Eagle Pharmaceuticals Inc (EGRX) 2015 Q4 法說會逐字稿

Good morning. My name is Keith and I will be your conference operator today. At this time I would like to welcome everyone to the Eagle Pharmaceuticals' fourth-quarter and full-year 2015 earnings results conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded today, February 25, 2016. It is now my pleasure to turn the floor over to Lisa Wilson, Investor Relations for Eagle.

Thank you, Keith. Welcome to Eagle Pharmaceuticals fourth-quarter 2015 earnings call. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals.

With me on today's call are Scott Tarriff, President and Chief Executive Officer and David Riggs, Chief Financial Officer. This morning the Company issued a press release detailing financial results for the three months and full year ended December 31, 2015. This can be accessed through the Investor section of the Eagle website at www.EagleUS.com, and you can also access the webcast of this call from there.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the Company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Eagle Pharmaceuticals' Management as of today, and involve risks and uncertainties, including those noted in this morning's press release and our filings with the SEC. Such forward-looking statements are not guarantees of future performance.

Actual results may differ materially from those projected in the forward-looking statements. Eagle Pharmaceuticals specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. A telephone replay of the call will be available shortly after completion through March 9.

You will find the dial-in information in today's press release. The archived webcast will be available for one year on our website at www.EagleUS.com. For the benefit of those who may be listening to the replay or archived webcast, this call is held and recorded on February 25.

Since then Eagle may have made announcements related to the topics discussed, so please reference the Company's most recent press releases and SEC filings.

With that I'll turn the call over to Eagle's CEO Scott Tarriff.

Thank you, Lisa, and good morning everyone. I am pleased to be here today to review what has been an exciting quarter and an extraordinary year for Eagle Pharmaceuticals. We achieved several major milestones over the last eight weeks, including the recent launch of BENDEKA, where we expect a near complete market conversion by March 31 by our marketing partner Teva, and for which we are entitled to a 20% royalty.

The recent launch of our alcohol-free Docetaxel product, the upcoming PDUFA day for bivalirudin, by the way we trademarked that Kangio, and that will be in the next three weeks. FDA Fast Track designation for RYANODEX for Exertional Heat Stroke, along with an upcoming meeting with the FDA to discuss our go-forward plans and agreement with AMRI to further advance our pipeline, and the issuance of another very important patent for bendamustine. As you can see from our results, we turned the corner from investment-mode drug delivery Company to a fully commercial, profitable, earnings-driven, specialty pharmaceutical Company.

Eagle was profitable in 2015. As we achieved the milestones I just outlined, we expect significant EPS in 2016 and beyond. The fact that we were profitable in 2015 is important, as it is the fact that we maintained our cash levels throughout the year while investing heavily in our future.

Now we are poised to take advantage of the nine years of investment and build the earnings of the Company. At the end of 2015, we took measures to establish a firm foundation for executing our 2016 strategic objectives. We invested in our business by making key hires to advance our sales and commercialization infrastructure.

We believe we are now well-positioned for what will be a busy 2016. We expect to see significant activity between now and May of this year as we launch new products in several key markets and our growth outlook over the next several years is very strong. We have many key catalysts ahead of us in the next several weeks and coming months.

To recap, we are waiting to hear about: our three- and seven-year exclusivities for BENDEKA, the outcome our FDA meeting on Exertional Heat Stroke, which we expect to hold next month; a decision on the TREANDA and the litigation in Delaware; the March 19 PDUFA date for Kangio, or bivalirudin; the reimbursement status for bendamustine; the bendamustine clinical safety data reporting, which is forthcoming; and additional information regarding meaningful label expansion for RYANODEX beyond Exertional Heat Stroke and malignant hyperthermia.

While we will not be issuing guidance for the year we think it would be helpful to provide some visibility into the key components of what will drive Eagle's success in 2016 and beyond. Q1 will be a pivotal quarter largely dependent upon the timing of several factors, some of which are outside of Eagle's control. Principally, this relates to the rate of conversion of BENDEKA, as well as our receiving approval from the FDA for Kangio or bivalirudin.

It is hard for us to project quarters. For example, if bendamustine share of sale shift $10 million into one quarter or the next, the swing could result in a $0.12 impact to EPS in either quarter. However, as we look out, and assuming we fully achieve our internal BENDEKA conversion estimates and we have launched Kangio, we are generally comfortable with the current external projections during the first half.

