Alkermes Plc (ALKS) 2012 Q2 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 second quarter and fiscal year 2012 financial results. At this time, all participants 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 now like to introduce your host for today's call, Ms. Rebecca Peterson, Vice President of Corporate Communications at Alkermes. Please go ahead.

Good morning and welcome to Alkermes PLC conference call to discuss our financial results for the second quarter of fiscal 2012, which ended on September 30, 2011. With me this morning are Richard Pops, our CEO; Shane Cooke, our President; and Jim Frates, our CFO.

Before we begin today, let me remind you that during the call, we will make forward-looking statements relating to, among other things, our expectations concerning the commercialization of RISPERDAL CONSTA, INVEGA SUSTENNA, AMPYRA, BYDUREON and VIVITROL; the financial and operational impact of the merger between Alkermes Inc. and the Elan Drug Technologies, which we will refer to as EDT; the timing of additional development activities for BYDUREON; the approval and commercialization of BYDUREON; our future financial expectations and business performance and our expectations concerning the therapeutic value and the 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, our registration statement on Form S-4, effective on August 4, 2011, filed with the SEC, and the most recent ALKS, Inc. annual report filed with the SEC identify risk factors that could cause our actual performance to differ materially from those projected 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 developments.

This morning, Jim Frates will discuss our second-quarter financial results and Richard Pops will provide an update on the company. After our remarks, we will open up the call for Q&A.

Now I would like to turn over the call to Jim.

Thanks, Rebecca. Good morning, everyone. Today, we are reporting quarterly results for the first time as Alkermes PLC, following the successful completion of the merger with EDT on September 16, 2011. We now have been a combined organization for seven weeks and we're well on our way to becoming a truly differentiated Company, one with a portfolio that includes key products early in their commercial lives, a valuable and rapidly advancing pipeline focused on CNS, and a corporate structure and management philosophy oriented to deliver strong financial results.

Thus far, we have only reported financial results for the combined Company for the 14 days post the merger close, but you can start to see the power of the combination and the transformative effect that it will have our financial profile. Our updated guidance for this fiscal year reflects the broader revenues and adjusted EBITDA that the combined business can generate, and we are eager to deliver on the promise of the new Alkermes.

Let me start by providing some highlights of our second-quarter results. We recorded total revenues of $72 million, a 46% increase over the second quarter of last year. This increase in revenues was a result of the contributions from the EDT business, a milestone payment received when BYDUREON launched in the EU, the increase in net sales of VIVITROL and the strong performance of our long-acting antipsychotic franchise.

Since we now receive revenues from both RISPERDAL CONSTA and INVEGA SUSTENNA, we have a valuable stake in a long-acting market, and that market is doing extremely well. As J&J stated on their last earnings call, quote, total US sales of our long-acting injectables including INVEGA SUSTENNA increased over 25% versus a year ago, due to an increase in combined market share, end quote.

Manufacturing and royalty revenues from RISPERDAL CONSTA were approximately $44 million. Worldwide and market sales of CONSTA in the quarter were $390 million. J&J does not break out INVEGA SUSTENNA sales at this time, but the product is growing nicely and we expect to be able to share more information in the future. We anticipate our net economics on RISPERDAL CONSTA and INVEGA SUSTENNA will be roughly equal, so Alkermes is well-positioned to benefit from this growing franchise.

Net sales of VIVITROL for the second quarter of fiscal 2012 were $9.9 million, representing the ninth consecutive quarter of growth. This reflects 2% growth sequentially and 53% growth over the same quarter last year. Due to the timing of the AMPYRA shipments, we recognized only a modest amount of revenue during the 14-day stub period. Acorda will be reporting their third-quarter AMPYRA sales tomorrow. And as a reminder, AMPYRA sales in Acorda's second quarter were $51.8 million, and they were $46.8 million in their first quarter.

Our economics on AMPYRA are a combined manufacturing and royalty rate of 18% of net sales. With anticipated growth in the United States and the launch of the product around the world by Biogen, we are confident that AMPYRA will be an important source of growth for the Company.

