ObsEva SA
Q4 2018 Earnings Call Transcript

Published: 5 Mar 2019

[Operator:]

Good day ladies and gentlemen and welcome to the ObsEva Fourth Quarter and Full Year Financial Results and Business Update Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instruction will be given at that time. [Operator Instructions] And as a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Mario Corso, Senior Director of Investor Relations. Please go ahead.

[Mario Corso:]

Thank you operator. Good morning everyone and welcome to today's call to review ObsEva's fourth quarter and year-end 2018 financial results and business update. On this call, I'm joined by Ernest Loumaye, our Co-Founder and Chief Executive Officer; Jean-Pierre Gotteland, our Chief Scientific Officer; Wim Souverijns, our Chief Commercial Officer; and Tim Adams, our Chief Financial Officer. During the call today, we will make forward-looking statements and we remind you of our Safe Harbor language. We will make forward-looking statements including, but not limited to, statements relating to financial results and trends; the process and timing of anticipated future development of ObsEva's product candidates; our oxytocin receptor antagonist, nolasiban; our gonadotropin-releasing hormone or GnRH receptor antagonist, linzagolix; and our prostaglandin F2 alpha receptor antagonist, OBE022, including clinical trial results and potential regulatory pathways towards gaining approval of product candidates in the U.S., Europe, and Asian countries; as well as a therapeutic and commercial potential on ObsEva's product candidates. These forward-looking statements are based on ObsEva's current expectations and inherently involve significant risks and uncertainties. ObsEva's actual results and timing of events could differ materially from those anticipated in such forward-looking statements and as a result of those risks and uncertainties which include without limitation risks related to ObsEva's development programs; clinical trial timelines and results; the uncertain clinical development process including adverse events; the success cost and timing of all development activities and clinical trials; the market potential for ObsEva's product candidates; the accuracy of ObsEva's estimates regarding expenses, capital requirements, and the need for financing; and other risks detailed in the risk factors and elsewhere in ObsEva's U.S. Securities and Exchange Commission filings and reports including its 20-F report to be filed on or around March 5th, 2019; and its 20-F report filed on March 9th, 2018. ObsEva undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information, future events, or changes in its expectations. I will now turn the call over to Ernest Loumaye, our Chief Executive Officer.

[Ernest Loumaye:]