As we gain more visibility into the launch of BENDEKA and approach the end of the first quarter, we believe that Eagle will be in a much better position to comment on the remainder of 2016 and into 2017. I will be also be discussing the longevity of our bendamustine franchise in more detail shortly.

But first, I would like to ask David Riggs, our CFO, to review the financials. David?

Thank you, Scott. For the period ending December 31, 2015, our revenue mix consisted of product sales comprised of sales of RYANODEX, which we launched in August 2014, sales of diclofenac-misoprostol, which we launched in January 2015, and sales of Argatroban to two commercial partners. Also a part of revenue are our royalties we receive on commercial partner net product sales of Argatroban to their respective customers And license and other income.

As Scott indicated, we are pleased to report a profitable 2015 and look forward to being an earnings-driven Company in 2016 and beyond. With that, let me now turn to a full review of the financial results.

For the three months ended December 31, 2015, total revenues were $18.2 million, as compared with $5.6 million in the prior-year quarter. The increase was driven by a $15 million milestone payment earned with the FDA approval of BENDEKA, an increase in RYANODEX product sales, and offset in part by lower Argatroban royalty income.

We took several measures in Q4 to invest in the business to prepare for 2016. These investments are reflected in our expenses and enable us to solidly move into 2016. R&D expense increased by $4.8 million, to $8.8 million in the fourth quarter of 2015 compared to the prior-year quarter. The increase is due primarily our ongoing investment in EHS, Pemetrexed, R&D personnel costs and other investments in our pipeline.

We elected to spend more in the fourth quarter on the EHS clinical development program based on what has become a much more robust clinical trial. Additionally, we elected to commence development work on projects that are a part of our joint product development program with AMRI, giving us a head start on work that will continue into 2016. These costs are offset in part by a decrease in spending related to bendamustine, for which we submitted the NDA in the first quarter of 2015.

For 2016, we expect R&D investments to focus on: our EHS label expansion program; on the preparation and filing of an NDA for Pemtrexed; but more importantly, on new and as yet undisclosed organic development programs. We expect total R&D spending for the year to be around $30 million, although our programs are scalable, which is consistent with our spending -- in this level I'm forecasting in 2016 is consistent with our spending in 2015.

SG&A expense increased by $1.9 million to $5.6 million in the fourth quarter of 2015, compared to the prior-year's quarter. Personnel related expenses accounted for the bulk of this increase and were due to overall expansion of the business, especially related to our commercial development activities. To that end, in the fourth quarter we began our internal infrastructure build-out plans needed to support 2016 launches and that will dovetail with the efforts of our co-promotion partner Spectrum Pharmaceuticals' activities.

We expect sales and marketing expenses in 2016 will ramp up as new product launches begin and gain momentum. We expect to spend in the range of $18 million to $20 million. In G&A expenses are expected to be in the $19 million to $21 million range. Net income attributable to common stockholders was $1.2 million for the fourth quarter of 2015, or $0.08 per basic and $0.07 per diluted share, compared with a net loss attributable to common stockholders of $5.5 million or $0.39 per basic and diluted share for the same period last year.

Turning now to our results for the calendar year 2015. Total revenues were $66.2 million compared to $19.1 million in FY14. This increase is primarily due to milestone payments earned on our BENDEKA product. R&D expenses were $27.9 million in the 12-month period ended December 31, 2015, up from $16.8 million in FY14, due primarily to investments in BENDEKA, Kangio, Pemetrexed, EHS and our ongoing development programs along with R&D personnel costs. SG&A expense for the full calendar year increased by $10.8 million to $20.2 million, primarily as a result of the expansion of our commercial activities, including selling, salary and personnel expenses and support of our multiple product development programs. Net income attributable to common stockholders for the full year was $2.6 million, or $0.17 per basic and $0.16 per diluted share, compared to a net loss attributable to common stockholders of $19.6 million or $1.97 per basic and diluted share in FY14.

We closed the quarter and the year with $79 million in cash and cash equivalents and $197.4 million in additional paid in capital. We had $90.3 million in stockholders' equity as of December 31, 2015. Lastly, note that inventory at year end includes $14 million in launch quantities of BENDEKA that will be purchased by Teva and that accounts receivable contains $15 million due from Teva for which we collected in January. These two items combine to restore $29 million to our cash balance.

