Alkermes Plc (ALKS) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alkermes conference call to discuss the Company's third quarter financial results for fiscal 2008. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow.

Please be advised this call is being taped at Alkermes' request. Now I would like introduce your host for today's conference call, Ms. Rebecca Peterson, Vice President of Corporate Communications at Alkermes. Please go ahead.

Thank you. Good afternoon and welcome to the Alkermes conference call to discuss our financial results for the third quarter of fiscal year 2008 which ended on December 31, 2007. With me this afternoon are our CEO, David Broecker; our CFO, Jim Frates; and our Chairman, Richard Pops.

Before we begin, let me remind you that during the call today we will make forward-looking statements relating to, among other things, our expectations concerning the commercialization of RISPERDAL CONSTA and VIVITROL, our future financial and business performance, and our expectations concerning the therapeutic value and continued development of our product candidates.

Listeners are cautioned that these statements are neither promises nor guarantees, but are subject to risks and uncertainties that could cause our actual results to differ materially from the results contemplated by these forward-looking statements.

You can find a list and a detailed description of these and other risk factors in our Annual Report on Form 10-K filed on June 14, 2007 and other periodic reports filed with the SEC under the Securities and Exchange Act of 1934, as amended. We undertake no obligation to update or revise the information provided in this call.

This afternoon Jim will discuss our third quarter financial results, and David Broecker will provide an update on our business. We will then open up the call for Q&A. Now I would like to turn the call to Jim to review our financial results.

Thanks, Rebecca. Good afternoon, everyone. I thought we might do things a little differently on this call today and that we will keep our prepared remarks brief and will focus our comments on the most important elements of the release, rather than going through results line by line.

Our press release is quite comprehensive and I trust that you will read it and that results are clear, and if you have any questions, of course, we will be here to answer them and we will get to that shortly. In summary, you can see we are continuing to build a strong business and we ended calendar year 2007 in the strongest position we ever been in, financially, for sure, but also in terms of the progress and outlook for our late stage programs as well as the excitement around our earlier stage pipeline programs that have gained momentum in the last several months.

Let's focus on the most important elements of the earnings release. I will begin with RISPERDAL CONSTA. We, and our partner Johnson &Johnson, achieved a major milestone with RISPERDAL CONSTA during the quarter. Annual end market sales by Johnson &Johnson exceeded $1.1 billion in calendar year 2007. That is a 30% plus increase annually.

As you know, we are the exclusive manufacturer of RISPERDAL CONSTA for J&J and we look forward to the continued success of this product. Manufacturing revenues for the product were $12.9 million in our third fiscal quarter. That is exactly within the $10 million to $13 million range that we provided in our last earnings call and relates to the planned lower shipments to Johnson &Johnson as they managed their inventory levels.

We do not control J&J's inventory. However, based on recent purchase forecasts provided to us we expect shipments to increase. For our fourth fiscal quarter we expect manufacturing revenues for RISPERDAL CONSTA to be back up between the $26 million to $30 million range. I will remind you that our fiscal year 2008 expectations ending in March 31, 2008, for manufacturing revenue for RISPERDAL CONSTA remain in the range of $95 million to $100 million, which we provided in May of 2007.

With respect to VIVITROL, gross sales by Cephalon during the quarter were $5 million. This compares to $2.3 million for the same period last year. We were pleased to see continued sequential sales growth which we achieved during the quarter while we realigned our sales forces.

We are continuing to strategically invest in VIVITROL while at the same time significantly reducing our expenses. We are making demonstrable progress toward our goal of bringing the product to break even by the end of calendar year 2008. We reduced our loss on VIVITROL each quarter during fiscal 2008 from approximately $25 million in the first quarter to $18 million in the second quarter, and now down to approximately $7 million for the third quarter. And all that while increasing sales quarter-to-quarter.

Addiction is a serious disease and we continue to believe that over the long term VIVITROL will play an important role in this marketplace.

Another major highlight for the quarter included the receipt of significant income and cash from the sale of our stake in Reliant Pharmaceuticals to GlaxoSmithKline. The sale generated income to Alkermes of $171.3 million which is net of $3.3 million in taxes. We received $166.9 million when the transaction closed this past December, and we expect to receive an additional, up to an additional $7.7 million when the 15-month escrow period expires.

