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Executives

Martha Hough - VP of Finance and IR

Gerry Proehl - President and CEO

Debbie Proehl - SVP and CFO

Tom Joyce - VP of Marketing and National Accounts

Analyst

David Amsellem - Piper Jaffray

Scott Henry - Roth Capital

Annabel Samimy - Stifel Nicolaus

Jason Gerberry - Leerink Swann

Santarus (SNTS) Q1 2013 Earnings Call May 6, 2013 4:30 PM ET

Operator

Good afternoon. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to the Santarus First Quarter 2013 Financial Results Conference Call. All lines have been placed on-mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

Martha Hough, you may begin your conference.

Martha Hough

Thank you, Rachel. Good afternoon, and welcome to today's call. This is Martha Hough, Vice President of Finance and Investor Relations. Joining me on the call today are Gerry Proehl, President and Chief Executive Officer; Debbie Crawford, Senior Vice President and Chief Financial Officer; and Tom Joyce, Vice President of Marketing and National Accounts; Dr. Wendell Wierenga, Executive Vice President of Research and Development will also be available during the question-and-answer session.

Earlier today, Santarus issued a press release announcing our first quarter 2013 financial results, which is available on our website at www.santarus.com. We will also make a replay of this call available for the next two weeks on the Investor Relations section of our website.

Please keep in mind that risks and uncertainties involved in the company's business may affect the matters referred to in forward-looking statements made by management during today's call. As a result, the company's performance may differ from those expressed in or indicated by such forward-looking statements, which are qualified in their entirety by the cautionary statements contained in the press release and the company's Securities and Exchange Commission filings.

The content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May6, 2013. Santarus undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

In this call, when talking about our company's performance and financial outlook, we will also discuss adjusted earnings and diluted adjusted earnings per share which are non-GAAP financial measures. You can find the reconciliation of non-GAAP adjusted earnings to GAAP net income in our press release issued this afternoon.

I'll now turn the call over to Gerry Proehl.

Gerry Proehl

Thank you, Martha, and welcome to this afternoon's call. We are pleased to announce another quarter of strong financial results for Santarus. Today reported total revenues of $79.4 million up 73% over the first quarter of 2012. Our net income increased to $18.7 million compared with net income of $627,000 in the prior year period.

Notable increases in net sales of GLUMETZA and ZEGERID drove revenues higher along with our first reported net sales of UCERIS following a commercial launch in mid-February. Our expectations for continued strong performance from our commercial portfolio especially from GLUMETZA, ZEGERID, and UCERIS has let us to raise our 2013 financial outlook.

We increased our expectations for total revenues to a range of $330 million to $340 million, an increase of 10 million to 15 million over our prior estimates. We are also raising net income guidance to approximately $57 million to $64 million, an improvement of $7 million to $10 million.

Debbie Crawford, will discuss our financial outlook in more detail next in our financial review. The UCERIS launch is going well. We’re pleased with the trend line for prescription. We believe initial strong prescription performance reflects the positive feedback we are getting from the field.

Our sale representatives tell us that physical view UCERIS as familiar and logical treatment approach combing budesonide, a drug they’re comfortable with and know with the MMX colonic delivery technology.

Our feedback from doctors reinforces the clear need for a product like UCERIS which offers efficacy of steroids with a favorable safety profile. Another important milestone recently achieved was the issuance of a new formulation patent for CYCLOSET with an exploration data 2032. We also recently announced the CYCLOSET has been added to the American Association of Clinical Endocrinologist Comprehensive Diabetes Management Algorithm.

Turning to our pipeline, the Biologics License Application or BLA for RUCONEST for the treatment of acute attacks of angioedema in patients with hereditary angioedema or HAE was submitted to the FDA in mid-April.

We expect to hear from the FDA in mid to late June regarding the decision of whether or not to accept the BLA for review. If accepted, we would anticipate an FDA action date in April 2014. In the second half of the year assuming the RUCONEST BLA has been accepted for review, we plan to request separate meetings with the FDA to discuss the pathway for other potential indications for RUCONET such as the treatment of acute pancreatitis and the prophylactic treatment of hereditary angioedema.