Thank you, Mario. I appreciate the opportunity to review the excellent progress ObsEva made in 2018, its second year as a public company; and also to outline the exciting time I had in 2019 and beyond. While 2017 was a year for initiating clinical trials and laying the groundwork for the future, 2018 was a year of multiple data feed-outs for us and we were exceedingly pleased with the results. Most notably, for our two lead program, the oral oxytocin receptor antagonist, nolasiban, for improving IVF outcome; and the oral generator receptor antagonist, linzagolix, for the treatment of endometriosis-related pain and heavy menstrual bleeding due to uterine fibroid. Data from the IMPLANT 2 Phase 3 trials of nolasiban demonstrated statistically and clinically significant increase in both pregnancy and live birth rates among women undergoing IVF procedure, which we believe is a first compound of this class ever to do so in randomized controlled trial. And result from the EDELWEISS Phase 2b trials of linzagolix in the treatment of endometriosis associated with pain showed a clinically meaningful and sustained response in nearly three out of four women at the low dose of 75 milligram as well as an impact on bone mineral density, or BMD, which we believe will not require the addition of hormonal add-back therapy or ABT. Taken together, we believe this data create tremendous potential for the first-time therapy with a GnRH antagonist class. Now, looking ahead to 2019, we would be generating further important clinical data on both of these compounds and importantly, moving toward ObsEva's first regulatory filing later this year, a marketing authorization application in Europe for nolasiban as moving in the transition from the pure development stage company to -- of a commercial company. More on that in a few minutes. I would like to spend a few minutes reviewing our recent and upcoming preclinical milestones before turning it over to our Chief Commercial Officer, Wim Souverijns, who will talk about our emerging commercial strategy planning. It is important to remind everyone that IMPLANT 2 trials results of nolasiban disclosed in 2018 showed the potential for increasing rates of 10 weeks ongoing pregnancy as well as live birth by approximately one-third in women undergoing a day five single fresh embryo transfer. A result that we consider to be historic and represent an enormous impact on outcome for those patient experiencing infertility and undergoing IVF procedure. 28-day neonatal safety from IMPLANT 2 did not identify any safety issues and the final data point from this trial is expected in second quarter of this year, 2019, which are the six months pediatric follow-ups. Up next, we announced in December the initiation of the Phase 3 nolasiban trial in Europe, IMPLANT 4. The IMPLANT 4 trial is planned to enroll approximately 800 patient who are undergoing a day five fresh single embryo transfer in over 40 centers across Europe, Russia, and Canada. As communicated previously, our plan is to proceed with a MAA filing in Europe subsequent to confirmatory 10 weeks ongoing pregnancy primary endpoint results from IMPLANT 4 by the end of 2019. We are pleased to note that initial centers and patient interests and holding in IMPLANT 4 has been very strong, increasing our confidence in the primary endpoint reserve timing in the fourth quarter of 2019. As for the U.S. market, we have begun further FDA interaction with the submission of a briefing document and formal meeting request. If this process concludes in the second quarter, we intend to proceed with a Phase 3 U.S. development program of nolasiban in second half 2019. All in all, we're tread to be moving toward the regulatory approval process for Europe as the largest IVF market with nearly 800,000 annual cycle, but also consider the U.S. to be a very important market for our commercial plans as well. Now turning to linzagolix. In 2018, we disclosed result from the Phase 2b EDELWEISS trial for the treatment of endometriosis-related pelvic pain. We believe that the important takeaway for the trial results were that partial suppression of estrogen with linzagolix at a dose of 75 milligram was nearly as effective at reducing pain as was full suppression of estrogen with a higher 200 milligram dose after 24 weeks of treatment with a responder rate of 71% versus 77% respectively. In addition, the estrogen associated decline in bone mineral density of 0.8% and 2.6% at the lumbar spine respectively was as expected indicating that the use of 75 milligram should not require add-back therapy, while the use of 200 milligrams would require the use of add-back therapy to protect bone if used for more than six months. We believe the topic of to use add-back therapy or not may not be yet fully understood by everyone. But it's actually rather simple to understand by looking at clinical data and assessing real world risks to patients. We believe that patient-desired medicine that treat their symptoms and their ability to function in their day-to-day life without taking undue safety risk even if they may be rare. The linzagolix 75 milligram dose appears to offer potential symptomatic relief in nearly three out of four patient with a level of BMD loss that would not require add-back therapy issues clinically. Therefore, if the risk of bone mineral density loss is well-controlled, we do not believe physician and patient will find it prudent to introduce add-back therapy to over 70% of patient who do not need it and expose them to risk as identified in the black box warning in the U.S. for cardiovascular disorder risk dementia and malignant neoplasm including breast cancer. As opposed to being complex to the contrary, we see it as quite simple to give one drug once per day in order for most patient to be well-controlled and with safety risk minimized. Wrapping up on endometriosis, we have received a minutes from the end of Phase 2 meeting held with the FDA in December and we are moving forward as planned this quarter commencing two Phase 3 trials of linzagolix with plans to enroll a total of approximately 800 patient who would be randomized to receive either 75 milligram with no add-back, 200 milligram with add-back or placebo. I would now like to provide an update on the enrollment of our two ongoing Phase III trials of linzagolix PRIMROSE 1 and 2 for the treatment of heavy menstrual bleeding due to uterine fibroids. We announced in December that the European and U.S. study PRIMROSE 2 completed planned patient recruitment. For the U.S. study, PRIMROSE 1 based upon a recent and expected enrollment trend, we expect patient recruitment to be completed in early Q2 of 2019. Therefore, we continue to anticipate announcing six months primary endpoint reserve from PRIMROSE 2 in the fourth quarter of 2019 and PRIMROSE 1 result a few months later in early 2020. Importantly, a U.S. NDA submission remain target for the late 2020, which assume data with 12 months of treatment for a chronic indication. We would also like to highlight that our uterine fibroid Phase 3 program is the only one utilizing a non-add-back therapy regimen of GnRH antagonist, which consistent with my previous comments on add-back therapy is being done in the interest of exploring whether a significant proportion of patient might experience symptomatic relief with partial estrogen suppression thereby not requiring add-back therapy to protect bone mineral density. If this were the case, we believe this data would highly differentiate linzagolix within the class. Now turning to our third pipeline compound OBE022 the oral and selective PGF2 alpha-receptor antagonist for the treatment of preterm labor. We recently announced that Part A of the Phase 2a PROLONG study was officially completed and holding a ninth patient for PK/PD data purposes. Part A is promising with eight out of nine patient achieving the goal of delaying delivery through the seven day dosing period and with no tolerability or safety concerns identified with OBE022. The randomized control Part B of PROLONG is underway to assess the initial efficacy signal. Clinical side screening patient in Part B of PROLONG in Finland, Spain, the Czech Republic and Vietnam and soon to be in Russia and Israel. We eagerly anticipate an interim efficacy analysis for Part B in 30 patient in the first half of 2019. And this important area preterm birth involved significant mortality and morbidity of infants as well as enormous associated emotional and medical costs. Summing up on ObsEva's pipeline, 2018 was a year of significant clinical milestone that has helped shape the promising future of the company as we begin 2019. And as I have outlined over the last few minutes, there are several key milestone this year as we transition into the commercial stage with what we believe is a potential blockbuster product in nolasiban. I will now turn the call over to our Chief Commercial Officer, Wim Souverijns who can share his perspective following joining ObsEva last November. Wim?

