Alkermes Plc (ALKS) 2016 Q4 法說會逐字稿

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

(Operator Instructions)

Please note this conference is being recorded. And I will now turn it over to Sandra Coombs, Director of Investor Relations. Sandra, you may begin.

Thank you. Good morning, everyone. Welcome to the Alkermes plc conference call to discuss our financial results for the quarter and year ended December 31, 2016. With me today are Richard Pops, our CEO, and Jim Frates, our CFO.

Before we begin, I encourage everyone to go to the Investor section of alkermes.com to find our press release and related financial tables issued this morning for full details of our financial guidance for 2017 and a reconciliation of the GAAP to non-GAAP financial measures that we will discuss today. In conjunction with our GAAP results we believe the non-GAAP financial results better represents the ongoing economics of our business.

Our discussions during this conference call will include forward-looking statements which are based on our current expectations and beliefs. Actual results could differ materially from these forward-looking statements. Please see our press release issued today and our most recent Annual Report on Form 10-K filed with the SEC 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 or future results or development.

Today Jim Frates will discuss our financial results and Richard Pops will provide an 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. 2016 was an important year for our business as it further revealed the opportunity we have in VIVITROL and ARISTADA and as we executed on our objectives across the Company. Our financial results for the fourth quarter and year ended December 2016 reflect the strength and breadth of the Alkermes business model, and were characterized by continued robust revenue and prescription growth from our proprietary commercial products, as well as focused investments in our commercial infrastructure and our advancing late-stage pipeline of CNS medicine.

I will start with our key financial highlights. We finished 2016 ahead of expectations with total revenue of $746 million, a 19% increase over last year, and a non-GAAP net loss of $10.3 million compared to a non-GAAP net loss of $56.8 million in 2015. With $619 million in cash and total investments at year end we are well-positioned to execute on our future growth plans. For the fourth quarter our total revenues were $213.5 million and we recorded a non-GAAP net income of approximately $23.3 million.

Let me now review some of the key drivers of our financial performance during the quarter, starting with VIVITROL, our novel once-monthly injectable product for the treatment of alcohol dependence and the prevention of relapse to opioid dependence. In the fourth quarter, VIVITROL net sales grew 62% to $62.1 million compared to $38.2 million for the same period last year. During the quarter volume continued to grow both commercially and through state-based Medicaid programs, with approximately 30% and 150% growth, respectively.

On a sequential-quarter basis, net sales grew 11%. Our fourth-quarter growth did include inventory build of approximately $3 million which we expect to work through in the first quarter of 2017. As a result of this inventory work down, as well as typical seasonality related to deductible resets of commercial plans, we expect our first-quarter 2017 net sales will be fairly flat sequentially.

For the full year of 2016 VIVITROL net sales grew 45% to $209 million, reflecting robust volume growth. And no price increases were taken during the year. For 2017 we expect the strong growth of VIVITROL to continue with net sales in the range of $280 million to $300 million, representing growth of approximately 40% and reflecting our belief that VIVITROL is still early in its growth phase.

Turning to ARISTADA, in the fourth quarter we generated net sales of $17.3 million, resulting in net sales for the year of $47.2 million. 2016 was the first stage of the launch focused primarily on securing parity access on Medicare Part D and Medicaid formularies to lessen the burden of prior authorizations for fail-first requirements. We were successful and parity access has been largely achieved, enabling a large number of patients to more easily obtain treatment with ARISTADA. With contracting for two additional plants taking effect in March, we are well-positioned to compete on ARISTADA's merits.

Looking ahead to 2017, we expect ARISTADA to begin a period of sustained and significant growth, with net sales increasing this year by at least 100%. Because of the contracting that supports broad access, we expect a modest increase in our gross to net as volume grows. We expect ARISTADA first-quarter revenues will be in the range of $18 million to $21 million.

Over the near term the growth of ARISTADA will be driven by increasing the number of ARISTADA prescribers and broadening awareness of the features of the medicine. Over the long term we believe ARISTADA's growth trajectory will be augmented by the overall growth of the atypical LAI market, which grew approximately 25% on a net sales basis last year, as LAIs are increasingly recognized as being among the most effective treatments in psychiatry.

