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Edited Transcript of ALKS earnings conference call or presentation 27-Apr-17 12:30pm GMT

Thomson Reuters StreetEvents

Q1 2017 Alkermes Plc Earnings Call

DUBLIN Apr 28, 2017 (Thomson StreetEvents) -- Edited Transcript of Alkermes Plc earnings conference call or presentation Thursday, April 27, 2017 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James M. Frates

Alkermes plc - CFO, SVP and Treasurer

* Richard F. Pops

Alkermes plc - Chairman and CEO

* Sandra Coombs

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Conference Call Participants

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* Biren N. Amin

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* Cory William Kasimov

JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst

* Douglas Dylan Tsao

Barclays PLC, Research Division - Director and Senior Research Analyst

* Hiroshi Shibutani

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Liav Abraham

Citigroup Inc, Research Division - Director

* Paul Andrew Matteis

Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst

* Vamil Kishore Divan

Crédit Suisse AG, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the Alkermes plc First Quarter 2017 Financial Results call. My name is Brandon, and I will be your operator for today's call. (Operator Instructions)

Please note this conference is being recorded. And I will now turn it over to Sandra Coombs, Director of Investor Relations. Sandra, you may begin.

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Sandra Coombs, [2]

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Thank you. Welcome to the Alkermes plc conference call to discuss our First Quarter 2017 Financial Results. With me today are Richard Pops, our CEO; and Jim Frates, our CFO.

Before we begin, I encourage everyone to go to the Investors section of alkermes.com to find our press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today. We believe the non-GAAP financial results better represent the ongoing economics of our business.

Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see our press release and 10-Q issued today and also our 10-K for the year ended December 31, 2016, for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call as a result of new information or future results or developments.

Today, Jim Frates will discuss our financial results, and Richard Pops will provide an update on the company. After our remarks, we'll open the call for Q&A. Now I will turn the call over to Jim.

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [3]

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Thanks, Sandy. Good morning, everyone. During the first quarter, we continue to execute on our business strategy, and our results reflect strong year-over-year growth, driven by our proprietary products. We remain confident in our financial expectations for the year, which we are reiterating today. During Q1, our sequential quarter-over-quarter unit growth for VIVITROL and ARISTADA was somewhat masked by our net sales results, and I will explain that more in a moment.

Let me start with an overview of our key financial highlights. During the first quarter, we generated total revenues of $191.8 million, and recorded a $27.9 million non-GAAP net loss. In the quarter, VIVITROL had net sales of $58.5 million, compared to $43.8 million for the same period last year, demonstrating growth of approximately 33%, driven by underlining unit growth of 43% and robust expansion across the country.

Typically, first quarter net sales are impacted by deductible resets in commercial plans that happen at the beginning of the year, and inventory build at our wholesalers during the preceding fourth quarter. The inventory build of $3 million from the fourth quarter of 2016 was largely worked down during the first quarter. Adjusting for these inventory fluctuations on a sequential basis, VIVITROL units grew approximately 4%. With channel inventory at current levels and the commercial insurance plan deductible reset behind us, we expect the growth rate to accelerate throughout the year, and we are reiterating our expectation for VIVITROL net sales in the range of $280 million to $300 million in 2017.

The underlying fundamentals of VIVITROL's growth and potential are strong. Since our year-end results call in February, we've seen a number of state programs expand from approximately 400 programs in 36 states to nearly 450 programs in 39 states. The robust growth of these programs, which range from public health initiatives to criminal justice programs in drug courts, prisons and jails, represents a leading indicator of the sustained growth of VIVITROL.

Further, last year, the Comprehensive Addiction and Recovery Act and the 21st Century Cures Act were signed into law and we'll begin to see the initial impact of these major pieces of legislation later this year, as states access funding and implement new treatment programs to address the opioid epidemic.

Turning to ARISTADA. The launch continues to gain traction in the growing long-acting atypical market, with $18 million of net sales during the first quarter. As with VIVITROL, the underlying growth of ARISTADA was somewhat obscured in our net sales results. During the first quarter, ARISTADA prescriptions grew approximately 16% compared to the fourth quarter. In March, contracting for 2 major payer plans, SilverScript and WellCare, took effect. Together these 2 plans open up a significant pool of patients, representing 35% of the Medicare Part D market. As these payer contracts took effect, gross-to-net deductions increased during the quarter. Additionally, inventory in the channel stayed flat from the end of 2016, after sequentially increasing each quarter since launch.

