The Medicines Company CEO discusses Q4 2012 Results - Earnings Call Transcript

Feb.20.13 | About: The Medicines (MDCO)

The Medicines Company (NASDAQ:MDCO)

Q4 2012 Earnings Call

February 20, 2013 08:30 PM ET

Executives

Michael Mitchell - Head of Global Communications

Clive Meanwell - Chairman & CEO

Glenn Sblendorio - President & CFO

Brent Furse - Senior Vice President and Chief Customer Officer and Head of the Americas

Cees Heiman - Senior Vice President for Europe and the Middle East

Rob Mitchell - Senior Vice President for Asia Pacific

Analysts

Adnan Butt - RBC Capital Markets

Jason Kantor - Credit Suisse

Omar Rifat – ISI Group

Cory Kasimov - JPMorgan

Steve Byrne - Bank of America Merrill Lynch

Michael Schmidt - Leerink Swann

Jonathan Eckard - Citi

Biren Amin - Jefferies

Operator

Good day ladies and gentlemen and welcome to the Q4 2012 The Medicines Company earnings conference call. My name is Stephanie and I’ll be your operator for today. (Operator Instructions). I would now like to hand the call over to Mr. Michael Mitchell, Head of Global Communications The Medicines Company. Please proceed.

Michael Mitchell

Thank you, Stephanie and good morning, everyone. This morning, we will review The Medicines Company's fourth quarter and full year 2012 financial and operating results. I'd like to remind you that this call will contain forward-looking statements about The Medicines Company that are not purely historical and all statements that are not purely historical may be deemed to be forward-looking statements, which involve a number of risks and uncertainties. Without limiting the foregoing, the words believes, anticipates, plans, expects, estimates, aim and similar expressions are intended to identify forward-looking statements.

Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are identified in the Company's SEC filings, including a Form 10-Q filed with the SEC on November 9, 2012. Copies of our SEC filings can be obtained from the SEC or by visiting the Investor Relations section of our website. I would also note that during the call we may refer to non-GAAP measures, which exclude costs associated with stock-based compensation expense and non-cash income taxes. Please refer to the non-GAAP reconciliation tables in our press release issued this morning. We have also posted a guidance factsheet on the FrontPage of our website after this call.

This morning, Clive Meanwell, Chairman and Chief Executive Officer will provide his perspectives and Glenn Sblendorio, President and Chief Financial Officer will present financial operating results and guidance and financial results. Joining us also for the Q&A portion of the call are Brent Furse, Senior Vice President and Chief Customer Officer and Head of the Americas, Cees Heiman, our Senior Vice President for Europe and the Middle East, and Rob Mitchell, Senior Vice President for Asia Pacific and Bill O'Connor, our Chief Accounting Officer. So with that over to Clive.

Clive Meanwell

Well thanks very much Michael and welcome everyone to our call from a bright and brisk morning here in New Jersey. We closed out 2012 and report our plans for 2013 with an established based business which is growing robustly. An exciting and expanded portfolio of high value assets in acute and intensive care medicine. A superb group of professionals here at The Medicines Company who are ready, willing and able to drive growth and momentum in all our segments of business which sets us for another exciting year in 2013. Our strategy is unchanged we have laser sharp focus on acute intensive medicine. Our purpose is to save lives, elevate suffering and improve the economic efficiency of about 2500 leading hospitals in the world. We’re confident that we can continue to create value per share.

Our strategy is founded on four main ideas, first to focus on acute intensive hospital medicine, second to concentrate resources on leading hospitals, third to leverage resources across vast service lines and fourth to prioritize work on a high value solutions.

As Glenn will describe in more detail during 2012 we made real and measurable progress with our base business centered on Angiomax Worldwide with our Phase III programs of Cangrelor oritavancin and other research and development through deals which secured important and valuable new assets which fit our strategy and by building increasing strength in our organization. What happens next is based on our conviction that we continue to grow and build the leading acute cardiovascular care business for the management and potentially the disease modification of Recothrom were induced in acute ischemic heart disease, the world’s leading killer.

Also as a second robust line of business. We’re in a position now to build a leading surgical and perioperative care medicine franchise and then subject to ongoing clinical trial results to oritavancin. We can potentially change the rules and the performance for the treatment of serious possible infections and use this as a platform to build place to receive business. Some of these ambitious and valuable goals will be achieved with other leading organizations. We will also continue to pursue for the details. Glenn?

Glenn Sblendorio

Thank you Clive and good morning everyone. The fourth quarter 2012 and for the full year we delivered strong financial results and we believe built significant short, medium and long term value for the company and our investors. We delivered on core drivers of the business as we met our financial and operating goals for 2012. Now looking back at 2012 and starting with top-line performance, we entered the year with a plan to grow global net revenues by 9% to 11% and finish the year with top-line growth of greater than 15%. Our Angiomax growth in the U.S. was strong at 10.9% as we grew both market share and high risk patients undergoing percutaneous coronary intervention and continue to demonstrate the value of Angiomax for hospital customers which enables us to increase the net price by 7.4% effective January 2013. Our revenue growth outside the U.S. was up 47.4% driven mainly by gains of Angiox in Europe.

