U.S. Markets open in 4 hrs 7 mins

Edited Transcript of ARLZ earnings conference call or presentation 9-Nov-17 1:30pm GMT

Thomson Reuters StreetEvents

Q3 2017 Aralez Pharmaceuticals Inc Earnings Call

Milton Nov 9, 2017 (Thomson StreetEvents) -- Edited Transcript of Aralez Pharmaceuticals Inc earnings conference call or presentation Thursday, November 9, 2017 at 1:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Adrian Adams

Aralez Pharmaceuticals Inc. - CEO & Director

* Mark A. Glickman

Aralez Pharmaceuticals Inc. - Chief Commercial Officer

* Nichol L. Ochsner

Aralez Pharmaceuticals Inc. - Executive Director of IR & Corporate Communications

* Scott J. Charles

Aralez Pharmaceuticals Inc. - CFO

================================================================================

Conference Call Participants

================================================================================

* David Bautz

Zacks Investment Research, Inc. - Senior Biotechnology Analyst

* David C. Martin

Bloom Burton & Co., Research Division - MD & Head of Equity Research

* Keay Thomas Nakae

Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics

* Mitchell Kapoor

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to Aralez Pharmaceuticals' Third Quarter 2017 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Adrian Adams, Chief Executive Officer of Aralez Pharmaceuticals. Please go ahead.

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [2]

--------------------------------------------------------------------------------

Good morning, everyone, and thank you for joining this webcast to discuss the 2017 third quarter financial results for Aralez Pharmaceuticals. Joining me on today's call is Scott Charles, Chief Financial Officer; Mark Glickman, Chief Commercial Officer; James Tursi, Chief Medical Officer;and Nichol Ochsner, Executive Director of Investor Relations and Corporate Communications.

Before I proceed, I would like to ask Nichol to say a few opening remarks. Nichol?

--------------------------------------------------------------------------------

Nichol L. Ochsner, Aralez Pharmaceuticals Inc. - Executive Director of IR & Corporate Communications [3]

--------------------------------------------------------------------------------

Thank you, Adrian. Earlier today, we issued a press release summarizing our financial results and key achievements for the third quarter and nine months ended September 30, 2017, referred to as year-to-date 2017, which can be found on the EDGAR and SEDAR databases and on our website at aralez.com.

Additionally, I would like to remind everyone that we have a slide presentation to accompany our conference call this morning, which can also be viewed at our website. If you are listening to this call on your telephone, you may access a synchronized slide deck on our website by choosing the link on our webcast page that says, Click Here to Listen.

Before we begin, I would like to remind you that certain statements made during today's call may contain forward-looking statements under applicable securities laws. Forward-looking statements include statements regarding our updated 2017 financial guidance and our preliminary financial outlook for 2018. Forward-looking statements may also include those described in the disclaimer on Page 2 of the slide presentation.

Any forward-looking statements are based on management's current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to vary significantly from those set forth in the forward-looking statements. These important factors are described in the earnings press release we issued this morning; the company's annual report on Form 10-K for the year ended December 31, 2016; and the company's quarterly report on Form 10-Q for the third quarter of 2017, which will be filed later today. You may obtain free copies of these documents and other related documents filed with applicable securities regulators at our website, aralez.com, under the heading Investors or on the SEC's website at sec.gov or on SEDAR at sedar.com. We undertake no obligation to update these forward-looking statements unless required by applicable law.

This presentation also contains non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our third quarter earnings release issued earlier today. I would also note that all dollar amounts referenced on this call are references to U.S. dollars unless otherwise noted.

With that, I'll turn the call back over to Adrian.

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [4]

--------------------------------------------------------------------------------

Thank you, Nichol. On Slide #3, you will find the agenda we would like to cover for today's call.

I will open with an overview of our third quarter 2017 and year-to-date performance, then provide a summary of some key events that are taking place with our evolving, and indeed, transforming business. I will then provide brief performance updates for our product portfolio, with a focus on Zontivity, the Toprol-XL franchise, Yosprala, and our Canadian business.

Scott will next discuss our financial results, an overview of our improvements in SG&A expenses, and will also provide updated 2017 financial guidance and our preliminary financial outlook for 2018. Following that, I will briefly conclude by summarizing what we believe will be our pathway to becoming a profitable and growth company before opening up the call, as always, for your valued questions.

Turning now to Slide #4, let me quickly review some key financial accomplishments for the third quarter before discussing our financial improvements and preliminary outlook for next year. Turning, importantly, to the financial results we announced this morning, we are pleased to report a very solid third quarter 2017, with net revenues reaching $24.3 million, a $10.7 million increase compared to the third quarter of 2016, and year-to-date 2017 net revenue of $77.9 million, a $43.6 million increase compared to the comparable nine-month period in 2016.

Our performance in the third quarter demonstrates the strength of our underlying business, with growth from our growth driver brands in both the United States and Canada. This puts us on the path to profitability, importantly demonstrated by the achievements of positive adjusted EBITDA this quarter for the very first time at Aralez. We also updated 2017 net revenues to be in the range of $95 million to $105 million, and updated 2017 adjusted EBITDA to be in the range of negative $5 million to break even.

Today, we announced our planned pathway to achieve sustained profitability and growth with a goal to streamline the U.S. business through implementing financial improvements with our design, to result in a leaner and more efficient performance-orientated operating model. We are now targeting 2018 revenues to be in the range of $140 million to $160 million, representing a $50 million increase over the midpoint of our updated full year 2017 guidance. We also now expect 2018 adjusted EBITDA to be in the range of $35 million to $55 million.

Our financial improvements include continued revenue growth and an approximately $32 million reduction in SG&A expenses in 2018, compared to our current 2017 estimate, which we believe will significantly improve our overall cost in addition to extending our cash runway. Moreover, we now expect to produce significant adjusted EBITDA in 2018 and beyond due to a combination of enhanced revenues and cost optimization, which we will discuss later in more detail.

Taking into account our current assumptions, we are confident that we have sufficient cash to operate our current business as planned through 2018 and beyond. We're also confident that this will better position the company to refinance our debt in the future.