We also are moving forward plans to initiate a Phase IIA clinical study later this year with a subcutaneous dosages form of SAN-300, our anti-VLA-1 antibody in patients with rheumatoid arthritis.

In addition, we now plan to initiate a preclinical toxicology study with SAN-300 in the second half of the year. We held an investor and analyst day on April 11, where we provided in-depth review of our development pipeline. I encourage investors to listen to the replay of our investor relations website, if you have not had the opportunity to do so.

That completes my review and I’ll now turn the call over the Debbie for financial results.

Debbie Proehl

Thank you, Gerry, and thank you to everyone for joining our call. I'm pleased to report strong financial results for the first quarter of 2013. As Gerry indicated, total revenues for first quarter of 2013 grew approximately 73% from the prior-year period to $79.4 million led again this quarter by substantial increases in net sales of GLUMETZA and ZEGERID and our first revenue from net sales of UCERIS.

Net income in the 2013 first quarter was $18.7 million and diluted EPS was $0.25 compared with net income of $627,000 in the first quarter of 2012 and diluted EPS of $0.01. Non-GAAP adjusted earnings for the first quarter of 2013 were $23.9 million and diluted non-GAAP adjusted EPS were $0.32 compared with non-GAAP adjusted earnings of $7.8 million and diluted non-GAAP adjusted EPS of $0.12 in the first quarter of 2012.

Net product sales in the first quarter of 2013 totaled 78.5 million with individual product breakouts as follows. GLUMETZA net sales increased 33% to $41.5 million. In the prior-year period, we reported GLUMETZA net sales of $31.2 million.

ZEGERID brand and authorized generic product sales were up 189% to $24.6 million compared with $8.5 million in the first quarter of 2012. The increase in sales reflects higher prescription volume and pricing for the ZEGERID authorized generic which is now a single source generic product.

UCERIS net sales were $6.6 million for the first quarter with the commercial launch taking place in mid-February.

CYCLOSET net sales were $3.9 million growing 8% compared with $3.6 million in the prior-year period. And FENOGLIDE, which we began, promoting in February 2012, achieved net sales of $1.9 million.

First quarter expenses for license fees and royalties were $17.8 million in 2013, an increase of $1.5 million over the prior-year period. The increase was primarily a result of royalties payable on net sales of GLUMETZA and UCERIS offset in part by a $3.7 million success-based milestone expensed in the first quarter of 2012. First quarter 2013 R&D expenses were $6.6 million compared with $5.2 million for the prior year period. The increase in our R&D expenses is primarily due to an increase in cost associated with our ongoing UCERIS clinical study. SG&A expenses were approximately $30.8 million in the first quarter of 2013, an increase of approximately $11 million from the first quarter of 2012. The higher spending reflects cost associated in our commercial presence including the addition of 85 sales representatives in the first quarter of 2013 and expenses related to UCERIS launch activities.

As of March 31, 2013 we had cash, cash equivalents and short-term investments of $97.6 million, which represents an increase of $2.9 million during the first quarter compared with the balance at the end of 2012. Today we are raising our outlook for 2013 based on strong performance in our first quarter our new estimates are total revenue of approximately $330 million to $340 million net income of approximately $57 million to $64 million diluted EPS of $0.72 to $0.81 non-GAAP adjusted earnings of approximately $81 million to $91 million and diluted non-GAAP adjusted EPS of approximately $1.03 to $1.15.

We are using an estimate of 79 million shares for the fully diluted EPS calculation additional details on selected estimated expenses for 2013 are unchanged from our prior outlook and are as follows; license fees will include a $5 million expense for a success-based milestone assuming FDA acceptance for a revenue of the RUCONEST Biologics license application R&D expenses of approximately $34 million to $38 million and SG&A expenses of approximately $131 million to $134 million which includes the incremental estimated $38 million to $40 million to fund the sales force expansion of 85 sales rep and promotional and another cost related to the UCERIS launch and ZEGERID relaunch.

