Alkermes, Inc. F3Q10 (Qtr End 12/31/09) Earnings Call Transcript

Feb. 4.10 | About: Alkermes plc (ALKS)

Alkermes, Inc. (NASDAQ:ALKS)

F3Q10 (Qtr End 12/31/09) Earnings Call

February 4, 2010 at 4:30 pm ET

Executives

Rebecca Peterson - VP, Corporate Communications

Jim Frates - CFO

Richard Pops - Chairman, President and CEO

Analysts

Cory Kasimov - JPMorgan

Steve Yoo - Leerink Swann

Dave Windley - Jefferies & Company

Thomas Russo - Robert W. Baird

Ian Sanderson - Cowen & Company

Operator

Ladies and gentlemen thank you for standing by. Welcome to the Alkermes conference call to discuss the company's third quarter financial fiscal 2010 financial results. My name is John and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised this call is being recorded at Alkermes' request.

At this time, I would like to introduce your host for today's call, Ms. Rebecca Peterson, Vice President of Corporate Communications at Alkermes. Please go ahead.

Rebecca Peterson

Thanks very much. Good afternoon and welcome to the Alkermes conference call to discuss our financial results for the third quarter of fiscal 2010, which ended on December 31st, 2009. With me this afternoon are Richard Pops, Chairman, President and CEO of Alkermes and Jim Frates, our CFO.

Before we begin, let me remind you that during the call today, we will make forward-looking statements relating to among other things our expectations concerning the commercialization of RISPERDAL CONSTA, VIVITROL, and Exenatide once weekly, our future financial expectations and business performance, our expectations concerning future of business development transactions and our expectations concerning the therapeutic value and development of our product candidates.

Listeners are cautioned that these statements are neither promises nor guarantees, but are subject to risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements. You can find a complete list and detailed description of these and other risks in our Annual Report on Form 10-K, our quarterly report on Form 10-Q, which was filed this afternoon as well as the other periodic reports filed with the SEC under the Securities and Exchange Act of 1934 as amended. We undertake no obligation to update or revise the information provided in this call.

This afternoon, Jim Frates will discuss our third quarter financial results and Richard Pops will provide an update on the company. After our remarks, we will open up the call for Q&A.

Now, I’d like to turn over the call to Jim.

Jim Frates

Thanks, Rebecca. Good afternoon, everyone. Overall, this has been a strong quarter from a financial point of view. Both RISPERDAL CONSTA and VIVITROL achieved record quarterly sales. On a revenue basis, RISPERDAL CONSTA, the primary engine of revenue growth here at Alkermes, continued to perform very well growing operationally at over 18% year-over-year.

In addition, we’re making progress toward our goal of reaching operational breakeven for VIVITROL in the alcohol dependence indication with 17% sequential growth in net sales. During the quarter, our strong revenue performance coupled with our expense management allowed us to record a small pro forma net income and generate $6.4 million of cash from operations, finishing the quarter with approximately $358 million in cash.

As Rich will discuss further, our strategy is to make disciplined investments in our pipeline with the cash flow we generate to lay the ground work for the next stage of our growth. To provide more detail on this quarter’s financials, total revenues were $44.2 million attributable to strong manufacturing revenues and record royalty revenues from RISPERDAL CONSTA based on roughly $400 million in end market sales.

As J&J stated on its recent quarterly earnings call “RISPERDAL CONSTA achieved fourth quarter sales growth of 18.1% on an operational basis. U.S. sales growth was 13.7% with increased script share and market growth contributing to the results. Sales outside the United States were up 20.6% operationally with double digit growth in all the major regions and a launch earlier this year of RISPERDAL CONSTA in Japan.” These strong revenue results from RISPERDAL CONSTA were notable as they occurred during the first full quarter that Johnson & Johnson was promoting both RISPERDAL CONSTA and their long acting form is INVEGA demonstrating an additional promotional activity in the market place may in fact serve to grow this class. There is room in the market for multiple long acting atypical products.

