Veru Inc.
Q2 2018 Earnings Call Transcript

Published: 9 May 2018

[Operator:]

Good morning, ladies and gentlemen, and welcome to Veru Inc.’s Investors Conference Call. All participants will be in listen-only mode. [Operator Instructions] After this morning’s discussion, there will be an opportunity to ask questions. Please note this event is being recorded. The statements made on this conference call that are not historical in nature, are forward-looking statements. Such forward-looking statements reflect the company’s current assessment of the risks and uncertainties related to our businesses. Our actual results and future developments could differ materially from the results or developments in such forward-looking statements. Factors that may cause actual results or developments to differ materially include such things as the risks related to the development of the company’s product portfolio; risks related to the ability of the company to obtain sufficient financing on acceptable terms when needed to fund development and company operations; risks related to competition; government contracting risks; and other risks detailed in the company’s press releases, shareholder communications and Security and Exchange Commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Dr. Mitchell Steiner, Veru Inc’s Chairman, CEO and President. Please go ahead.

[Mitchell Steiner:]

Thank you, operator, and good morning. This is Dr. Mitchell Steiner, Chairman, President and CEO of Veru Inc. And joining me are Michele Greco, CFO and CAO; and Philip Greenberg, Executive Vice President, Legal. Today, we’ll provide an update on the clinical development of our drug pipeline; commercialization of our products, as well as provide financial highlights for the second fiscal quarter 2018. Veru, a urology and oncology biopharmaceutical company is executing on its strategy for near-term revenue growth by having several drugs under clinical development progressing at the same time to ensure that we have several NDAs and commercialize multiple drugs in urology and oncology. In fact, we expect to file three NDAs for four drugs over the next 18 months. First, we have a proprietary new slow release granule formulation of Tamsulosin in two drug products, Tamsulosin DRS, extended release granules for oral suspension and Tamsulosin XR capsules. These two new drug formulations address the administration concern of FLOMAX. FLOMAX has a food effect, which means that according to the label that a greater amount of drugs up to 70% more gets rapidly absorbed with results in the higher than 30% higher blood drug levels when given on an empty stomach. As a precaution to prevent unwanted side effects like dizziness, fainting, orthostatic hypotension, the FDA label states that FLOMAX must be given 30 minutes after a meal. Our novel slow release granule formulation does not appear to have a food effect based on two bioequivalency studies that we have already conducted. This lack of a food effect provides a major clinical advantage for Tamsulosin DRS granules and Tamsulosin XR capsules in both Drug Administration and compliance, compared to FLOMAX and its current generics. Furthermore, Tamsulosin DRS granules has an additional important benefit of providing an alternative for the underserved population of men with BPH, who have difficulty who cannot swallow tablets or capsules. For compliance by men with dysphasia leads to increased risk of acute urinary retention, Urosepsis and death. We expect final bioequivalents clinical data and filing of an NDA in 2018. As for the NDA, we recently announced that the U.S. FDA granted our application for a small business waiver of the drug applications fee of approximately $2.4 million for the company’s Tamsulosin New Drug Application. The launch is planned for 2019. Our third urology drug in late clinical development is a new proprietary Tadalafil 5 milligrams, Finasteride 5 milligrams combination tablet formulation. This proprietary fixed combination formulation contains the active ingredients of CIALIS, which is Tadalafil 5 milligrams approved for the treatment of symptoms of BPH and erectile dysfunction and Proscar, Finasteride 5 milligrams, approved for shrinking an enlarged prostate to treat BPH. The Tadalafil/Finasteride combination tablet formulation will allow us to offer a portfolio of BPH drugs that have different mechanisms to treat the different symptoms and signs of BPH. For example, Tamsulosin treats urinary symptoms of BPH quickly in men with smaller prostate, whereas Tadalafil/Finasteride combination tablet formulation quickly treats urinary symptoms of BPH, while it also shrinks the size and prevents the progressive growth of the prostate in men who present with an enlarged prostate. It also has the added advantage of having an erectile dysfunction medicine as one of its active ingredients. We anticipate for