Zogenix, Inc.
Q4 2014 Earnings Call Transcript

Published: 10 Mar 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Zogenix, Inc. Q4 2014 earnings conference call. [Operator Instructions] I would now like to turn the call over to Catherine O’Connor, senior director, corporate communications. Please go ahead.

[Catherine O’Connor:]

Thank you, operator, and thank you all for joining us this afternoon. With me on today’s call are Roger Hawley, Chief Executive Officer; Dr. Stephen Farr, President; Ann Rhoads, Executive Vice President and Chief Financial Officer; and Dr. Brad Galer, Executive Vice President and Chief Medical Officer. This afternoon, Zogenix issued a news release announcing the sale of Zohydro ER to Pernix and an additional news release announcing the company’s financial results for the fourth quarter and full year 2014. We encourage everyone to read today’s news, as well as the Zogenix’s annual report on Form 10-K, which will be available on the company’s website at zogenix.com. Please note that certain of the information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Zogenix’s management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are qualified by the cautionary statements contained in Zogenix’s news releases and SEC filings, including in the annual report on Form 10-K. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, March 10, 2015. Zogenix undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Now, I’d like to turn the call over to Roger Hawley, Chief Executive Officer of Zogenix.

[Roger Hawley:]

Thank you, and good afternoon. Thanks for joining us. As Catherine mentioned, in addition to announcing earnings, we just announced we entered into a definitive agreement to sell the Zohydro ER business to Pernix Therapeutics for $100 million and the potential development and sales milestones totaling $283.5 million. I’m going to begin today’s call with an overview of the transaction and its strategic benefits, then I’m going to turn it over to Steve Farr, who will update you on our development pipeline, which is now really the strategic focus for the company and the driver of future value for our stakeholders. Then we’ll follow that up with the overview of the fourth quarter and full year 2014 financial results by Ann Rhoads, and we will allow plenty of time for questions. Almost exactly one year ago, we introduced Zohydro ER to the pain management community and it was a year I’ll never forget. We’re also very pleased with the outcome of our commitment to responsibly commercializing this product, the implementation of initiatives for safe use, and receiving approval promptly for the next generation of Zohydro ER designed to have abuse deterrent properties. As you all know, we were looking at copromotion opportunities and the submission and recent approval of the new formulation of Zohydro ER created a wider variety of broad strategic opportunities for the brand and the company. We evaluated several options based on what we could simultaneously achieve, how we could simultaneously achieve the best outcome for our shareholders and our company’s future while also providing a positive outcome for our patients, our prescribers, our employees, and the Zohydro brand long term. We believe the sale of Zohydro ER to Pernix complements both companies’ strategic visions. For Zogenix, this offers us a great opportunity for several reasons. The proceeds from the sale, along with the corresponding reduction in our operating expenses, will enable us to invest in our pipeline of novel investigational therapies without the need to seek additional financing. This strategy leverages the proven capability of our development team which, as I hope you’re aware, has a track record of successfully developing products and bringing them to market. We are extremely positive on the opportunities for ZX008 for Dravet syndrome and for Relday for schizophrenia, and we have a strong cadence of development milestones during 2015 and 2016. Zohydro ER will be a lead asset for Pernix and we have the opportunity to benefit from its continued growth through our sales and development milestones. Pernix will retain our sales team, who will transition to Pernix after the close of the agreement, which we expect in April 2015. This was also an important consideration in our selection of Pernix as the future owner of Zohydro ER, because these individuals have demonstrated their dedication to the product, and we believe they have the proven knowledge to continue the successful growth of its sales. We will provide assistance in the development and regulatory approval of future abuse deterrent formulations of Zohydro ER, including amending the current label, with abuse deterrent claims, and seeking approval for ZX008, the novel tablet abuse deterrent formulation of single entity extended release hydrocodone in development with Altus Formulation. In addition, we are eligible to receive multiple milestone payments, including $12.5 million for the FDA approval of ZX007, the novel tablet formulation we’re developing with Altus, and then we have sales milestones of up to $271.5 million based on specific levels of annual product sales for Zohydro ER and ZX007, the first of which is a $7.5 million payment on aggregate net sales reaching $75 million in a single calendar year. And on closing, Pernix will purchase product invest of Zohydro ER from us. This transaction now sets the stage for the company to have a new strategic focus on advancing our current development programs within the CNS space. Steve Farr is now going to provide an update on those programs. Steve?

