Alkermes Plc (ALKS) 2014 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Alkermes conference call to discuss the Company's financial results for the second quarter of 2014.

(Operator Instructions)

Please be advised that this call is being recorded at Alkermes' request.

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

Welcome to the Alkermes plc conference call to discuss our financial results for the quarter ended June 30, 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 section of the Alkermes website to find our press release and related financial tables, including a reconciliation of GAAP to non-GAAP financial measures that we will discuss today. We believe that the non-GAAP financial results better represent the ongoing economics of our Business.

Our discussions during the call today will include forward-looking statements. Actual results could differ materially from those contemplated by the 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 projected 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, future results, or developments.

Today, Jim Frates will discuss our financial results and Rich Pops will provide a brief update on the Company. After our remarks, we will open up for Q&A.

Now, I'd like to turn over the call Jim.

Thanks, Rebecca. Good morning, everyone.

We are pleased to report another solid quarter of financial performance and operational progress. During the quarter, Alkermes generated revenues of $153.4 million, non-GAAP net income of $17.7 million, and free cash flow of $12 million.

We also began to see the evidence of our expanding R&D activities, as we made excellent progress in advancing our increasingly late-stage pipeline. This is reflected in this quarter's results and our updated guidance for the balance of the year.

Within our commercial portfolio, worldwide end market sales of our long-acting atypical franchise, RISPERDAL CONSTA and INVEGA SUSTENNA, were approximately $696 million in the second quarter, compared to $626 million for the same period last year, reflecting double-digit growth, driven by sales of INVEGA SUSTENNA. For the quarter, Alkermes recorded manufacturing royalty revenues of $60 million for this product franchise.

INVEGA SUSTENNA continues to show impressive growth and it is the leading product in this class, with end market sales of the $394 million during the quarter, reflecting robust growth of 36% year over year. Of note, during the second quarter, year-to-date end market sales of INVEGA SUSTENNA surpassed $500 million, and as such, we will record royalty revenues at 9% of end market sales for the remainder of the calendar year, based on our tiered royalty structure.

Looking ahead for this franchise, our strategic partners at Janssen Pharmaceuticals recently announced that the FDA granted priority review for a new schizoaffective disorder indication for INVEGA SUSTENNA, with a PDUFA date in November 2014. In addition, Janssen recently submitted an sNDA to support an expanded label for INVEGA SUSTENNA. If approved, it would include new data showing significantly delayed time to relapse of schizophrenia using this long-acting injection, compared to oral anti-psychotics, based on real world clinical data. We also continue to expect Janssen to submit the NDA for INVEGA SUSTENNA three-month, to the FDA by the end of 2014.

For AMPYRA and FAMPYRA, our manufacturing royalty revenues were $19.5 million for the quarter, and for BYDUREON, we recorded royalty revenues of $8.8 million. For VIVITROL, we recorded net sales of $21.6 million, compared to $17.4 million for the same period last year, demonstrating strong year-over-year growth of approximately 24%.

In terms of expenses, our total operating expenses for the first quarter were $176.2 million, compared to $125.1 million for the same period last year. This increase in operating expenses reflected accelerated investment in our advancing late-stage clinical pipeline and commercial organization.

Specifically, investments in R&D included the following: The completion of the successful Phase III study for Aripiprazole Lauroxil and preparation of the NDA, which we will submit this quarter. Second, the initiation of two core efficacy studies for the ALKS 5461 pivotal program during the second quarter, which are ramping up with site initiation and enrollment ahead of schedule. And third, the acceleration of our ALKS 3831 program.

The first ALKS 3831 Phase II study for schizophrenia with olanzapine-associated weight gain, is enrolling faster than expected. And we were able to expedite the initiation of the second Phase II study for ALKS 3831 in patients with schizophrenia and alcohol use.

On the commercial front, our SG&A expenses reflected increased promotional activities for VIVITROL and early preparations for our anticipated launch of Aripiprazole Lauroxil. Additionally, during the second quarter, we recorded a $15.3 million gain on investment related to the sale of our stake in Acceleron Pharma and a $12.3 million gain on the sale of an unused fill finish facility in Athlone.

With respect to our financial expectations for 2014, we are updating our guidance to today to reflect our results year to date, and the increased investment in R&D, as we accelerate and expand certain clinical programs. I'll now highlight the key elements of our updated financial expectations for 2014.

