Aeterna Zentaris Inc.
Q2 2014 Earnings Call Transcript

Published: 8 Aug 2014

[Operator:]

Good morning. My name is Janec, and I'll be your conference operator today. At this time, I would like to welcome everyone to Aeterna Zentaris' Second Quarter End of June 30, 2014, Financial and Operating Results Conference Call. [Operator Instructions] Thank you. Paul Burroughs, Director of Communications, you may begin your conference.

[Paul Burroughs:]

Thank you. Good morning, and welcome, everyone. With me today are David Dodd, Chairman and CEO; Dennis Turpin, Chief Financial Officer; Richard Sachse, Chief Scientific and Chief Medical Officer; and Jude Dinges, Chief Commercial Officer. Please note that during this call, we may be making forward-looking statements regarding future events and the performance of Aeterna Zentaris that involve risks and uncertainties that could cause actual events and results to differ materially. These risks are described in further detail in the company's press releases and in reports filed with the U.S. and Canadian securities regulatory authorities. These forward-looking statements represent the company's judgment as of today, Friday, August 18 (sic) [ August 8 ] 2014, and the company disclaims any intent or obligation to update these forward-looking statements unless we are required to do so by applicable law or by a securities regulatory authority. However, we may choose to update, and if we do so, we'll disseminate the updates to the investing public. It's now my pleasure to introduce the Chairman and CEO, David Dodd. David?

[David Alan Dodd:]