Tadalafil/Finasteride combination tablets formulation, final bioequivalence data – clinical data in 2018 and filing of an NDA in 2019. Our fourth urology drugs in late-stage clinical development is called Solifenacin DRG, a proprietary delayed release granule formulation of Solifenacin, the active ingredient in VESIcare, a popular drug for the treatment of overactive bladder, which is urgency, urging incontinence and frequency in both men and women. Similarly, as instructed for Tamsulosin, the FDA package insert states that Solifenacin tablets must be swallowed whole and are not to be crushed or chewed. There were no granule formulations available for these selective M3 muscarinic receptor antagonists class of drugs for men and for women who have the common condition of overactive bladder and who have difficulty or who cannot swallow tablets. Our proprietary Solifenacin DRG formulation uses the same delivery technology platform as our Tamsulosin DRS slow release granule formulation. The overactive bladder market is a multibillion opportunity. According to a recent study conducted by the Department of Health and Human Resources, 37% of short-term and 70% of long-term nursing home residents did not have complete bladder control. Consequently, the initial target population will be men and women in long-term care facilities with overactive bladder symptoms who have difficulty or who cannot swallow tablets. We expect for Solifenacin DRG, a slow release granules for the treatment of overactive bladder in men and women final bioequivalence clinical data in 2018 and filling an NDA in 2019. We are well-positioned to offer numerous urology drugs and take advantage of the multibillion dollar BPH and overactive bladder opportunities. These four products, Tamsulosin DRS granules, Tamsulosin XR capsules; Tadalafil/Finasteride combination tablets and Solifenacin DRG granules, will allow us to file several NDAs, as well as launch and partner when appropriate, multiple urology drugs over the next two-and-a-half years. As for our other propriety drugs in development, first, VERU-944, which is pure form of cis-clomiphene citrate is being evaluated for the treatment of hot flashes in men who are on hormone therapy to treat advanced prostate cancer is close to initiating a Phase 2 clinical trial. We plan to file the IND this month and the first patient should be dosed with a drug by July 2018. The clinical trial is a Phase 2 randomized blinded, placebo-controlled dose finding study, is a four arm study with 30 men for study arm for a total of 120 men that will be conducted in 10 clinical sites in the United States. We plan to test three different doses against placebo. It’s a short study as the treatment period will be only 12 weeks. The primary endpoint is the change in the frequency of moderate severe hot flashes from baseline to four weeks and 12 weeks in the study. We expect final Phase 2 clinical data for VERU-944 in early 2019. Dr. Domingo Rodriguez has joined our team as Executive Vice President Clinical Operations to manage our clinical development studies. Dr. Rodriguez has over 30 years of pharmaceutical experience and 17 years in clinical operations. He was recently VP of Global Development Operations and Clinical Operations at Mallinckrodt Pharmaceuticals. It should also be noted that the U.S. Patent for VERU-944 was recently issued and has an expiration date in 2035. Currently, there are no drugs approved by FDA for this indication of hot flashes in men with advanced prostate cancer caused by hormonal therapies also called androgen deprivation therapy. Androgen deprivation therapies include drugs like Lupron, Eligard, Firmagon, and Zoladex. Over 6,000 men on androgen deprivation therapy in the United States, up to 80% of these men experienced hot flashes and 30% to 40% have moderate to severe hot flashes making hot flashes the most common side effect of androgen deprivation therapy. Second, we’re also developing VERU-111 in novel oral anti-tubulin therapy that targets alpha and beta tubulin for sub-units of microtubules for the treatment of metastatic prostate, breast, ovarian, endometrial and other advanced cancers. We’ll begin the Phase 1/2 clinical trial by the second-half of 2018. And in the Phase 1/2 open label clinical trial, we will initially target men with metastatic castration-resistant prostate cancer, who have become resistant to, or who have failed to respond to ZYTIGA, abiraterone, or XTANDI, enzalutamide and may have failed one of the taxane therapies such as being treated with docetaxel or cabazitaxel. An open label study means that each patient will be dosed with VERU-111 and so we will have early evidence of safety and efficacy in late 2018. Scientific preclinical data for VERU-111 were presented at the American Society of Clinical Oncology Genitourinary Cancers Symposium in San Francisco on February 2018 and the European