Entering 2012 we had an aggressive growth plan to sell 50% more boxes in 2012 than 2011 and that goal was achieved. In the fourth quarter 2012 net revenues were 159.5 million a 20.6% increase versus the same period in 2011. As I mentioned in January we took a price increase here in the U.S. on Angiox this was similar to last year’s price increase and became effective January 1 of 2013. Not unexpectedly hospital bought and additional product at a lower price in late December and roughly the same volume as last year. Wholesaler inventory was approximately three weeks which was also consistent in prior year levels. Our cost of goods was 32% of net revenues in-line with our guidance and reflecting the heavy weighting of Angiomax in 2012 approximately 70% of our cost of goods present royalties paid to Biogen Idec. For R&D during 2012 as you know we accelerated spending for oritavancin, Cangrelor and business development with the objective of getting clinical results quicker and finding late stage business development opportunities both objectives were achieved. Reported positive results of SOLO-1 and Cangrelor and we identify they announce the acquisition of Incline Therapeutics and Recothrom from Bristol-Myers Squibb in early December.

This acceleration is spending caused us to exceed our plant R&D target of 20% by approximately $14 million. Total R&D for the year was a 126.4 million to 2.6% of net revenue. In early January we had the exciting news that the champion Phoenix Phase III trial of our intravenous antiplatelet Cangrelor met its primary end point and demonstrated statistically significant improvement in the ischemic outcomes as compared to clopidogrel. Safety outcomes were similar to those observed in the champion trials.

The full trial results are scheduled to be presented at the American College of Cardiology conference in March specifically March 10th. We anticipate submitting our application for U.S. regulatory approval in the second quarter of this year. In 2012 we also accelerated one of our two Phase III pivotal trials for intravenous long acting anti-biotic oritavancin and delivered results in December. The SOLO-I trial met all of its protocol specified end point at one single intravenous dose of oritavancin is not inferior to a twice daily vancomycin intravenous dosing for seven to 10 days, enrollment continues in the identically designed SOLO-2 trial which now has over 85% of the patients enrolled and if the results are positive we’re planning a 2014 launch. The long term growth potential more expanded antilipid franchise is making progress as well. We announced an early February our strategic alliance with Alnylam to develop their PCS RNAi therapeutic program for the treatment of hypercholesterolemia and that is progressing as planned. Additionally MDCO-216 or ApoA-I Milano is back into (inaudible) just this week. We enrolled the first patient and help volunteers Phase I study and there will be more news on both of these programs to come as the year progresses. For SG&A in 2012 our commercial business achieved global leverage as evidenced by top line growth of 15.2%.

With SG&A growth of just 7.6% as a result income from operations are key metric for us in 2012 compared to 2011 increased by 43% from 58.1 to 83.1 million. It's also worth mentioning the GAAP and non-GAAP EPS comparison for 2012 compared to 2011. As reported in 2011 we recognized the tax benefit of approximately $50 million as our future earnings outlook became more sure, in 2012 we recognized the tax expense of 35 million. This explains a dramatic difference in GAAP EPS for 2012 versus 2011 and would have however like to point out the positive growth compared to non-GAAP EPS in 2011 of a $1.57 and an increase of approximately $20 million year-over-year. Of course we concluded a full reconciliation of GAAP and non-GAAP in our press release also it will be posted to our website. That completes the discussion around 2012 and now I would like to look forward to an exciting what we believe will be an exciting 2013. Our 2013 plan and consequently our guidance are built on the healthy very foundation of a growing base business which is mainly Angiomax, Cleviprex, Argatroban RTU as described in 2012. We expect our base business to continue robust growth in 2013. That base business also included substantial R&D cost which will now come down since the high burn rate of Phase III Cangrelor and (inaudible) trials will be reduced in 2013. In fact without substantial new products in our R&D portfolio, our R&D number would have fallen to 16% of net sales low below our target of 20%. Furthermore our SG&A would have remained essentially flat as it has been for several years demonstrating again the leverage in our business model.

Based on that strong base and it's anticipated longevity and because of these trials recently we have been able to invest in more opportunities and potentially into accelerate medium and long term growth accordingly. Therefore our 2013 guidance takes into account the following five points, first the growth of the base business including its progression in Western Europe and expansion into new European markets the mid-east as well as Asia markets, second, the addition of growing and profitable Recothrom business falling the closing that transaction with Bristol-Myers on February 8th, third the completion of Phase III programs manufacturing and commercial production and subject to regulatory discussions the submission of market applications around the world for both Cangrelor and oritavancin. Fourth, the addition of the exciting IONSYS program following our acquisition on Incline Therapeutics which closed in early January, a program that is also reaching the stage of global regulatory filings and commercial scale manufacturing and finally the investment we made to acquire global rights to Alnylam clinical proof of concept PCSK-9 program to tackle LDL cholesterol lowering which we believe strongly compliments our clinical proof of concept stage program, ApoA-I Milano which as mentioned entered the patients this week.

All of these developments fall within the acute intensive care strategy outlined by Clive and we believe provide absolute and leveraged growth of our business in the short, mid and long term. Thanks to our strong business base we’re confident that we can take on additional opportunities and we anticipate significant increase in value for our shareholders as the consequence of this expanded portfolio of important assets.

Obviously we have to manage this exciting expansion within our usual fiscal discipline balancing both short and long term considerations. So specifically for 2013 we expect year-over-year on net revenue growth of 20 to 22% driven by the robust growth in the base business of around 10% as we have indicated in prior guidance, long term guidance and on top of that we will benefit from approximately 46 weeks or about 10.5 months of Recothrom sales. Net sales excluding Angiomax in the U.S. will exceed 20% a good sign of diversification of revenue sources and leverage of our infrastructure worldwide. We expect cost of goods to be 37%, this proportion is temporary. It's increased over the next two years as a consequence of two developments that we regard as very favorable in the long term. First, due to a settlement with Biogen Idec which we previously disclosed we added an additional 1% to the Angiomax royalty for both 2013 and 2014. After that from December 14, 2014 forward all royalties to Biogen Idec on U.S. sales will end. Also as we previously disclosed the structure of our deal for Recothrom includes a royalty payment to Bristol-Myers Squibb during the two year option period of the arrangement and that we also anticipate will end in 2014.