With that I'll turn it back over to Scott.

Thank you, David. Our fourth quarter was characterized by several major developments and achievements in our pipeline and commercialization strategy. With the FDA approvals and launches of BENDEKA and alcohol-free Docetaxel, along with several additional product decisions that are due in the first half of this year, we expect to expand our in-market products along with revenue and earnings power significantly in 2016.

On December 8, 2015, the FDA approved BENDEKA, our rapidly infused bendamustine product. Teva is now shipping BENDEKA, putting this differentiated product in the hands of healthcare professionals and patients as scheduled. Per our agreement, Eagle is entitled to 20% royalties on future net sales of the product, as well as possible incremental step-up royalties if we achieve additional milestones.

Based on $760 million in sales of Teva's TREANDA in 2015, and sales of just under $200 million last quarter, we expect BENDEKA to be an important earnings driver for us going forward. And we expect BENDEKA to have a significant life cycle. We issued a press release earlier this week discussing our newly issued patent and summarizing our current patent situation. We feel that we have developed a very strong patent position very early in the life cycle of the product.

We view the longevity in bendamustine to be derived by several factors. To review those, first and foremost it's the attributes of the product, the safety profile of BENDEKA. We believe that the attributes of the products will speak for themselves. Then we have our robust patent portfolio, the potential for exclusivities of either three and seven years, reimbursement under a potential new J-code and the contractor reversion rights we have in certain circumstances which gives us the ability to take back the asset if competition exists.

Many, if not all, of these should provide a long revenue stream. I realize that we are waiting for some clarity regarding the exclusivities reimbursement and the outcome of the ANDA litigation. These outcomes will be clear soon enough.

What we can concentrate on are the known value drivers today. We already know that the product attributes and our patent position are strong. These may, in fact, be the most significant pillars of bendamustine's sustained exclusivity and longevity.

The benefits to patients and providers of the bendamustine products are well known, and are being well received by the market. The patent situation is also well known. At this time, Eagle has six patents issued and listed in the Orange Book.

Given the niche of your patent portfolio, we believe it will be very difficult for any ANDA filers to design around these patents. These patents run from 2026 to 2033, which puts us in great shape. As for the ongoing TREANDA ANDA litigation, remember, all of these defendants have already admitted that they infringed the patents.

These patents must be invalidated for the ANDAs to reach to market, again a high hurdle. As you'll recall, our bendamustine 500mL product has been tentatively approved and we have the contractual right to launch on May 1 of this year. This covers bendamustine, and with that I'm going to switch to our next portfolio product that we are excited about.

We had another win in December when FDA approved our alcohol-free Docetaxel injection, making our product the first and only alcohol-free formulation in the US. We announced the shipment and commercial availability of Docetaxel injection earlier this month. As the first alcohol-free formulation approved in the US, we think this product addresses a compelling need in the Docetaxel market.

Its novel formulation has the potential to improve the lives of patients, resolve concerns among healthcare professionals at hospitals and infusion centers and ultimately drive value for Eagle's stakeholders. We have already begun to see positive movement with Docetaxel in the last several weeks as our newly engaged salesforce began marketing the product.

Next up is our PDUFA milestone on March 19 for Kangio, or RTU bivalirudin, which is less than three weeks from now. Based on the appellate court's decision being vacated on Angiomax, we currently expect to be the next entrant into this market ahead of other generics. Our version of the drug is easier to use because you just spike it and hang it, thereby reducing the potential for error by healthcare professionals, compared to Angiomax and the other generic formulations. We feel good about our chances of capturing a meaningful share of that market. We have been interacting with FDA and we are preparing for launch. Everything seems to be on track for our March 19 approval and we anticipate shipping in late Q1 or early Q2. Obviously, the timing here would impact our first-quarter 2006 (sic - see press release "2016") performance, but the important point to keep in mind is that we will likely be the next entrant into this limited market and the market continues to look promising over the near term.

By the time we launch Kangio, our salesforce will be substantially complete. We expect to have a team of about 50 by launch time and it will be a great opportunity to test and observe the new team. We are also taking steps to safeguard our intellectual property. We have two patents already issued and the third currently pending.

