Alkermes Plc (ALKS) 2014 Q4 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 fourth-quarter and year-end 2014 financial results.

(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, Miss Rebecca Peterson, Senior Vice President of Corporate Communications at Alkermes. Please go ahead.

Thanks Brandon. Welcome to Alkermes' PLC conference call to discuss our financial results for the quarter and the year ended December 31, 2014. With me today are Richard Pops, our CEO; Shane Cooke, our President; and Jim Frates, our CFO.

Before we begin, I encourage everyone to go to the investor relations section of www.Alkermes.com to find our press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures we will discuss today. We believe that the non-GAAP financial results better represent and reflect 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 these forward-looking statements. Please see our press release issued today and our annual report on form 10K for important risk factors that could cause our actual results to differ materially from those projected or suggested in the forward-looking statements. We undertake no obligation to update or to revise the information provided on this call as a result of new information or future results or developments.

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

Thanks, Rebecca. Hello everyone. We're pleased to report our results for the fourth quarter and year ended December 31, 2014, and our financial expectations for 2015.

Alkermes ended the year strongly, and our 2014 results were ahead of expectations. These results were characterized by strong revenues from our portfolio of commercial products and focused investments in our pipeline.

We believe this pipeline has matured into the most exciting pipeline in CNS. It is late stage, we have validating data, and we control the assets 100%. With this pipeline and our commercial business both performing well, we continue to build a major biopharmaceutical company with significant growth and earnings ahead.

In 2014 our commercial portfolio generated $618.8 million of total revenues, and we earned $54.6 million of non-GAAP net income, demonstrating our strong financial and operational performance. We ended 2014 with over $800 million in total cash and investments and are well capitalized to execute on our pipeline and commercial portfolios.

During the fourth quarter, our total revenues were $175.2 million, driven by robust revenues from INVEGA SUSTENNA, VIVITROL and AMPYRAM and we recorded non-GAAP net income of $16.8 million. I will now review some of the key drivers of our financial performance during the quarter.

Within our commercial portfolio, worldwide end market net sales of our long-acting atypical antipsychotic franchise, RISPERDAL CONSTA and INVEGA SUSTENNA, were approximately $712 million in the fourth quarter compared to $671 million for the same period last year. For the quarter, Alkermes recorded manufacturing and royalty revenues of $70.3 million for this product franchise. INVEGA SUSTENNA continues to show impressive growth as the leading product in the class with end market sales of $418 million in the quarter reflecting nearly 24% operational growth year-over-year.

Our partners at Janssen continue to invest in the long-acting atypical antipsychotic space. The NDA for INVEGA SUSTENNA three month recently received priority review from the FDA with approval expected midyear. Additionally, INVEGA SUSTENNA received approval for a new schizoaffective disorder indication in November 2014.

We're pleased to see the continued growth of the overall market for LAIs with sales growth of approximately 20% in the United States over the fourth quarter of last year. This market is expanding, and we're excited to be preparing for the launch of aripiprazole lauroxil later this year.

For AMPYRA and FAMPYRA, our manufacturing and royalty revenues were $24.3 million for the quarter, reflecting strong end market sales and the timing of shipments to Acorda. For VIVITROL, the fourth quarter was our strongest quarter yet, with net sales of $29.7 million compared to $20.6 million for the same period last year, demonstrating growth of 44% versus last year and 15% sequentially.

In terms of expenses, our total operating expenses for the fourth quarter were $190.8 million compared to $148.6 million for the same period last year. This increase in operating expenses was driven primarily by the success we are seeing in our late stage clinical pipeline along with increased promotional activities for VIVITROL, commensurate with its growth, and early preparations for our anticipated launch of aripiprazole lauroxil.

Looking forward to 2015, we're well-positioned to execute on our plans to drive the next stage of Alkermes' growth. We're developing a robust late stage CNS pipeline of differentiated drug candidates with long patent lines in disease areas with major unmet medical need, and we have the resources to bring them to market. 2015 will be a year of investment as we continue pivotal studies for ALKS 5461 in major depressive disorder and initiate pivotal studies for ALKS 3831 in schizophrenia and ALKS 8700 in multiple sclerosis.

