Endo International PLC (ENDP) 2003 Q1 法說會逐字稿

Welcome to the Endo Pharmaceuticals Q1 2003 earnings conference call. This call is being recorded. Before we begin, I would like to remind you that during the course of this call, Carol or Jeff may make forward-looking statements concerning such topics as future results, product performance, and anticipated timing of FDA approval of certain of the company's drugs, as well as other non-historical facts that reflect Endo's current perspective on existing trends and information. As you would expect, these statements will be made with appropriate qualifying language such as we believe, expect, plan, anticipate, predict, or similar expressions. By their nature, these forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results to be materially different from any future results expressed or implied by these forward-looking statements. Listeners should not rely on any forward-looking statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Important factors that may affect Endo's future results include, but are not limited to, those factors discussed under the heading "Forward-Looking Statements" in Endo's SEC filings. We urge you to review these factors. Instructions for the Q&A will be given after the speakers' remarks. Thank you. I will now turn the call over to Ms. Carol Ammon, Chief Executive Officer. Please go ahead.

Thank you, and good morning. Earlier today we reported our financial results for the first quarter of 2003. We thank you for dialing in, and giving us the opportunity to discuss those results with you, as well as other developments. Joining me on the call this morning is our Chief Financial Officer, Jeff Black. Before we discuss our financial results in detail, I'd like to take a few moments to summarize some of the recent developments that have occurred so far in 2003.

Back on February 19, we announced that the FDA accepted our NDA filing, submitted late last year, for Oxymorphone extended release and immediate release tablets. Under the producer guidelines, we expect an action letter from the agency toward the end of 2003. In March, Endo presented a total of 15 abstracts on Lidoderm, Oxymorphone and Percocet at the American Pain Society meeting, the largest gathering of the year among pain management specialists. We also disclosed during the quarter, that we intend to pursue clinical development of Lidoderm in low back pain, and have initiated a Phase Two study in this indication.

Earlier this month we announced several key management changes that we believe will help position us for continued growth. Peter Lankau, previously our head of sales and marketing, was promoted to President and Chief Operating Officer. In his tenure as head of sales and marketing, Peter built a first rate sales and marketing organization that has been instrumental in our success. We look forward to benefiting from Peter's broad-based pharmaceutical industry experience, as he assumes an expanded role within the organization.

We also named Dr. David Lee, head of R&D, Executive Vice President. Finally, we announced that my good friend and co-founder, Mariann MacDonald, will retire at the end of this year. Mariann has been instrumental in the success we have seen over the past five and half years. Although we will miss her, her impact on our business and our future successes will last for years to come.

Now I'd like to briefly summarize our financial results. Driven by continued strong growth of our lead products, Percocet, and Lidoderm, net sales for the first quarter of 2003 increased 127% to $152.3m, compared with $67m in the same period a year ago. Gross profit increased to $125m, a 60% increase from the year ago first quarter. Operating income rose 157%, to $26.7m versus $10.4m for the first quarter of 2002. Consolidated EBITDA for the 2003 first quarter was $79.5m, compared with $15.8m in the year ago first quarter. Diluted earnings per share for the first quarter of 2003 were 12 cents compared with 5 cents in the comparable 2002 period. Earnings per share for the first quarter of 2003, adjusted to exclude non-cash compensation charges related to non-diluted stock options, increased to 35 cents per diluted share, compared with 5 cents in the comparable 2002 period.

As a result of the anticipated continued strength of our product line, we are revising our guidance upward for 2003. We believe that we are well positioned to achieve net sales in 2003 of approximately $495m and consolidated EBITDA of approximately $200m. We believe net income, adjusted to exclude non-cash compensation charges, manufacturing transfer costs, and estimated payments to partners for successful achievement of regulatory milestones, will be approximately $119m, or 90 cents per diluted share. Net income, adjusted only to exclude non-cash compensation charges, is estimated to be $108m or 82 cents per diluted share.

Our revised 2003 guidance reflects our continued assumption of generic Percocet competition by mid year 2003, and our assumption of competition on our extended release Morphine Sulfate product, by late second quarter of 2003. We expect Lidoderm net sales to be approximately $165m in 2003. Now I would like to turn the call over to Jeff, who will discuss our first quarter financial results in detail. Jeff?

