Alkermes Plc (ALKS) 2011 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 fiscal 2011 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 reported 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.

Thank you. Good afternoon, and welcome to the Alkermes conference call to discuss our financial results for the third quarter of fiscal 2011, which ended on December 31, 2010. With me are Richard Pops, our CEO, 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, the timing of additional development activity for Bydureon, the approval and commercialization of Bydureon,our future financial expectations and business performance, and our expectations concerning the therapeutic value and development of our products. Listeners are cautioned that these forward-looking statements are neither promises nor guarantees, and are subject to a high degree of uncertainty and risk. Our press release issued today and our annual report on Form 10-K for the fiscal year ended March 31, 2010, identifies certain factors that could cause our actual performance to differ from the results contemplated by these forward-looking statements.

We undertake no obligation to update or revise the information provided on this call, as a result of new information or future results or development. This afternoon Jim Frates will discuss our third-quarter financial results and Richard Pops will provide an update on the Company. After our remarks, we'll open the call for Q&A. Now, I'd like to turn the call over to Jim.

Thanks, Rebecca. Good afternoon, everyone. I'm happy to report another strong financial quarter, right in line with our guidance. Total revenues for the quarter were $44 million, driven primarily by Risperdal Consta, which generated $35.2 million of manufacturing and royalty revenues in the quarter. Royalty revenues for Risperdal Consta were based on approximately $388 million in end-market sales. In the United States, units sold increased over last quarter, however, dollar sales were affected by a reduction in average selling price during the quarter, primarily related to health care reform.

Worldwide sales of Risperdal Consta for last quarter were up almost 3% compared to the quarter ended September 30, 2010. In fact, it was the second highest quarter ever on a sales basis, and the highest quarter ever on a unit basis. The strong growth of this product in markets like Japan, and Consta's continued sales in more 90 countries around the world, underscored that this blockbuster product will continue to be an important revenue stream for Alkermes. Risperdal Consta has patent protection through 2020 in the United States, and 2021 in the EU.

Vivitrol also performed well during the quarter, tracking to our expectations, with $7.7 million of net sales. This represents a 10% increase in units sold over the previous quarter, and includes a price increase that was taken on October 1st. As you know, we see a growth opportunity with the opioid-dependence indication. As we have said previously, you should expect a slight increase in our promotional spend as we expand our call universe once our marketing materials are approved by DDMAC. Pre-clearance is expected in the first half of 2011.

Turning to expenses, total operating expenses for the third quarter were $55.9 million, which included $5.8 million of non-cash charges for share-based compensation expense. On a GAAP basis, we reported a net loss of $11.4 million or a basic and diluted loss per share of $0.12. This compares to a loss of $7.7 million during the second quarter of fiscal 2011. Excluding non-cash share-based compensation expense, we reported a pro forma net loss $5.6 million this quarter, or a basic and diluted loss of $0.06 per share. For a full reconciliation of our pro forma net loss to GAAP as well as details of our quarterly revenues and expenses, please see the press release issued this afternoon.

We maintained a solid cash position, ending the quarter with cash and investments of $285 million, up from the $274 million at the end of last quarter, primarily due to the timing of our collections of receivables from Risperdal Consta and Vivitrol. With respect to guidance, we're pleased to increase the Risperdal Consta revenue guidance based on the performance of Consta to date and our orders in hand from Janssen. We are in a position to improve our overall financial expectation due to Consta's continued strong performance, coupled with our financial discipline. Here are the highlights of those adjustments.

We are increasing total revenues to a range of $172 million to $186 million, revised from an expectation of $161 million to $180 million. We are increasing Risperdal Consta manufacturing revenues to a range of $110 million to $115 million, revised from an expectation of $100 million to $110 million. We're increasing royalty revenues to a range of $36 million to $38 million, revised from an expectation of $35 million to $37 million, based on higher-than-expected revenues from Risperdal Consta.

