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`NPS Pharmaceuticals' (NPSP) CEO
`Francois Nader on Q2 2014 Results
`
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`Earnings Call Transcript
`
`NPS Pharmaceuticals' (NPSP) CEO Francois Nader on Q2 2014 Results Earnings Call Transcript | Seeking Alpha
`
`Aug. 6, 2014 11:39 PM ET | About: NPS Pharmaceuticals, Inc. (NPSP) by: SA
`Transcripts
`
`NPS Pharmaceuticals Inc. (NASDAQ:NPSP)
`
`Q2 2014 Results Earnings Conference Call
`
`August 06, 2014, 05:00 PM ET
`
`Executives
`
`Susan Mesco – Executive DirectorInvestor Relations
`
`Francois Nader – President and CEO
`
`Luke M. Beshar – EVP and CFO
`
`Eric Pauwels – SVP and PresidentNPS Pharma International
`
`Roger J. Garceau – EVP and Chief Medical Officer
`
`Paul Firuta – PresidentUS Commercial Operations
`
`Analysts
`
`Tazeen Ahmad – Bank of America
`
`Lisa Zhang Goldman Sachs
`
`Joseph Schwartz Leerink Partners.
`
`Kim Lee Janney Capital
`
`Alan Carr Needham & Company
`
`David Nierengarten Wedbush Securities, Inc.
`
`Operator
`
`Good day, ladies and gentlemen, and welcome to the NPS Pharmaceuticals Second
`Quarter 2014 Financial Result Conference Call. My name is [Estobon] (ph) and I will
`be your operator for today. At this time, all participants are in listenonlymode. Later,
`we will conduct a questionandanswer session. (Operator Instructions) As a
`
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`reminder, this conference is being recorded for replay purposes.
`
`I would now like to turn the conference over to Susan Mesco, Executive Director
`Investor Relations.
`
`Susan Mesco
`
`Thank you, Estobon and welcome to our second quarter conference call. Before we
`start, let me remind you that today’s call will include forwardlooking statements
`based on current expectations. Such statements represent our judgment as of today
`and may involve risks and uncertainties that may cause actual results to differ from
`the results discussed in the forwardlooking statements. Please refer to our filings
`with the SEC, which are available from the SEC or our website for information
`concerning the risk factors that could affect the company.
`
`Joining me on today's call are members of our executive management team,
`including Dr. Francois Nader, our President and Chief Executive Officer; Luke
`Beshar, our Chief Financial Officer; and Paul Firuta, President, U.S. Commercial
`Operations. Roger Garceau, our Chief Medical Officer and Eric Pauwels, President,
`NPS Pharma International, are also here to participate in our Q&A session.
`
`At this time, I will turn the call over to Dr. Francois Nader.
`
`Francois Nader
`
`Thank you, Susan, good afternoon and thank you for joining us today. My
`management team and I are delighted to share with you some important targets that
`we made during the second half of 2014 positioning NPS as a premiere global rare
`disease company.
`
`Our focus first on our key strategic priority. Growing our international Gattex
`customer, global rare disease business would continue in success of Gattex in the
`U.S. and the introduction of Revestive in key European markets later this year.
`
`Our second strategic priority is building our global endocrinology rare disease
`business as we prepare for the approval and launch of Natpara in the U.S. and the
`filing of Natpara in Europe.
`
`And third, strengthening our pipeline with the recent initiation of our Phase 2 proof
`ofconcept study of NPSP795 in autosomal dominant hypocalcemia, and the
`commitment to continue building our portfolio for licensing and acquisitions.
`
`Beginning with Gattex, we continue to be very pleased with the success of Gattex in
`the U.S. as the first and only GLP2 analog that is indicated for adult patients with
`Short Bowel Syndrome dependent on parental support.
`
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`In the second quarter, sales of Gattex Revestive were $22 million and yeartodate
`we have achieved net sales of $40 million leaving us confident that we will deliver on
`our full year guidance of $100 million to $110 million in net global sales. And we
`remain very bullish on the long term potential for Gattex.
`
`We continue to grow our existing prescriber base with more than 50% of new
`prescriptions coming in from first time prescribers leaving plenty of room for
`significant market growth.
