as we were kicking the tires, it you will, trying to figure out which one made the most sense, given what we know about our molecular structures in our clinical library, GrayBug was one of the ones that came to the forefront pretty quickly. There is one or two others that we liked a lot as well. But at the end of the day, it’s awfully difficult to run too many of these things in parallel. So we chose GrayBug as the first one for us to take a look at. We’re going to be – they are private and so right now we’re going to be remaining silent in terms of the entire scope of the collaboration other than to say this is something where it’s consistent with what we’ve talked about in the past where we will do some of these collaborations, where we put up some upfront money, we provide research funding for one or more projects over a year or two to try to get some defined endpoint and try to get – specific question and answer that we need to have in order to move forward. Once we get to that point, then we’ll have a choice to make as to whether we continue the collaboration and exercise a license agreement that’s already been negotiated or just simply walk away. And so that’s the idea of the structure with GrayBug. We’ve got the opportunity to put more than one product into their development process, or put it into their delivery system and we’ll do the necessary testing and like. And over a year or two period, we’ll make a decision as to whether we want to continue or not. If we chose, to answer your last question, if we choose to move forward with Rhopressa, it depends on what – the development plan will purely indicate, be driven by what indication we try to pursue, because it would be an injection, if we choose to do something other than just simply dropping intraocular pressure for the treatment of glaucoma, let’s say we want to go after neuroprotection that would require a complete development plan.

[Operator:]

And our next question comes from the line of Annabel Samimy with Stifel.

[Esther Hong:]

This is Esther Hong in for Annabel Samimy. I just had a few questions about managing the enrollment of the trials, can you talk a little bit about how you’ll manage the enrollment of Rocket 4 as well as in Mercury trials? Will the sites compete for patients? And at this point, can you ensure that the patient populations will not overlap?

[Thomas Mitro:]

First off, no site will be involved in two trials at the same time. They all have their own singular trial going on. And certainly, unless they are right next door which is very far between, they really won’t be competing with patients either. So we’ve not seen that in – until we did Rocket 1 and Rocket 2 trials and really we haven’t heard a word about competition between the various sites. So it’s really not a concern. Just to give you a general sense for what we have, just north of 50 sites in both Rocket 4 as well as the Mercury 1 trials here in the US.

[Esther Hong:]

Just a follow-up to the Rocket 1 and Rocket 2, is there any further color around the site-specific issues that cause problems in Rocket 1 and could these possibly be repeated in Rocket 2 for the two sites that are included?

[Vicente Anido:]

We don’t have any further news regarding the five sites that we identified in Rocket 1 as being problematic. In terms of the spillover into Rocket 2 is, as a reminder, two out of the five sites that were in Rocket 1 were actually included in Rocket 2. So obviously, we’re going to be tracking those pretty closely, but they had already finished enrollment, so there is nothing that we can do about that in hindsight. So we’ll obviously keep a close eye on them and hope that we don’t see the same things happen again.

[Esther Hong:]

Would it be premature to start another program while Rhopressa and Roclatan are ongoing?

[Vicente Anido:]

I’m sorry, you mean starting Rocket 4? I’m not sure I understand.

[Esther Hong:]

No, another pipeline in your...

[Vicente Anido:]

No, I see what you’re saying. So the kinds of products that we’re bringing forward won’t hit the clinic until say sometime in late 2016 or so timeframe. And by that time, we will be in the process of having already filed the NDA for Rhopressa and we’ll already be in the finishing throws of the trials for Roclatan. So being able to move a program into the clinic and remember, when we’re talking about moving them into the clinic, that could simply be in Phase 2. And so those don’t require near as many patients and are not near as long as the trials we’re currently conducting. So we don’t think that will be problematic.

[Operator:]

And our next question comes from the line of Serge Belanger with Needham.

[Serge Belanger:]

A couple of questions on Rhopressa program, has there been any additional changes to the Rocket 4 study design or is it the same as you had previously talked about back in June?

[Vicente Anido:]

Just to recap, so Rocket 4 will have first the primary endpoint will be below 25 millimeters of mercury and the secondary endpoint will be below 27 millimeters of mercury. So basically flipping from what we had originally in Rocket 1. We will enroll patients and one of the big changes is we’ll be enrolling patients all the way up to 30 millimeters of mercury. So that will allow us to enroll those patients, the top one or 2 millimeters will include in the intent-to-treat population analysis protocol, but the actual primary would be all the way down to below 25. So if we have the same things happening at the upper one or 2 millimeters, it will happen in Rocket 1, we’ll be getting ourselves out of [harm’s way]. In addition to that, we’re adding a secondary look at efficacy at six months, whereas Rocket 1 and Rocket 2 were both for 90-day efficacy. So that’s a second major difference. From an execution point of view, what we’re seeing with Rocket 4 is we’ll be doing some things like being able to track utilization little bit better, we’ll be putting things in place that will encourage and remind patients to take their dosing, so hopefully that will get rid of some of the issues that we face with compliance and things like that. And so we’re putting in some bells and whistles into the protocol that we think will at least negate some of the issues that we faced in Rocket 1.