[Steve Farr:]

Thank you, Roger, and good afternoon to everyone. We are extremely excited about the outlook for our clinical pipeline, as there are several important milestones for ZX008 and Relday in 2015 and the year after. We acquired ZX008, formerly known as Brabafen, with the acquisition of Brabant Pharma in October of last year. To remind you, it’s a low-dose formulation of fenfluramine for the treatment of Dravet syndrome, a rare and catastrophic form of epilepsy that begins in infancy. Dravet patients suffer from severe epileptic seizures starting in the first year of life, which often leads to cognitive and development impairment. These patients have a high incidence of status epilepticus or severe continuous seizures and have an increased risk of sudden, unexpected death in epilepsy, more commonly referred to as SUDEP. There is no effective long term treatment for Dravet syndrome, and there are limited treatment options for patients. We believe ZX008 has the potential to be a significant new option based upon the existing long term data from the ongoing open label European study which has showed that 67% of patients were seizure-free and 87% had a greater than 90% reduction in seizure frequency during an average treatment period of more than 12 years. To our knowledge, no available treatment options or those in development for Dravet syndrome have demonstrated this level of effectiveness. Since announcing, we are now leading the development program for ZX008. We have received a great deal of interest from pediatric neurologists who treat Dravet syndrome patients, the families of these patients, and advocacy groups who support these patients. We view this as indicative of the true patient need and positive reputation filled by Brabant Pharma and the European investigators prior to our acquisition of the product candidate. We are now preparing for the Phase III clinical studies in the U.S. and Europe which are planned for the third quarter of this year. This includes optimizing the synthetic production of fenfluramine, formulation development, and finalizing the clinical trial design. We have also hosted a KOL, or key opinion leader, advisory board in the United States and have a similar one scheduled for Europe next month. Overall, we have made excellent progress to date and remain on track with our timelines. As a reminder, we anticipate that the Phase III program will be two separate multicenter double blind [power] group placebo-controlled studies of fenfluramine as an adjunct therapy in Dravet syndrome. We are planning one study in the U.S. and one study in Europe, with each enrolling between 50 and 60 patients with results available around midyear in 2016. Ahead of the Phase III studies, the investigators from the ongoing open label study have submitted to present an update of their results in May at the European Pediatric Epilepsy Conference. If their presentation is accepted, we would issue a press release highlighting the updated results, which should further confirm the robust effectiveness and safety profile of ZX008 in the treatment of Dravet syndrome. I’ll switch now to Relday, our proprietary once monthly subcutaneous formulation of risperidone for the treatment of schizophrenia. There is a large and growing market for long acting injectable treatments for schizophrenia. It has been estimated that the U.S. market alone could reach $3 billion by 2020. It’s an attractive commercial opportunity when you consider the concentrated number of psychiatrists prescribing these products and the unique profile of Relday amongst other long acting injectable therapies for maintenance treatment of schizophrenia. Relday is unique in being able to achieve therapeutic levels on the first day after the very first injection. Our previous studies have demonstrated Relday achieves dose dependent therapeutic plasma levels of drug within 8 hours of initial dosing, and therefore removes the requirement for supplementation of oral drugs or complicated dosing regiments typically associated with long acting injections of antipsychotic drugs. Relday is a subcutaneous injection, unlike marketed product options today, which are delivered through intramuscular, or IM, injection. Subcu injection has the potential advantages of better tolerability and safety compared to IM injections, and Relday is also a once monthly administered product that does not require reconstitution prior to injection. We have recently initiated enrollment in the next Relday clinical study, which is a 20-week multidose clinical pharmacokinetic and safety trial. There are four patient groups covering 60, 90, and 120 mg doses of Relday along with an active control group receiving RISPERDAL CONSTA. We expect to report top line data from this study in the third quarter of this year. These clinical data will allow us to progress into an end of Phase II meeting with the FDA and will also be the catalyst for potential partnering opportunities. In summary, Relday and ZX008 represent exciting opportunities for the company, and we look forward to advancing these programs over the course of the year. Turning finally to Zohydro ER, in January, we received FDA approval for a new formulation with BeadTek, a technology designed to have abuse deterrent properties. This was a significant accomplishment for the team and for the brand. Around this time, we also began an intranasal human abuse liability study with the goal of further amending the labeling for Zohydro ER to include abuse deterrent claims in the latter part of 2015. In parallel, we continue to develop a novel abuse deterrent formulation, a tablet formulation, of extended release hydrocodone under our collaboration with Altus Formulation. We remain on track with our development timelines, including the initiation of the clinical pharmacokinetic study in January. As a reminder, the new drug application, or NDA, for this product, which is targeted for midyear 2016, will reference the approved NDA for Zohydro ER with respect to previous findings of safety and efficacy. We are now looking forward to supporting further development as part of our recently announced agreement with Pernix. I would now like to turn the call over to Ann for a financial update.