`
`We were also gratified to receive FDA's approval of a revised label for Gattex, which
`includes the long term data from our STEP2 study. This data showed that Gattex
`treatment beyond two years resulted in clinically meaningful reductions in volume of
`parental support, more day of parental nutrition and for some patients complete
`independence from PN.
`
`This revised label has allowed us to strengthen our promotional and educational
`materials to boost Gattex's appeal to physicians and patients. While we are very
`pleased with the effectiveness of our current field organization, we leverage our
`launch experience and recently implemented a field force expansion to extend our
`indepth reach to more prescribers in more territories.
`
`On the international front, we are preparing for the rollout of Revestive, which is the
`exU.S. brand for Gattex. To this effect, we filed our price in the U.K. in June, which
`now allows Short Bowel Syndrome patients to access Revestive via individual
`funding requests.
`
`We also submitted the health technology assessment for Haute Autorité de Santé in
`France. We will be filling the AMNOG dossier in Germany in the fall which will mark
`the launch of Revestive in Germany and the start of the three months equate review
`process.
`
`And our pricing submissions in Denmark, Norway and Sweden are well underway.
`Japan is a key market for the global success of the brand. We are very pleased with
`the recent meeting we had with PDMA, the Japanese Pharmaceuticals and Medical
`Devices Agency.
`
`Our development program has been defined and includes a bridging study in adult
`Japanese Short Bowel Syndrome patients, as well as a pediatric study. We are also
`preparing to file for orphan status later this year.
`
`The last point to touch on regarding our G1 franchise, is our global development
`program in pediatric Short Bowel Syndrome. The global study in this setting is
`progressing well. We are currently enrolling our second cohort of patients and
`anticipate reporting top line results later on this year or early next.
`
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`I would like to now switch gears and turn to our global endocrinology rare disease
`franchise. The FDA's review of the Natpara BLA is advancing as planed. At
`September 12, AdCom date was recently published in the Federal Register and the
`Natpara PDUFA action date remains October 24.
`
`As we successfully did with Gattex, we are working with distinguished outside
`experts including former FDA reviewers and panel members and holding a number
`of marked Advisory Committee meetings to ensure readiness.
`
`In connection with the Natpara AdCom meeting, we will begin a selfimposed quiet
`period on August 18, in anticipation of receiving the FDA briefing documents. We will
`list this quiet period on September 12, as for the completion of the AdCom meeting.
`
`A key components of our global rare disease endocrinology strategy is to secure
`approval of Natpara in Europe and the 10year exclusivity that will come with it. We
`remain on target to finding the Natpara European marketing authorization application
`before the end of this year.
`
`As you know, patients with hypoparathyroidism face a significant burden of disease,
`given the multitude of physical, cognitive, and emotional symptoms associated with
`the disorder. Findings from our landmark PARADOX study were recently published
`in Endocrine Practice.
`
`The data described the high burden of illness with hypoparathyroidism patients as
`they experience symptoms for more than 13hours a day. 72% of patients have 10 or
`more symptoms despite taking calcium and vitamin D. If approved, Natpara could
`provide hypoparathyroidism patients with the first replacement therapy to treat that
`condition.
`
`In preparing for the successful introduction of Natpara in the U.S. our commercial
`team has been advancing three priorities. First, generating disease awareness.
`Second, profiling potential prescribers, and third, ensuring market access.
`
`I would like to now invite Paul Firuta, our President of U.S. Commercial Operations
`to update you on our prelaunch activities for Natpara. Paul?
`
`Paul Firuta
`
`Thank you, Francois, and good afternoon to everyone joining us on today's call. Let
`me begin by telling you how delighted I am to have joined NPS at such an exciting
`time. I've enjoyed getting to know the commercial team at NPS. I have found them to
`be very experienced, highly motivated and patient focused.
`
`I am confident that strong execution will deliver significant growth in the month and
`years ahead that lie for Gattex. We are making excellent progress executing the
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`2014 plan and the team's doing a very good job analyzing the market dynamics and
`developing strategies and tactics to address findings identified in the early phases of
`the launch.
`
`We think Gattex highlights include an expanded sales force with 11 new members,
`enhanced targeting tools, the addition of powerful long term data to our label and
`additional NPS care coordinators to support the growth in the patient phase.