We're decreasing our expectation for R&D expenses to a range of $90 million to $100 million, revised from an expectation of $90 million to $105 million. We're reducing expectations for operating loss and net loss to a range of $42 million to $57 million, revised from an earlier expectation of $53 million to $68 million. And we're reducing our expectation for the cash outflow from operations to a range of $22 million to $37 million, revised from an earlier expectation of an outflow of $33 million to $48 million.

We're pleased with our financial performance thus far in fiscal 2011. Risperdal Consta is proving to be a steady revenue stream and remains the financial base of Alkermes. In fact, with this new guidance, fiscal year 2011 should be our best year ever for Risperdal Consta, generating approximately $150 million in revenues for Alkermes. Looking forward, we see Vivitrol and the opioid-dependence indication as an important source of growth. We also believe that Bydureon will be a major financial contributor.

The royalty structure for Bydureon provides a very attractive return opportunity for Alkermes, as having no expenses on our end means that this product will beprofitable to us from the very first day of sales. In addition, Alkermes will collect royalties on any formulation of Bydureon that uses our proprietary Medisorb technology, including the once-monthly formulation currently in development. Finally, our pipeline continues to advance, and we're excited to have key clinical data coming in the near- and medium-term. With that I'll turn the call over to Rich.

Great. Thank you, Jim. Let me step back from what Jim was talking about and talk a bit about our perspective for the calendar year 2011. We've always been a Company with strong science and multiple products in the pipeline, but we've never before had this number of important late stage milestones all set to read out in a single year. From Bydureon to Vivitrol to ALKS 33, 37, 9070, it's taken a number of years to get ourselves into this position. This was the plan, and we executed it successfully,and now we're ready to see the results.

As Jim just outlined, Risperdal Consta forms the financial foundation of the Company and based on manufacturing orders in hand and our view of the future, we believe it will continue to be an important source of revenue for us for a long time. With sales in 2010 of $1.5 billion, Risperdal Consta is J&J's third-largest pharmaceutical brand. It's a global brand, and it's sold in 92 countries. It's well established in the EU with over 16% market share, and it's growing rapidly in Japan. J&J has build this brand around the globe, based originally on safety and efficacy, but increasingly now on the accumulating evidence of real-world outcomes, long-term experience supporting and building on the proven medical and economic benefits of using Consta. There's no substitute for this kind of accumulative experience. In fact, no other long-acting injectable atypical product has anywhere close to the patient years of experience of Consta.

Turning to Vivitrol, we're in the early days of launching the new opioid-dependence indication. While it's too soon to quantify how this indication will be, the initial anecdotal feedback from physicians and patients has been extremely positive. Vivitrol has also been getting considerable attention from organizations outside of Alkermes, such as the National Institute on Drug Abuse, The Partnership for a Drug-Free America and other patient advocacy groups, as well as groups associated with the criminal justice system.

As we pointed out to you many times before, opioid-dependence is an established medical market. The leading products in the market are Suboxone and Methadone, and their sales exceed $1 billion a year. Unlike Suboxone and Methadone, Vivitrol is a non-narcotic antagonist, making it an attractive treatment option for certain patients and physicians. Vivitrol represents a truly new paradigm as the first and only once-monthly medication for the prevention of relapse to opioid-dependence.

There are about 1.6 million opioid-dependent adults in the US, of which about 1.2 million are currently seeking treatment based on government numbers. Of those 1.2 million seeking treatment, about 900,000 patients are currently prescribed medications, primarily Suboxone and Methadone. So Vivitrol enters a rapidly-growing new pharmaceutical class, one with 900,000 patients already being treated and with only one branded entrant that has an entirely different mechanism of action than Vivitrol. This is a real opportunity for us. As you've heard us say before, it's a complex opportunity with its own obstacles, but a real opportunity.

Since the approval in October, our sales reps have been in the field, actively promoting the new indication, targeting physicians who are currently prescribing Vivitrol and teaching them about the new indications. Starting with this enriched core of doctors who understand the drug, how to get reimbursed, and how to use it. With the approval of marketing materials by DDMAC, which we expect in the first half of this calendar year, we will move into the second phase, where we expand the commercialization effort. We'll be calling on high-decile Suboxone prescribers, in-patient treatment centers with medical models in place, and of course continue with the existing high-volume Vivitrol prescribers. We anticipate getting traction in the opioid-dependence indication in 2011 and we'll look forward to updating you on our progress in our year-end conference call in May.