With the end of these temporary terms our cost of goods and therefore our gross margin, we expect to improve dramatically from 2015 forward. Our R&D guidance as the amalgamation of reduced spending on the base business and the addition of new R&D investments which will drive mid and long term growth. As we continue to guide to a total of 20% of net revenues I should mention the following. For the base business we will continue measured Phase IV clinical investments for Angiomax and Cleviprex and we’ll see reduced spending on Cangrelor and oritavancin as they transition from high Phase 3A trial burn rates to lower burn rates for manufacturing scale up, regulatory actions and potentially Phase 3B and 4 studies. As I mentioned earlier this has the effect of reducing the base business R&D to 16% of net revenues for 2013. The reduction of the base business spending leaves us room to invest however in new valuable R&D programs this includes the addition of the regulatory submission stage IONSYS program, advancement of proof of concept clinical studies and manufacturing development for ApoA-I Milano and the addition of the Alnylam PCSK9 program.

I should mention however the PCSK9 program will be managed for approximately two years by Alnylam and this is paid for in a single milestone that will be expensed in the first quarter and that milestone is 25 million. With all of these exciting R&D investments we expect our total spend to be consistent with our R&D goal of spending 20% of net revenue per year consistent with our approach and guidance in previous year this target excludes stock based compensation expenses. Our anticipated 2013 SG&A expenditures also reflect the amalgamation of several parts moving favorably in our business. In 2013 we expect SG&A for the base business decrease slightly from 2012.

This SG&A line has as you know been flat to slightly down for several years. Associated with the increased net sales growth we now add the Recothrom transaction cost in team as well as the Incline team to our organization and based on this we expect SG&A to be approximately 27% to 30% of net revenue again excluding stock based compensation in 2013.

Across the board we expect total stock based compensation to be approximately 19 million to 20 million for the year allocated approximately 20% to R&D and 80% to SG&A. In 2013 our tax position also reflects increased diversity and growth of our business. We exit 2012 with 60 million of net operating loss carry forwards and 30 million of tax credits. We expect to pay minimal cash taxes at 2013 as we use up a portion of our NOLs and tax credits. Our mostly non-cash income tax provision for 2013 is expected to be 35% to 38%.

I thank you for listening to this very complex explanation of our forward look of 2013. But we believe this is a transparent and also helpful set of guidance reflecting the exciting growth and potential future growth for our firm. We have included for your help a full worksheet on our website that outlines the guidance I just covered for 2013. One additional point related to the first quarter, although we normally do not provide quarterly guidance we thought it would be helpful to provide a specific outlook associated with recent transactions and other events that will impact the first quarter for 2013.

As you would expect our P&L during the first quarter won't be burdened by a number of one time business circumstances, these include the following, first net worldwide revenue will be a $145 million to a $155 million as we burn off, as we have for the past several years the modest volume by hospitals in the United States associated with the price increase for Angiomax.

Second, specific expenses will contribute to an overall loss for the quarter specifically we will incur a 25 million license expense for the fee that we pay to Alnylam this will be included in R&D in the first quarter. In addition we will also record certain onetime cost in connection with recent transactions including restructuring cost and legal cost that will total between $12 million to $15 million. These savings derive from restructuring are reflected in the full year guidance I just covered with you before. As a result of these four specific items we expect GAAP EPS loss of $0. 24 to $0.33 for the first quarter. Again I will emphasize that we did provide full year guidance that includes the first quarter, so in summary let me talk about three very important points for 2013.

First, we expect worldwide net revenue growth of 20% to 22%, R&D will remain at 20% again excluding stock compensation expenses and finally SG&A is expected to be 27% to 30% of net revenue again excluding stock compensation expense. I thank you for listening to this long explanation but I believe it's very helpful and we look forward to a very productive 2013.

Clive Meanwell

And this is Clive again, thanks a lot for that, that is very important and detailed set of information I have. So, I will wrap up after a year of excellent results and outlook as exciting as the one Glenn outlined it would be remissive of me not to acknowledge and thank a number of people today. First I want to thank our business partners both the established and new ones who have worked with us to move our business forward and many of whom who have come onboard as medical employees now. Second to all of our employees worldwide who can be satisfied with their 2012 accomplishments and look forward to an incredibly exciting 2013. Third the members of financial community who sometimes patiently as just now and certainly diligently have made all efforts to understand that business, fourth to our research collaborators worldwide who have made such contributions to the progress of our R&D programs and finally and probably most important to the doctors, pharmacists, nurses, technicians other care givers, administrators and hospitals around the world who have placed their trust in our knowledge, our understanding and our products. Using the more and more in the care of patients with heart attacks, undergoing PCI or surgery with or risk of life threatening thrombosis or severe hypertension.

We look forward to more progress with you over the coming years helping you to stabilize and elevate suffering and improving the economic efficiency of your institutions and your systems. With that let’s get on with some questions.

Question-and-Answer Session

Operator

(Operator Instructions). We have a first question that we have coming from the line of Adnan Butt from RBC Capital Markets. Please go ahead. Your line is open.

Adnan Butt - RBC Capital Markets

I have two questions first can you give us a bit more on what’s driving growth and what allows Angiomax to have pricing color, is it basically a pharmco-economic argument and the second question I have is on can you outline for us assuming positive data which products you could file applications for in the U.S. and Europe and the (inaudible) because assuming everything works out, your pace could be pretty slow. Thanks.