Looking ahead to the second quarter, we expect that net sales will be in the range of $19 million to $21 million. Our Q2 expectations reflect a lower average selling price, as the contracting that took effect in March is in place for a full quarter and ARISTADA sales volumes increase in these channels. Net sales should track prescription and unit growth more closely in the second half of the year, as gross-to-net adjustments due to payer mix stabilize. Also in the second quarter, we expect the approval for the 1,064 milligram 2-month dose in June and are preparing for that launch shortly thereafter.

We are making steady progress, and we're optimistic about ARISTADA as our growth in new prescribers and the depth of prescriptions among our highest users continues to increase. In March, our market share for new prescriptions in the long-acting aripiprazole market grew to approximately 20% compared to 10% in March of last year. When health care providers use ARISTADA, they appreciate its unique attributes and we remain on track with our expectations for net sales to increase by at least 100% this year.

Moving on to our key partner products. We saw overall revenues of $101.5 million in the first quarter compared to $93.4 million in the first quarter of last year. This included manufacturing royalty revenues of $60 million, related to RISPERDAL CONSTA, INVEGA SUSTENNA and INVEGA TRINZA compared to $54.7 million for the same period last year.

For AMPYRA and FAMPYRA, we recorded manufacturing royalty revenues of $29.2 million during the first quarter compared to $28.2 million for the same period last year. Generic competition to AMPYRA is expected in July 2018. And at this time, our total revenue guidance for 2017 is not affected.

In terms of expenses, our total operating expenses for the first quarter of 2017 were $262.6 million compared to $233.7 million for the same period last year, reflecting targeted investments in our late-stage pipeline and in our commercial infrastructure to support the growth of our proprietary products as well as increased manufacturing activity.

Turning to our balance sheet. We're in a strong position and ended the first quarter of 2017 with approximately $590 million in cash and total investments. The financial underpinnings of our business are solid. We look forward to accelerating the growth of our proprietary products and executing on our development pipeline to deliver our important medicines to patients. And with that, I'll turn the call over to Richard.

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Richard F. Pops, Alkermes plc - Chairman and CEO [4]

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Thank you, Jim. Good morning, everyone. Our commercial portfolio and our late-stage pipeline are in a phase of rapid evolution. VIVITROL and ARISTADA are growing and they'll continue to do so, because they are important differentiated products addressing profound societal needs, which are only becoming more prominent. From a operational perspective, the commercial and development teams are full throttle and excited to be building data and capabilities around medicines with incredible long-term potential.

In the fields we operate in, serious mental illness and addiction, things take time. But you can see from our experience with VIVITROL and in the long-acting injectable antipsychotic market that good medicines, priced fairly, will build steadily over time. As you heard in Jim's remarks, the trends underlying VIVITROL's potential and growth are strong and supported by the activation of policymakers at the local, state and federal levels.

Just yesterday, Health and Human Services Secretary, Tom Price, visited our Wilmington, Ohio facility to learn more about VIVITROL and Alkermes' commitment to the treatment of addiction. The opioid epidemic is affecting every state and district across the country. Advancing treatment and prevention strategies have become national, political, health and criminal justice issues with bipartisan support. VIVITROL is an essential part of that discussion and it was inspiring for the whole company to hear the Secretary recognize our dedication to this field and our growing impact on it.

Turning to ARISTADA, our long-acting injectable atypical antipsychotic for the treatment of schizophrenia. Like addiction, approving the treatment of serious mental illness is a national priority, and long-acting injectable treatments are growing in importance for both medical and economic reasons.

We designed ARISTADA for market leadership, and we continue to build the ARISTADA product family to provide more options and flexibility for patients, physicians and payers.

This continues with the expected approval of the 1064-milligram 2-month dose in June, which would add to our current offerings of once monthly and once every 6-week dosing options. This will be the only 2-month antipsychotic on the market and our launch preparations are well underway.

Now onto the late-stage pipeline. We have 3 late-stage candidates approaching registration or completion of pivotal programs. This pipeline is moving quickly, and we expect a number of important milestones in the next few months. I will start with ALKS 5461. We are developing 5461 as an adjunctive therapy in the treatment of major depressive disorder in patients not achieving adequate clinical response to their first-line therapy. It's important to understand the clinical context. These patients are several weeks or months into their major depressive episode and can experience debilitating and potentially fatal symptoms of their disease. Treatment options are limited and introduce new and significant risks. ALKS 5461 is doing different things for patients than other depression medications. It's well-established that the endogenous opioid system is intimately involved in motivation, social connection and resiliency. And that its function is dysregulated in the context of major depression and other psychiatric disorders.