Thank you, Paul, and good morning, everyone. Thank you for your interest in Aeterna Zentaris and our continued progress. During this quarter -- this past quarter, our growth and development focus continued to be on our 2 lead programs, the active NDA and commercial planning for MACRILEN, which is in adult growth hormone deficiency; and our pivotal ZoptEC Phase III trial in endometrial cancer using zoptarelin doxorubicin. In addition, our focus on accelerating our commercial activities resulted in the signing of a co-promotion agreement with Ascend Therapeutics for the U.S. marketplace. Regarding our use of resources, we have announced the results of a significant restructuring across our organization, resulting in a 1/3 reduction in staffing and, we believe, a significant improvement in how we will conduct our development programs going forward. At this point, we believe we are more sharply focused with greater flexibility and ability to drive towards our goal of becoming a growth-oriented biopharmaceutical operation, actively developing our customers while ensuring we have a vibrant and attractive portfolio of future growth products. As for MACRILEN, we continue our active discussions with and provide further information to the FDA, which is currently reviewing our NDA with a PDUFA date of November 5. You will recall that upon approval, MACRILEN will be the first orally administrated drug indicated for the evaluation of adult growth hormone deficiency. We also completed our commercialization plans during this past quarter, focused on the many critical issues necessary and in support of rapid commercial launch and penetration of our target market. This has included critical staffing at our new operation in Charleston, South Carolina. We believe we have a strong value proposition in MACRILEN. It's accurate, comparable to the current standard procedures. It's safe and well tolerated. It's much more convenient versus the insulin tolerance test and a number of parameters now. Recall the annual market opportunity today is approximately 40,000 evaluations in adults annually, with significant upside related to development of evaluations in adults who suffer traumatic brain injury. And as you recall, in that case, it could go -- it could quintuple based upon that. It's a very difficult build for the market. Our initial focus will be on the 40,000 that exist today. For zoptarelin doxorubicin, which is our lead oncology compound, it's an engineered molecule composed of a synthetic peptide carrier linked to the widely used and well-known chemotherapeutic agent, doxorubicin. Our treatment is intended to provide a more impactful delivery of the cytotoxic agent with fewer side effects and especially those that are more typical. During the quarter, our efforts were focused on ensuring successful patient recruitment to secure a first interim analysis in the first half of 2015 for our ZoptEC Phase III trial. I'm pleased to report that we've completed initiation of sites with over 150 -- 115, excuse me, in operation, and the trial is clearly on track from a patient recruitment basis, with over 230 recruited, thus, nearing the halfway mark of the total of 500 patients. In fact, at this point, we have enough patients to ensure our interim analysis for first half of next year. Recall the ZoptEC Phase III trial compares zoptarelin doxorubicin to doxorubicin alone, a second-line treatment for women with advanced, recurrent or metastatic endometrial cancer conducted under a Special Protocol Assessment from the FDA. Our primary endpoint, as you may recall, is improvement in overall survival. Endometrial cancer is a very important unmet medical need, a very large market opportunity for us. It's the most invasive gynecologic cancer in women, with approximately 53,000 new cases expected in the U.S. alone this year, there's no systemic treatment approved in the U.S. and throughout most of Europe, and we hold worldwide rights to the compound. During the remainder of this year, our goal is to reach the number of patients so that we can even further be assured of providing the interim analysis during the first half of next year. Regarding our earlier stage developments, I want to comment on these. We're very pleased at the annual meeting of American Association of Cancer Research in April, that our -- the presentation on our Erk inhibitor, AEZS-134, was 1 of only 11 posters singled out for detailed discussions relative to potential significant advancements in chemotherapy or cancer therapy in the future. The signaling pathway approach of treating various cancers is increasingly becoming a critical tool for oncologists today. We are clearly in the frontier of development in this approach, and we're looking forward to further progress with our class of compounds. For the business development area, we continue to aggressively pursue opportunities to in-license, acquire and/or promote existing marketed products as part of our strategy to transition into a commercial entity, and we'll continue to do so. And as we mentioned earlier this week, we announced the signing of a co-promotion agreement with Ascend Therapeutics for EstroGel, which is a non-patch transdermal FDA-approved and commercialized estrogen replacement therapy. EstroGel is marketed in over 70 countries. It's the most prescribed estrogen product in Europe, as well as the most prescribed transdermal estrogen product in Canada. Under the terms of the agreement, we will market Ascend's EstroGel in specific, exclusive, agreed-upon U.S. territories in exchange for a sales commission, which will be payable based upon incremental EstroGel sales that are generated over certain baselines. Additionally, the agreement provides that following regulatory approval of MACRILEN, Ascend will provide similar services to us in exchange for a sales commission. We anticipate approximately 20 sales representatives to cover our assigned U.S. territories, while Ascend will use its existing sales force of over 35 sales representatives to cover its territories, which means in total, over 50 representatives will be selling both EstroGel and MACRILEN. This co-promotion agreement is an important step in our strategy of transiting into a commercially operating specialty biopharmaceutical company. The co-promotion of EstroGel will jump-start our commercial activities while the FDA continues its active NDA review of MACRILEN. We very much look forward to working with Ascend as it will enable us to use our new commercial structure not only for the co-promotion of EstroGel but also for the potential launch of MACRILEN, as well as for other commercial products that we plan to obtain and bring in in the near future. Now part of our transition strategy, we started implementing a global resources optimization program to streamline R&D activities to increase our commercial operations and overall flexibility. This resulted in the termination of 30 employees, representing approximately 1/3 of current staffing, is expected to be fully completed over the next year. Upon completion of this program, our overall annualized savings are expected to amount to approximately $2.2 million. In summary, for the rest of this year, our focus will be on our 2 lead compounds, MACRILEN and zoptarelin doxorubicin, while continuing to develop a commercial portfolio through in-licensing, acquisition or promotion of registered products; on improving our resource and organizational efficiency to better flexibility and productivity of operational and development processes; and quite frankly, most of all, our launch of EstroGel and stepping into the selling arena and building value among customers. I will now turn the call over to our CFO, Dennis Turpin, for more details on our financial activities. Dennis?