Based on sales during our first three fiscal quarters of 2010, RISPERDAL CONSTA continues to be a blockbuster product, on track for another year of growth with expected sales in excess of $1.4 billion for our fiscal year. RISPERDAL CONSTA has patent protection through 2020 in the United States and 2021 in the EU. And so we expect RISPERDAL CONSTA will continue to generate a profitable revenue stream for Alkermes for years to come.

With respect to VIVITROL, net sales for the third quarter were $5.5 million, an increase of approximately 17% compared to the second quarter. In addition for the fourth consecutive quarter, we have reduced our SG&A expenses associated with VIVITROL. The big news in the quarter was the positive results from our Phase III study of VIVITROL and opioid dependence. We intend to file an sNDA for that indication by April of this calendar year and plan to leverage our current commercial team to sell the drug.

Turning to Exenatide Once Weekly or EQW, the PDUFA date of March 5th, 2010 is rapidly approaching. And our partner Amylin is preparing for all aspects of product launch including manufacturing. During this quarter we recognized manufacturing revenues in the amount of $1.5 million related to our supply agreement with Amylin for polymer for Exenatide once weekly.

We expect EQW to provide a substantial revenue stream for Alkermes upon the lunch of this product, with our royalty on net sales and no unreimbursed expenses. We will have a significant stake in the profits from EQW.

Turning to expenses, total operating expenses for the third quarter were $50.4 million, which included $3.4 million of charges for non-cash compensation, $2.1 million of R&D expense related to our license agreement with Acceleron Pharma and $3.6 million of mostly non-cash charges associated with our relocation of our headquarters from Cambridge to Waltham, Massachusetts.

We will continue to incur relocation cost through our fourth fiscal quarter and expect our move to generate annual savings of approximately $10 million to $15 million in fiscal 2011 and beyond. Excluding our headquarter relocation cost and non-cash compensation expense we reported a pro forma net income of approximately $147,000 this quarter.

On a GAAP basis, we reported a net loss of $6.8 million or basic and diluted loss per share of $0.07. For a full reconciliation of our pro forma net income to GAAP, as well as details of our quarterly revenues and expenses, you can review the press release issued this afternoon on our website.

We ended the quarter with $358 million in cash and view it as a strategic asset. We are deploying our cash opportunistically, for example in December we licensed the Medifusion technology platform from Acceleron for an upfront cash payment of $2 million. As part of the transaction, we also made an $8 million equity investment in Acceleron, which is carried under other assets on our balance sheet.

In closing, we’re pleased with our strong performance this quarter especially with the growth of RISPERDAL CONSTA. We’re pursuing our corporate goals while maintaining our culture of physical discipline and we remain well positioned to invest in our research and development efforts and explore future opportunities to build value.

For more on that, I'll turn the call over to Rich.

Richard Pops

Thank you, Jim. Good afternoon, everybody. So we had a good quarter and what shaping up to be a very good year for Alkermes. We expect 2010 to be a transformative year for the company and we entered the year with momentum. We are in a newer position of having two promising late stage products that could receive FDA approval this year, we have a solid foundation of revenues from first-in-class products and financial strengths and we have a promising pipeline of new medicine becoming increasingly visible to you and to potential pharmaceutical company partners.

During the last quarterly conference call in November, we outlined our plan to accelerate the development of our own portfolio to reinvigorate the company’s scientific initiatives and expand the scope of our business. Since that call in November, we’ve been focused on executing our plans and we’ve already made significant progress.

I see the company at a point of shifting into a higher year. We’ve got more going on, more late-stage programs, more mid-stage programs, more regulatory interactions, more science and more business development discussions. This is an exciting time and an exciting place. So here are some of the key highlights to focus on. Let’s start with the major near term driver for Alkermes, mainly Exenatide Once Weekly or EQW, since we are quickly approaching the March 5th PDUFA date. Just last week, even though it seems like a month ago, the FDA approved Victoza, a once-daily injection GLP-1 analog for the treatment of type 2 diabetes.

