Alkermes Plc (ALKS) CEO Hosts R&D Day (Transcript)

Jul.19.13 | About: Alkermes plc (ALKS)

Alkermes Plc (NASDAQ:ALKS)

R&D Day

July 17, 2013 13:00 ET


Richard Pops – CEO

Rebecca Peterson – SVP, Corporate Communications

Elliot Ehrich – Chief Medical Officer

Bernie Silverman – VP,Clinical Science

Mark Stejbach – Chief Commercial Officer

Marlene Freeman – Harvard Medical School, Clinical Psychiatrist


Terence Flynn – Goldman Sachs

Michael Schmidt– Leerink Swann

Pamela Bassett – Strategy Signal

Cory Kasimov – JPMorgan

Anant Padmanabhan – Cowen & Co.

Steve Byrne – Bank of America/Merrill Lynch

Dave Risinger – Morgan Stanley

Mario Corso – Mizuho

Rebecca Peterson

Would our CEO please take a seat? Okay, we're good on the webcast. Everyone, thank you very much for joining us today. We're very excited to have you. And I think you will see today how productive Alkermes R&D engine really has been. And we will be unveiling some new programs that Richard will talk about in-depth, and running through some of our later-stage programs as well.

Before we begin, however, I need to remind you that we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Inherent in biotechnology, there are risks. We try to articulate these risks in our filings and encourage you to review them.

So today, Richard will kick it off; talking about our approach to R&D and what makes it unique and different and the fact that it's really driven by patient needs and truly is patient inspired. And hopefully, by the end of today, you'll see frankly how productive the R&D engine has been.

Dr. Elliot Ehrich who leads and – he's our Chief Medical Officer, he leads all of our development activities. He will put forth a lofty ambition about rethinking psychiatry and how we're doing so vis-a -vis opioid modulation. And he'll explain that a little bit more, and he'll also use ALKS 5461 as an example of how we are able to leverage our unique insights and how we run clinical trials frankly very fastidiously in order to successfully run studies in the CNS area.

And we're pleased to have with us today, Dr. Marlene Freeman, who is a Clinical Psychiatrist at MGH and Harvard Medical School. And she will help us give some real patient perspectives and talk about the disease and how she currently treats it, and why new treatment options are needed. Dr. Freeman also has expertise in running clinical studies, so I think that will be helpful insight for all of you and as you try to evaluate companies and their programs and pipeline.

Then we'll have a Q&A with those three folks, and we'll switch gears then, we'll take a brief break, and then Dr. Bernie Silverman will talk about ALKS 3831.

And we're going to talk about that program more in-depth today than we ever previously have. And really, how we're looking at leveraging dual pharmacology to really address the needs of two distinct sub-populations within schizophrenia. And I think both are really important opportunities, both from a commercial perspective, but more importantly for the patients.

And then our Chief Commercial Officer, Mark Stejbach, who for many of you, this is the first time you'll meet Mark, but he has been running the VIVITROL commercial efforts, and has put forth a plan. And frankly, folks are in motion getting ready for the launch of Aripiprazole Lauroxil. We'll then have another group Q&A, and some closing remarks by Richard.

But we think it's an exciting day, it's sort of jam packed with new news and we invite your interaction and we're very pleased to have you here. So without further ado, I will hand over the podium to Richard.

Richard Pops

All right. Thank you, (Harland) for the applause.

Okay, is the webcast good? Are we – the audio is fine?

Rebecca Peterson

Good to go.

Richard Pops

Fantastic. Okay, hi, everybody. Are you ready? We're going to cover some ground now. I couldn't be more excited to be here today and welcome you and give you a glimpse of some work that's been going on for years within the company, we're opening the curtain on work that's been happening, that we've known about, but you haven't known about for quite some time.

It's no secret, right, that we have the ambition of building what's going to be one of the next major bio pharmaceutical companies. And what you're going to hear about today, is an R&D engine that is incredibly distinctive. It's differentiated because it derives from, evolves from many, many years of arduous development work that we've been doing at the highest level of sophistication with pharmaceutical company partners and on our own.

It's also incredibly patient focused. Almost everything we do, has, at its core, a perspective of an individual patient taking a medicine for long periods of time.

The other thing you're going to see is that it's incredibly productive. We're in that magic moment in the company's history, where the people and the experience and the technology and the IP and the culture really start to gel. And it's a really heady time for us at Alkermes. So, let's start with kind of the highest conceptual level, and that's our interest in chronic disease.

So in this figure, we’d plotted diseases, as a function of a number of patients suffering from that disease and the number of treatments that might be available for that disease.

So historically, you would have thought the big pharma was happy in that top-right quadrant. Deal with the major chronic diseases, cardiovascular disease, diabetes, asthma, and the like. Whereas biotechs, origins and much biotech action still stay in the lower left, in orphan indications, where often, it's the first medicine ever developed for a patient population.

What's so interesting is pharma's migration now down into that space, attracted by the freedom of pricing, and the more favorable regulatory environment, often.

But – well that – it may not even make sense for pharma to do that. It neglects the fact that the top right quadrant is still where the burden of disease lies.

These are millions of people, these are the diseases that are going to break the bank of this country, and other counties, and this is where there's still so much unmet medical need and economic opportunity. So, Alkermes is running against this current. We're really excited about that top-right quadrant, and we're quite excited about playing in places, where there are big diseases, with unmet medical needs that we still can improve patient outcomes.

But we're taking a biotech approach to this, in a sense that so you'll hear today most of the programs that we're working on, we're looking for sub-segment or further refine the definition of a fairly – of an incoherent definition.

Schizophrenia, what does it mean? There's all kinds of Schizophrenic patients.

And by picking specific subsets and creating medicines that are directly focused on solving particular needs for those, it changes the risk profile, it changes the regulatory interaction, and I think provides us with a really broad opportunity.

This, I think, is a critical differentiating feature in this company. We're playing in big markets with big drug opportunities using modern science, and it's a theme you'll hear throughout the day.

So what do we do? Here's what we do. We're making now, valuable new medicines. And the words are chosen deliberately. These drugs need to be valuable, and they need to be new.

This is essentially a checklist that we run through when we think about our drug development programs and advancing programs in our development portfolio.

First, we focus on specific problems with patient’s experience living with chronic disease because taking a drug for a long period of time is taking – is different than taking a drug on an as-needed basis.

We identify at the outset, the general parameters of the value proposition for key stakeholders. We don't have to solve it at the outset, but we have to be cognizant of the value proposition for everybody involved, not just the patient, and the caregiver and the provider, but the FDA, the payers, and the whole ecosystem that's affected by the new medicine.

A critical point that Elliot will talk much about is that we build on a foundation of insight derived from known pharmacology and clinical practice. You will not see us exploring entirely new pathways.

We think there's huge opportunities in leveraging what's known – a vast scientific understanding and clinical understanding, but tuning it, improving it, not a subtle way, we're looking for significant increments of value, but we're building off of known pharmacology.

Critically, you'll see we're embodying these discoveries – these insights in new patentable, differentiated medicines. IP is s corner stone of what we do and that's formed by years and years of prosecuting, defending, and articulating IP positions.

We test our medicines early in rigorous human clinical trials. The human is a species of interest to us at – in – from a laboratory perspective. We want to move into man as fast as we can. We can because these are often precedented targets. And we ask tough questions, early.

We believe in bio statistics, we believe in size, we believe in data. And you'll see, when you have the financial resources we have now, we don't have to postpone the tough questions, we ask the tough questions early. And with data, it gives us the ability to continuously re-evaluate the portfolio as data emerge. We have multiple elements in the portfolio.

We are agnostic about the individual elements, we're going to advance the best ones that make the most difference for patients, and for our shareholders. And that's a brilliant place to be because you don't have to round up when you're looking at data sets in that case.

So, part of that is being rigorous about these tough questions. And I think we pride ourselves now on asking the hard questions early.

For example, does it represent – not just innovation, but useful and important innovation for patients? There was a time in the biotech world where innovation per se was enough. If it was different, it would be approved, reimbursed, and everybody would be happy. That's not the situation today, as you all know, as well as anyone.

Does FDA want to approve this drug? Does it address an important unmet medical need from the FDA's perspective? Is it consistent with the current regulatory climate because we all know, swimming upstream against FDA trends is a very, very difficult thing to do.

Are the physicians motivated to prescribe the drug? Does it make their life easier, or harder? What are the economic realities of practicing physician contemplating the use of this new medicine? Does it make their practice harder, or easier? And what will the payer's reaction be? Will they create obstacles with the use of this medicine? Will they embrace this new medicine, or will they require data set that are entirely different from those necessary to gain FDA approval?

This is the real world, and you have to deal with these things early on. And in our experience, what we find is many younger biotechnology companies and many pharmaceutical companies aren't asking these questions as early in the process as they need to.

So, what do we do? We have this foundation of drug development experience that has been – that's been forged over many years of working with advance formulations of important existing medicines. That's been very productive. That's yielded RISPERDAL, CONSTA, INVEGA SUSTENNA, VIVITROL, AMPYRA, BYDUREON.

These are important drugs. They're singular drugs in their classes and they're helping many, many patients, and they'll continue to do so in the future. And they provided almost the intellectual and experiencial base then to do what we're doing today.

But to be very clear, what we're doing today is, we're making new molecular entities. We're not doing drug delivery anymore; we haven't for some time. But we're informed by the logic, by the reasoning that led to the development of those drugs, and we're creating new molecular entities.

Everything you'll hear about today is an NME that has important regulatory implications, IP implications, partnering implications – the whole gamut. It's a transformation of the scientific capabilities of the company.

So, today, we'll give you a way of thinking about these NMEs in three discrete bins, if you will.

One is the idea that we're making pro-drugs, novel pro-drugs. The other are what we call orthogonal combinations, and I'll define that in a bit.

And the third bucket here are single agents; entirely novel molecules unprecedented, that incorporate the learnings from our labs.

You know about three of these. You know about Aripiprazole Lauroxil, you know about ALKS 5461, and ALKS 3831.

And today, you're going to learn about three new programs, our MMF prodrugs – ALKS 7106, and RDB 1419. RDB will grow up to be an ALKS and it's just hasn't gotten there yet, but it's our first biologic. Okay? So, let's take these in turn.

The novel prodrugs are new molecular entities that seek to capture the established benefits of blockbuster medicines, but improve patient outcomes or experience, again viewing it through the prism of the patient taking this disease chronically – taking the medicine chronically.

The poster child for this, of course is Aripiprazole Lauroxil, which is a novel, long-acting injectible prodrug of Aripiprazole for Schizophrenia.

We're not looking to make a better pharmaco for the Aripiprazole, it's a brilliant drug. What we're looking to do is bring the benefits of long-acting injectibles in a patient population that could benefit from them, with a range of doses and a very user-friendly presentation for the clinic, for the nurse, for the patient.

So, it leverages everything we've done with CONSTA and SUSTENNA, our knowledge of that market, the proven safety and efficacy of Aripiprazole, but embody the new molecule – a new product that can deliver significant value to patients and to payers.

Same story is true with our MMF prodrugs. We've been working on this for a while, and I'll show you some more information on this. In this case, we're talking about making novel oral products of monomethyl fumerate, which is the active component of BG-12 or TECFIDERA for the treatment of multiple sclerosis.

And the idea is to build on what TECFIDERA is doing in the market by creating a once-daily dosing product that might even be better tolerated than TECFIDERA. And I'll tell you a bit about that.

Before I describe orthogonal combinations, the definition is in order.

So, orthogonal means, in geometry means right angles, but it also means this idea of the -- the characteristic of being independent or non-overlapping.

The idea of drug combinations is pervasive in the pharmaceutical industry, of course. And the schematic on the left represents the general idea of a combination drug; three HIV agents directed toward the same target, put into a single tablet or capsule to improve convenience in compliance for patients.

Schematic on the right is the cartoon about what we're doing; the idea of two medicines with completely discrete, different mechanisms of actions yielding something surprising because of the dual pharmacology.

These are orthogonal combinations. And there are really two examples of those right now. So, the idea is creating brand new medicines through new insights realized to do a pharmacology. So, as an example, 5461; you'll hear quite a bit more about this today.

Who would have thought that the combination of a mu opioid partial agonist for pain and addiction, when you couple that with a drug for addiction, would yield a new treatment for depression that was driven by the insight that we could de-couple the anti-depressive properties of an opioid from the addictive potential in opioid.


3831 – a combination of one of the most important typical psychotic products with a reward disorder compound, a new antagonist, could yield a broader spectrum anti-psychotic that has the ability to attenuate weight gain in patients taking olanzopine and provide a specifically targeted treatment for the dual diagnosis patient.

This is important insight. It's novel, and it's potentially has huge implications for patients with Schizophrenia.

Finally, the single agents. So this is kind of the ultimate embodiment of all these understanding is in brand new molecules, be they biologic or small molecule, that incorporate these discoveries that we've made. And two examples today, you'll hear about that have been incubating for a number of years.

7106 for pain. This is a small molecule MME that derives from our opioid modulator platform. And its profile is so interesting because it's inherently less abusable and less prone to overdose death, not because of abuse deterrent features that are built into the dosed form, because of the inherent properties of the molecule at the receptor in the brain.

RDB-1419 is our first biologic in advance for cancer. This is an immunomodulator, based on IL-2 and its receptors, which is ideally suited for using combination with cancer agents, including the newest, most exciting cancer agents like the checkpoint inhibitors. And we'll tell you more about that.

So, the common thread among these agents – is what I said at the outset – the idea of building on proven pharmacology, adding real science to it, putting these in dosage forms and in development programs that can demonstrate value and moving as aggressively as we can to call this portfolio and advance the most important ones.

These have made it. And this – what's so cool about this presentation is, it's not aspirational, it's not theoretical. Often, biotech companies say, “This is what we'll do when we grow up.”

We're looking backwards. These things have – these have happened. These drugs are now moving into later stages of development as they move into human clinical trials.

So, let's spend a few minutes on the newer ones. We'll start with the MMF prodrugs.

In each of these cases, what I'm going to do, is I'll show you the logic that drove the program – some of the data. But, also, we'll show you the IP strategy that supports them because you'll see that the IP strategy is different in each case, depending on the circumstances and the environment that these agent will be moving – that we will be moving into.

Okay. So, MMF prodrugs for the treatment of MS.

The product concept. A novel prodrug of MMF that differentiates from TECFIDERA.

So, differentiation is important. It's not just having another agent that can compete in burgeoning market place, which is – that's a good enough reason, but we actually, we set the bar higher, we want to differentiate. And I'll explain why.

The approach is to use our proprietary prodrug, medicinal chemistry capabilities, which I think are increasingly demonstrated now, plus our oral formulation technologies. These two mesh together brilliantly.

If you think about development of product for a specific delivery system, then you have a way of modulating the PK and the PD of a drug in many – with many degrees of freedom.

So, the potential points of differentiation are once-daily dosing versus twice daily. Minimal GI side effects, as you know, TECFIDERA has some GI side effects – flushing, food effect, and also, certain pharmaceutical properties relating to the handling, manufacturing of the API or the drug product itself.

So, to level set, everybody – and I'm sure you all know this. TECFIDERA is dimethyl fumarate.

So, in the structure, on the lower left there, dimethyl fumarate is a very simple molecule; it's carbon backbone with the methyl group on the left and the methyl group on the right.

But as you can see from the product label, after oral administration of TECFIDERA, dimethyl fumerate rapidly becomes monomethly fumerate. So, the methyl group on the left has been replaced by hydrogen, and that's MMF. That's the active moiety of DMF.