With respect to BYDUREON, Alkermes received a milestone payment of $7 million related to the launch in the UK in July. BYDUREON has also been launched in Germany recently, and for the quarter ended September 30, end market sales for BYDUREON as reported by Lily were approximately $800,000, which is clearly just a start for this potential blockbuster product. As the launch continues, Alkermes will receive an 8% royalty on worldwide net sales.

Turning to expenses, total operating expenses for the second quarter were $83.7 million. These expenses included $12.8 million of merger-related expenses which flowed through SG&A and $6.8 million of expenses associated with the EDT business during the last 14 days of the quarter. R&D expenses were flat from the first quarter of fiscal 2012. You should note that we also have a new non-cash line item in our operating expenses for the amortization of intangible assets related to the purchase of EDT. As we have said previously, we expect annual charges related to amortization in the range of $40 million to $80 million. These charges will follow a bell curve over approximately the next 10 years and we will provide our expectations on amortization charges on an annual basis in conjunction with our annual guidance.

Net interest expense for the quarter was $7.2 million, related primarily to the $450 million of term loan secured on June 30 to fund the merger with EDT.

During the second quarter, we also recorded tax expense of $3.7 million. This charge is primarily related to state and federal alternative minimum taxes, both on the transfer of BYDUREON to our Irish subsidiary. Long-term, we expect a blended tax rate of approximately 20% for the combined company with profits being taxed in the jurisdiction in which they are generated.

Finally, since we announced the merger in May, we have been highlighting adjusted EBITDA as the most appropriate financial measure of our ongoing business operations since it provides a clear picture of the fundamentals of our business. Our adjusted EBITDA for the quarter was a positive $13.3 million, which reflects our GAAP net loss of $22.3 million less the following items -- first, interest expense of $7.6 million; second, the taxes of $3.7 million; and, third, non-cash and nonrecurring items. These non-cash items include the amortization of the intangibles created through the EDT transaction, which was $1.8 million for the last two weeks of the second quarter, and share-based compensation expense of $7.1 million for the quarter. Our adjusted EBITDA also excludes $12.8 million of nonrecurring charges related to merger expenses.

In the last 14 days of September, the EDT business contributed approximately $3.4 million of the total adjusted EBITDA of $13.3 million for the quarter. For a full reconciliation of our adjusted EBITDA to GAAP as well as further details from our second-quarter fiscal 2012 revenues and expenses, please review the press release issued earlier this morning.

As of September 30, 2011, we had approximately $241 million in cash and total investments. The decrease in cash from the June 30 balance of approximately $285 million was primarily related to the use of $50 million in cash to finance the merger transaction.

I will now provide some highlights of our financial expectations for fiscal 2012. As you may recall, on our May year-end results call we provided our financial expectations for Alkermes, Inc. on a standalone basis. We are on track with those expectations we set forth in May for the Alkermes, Inc. business and for the merger, and today in our press release we provided our full financial expectations for the combined Company for fiscal 2012, which includes the contributions from the EDT business from the September 16 close of the merger through March 31, 2012.

I would like to highlight the key elements of our expectations for fiscal year 2012 now. We expect total revenues to range from $350 million to $380 million. This strong base of revenues reflects the diversified portfolio and we expect growth to be driven by our five key products. Our GAAP net loss for fiscal 2012 is expected to be in the range of $90 million to $102 million, or approximately $0.78 to $0.89 per basic and diluted share based on 115 million weighted average shares outstanding. This includes the impact of the transaction cost, interest expense on the debt and the amortization of intangibles related to the merger.

We expect adjusted EBITDA to be in the range of a positive $45 million to $55 million for fiscal 2012, or adjusted EBITDA of approximately $0.38 to $0.46 per diluted share based on 120 million weighted average shares outstanding on a diluted basis. This positive EBITDA number represents a measure of profitability for Alkermes PLC's ongoing operations and underscores the transformative nature of the merger.