At the most mature end our pipeline, we have aripiprazole lauroxil, which represents another key area of focus for 2015. We're investing in our commercial organization and preparing for the launch of this product into a schizophrenia market that is shifting in favor of increased use of long-acting injectables.

With this context, I will now review the highlights of our financial expectations for 2015. We expect total revenues to be in the range of $640 million to $670 million with VIVITROL revenues to be in the range of $125 million to $135 million, reflecting growth of approximately 33% to 43% compared to calendar 2014. Additionally, assuming a September launch and using the Abilify Maintena launch as a proxy, we currently expect aripiprazole lauroxil revenue of $5 million to $10 million.

We expect R&D expenses to be in the range of $345 million to $365 million. This expectation reflects investment in the ongoing FORWARD pivotal program for ALKS 5461 and the initiation of pivotal programs for ALKS 3831 and 8700. We expect R&D expense to ramp throughout 2015 as these additional pivotal programs get underway. Additionally, we will advance our biologic into the clinic and unveil a new CNS candidate this year.

We expect SG&A to be in the range of $310 million to $330 million. This increase is primarily driven by the expansion of our commercial organization to support the anticipated launch of aripiprazole lauroxil. We expect the majority of the sales force will be hired in the second and third quarters and would expect to see a ramp up in investment to occur during those periods.

Reflecting these investments, we expect non-GAAP net loss for the year ending December 31, 2015 to be in the range of $40 million to $60 million and non-GAAP net loss per share to be in the range of $0.27 to $0.40. Even with this increased investment in the business, we remain well positioned and financially strong as we expect to end 2015 with over $700 million of cash and total investments.

The investments we make in 2015 will be the foundation of Alkermes' future growth. Through active management of the business, we have the resources in place to aggressively advance our innovative late stage pipeline, launch aripiprazole lauroxil and drive future growth for our shareholders.

With that, I will turn the call over to Richard.

That's great, thank you Jim. Good morning everyone. 2014 was a year characterized by excellent execution of our plans and validation of important drug candidates as we continue on this path to build a high-value biopharmaceutical company.

We have proven and productive R&D engine generating innovative products designed to address the needs of a range of participants in the healthcare system, not just patients who are central to our focus, but also their caregivers, families, healthcare providers and payers. Moving into 2015, we have identified our next leg of growth, as the potential has become clear for this exciting portfolio of late stage drug candidates following a series of positive clinical trial results.

We now have three portfolios that drive our business. Our commercial portfolio of market products, the emerging blockbusters that are next in line to become potentially significant commercial products and the pipeline of earlier stage candidates that continues to be replenished by our R&D engine.

As we look ahead, we see one of the strongest pipelines in the pharmaceutical industry with four late stage drug candidates, each with major potential. The first is ALKS 5461 for patients with major depressive disorder and an inadequate response to standard therapies. 5461 is based on a new mechanism of action and is differentiated from the classic SSRI or SNRI approach.

Based on the compelling data from the phase II program, last year we initiated the comprehensive FORWARD pivotal program. The objective of this program is not to run entirely new clinical experiments, but to replicate our successful phase II results in phase III.

Last month we announced data from the first study in the pivotal program called FORWARD I. These data were very positive and clearly replicated results from our previous phase I study.

Seeing these consistent effects study to study gives us a sense of confidence in robustness of the effect of ALKS 5461 in this patient population and its ability to potentially improve the standard of care. We're continuing to enroll the three core efficacy studies of the FORWARD program in 2015, and we are on track to report data in 2016.

Next, 3831 is our novel oral broad-spectrum antipsychotic drug candidate. With ALKS 3831, we have built on the proven pharmocologic activity of olanzapine and added our own proprietary NCE Samidorphan to create a novel agent designed to deliver the efficacy of olanzapine without the weight gain associated with it and to have particular applicability in patients with co-occurring substance abuse.

The phase II study and weight attenuation for which we announced data last month was designed as an acid test study to determine early in the program whether 3831 had not only some degree of affect on olanzapine related weight gain, but whether the effect was large, consistent and clinically meaningful to patients, and it was.