5461 is specifically designed to confer therapeutic benefits via the endogenous opioid system, while avoiding the risk of abuse, dependence and addiction associated with opioid agonists. We did this specifically and intentionally by including a potent opioid antagonist component. This is a fast-track designated medicine. With the pivotal program completed, we've requested the pre-NDA meeting, and we expect it to occur in the late June or early July time frame. We are preparing the New Drug Application and are on track to submit the NDA later this year.

Our belief in the safety and efficacy of 5461 is based on data. Last year, we presented data from FORWARD-3 and FORWARD-4 at ASCP. In May, we'll present the balance of the data from the FORWARD pivotal program at the Society of Biological Psychiatry medical meeting and will host a webcast conference call for analysts and investors. These data will include FORWARD-5, the prespecified proof analysis of FORWARD-4 and FORWARD-5 as well as a holistic overview of the consistent efficacy and safety profile of 5461 demonstrated throughout the development program.

As we continue to build the evidence supporting the safety and efficacy of ALKS 5461 and share it with key opinion leaders in the field, we recognize that we're just getting started revealing the clinical importance of this new pharmacology. The approval of 5461 as an adjunctive agent in patients failing to get adequate clinical relief from first-line treatments, as measured by MADRS, should just be the beginning. We're going to continue to expand the dataset supporting ALKS 5461's distinctive clinical profile through new clinical trials. This begins later this quarter, as we initiate Study 217. This study will continue our focus on patients suffering from treatment of refractory depression.

In addition to the MADRS, this study will utilize scales and end points to assess additional domains, such as social interaction, anhedonia and resilience, which are regulated by the opioid system and where ALKS 5461 may have particular benefit. So finishing up on 5461, we will present the FORWARD-5 and the FORWARD-4, and FORWARD-5 pooled data at SOBP in May. We have submitted our request for the pre-NDA meeting, expect that to be scheduled soon, we will start the next study by the end of the quarter and we're on track for our -- with our preparations for submitting the NDA by year-end.

Turning to ALKS 3831, we're entering a data-rich period as the pivotal program matures. 3831 is our novel oral antipsychotic, designed to harness the efficacy of olanzapine, with a more favorable weight and metabolic profile. The first piece of new data comes from our recently completed exploratory Phase II study in patients with schizophrenia and co-occurring alcohol use disorder. Despite representing more than 1/3 of patients with schizophrenia, these patients are generally excluded from clinical trials and represent an undertreated and underserved patient population. Our study was designed to assess ALKS 3831's efficacy, safety and tolerability compared to olanzapine in this population and breaks new ground in testing antipsychotic medications in patients many physicians are unsure how to treat. The hypothesis was that because 3831 contains samidorphan, it might have a greater effect on drinking behavior than olanzapine alone, and thereby, avoid some of the deleterious outcomes associated with alcohol use. We prespecified the primary endpoint as a novel composite measure of disease exacerbation as measured by a series of potential events ranging from hospitalization to arrest. The study did not show a difference on this endpoint, as the ALKS 3831 and olanzapine treatment groups performed similarly well. The study did, however, provide a wealth of data supportive of the safety and real-world efficacy of 3831 compared to olanzapine in this complicated and underserved patient population. Perhaps the most striking finding was in terms of long-term antipsychotic efficacy. While both groups experienced an improvement in PANSS scores, which is the positive and negative syndrome scale, subjects on ALKS 3831 had greater long-term improvement. This is remarkable as olanzapine is regarded as among the most effective of all the antipsychotic agents. This underscores our fundamental positioning of ALKS 3831 as a new antipsychotic agent. As its favorable weight and metabolic profile is established through the development program, the focus shifts to its potential to have a profound impact on the treatment of schizophrenia based on its efficacy. This study provides additional support for that positioning. We will complete the analysis of the study and look forward to presenting the data at a future medical meeting.

The next study to read out will be the pivotal Phase III study, evaluating the antipsychotic efficacy of ALKS 3831 compared to placebo and olanzapine in approximately 390 patients. We have moved in the time lines for this study, and now expect to complete enrollment in the next couple of weeks with top line data expected around midyear compared to our previous expectation of year-end. The pivotal study evaluating the effect of ALKS 3831 on olanzapine-associated weight gain will continue its enrollment throughout this year with data expected in mid-2018.

Next is ALKS 8700 for the treatment of multiple sclerosis, which is also enrolling in its pivotal program. 8700 is a novel oral molecule formulated in an advanced controlled release dosage form that is designed to compete against Biogen's TECFIDERA, which represents a $3 billion class in the U.S.