On February 4 we announced the appointment of Michael Moran to the role of the US Head of Sales. He joins us from GlaxoSmithKline where he most recently served as field Vice President, overseeing more than 100 sales reps and increasing key customer reach by 45%. Mike's extensive experience and innovative selling strategies will be instrumental as we continue to develop our sales capabilities and strengthen our market position as a fully commercial specialty Company. Mike will play a key role coordinating our co-promotional activities with Spectrum as we finalizing building our internal salesforce.

Turning to RYANODEX, this product has now been on the market for about 18 months for malignant hyperthermia. RYANODEX remains a clear advantage over other treatments in terms of the ease and speed which it can be administered, and we remain confident that it will become the treatment of choice for malignant hyperthermia. We are hopeful that the sales gains we are seeing now will be accelerated once we have additional representatives handling the product towards the end of the quarter. We expect to have 20 people selling RYANODEX for MH, versus the five today.

If you are at all familiar with the Eagle store, you know that one of our main focuses is on expanding RYANODEX's label to include a second indication for the treatment of Exertional Heat Stroke or EHS. EHS is a sudden life-threatening condition that affects individuals who expend large amounts of physical energy in extremely warm temperatures. It is a leading cause of death among student athletes and one of the primary causes of non-combat related death in the military. There are currently no drugs available in this market. So you can imagine how very encouraged we are when the FDA granted Fast Track designation to RYANODEX for EHS a few weeks ago. In our view, this was a clear acknowledgment by FDA of the seriousness of Exertional Heat Stroke and the current lack of a drug treatment.

With this Fast Track designation, we will be able to work very closely with the FDA and potentially expand the product's label to include EHS as an authorized second indication, pending the outcome of our FDA meeting. We already received orphan-drug designation for RYANODEX as an EHS treatment in the US and hope to also be able to receive seven years of exclusivity in the future. Last fall, we successfully completed a novel clinical trial of 34 patients who suffered from EHS during the Hajj in Saudi Arabia.

Our results were strong and using the Glasgow scale, a widely-validated measure used to evaluate neurological functioning, we found that using RYANODEX in conjunction with the current standard of care is much more effective at treating EHS than the standard of care alone. Patients who received RYANODEX took about 55 minutes to cool down on average, compared with about 70 minutes for the control group, given the intense risks associated with having prolonged internal body temperature approaching 106 degrees, we think the 15 minute difference is extremely important. We are in the process of providing the FDA with more robust data than was originally planned, and we are optimistic about our upcoming meeting with them next month.

We look forward to sharing the outcome of this meeting with you at the appropriate time. Also as you know, we hired Sherry Korczynski for the future launch of RYANODEX. Sherry has more than 20 years of experience in the pharmaceutical industry, including her most recent direct role in the marketing of EpiPen, which we believe has similar market characteristics to RYANODEX for EHS.

As our SVP of Marketing, she will focus on positioning our approved and pending projects for successful commercialization. We are exploring potential marketing strategies for the product, and we are very encouraged by what we think will be a very significant market for the indication. As soon as we hear from FDA we will be able to provide more detail on the expectations for the product. We truly see RYANODEX as potentially one of our biggest products. And we are excited to potentially further expand the label indication to ecstasy and methamphetamine overdose in the future, which addresses a large audience.

Turning to Pemtrexed RTU, we plan on filing this NDA at the end of this year. In early January, we took additional steps to diversify and expand our portfolio pipeline. We announced a partnership with AMRI to produce and market several parenteral drugs in the US. This will be a joint development program for several new product candidates.

Once those drugs are approved, AMRI will be responsible for their development and manufacture, and Eagle will handle the clinical trials, regulatory submissions and commercial distribution. We expect this partnership to expand our portfolio considerably in the coming years and we are looking forward to collaboration with AMRI. Over the year we will also speak more about our expanded internal portfolio.

So as you can see, 2016 is shaping up to be a very promising year for Eagle. One that we expect will define a strong market position for years to come. By May 1, we expect to have as many as seven end-market products addressing large and dynamic markets in a profitable sector with a promising pipeline in development.

Our bendamustine family has a long life cycle supported by robust patent protection, for which we are entitled to earn a 20% royalty combined with the numerous other products that will shape Eagle's future for many years to come. We are comfortable with the way that the earnings power of Eagle is shaping up for 2016 and 2017. We look forward to sharing more details with you in the first half of the year.