The data were clear and compelling. 3831 demonstrated equivalent antipsychotic activity to olanzapine with statistically significant lower percent weight gain across a range of analyses of the study results.

In all of our analyses, we saw a clear beneficial effect of ALKS 3831 on weight gain versus the active olanzapine control in the study. With these data in hand, we're confident that ALKS 3831 has a meaningfully different weight gain profile compared to olanzapine. And we think that is going to have a profound impact on the use of this medicine in a wide range of patients with schizophrenia.

We have only had a look at the first three months double-blind phase of the 3831 data in weight attenuation. The second three month period is ongoing, and we will have that data early in Q2. We plan to meet with the FDA and initiate the pivotal program for 3831 later this year.

We also have an important ongoing phase II study in patients with alcohol use and schizophrenia, which comprises about one-third of the patients with schizophrenia. That study is continuing to enroll. So ALKS 3831 is firing on all cylinders, and it is really gaining momentum.

Next, our newest emerging blockbuster potential product is ALKS 8700 in multiple sclerosis. We designed this molecule to provide the efficacy of the active moiety of Tecfidera MMF and to offer favorable tolerability by applying our chemistry and oral formulation capabilities.

Earlier this month, we announced the positive results from a large phase I study. We achieved the results we were hoping for. The highly informative study showed that ALKS 8700 provided MMF exposures equivalent to Tecfidera with favorable gastrointestinal tolerability. Based on these data, we plan to initiate the pivotal development for this program following an end of phase II meeting with FDA, and we're incredibly excited to be moving forward with this opportunity.

Now for ALKS 7106, we announced this morning that the phase I study did not meet our prespecified criteria that would support advancing it into further development. We're stopping work on ALKS 7106 because of certain limitations specific to that molecule that this early study revealed. Our R&D efforts will keep going because of our leadership in this field and our confidence in the opportunity to create opioid modulators with fundamentally different risk profiles than traditional opioids.

ALKS 7106 is another example of the way we approach drug development here at Alkermes. We set clear, prespecified criteria; if we hit them, we go forward aggressively. If not, we are disciplined about holding investment and moving on, in this case to the next series of compounds.

Let me switch gears now to our most proximal commercial opportunity, which is aripiprazole lauroxil. Aripiprazole lauroxil embodies all the key attributes that we've learned are important to patients, nurses and physicians: efficacy, range of doses, ease-of-use. And we believe this is a fantastic time to be coming to market with our own product.

With a PDUFA date of August 22, we are moving quickly to put all the key elements in place to successfully launch this emerging blockbuster later this year. We know the LAI market, and we understand the changing market dynamics. We have a team of experienced commercial leaders and an established commercial infrastructure for specialty injectable products in place.

In the second and third quarter, we will build the field sales force. We know which accounts to target at launch, we have an attractive product profile and we're moving full steam ahead. With a newly allowed patent to extend aripiprazole lauroxil's patent protection to 2032, this product is going to be an important contributor to our business for a long time.

At higher level, what's remarkable is that over the last few years, we have been able to position the company to independently develop and advance each of these blockbuster opportunities, and this is not by chance. Our commercial business is operating just as we intended and generating significant revenues. Coupled with active management of our balance sheet, we have the financial foundation and flexibility to invest in the success of this rapidly growing business.

As you can see, we've identified products that are going to drive Alkermes' future growth. 2015 will be a year of major news flow and catalyst.

To start, next week we will host an analyst and investor event in Boston where we will provide an update on the pipeline and also provide some perspective on the market potential for each of these late stage product candidates. We look forward to seeing many of you there.

We're incredibly excited about the prospects for Alkermes in 2015 and beyond as we bring this pipeline of valuable medicines to patients and build value in our business. And with that, I will turn the call back over to Rebecca for the questions.

Thanks, Richard. We will now open up the call for Q&A.

(Operator Instructions)

Michael Schmidt, Leerink Partners.

So you will have three new agents in phase 3 testing by year-end. How is your thinking evolving with regards to addressing these opportunities on a global basis, either from the regulatory point of view for these trials, these potential new trials with those allowed for your approval as well? And secondly on the commercial front, how do you foresee addressing (inaudible) markets with these opportunities?