[Dennis Turpin:]

Thank you, David. First, let me update you on our cash position. Our cash and cash equivalents totaled $39.6 million at June 30, 2014 as compared to $43.2 million at December 31, 2013. The decrease is attributable to recurring disbursements and working capital fluctuation, partially offset by the receipt of $12.2 million in net cash from our January public offering. We have adequate short to mid-term funding to advance our business plan and more specifically, our ongoing Phase III ZoptEC trial with zoptarelin doxorubicin in endometrial cancer, as well as prelaunch activities associated with MACRILEN and sales effort related to our co-promotion agreement recently signed with Ascend for EstroGel. Regarding our burn rate, our average monthly operating burn from continuing operations for the first half of the year was about $2.6 million per month as compared to $2.9 million per month for the same period in 2013. Taking into account our ongoing Phase III ZoptEC trial, sales and marketing efforts and the implementation of our previously announced restructuring plan, including the start of severance payments later this year, we expect that our overall operating burn in 2014 will be around $35 million. Once our restructuring plan is fully implemented in 2015, we estimate total annual payroll-related savings at approximately $2.2 million. Regarding our P&L, for the quarter ended June 30, 2014, R&D costs increased to $5.5 million for the last quarter from $5.3 million in the same period in 2013. This is as we advanced our ZoptEC trial. Our SG&A cost for the last quarter decreased by nearly $2.5 million as our comparable 2013 expenses included, most notably, about $1.4 million in one-off termination benefits paid and $700,000 related to noncash share-based compensation costs. Overall, our net loss from continuing operations for the second quarter was $5.2 million compared to $9.8 million for the same period in 2013. The quarter-over-quarter decrease is mainly due to lower selling, general and administrative expenses and to higher net finance income, which includes noncash gains recorded in connection with the periodic reevaluation of our warrant liability. Well, thank you for your attention. Now back to David.

[David Alan Dodd:]

Thank you, Dennis. Now my colleagues and I will answer any questions you may have, so I'm turning the call over to our operator for instructions on this question-and-answer period. Thank you.

[Operator:]

[Operator Instructions] Your first question comes from the line of Swayampakula Ramakanth from H.C. Wainwright.

[Swayampakula Ramakanth:]

Assuming that MACRILEN gets approved by November 5, how soon can this product be launched, and how is management ensuring that a smooth launch does happen?

[David Alan Dodd:]

RK, thank you. We've built in our plans that should that happen, we'll be launching it in January, and all of our plans have been completed. As of now, we're now at the ready execution type stage, obviously, a little bit of fine-tuning. But as an example, our National Sales Director starts with the company on Monday.

[Swayampakula Ramakanth:]

Okay. One additional question, and then I'll get back on the line. Co-promotion of EstroGel, certainly, it's going to make Aeterna Zentaris a commercial company by the end of the year, but what range of revenues from the co-promotion do you need to achieve to call this a commercial success? And to achieve that, what kind of spend is required by Aeterna Zentaris?

[David Alan Dodd:]

We're not publishing or delivering or, I guess, announcing any types of sales forecast numbers and all. We've obviously built them down to the territory level, where we have baselines defined. We have looked at what the average rep does in a territory, not only in the total category of multibillion-dollar category of estrogen replacement but even within the segment of the non-transdermal patch area and all. And we understand this market extremely well. Some of us have been in it for many, many years. And then we have organized to develop our territories, our 19 territories around these opportunities, and we feel confident that we will begin to see success within the first 12 to 15 months. So as always, one is going to go in -- because these are territories that have not had active selling in, but they have significant potential in those. And so we will be putting people in there. Just as a data point, which I find quite interesting, is every territory where Ascend has a sales rep present, they rank #1 in the category. And so it's very clear that this product is a very -- is a highly well-accepted product, a preferred product in this category, and that by placing sales reps behind it, it creates significant market share growth and usage for EstroGel and all. Frankly, we don't know of another category where you literally look across every territory where you have a sales rep, you rank #1 in your segment, but that's what we'll be dealing with here.

[Operator:]

Your next question comes from George Zavoico from MLV & Co.