Thanks Carol. As Carol mentioned, Endo's net sales for the first quarter of 2003 were up 127% to $152.3m. Net sales of Percocet, our largest selling product, grew 136% to $55.5m for the quarter versus the first quarter of 2002. This strong growth reflects the continued market acceptance of the Percocet 7.5/325 and Percocet 10/325 that we launched in late 2001. These dosage forms allow physicians the flexibility of increasing the dose of narcotic for effective pain management, with a lower level of acetaminophen.

According to IMS data, these dosages now represent approximately 69% of all Percocet prescriptions dispensed. Percocet, as a family, according to IMS data, now represents approximately 16% of the Oxycodone acetaminophen prescription market, compared to approximately 10% of that market at the time of the launch of these strengths. Prescription growth for Percocet was up 35% and dispensed unit growth was up 50% in the first quarter of 2003 compared to the comparable 2002 period.

During the first quarter of 2003 we were also favorably impacted by our customers increasing their Percocet inventories back to normalized levels, compared to the relatively low levels they maintained as of December 31, 2002. Based on IMS data, dispensed units of Percocet were approximately $45m in the first quarter of 2003, and inventories maintained by our customers returned to their normal levels of approximately one month.

Net sales of Lidoderm, our patch approved for postherpetic neuralgia, rose to $41.5m, compared with $10m in the year ago first quarter. Lidoderm has orphan drug status until March 2006, and patent protection beyond that. The success of Lidoderm reflects growing market awareness and acceptance for the product, as more physicians and patients recognize its benefits. Prescription growth for Lidoderm was up 96% and dispensed unit growth was up 107% in the first quarter 2003, compared to the comparable 2002 period. Based on IMS data, the run rate on Lidoderm is now approximately $131m.

Lidoderm was also favorably impacted during the first quarter of 2003 by our customers increasing their Lidoderm inventories back to normalized levels, compared to the relatively low levels they maintained as of December 31, 2002. Based on IMS data, dispensed units of Lidoderm were approximately 32m in the first quarter of 2003, and inventories maintained by our customers returned to their normal levels of approximately one month.

Net sales of our generic products rose 70% in the first quarter of 2003, to $48m. In addition to our extended release Morphine Sulfate, our generic Endocet also showed good growth versus the prior year first quarter. We continue to benefit from the absence of generic competition with our extended release Morphine Sulfate product. Generic sales represented approximately 31% of Endo's total net sales for the first quarter of 2003.

I would like to point out that generic competition with our products may have a material impact on our results of operations and cash flows in the future, and reiterate our assumptions of a generic Percocet competitor by mid year 2003, and our assumption of competition on our extended release Morphine Sulfate product by late second quarter 2003.

Gross profit for the first quarter of 2003 increased 159% to $124.7m. Gross profit margin improved to 82% for the quarter, versus 72% in the first quarter of 2002. This increase in gross profit margin is due to our continued focus on brand products and difficult to develop generic products that have the ability to generate brand like margins. In addition, the increase in gross profit margin was also due to product mix and the existing fixed cost nature of one of our existing manufacturing relationships.

Selling, general and administrative expenses of $36.1m for the first quarter of 2003 were up 53% from the year ago first quarter. This increase reflects the promotional efforts and support for Lidoderm and the new strength of Percocet, as well as support provided to our new product pipeline, as we prepare to launch a number of products in 2004.

Research and development expenses were $12.1m for the 2003 first quarter, down about 10% from the same period a year ago. Comparison reflects a higher level of clinical trial research activity in 2002 included the development of Morphodex and our extended release and immediate release versions of Oxymorphone. During the remainder of 2003 we estimate making approximately $11.5m in payments to our partners for achievement of certain regulatory milestones.

As previously disclosed, Morphodex was not approved by the FDA by March 31, 2003. As a result, three events occurred. First, the warrants held by Endo Pharma LLC, an affiliate of Kelso and Company, in which certain members of management have an interest, and others, became exercisable on December 31, 2002, into 29.7m shares of company common stock. Upon the exercise of these warrants, the outstanding common stock of Endo Pharmaceuticals Holdings, Inc., increased to 131.7m shares from 102.1m shares, and Endo Pharma LLC's ownership as a company increased to approximately 75% from approximately 68%.

Second, the Endo Pharma LLC 2000 supplemental stock option plans became effective, according to their respective terms, on January 1, 2003, resulting in the issuance of approximately 10.7m stock options to certain employees and members of management. Because approximately 9.2m of these options were vested upon their issuance, the company recorded a non-cash compensation charge of approximately $48.5m, effective January 1, 2003, for the difference between the market price of the common stock and the exercise price of these stock options of $2.42.

