Alkermes Plc (ALKS) 2016 Q1 法說會逐字稿

Good morning and welcome to the Alkermes PLC first-quarter 2016 financial results conference. My name is Brandon and I will be your operator for today.

(Operator Instructions)

Please note that this conference is being recorded. I will now turn it over to Sandra Coombs, Director of Investor Relations at Alkermes. Please go ahead.

Good morning. Welcome to the Alkermes PLC conference call to discuss our first-quarter 2016 financial results. With me today are Richard Pops, our CEO, and Jim Frates, our CFO.

Before we begin, I encourage everyone to visit Alkermes.com to find our 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 results better represent the ongoing economics 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 and 10-Q issued today, and also our 10K for the year ended December 31, 2015, for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call as a result of new information due to results or developments.

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

Now I'll turn the call over to Jim.

Thanks, Sandy. Good morning, everyone. We're happy to report solid first quarter results.

Our base royalty and manufacturing business performed well and as we expected. On top of that foundation our commercial products, VIVITROL and ARISTADA, are in phases of significant growth and will be the key drivers of our top line in the coming years.

This quarter was also marked by steady investment in our late stage pipeline, and reflects launch spending on ARISTADA. What you can begin to see is the opportunity ahead, as our proprietary products grow our top line significantly and we leverage our efficient infrastructure. As our commercial products grow and our late-stage pipeline comes to market, we have significant operating leverage in our business in the years ahead.

Let me start with an overview of our key financial highlights for the first quarter. We generated total revenues of $156.8 million, a 10% increase over last year when we exclude our divested Gainesville business.

For the quarter, we recorded a $24.6 million non-GAAP net loss. These results are in line with our financial expectations for 2016, and reflect the investments we are making this year in the Phase III portfolio and the launch of ARISTADA.

The key driver of our financial performance during the quarter was VIVITROL, our novel once-monthly injectable product for the treatment of opioid and alcohol dependence. In the quarter, VIVITROL had net sales of $43.8 million, compared to $31.1 million for the same period last year, demonstrating growth of 41%.

On a sequential quarter basis, net sales grew 15%. We are seeing growth in both the commercial business and in the Medicaid business. Over the last 12 months the contribution of Medicaid sales to our VIVITROL revenues doubled to approximately 30% and continues to grow. We think this is great news because the majority of patients with addiction are not covered by commercial health plans, and the expansion to Medicaid and other state programs is beginning to contribute more significantly to VIVITROL's growth.

This growth in our Medicaid sales is being fueled by policy advances and criminal justice programs designed to address opioid addiction. In the last few quarters, we have begun to experience organic growth in state and federal programs as the positive results being generated in pilot programs in one area are recognized and replicated in others.

We saw another prime example of this organic growth last month when the results of a VIVITROL criminal justice study were featured in the New England Journal of Medicine. What was so notable was that this large study in more than 300 individuals in the criminal justice system was independently conceived and funded by NYDA and conducted by third-party addiction experts at leading academics medical centers in the country.

We believe the recognition of the opioid crisis and VIVITROL's results in one of the most prominent medical journals is a sign that our product is fulfilling an important medical need in a unique and compelling way. We see the growth of VIVITROL in the criminal justice system as a leading indicator of VIVITROL's potential in communities nationwide.

As these programs continue to produce compelling results, the network of VIVITROL providers in these communities is expanding. We believe we are just at the beginning of this growth curve.

To give you a sense of how early we are, 50% of our VIVITROL net sales in 2015 came from only six states. As experience with VIVITROL expands through the country, it is clear that we have a significant opportunity ahead of us.

Turning to ARISTADA, we are now in our six month post launch and ARISTADA continues to perform as planned. We are off to a solid start, with $5.5 million of net sales during the first quarter.

Looking ahead, we expect that Q2 net sales will be in the range of $7 million to $9 million. We will provide more specific net sales guidance for the full year as we gain further experience with the launch.

As we have said before, this market is a Medicare and Medicaid market, and it will take a full calendar year for us to gain broad access. Rich will provide some more color on the launch, but we are well on our way.

Moving onto our key partner products, we saw overall revenues of $93.4 million in the first quarter compared to $93.2 million in the first quarter of last year. This included manufacturing and royalty revenues of $54.7 million related to RISPERDAL CONSTA, INVEGA SUSTENNA, and INVEGA TRINZA, compared to $46.9 million for the same period last year.

