Vanda Pharmaceuticals Inc (VNDA) 2014 Q4 法說會逐字稿

Welcome to the fourth-quarter 2014 Vanda Pharmaceuticals Inc. earnings conference call. My name is Lorraine and I will be your operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded. I would now turn the call over to Mr. Jim Kelly, Senior Vice President and Chief Financial Officer. Mr. Kelly, you may begin.

All right, thank you, Lorraine.

Good morning and thank you for joining us to discuss Vanda Pharmaceuticals' fourth-quarter and full-year 2014 performance. Our fourth-quarter and full-year 2014 results were released this morning and are available on the SEC's EDGAR system and on our website, www.vandapharma.com. In addition, we are providing live and archived versions of this conference call on our website. Joining me today on our call is Dr. Mihael Polymeropoulos, our President and CEO. Following my introductory remarks, Dr. Polymeropoulos will update you on our ongoing activities. Then I will comment on our financial results for the fourth-quarter and full-year 2014 before opening the lines for your questions.

Before we proceed I would like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of Federal Securities Laws. Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. These risks are described in the risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our annual report on Form 10-K for the fiscal year ended December 31, 2013, and our subsequently filed quarterly reports on Form 10-Q, which are available on the SEC's EDGAR system and on our website. We encourage all investors to read these reports and our other SEC filings.

The information we provide on this call is provided only as of today and we undertake no obligation to update or revise publicly any forward-looking statements we may make on this call on account of new information, future events or otherwise except as required by law.

With that said,, I would now like to turn the call over to our CEO, Dr. Mihael Polymeropoulos.

Thank you very much, Jim.

Good morning, everyone. Before I begin the update, I would like to thank the amazing Vanda team for producing an unbelievable 2014, with great milestones, the approval of HETLIOZ for Non-24, its commercial launch, and the regain of Fanapt rights in the US and Canada. This would not have been possible without the professionalism and teamwork of our Vanda team, the community of patients that we serve, and the physicians that treat them.

I would like to first update you on our progress with the launch of HETLIOZ in the US for the indication of Non-24. In the fourth quarter we continued to strengthen our commercial organization. We restarted our direct-to-consumer campaign on Non-24, which produced a significant number of additional new prescriptions and opt-ins. Our case manager and account manager system has been successful in providing support to patients and their physicians, and drive towards diagnosis and treatment with HETLIOZ.

Over 760 HETLIOZ new patient prescriptions were written as of December 31, 2014. This includes the addition of over 220 new patient prescriptions during the fourth quarter of 2014. Since the third quarter, that reflects a growth rate of 40% for total prescriptions written. Of the over 760 new prescriptions written, more than 470 patients have already received at least one script as of year-end 2014. Of the remaining 290 unfilled scripts, approximately 180 are in various stages of the payor approval process, and we expect them to eventually be dispensed to the patients. We expect that the remaining 110 will not be filled primarily for patient-specific reasons.

During 2014, the average time to fill ranges from 8 to 12 weeks for about half of the prescriptions written, while the remaining prescriptions time to fill extends beyond 12 weeks. More importantly, of the more than 470 patients who have received at least one prescription, over 330 were on therapy at the end of 2014, representing a cumulative persistence rate since launch of about 70%. We have provided this data to quantify the progress of the launch at this time and we do not intend to continue to update on these metrics in the future.

In 2015 we expect to continue our DTC campaign, and by that build on our awareness campaign, increasing both the number of patients diagnosed as well as treated. In addition to our successful DTC campaign, we have begun an evaluation of a program to engage and increase awareness of Non-24 among blind individuals who participate in independent living training facilities for the blind. We believe that these activities, coupled with our commercial organization, will yield significant growth in HETLIOZ revenues in 2015 and beyond. As we discussed in our press release earlier this morning, we are now providing guidance for total 2015 net sales revenue of HETLIOZ between $40.0 million and $45.0 million, representing year-to-year growth of approximately 230%.

As we are excited about the value that HETLIOZ provides for patients with Non-24, we are working diligently with lifecycle management activities, as HETLIOZ may have additional applications. Our observational study in patients with Smith-Magenis Syndrome is nearing completion and based on the characterization of the circadian rhythm defect, we will be finalizing a clinical development plan to discuss with the FDA this year. We are also making progress in the pediatric Non-24 indication for which we will be initiating a pharmacokinetic study by year end. Our EMA application for HETLIOZ is under review and we expect a decision in the third quarter of 2015.

