Forest Laboratories Inc. F1Q10 (Qtr End 06/30/09) Earnings Call Transcript

Executives

Frank Murdolo - VP of IR

Larry Olanoff - President and COO

Frank Perier - SVP of Finance and CFO

Analysts

Tim Chiang - FTN Equity Capital

Greg Gilbert - Bank of America

Corey Davis - Natixis

David Risinger - Morgan Stanley

Ian Sanderson - Cowen & Company

Gary Nachman - Leerink Swann

Louise Chen - Collins Stewart

Ronny Gal - Bernstein

Marc Goodman - UBS

Frank Pinkerton - SunTrust

Tom Russo - Baird

Scott Hirsch - Credit Suisse

Richard Silver - Barclays Capital

Dave Windley - Jefferies & Co.

Jami Rubin - Goldman Sachs

Forest Laboratories Inc. (FRX) F1Q10 (Qtr End 06/30/09) Earnings Call July 21, 2009 10:00 AM ET

Operator

Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Forest Laboratories first quarter 2010 Earnings Call. (Operator Instructions) Thank you. Mr. Murdolo, you may begin your conference.

Frank Murdolo

Thank you, operator and good morning, everyone. This is Frank Murdolo. Thank you for joining us today for this first quarter fiscal 2010 conference call. Joining me today is Larry Olanoff, our President and Chief Operating Officer, and Frank Perier, our Senior Vice President of Finance and Chief Financial Officer.

By now, each of you should have seen the earnings release that we put on the wires around 8:00 a.m. this morning. The release is also available at our website www.frx.com. By way of Safe Harbor statement, let me add that various future remarks that we make about future expectations, plans and prospects for the company constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and actual results may be different. Let me now turn the call over to Larry who will comment on the business during this quarter.

Larry Olanoff

Good morning, everyone. I will start today's call by reviewing key company events for the quarter, and then turn the call over to Frank Perier who will review the financial details for the quarter.

Our underlying business continued to perform well during the quarter for our key marketed products, although Lexapro sales declined, reflecting the modest decrease in market share. Our launch of the adolescent depression claim for Lexapro is just getting underway, which may positively impact sales trends later this year.

This quarter we saw a solid prescription growth for Namenda, Bystolic and our newest product Savella. We launched Savella at the end of April and sales in the quarter were $9.6 million. As you would expect, reported sales are impacted by wholesaler initial stocking orders.

Our broad-based early experience sampling program and general promotional activities appear to have succeeded in their objective to drive patient and physician experience with Savella, and we are highly encouraged with the early uptake and early positive response by physicians to Savella's profile and performance.

Savella is now in its 13th week on the market, and new prescriptions for the week ended July 10 totaled 5,547. This recent data point reflects lower volume, resulting from the Independence Day holiday. Savella has rapidly gained share in the fibromyalgia market, and our share of new prescriptions is now 6.9% and our total prescription share is 3.5%.

New prescribers are being added at a rate of approximately 1,200 to 1,300 per week. Repeat prescribers now account for 61% of Savella weekly prescriptions. 48% of these prescriptions have been written by primary care physicians, 17% by rheumatologists, 12% by pain specialists and 8% by neurologists.

Detailing activity to physicians for Savella continues to be high. For the week ending July 10, Savella had a 59% share of voice of fibromyalgia details relative to Lyrica and Cymbalta in primary care offices, and 50% share of voice in rheumatology offices.

We have been meeting with managed care organizations and making presentations to the key plans, and have already picked up coverage in some major health plans. Savella by example has been added to both Aetna and CVS Caremark formularies as Tier 2 unrestricted access effective July 1, and has also been added to some significant regional plans.

Our goal is to have an unrestricted formulary position, either Tier 2 or Tier 3 in the majority of major plans and to do at least this well in gaining formulary access as we did with Bystolic.

Currently, during the launch phase about 80% of prescriptions are covered by third-party insurance payers. Regarding our inline products, Lexapro sales in the quarter totaled $565.5 million, a decline of 3% year-over-year. As we have previously mentioned, we put programs in place during the second half of last year that we believe are working to better preserve Lexapro market share considering the current competitive market conditions.

In March, we announced FDA approval of our supplemental NDA for Lexapro for the indication of acute maintenance treatment of major depressive disorder in adolescents 12 to 17 years of age. This additional indication, which we recently fully launched, is helping to stabilize the position of Lexapro in the market. The amended sales were $259.3 million during the quarter, growth of 18.6% year-over-year.

Bystolic our fastest growing promoted product has sales in the quarter of $37.7 million comparing to sales of $4.4 million in the year ago period, and represents a 27% increase over sales reported in the fiscal quarter ended March 2009. Bystolic sales continue to perform strongly and we continue to see an encouraging mix of patients including significant proportions of those switching from generic beta-blockers and those new to beta-blocker therapy.

