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Executives

Roland Haefeli - Senior Vice President, Head of Investor Relations and Public Affairs

Jean-Paul Clozel - Chief Executive Officer and Member of the Board and Founder

Otto Schwarz - Executive Vice-President and Chief Operating Officer

André Mueller - Executive Vice-President and Chief Financial Officer

Analysts

Ravi Mehrotra - Credit Suisse

Richard Parkes - Deutsche Bank

Peter Welford - Jefferies

Fabian Wenner - Kepler

Olav Zilian - Helvea

Sarah Potter - Merrill Lynch

Guillaume van Renterghem - UBS

Richard Parkes - Deutsche Bank

Olivia Capra - Barclays

Actelion Ltd (OTCPK:ALIOF) Q3 2013 Earnings Call October 17, 2013 8:00 AM ET

Operator

Welcome to the Actelion's nine months 2013 financial results conference call. (Operator Instructions) At this time, I would like to turn the conference over to Roland Haefeli, Head Investor Relations and Public Affairs. Please go ahead.

Roland Haefeli

Good morning, for those of you who are joining us from the United States; good afternoon, to everybody else. Welcome to Actelion's first nine months 2013 financial results conference call.

We are reporting a pleasing set of financial numbers, and in order to discuss those and also a few other details of our operations, we have here with us Jean-Paul Clozel, the Chief Executive Officer. He is being joined by Otto Schwarz, our Chief Operating Officer. And last but not least, for the first time, we are being joined by André Mueller, our new Chief Financial Officer.

Next Slide. Before I hand over to Jean-Paul, I would like to remind everyone that we will be making so called forward-looking statements and you are hereby appropriately warned about the benefits or dangers to be invested in Actelion's stock.

With that and without further ado, I would like to hand it over to Jean-Paul, for his introductory remarks. Jean-Paul, please.

Jean-Paul Clozel

Thank you, Roland. Good afternoon or good morning to you and thank you for joining us today. Actelion today reports strong financial numbers. Sales of CHF 1,322 are up by 4% in local currency. Core earnings are up by 14% to CHF 496 million.

Our new Chief Financial Officer, André Mueller, will discuss our financial performance in much more detail. At this state, I would like to welcome André to Actelion. I appreciate his strong background as an operational CFO and I am sure you will as well.

In May 2012, we led out our strategy for value creation. We are making steady progress on Lucerastat. We are maintaining and growing our pulmonary arterial hypertension franchise, as evidenced by increasing product sales today. And Opsumit, nearing the end of the regulatory review payout in both the United States and the European Union. The Phase III program for Selexipag in pulmonary arterial hypertension is on track to report data in mid 2014.

With the acquisition of Ceptaris, we have broadened our product portfolio. Together with the Phase III initiation for our new oral antibiotic agent cadazolid, we are advancing in creating additional product franchise.

Otto Schwarz, our Chief Operating Office, will now discuss the details of these developments with you. Please, Otto.

Otto Schwarz

Thank you, Jean-Paul. Good morning, good afternoon, to everybody around the globe. Thanks for joining us today. We are ready, ready to launch Opsumit. The regulatory process in the U.S. is on track to deliver approval in the fourth quarter this year. Actually, the PDUFA date in the U.S. is on Saturday, October 19, so we might be talking again, very soon. Please note that legally speaking the PDUFA is still met if the FDA renders its decision on Monday, October 21.

Also during the fourth quarter we expect the European CHMP opinion. Additionally, we expect approval in Canada still this year. Switzerland and Australia are expected to follow next, in 2014. Filings in other territories are ongoing as planned. Furthermore, the Japanese bridging study to the SERAPHIN study is on track for a filing in Japan, during the first half of 2014.

As you are aware, the SERAPHIN study has been published a few weeks ago in the New England Journal of Medicine, and this availability of the core pivotal macitentan data has further enhanced the appreciation in the PAH medical community for the SERAPHIN long-term morbidity/mortality outcomes. And for macitentan 10 milligram, which is the engine behind these unique PAH outcome data.