We are increasing our R&D expense expectation to a range of $260 million to $280 million, up from a range of $225 million to $245 million. Following the strength of the results of the Phase III Aripiprazole Lauroxil study, we have now expanded our clinical program to prepare for what is shaping up to be a clear and robust commercial opportunity. In addition, we have accelerated investigator site initiations for the ALKS 5461 and ALKS 3831 clinical studies to enable faster enrollment for these promising drug candidates.

We are increasing our expectation for other income to a range of $25 million to $30 million, up from a range of $10 million to $15 million. This increase reflects the gain recorded during second quarter, related to the sale of our equity stake in Acceleron. Consistent with this increased R&D investment, we now expect non-GAAP net income be in the range of $30 million to $50 million, revised from our previous range of $65 million to $85 million. Our complete financial expectations for 2014 are outlined in the press release issued earlier this morning.

Stepping back, let me put these updates into some context. The value of our wholly owned pipeline will be realized through the efficient and ultimately successful execution of large scale clinical studies. The increasing investment that we've outlined today is directly related to progress we are making in these important clinical studies and is supported by our strong commercial business and our significant financial resources.

We are enthusiastic about the prospects ahead for each of our pipeline candidates, and the opportunities they present to grow the business and the value-creating milestones that lie ahead.

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

Thank you, Jim. Good morning, everyone.

We try to keep these summer calls brief, but there been a number of exciting pipeline advancement since our last earnings call. But before I dive into the status of the individual programs, I'd like to briefly summarize our basic philosophy on product selection and development, because we think it is a very distinctive feature of our Company and reveals common themes in the pipeline.

We have what we think is a very contemporary approach to product selection and development, reflecting today's healthcare environment. It's informed by our focus on chronic CNS and mental health conditions affecting large numbers of patients and the principle that our medicine should have value for patients, for payers, and for society. So what does that mean in practice and how has it led Alkermes to have a pipeline with some of the most exciting candidates for chronic CNS diseases?

First, our drug candidates need to provide a differentiated mechanism of action or some property relating to safety or efficacy that is relevant to patients and payers and makes the medicine unique and ideally non-substitutable. Second, we need to justify the economic rationale for their use in the real world.

Third, we need to understand and have the ability to shape the policy framework around the use of the medicine in government and commercial systems. And fourth, we need to seek and integrate into our development plans the voices of the people affected by the disease and by our medicines, the patients, their families, and even their communities.

These principles may seem like common sense but Alkermes is ahead of the curve in applying them. If we are sensitive to each of these considerations, we have the potential to create pull for our medicines, from regulators, from patients, and from payers and policymakers. That's what makes the candidates in our development pipeline so interesting and potentially valuable.

Let's start with the most advanced product candidate, Aripiprazole Lauroxil, our long-acting injectable form of ABILIFY. Following the positive Phase III results that we announced in the beginning of April, we are moving quickly and are on track to submit the NDA during the third quarter.

Multiple factors are coalescing in the US market for long-acting injectables and we believe it's a market primed for growth. Today, the LAI market in the US represents fewer than 10% of patients with schizophrenia and a limited number of prescribers. And until recently, LAI use was essentially limited patients who had multiple relapses and were advanced in their disease regression.

This is a unique moment in time, with five important factors contributing to a very dynamic market poised for expansion. First, there are going to be multiple entrants with a common message. There will be four companies with four different products educating a larger number of physicians about long-acting atypicals and advocating the logic of LAIs for patients and for providers.

Second, the major branded oral medications will be off patent, which will have two important implications. The LAIs will dominate [share of voice], and importantly, as the cost for oral significantly decreases, this creates at reimbursement of LAIs.

Third, there's now more than a decade of outcome data, including long-term studies on relapse prevention, and medical and pharmacoeconomic outcomes supporting the use of LAIs. These data are critical for the fourth factor, which is an increased focus on long-term cost, with the implementation of the ACA and the expansion of state and federal programs, which cover many of these patients.

Fifth, in the wake of the steady stream of tragedies associated with mental illness and gun violence, there is an elevated interest and urgency from the public and policymakers for better identification and treatment of these patients. Together, this is creating an environment that calls for a shift in the treatment paradigm toward expanded use of long-acting injectables.