This is big news and we believe positive news for those of us developing therapies in this class and for patients with type 2 diabetes. We think the launch of Victoza into the U.S. market is a good thing for a couple of reasons. First and perhaps most obviously it shows that the FDA is willing to approve long acting GLP-1 analog. Second, the launch of Victoza should help to broaden the awareness and adoption of this important new class of diabetes medications.

The growth of this new class will come from expanding the number of patients treated and this will come from expanding the number of prescribing physicians. Multiple interest in the class will increase the educational efforts directed towards endocrinologists and importantly expand the market to primary care physicians as well. So in an environment where physicians were increasingly aware of and more comfortable prescribing GLP-1 analog, the unique features in EQW standout.

Amylin strategy has been to position EQW for market dominance and it’s not just talk, they’ve been invested in the significant series of clinical superiority studies for EQW [com] duration. The results of these have been steadily building over the past few years with EQW already having demonstrated superiority to Lantus, Actos, Januvia, and Byetta.

Amylin also announced the initiation of Duration-6 to shows a superiority over Victoza, which results expected in 2011. There are also plans to initiate a large cardiovascular outcome study called EXCEL, designed to compare the CV profile of Exenatide Once Weekly to the current standards of care for diabetic treatment, which is expected to enroll over 12,000 patients and generate results in 2016.

So in summary, we believe that EQW can be a game changing medication. We think it has the potential to find a new standard of care in the treatment of type 2 and we are anticipating its approval. While nobody can predict with accuracy of the timing or the nature of the FDA review process, we are moving steadily towards the PDUFA date.

Turning to VIVITROL, last November we announced the positive top line data from the VIVITROL Phase III study in opioid dependence and the results were conclusive. The six months study met its primary efficacy end point as well as all of the secondary end points. The data show that patient treated once monthly with VIVITROL demonstrate higher rates of opioid free urine screen compared to patients treated with placebo. Based on their compelling results of the study, we’ve planned to file a sNDA with FDA by the end of April and we’ll request a priority for 6 months review.

The results are very significant and the VIVITROL has the potential to be the first and only long acting non-narcotic, non-additive medication for opioid dependence. This could significantly change in advance the treatment paradigm for these patients. As you may be aware, unlike alcohol dependence opioid addiction is frequently treated with medications. The leading product in the market Suboxone generated approximately $840 million in sales in 2009. So with our Phase III data in hand, we’re actively researching and quantifying the medical and market opportunity for VIVITROL in this new indication.

So let me switch gears now and review some of the progress we’ve made in the short period to expand the technology platforms. This morning, we announced the new proprietary technology platform called LinkeRx. LinkeRx is designed to create injectable sustained release versions of important CNS drug including those in an area where we have some expertise, atypical antipsychotic therapies.

You should think of LinkeRx as enabling the next generation of injectable sustained release medicines from Alkermes. This new generation of product candidates moves away from being dependant on microspheres and polymers to provide the extended release. We achieve extended release through the application of proprietary chemistry to create new drug molecules designed specifically for this purpose. This has certain advantages in terms of manufacturing handling, reconstitution, refrigeration et cetera.

ALKS 9070, the first candidate to be developed using this new technology is designed to be a once monthly injectable extended release version of the Aripiprazole, commercially known as ABILIFY. ABILIFY had worldwide sales in 2009 in excess of $4 billion. So this is clearly a significant market opportunity, a long acting version of ABILIFY, a drug that is proven safety and efficacy has the potential to improve patient outcome, reduce costs and provide physicians and patients with another important option to manage this serious and chronic disease.

From a business perspective, the success of CONSTA reveals the need for a broader range of injectable extended release antipsychotic. RISPERDAL CONSTA is an important drug in part because of Alkermes technology and in part because the active agent is RISPERDAL. Aripiprazole is a main stay in the atypical antipsychotic class and approved in six indications. A long acting version of this particular medication would be a significant addition to the treatment options available to patients and physicians.

Based on encouraging preclinical results, we expect 9070 to enter the clinic in the second half of this calendar year. We’ve submitted a number of patent applications to the U.S. PTO in order to protect the LinkeRx technology and ALKS 9070. We’re also applying this technology platform more broadly to other select molecules.