[Serge Belanger:]

And then we’ve talked extensively about Rocket 1, 2 and 4, just wanted to see if you can provide an update on Rocket 3 and how enrollment has progressed and if there was any impact following some of the issues on Rocket 1?

[Vicente Anido:]

Rocket 3 continues to enroll; it is being done – remember, it’s a safety study, only safety and it’s only in Canada. Many of the sites up there are institutional based and so it just slows up the enrollment, we’re not seeing the kind of enrollment numbers rolling in as much as we’d like. We do need to have some of those patients on there, because we have enough patients in there, so it makes us still pretty interesting because, remember, one of the reasons we’re doing that was not only to get to know the physicians out there and get to know the market, getting them to know us, but also to make sure we had some patients on drug for a year as part of our overall safety needs to sort of supplement what we’re doing here in the US. So if we don’t complete enrollment, we get a handful of patients, so that takes some of the load off and that can get to a safety endpoint for 100 hundred patients on drug for a full year earlier because I had Canada, and from my perspective, it will be successful. So that’s pretty much where it is.

[Serge Belanger:]

And then given the ongoing trials in – I guess, the initiation of Rocket 4 that’s upcoming next month, what are your expectations for filing in Europe?

[Vicente Anido:]

The big driver in filing in Europe is going to be that, for Rhopressa now, will be that we complete 300 patients on drug for six months. And so we’ll have a fair bit of that done as part of Rocket 2 and certainly we’ll have a whole bunch of more patients as part of Rocket 4. So I would guess that for Europe, we would see a submission with European authorities lagged about six months or so from the US submission which would be sometime in the middle of next year. So you would be looking at the end of 2016 for Europe.

[Serge Belanger:]

One last one, pipeline related, on AR-13154, does Aerie plan to advance this compound in the clinic beyond the collaboration with GrayBug next year?

[Vicente Anido:]

Yes. So GrayBug is – we got to be able to deliver the small molecule to the back of the eye in order to have any shot at all of showing that this drug can actually be successfully marketed, because putting a small molecule into the eye with a half-life of say 24 hours or so is just not viable for a wet AMD indication. So we do need to have a delivery system, we got to show that the GrayBug technology will actually allow us to deliver that small molecules consistently into the back of the eye for say upwards of six months. That’s our ideal target. And then in parallel, we’ll continue doing some additional work to continue to highlight the efficacy of that small molecule in back of the eye. So we’ll be looking at things like oxygen-induced retinopathy, models which are little bit more consistent than the choroidal neovascularization model and the like to continue showing the efficacy. But we’ll have to do a full-blown program which we would intend to do for back of the eye with 154 if in fact with the GrayBug technology we can show that we can deliver it over a sustained period of time.

[Operator:]

And our next question comes from the line of Caroline Corner with Cantor Fitzgerald.

[Caroline Corner:]

Apologies, I joined the call a little bit late, but did you disclose for the Roclatan Mercury 3 trial in the EU that’s slated to start in 2016? Did you disclose yet what the comparator is going to be for that trial?

[Vicente Anido:]

No, we have not. The idea is that we wanted to get the Mercury 1 study started, a trial which we did and get Rocket 4 off ground, in parallel we’re continuing to work on trying to identify the right combination over there. And we’re getting pretty close and as soon as we do, we’ll let you know. But we have yet to announce it.

[Caroline Corner:]

You recently had an R&D expansion in North Carolina, can you comment a little bit on how you feel about your R&D capacity right now and do you have the space set up now for late and early stage work? You mentioned that you’re trying to get product into the clinic, but you also sound like you have a lot early stage going on as well.

[Vicente Anido:]

The RTP facility, the Research Triangle Park facility that we’re putting up is actually designed mainly for our research side of the business. So it’ll have the necessary lab space. Right now, we’re jam-packed into a couple of small labs in a short term facility that we’ve been extending our lease on for quite a few years. And we’ve had 10, 15 people packed in some pretty tiny spaces. And so we needed to make a move there. So we’re starting to do that. But it’s mainly going to be for research only, we do have manufacturing folks that are based in RTP, but that’s a site that we’re putting up mainly for research and for office facilities. And so we think what this does is sort of rounds out the skill sets of the business. So we have more than enough folks now at each of the site to do the work that we’ve outlined that we needed to do, not only the clinical programs, and remember, clinical, we run mainly out of Bedminster office or our Bedminster, New Jersey office where we have most of our clinical research folks, we have some out here in California as well. The research side, the R side, it’s all done out of RTP. And the manufacturing folks are all based in RTP as well. And then out here in California, we have regulatory and QA, along with administrative staff and the like and then we have our finance function also in New Jersey. So I think we’re pretty well staffed right now. We have roughly 77 people, we think assuming some progress here in the clinic, we should be up in the 80s sometime by the end of the calendar year. So that’s the right number for the kinds of things we’ve outlined.

