XOMA Corporation
Q4 2012 Earnings Call Transcript

Published: 13 Mar 2013

[Operator:]

Good afternoon, ladies and gentlemen and welcome to XOMA Corporation’s Corporate Update and Fourth Quarter 2012 Financial Results Conference Call. (Operator Instructions) As a reminder this conference is being recorded. I will now turn the call over to your host for today, Ashleigh Barreto, Investor Relations at XOMA. You may begin.

[Ashleigh Barreto:]

Thank you, Karen. Before we begin I must remind you that we’ll be making certain statements in this call including but limited to statements to anticipated timing of initiation and completion of clinical trials, proof-of-concept trials, anticipated size of clinical trials, continued sales of approved products, regulatory approval of unapproved product candidates, efficiency of our cash resources, and anticipated levels of cash utilization and statements that otherwise relate to future periods. Such statements are forward-looking statements in the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Security Exchange Act of 1934. These statements are based on assumptions that may not prove accurate. The actual future events may differ materially from those anticipated due to certain risks inherent in the biotechnology industry and for company engaged in the development of new products in a global market. Potential risks to XOMA meeting these expectations are described in more detail in XOMA’s most recent filings and Form 10-K and other SEC filings. Consider those risks carefully when considering XOMA’s prospects. Any forward-looking statements in this conference call represents XOMA’s view only as of the date of this call and should not be relied upon as representing its view in any subsequent case. XOMA disclaims any obligation to update forward-looking statements except for required by applicable laws. Participating in today’s call are John Varian, Chief Executive Officer; Paul Rubin, Senior Vice President, Research and Development and Chief Medical Officer and Fred Kurland, Vice President, Finance and Chief Financial Officer. And with that I’d now like to turn the call over to John Varian. John?

[John Varian:]

Hello, everyone, and thanks for joining us. During 2012 we reset XOMA’s direction and squarely focused our efforts on both creating and capturing value from our key asset, gevokizumab. 2013 is going to be the year of execution for us. Our 2013 milestones include several sets of clinical data read outs for gevokizumab and the year is expected culminate with top line data from the EYEGUARD-A study, the first of our three pivotal studies in patients with non-infectious uveitis. Also in 2013 the data we have and will generate from the studies in our proof-of-concept program are expected to point us to the next Phase III indication for gevokizumab. These studies are also giving us significant insight into IL-1 beta role in inflammatory acne, erosive osteoarthritis of the hand and scleritis, which will benefit clinicians and patients alike. We’re off to a good start in 2013. The clinical team is working very hard and simultaneously managing several major trials well. We delivered our acne results on time in January and the results were very encouraging. The enrollment in our second proof-of-concept study in patients with inflammatory osteoarthritis of the hand or EOA is accelerating as expected to deliver results on time in July or August of this year. In the Phase III pivotal studies in our Phase III non-infectious uveitis program a huge worldwide effort between our team in the U.S. and our corporate partner Servier’s international team is fully under way. We expect to deliver results from these three pivotal studies beginning at the end of this year and through the middle of 2014. I want to stop for a moment to thank the development teams both here at XOMA and at Servier for their commitment to this effort and to the patients whom we hope will benefit from treatment with gevokizumab. We were quite pleased with the preliminary top line results from the first of our proof-of-concept studies with patients with moderate to severe inflammatory acne. This was the first double blind placebo control setting in which gevokizumab established a dose dependent effect compared to placebo. Even with the narrow patient population eligible for enrollment and a highest does that was very possibly too low. The results were very encouraging. Unlike our other studies that are underway in this study we will require to deliver weight based dosing. This resulted in virtually all patients receiving less than the highest six dose of 60 milligrams per patient we’re testing in other studies. As you’ll hear from Paul in a moment, in spite of this we do believe the data we generated provides preliminary evidence to warrant further evaluation of gevokizumab in moderate to severe inflammatory acne. I want to be clear. I am not saying we have decided to move forward towards a full acne program. What I am saying is that we are exploring what this program would entail and how we can design it to meet the FDA’s as well as our needs. We these data in hand we are also further evaluating the overall commercial opportunity for gevokizumab in acne. It was important to generate the initial product profile early in our proof-of-concept program so that we can test it with physicians, with patients and with payers. The results of our primary market research will help us evaluate the commercial viability and potential positioning of gevokizumab in acne. All this information will be important when we review the results from all three indications in our proof-of-concept program in the fourth quarter of this year and select the next Phase III indication for gevokizumab. Before I turn the call over to Paul to walk you through some of our findings from the acne study and provide you with an update on our substantial progress in the EYEGUARD studies, I’ll touch on our progress in evaluating and advancing the development of gevokizumab in either Neutrophilic dermatoses or Schnitzler Syndrome. We are communicating with the experts in these diseases and putting together the documentation needed to have productive discussions with regulatory agencies. Our partner Servier shares our interest in evaluating these opportunities and is also moving aggressively. We are seeing what we believe to be good possibilities in these very rare diseases. We expect feedback from the FDA on a proposal in the next couple of months and we will provide updates as our plans are finalized. With that I’ll turn the call over to our Senior Vice President, Research and Development, Paul Rubin. Paul?