In addition to LinkeRx, in November we had the Medifusion technology platform from Acceleron, which is designed to extend the circulating half-life of proteins and peptides. Medifusion represents another opportunity for Alkermes and like LinkeRx is based on this idea of direct molecular modification to enable sustained release.

Our first drug candidate using Medifusion will be for long acting version of an established blockbuster product. What we call, ALKS 6931 as a long acting form of a TNF receptor-Fc fusion protein for the treatment of rheumatoid arthritis and related autoimmune diseases. So ALKS 6931 is structurally similar to (inaudible), which had worldwide sales of more than $6 billion in 2008. We expect to file an IND in the second half of this calendar year for 6931.

So as I mentioned early, we have more candidates in the pipeline than ever before and we expect progress across the whole portfolio. We are not going to review the whole portfolio in debt today, but let me just give you a couple of points related to up coming news for some of the early stage candidates we didn’t talk about.

ALKS 33 is an oral opioid modulator for the potential treatment of addiction and other CNS disorders. We expect interim efficacy data from the Phase II study of ALKS 33 in alcohol dependence patient by the end of the calendar year. ALKS 37 is an oral, peripherally-restricted opioid antagonist with potential opioid induced constipation. We expect to report top line results from the Phase I clinical study of 37 in the first half of calendar 2010 and we plan to initiate both Phase Ib and Phase II studies before the end of the year.

So moving on to perspective, in the last quarter, one, we reported record sales for RISPERDAL CONSTA. Two, we announced positive Phase III clinical trial results for VIVITROL. Three, our products entered three new clinical studies. Four, we announced two noble technology platforms with two new drug candidates based on existing blockbuster drugs and we’re just getting started.

So with that, I'll finish and turn the call back over to Rebecca for questions.

Rebecca Peterson

Thanks, Richard. Operator, we'll now open it up for the Q&A.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Cory Kasimov from JPMorgan.

Cory Kasimov - JPMorgan

Great thanks. Let me start off with today's news or what came out this morning. And I guess two questions on this. First of all, can you talk about the IP around ABILIFY, at least what you know of it and then also assuming nothing on expected jumps up, as this starts to progress through the clinic. Can you discuss a little bit of what the development plan may look like, is there something that go straight from Phase I and II of pivotal Phase III program?

Richard Pops

Sure, The IP around ABILIFY is interesting. One of the things we learnt from RISPERDAL CONSTA is that if you look at the sales of RISPERDAL CONSTA $1.4 million or so, two thirds of it comes from outside the US. So the first important point is that the IP strategy is a global IP strategy. So I won’t be able to answer it and I won't answer it in granular detail on the call. But we viewed on a global basis number one, number two the IP is fluid in these various jurisdictions and number three is important to point out that our molecules are new molecular entities and separately countable on their own.

So we don't expect that there are still patents to be impediment to our launching of product. Second one on the development plan, similar to answers I’ve given you before on this where given the nature of these development programs, the real important study is that first study where we determined the PK profile. If the PK profile is within plasma concentrations that are relevant to previous studies of the drugs, we have probably a more accelerated route that if we are forging new ground scientifically. So we’ll move as fast as we can to get the dosage form into its first human study to see for (inaudible) what we see in the animals and when we have that data in hand, we’ll guide you to how we’re going to go from there.

Cory Kasimov - JPMorgan

And then regarding VIVITROL, now you have the positive Phase III data and opioid addictions. Any insight that you can share with us post that from your interactions with KOLs or potential market research you might have conducted in the intervening time period?

Richard Pops

Much of that is ongoing as you may know and we’re actually, will be getting data over the next several weeks from our (inaudible) agent, the more formal market research. That said, one of most interesting things since we priced last was really just looking and where the Suboxone number ended the calendar 2009, our number was around $840 million. But that does two things, number one it kind of quantities just with one data point a market opportunity.

