Forest Laboratories Management Discusses Q3 2014 Results - Earnings Call Transcript

Jan.21.14 | About: Forest Laboratories, (FRX)

Forest Laboratories (NYSE:FRX)

Q3 2014 Earnings Call

January 21, 2014 10:00 am ET

Executives

Frank J. Murdolo - Vice President of Investor Relations

Brenton L. Saunders - Chief Executive Officer, President, Director, Chairman of Compensation Committee and Member of Compliance Committee

William Meury - Executive Vice President of Sales and Marketing

Francis I. Perier - Chief Financial Officer, Executive Vice President and Member of Disclosure, Legal Compliance & Risk Management Committee

Marco Taglietti - Chief Medical Officer, Executive Vice President of Drug Development & Research and Member of Disclosure, Legal Compliance & Risk Management Committee

Analysts

Marc Harold Goodman - UBS Investment Bank, Research Division

Andrew Finkelstein - Susquehanna Financial Group, LLLP, Research Division

Ken Cacciatore - Cowen and Company, LLC, Research Division

Douglas D. Tsao - Barclays Capital, Research Division

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Mario Vincent Corso - Mizuho Securities USA Inc., Research Division

Traver A. Davis - Piper Jaffray Companies, Research Division

Elliot Wilbur - Needham & Company, LLC, Research Division

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

David Risinger - Morgan Stanley, Research Division

Operator

Welcome to the Forest Laboratories Third Quarter 2014 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Frank Murdolo, Vice President of Investor Relations.

Frank J. Murdolo

Thank you, Zach, and good morning, everyone. Thank you for joining us today for this third quarter fiscal 2014 conference call. Joining me today is Brent Saunders, our Chief Executive Officer and President; and Bill Meury, our Executive Vice President, Sales and Marketing; Frank Perier, our Executive Vice President of Finance and Chief Financial Officer; and Marco Taglietti, our Executive Vice President of Drug Development and Research and Chief Medical officer.

By now, each of you should have seen the earnings release that we issued this morning. The release is also available at our website, www.frx.com.

By way of Safe Harbor statement, let me add that various remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and actual results may vary. These remarks involve a number of risks and uncertainties, including but not limited to the difficulty of predicting FDA approvals, the acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, the timely development and launch of new products and the risk factors listed from time to time in Forest Laboratories' annual report and quarterly reports.

Let me now turn the call over to Brent.

Brenton L. Saunders

Thank you, Frank, and good morning, everyone. It's a pleasure to speak with you again. And by way of full disclosure, I have a bit of a cold, so please bear with me this morning.

It has been a little over 100 days since I joined Forest. It feels longer than that, since we have accomplished so much in just over 3 months. In fact, I think what we have accomplished challenges a lot of conventional wisdom. Conventional wisdom says that the first 100 days are just for planning, and execution begins after day 100. We have planned, but we have been focused on taking important actions quickly and acting nimbly. In the planning stage, we visited every site; visited every major partner; held about 45 roundtable meetings with colleagues; held town hall meetings, including one with half of our U.S. sales force. We also visited customers and our major shareholders. Importantly, we have zeroed in on a number of revenue-driving opportunities, including launching Fetzima for depression in the U.S.; and responding to the Pediatric Written Request for Namenda, which we hope will provide us with 6 additional months of exclusivity for this important franchise. We also resolved the Bystolic litigation to preserve its value well into the future. In addition, we took some very important strategic actions that have jump-started the rejuvenation of Forest. First, we completed product acquisitions, like Saphris for $240 million. Second, we began the first major cost-reduction program in our company's history to cut $500 million from our cost base. Third, we raised $1.2 billion in an oversubscribed maiden bond offering. Fourth, we named a new, larger management team. Finally, we announced plans to acquire Aptalis for $2.9 billion, the largest deal in our company's history.

While we accomplished a lot, I am most proud of the way our team responded to the challenges I set for them. We are starting to see the nimbleness and flexibility that will be a hallmark of Forest for years to come. It has been gratifying and motivating for our people to see the investment community's positive reaction to our strategic action. Now we need to continue our focus on execution.

This renewed sense of enthusiasm and motivation on the part of our team is contributing to the strong results we had this quarter. First, net sales were up 25% this quarter, and the Next Nine products contributed 44% of our sales. Second, non-GAAP EPS was $0.27 compared with a loss last year. This significant rebound in growth was in part a result of a pullback in spending following our announcement of Project Rejuvenate. We are working to maintain this momentum in our performance while executing 2 very important programs: Project Rejuvenate and the Aptalis pre-integration planning.