Let me quickly again summarize these data, as they have the potential to shift the paradigms in how PAH should be treated. Highly statistically significant 45% reduction in the primary compounded endpoint of morbidity/mortality events, 50% reduced risk of PAH related deaths and hospitalization.

Macitentan 10 milligram reduces morbidity/mortality events across functional classes. Macitentan 10 milligram improves outcome in mono as well as combination therapy. It is important to recognize that SERAPHIN is the first prospective double-blind, randomized control study also delivering solid data on combination therapy.

And last but not least, macitentan 10 milligram also improve exercise capacity, hemodynamics, such as pulmonary vascular resistance and cardiac index as well as functional class. This unique efficacy profile is coupled with a favorable safety tolerability profile, evidenced by number of patients discontinuing due to adverse effects are the same for macitentan and placebo.

The LFT profile of macitentan is similar to placebo. Also the edema rate has been comparable to placebo. And hemoglobin also increased with placebo is in line with what's to expect from an endothelin receptor antagonist.

Moreover, beyond the data presented in the New England Journal of Medicine, investigators have started to publish key findings out of the SERAPHIN database. For example, at ESC, the European Society of Cardiology, data was presented that highlights the lack of predictability for long-term outcome based on changes in six-minute walk, change in proBNP and change in cardiac index.

Investigators also presented the results of the hemodynamic sub-study as well as the quality of life data and data on PAH-related hospitalizations. And there are more interesting data coming. They will be presented as congresses over the next few years, so please stay tuned.

As I mentioned before, we believe that all this data will change some of the current perspective in PAH. This is why we launched a changed perspective educational campaign on a global basis, which should make by posing specific questions, physicians aware that there are data coming with the potential to shape their perspective on how to treat PAH in the future.

So we are ready to launch, all critical elements are in place. We have a unique set of data coming from the landmark SERAPHIN trial. A strong flow of publications and data, even beyond the pivotal New England Journal of Medicine data, supporting the medical utility of macitentan 10 milligram. Our market research indicates a strong endorsement for SERAPHIN and the macitentan 10 milligram outcome data.

We have strengthened our commercial capabilities. For example, we moved our field forces to iPad-based physician interactions. We also fine tuned our commercial resource allocation to match the opportunity such as setting up an innovative infrastructure in the U.S. We have almost all elements in place to make the pricing decision and ensure fast market access. The only pieces missing are the final product labels. So we are ready and we are eager to go.

Beyond PAH, we also made progress to diversify our portfolio, as Jean-Paul mentioned before. As you know, we finalized the acquisition of Ceptaris at the beginning of September. Their main asset is Valchlor, an FDA-approved gel presentation of mechlorethamine. This active ingredient is until now only available is non-standardized presentations, compounded by individual pharmacist.

The ad-hoc compounding has significant issues in terms of quality and reliability, as it is not standardized in production and handling also funding for patients is not straightforward. Hence, Valchlor will bring significant advantages because each treating physician, every patient, will know, what the product will deliver in terms of efficacy and safety.

Valchlor is an alkylating agent indicated for the topical treatment of Stage IA and IB mycosis fungoides type cutaneous t-cell lymphoma, that's quite a name, in patients who have received prior skin-directed therapies.

Just a few words about mycosis fungoides. It is the most common form of CTCL, so I go to the abbreviation, a rare subset of non-Hodgkin lymphoma. Unlike most non-Hodgkin lymphoma, CTCL develops primarily in the skin and lesions can appear as patches, plaques or tumors. Early stage disease may be confused with more common skin conditions, like psoriasis and eczema, most patients are diagnosed above 50. The U.S. prevalence of early MF-CTCL is around 20,000 patients.

We will commercialize Valchlor by building up a dedicated specialty business unit with the current Zavesca team as a nucleus. We expect to launch in the U.S. in Q4 this year. The ex-U.S. opportunity is currently under evaluation.