But number two, the more people that are on Suboxone that means the more people that are in treatment with pharmaceutical products and also the more people who are being treated with agonists, which increases the demand for anti-agonists, because the more and more to agonists, the realize the benefit of them, but also with the limitations of them. So this is just a generalized awareness of opioid treatment building in the community.

You may have seen that here in Massachusetts it’s all the sudden over the last there or four months becoming a critical and economic story because the cost of treating in opioid dependants in the common wealth getting to be so excessive. So part of that is because more and more payors are paying more and more money for Suboxone as well as Methadone. So there is an increasing interest in the use of anti-agonist. But I can go on forever that what I’ll do is we’ll wait till we get some of the more quantitative market research in the segmentation information and we’ll share that with you.

Operator

Our next question comes from Steve Yoo from Leerink Swann.

Steve Yoo - Leerink Swann

Just a couple of questions. One is the cost of goods for VIVITROL, right now I understand because it’s not selling that much it’s kind of variable, so where do you expect it in a normalized that one you hit several hundred million dollars worth the sales or $100 million plus in sales?

Jim Frates

Hi, Steve. So actually the last few quarters we’ve actually been doing better on VIVITROL production and our margins, our gross margins now are in same 70% to 80% range that RISPERDAL CONSTA has been. And you pointed it out the more VIVITROL we make the more likely we are to have those consistent margins. But we think it will be near RISPERDAL CONSTA going forward.

Steve Yoo - Leerink Swann

Okay. And let’s see on bigger level of question. You have a lot of cash and you are using money to get some R&D programs up and running, as far as future deals, are you thinking more along the lines of Acceleron like deals early stage or it’s in later stage. How do you envision cash use going forward?

Richard Pops

We’re not planning on any large deals right now, we never see anything, but right now the internal pipeline is so rich. We’ve got enough, this is evidenced by today with the LinkeRx tech that we’re talking about. We’re interested in kind of selective acquisitions to build on a product-by-product basis overall I’m looking at anything seismic for the company.

The other thing it’s important to point is that the more we build the technology platform and more we put more product into development the more opportunities we have with partner and generate revenue with pharma. Because we’re not depended upon their capital or anybodies capital at this point we can advance these things as far as we need to advance on our own with that being depended not everybody, but it gives us an opportunity always to be question in the opportunity for business development in along way.

Operator

Our next question comes from Dave Windley from Jefferies & Company.

Dave Windley - Jefferies & Company

Hi, thanks good afternoon. Jim, would you be willing to comment on the VIVITROL sales from the J&J Russia partnership for licensing?

James Frates

Sure, Dave, I mean I won’t break them out specifically, but they’re really de minimis compared to, so they don’t come in the VIVITROL revenue line really at all at this stage.

Dave Windley - Jefferies & Company

Okay, the ALKS 60, couple of five points question, ALKS 6931, what would you anticipate targeting as a dosing frequency and if it’s too early to given an answer along those lines maybe answer what do you think the minimum dose or the minimum duration between doses would need to be to make it a viable commercial candidates?

James Frates

Go again our objective is once a month. And I think you could argue for once every two weeks, but we’re going to go for once a month.

Dave Windley - Jefferies & Company

Okay, and on EQW and thinking about that versus Victoza Novo had some comments about their own views of the comparison, don’t know if you got a chance to hear those or read the transcripts, but I wondered if you might offer your views on the comparison between the two?

Richard Pops

I didn’t look at their transcripts. So I don’t know exactly what the comparisons would be, but the comparisons that will probably most interested about the once that have been publish in major scientific for in the form of durations studies we show compared data to other diabetes medications. So the advantages of self having once a week dosing with unsurpassed glucose control weight loss, well tolerated and potential cardiovascular benefit that’s all surely obvious at this point, but the most important thing for us now is to get approved and I think we’ll do just fine in the marketplace.

Dave Windley - Jefferies & Company

Richard, last question from me, as you’re building as you said your pipeline is getting richer and you’re building more opportunities, would you anticipate continuing to effectively keep your foot on the accelerator across the waterfront of programs here or are you going to prioritize, I guess it's basically an R&D spending question. Do you have a tolerance or an appetite to keep ramping the R&D spending number as programs warrant that or are you going to kind of keep a cap on that vis-à-vis revenue?