Association of Urology in Copenhagen Denmark in March of 2018, and have been accepted for future presentations and publications at the American Urologic Association Meetings in San Francisco in May of 2018 and the American Society of Clinical Oncology also known as ASCO Annual Meeting in Chicago June of 2018. In addition to prostate cancer, VERU-111 can be developed as an oral therapy for other tumor types that are currently being treated by intravenously given anti-tubulin chemotherapies, which broadens the market opportunity to well over $5 billion. We have a full and advancing pipeline of drugs. We will also continue to be opportunistic by internally developing and/or finding new pharmaceutical products to license in urology and oncology. We have accomplished quite a lot this past year by obtaining regulatory clarity and advancing the clinical development of our pipeline of drugs. We paid for these activities this past year in part by the revenue produced from our commercial products, the FC2 Female Condom business and PREBOOST. The Female Health Company Division has revenue from both the Global Public Health Sector and the U.S. markets. In the Global Public Health Sector, FC2 is the world’s leading female condom. This is the channel, where FC2 is purchased in bulk quantities by governments and non-governmental donor agencies for public health distribution. This past year and first and second fiscal quarters of this year, we have felt the impact of two of our largest customers, Brazil and South Africa, who did not place orders this past year due to their normal procurement cycles. We believe we will receive new orders from these countries in fiscal year 2018 and 2019, as we expect, Brazil will be awarding a 50 million unit tender this – for this year and South Africa is expected to award this year a 40 million unit tender per year for three years totaling 120 million units. We expect to hear the results of these government tenders in early summer. As for the U.S. market, FC2 is uniquely positioned as the only FDA-approved female condom to prevent both unwanted pregnancies and the sexual transmission of STIs. Our challenge has been to create a distribution in marketing to serve this U.S. market. We have seen traction with our efforts as they are increasing revenues in these new areas of market access. FC2 is reimbursable with a prescription by both public and private payers under the Affordable Care Act and under the laws of numerous stage prior to the Affordable Care Act. We now have the pharmacy distribution, market access and reimbursement infrastructure in place, so FC2 is available in over 98% of female – of retail pharmacies across the country. We have eliminated the middlemen FC2 distributors and we will now sell directly to Departments of Health and Community Organizations with better margins. We have signed a master service agreement to sell directly to 340b covered entities for approximately 56,000 of these entities such as HIV and STD clinics. We have partnered with the HeyDoctor telemedicine application, so that an FC2 prescription can be obtained by the patient via an Apple and Android smartphone, where the prescription is sent to their local pharmacy or ship to their home by a specialty pharmacy. We have an uninsured or underinsured assistance program, where the individual can purchase FC2 at a discount from our website. And finally, we have an active colleges and university program that continues to grow. As I mentioned, we’re finally seeing new revenue being generated and growing in the U.S. market. Historically, the average annual revenues for FC2 over the past years – past three years has been approximately $2 million a year. I’m pleased to report because of this new – these new marketing and selling efforts in just the past six months alone, revenues for FC2 in the U.S. were approximately $2 million. Because of this progress, we have refocused and expanded our marketing and sales efforts by converting to fixed costs internal 12% sales force into a variable costs external independent contracted sales force. We have entered an agreement with this group, who initially utilized 40 people, that is expected to expand to 100 salespeople by next year. This independent sales group will use salespeople who have established relationships with primary care and OB-GYN offices. And as this is a contracted sales force, our company should incur no additional expenses, when additional representatives added as the group will be compensated only on FC2 sales. Our other revenue opportunity is PREBOOST, it’s 4% benzocaine wipes for the prevention of premature ejaculation. We have entered into a co-promotion and distribution agreement with Timm Medical Technologies Incorporated, a specialty urology sales organization. I will now turn the call over to Michele Greco, CFO and CAO to discuss the financial highlights. Michele?