Turning to Bydureon, we continue to believe that this drug is a game-changer in the treatment of Type-2 diabetes. As requested in the October complete response letter from FDA, our partner, Amylin, stated they will submit the data from DURATION-5, a safety and efficacy study of Bydureon that was completed in December 2009, as well as conduct a thorough TQT study to evaluate Bydureon's potential effect on patients. As Amylin announced last week, it has received written approval from FDA on the TQT study design, will initiate the study this month and plans to resubmit to the FDA in the second half of calendar 2011. In addition to the US regulatory milestones expected this year, Bydureon is under review by the EMA for potential EU approval.

Based on the timing of the filing in 2010, action is expected in the first half of calendar 2011. Data from the DURATION-6 study and the Phase-II study of once-monthly Bydureon are also expected in the first half of this year. In 2011. we're looking forward to significant regulatory progress for Bydureon, both here in the US and in the EU. As Jim noted, we expect Bydureon to have an important financial impact on Alkermes. This impact should be felt immediately after launch since we received initial milestone payments on first commercial sales in the EU and the US, and begin to build royalty revenues from the first vial sold. So, Consta, Vivitrol, Bydureon, the commercial stage products have a lot going on.

So I will shift now to the progress we're making with the rest of the pipeline candidates. First, we're increasingly excited about the prospects of ALKS 33, one of our proprietary candidates for the treatment of reward disorders and other CNS disorders. In December, we announced the results of a successful Phase-II study, conducted in over 400 patients with alcohol dependence. These data confirm our belief in the pharmacology of ALKS 33 and its tolerability and efficacy in the clinical setting.

With these positive results in hand, we continue to move forward in a number of indications, including a Phase-II study on binge eating and in combination with buprenorphine, a Phase-II study in cocaine addiction. Data from the Phase-II binge eating study should be in hand by mid-calendar 2011 and the Phase-II cocaine study, which is funded by the National Institute on Drug Addiction, should start around that same time. Recently, we announced that we're expanding ALKS 33 into treatment-resistant depression, or TRD, and expect to commence a Phase-I study of ALKS 33, in combination with buprenorphine for TRD by the end of this year, so expect a lot of progress on ALKS 33.

We're also expecting major news from ALKS 37, our product candidate for opioid-induced bowel dysfunction, as we expect to report top-line results from our Phase-II study in the coming weeks. This is an area of real medical need, driven by the increasing number of patients taking opioid pain medications chronically. Unfortunately, the same mechanism that provides pain relief can slow down the natural movements of the gastro-intestinal system. ALKS 37 is a proprietary new chemical entity, a small molecule oral drug, designed to bind opioid receptors in the gut as an antagonist, blocking the agonist effects of opiate medications, thereby improving GI function. This is a multi-center, placebo-controlled study, testing the effects of multiple doses of ALKS 37 in patients suffering from opioid-induced bowel dysfunction due to treatment of opioids for chronic pain, so it's designed to get us quickly to the answer, to get us to a go, no go, point of understanding the safety and efficacy of ALKS 37 in this indication. The end-life portion of this study is now complete, and we're looking forward to the results soon.

We're also excited by ALKS 9070, the first candidate based on our proprietary LinkeRx technology. 9070 is designed to be a once-monthly, injectable, extended-release version of aripiprazole, or Abilify. We initiated a Phase-I/II clinical study in 32 patients with schizophrenia, and we expect to announce top-line data from this trial in the first half of 2011. This multi-dose study is designed to evaluate 9070's efficacy, safety, tolerability, and pharmacokinetic profile. Positive data from this study would drive an aggressive pivotal program.

So we have a lot of look forward to. Not only will we have a steady stream of news in 2011, but we expect the lion's share of that news to be late-stage advances by our key product candidates. By the end of this year, we expect to have a clearer picture of the utility and approvability of the candidates in the pipeline. With that, I'll finish and turn the call back to Rebecca for Q&A.