Clive Meanwell

I’m going to get some help from some real experts who are in the room with here particularly Brent and Cees in just a moment and then we will try and dissect the second question about I might need some clarifications of exactly what product you want us to talk about on the second question. I think your first question about what’s enabling the continued growth of Angiomax falls into a number of buckets I will just speak from a worldwide basis we have always been very careful to insure that our product pricing allows for economic dominance, that is to say that when hospitals use Angiomax they get back more than they spent and they can measure that and I think that’s been an important feature of our ability to increase price and our ability to grow and maintain volume around the world. So, that’s certainly being key to us and I think there is head room still particularly in the highest risk patients and particularly in patients who can be managed with Stable angina as outpatient PCI procedures not only in the U.S. but potentially around the world. So let me hand it to Brent a little bit to talk a bit about the U.S. volume, price, growth situation and then maybe case can make some comments about what we’re seeing in Europe where we’re obviously growing very quickly, Brent?

Brent Furse

I think it's fairly simple too complicated thing to do but it's fairly simple, one as Clive said our investment in development of a true economic story, the value of the product is improving and hospitals are more sensitive to that than ever and the product is positioned to demonstrate that dual clinical research, second is our continued effort to develop the drug through clinical research with the community. We don’t invest so much in marketing as we do aggressively invest in research. So as devices continue to evolve and eventually continue to seek barriers so does the drug, we invest the most almost completely. So and I think that’s valued by the community, Cees?

Cees Heiman

Certainly the factors that Brent just mentioned are very much relevant in Europe as well and I would like to highlight one additional point that especially also in Europe drove the business to the growth of 56% that we have seen last year and that is the issuance on the ESC guidelines, the European Society of Cardiology which issued guidelines regarding the treatment of PCI patients with a clear highlight of jobs in a predominant position and we have seen tremendous uptick of these guidelines in key markets throughout Europe including Germany which clearly is our largest market, in Europe as well as France as well as smaller countries like Switzerland. So it's really generated across the board support in addition to the points that Brent already mentioned.

Clive Meanwell

And summarizing you know deep knowledge in this space, saving hospitals and money and time when it's most important to hospitals and acute care hospital sales force that understands and appreciates the value that hospitals require and I think that’s also been validated with our contribution and our great partnership with AstraZeneca and Brilinta. I mean those things enable us to really deliver and communicate the value of the product.

Adnan Butt - RBC Capital Markets

And the second question let me see if I can understand it, I think you’re asking is about the timing of regulatory submissions for the main things, Cangrelor oritavancin and so on and that we have a lot on our plate. Is that a fair characterization of the question?

Brent Furse

That’s a fair summary quite and we will be filing both in the U.S. and Europe for some or all of those things.

Brent Furse

Thank you. So let’s go back with, I think that one of the most positive things about these assets is that they are all global in scope perhaps with the exception of Cangrelor which we don’t have right for in China and Japan but all the other assets are all global assets and I think that’s incredibly exciting. However it does put a burden on our development and regulatory teams to try to file simultaneously around the world. We will attempt to that, there will naturally be gaps they won't be filled in the same months for example, sometimes the gaps there are consequence of different regulatory requirements around manufacturing in particularly validation batches for example over quite Europe but not in the U.S. and so that would potentially impact Cangrelor where we held back on building scale manufacturing batches until we saw the data from the trial and now we have it we’re going full speed ahead. So Cangrelor for example may have a few months between the U.S. and the European filing.

Oritavancin I think we will be closer to simultaneous and IONSYS it a little bit early to tell but I think again there are differences of approach, IONSYS in the U.S. is an sNDA whereas IONSYS in Europe is a full NDA. So there may be different strategies there but our general principal is to try to get them in as close together as possible. Also by the way to embark the process of approvability in China which is a four to five year process by the time we have done the clinical trials needed and also to find partners in other parts of the world including Japan. So, complex but doable, now as far as the timing is concerned I think if we said mid to second half of the year I think that’s probably a catch all statement, we might be better than that for some and slower for others.

So I think you can saw a lot of activity from us during the middle stages of the year and we probably put specific data out later. Now the next part of your question which I think is an important part too is you know a lot on the plate. I think this is where leverage really starts to tell, I think this is a new strategy where you don’t try to build too many lines of business, the know how in our R&D growth and our supply chain group, the know how in our frontline organization that Cees and Brent were just talking about and the fact that all of these products, all of these products go to the same hospital. So I think that’s incredibly important and there aren’t that many of them. We’re talking about 2500 leading hospitals in the world and although that’s daunting to reach them all and take time to build up that reach at the end of the day they are all the same people. So same decision makers as well.

Now having said that if you want to go really fast and really aggressively with some of these new assets we may well reach partnerships in key geographies sometimes overlapping with our efforts and sometimes enabling us to go into geographies that we couldn’t even touch yet. So, I think the feature of our business going forward where we will be open for business for leveraging with partnerships in certain geographies. I hope that’s an adequate and comprehensive answer.

Adnan Butt - RBC Capital Markets

Just one quick follow-up and then I will get back in line, which assets is the company more likely to partner than others?

Clive Meanwell

I think we have always said that a drug like ApoA-I Milano which is driven I think out of the hospital because the need for coronary imaging will make the cath lab and particularly intravenous ultrasound. The cross roads for patient care and we’re all over that and honestly I have worked with Brilinta, with AstraZeneca shows you that we’re regarded there in that cross roads but of course one of the roads leads out of the hospital into longer term subacute or even chronic care certainly with PSCK9 and there I think one starts to think about leveraging these assets as they progress maybe not at the very beginning with the partners that have long fingers and many resources in the sales.