[Michele Greco:]

Thank you, Dr. Steiner. As we’ve mentioned in the past and the reasons for our diversification strategy, we’ve seen a marked decline in public sector volume over the past seven quarters for the FC2 product. The decline experienced in fiscal 2018 is due to the timing of public sector tenders and lack of orders from our two main customers in Brazil and South Africa. As Dr. Steiner mentioned, we’re optimistic about the upcoming Brazil and South Africa tenders, as well as the new revenues from our U.S. FC2 marketing and selling efforts. Looking at our fiscal Q2 results. FC2 unit sales totaled $4.1 million, which is 9% lower than the $4.5 million from Q2 2017. Net revenues for the quarter totaled $2.6 million, an increase of 7% from the prior year quarter. Gross profit decreased 6% to $1.2 million for margin of 47%, compared with $1.3 million from margin of 53% in the prior year quarter. The decrease in a gross margin percentage is primarily due to the unfavorable impact at the currency exchange rate and our cost of goods. Operating expenses increased $2 million from $3.9 million for the prior year quarter to $5.9 million. The increase in operating expenses was primarily due to increased research and development costs for our clinical development programs of $900,000, increased salaries related to our U.S. commercial team, increased corporate personnel and severance expenses. The bottom line result was a net loss for the quarter of $3.8 million, or $0.07 per diluted common share, compared to a net loss of $1.8 million, or $0.06 per diluted common share for the prior year quarter. Now for the results for the six months period ended March 31, 2018. Unit sales totaled $8.5 million, which is down 22% from the prior year, up 10.9 million units. Net revenues for the period totaled $5.2 million, a decrease of 9% from the prior year period. Gross profit decreased 14% to $2.5 million for a margin of 49%, compared to gross profit of $2.9 million for a margin of 52% in the comparable prior year period. Operating expenses increased from $7.4 million for the prior year to $14.6 million. Included in operating expenses is the $3.8 million related to the settlement agreement we entered with our Brazilian distributor, Semina, during December of 2017. Excluding the settlement agreement, the increase in operating expenses is primarily driven by increased research and development costs of $2.7 million and the increased salaries for the U.S. commercial team, the additional corporate personnel and severance expense. The bottom line result was a net loss for the six months of $8.1 million, or $0.15 per diluted common share, compared to a net loss of $3.1 million, or $0.10 per diluted common share in the prior year. For the six months, we recorded a tax benefit of $4.5 million, compared to tax benefit of $1.4 million in the prior year period. Moving on to our balance sheet. As of March 31, 2018, our cash balance was $9 million and our accounts receivable balance was $3 million. We remain focused on our cash position and liquidity. Our networking capital was $5.6 million as of March 31, 2018, which is up from $4.8 million as of September 30, 2017. We used cash of $4.2 million in operations during the six months ended March 31, 2018, compared with using $1.1 million of cash in the prior year’s six months period. During the second quarter, we completed a $10 million synthetic oral financing on FC2 product sales, which provided immediately – immediate funds to support our drug development program and operations. This transaction was non-dilutive. Our plans have been and continue to be to advance our clinical programs. We’re optimistic about the U.S. market for FC2 and securing orders from the new tenders in the global public sector. We work to expand our customer base in our markets and expect these opportunities to allow us return to historical volume. Now I’d like to turn the call back to Dr. Steiner.

[Mitchell Steiner:]

Thank you, Michele. We’ve established a foundation to make Veru a leading urology and oncology biopharmaceutical company. We have several near-term and mid-term products progressing. At the same time, we have multiple shots to have applications for approval of new drugs filed and launched in urology and oncology. We aspire to file at least one NDA each year for the next five years. This will provide the engine for growth as we continue to develop and plan to commercialization of new drugs and commercialize the company’s existing products in our portfolio. We’re also looking forward to advancing VERU-944 for the treatment of hot flashes in men who have advanced prostate cancer and are in hormone therapy into a Phase 2 clinical trial soon. We’re excited VERU-111, is a novel targeted oral anti-tubulin therapy for multiple types of cancer, and look forward to starting the Phase 1/2 clinical trial this year for the treatment of prostate cancer, as well as to share additional preclinical data at the multiple future scientific meetings. We will drive shareholder value through the lower costs and expedited clinical development for large market opportunities in urology and oncology. We’re committed to becoming a leading urology and oncology company. With that, Ill now open the call to questions. Operator?

[Operator:]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question will come from Kumar Raja of Brookline Capital Markets. Please go ahead.

[Kumaraguru Raja:]

Hi, good morning. Thanks for taking my question. So first, I want to understand how the – this change from fixed to variable? What is the timing that it will take impact? And how it is going to impact the marketing efforts and when do you see the result from those efforts? And as well as the timing of the tenders for Brazil and South Africa, I heard that you will hear about it first in early December, is that right? Is that the timing for both Brazil and South Africa? How does that impact timing of the revenues?