As you can see, these expectations represent a significant increase in revenues and adjusted EBITDA for Alkermes and are a strong foundation from which we can continue to grow our business. From this base, we will be diligently focused on meeting the financial targets we have established for Alkermes.

With that I will turn the call over to Rich.

Great, thank you, Jim. So that was an incredibly exciting and important quarter for Alkermes in the history of this Company. We think that Alkermes is now one of the most interesting and exciting CNS companies in the entire pharmaceutical industry. And by CNS, in our parlance we mean targeting disease areas within established medical markets with known regulatory pathways. We are focused on opportunities to improve treatment outcomes and expand options for millions of patients with debilitating diseases like schizophrenia, pain and depression. We are now in a stronger position than ever before to seize these opportunities. With our size, our global reach, our proprietary science and our track record for innovative products, we believe that we're just at the beginning of a new growth phase with real potential for robust growth in the near term and in the long term.

So the near-term growth will come from our newly diversified portfolio of commercial products, particularly our five high growth commercial products with long patent lives -- RISPERDAL CONSTA, INVEGA SUSTENNA, AMPYRA, VIVITROL and BYDUREON. Our long-acting atypical franchise of CONSTA and SUSTENNA is growing. By uniting CONSTA and SUSTENNA within our business, our stake in a growing multibillion dollar market has multiplied and we expect this growing franchise to be an important source of revenue for us for years to come.

For AMPYRA, our partners at Acorda are launching the product in the US, and Biogen recently launched the product outside the US in Germany, Australia and the UK. Additional launch preparations are underway for the rest of Europe and we expect additional countries rolling out in 2012 as reimbursement discussions are finalized. AMPYRA is a singular drug in its class and it's a highly efficacious product for the patients it benefits.

On the VIVITROL front, this quarter we had our ninth consecutive quarter of growth. We are making steady progress in the launch of the VIVITROL in the opioid dependence indication. VIVITROL is gaining recognition as an important tool for treating opioid and alcohol addiction, and we believe that its use will continue to grow. We believe this primarily because of its efficacy in the real world and the growing body of experience supporting its expanded use.

That said, old patterns of behavior need to be changed and they need to be changed in the setting of an intense focus on costs. We actually think that VIVITROL can perform well in this type of setting, but that payers need to be persuaded by data, and generating this data takes time. Looking forward, we continue to see real promise for the use of VIVITROL.

Turning to BYDUREON, it's gratifying to say at last that the commercial launch is now underway in two important EU markets, the UK and Germany. In October, the National Institute of Clinical Health and Excellence, or NICE, the government agency in the UK that oversees reimbursement of medications, issued a preliminary recommendation to reimburse BYDUREON with a final recommendation expected in February. This is obviously good news on its own, but I think it may represent a more general condition that our partners will be able to exploit as they launch BYDUREON in the US and around the world. And that's the fact that there's a significant existing body of clinical and outcomes experience with BYETTA, the twice-a-day precursor to BYDUREON. We expect these data, taken together with the compelling results of the clinical trials of BYDUREON itself, will provide a significant package of information useful to payers as they make coverage decisions for BYDUREON. In the US, prelaunch activities are underway as we approached the January 28 PDUFA date. So by the time our next earnings call, we will have passed that PDUFA date, and I hope to be updating you on the preparations for the launch.

So that's the summary of the five key commercial products. We have a strong commercial portfolio, and you heard Jim say -- and I believe strongly -- we expect to continue to grow. Our longer-term growth opportunities will come from this robust portfolio of development candidates with a focus in CNS areas where we are establishing ourselves as a global leader. We're quite excited about the progress we're making here, and I will turn now to some of the upcoming milestones you can expect in the development of certain of these proprietary product candidates.