So, ApoA-I Milano I think is a classic opportunity possibly the PCSK9 although that’s someway away and I think the other product that we would be interested in partnering and we have said this before also is oritavancin. Now to me the paradox is better the results are the more unlikely to want to partner because if it oritavancin really is the game changer that it could potentially be, if we really are going to change the rules of engagement in (inaudible) with a one shot you’re done or if for any reason at all the results from oritavancin prove to be superior to vancomycin which of course is not established yet then I think we really need to go heavy weight and hard into the market and that would certainly need a partner.

So depending on certain factors ApoA-I Milano, PCSK9 and oritavancin would be my sort of top picks if that answers your question.

Operator

Thank you. The next question comes from the line of Jason Kantor from Credit Suisse. Please proceed.

Jason Kantor - Credit Suisse

You have seen a lot of growth for Angiox in Europe and I’m just wondering if you could give us some sense about where you think peak sales could get to in Europe and also what the duration of the patents exclusivity is on that product in Europe or worldwide I guess.

Clive Meanwell

I’m not going to make comments about the U.S. situation because as you know it's subject to a lot of litigation, we’re very aggressively protecting our rights and as you know we have settlements with at least leading generic firms for 2019 and that gives something of a clue or strategy but obviously for Europe I’m going to turn Cees, we haven’t generally given specific guidance in the – we have given ranges of 80 million to 100 million in the most recent period but Cees what’s the shot at getting there and what’s the current situation in Europe right now?

Cees Heiman

Well I would say at this stage we’re definitely well on our way to achieving that goal that we earlier on shared, we had robust and significant growth as we mentioned earlier of 56% in 2012. Also for 2013 we look forward to robust high double digit growth also through well through a number of ways one is clearly continuing the growth in the markets where we are already present but also roll out launches into countries where we currently have not been present up to date and that will significantly contribute to the goal that we mention.

So the 80 million to a 100 million is certainly within very clear reach within the time period that the product will expire. Certainly Germany, France are contributing strongly. We have had a couple of years ago some initial startup planned in the German market. We had all the 60% growth there this year. So I think we’re definitely well on track.

Jason Kantor - Credit Suisse

I was just wanting to make sure so what is the, when did the patents expired, when did you lose exclusivity and in Europe and other key SQS’s (ph).

Clive Meanwell

First of all the working hypothesis of Europe is something in 2015, there is some life cycle efforts but I think that for the purpose of modeling that’s the right assumption at the moment but I think it's a bit different around the world regarding transition to generic as you know some countries, I mean Italy is a good example although that might be changing a little. The brand loyalty issue is different to the U.S. and generic transitions of highly specialized products do not always go exactly as they do for primary care products whether it's 20 competitors that come into the market. So as you know over the years we have not really tried to mask or (inaudible) the fact that when generics come along the market changes dramatically but on the other hand it is our intension as generics come into the markets and the royalties continue competing and whether that’s a U.S. or Europe this is an incredibly important brand for us and we don’t need it to be a $1 billion product to be attractive. So we’re willing to say in one of the necessary or appropriate ways we can in the market with Angiomax and definitely even after it generic now proof of that is that we head to the Indian market rather than Mitchell being here our Asia Pacific leader. We enter the market with generics as they say we’re competing now it's a slow start naturally but Rob do you want to comment about our ability to compete with generics in Asia maybe just in general terms, I’m not claiming we’ve any great proof yet.

Rob Mitchell

Exactly AS Clive has explained we entered the Indian market in 2012 and built some infrastructure there and partnership with Windlass Biotech and we have seen very positive signs particularly in the last six months, we’ve being able to actually compete in a generic marketplace for the value added services that we’re able to provide some key hospitals for example working with them to improve their ATS (ph) pathway and we strongly believe that there is a real potential for us to continue to compete not just in India but other markets where perhaps we don’t have to take protection in Asia Pacific. So, it's early days but we have positive signs here.

Clive Meanwell

I mean you’re pretty strategic and you’re thinking, I think when you look at the worldwide injectable market the issue here is that well it's pretty fed-up of real cheap injectibles, the reason being that they went out of supply they don’t have the quality that people wish they had, we saw that with Hepper (ph) and we have seen that with other injectable and whether I’m talking to our colleague in generic injectable companies or colleagues in originated companies. I think we’re all in the same mind that globally injectables need to be made to the highest possible quality and that means investing in supply chain and quality management programs and that means prices are going to go up and I think anybody who feels that we should press injectable generic prices down further and further and further needs to get their head examined.

So, throughout the industry whether that’s generic teams or originated teams the issue of injectable quality is a huge, huge topic and I think even the medical community and the pharmacy community realizes that you can only go so low. So it may not be a completely unattractive thing for us to be a generic injectable provider and obviously Angiomax included and obviously that links to our end generic compounds that we licensed in from APP and some of this will be launched this year.

I feel I know it's a long answer to a simple question but I feel we shouldn’t be thinking that when generic Angiomax comes along we’re out of the business and it wouldn’t be as profitable as it is and it won't be as big as a business but it will still be part of the medicines company in my idea.

Operator

Thank you. The next question comes from the line of Omar Rifat from ISI Group. Please proceed.

Omar Rifat – ISI Group

I had three or four quick questions actually so the first one what’s the latest on Angiomax litigation and should we expect any resolution in 2013? Number two, there is a few pan applications we can see online for Cangrelor, are there any updated thoughts on IP beyond 2019 in U.S., the third one on Cangrelor bleeding data, you have guys have mentioned it should look in line with prior trials and in Champion PCI specifically TIMI major was about a 36% increase versus Prevx (ph), should that be our expectation heading into ACC or should it be slightly higher than that given the 300 mg patients which are safer in lower bleeding and then finally Glenn just to clarify you said 20% of revenue will be the guidance for 2013 does that or does that not include the $25 million Alnylam payment. Thanks very much.