[Ann Rhoads:]

Thanks, Steve. During the course of our discussion today, I’ll be referring to the press release and to the included unaudited statements of operation in the balance sheet. I’ll be rounding numbers for purposes of this call, so please refer to these documents for the precise figures. Total net revenue for the fourth quarter of 2014 was $14.9 million, which was up 50% from the fourth quarter of last year. This includes net product revenue of $5 million on the sales of Zohydro ER, contract manufacturing revenue of $8.9 million, and service and other revenue of $930,000, primarily comprised of copromotion fees for Migranal. Our product gross margin improved to 80% in the fourth quarter of 2014, compared to 21% in the fourth quarter of 2013. This is excluding an $8.4 million charge for excess and obsolete inventory related to the transition from the original formulation of Zohydro ER to the new formulation with BeadTek planned for the second quarter of 2015. This increase in product gross margin was primarily due to product mix given the launch of Zohydro ER in March of 2014 and the sale of Sumavel DosePro in May of 2014. The cost of manufacturing services for Sumavel DosePro supplied to Endo during the fourth quarter of 2014 was $8.4 million. Fourth quarter 2014 research and development expenses were $6 million, and selling, general, and administrative expenses were $17.7 million. Our research and development and selling, general, and administrative expenses came in lower than expected for the fourth quarter and full year. We achieved this while also generating positive revenue trends for Zohydro ER. Other income for the fourth quarter of 2014 was $6.6 million, reflecting noncash mark-to-market adjustments for the fair value of the company’s outstanding warrants. Additionally, the company recorded $5 million in income from consideration received for its exclusivity waiver exchanged with Purdue Pharma and $3.5 million in income for sale of the right to reference its carcinogenicity data to Teva Pharmaceuticals USA, both related to Zohydro ER. Our net loss for the fourth quarter of 2014 was $20.5 million or $0.14 per share. Non-GAAP net loss for the fourth quarter of 2014 adjusted for certain noncash or nonrecurring items was $0.13 per share. The non-GAAP financial results are detailed in the table included in our financial press release issued today. We finished the year with cash and cash equivalents of $42.2 million compared to $50.5 million as of September 30, 2014. Additionally, we continue to have restricted cash of $8.5 million as of December 2014, consisting of a portion of the proceeds of the sale of the Sumavel DosePro business to Endo required to be held in escrow until May of 2015. On December 30 of 2014, the company secured a term loan of $20 million and $4 million in revolving line commitments for working capital and general business purposes. In addition, we expect to receive an additional $5 million from our waiver exchange with Purdue Pharma. With regards to the transaction, as Roger stated earlier, our agreement with Pernix is for $100 million up front with potential milestone payments of $283.5 million. The upfront payment will consist of $30 million in cash, $20 million of Pernix shares of common stock, and a $50 million short term promissory note. A portion of the cash will be held in escrow for 12 months to fund potential indemnification claims. This deal will enable us to continue to benefit from the success of Zohydro as we further develop our pipeline and build long term value for our shareholders. At this time, we are not providing financial guidance on expected 2015 revenues and expenses. However, the company does expect its current financial resources and the expected proceeds from the sale of the Zohydro ER business to provide a cash runway through three significant clinical milestones, those being the end of Phase II meeting for Relday, followed by an NDA submission in the U.S. and an MAA submission in Europe for ZX008, which are anticipated in the fourth quarter of 2016. The company expects to provide updated financial guidance after the transaction is closed on our first quarter 2015 conference call. I’ll now turn the call back over to Roger.

