Alkermes Plc (ALKS) 2013 Q4 法說會逐字稿

Welcome to the Alkermes plc conference call to discuss the Company's quarter and nine-month period ended December 31, 2013 financial results.

(Operator Instructions)

At this time, I would like to introduce your host for today's call, Ms. Rebecca Peterson, Senior Vice President of Corporate Communications at Alkermes. Please go ahead.

Thanks, Brendan. Welcome to Alkermes plc conference call to discuss our financial results for the 3 month and 9 month period ended December 31, 2013. With me today are Richard Pops, our CEO, Shane Cooke, our President, and Jim Frates, our CFO.

Before we begin today, let me remind you and encourage you to go to the investor relations section of Alkermes.com to find the press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today. We believe the non-GAAP financial results better represent the ongoing economics of our business.

We will also be making forward-looking statements based on our current expectations relating to, among other things, our expectations concerning the commercialization of RISPERDAL CONSTA, INVEGA SUSTENNA, AMPYRA/FAMPYRA, BYDUREON and VIVITROL; our future financial expectations and business performance; and our expectations concerning our products’ therapeutic scope and value, and clinical development. These forward-looking statements, which may be identified by words such as will, believe, and similar phrases, are neither promises nor guarantees and are subject to a high degree of uncertainty and risk.

Please see our press release issued today and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those projected or suggested in the 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.

Today, Jim Frates will discuss our financial results and calendar 2014 guidance, and then Richard Pops will provide a brief update on the Company. After our remarks, we'll open up the call for Q&A. Now I'd like to turn over the call to Jim.

Thanks, Rebecca. Good morning, everyone. We're excited to be joining you from our headquarters in Dublin with your results for the quarter and nine month periods ended December 31, 2013, marking our transition to a December 31 fiscal year end. We ended the period in a strong position and ahead of expectations. Today, we'll also provide our guidance for 2014.

Many of you are already modeling the Company on a calendar-year basis in anticipation of our change in fiscal year end. So in addition to quarterly results, I'll provide an overview of results for the full calendar year. For calendar year 2013, Alkermes generated record revenues of nearly $600 million, non-GAAP net income of $170 million, and free cash flow of $143 million. These results were driven by the robust performance of our commercial portfolio, which is the financial engine that enables us to advance our late-stage pipeline and to invest in preparations for the expected commercial launch of aripiprazole lauroxil. These initiatives represent important opportunities for value creation and growth for the Company.

Turning to the quarter ended December 31, within our commercial portfolio, our long-acting atypical franchise, RISPERDAL CONSTA and INVEGA SUSTENNA, continued to grow at double-digit rates. Worldwide end-market sales for RISPERDAL CONSTA and INVEGA SUSTENNA during the quarter were approximately $671 million, compared to $586 million for the same period last year.

For the quarter, Alkermes recorded manufacturing and royalty revenues of $71.2 million for this product franchise, compared to $52.5 million for the same period last year. The steady growth of this franchise is impressive and, as you know, this will take on a new level of significance for us as we prepare to launch aripiprazole lauroxil.

For AMPYRA and FAMPYRA, our manufacturing and royalty revenues were $18.6 million for the quarter, based on worldwide end-market net sales of approximately $102 million, as reported by our partners, Acorda and Biogen. VIVITROL had another strong quarter with record net sales of $20.6 million, compared to $15.9 million for the same period last year, an increase of approximately 30%.

For BYDUREON, Alkermes recorded royalty revenues of $7.7 million, based on worldwide end-market net sales of approximately $93 million, as reported by Bristol-Myers Squibb. Following the completion of the Bristol-Myers diabetes franchise sale to AstraZeneca earlier this month, AstraZeneca has taken full control of BYDUREON and we look forward to new momentum for this franchise.

Switching now to expenses. On the R&D front, we made enormous progress in 2013 in advancing our promising late-stage pipeline with the completion of enrollment in the phase 3 aripiprazole lauroxil study, the completion of the ALKS 5461 phase 2 study last spring, the initiation of the ALKS 3831 phase 2 program, and our work to ready a number of earlier-stage candidates to enter the clinic.

Our SG&A expenses for the year reflected additional promotional activities for VIVITROL, consistent with its recent growth and the early preparations for the anticipated launch of aripiprazole lauroxil. In addition, our bottom-line GAAP results reflected a net tax benefit of $15.2 million recorded during the December quarter related to the release of the valuation allowance against the majority of our deferred tax assets in the United States.