[George B. Zavoico:]

First question, I guess, is to David. If you look at when the ZoptEC trial ends, it's fairly -- it's about the same year that the patents run out, and yet your SEC filings say that you're confident that you can extend the patents. What is the basis of your confidence, and how can you reassure investors that you are actually going to get those extra years after zoptarelin is approved?

[David Alan Dodd:]

Sure. Thank you. So the patent expires in 2016, as you note somewhat. And we can't give full assurance. That's for certain. But we certainly will have 5-years of exclusivity in the U.S., 10 years in Europe and 7 years in Canada. Frankly, given what we see as the potential for this product, we feel very pleased, again, on the significance of the opportunity that we'll be able to -- we have patents on production, and it's actually -- excuse me, 8 years in Canada. Dennis is correct, and may I apologize. So anyway, we have patents on production, so that will give us strength there. And we also -- although -- we are actively evaluating opportunities to further strengthen our protection on this, and that is a new endeavor that we are looking at within the company and not really been heavily scrutinized in the past. But it's something that, obviously, as we're progressing with this product, we feel very strongly about. We have patents on production. We have the existing years of exclusivity that will go beyond the patents. And we think, in that regard, we can create significant value when you look at the opportunity and what this product would be addressing in the marketplace. So we feel pretty good about it, but we're not giving up at this stage on any further efforts to strengthen our exclusivity. We'll continue to work on that for now. And should we decide definitively certain steps will resolve in the right outcome, we will proceed with those, and we will announce that publicly, certainly.

[George B. Zavoico:]

And David, just to clarify, you just said that you already have existing years of exclusivity beyond 2016 or...

[David Alan Dodd:]

Yes, yes, as I said, with the product, upon approval, we have 5 years exclusivity in the U.S., 8 years exclusivity in Canada and 10 years in Europe.

[George B. Zavoico:]

So that's already established. You don't have to do anything to be...

[David Alan Dodd:]

That would already be established and all. And not just because of that, but even in this current situation, with the base kind of the expiring in 2016, we continue to have discussions with the potential partners, mostly relative to other geographies who are interested in this compound. Now I also mentioned, as you may recall, that we have disorazol, which is, from a life cycle management, it is a strongly patented next version of zoptarelin doxorubicin and all. And the way that we look at that project is, should zoptarelin doxorubicin be successful, then this product becomes a very high likelihood for successful development and all and has a strong series and patent life surrounding it.

[George B. Zavoico:]

Okay. And final question. I know Ascend is a private company. They don't really reveal sales figures. So you can't really enlighten us as to what their sales are in their territories, in any of the 70 countries where they're really selling in?

[David Alan Dodd:]

Can I? As I said, it's a -- I cannot do that and certainly, since we're not Ascend, okay? We've agreed not to disclose any of their information. But those who are familiar with the market, there's quite a bit of information about EstroGel from over the years in publications throughout Europe, where it's been a major and a leading product and all, and I believe Merck markets it in Canada and all and has for many years and all. And certainly, via IMS and other sources, one can get pretty good indication. One of the things we like about this product, especially -- I've been a fan of this product forever, and this may be the third time I'm associated with it. Its original approval was done under my leadership at another company, where we had licensed it in. This is the area that's highly promotionally responsive. And that's why one sees it -- within its category, wherever there's territory with a rep, as I mentioned, they rank #1. So we feel good about it. It's a good first product for us to have, and frankly, our agreement allows both of us to work together on additional products. And so these 50-plus sales representatives become an asset for us as either one of us, and in some cases, together, we may be having discussions with other companies about additional products coming into our joint portfolio, if you want to think, or collaborative, I would call it, portfolio. Make no mistake. There is no legal joint venture or anything here, but we do have -- our agreement is based upon the ability to continue to collaborate and promoting together on any products that we might agree to.

[George B. Zavoico:]

David, it's nice to see you're so passionate about the product. And I sincerely hope for your benefit that this starts the snowball rolling down the hill, and then you can enlarge your portfolio of products for sale.

