Alkermes Plc (ALKS) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alkermes conference call to discuss the Company's quarter ended September 30, 2013 financial results.

(Operator Instructions)

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

Welcome to the Alkermes Plc conference call to discuss our financial results for the quarter ended September 30, 2013. With me today are Richard Pops, our CEO; Shane Cooke, our President; and Jim Frates, our CFO.

Before we begin today, let me remind you we will make forward-looking statements relating to, among other things, our expectations concerning the commercialization of RISPERDAL CONSTA, INVEGA SUSTENNA, Ampyra, Fampyra, BYDUREON and VIVITROL; our future financial expectations and business performance; and our expectations concerning the therapeutic scope and value, and clinical development, of our products. Listeners are cautioned that these forward-looking statements are neither promises nor guarantees and are subject to a high degree of uncertainty and risk.

Our press release, issued today, our annual report filed with the SEC and our other filings with the SEC, identify risk factors that could cause our actual performance and results to differ materially from those projected or suggested in the forward-looking statements. We undertake no obligation to update or revise the information provided on the call as a result of new information or future results or developments.

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

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

Thanks, Rebecca. Good morning, everyone. Happy Halloween, as well.

The three months ended September 30 represented another strong quarter for Alkermes. We recorded total revenues of $139.8 million, non-GAAP net income of $31.8 million and free cash flow of $26.2 million, demonstrating the power of our commercial portfolio and business model to generate significant cash flows.

Our total revenues were driven primarily by growth from our portfolio of five key commercial products, which grew 38% compared to last year and now represent approximately 73% of our total revenue compared to approximately 59% in the same period last year. Within that portfolio, revenues related to our long-acting atypical franchise, RISPERDAL CONSTA and INVEGA SUSTENNA, were once again the most significant contributors to our top line during the quarter.

End-market sales for RISPERDAL CONSTA and INVEGA SUSTENNA, during the quarter, were approximately $650 million, compared to $563 million for the same period last year. As JNJ stated on their recent conference call, the franchise grew approximately 15% year-over-year, due to an increase in combined market share. JNJ also announced the approval of INVEGA SUSTENNA in Japan, where it will be sold under the trade name Xeplion, another important milestone for this growing franchise. For the quarter, Alkermes recorded manufacturing and royalty revenues of $62.6 million for this product franchise, compared to $50.3 million for the same period last year.

For Ampyra and Fampyra, manufacturing and royalty revenues were $12.6 million for the quarter. This morning, Acorda reported end-market US net sales of $77.8 million, and Biogen previously reported Fampyra net sales outside the United States of approximately $16.7 million for the quarter.

VIVITROL had a very strong quarter with record net sales of $19.2 million, compared to $15.2 million for the same period last year, an increase of approximately 26%. This growth reflects the success our commercial team is having in identifying key prescribers, deepening utilization in those practices and enhancing uptake.

For BYDUREON, Alkermes recorded royalty revenues of $7 million, based on worldwide end-market sales of $87.6 million, which grew 31% compared to last quarter. This included US net sales of $73.2 million and ex-US sales of $14.3 million, as reported by Bristol-Myers Squibb. Bristol-Myers and AstraZeneca are focused on growing the brand and introducing the dual-chamber pen device to the market by mid 2014.

Switching now to expenses, on the R&D front, we achieved an important development milestone for aripiprazole laroxyl with the completion of enrollment in the Phase III study. In parallel with the ongoing Phase III, we've been expanding our focus to pre-launch activities and preparing an NDA submission following Phase III completion. Both of these factors contributed to the relative increases in R&D and SG&A expenses during the quarter.

In addition, SG&A reflected investment in increased promotional activities for VIVITROL. Going forward, we expect this level of investment to continue in 2014, reflecting increased activity with incremental spending expected in R&D and SG&A as more late-stage clinical trials get underway and commercial activities accelerate for aripiprazole laroxyl.

As a reminder, we've changed our fiscal year end from March 31 to December 31. On our February call, we'll report a nine-month fiscal period ending December 31, 2013 and will also provide our financial expectations for calendar-year 2014.

Our optimism for the future is as strong as ever. With $395 million in cash and total investments as of September 30, and a powerful business model, we're well positioned to generate cash and invest in our late-stage pipeline.

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

Great. Thank you, Jim. And good morning, everyone.