In the United States, we intend to remain focused on achieving Zontivity's full potential, leveraging improved revenues and margins on the Toprol-XL franchise and maintaining profitability in 2018 and beyond on an adjusted EBITDA basis. In Canada, we plan to maintain an efficient, productive, and profitable growing business.

Now please refer to Slide #5 to see an illustration of our strong financial outlook that we believe demonstrates our business is on course to deliver meaningful growth in revenues and adjusted EBITDA year-over-year. Looking at the graph on the left, you can clearly see the robust revenue evolution we expect with 2016 actual net revenue of $54 million expected to grow to a range of $95 million to $105 million, based on our 2017 guidance, and from that, increased to a range of $140 million to $160 million based on our 2018 outlook. This includes a change to the presentation related to the Toprol-XL franchise revenues that we will discuss a little later. Please note that our updated 2017 guidance and 2018 outlook are based on the midpoints of all current estimates.

Turning to adjusted EBITDA, we expect a similar upward and transforming trajectory based on the midpoints of our current estimates for 2017 and 2018. Our 2016 actual adjusted EBITDA was negative $51 million, which is expected to improve and be in a range of negative $5 million to break even in 2017, and then to grow to a range of positive $35 million to $55 million in our preliminary 2018 outlook.

Let's now move on to review our portfolio performance. Turn to our next slide, Slide #6. Let's discuss an overview of the updated launch indicators for Zontivity. We remain extremely pleased with the Zontivity launch. With regard to the product's performance, we reached new all-time highs in both new prescriptions and total prescriptions in the third quarter, growing 151% and 82% respectively over the second quarter of this year. We believe this growth is being driven by our refined positioning or overall marketing campaign, as well as focused prescriber targeting.

We're also seeing a steady, consistent increase in refills, another sign of continued healthy growth. Of the prescriptions being generated by our three primary targets, 65% are coming from cardiologists, 24% from primary care physicians, and 4% from vascular surgeons. As a reminder, our 75-person sales team is detailing Zontivity to a target physician population of approximately 12,000 physicians, which represents 25% coverage of the oral antiplatelet market.

And as volumes increase, so does our share in the oral antiplatelet market. Interestingly, Zontivity has already achieved a 1.6% new-to-brand share within our target audience. Zontivity's managed care coverage remains strong, with approximately 90% of commercial lives and approximately 65% of Medicare Part D lives covered, as evidenced by approximately 80% of prescription claims approved on a typical weekly basis.

Additionally, our array of patient copay assistance programs continue to help ensure that the patient cost of obtaining Zontivity remains competitive with generics and other branded antiplatelet agents.

Now moving to Slide #7, I would like to review prescription trends for Zontivity in a little bit more detail. As discussed during our last quarterly call, following Merck's discontinuation of Zontivity promotion in the summer of 2016, the product began a steady, consistent decline. We initiated a sampling program for current Zontivity prescribers on the February 1 of this year, and began to see an immediate increase in prescribing among those sample doctors, a powerful supported indicator of Zontivity being a promotionally-sensitive product.

Our early June full launch resulted in an immediate and significant improvement in weekly prescription volume, which has continued through the most recent data week. This appears to validate our belief that we have appropriately and successfully repositioned Zontivity in the minds of our targeted prescribers and have tapped into a physician and patient audience seeking therapeutic options for an ongoing, unmet need.

Now moving to Slide #8, let's take a closer look at the market share performance of Zontivity in the antiplatelet category. Zontivity is experiencing share growth across a variety of metrics. Specifically, new-to-brand share, both overall and within targets, has increased significantly since our full launch in June of this year. As a reminder, the new-to-brand share metric quantifies those patients who are new to prescription therapy in the category in the last 12 months.

Zontivity recently achieved a 1.6% new-to-brand share within our target audience. In looking deeper at the potential market opportunity, we believe a 6% to 7% market share among our targets, which would equal 1.5% to 2% market share of the total antiplatelet market, could translate into greater than $100 million peak sales opportunity.

We also note solid growth in patients continuing therapy, with weekly refills nearly doubling since the Aralez launch. Taken together, the new-to-brand and continuation on brand metrics suggest continued future prescriptions and TRx/NRx share growth.

In summary, we believe that third quarter performance of Zontivity built on the successful launch of Zontivity in the second quarter, and we remain extremely encouraged with the potential for future growth.

Now let's turn to Slide #9 for an overview and a reminder of the strategic rationale for the Toprol-XL transaction. As you know, on October 31, 2016, Aralez acquired Toprol-XL and its authorized generic business from AstraZeneca. Toprol-XL is an established beta blocker with a stable prescription base. There are a number of key benefits that we articulated at that time for this transaction.

The addition of Toprol-XL also nicely diversifies our product offerings, revenue streams, and provides immediate cash flow. We continued to be pleased with the progress of Toprol-XL and its authorized generic during the third quarter of this year, and we are forecasting an improved outlook in 2018.

Turning to Slide #10, you can see the manifestation of our positive outlook in the form of prescription performance of the Toprol-XL franchise. The graph on the left-hand side of the slide shows that the Toprol-XL franchise retail prescription volumes, as reported by Symphony Health, continue to be predictable, robust, and increasing. The graph on the right-hand side of the slide shows that the franchise continued to grow nicely through September 2017, compared to the same period in the prior year, with an approximately 15% increase in new prescriptions and an approximately 11% increase in total prescriptions over 2016. We find this growth very encouraging, in particular for a product that has now been on the market over 20 years.

That transitions us nicely to Slide 11, for an overview of our improved outlook for the Toprol-XL franchise. As a reminder, we currently report net revenues for the Toprol-XL franchise under the transition services agreement that we have with AstraZeneca until the end of this year. Net product sales for the Toprol-XL franchise were $60 million year-to-date 2017. We reduced this amount by both the cost of product revenues and the transition fees payable to AstraZeneca for their services, which, combined, were $23 million. This gives us net revenues of $37 million year-to-date. Overall, the Toprol-XL franchise is performing in line with our expectations for 2017.

