Mr. Pelzel: What it means is that we are a pharmaceutical company that has a drug delivery technology that's unique to us, that can be used to develop unique products that have advantages for patients. Now, why is that relevant? Well, there are many pharmaceutical companies that develop brand-new products. For example, they will come out with a new chemical entity and a product that has to go through a lot of toxicology work from the FDA, and they develop the product from the very beginning. And that is very expensive, requires a huge infrastructure and is very risky because you don't know when you develop such a product what the benefits are going to be. We're different in that we have a drug delivery technology that takes the existing compounds and makes them better. We feel that model is better for us because we don't need the huge infrastructure necessary to find new compounds. We don't take on as much risk associated with the development of our compounds because we're starting with a known chemical that has been used in humans for many, many years. That means we don't have as many surprises. The other advantage is that we complete our development programs much faster. So we use this drug delivery platform to make products better, to get them through the FDA and to the market. The advantage is lower cost, lower risk, faster time-to-market and less uncertainty because we're using compounds that have already been used in man. The downside is that we don't have as much patent protection as you might with a new chemical entity.
TWST: Tell us about your technology and products.
Mr. Pelzel: Let me start by telling you what our technology does. When you take a pharmaceutical product orally, you have to rely on the body's ability to absorb that product into the blood stream. The body will absorb products at various places in the intestine. Some products are absorbed throughout the intestine and others are absorbed only in particular places. Our technology works particularly well for products that are absorbed just underneath the stomach. These are the products you have to take four, five, six times a day - Tylenol, for example. Once you take the pill and it passes the one place it's absorbed in the stomach, you have to take another pill. So you're taking something many times a day. Our technology involves taking a pill that we develop with a meal. When it gets into the stomach, it swells up three times its original size. Because of that swelling and because it's taken with the meal, it stays in the stomach for eight to nine hours. While it's sitting there, it can deliver a dose of a product very, very slowly over that eight to nine hours. The result can be a drug that you only have to take once a day. The other benefit is because your body is getting this drug very slowly, you can have fewer side effects.
A good example would be a product called gabapentin. This is a product most recently promoted by Pfizer, and it generated 3.7 billion in sales for Pfizer. It is a very good drug for nerve pain and other uses. Unfortunately, it's a drug that is only absorbed right under the stomach, so you have to take it three to four times a day. And because it's absorbed very quickly, it causes dizziness in about 30% of patients, and it causes daytime sleepiness in around 25% to 30% of patients. While it's a good, very effective drug, patients have a hard time taking it. When we recognized that this drug is absorbed just under the stomach, we put it into our technology, and we developed a tablet that you take once a day and it stays in the stomach for eight to nine hours. The result of this is we have a drug you take once a day and it has virtually no daytime sleepiness compared to 25% to 30% for the original gabapentin from Pfizer, and it has 10% dizziness compared to almost 30% that the original product has. We have taken Pfizer's original product, used our technology and made it more patient friendly. It isn't more efficacious, but it is more convenient, and it makes it much, much easier for the patients to take. This product has been through a Phase III trial and the NDA will be submitted this month. We've already partnered this product to Abbott Laboratories through their Solvay Pharmaceuticals subsidiary. We will be getting 14% to 20% royalties from Abbott and up to 300 million in sales milestones. When we saw that we could develop this product to reduce the side effects, we became aware of another use of gabapentin that had never been explored commercially. That was to use gabapentin for the relief of hot flashes associated with menopause. We saw this as a very interesting use because even though the product was used by some physicians for hot flashes, the side effects were so great that most women could not tolerate a dose that was high enough to control the hot flashes. We have a license to a U.S. patent for the exclusive use of gabapentin for hot flashes, and then we have proceeded to develop this compound, and we will start our last Phase III trial next month.
We feel that these two assets will bring us to profitability in 2011. How will that happen? We just announced that we ended the year with 82 million in cash. That happens to be the same amount of cash that we started the year with. That's because we are able to take our technology and license it to other people for cash, and so we've been able very successfully over the past three years to squeeze cash out of our technology to fund the development of these clinical programs. We will get a 10 million payment when we file the PHN NDA - that's the one that's partnered with Abbott and that should be in the second quarter. When that product is approved this this time next year, Abbott will owe us another 35 million and another up to 25 million, depending upon how our side effects appear in the FDA label. After approval, they will owe us a 14% to 20% royalty. That's how we get to profitability. Then when we see the results of our hot flash trial, we will submit that to the FDA next year, and anticipate approval and launch in 2012. At that point, we will hire a small sales force, and we intend to be a profitable pharmaceutical company.
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