In terms of expenses, our total operating expenses for the first quarter of 2016 were $233.7 million compared to approximately $188.5 million for the same period last year. This increase year over year in operating expenses was driven primarily by ongoing pivotal programs for ALKS 3831, ALKS 8700, and ALKS 5461, as well as investment in the launch of ARISTADA and in the growth of VIVITROL.

Of note during the quarter, we entered into a collaboration with Reset Therapeutics related to their Novel Orexin Modulators, which may have utility in a variety of CNS disorders. Alkermes made an upfront payment of $10 million that we recorded as R&D expense and that Reset will use to fund their clinical development through initial Phase II studies.

We also made a $15 million preferred equity investment in Reset. This collaboration with a company that has deep expertise in Orexin Modulators enhances our development portfolio and provides a new long-term opportunity for us in CNS.

Turning to our balance sheet, we are in a strong position and ended the first quarter of 2016 with $719.4 million in cash and total investments. Our cash use during the quarter included the $25 million investment in our collaboration with Reset, and capital expenditures of approximately $12 million related to investment in our manufacturing capabilities to prepare for commercialization of our late stage pipeline candidates.

As of March 31, we had $348.5 million of debt, roughly $60 million of which is due in September of this year with the remaining balance due in 2019. Operationally with three pivotal development programs under way and the ongoing launch of ARISTADA, 2016 is a year of investment.

However, our top line is poised for significant growth. Going forward as VIVITROL continues to accelerate and as the launch of ARISTADA progresses, we will have significant operating leverage, positioning the Company for a return to profitability in earnings growth.

The financial underpinnings of our business are as strong as ever, and we look forward to building Alkermes into a premier growing and profitable leader in CNS medicines. With that, I'll turn the call over to Richard.

That is great. Thank you, Jim.

The strength and resilience of the business we built became very evident this past quarter. The here and now of the business, the foundational base of manufacturing and royalty revenues coupled with VIVITROL and ARISTADA, represents an unusual and compelling growth story from products that have received FDA approval and are growing as key players in important markets. When you add on top of that our highly diversified pipeline of CNS candidates, any one of which could gap our valuation significantly, the upside of this Company is as clear as it has ever been.

As we move into the remainder of the year, we'll be entering a catalyst-rich period for the pipeline, and we expect to see exciting growth of VIVITROL and the launch of ARISTADA continue to build momentum. Jim covered the exciting progress of VIVITROL earlier, but I just want to give you a sense of how we see the groundswell of support for VIVITROL building through some of the statistics regarding media coverage throughout the country during just first quarter.

400 media pieces print articles, broadcast segments, and radio segments on VIVITROL have appeared in 39 states so far in 2016. This is more than three times the number of stories and nearly double the number of states compared to Q1 of last year.

We exceeded 1 billion estimated media impressions in Q1, a fourfold increase from Q1 2015. The absolute numbers and the growth rates, well they speak for themselves. They are important because the ultimate size of the VIVITROL opportunity will be determined to a great extent by public awareness of the existence of a different treatment alternative for a serious epidemic. This is beginning to happen around the country, and it is exciting to observe.

Turning to ARISTADA, the nationwide launch is in full swing, and we are encouraged by our early results in the schizophrenia market. The long-acting injectable, or LAI market, continues to grow at double-digit rates. On a prescription basis, the overall LAI class grew 14% in the first quarter compared to last year. Importantly, the Aripiprazole share of the LAI market also continues to expand, with ARISTADA contributing nearly half of the growth in last quarter.

Our team of 175 territory business managers is targeting a well-defined group of physicians who have a history of LAIs for the treatment of schizophrenia. We've distributed more than 14,500 samples since launch to help physicians gain experience with ARISTADA and to courage early use while accessing reimbursement established around the country. We are beginning to see the returns on this investment, as hundreds of physicians who initiated treatment with samples are converting now to prescribers.

Regarding reimbursement, you will recall that approximately 90% of our business will be with government payers, namely Medicare and Medicaid. During the first quarter, we conducted dozens of reimbursement meetings and we are pleased with the progress that we are making. ARISTADA is now available on most Medicare part D and managed Medicaid formularies, including the top 10 in both categories.

Initially in almost all these cases this access is subject to prior authorization, which requires providers to seek approval prior to the prescription be covered. Our next priority is to improve access to parity with other LAIs, and we are well on our way.