Let's talk first about ALKS 37, which is our orally active, peripherally restricted opioid antagonist for the treatment of opioid-induced constipation. As you know, this is a competitive space and we are playing to win. That's why we have designed our Phase 2 program to provide us with the maximum amount of information to inform the Phase 3 program. We recently initiated a second 12-week fixed-does Phase 2b study to complement the definitive Phase 2b dose ranging study initiated earlier this year. We expect data from both studies in mid-calendar 2012, and then we plan to move forward with two parallel Phase 3 studies.

For ALKS 5461, which is ALKS 33 in combination with buprenorphine, we expect to provide results of the Phase 1b study in treatment-resistant depression early in 2012. This is an area of significant unmet medical need, and we designed this first study to get a fast look at the safety and tolerability of different ratios of the two active agents. For ALKS 9070, our long-acting NCE which metabolizes in the body into aripiprazole, we announced positive results of a 1b study in patients with schizophrenia earlier this year. Based on the positive results of this study and following a very clear end of Phase 2 meeting with the FDA in September, we are moving forward to advance ALKS 9070 into pivotal clinical development by the end of this calendar year. If it's successful, 9070 will enter a multibillion dollar global market whose needs are currently being met only by the availability of two excellent but pharmacologically similar drugs, long-acting risperidone, RISPERDAL CONSTA, and its metabolite, paliperidone, or INVEGA SUSTENNA. This is the market characterized by physicians' use of multiple drugs in different patients since patients often cycle across different medications. So we see the introduction of a new long-acting agent as being a logical means of continuing to build the growth in this market. ALKS 9070 will allow us to take advantage of our experience in the long-acting atypical space and the increasingly proven value to patients and providers of long-acting medications for the treatment of schizophrenia and bipolar disease.

So I hope you can begin to see how the new Alkermes is a growing global leader in CNS therapeutics committed to developing innovative products for a broad range of diseases to benefit patients and healthcare systems around the world. The merger is complete. Integration has gone exceptionally well. We're firing on all cylinders with plans to aggressively develop our late-stage pipeline projects while also being rigorous about meeting the financial targets we've laid out. You will hear us talk about the combination of the here and now -- that is, the commercial products generating long-term revenue growth -- and the future growth driven by the quality of the pipeline. The proof is in the pudding, and this group of proprietary product candidates is the beginning of the realization of this promise.

So with that I'll turn the call back to Rebecca for questions.

We will now open up the line for questions, John?

(Operator instructions) Graig Suvannavejh, Jefferies.

Thanks, good morning, and congratulations on the quarter. I just had three initial questions.

First, can you just give us any more sense of your meeting with the FDA on 9070? I know you do plan on entering Phase 3, but any sense of whether this will be a typical Phase 3 program similar to what we've seen with the other long-acting atypicals, or is there a way to accelerate things, given your experience in the field?

Second, just on VIVITROL, even though you did see some growth, I was wondering -- sequential growth was smaller than I think I had expected. So I was just wondering if you could guide us maybe on how you think that will continue going forward.

And then, lastly, just on synergies, I was hoping you might be able to provide an update on where you think you stand there and whether there's any up additional opportunities.

I'll take those, Graig, it's Rich. (technical difficulty) I'll take them in sequence. The meeting with FDA on 97 was a really important meeting, as you know. And as I said in the prepared remarks, it was a very clear meeting, which was nice. And it was consistent with what we had expected from our earlier interactions with them, namely that we can proceed from the 1b into Phase 3 clinical trials, that we can leverage safety and efficacy information from aripiprazole in putting together our new drug application. And in terms of the Phase 3 design, we expect to run a single efficacy study in the US in the acute schizophrenia indication and be able to file in combination with a safety study that will run concurrently with that. So that was very positive for us.

One of the mantras around here is the best way to maximize your R&D dollar is by moving quickly to key decision points. And you saw how quickly we moved to get the 1b information and how quickly now we can move into Phase 3. So that program has a lot of steam behind it.