So what is ahead for Forest? This year will be about execution, execution against our new strategy and execution on our 4 key priorities. Let me take a moment to talk about our strategy for driving growth. Some have wondered if Forest is a roll-up strategy. It is not. We have been active in M&A of late. M&A is not our primary strategy. We are looking at building a durable business that is capable of organic growth rather than just a roll-up machine. For us, business development and M&A is an accelerator that we will continue to employ to drive growth. We will use both business development to accelerate growth by bringing in commercial-stage products, and we will use business development when appropriate to bring in late-stage R&D projects to fuel future growth. Remember, we have a core competency in drug development and we intend to fully capitalize on this strength to bring new drugs to market. So you should expect that we will also do disciplined deals to replenish and refill the pipeline after a really great run of drug development success over the last few years. By applying business development in this way to both accelerate near-term growth and sustain long-term growth, we hope to achieve our underlying goal of building an exceptional pharmaceutical company with innovation in categories in which we compete, and long-term sustainable growth.

Now for our key priorities. As we have said, our top priority in the near term is maximizing the brand performance, including advancing the launch of Fetzima. We will also execute on the direct-to-consumer campaign for Linzess in the coming months and continue fueling the shift on Namenda to Namenda XR. Successfully executing the Namenda pediatric extension is a key element of this plan.

Our second key priority is to deliver on some very important near-term pipeline opportunities, including our combination programs for Namenda XR, Bystolic and ceftazidime/avibactam.

Our third priority is to reduce our cost structure, and this is the critical year for executing Project Rejuvenate. We are very focused on this. We have already removed 2 layers from the company, reduced about 20% of the management positions in the top layers of Forest. And we also announced plans to consolidate our ongoing anti-infective development activities at our Jersey City site. More to come on this in months ahead.

Finally, we have used our balance sheet to drive growth and create value for shareholders. The Aptalis deal is an excellent strategic and financial fit. We are very excited about the prospects of beefing up our GI and cystic fibrosis businesses, gaining economies of scale, relevancy with customers and improved cash flow. On the financial side, the deal adds approximately $700 million in revenue, produces $125 million in cost synergy and yields about $0.78 in non-GAAP EPS to our results in fiscal 2015. We are already geared up to execute on this. Our joint pre-integration planning teams have already met, we have filed for the U.S. antitrust review and we are set to begin a debt offering shortly to secure permanent financing for the acquisition.

We want to be the company that is known for making choices, for acting nimbly and for having the best-in-class commercial business development and drug development teams and for executing extremely well. In our first 100 days, we have made choices and acted nimbly. Now it's time to continue focusing on and to raise the bar on execution.

Let me now turn the call over to Bill, who'll speak about the very good commercial performance in the third quarter.

William Meury

Thanks, Brent. And good morning, everyone.

As an overview, the third quarter was strong on 3 fronts. First, sales levels were above expectations and product growth rates were strong. Second, we launched Fetzima in late December to a broad audience of primary care physicians and psychiatrists. And third, we significantly expanded coverage for Namenda XR and Tudorza. Those are some of the highlights for the quarter. Now I'll touch on the key products.

Sales in the third quarter for Namenda XR were about $38 million, and for Namenda IR, $364 million, representing a franchise total of over $400 million and a 16% increase over prior year. The new prescription conversion rate was at 15% for most of the third quarter. We expect this figure to increase over the next several months, based on formulary wins at 4 major Part D plans. Effective January 1, Namenda XR has a preferred position at OptumRx and United AARP, Aetna, WellPoint-Anthem PDP and Prime Therapeutics. XR is now available to 80% of patients and is covered on 9 of the 10 largest Part D plans in the United States. Physician and patient feedback on XR remains very positive, and as you know, we're actively considering a hard switch of IR to XR. This, of course, has to be managed very carefully, and we are actively working to put ourselves in a position to make the final decision in the next few months.

We also plan to file a supplemental NDA for the fixed-dose combination of Namenda XR and Aricept in the near term. 70% of patients today are taking the non-fixed combination of the 2 products. If approved, the fixed-dose combination will simplify therapy for physicians, patients and caregivers. Basically, 3 pills twice a day can be replaced by 1 pill once a day. It should be commercially available in early 2015, before IR loses exclusivity. And so together, XR and the fixed-dose combination will help us preserve and extend a significant portion of the Namenda sales stream over the next several years.

Turning to Viibryd, sales in the third quarter were about $53 million, representing approximately a 30% increase over the same quarter last year. Prescriptions increased 16% versus prior year, and we continue to add 500 physicians to our user base each week.