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

(Operator Instructions). Our first question comes from Cory Kasimov of JPMorgan. Please go ahead.

It's actually Matt Lowe in for Cory question.Just a couple of questions on Vivitrol. Specifically on the reimbursement. If you could just speak to the progress there and if it's been different from what you experienced in alcoholism.

Sure, this is Rich, I'll take that call. So because we're riding on the coattails of Vivitrol's previous reimbursement experience on alcohol, we actually have a running start as we go into this new indication. And if anything, we've found that the reimbursement environment on the opioid indication is more favorable than it was for the alcohol, primarily because in the opioid indication, there's currently an existing medication, Suboxone, that payers are paying several hundred million for in the US. And they're more familiar with treatment alternatives, pharmacologic alternatives in this space. So we think our reimbursement is good. We believe that over 85% of the lives are covered right now from the commercial plans. And we're still working through the minimizing the number of prior authorizations and step edits that are normal as you bring in a new indication. So far, so good.

Okay. That's great. And just wondering, if at this stage, you know how long patients are likely to remain on the drug, and speak to what proportion of doctors have the ability to detox patients.

It's far too early to tell what the average central tendency will be for duration of use for the opioid indication. The clinical trial, recall, was a six month study, and we know from clinicians, they'd love to see the patients on it for six months, and often we've heard clinicians say they'd like their patients on it for a year. In the real world, it will be an amalgam of how long they stay on -- it will be a mix of all the various experiences the various clinicians have.

Second question was how many are able to detox? Well, our sales force, as we expand our calling effort, will move into two areas. One, where100% of the physicians will be able to detox, and that is for inpatient detox centers established to do just that. A less-clear answer is the number of outpatient settings or places that are currently prescribing other pharmacologic methods, how many of those will be equipped for detox, we don't know a precise answer on that, and we'll learn in the next few months as we call on this universe.

That's great. Thank you.

Thanks. Operator, we'll take the next question.

Our next question comes from Steve Byrne from Banc of America. Please go ahead.

Can you talk about your strategy for Vivitrol and the opioid indication, ex-US?

Sure. Hi, Steve. What we're doing right now in 2011, is we're pulling together the regulatory strategy and our strategy is to file for the approval for Vivitrol in those countries, where we don't need to run additional clinical trials, i.e., we can use the US dossier, coupled with a pricing strategy, where we do so sequentially and maintain the strongest pricing posture. Look for us to be filing in a number of countries outside the US, beginning this year.

And is the European setting a region where you can use your US studies?

We believe so. And each country is its own separate set of circumstances. But as a general matter, yes we believe in many countries, we can use the existing -- we can use the existing dossier.

And, Rich, you mentioned Consta sold in 92 countries. What percentage of your ex-US sales are in the European region where Sustenna has been filed for?

I'll have to ask Jim if he knows the answer to that.

It's a little over 50%, Steve, in the EU. But of course, it's going to take a while for one, the product to be launched and second for reimbursement to come into play. So one of the things we've seen currently is the way the product is growing, we expect that to continue, because we're seeing growth from around the world, not just any one individual country.

Half of those sales you're saying are in countries where you're really not at risk of Sustenna competition in the near term.

Well, 54% is in the EU and roughly 30% is in the United States where we've had competition already. Roughly 20% is outside of Europe.

Okay. And one for you, Jim. Are you not expecting any income tax credit on your P&L for the year?

For this year, no.

Okay.

We had a small amount in the early part of the year, but as you know, since we're in the loss position --

Does that reverse in the fourth quarter?

It should stay the same.

Okay. Thank you.

You're welcome.

Our next question comes from Ami Fadia from UBS. Please go ahead.

Hi, I had a couple of questions. Firstly on Vivitrol. Could you quantify the number of inpatient detox centers that your sales force will target and your estimate of the number of patients that are treated at those detox centers?

I know the answer to the first one. We'll see if Rebecca knows the answer to the second one.We're targeting somewhere between 600 and 1,000 inpatient detox centers.