In March, there were a number of positive developments in the intellectual property around dimethyl fumarate, which resulted in TECFIDERA patent protection being upheld through 2028. While our branded fumarate market is positive for the long-term potential of ALKS 8700, we expect the IP surrounding dimethyl fumarate will continue to be challenged. To more completely elaborate the potential competitive advantage of ALKS 8700, we're conducting an elective head-to-head study evaluating the GI tolerability of 8700 compared to TECFIDERA. This 420-patient study began in March, and we'll provide updates on expected timing of data, as we get more experience with enrollment trends. The pivotal program for 8700 consists of 2 elements: completed pharmacokinetic bridging studies, enabling a 505(b)(2) regulatory pathway referencing TECFIDERA and a 2-year open-label safety study. This study has enrolled now over 550 patients, and the data continue to support a differentiated GI profile of 8700.

We expect to complete the safety exposure requirements for registration later this year and remain on track to submit the NDA in 2018.

I'll finish with ALKS 4230, our novel immune therapy designed for selective activation of the IL-2 receptor in order to increase the number of tumor-killing immune cells. We have recently presented 3 posters at AACR, showing some of the preclinical data, which serve as the foundation of the program, including data that demonstrated the selective expansion of cd8 T cells and natural killer cells, with minimal expansion of the immunosuppressive regulatory T cells. We are currently engaged in the dose-escalation Phase of our first clinical trial, and we expect to see initial data later this year. So I'll finish there. We have a lot of important milestones on the near horizon, and we'll look forward to updating you over the course of the coming weeks and months.

With that, I'll turn the call back to Sandy for questions.

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Sandra Coombs, [5]

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Thanks, Richard. Brandon, we'll now open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) From Crédit Suisse, we have Vamil Divan online.

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Vamil Kishore Divan, Crédit Suisse AG, Research Division - Senior Analyst [2]

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So just 2 questions. You mentioned on 3831 the time lines have come in a little bit for the top line data there? Can you just explain what changed? Was it just that enrollment came in faster than you thought? Or were there any other changes that have taken place with the study? And then the second one on VIVITROL. I appreciate the comments you made around the volume that you've been having -- can you give a little more color just in terms of pricing that's been --- there's been an area of focus there, in terms of the net price you're getting, any changes or anything unusual in what happened this quarter?

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Richard F. Pops, Alkermes plc - Chairman and CEO [3]

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Vamil, I'll take the first one and I'll let Jim answer the second. The 3831 study is this efficacy study, which is analogous to the study we ran for the approval of ARISTADA. All along -- in all of our psychiatric studies, we say that we will trade time for quality or quality for time. In this case, we just had really excellent enrollment on the back half of the study, which allowed us just to hit our patient enrollment numbers sooner than we would have conservatively modeled. Other than that, all systems are go.

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [4]

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Yes, and on VIVITROL, I think the change sequentially from quarter-to-quarter was really due to the seasonality that we have seen in the first quarter typically. Our pricing was very stable. And our gross to nets were 43.6% last quarter and 44% this quarter. So pricing wasn't an issue. It really was just as those commercial plans reset and we head into the year. And we've seen that VIVITROL fluctuations from quarter-to-quarter in the past. So we're confident about where we're headed for the rest of the year.

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Operator [5]

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From Leerink, we have Paul Matteis online.

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Paul Andrew Matteis, Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst [6]

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A couple of questions on 5461 and 3831. First one, on 5461, was this study that you are initiating always planned? Or was it in reaction to any feedback from FDA? And do you have plans to initiate additional studies in the future this year?

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Richard F. Pops, Alkermes plc - Chairman and CEO [7]

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Good morning, Paul. No, this was not based on any feedback from FDA. This is based on our recognition that we're just at the beginning of elaborating the clinical potential of this new pharmacology. We had, as you may know, we had about a dozen or more of the top KOLs for depression at Logan Airport a few weeks ago. And it was interesting, because we reviewed all the data from the FORWARD program, and there is a strong consensus that the drug is doing as intended and will be approvable in that indication. So the conversation then shifts to, what do we do next? Because in a way, we've developed 5461 pursuant to the old rules up until this point, testing it as adjunctive agent in patients with major depressive disorder, failing to get adequate clinical relief, using MADRS as the endpoint. But it's doing different things in patients' brains than monoamine reuptake uptake inhibitors, particularly on these domains related to social resiliency, anhedonia, social connectivity, things like that. So this next study we'll begin to explore that. We also have some imaging ideas that we want to do just looking directly in the brain at different domains, then of course, other clinical indications other than adjunctive use in major depressive disorder. So we -- we'll be in the clinic with this drug for the next decade.