[Mitchell Steiner:]

Great. So your first question – thank you, Kumar. I appreciate that. The first question is the – provide a little bit more clarity on the fixed versus variable. So as the strategy – the initial strategy was to look at six different markets – market access channels and see which of these channels would have traction. So examples would be, would you use telemedicine? Would you use salespeople? Would you do online? Would you go after just public health? Would you go after 340B clinics. So we went after a lot of different ways to see where we could have traction in the U.S. market. Our hunch all along was based on the Affordable Care Act, where the insurance companies, both private and public had to pay 100% with no co-pay that having a prescription may be the best way to do it, we just didn’t know. So, as I told you in the last call, it looks like all the six channels generated revenue and particularly the sales force. Now the sales force was small. We didn’t want to put a lot of money behind it. So when we say fixed costs, we had to pay salaries, we had to pay bonuses, we had to pay for their expenses and their selling expenses, and so that was for 12 people. And then what happened, it became very, very clear that this was a way to go. Now next decision it is, do you expand it? Well, to expand it, you can to go from 12 to 40, or 12 – from 40 to 100, it’s not what we were intending to do alone. So the idea was can we convert those 12 fixed folks into a variable model in which we have a deal with a distributed kind of like what we did with PREBOOST with Timm Medical and go with a…

[Philip Greenberg:]

See, it’s not a distributor, it’s a service agreement.

[Mitchell Steiner:]

So it’s a service agreement with salespeople, which we have initially 40 that would then be expanded to 100 by next year. And the difference there is that, they’re being compensated as they sell the FC2 product and we are not providing them salaries and bonuses and all this other stuff that you would in the fixed situation. So we essentially converted the fixed into a variable, so that we can have more people out there selling. We get – we take advantage of the revenue that comes in for our bottom line and when – and we have less exposure to this fixed cost. So when would – the other part of your question is, when would you do that? The answer is, we’ve already done it. We started in February with an initial pilot launch and we’ve expanded that appropriately and we’re very, very pleased with the results of this approach. And I think it will affect our overhead, because we got rid of the fixed. And as we sell, we will be paying for the sales force that are out there selling for us. Second question was related to the timing of South Africa and Brazil. As you know, with governments, you never know a 100%. But what I can tell you that we know right now is that, Brazil is expected to – Brazil is a Dutch auction, so we expect that tender, which is 50 million unit order to be decided over the auction to happen sometime in the June timeframe. And the hope is that, we will hear something in June, July, so that has not changed. And then the second one, South Africa. South Africa, we’ve already applied. They’ve already announced their tender, 40 million units a year for three years. And based on what they have guided us, we’re looking for a June, July answer as well. So it’s both about the same time. In terms of the timing of the orders, all I can tell you is, we know that Brazil and South Africa are running out of product. And so I think, that – that’s good for us. We just have to see how that translates into now orders versus soon orders.

[Kumaraguru Raja:]

And so when do you see these results coming in, in terms of increasing revenues, especially the U.S. marketing efforts? When do you see the results for that?

[Mitchell Steiner:]

I’ll answer and I’ll have Michele answer as well. So we’re seeing results now, and so we’ll be able to provide more information via next call. But Michele, would you like to comment?

[Michele Greco:]

I would agree with Dr. Steiner. We’re seeing results from the U.S. marketing efforts and we’re going to continue to see that and that’s going to continue to increase. And once the tenders are announced and as orders get placed, we’ll see those orders will probably come in a month or so after the tenders get announced.

[Kumaraguru Raja:]

And I also…

[Michele Greco:]

So we’ll see it [Multiple Speakers] summer.

[Kumaraguru Raja:]

Okay. I also had a question for VERU-111. So a lot remains to be done before you guys can go ahead and file the NDA. Do you guys have enough clinical drug supply for starting the clinical trials? And also the potential in other oncology indication like what are your plans for that?

[Mitchell Steiner:]

Yes. So I think, you meant to say IND, not NDA, so for VERU-111, right? So when we file the IND, correct, or you think it’s not [Multiple Speakers]

[Kumaraguru Raja:]

That’s right, yes. That’s IND, yes..

[Mitchell Steiner:]

