Alkermes Plc (ALKS) 2010 Q2 法說會逐字稿

Welcome to the Alkermes conference call to discuss the Company's second quarter fiscal 2010 financial results. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at Alkermes' request. At this time I would like to introduce your host for today's call, Ms. Rebecca Peterson, Vice President of Corporate Communications at Alkermes. Please go ahead.

Good afternoon and welcome to the Alkermes conference call to discuss our financial results for the second quarter of fiscal 2010 which ended on September 30th. With me this afternoon are Richard Pops, Chairman, President and CEO of Alkermes; and Jim Frates, our CFO. 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 expectations and business performance, our expectations concerning future business development transactions and our expectations concerning the therapeutic value and 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 risks in our annual report on Form 10-K and our quarterly report on Form 10-Q which was filed this afternoon, as well as in 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 Frates will discuss our second quarter fiscal financial results and Richard Pops will provide an update on the Company. After our remarks we'll open it up for Q & A. Now I would like to turn over the call to Jim.

Thanks, Rebecca. Good afternoon everyone. On today's call I will walk you through the highlights of our quarterly financial results and updates to our financial guidance. We are more than halfway through the fiscal year and are refining our expectations based on our results here to date and our expectations for the remainder of fiscal 2010. You will note that included in our revised expectations we've lowered the expected manufacturing revenues for RISPERDAL CONSTA but have left the royalties revenues unchanged. This is due to changes in J&J's orders for RISPERDAL CONSTA for the remainder of our fiscal year as they manage their inventory. As they announced earlier this week, Johnson & Johnson is actively looking for ways to manage its operational costs and streamline its global supply chain. You should not assume that Johnson and Johnson's cost-cutting actions are an indicator of future RISPERDAL CONSTA sales. From our perspective it's just too early to forecast the effect, if any, that competitive products may I have on the US marketplace.

Our overall business remains strong and RISPERDAL CONSTA will continue to be a profitable revenue stream for the Company in the years to come. We have the potential for growth with a solid cash position with nearly $370 million in cash and investments. As we move forward we will continue to manage the business with discipline while investing in opportunities for long-term profitability and growth.

Let me now briefly highlight key financial results for our second fiscal quarter. We delivered a solid quarter with pro forma net income of $1.1 million. On a GAAP basis, we reported a net loss of $8.7 million or basic and diluted loss per share of $0.09. The GAAP net loss included $4 .1 million of charges associated with our planned relocation from Cambridge to Waltham, Massachusetts as well as $5.6 million of charges for noncash compensation and severance. As you may recall, we outlined these anticipated relocation charges during our May earnings call and expect them to occur until our move is complete in early calendar 2010. The vast majority of these charges are noncash. It is important to note that our relocation will substantially reduce our ongoing operating expenses saving us $10 million to $15 million annually in fiscal 2011 and beyond. For a full reconciliation of our pro forma net income to GAAP as well as the details of our quarterly revenues and expenses you can review the press release issued earlier today.

Total revenues were $48.2 million driven by manufacturing and royalty revenues from RISPERDAL CONSTA, and market sales by Johnson & Johnson were approximately $353 million this quarter. As J&J stated on its recent quarterly earnings call, "RISPERDAL CONSTA achieved third quarter sales growth of 9.9% on an operational basis. US sales growth was 9.3% while sales outside the United States were up 10.2% operationally driven by increased share." Based on sales during our first two fiscal quarters, RISPERDAL CONSTA is on track for another year of growth with sales in excess of $1.4 billion for this fiscal year. We expect RISPERDAL CONSTA, which is on patent through 2020, to continue to be a profitable revenue stream for us in the years to come.

With respect to VIVITROL, net sales for the second quarter were $4 .6 million, up $400,000 from the previous quarter. As you may recall, we spent the first half of the fiscal year improving the distribution system but have not yet seen the impact of these efforts in terms of sales. The trajectory of sales as we exit the fiscal year and the results from the Phase III trial in opiate dependence will guide future spending on VIVITROL.