The pipeline progress in the last year has been remarkable. Our goal has been to develop one of the most diverse and exciting CNS pipelines in the biopharmaceutical industry and that's now coming into focus. To capitalize on the opportunities ahead, we're at the beginning of a whole new level of activity in our development and commercial programs. We're taking the next steps to build a significant biotechnology company.

Looking at the pipeline programs first, earlier this month, we announced a number of key events in the development of our late-stage candidates. For our most advanced candidate, aripiprazole laroxyl for the treatment of schizophrenia, we announced the completion of enrollment in the multinational Phase III program, following a planned interim statistical analysis designed to confirm that the study was well-powered to analyze the primary endpoint. With enrollment complete, we're on track for top-line data in the first half of 2014, an NDA submission shortly thereafter and expected launch in 2015.

We see the opportunity for aripiprazole laroxyl growing, as market dynamics shift in favor of long-acting injectables, coupled with aripiprazole laroxyl's distinct product profile, which is specifically designed for leadership. Many of you know that Otsuka's long-acting aripiprazole product, ABILIFY MAINTENA, is launching and beginning to grow. As you have heard us say again and again, we believe that the entire long-acting injectable market will benefit from multiple sales forces highlighting the advantages of long-acting treatment for schizophrenia. And we believe that's exactly what's happening now.

As Jim outlined, end-market's net sales of INVEGA SUSTENNA and RISPERDAL CONSTA grew to $650 million during the quarter, against the backdrop of the ABILIFY MAINTENA launch earlier in the year. We believe this underscores that the growth of the class will be supported by new entrants, and we look forward to introducing aripiprazole laroxyl into this more than $2.5 billion market.

Aripiprazole laroxyl is designed to provide a generational advance in dosing flexibility and product presentation. Completing enrollment in our single, pivotal study was a major milestone. While our clinical and regulatory teams are focused on completing the study and preparing the NDA, our commercial team is preparing to launch.

For ALKS 5461, our proprietary opioid modulator, with a novel mechanism for the treatment of major depressive disorders, we achieved rapid alignment with the FDA on our proposed design for the pivotal program. In addition, the FDA also granted ALKS 5461 fast track status, further underscoring the agency's focus on new treatment options with novel mechanisms for this debilitating disease.

The purpose of Fast Track status is to get important new drugs to patients faster, and the practical benefits are numerous. This designation confers eligibility for a rolling review, which allows portions of the NDA package to be submitted separately. Fast track status also confers eligibility for priority review, which is a 6 month review clock, versus the standard 10 month review, from the time of an accepted filing. With this designation and agreement with the FDA on our Phase III program in hand, we're gearing up to start the Phase III program in early 2014.

The core efficacy studies will mirror the key design elements of the phase two study, with Montgomery-Asberg Depression Rating Scale scores, or MADRS, as the primary endpoint. The three core efficacy studies will include approximately 400 patients each and feature elements similar to those utilized in our Phase II study, including Sequential Parallel Comparison Design, or SPCD. In addition to SPCD, we'll continue to implement the rigorous quality control procedures we utilized in phase II.

For ALKS 3831, our novel, oral atypical antipsychotic, our first Phase II program is ongoing. ALKS 3831 is a proprietary combination of a novel opioid modulator, ALKS 33, and olanzapine, which is an important antipsychotic that causes a particularly high incidence of weight gain in many patients.

We're developing ALKS 3831 as a broad spectrum antipsychotic with potential utility in two distinct patient populations; those with a propensity for weight gain on olanzapine; and those with schizophrenia exacerbated by alcohol use, which represents approximately one-third of the patients with schizophrenia. The 400-patient phase two study currently underway will evaluate the impact of ALKS 3831 on weight and other metabolic factors compared to olanzapine in patients with schizophrenia.

A second Phase II study is planned to evaluate the potential utility of ALKS 3831 for schizophrenia exacerbated by alcohol use. This study is expected to start in 2014 following a meeting with FDA.

In addition to the late-stage pipeline, we have disclosed three new product candidates -- MMF prodrugs, which are oral medications for the treatment of multiple sclerosis; ALKS 7106, an opioid analgesic without the risk of overdose death; and RDB 1419, a biologic immunomodulator for the treatment of certain cancers; all being readied for human clinical trials.

Across the portfolio, our development candidates represent high-value opportunities because of their potential to be blockbuster products that offer meaningful benefit to patients, providers and payers. We've been working to build a pipeline with the potential for such tremendous medical and economic significance. We've had some important successes in the past few months and we are excited to carry on into 2014.