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Paul Andrew Matteis, Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst [8]

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Okay. Got it. So we should potentially expect more studies in the future. And then separately on -- thanks, Rich, for clarifying that. I appreciate it. And then on 8700, you conveyed that from the safety study, you are continuing to see a differentiated GI profile (technical difficulty) but are you seeing lower rates of diarrhea and flushing? How much of a window into the data do you have from your seat?

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Richard F. Pops, Alkermes plc - Chairman and CEO [9]

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Our team has a lot of data. What I can tell you based on what I know, I have been mostly looking at the major AEs, so the SAEs and also GI discons, and they are extremely low. So the weakness of that observation is despite the large number of patients that we have now, which is significant. This isn't a trivial end now, we're over 500 patients, but now we go head to head, it just underscores our interest and belief in the logic of running the head-to-head study.

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Paul Andrew Matteis, Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst [10]

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Okay. And maybe just one more on 3831, if you don't mind. This study -- so the timing pulls into midyear. Do you think that this study is long enough? And I guess, you tweaked the run in 2. I mean, based on the design, do you think that it's realistic to see a benefit or differentiation on metabolic [stuff]?

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Richard F. Pops, Alkermes plc - Chairman and CEO [11]

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I think we're talking about 2 different things. You are breaking up a little bit, Paul, but I think I understand the question. I just want to make sure, we're not confusing 2 different studies. We've got -- the study that we're going to have data on midyear now is part of the 2 study pivotal program as agreed with the FDA. This is the formal definition -- description of efficacy with the primary comparative being placebo in acute schizophrenia, it's a 4- or 5-week study. We also have an olanzapine arm, though we're not powered for noninferiority. The primary statistical comparison is to placebo. And of course, that duration -- that's how we ran the ARISTADA Phase III. This is a standard efficacy study for an antipsychotic agent. Separately, we're running a much more exploratory human metabolic study in volunteers. It's an inpatient study for almost a month where we're trying to see whether we can recapitulate in the humans what we are seeing in the rodents, which is the peripheral metabolic effects of olanzapine and the corresponding effects when samidorphan in the form of 3831 is also deployed. So in the animals, we've learned a tremendous amount about why olanzapine is causing weight gain, separate from our central hypothesis about the reward system. And if that's borne out in humans, we want to begin to explore that to underscore the pharmacology of 3831. That data -- those data will also be available midyear, but they're not part of the pivotal program.

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Paul Andrew Matteis, Leerink Partners LLC, Research Division - Director, Biotechnology and Senior Research Analyst [12]

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Okay. I guess my question was on this study that's going to read out in a year, you see differentiations on weight gain really (technical difficulty) are you anticipating that you may see differentiation from the olanzapine arm on metabolic side effects for 3831? That was my question.

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Richard F. Pops, Alkermes plc - Chairman and CEO [13]

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I'm sorry, I gave you a long answer to a question that you didn't ask, but in a 4-week study, we don't expect to see major changes in weight. But all patients are hospitalized, they are getting care. It's just -- it's a different experimental setting.

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Operator [14]

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From JP Morgan, we have Cory Kasimov.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [15]

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Actually 2 of them for you as well. So I guess, first when thinking about VIVITROL traction over the course of the year, how much insight do you guys typically have ahead of time as to when utilization of the product could or is kind of poised to pick up in certain states or systems? And I have 1 follow-up for Jim.

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Richard F. Pops, Alkermes plc - Chairman and CEO [16]

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Go ahead Jim.

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [17]

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Yes, Cory, that's one of the things that makes it difficult to predict VIVITROL, because it's -- we are changing care and the use of a long-acting relapse prevention medicine, which is an antagonist, is so different. These state programs are -- when state programs start, they can accelerate quite quickly. The question is when exactly do they start, right? When are the systems in place, when does the funding come through, how quickly do physicians get up and running. So I think the thing that makes us optimistic over time is that, in all of our territories across the country as I tried to refer to in my remarks, we are seeing that steady growth still occurring, and we are also seeing many states accelerate that growth. And our concentration and growth remains very high in those 5 key states still providing more than 50% of our sales. So it's very difficult quarter-to-quarter to know exactly which state is going to pop next, but given our market share and the movement we see across the country, we're very confident that it will happen. You know you add to that, the additional funding that's going to come in the second half of the year through 21st Century Cures and the Care Legislation that was passed last year. And what we're hearing on the ground from our sales team is we remain very optimistic about the growth.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [18]

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Okay. Great. And then the follow-up is, it looks like there is a step up in your cost of goods this quarter. Anything --- at least as a percentage of your total sales? So anything in particular behind that? Or is it more driven by the 1Q commercial dynamics you discuss?

