Robin DeCarlo – Director, Corporate Communications and IR
Glenn Cooper – Chairman and CEO
Michael Rogers – EVP, CFO and Treasurer
Annabel Samimy – UBS
Kevin DeGeeter – Oppenheimer
Gary Nachman – Leerink Swann
David Miller – Biotech Stock Research
Indevus Pharmaceuticals, Inc. (IDEV) F4Q08 (Qtr End 09/30/08) Earnings Call Transcript November 25, 2008 9:00 AM ET
Good day, ladies and gentlemen, and welcome to the fiscal 2008 year-end and fourth quarter Indevus Pharmaceuticals Inc. earnings conference call. My name is Becky [ph], and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today’s call Ms. Robin DeCarlo, Director of Corporate Communications. Please proceed.
Thanks, Becky. Good morning everyone. This is Ms. Robin DeCarlo, Director of Corporate Communications at Indevus. Thank you for joining us on the call this morning to discuss our 2008 fourth fiscal quarter and full year financial results. The order of the call today will be Dr. Glenn Cooper, Chairman and Chief Executive Officer of Indevus; followed by Michael Rogers, Executive Vice President and Chief Financial Officer.
Before Glenn begins, I must inform you that today’s call is being recorded and a replay will be available on our website at www.indevus.com as well as by dialing 888-286-8010 in the U.S. and Canada or 617-801-6888 from international locations. The pass code for the replay is 499-37-348. The replay should be available by 11:00 AM Eastern this morning and will remain available until December 21st.
I must also remind everyone that today’s discussion contains forward-looking statements regarding events that involve risks and other uncertainties. The company’s actual results may differ materially from those anticipated by our forward-looking statements. The risks and uncertainties are set forth in the company’s securities filings, and we encourage you to read them. I will now turn things over to Glenn.
Okay, thank you Robin. Good morning everyone. Thanks for joining us.
I’m going to start by highlighting the key issues of interest to shareholders, then hand over to Mike to review our numbers and guidance. I candidly say that we had one black mark on what otherwise would have been a stellar 2008. I don’t want to minimize the dramatic effect that our NEBIDO delay had on our business and our share price but I think we have responded forcibly and effectively on all fronts and convinced we have been able to turn the situation around and position ourselves for a highly successful 2009.
Let me start with the regulatory path forward for NEBIDO, which is foremost on the minds of all our stakeholders. As you know, FDA issued an approvable letter for NEBIDO in June. The one sticking point against approval was FDA’s concern about rare reports of injection related cough reactions. In our NDA, we estimated the incidence of cough reactions based on post-marketing surveillance data in Europe but by one in 15,000 injections. FDA’s position on the approvable letter that was that we would need a prospective clinical trial for them to be convinced that this is an accurate quantification of the incidence of serious cough, and I would emphasize it is only the serious cases that are of concern to them.
They couldn’t get comfortable with our assessment of risk since the estimation of the incidence of any drug reaction based on spontaneous adverse event reporting is fraught with assumptions and potential error. So, our initial assessment which we communicated to our investors immediately after getting FDA feedback was that we would need to do a new prospective trial. If we needed to do that it would delay approval by at least two years.
Now fortunately our partner Bayer Schering has been willing and able to devote the internal resources necessary to provide us at a very timely fashion with safety data on a large number of patients who have been participating in several ongoing European prospective Phase IV trials of NEBIDO. The original NDA included clinical data on about 4000 injections. The European Phase IV trials include approximately 10,000 additional injections.
FDA was able to rapidly accommodate a formal meeting with us to review the approvable letter and the potential path forward. At that meeting both sides came to the clearly amended [ph] agreement that the combined Indevus and Bayer Schering Phase II, III, and IV clinical database involving approximately 14,000 injections from about 2600 patients would enable FDA to conclude their risk benefit assessment.