We enter 2014 in a very strong position. With more than $700 million in cash, a strong cash-generating business fuelled by a diverse portfolio of long-lived commercial products, and an efficient corporate structure, we are well-positioned to advance our promising pipeline and to take advantage of strategic opportunities.

The basic themes for 2014 are our expectations for continued growth from our commercial products, increased investment in R&D and SG&A as we outlined last quarter, commensurate with the increased activity across the Company, and that we will continue to generate substantial cash flow.

Let me now provide some of the highlights of our financial expectations for calendar 2014. We expect total revenues to range from $580 million to $610 million, with VIVITROL revenues expected to be in the range of $90 million to $100 million, reflecting growth of approximately 25% to 40% for the brand compared to calendar 2013.

We expect R&D expenses to be in the range of $225 million to $245 million. This reflects the heightened level of activity with multiple clinical studies underway for our late-stage development candidates: aripiprazole lauroxil, ALKS 5461, and ALKS 3831. Additionally, a number of earlier-stage candidates will enter the clinic in 2014.

We expect SG&A expenses to be in the range of $190 million to $200 million. This increase is driven by increased promotional activity in support of VIVITROL, continued preparations for the anticipated launch of aripiprazole lauroxil, and an increase in our government policy initiatives.

Reflecting these investments, we expect non-GAAP net income for the year, ending December 31, 2014, to be in the range of $65 million to $85 million and non-GAAP diluted EPS to be in the range of $0.41 to $0.54. Finally, we expect to generate free cash flow for the year in the range of $30 million to $50 million.

In summary, we are very pleased with our financial performance. With a wealth of promising clinical candidates in development, 2014 is poised to be a year of unprecedented activity at Alkermes, and we believe we can make these pipeline investments that will drive our future growth even as we generate substantial cash flow. With that, I will turn the call over to Richard.

That's great, Jim. Thank you. Good morning everyone. 2013 was an intense productive year, and 2014 should be the same.

As Jim just outlined, our diverse and commercial portfolio serves as a financial flywheel that generates the funds to advance the R&D pipeline. We’ve been advancing this pipeline for the last several years, and it’s now borne fruit in the form of an advanced and promising set of pipeline candidates that reflect a sensitivity to the current environment and our strategy to develop important medicines in major markets.

We have a strong conviction that each of these medicines can make a tremendous difference to patients and will also be important to the healthcare system overall. This portfolio is comprised of medicines primarily focused on major CNS indications, and each in its own right is a potential blockbuster. Entering 2014, we control what we believe to be one of the most exciting pipelines in the biopharmaceutical industry.

I’ll start with aripiprazole lauroxil. This is a major opportunity built on our experience with long-acting injectable antipsychotics or LAIs. To put it into perspective, the atypical antipsychotic market is a $20 billion market worldwide, and it's the largest therapeutic class in the US.

We see this market shifting away from the orals and toward LAIs, which we believe is going to have two important implications. One is that more LAIs are going to be used based on the quality of the data supporting their use. The second is that they’re going to be used earlier in treatment. Schizophrenia is a progressive disease characterized by frequent relapses and a continuing decline in function.

We believe the opportunity exists to use LAIs earlier in the disease progression to potentially preserve higher brain function in patients for a longer period of time. Aripiprazole lauroxil is designed for differentiation in this space. It will come in a pre-filled syringe for both deltoid and gluteal administration. We are testing multiple doses with the phase 3 study nearing completion, and data expected in the next few months.

In parallel, we’ve been preparing the new drug application, which we plan to submit in 2014, and we expect commercial launch in 2015. The one-month aripiprazole lauroxil represents our first proprietary commercial entry into the LAI category. Our plan is to develop the most comprehensive suite of product offerings in the category for the benefit of patients, providers, and payors. Just last month, we announced the development of aripiprazole lauroxil two-month, which we expect to be the first line extension of this product family.

The commercial opportunity for aripiprazole lauroxil is an important value driver for the Company. We see our product as competitively positioned within a clinical landscape shifting in favor of LAIs. We are, already, actively preparing to execute a successful product launch in the US.

Our plan is to launch aripiprazole lauroxil with an Alkermes sales force, which will build and expand the commercial capabilities that we have established for VIVITROL. We are eagerly anticipating the phase 3 data and we're getting ready to enter this exciting market.

