Alkermes Plc (ALKS) 2014 Q1 法說會逐字稿

Welcome to the Alkermes conference call to discuss the Company's financial results for the first quarter of 2014.

(Operator Instructions)

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

Thanks, and welcome to the Alkermes plc conference call to discuss our financial results for the quarter ended March 31, 2014. With me today are Richard Pops, our CEO; Shane Cooke, our President; and Jim Frates, our CFO. Before we begin today, I encourage everyone 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 will discuss today. We believe the non-GAAP financial results better represent the ongoing trends of our business.

Our discussions during this call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see our press release issued today and our transition report on Form 10-K for important risk factors that could cause our actual performance and results to differ materially from those contemplated or suggested in the forward-looking statements. We undertake no obligation to update or revise the information provided on the call today as a result of new information or future results or developments.

Jim Frates will open up the call discussing our financial results and Rich Pops will then provide a brief update on the Company. After our remarks, we will open up the call for Q&A. And now I'd like to turn over the call to Jim.

Thanks, Rebecca. Good morning, everyone. The first quarter of 2014 was characterized by solid revenues from our commercial portfolio and key investments in our development pipeline and commercial organization. During the quarter, Alkermes generated revenues of more than $130 million, non-GAAP net income of $16.2 million, and free cash flow of $10.5 million.

Our results were in line with our expectations, and today we are reiterating our financial guidance for the full calendar year that we originally provided in our financial results press release issued in February. Within the commercial portfolio, worldwide end market sales for our long acting atypical franchise, RISPERDAL CONSTA and INVEGA SUSTENNA, were approximately $683 million in the first quarter compared to $619 million for the same period last year, reflecting double-digit growth driven by sales of INVEGA SUSTENNA.

For the quarter, Alkermes recorded manufacturing and royalty revenues of $49.6 million for this product franchise, reflecting the annual reset of the INVEGA SUSTENNA tiered royalty to 5% at the beginning of each year. You should recall that our royalty is tiered based on end-market sales and resets each January. For modeling purposes, we are currently in the 7% royalty tier and expect to surpass $500 million of sales and consequently move into the 9% tier during the second quarter.

Looking ahead, our partners at J&J recently announced positive results for the phase 3 study of INVEGA SUSTENNA 3-month and their plans to submit the NDA to the FDA by the end of 2014. The continued growth of the long acting antipsychotic market is great to see. This is a $2.5 billion-plus business for Johnson & Johnson that is growing and evolving in a positive way and is the foundation of our excitement for own product candidate, aripiprazole lauroxil.

For AMPYRA and FAMPYRA, our manufacturing and royalty revenues were $20.6 million for the quarter. Outside of the US, our partners at Biogen reported FAMPYRA end-market sales of $19 million. Acorda will report end-market sales of AMPYRA in the US next week. For VIVITROL, we recorded net sales of $17.1 million, compared to $14.6 million for the same period last year, an increase of approximately 17%. These results demonstrated solid year-over-year growth.

Sequentially first-quarter VIVITROL revenues were tempered by seasonality and extreme winter weather, as well as a voluntary recall that had a $1.4 million effect on the top line and a charge to COGS of $0.9 million. Overall, we remain excited by the developments in the VIVITROL business with many great things happening and we are comfortable with our revenue expectations of $90 million to $100 million for VIVITROL in 2014. Turning to BYDUREON, we recorded royalty revenues of $7.7 million based on worldwide end-market sales of approximately $96 million. During the quarter, AstraZeneca took over full control of BYDUREON and announced in March that the BYDUREON dual-chamber pen device had received FDA approval. The new device is expected to be available to patients in the second half of 2014.

Switching now to expenses. Our total operating expenses for the first quarter were $146.1 million, compared to $144.4 million for the same period last year. The increase in operating expenses reflected incremental investment in our advancing late stage clinical pipeline and commercial organization. Specifically, investment in R&D included activities related to the completion of the phase 3 aripiprazole lauroxil study for which we announced positive top line results earlier this month, initiation of the ALKS 5461 pivotal program during the first quarter, and continued enrollment in the first ALKS 3831 phase 2 study. Our SG&A expenses reflected increased promotional activities for VIVITROL and the early preparations for our anticipated launch of aripiprazole lauroxil, which will pick up in intensity as we prepare to submit the NDA in the third quarter.