So let me move on to our year-to-date nine months commercial results. And I am pleased to report, with Q3 net sales growth of 5% in local currency, we continue our strong performance in 2013, reporting year-to-date net sales of CHF 1,322 million, a 4% growth in local currencies.

The business was managed well in a still challenging competitive environment in the U.S. and its pricing pressures outside of the U.S. Price increases in the U.S. across the portfolio and the reversal of managed care Medicaid rebate accruals of CHF 8 million, supported net sales growth and helped to partially balance price erosion ex-U.S.

We are also doing well in our receivable collection in Southern Europe, especially noteworthy is our excellent cash collection in Greece this year, where we moved to cash-only revenue recognition in May 2013.

So let's come to Tracleer, which reported sales of CHF 1.138 million, a 3% growth in local currency. This reflects a 5% growth in units mitigated by an overall price erosion of two percentage points. Unit growth was supported by favorable inventory replenishments in the U.S. after low stocks at yearend 2012, continuous double-digit growth in Japan and by a 15% growth in digital ulcer patients in Europe.

As you know, we have lost Tracleer exclusivity in a few markets. And we are doing very well in defending Tracleer versus bosentan generic in Canada and Turkey. In both markets, we still have over 80% unit share. Of course, price erodes in both markets: In Canada year-to-date around 20%; in Turkey we had a mandatory price adjustment of overall minus-27%, upon generic entry. In Brazil, where we launched our own generic bosentan, so far we are winning all tenders against the local generic.

Also Stayveer has been registered. Stayveer is the bosentan brand of MARKLAS, an Actelion affiliated company setup to commercialize generic bosentan. And MARKLAS is ready to launch the product in selected markets where necessary to preempt generic competition.

So let's move on to Ventavis. Not much new news to report. Our patient base continues to erode due to Tyvaso's competitive pressure. Our unit sales are down 8%. An 11% price increase mitigated the topline impact.

Veletri, progresses very well in all markets where the product is available until today. The U.S. continues to grow by plus-25% in local currency also supported by a positive price movement.

In Japan, I'm happy to report the successful launch of Veletri as epoprostenol Actelion at the end of June 2013. Please remember that Japan is the biggest epoprostenol market worldwide. We also launched in Canada, U.K. and the Netherlands, have approval in Spain. Other approvals and/or launches in other markets are imminent.

And last but not least, Zavesca, which grew 17% in local currencies in the first nine months of 2013. Growth is mainly driven by strong demand in Niemann-Pick C disease. The successful NP-C launch in Japan added growth momentum. And we continue to enjoy a stable base in GD-1 patients, especially in the U.S. and in Brazil. In the U.S. where we only commercialize the product in GD-1 disease, we had also positive price effect of 6%.

So please, let me summarize. We continue to deliver pretty descent results in a clearly challenging environment. The Veletri success continues beyond the U.S. We have Valchlor approved in the U.S. with the launch imminent. And we are ready and we are eager to launch Opsumit.

With that, thanks for your attention. And I hand over to André.

André Mueller

Thank you, Otto. And thank you Jean-Paul for your welcoming words. Ladies and gentlemen, it is my pleasure for the first time to report the nine months 2013 financial results of Actelion. As Chief Financial Officer, I'm very pleased that this is a strong set of financial numbers underpinned by strong sales, good cost control, good cash generation and a strong balance sheet. All taken together, Actelion enjoy significant financial flexibility, allowing us to invest in any suitable growth opportunities.

Let me start with a quick look at the highlights. During the first nine months of 2013, Actelion's product sales increased by 4% in local currency to reach CHF 1.3 billion. Core earnings, again, in local currencies increased by 14% to CHF 496 million. Operating income rose to CHF 397 million, also 14% increase in local currency. Fully diluted core earnings per share for the first nine months of 2013 amounted to CHF 3.60 compare to CHF 3.09 for the same period of last year.