[Wim Souverijns:]

Thank you, Ernest. As Ernest said, I joined ObsEva in November from Celgene where I held both strategic and operational leadership roles. But before that I spent five years at Amgen in pricing and market access. Although oncology would have been an easy choice for my next endeavor, the level of innovation at ObsEva in such underserved areas as women's health and fertility were very appealing to me. I was particularly impressed by the unappreciated potential of nolasiban. It not only represents incredible value to young families, but also offers a strong economic value proposition that is critical in the current age of payer and pricing focus to support a long-term blockbuster opportunity. I often tell people that work in oncology was definitely rewarding, but unfortunately patients most of the time still die. Here at ObsEva, with nolasiban, we are enabling what probably is the most precious moment in life, the birth of a healthy baby, has a pretty good feeling to be able to contribute to that. So just a few words on nolasiban. The ability to potentially increase the rate of pregnancy in live birth by approximately a-third can bring significant value to IVF patients, centers and payers alike. Patients want to maximize their likelihood of successful cycle due to both, financial and emotional costs. Centers in turn want to attract business by maximizing their success rate; while payers can benefit from the high success rates as well as reduced healthcare costs from lower rates of multiple births. It really is a win, win, win. In predominantly cash pay markets like U.S., we believe consumer willingness to pay is high given that IVF may cost as much as $20,000 to $25,000 per cycle. And sales cycles are devastating and more so a burden. In countries where IVF is reimbursed on the other hand, payers can achieve high success rates for a fixed level of IVF-related spending. In addition, whether IVF is cash pay or reimbursed, the practice of transferring more than one embryo is still most common in order to maximize the hope for success. The use of nolasiban can capitalize the ongoing trend towards single embryo transfer over double embryo transfer and avoid multiple pregnancy rates that can be as high as 40% and costs 5 to 20 times of a single term birth without sacrificing the live birth rates. This is what payers can potentially save significant costs by utilizing nolasiban once approved and this is what we will be building our pharmaco-economic analysis upon. With such a strong value proposition and a very concentrated markets with about 500 centers in U.S. and 900 in the EU5, we believe that an infrastructure with less than 100 FTEs to realize a commercial potential of nolasiban in the U.S. and Europe. Now let's move on to linzagolix. As Ernest outlined, we are extremely satisfied with the data we have generated thus far in endometriosis and we're looking forward to the date expected later this year in uterine fibroids. These from the current data are showing highest response rates without the need for hormonal replacement, add-back therapy, and the once daily dosing, we believe that linzagolix has a potential to be best-in-class in a category with millions of addressable patients. Finally, a few words on OBE022. While the commercialization is much longer term, of course, we are very excited by the Phase 2 data that Ernest shared earlier. Pre-term deliveries represent a huge unmet need associated with massive costs to the healthcare system. Being able to preserve life at such a precious stage is an opportunity a marketeer can only dream of. So we eagerly anticipate the upcoming clinical milestone with proof-of-concept data. As you all can hear, I'm excited to be here at ObsEva and look forward to help make 2019 the best year yet for the company. I will now turn the call over to our CFO, Tim Adams, to review our fourth quarter and year-end 2018 results.

[Tim Adams:]

Thank you, Wim. Good morning or good afternoon everyone and thank you for joining us on the call today. I will start by spending a few minutes discussing our financial results for Q4 and the full year 2018, beginning with the income statement. Net loss for the fourth quarter and full year of 2018 was $20.1 million or $0.46 per basic and diluted share and $76.7 million or $1.91 per basic and diluted share, which compares to a net loss of $17.1 million or $0.48 per basic and diluted share and $66.9 million or $2.25 per basic and diluted share in the fourth quarter and full year of 2017. There were two factors that contributed to the year-over-year changes in the net loss and net loss per share. Number one, increased investment in our research and development programs. And two, a higher share count, due to the equity capital offerings that were completed in October of 2017 and June of 2018. Research and development expenses were $15.9 million and $62.9 million for the fourth quarter and full year of 2018, compared to $13.9 million and $54.9 million in the fourth quarter and full year 2017. This increase in investment is attributed to the clinical trial progress outlined by Ernest for all three of our development compounds. G&A expense in the fourth quarter and full year of 2018 was $4 million and $14.3 million as compared to $3 million and $12.6 million for the fourth quarter and full year of 2017. Our cash balance as of December 31, 2018, was $138.6 million. This cash balance reflects our use of cash of $17.8 million in the fourth quarter of 2018. For the full year 2018, use of cash from operations totaled $63.9 million and was offset by cash from the financing activities totaling $91.7 million, reflecting proceeds from our ATM program in May 2018 and the follow-on offering in June 2018. The cash used in operations reflect spending in support of all three of our pipeline assets, which includes the patient follow-up on our Phase 2b EDELWEISS study in endometriosis; the ongoing Phase 3 enrollment of the PRIMROSE clinical trials for the treatment of uterine fibroids; the completion of live birth and neonatal follow-up in Phase 3 IMPLANT2 clinical trial of nolasiban; and completion of Part A of the PROLONG study of OBE022 in pre-term labor. Current cash on hand is expected to fund our operations into mid-2020 and our expected cash use in 2019 is approximately $100 million. Notably, this expected 2019 cash use, reflects expanding investment in our pipeline activities with as many as six Phase 3 trials expected to be ongoing during the year. Summing up, 2018 was a year of tremendous progress and excellent data readouts, and we have aggressive plans for 2019 as we continue investing in our three pipeline assets and begin planning for commercialization. With that, I would now like to turn the call back over to the operator for questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Ami Fadia of SVB Leerink. Your line is now open.