[Paul Rubin:]

Thank you, John, and good afternoon, all. In January we presented a top line interim analysis interim analysis data from our Phase II proof-of-concept acne study. This study was designed to evaluate the efficacy and safety of gevokizumab for the treatment of the inflammatory lesions seen in patients with moderate to severe inflammatory acne vulgaris. Based on suggestions from FDA in this study patients received 0.2 milligrams per kilogram or 0.6 milligram per kilogram or placebo given subcutaneously once per month for three consecutive months. With mean patient weights of approximately 72 kilograms patients in the two treatment groups received average doses of approximately 40.5 milligrams and 45 milligrams. Our reported results included data from the 92 patients who received all three doses of study drug or placebo out of a total of 127 patients enrolled. The FDA guideline suggests that drugs for this disease should be evaluated according to two criteria

[Fred Kurland:]

Good afternoon, everyone and thanks for attending our call. We recorded total revenues of $33.8 million in 2012 compared with $58.2 million in 2011. You will recall the full year 2011 revenues include the $15 million up front collaboration and license fee that we received from Servier associated with our gevokizumab development agreement. For the fourth quarters ended December 31, 2012 and 2011, we recorded revenues of $7.4 million and $9.8 million respectively. The decreases in full year and fourth quarter 2012 revenues were primarily due to reductions in contract revenue and related expenses from our NIAID government contracts and in the reimbursements we received from Servier for gevokizumab related activities. We had a net loss for the full year 2012 of $71.1 million or $1.10 per share, compared with a net loss of $32.7 million or $1.04 per share in 2011. Excluding the $9.2 million non cash expense associated with the revaluation of contingent warrant liabilities, our net loss for 2012 was $61.9 million or $0.96 per share. In the fourth quarter of 2012, we had net income of $2.4 million or $0.03 per share, due primarily to a $16.6 million noncash credit associated with the revaluation of contingent warrant liabilities, compared to a net loss of $11.7 million, or $0.34 per share during the cars founding period of 2011. Excluding the noncash revaluation of the warrants the net loss for the fourth quarter of 2012 was $14.23 million or $0.18 per share. In January 2012 we announced a streamlining of our operations and a reduction in personnel which are reflected in our lower operating expenses during the year. Annual research and development expenses for 2012 were $68.3 million, nearly identical to the total in 2011 of $68.1 million. For the 2012 and 2011 fourth quarters R&D expenses were $15.7 million and $16.7 million respectively. During 2012 our external clinical trial costs were higher as expected reflecting our increased gevokizumab clinical development programs. These costs were offset by decreases in internal compensation and related personnel costs. Selling, general and administrative expenses were $16.9 million for the full year 2012, a 30% reduction from the $24 million incurred during 2011. This reduction is primarily due to decreases in personnel costs of $3.8 million and decreases in professional service costs of $3.2 million during 2012. For the three-month period ended December 31, 2012 and 2011 SG&A expenses were $3.9 million and $5.2 million respectively. As a result of our streamlining we realized approximately $17 million in reductions of internal expenses as we refocus exclusively on value creating activities. On December 31, 2012 XOMA had cash, cash equivalents and short term investments of $85.3 million compared to $48.3 million at December 31, 2011. I’ll now provide 2013 guidance. We anticipate our ongoing operating activities in 2013 will be approximately $50 million. The increase in our expenses directly reflects that costs associated with conducting the EYEGUARD Phase III clinical program, the trials for which are highly focused in 2013. We also reaffirm that our existing cash is expected to fund existing operations to the end of 2014. Importantly this is beyond the read out of the clinical studies Paul and john have been discussing today. With that, I’ll turn the call back to John.