Next slide please. Here you can see how is the nine months 2013 core earnings of CHF 496 million, an increase of 14% in the local currency came about. Firstly, of course it's higher product sales, up by 4% in local currency to CHF 1,322 million. Core research and development expenses at CHF 251 million were 12% lower in local currency compared to the same period last year. This is a result of last year cost saving initiative and the new strategy leading to a focused R&D portfolio.

Core SG&A at CHF 421 million was up 4%, supporting Veletri launches in Japan, Canada, U.K., Netherlands and of course getting ready for the Opsumit launch, as Otto recalled.

Next Slide please. For documentation purposes, here is the reconciliation from core earnings to U.S. GAAP operating income that you can also find in full detail in today's media release. Please allow me to highlight just a few details of general relevance. We had a CHF 10 million reversal in terms of doubtful debt provision, due to good cash collection. Days of sales outstanding, at the end of September 2013 was 79 days, basically unchanged compared to last year DSO.

D&A, depreciation and amortization as well as stock compensation are also basically unchanged from the same period last year. Under others, no new items, since we already reported a CHF 13 million arbitration settlements in the third quarter of 2013.

Now, moving to U.S. GAAP numbers. The main drivers for the 14% local currency increase in operating income to CHF 397 million are clearly the increased gross margin. Gross margin corresponds to additional product contribution, i.e. net sales less costs, but it's also due to a lower operating expense base. Additionally, you can clearly see the CHF 12 million adverse currency impact as we have Swiss franc reporter. Notably, the Japanese yen, but also the U.S. dollar weakened against the Swiss franc during the reporting period.

Now, moving onto U.S. GAAP net income. The company reported net income of CHF 304 million, an increase of 17% in local currencies. The financial results continues to be dominated by interest of CHF 30 million related to Asahi litigation bonds and there is also a CHF 9 million interest payments for the outstanding straight bond.

Tax expense for the first nine months was CHF 52 million, which translates into a tax rate of 14.7%. For the full year, we expect the tax rate to remain around these levels.

Now, moving onto earnings per share. The strong operating performance as well as the share buyback contributed to basic earnings per share increasing by 23% in local currency to CHF 2.73. Fully diluted earnings per share increased by 21% the gain in local currency. Net cash position is approximately CHF 1.2 billion of which CHF 616 million are restricted in relation to the bail bond for the Asahi case. Net cash decreased by CHF 94 million.

So let's move to the next Slide, so you can see what drove this decrease. Operating cash flow, continue to be strong with CHF 445 million generated during the first nine months of 2013. The acquisition of Valchlor for cash consideration of US$250 million resulted in an outflow of CHF 226 million.

CapEx was low at CHF 20 million as construction of our headquarter campus is basically finished. Therefore, we do expect the capital expenditure to remain around current levels going forward.

We have continued to return cash to our shareholders with CHF 530 million in 2013. We bought back CHF 417 million worth of shares with a recently concluded share buyback and we also paid out a dividend of CHF 113 million.

Other movement in treasury shares include proceeds from 1.9 million shares placed with a long-term investor earlier in this year and proceeds from the exercise by employees of 3.1 million stock options. Option exercises increase this year, in line with increase in our share price.

Finally, I am happy to confirm the increased guidance that was issued in July. For 2013, of course unforeseen events excluded, we continue to expect local currency core earnings growth to cross into double-digit territory. For 2014, we expect core earnings in local currency to be at least at the same level as for the current year. For 2015, we would then expect core earnings growth to be at least in the single-digit percentage range.

Last but not least, you should keep in mind that this guidance for the year 2013, 2014 and 2015, is on top of a much higher base than what we initially announced in May 2012. So in conclusion, and as Jean-Paul stated in his introduction, Actelion is making steady progress on all aspects of its strategy for value creation.

With that many thanks for your attention. And I hand back over to Roland.