This is precisely the right time to be coming to market with Aripiprazole Lauroxil, a product designed intentionally with a number of important attributes. Aripiprazole Lauroxil is designed for flexibility and ease-of-use for patients and providers, based on things we've learned through our successful development of RISPERDAL CONSTA and INVEGA SUSTENNA. It will come in a pre-filled syringe with multiple doses and options for deltoid and gluteal administration and a two-month dosing option and development.

Strong efficacy, multiple doses, duration, sites of injection, and ease-of-use. We are very excited about Aripiprazole Lauroxil's profile and we're looking forward to getting the NDA into the hands of regulator soon.

Next is 5461, our novel drug candidate for major depressive disorder, which has fast track designation from the FDA and is moving very rapidly in development. With yesterday's announcement of the initiation of the FORWARD-5 study, all three core efficacy studies in the FORWARD are now underway.

These studies will evaluate the efficacy and safety of 5461 as an injunctive treatment in patients suffering from major depressive disorder who have an inadequate response to commonly prescribed drugs. We are encouraged that [site in] initiation is progressing ahead of our expectations and will look forward to updating you on our progress in this important program.

ALKS 3831 is designed to be a broad spectrum and anti-psychotic for the treatment of schizophrenia. It's composed of samidorphan, a novel potent new opioid antagonist, in combination with the established anti-psychotic drug, olanzapine. During the second quarter, we announced that we had initiated the second Phase II study of 3831 for the treatment of schizophrenia in patients with alcohol use.

The first Phase II study of ALKS 3831, testing its effects in patients with schizophrenia and olanzapine-associated weight gain, is enrolling well, ahead of schedule. We are pleased to report that we are moving up our expected enrollment completion timeline to the end of the third quarter, with data expected in early 2015. So that's the quick update on the late-stage pipeline and these programs, as you can see, are really moving.

Two additional pipeline candidates are entering the clinic this year in studies designed to be highly informative early in their programs. ALKS 8700, our novel MMF molecule for the treatment of multiple sclerosis, is designed to offer differentiated features compared to Tecfidera, based on the combination of our novel chemistry and our oral formulation technologies and experience. Earlier this month, we announced the start of a comprehensive Phase I study to evaluate the safety, tolerability, and pharmacokinetics of several oral formulations of ALKS 8700, compared to both placebo and Tecfidera.

ALKS 7106, our novel oral opioid analgesic candidate for the treatment of pain, will enter the clinic this quarter. The first study will establish the range of doses that will then proceed into a second study using an established pain model. Our goal is to determine whether ALKS 7106 can provide analgesic effects without the same abuse potential or risk of overdose of more conventional pain products. We expect to have informative data from both programs in the first half of 2015.

We believe that we've built the most exciting CNS pipeline in the mid-cap space. With the NDA submission for Aripiprazole Lauroxil expected before the end of the third quarter and human proof-of-concept data expected for ALKS 3831, ALKS 8700, ALKS 7106 in the upcoming months, our Business has an unprecedented level of momentum behind it, with drug [candidates] each having blockbuster potential.

We're aggressively executing our strategy and taking advantage of every opportunity to rapidly advance the development of our innovative medicines and create significant value patients, physicians, and our communities.

With that, I'll turn the call back to Rebecca for questions.

Thanks, Richard. All right. We will now open up for Q&A. Brendon?

(Operator Instructions)

Ari Jahja, Credit Suisse.

First, pertaining to the drivers of long-acting injectables market growth in the US, can you elaborate further on potential benefits from new focus on total cost and elevated public interest in treatment? And then I have another question on Aripiprazole Lauroxil?

Good morning, Ari. It's really important moment in time, as I said earlier, that there is this coalescence of various factors in the marketplace, not the least of which is the pharmacoeconomic outcome data. In Jim's remarks, he highlighted the work that J&J is doing, Janssen is doing with INVEGA SUSTENNA, the sNDA they just filed based on real world data of the use of LAIs, and in a real world setting compared to oral anti-psychotics.

So the medical outcomes coupled with the pharmacoeconomic outcomes, which are really driven by reduced hospitalizations, are going to become very focal for payers going forward, particularly since that message is going to be echoed by multiple companies. All of us have a shared interest in making sure that the policy changes in the US accommodate the use of more LAIs, not just for the benefit of own drugs, but for the benefit of the public health the public budgets, as well. So that's going to be a fundamental trend.

On the policy side, it's interesting, there is a growing sense of a need to take some action to deal with this chronic violence associated with certain chronic mental health conditions. We are in the thick of that and we will be doing that in collaboration with multiple interest groups.