Fetzima, our SNRI for depression, was approved in September 2013 and launched to psychiatrists and primary care physicians across the United States in late December. As you know, Fetzima and Viibryd have the same indication, but they differ pharmacologically and clinically, and we expect that they will be used for different reasons and in different populations. Viibryd, as you know, is an SSRI 5HT1A partial agonist and Fetzima is an SNRI. Our plan is to segment the market so that both products can coexist and thrive. And consistent with our blockbuster line-call strategy, these products will be very logically promoted together, which gives us even more relevance in psychiatry and economies of scale. Ultimately, we expect to reach higher sales levels with both products on the market than we could with just one. Now it's still very early, of course, but prescription levels for Fetzima during the first several weeks look good, and we've already recorded several positive formulary wins.

As an update on Saphris, we will relaunch the product using 2 sales forces totaling 550 representatives starting February 17. Our overall promotional effort will be more than double what it is today. And almost 80% of the Saphris audience overlaps with Fetzima and Viibryd, which means we can take full advantage of our access and relationships in psychiatry. Here again, the benefits of the line-call strategy we're employing are being realized in a concrete way. Saphris is a very strong fit. Our promotional strategy is centered squarely on expanding the psychiatry user base. Only 22% of psychiatrists, or 4,000 physicians, have tried Saphris since its approval over 4 years ago. We believe that number should be 2x or 3x higher than it is. Our overall promotional effort on Saphris will be as high as or higher than that of any other company in the category.

Turning to our gastrointestinal product line. Linzess recorded sales of $51 million for the quarter. That is 48% sequential growth compared with the second quarter. Total prescriptions were up 23% versus prior quarter and market share with gastroenterologists climbed to over 20%. We're adding over 800 new users each week, and by the end of 2015, we expect to have close to 100,000 physicians using the product.

Now to sustain growth in fiscal year '15 and get Linzess on a new growth trajectory, we're launching a direct-to-consumer advertising campaign. The campaign will consist of print, digital and television advertising and it will be rolled out nationwide. OPDP has reviewed and commented on the Linzess ad unit, and so we expect to be in the market by the end of March, as originally planned. We believe this is the right product, the right market and the right time for DTC. Physician perceptions of Linzess are very positive, the user base is broad and patients are motivated and looking for alternatives. I'd also point out that we will continue to maintain high physician detailing levels during the DTC launch. We believe a 2-part approach that consists of both heavy physician promotion and DTC advertising will have the most meaningful effect on the new prescription line and sales.

Turning to Tudorza. Sales were $20 million for the quarter. This compares with sales of $17 million for the second quarter. Total prescriptions were up 18% versus prior quarter and new prescription market share reached an all-time high in December. So as you know, the focus here has been on improving formulary coverage, and while there's more work to do, we've made progress. Effective January 1, Tudorza is now on formulary unrestricted at 7 of the top 10 Part D plans and available without restrictions to 65% to 70% of patients, including both Part D and commercial. Our promotional levels remain at or near the top of the market even when accounting for the launch of GSK's Breo, and so we expect volume and market share will continue to increase at a steady rate for the balance of the fiscal year.

Sales in the quarter for Bystolic were $131 million, representing growth of 20% year-over-year. The current trends on Bystolic illustrate the market satisfaction with this product and the durability of the sales stream. We continue to estimate a double-digit sales growth rate for Bystolic. And we're starting to lay the groundwork for the launch of the fixed-dose combination consisting of Bystolic and valsartan, which we expect will expand the pool of eligible patients for Bystolic and generate even more first- and second-line use.

Before I turn the call over to Frank, I want to make just a few comments about the Aptalis product line. First, the product line is highly complementary and concentrated. While there is no product overlap, there is a high degree of audience overlap, about 80%, between the Aptalis products and Linzess. You couldn't get a better fit. The other point here is that sales for the Aptalis products come from a very manageable audience of 5,000 to 10,000 physicians. It's a concentrated business, which means our combined company will have the capacity to reach them effectively with the GI specialty sales force. Aptalis created a solid business from which we can build. Each product has a strong following in the GI community. They're not mass-market products, but they are very popular among physicians for select patient populations. And with a suite of 6 different GI products anchored by Linzess, we can be an even more complete resource to GI specialists. For them, it's like one-stop shopping.

Also, there's a cystic fibrosis business in the United States where there is no overlap. It's a great opportunity and is expected to be an important source of growth in the future. And so right now, we're focused on a smooth integration.

So we had a very strong quarter and we're setting the table for continued performance. Now let me turn the call over to Frank for an update on the financial results.