Richard Pops

A Little of both, because with the face when we put things in the clinic they’re not particularly expensive in order to get the key go no go or even human proof of concept results. So take 9070 or human PK study where the discount rate we put against that program will drop dramatically if we sell the PK profile that we wanted long before we initiated a complex Phase III program, we’ve an accelerated the Phase III program.

So the answer is we’re going to [hammer] those many things into man to proof-of-concept this year and next year and as we start then modeling out what the later stage programs are going to look like, we’re going to have the ability to partner and we’re going to have the ability to see how EQW is doing and make that determination real plan. The top of the funnel is to most important right now and most companies the top of the funnel for them is earlier stage discovery step, for us the top of the funnel our products that are really almost ready for clinic and given the nature of the drugs we develop, we can learn very, very quickly in the clinic rather these things we’re doing what we expected to do.

Operator

Our next question comes from the Thomas Russo from Baird.

Thomas Russo - Robert W. Baird

I wanted to revisit the LinkeRx update today as well and maybe just to push a little further, I heard new molecular entity and things of that nature. Could you be specific, is your understanding that this would qualify in FDA eyes as a new chemical entity for 5.5 years of exclusivity and also for a true composition of matter and I’m kind of thinking back to new reverse platform technology, I’m wondering if there is any analogy between that and what you’re looking at doing?

Richard Pops

Well, I think the answer is yes to both those questions, about whether to be deemed and a need from FDA's point of view and also certainly in terms of IP. So it actually one of the things that we thought to do was leverage some of the pharmacology associated with the known atypical but embodied in a new molecular entity that was separately patentable.

Thomas Russo - Robert W. Baird

Okay. I wanted to also just ask the VIVITROL opportunity in opioid addiction, hearing a proxy that $840 million is potential for another drug in the category and also that there’s currently no plans to increase the sales force. Could you comment maybe at what point you might consider that or what you would need to see in order to consider putting a bigger SG&A effort behind that opportunity.

Richard Pops

Well, I think just to be clear when I say to 840, I want to make sure the people don’t think that I’m saying the VIVITROL would be $840 million, I don’t know yet. The point I was making is that there is $840 million of doctors and patients and payors involved in the commerce associated between these, which is so different than what we went to at alcohol. So VIVITROL is a very different product, because its injectable product, it’s priced differently and it will appeal to a different footprint of patients and doctors and Suboxone as an antagonist versus an agonist. That’s it to answer to your question, what’s remarkable about the sales of Suboxone is that about 2000 doctors are doing about 80% to 90% of all that business. So it’s not a solid specialty or indication that requires large mere national footprint to go after. But that’s precisely the work that we’re doing right now, because we can identify those Suboxone docs, its attractable number and it maps well against the kind of specialty and capability that we have we’re doing that work now.

Thomas Russo - Robert W. Baird

Okay, and then one last question, obviously J&J put up a big number for CONSTA this quarter and I know on your last call we talked a little bit about the supply chain changes and as your guidance update at that time, can you give us a sense from your view point was the December quarter reflective of underlying demand and is the supply chain kind of unlikely to result in any disconnects going forward?

Jim Frates

Well, Tom its Jim. I’ll tell you what we know, which is what we quoted from Johnson & Johnson and they talked about increased prescription share in the United States as well as a growing market. And I think that’s very, very important for us because related to an earlier question as we consider how we’re going to spend on R&D, if RISPERDAL CONSTA is continuing to grow at a double digit phase here for the next two years. That’s obviously a very, very important aspect for us. So I think it remains early in this phase of RISPERDAL CONSTA now with other products on the market we’ve been in the market now that’s been in the market for four months, but clearly the growth that we saw in the United States is really the best quarter ever for CONSTA. It’s a great way to start from our perspective?

Operator

Our next question comes from Ian Sanderson from Cowen & Company.