Turning to expenses, total operating expenses for the second quarter were $56.4 million reflecting increased SG&A expenses associated with the transition of the VIVITROL commercial effort exclusively to Alkermes during the first half of the year. The headquarters relocation cost of $4.1 million this quarter I mentioned earlier as well as a one-time expense of $2.3 million associated with severance. Underlying our operations is a strong financial foundation with close to $370 million of cash and total investments in our balance sheet. During the quarter we continued to retire our nonrecourse RISPERDAL CONSTA notes on schedule redeeming $6.4 million of the notes in the quarter, leaving us with an outstanding balance of $63.5 million. The schedule redemption of these notes will continue each quarter until they are fully retired on January 1, 2012.

I will conclude with some comments on financial expectations for the remainder of fiscal 2010. You can look to our press release for a complete review of our expectations. We expect manufacturing revenues to range from $105 million to $111 million. Revised from an expectation of $116 million to $122 million due to changes in purchase forecasts from Janssen. For the third quarter of fiscal 2010 we anticipate manufacturing revenues from RISPERDAL CONSTA to be in the range of $20 million to $25 million.

We expect net product sales from VIVITROL to range from $20 million to $25 million revised from an expectation of $23 million to $28 million. We expect royalty and R&D revenues to remain unchanged and we have also completed recording a $5 million in net collaborative profit expected for fiscal 2010. As a result of these revisions we expect total revenues to range from $168 million to $183 million, revised from an earlier expectation of $182 million to $197 million. We're adjusting our expectation for cost of goods manufactured, to a range of $47 million to $56 million, revised from an expectation of $50 million to $60 million. We expect SG&A expenses to range from $73 million to $79 million, revised from an expectation of $69 million to $77 million largely due to severance expenses. We are adjusterring our expectation for other income and expense to a net expense in the range of zero to $3 million revised from an expectation of zero primarily due to lower than anticipated interest rates.

Expectations for R&D expense, income tax expense, expenses related to share based compensation and expenses related to the Company's planned relocation remain unchanged. As a result of these revisions, we expect an operating loss in the range of 45 to $52 million revised from an expectation of $30 million to $40 million, and a GAAP net loss in the range of $45 million to $55 million revised from an expectation of $30 million to $40 million. I will remind you that included in this number is $30 million to $40 million of noncash charges associated with our move, share based compensation expense and severance. As a result of these changes, we're adjusting our expectations for cash flow from operations to an outflow of $10 million to $15 million revised from an expectation of an inflow of $1 million to $5 million.

To conclude, we're well positioned to invest in innovation in Alkermes with an eye toward enhancing our growth prospects for the future. While revenues will be slightly lower than we anticipated this year our business is strong, and we're making good progress in our development programs. Our financial strength gives us the flexibility to consider ways to take the Company to the next level, and for more on that I will turn the call over to Rich.

Thank you, Jim. Good afternoon, everybody. It's actually quite good to be back in the job of CEO here. As many of you know, I've got a fair amount of experience in this role, and I have a very clear sense of where we can take this Company. Backing up for a second, if you think about Alkermes, it's among a very, very small minority of well positioned biotechnology companies. We've got cash, established revenue stream, a late-stage pipeline, proven R&D manufacturing know-how, and commercial capability. It's a tremendous platform.

What's going to change is the scope and the reach of our business plan. This is driven entirely by the opportunities we see in front of us. We made a name for ourselves over the years by developing and then evolving platform capabilities which enabled to us generate multiple product opportunities. With these multiple product opportunities, we created multiple business opportunities. Some partnered, some proprietary. The key was generating optionality in our business by having a diverse portfolio. And this approach yielded CONSTA, $1 billion drug developed with J&J, VIVITROL, as proprietary product in the new market area, and Exenatide once weekly, a potential game changing diabetes drug developed with both Amylin and Eli Lilly.