To date three of the top 10 Medicare part D plans and three of the top 10 managed Medicaid plans and about two-thirds of state plans have granted ARISTADA parity access, and we expect several more decisions in the next couple of months. Overall this process is advancing and will continue to worked through the formulary process of each individual plan throughout the remainder of the year.

As more plans get turned on, our expectation is that growth will accelerate into the back end of the year. ARISTADA embodies key attributes important to patients and health care providers; efficacy, flexibility with a range of doses and durations, and a simple ready to use formula.

Physician feedback has been consistent with this, and it is encouraging. Interestingly in the very early weeks of the launch, while many of the ARISTADA new starts came from oral antipsychotics as expected, we also saw a significant fraction coming from other long-acting atypical products and were for our 882 milligram dose, which indicated some unsatisfied needs in the market.

In the past few weeks this has evolved to where nearly two-thirds of ARISTADA starts are coming from patients on orals, and approximately half the prescriptions are at 882 milligrams. As the launch continues and the clinicians gain more experience with ARISTADA, we expect that the percentage of scripts coming from orals will continue to increase, which further expands the LAI market, and that the distribution among the range of ARISTADA doses will become more evenly weighted.

Beyond the currently approved doses, durations, and indications, earlier this year we announced positive results of a potential two-month dosing regimen of ARISTADA. And based on these results, we plan to submit a supplemental NDA in the second half of 2016 for a 1,064 milligram dose, which will expand our current offering to four doses and three dosing intervals; four weeks, six weeks, and eight weeks.

And we're not going to stop there. We will continue to invest in ARISTADA and we're building the product to be the market leader, with an unprecedented range of doses, durations, and multiple indications.

It's an important medicine in a rapidly growing US market, and we look forward to updating you on our progress going forward. I want to turn to our news this morning.

We continue to develop compelling new medicines from our R&D engine. ALKS 7119, our novel chemical entity for the treatment of Alzheimer's agitation and other psychiatric indications, entered the clinic in January. While still early in development, we are excited about the potential of this candidate in a disease area with a compelling unmet medical need in the growing area of Alzheimer's disease.

In our market research we found physician response overwhelming, indicating that agitation and psychiatric symptoms that can accompany Alzheimer's disease were the leading source of morbidity and caregiver burden. We are pleased to report today that based on the preliminary findings from the single ascending dose study of 7119, we have accelerated the decision to advance into a multiple ascending dose study. The early results of the single ascending dose study demonstrate a favorable tolerability profile and pharmacokinetic properties consistent with the potential for once a day dosing.

The study is still under way, and full data is expected in the second half of this year. We are excited to be advancing 7119 forward, and plan to begin the multiple ascending dose study in volunteers in the third quarter and expect results from that study around year end.

Okay, now on to 5461 in depression. As most of you know by now, we are proceeding with the Phase III program, and we're building a strong foundation of knowledge of the clinical activity of ALKS 5461.

We're looking forward to sharing the data from Forward-3 and Forward-4 with you and scientific community at the ASCP, or the American Society of Clinical Psychopharmacology meeting, at the beginning of June. And we'll host a webcast conference call for investors to discuss the data. We have taken all of our learnings from Forward-3 and Forward-4 and made important adjustments to Forward-5 to increase the probability of a positive outcome.

With that said, I will repeat what I've told you since January. While we are confident in the antidepressive properties of 5461, we have learned that the outcome of any single study is difficult to predict due to the variability of placebo response. To be clear though, if Forward-5 is positive we will meet with FDA and discuss the plan to file the NDA for this fast-tracked medicine.

In this scenario, our robust data package would include a positive Forward-5 along with positive results from the randomized placebo controlled Phase II study, together with support of evidence from Forward-4, data from Forward-3 and Forward-1, and other clinical pharmacology studies from the pivotal program. So operationally we have not changed our approach. That's the plan. We will have a much better sense of our next steps after Forward-5 reads out, which we continue to expect in the fourth quarter of 2016.

Turning now to ALKS 3831, our novel oral broad-spectrum antipsychotic drug candidate for the treatment of schizophrenia.

Both of the core studies in the Phase III program are now under way. Enlighten-1, a four-week efficacy study evaluating the antipsychotic properties of ALKS 3831 in approximately 390 patients with acute schizophrenia, and Enlighten-2, evaluating weight gain compared to Olanzapine in approximately 540 patients over six months.

Site initiation is well underway and enrollment will continue through 2016. As we did with the Forward program, we will update you on our progress and our estimated completion window as we get further under way and gain more experience with the enrollment trends.