As an important reminder, 2018 revenues will be recorded as total net product sales, or on a gross basis, starting in the first quarter of 2018, as our transition services agreement ends at the end of this year, which is the equivalent of approximately $60 million on a year-to-date basis through September 2017, or an estimated $80 million on an annualized basis. We are pleased that the Toprol-XL franchise continues to generate significant revenue and cash flow for Aralez.

Importantly, we have made significant commercial and financial progress on a number of fronts, and as a result expect improvements in 2018 Toprol net product sales over 2017 due to improved volume and margins going forward, due to, among other things, renegotiated distribution (inaudible) with some of our partners. As a result of this progress, we have an improved and positive outlook in 2018.

To reiterate, we believe that these volume and margin improvement initiatives will help the Toprol-XL franchise to grow in 2018 and remain a valuable commercial and financial asset to Aralez.

Moving to Slide #12, I review our commercial strategy and performance trends for Yosprala. Our commercial strategy for Yosprala is to promote the product alongside Zontivity while seeking to leverage our managed care physician and patient access programs in an effort to maximize the value of Yosprala with minimal non-selling expense.

Two quarters ago we announced the implementation of a patient-friendly program and allowing all patients to access Yosprala for only $10 per month, regardless of coverage, commercial or no insurance, and regardless of copay levels set by the insurer. As you can see, we continue to see the positive impact of this change, with third quarter retail prescription equivalents, or RPEs, increasing 31% over the second quarter.

The RPE measure normalizes all prescriptions to a 30-count fill to take into account mail order and those prescriptions that are greater than a 30-count fill. Additionally, we have seen a reduction in both patient abandonments and pay rejections, suggesting a loosening of roadblocks to prescription fulfillment in the retail setting.

While this quarter-over-quarter growth is significant, the rate of increase is not as great as desired, and suggests that Yosprala's prescription growth trend is being affected by underlying demand factors beyond just cost or payer access. As a result, we will continue to monitor Yosprala prescription performance and return on investment closely.

Before handing it over to Scott to review our financial performance, I would like to refer finally to Slide #13, where I will briefly provide an overview of the growth drivers for our Canadian business. Revenues were $7.1 million in the third quarter of 2017, up consecutively on a quarterly basis from the beginning of the year.

We are pleased that in addition to this revenue growth, the Canadian business continues to be profitable on an adjusted EBITDA basis. The key contributors to this solid quarterly performance continued to be from the growth driver brands Cambia, Soriatane, and Blexten, which currently represents around 39% of the revenues in Canada.

The business, driven particularly by these strong growth drivers, remains very strong, despite generic erosion of some of our other brands such as Fiorinal and Bezalip SR during 2017. We're also delighted to report that the Blexten launch has continued to be successful and significantly above expectations.

Looking ahead, we remain focused on maintaining an efficient, productive, and profitable business. With that, I would now like to hand over to Scott Charles to review our financial results and outlook in more detail. Scott?

--------------------------------------------------------------------------------

Scott J. Charles, Aralez Pharmaceuticals Inc. - CFO [5]

--------------------------------------------------------------------------------

Thank you, Adrian, and good morning, everyone. Today, I'll be reviewing our third quarter and year-to-date 2017 GAAP financial results and adjusted EBITDA. I will also provide updated 2017 guidance and provide a preliminary outlook for 2018. Our press release provides our financial results for the third quarter and year-to-date 2017, as well as the reconciliation to GAAP for our non-GAAP financial measures.

Overall, we are very pleased with our results. Later today, Aralez will file its quarterly report on Form 10-Q, which will also include our third quarter and year-to-date 2017 results, and I encourage you all to review that report. As a reminder, our merger with Tribute closed in February 2016, our acquisition of the U.S. and Canadian rights to Zontivity closed in September 2016, and our acquisition of the U.S. rights to the Toprol-XL franchise closed in October 2016. As a result, our consolidated results of operations for 2016 include the results of Tribute from February 5 through September 30, 2016, and Zontivity from September 6 through September 30, 2017, but do not include the results of the Toprol-XL franchise.

Now let's turn to Slide 15, which covers our strong revenue growth for both the third quarter and year-to-date 2017. We are pleased to report that our total revenues for the third quarter of 2017 were $24.3 million compared to $13.6 million during the third quarter of 2016, an increase of $10.7 million. Total revenues for year-to-date 2017 were $77.9 million compared to $34.3 million for the nine months ended September 2016, an increase of $43.6 million. We have broken down our revenues into 3 categories: first, our U.S. core business, which includes Zontivity, Toprol-XL and its authorized generic, Fibricor, and Yosprala; second, our Canadian products; and third, royalties and license fee revenues.

U.S. core business revenues grew from $0.2 million in the third quarter of 2016 to $13.5 million in the third quarter of 2017. We also saw U.S. core business revenue growth from $1.3 million for the nine months ended September 2016 to $42.9 million for the same period of 2017. The increase was primarily driven by the acquisitions of the Toprol-XL franchise and Zontivity.

Our Canadian product revenues, which are generated from products we acquired from the Tribute acquisition, declined from $8.1 million in the third quarter of 2016 to $7.1 million in the third quarter of 2017. The decline was driven by generic competition on Bezalip SR and Fiorinal, partially offset by growth from Blexten, Cambia, and Soriatane, our growth driver brands.

Canadian product revenues increased from $18 million for the nine months ended September 2016, to $19.7 million for the same period in 2017. Contributing to the increase were net product revenues from Blexten, as well as increased revenues from Cambia and Soriatane, partially offset by lower Bezalip SR and Fiorinal revenues. As a reminder, our 2016 Canadian product revenues include revenues for the period February 5 through September 30, 2016.

Our royalties and license fee revenues decreased from $5.3 million in the third quarter of 2016 to $3.7 million in the third quarter of 2017, primarily due to lower net pricing for VIMOVO in the U.S.. Pursuant to our agreement with Horizon and subject to certain conditions described in our public filing, we are guaranteed a quarterly minimum royalty amount in the U.S., calculated based on annual minimum royalty of $7.5 million, which was reflected in our third quarter results.