VIVITROL -- you are right; the quarter-on-quarter growth was about 2%. It's still, in terms of absolute numbers of cartons that comprise the sales each quarter, it's still fairly small numbers. So timing of shipments and pull-through and utilization by various clinics can really skew the numbers still off of a fairly small base. So we remain quite optimistic. There's a lot of exciting things that are happening out there in the field and we are taking a bit of a longer view on it, just kind of watching it grow. And that's why that nine-quarter curve, that sequence of points, describes an increasing line and we think that's going to continue.

On the synergies, Jim can comment, or Shane can comment in more detail. But the simple answer is that we have realized the synergies that we anticipated when we were putting the merger together. We've executed on that. We've reviewed the portfolio. We've rationalized to the extent we are going to rationalize, and we are now all systems go moving forward.

Okay, great. If I could just have a quick follow-up on 9070, given that you're going to be running only one single Phase 3 study in conjunction with the safety study, any rough guesstimates on potential filing time lines on that product?

I think we will give a little bit more guidance on that when we start the study and we scope out and describe exactly what the study looks like. But there's nothing particularly unusual about that.

And I'll say that we think about this product on a global basis, so there will be other studies. We will run studies in Europe in order to support European approval and reimbursement as well. But we are encouraged with the fact that a single Phase 3 study will confirm the efficacy of aripiprazole in the treatment of schizophrenia.

Thank you very much and, again, congrats.

Cory Kasimov, JP Morgan.

Thanks for taking the questions. I have two, also one on 9070. Just wondering if you could update us on your latest thinking regarding business development plans for the product and whether or not anything you've learned from the FDA with regard to the Phase 3 program changes how you might be thinking about that. So then I have a follow up after that.

No; 9070 is kind of -- it's going along exactly the development path that we thought -- that we hoped for, and that is it's entirely manageable by us. We know what we're doing here. We have some experience in this space and we are going like gangbusters on it.

On the business developer site, as I've said all along, this is an interesting product. It's an established market. It's a novel product with a long patent life and there's definitely interest in the outside world in products of this nature. But we don't want to be rate limited by anybody.

So we're going to keep going. We are beginning to talk to folks now because we have the 1b in hand and the FDA clarity in hand, so it's easy for us to talk to other folks about it. It's one of the real gems in our portfolio right now, so we will just carry on. But ultimately, I can see having a commercial partner, particularly for territories outside the US.

And then my follow-up is a little bit off the beaten path here, and it's with regard to Sanofi and Zealand Pharmas, GLP-1 (inaudible) exenatide which I believe is based off of Elan's technology. So given that the initial regulatory submission was announced today for Europe, can you tell us how much of a royalty you may be getting on this product if it's ultimately approved?

We won't give you a precise on [EN], but it's a low single-digit royalty.

Okay, all right, thank you.

Stephen Byrne, Bank of America.

Jim, you had another quarter here where the CONSTA manufacturing revenues seem to be ahead of the actual end market sales. Are you looking for a corresponding contraction in these next couple of quarters? And can you comment on your previous guidance for CONSTA of $120 million to $125 million?

Yes, good morning, Steve. You are right to note that. Over the years, we've always had multi quarters with RISPERDAL CONSTA. It's interesting; this happens to be the second-best quarter in manufacturing that we've ever had, actually, behind only last quarter. But that's why I mentioned in the remarks that we are keeping our guidance for Alkermes, Inc. consistent that we gave back in May. So we still see the same overall yearly manufacturing revenues for RISPERDAL CONSTA, as you've outlined. So no changes there.

Okay. And with respect to VIVITROL, Rich, your comments earlier about costs and so forth -- is it your view that payers' reluctance to support VIVITROL is what is leading to the stalled revenue growth?

I don't think it's that easy to say. I think that we are actually seeing an expanded footprint of people using VIVITROL. And interestingly -- we didn't dwell on it during the call, Steve, but you are a pro on this stuff. So we've actually got seven states now, for example, that are running programs either in criminal justice or otherwise testing the use of VIVITROL, and that number has gone up significantly. And one of the things that our policy folks are excited about -- every time they focus on a state and apply energy there, we end up with a program, and we believe those programs are going to yield important data, not just in criminal justice or in the state, but just in terms of the use of VIVITROL overall.