Great. Thank you. And then secondly on Aripiprazole Lauroxil, what do you expect the clinical program for a two-month formulation to look like, and assuming positive data, which [filing by the way] can be pursued?

Our strategy of the clinical side will be to put two-month into the clinic this year and we will be mapping out the PK profile of the two-month formulation. Our first job is to map that PK profile onto a range of therapeutic doses that we've established is efficacious in the Phase 3 program. Then will interact with FDA and decide on filing path.

Appreciate the color there. Thank you.

Cory Kasimov, JPMorgan.

I actually have three of them for you -- one clinical, one financial, and one strategic. The clinical one first, seems like you are running a pretty substantial Phase 1 program for 8700, and there's obviously a lot of dose and scheduling work that's taking place with this initial study. But how important do you believe this trial could be in beginning to delineate the product's clinical profile?

Cory, I'll take that. It's Rich. It's critical. It's Alkermes' style in our first clinical trial to bring as much relevant clinical information as early as possible. So we have a drug that metabolizes into MMF, and so we're going to test that metabolism by monitoring PK and PD within the clinical study.

We also range of formulation and we are quite good at oral controlled release, so we are coupling the novel molecule with various delivery profiles. So at the end of the data, at the end of the study, we will have a data set that will allow us to assemble and determine whether or not we can develop a once-a-day formulation or a twice-a-day formulation with improved properties. We will get an early sense of tolerability as well, but that will become more extensively elaborated in later clinical trials.

Okay. And then the financial one for Jim. With the bump to R&D guidance, given that you guys have some many different programs progressing through the clinic right now, is it possible to give us an early read into how we should be broadly thinking about R&D trends beyond 2014?

It's important, we haven't given guidance yet for 2015 and it is really going to be driven based on the data that we see from the initial studies that we're starting now. A big toggle in 2015 is going to be the outcome of what we see with 3831, 8700, and 7106. As we have in the past, we will make decisions based on data.

We are fortunate in the sense that we have a very broad portfolio, so if these products aren't meeting our expectations, and the high expectations that we have for each of them, we won't be investing in them next year. Once we have more information, we will be able to give you a better sense, but it's really going to be driven by the number of programs we have running next year.

Okay. Then last one Rich, for you. Just with Alkermes being an Irish-domiciled Company and the amount of time that you spent in Washington, I'm interested in your perspective on all the talk in Washington now building against tax inversions and how you suspect this could play out?

There's a lot of talk about it given the current political climate, but I don't think there's going to be much action related to it in the near term. I just want to underscore the fact that a lot of this discussion is talking about tax-driven transactions for the purpose of inversion.

We actually are an Irish Company with a huge Irish presence, lots of employees in Ireland making millions of doses of medicines in Ireland, with a four year operating business in Ireland. So even as people begin to talk about this thing, it is important to draw a distinction between Irish companies. We are incredibly solid in terms of our footing there.

I just want to build on one thing that Jim was saying in the previous question, too, Cory, because it's such an important moment for the Company and so many people within our Company deserve accolades because we have really been hammering here to put so many of these drugs into the clinic into important clinical trials. We're just in one of those really fantastic moments where we know that within the next several months, we are going to turn over cards that are incredibly informative to the valuation of the Company.

It doesn't happen by accident. It takes years of preparation and there are a lot of people who have been cranking around here all summer. I want to acknowledge how much work is going on and how exciting the moment is for us now.

All right. Great. Thanks a lot for taking the questions.

Jonathan Eckard, Citi.

The first would be on the Aripiprazole Lauroxil NDA. If you're expected to file before the end of third quarter, I'm guessing, based on the pathway you are submitting through, there is potential to see the FDA's acceptance of the NDA before year end if I'm not mistaken?

And then, with regards to some of the timelines of seeing data from these early programs, I know that you guys always have a conservative stance with regards to guidance when you can see data. But, is it realistic to think there's a potential to see some data before the year end for some of the 8700 or 7106 given the designs and the timelines to run these type of trials, the length of -- the durations of treatments, so on and so forth?

Good morning, John. On your first point about the timeline of the Aripiprazole Lauroxil NDA and acceptance right. That's right, so you're spot on there. Given the clarity of the Phase 3 results, we see the NDA as a large submission, but relatively straightforward in terms of its acceptability by FDA.