[Caroline Corner:]

Moving on to GrayBug, I haven’t seen one of their presentations very recently, but the last one I saw, they were working on AMD and glaucoma in-house as well. Are you in a situation where down the road you could be competing with them in those spaces, how does that work or have they backed up a bit? I know they’ve had some management changes.

[Vicente Anido:]

They have had a management change and we know Jeffrey Cleland, the CEO, the new CEO, the interim CEO pretty well and we know the investor group there, Hatteras Venture, very, very well. And so like any other drug delivery company, they’re going to be doing some of their own internal research and that’s fine. We do have the license for products like that are drive by Rho Kinase [and vision] is to field that we’re going to be pursuing and so if they’re going to study something that is not one of the pathways that we’re interested in and it’s for the same indication, then we’ll be competing with them. But remember, we’re doing an awful lot of the work on our own as well as doing all the testing here and things like that and we’ll do all the clinical work here. So we think that’s manageable because we’ve been doing that in the industry for a long, long time.

[Caroline Corner:]

With regard to the Rho Kinase [indiscernible] GrayBug exclusive with Aerie for that?

[Vicente Anido:]

Yes.

[Operator:]

[Operator Instructions] Our next question comes from the line of Difei Yang with Brean Capital.

[Difei Yang:]

Just a very quick one, could you comment on a very high level what is the GrayBug technology [indiscernible] work?

[Vicente Anido:]

I’m sorry, you broke up on that last part. I didn’t quite understand. High level GrayBug technology and then I missed your last part of the question.

[Difei Yang:]

In general, how does they work?

[Vicente Anido:]

Basically in cases the small molecule chemical structure, almost like a nanoparticle that is then enveloped in a sustained delivery portion of their delivery system. And so as that degradable polymer, if you will, starts to grading, then the small molecule gets released out of the nanoparticles, and then – so you have that slow release occurring over some extended period of time. We have reason to believe that they can run this thing out almost to a year in terms of its delivery. And so we think that based on the work we’ve done that delivering it out over – so it’s two injections a year, so one every six months maybe the ideal based on the current reimbursement scheme and the way that other drugs are being delivered. But it’s basically again some sort of a nanoparticle that in case is our molecule, our AR-13154, and then that is put into a degradable polymer that degrades overtime.

[Difei Yang:]

Just a quick follow-up, do you expect this polymer to be biodegradable or do you expect a second injection you’ll remove the residual polymer?

[Vicente Anido:]

It’s biodegradable.

[Operator:]

And I’m showing a follow-up question from the line of Adnan Butt with RBC Capital Markets.

[Adnan Butt:]

I thought I’d send one Richard’s way, I think that IP is moving to Europe, could you talk about the implications for that long term?

[Richard Rubino:]

We actually migrated our non-North American IP at the end of the first quarter, so it was explained in our first quarter 10-Q. Essentially what we did is remove that IP to reside [indiscernible] tax residency in Malta and we established an operating entity in Ireland, which Vince mentioned earlier in his prepared remarks. So the long term implications are to the extent we have income outside North America that will be taxed at a substantially lower rate. In addition, in the case where we might set up manufacturing facilities in Ireland, we could in fact use that as a source of product that’s ultimately to be sold in the US and that ultimately can result in our US tax rate being again lower because of the transfer pricing effect of the product moving from Ireland into the US. So the long term perspective here is the IP moved out, it really is part of our long term supply chain strategy and it does of course yield potentially meaningful tax savings down the road. I’m talking about, if we are as successful as I’d like us to be, equating to several points, full points of effective tax rate down the road.

[Operator:]

I’m showing no further questions at this time. And I would like to turn the conference back over to Mr. Vince Anido, Chairman and CEO, for any further remarks.

[Vicente Anido:]

Thank you, and thanks everybody again for taking part of your afternoon off and visiting with us. Certainly, obviously, we’re very excited about the prospects for not only what we’ve done to date, but also what we can expect over the next 45 days or so as we close out this quarter. We have an awful lot of things on our plate and obviously the most significant of those is the read-out from Rocket 2 which will occur sometime in September and hopefully assuming positive results, it’ll really set the tone for how big this company is really going to be. We think we’ve laid the groundwork appropriately for that event and also for subsequent events that will allow us to continue growing. So again, thank you for taking a little bit of time in your afternoon with us and have a great day.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program and you may all disconnect. Everyone have a great day.