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [19]

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Yes. We do fluctuate from quarter-to-quarter on cost of goods, and it has a lot of things to do with product mix and the amount of manufacturing that we are doing. Obviously, we did more in the first quarter this year than we did last year. And we also brought on some additional capacity too. So as that works through the system and volumes increase and we get more efficient on that, we are very confident that cost of goods will get back into that kind of 82% range versus the 79% we saw this quarter. So really just quarter-to-quarter fluctuation.

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Operator [20]

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From Cowen, we have Chris Shibutani.

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Hiroshi Shibutani, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [21]

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On VIVITROL, can you comment a little bit about some of the trends you're seeing in underlying drivers, such as the number of kind of the higher volume prescribers? You did comment about the programs, which are improving, as new programs come on. I know that they tend to be little bit slower, but lot of the traction has historically seemed to come from the higher volume prescribers, duration of use, if you could comment there. And then secondly, this has been a drug that has kind of needed a constellation of events to come through, payer backdrop, recognition of demand, et cetera. I think we've discussed in the past, sort of, what are the pushes and pulls. Where are you able to push and invest? I know that you tried to do so with that naltrexone kit. Can you speak to efforts that you feel you can proactively invest in and employ to somehow encourage growth in the market rather than sort of needing everything to move in sort of coincident fashion as it has, but -- how can you sort of accelerate or push growth?

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Richard F. Pops, Alkermes plc - Chairman and CEO [22]

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Chris, I'll let Jim answer some, and then I'll give you some color myself.

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [23]

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Yes, so I think it's a good question, Chris. And this again relates to the complexities of the VIVITROL system. We'll point you back to Analyst Day with that --- the expansion of our provider network. The policy overlay in a state and the access and reimbursement. And when we get all 3 of those things working, that's when we can drive and maybe add another salesperson to the territory. We can do some micro marketing, that's sort of more traditional marketing in a sense. And so what we're trying to do is continue to move those states up to highly developed states, as we've talked about. We don't do that count every quarter, but we absolutely are moving in the right direction with states moving to highly developed states. And it really is a coordinated effort between our reimbursement folks, our sales folks and our policy folks in the states to move that along. We are making progress, I think the key thing that we look at is year-over-year growth for VIVITROL, because again, the first quarter with those commercial resets is very different from other quarters. We've typically seen the highest growth rates in the second and third quarters. And we have no -- we have little doubt that, that will change as we go into the year. On some of the more specifics that you asked about, in terms of the number of high prescribers, our key accounts and maybe the depth of prescriptions and the duration, we are seeing improvements. The other thing is prescription fulfillment rates that sort of thing. We are seeing improvements in those underlying trends. Those are slow percentage point, percentage point a month-to-month at a time. And we're definitely continuing to see that growth occurring in the background. So as I say, we have reiterated guidance for the year. And hopefully, we will see -- and expect to see VIVITROL accelerating through the course of the year.

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Richard F. Pops, Alkermes plc - Chairman and CEO [24]

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Chris, the only thing I'll add to that is just was highlighted yesterday was Secretary Price's visit to the Wilmington site. The basic hydraulics in the market are that more VIVITROL is going to be used. That's why it's a little bit stochastic in a way, and that's why we used the 450 state programs compared to 400 even in February as a leading indicator. It's very difficult to predict any one of those 450, but in the aggregate, there's just more and more people using more and more VIVITROL. And it has got about 2% market share right now with a lot of states, municipalities, counties just beginning to get exposure to the product. So at the kind of highest level, at the systematic level, the basic instinct is to --- for more use of long-acting antagonist medication. You will see from us, even in this quarter, I got emails from a number of you all, you saw the buses in Manhattan that had the VIVITROL ad on them. We're beginning to expand these micro marketing approaches, and I think you'll be seeing more about VIVITROL.

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Hiroshi Shibutani, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [25]

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Great. And then just 1 quick additional seasonal question. We're heading into the Cancer time of year. 4230, your CSF1R, when we will see some color in terms of data or thinking about what you're going to do with that asset?

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Richard F. Pops, Alkermes plc - Chairman and CEO [26]

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I don't think you'll see anything yet at ASCO. But I think, for the fall, that'd probably the timing where we will be into those dosing cohorts, where therapeutic concentration is, we expect to start seeing activity.

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Operator [27]

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From Jefferies, we have Biren Amin.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [28]

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Just on the new 5461 study, can you just share how many patients you plan to enroll in that trial, and what the primary endpoint would be? And I guess, when should we expect data from this study? And I guess, another question is, will you be discussing the design of the trial with FDA in your pre-NDA meeting in second quarter?