Moving on to our royalty and manufacturing business, we saw overall revenues of $487 million in 2016, driven by revenues of $271 million from RISPERDAL CONSTA, INVEGA SUSTENNA and INVEGA TRINZA, and $114 million for the AMPYRA franchise, reflecting growth of 8% and 9%, respectively. In terms of expenses, for the full year we recorded R&D expenses of approximately $387 million and SG&A expenses of approximately $374 million, reflecting targeted investments in the pivotal programs for ALKS 3831, ALKS 8700 and ALKS 5461, and a full year of investment in the ARISTADA commercial [team].

Looking ahead to 2017, we expect R&D expenses to be in the range of $405 million to $435 million. This expectation reflects investment in our late-stage pivotal development program for ALKS 3831 and ALKS 8700, and continued focus on ALKS 5461 as we progress towards the NDA submission later this year.

For SG&A we expect to be in the range of $425 million to $455 million, reflecting increased investment in the growth of VIVITROL and ARISTADA, and initial investments in the infrastructure and Leadership Team for ALKS 5461 in the second half of 2017 as we prepare for its potential launch. In 2017 we also plan to invest $70 million to $80 million in capital expenditures, driven by investment and increasing our manufacturing capacity for VIVITROL for 2019 and beyond as we respond to the surging demand for VIVITROL.

To summarize, 2017 continues our focus on the growth of our commercial business and investment in our late-stage pipeline. For the year we expect total revenue growth of approximately 20% driven by VIVITROL and ARISTADA. And we are targeting the business to break even on a non-GAAP basis with our non-GAAP results in the range of a non-GAAP net loss of $15 million to a non-GAAP net income of $15 million. We expect to exit 2017 with cash and total investments of around $600 million, reflecting the strength of our business as we invest in our late-stage growth while maintaining our strong financial profile. With that, I'll turn the call over to Richard.

That's great. Thank you, Jim. Good morning, everybody. We built Alkermes to thrive in a dynamic healthcare ecosystem that is increasingly focused on delivering value. And we're entering 2017 in a strong position for future growth. Our current base business is significant and growing into a $2 billion-plus top line into the 2020s, primarily driven by VIVITROL and ARISTADA, FDA-approved medicines already growing in the market with long patent protection ahead of them.

We've also identified the drivers of our next phase of growth, with our late-stage pipeline of development candidates: ALKS 5461 for major depressive disorder, ALKS 3831 for schizophrenia, and ALKS 8700 for multiple sclerosis. Our focus on large chronic diseases of the CNS, coupled with our approach to selecting, developing and commercializing medicines [distinctive], by integrating inputs not just from scientists and clinicians but from patients, payers, government policymakers, we've positioned Alkermes to thrive in this complex public health environment.

I'm going to start with ARISTADA, our long-acting injectable atypical antipsychotic for the treatment of schizophrenia. We designed ARISTADA for market leadership based on our experience in this therapeutic area. We just completed our first full year in this rapidly growing LAI market, which has the potential to be a $4 billion-plus market as we approach the 2020s, and currently has only for key entrants. As Jim described, having largely secured parity access we will be competing in 2017 on the merits of ARISTADA, which are clear.

But we're not going to stop there. We see ARISTADA becoming a market leader as we continue to build this unique product family and provide more options for patients, physicians and payers. That actually starts later this year with the approval of the 1064-milligram two-month dose expected in June. This will be the only two-month offering in the market and will complement our currently approved four- and six-week doses. ARISTADA is on its way and it's entering a period of sustained growth.

Next is VIVITROL. As the opioid epidemic continues to rage across the US, more and more physicians are interested in learning how to use VIVITROL. To respond to this expanding interest, we developed ALKS 6428, a seven-day dosing card containing ascending doses of oral naltrexone administered as part of an outpatient detoxification protocol leading to initiation of treatment with VIVITROL.