In addition to the core pivotal studies, we will begin a study evaluating metabolic parameters of ALKS 3831 later in the year. This is an area of deep interest, and we are conducting extensive pre-clinical work in gaining an understanding of ALKS 3831's role in mitigating Olanzapine's metabolic effects.

Also enrolling in a pivotal program is ALKS 8700 for the treatment of multiple sclerosis. ALKS 8700 is an oral molecule that is designed to rapidly and efficiently convert to mono-methyl fumarate, or MMF, in the body, and offer differentiated features as compared to Tecfidera, a drug generating approximately $4 billion a year in annual revenues.

In the fourth quarter of 2015 we announced that initial data demonstrated that ALKS 8700 met the pharmacokinetic criteria for bridging to Tecfidera, enabling a 505(b)(2) regulatory pathway referencing Tecfidera. We're now completing the pharmacokinetic bridging work, which will include both fed and fasted studies, and we will announce the data from those studies in the coming months.

In addition to the PK bridging data, the pivotal program will include a two-year safety study in approximately 600 patients with MS, which is currently under way. This is a substantial study that would roll across 135 sites in the US and abroad. We are on track with our expectations in bringing those site on board, and we currently have 30 sites open for enrollment.

From a commercial perspective, we are very interested in determining the competitive profile of ALKS 8700, so we are electing to conduct a randomized head-to-head gastrointestinal tolerability study of ALKS 8700 compared to Tecfidera in approximately 420 patients that we plan to begin in mid-2016.

Lastly, for our immuno-oncology candidate, we submitted the IND application in March, and we plan to initiate a dose escalation study in multiple tumor types in the coming weeks. So in summary, with VIVITROL, ARISTADA, three drug candidates in pivotal studies, and two new candidates beginning clinical trials, the medical importance and potential economic value of our business has never been stronger.

We should have an exciting remainder of the year, and we look forward to updating you. With that, I'll turn it back over to Sandy for questions.

Thank you. Brandon, will you please open the line for questions?

(Operator Instructions)

Vamil Divan, Credit Suisse.

Great. Thanks so much for taking the question. I have one question on 5461, you mentioned the ASCP meeting in June. I'm just curious, the decision to present that data before Forward-5 is completed. And if you can just talk through why getting it out, would that in any way maybe risk impacting the placebo effect that you might see in Forward-5? Maybe if you could just -- why present it now versus later would be helpful.

Good morning. That is a good question.

As you know mitigating placebo response is the central design feature of these studies. We made the decision really for two reasons. One is that we feel like the enrollment and much of the in life phase of Forward-5 will be substantially complete by that time. And we don't expect a lot of media coverage of that particular meeting.

The second is that FDA attends that meeting and has historically. It's a really good venue for the community to get together and review data.

And we have heard from our key opinion leaders that it is quite important that we keep educating the community as to the viability of 5461. Because as you know we feel very strongly this drug is advancing in development, and we want to make sure that the community understands the progress that we are making.

So you're going with the fast track designation I guess more that getting the community will help with the discussion with the FDA on that front? Because I fear with the fast track you're already having the discussions with the FDA without having to present the data publicly.

Well I think that it is a very small community actually, this -- particularly those involved with the clinical research around depression products. And we have a lot to do with this drug over time. We really believe that this whole new area, this mechanism of opioid modulation for the treatment of mood disorders, is a different way of treating the disease, and we need to continue to build a scientific, academic foundation of support for this approach.

So this is a major program. It has been ongoing for years. We have been updating this community consistently over the years, and it is business as usual so we're going to keep going.

Okay. And then just one more on ARISTADA, if I could and then I'll drop off. Just I got the comment you made around uptick so far on the payer side.

Is there any more color you can provide on the success you've had? I know you said you will keep updating us through the course of the year, but we get a lot of questions on any more details you could provide where you've had wins and when we could expect more from that?

Thanks.

We try to give you some sense of where we stand with respect to Medicare Part D, managed Medicaid and whatnot, and so it's important. Think of it in two stages.

First stage is getting access at all, which we've been quite successful in the first quarter, as I mentioned. Many of that first stage of access is still subject to prior authorizations.

So then stage two then is to move into parity access with other LAIs. And we're at about 3 of 10 of the major programs, and many of the plans are preparing for their 2017 formulary by submissions that happen in the next few weeks.