Turning to ALKS 5461 for major depressive disorder. This is a market characterized by multiple blockbusters that are household names: Lexapro, Zoloft, Prozac, Paxil. All blockbusters, with common mechanisms of action.

The issue is that millions of patients do not receive adequate response from these therapies, even after second- or third-line treatment. So there’s a real need for well-tolerated, oral medications with a new mechanism of action. Our development program is focused on these patients not getting adequate clinical response. There is a compelling clinical need, as well as a compelling logic from a regulatory and a payor perspective.

The ALKS 5461 phase 2 data, that we presented last year, demonstrated its efficacy through the classic depression endpoints, reduction in depression scores. More recently, we presented data on remission, specifically, that 50% of patients treated with ALKS 5461 in stage 2 of the study had sufficiently low depression scores that they no longer qualified as depressed. This is a striking result and an example of the human aspect of the benefit that ALKS 5461 has the potential to offer.

This quarter, we will commence the phase 3 program for ALKS 5461, which is composed of multiple studies, including three core efficacy studies utilizing design elements from the phase 2 program, that will enroll a total of 1,500 patients. With fast track status from FDA in hand, we are moving very quickly on this clinical program and we couldn’t be more excited about the prospects for ALKS 5461.

Switching gears, ALKS 3831 is our oral development candidate for schizophrenia. It starts with the pharmacology of olanzapine, which is one of the most efficacious drugs for the treatment of schizophrenia. And ALKS 3831 builds onto it additional pharmacology that addresses two subpopulations of schizophrenia: patients who have significant weight gain on olanzapine and those with schizophrenia that is exacerbated by alcohol use.

Our hypothesis is that what links these two patient populations is a fundamental aberration in their reward system that is part of their disease pathology. While we refer to them as subpopulations, and they are, these groups represent millions of patients with schizophrenia who have real unmet medical needs.

So let’s start with that first group. It’s well established that olanzapine causes significant weight gain for many patients. In fact, the olanzapine label states that two-thirds of patients gain at least 7% of their body weight within a year, and that one-third of patients on olanzapine gain twice that, resulting in major negative effects on the long-term health of these patients.

We’ve already demonstrated that ALKS 3831 can attenuate the weight gain associated with olanzapine in animals and in human volunteers. Now we are running a large study to demonstrate this in patients with schizophrenia, and we expect to complete the enrollment in the study this year.

What’s newer, and I believe at the leading edge of the neuroscience, is the linkage between mental illness and substance abuse. This concept is starting to become a bigger part of the dialogue. A very recent JAMA article outlined that the odds of substance abuse were dramatically higher in patients with severe psychotic illnesses.

ALKS 3831 is designed to address this notion that alcohol use is actually part of the disease for some patients with schizophrenia, and when we treat schizophrenia without addressing the substance abuse, we’re not adequately treating these patients. So we’ll start a large, well-powered phase 2 study later this year that will give us a clear answer in this population of patients. So that’s the late-stage pipeline.

We also have a number of exciting candidates earlier in development, and 2014 is going to be a critical year for two of those: ALKS 8700 and ALKS 7106. ALKS 8700 is a monomethyl fumarate prodrug for the treatment of multiple sclerosis moving into the clinic this year. We are developing it as a product with differentiated tolerability and dosing as compared to TECFIDERA, the highly successful MMF prodrug marketed by Biogen.

Successful as it is, TECFIDERA is a first-generation product in our estimation as it has significant tolerability issues. We believe that these tolerability issues result from the peak drug concentrations related to TECFIDERA’s PK profile and its twice-daily dosing regimen.

For ALKS 8700, we’re thinking about twice-daily dosing with attenuated peaks and once-a-day dosing, building on our expertise in developing prodrugs and our expertise in controlled-release delivery. We will be filing the ALKS 8700 IND and beginning clinical trials with multiple formulations in mid 2014.

Also importantly, last month we were granted our first notice of allowance for ALKS 8700 for a composition of matter patent that extends to 2033, validating the novelty of our approach. ALKS 7106 is also moving into the clinic this year. With ALKS 7106, we are addressing the major and increasingly self-evident public health need for opioid analgesics that are less susceptible to abuse.

The pain market is the world’s second-largest therapeutic category. In the US, there were 230 million prescriptions for opioids written in 2013. In our view, this is a large and mature market that's unusual in that it's ready for complete change.