We continue to have deep scientific strengths and the proven development capability to create value by advancing product through the clinic. The environment is better than ever for companies with good products, the ability to develop them, and the capital. Because as the pharmaceutical industry is intensely focused on acquisition of new product candidates to replenish their product portfolios that are literally being devastated by patent expiration. This is the time to be offering innovative products with long patent life to pharmaceutical companies. So what we're going to do is move from the position of consolidating our business, which we've been doing for the past couple years, back to building it. So how are we going to do that?

You can expect to see increased energy and action from us primarily on two fronts. On our R&D, then business development. We see clear opportunities in both of these domains, driven by our own particular expertise which gives Alkermes a distinctionive point of view in many of these situations. It's important to say at this point, you shouldn't infer from this discussion or these comments any lack of enthusiasm or faith in the current late-stage programs. RISPERDAL CONSTA is a major global franchise. We're going to continue to reiterate that. VIVITROL Phase III opiate data are imminent, and the Exenatide once weekly MDA is filed and we're planning on it being approved but those are well underway.

We're looking forward now asking the question how can we build this business in this environment beyond these clear opportunities. On the R&D side, we'll be building on our current areas of expertise, which are complex formulation and opiate receptor biology historically focused primarily in CNS and in diabetes. We have some very important new programs here and we plan to disclose new product candidates in the very near future. Just last week for example, we announced the initiation of a clinical trial of what we call ALKS 37, which is a novel NCE developed in-house for opiate-induced constipation. In which leverages our insights in opiate receptor biology in chemistry. Business development transactions will also play an important role in the future growth. Our experience with complex formulations and our perspective on certain market areas gives us insight into opportunities that may be overlooked or unobvious to other companies.

Our business development team is hard at it, evaluating a range of new opportunities. We intend to announce the first of these transactions in due course. As we move into this more aggressive business building mode, it's going to influence the financial goals for the Company. For the past few years, we've managed the Company to cash flow break even. It's been a good exercise for us, and it's helped to us build a disciplined culture at the Company. You heard from Jim just a few minutes ago that we'll depart from the goal of positive cash flow in this current year in order to realize the potential for newer opportunities in front of us. We consider ourselves to be back in the investment mode. We have the financial resources. We don't need to raise capital, and we see the opportunities, which is the critical point. That being said, we do not intend to be reckless. We're operating from a position of strength, not weakness.

We have the resources to take advantage of situations that look to us to be high rate of return, high value opportunities where, we have the particular insight or opportunities resulting from difficult market conditions for small cap biotech companies which continue to persist. So the key take-away from these remarks is that we're going to be actively managing the business in a more aggressive manner to better position it for the future based on what we see as a very solid financial foundation.

So let me just review some of the key milestones ahead. We expect RISPERDAL CONSTA sales to continue to be strong with growth driven by the launch in Japan and the expanded use in the bipolar indication. We will keep you informed as to what extent competitive products are adopted in the marketplace. For Exenatide once weekly we're looking forward to the March 5, 2010 PDUFA date. In calendar 2010 we are also expecting results from DURATION-4 and DURATION-5, both head-to-head studies against competitive agents. Amylin also just recently announced plans to initiate a new study this quarter called DURATION-6, which is designed to demonstrate the superiority of Exenatide once weekly to Liraglutide. The DURATION studies should provide even further evidence of Exenatide once weekly's potential to be a blockbuster product for patients with Type II diabetes. We're also pleased, of course to see the FDA approve BYETTA Breeze's monatherapy and without a box warning. For VIVITROL later this quarter we should see the results of the Phase III clinical trial of VIVITROL in opiate-dependent patients. Assuming positive study results we'll file a supplemental MDA in the first half of next year for this new indication and new business opportunity for VIVITROL.

While we're not ready in this call to unveil additional pipeline candidates, ALKS 33 and ALKS 37, which you know about, are making real progress. ALKS 33 is oral opiate modulator for the potential treatment of addiction and other CNS disorders. We expect to initiate a Phase II study of ALKS 33 for alcohol dependence by the end of this calendar year. ALKS 37, I mentioned earlier, oral peripherally restricted opiate antagonist for opiate induced constipation, we expect to report top-line results from the clinical study of ALKS 37 in first half of calendar 2010. Looking forward, we are going back into build mode here at Alkermes with the goal of enhancing and diversifying the pipeline in the short term. So stay tuned. With that, I'll turn the call back over to Rebecca and we'll take questions.