Francis I. Perier

Thanks, Bill, and good morning, everyone.

Reported GAAP earnings per share were $0.07 in the third quarter of fiscal 2014, as compared to a loss of $0.58 in the third quarter of fiscal 2013. Non-GAAP earnings per share in the quarter totaled $0.27 as compared with a loss of $0.21 in the third quarter of fiscal 2013, excluding acquisition-related amortization and specified items in both periods, including charges taken for Project Rejuvenate.

Project Rejuvenate was initiated in December and takes a series of significant strategic actions to streamline operations and reduce costs, and it is expected to yield savings of approximately $500 million by the end of fiscal year 2016. Project Rejuvenate charges totaled $45 million in this quarter, and we expect the total cost of Project Rejuvenate to be in the range of $150 million to $200 million over the course of the project.

Turning to guidance. Earnings for the third quarter reflected strong sales for our key brands and lower spending for research and development expense. We expect these trends to continue and now expect non-GAAP earnings per share for the full fiscal year to be the range of $1.25 to $1.35. Our guidance for total product sales and total net revenue for the fiscal year remain unchanged at $3.4 billion to $3.5 billion, respectively. We look forward to providing our fiscal year 2015 guidance on the next earnings call.

Turning back to the fiscal third quarter. Total revenues were $878 million versus $716 million in the prior year. As you saw in the financials included in this morning's press release, the company modified its presentation of its consolidated statement of operations, effective for all periods presented. Interest income, interest expense and other miscellaneous income and expense items are now presented in the interest and other income expense caption below operating income or loss.

Product sales were $847 million versus $678 million last year. Contract revenue was about $32 million, including $30 million from the Benicar agreement. Wholesaler inventories increased about half a week this quarter compared to last quarter to just under 3 weeks. The impact to sales was approximately $20 million.

Turning to gross margin. In the current quarter, it was 79.25% versus 78.6% in the comparable period of last year. The increase was due to a change in product mix and more favorable margins on certain products.

SG&A spending during the quarter was $455 million, up 6% from $428 million last year. During the quarter, we recorded $18 million of restructuring expenses related to Project Rejuvenate in SG&A relating to post-employment benefits. Excluding this expense, SG&A increased 2% during the quarter. The current level of spending reflects the resources and activities that we believe are required to support our currently marketed products, particularly our newest products, Fetzima, Tudorza, Linzess and Namenda XR; as well as our recent launches for Viibryd, Daliresp and Teflaro.

For the quarter, Ironwood's share of the net loss from our partnership was $6.5 million.

Research and development spending for the current quarter was about $220 million as compared to $325 million reported in the third quarter last year, a reported decrease of 33%. R&D spending is primarily in support of our late-stage product development program spread over multiple pipeline projects, as well as post-approval commitment on marketed products. The current quarter includes product development milestone payments of $40 million compared to $44.5 million of milestone payments in the prior year. The current quarter had no upfront licensing and agreement payments compared to $76 million in last year's quarter. During the quarter, we recorded $27 million in restructuring expenses from Project Rejuvenate in R&D relating to post-employment benefits. Excluding the impact of milestone payments in both years, restructuring expenses in the current year and upfront licensing and agreement payments in the prior year, R&D expense decreased 26% in the quarter.

The company's reported effective tax rate for the quarter was 19.5% compared to 16.6% in the prior year. The effective tax rate for the full year is expected to be approximately 22%.

Actual shares outstanding as of December 31, 2013, were approximately 269,951,000 shares, an increase of approximately 3.9 million shares from last year's third quarter.

During the just-completed quarter, the company completed a private placement offering of $1.2 billion aggregate principal amount of 5% senior unsecured notes due December 15, 2021. Our cash and marketable securities balance as of December 31 was approximately $4.5 billion, an increase of $1.4 billion from the quarter ended September 30, 2013, primarily due to the recent bond offering. Of the $4.5 billion total, approximately $1.6 billion or 35% of our cash and marketable securities is domiciled domestically, with the remainder maintained by our international subsidiary.

Regarding our planned acquisition of Aptalis, we expect to fund the purchase with a mix of cash and debt. We do plan to go to the bond market for the debt component, and we have bridge financing available, if needed, to close the deal. More details to come. Based on some of our projections, this financing will take our "debt to pro forma adjusted EBITDA with synergies" ratio to about 2.6x, and we plan -- and we have plans in place to reduce that over time.

Let me now turn the call over to Marco for a pipeline update.

Marco Taglietti

Thank you, Frank. Good morning, buongiorno, everyone.