Ex-U.S. royalties continue to be relatively stable in 2017. Year-to-date 2017, royalties and license fee revenues totaled $15.3 million and were comprised of VIMOVO royalties of $11.3 million and a $4 million license fee received pursuant to a license agreement executed in May 2017. For the nine months ended September 2016, royalties and license fee revenues were comprised solely of VIMOVO royalties of $15 million. The decrease in VIMOVO royalties was again driven by lower net pricing in the U.S.

Now moving on to Slide 16, let's cover more details on our third quarter and year-to-date GAAP financial results. Aralez's costs and expenses for the third quarter and year-to-date 2017 included $3.1 million and $8.8 million respectively in cost of product revenues; $8.7 million and $25.7 million respectively of amortization of the intangible assets from the Tribute, Zontivity and the Toprol-XL franchise acquisitions; and $4.6 million and $12.7 million respectively in expenses related to the change in fair value of continued consideration from the Toprol-XL and Zontivity acquisitions.

SG&A expenses were $24.7 million for the third quarter of 2017 compared to $25.4 million in the third quarter of 2016. The decrease was primarily driven by lower U.S. commercial costs, primarily for Yosprala. This decrease was partially offset by increased cost for our U.S. sales force. If you recall, we expanded our sales force in the fourth quarter of 2016 to 110 sales representatives, from 25 sales representatives, to support our Yosprala, Zontivity, and Fibricor sales efforts. After our cost savings initiatives announced in the second quarter of 2017, we now maintain a sales force of approximately 75 sales representatives, compared to 25 sales representatives for the comparative third quarter of 2016.

SG&A expenses were $87.8 million for year-to-date 2017 compared to $85.6 million in the comparable period for 2016. The increase was primarily due to increased cost related to year-over-year increase in our U.S. sales force to support our sales efforts, again, for Yosprala, Zontivity, and Fibricor. We also incurred higher promotional cost to support the relaunch of Zontivity in the U.S. in the second quarter of 2017, and for Yosprala in the first quarter of 2017. These increased costs were partially offset by costs related to the merger with Tribute in the corresponding prior year period.

R&D expenses for the third quarter of 2017 were $0.7 million, compared to $2 million for the third quarter of 2016. R&D expenses for year-to-date 2017 were $1.6 million, compared to $7.9 million for the 9 months ended September of 2016. These decreases related primarily to lower costs incurred for Yosprala.

Interest expense of $6.8 million for the third quarter of 2017 and $20.2 million for year-to-date 2017 relates to our borrowing of $200 million under our credit facility in the fourth quarter of 2016, pursuant to the acquisitions of Zontivity and the Toprol-XL franchise and our $75 million in convertible notes.

Our net loss for the third quarter of 2017 was $24.4 million, or $0.37 per diluted share, compared to a net loss of $20.6 million, or $0.32 per diluted share for the third quarter of 2016. Our net loss for year-to-date 2017 was $79.4 million, or $1.20 per diluted share, compared to a net loss of $71.9 million, or $1.26 per diluted share, for the nine months ended September 2016.

Now please turn to Slide 17 for adjusted EBITDA for the third quarter and year-to-date 2017. We have provided our GAAP to non-GAAP reconciliations, which illustrate noncash share-based compensation and certain discrete items impacting the 3 and 9 months ended September 30, 2017, and 2016 respectively. We achieved positive adjusted EBITDA for the first time with Aralez in the third quarter of 2017. Our adjusted EBITDA for third quarter 2017 was $0.4 million, an increase of $12.7 million compared to negative $12.3 million for the third quarter of 2016.

Adjusted EBITDA for year-to-date September 2017 was negative $6.6 million, and improvement of $29.1 million compared to negative $35.7 million for the nine months ended September 2016.

Now moving on to Slide 18, I'd like to touch on quarter-over-quarter adjusted EBITDA improvements. Since the fourth quarter of 2016, we have demonstrated our commitment to improving our profitability on an adjusted EBITDA basis. As you may recall, in April of 2017, we announced cost savings initiatives, including a 32% reduction in our sales force, a reduction in Yosprala marketing spend, and other departmental cuts. At the same time, we announced a $7 million marketing investment in the relaunch of Zontivity in June 2017.

This two-pronged approach of cost savings initiatives and targeted investment in growing our revenues set the stage for our first quarter of positive adjusted EBITDA in the third quarter of 2017. We expect this adjusted EBITDA trend to continue in the fourth quarter and on a full-year basis in 2018. With the new cost savings initiatives, which I will cover in a moment, we are aiming to capitalize on the momentum established in the third quarter of 2017 on our path to sustained and increased profitability.

Please turn to Slide 19, where we will discuss our SG&A improvements in 2017 and 2018. As mentioned, we began streamlining our cost in the second quarter of 2017. This led to SG&A improvement in the third quarter of 2017 and a better outlook for the remainder of the year. While maintaining the stability of our sales force and with continued investment in Zontivity, we're now instituting further reductions aimed at reducing our estimated costs in 2018 by approximately $32 million or 28%, compared to the current full-year 2017 estimate, which includes reductions announced in April 2017, to approximately $79 million to $83 million, as compared to approximately $112 million to $114 million in SG&A costs in our 2017 latest estimate.

Our non-GAAP or cash-based SG&A expenses are expected to be approximately $66 million to $70 million in our preliminary 2018 outlook. Please note that our estimates for the fourth quarter of 2017 and our preliminary 2018 outlook exclude any restructuring and transaction-related cost. The key drivers to achieving this SG&A improvement are additional reductions in marketing spend and lower departmental costs, including professional consulting fees. We believe that these improvements provide an important inflection point to further accelerate the profitability for Aralez on an adjusted EBITDA basis.

Now, from a balance sheet perspective, we ended the quarter with 66.8 million shares issued outstanding and cash and cash equivalents of $40.7 million. With our expected revenue growth and planned cost reductions, we believe we have sufficient cash to fund our operations through 2018 and beyond. As we look forward, we continue to focus on driving revenue growth while being good stewards of our cash by prudently managing our expenses. We continue to explore ways to both reduce our debt and improve our overall cost of capital. In an effort to further increase our financial flexibility, we'll also be filing a shelf registration statement later today.