I would like now to turn to Fanapt. Vanda regained US and Canadian rights to Fanapt at the end of 2014. Fanapt is currently approved for the treatment of schizophrenia in the US and has been commercialized in the past by Novartis from 2010 to the end of 2014. We are currently completing the transition of responsibilities to Vanda as we are evaluating the most appropriate and effective means of supporting the brand in the US. For the year 2014, total Fanapt net sales by Novartis were approximately $65.0 million.

Given the early stage of the transition of Fanapt to Vanda, and the expectation that our full sales and marketing repositioning effort will not roll out until later, we are projecting a full-year 2015 revenue in the range of $55.0 million to $65.0 million. We do believe that Fanapt has the potential of being a significant driver of revenue for Vanda for years to come as it's exclusivity is protected by two patents, '198 NCE patent which expires in November of 2016, and the '610 Method of Treatment patent which expires in 2027. In addition to commercializing Fanapt in the US, we plan to submit an application for approval in the EU by year end.

I will briefly now comment on the rest of our pipeline.

Tradipitant, VLY-686 -- Results of the Phase II study of tradipitant, an NK1 receptor antagonist in patients with chronic pruritus, are expected in the first quarter of 2015.

AQW051 -- This alpha-7 nicotinic partial agonist was acquired from Novartis as part of our settlement. We are currently in the process of transition from Novartis. We will be evaluating the application of AQW051 in a potential program of cognitive impairment in schizophrenia, as well as the behavioral aspects of the genetic disorder known as 15q13.3 microdeletion syndrome.

Trichostatin A -- Trichostatin A is one of the most potent histone deacetylase inhibitors known to date. Investigations through our gene expression database of pharmaceutical compounds have resulted in a number of discoveries, and resulting patent applications towards the indication of hematologic and solid tumor malignancies. We have successfully manufactured TSA and plan to file an IND in the first half of 2016.

This concludes my update on our commercial assets and R&D pipeline. And I would now turn the call back to Jim.

Thank you, Mihael.

Investors will see in our press release that beginning this quarter Vanda is offering non-GAAP financial information. We're doing so because we believe the non-GAAP financial information enhances an overall understanding of our financial performance when considered together with the GAAP figures. On a GAAP basis, during the full year 2014, Vanda recorded net income of $20.2 million as compared to a net loss of $21.1 million for the full year of 2013. On a diluted shares basis, this reflects net income of $0.55 per share for the full-year 2014 compared to a diluted net loss per share of $0.69 for the prior year.

Vanda recorded net income of $69.7 million for the fourth quarter of 2014 compared to a loss of $7.7 million during the same period in 2013. On a diluted shares basis, this reflects net income of $1.77 per share in the fourth quarter of 2014, as compared to a diluted net loss per share of $0.23 for the fourth quarter of 2013.

The Vanda fourth-quarter and full-year 2014 financial statements reflect the impact of the settlement agreement with Novartis announced on December 22, 2014, related to the Fanapt license arbitration proceedings. As part of the settlement, which became effective on December 31, 2014, the parties dismissed the arbitration and released each other from any related claims. In addition, Novartis transferred all US and Canadian rights in the Fanapt franchise to Vanda, made a $25.0 million equity investment in Vanda and granted to Vanda an exclusive world-wide license to AQW051, a Phase II alpha-7 nicotinic receptor agonist.

Vanda has recorded a $77.6 million gain on arbitration settlement during the fourth quarter of 2014. A $15.9 million intangible asset related to the US and Canadian Fanapt rights and $3.0 million of Fanapt inventory were recorded as assets in the period. In addition, $59.5 million of Fanapt deferred revenue was released to income. The Fanapt deferred revenue was related to the unamortized portion of the up-front payment received from Novartis in 2009 for US and Canadian commercial rights to Fanapt.

Vanda non-GAAP net loss basis excludes Fanapt licensing agreement revenue, stock-based compensation, intangible asset amortization, and the gain on arbitration settlement. On a non-GAAP basis, during the full-year 2014 Vanda recorded a non-GAAP net loss of $80.0 million, as compared to a non-GAAP net loss of $40.9 million for the full-year 2013. During the fourth quarter of 2014 Vanda recorded a non-GAAP net loss of $13.5 million compared to a non-GAAP net loss of $12.7 million during the same period in 2013.