Our commercial strategy is robust with excellent partnerships and a growing increasingly skilled and marketing team. We are supported by a strong balance sheet that includes about $100 million in cash in net receivables and our current and future revenue opportunities, as we just outlined, will only continue to strengthen our capital position, earnings potential and enhance our free cash flow. All of this leads us to anticipate that we will be able to achieve continuous year-over-year growth for the next several years. We are excited about what's in store and we are confident that we will be able to deliver meaningful value to Eagle's shareholders.

With that I'd like to open the call for questions. Operator, please go ahead with the instructions.

(Operator Instructions)

We will take our first question from David Amsellem with Piper Jaffray.

Just a couple. First on bendamustine. So this may be tough to answer, but this is a question on the big bag.

So Teva has suggested that you wouldn't need to launch the big bag in May if they indeed are successful in switching the entire bendamustine market to BENDEKA. With that in mind, with their comments in mind, what are your thoughts on that? And then I have a couple of follow-ups.

Thanks, David and good morning. Look, as we've said all along over the course of the year, that we have the contractual right to launch in May, and its a good opportunity for our shareholders. We have been looking at the segment of the DSH hospitals, the 340B's as our target.

Certainly between now and May we will continue to plan. We do have that capability for May 1st. It's important to us.

Okay. And then switching gears to bivalirudin, a couple questions. Now that the medicine's company has sued you, does that -- just to be clear, does that change your thinking in any way at all, on launching right after you get the approval in March, assuming you do actually get the approval?

Secondly, assuming that you do enter the bivalirudin market, how are you guys thinking internally about when MDCO's case versus Hospira resolves in the appellate court and when you think other entrants with tentative approvals like Aurobindo and Sagent, would enter the market? What are your thoughts there? Thank you.

Yes. So let's go through all of that, David. As to the new lawsuit, as both parties reported at the time, the parties previously arbitrated the dispute under a licensing development agreement between the parties. In 2013, an arbitration panel ruled in Eagle's favor regarding Medicines' material breach of that agreement with us.

As a result, we terminated that agreement. Medicines accepted that termination in October of 2013. We have the right, as a result, to develop and move forward with our own RTU product, which we are doing, and we expect to prevail in this new lawsuit and we expect to launch the product upon approval.

In terms of the timing of all the other issues being resolved in the appellate court, it's very hard to predict. Our best thinking its towards the end of this year. And the expectation from our side is there will not be any other entrants other than us until it's resolved, which means it could be us entering into this market that exists today and in keeping the status quo in that market until it's resolved, which could be up to eight months or longer.

And if I may just sneak in one quick additional question on bivalirudin. Just in terms it of your commercial supply, would you be able to supply the vast majority of the bivalirudin market, or are there any constraints we should be thinking of?

Yes. I think the best way to answer that, David, is we are moving forward in developing the product. The inventory, the commercial, and we certainly have enough capability as we move through the year to meet all of our internal expectations for the product. So I think we're going to be fine.

Thank you.

Our next question comes from Randall Stanicky with RBC Capital Markets.

Thank you, Scott. I feel like we have talked a lot of the last couple of days. But just a couple of additional questions.

Number one, just a follow-up. Why wouldn't you launch the big bag, given the margin benefits and the strategic opportunity that gives you?

Secondly, can you just give us some additional color on your confidence in the BENDEKA launch by your partner Teva? Clearly, that's a major focus for the stock, but also your P&L.

My third question is, can you just talk about the pipeline? I understand you are not going to able to disclose some of these additional products you are working on. Obviously, this is an important focus as we think about the ongoing recurring earnings. Can you talk about the strategy in terms of targeting additional products beyond pemetrexed? Thank you.

Thanks, Randall. Let's take your second question first, the BENDEKA launch of Teva. Here's what I will say about that. They are just doing a tremendous job. The two companies are working together incredibly well. I have nothing but great respect for what they are doing. They are doing everything that they said that they would do - really -- just wonderful.

The BENDEKA launch is going as well as we could have expected, probably ahead of what we were thinking. We believe that most of this market, nearly all of this market, is going to be BENDEKA by the time you get into April. So can't say enough good things about the way that launch is going, which is important for both companies.

Beyond that, the big bag, as I keep saying, May 1st is going to be here in a few weeks. We have the right to launch, and it does add some value to our earnings, obviously.

The pipeline, we continue -- I think we've done a marvelous job. When you look at today's financials that David went through, we have been doing this now for nine years. We are very proud of the fact we raised about $90 million privately in the seven years we were a private company.