We initiated a phase 3 study last year, testing three different transition protocols, and we just recently received the top-line results. They were very interesting. This study did not meet its primary endpoint which was to demonstrate a difference in the rate of initiation with VIVITROL between the protocols.

The 6428 treatment groups performed as we expected, in line with other recently published studies on detoxification protocols investigating ascending doses of naltrexone. Interestingly, all the treatment groups performed well, with a similar percentage of patients successfully transitioning to VIVITROL.

However, recall that the ultimate goal of this study was to provide guidance on how to transition patients safely and effectively from opioid dependence to treatment with VIVITROL in an outpatient setting. And we did just that, using multiple protocols that can facilitate a safe and comfortable transition process.

But we're still analyzing the data and we have not yet determined the next steps for ALKS 6428. But there is encouraging information in the data set. We believe that there can be an important role for a product like ALKS 6428 and protocols that improve the state of the art of outpatient detox and provide healthcare professionals with a clear path for initiating their patients on to VIVITROL.

On the commercial side, VIVITROL continues to grow at an exciting pace. Our work is ongoing to build ecosystems across the country that support broader use of VIVITROL in the fight against the epidemic. Since our Investor Day in September four additional states have entered the ranks of what we call highly developed ecosystems, characterized by a broad provider network capable of addressing local patient needs, favorable access and reimbursement conditions with limited barriers, and a policy environment where government officials are focused on the opioid epidemic and engaged in implementing solutions. Overall, ecosystems have improved in 17 states, reflecting the accelerating momentum to address the opioid epidemic.

In 2016 we also saw the number of state programs nearly quadruple to approximately 400 programs in 36 states. These come in a variety of flavors, from public health initiatives to criminal justice programs in courts, prisons and jails. The viral growth in the number of these programs is indicative of the way the country is beginning to respond to the crisis. VIVITROL is coming into its own and is beginning to have a meaningful impact on the way opioid dependence is being treated in the US.

Turning to our pipeline development program, 2017 will be a year of unprecedented activity on both the regulatory and clinical fronts. I will start with ALKS 5461, the adjunctive treatment of major depressive disorder, or MDD.

ALKS 5461 is based on a new mechanism of action, opioid modulation, addressing a major clinical need for patients not getting adequate clinical responses to standard therapies. With a limited set of suboptimal options for these patients, the treatment community is primed for something new and different. Following the positive data from the FORWARD-5 study late last year, the FORWARD program is now complete. We will share the data from FORWARD-5 with the scientific community and with our investors at the Society of Biological Psychiatry Medical Meeting in May.

We've developed a substantial registration package now with data from more than 20 studies and over 1,500 patients. The data are remarkably consistent in terms of the efficacy, safety and tolerability of ALKS 5461.

This is a fast-track designated medicine. As we've done throughout the development process, earlier this week we met with FDA for a Type C scientific exchange to share with them the data from FORWARD-5. The meeting with the FDA was productive and we are on track with a planned submission of the NDA in the second half of the year.

Next steps will be to request the pre-NDA meeting in the coming weeks, and we expect that meeting to occur later in the second quarter. So we have a lot to look forward to with ALKS 5461.

2017 will also be an important year for the clinical program for ALKS 3831, which is coming into focus as the pivotal program matures. 3831 is our novel oral antipsychotic designed to harness the efficacy of olanzapine with a more favorable weight and metabolism profile. Consisting of two core studies, the pivotal program for 3831 is well underway.

The first study, evaluating antipsychotic efficacy compared to placebo and olanzapine, will be completed this year, with data expected toward year end. The second study, evaluating the effects of ALKS 3831 on olanzapine-associated weight gain, will continue to enroll throughout this year, with data expected in the first half of 2018.

In addition to the pivotal program, we're doing important work to support our understanding of 3831 mechanism of action, with our ongoing human metabolic study for which we expect data in mid-year. In the second quarter we will also begin a phase 3 study in young adults who are particularly susceptible to weight gain and could benefit from a highly efficacious and well-tolerated medicine early in the course of their disease.