We'll now open it up for the Q&A.

Thank you. We will now begin the question and answer session. (Operator Instructions) The first question comes from Cory Kasimov from JP Morgan. Please go ahead.

Good afternoon guys. Thanks for taking my question. Rich, I guess the first one here is for you. Maybe for Jim as well. Just to kind of clarify some of the comments you just made, and you talked about departing from your goal of managing the Company to be cash flow break even, to realize some new opportunities. Do you think that would be driven by increasing research and development expenses where instead it looks as if it's lower revenues that are driving the altered outlook you have for the balance of your fiscal year. So can you kind of reconcile that?

Yes there's two components. The most important one for us, Cory is that the R&D spend that we're going to be undertaking is going to be directed towards these new product candidates, and putting more things in this clinic. You also can expect us on the business development side to be doing additional initiatives that we haven't reflected yet in our guidance, nor would we because they don't exist yet.

But what I'm trying to make the point very clearly to everybody is that the Company has the financial resources and the development capability to actually create a significant amount of value with the technologies and pipeline product that we have and some of the business opportunities -- So instead of being constrained by this idea of we have to manage the business only to cash flow break-even, we're going to free ourselves from that constraint in the immediate term and build.

Okay. And then from a longer term perspective, you guys have this $2 to $3 target that's hang out there for 2013. Anything that you're seeing in current business trends that make that more unlikely at this juncture to be able to achieve it, or is it still just reliant on products like Exenatide once weekly and things that we have to wait and see in terms of approval?

I think you answered the question, we're really interested in making money here. We've never really built a big discovery engine in this place. We're interested in creating value in the pipeline and making money, but we really need to see how EQW plays out.

Based on that product you think $2 to $3 is still a realistic goal?

I think it all -- it entirely depends on how EQW gets through the FDA and how it ramps.

Okay, then lastly for Jim, how should we be thinking about gross margins for VIVITROL going forward?

Hey, Cory. I think for VIVITROL, we're in the rate of 60% to 70%, and we hope to get up to the CONSTA ranges, which is more closer to 80%, but it's really going depend on volumes, because as we're in a run rate from 20 to 25, we need to see that grow to really achieve the goals of gross margins that we have.

Okay, thank you.

Thanks, Cory.

The next question comes from Tom Russo from Robert W Baird. Please go ahead.

Thanks for taking the question. Apologies for starting off more near term, Jim -- but how much -- how many weeks of inventory and market does the $10 million in manufacturing revenues represent? It seems like it could be north of $100 million in terms of vend market sales. Just to make folks more comfortable, is there anything more in terms of color you can share on the supply chain changes?

You're referring to RISPERDAL CONSTA and we do receive a 10% royalty overall. That's were you get the $100 million, I understand that. I think right now, Tom, this -- remember, too, we're in the tail end our fiscal year here. So J&J moving a batch from one month, one quarter to another quarter affects our fiscal year as we look out. I think it's just too early to tell right now because we're literally only one month into their launch of their competitive product. So think as we move forward here, we believe RISPERDAL CONSTA is going to continue to grow ex-US. We believe there's an opportunity to continue to grow in the United States as the market potentially expands here. So it's just too early to tell the long-term impact of this.

Okay, just shifting gears with the VIVITROL opiate trial coming up. It seems like efficacy should be at least as strong in that setting. Can you maybe set expectations as far as what would be most important to look at in terms of safety that in group? That would be my second question.

This is Rich. It's a good question. Recall that neltrexone was first approved in this indication prior to its alcohol approval. The study we're running is looking at opiate-dependent patients who have been detoxed and randomized to receive placebo injections or VIVITROL injections. We're looking at urine screening to the presence or absence of opiates over a six-month period. It's probably too early to speculate on what the safety database might look like, but you should just know that we've run these types of patients in our safety database prior to the submission on alcohol, so we have some experience in this patient population. So let's wait and see what the data looks like and we'll let you know as soon as we know.