In summary, our financial results for the first quarter were consistent with our expectations, and we remain on track to meet our financial guidance for 2014 that we provided in February. We are pleased that our business is performing as planned. With a cash generating commercial portfolio, more than $700 million in cash and investments, and an exciting late stage CNS pipeline, we are uniquely positioned to grow our business and continue to build value as a CNS focused biotechnology Company.

With that, I'll turn the call over to Richard.

That's great. Thank you, Jim. Good morning, everyone.

Since our last earnings call just two months ago, Alkermes has changed in a fundamental and meaningful way. The positive phase 3 results for aripiprazole lauroxil we reported earlier this month had two clear implications. First and most obvious is that we expect to be adding a major new element to our commercial portfolio, one that we believe will have an important positive impact on patients in the treatment community, as well as our own top line growth over time. Second, in completing this study so successfully, we validated our capability to conduct large international studies in psychiatry which is an area of deep interest for us.

Let's spend a minute on aripiprazole lauroxil. Backed by a differentiated product portfolio -- I'm sorry, a differentiated product profile and strong pivotal study results and launching into an antipsychotic market that we believe is shifting in favor of long-acting injectables or LAIs, aripiprazole lauroxil is well positioned to complete. The phase 3 study showed conclusively that both doses of aripiprazole lauroxil tested in the study, 441 milligrams and 882 milligrams, demonstrated a clinically important and statistically significantly reductions in PANSS scores from baseline, compared to placebo at week 12 with p-values of less than 0.001. Aripiprazole lauroxil was generally well tolerated and the safety profile was similar to that reported with oral aripiprazole. The most common adverse events in the study were insomnia, akathisia, and headache.

We believe having multiple dose options, a ready to use prefilled syringe, and options for deltoid and gluteal administration will help physicians address the needs of individual patients and be user-friendly for doctors, nurses, and patients. We will present more complete results of the phase 3 study in June at the American Society of Clinical Psychopharmacology meeting in Florida. In the meantime, we are moving quickly to submit the NDA during the third quarter and we expect a standard 12-month review.

Aripiprazole lauroxil is poised to enter a market at a time when we believe the psychiatry field is at a tipping point for broader adoption of LAI antipsychotics. Based on new entrants to the class, along with an increasing body of literature and thought leaders supporting the use of LAIs early in the disease progression where we believe the greatest benefit and outcomes can be realized. The market opportunity for aripiprazole lauroxil arises from these favorable dynamics coupled with the particular attributes of our product. We are preparing now in earnest for a launch next year and will update you over the course of the year on additional plans for this program.

The positive phase 3 results also have broader implications for the pipeline in that they underscore our comprehensive drug development capability and demonstrate our ability to conduct large studies in psychiatry. This is a set of capabilities we have built carefully over the past few years, and we consider it to be fundamental to our future success. We will apply the same commitment to quality and rigor in execution to our other late stage candidates, ALKS 5461 and ALKS 3831, as well as every other element of the pipeline.

Let's shift now to ALKS 5461, now in phase 3 for the treatment of major depressive disorder. ALKS 5461 offers a new mechanism of action for this difficult to treat disease. During the first quarter, we commenced the comprehensive pivotal program for 5461 called FORWARD. The FORWARD program will include three core phase 3 efficacy studies and additional supportive studies. Data from the FORWARD studies will serve as the basis for the NDA submission.

The three core efficacy studies will begin mid-year and they will utilize state-of-the-art methodologies you've heard us describe in the successful phase 2 program. These studies are designed to include a total of approximately 1,500 patients with major depressive disorder who had an inadequate response to standard therapies. The Fast Track status from the FDA in hand, a clear development pass, and the validation of our approach from the aripiprazole lauroxil experience, we are moving ahead quickly on this clinical program.

Let's turn to ALKS 3831 which combines the pharmacology of olanzapine, known by the brand name Zyprexa, one of the most efficacious drugs for the treatment of schizophrenia, with ALKS 33, a potent new antagonist targeting the reward system. ALKS 3831 is designed to address two significant patient populations: patients with schizophrenia who experienced significant weight gain on olanzapine, and those with schizophrenia whose -- is exacerbated by alcohol abuse.