Recall that before its effects on weight and metabolism were well known, olanzapine, or Zyprexa, dominated the atypical schizophrenia market with 45% market share due to its robust efficacy. Even today, despite its serious liabilities, olanzapine has 17% market share because of its efficacy.

The promise of ALKS 3831 is capturing this efficacy with favorable tolerability, which is what we showed in the phase 2 study. If we continue to show that, we believe that ALKS 3831 has the opportunity to redefine the target profile of a modern antipsychotic medicine and have a major impact on the way schizophrenia is treated in this country.

ALKS 8700 for the treatment of multiple sclerosis is also enrolling in its pivotal program. ALKS 8700 is a novel oral molecule formulated in an advanced oral-controlled release dosage form that is designed to compete against Biogen's Tecfidera, which represents a $3 billion class in the US.

To reveal the potential competitive advantages of ALKS 8700, next month we're commencing an elective study to evaluate the GI tolerability of 8700 compared to Tecfidera head to head in approximately 420 patients. The pivotal program for 8700 consists of two elements: recently completed pharmacokinetic bridging studies enabling a 505(b)(2) regulatory pathway referencing Tecfidera, and a two-year safety study that is ongoing and enrolling faster than expected. We remain on track to submit an NDA in 2018.

I'll end with ALKS 4230, our novel immune therapy designed to preferentially activate IL-2 signaling and increase the number of tumor killing immune cells. We are currently engaged in the dose escalation phase of our first clinical trial and we expect to see initial data later this year.

So I will finish there. In 2017 we are at an unparalleled level of activity, with a full slate of anticipated milestones across our commercial and our proprietary portfolios. We're firing on all cylinders and poised for significant value creation throughout the year. And with that, I'll turn it back over to Sandy for the questions.

Thanks Richard. Brandon, we will now open the call for questions.

(Operator Instructions)

Cory Kasimov, JPMorgan.

Hi, guys, good morning. This is actually Whitney on for Cory. The first question is on VIVITROL, and you talked about increasing the manufacturing capacity. Can you just remind us where you are now? I think it is somewhere around $700 million or $800 million. And then just talk about much you intend to add.

Yes, absolutely. Good morning, Whitney. It's Jim. I would say right now we are in the $600 million range for VIVITROL capacity. We are well planned out to see growth through 2019.

But as we look out beyond 2019 and start planning for VIVITROL potentially being a $1 billion-plus product, we're actually talking about building capacity for $1 billion to $1.5 billion of sales at these prices and profitability levels. We see that growth continuing in the future, as we said, and we're putting our money where our mouth is as we plan for that growth of VIVITROL to continue.

Got it. And then in light of the 6428 data that you touched on, and I understand the analysis is ongoing, but any more color you can give there on how you are thinking about the potential of that as you think about out of your revenue potential, because I think you had previously talked about that product increasing the prescriber base or potential prescriber base for VIVITROL. So, if that doesn't play out, would that change how you think about the outer year revenue potential?

I'll take that one, Whitney. It's interesting because on the face of it, you say the study didn't meet its primary endpoint, that must be negative. But the whole purpose of 6428 is subservient to getting more doctors comfortable with initiating on VIVITROL. And what this particular study showed is that any of these protocols allowed patients to transition over to VIVITROL pretty easily. And that's a really good finding.

So, we will publish these data. There's also been recent NIDA publication on this, as well, showing transition from prescription opioids in heroin over to VIVITROL. So, like I said, I think that there's very much a place for 6428 as a dosing kit to provide those fractional doses of naltrexone.

We will look at it more. But I think the encouraging thing is that it's not so mysterious how to transition somebody from a physical dependence on an opioid over to initiation with a long-acting antagonist in an outpatient setting.

Great. Thanks for taking the question.

Vamil Divan, Credit Suisse.

Thanks for taking my question. Thanks for all the color on the pipeline. Can you give a little bit more detail.

You mentioned on 5461 you had this productive meeting and you planned, obviously, to file later this year. Just maybe a little more detail on exactly out the discussions went and how comfortable the FDA is with the overall profile given the positive FORWARD-5, but then the negative results on some of the other studies. So, just more color there would be helpful. Thanks.