`
`So, for Gattex, we are very pleased with the continued success the team is
`delivering. For Natpara, we're advancing numerous priorities to the U.S. launch
`readiness. Generating awareness around the burden of hypoparathyroidism is a
`missioncritical component of our commercial strategy.
`
`Like many orphan disorders hypoparathyroidism is often misunderstood and we're
`using multiple educational tools to enhance patient and physician understanding of
`hypoparathyroidism and the burden of the disease.
`
`We have generated significant results through our digital and social media platform
`like our unbranded website, hypoparathyroidism.com where patients can register
`and opt in to receive information and updates from NPS.
`
`We've also seen a terrific response to our YouTube channel and Facebook page.
`Through these platforms, patients can access educational information, view videos
`and download ebooks. Last month in support of world Hypoparathyroidism
`Awareness Day, we introduced a free emergency resource kit for patients.
`
`This kit which includes a medical alert bracelet and ID cards, is designed to support
`accurate and more rapid diagnosis of hypoparathyroid symptoms in emergency
`settings. In less than one month, we received nearly 500 patient requests for this kit,
`another indication to us of the unmet medical need in the community.
`
`Let me turn now to our second key commercial priority, physician targeting and field
`force deployment. We recently deployed a contract field based team of 38
`professionals. This team is charged with profiling approximately 3,500
`endocrinologists, who would be our primary prescriber targets.
`
`The demographic information they are capturing will help us refine our physician
`targeting list, support our field force mapping, and develop our launch playbooks.
`
`Our medical sales team is also playing an important role in profiling effort. This team
`of 14 is focused on building hypoparathyroidism awareness through education of
`centers of excellence and other key institutions.
`
`Regarding the buildout of our NPS Natpara sales organization, we will be hiring a
`dedicated team using a gated approach based on upcoming regulatory milestones.
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`The plan is to have the sales leadership in place by end of September and the
`majority of the sales team in the field after approval.
`
`The last here I'd like to cover is market access. Specifically specialty distribution,
`patient services and payer mix. We will utilize a limited network of specialty
`pharmacies to distribute Natpara directly to hypoparathyroidism patients. This
`network is now being established.
`
`We are also expanding our NPS advantage support programs to include
`hypoparathyroidism team, who will be ready to provide patients and healthcare
`providers with personalized support by October 24th PDUFA date.
`
`In addition, as we do for Gattex, we’ll offer suite of patient assistance programs to
`support broad access to Natpara. These programs will be easy to navigate and
`designed to enhance the patient and physician experience.
`
`The last thing I will cover is the payers. Our recent research shows that the payer
`mix for hypoparathyroidism patients is approximately 60% covered by commercial
`plans, 35% government and 5% uninsured.
`
`So, to summarize, our team continues to make excellent progress on the commercial
`front, and we are really excited to bring the first parathyroid hormone replacement
`therapy for hypoparathyroid patients as quickly as possible.
`
`With that, I'll turn the call back over to Francois.
`
`Francois Nader
`
`Thank you, Paul. I would like to now cover some highlights from our endocrinology
`development program. We recently reached an important milestone with the initiation
`of the Phase 2a proofofconcept study of NPSP795 for Autosomal Dominant
`Hypocalcemia or ADH.
`
`As a reminder, ADH is a lifelong genetic disorder that affects only a few thousand
`patients globally. It is caused by mutations of the calcium sensing receptor gene,
`which plays a major role in calcium homeostasis.
`
`Patients with ADH continuously excrete calcium in the urine, because the receptor
`always senses that the serum calcium is too high even when it is not. ADH can
`present with severe hypocalcemia, which can cause life threatening neonatal
`complications, such as cardiac arrhythmias, seizures or laryngeal spasms.
`
`In adult, ADH patients are at a significantly increased risk for renal complications,
`including nephrocalcinosis and impaired renal function. Unfortunately there is
`currently no approved treatment for ADH.
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`NPS has embarked on the development of NPSP795 which is a selective calcium
`receptor antagonist that binds to the calcium sensing receptor and decreases its
`sensitivity to serum calcium. This in turn could restore normal calcium homeostasis.
`
`Because NPSP795 mechanism of action normalizes the physiological activity of the
`receptor, it could be the first treatment specifically targeting the ADH mutation. We
`look forward to reporting topline results from this important study later this year or
`early next.