[Ami Fadia:]

Hi. Good morning. Thanks for the questions. Couple of questions. Firstly, with regards to elagolix, can you talk to the ramp – sorry, for linzagolix, can you talk to the ramp of elagolix that we're seeing currently? And then how that -- what are your takeaways with regards to the commercial opportunity and how long it would take for these products to reach their peak revenue potential? Secondly, on OBE022, when you announced the interim data, what should we be looking for in terms of a hurdle rate for the study to be positive for you to continue on with enrolling the study to completion? And then lastly, may be a question for Tim, given your existing burn rate and the funds through mid-2020, what are your current sort of thoughts on the financial -- on financing outlook? Would you consider doing a partnership for any of your products or would you need to come back to the equity markets to raise more funds? Thank you.

[Ernest Loumaye:]

Thank you. Thank you for your question. We start with Wim about the elagolix launch and how they are performing. Wim?

[Wim Souverijns:]

Ami, thanks for the question. A few angles to your -- to answer that question. The first one is, we're conducting our own intelligence work in the marketing. What we hear is quite some enthusiasm both from women there's quite a bit of demand, but also physicians in terms of how they perceive elagolix. So the feedback is quite positive. Secondly, we are very pleased with the level of investment that AbbVie is putting behind this product. They launched last year in August, they started with an unbranded DTC campaign. And basically as soon as they were allowed to, they launched a branded DTC campaign at the beginning of this year during JP Morgan. So we have -- it's very clear they are convinced by the potential of this asset and this class in general. In terms of their uptake latest data that we have show that they're hitting a total Rx number of around 1,200 per week by the end of February beginning of March and a new Rx of around 700. So what we've seen is in the first seven months here is probably reflecting the typical time that it takes to get on the managed care formularies a process that can take up to 12 months. And what we're learning is that AbbVie is now being covered for at least on the majority of the plans obviously that's something that they're expanding further. And we are very optimistic about the prospects of the class respect to this launch. And given the size of these opportunities both endometriosis and uterine fibroids, there is ample room for a competitor coming in after elagolix. So our strategy is really to keep following this launch and differentiating us product, but we see there's a big opportunity for us there.

[Ernest Loumaye:]

What we hear also, and Wim please confirm is that there is a preference prescription of the low dose, 150 milligram not requiring the add-back therapy and this is further supporting us in our strong development strategy. Coming to OBE022, so refresh your mind, the Part A was an open label, where we administered the drug on top of the standard of care atosiban. Standard of care issues for 48 hours we give the drug daily for seven days. And as mentioned already, the objective is to see first in term of efficacy how many patients did or did not deliver after seven days. The Part B that we start up now is a placebo-controlled double blind where we compare atosiban plus placebo versus atosiban plus OBE022. What our expectation is first for sure to see the safety of the drug and we have some very good initial data on the target safety for example. But then in term of efficacy the assumption is that, if we have a difference of 10 to 15 person in term of number of patient proportion of patient who did not deliver after seven days of treatment or day seven of treatment, we would consider that this is an efficacy -- initial efficacy signal and that we should continue testing the drug. So in one word, a difference between atosiban plus placebo versus atosiban plus OBE022 of about 10 to 15 person in the proportion of patient not deliver on this seven of treatment.

[Tim Adams:]

Ami, it's Tim. Just a word on the cash investment this year and potential opportunities partnership opportunities. So as Ernest mentioned earlier on the call that the cash burn investment rate for 2019 includes up to six Phase 3, two for fibroids, two for endometriosis, potentially two for nolasiban. We have also included some investment for exploring the Chinese market for nolasiban. As you know, China is one of the largest market opportunities on a global basis with approximately 800,000 cycles per year. And we think that is a fine opportunity to potentially find a partner in China for nolasiban that could bring some funding of cash into the company. So one of my colleagues is working very hard on this, and hopefully, we can report something down the road on that front.

[Operator:]

Thank you. And our next question comes from Liana Moussatos of Wedbush Securities. Your line is now open.

[Liana Moussatos:]

Thank you for taking my question. What are the topics for your Q2 discussion with the FDA for the nolasiban Phase 3 program? And what are the next steps to start the Phase 3?