Nearly 80% of patients may be categorized as continuing patients, which is indicative for early success with Bystolic therapy. Bystolic has a growing base of almost 100,000 prescribers with in -- over 80% of those being repeat writers. The brand continues to add new prescribers and gain repeat prescribers at a higher rate in Benicar at a similar time post-launch.

Based on script align performance, both primary care physicians and cardiologists are prescribing the product, and share amongst cardiologists exceed that of national share for beta-blockers as a class. This observation is particularly important like in many categories, primary care physicians will often rely on the opinions and recommendations of specialists.

We continue to see a steady growth and prescription volume with the majority of prescriptions written for Bystolic and a dose of 5 milligrams. This indicates that most patients are achieving sufficient blood pressure reductions at our starting dose and at the products performing as we had expected.

And we continue to see Bystolic share of mail order business outpace that of retail. This may be another indication of physician and patient satisfaction with the product as more physicians -- sorry, as more patients move to automatically refill their prescriptions through a mail order process. We continue to make substantial progress relative to Bystolic's managed care coverage goals. Overall, our access without any step edit or prior authorization restrictions covers over 85% of total beta-blocker volume in the managed care settings.

And with several recent Tier 2 additions, Bystolic now has unrestricted Tier 2 coverage on 12 major national health plans. Overall, we are very pleased with the strong earnings and sales performance during the quarter and are enthusiastic about the progress we are making in further building our pipeline and bringing novel therapies to market.

I'll now turn the call over to Frank Perier, who will provide more details on the financial results.

Frank Perier

Thank you, Larry. Fiscal first quarter revenues were comprised of $948.2 million of product sales versus $893.7 million last year; $44.7 million of contract revenue from the Benicar agreement was down 14.6% versus last year, as related to do the contract terms on the tail end of our agreement, as well as $12.2 million of interest income.

Total revenues, which are inclusive of product sales, pretax earnings from Benicar, interest and other income totaled $1,008,200,000, an increase of 4.3% from last fiscal year. Gross margin in the quarter came in at 77.1%, this level compares to 77.9 in the last year's fiscal first quarter. SG&A spending during the quarter was $311.8 million, down 9.1% from last year, however, when adjusting for last year's one-time $44.1 million Azor termination charge, SG&A spending increased by 4.3%.

In addition to our ongoing spending levels and support of our inline products, this quarter included significant investment spending to support Bystolic, which is still in launch mode; and Savella, which was launched in May. Research and development spending was $147.1 million in the quarter as compared to 112.1 million in last year's first quarter. There were four million of product development milestones this quarter and we expect the balance of milestones to be fairly evenly distributed over the remaining three quarters of the fiscal year.

Our effective tax rate for the quarter was 20.9%. Actual shares outstanding as of June 30 were at 301,676,000 a reduction of 3.1 million shares from last year due mainly to the company share repurchase program. We did not repurchase any stock in the first quarter and have remaining authorization to repurchase up to 5.7 million shares.

Our cash and marketable securities balance at June 30 was approximately $3.4 billion, an increase of $370.6 million from last quarter. Of this, $950 million or 28% of our cash and marketable securities are domiciled domestically with the remainder maintained by our international subsidiaries. I'll now turn the call back to Larry for a pipeline update.

Larry Olanoff

Thanks, Frank. As we move into fiscal 2010, our focus will remain on meeting our dual goals to further advance and expand our product development pipelines throughout the year. We've filed a supplemental sNDA for Bystolic for indication of congestive heart failure and the action date from the FDA is expected to be first quarter 2010.

As previously announced, we along with our partner Almirall have determined an alternate development pathway forward for aclidinium, and we have commenced the first Phase III trial to establish the efficacy and safety of aclidinium at a higher and more frequent dosing regimen.

An additional Phase III trial with this dosing regimen is planned to begin in the coming months. More detail will be provided on this program later in the year. We expect to report top-line results from the first of these studies in the first half of next year, and anticipate a filing date for late 2011 or early 2012.

I would like to remind you that we view aclidinium as a broad franchise opportunity, and the tolerability experienced from the ACCLAIM study suggest that higher doses are indeed possible. In addition, the new b.i.d. program will facilitate and potentially accelerate our strategy to develop a twice-daily aclidinium-formoterol combination in the future.

We have access to a unique dry powder inhaler delivery device for aclidinium that will be convenient to use and easy to incorporate higher or more frequent dosages as well as combination agents. The ease of use or functionality of the inhaler device is an important factor in delivering the correct dose to the lungs to ensure effective COPD treatment.

With the dose counter and a unique control window that tells patients that the dose has been inhaled correctly, we believe the Aclidinium MDPI will add to the competitiveness of the franchise.