I also have further positive news to report to you today. We now believe there is only a single serious case of cough reaction in those 14,000 injections, which gives an incidence consistent with our expectations and unequivocally defines serious cough reactions as rare. Said differently, there have been zero cases of serious cough reaction among the approximately 10,000 additional injections from the Bayer Schering Phase IV studies.
At the FDA meeting, we also came to an agreement on how to characterize the handful of patients in post-marketing surveillance where the physician reported the cough reaction as an anaphylactic or anaphylactoid reaction. Although we believe these cases are probably the same oil-based cough reactions as the other cases we have agreed to describe the potential for rare anaphylactoid reactions in the label and to educate physicians on proper injection techniques and risk mitigation for cough for anaphylactoid reactions. Based on our discussions with the FDA, we do not believe that NEBIDO will have a black box warning or any kind of a restricted distribution system.
Post approval we have agreed to conduct the large simple 10,000 patient safety study using commercially sold products. Recall that we have not seen a single serious case of cough reaction to date using our 3 cc 750 milligram formulation. The European dosage formulation is 4 cc 1000 milligram. This prospective post-marketing study will enable us to get incidence data on the 3 cc product and possibly the incidence will be even lower given the lower injection volume but this remains to be seen.
Right now, we anticipate being able to resubmit the NDA with the new Bayer Schering data by the end of the first calendar quarter next year with a standard 6-month approval clock we anticipate launching NEBIDO early in the fourth quarter of 2009. We continue to be very comfortable with our NEBIDO pricing assumptions on par with gels, which currently sell for about $2500 per year therapy. We remain confident that NEBIDO can still capture the lion’s share of the $300 million price adjusted injectable market. We also remain quite encouraged by the opportunity to capture significant share in the $620 million topical gel and patch market.
Furthermore, the overall testosterone market continues to exhibit robust double-digit growth as physicians become more aware of undiagnosed hypogonadism and adopt routine testosterone screening.
Among key opinion leaders and other physicians with an interest in hypogonadism there was disappointment when NEBIDO launch was delayed. Physicians who actively prescribe testosterone products continue to early await the highly differentiated therapy so they can offer patients an alternative to daily gel usage or frequent injectibles.
The SANCTURA franchise for overactive bladder is doing well. We continue to co-promote the product with our partner Allergan, and have extended our copromotion contract till the end of March 2009. Any decision to extend the copromotion agreement beyond that would be up to Allergan and if they presented us with this option we would examine it carefully.
Allergan is continuing to put a tremendous amount of investment into their brand. Over the last several months Allergan has publicly stated their desire to secure access to a primary care sales force either by entering into copromotion with a large pharma company or with a contract sales organization. We believe that the addition of additional primary care sales reps will have significant impact on the overall market share of the product.
SUPPRELIN LA for central precocious puberty continues to surpass our most optimistic expectations. Pediatric endocrinologists are getting increasingly more confident in the product. Approximately 84% of all physicians who treat this disorder have used SUPPRELIN LA one time or more during the initial year of launch and 55% of them have used it 2 times or more.
The end of our first launch year, we achieved a 15% market share on the category and we expect this share to significantly rise in the future based on current trends and marketplace feedback from physicians (inaudible) patients, who recognize the advantages of a product that gives us smooth complete hormonal control with a single 12-month implant versus 12 to 17 painful intramuscular injections with the alternative product.
For the fourth quarter, we recognized revenue on 331 implants, which was a 27% increase over the previous quarter. For fiscal 2008 we recognized revenue on 976 implants. Performance for fiscal 2009 in the first quarter is looking very strong achieving a new high water mark in monthly sales. We are now entering our first wave of annual reimplant patients and the process is going smoothly. It is early days so far but almost 100% of all children with an implant who require further suppressive therapy have been opting for another year of SUPPRELIN LA.
Overall the managed care coverage of the product is excellent. The prior approval and reimbursement process has become well oiled without significant delays in approval or reimbursement and recent price increases taken the price for implant up to $14490.