We will be generating data in the 7106 and the 8700 program earlier than what we've guided to. We have not made the decision yet about how we compile those data and share them with you. I did say today, though, that the 3831 enrollment in the olanzapine weight gain study is faster than we had originally modeled, so we will expect that data early in 2015, but the actual precise timing of that will be determined as we finish up that study.

If you don't mind, if I can ask one more question. I know it's a tricky one because you don't like picking your favorite child, so to speak, which one you love the most. But if you had look at the 3831 results, 8700 or 7106, is there one in particular that you're most enthusiastic about with regards to what the trial could show and what clarity it could show to the potential commercial -- the commercial potential that, that opportunity could have?

They are three very different business and scientific opportunities. I will -- [here is] the way I will answer the question. Starting with 8700, 8700 is obviously derivative of the massive opportunity that Tecfidera is demonstrating in the oral MS in the market. It's an exercise of improving on an excellent product using technologies and experience that we have within the building.

It will be very clear whether we achieved or not and that will be the go or no-go decision toggle for us on 8700. If it's go, we move into a very established market with clear economic opportunities and medical opportunities.

3831 is a medicine that, if we have significantly attenuated weight gain associated with olanzapine, we think we have one of the most important broad-spectrum oral anti-psychotics to be developed, but it's still to be determined. I analogize 3831 today to where we were with 5461 before we got this [conference] of Phase 2 -- a fantastic idea, founded on tremendously strong science, but let's see what the data show, whether it bares itself out.

7106 is a game changer. 7106 is a new class of opioid painkillers that has less potential for -- reduced potential for addictive properties and overdose potential. What we like about 7106 is that it is, as you've heard us say before, this is a giant market in the US, 230 million prescriptions are written each year, and the whole market could pivot to less abusable, less addictive molecules.

So I can't pick my favorite or any of our favorites around here. It's a subject of intense discussion around the building, but the data will point us in the right direction.

All right. Thank you so much.

Biren Amin, Jefferies.

I have a question on 3831, on the Phase 2 that you are expecting data on, in early 2015. What can we expect on the weight gain, given the earlier three-week study showed a 2 pound reduction in weight gain at week three. What is the Company expecting at week 12 to warrant moving forward into a Phase 3 program? Thanks.

Good question, Biren. What I would say is that the previous [interest] on human volunteers, I wouldn't look at the absolute weight gain of a couple of pounds as being indicative of -- what we are really looking for was changing the shape of the curves, because that study by necessity could only be of three weeks duration in normal volunteers.

It was more interesting to see the slopes and the rate of change of the weight gain that was indicative of it being consistent with what we saw in the pre-clinical model. So to answer the question, important in this large study in Phase 2 in patients with schizophrenia who are receiving 3831 on a blinded basis for three months and then open label for another three months, we're going to look not simply at median change in weight, because, as you've heard me say before, the median weight change for patients on olanzapine is actually about 8 or 9 pounds in the CATIE study, which isn't a clinical problem.

The problem is people who are way above the median, and there are people who gain 30, 40, 50, 60 70, 80 pounds on the medicine. So what we are hoping to get is a profile, a distribution of weight gain, in this study, in a large sample size, and seeing a shifting distribution in the patients on 3831, ideally looking at that cut of patients who gain excessive amounts of weight, say, in excess of X percent of their body weight, maybe 7% of their body weight, and see if we can reduce that fraction significantly.

Our statistic of interest in not necessarily changing median weight gain in the patients. It's the fraction of patients who gain more than some clinically significant amount of weight. We think we have a large enough sample size to be able to get a sense of that in this Phase 2 study.

Got it. And then on Aripiprazole Lauroxil in the two-month formulation, can you provide any details on this PK program? How many patients, what type of doses would you be evaluating, in this trial?

I won't yet, primarily for competitive reasons. We think that having a range of durations is going to be a real competitive factor because we think we have a range of doses and a range of duration, so we will probably reveal that as we get into the program, if you don't mind.

Got it. Thank you.

Michael Schmidt, Leerink Partners.

It is Jonathan Chang stepping in for Michael Schmidt. Thanks for taking the questions. My first question, can you provide any updates on how your ex-US plan for Aripiprazole Lauroxil are evolving?