[David Alan Dodd:]

That's the key, George. And we continue. We haven't slowed down at all. We've mentioned before we have assembled a coterie of top industry business development individuals who work with us on a contractual basis built on a success fee. They all are highly experienced, very successful background, well connected and all. And for the last many months, they have been working for us, and that basically gives us a much greater real-time span, and we're not doing it part-time because they're highly focused on specific projects. We hope to be making further announcements yet this year about the building of an active portfolio, in which we can put more than 20 reps and 50-plus reps behind it.

[George B. Zavoico:]

The last question is a very quick one. In which quarter do you expect to be able to report your first sales figures for EstroGel?

[Dennis Turpin:]

George, first, we have to understand that it's not sales on EstroGel that will be recorded by Aeterna Zentaris. This is belonging to Ascend.

[David Alan Dodd:]

They book sales.

[Dennis Turpin:]

They're going to book sales, so we will show a commission revenue in our financial statements. And we expect to initiate the activities in the last quarter of this year, and we'll report on the outcome -- the outcome will be reported with the final year-end financial statements.

[Operator:]

Your next question comes from Jason Kolbert from Maxim.

[Jason Kolbert:]

Can you walk us through 2 things? One, on EstroGel, I know that this is a very, very large market, and the patch or non-patch transdermal delivery side represents a sliver of that market. Help us understand how big that market opportunity is today and where you think that market is going.

[David Alan Dodd:]

Okay. Thank you, Jason. The total market is in the multibillion dollars, as you know. About 55% today of the total market is oral and, we feel, dominated by PREMARIN and the PREMARIN family and all. And then you break it down into the very small injectable, but it really is -- the way I've always looked at it, which is different than some, but there's the oral and the non-oral. The non-oral has been growing and continues to grow at the expense of the oral. And within there, there is the -- it's growing moderately. If you recall, the Women's Health Initiative changed the whole marketplace. And when that all hit, it really not only slowed and eliminated the growth, but it reduced the market. Many women left the market. And more recently, in this last year, there was evidence published that said that up to 50,000 women had unnecessarily died who should have been on estrogen or hormone replacement, some combination thereof, who went off prematurely out of the, let's say, the fear factor that's associated with the Women's Health Initiative announcement. So now it's settled back down, and one is starting to see some growth prospects within, especially, the non-oral area and all. So you've got around 55%. More recently, it's actually a little bit less, but let's just use 55% on sort of a moving basis right now. And then the rest of it is split into the patch and the non-patch. Frankly, our approach will be to promote EstroGel as an alternative for any woman who is starting estrogen replacement and all; and then, within that territory, to try and encourage and allow that combination of what that patient would like to have versus what the physician may feel and all. Historically, as you know, at one time, PREMARIN was clearly over 80% of the entire market, but these other elements, just like in so many areas, they give alternatives, and some people prefer to do a topical. They prefer to do a gel. They prefer to do a lotion. Some people prefer to even do a patch and all. And so it's showing a growth element of that. It is very promotional and responsive. The profile of the woman that normally selects EstroGel is she tends to be more highly educated with a higher discretionary income and all. I don't know why that translates, but that is the profile from what has been described and what we've been able to see and all. And so we will promote it not solely as to be used only within the current segment, but we believe that if you look at Europe, where it's the leading estrogen replacement, there is no reason why someone should not have a choice to decide if they want to take an estrogen orally or if they would like to take it transdermally. And transdermally, we would recommend the gel over the patch or other non-patch alternatives. You avoid the first pass effect to deliver there. There've been many published advantages there. A lot of reproductive endocrinologists feel very strongly about it. So what we're doing, we're increasing the promotional noise behind, probably, the strongest well-known brand, certainly, within the non-patch transdermal area.