Okay, IND, good. I just want to make sure I answered the right question, yes. So the answer is that, we’re on target to file the IND by December time, so that we can have a third quarter start of the trial. So we have drug, we have drug supply. We have to create a – it’s a brand-new drug. So we have a manufacturer that’s fully GMP. We’ve got plenty of drug to start the trial. The initial thought was that we would start the trial in men with metastatic castration-resistant prostate cancer. They have failed abiraterone and enzalutamide and they could have failed, at least, one taxane, whether it’s cabazitaxel or docetaxel. So the thinking behind that is, because PSA response, which means greater than 50% reduction in PSA over 12 weeks or three months is a pretty good predictor of activity that we would be able to start seeing within three months. These patients that are being rolled into the trial – enrolled into the trial some of the efficacy activity and, of course, we’re looking at safety. And so the thought was get that done with prostate cancer first, because then you can make a comment on safety and then even make a comment on efficacy. Even though the medical oncologist that we’re working with and Hopkins is – it looks like it will be the lead group – that they’re telling us that this should have activity in other taxane sensitive, quite frankly, taxane sensitive that became taxane resistant tumor types. And you will be seeing some new data coming out of ASCO showing you some of the additional tumor types that we have activity. That – if we did a study, where everybody came in, then we wouldn’t have enough of any one tumor type that we saw a signal. So with that said, get past the prostate one, get into Phase1/2, get into 2 and then begin to expand VERU-111 into other tumor types, we’re having an oral anti-tubulin therapy would be preferable. So that would be the plan. Our hope is that, by the time we start showing the prostate cancer results, particularly the efficacy that we’ll be in good position for a potential large pharmaceutical partnership and that certainly would influence the number and types of additional trials that we would do. But we can certainly broaden the market.

[Kumaraguru Raja:]

That’s very helpful. Thank you so much.

[Mitchell Steiner:]

Thank you.

[Operator:]

Our next question will come from Yi Chen of H. C. Wainwright. Please go ahead.

[Yi Chen:]

Hi, thank you for taking my question. Regarding VERU-944, can you provide some color as to when can we expect to see the Phase 2 protocol? And how many patients will be enrolled once you start in July? And when can we expect to see the top line results? Thank you.

[Mitchell Steiner:]

Yes. So I had made – so the question is on VERU-944, which is the product cis-clomiphene, which is about greater than 98% pure cis-clomiphene, which is in a nonsteroidal oral estrogen for the treatment of hot flashes in men on androgen deprivation therapy. The question is when will we see the protocol. So what I think guided in the calls that we plan to file the IND this month. What I will – once the FDA has had a chance to review the protocol, which we have to give them 30 days, then at that point we’ll provide full details on the protocol and you can even go to clinicaltrials.gov. And I think, there’s information that’s registered there to give you some specifics on the protocol once we move forward with it. At a very high-level, we’re looking at three doses versus placebo. And the endpoint is the – looking from the baseline to week four and week 12, the number of or the frequency of moderate to severe hot flashes and what that change is. The reason that’s important is, because this is, in fact, the same endpoint that the FDA uses for postmenopausal women that have hot flashes and drugs that have been approved for those indicate – for that indication And so – the FDA has allowed us to use the same endpoint, as mentioned in there – I think it’s a draft guidance for treatment of hot flashes in women with estrogen products and that guidance is as of 2003. So that’s the end point. It’s a 12-week treatment period. So we know it’s a short study. And the results we’re expecting in the first part of 2019 and again, 120 patients total of approximately 120 patients will be in the study. So we’ll give you more information. So in summary, then it’s a 120-patient study enrolled in four arms, three doses versus placebo, endpoint similar to postmenopausal women, hot flashes and the date is expected first part of 2019.

[Yi Chen:]

Got it. Second question regarding Tamsulosin DRS NDA filing, is this still on track to occur in the second-half of calendar 2018?

[Mitchell Steiner:]

Yes. So we’re still on track and we’re still on track. One of the things I keep telling folks is that, we ended up getting some interesting news when we did the first two bioequivalency studies, and that sort of changed our approach. Initially, we thought we’d come up with a alternative to FLOMAX that will allow patients with dysphasia to have an opportunity to take granules and that was a big niche market and that alone would have been quite profitable. During the two studies, we found out, it turns out that this new slow release technology, in fact, change the attributes of the drug product by providing us now a drug that doesn’t have a food effect. And so now that you don’t have a food effect, then we said, well, gosh, not only could we be beneficial in patients who cannot swallow, but we now have access to the 22 million prescriptions that are written a year for FLOMAX and its generics and providing something that doesn’t have a food effect could have advantage – clinical advantages both for administration, because patients never listen, tell them to take it on a full stomach, they take it at bedtime and they stand up and get dizzy and they could fall down and break their hip or something of that nature. So to be able to have something that will change the administration and compliance would be a big deal. So we added a capsule. So now the NDA has two drug products. The first drug product will be the slow release granules and then we took those slow release granules and stuck them into a capsule. And so we just want to make sure we kind of do it all right. And we’re on track and we’re excited with this new change, because I think this is going to make this even more successful drug and needed in the marketplace. And just to also add, it also turns out for the alpha blockers, which is the class that Tamsulosin falls under. There are no granule formulation. So it’s not just we would provide something for Tamsulosin, which is 85% of the market. But it means 100% of the market could be served by having a granular formulation.