Sure. Good morning, Vamil. Remember, the purpose of this Type C meeting was focused on providing the analysis for FORWARD-5 and the pooled analysis of FORWARD-4 and FORWARD-5. So, the purpose of the meeting wasn't to go over the entire program. We will do that in the context of the review of the NDA. The meeting, as I say, was productive. We are quite clear that we're going to go ahead and file the NDA. So, we're on track. I think that's the best summary of it I can give you.

Okay. Thank you.

Umer Raffat, Evercore ISI.

Hi, thank you for taking my questions. Richard, how do you think FDA looked at the pooled data that you provided? And are they looking to see, did they request to see pooled data from all three phase 3s, or just the two SBCD trial?

And then, separately, can you give us a bit more color, now that you're presumably finalizing the protocols for 8700, what the primary endpoint would be, when we should expect completion? And 400 patients -- what does that represent in terms of towering on that primary endpoint?

I don't know if you heard the answer to the previous question, but I'd just make it clear, the Type C meeting that we just had with the FDA was really focused on presenting the data from the most recently completed FORWARD study. So, it wasn't a comprehensive analysis of the entire program. That will happen in the context of the review of the NDA. So, when we submit the NDA, we will submit all the studies, the 20 studies.

And that's the power of the data set, actually, is all the different studies and the way you can look across the various studies, various designs, various stages, various doses. That's the power of the submission. So, this was a much more narrowly focused conversation this week with FDA.

On 8700, I know this is a study that has been near and dear to your heart, so, yes, I will give a little bit more on that. This is really focused on teasing out the differences in a statistically significant way on GI tolerability. We're using two different scales as the tool for doing so. One is called the individual gastrointestinal symptom and impact scale. It focuses on five key symptoms of GI discomfort, and they are nausea, vomiting, upper abdominal pain, lower abdominal pain, and diarrhea. And there's a second scale which is a global gastrointestinal symptom and impact scale.

We will launch into that study. I don't think we have a sense of completion. I don't know, Sandy, if we have given any guidance on when we intend to complete. But we will update as we start to enroll in that.

But we're encouraged by the fact that the enrollment that we've seen in the safety study has been ahead of schedule. And at the last censored data cut that I looked at, I think we had 435 patients in there, and our GI rates were still really favorable. So, we're excited to run the study and glad it is underway -- or soon to be underway.

Got it. Richard, just a quick follow-up. When I heard you on another broker conference in January, my recollection is you mentioned that the Type C meeting will be the more detailed meeting. And you want to do that because the pre-NDA meeting would be much more tight and there's a very specific 45 minutes of time, or very limited amount of time. But I feel like the way you described it today, it sounds like the Type C meeting was more narrow and then the next meeting will be a more detailed one. I just wanted to reconcile that.

Yes, let's clear that up because I think you might be confusing two different things. The Type C meeting that we had, we said all along, we had a Type C meeting in September 2016 where we reviewed FORWARD-3 and FORWARD-4, the data that had been presented at ASCP. With the completion of FORWARD-5, we scheduled another Type C meeting to focus on FORWARD-5 and the pooled analyst of FORWARD-5 and FORWARD-4. That was the scope of the meeting. That's why it's a Type C meeting.

The pre-NDA meeting, you're right, the pre-NDA meeting is not a meeting to adjudicate all the data. It's really to focus on what's going to be in the NDA itself That meeting, we will go ahead and request now in the next couple weeks and we expect to have that meeting in Q2.

Then we will submit the NDA that has the data presented across the entire program in the format that FDA and we have decided is the best presentation of the data. Because, as you may have remembered, there are a lot of different studies, there's a lot of different ways of presenting the data statistically and we want to make sure that we're doing it in such a way that is most easily interpreted by FDA. Does that make sense?

Got it. Thank you very much.

Liav Abraham, Citi.

Richard, thanks for all the color on 5461. And apologies in advance for another question on this topic. Just following your Type C meeting with FDA, to what extent are you more or less comfortable than you were prior to the meeting that you don't need an additional study for the drug in order to -- for a successful filing with the FDA at this point in time?