Vanda non-GAAP total revenues include HETLIOZ net product sales, Fanapt net product sales, and Fanapt royalty revenue, but exclude Fanapt licensing agreement revenue. Non-GAAP total revenues for the full-year 2014 were $19.4 million compared to $7.1 million during the prior year. Non-GAAP total revenue for the fourth quarter of 2014 was $7.6 million compared to $2.0 million in the same period in 2013. HETLIOZ was launched in the US in April 2014 and net product sales for 2014 were $12.8 million. HETLIOZ net product sales for the fourth quarter of 2014 were $6.0 million compared to $5.2 million for the third quarter of 2014. Gross to net sales adjustments for HETLIOZ product revenues are below 10% for the full-year sales.

HETLIOZ is sold through the specialty pharmacy channel and in the fourth quarter, net product sales are reflective of underlying prescription demand. As of December 31, 2014, the specialty pharmacy channel held less than two weeks of inventory, as calculated based on trailing demand.

Full-year 2014 Fanapt royalty revenue was $6.5 million as compared to $7.1 million in 2013. Fourth quarter 2014 Fanapt royalty revenue was $1.6 million as compared to $2.0 million in the fourth quarter of 2013. During each period, Vanda recognized a 10% royalty on Novartis net sales of Fanapt. Fanapt prescriptions as reported by IMS were approximately 40,500 for the fourth quarter of 2014.

Vanda non-GAAP operating expenses exclude cost of sales, stock-based compensation, intangible asset amortization, and gain on settlement. Non-GAAP total operating expenses for the full-year 2014 were $98.0 million, compared to $48.2 million for the fourth quarter of 2013. Non-GAAP total operating expenses for the fourth quarter of 2014 were $20.4 million, compared to $14.8 million for the fourth quarter of 2013. Vanda cash, cash equivalents and marketable securities as of December 31, 2014, totaled $129.8 million. In October 2014 Vanda completed a public common stock offering that resulted in $62.3 million in net proceeds. In December 2014, Vanda sold $25.0 million of common stock to Novartis as a part of the arbitration settlement.

2015 financial guidance -- Vanda expects to achieve the following financial objectives in 2015. Combined net product sales from both HETLIOZ and Fanapt of between $95 million and $110 million. HETLIOZ net product sales of between $40 million and $45 million and Fanapt net product sales of between $55 million and $65 million. Non-GAAP operating expenses excluding cost of sales of between $105 million and $120 million. In addition, for reporting periods beginning in 2015, Vanda will no longer record Fanapt licensing agreement revenues, and will no longer report the number of HETLIOZ prescriptions written, dispensed or patients on therapy.

I will now turn the call back to Mihael.

Thank you, Jim. I'll be happy now to address any questions.

(Operator Instructions)

Jason Butler, JMP Securities.

Hi, thanks for taking the questions, and congratulations on the quarter.

First question just on the 4Q revenue, can you just walk us through -- you gave us some very helpful details on the patient metrics, et cetera. Can you just talk us through the patient dynamics in the quarter end how you arrive at the $6.0 million number?

Thank you very much, Jason. I will pass this on to Jim.

I think the way we would describe the fourth quarter and, frankly, how we are looking at the business on a go-forward basis, is that we continue to be successful in identifying patients and having new patient scripts written. And, as you can see, there is a sequential, methodical growth that we're seeing in our business. And that's really our expectation on a go forward, as well.

We ended the year with about 330 patients on therapy and our expectation is that by quarter to quarter you are going to see us grow in a slow, methodical fashion quarter over quarter. There's going to be quarters where you're going to potentially see some better and some worse, but that's the underlying dynamics. And we are exceptionally thrilled with continuing to see good reimbursement and persistency.

And just to close this, Jason, our guidance of $40.0 million to $45.0 million per year is exactly consistent with what Jim described. A base of about 330 patients on therapy at the end of the year plus this continuous incremental growth month to month, quarter to quarter.

Okay, great.

Then just in terms of, you made a comment about inventory being reflective of patient demand. It is a growth product, so is it fair to say that there was some inventory purchasing during the quarter to maintain the roughly two weeks of stocking?

You are exactly right, that once you reach a steady state, the incremental, call it, increased purchasing you need to keep up with underlying demand is de minimus. And that was certainly the case this quarter.

