Flexion Therapeutics, Inc.
Q4 2015 Earnings Call Transcript

Published: 11 Mar 2016

[Operator:]

Good afternoon ladies and gentlemen, and welcome to the Flexion Year End 2015 Financial Results Conference Call. My name is Kat and I will be your coordinator for today. [Operator Instructions] We'll be facilitating question-and-answer session towards the end of today's conference. [Operator Instruction] I will now turn the call over to the company. Please proceed.

[Fred Driscoll:]

Thank you, Kat. And good afternoon everyone. This is Fred Driscoll, Chief Financial Officer, and I thank you for joining us on today's year end 2015 financial results conference call. Both the earnings release from this afternoon and an archive of this earnings call can be found on the Company's website at flexiontherapeutics.com. Joining me on today's call is Flexion's Senior Vice President of Commercial Operations, Dan Deardorf; and President and CEO, Dr. Michael Clayman. Before we begin our prepared remarks, I need to remind you that we will be making forward-looking statements during this teleconference that include financial, clinical, and regulatory projections. Statements relating to future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding operating plans, cash usage and clinical and regulatory developments and anticipated milestones, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Flexion cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties which change overtime. Further information on the factors and risks that could affect Flexion's business, financial conditions and results of operations are contained in Flexion's filings with the SEC, which are available at www.sec.gov. These forward-looking statements speak only as of the date of this call and Flexion assumes no duty to update such statements. With that said, I will now turn the call over to Flexion's CEO, Mike Clayman.

[Michael Clayman:]