And then, secondly, on ARISTADA you mentioned in your prepared remarks that you are entering the next phase of the commercial launch. I would appreciate a few more details on those and how you think this will inform the launch or revenue trajectory of the drug beyond 2017 as we think about our modeling in 2018 and 2019. Thank you.

I think that the FDA meeting went as we would have predicted in the sense that we presented the data that we wanted to present. We know that we're going to go ahead and file the NDA. And the strength of the submission is in the totality of the data. So, I don't think I feel any more or any less.

I think we're in the same position that we were when we finished the FORWARD program. We have been really testing an agent really rigorously in multiple clinical trials in patients who were refractory to treatment with SSRIs and we're seeing consistent evidence of efficacy, as well as dose response and the impact of study design on outcome. So, to us it all feels quite internally consistent, so we're looking to proceeding with the review.

ARISTADA -- it's just such an interesting market, because as we said in the beginning, that first stage of the launch, which takes the better part of the first year, if not more, is gaining access onto the various formularies, the various plans, and completing whatever contracting necessary to establish access. As Jim said, I think most of the contracting is done with a couple more to take effect in March. So, we roll into 2017 able to compete on the virtues of the product. And having tested that for the last year in the market, we know that those product virtues are evident to the market.

As we get the approval of the two-month dose, too, the space between our product and other products begins to widen because it'll be the only two month offering in the market. SUSTENNA has a three-month, but we actually like the two-month interval. And I think that the overall growth of the LAI market is so robust that we expect to just continue catch that wave and grow the product.

So, I think Jim said, we expect to be entering a phase where the sales start doubling. We will give you guidance along the way as we begin to extrapolate with more precision, but we're very optimistic about ARISTADA.

Great, thank you.

David Risinger, Morgan Stanley.

Richard, I was hoping that you could talk about 3831 and provide an update on the time lines for key readouts over the next couple of years. Thank you.

The two pivotal studies that are underway, the first one, the efficacy study, will read out at the end of the year, towards the end of the year, say, Q4, is a good place to plan for that, the efficacy comparison in acutely schizophrenic patients. The weight gain study is enrolling strongly now and we expect to complete enrollment of that sometime this year with data in the first half of 2018. Remember, that's a six-month endpoint, so it takes some time to get the endpoint after we complete the enrollment. Those two studies comprised the filing package for 3831.

Separately, we're fascinated by what we're learning preclinically in terms of the mechanism of action and why are we getting less weight gain, and how it ties back to fundamental metabolic changes that are induced by olanzapine and attenuated by samidorphan. That study in the human volunteers is underway, an intense translational study that we will learn from and we will share those data with you mid year or so.

That's great. And just a quick follow up on that, could you just talk a little bit more about the weight gain assessment and how the endpoint is designed and that will be conducted?

Recall that we ran a very large phase 2 program, investigating weight gain head to head versus olanzapine, which is where we saw the strikingly positive data that provided the foundation for our moving into phase 3. In that first study, in the phase 2 study, we looked at time points at both three months and six months. We've simplified the structure in this phase 3 study. So, it's a six-month assessment where we will be looking at both the average or median weight change, as well as a categorical cut of patients who gain more than 10% of their body weight, both of which endpoints we looked at in phase 2, and both of which were quite significant.

We're hoping it will just do again what it did the first time, because the sample size was large and I think the effect that we saw was very clear. Because we know that patients on olanzapine who continue to take olanzapine over a six-month period will gain weight quite reliably.

The study features that matter is really retention. You need to keep people in the study so they are able to keep gaining weight. Similarly, patients on 3831, we see that attenuation of that weight gain very fast. The space between those curves, assuming retention, continues to widen with time. So, we're hopeful that's exactly what we will see again.

Great. Thanks again.

Chris Shibutani, Cowen.

Good morning. This is [Sanpush] on for Chris. Just a couple of questions, one on VIVITROL. You always guided getting the software for the payer mix as well as the growth per net, and also the co-providers. Is it possible for you to give us some color on any of those metrics? As well as all of these variables do you anticipate will change in the coming years. So, any color on that would be appreciated.