My second question is, on SG&A with the [bird] out of the commercial infrastructure, do you foresee any commercial synergies for VIVITROL as well? Thank you.

It's Rich. I will take some of those. First of all, thanks for the questions. It's a really high quality series of decisions we have to make now because the pipeline is so populated, as you say, with late stage products.

Taking the pivotal programs in turn, 5461, 3831, 8700 -- 5461 we see as a global product. The FORWARD program is addressing many of the global registration needs.

For European registration, we expect we have to run an additional study in addition to the FORWARD program we disclose. We're talking to European regulators and developing that strategy now.

3831 the data are pretty new, but we absolutely see that as a global product as well. As we design this phase 3 program, we will also meet with European regulators to talk about its applicability to the US market.

The same holds for 8700. We will -- we clearly see Tecfidera being sold on a global basis, and we have to be mindful of exclusivities in various territories and meet with the regulators to come up with the plan. We see all three of those in particular on a global basis.

The commercial technique that we will use to bring these products to market OUS is in development right now, and it is catalyzed by in fact by the point now that we have multiple assets in the CNS categories in psychiatry. If we only had one, we would think about licensing probably OUS, but given the fact we have multiple products, we like the idea that we have perfected ownership of all of these products on a global basis right now. We are evaluating what our global commercial strategy will be for the portfolio.

SG&A question, Jim, do you want to take that one?

I will take that one. The overlap between potential synergy is between VIVITROL and aripiprazole lauroxil -- another good question.

First of all, we are adding reimbursement specialists and policy people that will be able to work across the country on both products. The sales forces are going to be sharing a management team and a management structure, so there will be some synergies there.

There's not really a particular overlap between the folks that prescribe medicines for addiction, for opiate dependence and alcohol dependence and schizophrenia. I think and we hope and expect that as maybe treatment evolves that becomes more together, but right now they're very separate systems. So we will have separate sales forces, but there will be some synergies on the management and some of the more reimbursement areas

Let me just make one more point for you all, one more subtle point about synergies. When you think about attracting the finest commercial people in the business to come to a company, when you have a product like VIVITROL in the market, aripiprazole lauroxil on the threshold of coming to the market and now 8700, 3831 and 5461 all within the planning scenario of somebody who is looking to make a career change. We're seeing just a remarkably talented group of people attracted to come to Alkermes now.

Thanks so much.

Ken Cacciatore, Cowen and Company.

My question is as you look at the stock your currency is up very nicely. Your balance sheet is still very healthy. You are in overall good position.

So I'm wondering why not as you're building the infrastructure ahead of aripiprazole lauroxil launch and it bulks up, why wouldn't you be looking to expand the unmarketed portfolio given the position that you're in? Are you actively looking at assets, even maybe late stage assets, or do you just want to continue to push forward with the current portfolio alone? Thank you.

It's Rich. The answer is yes to both. We built this Company over time through a series of clever acquisitions that were timely and consistent with our business at the time.

We have just an incredibly rich portfolio of development products. We would add to that by exception when we see things that are complementary and at the same level of quality.

On the commercial side, it's interesting. You're right, there may be opportunities for us to accelerate our presence in some of these markets with commercial products. It's a target poor environment as I always say, but we're always out there evaluating those deals.

Thank you.

Cory Kasimov, JPMorgan.

I have two of them for you. The first one I guess is for Jim, just looking for some additional granularity on the SG&A guidance. Can you remind us of how many sales reps you have now? I guess they would be primarily dedicated to VIVITROL, and how many do you expect to have by the time you launch aripiprazole lauroxil?

Sure, Cory, currently we have 65 reps selling VIVITROL. That has been a pretty consistent number over the last year or two.

As we've said before, we're targeting a number of 175 salespeople for aripiprazole lauroxil. We will be making those hiring those people becoming on board in the second quarter and early third quarter as we prepare for launch in September.

Okay. Great. And then the second question is following up on the positive data that you talked about that you had earlier this year for both 3831 and 8700 and the company stated intention to advance both into pivotal trials.