So, we have been focused on making prodrugs of MMF because it's the important after biologically.

So, it's a simple concept. The chemistry turns out to be complex, and that's why we end up with IP. But the concept is simple. This is in vitro chemical conversion. You start with one of our analogs, 1559.

At the beginning of the experiment of in vitro, 100% of the material in the well is the prodrug. But you see reliably, over time, that converts, and what comes up is the red line which is MMF.

So, you're looking for rapid quantitative conversion, without other intermediates of the prodrug into the active moiety. And that's what we've done.

So, what we're thinking about then, marrying it with this idea of oral formulation technology. This scheme just sets up a schematic – and this isn't actual data, but you'll get the point.

If you take TECFIDERA twice a day, which you do, you get plasmic concentrations that looks something like this – the rise, and then they'll fall back to baseline. Take another dose, they'll rise and they'll fall back to baseline.

So, the combination of a prodrug and a formulation can do a couple of things.

Number one, the easiest increment for us to consider is another twice-a-day dosing regimen that might have clipped peaks and longer tails. So. you get a smoother profile that can eliminate some of the C-max associated toxicities.

The other thing, of course, is you can think about making once-a-day medications as well. So, we have the tools to do this, and that work is underway. And that's what we're doing in this program right now.

The IP, in this case, is really specific and fairly narrow. MMF is an old drug, DMF is an old drug. Biogen is out there with a major drug, other people play in this space.

The goal here from an IP strategy is to focus on patent protection of our molecules, and freedom to operate. And that's what we think we've achieved; we have composition of matter patents filled, which provide protection until 2034.

It covers multiple compounds. But interestingly, it doesn't cover thousands or millions of compounds; it covers just those compounds that we think are relevant to the development program. You’ll see that distinctly different in certain – or other development programs.

But we also have filled method of treatment claims in MS. And as I said before, we anticipate it as we mesh the oral formulation expertise with the prodrugs, will yield novel IP in the specific embodiments that will be the ultimate product concept itself. So, this is a very Alkermes kind of informed IP strategy.

And the current status of this program is that we have two lead candidates advancing. And we're going to play to win here. So, the formulation work focused on once-daily dosing is underway, the first scallops are completed, toxicology studies to support the IND filling are underway, and we'll put these in demand next year.

And what's so important about this is that much like Aripiprazole Lauroxil, the first clinical trial is actually the money study because in that study, you look at the conversion of the prodrug into the active moiety, it track the PK, the PD, the tolerability, bio availability. All the things you need to know; you know them early.

So, we consider a major de-risking step for us and for you, for everybody observing this program. So, we're obviously quite thrilled to be moving forward with this, we think Aripiprazole Lauroxil provide a little bit of experience that helps inform the way we go.

Next one. Topic change. We're now moving to pain. 7106.

So, we start with the current reality; the growing opioid crisis. The prescription opioid abuse problem is something we at Alkermes, because of our work with VIVITROL, because of our other work, we've been living through this for the last several years, and watching this tsunami build of medical importance and also public sentiment about the growing opioid crisis.

L.A. Times – “Drug death now outnumber traffic fatalities”. CNN – “Let's end the prescription drug death epidemic.” Wall Street Journal – “The prescription pain killer epidemic”.

Interestingly, what FDA says in their most recent guidance for industry, which came out in January. They say, “Most abused deterrent technologies developed today are designed to make product manipulation more difficult, or to make abuse of a manipulative product less attractive or rewarding.”

These are gelling agents, crush proof technologies; the idea of wrapping around abused deterrent technology. But they make a critical point which is, these technologies have not yet proven successful at deterring the most common form of abuse, which is swallowing a number of intact pills or tablets.

So, the way you abuse these drugs, you just take more of them, and there's nothing in those ADT technologies that really address the principal root of administration, both for abuse and for sudden death. People die from respiratory failure from taking these potent analogs, in overdose quantities. And they die.

So, the idea of 7106 is building off of our extensive understanding of the opioid system, which Elliot will spend much more time on in the next talk.

So, the concept is a safer oral opioid analgesic with intrinsically low potential for abuse and overdose death. Intrinsic. Okay? It's not a wrap around.

The approach is to create an opioid modular, without ADT, rationally designed, so it has a limited or a sealing effect at the receptor level and wrap an entry into the CNS.

For pain relief, we want these drugs to get in the brain fast, but in the brain, to have an inherently limited potential for overdose or abuse while still above a threshold for powerful analgesia.

And we have a great amount of data on this. We're quite excited about showing you. I'll show you just a couple of snapshots. There's infinite ways of showing these types of data.

But a couple of important points. We can make a compound. 7106 is more potent than morphine, okay? 7106 is more potent than morphine. This is a simple inflammatory and pain model in rats.

ALKS 7106 – if you can't see in the back of the room – is dosed at 0.1 milligrams per kilogram, compared doing this assay morphine at 3 milligrams per kilogram. You see – and equally potent in reducing the pain in rats. And it's about 30-fold more potent in this assay.

But here's actually the most important thing I think; the idea of the sealing effect.

In this plot, we're plotting concentration of the test agent against neurotransmitter release in the brain. And you see buprenorphine, which is a partial agonist quite potent that's why it fits on the same scale, we chose that one, and morphine off to the right, which is a couple of logs less potent.

But the principal of distinction to notice is that as you give more of those – more traditional molecules, you get more neurotransmitter release. There's a reward to take more.

But over a thousand full range of doses with 7106, you don't get any more neurotransmitter release. That's the whole idea of intrinsically limiting the abuse potential and the overdose death toxicity.

So, the IP status on this is different than you would have seen with MMF because it's newer; there's more discovery here. It's a broader IP strategy to protect compounds and methods.

7106, as a specific embodiment, already has an issued patent. It takes it through 2025 without extension, and new methods of treating pain applications are pending.

Current status. Some we've done extensive in vitro and in vivo characterization of 7106. It's being scaled up further. It's already been scaled up ones. IND-enabling studies are underway. And again, we'll in the clinic next year with this in a very similar motif, right?

In an early study in pain, contracted with Alzheimer's disease – in pain, you know in the first study, analgesic effect, abuse potential, tolerability, dose range, PK, viability, all the critical parameters. This is very well traveled path, from a regulatory point of view. There's a pressing need. The regulators want to address this problem. We know the assays. It's a very, very straightforward program for us to run.

Okay. This is the biggest topic change now, okay?

Just when you thought it couldn't get more bizarre, you get the ALKS Immunomodulator Program. And this program is actually incredibly logical. And I'm going to take a little bit of time to step you through to see why it derives so logically from the things we've done before.

So how do we get here?

You recall, a few years ago, we announced a deal with Exceleron that we called “medifusion”, which is focused on hyper glycosylization of protein to extend their circulating half life; the idea of making biologics, important biologics into better drugs for patients by changing dosing regimen.

That actually led to quite an interesting scientific meander. This resulted in two different paths that run.

The top – we're not going to talk about, which are other protein engineering approaches to improve half life of proteins; someone which we're working on now, we're not going to disclose this today.

The other is a platform that's completely removed from half life extension called “Picasso”. And we have a number of things going on with Picasso. And the one we're going to talk about today is 1419.

And in this embodiment of the Picasso technology, we're looking at creating a novel immunomodulator that enhances tumor killing t-cells. And essentially what this is designed to do, is realize the original potential, biologic potential of Interleukin-2 and its receptors.

So, Interleukin-2 PROLEUKIN, the idea of a superior product to PROLEUKIN because it's actually a different product in PROLEUKIN. It actually has a different behavior in vivo. And given the way that the checkpoint inhibitors in the other side of the equation in cancer therapy is evolving, the idea of having – on something on the gas pedal as well, which is the host immunity through immunomodulation, be this perfect complement to many of these new emerging therapies.

So, the brief tutorial on PROLEUKIN is that Interleukin-2 exerts its effects in vivo by interacting with two different categories of receptors; the intermediate-affinity receptors, and high-affinity receptors. And those are distributed on different cell types. And so what Interleukin-2 does is it interacts with these different cell types, but the preferential interaction of course for the higher affinity receptors.

It turns out that the CD8+ cells and the natural killer cells on the top, are the cells that we want to expand in immunotherapy. And the ones on the bottom, the higher affinity receptors, have the more deleterious effects, both in the lung endothelial and also what they call as T-reg cells, which down regulate the good cells; we want the natural killer cells.

So, the simple idea – the simple idea – and you see how complex the embodiment is – but the simple idea was, can we shunt the profile of an immunomodulator to be more toward the cells we want, and less toward the cells we don't want. It's a pretty idea – and a pretty cool idea. And if you could do it, the implications are powerful.

IL-2 is an approved drug with a big black box warning. And it's limited. It can evoke very durable responses, as phone numbers of patients, but it comes at a very high price. And the black box talks about capillary leak syndrome and things like that.

So, our picture of this – this is the motif, you can think about it as we thought about Picasso, is that these two ribbon diagrams represent those two classes of receptors; the intermediate-affinity receptors on the left, and the high-affinity receptors on the right.

The difference between the two is a single polypeptide called the alpha chain, which distinguishes between the two. Otherwise, it's the same. And IL-2 binds happily to both, but with a higher affinity interaction on the high-affinity receptor because the alpha chain confer certain conformational changes that help it lock into that receptor. So, our reasoning was pretty straightforward.

Why don't we bulk up and burden IL-2 by linking it to the alpha sub chain. If you did that, it would have trouble fitting into the high-affinity receptor, and it might increase its affinity for the low-affinity receptor.

From a molecular construct point – that was trickier than it sounded – these are the two molecules that we're talking about, oriented in space. This is computer generated.

IL-2 on the right, and the IL-2 receptor alpha chain on the left – when they're bound, that's kind of how they sit together in space. From the molecular biology scenario, you'll know what I'm getting to. But for the none, it's pretty simple.

The ends of the IL-2 molecule, the red molecule, the C-terminus and N-terminus sit out there on the left in space next to each other. Whereas the end of the receptor alpha chain sit, as you can see, C and distributor across the molecule.

Because of the physical proximity of the IL-2 C-terminus and terminus, what we did with Picasso is called “circular permutation”. So, we linked those two, and we actually create a new opening on the IL-2 molecule with the C-terminus that's much more proximate to the N-terminus of the alpha receptor. Then, we linked those. And that creates a brand new polypeptide; that is our 1519 or 1419.

So, this thing, is actually a natural molecule than unnatural natural molecules. It’s oriented and spaced the way that you would expect the two molecules to be oriented and spaced, but it never existed before. And indeed, it binds with very high affinity to that intermediate-receptor, and it doesn't really fit into the high-affinity receptor very well anymore.

But when we talk about precedented biology, when we talk about building off a known pharmacology, this is just doing it with biological tools, as opposed to small molecule tools.

And the proof is in the pudding, it's really interesting. If you look at on an assay of affinity to the intermediate receptor on the left, and high-affinity receptor on the right, it did exactly what you expect it to do; we shifted the affinity for the intermediate receptor by 10-fold, so that alpha chain makes it click on 10-fold better than it would have before. And on the right side, the high-affinity receptor, we shifted that curve out 100-fold.

So, that confers 1,000 fold more selectivity for this receptor, and the you see it in the actual in vivo, you see the expansion of the cell types that we care about, and less expansion of the cell types we don't care about.

And the results – you don't even need to show this slide but you do it for formal completion of this thing – is that in the tumor model, it kills tumors. And it should because it's IL-2. It's an IL-2 type construct, but it's a better IL-2 immunomodulator. That's why we're moving this in demand. It's precedented, it's logical, it's highly patented, and it's incredibly innovative.

So, the IP status of this, is the broadest of them all, right? This is a new platform. We have a broad patent strategy to protect Picasso, as well as the individual product entities. So, we filled that patent, we have a composition of matter patents filled as well that will give us protection for a long, long time.

So, those are the three new programs that we're moving along. This one, is moving quickly. It's biologic. We've scaled up. In Wilmington, Ohio, we now have a pilot biologics facility now; it's producing protein. We'll be conducting the scale-up of that through the next several months, and doing the IND-enabling studies through calendar 2014.

Okay. So, we're going to finish here and we're going to say, in a simple matrix then of developing drugs in our world, risk on the x-axis return on the y-axis. Traditionally biotech has lived higher risk, higher return. That's why we do it, right, because we see that it's risky, but we feel like we can attenuate the risk through insights, through the science.

Alkermes has always been interested in this top left area. We don't want to give away any of the idea for high potential return but we like to figure out ways, based on precedented biology, to mitigate risk to some extent. I think we're doing a good job of occupying that space.

And if we blow that up – what's so interesting about this portfolio now that you see, it's comprised of six different molecules, is that it's expansive, there are very little correlation between them, and it's designed to move quickly. So, Aripiprazole Lauroxil is a great example.

We always had a pretty good sense of the economic potential of a long-acting Abilify. But in a single clinical trial, we mitigated a significant amount of risk. It was never a particularly high-risk program, once we came over the right molecule, we believe – touching wood. But in a single study, we can move Aripiprazole Lauroxil to the left on the axis.

5461 is slightly different. 5461 was always new. It was more new concept, decoupling the addictive potential of an opioid from its anti-depressive. But in that single Phase II study – it’s conducted correctly – we mitigated a tremendous amount of risk and we actually elucidated much of the commercial opportunity for 5461 because of its tolerability, it's dose, it’s power, the magnitude of its effect, its speed of onset, all kinds of things that you'll hear more about.

And that's the way the whole portfolio is going to play out – 3831 in Schizophrenia, 7106 in pain, the MMF prodrugs, 1419.

If we designed the first early experiments correctly, you can do an enormous amount to figure out what the ultimate economic value is of this portfolio.

So, I'm going to finish there. This is an attempt to kind of capture holistically, not just the individual elements of what we're doing, but also the organizing principle that makes them all part of our portfolio.

So, thank you very much. I'm going to turn it over now to Elliot. He's going to take you through specifically 5461. But before that, a little bit more sense of how we do what we do around here.

Elliot Ehrich

Thanks, Richard. Thanks, Rich, and thank you all for attending here today and those on the webcast. It's super exciting to be here, as we are now raising the curtain and talking about what we've been working on over these past couple of years.

This slide right here is the crux; this is the transformation of the company moving from advanced formulations of existing molecules into new molecular entities. And we built a great R&D foundation, with advanced formulations, we got a ton of experience, but the clinical needs that we're addressing now with our drug candidates demand new molecules.

So, how do we get here? Well, we took a distinctive R&D approach, with two elements that comprise our drug candidates and our development approach.

In terms of our drug candidates, we've been working in depression, in pain, schizophrenia, addiction, over the past decade or so, and that’s given us new insights; insights that others don't have, in terms of these diseases.

Secondly, we're building on validated pharmacology. Rich mentioned this in his presentation. This is critical to our success. And it’s, by no means, the norm of what's taking place in the pharmaceutical industry today.

And, then, finally, we have this great expertise that we built in physical chemistry and formulation science, and we leverage that as we build our drug candidates.

In terms of our development approach, as you heard, we – I asked the critical questions early. We want that information. We want to know exactly how to direct our programs. If there's information that we don't like, we can stop a program. And, so, we design our studies carefully to get those answers early.

Finally, we're fastidious, fastidious, fastidious, about data quality control. This is absolutely essential, particularly in CNS trials.

So, here we are, going from advance formulations, to new molecular entities. We think about those in these three categories; the prodrugs, the orthogonal combinations, and single agents.