Regarding ceftaroline, last month we reported positive top line results from two Phase III trials for community-acquired bacterial pneumonia. The top-line data in each of the pivotal trials named FOCUS I and FOCUS II demonstrate that ceftaroline met the primary objective of non-inferiority and achieved high clinical cure rates compared with ceftriaxone in patients with moderate to severe community-acquired bacterial pneumonia requiring hospitalization.

According to the integrated efficacy data from the two clinical studies, the clinical cure rate in the clinically evaluable population was 84.3% for the ceftaroline group compared with 77.7% for the ceftriaxone group. Ceftaroline was also very well tolerated with an adverse event profile similar to that of ceftriaxone.

Data from both of these studies along with the positive Phase III study results that we received last year for complicated skin and skin structure infections will serve as the basis for our planned NDA submission for initial marketing approval of ceftaroline to be filed around the end of 2009.

We also filed an IND for ceftaroline beta-lactamase inhibitor combination product earlier this quarter. This product as we refer to as ceftaroline 104, which we believe has the potential to further expand the clinical utility of this franchise.

Working with our partner Ironwood Pharmaceuticals, we are conducting a comprehensive Phase III program to evaluate linaclotide safety and efficacy in patients with either IBS-C or chronic constipation. The chronic constipation studies were initiated in September 2008, and we expect to report top-line data in the fourth quarter of 2009. The IBS-C trials commenced earlier this month and efforts are already in progress to expedite their recruitment.

Our collaboration with Phenomix for the development and commercialization of dutogliptin, a DPP-4 inhibitor in development for Type 2 diabetes is progressing well. The first Phase III trial for dutogliptin began last July, and we expect to have top-line results available in the second quarter of 2010.

As planned, we also initiated additional Phase III trials last month. Our Phase III program will be similar in size and scope to the Phase III programs reported for other DPP-4 inhibitors.

We had the benefit of being able to design the trials to include the collection for cardiovascular safety data prospectively that the FDA now requires without delaying or extending the target completion time for the program. Our collaboration with Pierre Fabre for F2695 or levomilnacipran, a once-daily administered selective norepinephrine and serotonin reuptake inhibitor for the treatment of depression is also on track, and as planned we will initiate the first Phase III clinical trials later this summer.

Turning to the cariprazine, last September we announced top-line results from a Phase II clinical trial in patients with acute mania associated with bipolar 1 disorder, which showed that cariprazine produced significant system improvement compared to placebo within the first week of treatment and at each subsequent time point study.

This potential indication may in fact represent a significant opportunity for cariprazine in addition to the planned indication for schizophrenia. Our ongoing Phase II-b study in schizophrenia with our partner Gedeon Richter, we'll examine in greater detail a range of lower doses based on the encouraging results of the first Phase II proof of concept study.

This second Phase II study is being performed in order to better determine an optimal dose range to take into the planned Phase III program, and the top line results will be available in the fourth quarter of 2009. Depending on these results, we also expect to initiate the Phase III mania disorder studies in early 2010 to be followed shortly thereafter by the start of the Phase III schizophrenia program.

In addition, we have commenced Phase II proof-of-concept studies in bipolar depression and as add-on treatment for major depressive disorder. Lastly, Oglemilast, the PDE4 inhibitor program partnered with Glenmark is currently in a proof phase -- proof-of-concept study in COPD and we expect to report this data later this quarter.

There is a high unmet medical need for well-tolerated oral anti-inflammatory products in both COPD and asthma. Oglemilast targets the underlying cause of both diseases by blocking inflammation through a non-steroidal dependent mechanism and therefore would exert its therapeutic effect through a mechanism unique to existing classes of approved COPD or asthma products.

As I've previously stated, we continue to believe that our late stage product pipeline could collectively represent several billion dollars of potential product sales in the long term, sufficient to replace over time the revenues lost due to patent expiries for Lexapro in 2012; and Namenda in 2015. However, we must operate with the assumption that not all of our late stage programs will ultimately result in approved products or products that achieve our peak sales projections.

Accordingly, one of our strategic goals has been to double the commercial value of late stage product pipeline by 2012 through the addition of new development opportunities both license and acquired, and the advancement of our earlier stage pre-proof-of-concept programs. We have already added the first two major installments towards the 2012 pipeline expansion goal that is dutogliptin and F2695, and we continue to advance our complete development pipeline.

Importantly, our business development team continues to see interesting and commercially viable products in the market, and we have clearly demonstrated the ability to compete effectively to secure such important new products. Just to remind you, during the five-year period from 2004 through the end of 2008, we completed one co-marketing agreement, 13 product license or acquisitions, and four drug discovery agreements.

This list includes 11 products currently in development; Bystolic, which was just launched a year ago; and Savella, which we launched in May. Thus we remain confident in our ability to achieve our 2012 product acquisition goal in parallel to advancing our established pipeline.