Thanks, Fred. Good afternoon everyone. Thanks for joining us on our 2015 year-end financial results conference call. The agenda for today will be to discuss our 2015 and most recent accomplishments and follow that with our expectations for the remainder of 2016. I'll turn the call over to Fred to summarize the year end audited financial results. And after that we will take your questions. 2015 was a truly transformational year for Flexion as we made significant progress across our entire business. The driving force behind the success we have had this past year is based on Zilretta. For those of you who may be new to the Flexion story, Zilretta is an investigational sustained release intra articular steroid that we are developing for patients with moderate to severe osteoarthritis. It combines a commonly administered steroid, triamcinolone acetonide or TCA, that has been approved by the FDA with a sustained release polymer called PLGA which is then manufactured as microspheres. Following injection into the knee, the microspheres slowly dissolve in the fluid of the joint, also called the synovial fluid releasing their component sugars and TCA in parallel. Given its specific dissolution characteristics, in clinical trials Zilretta achieves therapeutic concentrations of drug in the joint for months while minimizing drug exposure in the blood. In clinical trials to-date, Zilretta has also demonstrated following a single injection, rapid onset, durable and clinically meaningful pain relief. While avoiding systemic side effects which remain a liability or many currently available away therapies. We began 2015 initiation of our phase III clinical trials of Zilretta in patients of the knee and I'll speak about the results of this trial later. On a separate note, we added Scott Canute to the Board of Directors. Scott is a seasoned pharmaceutical manufacturing operations executive and the former president of global manufacturing of Eli Lilly Company and subsequently at Genzyme Corporation. Scott has already made significant contributions providing valuable perspective and counsel regarding manufacturing and other matters. In April we announced that we had been awarded a $2 million grant from the U.S. Department of Defense to conduct a phase II trial of Zilretta compared to immediate release TCA in service members with post-traumatic OA. In June, data from our first phase 2b efficacy trial of Zilretta which demonstrated better and longer pain relief compared to the standard of immediate release TCA. Was published in the Journal of Bone and Joint surgery. A pre-eminent journal amongst orthopedic surgeons who are key decision makers in the management of OA patients. In August we announced that we signed an agreement with Patheon as our contract manufacturer for our planned commercial manufacture of Zilretta. In tandem with the announcement we secured a $30 million non-dilutive debt financing with Silicon Valley bank and MidCap financial to provide the funding for the manufacturing expansion with Patheon. The progress that Patheon has made in just 7 months from the signing of the agreement has been nothing short of remarkable. They have constructed a clean room facility to our specifications. Have ordered, received and qualified all the requisite equipment and our running Zilretta batches as we speak. In September we were pleased to learn that the FDA had granted fast track status to Zilretta. The FDAs fast track program was designed to facilitate the development and expedite the review of new drugs that are intended to treat serious or life threatening conditions and that demonstrate the potential to address unmet medical needs. Drugs with fast track designation generally qualify for quality review if supported by clinical data at the time of NDA filing thereby expediting the FDA review process. Additionally fast track designation allows a company to submit complete sections of a related NDA on a rolling basis. It's encouraging that Zilretta has received fast track designation from the FDA which now clearly recognizes OA as a serious disease and that Zilretta has the potential to provide meaningful improvement over the existing therapies. In September we reported top line results from the first of two pivotal clinical trials of Zilretta. In the phase 2b trial 40 milligrams of Zilretta compared to Placebo, demonstrated statistically significant and clinically meaningful average pain relief over weeks 1 through 12. With a p-value of 0.0012 and over weeks 1 through 24 with a p-value of 0.0209. At weekly time points 40 milligrams also demonstrated superiority to Placebo in pain relief beginning at week 1 continuing to week 11 an also at week 13 where p-value was less than 0.05 at each time point. The primary endpoint of the trail, superiority and pain relief at 12 weeks did not reach statistical significance with p-value of 0.0821. In December we initiated a pharmacokinetic open label single administration clinical trial at 4 U.S. sites to study 40 milligrams of Zilretta administered as a single 5 ml intra-articular injection in 50 patients with OA of the knee. The objective of the study is to provide additional characterization of local concentrations of TCA in the knee over 20 weeks following a single injection. Finally, in February of this year we reported a positive top line phase 3 clinical trial data for Zilretta whereby it met its primary end-point at week 12. Demonstrating highly statistically significant p-value less than 0.0001, durable and clinically meaningful pain relief against placebo in patients with moderate to severe OA knee pain. In addition, Zilretta achieved statistically significant and clinically meaningful analgesia against placebo at each week. Beginning at week 1 and continuing through week 16. Importantly, patients treated with Zilretta experienced on average a 50% reduction in pain from base line over weeks 1 through 12. In pre specified secondary measures compared to immediate release TCA, the most commonly injected intra-articular steroid, Zilretta achieved statistical significance at each time point through 12 weeks in OA specific measures including WOMAC A (pain), WOMAC B (stiffness), WOMAC C (function) and also in the knee injury and osteoarthritis outcome score so called KOOS, quality of life subscale. Zilretta was numerically superior to immediate release TCA in weeks 2 through 12 on daily pain rating scale although it did not achieve statistical significance in that measure. Overall, we are highly encouraged by the strength of the data from this study an while it is impossible to predict exactly how the FDA will respond, we believe the data positioned us well as we look forward to our upcoming meeting with the FDA as we establish the file ability of an NDA for Zilretta, something we expect to do in the second half of this year. Our confidence in the path of outcome from that meeting is bolstered by feedback we have received from experienced regulatory consultants who have reviewed the data under confidentiality. Additionally, we have presented under confidentiality, the full data set to a number of prominent orthopedic thought leaders last week at the annual American Association of Orthopedic Surgeons meeting. The reaction to the data was very enthusiastic. In particular the statistically and clinically relevant outcomes that Zilretta demonstrated on the osteoarthritis measures of the WOMAC and KOOS versus both immediate release TCA and placebo. It is this type of feedback from subject matter experts that also gives us great confidence in Zilretta. Ultimately our success comes down to our greatest asset, our people. And to their dedication for making a difference in patients. Over the past year we have significantly bolstered our outstanding employee base by selectively hiring superb individuals who increased our workforce from 30 to today's head count of 52. Several highly skilled professionals with deep domain experience and expertise and discipline such as clinical research, regulatory affairs, quality assurance, commercial operations, human resources and legal affairs are now on board in making important contributions. Looking forward to the rest of 2016 we expect to achieve several key milestones. First, we have scheduled a pre-NDA meeting with the FA and we remain optimistic that they will view the totality of our clinical data as supportive of an NDA filing for Zilretta in the second half of 2016. Second, we expect to initiate a clinical trial of Zilretta in patients with OA of the knee who also have diabetes. A total of approximately 36 patients will be randomized and blood glucose levels will evaluated using a continuous glucose monitoring device. The primary end-point of this trial is the average blood glucose over time from base line through 72 hours post injection. For patients receiving Zilretta compared to patients receiving immediate release TCA. Let me place the potential importance of this trial in context. Approximately 20% patients with knee OA have diabetes in clinical trial data demonstrated when these patients when treated intra-articular injections of immediate release TCA as well as other corticosteroids can experience substantial elevation in blood glucose levels in the days post injection. These increases in blood glucose coincide with peak plasma concentration of the injected steroids and are thought to reflect the anti-insulin effects of such drugs. Since Zilretta has demonstrated minimal systemic exposures in clinical trials and much lower plasma concentration than those seen with immediate release TCA, we believe that administration of Zilretta has the potential to avoid elevated blood glucose levels an thus be positioned to confer patients with diabetes not only better pain relief but improved safety as well. Should the data support this, we expect that Zilretta could become frontline therapy for approximately 800,000 diabetic patients in the U.S. currently receiving immediate release steroids for OA of the knee. With that, I will turn the call over to Fred to review our year-end 2015 financial results.