The first phase 2 studies underway to evaluate the effects of ALKS 3831 on the attenuation of weight gain associated with olanzapine. It's enrolling well and we expect to complete the enrollment of the study this year. The second phase 2 study of schizophrenia and alcohol use will start later this year. From a commercial perspective, ALKS 3831 takes on even more importance given the positive outcome of the aripiprazole lauroxil phase 3 as this is a therapeutic area where we will be building a substantial presence for the future.

In addition to this late stage pipeline, we have a number of exciting earlier stage candidates, two of which will enter the clinic this year: ALKS 8700 and ALKS 7106. ALKS 8700 is a monomethyl fumarate prodrug for the treatment of multiple sclerosis. We are designing it as a product with differentiated tolerability and dosing as compared to Biogen's TECFIDERA. We plan to file the IND and initiate a phase 1 study testing multiple formulations of ALKS 8700 mid-year. We will test the kinetics and dynamics of various formulations with the goal of determining the optimal formulations and doses of ALKS 8700 to advance into further clinical testing. This is a clear opportunity with early informative data and we are pressing hard to get the studies underway.

ALKS 7106, our novel pain product, is also moving to clinic this year. With this product candidate, we are addressing the major public health need for opioid analgesics that are less susceptible to abuse. The pain market is the world's second largest therapeutic category. And in our view, this large mature market is unusual in that it is ready for dramatic change. Our deep scientific know-how of opioid modulators gives us the ability to develop novel pain products that have intrinsically different potential for abuse and liability. ALKS 7106 is a drug that we believe will have a very potent analgesic property but will also have significantly reduced risk of overdose toxicity and less addictive potential. We expect that very early in the program we will be able to establish the differentiated profile of this new medicine, and if we're successful, generate a significant level of interest in this innovative approach.

The next 12 months are going to be remarkable as we turn over many important cards on the pipeline. Alkermes is in an unusual position in this front. We will file the NDA and pursue the US approval for aripiprazole lauroxil. We will be ramping up the ALKS 5461 FORWARD program around the world. We will complete the weight gain study for ALKS 3831 and launch the second phase 2 study. We will put ALKS 8700 and ALKS 7106 into the clinic and get our first indications of their profiles in man. This rich pipeline, coupled with our robust commercial business, efficient corporate structure, and a strategic amount of capital will allow us to create significant value and take advantage of new opportunities as they present themselves. We are exactly where we want to be in the year and couldn't be more excited for the year ahead.

With that, I will turn it back to Rebecca for questions.

Thanks, Rich. We will now open up the call for Q&A. Operator, we will take the first question.

(Operator Instructions)

From JPMorgan Chase, we have Cory Kasimov online. Please go ahead.

Hi there. It's actually Matt Lowe in for Cory today. Just a couple of questions. I guess the first one is on the schizophrenia market. If you could just outline to us how you expect the once every three month INVEGA SUSTENNA to fit into the market alongside with the once a month injectables? And then secondly, if you could just outline when we might expect the initial clinical data for 8700 and 7106? That would be great. Thank you.

Matt, it is Rich. I'll take that. As Jim said in his remarks, it's quite encouraging to us to see the way that this long-acting injectable market is evolving and growing. The current status quo in the market is this dominant product offering is the once a month product, INVEGA SUSTENNA, and with Abilify Maintena's once a month coming in and with us coming with aripiprazole lauroxil once a month, that is the dominant use of long-acting injectables.

The 3-month is a nice advance because for those patients who are stable for long term on LAIs, which is a small percentage of the patient population right now, they have the opportunity to progress then to a 3-month dosing interval which minimizes the number of injections, which is precisely why we are developing a 2-month as well.

The 2-month will allow for the patients who are stable on our product to cut the number of injections per year in half but we believe the central tendency will always be around that 1-month and the goal the market is really to get more and more patients from orals on to LAIs of any duration but we think the central tendency will always be that 1-month dose. 8700 and 7106 will go in demand mid-year. We haven't quite given precise information on when we think we will get data out of the studies but we expect within the first few months of those being in the clinic, so early in 2015 we expect to have insight into the data.

Okay, that is great. Thank you.

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

Good morning. Thanks for taking my question. You recently decided to take a strategic price increase for VIVITROL. I was just wondering what drove that decision?