Let me start with the key activities supporting our largest franchise, Namenda. First, we were very pleased to announce last week that we filed the Pediatric Written Request for Namenda. There is now a 6-month review of the file by the FDA, and if accepted, we would be granted an additional 6 months of exclusivity for Namenda. As Brent said, this is a very important milestone for the franchise. And I'm very proud of my team who completed this very complex and challenging project.

Second, as mentioned by Bill, we are developing a once-daily fixed combination of Namenda XR and Aricept with Adamas. I'm pleased to report that we are on track to file the NDA in this quarter.

Let me also remind you about cariprazine, our atypical antipsychotic for the treatment of schizophrenia and acute manic episodes. You will recall that we received a complete response letter from the FDA in November. In the complete response letter, the FDA acknowledged that cariprazine clearly demonstrated effectiveness in both indications. However, the agency indicated that more information, including additional clinical trial data, will be needed to better define the optimal dosing regimen to maintain the demonstrated efficacy while minimizing the potential for the development of adverse events generally associated with this class of drug. We expect to meet with the agency later this quarter, and we'll update you as soon as we have additional information that we can share with you.

I would like also to remind you that cariprazine is under development in Phase II studies for bipolar depression and as an adjunct treatment in MDD. We expect to report the top line results from the Phase II studies in these 2 indications during the first half of calendar 2014.

With regard to anti-infectives. Our joint collaboration with AstraZeneca for the development of the combination of ceftazidime with avibactam is ongoing. We expect results from the Phase III clinical studies in complicated intra-abdominal infection and complicated urinary tract infections around the middle of calendar 2014.

We recently met with the FDA to discuss the program of ceftazidime/avibactam. And we are very pleased to share with you that the agency has advised that they will accept an NDA filing for both indications using the Phase II data that we currently have in hand under a 505(b)(2) process. We are planning to file the NDA this summer. And thanks to a QIDP-qualified infectious disease product designation, the review should be about 8 months instead of 12. The Phase III studies will be added to the NDA later in the year when they are available, but should not delay the 505(b)(2) review. Assuming we receive an approval with the Phase II data, this will be a full approval for both indications of cUTI and complicated intra-abdominal infections.

And to finish, very briefly on 2 upcoming regulatory events. Regarding our fixed-dose combination of aclidinium/formoterol, we have completed our analysis of the existing information in our database and have submitted our responses to the comments and questions that were raised by the FDA during the pre-NDA meeting we had in August. We expect to receive feedback from the agency later this quarter, and we'll update you as soon as we have additional information to share with you.

We remain on track to file the NDA for the fixed-dose combination of Bystolic/valsartan later this quarter. This is a nice opportunity to extend the value of the Bystolic franchise. And finally, as part of our pre-integration activities for the Aptalis acquisition, we are evaluating the development programs and how to integrate them in our pipeline.

So you can see that we are very active with our drug development programs, with many significant milestones coming this year.

And I'm now turning the call over to you, Brent.

Brenton L. Saunders

Thank you, Marco.

To wrap up. We had a very strong quarter, which was fueled by a 59% increase in the sales of our next-generation products and decreased spending. As a result, we are raising our full year guidance.

I look forward to telling you about how we are executing our strategy, including Project Rejuvenate and the Aptalis integration in coming months, to drive sustainable growth and value creation.

Thank you. So I'll turn it back over to Frank.

Francis I. Perier

Thank you, Brent.

And just before we go into the Q&A, I'll read the third quarter sales figures for some of our smaller products. Starting with Campral, it was $0.4 million; Celexa, $3.5 million; Cervidil, $15.3 million; Esgic, $0.3 million; European sales, $37.9 million; generics, $5.7 million; Lexapro, $21.1 million; Lorcet, $0.5 million; Monurol, $1.7 million; Thyroid products, $11.1 million; and Tiazac, $0.3 million. And just lastly, the Benicar third-party sales were $210.7 million.

And operator, I think we're just about ready to get started with our Q&A, so we'll go ahead and take our first question.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Marc Goodman with UBS.

Marc Harold Goodman - UBS Investment Bank, Research Division

A couple things. First of all, on Saphris, can you talk about the marketing hook and the message that you're going to be using to kind of drive scripts on that one? Second, Brent, in the past, you've talked about respiratory, and it kind of sounds like you like it but you're not quite sure how committed you are. I was just curious if you're all in on respiratory here. And then third, you had talked about, at the beginning of the call, how traditionally Forest has always been an in-licenser of late-stage assets. And obviously, you brought -- a little bit added to that with respect to adding commercial product. And how are you thinking about that over the next year or so as far as which one's more important, where you're focused? Because the late-stage pipeline, obviously we've got a couple of really interesting products coming up in the next year or so, and then the mid-stage is kind of weak, so obviously, we need to fill that in. So I was curious, what was going on behind the scenes on BD, and if there's as much activity as there used to be in that area?