[Roger Hawley:]

Thanks, Ann. Well, 2014 was a big year for the company, including the sale of Sumavel DosePro, our commercial launch of Zohydro ER, the acquisition of Brabant for ZX008, and the advancement of Relday clinical program. We’re really enthusiastic about the continued evolution of the Zogenix story in 2015, highlighted by our differentiated development pipeline featuring ZX008 and Relday. There has been increasing interest in these programs from the investment and medical communities, and we look forward to keeping you apprised of our progress throughout the year. We believe if we execute on our plan for our key programs, it will translate into increased value for our dedicated employees and our valued shareholders. And now I’d like to turn the call back over to the operator to begin the question and answer period. Operator?

[Operator:]

[Operator instructions.] And our first question comes from the line of Jason Gerberry with Leerink Partners.

[Jason Gerberry:]

First question, for Ann, curious, for 2014 can you break out what total SG&A was? My second question is on the milestones, just if you can give us a sense of whether they’re more weighted towards commercial or regulatory outcomes? And then my third question, on ZX008, any related patent updates or any evolving color you can provide on how you think that agent could be priced in the Dravet syndrome market?

[Ann Rhoads:]

I think if you can give me just one minute, I’m pulling that G&A number for you, and we can move on to the second part of your question. I would just note for you, as a reminder, on SG&A we did have about 100 sales reps. We’ve previously given expense guidance for those reps at about $240,000 on an annual basis per rep. So that should start to help you, I think, as you’re trying to pull those numbers apart.

[Roger Hawley:]

Steve, do you want to touch on the ZX008 IP question?

[Steve Farr:]

Yeah, Jason, would you mind just repeating that again?

[Jason Gerberry:]

The first question was just on the milestones for the transaction, if they’re more weighted towards commercial or more weighted towards regulatory and labeling outcomes. But my question on ZX008 was if there are any related updates on patents. I know the last conference call that you had, there was mention of looking into additional IP for that asset. So just kind of curious if there are any updates there. And then just your evolving thoughts on potential pricing of 008 in the Dravet syndrome market.

[Steve Farr:]

I can certainly address the milestone question relating to the agreement with Pernix. They are principally commercial. The regulatory one is actually spelled out, and that’s the approval of the Altus Formulation ZX007. The rest are all sales milestones. With respect to ZX008 on patents, that’s clearly an evolving story. There’s really no update we can provide on this call, but we are clearly moving forward on a number of strategies to protect the product with a variety of patents. And if it’s approved, it will be patents plus the fact that it will be an orphan drug with the appropriate exclusivity around that, seven years in the United States, 10 in Europe. Roger, do you want to take the pricing question?

[Roger Hawley:]

Yeah, I sure will. On the pricing, it’s just premature for us to talk about pricing. This is a very sensitive market and sensitive issue. Pricing is something that needs to be supported by data. We have a lot of work to do, including in the clinic and looking at the current cost of treatment of these patients. So I really don’t want to talk about price yet at this stage. I think it’s premature to do that. Obviously, in an orphan market with a disease of this severity, we think there is an important opportunity here, and we believe when we did the analysis of the asset that we acquired that pricing as well as the number of patients and the fact that we already had orphan designation in both Europe and the U.S. provided a very adequate possibility for significant return on the investment, if we could get the clinical data to be repeated that’s already been achieved with this asset.