The second question is on the LD IO product. You mentioned that we might see initial data this year. A lot of these products are used in combination with other PD-1, PD-L1 action. Is it possible for you to provide data [next year] about such partnership with other companies? Thank you.

Good. I will take the second one. Jimmy, you go ahead on the VIV.

We think we are in the same spot as we have been recently on VIVITROL, which is we're going to continue to see that 60%-plus unit growth that we've seen year to year. To go back and look, broadly, 2016 over for 2015, we saw 66% growth in units and a 45% increase in net sales, again as that mix shift between Medicaid and commercial pay. And we're predicting for basically that straight line to continue.

From a gross to net perspective, annually our gross to net turned out a little under 45% for the year. And we think that it will continue to move up closer to 50% over time. We haven't picked a specific number of core providers. We have internal targets for that. We won't update you on that today, but assuming that it is easy enough to look at growth and net sales.

So, that $280 million to $300 million range, we feel comfortable with, and it really straight lines the growth that we're seeing right now. But I will remind you, too, that those numbers, we're still very concentrated, right? At 2% or 3% market share for the VIVITROL, we see a lot of upside. And we're also seeing continued growth in our largest states well into the double digits, some in the triple digit growth in some of our key states. So, we think that growth in VIVITROL is going to continue. I'll flip it to Rich for the --.

On the IO products, the first clinical data of interest will be looking to see whether we have the differential expansion cell types compared to what you would have seen historically with IL-2. Specifically, we're looking for an increase in NK cells and CDA-plus cells without the corresponding increase in T-regs. The immunological response is what we're looking for in this first cohort of patients, starting from very low dose, first biologic agent, and escalating gently until we see the immunological response.

If we see that, that proves the pharmacology in vivo, and then we will start thinking about how do we start best thinking of utilizing this drug in combination with other agents. Because, you're right, it will absolutely be used in combination with other agents. We can envision a number of different collaborations to explore that.

Thank you.

Bill Tanner, Cantor Fitzgerald.

Thanks for taking the question. Richard, I had a couple questions on 8700. You mentioned the bridging study to support the 505(b)(2) filing. Apologies if I missed it. What is the status of that just in terms of the data from it?

And then, more importantly, as you are looking at the commercial viability of the compound versus Tef? As an example, what is the level of GI side effect reduction that you think you'd like to see? Thanks.

Hello, Bill. The requirement for the submission is the completion of the PK bridging studies and the two-year safety studies. The PK bridging study is necessary for registration we completed at the end of last year. So, you can check that box. It's basically looking at similar MMF exposures to what people would see with Tecfidera in various states. So, that's quite straightforward.

The GI tolerability question is really an interesting one, because it starts on the continuum with the question, if we had no differentiation, is it possible to complete in that market with a similar product, as one of only two competitors. And we think the answer to that is yes. Our ambitions are greater than that, as you may know. We've seen in small head-to-head studies a superior GI profile to Tec. And in the large open-label study that we're running now, we're seeing very low GI AE rates. So, that's why we're running this head-to-head study that starts next month.

It's hard to say. We really want to see something that is clinically meaningfully different, statistically different. Practically not different doesn't help anybody. So, we're really looking to see, on those specific domains that patients tend to complain about, which are particularly the nausea, vomiting, upper GI pain, things like that, that's where we'd like to see a really meaningful difference. But we will wait until we see the data set.

But I guess it's safe to say, obviously you do need to do the safety study, but the PK data, in your mind, would with support the approval on a 505(b)(2), and then ultimately, if there is not a significant differentiation on the tolerability, it's not off the table that Alkermes might go ahead with a -- I don't want to say a me too, but it could be something that is similar to Tecfidera and could compete on various dimensions such as price or something like that.

Precisely. It's not as valuable a product if it doesn't separate on GI, but its value is significantly greater than zero. There's a $3 billion monopoly in the US right now, so there's room to compete.

Okay. Thanks very much.

Thank you. We will now turn it back to Sandy Coombs for closing remarks.

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

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