So if we didn't feel that things were changing out there, we wouldn't be as optimistic as we are. That said, we are taking a longer view of it. We really don't have competition in this space in terms of other long-acting or antagonist approaches. The drug works quite well, so we're just carrying on. And we feel like it's building out there.

And can you comment on your support program for those patients that are either uninsured or need some support on the co-pay?

Well, there's two different things. Obviously, we have different pricing for 340-E type institutions and there's discounted pricing for Medicaid as well. And there are all kinds of federal block grants that help support the use of VIVITROL in patient populations that can't pay. For the more commercial type there's we have a co-pay assistance card that can provide -- Rebecca, you will know specifics -- up to --

Up to $500 a month for more than a year.

For more than a year, so we're trying to remove any barriers related to getting onto VIVITROL as they relate to co-pays or access cost.

And then just lastly, can you comment on your discussions with payers about the Depot formulations of the antipsychotics? Do you see any increased interest there or a recognition of overall cost benefits to move to one of the long-acting antipsychotics?

I do, and there's a countervailing force there. So yes, the data are quite clear. The opposing force, of course, is that in the US this is typically state-based Medicaid systems, and states are under enormous pressure in terms of funding their pharmacy budgets at this point.

Now, there's a couple of other factors that are changing in the marketplace. We believe that Otsuka will come to market with a long-acting form of a drug, and with our coming with 9070, all the sudden, the intensity, the promotional energy, the information around long-acting atypicals will go up by quanta, because really, right now, it's only Johnson & Johnson out advocating the use of long-acting atypicals. So we actually think that the class should continue to grow and expand as new agents come in.

All right, thank you.

Anant Padmanabhan, Cowen and Company.

I have a few questions. First, on the revenue guidance, could you talk about what drives the revenue range from $350 million to $380 million? Is a mostly BYDUREON? Is there anything else there? Then, I have a couple of others.

Yes -- no; I would say the expansion is actually mainly from the full -- the next six months, we'll have the entire EDT portfolio. So you are seeing the -- yes, on the Alkermes, Inc. side you are seeing increase from the VIVITROL and CONSTA, mainly. And BYDUREON is only a very small amount; I think we have 0 to $5 million in royalty revenues in for the United States, actually for the whole world with the US PDUFA date in January. So the main driver in the expanded revenues is having the EDT business together with the Alkermes business from now going forward.

Okay. And On VIVITROL, could you just talk about whether IMS prescriptions are a good indicator of VIVITROL sales, in the first place? It seems like prescriptions were down as per IMS about 10% in the quarter. So was there stocking? And how we reconcile this difference?

I'll take that. I think, as I am as grew dramatically in the first quarter, we cautioned people about using it for such a relatively small product that goes through specialty distributors. And they have made -- we know they have made formula changes as well through the process.

So I think neither the growth that we've seen in the first quarter or the relative decline in IMS is something -- we've seen a steady growth in prescriptions over the course of the year. So I would -- IMS should be used directionally, but I would caution trying to find exactly what the gross sales are until we get more data in hand and the product gets a little bigger.

Thanks. Can you compare or do you get an early sense of the duration of therapy for the opioid indication versus alcohol?

Yes, it's a good question. I believe we are seeing it lengthen. Again, it's still early days. We get good data out of our hub, but that's only about 40% of the prescriptions that come through. So we are seeing it lengthen in average by a few months, and I think our hope is that in the opioid space, again, if people are committed to being opiate-free, that VIVITROL could provide support for a much longer period of time than the three or four months average that we are seeing now.

Okay, thank you.

Ami Fadia, UBS.

I have a couple questions. Firstly, on the R&D guidance, could you give us some clarity around your thinking behind the guidance? You mentioned a little bit about streamlining some of the pipeline assets. Have you gone through a full process of reviewing your pipeline and deciding which ones you want to take forward or not? Or is that something that's sort of planned for sometime in the future?