Okay, great. Just one more question on HETLIOZ. The gross to net in 2015, can you talk about what your expectations are there, and specifically in 1Q when you expect to see some impact of reimbursement resets?

Yes, that's another question for Jim. But just to set the stage here, that Q1 is a typically higher gross to net quarter given the patients who are on Medicare Part D. But, Jim?

It starts with, you've heard that our full-year gross to net 2014 was less than 10%. And we do expect that that will increase in the first quarter. And it is because approximately half of our patients, half of the 330 we talked about ending the year, are Medicare Part D patients who are going to be subject to that coverage gap.

And if folks are familiar with that calculation, it is about just over $2,200, is the manufacturer's contribution to that. And that means about half of our patients will result in us having a liability for that in January as a one-time item during the year. So, when you look at 2014 gross to net below 10%, you would expect something in maybe the mid teens in Q1 that dissipates as the year goes on.

Great. Thank you.

And then last question for me, just on the pipeline on the VLY-686. Mihael, can you give us some broad perspectives on what the medical need here is for this patient population, and what the ultimate commercial opportunity is that you think you can address with this drug?

Yes.

Of course we're focused to close the study and see the results and more discussion to follow once we have that. But, broadly, chronic pruritus, the itching seen among many indications, and especially in patients with atopic dermatitis, is a significantly unmet medical need. In fact, the definition of chronic pruritus means treatment-resistant.

And we are not talking about something mild here, but rather something life altering. These people respond to itching by scratching to the point of bleeding, deformities, avoiding going to public, et cetera.

In some estimates there are about 1 million people in the US that would suffer from chronic pruritus. In current treatments that include antihistamines, steroids or UV radiation are totally ineffective. So, if we were to show that we have an oral drug that can actually control the chronic pruritus, that can suggest a very significant contribution to the patients in addressing this unmet medical need.

Great. That's very helpful. Congratulations again on the quarter and thanks for taking the questions.

Josh Schimmer, Piper Jaffray.

Hi, thanks for taking the questions. First, on both HETLIOZ and Fanapt, how do you gauge whether there is room for additional price increases? You took a price increase on both products, so just trying to understand the thinking behind that and whether you feel that there is additional leeway for price increases in the coming months or years?

And then the second question is I think you had, Jim, said you were going to stop giving update metrics on the HETLIOZ launch. Can you just explain why you are deciding to do that now? Thank you.

Two parts. Let me discuss the price increase thinking. First of all, on HETLIOZ. On HETLIOZ we consider that a price adjustment having a better understanding of the market and what the drug offers. So, just for everybody, we took about a 15% market adjustment this year. Now, for future plans, that's nothing I can comment on at this time.

On Fanapt there were two parts. Fanapt comes in several doses -- 1 milligram, 2, 4, 6, 8, 10, 12 and a titration pack. Based on the demand and understanding how the product is used, we took a price increase on the 6 and 8 milligrams, which was a significant jump of about 30% or so. The 12 milligrams was adjusted in what appears to be 100% but actually it is consistent with the use of 12 milligrams as once a day, and therefore it was adjustment for usage.

Now, the net Fanapt increase overall is actually small. It is about a 15% net, taking into account that 40% of the patients are on Medicaid, and price increases based on the legislation result in additional rebates leading to actually a decrease, a net decrease of the Medicaid channel. And again, your question on future price increases or prospects, I cannot comment on at this time.

The second part had to do, why are we suggesting that we are not going to give all these metrics in the future. The simple answer is because we believe that the explicit and detailed metrics we gave today are very reflective of what is going to be happening in the near future. If there is some significant deviations and reasons to revisit some of these metrics, we can come back. But we believe now a quarterly reporting of revenue progress is the best metric to allow shareholders to calculate value.

I would agree. The purpose of providing this level of granularity in a launch year when, for example, we didn't provide guidance, was really to enable investors to have better visibility into our business model and cost structure. And we feel like we've done that.

And that was an important part of getting people grounded in what HETLIOZ could look like in the future. And now that we've evolved to providing guidance this year, that level of granularity really shouldn't be required.

Can I just clarify on HETLIOZ, Mihael you said the price increase was based on the learning of the market and the product. What is it that you've learned since launch that's given you greater confidence in the value add?

While we are not running an open label study with our patients, we are in continuous contact with hundreds of patients that have taken treatment. Clearly the anecdotal reports are of these life changing experiences that they have once HETLIOZ works for them. And that's all.