Tom Joyce will now give a brief overview of commercial operations and our UCERIS launch activity.

Tom Joyce

Thanks Debby. I am pleased to report that physician reception to UCERIS has been excellent and that initial feedback from prescribing gastroenterologist on patient outcomes is encouraging. We believe UCERIS represent a significant new therapeutic option for patients suffering from active mild to moderate ulcerative colitis which is a very serious chronic disease with relatively few treatment options. Our sales representatives are calling on approximately 7500 gastroenterologist to promote both UCERIS and ZEGERID.

To the third week in April more than 1700 physicians have prescribed UCERIS at least one time. And as of mid-April there were more than 400 physicians prescribing UCERIS each week, each writing approximately 1.4 prescriptions. As we increased product awareness in trial through educational programs, advertising and sales representative promotion, we expect the number of prescribing gastroenterologist to increase along with the number of prescriptions they write. As a result of the favorable safety and efficacy profile of UCERIS managed care has been receptive and supportive of making UCERIS accessible and available for patients.

We have received feedback from payers that they view UCERIS as a reasonably priced option for patients with mild to moderate ulcerative colitis especially when compared to biologic treatments which are typically prescribed for moderate to severe disease and are significantly higher priced. For most commercial health plans UCERIS is available on third tier with fairly limited restrictions. We are also in negotiations with Medicare Part D clients to include UCERIS on their 2014 formularies. Some of those plans have expressed interest in including UCERIS on their 2013 formularies as well.

In addition promotion focused on physicians and pharmacists we have also implemented a direct to patient campaign for UCERIS with a goal of increasing patient awareness of UCERIS in motivating patients to visit their physicians to learn more. Our direct to patient activities include advertising on social media outlets and on key medical information website, in particular WebMD and the Mayo Clinic website. Early results from these activities have been promising. For example, in February March our adds on WebMD and the Mayo Clinic website greeted over 25,000 visit to the UCERIS website.

Following FDA approval of UCERIS in January, we added 85 new sales representatives to our existing core of a 150 sales representatives. All 235 sales reps are promoting both UCERIS and ZEGERID primarily to gastroenterologists. They're also promoting GLUMETZA, CYCLOSET and FENOGLIDE to endocrinologists and high prescribing physicians who treat patients with type 2 diabetes and high cholesterol. Using the entire sales force to promote all products has allowed us to reduce the size of our larger territory and mirror more of our smaller more productive territories. We have learnt from our past experience with launching new pharmaceutical products that putting sales reps in smaller geographies and mirroring sales reps in higher potential territories allows for higher call frequency and better access to our key physicians which are essential for creating awareness and driving rapid product uptake. In addition to the strong performance of UCERIS in the first quarter we also had solid performance from ZEGERID and from our base business GLUMETZA, CYCLOSET and FENOGLIDE.

ZEGERID prescription volume for the total molecule has declined since generic completion entered the market in mid-2010. In the first quarter of 2013, ZEGERID revenues increased substantially benefiting from our single source data. However total prescriptions for the ZEGERID molecule decreased approximately 20% compared with the first quarter of 2012. The goal of relaunching ZEGERID promotion is to make physicians aware of the positive clinical attributes of ZEGERID and to stop the decline of prescriptions for the franchise. ZEGERID promotion focuses on its strong, long lasting acid control. GLUMETZA is differentiated from immediate release and other extended release forms of metformin based on improved tolerability which enables patients to tolerate higher doses and therefore achieve better A1C control, GLUMETZA total prescriptions increased 18% in the first quarter versus the prior year quarter.

We believe there is potential for continued growth with GLUMETZA, currently there are almost 62 million prescriptions written for metformin each year and GLUMETZA still only represents, less than 1% of those prescriptions.