Sales of VANTAS for prostate cancer also continued to exceed our expectations. For the fourth quarter, we recognized revenue on 3776 units. In the fourth quarter of this year we achieved a 70% increase in units shipped over the fourth quarter of last year. In part this excellent performance can be attributed to our ability to capitalize on the exit from the market of Viadur, the only competitive implant. Also I think we have done a good job in communicating the benefits of a full 12-month smooth continuous suppression of testosterone in these patients.
Finally, our average selling price for units in this price competitive Medicare market has been holding firm with no erosion and price per unit has been steady above $1450.
In April, we announced the partnering of European license of VANTAS to Orion. VANTAS will be the first and only implant option in Europe for the treatment of advanced prostate cancer. We believe that VANTAS will perform extremely well in that market. Orion is an experienced organization with a strong presence in the European market. In preparation for their anticipated launch in the first half of 2009, Orion has placed their initial launch orders and shipping of implants has begun.
Moving on to VALSTAR, FDA and State of California inspections of our contractors new and existing facilities are ongoing. The process has taken longer than expected due to a number of extraneous issues that have nothing to do with VALSTAR even including California budget prices and the recent state inspections. Once we have been advised the inspections have been completed we will let you know, given the time of the year, we are organizing our sales force, who are trained and ready to go for VALSTAR launch in early 2009.
In September, we announced the initiation of the Phase III study for octreotide implant for acromegaly. The six month treatment for octreotide implant has the potential to provide patients with a very compelling treatment option versus the daily or monthly injections today available. The Phase III study will enroll approximately 140 patients in about 34 clinical sites in 6 countries. These patients must be known responders to Sandostatin LAR having well maintained growth hormone insulin-like growth factor 1 levels. The patients are being randomized in a 3 to 1 ratio to either octreotide implant or Sandostatin LAR. The primary efficacy of the implant with Phase III trial is the suppression of growth hormone in IGF-1.
If approved this implant will provide improved treatment options for the thousands of individuals who suffer this serious disease. As we have stated previously, we expect that this single large and well controlled Phase III trial in acromegaly, which has been heavily betted by the FDA will serve as the basis for US and international marketing applications we are beginning planning for 2010 launch.
We expect to initiate a Phase II trial in the first half of 2009 testing octreotide implant in patients with carcinoid syndrome, this slow growing hormonally active intestinal malignancy. Carcinoid syndrome represents a significant share of the overall octreotide market currently served by Sandostatin as Sandostatin LAR. If proven effective our long acting implant would be a very effective competitor in this market with an anticipated 2011 launch date.
Octreotide implant represents a large commercial opportunity for the company with the global Sandostatin market was approximately was $1.2 billion in 2007 in the US. The acromegaly product will be perfectly aligned with our urology and endocrinology specialty sales marketing groups. In international markets we have begun the process of seeking commercialization partners.
Another major milestone in the year was the outlicensing of pagoclone, our product with stuttering. In Teva, we have secured a highly sophisticated international partner with the expertise in CNS drug development and commercialization. As you know, Teva will fully fund a contributory [ph] Phase 2b trial in stuttering which we will conduct. If the trial is positive our agreement provides for a 50-50 split of economics or the conversion to a royalty bearing structure at our option providing us with the flexibility and future with an excellent return on investment to shareholder value in either scenario.
We are eagerly awaiting the results from the NIH sponsored PRO 2000 study probably in January of 2009. PRO 2000 is our topical microbicide for the prevention of HIV and other sexually transmitted diseases. If this trial is successful, we anticipate beginning the regulatory process necessary for approval. The second PRO 2000 study sponsored by the MRC has completed enrollment and we expect results from this probably available at the end of 2009.