Frank Perier

Thank you, Larry. I will now offer some first quarter sales figures for the smaller products in our portfolio. Aerobid sales, 3.2 million; Campral, 6.8 million; Celexa Brand, 4.7 million; Cervidil, 14.0 million; Esgic, 0.6 million; Europe, 17.3 million; Generic sales, 7.8 million; Infasurf, 3.2 million: Lorcet, 1.7 million; Monurol, 0.3 million; Tessalon, 0.1 million; Thyroid, 13.6 million; the Tiazac brand, 1.6 million.

And with that I'll now ask the operator if you would please start the Q&A session.

Question-and-Answer Session

Operator

(Operator Instructions). And our first question comes from Tim Chiang with FTN Equity Capital.

Tim Chiang - FTN Equity Capital

I had a question about some of the guidance numbers that you provided last quarters and sort of given the strong uptake of Savella, why you're not taking up guidance on that product today. Also, on Lexapro it looks like sales are down about 3% but you're looking for flat Lexapro sales for the fiscal year. Are you expecting some form of a rebound in the second half? Thanks.

Larry Olanoff

On the Lexapro sales we're still projecting flat sales versus last year, as I mentioned earlier in this call, the adolescent claim is just getting fully launched now and we believe that will support as well as other measures we took last year, will support an essentially flat total revenue that's taking into account this year's price increase as well as what we see as somewhat higher than projected increase in the market growth for the class as a whole.

So we're still confident in that in terms of that number. As far as Savella, granted the number we gave, initially may still appear a bit conservative, but it's still very early on in the game. While that number may, in fact, be a little higher at the end of the year, than what we had projected, we don't see it at this point reason to change our overall earnings forecast.

Tim Chiang - FTN Equity Capital

Just a quick follow-up, have you guys shifted a pretty significant amount of your marketing resources over to Savella from Lexapro?

Larry Olanoff

We've shifted some sales calls from Lexapro over to Savella, as we shifted sales calls from all of our products over to Savella as part of the early launch phase, but we believe we're still supporting all our products adequately, we still have a leadership position in terms of numbers in details in each of our categories, each of our four major product. So, we're very comfortable where we are in terms of [costs] behind these products.

Frank Perier

Tim, we're still putting what I would classify as significant investments spend behind Lexapro from both a sales force and marketing standpoint.

Operator

Your next question is from Greg Gilbert with Bank of America.

Greg Gilbert - Bank of America

Given your statements about SG&A, Frank, can we assume that there won't be a meaningful increase in SG&A until you launch another primary care product, and could that number even creep down a bit as you get through launch phase on Bystolic and Savella?

Frank Perier

We're not going to really comment on line-by-line guidance. By staying mute we basically maintain our guidance for the year. What I would say is that overall SG&A spend; we still see it essentially in line with our guidance for the year.

Greg Gilbert - Bank of America

Secondly, can you comment on inventory levels for Lexapro? It looks like they may have come in a bit or and or ASP came down sequentially. Can you comment on both inventory levels and selling price for Lexapro?

Frank Perier

The inventory levels are basically dead flat March versus June. We actually see a little bit of improvement in the price.

Greg Gilbert - Bank of America

It didn't look like we saw any benefit from the 6% price hike that was taken midway through last quarter. Is there something else going on there?

Frank Perier

When we look at the ASP on the drug, we're getting a modest kind of inline 4% increase quarter-over-quarter. Again, don't forget, we took that price increase early in the quarter, so you got about two-thirds of it in the fourth fiscal quarter of last year.

Greg Gilbert - Bank of America

Larry to what extent was or has the positive Markman ruling affected your thinking on the Namenda QD strategy?

Larry Olanoff

That a good question, Greg. We're very pleased to see the positive Markman ruling, but this is a long process, these types of litigations. We've got a lot of time ahead of us in moving that ahead. So we're still kind of carefully watching the tea leaves in terms of making a decision as to when we want to make that filing based on the litigation case. I don't think we can say anything further at this point.

Operator

Your next question is from Corey Davis with Natixis.

Corey Davis - Natixis

Back to Frank's answer about staying mute on the guidance despite beating consensus EPS this quarter, so did consensus just get it wrong and we were too low based on what you expected this quarter or is there something that we missed that will depress future quarters like milestone payments and R&D or something like that?

Larry Olanoff

Kind of the wildcard across the board is really the R&D spends, and I think even without milestones we were probably over most estimates on R&D spend. If you factor in the fact that we still have three quarters worth of milestones to go, it's about $69 million left to go. If you kind of evenly spread that, I think that should kind of help you a little bit.

Corey Davis - Natixis

Second on aclidinium, I know that this probably won't be on the market until 2013 I'd guess at the earliest, can you remind us of the IP position and how much runway you might have for the molecule beyond the five years of statutory exclusivity?