[Fred Driscoll:]

Thanks, Mike. For 2015 the company ordered a net loss of $46 million as compared to a net loss of $27 million for 2014. R&D expenses were $33 million and $18 million for the year ended December 31, 2015 & 2014 respectively. The increase in R&D expenses of $15 million in 2015 as compared to 2014 was primarily a result of increased costs related to the company's clinical development program for Zilretta and expenses associated with head count additions throughout 2015. Administrative expenses with $13 million and $9 million for the years December 31, 2015 & 2014 respectively. The increase in general administrative expense of $4 million in 2015 was primarily due to an increase in stock compensation expense and other related employee cost due to increased head count. At December 31, 2015 Flexion had cash, cash equivalents, marketable securities and long term investments totaling a $119 million compared to $151 million at end of 2014. As a matter of corporate practice we do not provide guidance due to being a pre revenue stage company. However, from a liquidity and cash resource perspective, we believe that our existing cash resources will provide a runway into mid-2017. We expect R&D expenses to increase over the next several years due to late stage trials being conducted for Zilretta. Expenses and capital additions surrounding scale up activities and manufacturing, pre-clinical and clinical work associated with FX-07 and the significant ramping costs associated with pre and post commercial launch activities of Zilretta. We also expect general administrative expenses will grow as well in support of the anticipated growth in the after mentioned functional areas. That concludes our prepared remarks and operator we will now open the call for questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Randall Stanicky with RBC Capital Markets. Your line is open. Please go ahead.

[Randall Stanicky:]

Great, thanks guys, can you just talk about the timing of the FDA meetings, has anything changed on that front? And what do you need to do to prepare ahead of that meeting? Then I have a couple of follow-ups.

[Michael Clayman:]

Sure, we are not guiding to a specific data, I will simply say it is scheduled. We expect that we will be in a position to announce to the world the outcome of that meeting once we receive minutes from the FDA. I expect that this will all play out and we will be communicating with other and you in the coming months.

[Randall Stanicky:]

Okay, got it and Fred can we just go back to your discussion around some of the spend. When do we start to see the sales and marketing line start to ramp up, in other words when should we expect you guys to start spending on pre-launch activity and then a second question Fred, how do we think about the R&D and the gains through R&D throughout this year?

[FredDriscoll:]

Yes, I would say that in 2016 we will start to see an increase over the course of this year, specifically in the areas, I think the marketing related areas, that's where primarily the budget is focused and I think as we get into next year ahead of launch we will obviously start to see increases in the sales expenses. So that gives you an idea but its already started, we have a marketing team under Dan Dierdorf who is here with us today in place and that will continue to grow through the rest of the year. In relation to R&D, as Mike mentioned and we will continue to have additional clinical trials like Mike mentioned the diabetes trial, we also in our public documents have talked about repeat dose administration so that will be something that we are coming on down the line so we would expect to continue along sort of at the same rate that we have been this year.