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Richard F. Pops, Alkermes plc - Chairman and CEO [29]

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Good morning, Biren. No, we won't talk about it with FDA in the pre-NDA meeting. It's not really part of the submission package. We'll probably give you more specific details when we do the webcast around the SOBP presentation, because we're finishing off the details on that. MADRS will continue to be one of the primary endpoints, but we are going to augment that with some new scales. One of the tensions in running these depression studies is that you don't want to invoke a number of scales. The more interventions with the patient tends to drive a higher placebo response. So we're being very, very reductive and selective about trying to explore particular domains that we think map onto this opioid -- endogenous opioid system pharmacology, and those -- the team is settling on those. And we'll tell you more about those as we get closer to launching it.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [30]

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So Rich, maybe a follow-up on the MADRS endpoint. Are you going to be evaluating an average across several weeks' time such as what you did with FORWARD-5?

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Richard F. Pops, Alkermes plc - Chairman and CEO [31]

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Yes. We think that's the more precise and accurate determination of separation of these curves in these studies. We and others have demonstrated that there is just inherently week-to-week variability. And you can win and you can lose simply based on variability. So a more accurate approach is to capture more data in the analysis. And we will probably employ an SPCD or SPCD-like study design as well with a first stage to filter out high-placebo responders.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [32]

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And when do you hope to finish the trial by?

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Richard F. Pops, Alkermes plc - Chairman and CEO [33]

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Well, we have to start it first. So it depends on the end. So I'm not sure. Obviously, it will be next year at a minimum, but we will give you more details as we finish the design.

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Operator [34]

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From Evercore ISI, we have Umer Raffat.

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Unidentified Analyst, [35]

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It's [Dara] standing in for Umer. I just had 2 questions. So first on 8700, in a scenario where 8700 differentiates in the Phase IIb versus TECFIDERA, do you intend on going it alone in this market? Or are you willing to partner?

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Richard F. Pops, Alkermes plc - Chairman and CEO [36]

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I think the answer is yes. So we -- the most important thing is to really understand the clinical and economic value of 8700 relative to TECFIDERA. There are a number of people paying attention to this development program as you might imagine. Unlike 3831, 5461, in our core psychiatry franchises where we know that we want to be launching those drugs ourselves, MS would be a new foray for us. We can do it ourselves. It's certainly tractable, but we also could see collaborating around it as well.

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Unidentified Analyst, [37]

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Great. And on ARISTADA, what was the gross to net in the first quarter? And was there any change from Q4? And is this a trend change -- is there any trend change we should expect to continue?

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [38]

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Yes, thank you --- yes, the Q --- excuse me, the gross to net did increase from quarter-to-quarter. So we were up about 3 points from 33% to 36%. And our estimate for the full year is more in the mid-40s, which is where you would see the other competitive products, given that very heavy Medicare and Medicaid that's 90% of the market here. So that's one of the things I talked about in the dynamics. We're going to continue to see unit growth in the second quarter, but as those Medicare Part D plans came on in March, for the second quarter, we expect gross to nets probably to move up into the mid- to low-40s from the mid-30s, where they were in the first quarter, and stabilize in that mid-40% going forward for the foreseeable future.

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Unidentified Analyst, [39]

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And if I may, just 1 quick question on the GI tolerability of 8700 again. If that reads out in -- towards the end of the year, is there any chance it will be included in the NDA package at the FDA?

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Richard F. Pops, Alkermes plc - Chairman and CEO [40]

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Our expectation is it would not be in the initial label, based on the 505(b)(2) approach and also having run a single study. With that said, we would expect, at launch, to have that --- those data publish. And if the data are clear and compelling, we could consider running a second study for a potential label inclusion.

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Operator [41]

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From Citi, we have Liav Abraham.

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Liav Abraham, Citigroup Inc, Research Division - Director [42]

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A lot of mine have been already answered. Just a quick question on 5461 and on your pre-NDA meeting with the FDA that's scheduled for later in the quarter. What feedback exactly do you plan on getting from FDA in this meeting? Or is it purely to tick the box? And will you be communicating anything to the investment community after this meeting? And if so, how and when and in what format?

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Richard F. Pops, Alkermes plc - Chairman and CEO [43]

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The pre-NDA meeting is a kind of a statutory well-known type B FDA interaction. All of our interactions with the FDA are meaningful and have an opportunity to teach and to learn. This particular meeting is more typically focused on the structure of the NDA itself, the table of contents, the various analyses, the various figures, tables and listings that will be provided in the NDA across the various elements, the various modules of the NDA itself. Typically a 90-minute meeting, a working-type meeting. So we will absolutely give feedback coming out of it, because that will give us more clarity on the timing of the submission, we've said year-end. And we will tune that up as we come out of the meeting. And any other things we learn, we would share with you.