Sure, we -- and I mentioned in our last call -- based on the strength of the US 003 data from the international 003 study, the pivotal study for Aripiprazole Lauroxil, we are going back to Europe to seek scientific advice on the filing strategy. The guidelines suggest that we need to run another study. That's our base plan and we are designing the study right now, but we want to go check in with the regulators to make sure that, that is necessary, based on the clarity of the results in the 003 study.

Okay. Thanks. Also, when can we expect to see data from the second Phase 2 study of ALKS 3831 for schizophrenia patients with the co-current alcohol use disorder?

We've modeled a fairly long [fuse] on that one. So we are currently saying early in 2017, I believe, but we will really update it based on--

We will update based on enrollment rate.

It's uncharted territory, in terms of patient enrollment and productivity. So what we decided to do, is we are going to activate the sites, and we will get a sense of the enrollment rate, and then we'll guide toward when we think the study will complete. But it won't be in early 2015 or anything like that. It will be later than that.

Okay. Thanks. And just one last one. Are there any updates on the IL-2 immunotherapy RDB 1419?

Thank you for asking. Yes, it is moving on. We're on track to put that in the clinic next year. Our lack of discussion about it doesn't reflect anything about diminished excitement about it, it is just that we have so many things to talk about this pipeline, we rarely get to the biologics. So, thanks for asking.

Thank you.

Mario Corso, Mizuho USA.

Good morning. Thanks for taking my questions. Just a couple things I wanted to ask about. Starting with the R&D guidance, the about $35 million increase, is there any way to break that down, even in broad terms, where it is coming from, 5461 versus 3831 versus other?

And then second half of the year, on both R&D and SG&A, anything remarkable or identifiable in the quarterly spending trends we should be thinking about or should it be fairly linear? And then lastly on the long-acting anti-psychotics, what do you think, or what you expect or hope that organizations like the APA may do or say over time, which will potentially help the use of the whole class? Thanks very much.

Sure, Mario. I will take the financial questions first and then turn the last one over to Rich. From R&D guidance, the increase for 2014 is really driven by, as I mentioned in the script, the increasing enrollment from 5461 and 3831. That's mainly going to be driven by 5461, so if you're thinking about the relative increases in each of the programs, and we have outlined in the Qs some detailed spending that you can see for the last quarter historically, where that spend is.

5461 is the largest program, then 3831, and then Aripiprazole Lauroxil. Going forward through the year, as I mentioned, as well, we are going to continue to see those curves now start to play out. As you pull enrollment into 2014, finish some studies in 2014 with 3831 a little faster than we anticipated. And continue the work with Aripiprazole Lauroxil on the two-month study this year and some other things that we're not disclosing for competitive purposes.

That's where you're seeing that increase in R&D. Again, all highly valuable, and the faster we can get those done, obviously the faster, we'll [inure] benefits to patients and shareholders. In terms of SG&A and other spending, COGS, those are right in line with guidance where we gave earlier this year in February, so I don't really have any updates that spending. Rich?

The point on the professional societies, there's actually two domains that we are interested in from a policy point of view. One is the professional society like APA, and in that particular case, their guidelines have not really been updated since 2004. We think that with more LAIs in the marketplace and more data, they will, at some point, update the guidelines to accommodate the data around LAIs.

The other domain, of course, is government, because so many of these patients are covered by Medicare or Medicaid. So it's important also that the treatment guidelines that are in those systems are modernized to reflect the expanded use of LAIs. We're working, hopefully constructively, with folks to help both happen.

Tyler Van Buren, Cowen and Company.

With respect to the 3831 program, I was hoping you could elaborate a little further on the cut of patients with excessive weight gain that you're looking at, of the overall population, what that cut of patients looks like and how we should expect to look at the data when we see it in early 2015? And also with respect to the accelerated enrollment in the program, is that largely due to the increased sites or are you seeing something else with respect to perhaps interest in the product profile?

Yes, it's a good question. Just to be clear, the study that we are running right now, we don't really take an enriched cut, quote-unquote, of patients. We're really just taking all comers, the patients who are interested on going on oral olanzapine or 3831 in the context of the study. It's very naturalistic in that sense.

It's informative, in addition to just looking at the effects of 3831 in terms of weight, it's informative in terms of the naturalistic profile of weight gain in patients with schizophrenia with olanzapine, which has not really been clearly demonstrated before. Even on a blinded basis, we can monitor the gained weight, and it's fair to say that patients in the study on the blinded basis are gaining weight. If you look at the label for Zyprexa, that's consistent with the data demonstrated before.