[John Varian:]

Thanks, Fred. So before we open the floor for questions I’ll remind you of our focus on both creating and capturing value. While we continue to work diligently to obtain the study results, we’re also bust identifying ways to achieve these two goals. As you know we plan to commercialize gevokizumab ourselves to specialty physicians in the United States. A small highly targeted XOMA sales force can be very effective with the UV data specialist, the rheumatologist and the dermatologists who will be important in determining gevokizumab usage. We will be spending time this year digging into the dynamics of each therapeutic area at the patient, physician and payer levels. This information will be crucial in potentially commercializing gevokizumab in the NIU indication and to our decision as to our next Phase III indication. To capture value for XOMA and its shareholders we will take our discoveries forward to the point where we can retain significant value from our investment. XMet A and XMet S are prime examples of our determination that we should be rewarded for the novel scientific approaches that come from our discovery team. In 2013 we will continue our pre-clinical work on these two candidates to establish the dosing and durability of effect for each and higher species. The relatively small investments we make in moving them closer to clinical trials has the potential to result in exponentially greater returns in the future. Over the next 18 to 24 months we plan to take XMet D through manufacturing and toxicology studies and conduct a pre-IND meeting with FDA. At that meeting we plan to present and seek agreement on the studies we would like to perform in one or more orphan indication related to insulin over-production. 2013 is an exciting year for us. We have the acting results in hand. We have learned a significant amount about gevokizumab and a high and low data in patients with inflammatory acne. We will be working closely with experts over the next few quarters to understand the clinician’s need in order to design a Phase III program that gives gevokizumab the best opportunities to succeed clinically and commercially. We anticipate we’ll have the EOA data during the summer and the scleritis data in the fourth quarter. By the end of the year we believe we’ll be able to announce our next Phase III indication. Together with our shareholders we anticipate the completion of each study in the EYEGUARD program beginning at the end of 2013 and through the middle of 2014. In the meantime we will continue to work to both create and capture value. Operator, we would like to open the call for questions.

[Operator:]

Thank you. (Operator Instructions) Our first question comes from the line of Jason Kantor from Credit Suisse.

[Jeremiah Shepard:]

Good afternoon, this is Jeremiah for Jason.

[John Varian:]

Hi, Jeremiah.

[Jeremiah Shepard:]

I just have a few questions. First is can you give us some ideas what you consider is a positive result for the erosive osteoarthritis of the hand study?

[John Varian:]

I could tell you what the assumptions that we’ve made in terms of our powering. And that can give you some idea of what would be considered clinically relevant. First of all, to get a drug for osteoarthritis in general approved, almost every drug cleared for, has been approved on the basis of control of pain, or improvement in pain. So we are looking at, at least a 50% improvement in pain in the active group versus a 25% in the placebo, so essentially a doubling of the placebo response. And we consider that clinically relevant. In addition, though, because this is a unique subset of arthritis med, there’s an inflammatory and a destructive component. We’ll also be looking at the potential for our drug to have a disease modifying affect, although, it’s not necessary for approval. This would be an additional subset of an indication that we could pursue. So in addition to looking at pain on the off scan scales we mentioned, we’re also looking at the ability to modify the disease looking, at lease in our Phase II trial, wouldn’t in three separate indicators

[Jeremiah Shepard:]

Okay, great. And then in terms of, you mentioned that you’re expecting to have offerings census of roughly 50 million in 2013. Is there any way we should think about the R&D and SG&A have breakout over the quarters? Will it be pretty steady, or be kind of more lumpy in one part of the year over the other?