We are using proceeds from our Reliant sale to buy back our stock which we believe represents an excellent invest for our shareholders. To date we have repurchased approximately 2.3 million shares of our common stock for $33.3 million. Our buying activity stopped when we entered a blackout period between the close of our quarter and today's earning announcement.

Now that we have announced earnings we will be back in the market. Today we announced an accelerated buyback program to repurchase $60 million of our common stock through the end of May 2008. With this accelerated program in place, we've committed over $93 million to repurchasing our stock since our board authorized the repurchase plan last November.

Turning to our financial profile, our business is stronger than ever. As of December 31, 2007, our balance sheet included over $516 million in cash and investments, and we expect to be cash flow positive on an operating basis for the full fiscal year. Our net income for the third quarter was $168.9 million, or $1.66 per basic and $1.63 per diluted share, including $171.3 million net of taxes for the sale of our stake in Reliant and share-based compensation expense of $5.2 million. On a pro forma basis, net income for the third quarter was $2.8 million, or $0.03 per basic and diluted share.

Finally, with one quarter left in our fiscal year I want to briefly comment on our financial expectations for the full fiscal 2008. While we expect GAAP net income to significantly exceed our full year financial expectations due to the Reliant transaction, if we exclude the net impact of Reliant we expect to remain within our fiscal 2008 expectations. Consistent with what we've stated before, we continue to anticipate GAAP net income in the range of $10 million to $15 million for fiscal 2008, or basic EPS of approximately $0.10 to $0.15 per share based on a weighted average of 101 million shares outstanding.

Let me close by briefly providing my perspective on the financial condition and events at Alkermes. Our stock buyback program, which I mentioned earlier, is an investment in Alkermes and a reflection of our confidence in the earnings power of our business model. We are focused on our goal of developing a and commercializing multiple innovative products to build a major Company and we are very excited about the future.

In order to give you a financial picture of the type of Company we are striving to be, we recently provided a more specific long-term goal namely to deliver earnings per share of $2.00 to $3.00 in 2013. Underlining this assumption is continued growth of RISPERDAL CONSTA, uptake in VIVITROL and a successful commercialization of both Exenatide once weekly and AIR Insulin.

To conclude, we made solid progress in 2007 which has set the stage for continued achievements in calendar 2008. The financial foundation of Alkermes is very strong providing us with the ability to invest in our pipeline while focusing on long-term profitability and growth. We have an important year ahead of us and I look forward to updating on our progress. With that I will turn the call over to David.

Thanks, Jim, and good afternoon, everyone. As Jim mentioned, we end calendar year 2007 in unprecedented financial position. More importantly, however, we enter calendar year 2008 with a continued focus on building a growing multiproduct Company with the capabilities to develop and commercialize products that really make a difference in patients' lives.

I would like to update you on each of our major products and programs and provide a brief overview of our development pipeline. Let's start with RISPERDAL CONSTA. We have shipped more than 20 million vials since launch of this product. This is a reflection not only of our significant manufacturing expertise, but of years of patient and physician experience with this important product.

Last calendar year RISPERDAL CONSTA officially became a blockbuster product achieving more than $1 billion in worldwide sales. Looking to the future, we continue to believe that RISPERDAL CONSTA sales will grow. Importantly, J&J continues to invest in this brand. This week at a scientific conference in Switzerland, J&J presented positive data from a one-year Phase 3 study of RISPERDAL CONSTA in the maintenance treatment of frequently relapsing bipolar disorder.

The study met its primary end point and showed the time to relapse was significantly longer in patients receiving RISPERDAL CONSTA plus standard treatment compared to the placebo group. J&J plans to use these results to file an NDA for this indication during the first half of calendar year 2008. In addition to expanding the label in frequently relapsing bipolar disorder, last November J&J submitted an application to the FDA to approve RISPERDAL CONSTA as a deltoid injection for schizophrenia.

Currently RISPERDAL CONSTA is administered as a gluteal injection. Enabling injection in the upper arm may be easier for some patients and practitioners. RISPERDAL CONSTA is the first and only long acting atypical antipsychotic commercially available for patients. While other companies are developing additional long acting products, their future success is unknown compared to RISPERDAL CONSTA. With the wealth of real world data and years of patient and physician experience, we believe RISPERDAL CONSTA will remain the gold standard for long acting therapy.

