Good day, ladies and gentlemen, and welcome to the BioCryst First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host for today, Mr. Rob Bennett, Executive Director of Investor Relations and Communication. Sir, please go ahead.

Thank you. Good morning, and welcome, everyone, to BioCryst's First Quarter 2012 Corporate Update and Financial Results Conference Call. Today's press release and accompanying slides for this call are available on our website at BioCryst.com. [Operator Instructions] Joining me on the call today are Jon Stonehouse, Chief Executive Officer of BioCryst; Dr. Bill Sheridan, our Chief Medical Officer; and Tom Staab, Chief Financial Officer. Before we begin, I will read a formal statement as shown on Slide 2 regarding risk factors associated with today's call. Today's conference call will contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information and company performance or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any results or performance expressed or implied in this presentation. You should not place undue reliance on the forward-looking statements. For additional information, including important risk factors, please refer to BioCryst's documents filed with the SEC, which can be found on our company website. With that, I will turn the call over to Jon.

Thank you, Rob. Good morning, and thanks to everyone for joining us today. BioCryst entered 2012 with the most promising risk balanced development pipeline in the company's history. Our team established strong momentum in the first quarter by generating positive clinical results from our Phase IIb BCX4208 gout trial and completing our FDA end of Phase II meeting, as well as reporting promising preclinical results for our hepatitis C and hereditary angioedema programs. We continue to aggressively execute our plan to advance all 4 of our development programs during 2012. Each of these programs has clear milestones and goals, representing attractive value creation opportunities for BioCryst and its stakeholders. Let me begin with gout, where we have recently completed our end of Phase II meeting with the FDA. The interaction provided clear and informative guidance regarding the path to approval for BCX4208, and we are now incorporating this advice into the Phase III plan. Our primary focus is on securing the right partner to complete the Phase III program and to commercialize the product. We are convinced that the gout market in general and BCX4208, specifically, have great future potential. There is a very large, growing and underserved gout population following decades without innovative new treatments and patient education. Over the last year, investors have questioned the market potential of new gout treatment options. In April, we witnessed 2 large transactions in the gout market that validated the commercial opportunity: the acquisition of URL Pharma by Takeda to build upon its existing franchise and the acquisition of Ardea and its Phase III compound by AstraZeneca. Both proposed deals exceed $1 billion in value and confirm that large competitive pharmaceutical companies are willing to commit not only cash, but development resources and marketing muscle to the gout market. These developments not…

Thank you, Jon, and good morning, everyone. I'm pleased to discuss our strong first quarter financial results and to provide some additional detail regarding the financial and operational achievements discussed in today's press release. I also would like to specifically point out some achievements in the first quarter as they relate to goals we have established and have discussed in previous quarters. First, we have successfully transferred the forodesine IND and relevant data to Mundipharma one quarter after amending and restructuring our licensing agreement. Our completion of this transfer allows Mundipharma to advance the forodesine program and allows BioCryst to focus its resources and attention on our 4 primary development programs. In addition, this transfer resulted in our first quarter operating loss decreasing approximately 50% as compared to 2011 by recognizing all previously deferred revenues and expenses associated with the forodesine program. Second, we have continued to focus our cash resources on advancing our development programs and minimizing noncritical and non-project spending. You will notice that our first quarter G&A expenses are half of what they were in 2011. We successfully completed the transition of our corporate headquarters in early 2011 and have realized in 2012 a significant reduction in administrative costs. Third, we remain committed to maintaining a strong balance sheet. We have ended the first quarter with $57 million or less than $0.5 million decrease in our cash balance from year end 2011. Over the last year, we have significantly improved our working capital parameters by closely managing our accounts payable and accounts receivable. Additionally, we have opportunistically and judiciously utilized our ATM facility to raise cash through the sale of equity when favorable market and stock conditions were considered to exist. The result is a strong balance sheet affording us the ability to maintain a healthy operating…