Our deep scientific know-how of opioid modulators gives us the opportunity to develop novel pain products that have intrinsically different potential for abuse and liability. ALKS 7106 is a molecule that exemplifies this new paradigm. It’s an opioid as potent as morphine in our inflammatory pain models, but with a ceiling effect on neurotransmitter release that limits its abuse potential.

We are planning to initiate the clinical program for ALKS 7106 this year, testing its analgesic properties and exploring a range of doses to elaborate its safety profile. If ALKS 7106 meets our criteria, we will have a very important new medicine on our hands.

2014 is shaping up to be a pivotal year for the pipeline. We have an unprecedented number of programs underway. This year, we’ll complete the phase 3 study for aripiprazole lauroxil with data in the first half, and the NDA filing shortly thereafter.

We will begin the comprehensive phase 3 program for ALKS 5461 in major depressive disorder this quarter. We’ll begin the second phase 2 study for ALKS 3831 in schizophrenia with alcohol use mid-year, and we’ll complete enrollment in the ALKS 3831 phase 2 study in olanzapine weight gain by year end. ALKS 8700 and ALKS 7106 will begin human testing in highly informative studies. It’s going to be an incredibly active and important year for the Company, and we're hard at work already.

Speaking on behalf of the employees of the Company, I can say that we enter 2014 at full speed, absolutely committed to advancing what we believe is one of the most important CNS pipelines in the entire pharmaceutical industry. With that, I will turn the call back to Rebecca.

Thanks, Richard. We'll now open up the call for Q&A. We'll take the first question.

(Operator Instructions)

From Leerink Partners, we have Michael Schmidt on the line. Please go ahead.

Good morning. Thanks for taking my question. I have two. Number one, how do you think about the opportunity for aripiprazole lauroxil ex-US and what are your regulatory and commercial plans to capture that opportunity? And then the second question is regarding your strategy on business development. How willing are you to go after accretive deals should you encounter opportunities in that regard? Thank you.

Hi, Michael. It's Rich. I'll take both of those. Ex-US, we see an opportunity for aripiprazole lauroxil, absolutely. We are right on the threshold data from our phase 3 program, and with that data in hand, we'll be approaching the European regulators.

On the business development side, we built this Company through acquisition over time. We're absolutely interested in building this business into the Company we think it's going to be through continuing to do accretive and also scientifically advancing types of acquisitions, so I'll leave it at that.

And I guess commercially, how do you think about capturing, you know, the ex-US opportunity? Are you looking to launch the products in certain countries yourself? Are you thinking about a global partner, a regional partner? What is the strategy commercially?

We're evaluating a couple different options in that regard. And from what you just said, and from others as well. The commercial opportunity is a global one, and what we think is going to happen is that with approval in the US and a clear pathway for approval outside the US, that there will be multiple configurations and ways we can approach the market.

The other piece of it is that we have another asset in schizophrenia, ALKS 3831, that we're developing really meaningful data this year on. And so the evaluation changes as we consider whether we're going to bring two products to market in countries outside the US as well. It's a dynamic situation for us now.

Okay. Great. Thank you.

Thanks, Michael. We'll take the next question.

And from JP Morgan, we have Corey Kasimov online. Please go ahead.

Thank you for taking the questions, and congratulations on a good quarter and good year. First question for you is also on aripiprazole lauroxil. Are there specific lessons that you're learning or cues you're taking from the launches of the initial long-acting injectable products that are out there as you begin your commercial prep? And then I have a follow up.

It's a great question. It's really interesting to watch, of course, other LAI's launch. Some of them as we speak. What's interesting about the launch of Abilify Maintena, for example, is the number of new patients starting on Abilify Maintena who don't come from oral aripiprazole starts. In other words, they are coming from other oral compounds or other long-acting injectables. That's interesting and in fact, it affects out of planning for the launch because it opens up a larger population of patients to target at launch.

But I think in general, it's worth saying, what I said in the earlier remarks, we think the LAI market itself is favorably impacted by more entrants coming in and with the diminution of the promotion of the oral compounds. And we're already seeing it because you saw in the quarter that RISPERDAL CONSTA grew. And certainly in many ways as the tide comes in, all shifts get lifted and more and more promotional attention in this space by multiple purveyors of good medicines here I think is going to have a very beneficial effect on the overall class.

Okay. And then my second question, Rich, is a little bit of a bigger picture question than I guess, it piggy backs on the BD one asked before, but what are your intentions now that you have $700 million of cash in the bank? Obviously BD can be a component. There's a lot of things you could do with that money.