`
`So, in summary, we are focused on delivering tremendous value in 2014 and
`beyond. We are very confident in the significant market potential of Gattex and
`Revestive. We are preparing for the U.S. launch of our second orphan product
`Natpara and the filing of the Natpara European marketing application later this year
`and our Phase 2a of NPSP795 in ADH is now underway.
`
`Behind these programs, we have implemented a very active business development
`strategy to pursue acquisition or in licensing opportunities that are either first end or
`best end rare disease therapeutics that provides quantifiable value to patients and
`society.
`
`We have a lofty vision here at NPS, nothing less than to create a world in which
`every patient, every person living with rare disease has a therapy. Our GI and
`endocrinology franchises are only the beginning.
`
`Our patient centric ambition is to 10 in 10 or developing treatments for 10 rare
`diseases in 10 years. I know that this is an ambitious goal. Some would say
`unrealistic but I truly believe, that given our team, our expertise and our patient focus
`motivation, we will make it happen.
`
`At this time, I will turn the call to Luke for his financial report. Luke?
`
`Luke Beshar
`
`Thanks, Francois. Again, good afternoon to all joining us on today's call. I am really
`pleased to report that NPS Pharma turned in another strong financial performance
`this quarter. We achieved $20 million in net global sales of Gattex and continue to
`feel very good about delivering our full year global net sales guidance of $100 million
`to $110 million.
`
`Our Sensipar royalties remain an important value driver, bringing in nearly $32
`million of revenues in the quarter. As a reminder, under the repayment terms of
`royalty advance from Amgen, on August 15th, we will receive a $24 million cash
`payment, and Amgen will withhold the remaining $8 million to repay interest and
`principal on the advance.
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`We continue to anticipate that we will fully repay the remaining balance of the $41
`million in the third quarter of 2015, after which we will receive 100% of Sensipar
`royalties through March 18 in the U.S. and through the end of the 2018 for the rest of
`the world.
`
`With annualized sales of Sensipar now $1.2 billion, we believe our cash flows in
`Sensipar royalties provide tremendous financial flexibility to NPS over the coming
`years as we drive towards our 10 in 10 goal and bring in new pipeline opportunities.
`
`We also receive a cash royalty for Janssen sales NUCYNTA, which for the quarter
`was approximately $700,000.
`
`Moving to the expense side of the P&L, cost of sales were $3 million, or roughly 12%
`of net sales which consisted primarily of royalties and packaging costs. As you may
`recall, the product being used to support the introduction of Gattex was
`manufactured before approval and therefore expense to R&D.
`
`We expect that this will result in the benefit to our gross margin and to the later part
`of next year when the preapproval product is fully consumed. After that, we expect
`our gross margins to normalize at approximately 80%.
`
`Second quarter research and development expenses were $21 million, representing
`a decrease of approximately $10 million from the same quarter last year. The
`primary driver of this variance was the cost related to the production on preapproval,
`Natpara inventory produced in 2013.
`
`Selling, general and administrative expenses were $26 million for the second quarter
`versus approximately $14 million for the same period last year. The increase is
`attributable to the activities to support the launch of Gattex, prelaunch initiatives for
`Natpara, and the buildup of our international business.
`
`We continue to maintain a strong financial position and ended the quarter with
`approximately $170 million in cash. This leaves us very well capitalized to globally
`commercialize both Gattex and Natpara as well as to advance new pipeline
`opportunities for growth.
`
`So to summarize the second quarter financial results, we remain highly confident in
`our growth prospects for Gattex Revestive 2014 and well beyond. We believe that
`Natpara will be the second significant sales driver for NPS Pharma, and our team is
`very focused on advancing the regulatory process for this drug both in the U.S. and
`the EU.
`
`We have a number of key pipeline initiatives in place to deliver growth beyond
`Gattex and Natpara, including our development programs for Gattex in pediatric
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`Short Bowel Syndrome and NPSP795 in ADH.
`
`And finally we have the financial strength to allow us to execute on these initiatives.
`
`That concludes this afternoon's prepared remarks. At this time, I'm happy to turn the
`call back over to the operator to begin our Q&A session. Estobon?