I realized that end of phase 2 meetings are still pending for both, but do you have any updated thoughts, maybe, to what you had to say earlier this year on what phase 3 studies might look like for these? I guess I'm asking, how straightforward do you consider these programs are going to be?

I think they're both going to be relatively straightforward. It's just a matter than of sitting down with the regulator and figuring out what the most optimized strategy is going to be.

3831 in particular, if you think about it, Cory, we have actually run a large randomized study testing its effect on weight, and we will have the most complete data set from that in a few weeks time. But it really answers the question in a very rigorous way about the differential effects on weight.

The primary endpoint of the clinical trial that we just ran, as you know, is efficacy. So we think the probability of repeating in phase 3, the demonstration of the efficacy of 3831 is extremely high. And going into that with some very well elaborated sense of its weight differences, we think the overall program is quite straightforward.

What's interesting is to feather in additional data that might arise from the second phase 2 program in its own way, and the concomitant alcohol use patient populations well. We actually have a very big ambition for 3831. Ambitions are really driven by the quality of the data set that we just reported.

8700 I know there's a lot of questions, speculation about what the most accelerated form of clinical trials could be for an MMF prodrug. So instead of speculating, we have our own thoughts and we will sit down with the regulators as soon as possible and let you guys know as soon as we come to some agreement on that.

Okay. Thanks for taking the questions. See you next week.

Mario Corso, Mizuho USA.

Good morning. Thanks for taking my questions and congratulations on all of the progress.

In terms of SG&A, drilling down there a little bit, if we annualize the 4Q number, we get about $220 million. So then that would mean another $100 million or so incrementally in 2015.

So, is that's really all aripiprazole lauroxil commercial? Obviously 175 reps would get you maybe $40 or $50 million in terms of direct costs. Is that the right way to think about that?

And then in terms of the pipeline, NCDEU, is that still the target meeting for both the 5461 and the 3831 data? Thanks very much.

Jim, go ahead and take the SG&A one.

Sure. You are right. You are doing the math correctly. That is about $100 million increase in spend.

One thing to point out, a lot of that is actually an increase in non-cash compensation. Given that our stock price has almost doubled year-over-year, our non-cash comp is going up quite significantly. And that is just based on the number of shares issued, times of stock price.

There's also an increase in spend on VIVITROL as well. And that spend is really commensurate with the growth in sales from the $80 million range up to the $125 million -- excuse me, $90 million range up to the $125 million to $135 million we're projecting into next year. The bulk of the spend is going to be around aripiprazole lauroxil, the sales force and the preparation for the launch spend.

Rebecca, why don't you answer the next question.

Mario, obviously we submit a plethora of abstracts for scientific data, but there is a number of conferences this spring that you should expect to see data at on our pipeline.

So more than NCDEU, we are growing beyond that.

The most proximal is the international conference on schizophrenia which is coming up at the end of March.

Ari Jahja, Credit Suisse.

First for Rich, beyond your disclosures at the investor meeting, can you remind us about the clinical use flow in the first half of this year? I know Rebecca has mentioned about the international congress in schizophrenia, and I also have a follow-up question for Jim. Thank you.

The most dynamic part of it is 3831, which we're submitting abstracts immediately after receiving those data. We will have a few different ways of data. One you will see the data from three month double-blind cohort that we gave top line results on, but we're also fascinated to see the second three month phase. And we will get that either out in subsequent meetings and publications as well.

3831 will have a whole lot of data. We will give you a lot of transparency into the data supporting the program.

5461 we are also beginning to present data in various scientific forums both pre-clinically and clinically about this novel mechanism of opioid modulation, particularly introducing the idea that opioid modulation can be done to affect mood without having addictive properties as well. And throughout the course of the year by the end of the year, we will have the human abuse liability studies done which will provide human clinical data to support that observation as well.

On 8700, we are already have lined up, I think we will be presenting the first data from 8700, I'm looking to Rebecca to confirm that --

It has been submitted.

It has been submitted, but I don't know if we have it approved or know for sure. Of course as we move into the summertime, we will be looking at approval of aripiprazole lauroxil in August is the planned launch in September.