Turning to VIVITROL, we are continuing to make progress in expanding the utilization of this important product for alcoholism. As you know, we recently realigned our sales team and are focusing on areas where we feel there is significant opportunity for sales adoption and growth. We are pleased to have increased gross sales to $5 million during our third fiscal quarter. Our job now is to show you the results in terms of continued sales growth.

In addition, we recently signed an agreement with Janssen Pharmaceuticals to commercialize the product in Russia. And we are planning to initiate a Phase 3 study of VIVITROL for opiate dependence for the first half of calendar year 2008.

Let me move to Exenatide once weekly. As you have heard on Amylin's recent earnings call, the companies believe that Phase 3 data for Exenatide once weekly is the best ever seen for a diabetes medication. The efficacy and safety data observed in the clinical program prompted Amylin to expand this program to make even more clear the potential clinical superiority of Exenatide once weekly.

As Amylin described, the plan is to conduct three marketing studies this year designed to show superiority. The goal of these studies is to position Exenatide once weekly as the best product for the treatment of type 2 diabetes. At Alkermes we were continuing to supply clinical trial material for these superiority studies and are transferring the manufacturing process to Amylin. We are pleased with the progress our teams are making and we continue to be on track for commercial readiness by the end of calendar year 2008.

I would like to move on to comment on a couple of our other pipeline programs. With respect to AIR Insulin, we and our partner, Eli Lily and Company, are working together on a variety of activities to complete the Phase 3 clinical program and to prepare for an NDA filing next year. We are optimistic about AIR Insulin because even with the advent of novel approaches that are reshaping the diabetes landscape, we and many others in the diabetes community think that most patients will eventually require insulin.

The exit of other inhaled insulin products from the marketplace underscores the need for system simplicity. Our AIR technology enables us to provide patients with a practical, convenient system that fits in the palm of their hand. Together with Lilly, we have in place a comprehensive clinical development program designed to assess safety, efficacy and, importantly, outcomes in diabetic patients compared to other treatment options. If the Phase 3 data are positive, we believe AIR Insulin can become a very important treatment option for these patients.

We are also excited about the opportunity for ALKS 27, a respiratory product that we hope to develop as a once daily treatment for COPD. ALKS 27 is an inhaled formulation of trospium chloride, an anticholinergic approved for overactive bladder that leverages our AIR technology. As we have mentioned previously, we are evaluating partner opportunities around this program and continue to optimize the product for the next stage of clinical development.

Also within our pipeline, we are developing ALKS 29 for the treatment of alcohol dependence. ALKS 29 is an oral combination opiate antagonist and [gaba] modulator. We are currently working on the development of proprietary formulations of this product that we will evaluate in the clinic this year.

We also recently announced our first lead development candidate, ALKS 33, to emerge from our library of novel opiate receptor compounds which we end license from Rensselaer Polytechnic Institute. ALKS 33 is also being developed for addiction and we plan to file an IND and begin a Phase 1 study of ALKS 33 this calendar year.

In conclusion, we have a busy year ahead of us and are focused on the following milestones during the calendar year. Number one, initiation of marketing trials for Exenatide once weekly. Number two, completion of the technology transfer to Amylin in order to bring online the commercial manufacturing facility for Exenatide once weekly.

Number three, initiation of a pivotal study for VIVITROL for the treatment of opiate dependence. Number four, initiation of clinical studies for ALKS 29, ALKS 27, and ALKS 33. Number five, completion of all the registration trials for AIR Insulin. And number six, addition of at least one new product candidate to our pipeline.

To conclude, we are pleased with the advancements we are making in our business and look forward to updating you on the progress in the coming months. With that, I'll turn the call back to Rebecca.

Thanks, David. Operator, we'll now open it up for questions.

Certainly. (OPERATOR INSTRUCTIONS) Our first question comes comes from Cory Kasimov from JPMorgan.

Great. Good afternoon, everyone.

Hey, Cory.

I guess starting with CONSTA, I would be interested in just getting your reaction to yesterday's FDA advisory committee meeting for Zyprexa Depo?

Cory, this is David. Great question. I don't know if you sat through and watched the whole thing. I was only able to kind of catch the tail end.

Unfortunately I did.

(laughter) We thought it was fascinating. And I think the big take away for us is data matters. We didn't really know a lot about Zyprexa Depo going into the advisory panel and, obviously, there was some lively discussion about what it looks like.

I think the other thing is the recognition that not all long acting antipsychotics will be the same in this marketplace. So it's going to be very interesting, I think, to see what happens at the FDA, particularly around the label for this product going forward.