This is a unique company. One with the here-and-now of a diversed and balanced, cash-generating commercial portfolio, coupled with what is emerging as one of the most important CNS pipelines in the biopharmaceutical industry.

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

We'll now open up the call for Q&A. Paulette?

(Operator Instructions)

Our first question comes from Cory Kasimov, JPMorgan

Hey, good morning. Thanks for taking my questions. And once again, well done on the pre-call music. A couple of questions around 9070. I'm curious on the significance of that interim analysis and maybe you can explain how detailed of a look the DMC took to make the decision not to upsize the trial. And then, also, in terms of -- I'm interested in the type of market research you're doing for 9070 and what sort of commercial prep is currently underway that's giving a little bit of a boost to SG&A. Thanks.

First on the interim look. It's interesting because it was really a sample size re-estimation look. So, we took no alpha penalty. It was not about determining whether we should stop or not stop, to make sure we were correct on sample size estimation, because we made that determination based on pre-specified, or modeling based on PAN scores, variability and retention rates, and the like. What we came back with was a very clear signal that, above 540 patients, we had plenty of power to analyze the primary endpoint for both doses. With that we were able to start winding down the enrollment.

We had enough forward momentum at the time that we kind of blew through the 540. We didn't get quite to 690, but it was a really encouraging sign for us on that blinded basis. But, we, obviously, have no insight into results themselves.

What's interesting about the market research, right now, is much of the market research is playing out in front of us in realtime with the launch of ABILIFY MAINTENA. Right? So, as I mentioned earlier the dynamic in the marketplace is playing out as we would've hoped and expected which, is CONSTA and SUSTENNA are strengthening. And more and more doctors are getting detailed by another complementary set of sales forces explaining the virtues of long-acting injectable medicines.

As we showed at the R&D day, in July, if you recall, the messaging -- if you look at the actual messaging behind CONSTA, SUSTENNA, and MAINTENA, they're very complementary. They're not fighting over the same patients, they're basically educating in general long-acting injectables are better way to treat schizophrenia.

What we're doing internally now, is essentially preparing our organization to be able to go after this market. But, we're doing it on lit pathway that's been lit, both by J&J and increasingly by the folks at Otsuka and Lundbeck. If you've been able -- if you've been tracking the numbers, the monthly numbers, for ABILIFY and MAINTENA, you can see it's beginning to ramp nicely now.

And how big of a sales force is behind MAINTENA?

We understand that Otsuka is using something on the order of 200 people.

Okay. Great. Thank you.

And our next question comes from Jonathan Eckard from Citi.

Good morning. Thank you for taking the questions. I was just wondering if now that you are more confident with the enrollments and that you have a sufficient number of patients for Aripiprazole Laroxyl, is there any ability to narrow the timeline for the Phase III data release in first half 2014? And then I have a follow-up question on the pipeline.

It's a little bit like you press play now. We have the patients --there's a certain amount of time that they're on oral Aripiprazole run-in and there's a three month in-life phase where we're looking at the primary endpoint, and then there's an opportunity for them to roll into an extension so there's certain per protocol elements that the push us then into the first half of 2014.

Okay. Very good. And then, with regards to the early pipeline programs, mainly MMF prodrugs and ALKS 7106, outside the standard safety and dosing questions that you'd like to answer, what are some of the other aspects that you -- of these drug profiles that you wish to, kind of answer, from the initial human trials?

It's a good question and it illuminates some of the features of these programs that we find so attractive. In the sense that those early clinical trials can reveal a significant amount about the characteristics of the drug and in effect lower the discount rate for subsequent studies.

In the case of MMF prodrugs, of course, you're looking at replicating or creating a pharmacokinetic profile of the active [Moid] MMF, that is the appropriate twice-a-day profile or the once-a-day profile that we're interested in pursuing.

Also, you can look at tolerability, because one of the advantages, we think, the potential advantages of our dosage form, is to prove the tolerability. So that should demonstrate itself early in clinical trials if you run the correct initial studies, which we have a tendency to do.

With 7106, as a pain product we know, as you've seen from the animal models, we have strong belief that this as an opioid modulator is going to be an effective analgesic. So, what we'll be able to do is test early on these features about overdose liability, drug liking and the like. And so we can -- we think that the first series of clinical trials on both of these programs will be a incredibly informative for us. That's why we're so anxious to get them into the clinic as fast as we can in 2014, and more modeling sometime around midyear.