No additional shares of Endo common stock will be issued upon the exercise of these stock options, however, because these stock options are exercisable only into shares of company common stock that are held by Endo Pharma, LLC. Accordingly, these stock options do not dilute the ownership of the public shareholders.

Finally, the publicly traded Class A transferable warrants, previously traded on NASDAQ under the symbol ENDPW, and Class B non-transferable warrants, expired on March 31, 2003, and have no economic value. Accordingly, the company de-listed the Class A transferable warrants upon their expiration.

Diluted earnings per share for the first quarter of 2003 were 12 cents, compared with 5 cents in the comparable 2002 period. As detailed in the supplemental financial information in today's press release, earnings per share for the first quarter 2003, adjusted to exclude the non-cash compensation charge of $48.5m related to the vesting of non-diluted stock options, increased to 35 cents per diluted share, compared with 5 cents in the comparable 2002 period.

We generated cash flow from operating activities of $65.1m for the 2003 first quarter. Our cash and cash equivalents were $96.4m as of March 31, 2003. During the first quarter of 2003 we paid to SkyePharma the $25m up front payment related to the license of marketing rights to Depomorphine and Propofol IDD-D. We feel our solid financial position with good cash flow, and no debt, provides us an opportunity to pursue acquisitions and other strategic alliances, which would, we believe, accelerate our growth as a premier specialty pharmaceutical company. I would now like to turn the call back to Carol for some additional comments.

Thanks Jeff. Before we take your questions, I would like to review with you some of the upcoming key milestones and significant events for Endo. We expect continued growth of Lidoderm, and expect to achieve net sales of approximately $165m in 2003. In our litigation against Purdue Frederick, on our extended release Oxycodone tablets, the district court has tentatively scheduled trials of the patents claims in all three of the suits against Endo, for June 2003.

We anticipate FDA approval and being in a position to launch Oxymorphone extended release and immediate release tablets, in the late 2003 early 2004 timeframe. We also expect to be able to file our NDA of our prescription oral rinse for oral mucositis, in late 2003, early 2004. This product has fast track review designation at the Food and Drug Administration, and we could be in a position to launch this product by late 2004. We expect our partner, SkyePharma, to file the NDA for Depomorphine in mid 2003. We will continue to advance other development products through the pipeline, and finally, we will remain active in pursuing further end licensing and acquisition activities in pain management and complimentary therapies.

As you can see, Endo has positioned itself extremely well to sustain long term growth, with two NDA filings in 2002, plus two products in Phase Three clinical development, Endo could potentially be in a position to launch four new patent protected products in 2004, should they all stay on schedule and be approved by the Food and Drug Administration. Now, Jeff and I would be happy to take your questions.

If you would like to ask a question at this time, you may do so by pressing star, then the number one on your telephone keypad. Please hold for your first question. Your first question comes from Angela Larsen of Smith Barney.

Hey, good morning guys, and congratulations on a good quarter.

Thank you.

You can see the day is going so quickly. If you could give us a little bit more color on how we should look at the sales trends versus prescription trends in the inventory levels that are out there, given that everything except for Lidoderm is a controlled substance, so the DEA is involved in how much inventory can be out at a time.

OK, good question. We tend to follow the prescription data as closely as we do sort of our factory sales as well. Prescription data is really what ultimately drives demand of the product and our sales. So it's something we monitor very closely. Typically, inventories held by our customers for most of our products are approximately one month, and that, as we indicated I guess last quarterly conference call, those levels were low at the end of last year versus where they traditionally have been. During the first quarter, again, they did increase back to the approximately one month level they maintained.

As it related to Lidoderm, we did ship $41m of Lidoderm during the first quarter 2003, and the dispensed prescriptions of Lidoderm, if you count it that way, was about $32m. Typically, customers will buy in excess of what's being prescribed out in the marketplace, so there's usually a little bit of growth there. So there was a disconnect there, which recovered people back to what the inventory levels normally are, of approximately one month. Percocet, sort of the same trend. We shipped $55m in the first quarter 2003, the prescription trends would tell you that there's about $45m of prescriptions written for Percocet first quarter 2003. Again, that disconnect caught people up to where they normally maintain their inventory levels, at about one month.

And what do you think led to them having lower than normal inventory levels at the end of the fourth quarter?