Okay. And then last question with CONSTA. Are you aware of Lilly's or J&J for that matter with regards to Palmitate with their strategy for ex-U.S. regulatory filings?

At this point what we have been told or what we know is that it hasn't been filed. Palmitate hasn't been filed in Europe. And we understand there were some additional requirements that the European regulatory agencies wanted to see. That's kind of all we know at this point.

Okay. And then one question, if I might, on Exenatide once weekly. There is still discussion, obviously, out there, as you are well aware, that the FDA may not require a bioequivalency study. Can you discuss the precedent there, as well as your experience with this matter, especially as it relates to CONSTA and VIVITROL?

Yes, we can comment on that. For the specifics of the interaction with the FDA around once weekly Exenatide I would continue to refer people back to Amylin since they are the ultimate NDA holder on this. And I know they are planning to provide updates as they have more information and insight into this as we go forward.

But as it relates to some of the other programs, as you mentioned, we have had experience doing this a couple times. With RISPERDAL CONSTA, we actually didn't have to go through an elaborate comparability plan because we supplied material for the clinical studies out of the commercial scale equipment. So there was no need to do any sort of bridging-type of work to show comparability there.

However, on VIVITROL for our Phase 3 program, what we did was we produced all of the clinical material at the one-kilogram scale. So when it came time to scale that up, we had to show comparability to that one-kilogram material. We are talking about dozens and dozens of batches of one-kilogram material.

We were able to negotiate with the FDA essentially a chemical comparability type of strategy where we showed what the in vitro release profiles of that one-kilogram material were compared to the large scale material and the FDA bought into that.

It was obviously data driven and we worked side by side with the FDA and we were able to get approval for that. So that's what we did for VIVITROL.

Okay. That's helpful. Finally, one just housekeeping question. I want to make sure I caught this right.

This is for Jim. With regards to the repurchase program, the $33.3 million, you said that stopped at the end of the fiscal third quarter? That's at the end of December? There's been nothing so far then this quarter?

That's correct.

Okay, great. Thanks a lot. Thanks for taking the question.

Thanks, Cory.

Thank you. Our next question comes from William Ho from Banc of America.

Hi, guys. A couple quick questions. First of all with respect to Johnson &Johnson and Palmitate, do you know much about the properties of that compound? We haven't been able to find much. After yesterday aren't very significantly concerned about LAI, but had additional questions about the future of Paliperidone Palmitate relative to CONSTA?

We haven't seen a lot of information either. I think there were some recent abstracts that came out. I'm looking at Rebecca here maybe for some help.

Very early Phase 2a data on Paliperidone Palmitate. But we really haven't seen anything beyond that despite the fact that the studies have been completed for some time now.

Okay. And then is there anything you can tell us about the manufacturing revenues with respect to CONSTA? They jump around a little bit. There is anything that drives J&J's decisions as to, is there seasonality or anything else that we can help smooth that out in our models?

Yes, William, it's Jim. We've always talked about the manufacturing revenues being lumpy. I think there are a couple of things. One, they are selling it in almost 80 countries around the world and it's various inventory levels, number one.

Number two, as you know, the price is very different outside the United States versus inside the United States. And so the -- depending how many batches we ship to ex-U.S. versus U.S. batches in a quarter that will also have some impact.

But it's lumpy quarter-to-quarter. But if you take a step back and look at it on a full year basis, actually you can see that increase that matches very closely actually with the sales increases that we are seeing. We have given guidance for 95 to 100 for the full fiscal year. As I mentioned, we are standing by that at this time.

On a worldwide revenue standpoint, it seems like sales are becoming pretty much stable or are fairly robust at 295. Do you see that constant over the foreseeable term? How do you see that moving in the future?

Well, I think at this stage we expect it to grow. I mentioned we have a purchase forecast from J&J that obviously extends out into next year. Interesting, I think, if you compare year-to-year, fourth quarter to fourth quarter we are up 30%.

And actually if you could compare to last year's fourth quarter, last year's December quarter, our fiscal third quarter, you see the same kind of small amounts of growth at the end of the year. I think with the work that J&J just presented on the bipolar disorder and the fact that they are moving aggressively to file in bipolar which, as you know, is a bigger part of the atypical antipsychotic market, and the fact that they are planning to file for the deltoid injection, I think we see both of those as very, very positive for the future of CONSTA.