First of all, what's amazing at Alkermes at this point is that we're advancing this pipeline in these five medicines. We're hammering on it hard yet we're still generating significant amounts of cash. And we have this strategic amount of cash as well that allows us to continue to build the business.

Business development -- we see business development in two ways. Out on the out-licensing side, it's all about over time, realizing the full international global commercial potential of these medicines as they prove themselves to be valuable medicines. And we'll cross those bridges as we come to them on a product-by-product basis.

On the inbound basis, there's just an abundance of opportunity for us as we look at different technologies at different stages of development in the therapeutic areas of interest to us. So we're active but we don't have any urgency. We're just looking for things that are correct.

Okay. Thanks for taking the questions, and thanks, Rebecca, for branding that hall of fame song in my brain for at least a few days.

(laughter) You'll be singing that all day, Cory. We'll take the next question.

And from Citi, we have Jonathan Eckard online. Please go ahead.

Thanks for taking the questions. First on the long-acting injectable, you know, market as a whole, specifically in the US. You have made the comments about the tides being lifted because of new people or more people are marketing it and less people are marketing the orals. Now, how far can that go?

And what kind of, I guess, what legal or legislative aspects could actually carry it further? And maybe if you could detail some of the key ones that may be up in discussion or even on the floor today that could have the biggest impact on these class of drugs. And then I have another question about the aripiprazole program.

Certainly, Jon. It's Rich. So what's the natural limit? Is there a natural limit to the level of anti -- long-acting injectable antipsychotics that could be used in schizophrenia. Well, we had the proof-points in Australia and in Spain and in countries like that where approaching one-third of the patients are on the long-acting injectables. You contrast that with the US where it's in the low-single digits.

There are potentially fold increases in the size of the market by increased utilizations. The -- again, we're not promising that. I'm just saying what could happen as the promotional power behind the oral brands dissipates and it's replaced by the promotional power of the data that's supporting the use of long-acting injectables, both from the patient perspective as well as the pharmacoeconomic benefits of using the long-acting injectables.

To point it up the legal or the policy overlay is a really important one because I think that as the Affordable Care Act becomes law, is law, and becomes implemented, there's much more focus on how we're going to bend the long-term cost curve, and the way we bend the long-term cost curve in the United States is by focusing on chronic disease that costs a lot of money, and schizophrenia is one of those. And data show that more strict adherence to antipsychotic regiments leads to better outcomes, economic and personal.

And so I think that we are, as you know, we're organizing ourselves both independently and in coalition to drive more utilization of these types of medicines for patients who need them.

Very good.

I think you had a follow up. Go ahead.

Yes, so the follow up is regarding the phase 3 for aripiprazole lauroxil. Based on your interactions with the agency to date, and you said you could probably start preparing some of the NDA or the BLA for this. What do we have to -- what do you really have to fold in?

Is it really just a phase -- once you get the phase 3 data, you package that in and then it's pretty much done? I'm just trying to understand how based on the interactions you've had to date, all the other bioequivalence data and stuff like that, that's pretty much all ready to go, and we're really waiting for the phase 3? Is that the last step?

That's right. If you think about an NDA, it's composed of a certain number of modules and one of the modules, for example, is the CMC module and we can substantially complete the CMC module now because we've -- you have to do with manufacturing the product and we have a lot of experience in that type of submission.

The clinical trial result, the phase 3 result, is an element in multiple modules, so once you get that study completed, we'll report the top line results to you all, but then we'll prepare the final clinical study report itself, the formal completion of the overall study report, which then gets inserted in the NDA and ripples through the narrative sections of the NDA in multiple places. We'll also interpose a meeting with FDA in there as well. We'll have a pre-NDA meeting to make sure that all boxes are checked in terms of the NDA being acceptable and being able to meet PDUFA date, which will be a year from the time we submit.

Remember, now, this is an NDA because it's a small molecule drug. And we've run an efficacy program but we're filing utilizing 505(b)(2) which allows us to reference a lot of existing safety and efficacy information about aripiprazole. And that's why we're able to submit based on a single study which is the agreement we have with the FDA at the outset.

That's very helpful. Thank you.

Thanks, Jon. We'll take the next question.

From Cohen & Company, we have Anant Padmanabhan online. Please go ahead.

Yes, thanks. I had a couple of questions. First, Rich on MMF for 8700, when is the earliest we can see the PK data? And could you just kind of help us think through the periodical therapeutic differences versus Tecfidera?