Okay, last question, even a little bit further out, some of the compounds we've heard about in the past, ALKS 33 and 36, can you give us a rough timeframe when you would have or expect to have Phase IIb type proof of concept and be getting ready to advance one of those into Phase III? What would be the rough timeframe for that?

I think it's a critical question. Since I've come back into the CEO role it's one that I've been focused intensely on. I'm not ready yet to give you those timelines, but you should know that they're actively under scrutiny here at the Company, but we're doing everything that we can to move those up. We've said with ALKS 33 we're starting a multicenter Phase II study with 33 imminently, and with ALKS 37, we just put that into man, ALKS 37 is a component of ALKS 36. So we just put that into man last week or so. We'll have data from that in the early part of next year, mid part to next year, then we'll move as fast as we can into a more definitive Phase II program with that.

So if we were thinking -- 2011ish, something in that area would be kind of realistic for those two to be getting ready for Phase III?

It's not one size fits all. Give us a little bit of time on this, and we'll give you much more specificity but we're trying to move those timelines as fast as possible. The nice thing on the ALKS 37, for example is there are precedents in development right now that you can learn from. And so we're going to try to take the best practices and incorporate them into our program because we think we may have a superior molecule.

Okay, thanks very much.

You're welcome.

Thanks, Tom.

The next question comes from Dave Windley from Jefferies & Company. Please go ahead.

Hi, good afternoon, thanks for taking the questions. This may have been answered in the last question but I didn't quite catch it. So I will ask again. In terms of ALKS 33, and Richard, you said you would move forward into studies by the end of the year on that one, would you proceed with that if the VIVITROL in opioid results were not up to your expectation?

Yes, and I'll tell you why. ALKS 33 is kind of a unique animal. You may recall Dave, we've completed a couple of clinical trials already of ALKS 33. We have some clinical experience with it. We understand how it behaves from a PK point of view, and increasingly from a PD point of view as well. As an oral medication it it appears to be well tolerated, and has logic as to why it even may be more safe than predecessor compounds. Is it's got a separate life from VIVITROL. But that said, we're still keen on seeing the VIVITROL Phase III results. Given this mechanism we're really looking forward to seeing whether that bears out in this current Phase III.

And stepping back more broadly, as you think about, as you're alluding to using your balance sheet to go out and grow the business, expand the number of opportunities, that kind of thing, how do you think about competing with companies that have even bigger balance sheets than you?

Tell what you, the most exciting part about that is you don't really to have compete with them for many years. Competing with them in the marketplace can be very daunting, but competing with them in development is a real opportunity, because a lot of the companies with the biggest balance sheet have the greatest need for innovative new product. We have strong IP foundations here. We have strong insight into our areas of expertise.

The important point to make, which I probably should have made earlier, just because we're going to be investing more to put things in development doesn't mean we're going to take all the way to the end and commercialize them ourselves. All along in the history of this Company we were able to create value through our development work, then for certain programs we can raise significant capital through out licensing those product, when proven important points either in clinical trials or even beforehand. So I think it's a question about optionality. With more product candidates moving we have more optionality on how to construct a business case around each one.

Certainly, I guess I'm thinking more from a licensing standpoint. And I know your focus is earlier in the pipe. But thinking about licensing activity and how are you going to find -- some, you're going grow yourself. How are you going to find the ones that you bring in from the outside?

That's a great question. I'm sorry I rambled on another aspect of it.

No worries.

So you're rarely going to see it. I don't expect to see us in a jump ball situation with huge companies looking for licensed products or product that have completed Phase III, and they're running an auction to see who will pay the most to commercialize the product it the large sale infrastructure. That's not our game.

We do find and the reason I referenced it earlier, we do find situations where Alkermes has a particular unique insight because we understand the IP environment better or we might understand the formulation opportunity better or some combination of all those things, or it just may be an area where we have some market insights from the work that we're doing. So we're not so interested in single large expensive transactions that are single game changing transactions. We're interested in an amalgam of smaller, more considered insightful deals in that the aggregate create a really interesting portfolio for us.