[Ann Rhoads:]

And Jason, your question earlier, of the $88.9 million in SG&A expenses for 2014, approximately $31.6 million of that is associated with G&A.

[Operator:]

Our next question comes from the line of Annabel Samimy with Stifel.

[Annabel Samimy:]

Essentially, you’ve turned yourself into a CNS development company with I guess $100-plus million in cash. So can you talk about your uses for that cash given that the Brabafen trial was supposed to cost only around, if I remember correctly, $20 million. So are you going to be more active in licensing? Are you going to keep the development of Relday and make that more of a proprietary product? And I guess at what point can we start waning down your cost structure? Is that after April, or should we assume it starting right away?

[Roger Hawley:]

Well, on the cost structure, we expect the transaction to be concluded in about 30 days, or in April. And we expect our team and the other changes in our commercial organization and support for the brand to be effective almost immediately thereafter. There are some transition services that we will be providing, and then on a billable basis, Steve’s team will continue to support some of the development activities for Zohydro ER that we talked about earlier. But we will dramatically change the burn as soon as the deal is closed, as they take responsibility for our entire sales force, including its management, and many other members of the commercial organization that will be offered positions. We don’t have the exact number, but I would say the number of employees in the company will be down to around 60 thereafter. And as far as the focus for our investment, and it’s strictly the assets that we talked about, Relday and the ZX008, both in the U.S. and Europe. And while you’re right, those trials are not all that expensive, they’re important, and we want to make sure that they get to submission of those. As we’ve said, our goal is to reach all three of those key milestones for us without raising additional capital, and we believe that we can do that even without business development. Your question, as it relates to are we going to change our stance on Relday, our current plan is as stated before. We know that there was significant interest, particularly if we could get it Phase III ready, for rest of world. So we will be entertaining partnerships on Relday. It’s a very large market with reach beyond our ability. We are, however, planning to commercialize the Brabafen asset in Europe ourselves, because it really doesn’t take much of a commercial presence or distribution network. So that one’s a little bit different, but right now, our plan is still to partner Relday and keep U.S. commercial rights, which is a small number of physicians that would require a small and targeted sales force. So we’re not permanently exiting commercial at all, but we won’t need a sales force until we would launch Relday in the U.S. We don’t really need a large sales force. It’s more the MSL function for the Brabant asset.

[Annabel Samimy:]

And I know that you said that you’ve got enough cash runway to get through these three milestones, end of Phase II meetings and the NDA and the MAA in the fourth quarter. That seems to be a somewhat conservative assumption, given that you do have more than $100 million in cash sitting there. So is that just a placeholder until you provide formal guidance, or is there some other expense that we’re not assuming here?

[Roger Hawley:]

Well, it’s conservative in that we don’t want to get down to the point of being forced to raise money. We’ve dealt with the financial overhang long enough. And we’re trying to avoid that as we move forward. At the same time, I don’t think when we get there it will be an excessive amount of cash. What could change all of that are business development and as that advances, either for Relday, or we have territories outside of the major markets of the U.S. and Europe where there’s already been some expressions of interest. So BD is all upside for us now, not required. We think that puts us in a stronger position, and business development talks. And we’re very comfortable. And one of the key reasons we made this difficult choice on Zohydro ER was to put ourselves in a position of control of our own destiny and put our shareholders in a position where they can follow our advance and our pipeline and understand what the economic equation is for shareholders as we move forward past a number of key milestones. And that was the key objective that we wanted to accomplish with this decision.

[Annabel Samimy:]

And what kind of costs should we be assuming for the continued development of Zohydro ADF label changes and just the new tablet formulation?

[Roger Hawley:]

Well, those costs would not be borne by us. Those costs would be paid by Pernix, and I would let them talk about what they want to actually disclose from their call, which I understand is scheduled for tomorrow morning.

[Operator:]

Our next question will come from the line of Akiva Felt with Oppenheimer.

[Akiva Felt:]

So with ZX008 not all that far away from potential regulatory filings, how do you plan to transition back to the commercial [unintelligible] organization, and how might things differ from planning for the Zohydro launch?