Roland Haefeli

Thank you very much, André. Thank you very much to the other two presenters. We took about 25 minutes to take stock of the current situation at Actelion. We are aware that, as we are, you are all focused on what will happen with the FDA PDUFA date that is scheduled for the 19 of October. It's a Saturday.

Please, before we open for the Q&A session, allow me to preempt any questions you might have related to these ongoing regulatory procedures. As a matter of policy, we do not discuss ongoing procedures. So I ask for your forgiveness and for your understanding, if and when we cannot reply in detail to any questions you might have to that subject. But we are hopeful that very soon within the coming days we will be able to provide you detailed update.

With those preliminary remarks, I would like to open the floor for any questions you might have. We have approximately 15 minutes to maximum 20 minutes available to go into detail, but we're happy to take any of your calls outside of this webcast. Conference call operator, please open the lines.

Question-and-Answer Session

Operator

(Operator Instructions) We have our first question from Ravi Mehrotra.

Ravi Mehrotra - Credit Suisse

I'll just put two in, both of which regard pricing. Probably for Otto, in the markets such as Canada, Turkey, Brazil where you've managed to hold onto the tenders, can you talk about some of the dynamics, how you've held onto it, what the pricing of the generics that came in were?

Secondly, for your own approved generic, which I can't pronounce the name of, can you give us an indication of the pricing discount you probably get for that against branded Tracleer? And then thirdly, sticking with the pricing theme, can you conceptually remind us what you've said about pricing for Massey?

Otto Schwarz

Thank you, Ravi. I think the first question relates to the general dynamics. The generics in Canada are coming in. They have different prices between minus-40% and minus-60% versus Tracleer. In Canada, we have specific strategy in place province-by-province, because market X is a bit different from provinces-by-provinces.

So we have a mix of prices in some provinces, we still sell for the full Tracleer price against the generics in some provinces. We have some schemes in place to match that pricing. And one key factor also beyond all the strategies we still have in place. There is a huge physician loyalty to Tracleer in the Canadian market and that's the same which plays out in Turkey.

On the Opsumit pricing, I am just going to repeat what we said before. We want to price the product in a way that it reflects the quality and the innovativeness of the data. On the other hand, we need to make sure that we have market access from day one, so maximum price, which gives us market access from day one, unrestricted market access.

Roland Haefeli

Thank you very much, Otto. And I am sorry, I forgot to say, please if you have a question, if you could introduce yourself with name and affiliation, and if possible restrict yourself to one question. So Ravi, you got a free one here, because I forgot to. Next question please.

Operator

We have the next question from Richard Parkes from Deutsche Bank.

Richard Parkes - Deutsche Bank

I was going to ask two questions as well. So the first one I think you're probably not going to answer. So I'll ask the first one and if you don't answer it, then I'm assuming I'll get a second. So I'm just wondering, once you get the decision from the FDA, do you think you're going to be ready to launch immediately? And the reason I'm asking that is because it just gives me a sense of what kind of discussions you've had over REMS requirements with the FDA already.

Otto Schwarz

You already answered the question.

Roland Haefeli

I think we can just in general, I think, Otto, we are ready and eager to launch, that's about as much as we can say.

Richard Parkes - Deutsche Bank

My real question was I just wondered if you could discuss the investments in sales and marketing that are going to be required in the fourth quarter. You're going to be launching Valchlor and hopefully Opsumit as well, and generally we do see an increase in costs in the fourth quarter anyway. So I'm looking for some kind of guidance as to how to kind of look, what to expect in the fourth quarter?

Otto Schwarz

Maybe, André, can you give you bit more specifics from where we are spending the money, number one. There is an underlying phasing pattern where Q4 investments or the spent is in general higher. You see that over the pattern over the last couple of years, which relates to a lot of the activities. There is a heavy concentration of significant activities in the fourth quarter. And now, on top comes Valchlor.

As I said, we're building our own business unit. We are working with Ceptaris. We are preparing for a launch, so we're investing into that asset to get ready and build up the infrastructure. And then of course, we need to get ready, so that we can launch immediately as fast as possible Opsumit. We basically have most of the launched investments now. One day we'll grow up now in Q4 as we prepare for the launch in the fourth quarter, so two effects.