So there's a lot going on as we move into the early part of the summer that will prepare the decks for 2017. So even as we get winds in 2016, sometimes it does not drive formulary behavior until as we move into 2017. That's why we've always said all along it takes about a year to get on. I say it is just steady progress, and each month we will turn over more cards and we expect to exit the year in a very good position.

Okay. Thank you.

JPMorgan, Cory Kasimov.

Thanks for taking the question. Rich, first on VIVITROL, just curious how much are you able to do on your end to help further accelerate the adoption of state programs, or is this something that you sit there and support and enable, but need to play out by itself?

Good morning, Cory.

What's so fascinating of course is the 10 years to be an overnight success with VIVITROL. We've been doing this stuff for six years now on the opioid side to lay the foundation for this. So we can do a lot, but what actually makes the plane take off the runway after lumbering down for a long time is the fact that, as Jim mentioned in his remarks, it starts to become a little bit organic. That other jurisdictions see what is happening and they begin to start pushing for implementation of VIVITROL programs on their own without our help.

We are, as you've heard us say, we are in 100 programs in 30 states, but Jim will correct me, I think there is something on the order of 3,100 counties in America. So when you think of the denominator being 3,100 and the numerator being 100, we are just getting going.

So there is no way we can, from a personnel point of view blanket 3,100 counties in America. What happens is that it becomes self-propagating. That is what is exciting. So the answer to your question is we can do a lot, but in doing a lot the idea is that there is a multiplier affect.

Okay. That is interesting.

Just one other bigger picture question. You said we've been talking about your relatively big balance sheet and potential BD opportunities for awhile. You had the deal you talked about a little bit -- a little update this morning. Are you starting to see more opportunities though in the emerging CNS space?

Do you think that -- do the opportunities in maybe 2016 are better than they have been for you the last couple of years? Obviously you've had the downtick in valuations, but just more on the emerging platform and new candidate side?

I think there is more activity in the earlier development of CNS compounds that would be of interest to us. But I would not go so far as to say that it is a target-rich environment. It is still selective.

A lot of the stuff that we see is still derivative of prior development programs, and we really don't have any interest in repurposed molecules or things that are shades of the same color of what already exists. To gain reimbursement and access and pricing and all the things you've heard us talk about over the years, as we think about our business through the perspective of the four pillars, we really need highly different medicines. And I think there is a growth in those opportunities, but it's always going to be very selective.

Okay. All right. Makes sense. Crazy earnings day, so I will stop there and hop back into the queue. Thanks a lot, Rich.

From Barclays we have Jon Eckard.

Thanks for taking the questions. On ARISTADA, I think you made a comment that you're seeing a lot of conversions from other LAI, long-acting injectables, and you also said that you are seeing some conversions of physicians who -- converting patients from samples to commercial product. And I think the number of samples went up at least 4,000 I think from the last update.

Going forward, what metrics can we look for on an ongoing basis maybe to -- that could be an indication that you are getting more of these conversions from commercial to -- from a free product to a commercial product? And then I have a question on VIVITROL.

Good morning, Jon.

I think the simplest thing to do is watch those scripts. We are doing this for a reason. Obviously the sampling intensity will decline as we gain more and more access. This is really a way to give physicians experience with the drug while access is still difficult across the country. And the sampling program has -- it is not a one-to-one. Every sample we give does not convert into a prescription. There is an inherent uncertainty in the whole thing.

But so far we are really pleased with what we've done, and to put that number into perspective I think we said 14,500 samples, this is again the backdrop of selling on the order of 500 or so samples a week. So we have put a lot of product out there for people, and we think that people getting experience with the product hands-on, the flexibility, the ease-of-use and whatnot, is really laying a strong foundation for accelerated growth on the back end of the year. But ultimately the only thing that matters is the prescription trends as the plane takes off the runway.

Great. And then on VIVITROL, if I heard it right I thought it was a really interesting statistic, that 50% of sales from six states, if I heard that right. Again, I have been monitoring a lot of these -- the vast number of VIVITROL related news events and programs that are up and coming.

Is there also an effective way that we can track over time between quarters on how or new VIVITROL programs? Is there some kind of a centralized place where people are -- where these are being announced or we can follow them, so we can track them?

Unfortunately Jon, there really isn't. And the most crude way of doing it is just by tracking on Google Alerts or whatever, looking at VIVITROL. What you will see is an amazing amount of coverage about the product.