Congratulations on the first time your last name has been pronounced correctly. (multiple speakers) Fantastic. We'll get 8700 in the clinic mid-year. We will be running an open label study, looking at multiple configurations of dose and formulation. I haven't figured out exactly how we're going to communicate that information to the street yet. We'll be getting the data fairly realtime. I'm hoping by the end of the year, we'll have a sense of how the drug is performing. We'll update you on the next call when we think we'll have data in a form that we can top line to you all.

And the potential therapeutic advantages are really driven by two things. One is the inherent properties of the prodrug compared to Tecfidera, and I referred to Tecfidera as a prodrug of MMF and in kind of a formal sense, it really is because it metabolizes presystemically into MMF and there's a certain inherent level of GI irritability associated with that molecule.

Number two, is it's twice a day dosing. So to the extent it has any intrinsic -- whatever intrinsic irritability or associated with the molecule, we're subjecting to GI [mucositve] twice a day rather than once a day. We're working on both. We have a different molecular entity then metabolizes into MMF, and we also have formulation approaches that in addition to enteric-coating, also prolonged release and extend the absorptive area along a larger swath of the GI tract. There's a number of opportunities for improved benefit and that should be manifest in terms of its GI tolerability.

Okay. Thank you. And then could you just give us on the base business, maybe Jim, could you just give us a sense of you know, your expectations for RISPERDAL CONSTA and INVEGA SUSTENNA, that franchise as well as the BYDUREON franchise and how that factors into the guidance? Thank you.

Sure. While we haven't given specific guidance for each of those products, you know, mainly because they're marketed by our partners, both Johnson & Johnson and AstraZeneca. I think what we have said and are quite pleased to see is that our top five products are going to continue to grow at a double-digit rate. They grew nicely last year.

Those are going to be the key engines for us, and they're approaching almost 80%. They're getting in the high 70% of all of our revenues. We see that growth continuing and that's really the solid products. They're all in patent for a long time, and that's going to provide that cash flow that's allowing us to invest in our pipeline.

Great. Thank you.

Thanks, Anant. We'll take the next question.

From Goldman Sachs, we have Terence Flynn online. Please go ahead.

Thanks for taking the question. First, maybe just a follow up for Jim. I was just surprised by the ramp in spend I guess on the SG&A side. I was wondering if you can help qualify for us how much is due to a 90/70 prep? And then is this level of both R&D and SG&A the new base for the Company going forward? And then one follow-up.

Sure. Thanks, Terence. Yes, I think the trend that you saw in 2013 is really related to two things. First, VIVITROL, and we talked about it last quarter with the removal of the black box and actually investing in the momentum of its growth. That's a profitable product for us now, and we think, actually it's very smart to be continuing to invest in VIVITROL as we move forward. That's going to help fuel and hopefully increase that growth.

And then as you know, and as you mentioned, we're investing in the preparations for the launch of aripiprazole lauroxil. You know, I would say both of those things, along with you have to recognize too the rise in the stock prices caused us to be taking a much larger charge for non-cash compensation in the future year, in 2014 going forward, off a base assumption of a stock price around $53 a share than it was last year where the price was less than half.

Those three things are contributing to that increase in SG&A. But again, I'd go back to as we continue to generate cash here, we think that's the right kind of investment we want to make, both in VIVITROL, and in preparation for aripiprazole lauroxil.

I think you said you had a follow up.

Sure. Just wondering on 9070, so beyond just the statistical significance on the primary endpoint, can you maybe help characterize what you guys would see as a win? And then can you be more significant on the timing of the data given we're almost through the first quarter here?

Terence, this is Rich. I would say that recognizing that the active metabolite of this molecule is aripiprazole and this significance is sufficient for us filing the NDA is all we need. We have other attributes that are hard wired into the product in terms of its prefilled syringe, its ease of use, things like that.

So we're really just looking to get the ticket punched so we can get into this game which looks like a market that's really has favorable dynamics for us. I won't give you more. We've said first half. We'll stick with that and we'll -- as you know, this is a big international study with a lot of data points and when the database is clean, then we'll unblind and we'll let you guys know right away.

Okay. Thanks.

You're welcome.

Thanks very much. We'll take the next question.

And from Mizuho USA, we have Mario Corso online. Please go ahead.