What I'm going to do is focus on our opioid modulator platform and that recent strikingly positive Phase II data with ALKS 5461 in depression.

This is psychopharmacology over the past 30 years. The monoamines; serotonin, norepinephrine, dopamine. That's basically it. And there's been some good medicines that have come out, but many patients don't respond to these medications, and in fact, a majority of patients get an insufficient response. So, we desperately need new mechanisms of action. But the industry has largely been stuck in this area.

Okay. So, there's been some work in GABA; some progress there. And there's been some recent highly publicized work in the glutamate area, the mGluRs. But frankly, the glutamates have not been validated, and there's been some very spectacular and well-publicized failures. So, again, we've been stuck.

Alkermes – we've been interested in the opioid system. So, why is that?

Well, first of all the opioid system is highly validated pharmacology. There's no question that opioids have behavioral effects in man. The real question is, can we leverage that? Opioids have had the issue or do have the issue of abuse and addiction, and how can you get around that?

Well, we're interested in it and keep that interest because of the power of the system. The opioid system – one way of thinking about it is it’s sort of a super controller or master regulator of neurotransmission; the opioid system regulates transmission of all the neuro, all of the monoamines, it regulates GABA transmission, and it regulates glutamate transmission. As such, opioids play a key role in multiple psychiatric disorders.

But it's not just the number of transmitters that the opioid system affects, it's also where and how. For example, opioids will raise serotonin in certain areas of the brain like the frontal cortex that are involved in mood regulation, but they don't affect serotonin in other parts of the brain.

Contrast that, for example, of an SSRI – SSRIs will uniformly raise serotonin throughout the brain in places, where it's desired, but also in places where it's not desired, and that can cause side effects. So, again, the opioid system is pervasive, but it's also highly controlled.

So, how do we lock that power? If we get – a lock to power to the opioid system, we thought, “Boy. We could get some really special important medicines.”

Well opioid receptors are GPCRs, and GPCR science has evolved tremendously during the past few decades. They are initially thought to be very simple on-off switches controlling cell signaling. The reality is that there's much more nuance in that, there's a lot of complexity in varying ways in which these receptors can signal, in fact complexity that provides us with the opportunity.

But not only does the science evolve, but the tools have evolved as well. And at Alkermes, we've been using state-of-the-art or modern tools to look at receptor engagement. We have tools looking at sub cellular signaling. We also have tools that looks specifically at regions of the brain and looking at what types of neurotransmitters are released.

We're using these tools on our large novel opiate library. This is a very large structural proprietary library. And we're beginning to learn quite a bit, including, most importantly, that you can decouple, delink, or decouple the addictive properties of opioids from important therapeutic effects.

Let me just drill into this a little bit.

So, we start with our opioid library. So, proprietary opioid library contains millions of potential structures. We interrogate that library with our – with modern tools and we come out with new insights, in terms of our areas of interest, whether with pain, depression, or word disorder. We use those insights and then select new molecules out of that library, and it's a bit of a recursive process.

The output is two-fold.

One, we see – we derive new chemical structures. And these are the additives that we're most interested; and these are structures that we can derive IT on and that we can bring forward into the clinic.

But what's cool about the opioid system is they've been around for a long time, and their molecules that have gone in to man, there are molecules have been evaluated by regulatory agencies and some on the market.

But they were all – many – a lot this work was done – were evaluated very older in tools. And as it turns out, if you take some of the older molecules, assay them with modern tools, you learn that the prevailing wisdom or how these molecules work, it's just simply wrong.

And so, again we're developing further proprietary insight that we cycle back in terms of selecting molecules so that we can bring it to the clinic with a high degree of confidence that they will be successful and do what we want to do.

So, what's our ambition? Our ambition is very lofty; we're rethinking psychiatry. We want to create powerful new medicines. We're exploring and we're using state-of-the-art rigorous clinical trial methodologies to maximize the probability of success. So, again, we want to harness the power of the opioid system for patient suffering from serious clinic psychiatric disease.

And as Richard very often reminds again, this isn't aspirational. We've done this. So, I’m going to talk a bit about what we've done in pain. You've heard about – from Richard – what we did – have done in – or I guess we’ll give you –in depression – you've heard from Richard about what we've done in the pain area, and Bernie coming up later; he's going to talk on schizophrenia.

But that's just the beginning of the list. Bipolar disease, OCD, PTSD and other conditions, all of this have opioid play a key role in the path of physiology. So, I think from that perspective, our work is just beginning.

So, let's focus it on major depressive disorder. This is big. This is a big issue. They're about 10 million or more patients now in this country taking antidepressants. But the real crime here is that about two-thirds of these patients are not getting a sufficient response from this therapy. You're going to hear more about this from Dr. Freeman later on.

So, there's an enormous number of patients, who are not getting what they need from current therapy. And this, frankly, is a screaming opportunity for Alkermes.

Going into this program, we had a very clear hypothesis, and we start with the pharmacological precedent that opioids are known to have beneficial effects on mood. No question.

But it's our hypothesis, based on our insights, that new agonism that drug high or euphoria are neither responsible nor necessary for the antidepressant effects of opioids and that a non-addictive opioid modulator will demonstrate efficacy in the treatment of depression.

So, to address this hypothesis, we created ALKS 5461; our opioid receptor modulator. ALKS 5461 starts with buprenorphine. Buprenorphine is a partial new agonist plus, I call it – it has activity at multiple opioid receptor subtypes.

To that, we marry ALKS 33. ALKS 33 is our proprietary full mu-antagonist.

Now, in this kind of a combination, you can't use any new antagonist. These are being delivered sublingually. So, what – so, that's a requirement of buprenorphine.

So, our co-agent in this formulation has to have high potency. I’m going to put it under the tongue in sublingual. It's got to have high sublingual bioaviability, minimal metabolism.

Also, it has to last a good while. Buprenorphine has a long half-life. We need to match it up with something that will have that parallel half-life and maintain that complement overtime.

And together, we bring those into ALKS 5461, which is a fixed combination. It's a one-to-one ratio, weight-to-weight buprenorphine to ALKS 33, and they're in that co-formulation to maintain the specific agonist ratio, but also to enhance this co-compliance.

You can't, in this situation, give someone an agonist and antagonist and say, "Take it together." There will be patients, who will take an abuse the buprenorphine and throw away the antagonist. So, again, this isn't something that can be matched by just giving people separate pills. It has to be a co-formulation. And you'll see down in the lower right-hand corner, we bring this together, in a very elegant sublingual formulation.

We did initial pharmacology work again to determine this one-to-one ratio. At this ratio, we blockade. We fully blocked those new agonist effects associated with addiction. We blocked the euphoria. We blocked papillary physiologic effects.

And we moved this into an initial Phase I study. This study – data that we have shown previously. Many of you may be familiar with this study, but again this – right away our first study, in depression right up front, were carefully designed and we showed clear anti-depressant effects with both ratios; both the full and a partial blockade ratio.

But what was really exciting, and as you see on the data here, was that full blockade, that complete blockade, that combination that was devoid of those effects, related to abuse or addiction showed greater efficacy than that partial blockade. In many ways, that was contrary to the common teaching.

So, we are excited by that result. We define the ratio. We have a dose that we know that works. We then move in to our second study, again very carefully designed study. First order business in that study is to extend that findings, so you see we take that same 8 milligram and restudy it.

But then 8 in 8, that's a lot of opioids. But these are good – both buprenorphine and ALKS 33 are very potent molecules. So, that's a lot of opioids for opiate naive people.

So, we thought, "Let's go ahead and begin to evaluate the dose range." And so, we – in addition to that 8-8 dose, we went down four folds. We went down way down to see if we can start to get efficacy moving down to much lower masses of opioids.

We put this together in a state-of-the-art Phase II trial. This was a multi-center, double-blind, randomized placebo-controlled trial. We use advance study design. This is sequential, parallel, comparison design; design developed at Mass General Hospital, involved two, four-week treatment periods and we studied 142 patients.

These are patients with multiple – with major depressive disorder, who are not responding to SSRIs or SNRIs, and they – or maybe with an inadequate response is probably the better way to say it. But importantly, the patients are staying on these therapies background in the trials.

So, the clinical improvements that I'm going to show you in the study are on top of the existing therapy. Dose groups in the study – we looked at the 8-8, as we've talked about and then going down four-fold lower 2-2, as well as placebo.

And then, as highlighted in terms of our research approach, we entailed in a very extensive quality control program, both in terms of how we admitted patients into the study and following their data throughout the study.

This is the study design. This is sequential parallel comparison design. It's really two studies in one. And let me break that down for you, so you see how that works.

So, the first part of the study is quite simple; 142 patients come in and they get randomized, either to get the low dose, the higher dose, the 8-8 or placebo. Quite straightforward.

But one thing that you'll notice about this is that we have many more patients receiving placebo in this stage, compared to the act. And why is that? It's because we use that group of placebo patients to find patients who will be on placebo treatment but not respond. And so out of that 99, we found 65 patients who satisfy the definition of placebo non-responders. Then, we bring it to the acid test.

So, again, these are patients who sustain themselves four weeks of trial taking medications say, "This placebo is not working for me." These are tough patients. We then, re-randomize those patients to again receive 2 milligrams, 2-2, 8-8 for placebo, and that's part two of the study.

The other thing I want to point out for you is that the patients receive active and stage one of the trial are different from the state patients, who receive active in stage two. So, from that perspective, there's no double counting of patients here. And what you really get in terms of the study is two separate independent assessments that we can look at and judge together.

Now, the overall analysis of the study brings both of these parts of the study and gives us a pooled global analysis and we're reporting this as the primary analysis. This was the primary analysis of the study. And you can see all of the primary and key secondary points showed a positive effect statistically significant. And this was incredibly reassuring to see. But if you take a look at the data, I think it gets even more exciting.

So, here is a HAM-D data. This is one of those – the key primary endpoints of validated scale in depression. You can see in stage one, you see effects. And as you go from stage one into stage two, look at that placebo effect melt away.

So, the trial, in fact, is doing what we intended to do. It – and it's in stage two, we’re able to very effectively control that placebo effect and yield substantial efficacy. We see that as well on the MADRS. Again, large treatment effects in stage one but even greater in stage two.

Just to kind of, again, put this into perspective, the difference is that you're seeing MADRS are substantially greater than what you might observe with standard or conventional anti-depressants in trials.

Another way of looking at the data and assessing it for clinical meaningfulness is to use what's called the “responder analysis”. This is a standard definition. These are patients who have a greater than 50% reduction in their MADRS scores; patients, who are having a really big reduction.

You'll see again in both stage one and stage two, significantly more patients are having a reduction in their – or sorry – or having greater than 50% reduction will be considered responders. And, again, the level of response, the magnitude of response here is greater than what you might observe with conventional agents.

Finally, what we saw, which was also very important to the profile of this drug, is we saw a rapid onset effect. We're seeing separation at week one. And, again, with conventional agents, it can take several weeks to start to see effects, and those effects continue to grow overtime.

Now, I've heard that there's been some misunderstandings of confusions on Wall Street about the placebo line and what's going on there. From a clinical research and clinical perspective, there's no confusion here; it's very clear.

In a stage two SPCD, you expect to see about a minus two for placebo effect. And as you look at over weeks one, two, three and four, you can see that that's variation around that two.

I think, again, what's really critical here and important here if you look at the profile of that 2-2. This is our – going to be one of our core doses moving ahead. You see that again that very rapid onset effects already well present at week one and continuing to go down overtime.

In terms of safety, ALKS 5461 is generally well tolerated. The adverse events that we saw are exactly what you would expect for opioids.

Importantly, they are transient. They were present for a day or two and then generally disappear. And the rates were lower with 2-2, as compared to 8-8.

So, summary of the findings and the study, ALKS 5461 demonstrate a substantial efficacy in patients with treatment resistant depression and we define that as patients who are getting inadequate response to one or two SSRIs or SNRIs. Their results were statistically significant, clinically important. They are rapid.

And, again, rapid is very important. There are patients who present with acute symptomatology than acutely suicidal. They're waiting two or three or four weeks for treatment effect. It's just simply not acceptable. So, again, this is going to be a very important feature, I believe, of this molecule as we move ahead. And, again, the treatment effects compare quite favorably with currently approved therapies as the tolerability.

So, again you've seen a state-of-the-art Phase II program carefully designed and carefully executed confirm the results from our proof of content study, generally provide clear evidence for advancing into Phase III, and even more important than that, provide a blueprint of how to optimize the design for the pivotal program.

We've got information from these studies about how best to design our Phase III program. Next steps – we're going to be meeting shortly with the FDA and we're going to be beginning our pivotal program for this ALKS 5461 early in calendar year '14.

So, coming back again to the opioid system, the – that we’ve done it. This is not theoretical. We have developed deep understanding of new approaches to opioid system modulation. It's a key player in multiple psychiatric disorders. And as such, ALKS 5461 in patients with CRD is just the beginning. And our R&D approach again has been highly productive. And, as you have seen, has given us candidates that would increase the likelihood of success.

Now, it's really my pleasure to introduce Dr. Marlene Freeman. Dr. Freeman is on the faculty at Harvard Medical School, and she practices at Mass General Hospital.

She's also Vice Editor of the Journal of Clinical Psychiatry, which is the most widely read journal among practicing psychiatrists, and be readily giving us your clinical perspective. And so, thanks. I'm thrilled that you're here today.

Marlene Freeman

Can you hear me okay? All right.

So, I'm really delighted to be here today and I appreciate your interest in advance. Some of the reasons why I'm so interested in being here today is – one, we had a very exciting collaboration looking at some of the research that was just presented to you, and that was a collaboration between the clinical trials network and institute at Mass General, so an academic organization, and with Alkermes.

And I really think that in terms of the most promising courses for drug development today, I think it is going to be a combination of academia and industry really the best of all models, in terms of moving things forward as quickly as possible, things that are truly novel.

And the other thing that I just wanted to comment on, which is why I'm also very excited to be here, is that when Richard was speaking this morning, he mentioned that it was surprising that an opioid modulator would have antidepressant effects. And the truth is if you ask psychiatrists that specializes mood disorders, they would say, "Finally."

So, we've known for a long time that opioids have antidepressant effects. The problem is the abuse potential. And I remember learning about this long-residence, like 15 or 20 years ago. And really the use is limited, up until now, by the abuse potential. So, this is really very exciting in the field.

So, I'm going to talk about major depressive disorder and treatment resistant depression in particular. And I know some of you are very well-informed on this topic. But just to give some definition so we’re all in the same page major depressive disorder is defined as at least a two-week period. Although, it's usually a lot longer, like months and years. But it's at least a period of weeks to months, where patients have persistently depressed mood, loss of interest or pleasure in things, other sematic or medical symptoms, and it impairs functioning, which is really key.

The lifetime risk is very high; about a quarter of women will experience major depressive disorder, about 12% of men. So, women are at higher risk than men are. And the cause is phenomenal; the impact on our economy is phenomenal.

Now, most patients will fail to receive an adequate benefit to a first antidepressant. So, although there are antidepressants in the market, what we see in our clinics, we see an enormous number of patients, who do not get relief from depression despite many, many trials of antidepressants.

So – and I wanted to just point out, in fact the impairment that patient's do experience – this is a slide from the World Health Organization – looking at rates of disability in those 15 to 44 years of age, so young people in the US and Canada. And this slide is not prevalent. It's millions of individuals who are disabled by illnesses. And as you can see, the number one reason for disability among this young age group is mental illness.