That usually varies from period to period, based on, I think, anticipated price increases and/or price increases that have already occurred. So our customers tend to buy in advance of when they think a price increase is going to occur, and if a price increase already has occurred, there's no motivation for them to necessarily stock up on their inventory. So we had taken a price increase in September of 2002, and so there was no further incentive, I guess, for them to build inventory after that price increase occurred. There was an unannounced price increase and so I think they let their inventories sort of dwindle toward the end of the year and sort of utilized, I guess, that cash to invest in other companies' products that might have been raising their prices in the first part of this year.

So given that the price increases were in September, it seems that there's relatively limited incentive for them to start more of a stocking trend in the second quarter. So we should look at this as a run rate more in line with scrip trends going forward?

Yeah, obviously we intend to grow the products, Percocet and Lidoderm, and the others, but otherwise, yeah, the run rate is sort of the way that we tend to look at it.

Great. And then just one quick pipeline question, I'm very intrigued by the oral mouthwash rinse. Can you tell me how the studies are going on that?

I can tell you that we're currently in Phase III. We're continuing to enroll patients. Enrollment is going well and we feel comfortable that we should be in position to file the NDA towards the end of '03, beginning of '04. And, we're excited about this product too. It's a non-medical need and very exciting for us.

Of course, too, this is a fast-track status. So, it'll have a six-month review at the agency. So we're very pleased about this product.

Great, thank you very much.

Your next question comes from [Dave Winley], of Jeffries & Company.

Hi, good morning and congrats on the quarter. Angela kind of touched on several of the inventory questions that I was going to ask.

Looking at it in a little bit different way, the sales volatility over the last several quarters-we actually looked at the last couple of years' worth, has been, in particular on Lidoderm, much greater than the script volatility. And, seemingly not only in the kind of end-of-year stocking and first quarter dip, but at various times through the year. Is there an explanation for that? Has that been due to more than one price increase per year, or something of that sort that would cause the sales volatility on a sequential quarterly basis to be so high?

Yeah. Again, we try to look at the prescription trends, because as you've mentioned, they're less volatile, necessarily, than sales trends. There hasn't been more than one price increase in any particular year, of Lidoderm. It is spec buying by the wholesalers, trying to anticipate when the price increase, when we would take a price increase.

And we, as a Company, have tried to stagger that price increase to sort of, I guess, not let them accumulate too much inventory of our products, you know, in anticipation of those price increases.

OK, great; the first quarter, clearly a very, very strong quarter. You're expecting your generic competitors to come in on the Percocet and the Morphine Sulfate around the middle of this year. Can you, in any way, quantify what kind of a downward slope you are building into your modeling assumptions for the back half of the year?

I guess, we have some experience with Percocet, the 7.5/500, 10/650 product, when they went generic in April of 2001. That's sort of the experience we had. There was one generic competitor. As you know, we launched our own generic at that time, and that followed a certain trend. And so, based I guess on how many competitors we have, if it's only one competitor, you might expect a trend that's similar to that. If it's several competitors, it might be more severe than that, but probably not a whole lot.

You know, Morphine Sulfate, we've been exclusive on that product since November 1998, on the generic side. And, that's sort of a wild card in terms of it depends on how many and who and when. Our assumptions, and [unintelligible], that's what they are, our assumptions is the middle 2003 for Percocet and late second quarter 2003 for Morphine. Again, we have no knowledge of anybody that is getting an approval or that's coming. It's just an assumption we've made to try and, I guess, be somewhat conservative in our guidance.

And how much lead time do you think you will have, relative to, when it becomes public knowledge that there is a generic filing and when they would get into the market?

There's no way for us to know that a generic has been filed under an NDA, unless it's under a paragraph 4, or there's litigation involved in it. And therefore, the brand company is notified. So, we wouldn't have knowledge of an NDA being filed necessarily. There are occasions where we will hear something in advance of an approval from our customers that might indicate that a competitor is coming.

By way of experience, when Percocet 7.5/500 and 10/650 received generic competition, we saw the approval of that generic on January 1st, I think, of 2001. And, they didn't come until April of 2001, so that's probably the only example we have to give, but sometimes companies are ready, upon approval, and sometimes they're not.

OK, and then the last question and then I'll jump off. On the impact of the manufacturing relationship that you have that creates more of a fixed-cost run in the cost structure, in the direct cost structure, when is that transition anticipated to be complete, such that that will be mitigated somewhat?

Yeah, it's with our existing relationship with Bristol Meyers Squibb, that contract, and in August of this year; we'll build inventory during the year. So, it probably won't completely trickle out until the early part of '04. And, probably starting in '04, it will be just a variable cost relationship with all of our contract manufacturers.