Brenton L. Saunders

Marc, let me take them in reverse order that you asked them. So with regards to business development, we are absolutely on the hunt and continue to look for accretive product and/or company deals. We believe that there is more we can do to fill-in our current portfolio of products, marketed products, and that remains our top priority for business development. Our second priority is looking for late-stage appropriate and disciplined pipeline projects. And what I mean by that is we are looking for pipeline projects that fit in the therapeutic areas in which we currently operate and have some clear advantage over existing therapy and/or meet unmet medical need. And so there, we would be very disciplined and we would look for assets that would be, I guess, derisked or well past proof of concept for the short term. So that's how we're thinking about business development. And we are obviously very active and have a full team looking for the right opportunities in a smart, disciplined way. With respect to respiratory, look, we are committed to our entire portfolio of products, including our respiratory therapeutic category, where we have 2 very good products. I think, as we look at that vis-à-vis the other therapeutic areas, it's clearly the most competitive area we're in, but we're also very competitive, so we're not backing away from the competition, nor do we hang our heads low when it comes to respiratory. As I've said early on, we are out fighting hand-to-hand combat for Tudorza, and Daliresp is a very nice complementary product. We remain very committed. And of course, the pipeline there is also very important for us to realize even greater value in that important therapeutic area. With respect to Saphris, we're getting prepared to relaunch that in mid-February, as Bill stated, but I'll ask Bill to just touch on the messaging or positioning of Saphris at a very high level.

William Meury

Yes. Marc, when you think about the unmet need in the antipsychotic market, it really centers around high-treatment failure rates due to either a lack of response or poor tolerability. It's a difficult -- these are difficult conditions to manage. There's a great deal of churn. I think the average patient with schizophrenia and bipolar mania will be on, on average, 4 or 5 antipsychotics over the course of their illness. When we look at the data on Saphris, the tolerability profile stands out to us as a marketable advantage, namely the rates of EPS, which is a common side effect. And the metabolic profiles are very competitive, especially relative to some of the older antipsychotics. And so I think that's going to be a part of the data set that gets the attention of psychiatrists. And I also just think that the promotional levels on the drug have been much lower than we typically would put against them. And that started very shortly after the launch. As I mentioned earlier in my remarks, the user base is relatively small, given the data sets for the drug and how long it's been on the market. And so we think that we could effect a positive change based on those things.

Brenton L. Saunders

Thanks, Marc.

Operator

We'll go next to Andrew Finkelstein with Susquehanna.

Andrew Finkelstein - Susquehanna Financial Group, LLLP, Research Division

Maybe you can talk a little bit about Linzess in terms of how we should be looking to evaluate the impact of the DTC campaign that you are starting soon and how that translates into your expectations of the product as it moves towards profitability over time. I think, at the product level, it's getting close to the breakeven now, but there's a big investment you're making in the near term. And I assume some additional sampling and physician and promotional efforts are going to accompany this rollout. And then also, on Namenda, maybe you can talk a little bit about how that performed in the quarter, particularly any insights, how the switch is proceeding by channel, where the conversion is likely to go in the near term and any observations about the dynamics, particularly around Medicare Part D, there's always some fluctuations around it, the change in calendar year, I mean, how that's playing out and whether it's similar for the XR product as well.

Brenton L. Saunders

Sure. Thanks, Andrew. So let's start with Linzess. I'll start and ask Bill to jump in, and then we'll do the same with Namenda. So obviously, with Linzess, we are very committed to this drug. It is the anchor of our GI franchise. And we also believe it has the potential for the greatest growth in that portfolio. We kind of measure ourselves against the curve or trajectory of Zelnorm. And as you know, that's a pretty high standard in that, that drug was launched about roughly 10 years ago when access and the ability to reach consumers was very different than it is today. And so as we go into a DTC campaign and the 360 campaign that Bill mentioned, TV, print and online, we will measure ourselves against this very lofty standard of Zelnorm. And we believe, as I think Bill said, if there ever was a drug that was made for direct-to-consumer advertising, Linzess is it. This is a target patient population that often suffers silently or self-treats with OTC medicines. We know that, both in the prescription and in OTC space, consumers and patients react to DTC. And we also know from talking with physicians, they would prefer their patients coming in a little bit more educated around the treatment options so that they can have a more robust conversation with their patients. So I think we believe Linzess has a lot of opportunity and we're holding ourselves to a high standard. Bill?