These studies in aggregate will provide data from approximately 15,000 women in controlled clinical trials. For Indevus, the PRO 2000 program is certainly exciting; it is highly leveraged due to the fact that the vast majority of funding is provided by third parties. However, we fully own and control the product for worldwide commercialization and should the NIH trial be positive in January, we will be fast tracking our commercialization and partnerships activities.
This year our business development group continues to deliver important agreements for the company as they have consistently done in the past. We announced the outlicensing of SANCTURA XR rights for Allergan for Canada as well as two deals that I previously mentioned, VANTAS for Europe with Orion and worldwide rights for pagoclone with Teva.
Last but certainly not least, is the $105 million nonrecourse financing that was secured this year by monetizing our SANCTURA XR royalty stream. This adds considerable amount of cash to the company’s balance sheet, enables us to address the outstanding convertible note that is due next July and gives us a working capital to continue to expand the share of our market products and prepare for the NEBIDO launch.
As we move into 2009, we do so as a streamlined organization due to the reduction of force at the corporate level and burn reduction program we put in place following the NEBIDO delay. As investors, you should be focused on the following milestones for 2009. The resubmission of our NDA for NEBIDO followed later in the year by the anticipated approval and launch, announcement from Allergan on their primary care plans for SANCTURA XR, data for the first of the PRO 2000 trials , the launch of VALSTAR, completion of the Phase III trial for octreotide for acromegaly, the initiation of a Phase II trial for acromegaly in carcinoid syndrome, the launch of our Phase 2b study of pagoclone in stuttering and the continued growth of our marketed products VANTAS, SUPPRELIN LA, and SANCTURA XR.
Still it hasn’t been an easy year for our shareholders but I believe the company has effectively taken steps to position Indevus for an excellent recovery. And let me now turn it over to Mike.
Okay. Thanks, Glenn, and good morning everyone. I would like to start today with a review with a review of the company’s financial results looking at both the fourth fiscal quarter and the full year ended September 30th, and then I will provide an update on our outlook for 2009.
Let us start with the fourth quarter. I want to just begin by saying that any comparisons of the fourth quarter results to the fourth quarter last year are difficult for one important reason and that is that last year in the fourth quarter SANCTURA XR was approved by the FDA and we received a $50 million milestone payment from Allergan. We recorded $13 million of that amount upfront as revenue and that amount dropped directly to the bottom line as well. Therefore, it is a little difficult to make an apples-to-apples comparison. Nonetheless, I will provide you the year ago numbers on a non-adjusted basis.
Our net loss for the fourth quarter was $14 million. This compares to a net loss in the corresponding period last year of $8.8 million. On a per share basis, the fourth quarter of 2008 loss was $0.18 compared to a loss of $0.12 per share in the fourth quarter of 2007.
Let me take you through some of the key components of our income statement. Total revenue for the fourth quarter was $23.3 million, a decrease of $6.1 million versus the fourth quarter of last year but an increase of $3 million or 14% over the third quarter of this year.
Breaking down the revenue components, revenue from the SANCTURA franchise totaled $12.9 million up from $11.2 million last quarter.
For VANTAS, as Glenn mentioned, unit sales were up 70% over last year’s fourth quarter. Product revenue from sales of VANTUS totaled $5.1 million in the quarter, which is a 73% increase over the $2.9 million we recorded a year ago. We’re obviously very pleased with that result and we are also encouraged by the trend we see thus far in the first quarter as we continue to see strong demand.
SUPPRELIN LA is also performing quite well. Product revenue for the fourth quarter totaled $4.4 million, up 27% over the June 30 quarter. Like VANTAS we are continuing to see strong demand for SUPPRELIN thus far in the first quarter.
Finally product revenue from sales of DELATESTRYL in the quarter were approximately $400,000.
Moving to expenses for the fourth quarter, cost of product revenues for the quarter was approximately $10.7 million, consisting primarily of three items. First, the costs related to sales of SANCTURA XR to Allergan. Recall that up to and including this past quarter we have been selling SANCTURA XR to Allergan at our cost. As per our agreement with Allergan they have assumed full responsibility for manufacturing XR that happened in August and so moving forward we won’t have any further sales of XR to Allergan running through the costs of goods line. There maybe COGS related to twice-a-day sales to Allergan and also sales of SANCTURA XR to Rottapharm Madaus for the European market.