`
`QuestionandAnswer Session
`
`Operator
`
`(Operator Instructions) Our first question comes from Tazeen Ahmad with Bank of
`America.
`
`Tazeen Ahmad – Bank of America
`
`Hi, thanks for taking my questions. Just a couple on Gattex. You mentioned that
`more than 50% of scripts are coming from firsttime prescribers. Can you breakdown
`whether most of those prescribers are KOLs or are they more community based?
`
`Francois Nader
`
`Thank you, Tazeen. We are not breaking down who our prescribers are. Sad to say
`that, it represents exactly what we said it will, which is part of the prescribers are
`KOLs coming from large institutions.
`
`And about onethird of them are coming from centers of excellence and twothirds
`really are coming from large practices and other specialties.
`
`And I'm very happy to report that with the expansion of our sales organization, we
`will be able to reach even more target and more diverse targets as well.
`
`Tazeen Ahmad – Bank of America
`
`When was that sales retention completed?
`
`Luke Beshar
`
`We finished the sales force expansion in July as the teams in the field and just
`starting the process as meeting their customers for the first time and then we
`characterize.
`
`Tazeen Ahmad – Bank of America
`
`Okay. And I guess the last question I have is, what are you noting on discontinuation
`rates, if you could provide some sort of directional view on that? And has there been
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`any change on the time to secure prior authorization from payers? Has it stayed
`stable or is it getting faster?
`
`Francois Nader
`
`Yeah, let me start with part two of our question. We haven’t seen any changes in the
`reimbursement pattern and we are very pleased with how the reimbursement is
`going. Really underlining the value frankly that Gattex is bringing to payers and
`patients.
`
`On the discontinuation rate, what we said and continue to say is over the longrun,
`we'd expect the discontinuation rate to settle in around 20% to 30%. At this stage,
`we are not disclosing what debt rate is on a quarterly basis.
`
`Tazeen Ahmad – Bank of America
`
`Okay. Thanks.
`
`Francois Nader
`
`Thank you.
`
`Operator
`
`Our next question comes from Navdeep Singh with Goldman Sachs.
`
`Lisa Zhang Goldman Sachs
`
`Hi, this is Lisa in for Navdeep. Thanks for taking our questions. First, in 2Q did you
`work through all that weather headwinds from Q1? And additionally at the beginning
`of 2Q, you added about seven to eight patients on Gattex per week and saw about
`nine to 10 new prescriptions written per week.
`
`So, can you just talk a little bit about how these trends faired throughout the rest of
`the quarter, whether they increased, decreased or remained the same? And then,
`what are you seeing in the early days of 3Q?
`
`Francois Nader
`
`So, fortunately winter is behind us, so that's good news and other headwinds they
`are also behind us. As I said in my prepared remarks, we are very confident that we'll
`reach our target guidance of $100 million to $110 million this year.
`
`This has really fostered by the fact that we have added among other things, we
`have added an additional sales force. But also Paul and his team and he can
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`comment on this, they did fabulous job in targeting and really giving our marketing
`teams the tools they need.
`
`This being said, we are not providing anymore with any realtime or intraquarter
`metrics on prescription and dispenses.
`
`Lisa Zhang Goldman Sachs
`
`Okay. And I saw you took about like 10% price increase in July 1st. So, can you just
`talk a bit about what that says about, one, the pricing power in this market, and then
`two, the underlying growth of Gattex?
`
`Francois Nader
`
`Well our increase was 9.4% and we took this increase after carefully setting the
`market, adjusting the value that Gattex brings to the patient especially when we have
`now in our label, very strong data on the long term use of Gattex.
`
`So we were very deliberate if you will in making this decision. Fact of the matter is,
`as is said, we haven’t seen any negative reaction from the payers and our
`reimbursement continues to be very, very strong. And we are working with the
`payers on reducing the time from, if you will prescription to dispensing.
`
`So on the reimbursement front, things are going as well as one could expect.
`
`Lisa Zhang Goldman Sachs
`
`Okay, thanks. And then lastly on Natpara, this is just a question we receive a lot from
`investor. For Natpara, received a complete response letter for osteoporosis, so, can
`you just walk us through what the issues were there? And then why you’re confident
`you won't face the same issues with Natpara for hypoparathyroidism? Thank you.