And finally, as you mentioned, in terms of where some of your particular insights are in your delivery technologies and complex formulations, and then in opioid receptor biology, are you going to leverage those? Are you going to stick with extended release, extended duration delivery type things, or are you going to try to expand your purview there as well?

We'll do what we've always done. We're always thinking of expanding, but expanding from a foundation of understanding. So you won't probably see us just randomly acquire a company that's doing some type of new discovery work in a new area of biology. We're going to do things that segue logically from where we have expertise because that gives us the competitive advantage when we're doing the diligence and making bids.

Okay. Thank you.

You are welcome.

The next question comes from Skip Klein from Federated Kaufman. Please go ahead.

Hey, guys, sort of an odd question, but it occurred to me given that stock market investors aren't giving you full value for CONSTA and you've had a very successful experience with nonrecourse pharma bonds, and those people are probably very happy with how they've been treated, would you ever consider monetizing CONSTA and either doing a very leveraged repurchase, which is odd for a biotech company to do, or doing something else with that capital? Because it's kind of going to be an overhang.

Hi, Skip. I haven't heard you on one of these in a long time. Good to have you back. I think that the idea of securitizing and monetizing is always interesting. Right now we don't need the capital, and we're so close to the threshold of understanding of EQW with a PDUFA date coming up our feeling is right now -- because we think that's going to break our way, let's let that play through. Since we have a significant amount of cash right now, we're willing to play that through. You're asking a slightly different question, would you kind of lever up right now and buy stocks and I don't think our instinct right now is to do that.

Even though you could raise probably $400 million on the back of CONSTA, -- loan to value, buy back a lot of stock, then really leverage our participation in the LAR royalty stream.

We can talk more about it off-line, but I tell you those deals, as you may have seen, the pricing of the deals have gotten more and more expensive too. It's not nearly as low cost financing as it used to be.

Okay, I guess a final question, which is a variation on the theme, you probably have thought about it. I know you've said to the prior caller -- or questioner, that you wouldn't do one big deal, I congratulate you for that, but what do you think your aggregate spending power is when you consider you have $315 million cash, You've got some debt offsetting that. You probably have a latent $400 million or $500 million in CONSTA that you could put your hands on. So you probably could, if you needed it could, have $700 million or $800 million in capital to put to work. Is that roughly in the ballpark?

That's probably bigger than I would model it, just because we're probably a little more conservative operationally. But I think the way we'll model it -- we'll model both the acquisition cost and the tail, assuming success. Migitated by the fact that you can actually -- you can turn around and partner these things after you add value over certain period of time. So it's a much more dynamic model than you might imagine. But I do think we have substantial financial resources particularly if we structured deals in a clever way which we have a history of doing.

Good, thanks a lot. See you soon.

The next question comes from Bert Hazlett from BMO Capital Markets. Please go ahead.

Thanks for taking the question. Just to continue on the theme of strategic questions, Richard, I mean, it seems like CNS would be the logical area for you to focus on in terms of expanding your effort. Does that make sense nearer term? Is that where the focus is, as you consider the -- let's call it the licensing effort, or M&A effort? And is there a need for incremental, let's say delivery technologies or platform technologies along with that?

Hey, Bert. I think that we -- even from our original origin, at Alkermes' blood-brain barrier company, we've got strong scientific connections in this area of CNS. So it's a place we tend naturally. We like some of the specialty areas in CNS better than some of the mass market areas in CNS for obvious reasons. Recognizing also that CNS drug development historically has been a difficult place, but, yes, it's a place of great interest to us. Drug delivery technologies for their own sake are less interesting to us, more interesting when they lend themselves to embodiment in a product that's ready for the clinic or in the clinic already. So we'd be much more skewed towards a product that incorporated advanced drug delivery technology rather than a platform at some nascent stage that we would have to spend the next few years building.