Jean-Paul Clozel

André, would you like to add some color.

André Mueller

Yes, Otto, have just discussed the SG&A, increased OpEx and we should also have an increased R&D. Notably, we see initiations of Phase III for cadazolid. So altogether, we should have a fourth quarter, which will confirm hopefully that we will meet guidance by the yearend.

Otto Schwarz

And maybe just to highlight, we have confirmed guidance today, crossing into double-digit territory. And you'll see that this is indeed a major achievement as you have just seen due to the acquisition of Valchlor, there are additional spending that have not been taken into consideration when we issued the crossing into double-digit territory guidance in the middle of the year. So clearly underlying performance remains and is strong.

Operator

The next question comes from Peter Welford from Jefferies.

Peter Welford - Jefferies

Firstly, just on Opsumit, there has been a lot of talk in the presentation about the 10 milligram dose. And I guess I'm curious with the emphasis on that. Is the assumption that the 3 milligram dose, should we think about that as an option for patients to down-titrate to, if needed, and the 10 milligram dose is the focus or should we even think more perhaps stretched view to even them that?

And just a quickie then, possibly if I can, what is the amortization charge we should be assuming from 2014 or even the fourth quarter? I guess, I'm just trying to understand with the Valchlor acquisition, if you can give us assertive idea of the duration of that intangible that would be great.

Otto Schwarz

Regarding Opsumit 10 milligram, in hopefully a few days you will see the label. And then I think everything will be very clear. The second thing is have a look at the SERAPHIN data as published in the New England Journal of Medicine. And then you see 10 milligram versus 3 milligram, everything is published there.

Peter Welford - Jefferies

Then in relation to the Valchlor accounting, not the easiest part on the U.S. GAAP. You find the detailed numbers in the press release on the second page when we discuss the Veletri, but to address one of the issues, amortization of the intangible.

André Mueller

I don't want to bother you into too much detailed information regarding the U.S. GAAP purchased price allocation. But as you know, we have posted in US$378 million of intangible assets. And these intangible assets will be amortized over the useful life of the asset, i.e. from 2014 to 2028 before the Veletri will loose exclusivity. That will be also reversal, because in front of these intangible asset, we have a deferred tax liability of 40% of the asset and this will partially offset for 40% of core fees amortization.

Roland Haefeli

It started to become a free entertainment [indiscernible] on how to educate on U.S. GAAP. So please if you have more questions André will be happy to take them offline to fine tune your models. Plus as you have seen, we will reach out to you in more detail to introduce André over the coming days and weeks to the investors and the analyst base.

Operator

The next question comes from Fabian Wenner from Kepler.

Fabian Wenner - Kepler

Just one question. You mentioned new trials and new indications for Opsumit. Can you give us a rough guidance, what you have in mind and how large the trial could be, so we can roughly estimate the respective R&D cost increase?

Jean-Paul Clozel

I just talked about the new data coming out of the existing SERAPHIN database. I didn't talk about any new trials and I don't think we are going to discuss that here now. The company has said that once macitentan has been, A, approved; and B, launched, we will discuss with you additional lifecycle planning for the compound next through the already ongoing studies that have been disclosed previously.

We have the Phase III program ongoing from macitentan in digital ulcerations. We expect results in the first half of 2014. We are also running an additional enabling study for PAH CHD. And we have also a safety ongoing in glioblastoma patients that's a Phase I for purely safety-driven. These are the disclosed studies that you'll find on clinicaltrials.gov. And the new one, we will discuss with you later, hopefully in February 2014, when we will be rejoined by Guy Braunstein, Head of Clinical Development.

Operator

The next question comes from Olav Zilian from Helvea.

Olav Zilian - Helvea

Could you please comment on the reasoning, you're reasoning to acquire the Valchlor rights? And are your considerations as for the competitive environment, please?