[Fred Kurland:]

The dominant element of our R&D expenses is the conduct of our clinical trials. So we would expect that as these trials go, so would be the expense. So our expectation is not to see terribly many bumps, but at the same time you’re not going to see perfectly equal numbers per quarter.

[Jeremiah Shepard:]

Okay. Thanks a lot for taking the questions.

[John Varian:]

Thank you.

[Operator:]

Thank you. And our next question comes from the line of Simos Simeonidis from Cowen & Company.

[Simos Simeonidis:]

Hi, can you guys hear me?

[John Varian:]

Yes. Simos, that was the best pronunciation of your name I’ve ever heard, actually, it was very, very well done.

[Simos Simeonidis:]

I know I was amazed myself. So I guess this is a question more for Paul. Given that you have a dose that’s probably below therapeutic levels with a 0.2 milligram dose that you had to do, can you help us put the efficacy data in the acne trial in context with other drugs that have been approved in this indication? Can you help us understand why this is a positive trial?

[Paul Rubin:]

Yes. That’s a great question, Simos. First of all, we did see, even in this small number, statistically differences from placebo in the higher dose group. So that was, there was statistical relevance. But also, if you look at the magnitude of the effect, it also is quite good in and of itself, but also compared to other drugs. For example, we saw a 70% improvement in overall lesion count with a 15% difference from placebo, which, if you look at especially the oral antibiotics, they’ve been approved on the magnitude of effect versus placebo, that’s actually lower than that. So if you look at, and if you wanted to, rank order the size of the effect, at least preliminary, this appears to provide a bigger effect versus placebo than the oral antibiotics. And in fact, we designed this trial where only patients that have failed oral antibiotics could be enrolled in the trial in the first place. So at least, if we can confirm what we’re seeing in the Phase II trial, we would have good ammunition to position this as a drug that can be used after oral antibiotics fail, from a number of perspectives. The fact that the 0.2 milligram-per-kilogram dose was not effective, and the 0.6 is, again, shows that there are least, in our interpretation, a dose response, which also makes it very suggestive that this is a real drug effect, and not a placebo difference, a placebo effect.

[John Varian:]

Yes And just one other thing to add. When it comes to Accutane and the effectiveness of Accutane, we are not trying – we will not be trying to compete for effect with Accutane. Accutane is an incredibly effective drug. The issues with Accutane are its safety profile.

[Simos Simeonidis:]

Okay, great. That’s helpful. Thanks, Paul, and thanks, John. The other question I had is more, I guess, on timing the strategy. Given that you’re going to have a lot of data readouts starting in 3Q, we see osteoarthritis trial, and then going on for the next five or six quarters. Did you say on the call, and correct me if I’m wrong, but do you – is there’s a possibility that you may start a Phase III trial or a Phase III program in one of the three proof-of-concept indications before all of the three uveitis trials have read out?

[John Varian:]

So the timing would be that by the end of this year, we would pick the next Phase III indication. And it doesn’t mean that the other ones would never go forward, it just means which one would be the next Phase III indication. We will then spend the next several – my guys would probably say several quarters, I’d say hopefully shorter than that – putting together what the Phase III program would look like. And setting that up, we’d be talking with our partner Servier also about their plans potentially for Phase III in Europe that sort of thing and so, what will happen in the beginning of 2014 will be the planning and the work that goes into being able to launch the next Phase III study. So I don’t – I would say that it would be unlikely we’d actually launch the Phase III study before all the Phase III’s are reading out. But it would be fairly close to the same period of time. Paul, do you have anything you want to add to that?

[Paul Rubin:]

Nope. That’s it.

[Simos Simeonidis:]

Thank you for taking the questions.

[John Varian:]

Sure.

[Operator:]

Thank you. And our next question comes from the line of Adnan Butt from RBC Capital Markets.