Larry Olanoff

I can't give you an exact date, but I believe we have a proprietary position beyond 2020 on this product.

Corey Davis - Natixis

The last question and I've asked this probably nine times over the past couple of years, but the fact that the majority of patients around 5 mgs of Bystolic for hypertension, does that give you an opportunity to perhaps raise the price significantly of the 10 mg dose if you get the heart failure indication.

Larry Olanoff

I think it's a good question. At this point though we have no plans to play with or modify our pricing scheme for the product. We simply go on flat pricing across the various strengths for Bystolic as well essentially across all our products. So, it's an interesting thought but at this point we haven't considered that.

Operator

Your next question is from David Risinger with Morgan Stanley.

David Risinger - Morgan Stanley

Yes. Thanks. I have a couple of questions. First of all, in terms of Savella, could you just discuss the sampling impact on the prescriptions being reported by IMS in the June quarter? Then as we look to you reporting sales for the next quarter in September, could you talk about inventory stocking of Savella in the June quarter, and whether that will negatively impact reported sales in the September quarter? I have one or two more after that?

Larry Olanoff

Regarding Savella and inventories and sampling, I think what we can say at this point it's really too early to make projections on those factors relative to what the share rise will be, and I would say that for two reasons. On the early sampling, we really have two sampling programs going on. We have a two-week and a four-week sampling process.

The four-week is based on our early start program. Those types of programs based on our experience in the past, they really take more than a few months to really impact the market in terms of both their impact on share as well as a long-term impact, which is to really take physicians and give them the experience they need to begin prescribing repetitively with the products.

So, we've been very happy with our results to-date, but we think these kind of early start programs and the general sampling as well gives us greater inroads into physicians who perhaps are slower starters in terms of adopting the product with any frequency.

Regarding the inventories, for any launch product it's very hard to manage inventories per say. What I can tell you at this point in time is that we are seeing repeat orders for the product early into its launch which, again, is very encouraging to us as well. But we're really not worried about inventory levels clearly within the first six months.

David Risinger - Morgan Stanley

Thank you. In terms of wholesaler stocking, is there any way to carve that out and tell us what that was as a percentage of the sales that you reported for the June quarter.

Larry Olanoff

Dave I think it's safe to assume that the bulk of sales reported in the first quarter, as we just launched the product in May, that the bulk of those sales are stocking sales.

David Risinger - Morgan Stanley

Okay, then just changing gears. If you could please compare and contrast ceftaroline with J&J's ceftobiprole, it would be helpful to understand your perspective on the profiles.

Larry Olanoff

It's a good question. Both products are unique cephalosporins, both ceftaroline and ceftobiprole in that they both have MRSA activity, which is very important in both that offer. The general safety experience and tolerability of this cephalosporins with a unique efficacy feature. Beyond that, based on what we've seen to-date, clearly, we're in the first of the two to establish clear efficacy in both skin and community-acquired bacterial pneumonia.

The ceftobiprole data for a number of reasons, we don't think will pass muster in pneumonia from an approval standpoint, and has not been submitted despite the fact it's been available for quite some time.

We also believe there may be some other differentiating features in terms of some tolerability endpoints as well as clearly, what we believe to be the practical use of the products in terms of the difficulty or ease of use in terms of delusional materials, and just the way the products are administered, which gives us some potential practical advantages in terms of ease of use.

So, overall, we think we have a very competitive product, and given the delay in its approval for its first filed indication, we could both be to the market in a very reasonable timeframe in terms of lack of any substantial differences in the entry of the products.

David Risinger - Morgan Stanley

Thanks. One final question in terms of accelerating the IBS-C studies for linaclotide, could you just discuss what your plans are and how much you can accelerate those two Phase III trials?

Larry Olanoff

Well, just as a bottom line kind of assessment, we plan to have the results of those studies available in the second half of 2010, which gives you a sense of the speed in terms of what we project to get them enrolled and completed, and that's taking into account one of those studies has a six month endpoint.

Part of the plan that we put into place is utilizing the fact that many of the sites that we're enrolling in IBS-C, we had previously enrolled for chronic constipation. So, we know the sites, it really facilitates the logistics of getting the studies up and running, and we're putting every effort we can into moving those patients along into the study. So, I think in the next three or four months we'll have a better sense of how we'll be able to meet those projections. But so far the early enrollment looks very good.

Operator

Your next question is from Ian Sanderson with Cowen & Company.

Ian Sanderson - Cowen & Company

First on aclidinium, can you provide a bit of color on how the kind of the relative timing of the two alternative dosing regimen trials, the higher dose and then the twice-daily, and how the timing of the combination program may fit in? Secondly, on Lexapro, do you have a co-pay rebate program in place there? If so, do you see state's beginning to prohibit these programs?