[Ernest Loumaye:]

The discussion with the FDA is essentially discussion on the study design for the U.S. Phase 3 trial that we call IMPLANT3. There is a range of discussion with the FDA regarding the design like time of randomization; like age of the patient group on which we are focusing, we would like to focus up to 37. And luteal support for example or number of previous failure of IVF. So these are technical discussion. As mentioned, we have asked for a face-to-face meeting and we should know in the upcoming days of weeks when we will have this meeting we will have -- filed a briefing document and pending agreement on the study design we are in the starting blocks to start immediately IMPLANT3 in the U.S. Does that answer your question?

[Liana Moussatos:]

Yes sir. Thank you.

[Operator:]

Thank you. And our next question comes from Martin Auster of Credit Suisse.

[Unidentified Analyst:]

Hi, everyone. This is Mark on for Marty. Thanks for taking my question. Perhaps would you be able to speak to the nuances between the U.S. and E.U. market opportunities for nolasiban? And secondly, can you speak to how we should think about pricing in these two markets? Thank you.

[Ernest Loumaye:]

Wim?

[Wim Souverijns:]

Yes. So IVF is a -- is a bit of an untypical market for pharmaceuticals in that when you normally expect U.S. to represent 60% to 70% of the potential, it's very different in IVF. Based on the sheer number of embryo transfer cycles, you'll see that Europe has about 800,000 HRT cycles U.S. is around 40,000. With that in contrast, the market as China is already catching up with Europe. So that's why for us, it's really important to have access as soon as we can to the European market given the size that it represents. From a pricing perspective, there are obvious differences. There are differences between different countries. And there is like a broad difference between U.S. and ex-U.S.. And the reason for that is partly related to the overall cost of IVF. While the cycles of IVF in Europe costs between -- depending on the market between $3000 to $5000, $7000 in the U.S. is talking about a multiple of that. It can get up to $25,000 which means that also from a product perspective from our side from nolasiban, we will have most likely a differential strategy in the two markets. What is very clear is that, nolasiban represents a very attractive value proposition. There are two reasons for that. The first one is we are increasing live birth rates. That simply means that for the same investment in IVF you actually have a higher productivity you basically deliver more babies. So the cost per individual baby goes down. That's the first source of value that nolasiban will try to capture. The second aspect is the impact on the multiple versus the single embryo transfers. The reason why we see still a very significant amount of multiple embryo transfers is that couples and also centers sometimes want to maximize their chances of delivering a baby. And so by putting two and sometimes even more embryos you have a higher chance of having a birth. The downside of that though is that you massively increase the number of multiple pregnancies. And we have data from the U.S. will speak about 30% to 40%, okay? Now those multiple pregnancies are not just a challenge for the couple who then have to take care of two or three babies, but they also come with a very high economic cost. Most of these multiple pregnancies they have preterm delivery. So the cost in pre, in ICU are very extensive. On top of that very often these multiple pregnancies triplets, twins they also have long-term co-morbidities. So that amount of money is very significant, that cost is very high and it's much higher in the U.S. than it's in Europe because of the healthcare system. And so these two sources increasing the live birth rate and reducing those multiple pregnancies allow to really charge a price that is quite significant. It might be different from what IVF centers are used to from a treatment perspective.

[Unidentified Analyst:]

Thank you.

[Operator:]

And our next question comes from Do Kim of BMO Capital Markets.

[Keith Tapper:]

Hi guys. This is Keith Tapper on for Do. Two quick questions. The first during the call you mentioned the impact of add-back therapy is not being fully understood. Could you talk a little bit about kind of where you're getting that impression and how you might be able to fix that going forward as the drug progresses? And then secondly, could you give us some insight into timing of expenses and how that ramp would look in 2019? Should we expect a peak in Q3 or anything like that? That'd be helpful, thank you.

[Ernest Loumaye:]

Yes. I don't think we mentioned that add-back therapy is not fully understood. Add-back therapy used with the GnRH antagonist actually the preparation for pretext used for hormone replacement therapy in post menopause are women. So there are -- those of millions of women who have been exposed to this class of drugs. So it's extremely well-known. And indeed, it's so well known that it's just been associated with a black box warning in term of rare or very rare very severe side effects that comes as cardiovascular, complication, no plasma and so forth. And therefore I think the physical state of add-back therapy is well known and we all expect that GnRH antagonist with add-back therapy will have a preference to this black box warning. So as we said in the conference, if we can achieve close to or similar effect that with moderate suppression and no need to add two drug on top of the GnRH antagonist, we see that as a very significant advantage for the patient. So that's how we see the add-back therapy based on how well is known this safety profile. There is no question about the benefits of add-back therapy to protect bone, pending obviously you need that because you have full suppression with high dose of GnRH antagonist. Now in term of spending Tim yes?