Brent Furse

We do have the work sheet, I will start with the last question first, we do have the work sheet that will be posted to the website but it's a very easy answer and thanks for pointing that out, I feel the work sheet will help but didn’t get that, 16% of net revenues will be applied to existing portfolio. So, that includes projects we already have going as well as IONSYS as well as anything we may or may not do on Recothrom and yes you’re right an additional 4% will be applied to Alnylam. So existing plus Alnylam equals 20% so Alnylam is included in that 20%.

The question around Angiomax litigation, unfortunately we give this answer all time since it is active litigation we can’t comment and Clive did mention that we have settled the two of the four parties but the that’s about what I can say, I’m sorry can’t go further.

Glenn Sblendorio

On the Cangrelor IP it's too early, I think out of all of our products we traded in products that others have found to be a strategic misfit that means we tend to get them late and it tends to be that their IP run-way is not ideal and we have to work at it and you can guarantee, I can guarantee you one thing that we will be working on life cycle management for all of our products including Cangrelor. So I won't be specific there because I want to be competitive if you don’t mind but that’s a work in progress. I think one of the most interesting question asked about Cangrelor I’m not going to preempt either the publication or the presentation side investigators at ACC but you’re absolutely right we have said that one good set of clues for people about what those results might show is the rather large data set we have already published. Now you’re pointing to a very specific increase in TIMI major bleeding in the platform and PCI trails which you say is about 36%.

Now I don’t think that wasn’t statically significant and so that means it's not necessarily a particularly indicative number or ratio. I think that if you look across the board it's clinically relevant bleeding at the different scales, there is not a lot of difference. I’m not sure I agree with you that 300 milligram is less bleeding that 600 milligram. I think actually some of the randomized trials have gone all kinds of different ways where you compare 300 to 600 milligram Plavix.

So I wouldn’t read too much into that if I were you, now the net of all this I think is that when we have said as we have that major bleedings is clinically important leading is not different, I think we’re going to stick by that notwithstanding the precision of your question and let’s wait for results but I think we’re very comfortable with the bleeding profile of Cangrelor because of its reversibility and actually it's positive effect. That will be it for now, is it okay?

Operator

Thank you. The next question comes from the line of Cory Kasimov from JPMorgan. Please proceed.

Cory Kasimov - JPMorgan

I guess questions I have left I want to ask you about each of your recent positive Phase III product. So on Cangrelor you have talked in the past about your expectation I feel for about 450 million in peak sales. Can you give us a little bit more detail on what goes into that type of number and kind of how quickly you would expect this type of product to ramp with your existing infrastructure in place and then for oritavancin just following up on Clive’s previous comments they are potentially partnering this one. If you were to go alone with oritavancin roughly how much infrastructure investment do you believe would be needed for that product? Thanks.

Clive Meanwell

On the Cangrelor we have said 450, we have also said I think on calls which may or may have not been transcripted that a half to two thirds of that would probably come from the PCI indication and the balance of it would potentially – we have said that the PCI indication is relatively easy one to read. All of these are assumptions and these assumptions are all subject to change if depending on how the clinical community and the economic community view the results of the trials that can be published. But we have said historically that around a price point roughly around the Angiomax price point and we have said that the penetration to PCI. I would begin with the high (inaudible) for those that cannot for whatever reason or is not feasible to use in oral agent, a good oral agent obviously we love Brilinta and integrate drugs but we’re promoting it after all and also Cleviprex (ph) is good drug, so you know I think there were options but they are certainly not options for patients who are I mean by (inaudible) or incubated or for some reason aren’t able to observe oral agents because of the circulatory status. So that sort of gives you a chance to model the approximately 3 million PCIs in the world against those criteria.

Now price point as I mentioned, the rest is bridge, the bridge model is hard to build. We ourselves have struggled, we had a model bridge because it's a bit like building a free way to Albany and you’re not going to know how people are going to bother to go there. And here we’ve a bridge a free way for people who need to come-off oral agents and we know that’s put from a label point of view puts people in awkward position since the FDA label says don’t stop your 2i2 inhibitor but do stop (inaudible) surgery. But there will be some people who find that very compelling as a reason to share and some people to say well we don’t need to and we have not really been able to nail down that number in any particular market. So we just sort of guesstimated that about you know a third to half of the sales could be there merely because you use a lot more drug and you probably end up selling two or three vials that way.

But that’s the best we can do right now and I think until we see the response to the NDA and we start engaging customers in that it's going to be a little tricky. As far as ramp for these two drug systems I’m going to turn my colleagues here because the question of how well prepared our teams to sell an antiplatelet agent along an antithrombin agent, well Brent what about that I mean where are we as a team selling antiplatelet agents.

Brent Furse

Well I think a couple of things I think one of our deep knowledge in space if they are allowing top institutions in the Americas, the position is ideally. The partnership we have constructed with Brilinta and AZ team I guess that’s been a great success for us so far and I think it's only confirmed that we are able to want to sell two products in the same space but that there is value seen and a direct thrombin inhibitor with a potent oral antiplatelet agent and in this space for acute care medicine and IV fast on fast off platelet agent is absolutely valued of the highest value. So we’re completely well positioned to do it and our sales reps are very comfortable with the data and it's very well received.

Cory Kasimov - JPMorgan

Do you think the Brilinta experience has helped us become better?

Brent Furse

Absolutely it has completely prepared us for us, the eight months we have had that partnership in place it's been nothing but a success learning how to do it, how to position them, understanding the space how they work together and even the patient responses that the challenge that Brilinta is having a this end is well understood to the complications of the drug and the value and eventually seeing it, we’re well positioned good ready to go.