[Jason Kolbert:]

That's really helpful. And just switching gears to the ghrelin diagnostic, can you walk me through what steps you're taking to develop reimbursement strategies in advance of marketing, formularies, managed care, et cetera?

[David Alan Dodd:]

That's an excellent -- The #1 issue as we have prepared for the commercial is the whole area of access and reimbursement. And I'm going to turn over to Jude, but I'll just say that we recognize that it is such a critical issue that we wanted to also to engage some very leading knowledgeable long-term advisors in this area, who also work the reimbursement network for us on our behalf. And that's what Jude just put in place, and I'll turn it over to Jude at this point.

[Jude Dinges:]

Thanks, Jason, and we have -- as you know, there's some discussion around which of the 2 primary benefits, health insurance benefits, it will fall under, and we think we've got that figured out now. And we've hired, as David said, the leading outsourced coverage firm in the U.S. that has got 10 people assigned to all the major payers in the U.S. And so we feel we've got a good plan, good strategy to go forward, and they are active right now. We've signed a contract with them last month. And so we're ironing all that out.

[David Alan Dodd:]

Jason, let me mention that with the 50-plus reps we will be able to launch with MACRILEN now, what it does for us in that regard is we will be able to literally have a rep in front of 100% of the targeted endocrinologists twice within the first 6 months and all. So our goal is going for very rapid initial trial of our product versus the insulin tolerance test. We believe very strongly, from the market research and the other discussions we've seen, that if we can get these people to try it once, which should not be that difficult because of their negativity on the insulin tolerance test, that the conversion rate can be a much more rapid than traditional pharmaceutical products, which are used in chronic matters and which require "Let me get used it," et cetera. And so this is -- for us, this enables us by going out with 50-plus reps to literally hit a 100% of them and hit them at least twice and get them in there. And our goal is going to be to have them just try and see how it works and all, and we think they'll be convinced very quickly.

[Jason Kolbert:]

David, when you came in to see me a little over a year ago and you said you were going to turn this company around, I was really interested to watch. I have to say you've really done it. It's remarkable. And rarely in my 18 years have I seen a company execute a turnaround this well. Great job.

[David Alan Dodd:]

Thank you, but it's the team, as you well know. I mean, that's -- and fortunately, that's truthful. I mean, we have -- and we have built a really good, dedicated not only leadership team, but people, even in the areas -- in the most challenging area, where we are doing some very painful restructuring now. And that is when the most difficult things, as you know, you go through, that our key people in the line in Frankfurt are leading a very -- as positive as one can be and focused on the future and continuing to urge us to look at such opportunities, which we are seeking to figure how to finance our Erk inhibitor work. And so, I could not be any more pleased to see the reaction of people throughout the company. And frankly, it's helping us now. Our recruitment is going fairly smoothly. We're recruiting people from top-notch companies to join us, leaving leading companies worldwide and in good positions to join us in a much riskier but exciting opportunity. So thank you for your comments. We appreciate that.

[Operator:]

Your next question comes from Pooya Hemami from Edison.

[Pooya Hemami:]

I just have a couple of, I guess, housekeeping-related questions. One is this EstroGel co-promotion agreement. Are there any financial terms that are being paid with Ascend to start this off?

[David Alan Dodd:]

No, not at all. It's a very clean -- I've utilized and benefited from similar style agreements in the past. What we are doing is we are not paying for anything. We are paying for -- we are putting forth our selling effort. So at risk, we are putting forth our selling effort and all. The reason why is we have determined that there's sufficient upside with the characteristics and dynamics, both of this product and within its respective market and all, promotional responsibility, et cetera, et cetera. And these are the things we look at and a number of things when we're looking at co-promotion. And you -- one would also look at the same type of stuff under licensing. So we are sufficiently confident that we will go forward in promoting this, that we can build over the baselines and all and based upon the commission rates, that it makes clearly strongly financial steps.

[Pooya Hemami:]

Very good. And also, can you just go over your current preclinical Erk/PI3K program and really, what you're working on there right now?