OK, thanks a lot. Congrats.

Your next question comes from John Moran, of SG Cowan.

Yes, hi. Thanks for taking my question. I have just a couple of miscellaneous ones, here. The court case for Oxycodone that is set for June, is there an exact date for that trial in the month? And, have you asked, or have you not asked, for a summary judgment? And then I have a couple of other questions.

Sure, let me just address, John, the question that you just asked. The court case, we have a tentative date for that trial to begin on June 2nd. And, to the summary judgment, no, we have not.

OK. My second question is, when we might see the Phase III data for Depomorphine?

We haven't determined exactly yet when we will be putting that data out. But we do believe that we're in a position to, we should be in a position to see SkyePharma file that application the middle of this year. So, we'll be deciding that in the near-term.

Yeah, I'll just to that a little bit. Our philosophy around releasing clinical data has always been to support the marketing of the product and the launch of the product and education of the community of the product in advance of the launch of that product. So, there will be a number, we believe. And then, if we're able to file this, middle of 2003, and launch, I guess, towards the latter part of 2004, there will be a field of clinical data being released over that time period in order to get the market prepared for the product, to build education about the product, over the coming 18 months or so.

OK, and then just lastly, could you review the patent estate on Oxymorphone?

Sure. Oxymorphone Extended Release has a patent. The patent is on the time-release technology of Penwest. We have a number of other pending patents that we have filed on that product as well, which I'm unfortunately not able to discuss.

Thank you.

Your next question comes from Cory Davis, of JP Morgan.

I'll actually follow right on that last one. Is Oxymorphone going to get three years of exclusivity, or five years of exclusivity?

That will be three years.

OK. And, the "Oxycon" trial, is there a jury involved? Or is it just the judge?

This is a judge.

And how about guidance on how long you think that full trial will take, weeks, months?

I would love to be able to give guidance, because I'd love to know. But there is no set timeframe and we just have to wait and see and go along with it as it goes along. So, we don't know.

The Percocet franchise, it would be a shame to lose that brand name. Do you have any other line extension strategies that you could possibly pursue when the other one goes generic?

No. We, from day one, have made a commitment to that product, and, as you know, have found multiple ways to improve the product and introduced those products over the last several years. And it certainly is our intent to maintain the equity in that product. Certainly, there's nothing we can disclose at this point, because of the competitive nature of the market. But certainly, it is our intent to keep the brand alive.

OK. How about when it does, when you do see the new generic entrance? Are you going to stop detailing at that point in time?

We haven't really decided that, at this point. When the 7.5/500, 10/650 went generic in April 2001, we continued to detail Percocet, knowing that we had this other half, 7.5/325, 10/325 a little bit behind it end up being, I think, a six or seven month gap there, where we would continue to detail Percocet, as well as Lidoderm.

Obviously, we believe that was, in part, able to sort of catapult the success of the 325 strengths, when we started detailing those towards the end of 2001, early 2002. So, I think it helps with the curve of the conversion into those 325 strengths. So, I guess, depending on the timing of when the next generation of Percocet may come, we'll make that decision.

Do you have a good sense-I'm not asking you to disclose it, but do you have a good sense of when the next generation Percocets are going to come?

Yes.

Yeah, I guess there's always uncertainty, but we have a pretty good idea of that, yes.

I'm trying to figure out a quarterly progression for the rest of the year. It looks like this quarter, just for Lidoderm and Percocet, there was about $20m in inventories becoming more normalized. Were there shifts on inventory of any other products in the quarter?

Nothing else really significant, no.

Right. Is there any reason not to suspect a mildly sequential down top line for Q2?

Again, we expect Lidoderm and Percocet to continue to grow, from a prescription basis. Wholesale inventories are at normalized levels. Will they stay there? That's hard to predict. Will they try to spec buy? That's hard to predict, but I'm not sure there is. Yeah, I think that's a reasonable assumption.

And you'll have to pardon my ignorance on this one. What is the difference between prescription growth and dispensed unit growth? And why is there such a differential between those two numbers you were throwing at us?

Sure. Dispensed units is the actual tablets or patches, per prescription. So, for example, Lidoderm, each prescription counts as one, but on average, there are about 36 patches in a prescription. So, the number of units, either tablets or patches, has increased, vs. prescriptions at a more accelerated rate.

So, for both of those products, is the average price per prescription going up? Not from your price, but just price as determined by the number of units per prescription?