Now moving on to Slide 20, let's review our updated financial guidance for 2017 and our preliminary outlook for 2018. These estimates reflect our current belief about, among other things, prescription trends, competition, pricing levels, inventory levels, and anticipated future events, and are subject to other material factors and risks (inaudible) particularly described in our earnings release and public filings.

We have increased our net revenue guidance range for 2017 from a range of $80 million to $100 million, to, now, a range of $95 million to $105 million. The midpoint of the guidance range represents growth of 85% over 2016. As discussed, our 2017 net revenues for the Toprol-XL franchise are recorded net of related cost of product revenues and transition fees. For better comparability, the updated 2017 guidance for total net revenues of all products would have been approximately $125 million to $135 million on a pro forma basis, using the 2018 GAAP revenue presentation.

Beginning in 2018, the company will record net product revenues and cost of product revenues separately, consistent with its other products. We have narrowed our adjusted EBITDA guidance range from negative $5 million to $5 million, to now be in the range of negative $5 million to break even. The midpoint of the guidance range represents an improvement in adjusted EBITDA of approximately $48 million over 2016.

With expected continued growth in revenues and planned expense reductions, our preliminary outlook for 2018 is a range of $140 million to $160 million in net revenues, and $35 million to $55 million in adjusted EBITDA. Our earnings release contains further information regarding the assumptions underlying our 2017 financial guidance, and preliminary 2018 outlook on adjusted EBITDA, as well as a reconciliation.

We are very excited about our prospects for the rest of this year and will keep you posted with our progress on our next call.

With that, I will turn the call back over to Adrian for some final comments.

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [6]

--------------------------------------------------------------------------------

Thank you, Scott. I would like to briefly turn to Slide #21 to return to the illustration of our strong financial outlook for 2018 that we believe demonstrates that our business is on course to deliver meaningful growth in net revenues and adjusted EBITDA going forward.

As Scott mentioned, based on our preliminary 2018 outlook, we expect to pivot into a profitable, on an adjusted basis, and growth company in 2018. With that, I would like to finish with our final slide, Slide #22, which summarizes our planned pathway to Aralez becoming a profitable and growth company.

To recap, we have solid revenue performance in both the United States and Canada year-to-date that is expected to continue through the end of this year and beyond. In addition, we plan to implement cost improvements with the intention of embracing a more efficient performance-orientated operating model that we believe will position the company to deliver profitability and extend our cash runway through 2018 and beyond.

These improvements include broad efforts to streamline SG&A expenses, along with enhanced revenues, which are expected to produce significant adjusted EBITDA in 2018 and beyond, that in turn will better position the company for the refinancing of its debt.

In conclusion, we are pleased with both the third quarter and year-to-date 2017 financial results. We believe that fiscal improvements being implemented will provide a pathway to improve our capital structure, as well as result in a strong financial outlook in 2018 and beyond. We thank you for your continued interest, and indeed, support.

I would now like to open up the call for your valued questions. Operator, can you please give the instructions?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from the line of Ram Selvaraju from H.C. Wainwright.

--------------------------------------------------------------------------------

Mitchell Kapoor, [2]

--------------------------------------------------------------------------------

Hi there, this is Mitchell on for Ram. Thank you for taking our questions. My first question is, what is the current average length of script being filled for Zontivity?

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [3]

--------------------------------------------------------------------------------

We're seeing a nice blend of both 90- and 30-day prescriptions coming from Zontivity right now. I believe the average prescription is about in that 40-day period right now, so the average script per pill is around 40 right now, and increasing.

--------------------------------------------------------------------------------

Mitchell Kapoor, [4]

--------------------------------------------------------------------------------

Okay, great. And how are physicians viewing the use of Zontivity versus Brilinta, Effient, and generic clopidogrel?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [5]

--------------------------------------------------------------------------------

Well, obviously, I think, as we pointed out I think, when one was looking at the positioning of Zontivity in the marketplace, we obviously referenced that within our overall label that we had a differentiated label as it relates to the peripheral artery disease market. So, obviously, I think one of the reasons why we are getting very good momentum in our target physician population is that this positioning appears to be resonating well with both physicians and in the patients, and is a differentiation opposite Brilinta and Effient. So we think we've positioned the product extremely well, and I think the performance that we've seen where the prescriptions have increased significantly since we relaunched the product in June of this year, reflect that particular positioning.

So we think we're positioning very nicely for ongoing growth, which by the way is why we're continuing to ensure that we have stability in the sales force and continue to invest in the Zontivity brand, which clearly is a strong growth driver.

--------------------------------------------------------------------------------

Mitchell Kapoor, [6]

--------------------------------------------------------------------------------

Okay, great. Thank you for that. And when might the debt be refinanced, and on what terms?

--------------------------------------------------------------------------------

Scott J. Charles, Aralez Pharmaceuticals Inc. - CFO [7]

--------------------------------------------------------------------------------

We continue to explore various pathways to both lower our debt balance and obviously reduce the rate as well. From our perspective, we want to do so at the right time and on the best terms for Aralez and its shareholders. With our improved financial performance and our positive outlook for 2018, showing significant adjusted EBITDA, we're now much better positioned to do so.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

Our next question is from the line of David Martin with Bloom Burton.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [9]

--------------------------------------------------------------------------------

On one of the slides, you showed a rundown of where the prescriptions were being generated -- 65% for cardiologists, 24% PCPs, 4% vascular surgeons. Is that where you want it to be long term, or are there groups of physicians that you expect over the long term will make up a greater proportion of the prescriptions? And if it's PCPs, how do you expect to address it with a relatively small sales force?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [10]

--------------------------------------------------------------------------------

Yeah, I'll ask Mark to comment on that in a moment. Clearly, I think, as part of our positioning of the product, it was very important, I think, in initial phases of the launch, which clearly we're still in at this particular point in time, that we had built up a strong advocacy base amongst the cardiologists and community. And clearly, we've done that, and that remains important as we continue to build the prescription platform. We recognize, obviously, that we've started to see, obviously, increase in the primary care physician population as well.