The second major item in COGS is the royalty payments that are owed to Madaus and (inaudible) related to SANCTURA and SANCTURA XR. These costs are paid by Allergan. The third item in COGS is the cost of products related to the sale of VANTAS, SUPPRELIN, and DELATESTRYL.
Research and development costs were $7.1 million for the fourth quarter, a decrease of $5.3 million from the fourth quarter of last year. The reduction in R&D costs in the fourth quarter of this year was driven primarily by the reduced spending on NEBIDO.
Marketing, general, and administrative expenses were $16.2 million in the fourth quarter, a decrease of $2.6 million from the fourth quarter last year and a decrease of approximately $4.5 million from the third quarter of this year.
Now I would like to review the financials for the full fiscal year ended September 30th.
Our net loss for the fiscal year was $65.6 million, or $0.86 per share. This compares to our 2007 fiscal year net loss of $103.8 million or $1.61 per share.
Full year revenue for 2008 totaled $77.8 million, an increase of $11.7 million or 18% from the $66.1 million we recorded in fiscal 2007.
Let me break this down into the same components we used when I discussed the fourth quarter results. The components of revenue for the full year included $43.8 million from the SANCTURA franchise, $16.6 million from sales of VANTAS, $13.2 million from sales of SUPPRELIN, and $1.9 million from sales of DELATESTRYL.
Additionally, we received approximately $600,000 in (inaudible) royalties early last year.
Moving over to the expense side for the full year, cost of product revenues for the fiscal year was approximately $30.8 million, consisting of the same items I mentioned earlier, costs to produce SANCTURA XR and royalties payments to Madaus both of which are paid by Allergan as well as the cost of products related to sales of VANTAS, SUPPRELIN, and DELATESTRYL.
Research and development costs were $25 million in fiscal 2008, a decrease of $16.9 million from fiscal 2007. There were a number of a year-over-year changes as our development programs advanced during the year. However, most importantly during 2008, we did have costs associated with the SANCTURA XR development program as we did in 2007 and we also saw a significant decrease in clinical expenses for the NEBIDO development program. These reduced expenditures were offset in part by increased spending on the octreotide development program.
Marketing, general and administrative expenses were $75.9 million for the year, an increase of $15.7 over fiscal 2007. The increase is the result of a number of factors including the prelaunch activity for NEBIDO and the launch expense for SUPPRELIN LA.
So that covers the fourth quarter and the full year results of operations. Let me briefly comment on the balance sheet. Our cash, cash equivalents, and marketable securities balance at September 30th was $131.3 million, an increase of approximately $78.7 million from last quarter. Our current cash position has been substantially improved with the $105 million nonrecourse financing that we completed in August. Our operating cash burn for the quarter was approximately $12 million. We previously stated that in the September quarter we would see a slightly higher burn rate then we expect to have in fiscal 2009. This is due in large part to the corporate restructuring we announced in June. Overall, our cash burn was in line with our expectations for fiscal 2008 and for fiscal 2009 we stated previously that without factoring in NEBIDO we expect our burn rate to average approximately $10 million per quarter for the fiscal year. We now have clarity around the plan for NEBIDO and it is our expectation that our quarterly burn will increase slightly for 2009. This is primarily to support the prelaunch cost associated with NEBIDO.
Moving to our P&L outlook, as you know there are number of factors that could affect our operating performance for fiscal 2009 and consequently we are not going to provide full P&L guidance. However, I will walk your through a number of the components for which we do have visibility. On the revenue side, we are comfortable at this point with increasing our overall guidance for total revenues in fiscal 2009 to approximately $95 million.