Roland Haefeli

So maybe for the general reason for acquiring companies and products, Jean-Paul if you want to delve a little bit into the strategic environment.

Jean-Paul Clozel

I think that we had decided to invest into specialized compound or compound treating orphan disease with high medical need with very little drugs available and Valchlor is a typical example. In fact, we're buying by Ceptaris company with only one product. So basically we are buying one product. And we're seeing that there was a way big medical need and that Valchlor would satisfy this medical needs without a huge investment, with a limited investment in marketing, that's the reasoning.

Roland Haefeli

Otto, would you like to discuss the competitive environment.

Otto Schwarz

I think the competitive environment, the key competitor for now is the compounded product, because that's the only way how the product today is available. There is an estimate, again the estimate is, question mark 2,500 to 2,000 patients on the compounded product. So that's a natural source of business for Valchlor.

I think the opportunities are significantly bigger than this 3,000 patients, because again the compounded nature of availability restricted access to that therapy. So two competitors; one, compounded product; second competitor is in a sense we need to expand the market, because there's a significant bigger need for this type of product. So there are good opportunities.

Olav Zilian - Helvea

So what is your view on the development in the field of antibody drug conjugates for this indication?

Otto Schwarz

This was difficult to understand. Could you repeat?

Olav Zilian - Helvea

There are antibody drug conjugates in development for the same indication. Is that a threat to your product?

Otto Schwarz

Not immediately. And just seeing that I don't know this disease as well as others, but I think that there are more, not for this exact early form of indication, they are for the late form when there are systemic therapies needed. So in fact it's not competing with market that we are aiming at for the time being.

Operator

The next question comes from Sarah Potter from Merrill Lynch.

Sarah Potter - Merrill Lynch

Just one question please. When can we expect to have an update on the Asahi litigation? I think you've previously said 2H13. And if positive, could you provide some color on how you may use this cash?

Jean-Paul Clozel

In terms of timelines, if you read the case, we said, we might be getting it before the end of 2013. André, do we have an update, it's probably going to be a little bit tight.

André Mueller

Yes, exactly. We now expect a decision on the appeal some time during the third quarter of next year. And regarding to the second part of your question, first, we wait for the decision on the appeal; and then we will discuss the appropriate way for it, regarding any cash that might become available.

If we win the appeal, Asahi in turn has the right to appeal to the Californian Supreme Court within 40 days, which can then decide within 90 days to accept or reject that decision, which means that we will have to wait. I would say Q2 2014 to have complete and definitive view on the Asahi litigation.

Roland Haefeli

And maybe just to preempt the next question, are you sure it's going to be in Q1 this time? Most likely, yes. Due to procedural reasons we have been informed that it is very likely that it will be in Q1 2014. It will most likely not be before the end of '13, again for procedural reasons.

Operator

We have our next question from Guillaume van Renterghem from UBS.

Guillaume van Renterghem - UBS

Maybe one for André and one for Otto. The one for André, Actelion used to publish actually your geographic split in revenues U.S., rest of the world and so on. Can you give it to us for Q3 or nine month, doesn't really matter? And maybe then a question for Otto, on Valchlor, can you tell me actually I mean how much does it cost to prepare let's say one tube of mechlorethamine gel? And how much do you think you're going to sell it, gel tube of Valchlor?

Roland Haefeli

I have to apologize indeed. I was a little bit too quick by removing the slide covering the geographical split. And André will just give it to you verbally.

André Mueller

In local currency the 4% increase for the first nine months. The U.S. is taking 1.7% of it.

Guillaume van Renterghem - UBS

No, I'm not speaking absolute number. What portion of sales were in the U.S., what portion of sales were in rest of the world?

André Mueller

If you want in for U.S., it's 40% of the increase and Japan is roughly 10% of the increase.

Guillaume van Renterghem - UBS

No, no. So I'm not talking about the increase. I'm talking about [multiple speakers].