Now, clearly, I think, with a very targeted effort, we think the prescription evolution has been going extremely, extremely well, and we recognize as part of a growth platform that is Zontivity, the decision making in relation to broaden the reach with primary care physician population in the future will be something that we will need to address.

One interesting point is that, clearly, the evolution of Zontivity has been noticed by a number of different parties, so the strategic flexibility that we have, either to look to increase our sales force at some stage in the future or indeed to adopt a co-promotion partner, are classic ways in which one can broaden the base of target physicians to include the primary care physician population.

So that's the way we're addressing things at this point in time. Very targeted, very specific, frequency of prescribing, continuing to build a cardiologist community, and gradually look to increase the primary care physician population. Mark, would you like to add anything?

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [11]

--------------------------------------------------------------------------------

That was a great summary. If you recall, we hired a cardiovascular sales force, and I think our sales force is doing an excellent job in educating the cardiologists on Zontivity and also educating on peripheral arterial disease. So with that being said, the 65%, we're very pleased with that number. And keep in mind also, we also, because we're a smaller sales force, we're very focused on the highest decile physicians, and those, by and large, are cardiologists in this field.

So we continue to be pleased with our breakdown of the 65% card, 4% vascular surgeon, and we'd be very comfortable with this for the foreseeable future. In saying that, also, cardiologists typically, when they start a product, they will influence the primary care physicians, because eventually that patient will make its way into primary care. And having that patient started on Zontivity early at the vascular surgeon or the cardiologist will naturally pull through into the primary care. So we'll continue to have a focus on the high-decile primary care, and we'll have targeted programs towards them, but our focus will stay in cardiology and vascular surgery for the foreseeable future.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [12]

--------------------------------------------------------------------------------

Okay, great, thanks. Another question related to Zontivity. Are you seeing any activity from Janssen as far as it talking about the PAD indication?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [13]

--------------------------------------------------------------------------------

Not at this stage. Certainly, we're well aware of, obviously, all the activities in this area, and we've not seen any activity in that area at this particular point in time. And clearly, I think that's one of the related reasons as to why we're seeing some very good evolution with the product. Zontivity is differentiated (inaudible) only products at this point in time that has the label that includes peripheral artery disease, and we have maximizing leverage in that platform position to build our position in market share in this market.

And that in some ways is why we, obviously, covered market share evolution that we've seen with Zontivity in our target physician population. We believe that the positioning that we have and the differentiation opposite Brilinta and Effient is a key driver to the market share we've already achieved in a very short period of time. So we've not seen any significant efforts from that at this point in time, and that is great because we can continue to build our market share differentiated position within the market.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [14]

--------------------------------------------------------------------------------

What is driving the growth of Toprol scripts? And also, you have the reduction in the VA pricing that kind of trickled out into the market. I'm wondering, was that fully in Q3 or do you expect an average price drop between Q3 and Q4 because it wasn't fully worked in?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [15]

--------------------------------------------------------------------------------

I'll ask Mark to address that second point. Obviously, I think it's a great question as it relates to Toprol-XL prescription evolution. For a product that is over 20 years old, it is amazing the loyalty and support that this product and the quality of the product has within the cardiologist and primary care physician population. So I think the prescription growth that we're still experiencing with the product, I think in essence points to the strong loyalty base that abides within the cardiologist and primary care physician population. I think there is no doubt also that since we took over the franchise, we spent a lot of time getting around, around the asset, getting around, around the customer, the distribution points, et cetera, and we've done a lot of very productive work, some of which we reference within the call, to look for opportunities of growing the product.

There is no doubt that every time we go in to see a cardiologist and a primary care physician, and where they talk to us about not just Zontivity and Yosprala, and they recognize that we also have the Toprol-XL franchise, there is a halo that comes with the overall detail that's in place. It's a very well respected product, and one that in this marketplace I think continues to do extremely well.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [16]

--------------------------------------------------------------------------------

Are the (inaudible) actually promoting Toprol, then, along with a few other drugs?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [17]

--------------------------------------------------------------------------------

No, there's no promotional effort that is taking place, but clearly, with the building kind of reputation that Aralez has within the cardiologist community, clearly, I think they have become aware that we now got the Toprol-XL franchise around, and it crops up in quite a number of calls. But we are not detailing the asset at this point in time, and clearly, I think a lot of our activities commercially have been looking to see whether or not there are leverageable opportunities with (inaudible) partners to build a brand. And that, by the way, is reflected on our improved positive outlook for 2018 that we articulated on the call.

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [18]

--------------------------------------------------------------------------------

Regarding the VA pricing, that will all have been washed through in these numbers. So, typically, those prices take place immediately. That would have been the second quarter and that would have been fully reflected in the third quarter results.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

Our next question is from the line of Keay Nakae with Chardan Capital Markets.

--------------------------------------------------------------------------------

Keay Thomas Nakae, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics [20]

--------------------------------------------------------------------------------

With respect to the operating expense, did see a nice reduction, about $6.4 million sequentially. How much of that G&A as opposed to marketing and sales?

--------------------------------------------------------------------------------

Scott J. Charles, Aralez Pharmaceuticals Inc. - CFO [21]

--------------------------------------------------------------------------------

Yeah, good question. So we obviously haven't publicly put out the breakdown between G&A and sales and marketing, but what I would say is that it was a decent portion of the breakdown between what's sales and marketing and G&A. The reduction I assume you're referring to is from Q2 to Q3, and that's following the announcement, obviously, of our cost savings initiatives in the second quarter, and that's what led to the improvement in Q2 to Q3.

And again, we haven't split out the component versus -- G&A versus sales and marketing, but there was certainly a piece that was G&A and then there was a piece that was sales and marketing.

--------------------------------------------------------------------------------

Keay Thomas Nakae, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics [22]

--------------------------------------------------------------------------------

Similarly, as we look at your projections for continued expense reduction in 2018, can you give us a sense of what that split's going to look like between G&A and sales and marketing?