We raised another $100 million now as a public company and we still have $100 million of cash in the bank. Which means we have created this Company with a net $90 million. And we have done it by developing products that have low clinical risk and relatively low cost of development, relative to other segments in the industry.

As we look at our pipeline, we believe that the opportunities to continue to develop products like bivalirudin, like bendamustine, pemetrexed, dantroline and the label expansions, you know, it's just about limitless. We are finding new product opportunities all the time. We have a core team of people that are looking for additional products.

We have announced now that we have two additional products that we can't go into a lot of detail. The first one we have given a little bit of color to, we think leaves us with a significant change in about a $400 million market and we believe we can get that product to the market before our generics because of our patent [will be applied]. Our expectations just continuing to expand the pipeline, filling in with partnerships like we do with AMRI.

I think our future when it comes to internal capabilities of developing products is very bright.

Great. Thank you guys.

Thank you.

Our next question comes from Irina Koffler with Mizuho.

Hi, good morning. Can you just remind us about the pricing strategy on the docetaxel and the Kangio? When you are selling products into these fairly genericized markets, in these cases, are you thinking about premium pricing, or more on par with generics?

And then the second question is on BENDEKA and if the layoff life powder goes generic and you take back the rights, I mean, how do we get conviction that you would be able to penetrate that market longer term if you took the product back, versus if it remained with Teva and they just sold it as a generic themselves? Can you help us think through those two cases? Thank you.

Thank you, Irina. The first products, the docetaxel and the Kangio. It's in the cornerstone to the way we are thinking here at the Company. We have two products that we're launching into somewhat generic markets, docetaxel and Kangio.

We have better products, innovative products with significant product attributes, and we are entering those markets and we are going to price those products around parity to the market pricing that exists now. And so why are we doing that? For several reasons.

First, foremost of importance to us is converting the market share over to our products. Part of the reason for that is these are therapeutic substitutes, not generic substitutes. With a 50 person sales force protecting the product once we have it, it will be a little bit sticky and we will keep share over time.

So I think that's important. Get the share. We make nice money on each of these products. Get the products over here.

Then second to that, just from a global franchising of the Company, what a great idea to ingratiate ourselves with our customers, especially in the environment that we have today. Provide significant improvements of products, but be socially responsible for price so when the time comes that we have products that have more pricing power, that have greater innovations, that require increased pricing, we are in a good balanced situation. And so we think it's the right thing to do for our shareholders to garner as much share as we can early, and to help build the value of our Company as we bring these innovative products to our customers.

As we move to your question about BENDEKA and if generics do enter into the (inaudible) market and we wind up being the marketer of both big bag and BENDEKA against the generic LYOS, we think we have more than enough sales and marketing capability and expertise here to be extremely successful. We think that the 50 people that we have, the Spectrum sales force has been very successful selling oncology products. I don't think they need any more people to have a full marketing capability for BENDEKA if that's the situation that arises.

Coupled with the 20 people that we have, and the sales team that we have, I think we will do great. Keep in mind the big difference is the fact that we would keep around 80% of the profit if we marketed it ourselves as opposed to receiving 20% of the market so that difference of the margin by taking back the product more than makes up for any slippage that there might be.

So in our belief, and the reason we negotiated this, is we believe that aspect of the contract puts us in the best shape for the Company in the unlikely event those LYOS get through the courts next month or so.

Thank you. If I could have a follow-up. So the CMS is trying to do away with the whole ASP+6%, as we've seen.

And does that change the way that you're planning your pipeline and the types of things you are looking to introduce into the hospital setting? How are you thinking about that development? Thank you.

You're welcome. It's hard to think what's going to happen with the government and CMS, Irina. It's complicated and difficult.

From our standpoint, we think the best way of building value for our shareholders is just to continue to introduce valuable products that are differentiated and meet the needs of the marketplace. And if we keep doing that, I think it will all take care of itself, and we will build significant value in Eagle.

Thank you.

Our next question comes from Tim Lugo with William Blair.

This is Roger in for Tim. Thanks for taking the question. A follow-up on BENDEKA, is there a scenario -- I know you have the ability to take it back [if generics launch] in May. Is there a scenario for conversion or maintenance of patients on BENDEKA where you just let Teva handle it? I know they mentioned being able to have 50% at least, of patients on BENDEKA by May if the generics launch. So I was just kind of thinking about that, is that a financial exercise at that point?