And when we break that down even more specifically, major depression is the number one cause of disability among this age group. So, it’s – these are individuals who are so impacted by their illness if they're not living the lives that they would otherwise be leading, despite the fact that we have many treatments already on the market.

So, I want to discuss a little bit about clinical approaches for treating depression. We do typically treat with antidepressants and then in serial steps, we have to trial and error; expose patients to different treatment options. And each treatment trial can take a long time; it could be weeks or months until the patient might even know if the treatment is working.

And this is information from the STAR-D study, which was an extremely large multi-state federally funded trial looking at patients in real world conditions, who had depression. So, patients came in to either psychiatry clinic or a primary care clinic. They were given open-label treatment. They were not randomized. They were all treated first line with the SSRI Citalopram.

Patients who didn't respond went on to get randomized to other treatments, not with placebo. Some placebo wasn't an effect here. So, patients knew that they were getting active treatment and they were still pretty dismal results in terms of response and getting out to three or four steps down the line. The treatment response was really, really quite discouraging.

So, in terms of clinical approaches to treatment resistant depression in the clinic, each individual clinician is going to have some of their own steps. But these are some of the typical ones and maybe just approaching some difference in order depending on the patient situation. But what we often do is switch to a different medication.

And really, all the medications, the antidepressant medications that we have available are based on the monoamine hypothesis; the same set of neurotransmitters that are targets of these medications. So, they are all kind of based on the same pharmacology.

So, we can switch. We can switch within a class or to another class. We can increase dose, but that's usually limited by tolerability. We can augment with other agents, which – usually these augmentation strategies do have some modest effects; certainly don't work for everyone.

There's a very old class of medications called monoamine oxidase inhibitors, which can be very effective antidepressant but they're limited by interactions with food and drugs, some of the combinations, which can be lethal. So, they're not very attractive to patients based on those restrictions and carry some very serious risks.

The other issue with MAOIs is that the patient has to fully stop another antidepressant for a while before they can try one. So, if you take something that's already quite depressed and then tell them that they have to stop an antidepressant for up to six weeks to start and MAOI, that's a very tough position for them to be in.

Psychotherapy, of course, is very important, but it has modest incremental benefits. And also in this country, truthfully, we have limited access to care for psychotherapy.

Electroconvulsive therapy is also an older treatment. It's very effective, but has very severe limitations also.

One is there's great stigma. There's short-term memory loss – is a big constraint, and it's also not easy to get. So, patients need to come to the hospital; spend a day getting ECT three times a week. I really think though that stigma is the greatest barrier for ECT.

One of the other areas that they think is very telling is nutraceuticals. So, nutritional supplements, other complementary and alternative treatments where – it’s an area that I've done some interest in – done some research myself.

It's interesting because Americans spend about $40 billion out of pocket on complementary and alternative treatments every year. And in psychiatry, major depression is the number indication for these purchases. And those purchases are really based on really limited efficacy data.

Most of them have not been shown to work, and usually a property of safety data also. So, I think out of desperation, we see a lot of patients are spending a lot of money out pocket on treatments that really like have probably no worth for depression.

We do some FDA-approved augmentation strategies for depression – Abilify and Seroquel has been FDA approved. They are both atypical antipsychotic medication. And this is a class that the – a limiting factor really is side effects. They're best known or most notorious for metabolic side effects.

One other factor, in terms of depression, because they're atypical antipsychotic – that's the class – it can also be a very difficult sell for patients. There's a lot of stigma that's associated with taking an antipsychotic medication. And like other antidepressant medications that have been approved, even if there's a significant benefit, it's often very modest. And that's what we see with a lot of treatments.

So, where we're really at in the field today is that treatment-resistant depression is very common, affects tremendous number of people. Most of the treatments available are based on the same monoamine drug hypothesis. And we've seen a lot of "me-too" drugs; we haven't see a lot of novelty in terms of drug development for antidepressants. The atypicals do have utility and they are in option but are limited by side effects, and we desperately need new treatments.

Now, I want to talk a little bit about clinical trial methodology because I'm sure all of you are aware that it's very difficult to conduct trials and depression and CNS in general.

So, one of the problems are high placebo response rates. There have been high placebo response rates. And once you get to a high enough placebo response rate, even if you have a great drug with a true effect, you can wash out being able to see that effect if the placebo response is too high. So, what we've done is really work on novel ways to implement trials where we're most likely to see a true drug effect.

So, I want to tell you this little bit about the clinical trial network and institute that we have at Mass General. It's a non-profit academic collaborative group, and we work on the studies that Elliot just went over. And, so, we – what we try and do is make sure that we have the most – the best chance to see a true drug effect in clinical trials, which is very challenging to do these days.

So, we have the ability to bring some novel approaches, like clinical design, like the sequential parallel design. Make sure the right patients are entered in the study.

So, what we have now is we typically have clinical trials that incentivize enrolling patients. And the problem is is that there are lot of patients out there that are not appropriate for trials in which they're randomized.

So, despite they’re often incentivized – usually they're incentivized by enrollment numbers. So, they’re really – they have a lot of pressure and a lot of incentive to enroll, even if the patient really isn't appropriate for a trial.

And we work very carefully with sites, in terms of quality assurance to make sure that – and have developed specific methods to make sure that there's close oversight of that. So, we have what we call our SAFER interviews to make sure that there's a double check on patients that are going to be entering trials to make sure they really have the disorder being studied, they're really appropriate for the trial.

We have state-of-the-art data management, trial operations, key ancillary services. We have a great leadership team. I'm a little bit bias I think. But one of the -- our recent additions to our team is Tom Laughren, who was recently the head of the FDA – psychopharmacology division.

We work closely with the network of sites that we're able to keep close tabs on. So, we know those investigators. We know their placebo response rates at their sites. We know if there have been any problems with them. And because we are interviewing all of the patients that enter in the studies, we find out a lot of things about the sites.

The other thing about Mass General – and again, I'm not unbiased – but Mass General is a very cool place to work. And our Department of Psychiatry has about 600 faculty members and we have experts in almost every area of psychiatry in CNS that you can imagine. And so, it's nice for us because when we need to pull together investigators and consultants, we can easily do that and it's really a wonderful environment for us.

So, one of the things that we do is we make sure that, in terms of making sure that the right patients are entered in the studies, we have highly qualified clinical researchers in psychiatry, with a lot of clinical experience, interview every single patient that enters the trial. So, we want to make sure that the resources that are spent on a trial are not wasted by the very high pressure of sites to enroll, which I think is a tremendous problem right now with CNS studies.

So, what we actually have – we have a director of training to make sure that all our sites get trained in a high quality way and all our specific interviewers are trained as well. And we also have ongoing surveillance throughout the trial, so making sure there's quality assurance while the trial is progressing.

So, I talked about these trial – interviews.

We also have innovative design that's been touched on already. So, looking at the sequential parallel comparison design, in a way to really make sure that the placebo effect has kept us low as possible. So, it's a way to really make sure that placebo responders are not over-factored into the results – to make sure that the study is really enriched with placebo non-responders, who are really going to give us the greatest amount of information. And this was a paper that was actually written by statisticians at the FDA on some of the benefits of using this type of design.

And in our collaboration in the ALKS 5461 studies, these elements of clinical trial methodology were employed, and results showed a powerful antidepressant effect, despite the fact that when you look at clinical trials, there were fewer patients in the study, compared to a lot of trials, are there are just tremendous numbers of patients that need to be enrolled to show even a very small statistically significant effect and sometimes often a questionable clinically significant effect.

So, this is the slide that I think you already saw. But just to emphasize the bar in teal – I guess they're all kind of close to teal. But the placebo bars are quite low in the study. And considering that many of the trials in this area are played by very high placebo responses, this is really important and really helps be able to see the benefits of the drug.

Also, just to give you a sense of how the drug performed, compared to the FDA-approved medications for treatment resistant depression Abilify and Seroquel, this is some comparison.

So, these are changes in the MADRS score, which is a primary outcome that's used in many trials of depression. And the key really is – you can look at the overall MADRS scores to see basically that these are – these represents substantial movement on the scale.

But the other thing about that is to look at the placebo and drug difference, which is really important. And so, you can see that there was – compared to the other studies, there was really whopping difference between drug and placebo in the Alkermes study.

Okay. So, coming back to the clinical approaches, it would be nice to have more novel drugs, different mechanism of action and really more to offer patients.

We have some established medicine. But part of the problem is they all really work on the same hypothesis. So, we really hope that there are going to be a lot more medication that come along that are novel and that's something different to offer patients.

And we're hoping that the future is going to look really different with the addition of these. So, the possibilities in terms of augmentation, monotherapy – we're extremely hopeful that there's a lot of potential for a medication with this type of mechanism.

So, I thank you very much, and I believe we're going to do some question and answer. Okay.

Rebecca Peterson

So, if you didn’t mind bearing with us just a moment as we the stage and – thanks, sorry. I didn’t wait for the mic. So, we’re just going to set the stage for the Q&A and I'll ask Dr. Ehrich, Dr. Freeman, and Richard to come up, and we'd be happy to take your questions. So, bear with us just for the setup for a minute and we'll go from there.

Question-and-Answer Session

Richard Pops

Okay. Since, we're webcast, we'll do the questions through the mic. So, if you want ask a question, reach for the mic and then post on the webcam here as well.

Rebecca Peterson

Does anyone –we’ll start with Cory

Cory Kasimov – JPMorgan

Great. Thank you. I'm Cory Kasimov of JPMorgan. I'll start with a couple of questions for Dr. Freeman. I'm wondering what you would ideally like to see the Phase III program for 5461 look like if you're able to design it?

And then, secondly, assuming this would ultimately get to market and be a scheduled product, does that have any bearing on how you would use it commercially? Thanks.

Marlene Freeman

So, in terms of the Phase III program, I would love to see both augmentation and monotherapy trials move ahead. And I think that – I think that there may be some limitations, if we approve the schedule of drugs. But I think that the used potential would still be great because the number of patients with treatment resistant depression.

So, I think that in terms of psychiatrist, I think the psychiatrist have no problem prescribing scheduled substance, as we use Benzodiazepine all the time. You know it’s some of the most commonly prescribed medication. So, I actually don't think that that would be a limitation for most psychiatrists.

Richard Pops


Rebecca Peterson

Anant, you want to go?

Richard Pops


Anant Padmanabhan – Cowen & Co.

Anant Padmanabhan with Cowen & Company. Couple of questions – first for Dr. Ehrich, how accepting do you think the FDAs like you to be of this design, this trial design? And then, could you talk about some other studies that have been conducted with similar design? And then, I have another question on the monomethyl fumarate.

Elliot Ehrich

Well, the SPC design has been used in early stages and in number of areas, and as you've seen the FDA has written about SPCD. And frankly, the FDA is as interested as we are in advancing trial design methodology and finding ways to control treatment effects and bring new therapies forward.

And so, I think from that perspective, we're all in the same page. Yet we are going to the FDA and we will talk about a proposed SPCD as part of our trial design. But that's not the only way to win in this indication and will be also bringing other design.

So, although I'm actually quite optimistic that we are going to work together with the FDA and include SPCD as part of our Phase III program, just kind of beyond that, I'm quite certain that we are going to – we will – we've got multiple ways of conducting Phase III studies, and we're going to come out with a mutual and agreeable plan.

Anant Padmanabhan – Cowen & Co.

And then this – Rich, you might want to take this. How is the monomethyl fumarate – how is that different from, I believe, XenoPort has a similar drug. So, just based on early data, could you talk about any points of differentiation versus that product?

Richard Pops

Right. XenoPort, we understand, is developing a prodrug of MMF as well. Ours is obviously would have different chemistry, different IP, and we think it actually has a different metabolic profile. So, I really don't want to comment on their drug too much. You should look at their data. But as we present more on ours, you'll be able to see the distinctions between the two.

The other point is just this idea of superimposing our oral formulation technology on top of the pro-drugs. So, you don't always have to rely on the pro-drug itself do all the kinetic work that you want to do in the dosage form.

Rebecca Peterson

Okay. Steve Byrne.

Richard Pops

Go ahead, Steve.

Steve Byrne – Bank of America Merrill Lynch

How comfortable are you heading in the Phase III with what doesn't look like a dose response curve? And what if your – if that study had only been a three-week study? You might have come to different conclusion. I mean are you ready for Phase III?

Richard Pops

Let me start and then I'll turn it over to the experts. But one thing you should be quite comfortable is that the rigor to which these statistics have been subjected. And I think implied in your question is a misinterpretation fundamentally, the curve that you saw of the effects overtime.

Actually, the statistical model is used to evaluate the response to stage one to stage two in an accrual basis across multiple endpoints and different permutations uniformly point to a substantial treatment effect of the magnitude that Elliot referred to.

So, what I would say I think the reason we've accelerated the pivotal program is because of the clarity of the result that came from the Phase II program.

But, Elliot, I’m going to have you comment.

Elliot Ehrich

I’d say one of the real upsides of that study that we just completed is that we did define aspects of the dose response. And I didn't really emphasize it during the presentation. But you saw that the effects with the 2-2 dose were actually a little bit bigger consistently in both the stage one and stage two of the study. And that's not atypical. Psychiatric drugs, they’re – these are subjective response. And you can overdose them and it's not atypical for drugs if you get too much to start to see then a slight decrement in the efficacy.

But the flipside is it can be very hard to define dose response. So, we came out a study with an understanding that two is actually a great place around the top of the dose response group; we don't need to go any higher. And it's that kind of data that gave us a competence, yes, we know the top of the dose response. And when we go into Phase III, we'll start there and we'll continue to explore lower doses. So, frankly, I think we're in fabulous position and it's the data from that study that really moved us in that direction.

Unidentified Speaker

(Bob Duressa) from Willington. I have one very quick question and then a couple of basic questions. The quick question is how many patients were in the non-respondent group after stage one?

Elliot Ehrich

So, there were 99 that were treated with placebo, and there were 67 or so. I'm going to – this will be – if you can do the subtraction would be placebo.

Unidentified Speaker

Okay, okay.

Elliot Ehrich

Sorry, sorry. There were 67 placebo non-responders. And that the others were responders and were not re-randomized in stage two. They did great on placebo.

Unidentified Speaker

Great. Okay. Question about MMF. Do we know if the activity is related to the area into the curve, the peak of the plasmic dose or some combination of both?

Richard Pops

I'll let Elliot answer that. I think we have some clues. But go ahead, Elliot.

Elliot Ehrich

You know it's not really – it’s not known exactly but I'll tell you – I'd say for about 90 percent of drugs is a correlation between efficacy and a specific key parameter isn't really known. I mean – and the mechanism of that is entirely understood, although it is – it hasn’t speculated. It involves gene regulation in certain – in inflammatory pathways. That's not the kind of thing that's related to a Cmax or Cmin. These are you – you bind intracellular proteins and you module a gene expression for a period of time, as a search of history.

So, if I have to – I don't know if I have to guess, it would be A1C or exposure. And that would be consistent probably with, again, a lot of drugs. But maybe I'll just leave it there. But that's our hypothesis and I think it's a very good one.

Unidentified Speaker

Okay. And then, as far as the combination, you say it's one to one by weight; that's what it says in the slide. So, it's not a molder issue of one-to-one?

Elliott Ehrich


Unidentified Speaker

So, the question is what is actually driving the response? Is the neuroreceptor completely off at this ratio? And do we know about anything about the other receptors that might be playing a role?

Elliot Ehrich

Well this is you know – this program is based on empiric observations. I didn't show you the data here, but we did do a specific clinical pharmacology study in humans.