--------------------------------------------------------------------------------

Scott J. Charles, Aralez Pharmaceuticals Inc. - CFO [23]

--------------------------------------------------------------------------------

Yeah, again, we haven't broken down the split. What I would say is that we made a concerted effort in our 2018 initiatives to both lower G&A as well as sales and marketing. And in particular, there was a real focus on the G&A front across all of the departmental pieces as much as we possibly could, to put ourselves in a position where the -- most efficient structure going forward.

--------------------------------------------------------------------------------

Keay Thomas Nakae, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics [24]

--------------------------------------------------------------------------------

As far as the 2018 revenue guidance, is it fair to assume that the upside between $140 million to $160 million, most of that would be dependent on Zontivity?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [25]

--------------------------------------------------------------------------------

Well, I think there are two very strong components within that revenue guidance. Now, clearly, I think from kind of a (inaudible) business perspective, obviously the Canadian business continues to do well, and we get the kind of ongoing kind of (inaudible) that are sustainable over the course of time. But the key growth aspects that relate to our confidence and our enhanced outlook for 2018 do indeed relate to strong growth from Zontivity. We're very pleased with the way things are going this year. We think we've got the positioning right. And that is reflected in strong growth during the course of 2018. That, in some ways, by the way, is a reason why we want to maintain the stability of what is a high quality sales force to really make sure that we can continue that momentum moving forward.

But also, very clearly, I think, reflected in those numbers is an improved and very positive outlook for the Toprol-XL franchise, and that's why it's really important I think that we wanted to reference the obviously change in the way in which we were recording the revenues as an exit point this year and moving into next year. I'm going to ask Scott to comment on that in a little bit more detail, because that's obviously a very important aspect of the revenue guidance for next year as well.

--------------------------------------------------------------------------------

Scott J. Charles, Aralez Pharmaceuticals Inc. - CFO [26]

--------------------------------------------------------------------------------

It's an excellent question. From our perspective, when you look at 2017 to 2018, the growth is driven by a number of factors, particularly Zontivity and Toprol-XL. With regard to Toprol-XL, there's two components. One is the accounting revenue presentation. So, if you remember, for 2017, under the transition services agreement with AstraZeneca, we're recording our revenues net of related cost of product revenues and transition fees. As a result, as we showed you earlier, our net revenues that we're recording are lower.

In 2018, once the transition service period has ended, we're going to record those revenues on a gross basis, so as a result, our revenues will be higher for that reason, and we walk you through the map for that. So, from our perspective, that's a driver of it, and on an equivalent basis, if you look at 2017 annualized, 2018 would be $80 million. And then if you look at, for Toprol, we also said there's a number of improvements that we're looking to do in addition to the other products, to drive improvements on the top line for Toprol as well, and that's also helping lead to our improved guidance for next year, in addition to Zontivity and our other growth drivers.

--------------------------------------------------------------------------------

Keay Thomas Nakae, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Therapeutics, Devices and Diagnostics [27]

--------------------------------------------------------------------------------

And then just a question about M&A. Obviously, you've laid out a plan for 2018 which continues to show improved operating efficiency. Do we think about you not wanting to complicate that by adding something to the bag in 2018, or is that still something that's near the top of the list to do?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [28]

--------------------------------------------------------------------------------

Again, that's a very good question. I hope that you agree, and clearly, we remain very confident in relation to how the business is moving forward. Fundamentally, what we wanted to try and do, and I think we've been successful in that, is to make sure that the kind of cost aspects of the business and the kind of profitability and growth aspects of the business lead to a very strong platform which we can leverage in a lot of different ways. And clearly, that kind of focus on the basics, the execution basics as being a very key point, as we've been developing our plans during the course of this year.

Now, clearly, as we are doing that, and clearly, we have a very attractive platform moving into 2018, there's a whole market out there, the specialty pharma sector, of which has experienced a lot of different dynamics, so the M&A kind of brought a landscape, remains a landscape where there are lots of different opportunities.

So there are two components that I would like to comment on. One is to your question as to whether or not we will look for opportunities for products that could perhaps fit into the bag. Of course we're going to continue to look for those types of opportunities. And I think I would couch that within the phrase of there's an opportunism that comes with strategic flexibility, and I think that's how we're approaching products and indeed company types of transactions, moving into next year.

There are many, many different ways of structuring transactions, structuring possible M&A activities in what is a very entrepreneurial, opportunistic, and interesting landscape at this particular point in time. And the fact that we are moving into 2018 from a strong point of view in terms of demonstrating significant adjusted EBITDA evolution and revenue growth puts us in a stronger position, not only to look to kind of refinancing our debt, but also to put us in a position where we're an even more attractive proposition for doing M&A transactions.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Our next question is from the line of David Bautz with Zacks Investment.

--------------------------------------------------------------------------------

David Bautz, Zacks Investment Research, Inc. - Senior Biotechnology Analyst [30]

--------------------------------------------------------------------------------

You mentioned in one of the slides that potential peak sales for Zontivity, about $100 million. Do you have a time frame, or what should we be thinking about, how long would it take to hit maybe a peak sales revenue? And then, Scott, I've got a quick follow-up on refinancing the debt. Are there specific metrics that you think you need to hit as a company, or are we just thinking about overall financial health in order to do that?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [31]

--------------------------------------------------------------------------------

On the first point, I'll ask Mark to comment. I'll only say that from the point of view sequence-wise that my commentary to Mark Glickman is that that peak sales potential, I'd like to get there as quickly as possible. So, clearly, I think we've never given any specific guidance as to when we will get to that peak sales potential. I mean, obviously, we re-launched this product fully in June of this year. We are now in November, and already, within our target physician population, we have a 1.6% to 2% market share from a neutral brand market share point of view.

So that is a very impressive evolution in a relatively short period of time. And it's the momentum with those metrics of continued performance that are obviously going to get us to a situation where perhaps we can get to that peak sales number a little bit faster than we would otherwise anticipate. So as fast as possible, would be my answer. But the person who's going to execute against that desire is Mark Glickman.