[Adnan Butt:]

Hi, everybody. Thanks for taking my question.

[John Varian:]

Hi. Thanks for asking one.

[Adnan Butt:]

I guess my main question is on the osteoarthritis study. You mentioned a number of scans that will take place. When will – can you tell us when the scans actually physically were taken? How long were they taken for? And what timeframe would you expect them to be able to crack a disease modifying change?

[John Varian:]

That’s also an excellent question. So we’re getting scans at base line at three months and at six months. And interestingly especially some of the more sensitive scans like MRI and ultrasound at least historical data suggest you could see changes in synovitis in a relatively short time, in as little as two weeks at least when you’re looking at the swelling associated in the synovium on an MRI. So theoretically if the drug worked you could see an effect on potentially disease modifying activity certainly at the three month time point that we’re going to be doing our first analysis. And then radiographs typically take longer. And that’s why we also have this six month point in time.

[Adnan Butt:]

So when you report the data will it be based on the three month or six month time point?

[John Varian:]

What we’ll be reporting and all we’re saying right now is, it’s top line data from the primary endpoint which would be at that point in time we’ll probably only be reporting the pain scale from the off scan at the three-month period.

[Adnan Butt:]

But you will also have three month scan data or you’ll need more time to analyze the scan data?

[John Varian:]

We might. Again I can’t – we’ll have to look and see if we can but it’s likely we’ll need more time to analyze that.

[Adnan Butt:]

Oh, okay. And was an enrollment update given on the three studies from – my assumption is it’s on track?

[John Varian:]

Are you talking about the uveitis trials?

[Adnan Butt:]

Yeah. I got studies. Yes.

[John Varian:]

Yeah. What we’re seeing is the enrollments we’re seeing per center, the number of patients shows that they are out there on a per center basis and what we’re trying to emphasize is the key to this is getting the sites online. I think we’ll have the sites online in time to get the requisite number of patients and give you the data at our prescribed target dates.

[Adnan Butt:]

Okay. I’ll get back with you. Thanks.

[John Varian:]

Okay. Thanks.

[Operator:]

Thank you. And our next question comes from the line of Matt Kaplan from Ladenburg Thalmann.

[Matt Kaplan:]

Hey, guys. Can you hear me?

[John Varian:]

Yeah. Hi, Matt.

[Matt Kaplan:]

A few questions. First, just starting off on the proof-of-concept study and specifically the acne study; are you planning to have an end of Phase II meeting with the FDA to figure out what would be necessary and what a Phase III would look like? And can you talk about a timing of that meeting?

[John Varian:]

Yeah. I think, as you said before, we had a full I think 127 patients. So we have to get that full dataset complete and analyzed, and that’ll be sometime later this year. Once we have that data in hand, and plus we are talking to a number of experts not only about the data, but our about acne in general. Then we can create the questions that we’d like to ask FDA. So I think our intent is to have an end of Phase II meeting. We’d probably make the request for that meeting sometime at the end of the year.

[Matt Kaplan:]

Okay. So you’re not going to have it before the end of the year. And in terms of just going back to the results in that study, can you give us a little bit more of either quantitative or qualitative sense in terms of the number of patients who had lesions completely resolved? Did some patients have, let’s call it a complete response?

[John Varian:]

Yeah. Well, what we can say, our clinically relevant response, which is mitigated by the investigative global assessment. And in that instance we had approximately 30 patients at the end of the study and about 30% of those had a very clinically relevant response.

[Paul Rubin:]

Yeah. I think that’s probably the most telling because that’s the five-point scales from zero to four. And for patients to move – to be respondents they had to move by two on that scale. If you look at the way that that scale is laid out, a two-point movement is a real response.

[John Varian:]

It’s a big movement. And it’s hard to get full clearing because also these patients had nodular disease, so in order to go down to zero, you have to have zero nodules, which is very difficult to do in that short period of time.

[Matt Kaplan:]

Okay. Fair enough.

[John Varian:]

So a two-point change is deemed by FDA to be a clinically relevant improvement. And then on average we saw about a 70% improvement in overall lesion count.