Again, this is empiric observation. We took a fix dose of buprenorphine and then gave a range of doses of ALKS33 and we saw – we watched those new agonist effects. We watched where the drug liking – the euphoria and the pupillary dilatation disappeared.

We actually even – had doubled it. We gave kind of two times as much. And, again, this is based on weight-to-weight ratio. And with that empiric result, we constituted the empiric formulation.

So, in some ways actually the molar aspect of the science is secondary to what we've actually demonstrated in human clinical pharmacology studies.

Unidentified Speaker

(Chris Berne) from Birch Capital. Just a quick question to Dr. Freeman. How does the magnitude of this perfectly designed, perfectly executed trial with a very clean suppressed placebo response, how does that magnitude translate to our kind of old-fashioned traditional diet depression study?

And, therefore, what kind of assumptions can you use for planning that study, assuming that's the study you would execute? I know that there's potential discussion for more innovative design in Phase III.

Marlene Freeman

Well, I think what you're asking is about affect size and we saw a large affect size, relative to anti-depressant trials. So, many successful anti-depressant programs have had affect size of about a 0.3, which is your typically in – meta analysis of FD-approved anti-depressant is about 0.3. And this was I think – it was about 0.6, which is large affect size for an anti-depressant.

Unidentified Speaker

My second question is what affect size have we seen in a traditional trial where it's not so perfectly designed and where the placebo rate isn't as perfectly suppressed?

Marlene Freeman

So – and I'm not a bio statistician, so I would need to really defer to get more complicated in this. But I don't know that we would see a different affect size, but we would need to have a much greater number of patients enrolled, which is I think the biggest difference between the trial designs.

Richard Pops

But, (Chris), I want to make sure in implied in your question is something that is not going to happen, which is the trial design that you'll see as replicated in Phase III will be shades of this very same color rather than an old fashioned, all commerce parallel design. I think what we're showing through these techniques – and Elliot made the point – it can be SPCD or it can be other designs and incorporate some of these features of placebo run in fastidious control of enrollment and what not. We expect Phase III to look much more like Phase II than other precedented large kind of uncontrolled Phase III studies.

(Sarah’s) got a question. Go ahead. You got the mic. Go ahead.

Unidentified Speaker

Okay. I just wanted to ask if you're going to address the need for cardiovascular outcomes studies upfront in the Phase II meeting. It's great to try to limit the size of the study, but if you're going to be required to have large number of patients to address that, is it better to know upfront and how you're going to – what are your expectations for that?

Richard Pops

I think (Inaudible).


Elliot Ehrich

The – I don't know about it yet. Cardiovascular outcome is not something that is associated with this type of pharmacologic effect. You know what? Sir?

Unidentified Speaker


Richard Pops

He's kind of referring to the (inaudible) of new antagonism for…

Elliot Ehrich

The – well, this is not – so, this is not an unblocked antagonism. We're going to do – I guess I'll just maybe answer it at a higher level and say that we are going to do a comprehensive program. There are aspects, for example, that you need to look at in terms of the prolongation of the QT interval and other cardiovascular that are part of the standard program.

We'll include that – that to date, that's really not been an issue for this embodiment of opioids, for example, opioid antagonist.

I'm kind of – I’m now having a tough time answering the question because it's a little – I don't think it's really relates directly to what we're going to need to do in this program.

That being said, we'll go to the FDA. And I'm quite certain that we are going to come together with an effective development plan too.

Unidentified Speaker

And are we…

Richard Pops

We've talked about this before with other folks. And that is – if you're referring back to the use of opioid antagonist, peripherally restricted for opioid and just constipation and you're in a completely different patient population with a different risk benefit profile, we're talking about patients with treatment resistant depression, who are suicidal, who are in a completely different place. This is medicine that –it's of shorter duration and can be – and so – so far under the development problem with the FDA that hasn't been an issue and I don't expect it to be, but if it is, we'll do it.

Unidentified Speaker

Yes. On the pain program, can you give us a little bit more depth into how you're having that the (cutting) effect on the new terms initial release? What's that based on?

Richard Pops

We can. I don't know whether we will. But…


Richard Pops

Yes. Elliot, you can go ahead.

Elliot Ehrich

Well, you know, I think – to your point, Richard, this is something that is proprietary information; it’s part of our unique insight that we have, in terms of how we selected the molecule and what we've learned along the way.

So, I think at this point we're not going to – we're probably not going to talk about. I think – I hope that you get – that you sense the excitement that we have about this product. I mean you saw the neurotransmitter data. We can give very large doses of these molecules to rats doses that other kinds of opioids would kill that we give large – grams – and there – they do just fine.

So, we feel very good about it. It's an – it’s a wonderful elaboration of the science and the insights that we've obtained.

Richard Pops

(Sarah). The only thing I’d add to that is that Elliot made the point beginning to this talk that these are GPCRs. And GPCRs signaling – it's so not digital. They're so continuous – the distribution of the receptor state can be.

So, if you imagine it in that way, it's not just on or off. And if you have the tools, then we can -- the reason we call this opioid modulators is because we really do believe we can – on a much more analyzed basis, we can modulate the response.

And that's the benefit of having such a vast library and having been trained to it for so many years to rank order these in different ways in different asset system, so it seems to be working.

Rebecca Peterson

Great. Terence. And then, two more questions after Terence and then we'll wrap.

Terence Flynn – Goldmann Sachs

Thanks, Terence Flynn of Goldman Sachs. Just on 5461, I was wondering if you can speculate why you're still seeing the opioids like side effects with that combo, if you're blocking the receptor? And then on the RDP program, you put up a plot of the – you’re in lung tumor model. Just wondering if you included a proleukin arm in that, and if you can compare the efficacy to the proleukin arm to the dose response that you saw? Thanks.

Richard Pops

I think you can close it, Elliott

Elliot Ehrich

Yes. Well the – the opioid effects – and I – when I’m – used the term in terms of opioid side effects, there are a number of side effects that are seen both of opioid agonist and antagonist. And that’s the – those are the kinds of effects that we saw in the study.

The specific opioid effects that are related to that view agonism like the euphoria, drug high, pupillary effects and the addicted potential, the liking and all that, those are the ones that we don't see with our combination.

Rebecca Peterson

Okay. Well…


Terence Flynn – Goldman Sachs

I’ve got two questions – sorry – the RDP – the…

Richard Pops

Oh, the proleukin arm and then…

Terence Flynn – Goldman Sachs


Elliot Ehrich

We don’t have – we did – in that particular study, there's not a proleukin arm. The type of the killing that you're seeing here is quite effective. And – but I think what we're really excited about is bringing this into man. The animal models will only take you so far, but what we're kind of excited about is we have a pharmacological precedent with IL2. And based on what we're seeing in terms of the cellular selectivity, we – there's a real and we're excited about the potential to take that and expand that. If you don’t – if it’s not – if the molecule is not way down with the – this – the issues that had played IL2. So, it’s…

Unidentified Speaker

Two questions on 5461, Sir. So, one – so, on long-term opioid use, you might see some tolerance or desensitization. So, I was wondering you expect to – the anti-depressant effect to wear off overtime in this combination?

The second question is can you give a little bit more color on the various items within the scales? I mean is it just – is it mood? Or is it uptight in sleep or et cetera?

Elliot Ehrich

All the – you know, the – there – with – in terms of opioid tolerance, that's something that you might possibly see, if you're talking about an agonist or you're kind of wailing on a receptor and looking to – you know – but this is different. What we're doing here with modulation – we're controlling transmission at that receptor, which also involves, by the way, endogenous transmission as well. And this kind of state you really wouldn't necessarily expect to see tolerance occur.

The other?

Rebecca Peterson

Okay. The scale question. One is…

Elliot Ehrich

Oh, scale question. We saw good responses on the items of the scale, and that includes both somatic types of questions, as well as mood questions. And I think that's potentially why Dr. Freeman was – is hoping that we'll study, begin to study this in multiple ways.

Richard Pops

I think you want to comment on that?

Marlene Freeman

Sorry. I mean, if I can just add if there are questions about the individual items. If you haven't seen the scales, there are a lot of overlapping items between the matters and the HAM-D.

The HAM-D has a little more emphasis in terms of items on anxiety but they cover mood ability to enjoy things, motivation, some anxiety symptoms, physical symptoms, functioning questions, so there is a lot of overlap, but a lot of studies used both because they do capture things in a little bit of a different way.

Rebecca Peterson

So, Michael, and then one more question after that.

Michael Schmidt – Leerink Swann

Hey, Mike Schmidt at Leerink Swann. The pain product – do you expect this to be classified as DA schedule 3 like buprenorphine? And then my second question is on 5461. Dr. Freeman, what is your view on the tolerability? Do you view that as a potential hurdle to uptake, especially compared to Abilify, which is a standard of care for those patients?

Richard Pops

I thought you might want to take the schedule question?

Elliot Ehrich

We're not going to – I – we’re not going to speculate on what scheduling might be. I think what we're starting with is something very fundamental, which is that this drug is likely to be less addictive and even more importantly is not going to have that liability of overdose deaths. And that's going to drive how the drug is used and how it's deployed to the medical community.

Marlene Freeman

So, the biggest tolerability issue is really nausea, which occurs if the – when patients first initiate treatment. And in that regard, this medication is in great company, in terms of the anti-depressants out there.

A lot of them do have pretty serious anxiety, especially in the beginning of treatment. So, it's definitely not a unique profile. And in terms of Abilify – Abilify is a little bit different and that it is not likely to have very prominent nausea in the beginning. It's more likely to have what's called “akathisia”, which is sort of an inner sense of restless tension which is usually experienced as very uncomfortable.

And the problem with that is it often doesn't go away with time. And so, if a patient has a lot of anxiety as part of their depression which anxiety and depression are often comorbid and that can be very difficult for patients to tolerate, so that specifically contrasting the two most prominent side effects of those two medications.

Pamela Bassett – Strategy Signal

Okay. Pamela Bassett, Strategy Signal. For 7106, what are you expecting in terms of respiratory depression or not?

Richard Pops

Go ahead, Elliott.

Elliot Ehrich

That – there’s a – the respiratory depression is – when that goes to – it's extreme. In other words, patients stop breathing and die. That's the killer – that's occurring with standard opioid therapies. And whether or not – and that's the thing that we – that we're not seeing. We're not seeing stopping of breathing and animals dying.

Pamela Bassett – Strategy Signal

With opioids, there is depression short of death.

Elliot Ehrich

Yes. There is some – you know, there is – there’s a question with human – normal human respiratory rate – I don't know, 16, 18, something like that. At the highest doses, will that go from 16 to 14? I don't know. We'll have to get into humans to get that kind of data.

But I do know is this is – what's happening today is kids are going to the medicine cabinet, pulling out Vicodins from their parents, taking a bunch and not waking up. That's not the profile that one would anticipate with this drug.

Rebecca Peterson

Excellent. So, I think we'll stop it there. We're going to take a quick intermission so folks can get a cup of coffee. There are some snacks outside and we'll flip the stage and get right back to it.

So, we'll ask that we sort of do an expeditious break. Dr. Freeman will be available, if you want to try to grab a side bar with her quickly for a minute.

We also have Marc de Somer. Marc, do you mind standing up? He's one of our bio statisticians, who – if you really want to dig in to the geek chic sort of statistical plan, he's your man.



Rebecca Peterson

Started. So, we'll close the door. Dr. Silverman, are we powered up on the web? Wait for this. Okay. We're a go.

Bernard Silverman

Okay, good afternoon. I'm Bernie Silverman, Vice President of Clinical Science.

I'm happy to have the opportunity to talk about ALKS3831; our novel treatment for schizophrenia with the potential to remarkably improve treatment for many patients with this disorder.

At Alkermes, we have a lot f experience in schizophrenia and opioid modulation. With that background, we rationally designed ALKS3831 to address specific needs within the population of people with schizophrenia.

Today I'm going to unveil a new level of detail. And by the time I'm done, it should be obvious to you why we're so excited about this program.

As Elliot said earlier, we're using our experience in CNS and our knowledge of the opioid system to pursue orthogonal combinations. He spoke to you about our candidate ALKS5461. ALKS3831 shares this concept of dual pharmacology and opens up new opportunities for treatment.

In this combination, we're taking one of the most efficacious atypical antipsychotic therapies and then we're combining it with our proprietary opioid modulator, ALKS33. And in fact, we're taking the known pharmacologic therapy of olanzapine and bolting on opioid modulation, yielding a broad spectrum antipsychotic.

The antipsychotic properties are driven by olanzapine. The opium modulation helps control weight gain and addresses specific needs within the population of people with dual diagnosis.

Now, historically, drug developers have treated schizophrenia as a monolith. Based on our practical experience with schizophrenia and reward disorders, we recognize significant unmet medical needs within this monolith of schizophrenia.

The first is comorbid substance abuse, which affects about half of people with schizophrenia. Historically, people with comorbid substance abuse are excluded from schizophrenia clinical trials. The principal clinical issue is alcohol dependence in an area where we really have a great deal of expertise.

But also, a lot of times for people with schizophrenia take olanzapine; one of the most effective anti-psychotic agents. And the second subpopulation are those patients with substantial weight gain on olanzapine. If this problem can be attenuated, the benefits of olanzapine could be extended to much broader group of patients.

ALKS 3830 – ALKS 3831's dual pharmacology is designed to assess the needs of these subpopulations within schizophrenia. When I'm saying subpopulations, we're still talking about millions of people.

Let me walk you through this combination. Olanzapine is well established as one of the most effective antipyschotics, but its utility is limited by metabolic side effects. ALKS 33 is a proprietary new opioid antagonist, developed by Alkermes with high potency, high bioavailability and broad utility.

We combine these two into ALKS 3831; a single tablet, fixed oral combination designed to provide the established efficacy of olanzapine, plus enhanced efficacy in dual diagnosis patients by reducing comorbid substance abuse and attenuated weight gain. The result is a product candidate that has the potential to be successful really in two completely different ways.

I'm going to begin with weight gain.

The NIH-sponsored CATIE study is one of the largest studies ever done in schizophrenia; five antipsychotics. including schizophrenia were studied in a head-to-head manner. And what you can see in the red line on top is that olanzapine stood out, in terms of efficacy. This looks to how quickly people stop because of lack of efficacy and it stood out from the fourth comparator antipsychotics, where people discontinued therapy for lack of efficacy at a much higher rate. So, olanzapine generally isn't stopped because it doesn't work.

So, if Olanzapine was the most effective medicine, why doesn't everyone take it?

Well, there's a significant problem with olanzapine. This great efficacy comes at a high price, increase weight take gain, sometimes remarkably increased weight gain. Patients discontinue olanzapine and CATIE because of weight gain and its attended metabolic effects.

Again, not only does physicians still continue to prescribe olanzapine because of the severity of this disease and the efficacy of olanzapine, which often can't be equaled with other antipsychotic agents.

So, here we see the weight gain observed in CATIE. I know this maybe a little bit tough to see, so let's take it through row by row and it might be more readable in your binders.

The first row is weight gain, and the color of it shows how many people gain 7% or more of body weight. And this is a threshold that the FDA has chosen to classify the adverse event of weight gain and they use it in labels for all the antipsychotics.

So, in people taking olanzapine, about 30% had weight gain of at least 7%. That's much more than – in the comparators. And this actually may under represent true weight gain, as people in this trial could change course over the course of therapy.