Total prescriptions for CYCLOSET increased approximately 44% as compared with the first quarter of 2012. As Gerry mentioned, CYCLOSET has recently been added to the American Association of Clinical Endocrinologists comprehensive diabetes management algorithm, as a recommended second line therapy for patients with type 2 diabetes. For patients with an A1C equal to or greater than 7.5% the ACE algorithm recommends dual therapy to include CYCLOSET as one option in combination with metformin or another first line agent for patients with type 2 diabetes. The algorithm also highlights the demonstrative cardiovascular safety profile of CYCLOSET. We expect this recommendation will increase awareness and exposure for CYCLOSET with endocrinologists and may result in wide use of drug and treat patients with type 2 diabetes.

As we discussed in our recent investor and analyst day, our commercial goals for 2013 are successfully launched UCERIS which is a key growth driver for Santarus in a high priority. Stop with the client of ZEGERID prescriptions and continue grow our base business.

I’ll now turn the call back to Gerry for his concluding comments.

Gerry Proehl

Thanks Tom. In closing we are excited about our prospect at Santarus. Based on a strong financial performance in our first quarter we raised our outlook for 2013. We submitted the VLA for RUCONEST in April and expect a year whether submission is been expected for review in mid to late June and in are advancing our plan for additional indications in HAE prophylactic and acute pancreatitis. And we are moving forward with SAN-300 and a subcutaneous dosage form and (inaudible) initiative Phase II A clinical studies in patients with rheumatoid arthritis.

Our strategy is to maximize the value of our existing portfolio including developing additional formulations or indications and continue to seek new marketed or late stage development products through the license or acquisition. In addition we are planning to add new senior executive position to focus on strategic planning in acquisitions.

I’d now like to open the call to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instruction).

Martha Hough

This is Martha Hough again and while we wait for your questions, I’d like to mention that we will be presenting three upcoming investment conferences, will be at the Bank of America Merrill Lynch Health Care Conference in Las Vegas on Thursday May 16, presenting at 11:20 am specific time, 2:20 eastern time, will also be at the Deutsche Bank 38th Annual Health Care Conference in Boston on Thursday May 30th, presenting at 8:40 am Eastern. Finally we’ll be at the Jefferies Healthcare Conference in New York City presenting on Monday, June 3rd at 3:00 pm eastern. And operator, we’re now ready for your first question.

Operator

Our first question comes from the line of David Amsellem from Piper Jaffray. Your line is open.

David Amsellem - Piper Jaffray

Thanks. I had just a couple, first on UCERIS. First, give us a sense of what portion of the reported sales was stocking related and how should we think about steady state inventory levels for the product going forward, and then also another question on UCERIS on the reimbursement landscape, can you just remind us what portion of the UC population are Medicare and Medicaid beneficiaries?

Debbie Proehl

Hi, David its Debby, I’ll take care your first question where you’re looking for some additional insight on the sales we reported for UCERIS. Our approach in launching UCERIS was to provide limited amount of product into the wholesalers and we did not stock widely to pharmacy so approximately half of the net sales in the first quarter relate to our initial stocking activity at the wholesaler level and the balance relate to pull through related to prescription demand and wholesaler restocking.

So, going forward we certainly expect that the prescription demand will continue to drive growth and revenues for us on UCERIS and we would expect to have typical levels of product in the channel, maybe I’ll turn it to Tom to talk about the reimbursement questions.

Unidentified Company Representative

Sure for the UC market about 15% to 20% of the market is covered by Medicare Part D, 5% to 10% would be Medicaid and the remainder primarily is commercial. There is this little bit of other government programs but the vast majority of the market is commercial based market.

David Amsellem - Piper Jaffray

That’s helpful and then one more if I may on RUCONEST for HAE prophylaxis, I guess the bare argument in terms of that development program is that you have too short of a half-life, so I guess my question is, what makes you confident that it could have potential in the setting, what do you think would be the real point of differentiation if you brought it to market versus Synrise? Thanks.