Some of that coverage includes activities in state and county jurisdictions where there will be funding or other measures to facilitate the use or fund the use of VIVITROL. But we have not put together a central repository of it yet.

And then in Washington, President Obama has been quite vocal about the need to increase treatment -- medical licenses to treatment for opioid addiction. What about on the Congressional front?

I believe there is something -- a bill had passed through the Senate, but still waiting for Congress. Can you give us an update on anything that might be in the works down in Washington to help improve access for these products?

Yes. There is two or three different legislative routes that VIVITROL is deeply embedded in. The one you referred to, the Comprehensive Addiction Recovery Act, is a piece of bipartisan bicameral legislation focused on a number of different approaches to addressing the opioid epidemic in the country.

There's some provisions in there that are very favorable to VIVITROL, but depending on existence of floor time over the next few weeks, we think there is a high probability that because of the broad support that that bill could get passed. The judiciary side, of course, through the criminal justice system, we have interest in facilitating more programs that focus on non-addictive medications like VIVITROL being the central one in the criminal justice system, which has not been historically that amenable to the use of methadone or suboxone.

And then third, in the basic blocking and tackling of appropriations and omnibus funding each year, we saw last year the first funding that directly applied to VIVITROL, and we expect that to continue going forward. So it is really -- it is a dual pronged approach from a policy point of view at the federal level, as you know, that really augments what is happening at the state level.

Because ultimately the federal allocations get pulled through in the form of grants to states. So it is important that the states be prepared and ready to implement VIVITROL programs and to tap into that funding. So we've been working at both levels for multiple years.

Perfect I'll get back into the queue, because I know there's probably a lot of questions. Thanks.

Thank you.

Leerink, Paul Matteis.

Great, thanks. I appreciate it. I have a couple questions. My first is on ALKS 3831.

I was wondering if you could run through a little bit more detail on the two Phase III designs. I know one of these has a co-primary endpoint it seems for clinicaltrials.gov. And then based on that what kind of labeling language you are hoping to obtain relative to Zyprexa?

Good morning, Paul. Yes, the two studies, the first study, which is the acute study versus -- the primary comparison is ALKS 3831 versus the placebo in a four-week or five-week acute setting looking at demonstrating its clear antipsychotic properties. And of course that is fairly straightforward 130 patients per arm. We'll run an Olanzapine arm in that as well, just so that we are not powered for non-inferiority, just to have that data point. Because payers will be interested in that as well.

As you know, we have showed non-inferiority to Olanzapine in our previous large randomized Phase II study. That's called Enlighten-1. So that is up and running.

Enlighten-2 is the weight study. Enlightened two as you say has the co-primary endpoint, but they co-vary. That's why it's is not that different.

We are looking at what we showed in Phase II which is A, a change in median weight change from baseline compared to ALKS 3831 versus the control arm, which is Olanzapine in this case. And the second, then as you shift that curve the percentage of patients who -- the categorical cut of patients who have greater than 10% body weight.

And as you saw we saw a strong correlation between those two statistical parameters in Phase II. I think both are important. We like both in terms of labeling, because as you know some of the early responses to our Phase II data when you saw a mean change of a certain number of pounds or a certain percent, people say well that's a trivial amount, without recognizing it references a fairly profound shift in a curve.

And as you shift the curve those tails go down significantly, so that categorical cut at 10%, which you could say is the real clinically meaningful cut, is also really important. And we expect both of those to be in the label because they are the primary endpoint of one of the pivotal studies.

Thanks, that's helpful. And maybe a follow up on that, Rich. What doses of Olanzapine are you comparing 3831 to? And maybe to put into context, how does that compare to the dose that was used in the CATIE study?

We have flex dosing on the Olanzapine. So we are co-formulating multiple Olanzapine dose with 10 milligrams of samidorphan.

Okay. And for the olanzapine arm in the trial?

Yes. So the docs can dose as high as they want. We expect the median dosing to be between I guessing 10 and 20 milligrams. I think that will compare favorably to what we saw in CATIE.

Okay. Got it.

And then maybe just one follow up on the BD deal for the Orexin modulators. There has been others in development. I think J&J has one. Maybe can you speak to just what about this technology stuck out to you and was interesting? And what indications do you plan on positioning this mechanism in going forward?

Yes, we like the biology. We like the company. They are really scientifically excellent.

They are working on both positive and negative allosteric modulators of the Orexin receptors. We have probably the most proximate clinical utility that we would think of immediately with respect to Orexin is in narcolepsy. But there is a range of things not all of which we're going to disclose.