That's great. Thank you very much. I'll get back in the queue.

Thanks, Jon. We'll take the next question.

And our next question comes from Anant Padmanabhan from Cowen and Company.

Just a couple of questions. First, on 5461, could you just discuss when we might see the trials actually posted on clinical trials? And what the duration of the trials would be? And then, potentially, the timing of filing? And then I have another follow-up question.

The Phase III program will include three core efficacy studies, we'll also have a safety study and drive total number of exposures, so we need ICH guidelines for the overall exposures. The first studies will begin in the beginning of 2014 and then they'll kind of build through the year. The first posting, Rebecca, on clinical trials I've got, I guess would be in Q1?

Yes. Fairly close to the actual study, that's what you're required to do. So, you'll get information as the studies go live on us.

The SPCD studies will mirror, as I said, almost identically what we did in Phase II. So, you can expect in an SPCD study, a two-phase study, or a two-stage study, each one of them about five weeks in duration. We'll stack those type of studies underneath the umbrella of this longer safety exposure study and that together will comprise the NDA submission. We've not yet guided, yet, to when we think it will end because we're just tuning up now when we're getting them all started and how we're going to stack it through, but we'll give you guidance on that next year.

Okay, thanks. On VIVITROL, could you just discuss the label change and what impact it has on your promotional activities?

Sure. For those of you who don't know, it was a very positive development that the black box warning was removed from VIVITROL's label. The removal of black box in general, not just specific to VIVITROL, allows you to do things that you can't do when you have a black box product.

VIVITROL is such a specialized product, being focused on such a core group of doctors, right now. I would say that in the immediate aftermath of removing the black box warning, it was more of a sigh of relief than representing a step change in the way that doctors perceive it. The people who are prescribing VIVITROL right now understand VIVITROL. But, it does have implications for the future. As the drug begins to ramp, as it's doing right now, it gives us much more flexibility as we begin to expand the exposure of VIVITROL.

In the immediate short term, though, what happens is we essentially incurred some expense because we reprinted all the promotional materials, all the marketing materials, everything, to change the emphasis because with a black box warning, you have to, basically, lead your promotional materials with the black box warning. So, we were able to re-tool all of our marketing materials.

Great, thanks.

We'll take the next question.

And our next question comes from Michael Schmidt from Leerink Swann.

Good morning, thanks for taking my question. I had a follow-up on 5461. I was just wondering if you could provide some more incremental color on what you have agreed on specifically with the FDA in terms of the pivotal study design? How are the studies powered? Why are you running three efficacy studies? And what are your thoughts with regards to a path forward ex-US for this product? Thanks.

We sent a pre-meeting briefing package down to FDA before our end of Phase II meeting. And in it, we proposed the program, that I'll describe in a second. We were gratified to see the FDA, basically, came back and said, yes, we agree with what you propose. So, there really was no need for face-to-face meeting and we updated you promptly thereafter.

The program that we proposed was three efficacy studies, three core efficacy studies, and we proposed utilization of the SPCD design. As we had told you in advance, we really didn't think that was particularly controversial. We actually thought it was good science and FDA agreed with that. You saw, in Phase II, with an in of about 150 patients we showed statistically significantly results.

We're going to power those up little bit more. These studies, as we said, will be about 400 patients each. In part, not necessarily driven so much by the biostatistical analysis, but we just want to get total number of exposures in the total clinical trial program to a size where it supports how meaningful this product could be and how we patients we think this drug could be useful for. We'll run about -- we'll run three studies each on the order of about 400. There'll be pushes and pulls between them based on the design.

Two of the studies will be very similar to that SPCD design you saw in Phase II. The third is a little more nuanced based on some design elements that we have that we won't disclose right now that we're quite excited about pursuing.

The idea is, you run three to assure that you have two that you can file on. That said, we don't expect to fail on these studies. We expect that the drug has a clear signal. And if we continue to run these studies in this fastidious manner that we've been doing, we think that the drug's signal will continue to present itself.

Under the umbrella, those three studies, of a larger safety study, where we're just going to make sure patients stay on this drug for long periods of time so we make sure we have a full safety profile for the NDA submission.