[Tim Adams:]

Yes. So Keith yes expenses will be ramping up this year. As you know we're initiating the Phase III for endometriosis and that will ramp during the course of the year with patient enrollment. The IMPLANT four study for nolasiban the Phase III is in full swing as we speak. So that'd be more front-end loaded in the year. And if we are successful with the FDA later this year, we hope to be opening up the U.S. Phase III study that would ramp up in the second half of the year. So, yes, you see -- there a couple of moving parts, but as we progress throughout the year up to six Phase IIIs you will see the expenses ramping up this year.

[Keith Tapper:]

Okay, that’s terrific. Thank you.

[Operator:]

And our next question comes from Kennen MacKay of RBC Capital Markets.

[Kennen MacKay:]

Thanks for taking the questions and congrats on the progress. I think a company of this size with six Phase III trials, I really can't think of a quarter like here so this is truly impressive. Maybe just – first, a quick housekeeping question for Tim. Wondering if you could just help us understand share count at yearend versus the weighted average that was presented? And then a maybe commercial or sort of strategic question, I was just wondering, if you think about some of the other sort of in large markets that are out there similar to uterine fibroids or endometriosis what do you see as sort of the best analogy here? We've obviously been tracking a few competitive launches across other indications one of which has been migraine where there's been a strategic land grab by some of the three initial players in the market. I was wondering if that is sort of an analogy we should be thinking about here or not, or why and what do you see as the best analogy? And then lastly, a question on the U.S. opportunity for nolasiban, the language in the press release was a little bit cryptic talking about sort of meeting later this year maybe leading to commencement of the U.S. Phase 3. What is the biggest focus in the conversations with the FDA and is there anything that could potentially preclude development within this market there? Thank you.

[Ernest Loumaye:]

Let's start with number of shares. Tim?

[Tim Adams:]

Yeah. Hey Kennen, in terms of shares outstanding at the end of the year it was 43 million or 143,000. On a fully diluted basis, there are some additional unvested shares in the stock options that would bring you up to a total of approximately 46.9 million shares on a fully diluted basis. Then your second question?

[Ernest Loumaye:]

Is about commercial launch and..

[Tim Adams:]

Yeah.

[Ernest Loumaye:]

….compression we saw other class of drug. Wim?

[Wim Souverijns:]

Yeah. Kennen, it's a very good question. I think my first response was going to the migraine market simply because it's happening as we speak as well. Because I do think that it's hard to kind of use analogies of three years, five years, 10 years ago the markets have changed significantly. I think particularly, what we see in terms of this initial ramp-up, this market the managed care access is very different from what we've seen a few years ago. So we would be looking at migraine indeed as kind of a reference although we can have a pretty good – from our perspective, we'll have a pretty good position in that we'll see how Elagolix is progressing. But if you put in a complex vis-à-vis other therapeutic areas then I would refer to migraine indeed.

[Ernest Loumaye:]

Kennen, I'm speaking for your last question. No, I mean we remain – I think that the discussion around the protocol are really solvable. I don’t think there is any major issue regarding the protocol. It's true that, we were a little bit surprised by some comments or suggestion on the protocol. And it's true that, we want to remain therefore careful because we need to first solve this question, before being able to 100% guarantee that we will start the IMPLANT3 in the second half of this year. Now the calendar is very clear 60 days to give us a date for a meeting and they have 30 days to give them – to give us the minutes of that meeting. So I think that the – by the second quarter, we definitively as full feedback on the first round of interaction. Our expectation is that this round of interaction will address the technical question around the protocol and we would be able to move ahead. Nevertheless, we have to be careful, because we are not in control and we cannot exclude 100% that we will not have additional interaction before launching the study. I repeat, I think that the technical question are real technical discussion and we are not over-concerned that we should not be able to find a solution and an agreement with the agency during this cycle of interaction.

[Kennen MacKay:]

Got you. Thanks, Ernest. And maybe just one quick follow-up I guess this is more just sort of a theoretical question on nolasiban. In the prior data set, it seemed like there was quite a difference between sort of the day five birth rates versus placebo and the day three rates versus placebo. I was just wondering, mechanistically if there was any potential reason for that or anything we should be thinking about from a scientific perspective there? And thank you so much for taking all the questions.

[Ernest Loumaye:]

Yeah. Kennen, you're right. We fully report in our previous press release and we present at the ASRM data showing that overall the significance statistically clinical significant increase. But the increase between placebo and active was larger and more significant was day five instead of day three. We don't have real physiological reason for that except that implantation occurs soon after day five. So we are closer from the beginning of the implementation and I think as previously discussed, we do not exclude that in IMPLANT2 there was some collective bias toward the best embryo being kept for day five versus the day three. And it's true that, if the embryo is not healthy you can give all the nolasiban you want, if the embryo is not going to IMPLANT as we have a direct action on the uterus contraction uterus vascularization and likely endometrium. So now as you are aware, the field is moving to day five embryo transfer, because it has been shown that this indeed more efficient you have a higher chance of getting a baby, if you transfer the embryo on day five rather than on day three. So yes you're right. We have no definitive understanding and we are now focusing IMPLANT3 and IMPLANT4 on day five. And by the way the FDA did not discuss that. They agree on the fact that we're focusing on day five. This is the dominant practice in United States and is upcoming in Europe also.