[Randall Stanicky:]

Okay, that's helpful. Can I squeeze one more in there? Mike we haven't talked a lot about the XUS opportunity, how specifically, do we need to see an NDA file and more progress on the U.S. front before we can reasonably expect some activity in U.S. and is that an opportunity for potential proceeds as you think about helping to fund a launch in the U.S.?

[Michael Clayman:]

Yes, I don't rather say absolutely its XUS partnerships are very much on our radar screen as we realize they very much have the potential to provide financing and runway. I will simply say that we are having active discussions with people and what I have said before is that we won't guide to any expectations. The future of the company does not depend in any way on an XUS partnership, having said that we think that the potential of Zilretta can be best leveraged with partnerships with XUS. I don't think there is a specific gating item. I think the phase 3 that we have generated I such that once we have that presented and are in a position to discuss that robustly, I think that has a real potential to accelerate discussions.

[Randall Stanicky:]

That's great, thanks guys.

[Michael Clayman:]

Thanks Randall.

[Operator:]

Thank you. Our next question comes from the line Chiara Russo with Cantor Fitzgerald. Your line is open, please go ahead.

[ChiaraRusso:]

Yes, hey guys, thank you very much for taking my call. A couple of really quick questions here. I know you guys are looking to go ahead and publish them [ph]. Could you potentially narrow down expectations around that publication and then secondly, about the whole diabetic patients, you obviously got some nice databases ready, have you done sort of secondary analysis on the patient population? And if you have what do those results show?

[Michael Clayman:]

Yes, Chiara, in terms of presenting the data I would say that we are moving as aggressively as humanly possible to find -- to present at a prominent venue. There are a handful of rheumatology and orthopedic venues between now and the end of the year. We are exploring presenting at those and frankly the earliest ones that we can. I simply say stay tuned. Once we have an abstract submitted, we will be communicating where exactly we shall be presenting and when. Regarding the diabetes population there is a published literature that demonstrates that patients who get immediate release steroids, diabetic patients, can experience increases in blood sugar of a 100 milligrams to 300 milligrams. In close temporal relationship to the injection and what's interesting is if you plot the rise in blood glucose against the rise in plasma steroid concentration they're completely overlapping. So it's reasonable to assume that steroids and its anti-insulin effect is driving the glycaemia. Given the fact RPE plasma concentrations after Zilretta injections are less than 1/20th of the p-plasma concentrations associated with the immediate release TCA, we think it's quite a plausible hypothesis that we will avoid hyperglycemia. And this turns out to be on occasion, I would say rarely of substantial clinical consequence to patients. It is more routinely an inconvenience to patients and treating physicians and it is the kind of thing that we believe that assuming we have strong data that demonstrates that we are hyperglycemia sparing, it will become another compelling reason to use this product and potentially use it front line. We know anecdotally that there are diabetic patients who have gotten a steroid injection into their knee once experience hyperglycemia and said I will never do that again and we also know anecdotally their physicians who shy away from steroids and diabetics for the same reason. So I think it is the kind of thing that we have the potential to not only play on dramatically better efficacy but also play on better safety.

[ChiaraRusso:]

Thanks guys.

[Michael Clayman:]

Thanks Chiara.

[Operator:]

Thank you. Our next question comes from the line of Jim Molloy with Laidlaw. Your line is open, please go ahead

[Unidentified Analyst:]

Hi guys, this is actually Frank on for Jim. Thanks for taking the questions. So I had a couple, first one was, why is it that the mean age for OA diagnosis has gone from 72 to 90s to now about 56 and is this the main reason for so many more knee replacement surgeries in general?