Secondly, with respect to the SG&A guidance, how much of SG&A from the EDT side is in that guidance? Or another words, have you maintained your Alkermes guidance on SG&A line, and is there any potential for synergies there?

And then just thirdly, on ALKS 9070, how do you see your product being differentiated from Otsuka?

Jim, why don't you take that?

Okay, I'll start with R&D and SG&A. So the portfolio review has been done, and I think we are very pleased with the outcomes of that because we really concentrated on what we think are the best parts of the portfolio. And I think, as you can see, if you added together what EDT spent in R&D last year, which is roughly $50 million, and our guidance for the last -- for this year was $110 million to $125 million. So for the full year now, we are looking at $135 million to $145 million, and that includes -- so it includes less spending on the overall portfolios, but at the same time we're increasing spending on 9070 and 37 as they move into Phase 3.

So I would say we have realized those synergies. We have rationalized the portfolio, but we are moving aggressively into late stage studies with 37 and 9070. So on the one hand, we are saving; on the other hand we are spending more on clinical studies, which is the exact right spot to be spending them, in our opinion. So I think we are on track there, and that's very positive.

On the SG&A side you will see EDT spent roughly $40 million a year, and that would be on top of the roughly $80 million to $90 million that we have been spending. So we're going to be adding $8 million or $9 million a quarter. We think we will realize those synergies of roughly $5 million that we outlined because we think we can manage the business slightly more efficiently than it had been, mainly due to just our corporate structure as opposed to the old Elan corporate structure. So I think, again, we have put those estimates into our guidance going forward, and we are really maintaining the Alkermes, Inc. guidance. But with international structure, a number of different sites and, frankly, the tax planning and intercompany work that we have to do, there will be more work to do as we go forward than there would have been if it was just Alkermes, Inc. So I think those are the two synergy questions.

Jim, if I could just have a follow up on the SG&A question, you said around $40 million for EDT and $80 million to $90 million for Alkermes, perhaps to $130 million. So then the guidance for fiscal 2012 is $130 million to $140 million, which includes really a little over a half a year of EDT.

That's correct, but you also, so this year -- Ami, I'm sorry, I probably should have mentioned, we also have the one-off merger expenses, which are $25 million to $30 million that run through SG&A. So it's kind of you have to subtract the merger expenses and then you can look at your half-year/full-year kind of convention. But going forward, because of EDT we'll be adding about $8 million to $9 million a quarter on SG&A on a rationalized non-deal affected year.

That's makes a lot more sense, thanks.

Okay, sorry, thanks for that clarification.

Ami, it's Rich. Let me answer the question on 9070. It's a really important point that what we are developing in 9070 is a new chemical entity. It's a pro-drug of aripiprazole designed specifically for long-acting intramuscular injection. What Otsuka is doing, which I actually hope they are successful in doing it, is they have taken native aripiprazole and they have formulated into a long-acting Depot. By creating the pro-drug, which is a very deliberate strategy, it can do a number of different things as a pro-drug. Number one, we think we have potential advantages in terms of local tolerability in the muscle. We think we have advantages potentially in dosing, i.e., the amount of total dose we can deliver. And number three is in ease-of-use, and that's something we know a lot about, having developed both RISPERDAL CONSTA, INVEGA SUSTENNA and how important the actual delivery of the dose is in the real world.

So we are actually looking forward to seeing Otsuka Phase 3 data, which we really haven't seen in any detail. Hopefully, we will see most of the complete set in an FDA Advisory Committee, and then I think differences will become more clear.

Thank you.

Bill Tanner, Lazard Capital Markets.

I know that you guys did touch on this at the analyst meeting back during the summer, but I just wanted your thoughts on the philosophy or the discipline on R&D longer-term in terms of spending. I don't know if you want to continue to characterize it as a percentage of revenues. Then, also, if you could just comment on the adequacy of the pipeline as you see it now, maybe size and stage of development. And then with some data points reading out for 37, 54, 61, let's just say one or both of these do not move forward, how do you guys contemplate backfilling the pipeline?