[David Alan Dodd:]

Sure. And let me add one thing on this last part because it was in our press release. One, very important to us as we go forward in the commercial arena, it's very expensive. And a number of people and some of you on the phone had pointed it out over the last year, did we realize how expensive it is to be able to put in place an operational structure and infrastructure to launch just your first product, to be able to ship and so forth. And we all know that. And we are -- and so part of the way we have tried to approach whatever we're doing at this stage is to not be burdened with the full cost. So we are doing shared services with Ascend as part of the agreement. And many of the activities that, over the next few years, as we grow and develop our company, we will begin to institutionalize internally with this promotional effort, we will be sharing services. And some activities, we may actually take the lead on for the benefit of both companies. In others, they will. What that will do is we won't be carrying the full burden of cost of being out there, both with MACRILEN and EstroGel, nor will they at this case. So we think that helps out. So let me now get back to your question, who would be appropriate to answer it. Could you just restate it?

[Pooya Hemami:]

Yes, sure. I just wanted to have some broad ideas in terms of where you see the current Erk and PI3K programs right now because, I guess, your next stage...

[David Alan Dodd:]

Okay, sure. I'm going to comment and then turn it over to Richard if I could. So we're very proud to have been recognized in April at the AACR with that. With that happening and up to that point, we have been challenged with our ability to fund, as we would otherwise normally fund, the further development of that program because the ZoptEC trial is a very expensive trial and all. Coming out of that, it really enabled us to focus and relook. So what we have done is we've mapped out what everyone is doing in the cell signaling pathway development area. There are some -- and the rationale, they have approved products. There are some that are just starting clinical. There are some that are pre-clinical. So we put -- we looked at the entire market of who is where. We also looked at who has what from patent portfolio in this area. And we looked at how far we would be before we could get to clinic and what the cost will be. So we did a detailed analysis, and we also looked at our class of compounds. We focused on AEZS-134, but we have, as you might -- as any company would have, a full portfolio of compounds in this arena and all. And we looked at it, and we feel that where we are on the Erk inhibitor pathway has certain advantages, and some of those have been published by people at Merck and at Genentech and all why they feel an Erk inhibitor may have advantages over something, let's say, that's further up the cell signaling pathway. And then we also recognized, frankly, that we're about in the top 5 when it comes down to patents and sort of having a body of knowledge in here and all. We're probably also the one that has the least amount of resources to further develop this, but we feel that from all the important elements at this stage, that we are in a much better position than one otherwise would have thought and positioned much better than a lot of companies and all. I'm going to turn it over to Richard, who can comment maybe on some more details on how we're trying now to solve this dilemma and approach it.

[Richard Sachse:]

Yes, thanks, David. As you might well be aware, the MAPK kinase pathway is one of the key pathways currently, and Erk is relatively downstream in this pathway and thus, dealing with some sort of resistance, which is developed against other and more upstream-related targets in this pathway. And this is why Erk now is really regarded as one of the most promising targets in the entire MAP kinase pathway. And we have some very good preclinical results demonstrating a promising antitumor efficacy in a variety of different tumor models with our compound in tumors within activation of this pathway. And as David alluded to, this compound is really in the frontier of development candidates. We obviously have only limited resources behind it, but we're bringing it forward to the next stage, and we are very proud in this compound.

[Pooya Hemami:]

Perfect. Okay, that's very helpful. And this is -- I guess the last housekeeping question is, I see on your financial statements there's been spending done on perifosine. Can you maybe just describe what's that for? Is the product is still being looked at for development?

[Dennis Turpin:]

This is not a material expenditure because we have to support the development of perifosine before our partner, which is Yakult in Japan. Yakult keeps developing the compound in certain indications, so we have to support this technically.

[David Alan Dodd:]

And they will have results coming forward within the next year. They will be having clinical results coming forward in certain gynecologic cancers, and they have taken a higher dosing approach and all. We were recently with them, and so we support them not in a material manner, but should they be successful, then that will result in value coming to us.