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Sandra Coombs, [44]

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Brandon, we have time for one more question.

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Operator [45]

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From Barclays, we have David [sic] [Douglas] Tsao.

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Douglas Dylan Tsao, Barclays PLC, Research Division - Director and Senior Research Analyst [46]

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Just in terms of CARA and 21st Century Cures, I think Jim you referenced sort of some new money or states accessing new money later in the year. Is it your expectation or do you have a sense or is it too early, whether that money is going to go into existing programs? Or do you think it --- this will be a catalyst for new program formation and therefore sort of translation? And then how should we think about that for potentially sort of helping VIVITROL adoption?

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Richard F. Pops, Alkermes plc - Chairman and CEO [47]

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This is Rich. I will answer. The 21st Century Cures money really brings funding to the CARA legislation that was passed in the summer as well. So you can think about it as federal money that will be granted down to states, largely for the initiation of new programs. So we've been real strong advocates of this. And the new programs come in 2 domains, one is in the public health, traditional substance abuse treatment, also in the criminal justice side, where the whole logic that's beginning to build the idea of let's not incarcerate patients with addiction, let's start intervening in their treatment sooner prior to diverting them into the criminal justice system. So I think you could see it in the form of new programs. Some of those programs relate directly to funding that could support purchasing VIVITROL, but actually, more importantly, to put in the systems in the community to be able to treat patients with medication is as to treatment generally. Often in states there is access to VIVITROL through Medicaid expansion, and what's been lacking has been the human infrastructure to deploy the use of monthly injectable treatments along with psychosocial counseling and monitoring. So that's a long answer to a good question, but there is -- it's quite a complicated system.

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Douglas Dylan Tsao, Barclays PLC, Research Division - Director and Senior Research Analyst [48]

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Okay. And then one more question if I might on ARISTADA. You referenced that you plan additions for March. Just curious in terms of ARISTADA coverage right now, how you feel you are positioned, especially relative to the competition? Is there more work to be done? Or do you think that, at this point, it's a level playing field? And then just maybe some context around how you think the 2-month dose and how significant in terms of volume trends that might be?

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Richard F. Pops, Alkermes plc - Chairman and CEO [49]

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We're effectively at parity now. With the inclusion of those 2 big contracts in March, we're where we want to be, we could always improve, but largely we are at parity. The 2-month is important for a couple of reasons. Not that it creates a step function in the sales in the quarter, not far from it, because I think the modal -- the modal use of long-acting injectables will continue to be around that 1-month. But it's another reason for physicians to choose our product versus other competitive products, because it opens the opportunity to reduce the patient's number of injectables to only 6 per year, if they are complying and doing well on the medicine. The second piece of it, that's important over the long term that we are quite energized about, is the hospital start. We expect labeling for the 2-month version to allow initiation on the 2-month dose. This is different than INVEGA TRINZA, which requires stabilization on monthly SUSTENNA before initiating on TRINZA, the 3-month version. If you can initiate a patient as they leave the hospital on a 2-month formulation, that maps really well into a public health system now that's looking to reduce the number of hospital readmits for the same diagnosis and gives patients a chance to have stable therapeutic levels of the drug for a couple of months coming out of their acute episode. And we think from a personal and public health point of view that could be very powerful.

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Douglas Dylan Tsao, Barclays PLC, Research Division - Director and Senior Research Analyst [50]

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And then Richard, I mean, how many -- do you know how big these sort of hospital market or sort of initiating in the hospital market population is?

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Richard F. Pops, Alkermes plc - Chairman and CEO [51]

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We'll follow up with you on this, but my gut, I'm looking at Jim, is about 1/3 of -- or about 30% of the starts come out of the hospital.

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James M. Frates, Alkermes plc - CFO, SVP and Treasurer [52]

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Unfortunately, these patients cycle through a lot of times. The average duration of therapy is very short, 4 to 6 months. And so when therapy changes, they often sadly end up back in the hospital. And so therefore, they are a real opportunity for new starts on LAIs.

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Operator [53]

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We will now turn it back to Sandy Coombs for our closing remarks.

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Sandra Coombs, [54]

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Great. Thanks, everyone, for joining us on this busy morning. Please don't hesitate to reach out to the company if you have any follow-up questions. Thank you.

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Operator [55]

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Thank you, and ladies and gentlemen this concludes today's conference. Thank you for joining. You may now disconnect.