Sure. Thanks. And the --

I'm sorry, you asked about the ex-US too. I meant to say that. We're seeking scientific advice on that right now. And while the studies that I just described to you were primarily designed with US registration in mind, we're absolutely mindful of the global opportunity on this one. But, we have not quite yet integrated all the European advice into the program yet. We'll update you when we do.

Great, thank you.

Okay, Paulette, we'll take the next.

And our next question comes from Mark Goodman from UBS.

Are you there, Mark?

Mr. Goodman, your line is now open. I'll go on to the next question. And our next question comes from Mario Corso from Mizuho USA

Good morning. Thanks for taking my questions. A couple of things on the pipeline. As you alluded to some pretty significant increases in spending in the quarter. I'm wondering if you could talk a little bit about the pre-commercial activities and then what that covers and what you're looking for out of that? And on 5461, I'm wondering if there's any difference in design between Phase II and Phase III, whether it's efficacy measurements, secondary endpoints, that you would highlight? And then thirdly, kind of related, your R&D budget, as we think about the pushes and pulls there going forward, I think, post the EDT merger, you know $180 million or so was kind of the top end of the range you guys talked about, but I'm wondering if that contemplated a Phase III program such as the one you're embarking upon with the 5461. Thanks very much.

Thanks, Mario. It's Jim. I'll leave the question on the study design to Rich, but I'll try to tackle the two financial ones first. So, with SG&A spend. You know, you did see an increase in the quarter. I think that was really driven by -- we think, the best kind of SG&A spend you can have. And really, sales and marketing spend, rather than G&A. So, we have a growing product in VIVITROL and we've have decided to put some increased promotional spend behind that. As where you know, obviously, the product is doing quite well, compared to our expectations this year. Investing in that profitable growth is something we think is very smart. In terms of Aripiprazole Laroxyl, as we've come to the point where we've finished enrollment in the study and now we can see the light at the end of the tunnel.

Again, that market preparation, getting close to the changing market right now with the launch of ABILIFY MAINTENA, beginning to add a little bit to our professional leadership staff for 5461. And again, I think you'll see those investments continue as we go, given the strong revenue growth that we are also seeing.

And then in terms of the R&D expense, specifically, we'll guide to 2014 when we guide in February. We haven't given guidance out that far. And we're, obviously, within our guidance this year. As we finish the large Phase III, or begin to see the end of the large Phase III for 9070, we'll also be rolling on, thanks to the success we've had in the pipeline, a large Phase II study for 3831 and, obviously, the 5461 Phase III program.

As I said in my remarks, just to give you a little bit more color, I think you can use our current level of investment. That will continue. And you'll probably see some incremental spending growth through 2014 on top of that. And so, I'll turn the 5461 design question over to Rich.

Mario, I think, as I said in some of my earlier comments, it's very, very similar to our Phase II program. But let me just highlight a couple of things and be a little more specific on that.

Particularly, what do we care about? We care about the patient profile. We'll use the same idea of patients with major depressive disorder who are not currently getting adequate relief from use of SSRIs or SNRIs. This is where we've had success before in the previous studies and we'll continue in that patient population. We're settled on dose, we're settled on study design, which will mirror what we did in Phase II with the SBCD, and the endpoint to analytics are the same. So, it's very, very much shades of the exact same color that we would've had in Phase II, which is, I think, in our view, exactly where we wanted to end up because then the probability for replication goes up.

All right. Paulette, we'll take the next question if there's folks in the queue.

Our next question comes from Terence Flynn from Goldman Sachs.

Hi, thanks for taking the questions. Maybe just a follow-up on 5461, Rich, was wondering, specifically, in terms of the criteria you're using to deem a responder versus a non-responder, was wondering if you're still using that HAMD cutoff of 50% there in the Phase III trials? And then one question on the MMF prodrug you're working on, I think Biogen had some data at (inaudible) this year, where they showed gene transcription changes that take place with MMF and DMF are different, and there's some hypothesis that, maybe, DMF does have a clinical impact. So I would just love your guys thoughts on that as well. Thanks a lot.

Yes. Two good questions. On the first one, I'm not sure I quite understand your 5461 question, Terence. Now, in terms of responders, are you talking about how we stratify our enrolled patients who are non-responsive to their baseline the therapy? Or, actually, the responder analysis in our efficacy analysis?

I guess, it would be more of the enrollments. So, once you enroll the patient, deem them a non-responder and then they go on to be randomized after that.