Cory Kasimov - JPMorgan

How about in Europe case, how do you see the Cangrelor alongside Angiomax?

Clive Meanwell

I’m familiar with the arguments that Brent but Brent uses apply to us as well I would say on top of that we have now well established infrastructure in Europe and in the cath labs throughout all the key countries in the marketplace and further expanding as I mentioned earlier and the combination with Cangrelor would be an absolute perfect fit, very much along the lines of what’s happening in the U.S.

Brent Furse

I mean it took us years to build the Angiomax franchise, and it's still growing both of you or either of you see that being the same kind of lab or faster or slower? I mean we haven’t even had this conversation ourselves Cory, so you’re getting the special account but I would say faster, I mean when we an incredibly experienced team, I myself watched Plavix and Integralen. We have multiple people in the team like Ray Russo that led the launch of in Integralen, Paul Puccioni we have an extensive experience in the space far more than we had when we launched Angiomax. So relative to that launch it is we’re light years ahead and the experience that the entire sales force gained over the past eight months in launch in Brilinta I’m taking that forward in partnership with AZ has just been it's been brilliant, we couldn’t be better positioned to do it.

Clive Meanwell

And Europe I would absolutely second that over the last year I would say we’re having an amazing way to strength the year the team that this selling Angiox and we have really gone from strength to strength not only in terms of the sales effort but also in terms of the skill building of the team responsible for the product in Europe so I absolutely know that we will benefit and as such be able to ramp up quicker than we originally did with Angiox in Europe.

Brent Furse

It might be another favorable feature Cory although you know again we are trying to be a bit conservative here is the fact that the clinical trials at Cangrelor are very contemporary, very modern and we’re global whereas our initial date of launch of Angiomax we had U.S. only trials though at the time of launch which was a way back now was considered a bit old fashioned so that we might enjoy more enthusiasm from the leaders. I do want to correct myself something I said in the beginning Cory I’m not going to correct myself but clarify, I said that the price point to model might be around the Angiomax price and of course I was completely goofing on the point that Angiomax is now about $800 a vial. I have been with the product so long, I think we thought in the range 500 for our own modeling purposes, whether that’s for vial price I’m not saying but you know that’s what we use on internal thoughts if that’s any help to you.

But I will also add we have always singing P2I12 (ph) is a complimentary solution in Angiomax. It's always been positioned the product type as well and so it just makes complete sense, it's a bit of the promise we deliver here to go with that (inaudible) IV solution complimentary what we have been doing all along.

Clive Meanwell

And the second question was about how much infrastructure we needed if we go along with oritavancin while I guess the answer depends on who you ask if I ask a commercial leadership for oritavancin they get very excited and I bring them down but yeah it's a bit of a new point at the moment. I think until we see what the results of second vial are it's pretty hard one to guessestimate but so let’s reserve judgment on the side of commercial effort needed until we see for the SOLO-2 is as fantastic as SOLO-1 if it is you know we will be wanting to resource it very intensively.

Operator

Thank you. The next question comes from the line of Steve Byrne from Bank of America Merrill Lynch. Please proceed.

Steve Byrne - Bank of America Merrill Lynch

I was wondering what kind of data you have with oritavancin and on the impact on the healthy and inflectional bacteria and whether you have any concern about its long half-life increasing the risk for intestinal infections or conversely you could talk a little bit about the data you have on the efficacy on C. Diff.

Clive Meanwell

Two sides of the same metal really in a way, you know at this estimate of the safety of this drug now comes from 1000 patients I would say 500 patients approximately you got the drug in the SOLO-I trial and it's a pretty large data set now. There we didn’t see any evidence of side effects that could be related to change bacterial growth in the gut so for the time being that’s something which after 60 days of observation didn’t show up. As C. Diff I think like many in the field we know that these types of drugs are highly active against clostridium difficile infection. Honestly that has to be delivered into the gut as an oral agent and absorbed which potentially this drug could be and also we know from published data that it knocks off the spores of clostridium difficile which may or may not clinically important in theory it got to be helpful in preventing reoccurrence but you know we have good drugs to C. Diff we have mentioned of course the optima product which I think is moved the field forward and the bar is higher now and simply being as good as vancomycin isn’t good enough in our opinion. So unless we really felt strongly that oritavancin could out do deficit which it may or may not be able to do we still haven’t done the studies, I wouldn’t go there.

Steve Byrne - Bank of America Merrill Lynch

Okay now that the IONSYS and Recothrom deals have closed have you learned anything since then that meaningfully effects your outlook for those products?

Clive Meanwell

I think what we have learned is that they are managed by a group of extremely capable people and we’re looking forward to working with them and it's a few weeks since we closed so it's a bit early to say anything other than we’re very excited and Glenn outlined some of the financial implications and new products when you start to learn them you don’t have a time that will be no exception for us going forward.

Operator

Thank you. The next question comes from Joseph Schwartz from Leerink Swann. Please go ahead.

Michael Schmidt - Leerink Swann

It's Michael Schmidt for Joe this morning, I just have two quick ones, number one on the SOLO-2 trial it is the exact same design as the SOLO-1 study but I was just wondering if there may be a different geography or patient population and how that might affect the study and secondly could you just you know walk us through the rate limiting steps to NDA for the Incline product. Thanks.