[Michael Clayman:]

Yes, it's a great question. You know I think that the drivers for OA in general are ageing, obesity and sports injuries. The simple calculus on obesity is it just creates additional mechanical stress and more interesting calculus on obesity is it is actually metabolic syndrome contributes inflammatory mediators and may contribute to disease itself and on the injury side of things we say that before ACL, for example as a young athlete you have a 60% chance of becoming symptomatic OA in the next 10-15 years so imagine an 18 year old who tears there ACL playing soccer, football, whatever it is, then 10 years later at the age of 28 or 30 you know has symptomatic OA. If you couple that with the fact that 50% of patients who were diagnosed with OA of the knee will go on to knee replacement. You have a big driver to knee replacements. I think that the obesity and sports injuries together conspire to drive the age down and I think the fact that someone who is otherwise physically very active is now constrained in their activity for reasons progressively worsening knee OA pain is the kind of patient who is going to want to have that knee as functional as possible and that's a driver to knee replacement. The problem is replace somebody's knee at the age of 50 for example, you can be certain that they will be back in the OR again in the next 15-20 years because these knee prosthesis all have finite life spans and physicians in general and surgeons in general are incentive to delay that surgical procedure as much as possible as the IB of going back in on a replaced knee, having to do a revision, taking out the old prosthesis and putting in a new one is not nearly as straightforward surgery and does not have the same magnitude of success overall as the original surgery. So, for a lot of reasons, the field is looking for better more effective therapies to dress the pain that drives the decision to have a knee replacement in the first place.

[Unidentified Analyst:]

That makes all the sense and so I understand NRS has to be measured for rapid onset of effect but why is it that WOMAC is so much more relevant in OA population and are all WOMAC a, b, c, are they all as important to one another or one more important than another?

[Michael Clayman:]

I would say that WOMAC certain number of years ago and embraced by the field of osteoarthritis and is kind of gold standard of assessment. We, as you're eluding to Frank we look to NRS (Numeric Rating Scale) for an average daily pain characterization so that we could carefully assess the onset of pain relief and that's why we use those. When we began our development program and stayed with them but we have always had WOMAC as secondary, pre-specified secondary endpoints in all of our efficacy trials. And the difference is the NRS, the question for the NRS is how much pain have you had in the steady knee in the last 24 hours. You do that on an automated phone line, you are not talking to any individual and you punch in the number and you are done. WOMAC on the other hand is one very, typically 2 to 4 weeks and in our study every 4 weeks it coincides with a visit to the site, you sit with site staff, you are questioned about pain on for example WOMAC (a) pain, walking on flat surface, one question, upstairs, downstairs, getting into bed and getting out of bed so total five questions. That really speaks to the kind of pain that gets solicited with weight bearing. So it's a way, it's a different way to look at things. We are particular heartened that we across all three WOMACs, function is especially important. Its important measure of indirectly a quality of life and WOMAC sees 17 questions of the activity of the daily living. How much trouble are you having shopping for groceries, getting in and out of a car, etcetera and those characterize again. Typically weight bearing activities that compromise the ability to carry out the activities that we all take for granted and someone with OA does not. So to improve that meaning is to us, and the opinion leaders who we talked to is a big deal. And WOMAC (b) is a question about stiffness, 2 questions about stiffness at awakening and going to be at night. Most analgesics do not hit on, if they hit on WOMAC (a) they frequently do not hit on WOMAC (c) function and they very uncommonly hit on WOMAC (b) stiffness, so having hit across all of those and in addition the KOOS quality of life, I think positions very well from making statement about the effect of this drug and this patient population.

[Unidentified Analyst:]

Great, this takes us into the next question. So, last week at the American Academy of Orthopedic surgeons in Orlando, were there any anecdotal stories as what they were most impressed with and did they show any concern of failing to stat six for NRS and Zilretta versus TCA?

[Michael Clayman:]

Yes, it is a great question. I think what in particularly impresses surgeons is the magnitude of pain relief and the consistent magnitude of pain relief. You know it's a regulatory issue how well you separate from placebo. It's a patient and physician issue that absolute magnitude of pain relief. If you are a patient in pain frankly it's about how much better you are doing than you would do with placebo and the consistency 50% to 60% pain relief across all 3 studies and the rapidity of pain relief so within a week, you see beginning is separation from comparator or TCAIR or placebo, the depth of the magnitude of pain relief and the durability of pain relief. You put that all together, I think it is particularly impressive. And marry to the WOMAC considerations is also quite impressive. They don't speak NRS, when you talk NRS to an orthopedic surgeon, it's not uncommon to get a relatively blank stare because that's not the language that they use but they are all familiar with WOMAC and KOOS.