Larry Olanoff

Let me answer the second question first. The Lexapro co-pay rebate we've looked at and taken into consideration what we would call couponing programs as part of our considerations that we put into place about a year ago.

The only state to my awareness that prohibits such programs is Massachusetts. So, I would say we've had a modest effort in this regard, and it's directly related to the fact that some of the co-pays and some of the commercial plans are substantially higher than what we would consider appropriate for the patients to deal with. These plans also do not apply to Medicare Part D.

As far as the other question in terms of aclidinium, the program that we've started on the Phase III, it's really a combination of higher-dose and b.i.d. dosing. I'm really not prepared to go into more detail than that other than to say as I said on the call earlier that we started the first study, it's enrolling very well, we're projecting to have those results available in the first half of next year, and the second study, we anticipate we'll get started in the latter part of this year.

Ian Sanderson - Cowen & Company

Is there a q.d. arm in that or are they all b.i.d. dosing regimens?

Larry Olanoff

I don't really want to go into more detail than what I've said. It involves b.i.d. dosing and it involves higher doses.

Ian Sanderson - Cowen & Company

If I could ask a final question on Savella, I've heard reports that you're not sampling terribly aggressively to the psychiatry area. I'm just wondering if that's in fact the case, and if so, why not?

Larry Olanoff

We've not pursued psychiatrists typically on the call panel simply, because we don't want to get into any issues of off-label promotion. There may be some considerations for some individual psychiatrists who treat and it's clearly demonstrated that they treat fibromyalgia patients. We have relationships with some of them that are thought leaders that we use in our speaker programs. We recognize the fact that psychiatrists treat the disease, but we're being very careful in terms of avoiding any off-label promotion issues.

Operator

Your next question is from Gary Nachman with Leerink Swann.

Gary Nachman - Leerink Swann

First question on Savella. How much of the product do you think is being used in combination with other agents versus monotherapy? Regarding your share of voice, it's in the 50% and 60% range, have you noticed any shift in strategy by Pfizer or Lilly? Are they stepping up or stepping back? How is that going?

Larry Olanoff

Other than getting some verbatim back, I don't think we have any data thus far clearly demonstrating any changes by Pfizer or Lilly. I'm sure in the next few months we'll have a better sense of any changes in their strategy may be. As far as the combination use, at this point in time, we don't really have any numbers on that regard. We are out there talking about its use as monotherapy, combination therapy is a possibility, but that's a physician's decision.

Gary Nachman - Leerink Swann

One question on the inventories. You said earlier nothing on Lexapro, Frank. It was debt flat quarter-over-quarter. Is that true with Namenda as well, just wanted to make sure there were no shift?

Frank Perier

Yes, both Lexapro and Namenda were both very static right at about two weeks of inventory for each product.

Larry Olanoff

I'll just make another comment in terms of arguably the differential promotional strategies between the three companies on these products. Just to remind everyone on the call that we are the only product out there that's being promoted only for fibromyalgia. We're making a point of that as well.

Gary Nachman - Leerink Swann

Okay. One last question. The five products that you're giving to Caraco, I just want to confirm so that's coming out of sales beginning this next quarter, just give us the annual run rate of those products, and if you're getting royalties on those, where that's going to go? Thanks.

Larry Olanoff

The five products collectively that Caraco will start detailing, about 30 million will come out of various products, the Inwood products, and we'll have the royalty that will come through another income.

Gary Nachman - Leerink Swann

Okay. Is that like a double-digit type royalty?

Larry Olanoff

It depends. Depends on the product.

Operator

Your next question is from Louise Chen with Collins Stewart.

Louise Chen - Collins Stewart

Hi. Just a few quick questions. First on Savella, I was just curious if you are looking to expand the label or doing studies to broaden for other types of chronic pain aside from fibromyalgia?

Larry Olanoff

It's something under consideration but we're not at the present time pursuing any additional indications.

Louise Chen - Collins Stewart

Okay. The second question I had was with respect, as you have a big cash balance, how do you plan to use this to build your pipeline? Are you looking at a few big investments or several smaller ones? Are you looking at late stage or already commercialized products? How would you describe your investment strategy?

Larry Olanoff

Our investment strategy continues to be looking at all opportunities. We look at product licenses, product acquisitions or even with potentially company acquisitions, and we look at each on its own merit, each potential deal. We typically look at late-phase deals, some of them involve products just post proof concept like linaclotide, some involve products in Phase III, some may involve products that are already filed.

Occasionally we may see product that's already on the market. However, typically, most of our product deals have been product licenses, because they pose least risk to us in terms of the potential outcome of the product, and they've typically been products that are either starting Phase III or already in Phase III.

However, I would point out to you that we've also done company acquisitions such as the Cerexa, the tuck-in variety which allowed us access to essentially an antibiotic franchise. So far that's looking very good for us, with ceftaroline advancing and at least one other opportunity already in development which is ceftaroline 104.