Wendell Wierenga

Hi Davis, this is Wendell Wierenga, relative to you question half-life of RUCONEST and the use of prophylaxis as we’ve looked at with all the literature has to tell us about the best way to treat prophylaxis, we understand with etiology as it’s really different frankly than treatment of acute, there is no current correlation between frequency and C1 inhibitor levels the threshold really is not important in terms of identifying a protective level for prophylaxis as you know twice weekly Synrise is used to reduce attacks by about 50% or so yet there is an open label study with Synrise that shows comparable reduction in a Tac frequency given once a week. As we look at data with RUCONEST, we have an open label trial that's been published wherein the drug was administered over an eight week period to patients ahead in Tac frequency of about once per week and it was given once per week, at 50 units per kilo and the Tac frequency was reduced by about 50%. so when you add this all up, it does not seem to be a correlation between halfway and reduction in a Tac frequency and prophylaxis. If anything there seems to be a correlation with Cmax and the availability then of high dose to prevent an attack within a reasonable time frame. So we think there is a very good rationale to go forward based on data with RUCONEST as well as other literature.

Operator

Your next question comes from the line of Scott Henry from Roth Capital. Your line is open.

Scott Henry - Roth Capital

Couple of questions, first; any recent price increase that we should be thinking about (inaudible).

Gerry Proehl

We haven’t taken any recent price increases but on a pretty regular basis we look at that. We typically would take price increase on a product; usually we look at it anywhere from once to twice a year and it just depends on the market opportunity.

Debbie Proehl

Just want to add, in the first quarter we had taken an 8% price increase on GLUMETZA, so that would be reflected in the financial results and then on our smaller products we had also taken some modest price increases towards the end of the quarter.

Scott Henry - Roth Capital

And then on UCERIS, I don’t believe you’ve given any guidance on the demand you are expecting for 2013, if you want to provide guidance on UCERIS I am happy to hear to it but separately is it fair that we assume that the increase in total revenue guidance that you did provide was that all UCERIS related?

Gerry Proehl

Scott, I don’t know that we could say it’s all UCERIS related, certainly UCERIS has performed well for and we see good growth in prescriptions but we also saw a nice increase certainly in ZEGERID and continued growth on other products, so as you know we don’t typically divide out guidance on the individual products we would not want to make your jobs any easier than it already is.

Scott Henry - Roth Capital

Then I guess shifting gears just very quick question on UCERIS do you still expect to complete enrolment mid-2013 for the Phase IIIb?

Gerry Proehl

Yes.

Scott Henry - Roth Capital

Okay. And the final question I don't want to get too granular on it, with regards to ZEGERID it continues to outperform modeling expectations and I just looked at the subscriptions and I factor in a revenue per script and to make the math work in the first quarter when you are starting to get upwards of $270, $275 revenue per script which I doubt that is the true price, what do you think missing on the ZEGERID model?

Debbie Proehl

You know Scott I think it's difficult with smaller products in particular to have the absolute alignment between the shipment activity and the script activity. and I would agree I think your indication of the value is a bit higher than what the real value likely is but I think with regards to ZEGERID in the first quarter we did get the benefit of the first low quarter without the power of generic really being in the channel at any significant level so we got the benefit of that and we got the benefit of the true pricing that our partner for ASCO was able to realize on that authorized generic so we did get the benefit of both of those dynamics in the quarter.

Scott Henry - Roth Capital

I am sorry go ahead.

Debbie Proehl

I was just going to say thinking about ZEGERID on the go forward I think it is helpful to look at the big picture where if you look at the total ZEGERID molecule we still are seeing a decline. And although we have initiated efforts on promotion that may take a number of months for us to really see an impact and stop that decline and hopefully begin to re-grow the product but I think in the short-term it is probably fair to think about find of the overall molecule trend that we have been on.