[Matt Kaplan:]

And was there a differential in terms of patients that were more severe, perhaps, in the study than less severe in terms of the activity that you saw?

[John Varian:]

All these patients had to have moderate to severe activity by definition. So the mean count was around 30 lesions, and there wasn’t that much variability around that mean.

[Matt Kaplan:]

And remind us why you were doing that, the weight-based study.

[John Varian:]

It was suggested by FDA because the relatively young patient population and the fact that we had no experience in this indication, the dermatologic division in the interest of being cautious suggested that we use a weight-based satiate.

[Matt Kaplan:]

Okay. Good. And then going forward do you think you’ll have to continue to doing a weight-based or?

[John Varian:]

I can’t speak for FDA. I hope is, on the basis of the safety we’re seeing in this and other studies, we’ll be able to make a cogent case of doing a fixed dose.

[Matt Kaplan:]

Okay. Great. And one question about the EYEGUARD program, is – I guess is the timeline slipping a little bit for the EYEGUARD-B study or some of the other studies compared to EYEGUARD-A, the VSA in terms of data readout? Initially I think I was expecting first quarter and then kind of first half and now it seems like mid-next year?

[Paul Rubin:]

What we’ve said very consistently I think since a year ago today when we really started rolling out this program was that EYEGUARD-A would be end of 2013.

[Matt Kaplan:]

Right.

[Paul Rubin:]

EYEGUARD-C which is the other one we control, we actually didn’t announce that study until later in the year, if you remember. And we’ve said, from the beginning, we thought we’d have those data by the end of Q1.

[Matt Kaplan:]

Right.

[Paul Rubin:]

And we’ve always said that EYEGUARD-B would be the middle or second quarter of 2014. That one we did not speak – and so, absolutely, we didn’t say that there’s any slippage on that. That’s the one that’s being run by our partner, Servier.

[Matt Kaplan:]

Right.

[Paul Rubin:]

We speak less directly about the timing and that sort of thing on it than we do about – around the ones that we control because we have less control over it. But no, they’re exactly on pace with where they expected to be and we expect them to be on time. They get a little bit of a head start in their study in that as you remember they just had completed a Phase II study in patients who the underlying disease was in fact Behcet’s. And so, they actually had some experience with the centers that – some of the centers that are going to be part of this Phase III study also. So no, they’re exactly on their pace that they expected to be.

[Matt Kaplan:]

Very good. Well thanks, a lot for the update guys.

[Paul Rubin:]

Sure.

[Operator:]

Thank you. And our next question comes from the line of Ritu Baral from Canaccord.

[Whitney Ijem:]

Hi. This is Whitney on for Ritu. A couple quick questions on the OA trial, what percent of the sites are open at this point? And then, in terms of the imaging measures you mentioned, is any one of those more important than the other or more accurate than the other in determining disease modifying effect?

[John Varian:]

Okay. I’ll take the first. We were targeting 30. I think we have 24 or 25 open. What’s really exciting for us is that we’re about to open a site with Dr. Jim Gabay who is one of the experts in erosive osteoarthritis who works out of Switzerland and Servier graciously allowed us to use that site. He follows more than 150 patients and has told us that he has a good number already lined up and ready to go into the trial. And then, there’ll be an additional five after that including some very high-enrolling centers in New York. So we’re pretty much there, and all the centers should be enrolled within the next few weeks, including some very high-end rollers. So that’s again why we feel pretty comfortable about the predictions that we’re making. In terms of which is more important, on the disease modification, I think if we could show a signal in any of these, it will be important. I don’t think there’s ever been a drug that’s been approved as a disease modifying agent for osteoarthritis. So it would be a first. And in fact, I think we have been invited by the agency to explore MRI and ultrasound and try to validate those as capturing the disease modifying affect in our Phase II trial. I think if we showed significant data in any of these, we’d have the potential to include those as important endpoints in our Phase III program.

[Whitney Ijem:]

Thanks. And then also, are you keeping, or what cytokines are you keeping track of in this study?