Thanks, Tom. My comments today will begin with our BCX4208 end of Phase II meeting with FDA and next steps in our BCX4208 clinical program and regulatory interactions. I'll also discuss enrollment in our peramivir Phase III influenza trial, as well as progress for our BCX5191 hepatitis C and BCX4161 hereditary angioedema programs. In April, we held an end of Phase II meeting for the BCX4208 gout program with FDA. We are pleased to report that the Phase III program can move forward. We confirmed the proposed NDA safety sample size and Phase III patient population, trial designs, duration and primary efficacy endpoint. The Phase III program builds on the strategy and details of our Phase IIb trial. This proposed program studies approximately 1,800 patients for 12 months to study drug exposure with the primary efficacy analysis at 6 months. BCX4208 will be evaluated as add-on treatment toward the allopurinol or febuxostat in gout patients who are not adequately responding to a xanthine oxidase inhibitor alone. The primary efficacy endpoint is the proportion of patients with a serum uric acid level that is less than 6 milligrams per deciliter. In addition, we have also initiated the Scientific Advice Process with the EMA and expect feedback in the third quarter of this year. We expect to submit finalized trial protocols to regulatory bodies shortly thereafter. Our Phase IIb 203 trial extension through 52 weeks will conclude in the third quarter. We will also complete the BCX4208 moderate renal impairment trial during the third quarter. This latter trial's objective was to obtain additional experience in gout patients with moderately severe renal impairment. Our original enrollment target for the trial was 40 patients, however, we found that recruitment was slow with qualified patients more difficult to find than expected. With this in mind,…

Thank you, Bill. So looking ahead, we expect to continue to make progress with our development programs. Over the course of the remainder of the year, we will update you on clinical and regulatory progress for BCX4208, the completion of nonclinical safety studies for BCX4161 and 5191 and the peramivir interim analysis. We are focused on reaching a successful conclusion with our BCX4208 gout partnering process. And as always, we'll carefully manage our financial resources. This concludes our remarks, and we will now open it up for your questions.

[Operator Instructions] Our first question comes from the line of Charles Duncan from JMP Securities.

My first question is regarding some additional color on the protocol. Jon or Bill, I'm wondering if you could help us in terms of understanding timelines to the start, as well as enrollment. And then, finally, what dose do you expect to study? And then I have a follow-up on partner.

All right. So let me start with timelines. So we've got the guidance that we need to be able to begin the Phase III. And so the important step next is a partner in place to move the program forward. So we're working aggressively to secure a partner. We expect to do that this year and get the Phase III trial running as quickly as possible. So that's it with regard to timing. I'll let Bill talk to dose.

Charles, so we have discontinued the 40-milligram cohort in the Phase II program, so all of the other doses are addressable in Phase III, so that's 5-milligram, 10-milligram and 20-milligram. And we still have another regulatory step to go through, that's EMA scientific advice, so we had quite advance thinking on that protocols of course, but we won't finalize them just yet. And once they are activated by a partner, then they'll be available on clinicaltrials.gov.

And regarding drug exposure, it seems to me that in Phase II, you've got sufficient drug exposure to facilitate this Phase III. But is that truly the case? What was the agency's feedback on that? And do you think that they are concerned about shorter exposures versus longer ones for chronic dosing?

I think the -- one of the questions we asked was around duration of exposure in the NDA package, and that will be the same as in the Phase II, so 12 months. So I think that, indeed, our Phase II program is quite unusual in having a longer than normal duration of exposure at Phase II level. So we are very pleased that we were able to do that. We have a Phase IIb study with exposure through 52 weeks. And even in the first 6 months of that study, we had more than 900 patient months of exposure to BCX4208. So that gives us a lot of comfort with the duration of exposure that we will be studying in Phase III.

Yes. And Charles, I would add that one of the areas that you can run into problems in moving from Phase II to Phase III is making significant changes in the design. And as Bill says, when you've got the same amount of exposure in terms of length of therapy and you've got the same endpoint and a lot of other similar aspects to the design, I would argue that we have a lower than normal risk profile moving from Phase II to Phase III.

That's helpful. And then, in terms of your strategy on partnering. You mentioned this potentially increasing scarcity value, giving some of the other news in the gout space recently, but has your strategy changed in terms of -- or what are you really focused on? Is it upfronts or is royalty share over time?