Scott Henry - Roth Capital

Okay so it sounds like what you are saying is all of your one-time benefits are probably in the numbers and at this point I can’t look at the scripts at least for a trend and that should be a fair indicator going forward?

Debra P. Crawford

I think that's the way to think about ZEGERID at this time Scott yes.

Scott Henry - Roth Capital

Okay.

Operator

(Operator Instructions) And your next question comes from the line of Annabel Samimy from Stifel Nicolaus. Your line is open.

Annabel Samimy - Stifel Nicolaus

Just a few here, Just on the RUCONEST question of differentiation. I guess December still struggling with that competitive profile of RUCONEST, and you know how that’s going to differentiate itself from the current acute therapies. I know you just described differentiation from Synrise but in terms of the acute therapies outside of its recommend profile, can you just give us a better sense of how you would differentiate it. seems like you have got some activity or rapid activity similar to some of the others; so just a little bit more color there would be very helpful.

Unidentified Company Representative

The factors that we're looking at in terms of differentiation relative to the other agents for treatment of HAE relate to not only the fact that it’s (inaudible) recombinant layer with basically unlimited supply but also of course the safety implications that go along with that. And specifically as we've noted in the past in our clinical trials today with over 230-some patients, we have seen no evidence of thromboembolic events, and that’s approaching nearly 1,000 treatments. So we see that as an important distinguishing factor. We also believe we have very good efficacy based on the responses that we see in the clinical studies and the absence of any real need for rescue therapy.

So there is very little rebound in terms of, if any with the 50 unit per kilogram dose that’s used in our vital clinical trials study 13/10. And we also of course have a very fewer products that’s made recombinant lay and the purity is extremely high compared to certainly the plasma derived C1 esterase inhibitor and the ability to self-administer this which is what the agency has given us feedback on in terms of our labeling I think it’s an important factor too for the rapid treatment of acute angioedema attacks. So we think those are the differentiating features that will play out as the product hopefully gets approved and launched next year.

Annabel Samimy - Stifel Nicolaus

Well I guess one other point, I am trying to get out the other one, the delay over the safety issue, but I guess given that it is based on a rabbit cell line, there was one case of anaphylaxis, and I was just curious, you mentioned that you would get self-administration, but is there a possibility that the anaphylaxis in this case would possibly hinder that when it comes to approval and labeling?

Unidentified Company Representative

That case of anaphylaxis as we noted, was in one of the (inaudible) early studies, these were volunteer studies wherein the patients did not properly self-identify to rabbits and there was a reaction when the drug was administered. So that's really the only example we've seen out of over 230 subjects either symptomatic or asymptomatic that have been treated with the agent over the last five years of clinical studies, but we don't view that really as much of a factor. Now clearly that will have to be a factor noted in the labeling because it is of course derived from rabbits, of course thereof of having any managed to receive (inaudible)…

Annabel Samimy - Stifel Nicolaus

Okay, I'm just going to move on then to the next point on GLUMETZA, I guess this quarter it seemed like prescriptions were not as robust sequentially as they had been lately. I'm just wondering is this 4Q, 1Q trend or do you feel like it's starting to reach a peak in terms of how far you can take the penetration into sort of a more color there, I know that you mentioned you're still under 1% penetration of the market, but how you're going to get the next you know bits of penetration.

Gerry Proehl

This is Gerry, Annabel; I certainly don't think we've reached the peak of penetration in this marketplace. there are certainly times of the year where you see plateauing of prescriptions and then they start to grow again. typically the first quarter tends to be that time. Many times patients because of the end of the year, because of their planned dynamics they may be changing plans. They might get a prescription filled through mail order that gets them their three supply so you do see some softening in the first quarter we continue to get very positive response from physicians on GLUMETZA and we think that will continue to do so we think it will continue to grow.

Annabel Samimy - Stifel Nicolaus

Okay are there any other changes you plan on doing to the sales and marketing effort or do you feel like you're pretty much nicely aligned right now and you are just going to let it go on at some sort of into cruise control?