Those are great questions. So it's one of the things that actually gets us most excited as a management team here is that we actually think we can deliver on advancing this pipeline which is looking quite strong, within the constraints we're setting for ourselves on the R&D spend and still deliver this going top line and growing adjusted EBITDA line simultaneously, even without factoring in potential corporate partnerships or other revenue-generating things that we are not building into our base model. With the top line, if you will, on the R&D spend, if it's something that's circa $150 million a year, we actually have a lot of room because we don't have a big fixed nut every year. We don't have a huge R&D base organization, and the variable cost, the levers tend to be what we spend on outside as we make progress in the product development programs.

So the pipeline, in answer to your second -- we actually think the pipeline is looking very strong right now. We will always have feelers out into universe looking for things that augment our pipeline, but I can say those initiatives are competing against some homegrown things are looking very, very strong. And I think you're going to see more and more about this over the next few months. And that's why we are increasingly comfortable describing ourselves as a CNS-focused company. It's where traditionally we have developed products, and as we look forward we see opportunities for us.

So we expect certain of these pipeline candidates over time to succeed and fail. And that's actually the healthy part of the R&D culture here. So we have this legitimate jump ball of which programs are competing for the dollars in each budget cycle. And we are not going to solve for R&D spend based on a percentage of revenue. We're going to solve for it in two ways -- one, to meet our EBITDA target that we're setting for ourselves and, number two, to fund the best programs as aggressively as we can.

Okay, thanks very much.

Jon LeCroy, MKM Partners.

It's really just a modeling question. I know that Elan broke out some of their revenue lines and you guys have a lot of moving parts on the revenue line. Going forward, are you going to break things out in a little more granularity, or should we just assume it's going to mostly just be top line?

Yes. No, going forward. what are planning to do is to do is to break out those products that make up a substantial part of our revenues. And you've seen it at a little bit higher level; we broke out the Alkermes ones this quarter because those are the ones that are, with only 14 days of EDT, none of them really rose to the level of greater than 10% of revenues. But going forward, you will see that breakout, really much has EDT and Elan did and most companies do with their key products.

And then in the Q, will there be any more sort of full-quarter Elan information in there, or is it still just the 14 days?

No, it's the 14 days. The SEC really dictates that. You can see the other I guess 76 days in the Elan results, actually, which were published last week, and they have very detailed summary of the results. But they were quite strong with, I think if you look at the full quarter, adjusted EBITDA of roughly $20 million for the EDT business. So it's really nice to have the business going forward together, and we're looking forward to report next quarter as a full company for the full 90 days.

And then, internally, do you have any thoughts of what INVEGA -- what you guys are expecting INVEGA to sell worldwide this year or over the next two or three (multiple speakers) ?

It's interesting; the nice part of the portfolio for us now is that we have both CONSTA and INVEGA SUSTENNA. And as INVEGA is growing -- and I think the best -- we are a little limited because it's J&J's product and they are not breaking sales out, so we're trying to be a good partner there. But again, as it becomes more important in our overall quarter, we will give details to it. And I expect J&J will give details to INVEGA SUSTENNA. But CONSTA is on track to do over $1.5 billion this year and the 25% growth compared to the quarter last year with the whole franchise is something that we think bodes very well for Alkermes going forward.

Last question -- is it a focus to pay down debt over time with your cash flow, or --

Yes, it certainly is, and we will be looking at -- as we are generating cash now, we are obligated and are interested in paying down some of the debt. So our obligations under the loans are using 50% of our free cash flow to pay down debt. We could do more. We'll obviously be focused on keeping our share count as low as we can and also on investing in things. But with $240 million in cash and starting to generate cash, we'll be able to manage our capital structure a lot more aggressively than we have in the past.

Okay, thank you.

All right, everyone, thanks for dialing in this morning. If you have any additional questions, please don't hesitate to call us at the Company. Have a great day.

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