It's a little hard to quantify the number of patients because many of these patients are repeat visitors. This offers a very nice opportunity that fits very nicely with the Vivitrol label. So we're hoping to gain traction in those centers and in the high-decile Suboxone prescribers, as well.

If you look at -- when you talk about the high-decile Suboxone prescribers, what percent of the total prescribers is that, in your estimate?

About 2000 Suboxone prescribers drive 80% of scripts, so it's a concentrated group of docs.

Okay, the second question was regarding your guidance for R&D and SG&A. You've lowered your guidance for both those line items and even if I had to try to get to that guidance, I would have to assume a fairly decent ramp in expenses in the last quarter. Is that something that you are expecting?

Well, let's be clear and I hope I didn't misspeak. We're lowering our guidance for R&D expense from $90 million to $105 million to $90 million to $100 million. SG&A is staying the same. We haven't changed SG&A guidance. So our R&D, if you look at the last three to four quarters, bounces around a few million dollars here or there. It will come in the $90 million to $100 million range, we believe, without too much of a stretch. And SG&A, as I mentioned, we're going to increase a little bit, as we see the launch of opiates continuing, but it shouldn't change too much and I think, with the three quarters behind us, it does fit right into our annual guidance.

Okay. The next question was just on Risperdal Consta. What are the countries outside the United States that are still growing for Risperdal Consta?

Well, I don't think it would be correct for us to disclose. But outside the United States, we've seen growth in Japan, which J&J has talked about. And this is J&J's product so we're limited on what we can say publicly. And when we're selling in 90 countries, clearly, the balance of the countries are growing over time outside the United States and they have been for some time.

Okay. Thank you.

You're welcome.

Our next question comes from Tom Russo from Baird. Please go ahead.

Thanks for taking the question. Just a follow up on that, for Jim.The increase in guidance for Consta, is that more reflective of a change in underlying demand from J&J, is there any kind of a timing shift from the subsequent quarter up, or how should we think about that?

Tom, over time -- and I've encouraged people to do this, because I think any one quarter-to-quarter comparison can be thrown off by price changes or from a manufacturing perspective, whether we ship a US batch or a European batch. I like to encourage people to look at trailing four quarters. So there's no doubt that the orders have been going up both in the United States and Europe, which is why we're changing our guidance.

Okay. And then on ALKS 33, the update that you gave in December, there was, it didn't hit statistical significance on the primary endpoint, but then did on the endpoint more comparable to Vivitrol. I was wondering,have you had a meeting with FDA yet to discuss endpoint going forward, or when would that meeting be scheduled?

We're going to do that in the first half. So we're putting together that data now to go down to FDA and talk about endpoint selection for subsequent trials.

Okay. Thanks.

You're welcome.

Our next question comes from Biren Amin from WJB Capital.

Thanks for taking my question. I had a question on 9070. What can we expect from the 32-patient PK study?

Remember that what we're testing here is a long-acting form of Abilify. What we'll be looking for, similar to what we've with our microstrip technology is by injecting a reasonable cohort of patients, in this case, 32, and looking at plasma concentrations over time, so we're not just looking at the release of the pro drug, i.e., 9070, but we're looking at its metabolite, which is aripiprazole. So by plotting plasma concentrations of aripiprazole over time, we can then model what multiple injections could look like at steady state. So if we're releasing therapeutic concentrations of aripiprazole, and it's well-tolerated by the patient, we'll be highly confident that we'll have a dosage to move forward into more advanced clinical trials. So we're not asking a new question of whether 9070 would be an effective antipsychotic. We know that aripiprazole, so with free aripiprazole with a therapeutic concentration, we have a high degree of likelihood that we'll be successful.

And are there any IP issues associated with this long-acting form of Abilify?

9070 is its own new chemical entity, and has its own separate patent protection, and we don't think we'll be impeded from bringing 9070 to market.

Okay. A couple of questions on Vivitrol. What percentage of Q3 sales came from opioid addiction versus alcohol?