Right. Thank you.

You're welcome.

Thank you. Our next question comes from Elliot Wilbur from Oppenheimer.

Thank you, just a quick follow-up on Jim's commentary. Jim, just based on your understanding, what is the time line for the filing of CONSTA bipolar indication?

Thanks for the question. Just to be clear, the deltoid application has been filed. It was filed in November of '07. And J&J plans to file in the first half of this year for the frequently relapsing bipolar disorder.

Okay, and just to follow-up on that, Rebecca, is the deltoid application related to the bipolar indication? Or --

For the schizophrenia market.

Okay. And then I want to ask a couple questions on VIVITROL as well. I guess with respect to the goal of reaching profitability on the partnership by year end, do you think we are kind of at a point, frankly, where you've ratcheted down expenses as much as they can go and we really have to look to the top line now to kind of enable you to sort of cross that threshold?

And then looking at the Cephalon side of the equation, clear that their net losses have decelerated significantly over the past couple of quarters. I'm just wondering if you can give us sort of an update there as to what their current level is, commitment is, and any sort of update in terms of the actual number of people you still have in the field promoting the product?

And Elliot, this is David, and I will comment maybe qualitatively and Jim might comment quantitatively on some of the numbers and things. We did what we said we were going to do in terms of realigning the sales organization as we came into the end of last year. All total now in the, what we call the VIVITROL business unit, we've got about 90 people and about 70, 75 of those are actually field based people.

We've got the rest of the people that are basically dedicated to the marketing and medical affairs support of the program. It's a truly integrated organization. From that standpoint it's made up of Cephalon and Alkermes people. Sometimes Alkermes people report to Cephalon and Cephalon people report to Alkermes.

From a commitment standpoint it's very much an integrated partnership. Both of us very committed. I think overall we are committing about 35% or 40% of the resources and they are committing about 55% or 60% of the resources.

I just came back from their POA meeting, plan of action meeting, that they had down in Florida in January. I can just tell you that the group is very energized, very focused on what is it going to take to show that kind of sales growth and trajectory that will get us to the end of the year and they have a variety of plans. I don't want to go into the details of those.

Suffice it to say, we have got the team. They are energized, they are focused. And very confident on their abilities to deliver this year.

Yes, and, Elliot, from a cost perspective, of course, we need to see the revenues continue to grow. I think we were very, very happy with the fact that we didn't lose a beat even as we realigned the sales force and targeted it and that's quite extraordinary, frankly.

And I think that both Cephalon and Alkermes are committed through this year and the key thing is that at a certain point cutting expenses any further once they are in that rational part and you have the right sales force in place and you have the right strategies, doesn't make a whole lot of sense. I will remind people that as of January 1 this year we are going forward and we're splitting the costs and essentially splitting 50/50 both the revenues and the expenses with Cephalon.

And you've seen their net loss come down mostly because most of the SG&A expenses run through Cephalon's P&L. What runs through our P&L are the further R&D and the manufacturing of the product. I think we are quite optimistic about VIVITROL going forward into 2008.

This wouldn't be the first product in a new market that had a slow start, but it ultimately came out to be very, very meaningful for their sponsors.

Okay, thanks. And I had just one quick follow-up asked the same question I asked last time. With respect to ALKS 29, at what point are we going to get a little bit better sense as to what exactly that the actives are in that program?

I think I alluded to it in my conference call script that we are really working now on defining the proprietary product nature on this. Once we get through some of that work we will be able to give you a lot more clarity on that. So probably second half of this year.

All right. Thanks for fielding the questions.

Okay.

You bet.

Thanks, Elliot.

Thank you. (OPERATOR INSTRUCTIONS) Our next question comes from Ian Sanderson from Cowen and Company.

Good afternoon. Thanks for taking the questions. First, actually Jim, you talked a little bit about the move towards cost sharing. What exactly is the P&L impact of the cost sharing on VIVITROL in the current quarter? Is it just that net collaborative profits line will turn negative?

No. I think net collaborative profit line will come down. But it's not going to turn negative. So recall Cephalon books all of the revenue of sales and they have a good portion of the expenses. They are essentially still losing less money than we are losing.

They are sending us the balance so we each lose the same amount of money at this point. And that will turn over into sending us money to each match the profit. We also have each quarter about $1.3 million of milestone recognition because, remember, they paid us $270 million up front to license VIVITROL.