Yes, the average prescription dollars should go up, because there are more units in each prescription.

OK. And, my last question is more looking out to '04. Carol, I think you said four new product launches. That's a lot of launches, so can you remind us of your current commercial infrastructure? How many sales reps, how many more would you need to add in 2004? How would you segregate it, and how would you determine primary, secondary, tertiary details for all the products?

Sure. Today we have 230 reps, a 70-person specialty force that is internal, which we internalized last July, and 160 persons in the community-based force. With the advent of potentially four product launches next year, let me just segment these for a few moments.

We have the oral mucositis product, which will be a fairly focused audience; the Depomorphine, which potentially could be launching in 2004, which is going to be in the critical care setting. Our thinking on that is that might be a very dedicated force. And then, of course, the Oxymorphone Extended Release, an immediate release into the strong [opioric] market.

So we anticipate, if we're fortunate to get approval on these products that we would be looking to expand the force, as well as potentially putting in a dedicated force for the hospital care products.

And as far as numbers go, we are currently doing analysis in trying to figure out what the right number is. But we've tossed around numbers of 380 to 400 reps that it would take to support all these products. And again, that depends on whether there's a next generation of Percocet in that detail.

OK. And then, I lied, I do have one more and, just kind of remind us on how you're going to position Oxymorphone relative to all the other [opioids] out there? What's different or better about this one?

Well, certainly from the clinical studies that we conducted, we were very pleased to see that we believe this to be, or have seen it to be a true 12-hour dosing. And that is something that you'd probably appreciate that, other controlled-release [opioids] out there have a label claim of twice a day. But in actuality, as you look at the data, it's more like three times a day. So, we believe that is going to be a benefit for this product

And also, the fact that this will be the first new oral [opioid] to come to market in decades. This is really going to give physicians some treatment alternatives, be able to rotate patients from other [opioids] as they need to, as they develop side effects, or whatever else they might be developing on the current therapy that they're on. So we believe that it's going to have a benefit. And we've also seen that this is a very potent [opioid] and we'll be able to position it appropriately.

Right. I can't help but ask just one more, and that is, if Percocet and Morphine Sulfate don't go generic, when you budgeted for it to go generic, are there ways for you to spend the upside? Or, is that just going to go right to the bottom line?

Yeah, I would say we're spending appropriately on the products that we have, that we intend to launch in 2004 and the types of projects we have within R&D. Clearly, if we're able to end-license or acquire other products, we would spend more.

So, there's obviously potential that it all goes to the bottom line. But we're constantly looking for ways to invest in the business for the long-term, both in the sale and marketing functions, as well as research and development.

OK. Boy, just really good numbers this quarter.

Thanks.

Thanks, Cory.

Your next question comes from [Michael Tong], of Wachovia Securities.

Hi, good morning. I couldn't quite catch if you mentioned generic MSER sales, either as a percent of generic sales or absolute dollar terms. And, does your one-month inventory apply to that product as well?

We didn't disclose the Morphine Sulfate sales for the quarter. I can say they were about 22% of our sales in 2002. And on that product typically there's approximately a month, sometimes a little bit less, maintained on that product. And that's remained pretty consistent.

OK, and would you consider co-promotion for Depomorphine?

I think we look at all of these products as we get closer to the market and understanding the physician base that we're go to call on, and make a decision as to how best to commercialize the product and do a stand-alone evaluation on each of those.

Yeah, it is a hospital sell, so it's a pretty concentrated audience. It doesn't take significant large sales forces to reach the hospital audience. So, it's something we certainly can do internally. But we would always view every opportunity to maximize the potential of the product.

Great, thank you.

Thank you.

Thanks, Michael.

Your next question comes from Mary Kay Morris, a private investor.

Miss Morris, your line is open.

Oh yes, I was wondering if there would be a liquid form of Lidoderm? Because, I use the patch on my forehead, but there's no way of applying I to the hair area on the top right side of my crown, and the right side of my head. So, I was wondering if that could be a line extension?

Yes, thank you for that question. Currently, our only available formulation of this is as a patch delivering the Lidocaine. And certainly, scientifically I'm not sure that I would be prepared to address your question, but certainly, I will pass that along.

Thank you very much.

Sure.

Again, if you would like to ask a question at this time, please press star, then the number one.

There are no further questions at this time.

All right, well thank you, everyone. We really do appreciate your being on the call today, and we look forward to keeping you apprised of our progress as we go forward in 2003. Thank you.

This concludes today's conference. You may now disconnect.