More specifically on a product by product basis, we expect SANCTURA revenues to come in at approximately $50 million. We are currently planning for continued growth in VANTAS sales and are comfortable with the forecast of $20 million for the year. For SUPPRELIN LA, we expect sales of $19 million to $20 million and the remainder will come from sales of VALSTAR and DELATESTRYL as well as revenue associated with our partnership with Teva for pagoclone.
That covers revenues for 2009 and we will update you periodically on any significant changes to our expectations for revenues going forward.
On the cost side, we expect that operating expenses in fiscal 2009 will decrease slightly. We expect R&D expenses to be higher in fiscal 2009 due to costs associated with octreotide and pagoclone. We expect marketing, general, and administrative costs will come in slightly lower in fiscal 2009 with marketing staying relatively flat and G&A coming in lower due to the company’s restructuring.
So, finally I would like to say it was an excellent quarter for both the top line and the overall financial performance of the company. We have built some very strong momentum heading into physical 2009. In addition, our recent nonrecourse financing has significantly strengthened the balance sheet and puts us on a strong footing as we move through a very important time for the company. So, we’re happy to be in the position we’re in particularly given the difficult economic and market conditions. We think we’re poised for a great year in 2009.
So operator, Becky, if you are there, why don’t we move to Q&A at this point.
(Operator instructions) And your first question comes from the line of Annabel Samimy of UBS. Please proceed.
Annabel Samimy – UBS
Hi, thanks for taking my call. Good quarter and thanks for the update. One question about the converts that you are coming through next year, are the – is the idea of just restructuring that convert off the table at this point given the environment. And are there any developments regarding outlicensing of the other products to areas in Europe and Canada et cetera?
Okay, let me start with the convert Annabel. Certainly the idea of restructuring the convert is not off the table. I’ve had ongoing discussions with a high percentage of the noteholders and I think both parties would like to be able to do something. It is very difficult given the affect on our stock price of the market downturn. And that does certainly make it more difficult. But we’re fortunate that the convert owners, the holders of the note have also been – who own the stock and big supporters of the company. We have very good relationship with them. We both like to do something and so we will continue to talk about that. It may take a bit of time to get where we want.
On the additional potential revenues from licensing deals, we haven’t been built those into our model because we typically don’t project what a deal might look like in terms of revenue structure but we’re certainly aggressively pursuing all areas particularly octreotide in Europe and the rest of the world for acromegaly and carcinoid there are additional markets for VANTAS that – actually many markets around the world that haven’t yet been fully served particularly in Asia and Latin America and the Mideast. We are exploring SUPPRELIN LA for European, rest of world, and finally VALSTAR for rest of world. We think there’s going to be a high degree of interest particularly in Europe for VALSTAR for bladder cancers. So there are multiple additional sources of licensing revenues that are on the table but not on our model our projections. Next question.
And your next question comes from the line of Kevin DeGeeter with Oppenheimer. Please proceed.
Kevin DeGeeter – Oppenheimer
Yes, good morning. Thanks for taking the question and I want to add my congratulations on the solid quarter. Perhaps, can you talk a little bit more about VALSTAR? It looks like you have baked in several million dollars into the guidance for next year for VALSTAR. Just maybe a little bit more detail on the ongoing regulatory process. You seem to imply that you – or your guidance seem to be imply you kind of hope to launch in the first half of this year, just the sense kind of have you hope to position the product in the market.