It's hard for us to tell. And remember, the opiate indication was not approved until mid-to-late October. So our sales force was updated on the label in late October. But I think that we've seen a small change in the slope of the growth curve, but we've been seeing pretty steady 7% growth, prior to that. So I think we haven't yet determined what the growth rate with opiates will be. We haven't started focusing on the new doctors yet. So it will take us some time to figure out what that slope is.

And I noticed that the Vivitrol sales guidance remained unchanged for the year. So when do we start to see your sales efforts for opiate addiction reflected in top line sales?

I think we'll be watching carefully as we go to next fiscal year. As I mentioned, the DDMAC materials, we expect in the first half of the year. And we're going to have some more knowledge under our belt over the next quarter as we guide in May for our next fiscal year, I think we'll have a lot more knowledge about it then, and we'll certainly update you. Again, I'd caution with this new indication and our focus on it, and the new areas, it may take us time to figure out what that ultimate trajectory for opiate sales is going to be.

And you presented some interim data at JPMorgan. When do we get the final results from the health care professionals trial?

Biren, that's a two year study, so what we presented at JPMorgan was six-month data and we'll provide another update at 12 months.

Thank you.

You're welcome.

Our next question comes from Bill Tanner from Lazard Capital Markets. Please go ahead.

Thanks for taking the question, Rich. Just maybe to follow-on a little bit on 9070, you talked an aggressive pivotal program. Is that contemplating potentially jumping straight in to Phase-III, wondering, just thinking about a trial, would it be something along the lines of what has been done for Abilify in terms of duration and scope and is this something that Alkermes would contemplate doing without a partner?

Hey, Bill. Yes, I think what we would do if the PK works out the way that we hope it does, consistent with the animals,we would probably move it into what we would officially deem a IIb-III/III program. We would go through multiple doses to achieve steady state concentrations and then we'd just roll through into efficacy studies. Those studies we would talk to FDA about it, but I think we'd be looking at the shorter duration, looking at 12-week type studies, so I wouldn't link it back to any, when you say other aripiprazole stages, there's a whole bunch of them. We'd be looking at the shorter end of the duration. And be thinking about developing for both the US and the rest of the world simultaneously.

Obviously, you won't know until you know. Would you think that the data from this Phase-I trial would be pretty clear cut. That it would be just an absolute go/no-go decision once you see the data, or do you think there's going to be something intermediate that needs to be done?

Our presumption going in is that it's going to be pretty clear. We've done so much work in the animals, and we have so much experience with the Microstrip, that I think that we're hopeful that it's pretty clear. Now, that said, we have said publicly we do have a second formulation that we're ready to put into man as well. We feel so strongly that this is an interesting business opportunity and medical opportunity that we'll probably go right into the clinic with our second formulation, irrespective of the results of the first one, just to make sure we have the best horse. We're playing this one to win.

And just in a simple explanation, the difference between the two formulations?

It would just be the shape of that PK profile in the animals. One is slower and longer and the other is shorter and faster. And you see how that translates into humans. These things tend to preserve their rank ordering, but they tend to have different actual values in humans.

Okay. Great. Thanks very much.

You're welcome.

Our next question comes from Mario Corso with Caris & Company. Please go ahead.

Yes, thanks for taking the question. A few things I wanted to ask. On Vivitrol, anecdotally, on early use, do you get the sense that use is going to be driven by switching from Suboxone, or Suboxone failures, what sort of mix there? Also wondering about the rev count there and whether you think you're going to have to increase it over the next year or so,on the R&D side. So given the talk about 9070 and the treatment-resistant depression trials for ALKS 33, is this kind of a future franchise for Alkermes that you're thinking about holding onto, developing and marketing yourself now that you have two products coming into view there, and then finally, on Consta, have you seen from J&J, 12-month orders that would take into account the presumed European competition?