Gerry Proehl

Yes I think we are pretty much still aligned well with our 235 reps as one might expect when you are launching a new product even if your target rep spend a reasonable amount of time on GLUMETZA and CYCLOSET they are so excited about UCERIS they are going to spend more than what you would like them to spend on UCERIS just because of the excitement and the positive response they are getting from gastroenterologist so that is just going to happen usually it is in the first three to six months of them selling the products so we think we are probably seeing a little bit of that with GLUMETZA and CYCLOSET and that just level out and they should get back to a normal cold cycle as we move through the middle of the second half of the year.

Annabel Samimy - Stifel Nicolaus

Okay.

Operator

Your next question comes from the line of Jason Gerberry from Leerink Swann. Your line is open.

Jason Gerberry - Leerink Swann

Just coming back to ZEGERID wondering if you could answer pay is 1Q now a good reflection of sort of what we should expect for quarterly performance and if you could talk also about what are the upside drivers here ZEGERID assumptions and your guidance. Is that really category stabilization or another price hike and if you can remind us on the pricing with ZEGERID, how you guys in Prasco ultimately determine or control the pricing on that product. Thanks, on the AG.

Gerry Proehl

Yes, this is Gerry, I think as Debby said the first quarter really reflects kind of a full AG type of a quarter without power in the market. so I think it’s a pretty good reflection on the AG side. Certainly the overall molecule we'll continue to see some declines in the molecule although we are starting to see on the brand side a little bit of flattening of the prescriptions and maybe even beginning to see a new prescriptions as a little bit of growth but still seeing a little bit decline on the total molecule. And that's going to really determine the rest of the year and how the product performs because the majority of the business is in the AG. They are out there promoting ZEGERID to get some endocrinologists along with UCERIS and we think that will certainly help and as we said, our goal is to really stop to decline in the first half of the year and in the second half of the year begin to try and see if we can grow a little bit. So, that's really what we will be looking at.

As it relates to pricing, we are priced fairly little bit above the average at this point in time on our brand side. On the AG side, we don't directly control Prasco's price so they can set their own price. We do control the price, we sell our product to Prasco and so that obviously reflects a little bit of how they are going to price their product. But we think that they are probably priced about where they are likely to price it. if we do take a price increase on the brands and many times see AG, we'll follow with some type of a price increase but that's totally up to Prasco.

Jason Gerberry - Leerink Swann

Okay maybe just on UCERIS, Gerry, how do you think about that 300 million peak sales target that you have got a quarter under your belt, reimbursement seems to be less of an issue. Are you just more confident that 300 million number, one could you get maybe more confident that there could be upside to that number? I’ll stop there.

Unidentified Company Representative

Obviously it’s still early in the launch, we feel good about number one, the reception we’re getting from the gastroenterologist that are providing very good feedback, they’re very comfortable with prescribing UCERIS, they’re comfortable with budesonide and they’re comfortable with MMX. Those two things really are our favorite and so they’re jumping on board and prescribing it for their patients. the feedback that we’ve gotten through the sale reps from physicians on how patients are actually responded to Prasco is very favorable. because these patients are typically having 15 to 20 bowel movements a day, they’re going on UCERIS and within a matter of few weeks they’re starting to see a nice reduction in the number bowel movements.

We see then self-report back to the physician. so it’s a nice feedback loop back to the doctors. so that’s all positive for us and I think as I said before part of the most positive is the feedback we’re getting from managed care both the commercial plans and Medicare part D that’s probably going a little better than we had initially expected and so that’s going to help us out in the long term we get on formulary both on the commercial plans and Medicare part D.

Operator

And there are no further questions at this time. I will turn the call back over to our presenter.

Gerry Proehl

Great, well, thank you everyone and I'd like to thank you for your interest in Santarus and for joining us on today's call. If you do have any further questions, please feel free to contact me, Debbie Crawford or Martha. Thanks have a great evening.

Operator

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

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