`
`Francois Nader
`
`Well back in the day it was called preouts and the indication was osteoporosis, so,
`very different indication. The two reasons where we received an approvable letter
`was number one, the risk of hyperglycemia, when at that time kiosk was used in
`with osteoporosis patients.
`
`And the second reason was some comments from the FDA on the trend that was
`used back then.
`
`Now, fastforward to 2014, the indication is the front because now we’re talking
`about hypoparathyroidism and hypoparathyroidism patients suffer from
`hypocalcemia.
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`So boosting the serum calcium level up is exactly what we need. And this is why we
`are very confident that Natpara has the ideal mechanism of action for a condition like
`hypoparathyroidism because it replaces a hormone that is missing in these patients,
`which is not the case at all in patients suffering from postmenopausal osteoporosis.
`
`And the second aspect is the trend that was used back in the day in the development
`of payout is longgone. And we have a new trend that has been used during the
`development process.
`
`So, in many ways completely end related when it comes to the trend and frankly
`good news when it comes to boosting the serum calcium levels up.
`
`Lisa Zhang Goldman Sachs
`
`Okay. Great. Thanks so much and congrats on the progress.
`
`Francois Nader
`
`Thank you very much, Lisa.
`
`Operator
`
`Our next question comes from Joseph Schwartz with Leerink Partners.
`
`Joseph Schwartz Leerink Partners.
`
`Great, thanks very much. Natpara has either, I though I'd ask one on Natpara and
`then one on your 795 program.
`
`First of all, Natpara has some biomarker data which a lot of the specialists we speak
`with are convinced should translate into clinical benefit because it’s the same
`biomarkers they focus on managing today with vitamin D and calcium
`supplementation.
`
`And we've heard anecdotes about hypoparathyroidism patients feeling better after
`they go on Natpara. But I am wondering what clinical data do you have to
`demonstrate this in a rigorous enough way to satisfy the FDA if they ask you this in
`the upcoming panel?
`
`Francois Nader
`
`Thank you, Joe. And I will ask Roger Garceau, our Chief Medical Officer to answer,
`maybe both of your questions. Let's start with Natpara first. Roger?
`
`Roger Garceau
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`Let me just talk about Natpara. So, in the clinical trial we have so far as we looked at,
`as a replacement trial it says, can we maintain serum calcium base that we take
`away to supplements, which we could do. In addition to that, we have both clinical
`pharmacology studies but also in the replaced trial.
`
`So, if we look at the other markers and that is where you're talking about. So, we
`looked at the effect tenure on calcium, we looked the effect on phosphate, which is
`real critical with long term because it the high calcium phosphate product that is
`associated with tissue disposition in the brain, kidney and other places. And we
`looked at the levels of serum phosphate again, part of that scenario.
`
`We also looked at bone effect disease. These patients have adynamic bone and
`bone is important as a reservoir for calcium. They are the one to start mobilizing
`calcium from bone and really are normalizing bone turnover and also these patients
`have really abnormal hyperdense bone.
`
`So, what we will do with FDA and our whole presentation package, we're looking at
`this, replacement of the hormone which is the effect across these multiple metabolic
`parameters are now the two major concerns or the persistent hypocalcemia over the
`long term. We know we will raise serum calcium supplement to drive hypocalcemia,
`and we showed that in our trial and it has been well.
`
`The other reasons would be at the long term [indiscernible] high calcium phosphate
`product, and we clearly showed in our trial, that we can decrease [indiscernible] as
`well as the other parameter. So it's the totality of replacing the hormone is what's
`important in this, it's just not about calcium or supplements but totality of replacing
`the hormone.
`
`Joseph Schwartz Leerink Partners.
`
`Okay. Are these correlated with clinical outcomes for these patients in a rigorous
`way through quality or life measure or PROs. We heard anecdotes about people
`feeling better of course but, how is this measured because those sound like more
`biomarkers?
`
`Roger Garceau
`
`So we have in the trial, within quality of life but it’s not a specific instrument and in an
`orphan trial there is not a primary trial driven for qualityoflife. We don't see any
`significant versus placebo in the overall but the trends for the individual parameters
`are positive.
`
`And certainly when you talk to patients which is most important, okay. You see
`positive, but this trial wasn't designed for qualityoflife, there are pub