So our strategy hasn't changed, the market landscape certainly has. And my experience in business development over the years is good Phase III assets are not always available. And that we think we have the best and only remaining Phase III ready high quality asset left in the gout space. And so the goal is to get it in the hands of a competent partner that can really take full advantage of the profile of the drug and make it successful in the marketplace. So what's most important to us in the real core value of the molecule is at about the time we hope to be launching BCX4161 that we're getting very nice royalties and sales milestones from a successful partner to offset some of that expense. Of course, we'll want a fair upfront payment and the more competitive that processes is, the better that will be. But really, the core value of this asset is the stream of cash once it's in the market because we think the gout market could explode and we want to be able to benefit from that.

And I'm sorry if I missed this. Your confidence in having something done this year is a result of just general observations on the gout market? Or on -- based on discussions that you have ongoing?

Both. So clearly, AstraZeneca probably did us a favor by the acquisition of Ardea, and the interest level is high. And we want to get the molecule into the Phase III program as quickly as possible. And so we completed the end of the Phase II meeting with the FDA, and there's not a whole lot more that's necessary to get into Phase III. So it's both the space is heating up and it's important for us. We're done. We're basically done with the major events that lead up to a Phase III and ready to go.

And our next question comes from the line of Steve Byrne from Bank of America.

This is Sam [ph] for Steve. I have a question about the incidence of flu right now in some of the sites in India and, I guess, the confidence that you'll be able to achieve the 160 by next year?

So India has more or less a year-round flu season, if you like, but right now, it's quiet. The monsoon is yet to start. That should happen pretty quickly. There have been early signs of an uptick in influenza there. And given the amount of progress we made in during the Northern Hemisphere season with a light flu season, I think we're quite confident that we'll be able to hit the target.

And I think one other piece on India is we have a meaningful number of additional sites than we did in the last monsoon season. So we're really prepared to cast a very wide net in India and catch a lot of patients when flu arrives.

Okay. And then in terms of the 5191, what other preclinical studies are you planning at this point?

We mentioned during our last call that we intended to examine the combination of 5191 in vitro in the replicon assay with other drugs, so that work is ongoing. And I think the real task and most important task in the preclinical evaluation is to complete the nonclinical safety programs. So from that program, we'll be designing our early clinical starting doses and dose escalation and the like. So most of the heavy lifting is to [indiscernible] the nonclinical safety and drug supply.

[Operator Instructions] Our next question comes from the line of Rahul Jasuja from Noble Financial.

Few questions here. So one of the questions I had was regarding dosing. And I know the 5-, 10- and 20-milligram dose is the one that's going forward, but when you went into the FDA meeting here, was the consideration that maybe your lymphocytes suppression count was too stringent and maybe a 20-milligram dose could be viable? So that's one question. And then, I forget the 52-week study has a 20-milligram arm, I think it does not. And then the other question regarding the end of Phase II meeting is not that it's important to the FDA, but when you approached this meeting, was there any plan to design a study that would provide a marketing edge given what's on the market, what's going to be on the market, Ardea's drug and so on. So was something discussed at that meeting that provides 4208 a potential marketing action designing your Phase III studies?

Let me address your dosing questions and design questions. So there -- if you look at the labels for gout drugs, despite the way they were studied in Phase III, they're labeled to start the lowest dose and then if necessary, increase the dose. So there are 2 ways to get that type of information, one is to do a randomized cohort study and the other one is to do a dose escalation study. Both those are possible to do in Phase III. With regards to dose selection, the 40-milligram cohort has been discontinued. 5-, 10- and 20-milligram will all continue through 52 weeks, and I think that those doses were in the plans discussed. So we feel quite comfortable with that. With regard to lymphocyte monitoring and the like, this is a clinical trial and we've shown that we can conduct clinical trials extremely safely in gout subjects with this agent.