We are also going to put the immuno modulator oncology product into the clinic at the end of the summer as well, our first biologic in that program. And we also have another new candidate that we will be announcing that we will give you some timelines on as well that will provide additional news flow.

It's interesting because you look at all three of the portfolios of the Company. The commercial portfolio there's a lot of action with VIVITROL and INVEGA SUSTENNA in particular along with AMPYRA doing quite well. The emerging blockbusters portfolio you will hear of lot about next Monday, but all those elements, lauroxil, 8700, 3831, 5461, all moving quickly generating news.

The new portfolio products will continue to generate new flow as well. The immuno modulator, the new product candidate and other things in the pipeline that are growing.

That's great. Thank you. For Jim, can you talk about the pushes and pulls that led to the increase in R&D spend guidance this year? And also, on aripiprazole lauroxil, can you share more insights pertaining to the revenue benchmarking analysis relative to Abilify Maintena?

Sure. I will start with the Abilify Maintena question first. I think that's a launch and a market that we know quite well, Ari, as we have been in it for a long time with RISPERDAL CONSTA and INVEGA SUSTENNA and now watching Abilify Maintena launch.

We think we have product that potentially is best in class in the area, and I think taking the most recent launch in this space given it's a highly medicated space, taking the most recent launch as a proxy is something we have said before. That's what we will be doing going forward.

Given that we're launching in September, we will only have one quarter during the year and $5 million to $10 million launch will be ahead of where Maintena was. That is our goal, to continue to beat Abilify Maintena as we move forward.

In terms of the R&D spend, it has really been data-driven. As you know over the last year we have had -- the last few months, we have had a lot of data come out. And with the ability to move directly into phase 3 with 3831 and 8700, that is where the decision to continue to accelerate these programs has come in.

There is also going to be a full year of spend on the 5461 studies as well as Rich mentioned. Advancing both the immuno modulator in oncology as well as the new candidate FORWARD.

There is a little bit of increase there, but mainly driven by the phase 3 startup and the phase 3 program for 5461 in terms of R&D spend. Hopefully that is helpful.

Got it. Lastly, can you share your thoughts on the cash balance? I know it is getting stronger, $800 million, especially in the context of the anticipated burn this year?

Sure. That is a good question. Thank you for highlighting that. We were able with the sale in our stake of Acceleron and Civitas, and through the year I think wisely managing our balance sheet, we have ended the year with $802 million in cash.

As a we look forward, that gives us plenty of resources to continue to execute on these studies without the necessity of doing a financing. And that is I think another thing that makes Alkermes very unique because you get this late stage portfolio. That is the benefit of the commercial business.

We have managing that business well over the last few years. It is performing very well, and it's providing our ability to invest and on a non-GAAP net income level, in that $40 million to $60 million range, which while we are investing we think is going to yield many, many times in the future.

I think Alkermes is in a very enviable position vis-a-vis our cash balance and ability to prosecute this portfolio.

I appreciate the color. Thank you.

Terence Flynn, Goldman Sachs.

This is [Leeann] for Terence. I have a few on the pipeline. First one, 8700, do you think you can improve the extend release formulation, and why not wait to start pivotal until you have this optimization in place?

Secondly, on 5461, can you just provide a little more color on that enrollment and how that's going? And whether four to one data that you just reported, was that a gain factor in any way as it seems to have confirmed the titration schedule they have chosen for the phase 2 program. Thanks.

This is Rich. I will take that. On 8700, it's important to point out that Tecfidera is going to be a mega blockbuster drug as a twice-a-day oral product. We're thrilled to have a twice-a-day product that looks like it has the GI tolerability that we have demonstrated in the first clinical trial.

Absolutely not. We wouldn't wait. We're going to go as fast as we possibly can to get this medicine to patients.

That said we learned an enormous amount in the first study about the approaches one could take to extend dosing intervals. And we were going to apply those and keep working on that because it's important goal and one that we will continue to pursue.

On 5461, the enrollment is going well. We will update you soon on how we're doing on that but, it is something we're very pleased with and gives me a chance to reiterate the point we have always said about 5461 enrollment.