Yes, good morning. Thanks for taking my questions. On the SG&A side of things, again, just kind of drilling down there a little bit, if we're talking a $75 million, $80 million increase in 2014, so I mean, is there any granularity? Is half of that aripiprazole lauroxil? Is there any way to think about the breakdown between those components you referenced? And kind of the same for R&D, you know, is 5461 presumably the bulk of the increase there?

And then finally just quickly on CONSTA, it looked like the shipments were a bit ahead of, you know, maybe where reported sales looked like, and I know there's, you know, that will bounce around quarter to quarter. I'm wondering if you expect that to reverse in the next quarter or not. Thanks.

Thanks, Mario. Maybe I'll go backwards because I think the simplest one is the timing of RISPERDAL CONSTA. That has been variable because we make a significant amount of money on the manufacturing, but I think, again, if you look over more than one quarter, it's really quite in line with how the sales are doing. I think it's important to emphasize something Rich said, too, which is RISPERDAL CONSTA sales are actually growing in the United States, and we had our highest quarter in almost two years and I think that's much attributed to more focus being placed on the long acting injectable market, and I think that's very important going forward.

And as you know with INVEGA SUSTENNA, there's very nice growth across that whole franchise for us. On the R&D side, you're absolutely right. The largest increase is in the 6451 area with the phase 3 thankfully being accelerated because we had such positive data that came in in April of this year. We're very pleased to be spending in that program, and we think that's going to be one that's going to create a lot of value for us over time.

And on the SG&A side, I think actually we're close on. If you multiply the last quarter times four, you get to about $176 million, so I think you over-emphasized the growth that's coming in SG&A a little bit. And as I think I was trying to say with Terence, there are three main issues and you can make your own conclusions, but those three things being continued investment in VIVITROL, continued investment in preparation for aripiprazole lauroxil, and the non-cash component that's going to be increased about non-cash compensation just given our stock price rise. Those are really the three components that are contributing to the rise in SG&A.

I think we have time for one more question.

From Morgan Stanley, we have David Risinger online. Please go ahead.

Thanks for taking my question. First, I was just hoping if you could provide a little bit more color on 9070 and your confidence. It would seem that, you know, it's a no-brainer that phase 3 should succeed given that the study is versus placebo, but anyway, if you could provide a little bit more color on the clinical trial design and your level of confidence, that would be helpful.

And then I was also hoping that you could provide some perspective on the investment spending trajectory into 2015, and obviously you haven't provided any guidance beyond 2014 but just wondering how we should think about growth and investment spending beyond 2014. Thanks very much.

Hi, David. It's Rich. Related to the 9070 confidence, these are always brainers. There are no no-brainers. That said, you're exactly right. The pretest hypothesis is that aripiprazole is effective in the treatment of schizophrenia, and we're delivering aripiprazole in therapeutic quantities in continuous one-month format versus placebo in acute patients in the hospital.

Added to that is the interim sample size readjustment or look that we did reestimation last summer, which told us that we had adequate power in both doses by stopping the enrollment at 540 versus the fully planned 690. And then on the third element is on a blinded basis when we review the data, the study seems to be performing as we would have anticipated or better in terms of retention rate, dropouts, changes in PANSS scores, standard deviation, things like that. So all systems go, and as I always say, that plus a positive result will be good. But we're very pleased with the design.

We're pleased with the execution, and it actually helped to develop a theme that you'll see repeated with 5461, which is we will trade time for quality. Because we believe these drugs really work, the secret in the CNS studies is to enroll the right patients at the right sites and be careful about doing it. Hopefully that will become manifest when we have the data early.

Maybe Jim can take the 2015 question?

Yes, sure, you know, David I think 2015 is going to be an extremely important year for us. You know, especially as we go through 2014, we'll have the expected launch of aripiprazole lauroxil in the latter half of the year, if all goes well. We'll have the phase 3 program for 5461 ongoing through the duration of the year, and we'll be working on the phase 2 program for ALKS 3831.

And through 2014 I think it's really important with our five late-stage drugs here, you know, for all but 5461, we're going to get important data here over the next 12 months in each of the four other programs. With all those dynamics in play, it's our objective to be cash flow positive. Our underlying commercial business is doing very well, and we'll give you more specific guidance on 2015 when we know more about how actually the different programs are playing out.

Great. Thank you.

You bet.

Excellent. Thanks everyone for dialing in today. If you have any additional questions, please don't hesitate to give us a call here at the Company. Management is available, and have a great day.

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