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [32]

--------------------------------------------------------------------------------

So I want to stress, that's an illustration of what peak sales could be. We're very pleased with how we're tracking right now, and that's just saying that this market share continues to evolve. However, whenever we forecast a product, we assume peak sales to be between 5 and 7 years, and 6 is not only the middle point, it's probably the most likely. And this would follow that type of a curve anytime we forecast a brand. So you could expect peak sales from the time we've launched it to be in that 5- to 6-year range.

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [33]

--------------------------------------------------------------------------------

And I would also point out, the reason that's a very important question that you asked, and we thank you for that, is that one of the beautiful things, obviously, about Zontivity is that we have a long, long life with the asset. So not only can we get peak sales to a level very quickly, but the fact that this is going to create organic growth from a long-term business point of view gets to the very essence of profitability and growth moving forward. So with that, Scott, maybe you want to address the second part of the question.

--------------------------------------------------------------------------------

Scott J. Charles, Aralez Pharmaceuticals Inc. - CFO [34]

--------------------------------------------------------------------------------

Sure. With regard to your question on specific metrics for debt refinancing, the key to refinancing of course is to have sufficient EBITDA to be able to be positioned to refinance the debt. Our new plan and outlook for 2018, as you saw, puts us on a path to have much more significant EBITDA, creating a better pathway to be able to refinance the debt sooner.

So from our perspective, it's really making sure we have sufficient EBITDA to be able to go to the market to be able to refinance the debt, and clearly, with our new plan, we've better positioned the company to be able to do so.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is a follow-up from David Martin with Bloom Burton.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [36]

--------------------------------------------------------------------------------

Just to clarify, the $100 million, is that what you're estimating the peak sales to be, or is that -- you're just putting that up as an example of if you get to 6% to 8% market share in one of your targets?

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [37]

--------------------------------------------------------------------------------

So that is just an illustration of getting to that market share. I would say that that is not our estimate for peak sales. It's, I think, directionally, but that is not our estimate at this point.

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [38]

--------------------------------------------------------------------------------

I mean, clearly, I think, David, I know you know this market very well, and clearly from a quantitative perspective, we know that in your models you've done quite a lot of very good quality work. I would point out that Brilinta is a $600 million to $700 million asset, Effient is a $350 million to $400 million asset. And so, there's a lot of market to go for.

And one of the things that I've learned in running a number of companies, and a large number of (inaudible) with Mark Glickman running commercial, is that you can develop a really nice business model by a very targeted approach, be very competitive within your target physician population, grow that base, and then you can expand opportunistically into other areas. And that's what's going to drive the peak shares opportunity in getting there earlier and then broadening from there. So I would hope that that $100 million number will be conservative, and will certainly be driving Mr. Glickman on the sales force activities with that in mind.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [39]

--------------------------------------------------------------------------------

As you get the halo around the PAD indication, are you sensing there's any increased interest in using Zontivity in triple therapy in coronary artery disease?

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [40]

--------------------------------------------------------------------------------

That's a great question. I kind of heard two questions in there. The first aspect is, we're driving interest in PAD and we're working with advocacy groups, and there is definitely more attention being placed on PAD. I wouldn't say it's a halo into the secondary CV patient. Keep in mind, we're focusing on that persistent risk patient, so I wouldn't say it's a halo. I would say Zontivity's a really good fit in that persistent risk population -- the former MI that still has diabetes or is still smoking -- I just think that message is really resonating.

And keep in mind, not all those patients would be triple therapy. It's with aspirin and/or clopidogrel. So there is definitely uptake in that market. I wouldn't call it a halo. I would say it's a standalone, strong piece of the Zontivity message.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [41]

--------------------------------------------------------------------------------

And so, that is part of your marketing message, then?

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [42]

--------------------------------------------------------------------------------

Oh, yes.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [43]

--------------------------------------------------------------------------------

Okay. Also, I think in the second quarter call, you mentioned that you were getting better gross-to-net than you had expected. I'm wondering if that's continuing, and then going forward do you expect your net to improve even more?

--------------------------------------------------------------------------------

Mark A. Glickman, Aralez Pharmaceuticals Inc. - Chief Commercial Officer [44]

--------------------------------------------------------------------------------

Right now the gross-to-net continues to be very strong. I don't anticipate negative changes moving forward, but I think it'll stay strong and stable over the foreseeable future.

--------------------------------------------------------------------------------

David C. Martin, Bloom Burton & Co., Research Division - MD & Head of Equity Research [45]

--------------------------------------------------------------------------------

Adrian, you mentioned you're monitoring Yosprala and the return on investment. I'm wondering what that means. Is it costing you anything to carry it in the second position right now? Would you pull the product because it is costing more than it's returning?

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [46]

--------------------------------------------------------------------------------

Well, certainly, I think it's a very good question, and I think I've made reference on a number of calls in this regard. Now, clearly, as we evolved with the product during the course of this year, we implemented the $10 pricing level for the product and we've seen some positive reaction to that from quarter 2 to quarter 3.

We do have minimal non-direct selling expenses associated with Yosprala. In essence, it is just a second product detail. We're in with the physicians. Obviously, it's a very nice fit with Zontivity. But the amount of spend with (inaudible) is minimal. The reference I made on the call is that, clearly, I think whilst the level of investments and spends we have with Yosprala are minimal, I think we need to keep, obviously, close to the return in investment that we're having with the product.

And clearly, I think we want to see how things progress over the next couple of months and then we'll look at that within the broader context of where we should be placing dollars moving forward so we will make the right decisions in relation to where we place investment dollars moving into next year, and a very close eye on whether or not we are getting the right levels of return on Yosprala. But more to follow on that.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

Thank you. I will turn the floor back to Adrian Adams for closing remarks.

--------------------------------------------------------------------------------

Adrian Adams, Aralez Pharmaceuticals Inc. - CEO & Director [48]

--------------------------------------------------------------------------------

Well, thank you all for joining us this morning. We're excited about the quarter and indeed, the future outlooks, and we'll look forward to updating you on this on an ongoing basis on our next calls, and in particular with a focus on progress and corporate milestones. So thanks so much, and you have a good rest of the day. Thank you so much.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.