Ian Sanderson - Cowen & Company

Actually a couple of financial ones for Jim first, where were most of the relocation cost booked, either in R&D or SG&A just trying to get a kind of a representative numbers here?

Jim Frates

Yeah, mostly in R&D, Ian.

Ian Sanderson - Cowen & Company

Okay. And then was the $2 million up from payment to Acceleron expensed in the quarter?

Richard Pops

Yeah, it was, it’s detailed in the press release and it was actually $2 million booked upfront and then we had $100,000 of R&D essentially in December. So its $2.1 million of cost associated with the Acceleron.

Ian Sanderson - Cowen & Company

Okay. And then so the polymer manufacturing revenues for Exenatide Once Weekly, is that something that's going to be a steady revenue number looking forward, are you always going to be booking polymer manufacturing revenues?

Jim Frates

Well, it’s little too early to know right now what their launch quantities are going to be, so I think before the drugs approved it’s probably too early to speculate on exactly what the future is going to hold. But where there are exclusive polymer manufacture here for the time being and so as the drug launches you will see some polymer manufacturing revenue consistently come in if sales are growing.

Ian Sanderson - Cowen & Company

Any like, very rough indication of what percent of the end market sales value would be?

Jim Frates

Well, if I knew what the sales for Exenatide Once Weekly are going to be next year, I’d certainly be willing to put a stake in a ground, but we’ll give you a much better look forward on that when we update for our fiscal year ’11 guidance in May.

Ian Sanderson - Cowen & Company

Okay. And then finally on VIVITROL follow up on an earlier question, you mentioned in your prepared remarks that you're making progress towards breakeven on VIVITROL, but presumably, six months from April you may go into an investment fees there again would that be the proper way to look at this?

Jim Frates

Well, I think it's been very much a goal of ours as that we get the alcohol dependence indication breakeven and we’re making very good progress towards that and hopefully we will break over in to breakeven in fiscal 2011 for alcohol dependence. As Rich said, we’re going to make an investment in the launch of opioids, the opioid indication. We think it will be a reasonable one on a contain one, the real backbone of that is going to be the current sales force that we have, the infrastructure that we built to deliver the especially product after we get the product back from Cephalon is built, we’ll use that same infrastructure. So again we’ll give you a lot more of an indication once we get the NDA in, once we finish the work most likely at our quarterly or yearly update in May. But we will invest in launching this product, we think it wants it, at the same time, it will be a controlled investment.

Ian Sanderson - Cowen & Company

Okay. And just the curiosity, can you apply for reimbursement at the same time you file or you have to wait for the label on this particular product. And opioid dependence before you can apply for reimburse. Just wondering if you have had start because it's already on the market for different indications.

Rebecca Peterson

So Ian you can have discussions with payers about the product profile, but you can file for safer reimbursement in advance approval. Operator I think we have time for one more question.

Operator

Our next question comes from John (Inaudible) from Appleton.

Unidentified Analyst

Two quick question one on the new technology you guys were using to develop drugs. Is that something where you could go after drugs may be right when they launch or even maybe late stage drugs in other people’s pipelines where there is less competition? And then the second question is, the guidance you gave earlier in the year on line items should be still use that as kind of way you’re going to be in the next quarter?

James Frates

John we haven’t updated our guidance, so absolutely impact we updated in our last quarterly conference call so that is the first place to go the call we had in November. And we still like will be in those ranges that we outline.

Richard Pops

And I’ll take the first part. The answer is really dependent upon the nature of the underlining pattern for the original molecule. So in some cases you’ve actually seen drugs come to market with fairly short IP life really data exclusivity only the protection. And as I said R is our new molecular entities that leverage, but they’ve done before. But in many cases we don’t think the underlying patterns will be impediment to our making drug.

Rebecca Peterson

Thanks everyone for joining into me and is there any subsequent questions certainly don’t hesitate to call either Jim Frates or myself. Have a good evening

Operator

Thank you ladies and gentlemen this concludes today’s conference. Thank you for participating. You may now disconnect.

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