And consistent with that we decided to take the increase. But also the positive experience that we've been having with payors and reimbursement channels, recognizing the value added to the space and community that has been grossly underserved.

Got it. Thank you.

Cory Davis, Canaccord.

Thanks. First question would be, Mihael, how definitive are the Phase II results on 686 going to be? Is it enough to make an affirmative go/no go decision for Phase III, or could there be some ambiguity where you could see a signal that might warrant doing a different type of Phase II study?

Thanks, Cory.

It is a small study. So, with that, we cannot commit that it is going to be the definitive answer. It is really a true Phase II study, trying to understand the potential signal.

We are looking for a signal, we are looking to analyze the data very carefully, and see if there's something directional. Having said that, just to be clear, the study is still blinded at this time and therefore I have no knowledge which direction it is going to go. Of course we would prefer a clear signal for a Phase III progress, but certainly we're going to be looking very carefully.

If there is a clear signal can you go right to Phase III?

Absolutely.

It would require a couple of things. One is a design to identify more doses -- here we are doing a single dose 100 milligrams -- and a discussion with the FDA of the appropriate path. Remind you that nobody has been approved and the FDA at this time is uncertain what is the correct primary endpoint.

Ourselves and the community experts would argue that what we are using today is exploratory primary endpoint of the visual analog scale is the right approach. But certainly we would like to recheck with the FDA on that.

So, you would have to combine both a new primary endpoint and dose finding into a Phase III for that to work.

Yes, which is not unusual. You would like to have more than one dose and certainly it is going to be a number of endpoints. But, of course, the primary endpoint, at least there has to be an agreement with the FDA which direction to go.

And then I'm sorry if this was asked and answered already, but the Fanapt guidance seemed a little bit light to me compared to where it has been in the previous years. And I'm curious why it would be down especially if, arguably, now it's got more promotion than it had before behind it. I know you're not giving quarterly guidance, but is there some reason to suspect that the first couple quarters are going to be disproportionately lower than Q3 and Q4 might be?

Again, as you said we are not going to give guidance on the quarter, but let me tell you the thinking. Last year in the hands of Novartis the product was about $65.0 million net. The year before that was more like $75.0 million net. So, you can see there was sequential 13%, 14% drop in the hands of Novartis.

So, before we have the ability to evaluate tactics, strategies, testing and attempt to relaunch the product, we cannot commit that this kind of trajectory towards a lower number may not continue. So, our $55.0 million to $65.0 million guidance is a reflection of what the product has been doing, its trajectory, and the acknowledgment that this is a transition year, and during transition years this is not necessarily the time that you see growth.

And with that said, I think that -- you heard in our initial press release, this is an immediately accretive asset. When you look at the royalty we would have otherwise gotten this year versus the cash flow that we will get, even in the range of the guidance that we are offering, what an exceptional thing for Vanda. And it comes, of course, with a great deal of optionality for future growth that Mihael will, of course, keep you abreast of.

Just to highlight here what we tried to say in the script, as well, we see a dual value in Fanapt. We see the immediate value of net revenues to Vanda, very significant in the next two years, but we also see the revenues for years to come.

And just to remind everyone that the NCE patent for Fanapt with Hatch-Waxman expires November of 2016. However, our Method of Treatment patent that we listed in the Orange Book, just this January, has expiration in 2027, giving a long-term prospect for revenues, but also the potential for growth. And also to remind you that both the NCE and the '610 Method of Treatment patent, we are currently in litigation with a generic company.

So, the second patent, the use patent, that you recently listed has been consolidated with the litigation on the NCE patent?

Not yet, but certainly both of these patents are on the horizon, and both are being actively pursued now in separate lawsuits.

And is your goal to consolidate them into one litigation?

I cannot comment on that. It is true that historically judges would like to see both cases together. Whether this is going to happen in this case or not isn't clear.

Okay. Hopefully you can settle for a favorable outcome on that. But that's more a comment than a question and I will leave it at that. Thanks for answering.

Stefan Quenneville, Morningstar.

Hi, thanks for taking my question. I actually have a couple questions. I wanted to ask you about the persistence rate of 70% that you cite. I'm just curious what's driving people to stop taking the treatment, if there's any patterns emerging or anything we should be aware of.

My second question is about your operating expense guidance of $105.0 million to $120.0 million. I'm just curious about the range and how much of that range relates to the flex and the DTC spending.