William Meury

Yes, I think Brent said it well. DTC campaigns succeed when you have a very large, well-informed user base, which is what we have, and when you have good payor coverage. And those 2 things are in place. We know that patients, on some level, own this condition. And we think that the awareness levels, after the DTC campaign, are going to climb dramatically and that should drive demand. And right now, it's largely about execution.

Brenton L. Saunders

Now with respect to the Namenda switch, I think the way I think about it is we need to put ourselves in a position to have a choice. And the way you do that is by, in large part -- there are many things, but the 2 bigger things that you do is you try to get near mirror care -- mirrored managed care access and build supply. And so we ended 2013 with about 50% coverage for Namenda XR and we started 2014 with about 80% coverage. So we believe that will give us an opportunity to drive the next leg up, if you will, on the conversion of IR to XR. Also, if you -- if we were to effectuate and make a final decision to effectuate a switch or a hard switch, we would need enough supply to manage the IR patients to XR. So we do have our plant working on 3 shifts a day, 7 days a week, to build that inventory and that supply, and that should get us into a position later in the year to be able to make that decision. Physician perception is good. Caregivers and patients like XR. And I think, as Bill said, ultimately with the combination product with Aricept, you're taking patients from 3 pills twice a day, to 2 pills once a day, ultimately to 1 pill once a day. And in this patient population, that's a meaningful benefit to patients. So Bill, I don't know if you want to add anything.

William Meury

You asked about channels. There's 2 that are very important here. There is retail and long-term care. Our retail business is quite stable. And we've been working on shoring up long-term care. The conversion rate is similar in both, a little higher in long-term care, and that will be the focus of a hard switch if we pursue it.

Frank J. Murdolo

Great. Thanks, gentlemen.

Operator

We'll go next to Ken Cacciatore with Cowen.

Ken Cacciatore - Cowen and Company, LLC, Research Division

Brent, just wanted to go back to earlier comments you made talking about you're not a roll-up and kind of insinuating smaller transactions. But if you were going to do a tax inversion, that would have to be, at the minimum, a $5 billion transaction. I was wondering, earlier when you first kind of took control of the company, it seemed like all things were open and maybe even a merger of equals. Can you just talk about maybe some change in sentiment here and discuss a little bit in more detail?

Brenton L. Saunders

Yes, and Ken, I'm glad you asked the question. It's not a change in sentiment. In fact, we remain open to all possibilities to create shareholder value, whether that be an inversion, a merger of equals, buying products, buying other companies like Aptalis, but it's not our only strategy. The point I was trying to make is a lot of companies in our space are just doing roll-ups with -- as their core strategy. Our strategy is to create an underlying business that has performance of top line growth, durability, and creates long-term value. And so I believe those 2 things can live in harmony. Clearly, our first priority for the short term, over the next year or 2, is to do accretive deals to fill in our pipeline, to give our sales force more products to carry, to create more relevancy in the therapeutic classes that we're in, but we also need to give FRI more projects to work on in a smart, disciplined way. And so we will balance those 2 things, with a little bit more weight towards what we've always said, which is accretive smart deals to put more volume through the existing structure. And so I don't think there's been any change. It's just a clarification of the strategy, which is we're not just a roll-up. We are trying to use deals to accelerate growth while the underlying business also has growth. And so we remain very open to strategic deals that continue to advance our agenda to rejuvenate the company.

Operator

We'll go next to Douglas Tsao with Barclays.

Douglas D. Tsao - Barclays Capital, Research Division

Just Brent, when you think about business development, obviously, after Aptalis, you guys have pretty significant scale in the GI space, adding onto the scale that you already had in CNS. Just curious, are you thinking -- what's your sort of priority when you look at your relative therapeutic areas right now? And are you open to perhaps considering new ones if the right opportunity emerged?

Brenton L. Saunders

Yes, no, absolutely. Look, our first kind of threshold that we're looking at is to fill in our existing therapeutic areas. So clearly, we have a very strong appetite to look for products or acquisitions or deals or any kind of strategic options to create more volume in respiratory, in cardiovascular, in infectious disease in the hospital market. So -- and now also cystic fibrosis. So those would be areas where we could clearly put more products through the existing structure. And as you can see, when we do that and we report[ph] our costs low or reduce costs and put more products through, you get a very leveraged P&L. I think we would look at new therapeutic areas, but the bar is higher. We would need to see a clear opportunity to do something exceptional and drive innovation in some new therapeutic area rather than trying to do it with existing therapeutic areas. But much like the Aptalis deal, where we used it to primarily fill out our GI franchise, it came along with something else, and this one came along with cystic fibrosis. We already had a business in Europe, a small one albeit, but a business, but not one in the U.S. And so when we can go into a transaction that fills in a core therapeutic area but also gives us a very nice specialty business in an area where we also think we can grow, that's a very complementary and strategic deal. And so I think that's how you'll see us go into new therapeutic areas, most likely.