[Unidentified Analyst:]

Okay, great. In terms of doctors, would most doctors like to see repeat dose data or if it works, they will use it again if it works and would you keep going on with the repeat dose study for those interested in the data?

[Michael Clayman:]

Yes, I think what we have learned from what Dan has led is that both pairs in most physicians are very comfortable with the idea that if this product works effectively for their patients, they will use it again and they will not rely on repeat dose data. We have said that there is segment of the population not pair so much but there are prescribing physicians who would like to see repeat dose data and that's why it continues to be in plan.

[Unidentified Analyst:]

Great, thank you very much.

[Michael Clayman:]

Thanks.

[Operator:]

Thank you. Our next question comes from the line of Kim [ph]. Your line is open, please go ahead.

[Unidentified Analyst:]

Hi guys, thanks for taking my call. This is actually Brennan on for Kim. So my first question was around your FX-007 program. You mentioned in some of the outlook for future R&D cost, potential, pre-clinical, clinical, previously might have said that there might have been a read out from pre-clinical studies to inform the path forward for the program, this quarter, if you can talk more about if that has already occurred and what are your thoughts for the future of that program?

[Michael Clayman:]

Yes, I only recall guiding to a quarter, if I ever said that that was a misstatement. What we said consistently this year, is that we are generating important pre-clinical data this year which will help us decide on the future of that program and once we have those data in hand and we have made a decision, we will communicate that.

[Unidentified Analyst:]

Okay, so I will be looking at that.

[Michael Clayman:]

Yes, we are in the process of collecting the data and the best will be to stay tuned and we will be in touch when we have something to say.

[Unidentified Analyst:]

Okay, great and then as far as the G&A cost and the increases you talked about the employee cost and the increased head count, was the majority of those costs for the fourth quarter or were they spread evenly over this year as far as your hiring and your stock compensation?

[Michael Clayman:]

The increases were spread throughout the year I would say we did see a little bit more ramp in the fourth quarter which is historically traditionally in most businesses that ramping up at the end of the year and the more appropriate cost into it but as far as head count is concerned it was pretty much throughout the year.

[Brennan:]

Okay great, thank you guys so much.

[Operator:]

Thank you [Operator Instructions] Our next question comes from the line of Serge Belanger from Needham & Co. Your line is open, please go ahead.

[Serge Belanger:]

Hi, good afternoon. A couple of questions. In your discussions with Orthopedics AAOS I am curious if there was any talk about premium pricing or market positioning and also wanted to hear your thoughts about both of these issues.

[Michael Clayman:]

Serge, I am going to turn that over to Dan Dierdorf, Senior VP, who spent a good part talking with AAOS.

[DanDierdorf:]

Thanks, in a number of those conversations actually one of things that did arise was there perspective that this should be in fact be the first line steroid. We have some indications from pairs that this might be the second line steroid you might have a fail a first line steroid. And there was actually some very strong opinions in that room that there should be a push and support for this for a first line therapy. I would say we didn't delve into that too much. We were under confidentiality going through the data in detail to understand the clinical ramifications of that so really didn't touch a whole lot on pricing with that group last week.

[Serge Belanger:]

And when they talk about, he read outs per line, do they compare it to HA and just immediate release steroids?

[DanDierdorf:]

Yes, by and large I think they saw this as potentially more effective therapy than both of those and so, therefore would be there place to go to get their patient most pain relief they could.

[Serge Belanger:]

And then Michael, just want to get an update on where you are vis-à-vis CMC and I guess NDA filing?

[Michael Clayman:]

Yes, I mean we, our CMC efforts are progressing very nicely and are on track and I will just say this Serge continue to be consistent with the filing in the second half of this year.

[Serge Belanger:]

And one last one, I noticed you are initiating a couple of studies in patient populations. Should we expect additional smaller I guess this year and next year?