So let me tackle the positioning first. The product already had a great position in the market at the time it was removed for its stability problems several years ago. And it was and remains and will remain the only option for patients with bladder cancer who fail the first line immunotherapy with BCG, and that gap is really important because right now those patients are really have cystectomy as the next option and VALSTAR in clinical trials that are in the label and approved label has shown an 18% complete response rate and a disease free interval of about 16 to 17 months. So it is an important therapeutic option and positioning it back in the marketplace, we think will be relatively easy because urologists miss it and are anticipating using it again and our sales force is very well positioned because the people they call on for VANTAS, the people they call on SANCTURA XR are the exact same physicians who use VALSTAR. There is no primary care use of VALSTAR. This is instilled via an urinary catheter in the doctor’s office or an outpatient clinic setting. So, this is a urologic specific product. The regulatory process has been, I would say, frustrating because we have had a lot of factors that have been not only beyond our control but have nothing absolutely nothing to do with VALSTAR. We have a contract manufacturer who is attempting to open and license a brand new manufacturing plant at the same time they have – they are undergoing inspections on their existing manufacturing plants. This involves both state and Federal inspections and the two are coordinated and we have had the real frustration of the California budget freeze, which literally took investigator and inspectors out of the field in California for six months or more. So the process was – has been very protracted. We do expect a clearance when the inspections are complete and we’re gearing up for a launch now in the first half certainly of 2009, hopefully as early in 2009 as possible and yes, there are some revenues baked into our model assuming a launch in the first half of 2009, a couple of million dollars.
And your next question comes from the line of Gary Nachman of Leerink Swann. Please proceed.
Gary Nachman – Leerink Swann
Hi, good morning. Are you seeing a lot of Viadur patience switching over to VANTAS? Could you quantify the benefit there; and on the guidance you already hit $5 million in this last quarter. So, the $20 million guidance seems light to me. Could you just talk about that, thanks?
Yes, the Viadur switch has been going extremely well. We have added a number of substantial new accounts, buying groups of urologists who used to use Viadur and now use VANTAS. I think that is – that probably accounts for the lion’s share of our 70% increase Q4 versus Q4. And because this is really now the first quarter that Viadur is completely out of stock. I mean it hasn’t been sold for a while but physicians inventoried some of it and now I think definitely there is probably no more Viadur in the chain anymore. Look I think our guidance is conservative as we tend to be on most of these areas. When we’re in a situation where there is a rapid change in dynamics as we are with VANTAS with the Viadur exit, I think we tend to be a little bit conservative and will be become more than happy to be able to update and increase guidance later on if we see increase in trends. Likewise you can make the same comment, I guess, on SUPPRELIN LA you know, we did $4.4 million last quarter and our guidance is at 19 to 20. And it is the same kind of dynamic here. We are conservative; we are still in a perilaunch [ph] mode. It is just beginning our second year. We are in our reimplant patient cycle. So, we are seeing how that is going. And again we would be more than delighted at the next quarterly call to be able to update the guidance and hopefully increase the guidance. But we’re giving a conservative base for our numbers.
(Operator instructions) And your next question comes from the line of David Miller of Biotech Stock Research. Please proceed.
David Miller – Biotech Stock Research
Hi, good morning and thanks for taking my question.
Thank you David.
David Miller – Biotech Stock Research
You had a great year like you say with the exception of FDA hiccup on NEBIDO. And I want to look a little further than the guidance that you have given and to talk about the path the profitability with if we can get NEBIDO on the market in the end of 2009, do you believe that should take the company into profitability or is it going to take some pagoclone sales or some other product that maybe you have your sights on to get there?
Let me start than Mike can carry on. We certainly don’t rely on pagoclone revenues to get to profitability. The – that will be done with the addition of NEBIDO to the base of VANTAS, SUPPRELIN LA, and VALSTAR, and the – I think that combination of products in our view definitely takes us to profitability. Maybe we have an inflection point sometime in 2010 and we would expect first year of profitability to be in fiscal 2011 and pagoclone octreotide would be basically be sort of the rocket fuel that builds on that base and takes the company to the next level.
And I am showing that you have no further questions at this time. I would now like to turn the call back over to Dr. Cooper for closing remarks.
Okay. Thank you very much everyone for participating in this call and we will be available for any one-on-one questions and Robin can tell Mike and I, if you'd like to talk to us later. Thanks a lot. Bye-bye.
Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.
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