The patients that are enrolled in the study are patients who are -- have not responded to one or more SSRIs or SNRIs. And the determination about their response, the HAMD non-responsive level, I can't answer right now. We'll get that answer to you. I don't know whether it's 50% or 22%, but there's a pre specified non-response threshold.

On the MMF, DMF, fantastic question, because I think it's very much in Biogen's interest to draw a distinction between MMF and DMF based on the IP. The important thing to understand is, there's not much DMF that appears systemically. If you read the summary basis approval or even the label for Tecfidera, MMF is the active Moid that's described by the sponsor in the NDA. We believe biologically, the driver of the effect is MMF, notwithstanding the fact that invitro systems or in gene expression arrays you can show differences. But, that may be important or not important, but we think the driver of the efficacy is MMF. But, we'll see when we get into the clinic. But the most important thing for us right now is to make sure that we have a pro drug and a delivery system joined together that not only deliver MMF consistently, in a reliable way, but also against the waveform that we think we can sculpt with our drug delivery technology that allows us to provide a differentiated twice-a-day product or even a once-a-day product.

And, Terence, just one follow-up for some color on ALKS 5461, for those on the phone who may not know, but 5461 is designed as an adjunct therapy. So, recall that patients will have failed, or had an inadequate response, from one or more SSRI or SNRI, but they will remain or continue on that baseline therapy and 5461 will be layered onto that. All right, Paulette, we'll take the next one.

And our next question comes from Steve Byrne from Bank of America.

I wanted to drill into the VIVITROL commercial sales force a bit. You indicated it's in an expansion mode. Can you talk a little bit about how many reps you have out there now, and is the focus to expand geographically now that presumably you have enough pilot data that you can pitch this product in new regions?

Sure, Steven, and let me just draw a distinction, and perhaps I misspoke, but we haven't expanded our field sales force. What we've been expanding is our promotional spend. The sort of advertising and promotional spend that you typically do. The sales force remains about 66 people, 65, 66 people. You know, we'll be looking at that in next year's budget to make sense in those areas of the country that warrant more investment. I think we will do that. Again, the product is profitable and we'll continue to look to drive profitable growth.

One of the things that we're seeing is the product is being used more deeply in the key prescribers' offices. It does take some time for those prescribers to understand how to use VIVITROL. And I think you'll see next year a broadened effort at education across a number of fronts, both government affairs, direct promotion with the sales force and more advertising. That's allowed now that the black box is no longer part of the warning. So, you'll see some investment there. Again, you know, the growth is accelerating but it is gradual and we'll continue to invest to see if we can accelerate that into next year.

Hey, Steve, it's Rich. Let me just make one point to amplify what Jim said. On the policy side, we are, I think, ahead of the curve in terms of thinking about the integration of policy into our commercial organization. And it reads, not just on the VIVITROL, but also on the Aripiprazole Laroxy, BYDUREON, CONSTA, it's in everything. In an environment where payers are focused on long-term outcomes and long-term economics, better adherence to good drugs is a money-saving proposition.

So, on the VIVITROL side, we are definitely powering up. You've heard us talk before about our state-based programs. And we're powering up the integration of our state and our federal activities as it relates to VIVITROL because there's enough data now in these systems that we can begin to really promulgate the message that's being developed out in the field.

All right, Paulette, I think we have five --

The next --

Oh, I'm sorry, Steve, please, go ahead.

Thank you, Rebecca. I just had a follow-up financial question for Jim, and that was, you had a significant increase in the non-cash comp or stock-based comp, in the quarter. Is that lumpy and did that contribute to the sequential increase in the SG&A and R&D line items?

Yes, Steve. It is lumpy in the sense that it was the annual grant that went to our Board of Directors. And given their services through the course of the year, we take that all in one quarter. That is a non-cash comp expense and that'll be outlined in the quarter -- the quarterly, our 10-Q that we filed, I think, earlier this morning. But not imminently, no.

Thank you.

And also, it's driven by a higher share price as well. Given that share price is higher, that obviously goes in to the accounting charge that you take a higher charge for higher share price grant.

Okay, Paulette, I think we have time for one more question. I know there's a lot of folks reporting this morning, so we'll try to be respectful of everyone's time.

We're showing no further questions. I will now turn the call back over to the Company.

Everyone, thank you for dialing in and as Jim said, Happy Halloween. Take care.

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