Sure, Michael, it is Jim. It has really been three years since we have taken a price increase with VIVITROL, and I think as we've established the drug more, it was a very slight price increase of 5% and it was really just to keep up with the inflation of the cost we see in our distribution chain.

Got it. Okay. On then I guess on Abilify Maintena, I was just wondering with regards to your competitive intelligence there on that launch, what are you learning from that launch? Do you see certain types of patients go on that drug? If there is something you could apply to your launch later on?

Michael, it's a great question. There's two major domains that we are observing I think as we watched the launch of that product. Number one is the prescribers themselves and what sites, what centers, what physicians are early adopters of long-acting injectable Abilify. That is obviously instructive for our launch.

But I think maybe even more importantly is looking from where the new starts are coming from, and now that has been the surprising part of the launch is that our original hypothesis would have been that most everybody going on Maintena would have come off of oral aripiprazole and it turns out that really only about half the patients are coming from other medicines as well, which I think is quite encouraging because it says the starting pool of addressable patients is broader and I think that underscores how widely used Abilify has been and how well tolerated it is by patients.

Okay. And last question on the 2-monthly formulation that you are planning to develop, what is the regulatory path for that? Do you need a full phase 3 study for that program as well?

Well we'll meet with FDA now as we've prepared to pre-initiate a meeting package and given the fact that we have the PK profiles of both doses and we have a sense of how the 2-month pharmacokinetics will map onto that. We'll discuss the regulatory path with FDA.

Our expectation is, as we said, we'll put it in demand this year. We'll generate data. Hopefully we won't need to generate full outcomes data but if we have to, we will, but we think there is a logic for a more abbreviated clinical trial program but we will settle that with FDA.

Great, thank you.

From Citi, we Jonathan Eckard online. Please go ahead.

First on the VIVITROL, there has been quite a bit of press as well as FDA comments about opioid abuse, and some of the FDA comments specifically mentioned the importance of improving abuse -- opioid abuse therapies and specifically mentioned VIVITROL. So I'm just trying to figure out if you have any color on, going forward, how could some of these comments at least transform into or implement into programs that could actually improve the utilization of drugs like VIVITROL? Then I have another question on 5461.

John, good morning. It is interesting. The challenge we have in updating you all on VIVITROL is the fact that we are working on two different wavelengths here. One is the daily commercial business that we guide to and we report on, and the second is in the background what you referred to.

We just got back last night from Washington, DC, where we were in the Senate, large bipartisan policy forum on addiction and criminal justice with policymakers and judges and sheriffs and caregivers. There's just a lot of talk about VIVITROL because there is more and more data out there about in these pilot programs successful utilization of VIVITROL, which is really not built into the type of forecast that we give you. The answer to your question is we think there is a lot of really exciting things going on in the states and the federal government, particularly in the criminal justice system, that are uniquely suited to VIVITROL.

I think the commissioners commented about VIVITROL, and we really haven't heard FDA talk much about VIVITROL here recently because it is increasingly clear we have a national epidemic and there are a number of ways we have to go after addressing it and VIVITROL could be a very constructive solution to this problem. So we are really optimistic about where we are going to end up with VIVITROL. It is going to build over time.

Great, thanks. For 5461, the question -- you have the three trials that you outlined for the FORWARD studies. Could you remind us of the regulatory requirements for approval? Mainly like do all three of these trails need to be wins in order to submit or is it like two out of three? I think you need two positive trials so just if you could remind us what your strategy is as well as the regulatory hurdles are.

That's correct. It is the latter case. You would need two randomized well-controlled studies to file a new drug application on depression. I'd like to say that we expect 5461 to work in all three given the study designs that we are using and the robustness of the signal in the phase 2.

With that said, given how significant the commercial opportunity and medical opportunities are here, we decided to run three to assure that we had two because in depression, as you know, it is not uncommon for active agents sometimes not to separate from placebo due to placebo effects. Now, that said, you are well aware of the multiple steps we have taken to minimize the placebo effect and most notably is the architecture of the study using FBCD, but that said, we need two studies and it is a Fast Track medicine designated by FDA and we are hard at it now.

Great. Thank you very much.

From Cowen & Company, we have Tyler Van Buren online. Please go ahead.