And the 20-milligram arm was continued in the 52-week extension. So let me address the market edge and, Rahul, you used the word hiccup. I mean, the end of Phase II meeting was a standard part of getting the advice, that's important, critically important, before you go into Phase III. So we didn't see any hiccup, in fact, we found it to be incredibly valuable. We have a very clear picture of what is necessary for a successful review, so we're very appreciative that it went that way. On the market edge in Phase III, I don't think FDA is in the business of advising around competitive advantage for companies but having said that, what I will say is we've been thinking about that for years. And there's 2 areas that we see. Well, actually 3. The first one is mechanistically, we see synergy with allopurinol, and we think that, we've mentioned this before in our primary market research, that tests very well that doctors are looking for innovative new mechanisms and the synergy, the idea of using lower doses of both drugs to get more meaningful efficacy, very important for physicians. The second is drug-drug interactions, so mechanistically, other drugs being studied for gout affect or have a mechanism of a renal transport inhibitor, so by their very nature of their mechanism could have problems with drug-drug interactions and we know that these patients are on a number of concomitant chronic medications like antihypertensives, anti -- or hyperlipidemia drugs and diabetes drugs. So we think that's going to be an important differentiator. And we did have discussions with FDA around drug-drug interactions and the remaining step that we have is the ADME or metabolism -- human metabolism study that we've mentioned before, we hope to have results by the end of this year. And then lastly, we know that there's a high propensity for kidney stones in this patient population. And again, mechanistically, a drug that, by its mechanism, pumps out more uric acid through the kidneys to lower uric acid versus one that decreases production of uric acid, could be problematic in patients with a propensity for stones, and it's even more problematic when you consider that as much as 50% of patients with stones are in the silent stone category where they actually haven't had an attack, so the doctor doesn't know that they have a problem. So we think those are 3 differentiators that will put BCX4208 in a competitive position in the marketplace.

Great. And obviously, the hiccup was a bad choice of word, so sorry for that. Last couple of questions, and I'll get off the phone. Jon, this is probably for you. In terms of pickup by partnerships, should we be thinking just big pharma or should we be thinking mid-tier pharma as well? Because sometimes the economic value for a company like BioCryst may be well served by a mid-Pharma kind of player. And then finally, is there any data at EULAR that BioCryst is presenting on the gout program?

So on the -- what's the -- tier, if you will, of big pharma versus medium pharma and our interest in that kind of a partnership. For me, it's all about somebody who demonstrates that they can be successful with this molecule because, as I said before, the strategy and the value creating opportunity for the drug is in sales milestones and the royalties because we think the gout market's going to explode and we want to be able to get the benefit of that. So a capable, hungry midsized pharma that shows a real desire that they're really going to push hard with this drug is important to me. I mean the last thing I want to do is have this in a big company where it gets lost amongst a bunch of other priorities. That being said, if a big company shows that same interest, I'd love to have that kind of competition. So it really doesn't matter to me what size as long they can afford to do a high-quality Phase III, as long as they are committed to the molecule and pay a fair upfront payment and other terms. We just want somebody who sees gout the way we do. And then with EULAR, Bill, I'm not sure, do we have the...

Yes. So EULAR, we submitted some abstracts. I believe the abstract book comes out next week, so you can look forward to seeing that.

And we also have a follow-up from the line of Charles Duncan from JMP.

I wanted to ask you a quick question about 5191. And in particular, what is the key information that you'd like to hear from the ongoing IND-enabling or if you will, the safety -- nonclinical safety studies? And what is the predicted value that you see for clinical program added success, sort of that question?

The most important thing that I need to see coming out of the nonclinical safety studies is the nucs [indiscernible] level and the calculations to starting doses in humans. At the end of the day, the efficacy is a class effect for nucleoside NS5B inhibitors that -- and what drives that is how much of the triphosphate is formed in liver cells. So we can't measure that in humans because that would require a liver biopsy. So we'll take the exposures and the doses in the nonclinical program and try to extrapolate the therapeutic range. But you really have to do a biology study to work on -- to find out about efficacy in humans. So I think it's the most important thing is just being able to calculate doses and moving into the clinic and knowing what to look for and what to measure.

So the inflection points, Charles, are filing the IND, so we've successfully found those doses that we can take into Phase I and then I think the Mad study [ph] where we intend to have hep C infected subjects that we can measure by roload [ph]. So those to me are 2 important events in the coming months for BioCryst.

But you had both -- I mean it is a class effect in terms of efficacy, but also safety and so I guess, the question is, do you think that the ongoing studies are going to answer at least the latter half of that question?

At the nonclinical level, yes, absolutely.

And I see no further questions in the queue at this time. I would like to turn the conference back to BioCryst for any concluding remarks.

Yes. So thank you. We really appreciate your interest today. Like I said, the coming months are really going to be important for the company. You can trust that we will be very, very busy pursuing the partnership with 4208, moving our preclinical assets through the talks, studies and getting ready for Phase I. So an exciting couple of quarters to come. Again, thank you for your interest in BioCryst, and have a great day.

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.