[Kennen MacKay:]

Got you. Thanks again for taking the question and congrats on the progress.

[Ernest Loumaye:]

Thank you, Kennen.

[Tim Adams:]

Thank you, Kennen.

[Operator:]

Thank you. And our next question comes from Eric Joseph of JPMorgan. Your line is now open.

[Eric Joseph:]

Hi. Good morning, guys. Can you hear me okay?

[Ernest Loumaye:]

Very well.

[Tim Adams:]

Good morning, Eric.

[Eric Joseph:]

Good morning. Thanks for taking the question. Just a couple from my side on the linzagolix Phase 3 endometriosis, I guess with having the end of Phase 2 is in hand. I'm wondering, if you can provide a bit more detail on the statistical analysis plan on the combined pain responder primary endpoint whether there are any – whether there is any hierarchical testing between the different treatment arms between different treatment – sorry – different doses or durations of follow-up? And which secondary endpoints do you believe trial is added to compare – added to compare against? And then just as a point of clarification on the recruitment numbers, the expectation of 900 patients across for each of the EDELWEISS trials, or is it across the 230 in trial? Thanks.

[Ernest Loumaye:]

Yeah. It's total number of patient, it's not individual trials. It's total number of patients. So, it's about less than 500 patient of trial. Now, first, I have to say that the EDELWEISS data of Phase 2b were well-received. They fully agree on the selection of the dose. They fully agree on the selection of a low dose 75 milligram without add-back; 200 milligram with add-back. So, really they agree on our conclusion based on our data. Now the primary endpoint, as you're aware, they expect to have a co-primary endpoint on control of menstrual pain, as well as control of non-menstrual pain and both endpoint should be statistically significant, showing an improvement during the menstrual and in the non-menstrual pain. We use a VRS for recording pain during the Phase 2b and they say that we could use VRS or NRS both are acceptable. Just to remind you that Elagolix use a zero to three VRS as we are using. Now where discussion is that how do you define a responder with the VRS? Is it certain reduction as a proportion of initial pain, reduction of 30% for example, or is it an absolute reduction? So, out of zero to three, for example, minus 0.9 on the score. So they have a preference for the reduction in the absolute numbers. We have rerun this analysis on our EDELWEISS Phase 2b as we were using a proportion of reduction and we conclude that we have similar study power and we can maintain our sample size while using the recommended absolute reduction rather than collective reduction for pain. Now in term of secondary endpoint, you are very right. You know as we say hierarchy on secondary endpoint, and in order to avoid penalty for multiple analysis we start with the first secondary endpoint. If it's statistically positively, you move to the second one, the third one and so forth. And if one fail, you stop comparing. So, it has been a long discussion and maybe Jean-Pierre you can give some top line indication what our first secondary endpoints.

[Jean-Pierre Gotteland:]

Yes. So, we'll have as around secondary endpoint we have decided to have the assessed maintenance of the effect at six months on the non-menstrual pelvic pain as well as the menstrual pelvic pain six months. And then according to our very positive data on dyschezia on our Phase 2b EDELWEISS study we have decided to have and we agreed with the FDA to have dyschezia at the third round secondary endpoint. Then we also would like to have the overall pelvic pain measured as NRS on the NRS scale. And we will have these overall pelvic pain on NRS scale as in force around secondary endpoint.

[Ernest Loumaye:]

And then if you continue the list dyspareunia which is important for us and also improvement of wellbeing and activity. Does that answer your question Joseph? Eric?

[Eric Joseph:]

No, it's very helpful. Thanks a lot.

[Mario Corso:]

Okay. Thank you.

[Operator:]

[Operator Instructions] And our next question comes from Biren Amin of Jefferies. Your line is now open.

[Biren Amin:]

Yeah. Hi, guys. Thanks for taking my questions. On PRIMROSE 1, it seems like the timelines pushed back a little bit. Ernest, I just wanted to get a sense of enrollment pace, because I think in the last quarter call you had mentioned that enrollment seemed to be on track. So, just wanted to understand the reason for the slowdown in that trial. Thank you.

[Ernest Loumaye:]

Yes, Biren. I mean, I think since the beginning of last year we had some headwind on the recruitment for the PRIMROSE 1 which is a fibroids study in the U.S. Actually, we are facing a high screen filler rate which exceed 80%. This is due to the fact that the patient are approached through recruiting mechanism like Internet recruitment; recruiting activities managed by specialized company on heavy menstrual bleeding, because that the patient can assess. She cannot assess whether she has a fibroid or not. And then when she is pre-screener referred to the center they realize okay, you have heavy menstrual bleeding, but you don't have fibroid, so high. We took, if you remember well, some measure in the summer to increase the screening rate and we did achieve that. We have very, very good increase in rate. It is not a slowdown by the way, but still we did not randomize enough patient to finish enrollment by, I would say, Q1. Now we have trigger a second process supporting recruitment through another network in the Internet and we see already the effect. February was the best recruiting month ever in the PRIMROSE 1 study. So, now we know by projection that we will not complete recruitment by end of March, most likely it will be one or two additional months. Now, importantly, we do not think it will impact on our timing of NDA submission by the end of 2020, and we will keep you posted. But I think, we are not very far for completion, but it won't happen this months.