Why don't I take the first couple, and then Jim can answer on the Consta side. So I justwant to reiterate a point that I try to make fairly often, that we believe the growth of Vivitrol is not going to come necessarily at the expense of Suboxone. We think Suboxone is a good drug, and it's very, very useful in many patients, and that's part of the reason why it's become such an important product. What it's doing is bringing people into treatment with medicine and Vivitrol is a completely different treatment option. Antagonist, monthly injection, requires detoxification, is the opioid-free alternative for patients. I don't think that the bulk of the patients are going to come from people moving off of Suboxone if it's working for them. But we know that there are all kinds of patients for whom opioid agonist or partial agonist treatment is not indicated or not desired. There are certain physicians who aren't comfortable using it, and don't use it. And there are patients who failed on that. All of these are very enriched areas for us to go after with Vivitrol.

Where we're starting now with 60 reps in the field is exactly the right place to be.If this turns out to be an important big product in this indication, we won't be staying at 60 reps, but our commitment to ourselves and to you guys is to get some traction, and see where we're getting return on our investment and then we'll build from there. If we're really on our way here, you can count on us building this incrementally, in the face of data that says it's worth doing that.

With 9070 and the TRD and the things that we're doing, I think our feeling has been all along is to get the data from these clinical trials that are meaningful clinical trials in terms of determining the potential clinical efficacy market potential of the products and then make the decisions about partnering, keeping, and what the mix of products will look like. If they all work, we have a much different scenario than if one of them looks really good. But I think I'll reserve judgment until we get to the end. I didn't really answer Bill's question on 9070 about whether we'd be willing to do that ourselves, and the answer to that is yes, we'd be willing to do almost all of these by ourselves, but I'm not sure we'd be willing to do all of them by ourselves. But we'll make the decision as we get there.

Maybe Mario, I'll answer the Consta question. So specifically, we have orders that go from J&J that are locked for a four-month period. So they can't change those. And then we have long-range forecasts from them updated annually and sometimes semi-annually that go 18 months and three to four years from now. Additionally though, we also look as we make our planning efforts, because J&J is motivated by things that J&J is motivated by. We also look at the individual sales growth from the various countries that we know and what those sales trajectories are. And the final thing I would say is, remember, most of our revenues come from manufacturing.

And we manufacture new vials of Risperdal Consta for J&J. It gets shipped to J&J, they package it, they ship it around the world to 90 countries. So the material that's being bought and shipped to J&J today probably won't be used for anywhere from three to six months from now in patients. Our manufacturing revenues also provide a projection as to future sales, and obviously, J&J is paying for those when they come in. We think they spend a fair amount of time looking at those projections. Hopefully that gives you some color on how we think about our long-term guidance for Consta.

Okay. Operator, I think we'll take the next question.

Our next question comes from Steve Yoo from Leerink Swann. Please go ahead.

Thanks for taking the question, just a quick follow-up on a couple of questions. The first is the 9070 Phase IIb-III trial. If you were to go solo, about how much would it cost, rough ballpark?

Jim, do you have a ballpark on that yet?

I don't think we've determined the number of patients or how long it would go, Steve. I think you're probably talking in the $5 million to $10 million range depending on the numbers. But we can obviously be more specific when we see the data and design the study.

And the other question was on Vivitrol. Right now you're marketing to the current high Vivitrol prescribers, the one that are prescribing alcohol dependence.

That's right. How many in the current subset. How many doctors have their own inpatient detox and how many of them are high Suboxone subscribers.

The overlap with high-prescribing Suboxone is not particularly great. Rebecca, do you know --?

On the order of 20% to 30%.

I was going to say about 20%. Rebecca says 20% to 30%. So that's probably somewhere close.I don't know the answer to how many of them do their own inpatient detox.

Most of them do detox. They don't necessarily do it in patients. Most of the Vivitrol doctors know how to detox patients.

Okay. And in the 20% to 30% of doctors, where you do overlap the high-Suboxone doctors, do you see any difference? Are those doctors more willing, less willing to try for opioid dependence at this point?

I think all of these current users of Vivitrol are pretty interested in expanding the utilization and many of them have been waiting for the label expansion, so they can get reimbursed for doing that. That's an enriched group of docs, and it's difficult to extrapolate from that to what the current Suboxone prescriber or the non-Vivitrol user will do. It's hard for us to forecast. The ones that are, I think they're quite receptive to it.