[Dennis Turpin:]

We would have access to milestone royalties on that.

[Operator:]

[Operator Instructions] Your next question comes from Swayampakula Ramakanth from H.C. Wainwright.

[Swayampakula Ramakanth:]

David, if you're looking for additional opportunities, as you are, to license or to co-promote, what product categories will you be targeting at this point?

[David Alan Dodd:]

Well, now that we have started, we believe -- Well, we know there are a number of opportunities in the endocrine area that appeal to us, we just have to make certain they appeal to the other partner for us to either license or to promote or even to acquire the product. So we are looking -- and that would fit, as you can imagine, exceedingly well from a number of a parameters. It does not require a lot of sales representatives. We already have now at least 50 sales representatives that could carry that. And so we could do a very good job within there. And so we are looking at further products within endocrinology and all. We are also looking at -- and when I say looking at here, what I mean by that is there's some level of discussion or active discussion underway and all. And so it's not simply a book exercise. But it doesn't mean -- some of these do not progress as quickly as one otherwise might like, as you well know. So endocrinology is a good area. Some selected areas of oncology in supportive care oncology, we find very appealing to us. We like the concept. If we can shake loose on certain opportunities to work in conjunction or to pick up something related more to any area in gynecologic oncology, we like. And generally, we look for non-primary care, large sales force dependent types of opportunities. We've had some and sometimes it's hard to walk away from anything, but we have, I guess, our own respective experiences, we're very disciplined here, and it's been easy for us to say no to a number of things. But those are the core areas. I will also say that we believe this area -- this step into women's healthcare is -- it fits all the important criteria that we're looking for. And there is, I'll say, an endocrinology overlap from the area of endocrinology that we normally have been looking at and going into sort of a women's healthcare area. And we know that there are various opportunities to amass additional products, and in doing that, again, we have the opportunity to work in conjunction with Ascend on that. So we're looking more and more in those areas also.

[Swayampakula Ramakanth:]

One last question. This is on R&D spend. Based on the filing, I see that you're expecting to spend a little bit higher than what has been the range in the last couple of years on R&D. Is this just a one-off for 2014, or how should we expect the trend over the long term?

[Dennis Turpin:]

Okay. RK, first, the increase in the guidance for the R&D for this year, okay, is about $2 million. This is mainly related to severance payments, so this is a one-off payment that will be done. Part of it will be paid by the year end and part of it during 2015, okay? So it's like a provision, a noncash provision that we see that is increasing the R&D level. Now for next year, our R&D level, we did not provide any guidance yet on this. What we can tell you is that we have enough cash for the next 12 months-plus to execute our programs. We are revising our R&D level. Obviously, you know that the Phase III study with ZoptEC is in, let's say, high intensity with the recruitment that is, I would say, excellent. So we have all sites that are performing. Recruitment is going very well. So the good news is it's going to be on time. As far as R&D expenditures is concerned, we don't see any surprise from our plan -- from our original plan.

[David Alan Dodd:]

I would add, RK, we are very pleased. No one ever gives credit to our CROs. It seems like you complain about them falling behind and all, but our working relationship with Ergomed and their discipline and attention to this program has been very impressive, and we're very pleased with how it's all going.

[Dennis Turpin:]

RK, I should mention also that we do have -- as you all know, the goal of the company was to have enough cash to see the interim results. The first interim results will be disclosed in the first half of next year, so we secured enough money to see that.

[Operator:]

[Operator Instructions] There are no further questions at this time. Mr. Dodd, I turn the call back over to you.

[David Alan Dodd:]

Thank you. And I just want to thank everyone for your attention, your good questions and all. And we look forward to keeping you updated and updating you on an ad hoc basis should the activities, announcements dictate us. So thank you, and we look forward to speaking with you in the near future.

[Operator:]

This concludes today's conference call. You may now disconnect.