Now, this was a mean of 9.4 pounds, while in the study – and what you can see 1.1 with Quetiapine, and that's for the other comparators. But, now, look at the rate of weight change per month – its 2 lbs per month while they're on treatment, compared to 0.5 for Quetiapine; 0.4 for Risperidone; and then the other two being even more neutral. And people taking olanzapine are often described by family members and clinicians as being ravenous particularly early on.

And as you might expect, it's not just about weight. Here, we see other markers of increased cardiovascular risk. So, people treated with olanzapine had increases in hemoglobin A1C of 0.4% on average, compared to really minimal changes in the comparators.

Now, I'm an endocrinologist by training, and this is really a big difference. You can get a diabetes drug approved, if you decrease A1C by 0.5%. Here, we're seeing a drug that, on average, is increasing by 0.5%.

Notice in the line blue, the mean is 0.41 but the median is 0.2, so that means if there are some people with more extreme elevations in hemoglobin A1C.

Accompanying this are changes in cholesterol. We'll see increase in the olanzapine group of 9.4 milligrams per dl, triglycerides 40.5 milligrams per dl, all (harvengers) of increased cardiovascular risk.

Again, despite the weight in metabolic consequences of olanzapine, it's still prescribed by physicians, indicating the importance of this medication to many people with schizophrenia.

Now, we had a hypothesis that we could affect this increased weight gain and the adverse metabolic consequences through the dual pharmacology that you've heard discussed today. So, we first tested this in rats.

Animals given olanzapine are in green on top and you can see they are really rapid rate of weight gain. Animals treated with ALKS 3831 in blue had a rate of weight gain similar to animals treated with vehicle alone indicated in black.

The rat data was then extended to adolescents of growing monkeys. Again, animals given olanzapine alone are in top in green, and then ALKS 3831 the combination of olanzapine in ALKS 33 in blue. What's important to look at here is the rate of weight gain, as indicated by the lines drawn for slope and also the magnitude of this weight gain. As you can see, both the rate of weight gain and the magnitude was significantly attenuated by ALKS 3831.

So, we did something interesting, at day 35, we – as indicated by the dash line, we treated the animals, who were getting olanzapine alone, they had the edition of ALK S33. So, at this point, they're getting ALKS 3831. And notice the mark slowing in the rate of weight gain at that point.

It's important to know that we're not talking about a weight-loss drug. This is really a very different concept. We're talking about prevention of weight gain.

These dramatic non-human primate studies drove us to conduct a Phase I true proof-of-concept to rapidly valuate our hypothesis. As you've heard from Elliot, this is how we approach clinical design at Alkermes. We design early studies to extract as much information as possible. We go into Phase I; confident in our science asking critical questions early.

In this case, we designed an innovative human pharmacodynamic study to see whether the results we saw in the rats and non-human primates will be born out in humans. We involved 106 healthy lean young men. They were treated for three weeks. This – we picked three weeks. This is a maximum time that you can expose people – you expose healthy people to therapeutic doses of antipsychotics.

And despite this being a short window, we felt that if we could mimic what we saw in the animals and see evidence of weight attenuating effect early on, it would provide confirmation of our hypothesis. This study was powered to see an effect of three weeks, and that's really why we involved so many people in the study to make sure we can get a quick result, quick and accurate result.

Adverse events observed in the study was similar to what you'd expect with olanzapine alone; most common were orthostasis and somnolence. The addition of ALK S33 did not appear to significantly impact the 80 profile. But interestingly, increased appetite was spontaneously reported more commonly in the olanzapine alone group.

Here are the results showing weight gain by week over the three weeks of treatment. The difference between the olanzapine alone group in green and the 3831 group in blue widened week by week, so that by three weeks, it's almost a 1 kilo difference and this attenuation in olanzapine induced weight gain is highly significant with a P value of 0.014. Thus, we've confirmed what we saw in the rats and the monkeys.

Don't underestimate this 1 kilo difference in weight. This is why we powered the study to see. We've got a very significant P value at three weeks in healthy volunteers. We call it people with schizophrenia are treated with olanzapine for many months and usually for many years.

So, these Phase I results, this trend indicates the potential for even greater differentiation with longer periods of study. And we're really confident that we'll see a favorable metabolic profile and that's really the focus of our Phase II program.

These are the same results, over here displayed as the waterfall plot. So, weight change is on the Y axis and we order the subjects of people with the least amount of weight gain are on the left, with the most weight gain on the right.

I want you to appreciate here and then this really represents those statistical manipulations by just ordering patients. It's obvious that people in green treated with olanzapine are clustered to the right the 3831 patients in blue are clustered to the left. And the bane of my existence and those listed to the clinical trials is there's this one guy in the far left who takes olanzapine and loses weight.

I can tell you, he did have the lowest plasma concentrations of olanzapine in the study. But if we can figure how to get rid of him, things would be a lot easier. The package insert is very explicit about the risk of this medicine.

Look at the percentages of people who gained at least 7%, 15% or 25% of their baseline body weight, so a long time exposure, that's 64%, 32% and 12% respectively. So, 64% of people will gain at least 7% of their baseline body weight when treated with olanzapine.

The chart at the bottom – I'm not going to go through in detail, you can look at it later – but the point is there are people who gained 30, 40, or 50 or more pounds with olanzapine treatment.

So, clearly our therapeutic focus needs to be on these people with large amounts of weight gain. And this is our concept of how we're moving forward and that – we know that olanzapine and this weight gain had a wide distribution, but our focus is these folks on the right with the most significant weight gain.

So, we think that we may have very little effect on the people on the left; people who gained no or very little amounts of weight. But the action is going to happen on the right-hand side where people gained the most weight.

So, we may just see a modest change in mean or medium, but the profound benefit comes from reducing the number of people with the most problematic weight gain, and that's what we're going to be looking at in our Phase II studies.

So, now we're going to shift gears and spend some time in dual diagnosis; patients with schizophrenia and comorbid substance abuse. The simple fact is that substance abuse exacerbates schizophrenia; it makes the disease worst.

Substance abuse has even more serious implications in people with schizophrenia than the population at large. Substance abuse is probably an attempt to self medication but it’s bad medicine. And what's even worst it's often the leading cause for people stopping and taking the medicines that really do make them better.

Substance abuse is associated with more rapid disease progression and more severe symptomatology. That includes increased risk of relapse, higher dropout rates, increased hospital admissions and longer hospitals stays when people are admitted, more violent episodes and suicide.

Alcohol is the most frequently abused substance probably because it's legal and readily available. ALKS 3831 will have an effect on other substances but clinically alcohol is the primary concern here. The other commonly used drugs include Cannabis, opioids and stimulants including cocaine.

Comorbid substance abuse has long been recognized as a problem within the schizophrenia population, and everyone who works in the mental health field knows that comorbid substance abuse is a huge problem. Half of the people with schizophrenia have met criteria for some form of substance abuse or dependence and the third have an alcohol use disorder again in an area that we know quite a bit about at Alkermes.

So, ALKS 33 was designed as you may recall as an oral laser for treatment of reward disorders, including alcohol dependence. And we've previously shown the efficacy of ALK S33 in reducing drinking in the Phase II study of over 400 patients.

Over 12 weeks of treatment, we saw a reduction in the rate of heavy drinking of 41%, relative to placebo at the 10 milligram dose. A heavy drinking day is a day in which a man has five or more standard alcohol drinks, or four in a woman.

So, we can extend these reductions in heavy drinking to people with schizophrenia. We really confer a profound therapeutic benefit to these dual diagnosis patients.

Pharma trials of anti-psychotics routinely exclude people with dual diagnosis. Further, patients with severe mental disorders, such as schizophrenia and co-occurring substance abuse, traditionally receive treatments for their two disorders in two different sets with two different sets of clinicians really in parallel treatment systems. Thus, this very ill complex patient population is not even benefiting from advances in medical care and coordinated treatment. Our program is designed to address the unmet needs of these patients within a more complex set of problems.

The Phase II program for 3831 shares the features you've heard repeated several times today. It's comprehensive and seeks quantitative answers for the most critical questions.

These are not your typical Phase II studies of schizophrenia looking simply at PAM scores. We are presupposing that olanzapine controls psychotic symptoms. What we're seeking in these studies is to define the benefits of dual pharmacology in the patient population of interest.

Today, we announced the initiation of the Phase II study to assess the magnitude and effect and attenuation of olanzapine induced weight gain in people with schizophrenia and enrollment has already begun. We're also in the planning stages of a Phase II study to demonstrate clinical benefit of patients with dual diagnosis of schizophrenia and comorbid substance abuse.

Some detail on the Phase II study announced today. It's designed to evaluate the safety and magnitude of affect and attenuation of olanzapine induced weight gain in patients with schizophrenia receiving ALKS 3831 versus olanzapine alone. It will be randomized, double blind, controlled trial. We expect to enroll about 400 people. There will be once daily administration of olanzapine or ALKS 3831, where we're testing three different dosage of ALKS 3831. And as you've heard what's become a signature of Alkermes clinical studies are extensive and ongoing quality control measures. We expect top line data from this study in the first half of 2015.

The study will begin with a one-week treatment period of olanzapine alone. During this one week, we'll be able to characterize patients by their pattern of weight gain. We'll ensure the treatment groups are balanced within the study with regard to that pattern within the first week.

Over the three month double-blind period, we'll evaluate the difference in weight gain in patients on 3831 versus olanzapine alone. We're going to test three different dose levels. In addition having identified the fast gainers in the first week, we'll be able to explore the relationship between the early weight gain and drug response and we expect that this will facilitate enrichment strategies when it comes trying to design our Phase III studies.

We've got a three-months extension trial. On the end, this will help us evaluate the durability and magnitude of effect over a total time period of six months. The combinations of a three-month double blind period and the three-month extension study will give us a very good sense of the profile this medicine in patients with schizophrenia.

This is a powerful Phase II design. It's going to take us some time to run this study. But when we're done, we'll have answered the critical clinical questions.

ALKS 3831 represents an opportunity to benefit two large and distinct schizophrenia populations, patients prone to excessive weight gain with olanzapine and patients with dual diagnosis. Thus, we have a couple of ways to win either one of these being a big treatment in advance.

We're building a strong pharmacologic foundation. We know that olanzapine is a very potent antipsychotic, ALKS33 has already demonstrated stability to reduce heavy drinking and we've already demonstrated ALKS 3831 attenuates olanzapine induced weight gain in humans. So, our comprehensive Phase II program is designed to answer critical questions and define a product profile before we enter Phase III. We've made a big commitment to people with schizophrenia at this company.

Now, I'd like to hand the podium over to Mark Stejbach, who’s going to talk to you about our commercial plans for our most advanced schizophrenia candidate Aripiprazole Lauroxil. Thank you.

Go ahead.

Mark Stejbach

Thanks, Bernie. Okay. Hang in there. One more presentation.

I'm going to shift gears a little bit in talking about commercial. But I think you're going to see some common themes. I'm Mark Stejbach; Chief Commercial Officer.

If you think about what you've seen in the last couple of hours, you can imagine why we're so excited to join this company last year. This is now the opportunity to build the commercial capabilities of the company in many of the same, smart and thoughtful ways that you've seen applied to R&D.

We're not starting from scratch. We have a footprint in place. We market a special team injectible product that requires contracting, distribution, patient support services. And now, it's about sort of taking it to the next level, and that's a lot of fun.

You guys covered the pharmaceutical industry. Think about what's going on if these companies have built these massive organizations that essentially machines designed for a different time. And what's going on over the last decade is it's all been deleveraging or laying off or sometimes it's making cuts without real changes where companies will talk about their new commercial model.

We don't have these things in the past, but this is our commercial model. So, we have now is the opportunity to say, “What do we need to do to add to what we do today to gear for the next launch? And how does it fit in to this transformation that's under way?”

So, our next big thing is Aripiprazole Lauroxil. I want to cover three things – our understanding of the market today; why is it evolving in ways that are favorable, and we see that persistent for quite a long way; why do we view our products in generational advance with important differences that we think will really matter for customers; and then give you some insight into how we're thinking about a successful launch.

This activity is well underway already. A lot goes into these launches and I'll share some insights into how we're thinking about it.

All right. So, let's start with the market.

If you want to go deep on this, you have to catch Elliot. But what I have to show you here is the neuroreceptor binding activity of the currently used oral antipsychotics. And the point here is they’re very different and that's good patients and it's good for clinicians. There's a diversity of approaches to tailor the therapy to this specific patient.

However, if you think about the long-acting, more options are needed. They’d really only had one profile, and that's RISPERDAL CONSTA, and, of course, as you know, (inaudible) is very similar. So, what's needed are more options in the long-acting to have more treatment choices for patients.

If you are going to pick a next one – and Aripiprazole obviously is the next one with Maintena recently being approved – it makes sense as the market leader. So, this is sales on a world-wide basis. This is all indication, so a big market.

But the point here is Abilify is a $7 billion drug; it's the market leader. And I think what it represents is that it's a product profile that clinicians like and that they're very familiar with. So, if you wanted to take the next one to long-acting, this would be a going to do.

Now, think about how this market has evolved overtime. So, we're showing here, we're going to make 1999 where all of the different products of the atypicals and how they played out.

What you have for that first decade really and it was transformative in terms of this market, you had multiple atypical agents with diverse profiles all back by enormous large pharma companies really shifting this market over to (we’re a) atypicals.

You really only had one company and one product for the most part of that – one product profile, if you will, seeing the praises of long-acting injectibles. But think about how this shifts overtime.

So, when we come out, basically the orals have all gone, the promotion and sampling and related activities are all gone. And, now, for the first time you actually have multiple products and multiple companies all seeing the praises of long-acting injectibles, so that means the studies, the promotion, the education program, again, multiple companies, multiple voices are all going to be shifted – although there's maybe a couple of years left on some of the later agents – all shifted in favor of long actings.

Now, despite the generics today, the long actings are still growing very nicely. This is sales on a world-wide basis quarterly over the last couple of years. The blue bars at the bottom, that's RISPERDAL CONSTA. So, you see its holding steady. The growth is really driven by INVEGA SUSTENNA; that's in blue.

So, two points here, even in a market with generics today – both injectible and oral – it's the branded long actings that are driving it. The other point I'd make is the growth is really going to the second-generation product, SUSTENNA, and that's the theme I'll come back to when we talk about Aripiprazole.

Now, one question is, is there a natural limit on the use of LAIs? And I would say if there is, we're no way near it, okay?

So, in this chart we're showing the percent of patients, schizophrenia patients treated with either CONSTA or SUSTENNA today are the treated population. The US in the left is about 6% or 7%, okay? It's lower than Italy.

We could, in fact, triple the penetration of long-acting injectibles in this country and still not even approach where Spain is. And my understanding is Australia is actually even higher than that.

So, whether it's an economic or clinical limit, it's not there. There's plenty of room to grow. And to those of you who believe that the future of healthcare in this country start to look more like more the single payer European countries, I would argue, this is actually a very positive thing for because it's not what you often see where there's heavy restrictions in Europe. It's actually reverse here. There's quite a room to grow.

And so, why is that? We just need to focus on relapse prevention. There's a lot of evidence, and we've given you some citations in your book about the need to prevent relapses.

So, this is a progressive disease. Patients have multiple relapses, driven by hospitalizations and their condition deteriorates over time. This has bad consequences obviously for the patients but it's also bad for payers.

There had a been a number of studies – this is a recent one that was presented in May that show that the patient as switched from orals to LAIs had to have relapses were much less likely to be hospitalized and that's what saves money. So, that's why countries like Spain and Italy and the others actually advocate or endorse greater use of long-acting injectibles.