Good morning, everyone. Could you please give us a little more insight into the commercial launch preparations currently underway for aripiprazole lauroxil and also as we look into the next year, what we can expect in terms of a pickup of these activities and the associated spend? Thank you.

Tyler, I will start and then Jim might come in on the second half. We probably from this point forward won't give a lot of specificity about our launch preparations for aripiprazole lauroxil in that we're moving into a competitive market and we're planning to compete to win now given the product profile that we have. The basic architecture of the preparation, as you might imagine, is we have said before that we will have 150 to 200 additional reps that will launch this drug.

We won't to put those reps on until 2015 so we will be incorporating it in our 2016 guidance. We will do some of the preparatory work this year in terms of hiring people. That is already underway in preparing for the commercial launch in the second half of 2015. Jim, did you want to add any color?

Yes. I think from a guidance perspective, Tyler, I would just say that as Rich outlined, the build and the infrastructure work is in place and included in our guidance for 2014 but it is the major cost of the sales force that is not included this year that you will see come on a quarter to two quarters ahead of the estimated launch timeline.

Okay. Great. Thanks so much.

You're welcome.

From Credit Suisse, we have Ari Jahja on the line. Please go ahead.

Good morning, and thanks for taking my call. I have two questions here. First for Rich. Regarding the lauroxil launch prep, can you discuss about how you think about building your own commercial infrastructure as opposed to maybe buying a company that already has an infrastructure in place given the company's [tax situation] and balance sheet, an acquisition could certainly provide an opportunity as well.

There are two different questions, Ari, and you didn't ask them as two but I'll break them in half. The number one is the aripiprazole lauroxil launch prep. We have done a fairly comprehensive series of discussions with pharma and big biotech about co-promoting, collaborating on aripiprazole lauroxil, and one of the things we've learned through that is it is such an idiosyncratic type of product, long-acting injectable antipsychotic sold into Medicaid and in the community mental health center. We are convinced now with our experience with VIVITROL and our proximity to SUSTENNA and CONSTA, that we are the best suited to build this commercial team in the US.

Out of the US is a different matter and it is something we are in active discussions with folks about OUS. The second part of your question that segues into obviously how do we use our corporate structure in order to build infrastructure? That's something that's an ongoing opportunity for us, and we are constantly looking at ways that we can build the business in ways that are complementary, particularly now that we know that we are going to be in schizophrenia and addiction for a long time with hopefully the leadership positions in those areas.

Got it. Thank you. And then second question for Jim. Can you help us understand the latest gross unit trends for INVEGA SUSTENNA and VIVITROL? On VIVITROL, it certainly is encouraging to finally see a price increase there. Thank you.

Sure. I won't comment on J&J's gross units on INVEGA SUSTENNA or CONSTA. I think they do vary from quarter to quarter but it's really happening in the background of that double-digit growth in the long-acting atypical antipsychotic market which is again, as [Bill, Trish], and I referred to in our remarks, that is the key part of this industry as we are seeing higher penetration of the long-acting, particularly in the United States as compared to Europe with their high penetration there already.

This growth is very important and we think that will continue. There's always going to be slight quarter-to-quarter variations in inventory levels. But I would say that's the same thing that's happening with VIVITROL, particularly in the first quarter which is why I think the year-to-year comparisons are so important for VIVITROL. Certainly at the year end as people sometimes build some inventory in the December month. That happens with a lot of products.

We saw a little bit of that this quarter with VIVITROL, but longer term those growth trends in units are what we ultimately track and I think both markets, the LAI and for VIVITROL, we're very optimistic about.

Got it. Thank you.

From Mizuho USA, we have Mario Corso.

Good morning. Thanks for taking my questions. A couple things I wanted to ask about. Number one, bigger picture with the atypical antipsychotics, the long-acting market. How do you see -- how have you seen and how do you see payer attitudes evolving toward the more expensive long-acting injections as the markets largely gone generic of the oral side the last few years, and you mentioned Medicaid, and I'm wondering what you see is the progress there and if you're going to have some real pharmacoeconomic arguments to make and how you view that whole issue?

On then on cash side of things, you mentioned opportunities and I am wondering if you have a preference when you think about licensing, looking at commercial late stage or something earlier stage, and then also on the cash used side, how you see the debt paydown plans right now?