And, finally, given the filing for HETLIOZ in Europe as well as your plans with Fanapt there, can you help me size out the opportunities in Europe for both drugs? And what are your plans in terms of commercializing them there, and the needs that you're going to have to build up, or perhaps through a partner, to expand sales in Europe?

Sure, Stefan, thank you very much for your questions. I will take questions one and three and I will leave question two on the range of OpEx for Jim. So, question one -- a persistence in the 70%. We are actually very excited with the 70%. This is a great persistence cumulative rate. Of course it may change over time but we have sufficient data over the last nine months or so to feel very confident about this number.

Your question had to do what may make 30% of the patients eventually stop taking the drug. That would be a combination of things. Number one, it is not going to work for everybody, as we have anticipated, so that can be one of the reasons.

Number two, will be the experience of an adverse event that they don't like. And, remember, the adverse events most commonly seen in the clinical studies have been headache in 5% to 10% of the patients, or vivid dreams. And half the patients like them and the other half did not like them.

So, these are the flavors of why people stop. And then a myriad of reasons that people stop any drug -- they are planning to start a new treatment, et cetera. So, again, the high level here is that the 70% is a great number and we hope we can continue to see such great persistence in the future.

Your third question had to do with the overall European plan. I will break it up in two parts. One is HETLIOZ and then Fanapt.

On HETLIOZ, we're in the midst of the EMA review; hopefully a positive decision could come as early as Q3 of this year. We know that Vanda is in the best position to build the market and the awareness around Non-24 in HETLIOZ in Europe. Towards that effect, we began developing relationships with primarily the blind community across the major European countries. And we have started our efforts in building a small commercial headquarters in London.

Now, whether or not our HETLIOZ commercialization will need a sales force, and what type of sales force, will have to be determined over the ensuing months. And based on that we can make a decision whether this is one we own, one we contract or one we partner.

On Fanapt, and just on the opportunity side on HETLIOZ, Non-24 appears with the same frequency in Europe like in the US, and given the little larger population in Europe the number of patients projected with Non-24 in Europe are going to be a little higher than the US. But, of course, the same issues that we've discussed over the last couple of years of low awareness and building the market will exist and will make the opportunity in Europe interesting but certainly a challenge, but none that we cannot overcome.

On Fanapt, the plan for Fanapt is to file in Europe by the end of the year. And then it will take about 12 to 18 months to hear an outcome from EMA. So, plenty of time to think how this should be done.

Now, given the fact that there are six, seven, antipsychotics approved, and that oral atypical antipsychotics enjoy smaller market share in Europe than they do in the US, the opportunity for oral Fanapt will be projected to be lower than that of the US. And how much lower I cannot really tell you now.

However, having said that, Fanapt or iloperidone is an exceptional molecule in that it has been formulated as a once-a-month formulation to help with compliance. We are evaluating all of that in the context of our US re-launch now. But, as you may already know, in Europe depot formulations enjoy usage which is above and beyond that of the oral formulations. So, we are going to be looking very carefully as we size the Fanapt opportunity in Europe.

I will turn it to Jim to comment on the range of the OpEx.

On the question regarding 2015 guidance for non-GAAP operating expenses, I think I really heard two questions in there. One is, what's the thinking around the size of the range, and the other one relates to what's happening with our expectations around DTC spend. Why don't I start with DTC real quick.

I think what investors should begin to expect from us is that DTC is a part of our regular marketing mix quarter in and quarter out. Unlike, we took a little break, you might remember, in Q3 of last year, we expect going into 2015 you are going to see DTC on a more regular quarter-to-quarter basis.

Turning to the non-GAAP operating expense guidance, this is a new number for folks, so I will just remind them what this is. This is GAAP operating expenses. You back out cost of goods sold, which of course is a variable cost linked to revenue, and then you take out some of those non-cash items like stock-based comp, intangible asset amortization, and we also remove that one-time gain related to the settlement.

In 2014, our non-GAAP operating expense was $98.0 million, so we are guiding for 2015 for $105.0 million to $120.0 million. Given the magnitude of this, a range of $15.0 million appears to be an appropriate range that gives us the latitude we need to manage the business. We just simply aren't going into any more detail than that.

Thank you. I will turn the call over to Dr. Polymeropoulos for closing remarks.

Thank you very much, everybody. It has been a great quarter and a great year 2014. We look forward to success in 2015 and we appreciate all your support. Thank you.

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