Roland Haefeli

Guillaume, I'll get you the stuff offline. I'll put it up on the web. Sorry. I cut that slide, because we were a little bit. So it's clearly my mistake here. So we will rectify. Sorry for that. But now to the decent question about Valchlor pricing? Otto?

Otto Schwarz

On the cost I cannot really comment and on the price I cannot really comment either. But we are going to launch very soon and then we will disclose the price. The price will be clearly about what the compounded product would cost today. When I say cost, acquisition cost for patients.

Roland Haefeli

So we are left with two questions, if I counted correctly. Good. Second last question then.

Operator

The next question comes from Richard Parkes from Deutsche Bank.

Richard Parkes - Deutsche Bank

I was just interested in mycosis fungoides prevalence data that you've given. Is that 20,000 in the U.S? Is that diagnosed patient population or is that the overall prevalence? And if it is, how many more patients do you think could remain diagnosed and what's your strategy to access those patients?

Jean-Paul Clozel

The 20,000 number is diagnosed patients, not all of them are candidates for Valchlor, because not everybody in this early stage needs this type of product. And again, we are developing now a strategy, now we acquired the company a-month-and-a-half ago, so we are developing our strategy that we're going to be ready by launch and as we proceed building up the business unit. So I wouldn't like to divulge now things which are in progress.

Roland Haefeli

And Richard, just for documentation purposes, some of you have called me up and said that we found a much higher number of patients on compounding than the 2,000 and 2,500 that we have mentioned before. We followed up on that and indeed we saw that at some point in time, supposedly there was a bigger number of patients on compounded medicine, but due to the issues that Otto has mentioned, it seems that the number of patients have --

Otto Schwarz

There was obviously a shortage. There were numbers was around 5,000 at some point in time, but it seems to be more 3,000 based on some shortage in the past. So if that is wrong and it's 5,000, I am very happy, because my uptake will be better.

Roland Haefeli

And with this, we go to the last question.

Operator

And the last question comes from Olivia Capra from Barclays.

Olivia Capra - Barclays

And if I am correct, I think you put price increases for Tracleer through in January and then one further in March. Have there been any more in the quarter? I apologize if I missed this earlier. And do you expect any more in the future? I guess as follow-on, how long do you expect price increases will be viable for these types of products in the U.S. market?

Roland Haefeli

We had another price increase in September for 2.7% of Tracleer. And how long are the price increases viable in the U.S., I think that's a pharma political question. And I think it will take some time until the U.S. might go to a regulated environment like Europe, despite negotiation. But for the time being we have no indication that's going to change soon. And so I guess, that's what we can say indeed.

Roland Haefeli

Thank you very much, Olivia. Thank you very much, Otto. Thank you, André, Jean-Paul. We've spent hopefully 50 interesting minutes with you today on this conference call. We look forward to spend hopefully about the same amount of interesting minutes rather sooner than later when macitentan regulatory decisions are upon us.

As mentioned, FDA PDUFA is at 19, that's a Saturday. Also, if and when the FDA were to render their decision on Monday, the timeline would still be met. So we hopefully get back to you in the coming days with that regulatory decision. We're also looking forward for Europe regulatory decisions, CHMP opinion, and as Otto, mentioned many other territories. And whenever we have the regulatory decision, we will update you on potential launch deadlines.

Please also be aware that, if and when you can mark up your calendar already, February 11, 2014, we will provide the financial results for 2013 in a detailed conference call, where we will also update our assets in R&D again, then with the respective management present.

And for those of you who always look a little bit more into the future by mid-2014, we should then be able to deliver to you the topline results of the morbidity/mortality Phase III study with Selexipag in pulmonary arterial hypertension. This is an event-driven study. And we'll update you on some more precise timelines, but at the moment indeed it looks like the middle of 2014. Thank you very much for your continued interest in Actelion. And with this conference call operator, please close down the call. Good bye.

Operator

Ladies and gentlemen, thank you all for attending. You may now disconnect.

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