[Michael Clayman:]

I just say stay tuned, we are as you understand I know, extremely bullish about this product and it's potential to make a difference for a variety of patients. We are exploring a number of different options. It's premature for us to be speaking to specific studies. But just like we did with the diabetes study, once we have committed to a study then the studies initiation is imminent. We will communicating that but let me say this. I won't specify timing but you can be confident that there will be additional clinical development associated with this product.

[Serge Belanger:]

Okay, thanks for taking the questions.

[Michael Clayman:]

Thanks Serge.

[Operator:]

Thank you. Our next question comes from the line of Mark Landy with Northland Capital. Your line is open, please go ahead.

[Mark Landy:]

Good afternoon, thanks for taking my questions. Mike just digging a little bit into the diabetes study. Forgive me if I didn't chair, did you give us the size and the time frame of the study?

[Michael Clayman:]

It's 36 patient study, 12 patients in each of 3 arms. It has potential to be a really interesting study because it's using continuous glucose monitoring so you actually get curves with blood glucose's basically sampled continuously, so you can easily construct credible areas under the curve which gives you excellent discriminatory power between arms. There will be 12 patients in a saline placebo arm, 12 patients in TACIR arm and 12 patients in a Zilretta arm. And it turns out the placebo arm is probably important because to that extent that for some patients getting the injection invite any illicit degree of stress reaction, that itself might be associated with some anti-insulin effect and some hyperglycemia so we have to control for that. I will say on the timing of this, the initiation is imminent and Mark the completion will be rolling out in the coming months and as soon we have the data for the study we will be very happy to announce it.

[Mark Landy:]

So Mike, digging into some of the parameters around the continuous monitor, all patients required to be on the same monitor from the same company or is there?

[Michael Clayman:]

Oh yes, the continuous glucose monitoring is becoming mainstream. This has only been used as a research tool and absolutely we will control. We will have single vendor, we will have scrupulous attention to detail in terms of ensuring patients are able to use this properly, in terms of inserting the sensor etcetera and we will be dealing with sites who are quite comfortable with the technology. It turns out that Mass general's one of the centers of excellence for glucose monitoring and there is a thought leader there that we have worked with very closely to design this study.

[Mark Landy:]

Okay, so I have done a good amount of work with those and just furthering on, in terms of the inserting the sensor, would you be requiring a new sensor to be placed before the injection as there is some issues with the calibration of patients with different sensors or is it just kind of traditional day to day use of those things?

[Michael Clayman:]

It's a great question Mark, I have to confess I don't know the answer to that. We can certainly find out exactly offline. I will say that I am highly confident that the design of this study down to that level of detail has been very rigorously considered and will form a basis for us generating a credible discriminatory data set.

[Mark Landy:]

You know lastly on that Mike, are you looking at in terms of the data that you get, are you looking at the swings from base on respect to A-1c or are you looking at the dose of insulin that's required?

[Michael Clayman:]

Well we are actually just characterizing hyperglycemia Mark and these would be non-insulin requiring diabetics so that the study is not compounded by changes in insulin dose in response to hyperglycemia. And hemoglobin A-1c, Mark is a measure that actually is basically a calculus blood glucose over several months of time period or at least 3 months of period. This is really acute characterization over 72 hours of hyperglycemia.

[Mark Landy:]

Okay fair enough. I sometimes look at all types of diabetes as type as it is sometimes called when it's required. And then lastly, assume if you get a positive outcome here Mike, what would the next steps be to drive this process forward because this certainly is an interesting opportunity?

[Michael Clayman:]

Well, as is our want. We would drive hard and fast to present the data assuming they are positive, present the data at a prominent scientific meeting move rapidly to construct the manuscript an submit that and make it a part of the regulatory filing at the right time.

[Mark Landy:]

Fair enough, congratulations, thanks guys.

[Michael Clayman:]

Thanks.

[Operator:]

And I am showing no further questions at this time and I would like to turn the call back over to Mike Clayman for any closing remarks.

[Michael Clayman:]

Thank you and I would like to thank everyone for their participation in today's call. Do look forward to updating you on our progress through the coming years and I hope everyone has a good rest of the day. Take care.

[Operator:]

Ladies and Gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.