[Biren Amin:]

And then another thing is how do you ensure for patient quality with this new source of patients that are coming into PRIMROSE 1?

[Ernest Loumaye:]

Yes. Because they -- now prescreening and we see that the prescreening is pretty inefficient if we have more than 80% what really feel screening. But then, whatever the source of patients, when they're referred to the clinical center they go through the same process which mean two months observation with collection of sanitary material. The heavy bleeding is an objective assessment in the centralized lab. The presence and the size of fibroids are done by the clinician in the research center with ultrasound. So I don't think there will be any change in term of quality. Whether the screen followed by this new process is going to be lower or higher or similar that's a question mark but I think we are quite high already. So I don't expect it will be worse than that. So we keep you posted, but I think we are at phase of completing in the upcoming months. Tim, you want to add something?

[Tim Adams:]

No. I was just going to say, operator, we have time for one more question.

[Ernest Loumaye:]

Okay, okay. But we don't want to -- we don't compromise Biren on quality. We did not change the eligibility criteria, so I think it's extremely important to keep the quality in term of patient characteristics yes.

[Operator:]

Thank you. And our final question comes from the line of Raghuram Selvaraju of H.C. Wainwright. Your line is now open.

[Edward White:]

Hi, this is Edward on for Ram. Thank you for squeezing me in here at the end. Just a few quick questions. In terms of the EDELWEISS study, what is the time point which regulators are likely to pay the most attention when evaluating that data? In terms of the PROLONG study, what do you think the next stages would be provided the current Phase 2 setup is positively read out? And then a question for Tim. How is the stock-based compensation likely to trend this year and then into 2020 versus some more the historical levels? Thank you.

[Ernest Loumaye:]

So Jean-Pierre, the primary end point in EDELWEISS is?

[Jean-Pierre Gotteland:]

Co-primary endpoint.

[Ernest Loumaye:]

At what time?

[Jean-Pierre Gotteland:]

It's at three months.

[Ernest Loumaye:]

At three months.

[Jean-Pierre Gotteland:]

At three months. And we will read out the primary endpoints at six months.

[Ernest Loumaye:]

Yes. Okay. And the safety endpoint are obviously on six months onwards.

[Jean-Pierre Gotteland:]

Yes.

[Ernest Loumaye:]

Yes. So that's the first question. The second question on OBE022 ramp, can you repeat that I'm sorry?

[Edward White:]

Yes. Just in terms of what would the next stage in the development of OBE022 look like? I'm assuming that second stage of PROLONG read out positively?

[Ernest Loumaye:]

So if the first 30 patient shows a trend because a small number towards efficacy and maintain the safety, we will complete the trial which is meant to be for 120 patients, 60 placebo, 60 active. And then there will be the decision based on the data whether we move forward toward combination therapy on top of ObsEva and that's an option which is viable in Europe and Asia which is not viable for you as ObsEva is not registered there or we go for a self-standing treatment. I think it's premature to decide that. We may actually go for both. But let's see first the data and the priority for us is to move forward towards first the registration in Europe, U.S. then and Asia. And my last comments on that, is that we will meet with the data to have a very serious discussion with the FDA because so far it has been a request historically a pure placebo-controlled trial for preterm labor. And you know if there is no product registered in U.S. for preterm labor there are standard of care like nifedipine or NSAID. And I think it's really impossible for us to run a pure placebo double blind trial in patient with a risk deliver within a few days and lose their baby if you don't stop the labor. So step by step, let's gain initial information about safety and efficacy and then we will enter a discussion with the U.S. FDA, expecting and hoping they will help us to find a way to develop it in U.S. In Europe and Asia, I think it's much more straightforward considering the current environment for standard of care. Tim?

[Tim Adams:]

Edward, it’s Tim. I would use an estimate for 2019 stock-based compensation of approximately $10 million for the full year.

[Edward White:]

Okay. Thank you, guys very much for taking the questions.

[Ernest Loumaye:]

Okay. Thank you.

[Operator:]

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Ernest Loumaye for closing remarks.

[Ernest Loumaye:]

So I would like to thank you all for taking the time to join our fourth quarter report today and our full year 2018 update. As you hear, we're extremely excited to continue advancement of our pipeline compounds that are dedicated to improving the life of women and their families who suffer from these devastating and life-altering conditions. We look forward to updating our progress on our next quarterly call in May. Thank you again and I wish you a very good day. Thank you.

[Operator:]

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