Because we see it as an exercise in replication, the critical element in enrollment is the quality of the sites, quality of the raters, quality of patients. And so we will trade quality for time every time, but so far our original modeling is bearing out. We're pleased with that.

The FORWARD I titration schedule is not gating. We went a little bit at risk on that, you'd say, by choosing the one week titration schedule in advance because we had a good feeling that was going to be well-tolerated dosing regimen, and indeed it is.

The question we were asking is, is there an even better tolerated regimen, and it is gratifying to see that our original hypothesis was correct. We didn't lose any time, and it gave us a chance to get that confirmatory data that you are referring to.

Great. Thanks.

Steve Byrne, Bank of America.

Do you expect your initial uptake for aripiprazole lauroxil to be primarily inpatient or outpatient driven, and do you anticipate any challenges getting formulary access?

It's Rich. We're probably not going to give a whole of disclosure about how we think we're going to roll the product out, but we expect that we will gain access on formularies at the normal period that others have.

This is a largely Medicare and Medicaid product, so there is a certain rhythm to getting onto all the various formalities and all the various different states. We've had the benefit of watching folks at J&J and other companies do this. So we are well prepared to get into the market.

Okay. A question on 3831. Do you have any data on any of the other metabolic impacts of olanzapine other than the weight gain?

None that we have disclosed.

Will you have any at any of these upcoming conferences?

To be determined. I think because the way this study was designed, Steve, this one had a one week olanzapine lead for all patients, which isn't quite the most pure way of looking at the separate metabolic parameters. But we use weight as the primary endpoint, secondary endpoint in these clinical trials which is probably the focus of the presentation. As the data matures, we will present data as we get it.

Okay. And then just one for you, Jim. What is the focus of the capital expenditure investment for the year?

Good question. We have gone up from around $30 million of capital spend to a range of $50 million to $55 million.

That is really going to allow us to fully build out the manufacturing capacity for 5461, 3831 and 8700 actually. And then we should soon get back to areas back in the $30 million range which is more maintenance CapEx.

Another interesting point about these new products in our pipeline, not only do they have large market potential, they ought to have very nice Cost Of Goods Sold perspective. And we have the facilities really almost complete for all of that commercialization. That is why the increased spend.

David Risinger, Morgan Stanley.

Just two quick questions. First on lauroxil, I'm assuming you're not expecting an FDA panel, but just wanted to confirm that.

And second, with respect to the guidance for revenue, you've got it to $5 million to $10 million for revenue later this year, and that's below what investors were expecting. My guess is that that just relates to the time to get the product adopted by formularies and by the providers.

But could you just, I guess my question on the adoption of the drug in the marketplace is, do you expect that the customers, the providers and clinics that administer both Maintena and will be administering lauroxil, do you expect them to also stock your product or to displace the Otsuka product? Maybe you can just talk through how you expect to knock Maintena aside with your better profile. Thank you.

We don't expect a panel for aripiprazole lauroxil. And with respect to the adoption, as Jim said in his remarks, because we have a PDUFA date on August 22 and there tends to be some timing --in Q4 when we launched the drug, we were assuming a September launch. But weeks would matter in the forecasting.

We simply took the Abilify Maintena launch as a reasonable proxy because it is so close in time, and it's very good product sold by a very good company. We thought that would be a reasonable proxy. In part just for questions like this and getting people on the street focused on the idea of these long-acting antipsychotics in the schizophrenia indication reimbursed by Medicare and Medicaid are not square with wave launches. These are launches that build and build and build in a market we think has been increasingly using long-acting injectables.

We expect the features of aripiprazole lauroxil in many ways to distinguish themselves almost in the self evident way. We will help, but the fact is our product is very different than the competitive product because we expect to come to market with a range of doses. We're also in the clinic with a range of intervals, and we have a really elegant easy to use formulation.

We would expect providers to provide access to all of these important medicines for patients with schizophrenia. This is one of the six protected classes under the Affordable Care Act, so we just hope that we have equal access and level playing field which is what we model and that our features will speak for themselves in a market that is growing significantly. We expect to get our fair share of that.

Thanks everyone for dialing in today. Should you have any follow-up questions, please don't hesitate to give us a call here at the Company.

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