So, we're quite pleased with our overall business development strategy and we continue to look at all opportunities whether they represent product licenses, individual products or potential acquisition of a product franchise.

Louise Chen - Collins Stewart

Okay. The last question is, when do you expect to complete enrollment for your linaclotide chronic constipation trials or have you already completed enrollment for that?

Larry Olanoff

The enrollment, yes. For chronic constipation, the enrollment has already been completed. We plan to report out results later this year.

Operator

Your next question is from Ronny Gal with Bernstein.

Ronny Gal - Bernstein

Hi. Good morning and thank you for taking my questions. First, regarding Namenda, there has been a few cases in the recent past where some of those multi-player generic challenges, where many players share the challenge have gone to pretty broad set of settlements as the generics companies realized it's not really worth it to fight. Have you seen an interest from the generic side in settling some of the Namenda trials and has that changed after the Markman's hearing?

Larry Olanoff

I can't really comment on it at this point. It's clearly we believe we are in a very good position post the Markman hearing and we're fully prepared to go forward with the litigation. But we remain very active in that regard, but I can't comment any further.

Ronny Gal - Bernstein

Okay. About the Ceftaroline-104, the combination with the beta-lactamase inhibitor, can you give us a little bit more details about the time line for that? I think you mentioned you just went through IND, I mean, how long before this product can makes it to Phase III of the market?

Larry Olanoff

Listen, we haven't talked in any detail about that beyond the fact we filed the IND, the first step is to conduct the Phase I trials. The 104 molecule itself has been in Phase I prior to this experience through the licensors experience with another combination. So, we already have some preliminary evidence and some PK information on that, but we need to look at it in combination with Ceftaroline. Based on those results, we could take a very aggressive going forward program in terms of development. But, we really haven't said more than that in terms of what our next stage plans will be. I think that will become more evident to us by early next year.

Ronny Gal - Bernstein

Okay. And I'm not sure if you know that, but are you aware of a similar program for ceftobiprole?

Larry Olanoff

We're not aware of a specific program that's already in the clinic in terms of a combination beta-lactamase inhibitor with ceftobiprole.

Ronny Gal - Bernstein

Okay. And last unrelated, you kind of mentioned that you calculated the NRx share in the fibromyalgia market for Savella. And I was wondering how you guys do that. Obviously given that Lyrica and Cymbalta are detailed for other indications as well. How do you guys think about your share or how do you guys think about the size, the identity of that market?

Larry Olanoff

We use a number of different sources of data to make those calculations. SDI is one of the sources. We use an additional source, independent source to try to triangulate that information. When looking at the market per se, we're looking at a combination of various classes of agents. So Lyrica, generic-Gabapentin, Cymbalta, Venlafaxine essentially a group of SSRIs tri-cyclic antidepressants and tramadol or Ultram products. Those are we see as the major categories.

Ronny Gal - Bernstein

Okay. Thank you very much.

Operator

Your next question is from Marc Goodman with UBS.

Marc Goodman - UBS

Yes a couple of questions, I guess. First of all, on SG&A I just want to make sure I understand, so last quarter was the big quarter for the Savella launch and now the $312 million in this current quarter that you're reporting, that still has some Savella in it, but it's maintenance Savella spend in there, as well as maintenance, Bystolic expense. So, going forward we shouldn't expect dramatic changes quarter-to-quarter for SG&A. That's the first question?

Larry Olanoff

I think, again, we actually just launched Savella this quarter. So you've got your first big bonus of launch spend and that may ramp up slightly over the remaining three quarters of the year. Overall, we don't -- we see the overall SG&A number for the year as being achievable.

Marc Goodman - UBS

Okay and second on R&D, is just so I remember the guidance is 575?

Larry Olanoff

575 including about 70 million of milestone expenses.

Marc Goodman - UBS

Right. So in this quarter, if you take out the 4 million, you got basically 143, which if you multiply, you know, basically another couple of quarters' worth and then you tack on the milestones, you're above the number of 575? Am I doing the math wrong? Or do you expect the run rate to change?

Larry Olanoff

We're not going through line-by-line guidance. We basically by staying silent, we've confirmed that we're in the range on earnings per share. You know, we had a very big investment in R&D this quarter. And we continue to expect approximately that 70 million of milestones.

Marc Goodman - UBS

Can you all give us the Benicar sales in the quarter?

Larry Olanoff

Benicar sales are 244 in the quarter.

Marc Goodman - UBS

And then last question just has to do with Savella. What's the counter detail that Pfizer and Lilly are out there talking about? What are you hearing anecdotally from your sales force?