The other way to see greater use is to get them moved up earlier to in the treatment paradigm. So, this is the market research we did from 150 psychiatrists who use long-acting injectibles. So, you believe in LAIs today but when you ask when does the discussion of LAIs come-up and the meetings with the patients?

So, if you look at the top line – at first diagnosis – all this round up one-fifth of the time, okay? There's not until patient has multiple relapses, again, often requiring hospitalization, they eventually migrate to using the LAIs.

So, we believe, and I think the other company is in the space as well, I think that there's a great opportunity to improve outcomes and help patients by getting that discussion of LAIs up earlier to prevent this from happening.

Yes. One case study – I've been making the point that new entrants are going to help grow this market is an analogy here. This is the US biologic's market for rheumatoid arthritis.

So, we go back to 1998 when Enbrol and Remicade were first out. I'm not – I'm sure that some of you this room are actually following the market then. I don’t know if you would have anticipated that four new entrants in multiple companies would have grown the market to this extent.

But it's an example where when you have a new treatment paradigm and un-under penetrated market and successive new entrants you can also see the market grow. And I would argue at 6% to 7% penetration of LAIs today. It's significantly under penetrated and we see the potential too events as markets similarly.

So, that's the market. Let's switch over and talk about our products.

So, first step is my SAT question. It is to be a (C is the D). So, think about the first part in this category; RESPIRDAL CONSTA –this was a breakthrough. So it was the first long-acting injectible atypical. It was dosed twice a week, and then SUSTENNA came along as a generational event.

So, we went from – I’m sorry I think it's twice we went – twice a month. So, from every two weeks to once a month, it offered the convenience of a pre-filled syringe, not refrigeration, choice of injection sites.

It was not because it was a new molecule or had no clinical data or new efficacy, it was basically, a better product design. So, if you came to generational advance – and as you saw, it's the one that's really captured the growth in the market place.

Now, fast-forward to today. Recently, Abilify Maintena was approved. Again, we'll call this venture. This is for the first time offering profile of profile of Aripiprazole in a long-acting form.

And we see when our products comes out, it will offer product design generational advances; a pre-filled syringe so it doesn't require re-constitution multiple dosage strengths to cover the entire dose and range and give flexibility, the choice of different injection sites based on dose.

Let's talk a little bit about dose.

This chart is showing the daily oral dose with schizophrenia of Abilify over the last 10 years. So, a couple of points here.

One – you see a wide range of doses. The late blue at the bottom is, I think 10 milligram. You see some at 5, all the way up to about 30. So point one, patients with schizophrenia treated today are treated with a wide-range of doses.

Number two is there's really been a dosage creep over time, which is not unusual. We see this in a lot categories. So, half the patients are treated with the higher dose. A third of them nearly are treated in the very highest dose.

So, we believe that offering a low-medium and high-dose with Aripiprazole Lauroxil gives you not just the elegance of migrating people from whatever oral dose they're around today but also the flexibility to move up over time as needed as is commonly seen in this population.

So, what about pricing? So, now you've got a second competitor will be entering the market. If you look at Abilify Maintena, what this tells you is, this is still a premium product market. It is not a matter of price cutting to gain share in a commodity-like market. The price on a per dose basis you see here is $14.50.

Another way to look at that is say over a six-month period. So, if you look at INVEGA SUSTENNA, depending on the dose or you look at Abilify Maintena, what they're basically showing is comparability in prices, not become price war squabbling over the 6% or 7% market share. As I said, these products have a pharmacoeconomic story behind them that make sense to payers. And so, we see this being an attractive market for us and certainly us a lot of flexibility.

This is what you Abilify Maintena kit looks like. There's a lot of parts. This is what out sours look like. And so, while you're contemplating all the things that come in your kit that I should tap it, shake it, attach the needle and you're ready to go.

Now, if you're a busy psych nurse and in a community or in a health center, I would argue that these product design generational advances –this will matter too.

We'll see when you get there but I think this product has been designed with a user in mind and I think it will be meaningful, just as the way SUSTENNA was a meaningful advance over CONSTA.

So, this is the product; generational advance, prefilled syringe, non-refrigerated, ease of use to date – a range of doses. You're aware that we're in a Phase III study now. We anticipate wrapping that up for a step in next year and then we’ll be ready to launch.

So, what's going to into the launch? I mean, there are other people back the (off stay) with here. I’m fire working on this. We’ve got (Kent Charles), who can fill the wow with control with critical past and everything else. I'm going to give you a little bit of insight into some of the thinking and the key elements for us.

So, first of all, even before we get there, there’s companies today building this market. If you look across the companies and the products today, these messages are all quite well aligned. There's a concordance here. Any of us could be saying this. It's about emphasizing control, certainty, managing relapses, prevention. Again, it's not about battling for the market share of the existing one, it's about growing this market and everyone is pulling in the same direction.

We'll build on this. I've talked about the product advance. The next you do as you think about, who are the identified targets?

This is an exciting market today. So, this is not like when we launch VIVIVTROL or even when J&J launched RISPERDAL CONSTA. This is a market here where you can identify today.

Who are the key stakeholders? What do they think? What do they need to do? Where are they? Who are the patients we're going after? And what do you need to do to think about securing reimbursement access for your product?

So, let's start with Abilify in the US – about $6 billion product – and obviously, we're focused on schizophrenia. So, that's 24% of Abilify. That's $1.4 billion in the Abilify sales.

So, in the schematic here, we're showing – across the bottom here – our commercial priorities that launch and some opportunities we have later, an ease of conversion, so that $1.4 billion Abilify schizophrenia today goes in the bottom left there. That's obviously where we start.

But, there's also another $2.8 billion in other oral anti-psychotics used for schizophrenia today. So, our opportunity again as we grow this class and sell the merits of long-acting Aripiprazole is to convert existing oral users but also go after some of these patients that are currently on other oral products. Over time, as you were – Abilify also has substantial use in bipolar and that's something that we'll also explore. And they take those dollars and just convert this over the patients that we'll be focusing on.

That you see at the start, there's some over 350,000 patients today with schizophrenia on oral Abilify. That's the first target. To put them perspective, there's about 88,000 patients on CONSTA or SUSTENNA today. So, there's four times as many patients on oral Abilify today as there are on the long-acting injectibles. That's our target. And, of course, there's another 2 million there on – really on the psychotics. So, there's a lot of patients that we can go after.

I'm not going to through all this. You'll probably be relieved to know.

But the point is, all of this is determinable. This is what you do as a commercial organization at this stages to say what are the factors and who are the key people that are infecting adoption of the product? Who delivers it? And where? Who has influence?

And in case of like mental health, all this – it's often the often the case that adherence and support has a role in terms of support groups, in terms of the family. Obviously, we have to focus on reimbursement and access.

So, this is all determinable; it's all known today.

I'm going to give you a little bit of data on a couple of these. We’ll talk about psychiatrists who prescribed these agents today, the role of nurses and also how these products are reimbursed.

So, start with the psychiatrist. First point is, if you look at high prescribers of Abilify, they'll use LAIs. In fact, half of the high prescribers are already LAIs and this is a diagram.

Notice, if I took the bubble of just LAI uses, and super impose it on Abilify high prescriber, they're all in there. Everyone using LAIs is a high prescriber of Abilify. So, that's my first target, okay? There's 12, 5584 of them. They know this product and they use LAIs. That’s where you're going to start.

Now, the other half is also attractive because these are physicians who like Abilify. They don't use LAIs today. Maybe some of that is for depression or bipolar, maybe there's other barriers but that's certainly something we have the opportunity to explore as well. I think it's actually like (52.48) but it's just hard to make the graphics.

But you get the point. It's a targetable audience that understands our product and uses LAIs. And we’ll go those who aren't yet on the LAI bandwagon.

Now, if I take this 12,574 and just lay it out – I mean I want you to hear this – well, we've got on the far left here is the deciling of long-acting injectible medication. So, in the top decile – if you're all over the total – there's 95 doctors; 95 doctors in this country, right 10% of all LAI prescriptions. Can you go to the next decile? 165 right the next 10%, and so on the down the line. So, this gets me to the bottom right through that 12,574 LAI prescriber I talked.

But what I've done now, as I’ve crossed tab that with their prescribing of Abilify today. So, if you go up to the top left, that's the top deciling of Abilify prescribers among those who yield these LAIs. So, you have a feel for how this plays out.

Okay. There's 68% doctors in this country, who are the top deciles on Aripiprazole in long-acting injectibles today. And this is where they practice. This is knowable. We know exactly where they are. We know exactly what they like.

If I go to next decile and I'm only up to 193 port, you see how this works. This is basically a thermal heat transfer map for pharmaceutical targeting. Just start in the upper left and you move down.

So, as we're starting to decide how many representatives, where do we want to them, where they need to go, this is one of the key inputs. I'll also say before we launch, we'll be able to rerun this of course, but we will have the adoption of Ability Maintena in all of those little boxes too with all of the addresses.

So, again, as opposed to going into a brand market and if you start from scratch, the market is already there. It's already being built and we have exquisite data available to us to figure out how best to go after it.

What does it take today to go after it? So, Jane and Jay, obviously, they come to a lot of resources. They could throw a lot of this. This is about what they do; I mean about 180 representatives. Because of that targeting, it doesn't take in army. I'll also say that for us we have about 60 representatives today. At least half of them already have prior experience selling in atypical anti-psychotic? Those guys are chomping at the bit. They can't wait to go.

But again, go back to what's going on in the pharmaceutical industry today in sales forces; you know massive redundancy, restructuring lay-offs. I don't need to find 2,000. If I need to find another 100 or 200 people and add this kind of opportunity to join the company at this stage now, and the advertising for sales persons are really – own their dirt and build their franchise and see the pipeline coming behind it, we're going to get a lot of resumes. But, then again, I don't have to hire 2,000 of them.

And if you say who – if the choices to be in a pod with six counterparts filling out activity metrics versus the accountability of launching a product with this kind of precision, I think we're going to do we're going to do very well here.

That's about the sites. But nurses are also critical here. They're the ones who actually give the shots. The survey results here on the right is from psychiatrist who use LAIs.

Who actually gives the injection? It's the nurse. They also give the input on the treatment decision and dare why we believe that this product presentation and design and convenience in the real world will be meaningful to them.

Now, in addition to who the audience is, you have to think about where they are. So, I’m just – touch a little bit on three different settings. This is using a Medicaid population.

A community mental health centers – there's about 2,000 of those in this country. They deliver care about 8 million patients a year. That's for all conditions. But it's 40% of the injections – the LAI injections in schizophrenia.

It's a pivotal hub because they are often where patients go after hospitalization. It's often the coordination point to deliver the care when patients get home services. And again, a lot of the care is actually delivered there.

Private offices, this is the typical group practice or private psychiatric office that's about 24%. That's probably where you see more of the commercial insurance certainly. And then, hospitals play a key role here because that's often where the patient – first, gets the long-acting injectible because they've been there because of an exacerbation. So, it's an important source for new patients and it's also where some of these patients will subsequently go to get future injections.

In fact, we call in some of these today, both the hospitals and community mental health centers in terms of addiction therapy. So, again, as you're building out the territories, you got the prescribers, you think about the settings, you think about where they are, where we are today and this is how you start to build the sales force.

Now, reimbursement, similarly, the frameworks are already in place. There are coverage in formulary decisions for LAIs in private and public plans. There is various levels of tearing, prior authorizations using orals first, which is different how patients are treated anyway.

One thing that's different about this category from any others you may be familiar with is the government entities are the major payer, particularly Medicaid, and I'll break that down for you. But, again, think about the role of government pay in Europe and how that's led to even greater adoption of LAIs when you think that dynamic's beneficial here as well.

The mental health community has a very good base of advocates that have argued in favor of access to medications. This is not about interchangeable HMGs inhibitors. I mean, these are seriously ill patients. And for the most part, the health plans have not tried to squeeze down to single choices. And again, I think, having more choices for the LAIs will actually be a good thing for patients.

And, finally in terms of the evolution of the environment under the Affordable Care Act, as you know, there is going to be Medicaid expansion in many states and that may actually lead to even better coverage for some of these patients today.

So, here's the breakdown. 66% is Medicaid, as you know these are state programs. That care can be delivered either through a managed care plan, through managed Medicaid as it's called or through fee for service.

Medicare Part D – it’s not the traditional elderly Part D; these are people who qualify with disability under Social Security and therefore eligible for Medicare but that's how their prescription benefit is delivered.

Commercial is only about 9%. This is typically younger people. They may be under their parents insurance. Again, under the Affordable Care Act that age limit was raised so they may be more likely to be able to maintain uncommercial insurance at the early part of their disease.

But this is how the payer segments break down. And I'll just give you an example, again, the path is well lit for us.

This is a top 10 Medicaid states by number of lives and it's again a targeting exercise. So, we know for each of these states, how many Medicaid lives are there, how many of those are managed care plans, how many managed care plans are there, how many are in fee for service.

And the last column here is where you differentiated on the colors here. The darker blue, such as Florida – these are plans that do not maintain a single state formulary. So, in other words, there's a formulary for the state, Medicaid fee for service and then each of the managed care plans, in this case, 23, can develop their own formularies, okay?

Some of the other states, California, Texas, New York, they tend to have one – they carve it in as they call it. They have one state formulary they decide upon and then all the fee for service lives in the managed care plans follow that same formulary. So, again, this kind of tells you where to go hunting. So, let's take Florida for example. This is a state that does not carve in.

I said there are 23 plans. So, 36% of the lives are Florida Medicaid. And if you break out the managed care, there's 23 plans. But if you look at the top 3 plans in the state, that's 75% of the lives. So, again, just like the doctors, you can know ahead of time where you need a target. I'll also point out that many user plans that we know are contract with today for VIVITROL. So, we've got an existing infrastructure. What I'm saying here – with an establish market is you know where to go.

Let's look at another state that doesn't do the – or that actually does the carve-in. Here, I've got the top five, and it gives, as an example here, what J&J was able to achieve with SUSTENNA. So, this is essentially at launch. And these big states with centralized formularies, they had access in four of the five, pretty much at launch – Ohio took a little bit later – that was very different from what their experience was of RISPERDAL CONSTA. So, the very first time, you have a new product in a class, much longer to get all of that in place.

In this case, obviously, we know where to go. And recently we've learned that in California, New York and Texas, they've also approved Abilify Maintena. So, it is indeed possible to get rapid access and you need to know where to go.

So, I'll wrap by saying, look, we're ready for this. We're working. This is an attractive market. We have a great product. We've got plans in place. We're working on the launch. We're doing everything we do to make sure this is a success.

And what's nice is we're not building from scratch here; we've got an existing footprint with a specialty product with distribution, patient support, injection services and it's not about bulking up.

This is about how do we add the lean muscle mass to this existing framework that allows Alkermes to sort of bump up to the weight class. So, that's what we're doing. That becomes a platform for the next one and the next one and I hope we're all together again to talk about how we're going to launch 5461 and everything else we're doing. But those are stories for another time.

So, with that, I will wrap and invite and Bernie and Rich back up for the Q&A. Thank you.

Question-and-Answer Session

Rebecca Peterson

(Inaudible). Actually, I’d you to join as well, if you don't mind. So what we'll do is we'll Rich stand behind the podium, so he can see sort of who's on the queue and we'll bring the three chairs up.

Richard Pops

Okay. Holler for the mic, if you want to say more but we can begin. Let's go. Who's got a question? Sitting – sit right there. Yes.