[Roger Hawley:]

Well, first off, the nature of the launch is significantly different as are the amount of manpower that you need to launch that program. We will expect to have a small presence in Europe, likely based out of London with some commercial launch experience with this kind of opportunity. Here in the U.S., we are not totally exiting commercial, and we are keeping key members of our team in marketing and managed markets and other analytic functions, including market research to complete the work that we need to complete to be ready. And as I said, the size of the sales force, whether it’s the Brabant asset of ZX008 or Relday marketing, it’s a different equation, and without the complexities and clearly different market dynamics and price points than we’ve experienced with Zohydro ER. As I’ve said in the past, the real challenge we faced was the timing of Sumavel DosePro and Zohydro, where the call point didn’t fit. We only had one product in our bag. I think if you followed us, you remember that we tried to get a second product in our bag from copromotion. We thought we had one. It sort of fell apart at the finish line for unknown reasons on the other side, and then we looked at copromotion opportunities for Zohydro. It’s just tough to make it, particularly given the publicity around the launch, which is now abating, and that we think the future for the brand Zohydro is much brighter. But it was tough for us to make it without another product in the bag. And what Pernix is doing, and I admire them for doing it, is trying to leverage their commercial infrastructure, and I see the fit, where they’ve got other products, where they can be sold along with our sales team and Zohydro. We couldn’t get there, and I think we made the right decision by pursuing our pipeline because they are significant value opportunities, and we like the profile of these two assets. So we’re quite happy to be focused where we’re focused, and we’re very pleased with the outcome of the sale of Zohydro ER to Pernix.

[Operator:]

Our next question comes from the line of Tim Lugo with William Blair.

[Tim Lugo:]

First, a question for Ann. You spent around $89 million in SG&A last year. It sounds like you’ll save at least $24 million on an annual basis from the sales force. That gives a difference of about $65 million. You mentioned $31 million is I guess maybe permanent G&A. There’s a remaining $34 million out there. Can you just talk a little bit about that remaining $34 million and where can we see some savings there?

[Ann Rhoads:]

Part of those other dollars are related to the other commercial expenses incurred on the launch of Zohydro ER. Again, I think we noted in the press release and in the script, we are planning on giving detailed financial guidance on our Q1 call to give you a much better sense about what expenses you can anticipate in the second half of the year. So hopefully, the numbers we’ve given you today are helpful in starting to get your model where it needs to be, but just know we’ll be coming back with more information on that call.

[Tim Lugo:]

And maybe a question for Steve. For Relday, is there anything outside of the Phase II multidose study, which needs to be complete before it is Phase III ready? Any sort of preclinical data that need to be produced, stability, manufacturing, something of that?

[Steve Farr:]

You’re right, there are other activities ongoing, but that’s restricted to CMC activities, manufacturing, development, tech transfer to the site that will ultimately make the registration [unintelligible], the clinical trial supplies, and ultimately the commercial batches. So we have recently selected that particular candidate with Direct that will be moving forward and doing that work for us. So the intent is having at least a demonstration of Phase III readiness in the manufacturing supply chain to be together at the same time as we have the results from the ongoing clinical trial. So those two packages together will demonstrate that we are Phase III ready and will clearly be important parts of the end of Phase II meeting that we’ll have with the FDA.

[Operator:]

Our next question comes from the line of Difei Yang with Brean Capital.

[Difei Yang:]

Would you remind us what is the number of employees right now at Zogenix?

[Roger Hawley:]

We’re just under 200 right now. And that includes obviously the commercial team of just under 100 reps, plus their management. In addition, managed markets, trade, marketing, our commercial analytics group. So a large number of our employees are in commercial. The other piece, as you know, we still manufacture Sumavel DosePro for Endo. There’s about the equivalent of about 15 of our FTEs are involved in that program, so their costs are really covered through the sale of manufactured product to Endo. And then as I mentioned earlier, we do not have a final position, as you can imagine, our employees are just hearing about this today themselves, so we’ve got employee conversations that start after this call. But we expect to be somewhere around 60 employees in total after the full transition to Pernix.