But we're not -- the secret to this approach is not that you have to find people who have already gained weight, and have shown a propensity, you enroll patients who -- and determine along the way who has potential the gain more weight and hopefully 3831 can prevent that weight gain or minimize it. The increased enrollment or accelerated enrollment, I wouldn't overinterpret it other than just that we were fairly very conservative.

This is a study that is never been run before. We've just had excellent clinical trial management by our teams and very protective sites and a capability that we're building here in a general way that you saw in the Aripiprazole Lauroxil Phase 3 study and in the 5461 Phase 2, hopefully in the 5461 pivotal forward program. Just this rigorous fastidious attention to sites and execution translates into good enrollment rates so hopefully the data will confirm the excitement that the community has for this program, but we'll see that soon enough.

Great, thanks.

We have time for two more questions.

Steve Byrne, Bank of America.

This is [Sarah] on for Steve. Thanks for taking the question. First one is on what you've learned from the Otsuka Maintena launch. What do you think you will apply to the Aripiprazole Lauroxil launch and is there anything in particular that you will do differently? And then maybe you can elaborate on the early prep work that is being done and if you plan to start meeting with hospitals and payers in the near term?

Yes, we've been obviously watching the Otsuka Maintena launch with great interest, and you've heard us say before, our view is that it underscores the receptivity of the market to a new molecule. Up until this point, the only product that has available for physicians and patients have really been risperidone and paliperidone, [as] metabolite.

The introduction of Abilify has done a couple things. One is it's broadened the number of physicians who are being called on are starting to write LAIs. And interestingly, we're seeing new starts on Abilify Maintena coming not simply from patients who are on oral Abilify, but from other -- almost one-half of the patients are coming from other medicines, as well, which we think underscores the attractiveness of Abilify as a long acting injectable molecule.

We also have noted the scale with which they've come to market, which is consistent with J&J's scale, somewhere 150 to 200 reps focusing on these community mental health centers and specialized treatment centers. So we have very good metrics on where the business is and how the product is rolling out.

Also, the launch curve underscores the fact that $1,000 long-acting injectables in disadvantage patient populations launched with a different waveform than [Sovaldi]. That's okay. We have good experience with that and we are prepared for a strong introduction but a gradual launch. That's the way we're going to model it and we expect this drug to have a very, very good profile.

I'm sorry, Sarah, did you have one more?

7106, and then what kind of data you will need to determine a go/no-go decision and will you also be looking at the opioid-specific adverse events, such as somnolence, et cetera?

Absolutely. Actually, usually you hear about a single ascending dose escalation study being a fairly boring study. In the 7106 case, it's highly informative, because if we can demonstrate a range of doses that we can administer in patients safely without causing respiratory suppression, we immediately begin to separate this molecule from classical opioid agonists.

Then we will take those doses and move them into a pain model and we will start to establish a very broad therapeutic range. That's the idea. So we think the early studies will be incredibly informative.

Terence Flynn, Goldman Sachs.

Thanks for taking the questions. Just a follow-up with respect to thinking about the SG&A build here. Maybe Jim, you can just remind us what was contemplated in your 2014 guidance for the 9070 commercial build and then help us think about the cadence as that rolls into 2015? And then we would love any thoughts, Rich, on the recent FDA draft bioequivalence for Tecfidera? Thank you.

Thanks, Terence. Sure. As we guided for the year of 2014, we're on schedule with the overall Aripiprazole Lauroxil program, filing the NDA at this time, and looking for a launch in 2015. We have planned for and are executing on building the infrastructure, the Management team, the marketing group, et cetera, for Aripiprazole Lauroxil, but not yet the broad sales force. 2014 includes that infrastructure build as it were with people, but not the sales force, because we feel like we will have plenty of time before -- if we get the NDA in here in the third quarter, the sales force will be a 2015 build.

Terence, the FDA's bioequivalence guidance they just put out was very clear and very consistent with our hypothesis, which is a very clear statement that MMF is the active moiety in Tecfidera, and therefore bioequivalence standards for future generics will based on modeling MMF.

You should also expect that there will be a response from others. So this will be an ongoing discussion scientifically, but we think that the first statement by the FDA is consistent with the science and has been consistent with our approach this program all along. So we were very pleased to see it.

All right, everyone, thank you for dialing in today. If you have any additional questions, please don't hesitate to call us here at the Company. Take care.

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