Yes. I think what would wind up happening is -- I think the relationship between Teva and Eagle is very strong. As I mentioned, they are doing great jobs. They are easy to speak to.

If we wind up in this situation, I am sure the parties will get together and figure out the best plan for the two groups to move forward. The relationship between the organizations allows for free communication back and forth. It's really hard to predict all of the outcomes. There are so many possible decisions here that -- I'm sure the parties will get together and figure out the best course of action.

Great. And then just a quick question on pemetrexed. Is there any read-through that you can find with the UK decision for the Actavis pemetrexed trometamol? Does that impact your patent, at all, or your strategy going forward?

Without going into too much detail, I think that UK ruling certainly encourages us, with the approach that we have taken for the product.

Great to hear. Thank you for taking the questions, guys.

(Operator Instructions)

Next to Gregg Gilbert with Deutsche Bank.

Good morning, Scott.

Good morning, Gregg.

Could you remind us of the mechanics of the exclusivity discussion? The mechanics, what they are looking for and when you would find out on the three and seven years and maybe the same exercise for the J Code situation?

Sure. The three years, that comes from the Orange Book group within FDA. And the criteria for that is having run a clinical trial, which we believe that we have done. Right.

If you remember, our clinical trial was in about 80 cancer patients. It was a head to head study between BENDEKA and TREANDA. We are dialogued with them.

It's a slow process. But that is provided to you for having developed a clinical trial. That's number one.

The seven years, which is a little bit more complicated, on the orphan drug route. If you remember we spent a considerable amount of time with FDA prior to the approval of BENDEKA and in that situation what you need to do is provide a hypothesis, if you will, of why your product meets one of three categories. Either clinical benefit, safety superiority or major benefit to patient care.

At the same time that you do that, you provide the agency with the data, and what you'll actually wind up providing them, in support of the hypothesis. In this case it was the results of the clinical trial. So we did receive the orphan drug designation.

We think we have been able to show that we meet all three criteria, although you only need to wind up in one of the three buckets. We had a successful clinical trial. And I think that's defined by the fact that the drug was approved by the FDA based on that clinical trial.

And so now once the drug's approved, you get back together with FDA. You provide them the data that you said you would. There is some dialogue.

Now we are in the process of FDA reviewing the data set and rendering a decision. And I believe that -- it's hard to pinpoint. It took us about is seven months to get the orphan drug exclusivity for RYANODEX.

If I had to guess, Greg, we are 30 days or so away from hearing. It could be longer or shorter. But that's about where we are.

For the J Code, the process there is to show that your product is differentiated from the other products on the market. In this case, we need to prove that BENDEKA is significantly different than TREANDA. I think we have done a good job.

What I have said to people all along, though, is -- I think I have my numbers about right. I don't have notes in front of me. In the last three years, 46% of the 505B2's that asked for a new J Code were successful, which means 54% were not successful.

We think we have a better than average case compared to the ones that failed. I believe we did a really nice job. We met with CMS, our application is in, and now we wait for the response.

And typically that response comes out of CMS around the April or May timeframe. And I think so, therefore, by the time you get to May-ish we will know the exclusivities, you know, in the next couple of months.

Great. One last follow-up. What is the latest market opportunity estimate that you and your new colleagues have for EHS? Thank you.

So, you know, we haven't updated the EHS forecast. Sherry has been with us for about a month and she is now working diligently on helping us. In the past, we have sent the EHS opportunity out to two independent companies to help us derive the value.

We were nervous about getting caught up in our own hype, if you would. We thought we wanted to be grounded and have outside companies come in and help us. Both those companies came up with about the same numbers. We are encouraged by that.

But we have someone now within the Company that we believe is more expert at this than we are. We need to give her a little bit of time. At the appropriate time we'll come back to the market with a better forecast and better process to show you how we get to the numbers and a little bit of what we believe the marketing plan will be.

Thanks a lot.

You're welcome.

It appears we have no further questions at this time. I will return the floor to Scott Tarriff for additional or closing remarks.

Thank you everybody for attending. As you can tell, we are just very excited about our future. Appreciate the time you spent with us today, and look forward to providing more good news to the marketplace over time.

Thanks again. Bye now.

This does conclude today's program. Thanks for your participation. You may now disconnect. Have a great day.