[John Varian:]

We are not measuring cytokines specifically. We had the opportunity to do that and then we are archiving samples. But one of the things we are following is C-reactive protein. And one of the unique aspects of erosive osteoarthritis is that it’s a true inflammatory synovitis and its typified by patients having elevations in CRP which is not true for any other form of osteoarthritis. I think the scientific belief is that CRP is at least in part driven by elevations in IL-6 which is driven by IL-1 beta. So it’s kind of a surrogate for cytokine activity. We do have the opportunity to measure things like IL-1 beta and IL-6. The problem is IL-1 beta, in general, is very, very low in circulation, even in the severe inflammatory diseases. And what’s going on in the tissue is more important. So it’s hard to correlate cytokine levels, especially Ion-B with disease for these particular indications.

[Whitney Ijem:]

Great. Thanks for taking the question.

[John Varian:]

Sure.

[Operator:]

Thank you. And our next question comes from the line of Megan Dow from MLV & Company.

[Megan Dow:]

Hello, gentlemen. Congratulations on a successful 2012.

[John Varian:]

Thank you very much. Hi, Megan.

[Megan Dow:]

Hello. Looking forward to 2013, indeed. You know it’s nice to hear the updates on the osteoarthritis pre-trial and how you were looking at acne. You slipped in a couple new indications that you’re talking about with the FDA. Can you tell us a little bit more about what you’re thinking of with the Neutrophilic dermatoses and Schnitzler Syndrome? Have you had patients with urticaria or rashes and that is what led you to this? Can you just talk a little bit more about that?

[John Varian:]

Well, what really drew us to these couple of potential, extremely rare diseases, is that through both the literature and through our discussions with our KOLs, we have seen very clearly that there’s certain of these diseases that seem to be exquisitely controlled by IL-1 beta. In fact, in one or two of these indications the way that they actually diagnose the disease is, when they’re not completely sure they actually treat with IL-1 beta and if there’s a response then they know that it actually is the indication that they were, that they should have diagnosed. So it’s through discussions we’ve had with Servier, with the KOLs and we think that there’s a real opportunity for potentially an accelerated ability to get to market with some of these extremely rare diseases. Schnitzler Syndrome is predominantly European population with some in the U.S. that we’ve actually identified. Within Neutrophilic dermatoses there are actually several underlying indications that we’re exploring and we’ve actually been working to develop a plan around those and have been working to present our plans to the regulatory authorities so we can get some feedback from them about moving forward on those. So that’s – we’ve looked at them because we think there’s a real opportunity in these extremely rare diseases and we think that IL-1 beta’s very clearly involved in the ones that we’re looking at.

[Megan Dow:]

Fantastic, fantastic. And just the ongoing POC program, do you initiate conversations with Servier as far as interest from opt in or vice versa with your opt in on their cardiovascular program?

[Paul Rubin:]

So let me answer the last one first. On the cardiovascular program we actually under our option as I, from your question, we actually have the ability to exercise that option anywhere during the development process including after Phase III results are known. And so I would say that there’s – we will watch that development and we will make a decision at the point when we have kind of maximum data. So that’s really the way we think of the cardiovascular option.

[Megan Dow:]

Sure, sure.

[Paul Rubin:]

When it comes to the other way around what the way the deal works is we each present our data and we’ve been in consultations with them through the development of each of these indications. And we actually consult with them on any POCs that they’re considering which they are considering several POCs. And we will watch each other’s development and then what happens is we present the data to the other party and then we have the choice of opting in or not. And if we don’t opt in then we go on our own if we do opt in then we can put together a global program for Phase III development.

[Megan Dow:]

Fantastic. Congratulations. Looking forward to the rest of the year.

[John Varian:]

Thanks. We are too.

[Paul Rubin:]

Thanks.

[Operator:]

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back to John Varian for any concluding remarks.

[John Varian:]

Great. Thank you, operator. Thanks again everyone for attending the call today. We are off to a great start in 2013 and we have a lot of exciting events in front of us this year. And we do look forward to sharing our progress with you on those. So again thanks for joining us and we’ll speak with many of you I’m sure soon.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.