Okay, that's fair enough. Just to push a little on LAR, you did have some good news with the monotherapy results, but also some interesting announcements coming out of the FDA in terms of potential renal failure. How do you -- on top of that you do have a partner in Lilly that has other irons in the fire with two other extended release products. As you're thinking -- as your handicapping LAR and the potential revenue streams that might bring in or might not, how do you think about that, How do you think about the timing of when that actually might turn on, and what do you make of the recent FDA action, some positive and some maybe not so positive?

I think we were definitely more on the positive side of the ledger in terms of the recent FDA interactions on BYETTA, Absolutely as we fixed them to -- a, monotherapy approval. And B, such approval coming without a black box warning. The renal to us was more of a more routine label update that you would expect as the product gets more and more experience in a type II population. We model the drug every which way from Sunday. The great thing about it for us, irrespective of how you model it, it's profitable to us, because of the business structure that we have, which is where we get paid a royalty from the first file of sales.

I could spend a long time on this call espousing the attributes of Exenatide once weekly versus competitive products, punitively competitive products and I won't. Those are all well described. I think our view is that the NDA was filed in May. It's been prosecuted aggressively through its normal regulatory process. The Companies are preparing for approval of this drug and based on its profile, which has been presented in major medical meetings, it should be a very good drug. So a lot of the negatives on Exenatide once weekly are theory and speculation. Most of the facts on Exenatide once weekly are quite positive. So thankfully the air of speculation is drawing to a close as we approach the March PDUFA date, so we'll keep our fingers crossed and hope that things go our way.

Are you planning more specifically for it to be a drug and on the market in terms of your financial planning sometime in fiscal 2011?

It really doesn't effect our financial planning right now, because we're not dependent upon it to do anything we're doing right now. So we have a much -- as we guide, we'll give guidance for the new year in May, with our 331 year end, but we're in the same position as you all are. We're hopeful and we have an expectation of how things should happen. But we'll wait and see how they actually do happen.

Fair enough, thank you for your time.

Good to talk to you.

Operator, we have time for one more question.

Thank you. The final question comes from Ian Sanderson from Cowen & Company. Please go ahead.

Great, thanks for taking the question. First, if there is any update on ALKS 27. These IIa data look pretty good. Is this a program you're looking for a partner for? Secondly, on the commercial side, what levers can be pulled to get VIVITROL to profitability at something around the current sales level, and will you try to preserve the commercial organization here as part of your business development efforts, or might that be something that you would sacrifice?

Hey Ian, it's Rich. ALKS 27, no update today. You've seen the data. We've submitted that data to be presented at a meeting we're still in the process of looking for a viable partnership on that one, so no news on that one today. On the commercial side, absolutely. The commercial footprint can be a real option for us, or a real opportunity for us. It's a little early days to say how do we tune it at its current sales levels to be profitable because of these two shoes that are dropping -- one, we still really need to give the full fiscal year to see the benefit if any on the alcohol side of changing the distribution system and putting in the new initiative.

In the next matter of the next several weeks, we're going to have Phase III data which will lead to, we believe, new labeling and a new business area for the product. So we are intensely focused on the operational efficiencies and the growth on the alcohol side. We remain guardedly optimistic on that front. But we'll look at the data as we said from the beginning of the year, we'll look at the data as we exit the year. The exit trajectory, if you will in the alcohol indication, then we'll look at the results of the opiate study as well. But, yes I do think it's a potential resource for us.

Also, can I ask how frequently does J &J update its CONSTA purchase forecast? Is that something that we may be seeing another adjustment there, or do they do one adjustment and stick to it?

We get -- Jim, you can correct me on this -- it's essentially a rolling quarterly forecast. So the guidance we gave you today incorporates the order pattern they've projected for the coming quarter.

Thank you.

You're welcome.

Thanks, everyone for dialing in today, and if you have any additional questions, please don't hesitate to call Jim or myself. Have a good evening.

Thank you for participating in the Alkermes second quarter fiscal 2010 financial results conference call. This concludes the conference for today. You may all disconnect at this time.