We spent $120 million to first launch the product. Then for the second half of last year Cephalon was funding all of the losses essentially. Then moving forward, though, we still get to keep that $150 million of license revenue.

The SEC has us recognize that over the life of the product. So we do about $1.3 million a quarter. So the funds flow is still positive to Alkermes. And I think there is a table in our press release, essentially the Alkermes expense for the quarter was $3.8 million.

Okay.

So that was essentially our part -- our half of the net loss.

In the -- although you weren't into the 50/50 cost sharing in the December quarter, correct?

That's correct. That was funded by Cephalon, but that will be, going forward that is kind of the magnitude of where we are at in terms of a loss on VIVITROL.

Okay. Okay. Second question, on ALKS 27, what's the next development milestone that we should be looking for here?

I think we have a couple things going on. We continue to have active partner discussions. And so what we are trying to do is not lose any forward momentum on the rest of the clinical program so we continue to do some optimization of the product configuration. What we hope to do is sign a partnership and enter into a clinical study by the end of this year.

And at one point, I think, earlier this year the thought was that you would go into a Phase 2 program regardless of whether you had a partner or not. Is that still the thinking or now is it more optimize, get the partner, and then do the Phase 2?

There are a lot of moving parts and, I think, what our current assumption is is probably getting a partnership. But, obviously, we have a year to work on that and if at the end of the year something happens different than that, we can make that decision then.

Okay. Thank you.

Thank you. Our next question comes from Dave Windley from Jefferies and Company.

Hi. Thanks for taking the question. So just to clarify on that last one, David, the year that you speak of for ALKS 27 is calendar '08?

Yes.

Yes.

Okay. And then on the VIVITROL on Ian's question there, I guess I'm trying to understand that the VIVITROL P&L is losing single-digit millions of dollars at this point, is that right?

That's correct. In the fourth quarter of, December 2007 quarter, so the fourth calendar quarter, the net loss on VIVITROL was $6.92 million.

Okay. And so you split that starting in March and then you take $1.3 million of cost reimbursement or amortization of the milestone payment, and how does that end up as a positive number? What element am I missing to make that a positive number?

Because there are also funds that Cephalon pays to us, Dave, some quarters, so net collaborative profit. We have expenses that we always, and we always have shown in our expense lines. And when we get payments from Cephalon, we also have to show that somewhere. That runs through net collaborative profit.

Okay. Are those payments, though, not part of what makes that P&L come to $7 million?

No. The payments are just the cash flows. The P&L is what is spent. Remember, Cephalon has all the revenues coming in on their top line. We don't have any revenues coming in on the top line.

Right, okay.

And ultimately at the end of the day if there is a loss in the quarter, come March if there is the same loss in the quarter of $7 million, our P&L will -- our half of the losses are $3.8 million -- excuse me, $3.5 million, half of $7 million, obviously.

Okay.

If our expenses are a little bit more then Cephalon will have to send us money to make it balance out at $3.5 million of loss for each company.

Okay, all right, that makes sense to me. And then beyond that is correct would you take down additional cost reimbursement to cover that?

No, no. The milestone revenue going out forward for us is essentially straight line.

Just that one number. Okay. Moving on then.

Can you walk me through the approximate time line for the Cilag deal in Russia? You said you hope to start a Phase 3 study in '08. What would be the review cycle, the late stage development, then to review and launch cycle on that approximately?

A couple things, Dave, that you might be confusing. With regard to starting a new Phase 3 study, what we are talking about is doing an opiate study to expand the label for opiate dependency and that will start here in the first half of this calendar year 2008. Independent of Janssen and the deal we signed for Russia. We are doing that separately and independently.

But now turn to see Cilag -- or Janssen, we signed the deal with them, $5 million milestone, another $34 million worth of potential milestone payments. It's a royalty deal.

We are in the process of sending them our file, essentially, and they will be responsible for translating that and then submitting that to the Russian regulatory agencies for approval.

And I think the approximate timing on that is probably looking at again -- I'm not that familiar with the details of that, but probably towards the end of this year or beginning of next calendar year we could hopefully see approval of that product. And then they are responsible for launch of it it in that market.

Okay. Thank you.

Thank you. This does conclude the question-and-answer session in today's program.

Thanks, everyone, for dialing in. If you have any additional questions Jim and I will both be available. Have a good evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.