[Difei Yang:]

And just a quick follow up question on the cost of goods for Q4. The cost of goods line seems high for Q4, and would you help us to understand what might be going into that number?

[Ann Rhoads:]

Part of what ended up happening in the fourth quarter, as I noted in the script, is that we did take a charge associated with the generation one product of Zohydro ER that we expect we will not be using as we are transitioning over to our new BeadTek formulation, which again was the formulation approved in late January and will be launched in the second quarter. And so as you take a look at that, you can see that we did take an $8.4 million charge for that inventory related to the transition.

[Operator:]

We have a follow up question from the line of Annabel Samimy with Stifel.

[Annabel Samimy:]

I just want to understand the timing of the Brabafen trials again, because I think when you had purchased it, or acquired the company, it seemed that you’d be able to have an approval by 2016, unless I completely remember that wrong. So can you just help us understand the timing and whether those timelines are off now?

[Steve Farr:]

Yeah, if you remember, when we first acquired the asset, we put together our preliminary timeline, we felt we could get into Phase III a little faster than we are now. We felt we could get in in Q2, and that was driving some thinking around getting an NDA approval in the late 2016 and early 2017 timeframe. What we’ve done is basically paid a lot more attention to the CMC activities that are required to get into Phase III. In other words, having a clinical formulation that ultimately will become the commercial formulation. So we’ve spent a little more time there than we thought, but we think it’s good time added, because it reduces risk as we go from Phase III into the commercial phase. So that’s basically the reason for it. The clinical trial itself is still the same study duration, and we think we can get a readout on that if we start the study as we expect in the sort of end of third quarter timeframe. Then we’ll get a readout in midyear of 2016, and that will drive, then, the submission of the NDA.

[Annabel Samimy:]

Can you just remind us what the duration of the study is and how long you think it’s going to take to enroll those patients?

[Steve Farr:]

Yeah, Brad’s on the call, so I’ll turn that over to Brad, who’s been working with principal investigators.

[Brad Galer:]

So, the study is a very simple design. Basically, it’s run in where there’s a one month baseline and the patients get randomized, get titrated to three potential doses. Each dose will increase if they don’t get a significant reduction in their seizures every four weeks. Once they’re on their stable dose, there’s a maintenance phase of 12 weeks. We’re already working with a lot of the investigators, both in the U.S. and in Europe. They’re not completely aware of the protocol, but they are beginning to identify some potential patients to enroll in that study.

[Annabel Samimy:]

And do they have a database, or are they going to be enrolling the open label patients into this controlled study, so it could be a relatively rapid enrollment?

[Brad Galer:]

There is no database, but as I think Roger and Steve had mentioned prior, these patients are a cared for by very small, select group of pediatric neurology specialists, mostly in academic sites. We’re getting to know them throughout the world. There is pretty much only 25 to 35 per territory that are experts. So the patients are fairly well defined and we believe there should not be any difficulty with regards to enrollment.

[Operator:]

And we have a follow up from the line of Difei Yang with Brean Capital.

[Difei Yang:]

Just one quick question. Wanted to understand if I misunderstood the Relday product. So, my understanding is that you’re planning to take it to the end of Phase II FDA meeting and then potentially [unintelligible] license the product, commercial rights both in Europe and in the U.S.? Or is it just for Europe?

[Roger Hawley:]

No, we plan to look for a rest of world partner and keep the U.S. market.

[Operator:]

And with no further questions in the queue, I’ll turn the call back over to Roger Hawley for closing remarks.

[Roger Hawley:]

Thanks, everyone, for joining us and for the questions this afternoon. We’ll keep you updated on our progress. On our next call, we’ll update you on our financial guidance. We’re looking for a smooth transition to Pernix and really a very exciting year this year and next on key clinical development milestones. And we’ll keep you apprised of our progress. I don’t have the date yet, but we’re beginning to talk about having an analyst day sometime maybe this summer, but we’ll get back to you with firm dates on that. Thanks very much.