But we've got some time. We're doing chemistry. We are working on lead identification, but it is a fine group of scientists and we are excited about the collaboration.

Okay. Great. And I hope you don't mind. I just want one quick follow up on 3831. I realized I missed one of my questions.

On these two main studies, what are you looking at with respect to metabolic syndrome? I know you are doing a separate study for that, but in the two lead studies what are you examining there?

I am not exactly sure of all the various chemistries we'll look at, but basically we are looking at lipids and probably glucose and simple things like that. Although in a long six-month study in patients with schizophrenia that's not the right setting to be looking at metabolic parameters.

That's why we're going to go drill down in a much more intense way, doing what we are doing in the animals and try to replicate it in the humans. Because we're finding some really important findings with respect to what Olanzapine is doing to trigger metabolic changes in the periphery and also how 3831, or samidorphan component of 3831, is ameliorating or mitigating those effects.

So we're quite excited about that. As I mentioned when we were last together, it is probably one of the largest pre-clinical scientific programs within the Company, because we think the story of 3831 is far more than just about ameliorating weight. That its effect on weight is derivative of a more fundamental effect on metabolic changes in the organism.

Okay. Do you plan on presenting on that pre-clinical data sometime?

Absolutely. We'll publish it and we'll present it, although I would not expect anything on that until the fall at least.

Okay. Great. Thanks, Rich.

You're welcome.

I think we have time for one more question.

From Jefferies, Biren Amin.

Thanks for taking my questions. Rich, maybe I'll start with Forward-5. Have you discussed the changes in the study design with the FDA?

And also what do you think the Company needs to hit in terms of P-value? Would you need to hit like less than 0.01 to support a strong case for FDA approval?

No. Not at all. Forward-5, we'll present the data at ASCP, as I mentioned from Forward-3 and Forward-4. We will submit the psychoanalysis plan to FDA for Forward-5 normal course, sometime before we unblind.

But the operational changes that we made -- are making within the program really don't require FDA interaction. They are quite straightforward, and they're just based on learning and adapting from what we saw in Forward-3 and Forward-4.

With respect to P-value, I think alpha less than 0.05 is the ticket into this discussion. Because what you'll see is that -- remember, when we are talking about statistical separation from placebo in these types of clinical trials, it's against the backdrop of a placebo response that's quite powerful, even in study designs where you mitigate placebo response. So statistical separation from placebo is the most important thing.

Then of course, you go into the various subgroup analyses and teasing apart where you see more accentuated evidence of efficacy. But I think that it's not just a question of P-value per se, it is about robustness and consistency of the data.

For example, if you achieved a P-value based on a single time point that you happened to choose as your primary endpoint, but the rest of the time points were not statistically significant, that is much different than seeing continuous drug affect over an extended phase of the clinical trial. So I think it is too simplistic to focus simply on P-value; just know that alpha less than 0.05 is what you need.

Okay. And then a question on 6428. When do we get data from this trial?

And do you expect the data would be label-enabling for VIVITROL? And would you expect that this data would give you some leverage with especially the government's effort in tackling opioid addiction?

So 6428 is, for those who don't know, it is a very elegant taper kit based on very small doses of naltrexone to enable people to transition from opioid agonist treatment to VIVITROL, recognizing that people need to be detoxified from opioids before you can initiate with VIVITROL.

So it's basically -- think of like a Z-Pak. It is a series of daily doses of increasing levels and decreasing levels of naltrexone and opioid. We expect data from the first study in Q1 of 2017, Sandy tells me, and we think this is just part of -- as VIVITROL gets more and more traction around the country, we start expanding the shelves of physicians who are interested in using VIVITROL.

In the beginning we didn't need a taper kit because the only doctors who were using VIVITROL where the ones who were quite expert at detoxifying patients. As more and more doctors get trained and more and more people are interested in VIVITROL, a simple -- you would have thought that there is an established protocol for transition from opioids in the community, but there really isn't.

And so 6428 is part of a toolkit to help more and more physicians be able to transfer -- transition patients off of opioids onto VIVITROL. So we think it will have a good effect, but part of another brick in the wall as we build the foundations for VIVITROL.

Great. Thanks taking my questions.

Thank you, Biren.

Great. Thank you, everyone, for joining us on the call today. If you have any questions, please don't hesitate to call us here at the Company. Thank you.

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