Unidentified Speaker

Rich, you now have several products that you could potentially partner. And so, while I appreciate you may not need to partner a lot of these products, could you give us a sense of maybe sort of prioritize, which ones you would look to partner and maybe when you will want to partner them?

Richard Pops

Okay. It's a rich portfolio now. And the probability of our taking all of these, all the way in every geographic territory in every indication by ourselves is probably pretty low.

One thing I can say is – and I'll say you've heard me say this before is that innovative new products, particularly new molecular entities with proof of concept attract a crowd.

So, our base plan is to control the development over the next phase of development ourselves and not be – not wait for collaborations or be rate limited by collaborations. So, we're going to go. We know what we're going to do with these programs; the new three you saw today. We know exactly how to take them in demand as fast as possible. 5461 – you saw what's going on. 3831 – you saw what's going on. 9070 Aripiprazole Lauroxil is nearing – now at the end.

That said, we're having discussions continuously on the whole portfolio.

So, there's not a real good answer to is other than we see collaboration to broaden the commercial footprint and to access more patients in more territories with these medicines sooner as part of our plan. And I think we'll just deal with it as the opportunities present themselves.

Yes, Dave?

Dave Risinger – Morgan Stanley

Risinger from Morgan Stanley. Just to follow-up on that question. I was hoping that you could talk a little bit about ex-US opportunities.

So, specifically – clearly, in order to garner reimbursement in ex-US markets, drug companies are increasingly having to demonstrate superiority to generics that are available. And so, maybe you could just talk about leveraging these products ex-US; how that maybe worked into your development or whether you're really going to lead ex-US development to future partners.

Richard Pops

It's a great question, Dave, and if I had been asked this question two years ago, I would have said likely we'll partner most of OUSs, that's in trying to keep as many US as we can.

I think today what you're seeing is we're reaching a certain critical mass of assets now that comprise as pretty significant psychiatry offering from markets outside the US as well, either in collaboration or potentially to do ourselves.

And so, the answer is there isn’t an answer right now. We're doing the experiment. We're talking to partners, potential partners for OUS. We're learning a lot about the OUS opportunity.

We're now a bigger company. We have an international footprint and we're not afraid of commercializing, particularly if we follow this theme that you heard me talk about at the beginning, which is targeted patient populations with a real value add, it makes the commercial exercise much more straightforward than thinking about competing on scale.

So, it's a real question that we're evaluating right now and I can't gave you a correct answer.

Unidentified Speaker

Okay. (Greg Salonne, HLMB). Two questions, Rich. First, as it relates to Otsuka and Lunbeck products, what's the current feedback from the field? Or what kind of competitive intelligence do you have and how we’re doing? So, any insight there would be helpful, and then I'll wait for that for…

Richard Pops

Okay. I'll start with that and I’ll Mark to comment. And I think the over-arching response is it’s early aid. They launched in mid-March. And with that – we've learned this with others, especially long-acting injectibles, they ramped at kind of a different rate.

But Mark, I’d be curios – any response?

Mark Stejbach

Guys, I would agree. It's early. It's only been a few months. I think if you did plot it, it’s probably a little below where SUSTENNA was in its launch. But I think you have to consider that it takes time to do some of the steps I talked about, work through the reimbursement and access. So, I think they're probably doing that. As I said we recently got three new states. So, we're watching and cheering for it.

Unidentified Speaker

Okay. And then, my second question just has to do with a caveat that Aripiprazole Lauroxil will target a different population versus SUSTENNA and CONSTA. Do you have a sense of where J&J is in terms of their views of having you guys come on board with another product, just generally speaking?

Richard Pops

I could see the general matter for the last several years. J&J hasn't worried too much of Alkermes as a competitor.


Richard Pops

But that's changing now, I think. And I think that nobody cares more about the continuing success of SUSTENNA and CONSTA than we do. And Mark showed those pie charts of the neuroreceptor activity of the agents. And I think it proves the point, which is typically a patient who's the appropriate patient for Risperidone is a different patient, who might be a patient who's suitable for use with olanzapine or Aripiprazole.

And it's really this idea that the benefits of long-acting medicine, which is so manifest now in the data over a long term has only really been available to those patients who were appropriate for treating with Paliperidone or Risperidone. And what we're doing is opening this up now.

I actually would hope that there would be a long-acting preparation every single of the anti-psychotics for that very reason, and particularly in schizophrenia. Bipolar is a different animal but in schizophrenia where we know that compliance is just a persistent and insidious problem, I think that the point is the one that Mark made, which is 6% market share or 2% market share – how you’d calculate the dominator – is willfully inadequate, given the benefits of improving the data and not just by ourselves but by other people, that's what we hope happens in the category.

Unidentified Speaker

Just one last follow-up, as it relates to CONSTA with the growth slowing, how should we think about modeling that on a go forward basis in the US obviously?

Richard Pops

You know I think I'll leave it to the modelers. But you can see from the figure, it declined, and then it's kind of steadied up.

Now, remember CONSTA is the only one with labeled indication for bipolar in the US. And I think it's got an installed base of patients and prescribers that are comfortable with the medicine.

But you can clearly see how the growth baton has been passed over to SUSTENNA, and that's what's driving the market, and that's why I think Mark drew that analogy to generation I Aripiprazole long-acting and hopefully INVEGA SUSTENNA.

But hopefully, what happens to the tides coming in and more and more utilization, it is going to drive all these brands. What's so striking at that example of the TNF inhibitors is that they are multiple blockbuster drugs in that category and they're very different, right? I mean, they have different infusion, protocols, they have different labels.

But, boy, when that tide came in and it just became conventional medicine, a lot of people benefited from it.

Unidentified Speaker

Thank you.

Richard Pops

Yes, Allen. Well, wait your turn Allen. And then, (Holley). Yes.

Unidentified Speaker

I'm faster. Thank you.

Rebecca Peterson

Thank you.

Richard Pops

Yes. You were quick on the draw.

Unidentified Speaker

I had three questions, firstly for Bernard. What level of weight gain would you think for 30 or 31, be clinically significant and also commercially significant when you think about managed care access?

Bernard Silverman

I think it's not so much about the average change of weight gain. As you see, we're focusing on the people with the more extreme weight gain. So, we're going to be looking at how many people we move out of these higher weight gain categories and much of that will come out of what we see in this Phase II study, which is really to explore where we're seeing the exact benefit.

Richard Pops

Yes. And I'm so glad you asked that question because it's so critical and we get it all the time. What's clinically meaningful? And the point is, in this large 400 patient Phase II study, versus an active comparative landscape, we'll get a profile of that distribution like Katie did. We'll see low weight gainers, we'll see medium weight gainers and we'll see high weight gainers.

We'll also be able to correlate and look for indications in the child that suggests earlier in their disease course, whether they might become heavy weight gainers later. And when we designed Phase III, we'll design the appropriate test statistic to elaborate that far end of the tail. It might be percents of patients who gained more than X amount of body weight rather than what's the average weight loss of the population. Does that make sense?

Unidentified Speaker

Next one is on the ALKS 9070 program. Why do you think there hasn't been faster or larger penetration of long-acting injectibles so far? And it's just something to do with the number competitors or more than that?

And from a commercial perspective, where would you first focus your efforts? Would it be the new patients versus patients who are about to switch? What has your market research shown you?

Richard Pops

Go ahead, Mark. I’ll…

Mark Stejbach

So, in terms of why is the penetration so low today, I think there's a couple of dynamics.

I think one, as you mentioned, kind of the competitive noise of the last 10 years have been a lot of promotion and samples and detailing around the orals.

And let's face it, like with VIVITROL, it's easier to write a script for an oral, all right? And if people take it, it works fine. But with schizophrenia, it’s often – it doesn't happen.

Now, in terms of using injectible, then that means figuring out the benefit design. Is it buy and build, especially the pharmacy, who's going to give the injection?

So, I think there's a few more things in office has to figure out in order to use the long-acting injectibles, or a community mental health center.

So, I think as opposed to say Europe, where I think more of the outpatient care is hospital centered that was maybe a little more natural, so somebody who’s just doing what's easiest versus what's the best thing.

I think in terms of our efforts and the targeting, I think, as I said, it's the 12,574, who use LAIs today and use Abilify. But I don't think it switched candidates. I don't think we're trying to make an argument that you should switch somebody, unless if they're not doing well in their therapy for whatever reason. But I think it is going to be patients on oral Abilify who are likely may or may not be compliant who'll likely have relapses as well as advocating for use earlier.

Richard Pops

The only thing I'd add to that, obviously, for the first part of that – let's see, RISPERDAL CONSTA was approved in the US in 2003 and up until this year. They've been the only pharmaceutical company promoting the long-acting injectibles.

Lily had an offering, but it wasn't a real offering. But J&J, it was the only voice and everybody else had a discordant voice.

Now, the point that Mark made as he see the expiration of the patents on the orals, you start hearing this harmonious message to physicians and payers that long-acting injectibles drive better outcomes. So, it's the medical argument as well as the pharmaco economic argument that hopefully win shifts more to our backend in the whole category approach.

Go ahead, Allen.

Unidentified Speaker

You, obviously, as you're highlighting the incremental assets that are in the pipeline and obviously you have BD potentially as a safety valve in terms of spend, but maybe you could just help us think about the framework of sort of how you think about the amount that you want to spend internally in terms of sort of what will trigger you to think about the outlines you're seeing. Are there certain events that you're looking for as well that may affect the earnings growth and cash flow of the company that would lead you in one direction or another?

Richard Pops

Okay. That's a great way to ask the question too because it's really a philosophical approach because there's no right answer and you can't put it into an algorithm and get the answer.

What we have right now is an abundance of opportunities since – as we map out kind of the decision trees, as we gain more data over the next two years. In particular, we have all kinds of optionality.

Our basic philosophy is that we think we can continue to still drive substantial profitability, while investing in this pipeline, because a lot of what you see, in the new compounds, for example, that next increment – put them into man – we obviously knew this was coming when we guided a few weeks ago for the fiscal year, that first studies that we run in man are so informative and relatively inexpensive that they don't break the bank and the dynamic of Aripiprazole Lauroxil in Phase III coming off of its expensive Phase III program gives us a lot of head space in that guidance range that we've given for R&D.

Now, three years out, if every single one of these is working and they're blowing up, we can't answer that today. But for the foreseeable future, I think our guidance accommodates these programs and we just practically, probably will end up collaborating in certain of these assets just to maximize their medical and economic potential.

Rebecca Peterson

Okay, Mario is next, and then we have time for one more question after him.

Mario Corso – Mizuho

Mario Corso with Mizuho USA. So, on 3831, it's on the lower right quadrant of your chart for lowest return and highest risk. So, does that put it a shorter lease, per se? And when you think about that, do you have early stage data or pharmacokinetic data that gives you some confidence that it's not attenuating efficacy of Zyprexa and that it's not suppressing appetite, but doing something metabolically?

And then my second question on Aripiprazole. So, 1.4 billion in oral sales right now in schizophrenia. So, how do you target or really commercialize and convert the other oral usage bipolar without doing a whole array of expensive clinical trials? Thanks.

Richard Pops

Okay. Thanks. So, first question – I want to thank you for asking because it reminds me – I forgot to say when I put that chart up, don't look at where I put the bubbles on this thing because it's not – don't take the protractors and the rulers out. The point is we had to fit all the bubbles in there in one point.

The key thing about 3831 in that chart is it bifurcates, right? Because there are indications that Bernie talked about.

So, from a starting – or actually initial stance is not that it's a high risk problem at all. In fact as Bernie said, olanzapine is a well established antipsychotic and we're essentially creating a broader spectrum medicine by adding to it opioid modulation.

We don't believe that there's any crosstalk pharmacologically that's still curious in the efficacy of the olanzapine at all. And what's cool about the way we drew it, at least I think, is that if it only were to work in the dual diagnosis patient, that's on the lower – that's on the lower trajectory than if it works in weight gain.

What we've learned from talking, even at this level, to multiple physicians already, is that when you say attenuated olanzapine weight gain, people say, "I'm in." That's a mega product. And when we talk about dual diagnosis, they say, "Well let's go back to the weight gain."

Because it’s if it – so, the weight gain is an easy bottom. If we really attenuate the significant weight gain on olanzapine, this drug is going to be used by a wide range of patients. But we're not counting on that because we only have the data from the rats and the non-human primates and healthy volunteers for three weeks as our hypothesis, but we can't take it – we can't bank on it yet.

Whereas on the dual diagnosis patient right now we're quite confident that when we super impose 33 on a treatment regimen that includes olanzapine, we're going to reduce heavy drinking behavior in those patients.

And so, instead of plotting it where it is vertically, it's more in the idea that there are two diversion paths for the product and that significant attenuation weight gain is a mega opportunity for the product.

And Mark, I'll let you answer the second question.

Mark Stejbach

This question was about Abilify particularly in bipolar. So, let's be clear, our focus will be on schizophrenia at large. We'll have to do additional studies for bipolar indication.

Two interesting things about bipolar; one – that the penetration of long-acting injectibles is even lower there, which is a few percent. Now, whether that's the product today or the condition, that's something we're exploring because only CONSTA has that indication. And again it doesn't have the same profile as Abilify, which has even more use in bipolar than it does in schizophrenia. So, this one will be very interested in sort of untangling how much of that is the product profile versus the patient population and what the opportunity is. But to answer your question directly, we're' not targeting that at large so that's why it's kind of in the next quadrant of growth potential to come.

Richard Pops

And I think the most tantalizing question and I don't think there's an answer to it is that if you had a long-acting Aripiprazole formulation that drives superior outcomes, does it actually make Aripiprazole a better tolerated medicine, a more broadly used compound? So, does it foreclose the need for people to escalate it to more prone-tolerated agents based on the assumption of lack of efficacy when the efficacy decorum might have been driven by lack of compliance? So, this is a – it's quite a dynamic, as we see more and more long-acting injectibles being used more broadly, I think it's hardly ecstatic, a hardly ecstatic situation.

Rebecca Peterson

Okay. Last question to Tom before we close the (inaudible).

Unidentified Speaker

I was just thinking if Dr. Freeman has some comments on the appeal of going after these dual patients with the dual diagnosis?

Marlene Freeman

Sure. Is this live?

Rebecca Peterson

You got it. You got it.

Marlene Freeman

Okay? So I think it's a great idea. I mean I would also like to – if you don't mind…

Unidentified Speaker


Marlene Freeman

Just speak to the bipolar disorder issue as well. I mean in terms of comorbidity, it's true for bipolar disorder that there's tremendous comorbidity as well with substance abuse. And there's also tremendous non-compliance in bipolar disorder because part of the disorder mania and hypomania is really profound lack of insight as part of the disorder. So, I think that probably is a market that would be very important to look at.

In terms of dual diagnosis, I think in general there is a tremendous need that needs to be met. I'm not sure if there was a very specific questionnaire. But in terms of treating both the substance abuse and the disorder is very important, very clinically important.

Unidentified Speaker

Thank you. Is bipolar a next opportunity to pursue?

Richard Pops

It's an opportunity to pursue. I don't know if it is the next one. We’ve got a fair number of things that are lining up to be funded as we expand this. But its right up there, okay?

Rebecca Peterson

So, is there any closing remarks?

Richard Pops

No. I think you guys have had enough. I mean, thank you so much for your attention today. And I hope you see in just how excited we are about where we're going after here.

And so, we're here to answer your questions. There are some beverages and some food available to you. And I want to thank Rebecca and her core communications team for putting this all together. It was a superb afternoon. So, thank you very much.


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