Thank you.

You're welcome.

Our next question comes from David Windley from Jefferies & Company. Please go ahead.

Thanks for taking the questions. Jim, the gross margin on Consta appeared to decline by a fair amount year-over-year, and I wondered if, I saw also that you didn't raise your COGS in your guidance, along with the revenue raise. I just wondered if there was a timing issue in regard to Consta costs?

No, Dave. I think the main difference in margin was that in the December quarter, J&J made some adjustments at the end that affected US pricing as I mentioned for Medicaid reimbursement. So that was just a price issue as opposed to a COGS issue for us, if that makes sense. That's what affected the margin the most.

Okay. And second question would be around capital. So obviously, certainly understand overall you're expecting to use cash, but you're probably within a year hopefully of swimming in cash. So what might you -- you won't burn all $285 million hopefully. So what are your plans for what you'll have left over?

I think that's a question we look at, I don't want to say every day, but we're constantly looking at the appropriate use of our cash. As you say, hopefully next year as Vivitrol matures, and the opiate indication and as Bydureon wins approval around the world, we should see cash flow going up. Currently, it's driven mainly by Risperdal Consta. I think we're in an envious position now, having bought back almost $130 million of debt, and over $110 million of shares over time. We've moved to decrease our share count and invest as you will, if you will, in our pipeline broadly.

We also have the ability to develop new products. I think we're in an envious position of looking at the ability to have some near term launches coming with some exciting products, and also investing in the pipeline and getting data on that in the next three to six months. And so for now, I think we'll remain focused on operating our business and finding out what that information holds for us. And then we can decide how best to deploy our capital. Certainly, we can build our pipeline and launch our products without having to worry about taking more equity dilution.

Okay, thank you.

Operator, I think we have time for one more question this evening.

Our final question comes from Ian Sanderson from Cowen and Company. Please go ahead.

Good afternoon. Thanks for taking the question. On ALKS 9070, does the PK profile at this point indicate that oral supplementation will or will not be required, prior to steady state?

We don't have the data in hand yet. So that will be determined when we get the data.

Is that the goal?

No, not necessarily. Typically, people switching to a long acting, it isn't their first experience with the drug. We'll determine what the oral supplementation or what the initial dosing strategy will be when we see the PK.

And secondly, any update on 6931?

Ian, we're still in the formulation stages of 6931, and trying to optimize that formulation. So that is in the preclinical stage.

Okay. And then finally, on Vivitrol, you mention that had you may have some EU filings over the next year or so. What will be the marketing strategy for the EU? Would you look for a partner to do the whole thing, or perhaps do it yourself?

We won't do it ourselves likely. What we'll probably do is, we're having discussions about kind of a global partner. We're also having discussions on a regional distribution basis, and both look attractive. Our plan is to proceed with the registration of it, and make that call as we go along.

Great. Thank you very much.

And interestingly, Ian, it prompts me to remind you we do have a deal in one country on Vivitrol, and that's with J&J in Russia. And it's interesting because of the clinical trial having run in Russia, and with Russia, you've seen in the New York Times the articles about the problem with HIV transmission in addicts in Russia. I think Russia will be an interesting case for us to watch. And I'm not presupposing any outcome, I just think it's interesting, because Vivitrol is not yet approved in this new indication in Russia, but it will be first place OUS where it is, we expect and we'll how it performs over there. And a really important public health issue.

I did notice that you booked a small amount of revenues from Russia in the quarter. Is this the first quarter that it's actively been marketed in Russia?

No, it's been marketed in alcohol for some time, Ian, a little over a year. This is the first quarter where sales were over $500,000 in Russia this quarter. It's beginning to see some traction.

Okay.

And J&J has submitted the filing for the opioid indication to gain approval for that as well.

Great. Thank you.

Thank you.

Thanks everyone for the dialing in tonight. And if you have any additional questions, please don't hesitate to contact the Company. Have a good evening.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for the participating, you may now disconnect.