Clive Meanwell

So on the SOLO-2 it's essentially the same geography more or less exactly the same countries but different sides and so I think that sort of summarizes it, we will add about 60 more patients SOLO-2 to make sure we have enough for the modified intensive treat population that’s to do with patients valuablity around the world, a slight difference there but I think that’s the play of chance more than anything Michael. So other than that I think really nothing remarkable. As to the timelines for Incline we went on a bit of road show to discuss this and we file the dates this is our best guess, all these are guesses and subject to changes but we’re certainly looking forward to that product being on the market in the 2014, 2015 timeframe if I remember well.

Michael Schmidt - Leerink Swann

Okay great, so it's basically mainly I think I recall is it mostly manufacturing work that has to be completed ahead of the submission?

Clive Meanwell

As to the activities absolutely yeah there are no clinical trials – we have seven randomized trials as an indication, we’re accepted by global regulators already so all the work relates to in a matter (inaudible) usability studies NDA together and doing NDA supplement in the U.S. and a complete MAA in Europe and things like this management plans and their acceptance by the AT (ph). So those are the activities that are ahead of us and certainly we’re moving forward on all of those.

Operator

Thank you. The next question comes from the line of Jonathan Eckard from Citi. Please proceed.

Jonathan Eckard – Citi

I was really going to focus on first question is on oritavancin, Clive you talked about how you might change the rules and I was wondering if you could maybe discuss in more detail about what rules or hurdles you see being big challenge that you would have to change and then also with respect to the SOLO trial results how important are the results in SSA versus MRSA in achieving your kind of view or vision for the product?

Clive Meanwell

So while I talk about changing rules I talk about I don’t mean the FDA rules or the hospital rules I mean the rules of competitive engagement. I mean to me if you look back on Angiomax when we entered the market bleeding wasn’t relevant and we decided it should be and we changed those rules. And I think until now with vancomycin been the absolute dominant product worldwide in serious gram positive infections including resistant one.

The rule has been that you need seven to 10 days of infusions one sort of probably usually twice a day that’s been a rule and now there are some products that have come along that have helped you know moderate that rule but no one has actually changed the game and of multiple day infusions and we’re the only one who can and I think – when you look at where the money goes and obviously the rules are often based on where the money goes, in healthcare system needs to unburden itself of as much ancillary cost as it possibly can and when you have a drug there at least a potential and this is to be confirmed in the second trial that once you’re done.

Plugging that in to the way people have paid and reimbursed may not be the smartest thing to do you may actually have to sit down with people who pay and say what if we did it this way, or what if we did it that way and how would that help you and those are the conversations we will be having, have already had to some extent and those are the rules of the engagement that I mean we want to change. I want to deliver more value to some more customers than it has ever been done with vancomycin by a long way.

Jonathan Eckard – Citi

Very good and I’m not sure if the second part of the question has relevance or we can talk about it another time but do the results in this system is acceptable versus MRSA infections does that have an impact on your overall strategic for the drug?

Clive Meanwell

Yes it does and I think that’s an important second important question Jonathan look, if your vancomycin resistant obviously you know you need a different drug so that’s a no brainer. If your vancomycin acceptable but still MRSA you know if you had a drug that was superior for treating MRSA infections if you did that would then I think pose a very positive choice for prescribers and obviously MRSA patients are also the ones that tend to be a little bit more costly and certainly from the stubble point of view more troublesome.

So yes if we show particularly good results in MRSA and certainly results of SOLO-1 were promising in that regard then I think that helps you add more value in the marketplace.

Operator

Thank you. The next question comes from the line of Biren Amin from Jefferies. Please proceed.

Biren Amin – Jefferies

I guess first like Cangrelor, can you maybe remind us of the EMA filing timeline and whether Phoenix was designed with feedback with the EMA scientific advice working party?

Clive Meanwell

Yes it was lot of input and the timeline is nearly in the mid-year timeframe.

Biren Amin – Jefferies

Okay and then I guess a couple of financial related questions, like Cleviprex, you know order assumptions for sales in 2013 given you now have the Recothrom sales force to kind of promote it this year and also on R&D guidance it seems for the existing portfolio you’re going to be spending about a $107 million or so for the year, should we anticipate in the back half of the year as they may come down as SOLO-2 completes.

Glenn Sblendorio

We haven’t broke it out specifically but with the 25 million for Alnylam coming in the first quarter you’re clearly going to see some fun boarding of R&D. The big spenders right now are specular (ph) in oritavancin, Cangrelor in terms of preparation which includes the filing the manufacturing scale-up and oritavancin is still enrolling.

So as you model your 20% I think you can look at a decline in the later part of the year using the overall number of again 20% is max, you said one of seven I’m not sure where you got that number but there will be a tail off no question as the big programs end and then we ramp up other things. The other question on Cleviprex, the plan is to optimize sales effort around surgery which would include Recothrom, Cleviprex and may want to add some more on this and as for breaking out Cleviprex numbers right now we gave overall guidance, we’re going to stay with that and report on an actual basis. The Cleviprex numbers are still relatively small but we do believe with more effort which we will have with combined force overtime, the numbers will improve. It is obviously there is an improvement year-over-year and it's in fact density overall 20% - 22% increase.

Clive Meanwell

Well the short answer we have seen, we have always seen great synergies with the Recothrom team and the Cleviprex team both in sales force alignment, customer qualification as well as customers that are just frankly very pleased at that we’re working very closely together, so I expect the same thing as we merge these teams fully.

Biren Amin – Jefferies

Thank you very much.

Clive Meanwell

I think that probably wraps it up for today. We have taken over an hour; we really, really appreciate the interest in the company. We’re well and truly at it for 2013 I think the champagne is no lower fizzy for 2012 results so we better get back to work and thank you everybody for participating in the call and thanks particularly to the analysts for the questions.

Operator

Thank you for joining today’s conference call. This concludes the presentation. You may now disconnect. Have a good day.

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