Larry Olanoff

We haven't really heard much from Pfizer in terms of Lyrica, the counter detailed other than the features of Lyrica that they regarded as important. And now Cymbalta really we haven't heard anything consistent in terms of the counter detail. And they talk about Cymbalta being approved for many indications, which kind of feeds right into our promotion that's a proof of fibromyalgia only and that's where we focused. The other point they make is it's a once-daily indication versus a twice-daily indication use, which we now again don't think that this is a major stumbling block for the use of the product, it clearly hasn't demonstrated any major impairment to the uptick of the product in the first few months.

Marc Goodman - UBS

The share numbers you were talking for the NRx and TRx was that for the last week or was that the month or what time period was that share?

Larry Olanoff

Most recent weekly data, I think it's two weeks, two weeks old.

Marc Goodman - UBS

Thank you.

Operator

Your next question is from Frank Pinkerton with SunTrust.

Frank Pinkerton - SunTrust

Hi. First question is a follow-up on R&D, but more from a standpoint of understanding, as these large Phase III trials are coming through, can you just discuss what's being done in-house? What is being done maybe through outsourcing or other means, and the ability for the company to then over the next several years, as maybe there are fewer trials coming through to reabsorb without write-offs charges or other problems?

Larry Olanoff

That is a good question. We do most of our work in the US in an in-house manner. We're really not represented overseas from an R&D perspective. So we do that, at least the monitoring and field site management through CROs. We've used some CRO work to supplement some of our internal activities, but we've been pretty good about our flexible staffing overall, and we don't anticipate any problem in terms of either staffing up as necessary with the use of internal or external resources, to accommodate additional trials or do we believe that we're going to be in a situation where we're going to be in an overstaffing place, which would be uncomfortable. So we're comfortable with that.

Frank Pinkerton - SunTrust

Okay. Great. And then a specific kind of follow-up question, a lot of people have asked about Lexapro, but can you just define or try to quantify for me what we're looking at from a market size with that new adolescent indication and how do you go about tackling that. If I think of the year-over-year kind of approximate declines in scripts, can that market kind of make up for those scripts or do you need to also look for another way to try to detail Lexapro to turn that scrip trend around?

Frank Perier

Look, adolescent indication is the last new indication we anticipate for the product. We think the size of the market, approximately 100 to 200 million dollars opportunity here, as we said that in the past. I think in terms of our ability we don't project beyond next year, but our ability to continue to sustain Lexapro revenues is really driven by typical features we've used year-over-year which is market growth, the various promotional techniques we apply, dealing with managed care and price increases we take year-to-year.

So, again, all we can say at this point in time is that we project that the revenues will be flat from last year to this year for Lexapro, which takes into account what we believe now is a fairly steady trend in terms of the decrease in share that we're comfortable with projecting, and the fact that we are already seeing early signs of an uptick in the use of a product in the segment which we're now promoting which is the 12 to 17 year adolescent against the other products that are actively used in that segment. So, so far so good. I think we're comfortable that the performance to-date through this fiscal year has been very much on line with our projections.

Operator

Your next question is from Tom Russo with Baird.

Tom Russo - Baird

Good morning. Regarding linaclotide and IBS-C I know one of the trials is posted, and it looks like there are three responder analyses that are primary. Can you be specific on whether you have to hit all three of those and then remind us if anyone's analyzed or hitting Phase II?

Larry Olanoff

I don't think we'll go into any more detail from a regulatory standpoint other than, as you see posted we're looking at two real measures and then a combination of those measures. As far as the Phase II experience, we've used that Phase II experience, we've used all those measures in the past or some composite of those measures, and we used that Phase II experience to give us some level of comfort that we should be able to hit those numbers going forward. So we're not going into this with any major unknowns.

Tom Russo - Baird

I think you maybe commented in the past, but is the expectations still to wait for the IBS-C data before filing the drug at all?

Larry Olanoff

Our preferred pathway to the NDA would be to file both indications simultaneously, yes.

Tom Russo - Baird

Okay. Then just switching to ceftaroline, can you comment on when the detailed data for the pneumonia indication will be shown? Also, what we should be thinking up as a good proxy for the price point that that drug might command? Thanks.

Larry Olanoff

It's probably too early at this point to predict any kind of pricing on the product. We would like to price it reasonably in the sense that we would see this product being used as cared first-line use product for patients coming into the hospital in this category of diseases as opposed for being reserved simply for ICU use. I think that's the best guidance I can give you at this point. I'm sorry, what was the other part of your question?

Tom Russo - Baird

I can't recall if you've already said when you are presenting detailed data from the recent positive studies in pneumonia?

Larry Olanoff

I'm not certain whether we're going to be able to get anything in later this year. As you know there are only one or two venues that you can present information. We might try to get something in as early as this fall in the late-breaking but more likely you'll see the data publicly in the following fall.

Operator

Your next question is from Scott Hirsch with Credit Suisse.