Mario, maybe I will start with that. With respect to payer attitudes on the long-acting injectables, the first observation of that the proof is in the pudding. These things are growing nicely in the US against a backdrop of intense focus on cost control. I think that they are growing for the reasons we have said all along, that it is good medicine and it's also good economics.

And Europe is the proof point in single-payer systems showing that despite the fact that the acquisition cost of the long-acting injectable is higher than the generic oral, the cost of noncompliance of oral medications is manifest early in the disease progression in schizophrenia. The nice thing is that there has been a decade of experience with CONSTA that has been supplemented with certainly as experience with SUSTENNA and J&J has done a good job of getting that [bills] data published and promulgated out in the community.

Otsuka is fanning that flame and we're gong to be fanning that flame because we think it's good policy and it's good medicine. I'm optimistic about it. That is not to say that there aren't always barriers to the use of LAIs. There's going to be failed first on orals, which you expect. There's going to be prior authorizations. There's going to be steps and things like that. That's the world we are living in right now but we have a very strong case and we're going to continue to build that case for the use of LAIs.

On the opportunity side, we are fairly agnostic in terms of opportunities spanning from commercial products, phase 3, phase 2, and even earlier things that are congruent with our areas of expertise and our evolving disease expertise in the area of psychiatry. The basic adage is we have to find things that are worth a lot more to us than anybody else and then we can buy for less than they are worth. I think there is an opportunity for that.

The nice thing about a company like Alkermes with a pipeline as rich as this, and we almost take it for granted. But we can't get through a meeting and get through all the pipeline candidates that are real and not just no-show pipeline candidates, so we don't have a burning need to acquire anything right now. We just have a burning desire to build a major company and when we see elements that can fit into that, we are not afraid to expand our portfolio by including them. Jim, you want to talk about --.

On the cash and the debt relative to we have to the Company, Mario. I think one of the things we very closely watch is our cash flow and I think that is one of the things that makes Alkermes unique actually is the commercial portfolio we have now. It is very diversified, number one, and the cash flows are very, very strong. Over the last couple of years since we did the merger with EDT, we have been ahead of our expectations.

With this very low interest rate environment right now, actually with out debt structure, it is very flexible for us. We can pay it off at any time if interest rates decide to rise or if that makes sense from a corporate perspective. So we are very comfortable with our debt levels right now given our cash flow and the tax shelter that they provide and we continue to monitor that as we grow.

From Goldman Sachs, we have Terence Flynn on the line. Please go ahead.

Thanks for taking the questions. I was wondering if you guys have any new market research on 9070 following the data and if not yet, when we might expect to hear something on that front?

And then second on potential pricing, I know it is still early and you probably don't want to give a lot of color but how should we think about it relative to Maintena? Are there any differences we should think about on the pricing front? And then third, I think in the past either [Lundbeck or you guys] talked about a $1 billion worldwide opportunity here for Maintena and I realize that is not your guidance so it might be an unfair question but just wondering how you think about that and at some point, do you guys plan to give peak guidance? Thanks.

Terence, I will answer or not answer those questions. I won't give you a lot of satisfaction on those answers. All I will say is that this a market that is a very well described market right now with CONSTA, SUSTENNA, Maintena is there. It's a targeted set of patients in a targeted set of providers and facilities.

The economic benefit of the use of these molecules is being increasingly elaborated with data and we have based on our phase 3 data a product offering I think is going to be one of the really dominant entrants in the market if the drug is approved in the way that we think it is going to be. So we're going to compete and we think it is going to be a big opportunity for us.

Okay. Thanks.

From FBR Capital Markets, we have Bill Tanner online. Please go ahead.

Thanks for taking the questions. I had one clarification and a couple of other ones. Rich, just on the 3-month SUSTENNA, it sounds like a priority you guys don't expect it to expand the market per se, maybe it helps protect the franchise a bit versus other LAIs that might have a shorter dosing frequency. Is that kind of the way to look at it?

I think the way to think of it, Bill, is that most patients, despite the inherent nature of these long-acting injectables being a thing that you can stand for a long time, I still think the average duration is six months or so, maybe even less. What I like about the 3-month is that it is just another reason for doctors to adopt the medicine because they know that they can, for the right patients, they can extend the dosing interval to four shots a year for those who are really stable on it, just another reason to stay on the medicine.