[Yi Chen:]

Okay. Thank you.

[Operator:]

[Operator Instructions] Our next question will come from John Costello, shareholder. Please go ahead.

[Unidentified Analyst:]

Okay. Yes, thanks. Dr. Steiner, just kind of as a follow-up to that. Do we have a hard start date for the Tamsulosin Phase 2 trials, which I was – I think, would occur this month sometime in May. And also just in your opinion what are the chances for success in the second phase of the Tamsulosin trial?

[Mitchell Steiner:]

Right. Well, John, thank you. Good to hear your voice. So to answer your question, so we’re – this is – and I’m saying this just for purposes of other people listening to be sure we’re clear. So this is a bioequivalent study. And the bioequivalent study means that you have to show that you have the same drug levels with your new formulation, as compared to the reference, which in this case is FLOMAX. We just have the added benefit of comparing it to FLOMAX Fed and Fasted, because FLOMAX has a food effect. We want to match FLOMAX Fed, which is the safer version of it, okay. We have done Phase 1 Phase 2, but the way you think of Phase 1 and Phase 2, don’t think of it as a Phase 1, Phase 2 as in clinical development, the Phase 1 being trial 1, trial 2. Trial 1 was to pick a formulation of which we picked the formulation that showed us that we didn’t have the food effect and we match the general attributes of the PK or the pharmacokinetic of FLOMAX, Fed And Fasted, and then that’s what we found that we didn’t have a food effect. Phase 2 was really the second bioequivalancy study in which we announced we hit bioequivalence for drug levels both Fed and Fasted versus FLOMAX Fed and we were excited about that so that met that, but we did not hit on Cmax, Cmax means how quickly did the drug get in initially and we were off. And so the next trial that we are doing, John, is the trial where we fix the Cmax and the AEC is already in place and what is happening in terms of the timing and the question is, for that trial which will be the final trial, two questions, one, when is that going to start? And two, what the chances of a success? Okay, in terms of when it will start? We have chose a model in our company where we didn’t want to have our own labs. And so as a result we outsourced these activities and in part that introduces an element of uncertainty in timing and because we have to get in line with everybody else who is using the same facility that’s outsourced. And so everything that’s in our control we have moved very quickly, everything that’s out of our control is out of our control. So we are slated to have these data in 2018. There is no hard start at this time until I get word from the facility, because the facility is not just a manufacturing facility that makes the formulation, then they have to take that formulation and ramp it up so that it’s fully GMP, so that you can give it to patients, a fancy way of saying its clinical grade. And then the next thing is you have to go to a Phase 1 unit which is a separate unit that actually runs the clinical trial, brings the patients in and actually does the study and then once the study is done as a feed and bleed, meaning you feed a patient a dose and then you take blood samples at different times, then it takes time for the people to analyze those samples to also come back with their results. So, it’s – that introduces a little uncertainty, but what I can tell you is I believe we’re on track and what I can also tell you is, I think the chances of success are high. And now that we’ve had two studies under our belt, we know more about what we’re going to do with this formulation than ever before and the formularies are telling me that adjusting to Cmax, which is the beginning part of it, is a tweak that they’re comfortable with what they are going to be able to do. So, a long answer, but it kind of gives you a sense of all the moving pieces behind the scenes.

[Unidentified Analyst:]

Okay, thanks. That sets clarity.

[Mitchell Steiner:]

Thank you.

[Operator:]

[Operator Instructions] Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Dr. Mitchell Steiner for any closing remarks.

[Mitchell Steiner:]

I appreciate you joining us on today’s call and I look forward to updating you all on our progress at the next investors call. Thank you for the question, I appreciate it and have a good day.

[Operator:]

The digital replay of the conference will be available beginning approximately noon Eastern Time today by dialing 1-877-344-7529 in the U.S., and 1-412-317-0088, internationally. You will be prompted to enter the replay access code, which will be 10119574. Please record your name and company when joining. The conference has now concluded. Thank you for attending today’s discussion.