As I said, I think the challenge in the market is to get people on these monthlys and then the some small part, if you think of a normal distribution of people [strivations] on LAIs, it's that far right-hand part of the tale that would be a logical candidate to segue into the longer intervals.

Okay. The two questions I have, number one, can you remind us where we are on ALKS 33 just in terms of knowing about the safety profile and anything as it relates to potential toxicities? Obviously with 5461 and 3831, you've got a couple of other ingredients in it that are well known.

And then secondly, obviously a lot of activity going on in this space. I wouldn't expect you to comment as to conversations you are having with strategics, but just curious, your bigger picture thoughts as to how -- what opportunities could be availing themselves to Alkermes and whether you are going to stick to your knitting. You've got a lot going on. You're going to hopefully not in a couple of years from now wish we should have taken advantage of some opportunities that came along whatever they may be.

On the 33 side, we're developing a fairly significant amount of patient experience with 33, both as a single agent and incorporated in 3831 and 5461, and by the time we're done with the 5461 program, obviously that will be well elaborated. We are not currently developing 33 as a single agent in any indication. Safety data will continue to increment through the programs that I just described. This is a very well-characterized drug at this point, both in terms of its mechanism and structure. We are quite confident in its profile.

It is such an interesting point right now with Alkermes given the number of cards we're going to turn over in the next 12 months or so. We feel like we are on a very steep valuation ramp putting aside market conditions, macro conditions in terms of the intrinsic value of our business. 5461 is still not completely integrated into the value of this Company yet, nor is aripiprazole lauroxil or 3831. The major toggles that we have as we bring 7106 and 8700 into the clinic. In terms of strategic deals, that would be something that it is very difficult for us to think about. What our value is right now given how fluid it is and how everything is biased towards the upside with more information over time.

That said, we have a strategic amount of cash. We have $700 million in cash. If the biotech market softens, which it looks like it does from time to time, particularly in the smaller cap to mid cap space, we have the ability to do deals, not just for whole companies but for products as well. With our Irish structure, we have a lot of flexibility. We have teams of people that are dedicated to looking for these opportunities that are outside of our core business and our core business is plenty rich right now so I think at some point, we'll strike.

Operator, we have time for one more question.

From Bank of America, we have Steve Byrne on the line. Please go ahead.

Thanks for squeezing me in. I just wanted to drill into 3831. What has been the feedback you've received from psychiatrists about this product and particularly what level of weight gain do you think would be tolerable among that community to drive an inflection and a renewed interest in olanzapine?

I don't think we need to renew the interest in olanzapine. I think there are 350,000 patients that are currently on olanzapine for schizophrenia in the US, notwithstanding the significant amount of weight that people are gaining, and that's by the data and the label. We are waiting to see the data, Steve, but we think that, as I've said many times, I'm not sure that the median weight change or the central tendencies are necessarily the most interesting statistic. I think it's really if we can avoid that excessive weight gain, that a fraction of the patients -- a significant fraction of the patients can, I think that could be clinically very significant.

What we hear from physicians is interesting. Number one, there is just obviously complete recognition and knowledge of olanzapine as an antipsychotic agent and its power. It is considered to be the most effective, most efficacious of these agents in a dosage form with an attenuated weight gain to a file would be very attractive.

Secondly and separately, this dual diagnosis patient, which is the patient with comorbid substance abuse, mainly alcohol, is a very serious and real public health issue and I think this drug is the first drug that has ever been tested in this patient population which has historically been excluded from clinical trials. Even in our old 3 study for aripiprazole lauroxil, they excluded patients with comorbid alcohol dependency because it's a tough patient population.

But it's actually the real patient population that is confounding for clinicians in the real world and for payers in for the whole system. We are actually quite proud of this work that we're going to be doing in this comorbid substance abuse diagnosis. We actually think it is indicative of a more enlightened view of what the disease actually is because we really don't see alcohol dependence or substance abuse coexisting with schizophrenia like hypertension or diabetes coexists with schizophrenia.

We think it is part of the underlying pathology of the disease and treating schizophrenia without treating the underlying alcohol dependency is not completely treating this disease. And I think we are getting some accolades from physicians as we tackle this and develop data.

Ladies and gentlemen, this concludes today's conference. We thank you for joining.