Douglas D. Tsao - Barclays Capital, Research Division

Okay. And just one follow-up. When I look at your CNS portfolio today, you obviously have a lot of products, even leaving aside the Namenda franchise, but the psych portfolio in particular, and that would sort of -- I'd include Savella in that as well. Would you ever consider divesting any products? Or do you think that you can, even for some products that perhaps are in a slower growth mode, sort of just pare back the sales, commercial infrastructure enough that they can just sort of be sort of cash cows for the company?

Brenton L. Saunders

Look, I mean, there are no sacred cows in our product portfolio. We don't believe we can execute against any of our products, or someone else can do better, or it's more valuable in somebody else's hands. We certainly remain very open to that. So remember, most of our products, with a few exceptions, are licensed products, and so there's nothing to technically divest. It's really a return of the rights. And so that certainly is negotiable, I would imagine, but mostly leads to value destruction, not value creation. And we're kind of in the value creation business. That being said, I think, given our current portfolio, we believe we can be very competitive with the products we have. And we believe that it gives is optionality for growth because there are so many things that we can look at to add to our existing call points to drive additional growth into the current cost structure system that we already have.

Operator

We'll go next to Annabel Samimy with Stifel.

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

I want to dig a little bit further on the combination of Namenda and the cholinesterase inhibitors. I find it to be an interesting opportunity to potentially expand your market. So is there any way you can give us some kind of statistics around what part of the population is on combination right now, and separate products, and maybe what kind of expansion opportunity you might envision with this product? And then separately, on the Project Rejuvenate, obviously you haven't changed any of the specifics around the cost savings that you might expect. But with Aptalis and some of the investment you made -- make in the pipeline, how might you prioritize some of the R&D and some of the cost restructuring that you have?

Brenton L. Saunders

Yes, so first, on Namenda. Look, about 70% of current Namenda users also take Aricept, so that's the current combination. I don't know, Bill, if you have anything else you want to add to that, but...

William Meury

It may -- there may be an opportunity to expand a combination therapy in the market. Today, only 25% to 30% of patients are taking combination therapies, despite the indication and the guidelines. And so there's an expansion component to this, but like Brent said, a big focus is going to be the 70% of Namenda patients that are taking the non-fixed combo.

Brenton L. Saunders

I guess, with respect to Rejuvenate, that's kind of a net number, the $500 million. That contemplated the investment, let's say, in DTC for Linzess. It contemplates some additional clinical work that may be needed either for existing products or projects and/or new things. As we look at the Aptalis R&D pipeline, it's a bit early. We've only been a week or so into this thing. But they do have 2 products that are interesting assets. One is the inhaled Levaquin, looks interesting particularly in Europe and potentially in the U.S. And then of course, Zenpep, the -- is already filed in the EU, and we'd like to see that through. With respect to the rest of their pipeline, we need to study it further. And only if it meets a threshold that we believe is meaningful to us and a high probability of success would we advance it within our system.

Operator

We'll go next to Mario Corso with Mizuho USA.

Mario Vincent Corso - Mizuho Securities USA Inc., Research Division

Yes, a couple of quick ones. On the pipeline, I was wondering, with the ceftazidime/avibactam, the reason for the Phase II studies being adequate, is that really kind of focusing on KPC and some of the other more difficult-to-treat bugs and that's what's going to differentiate it from some of the other antibiotics in development of other companies? On the -- and then financially, it sounds like R&D spending is trending lower in the near term. I just wanted to confirm that's the correct way to think about it.

Brenton L. Saunders

Yes. So let me answer the second one, and then I'll turn it over to Marco for the first question. So I think you are thinking about the trending of expenses right. Our R&D organization was scaled up for the bolus of work that came with the Next Nine being in late stage. And as much of that work is now behind us, we still have the post-marketing commitments. We still have some work to do in cariprazine and our respiratory combo product. But I think we're -- I'm a strong believer in that you spend money when you have good things to spend it on. You just don't set an R&D budget based on a percentage of sales and hope for the best. And so we tend to spend our money like it's our own. And if we have good, high-probability, innovative things to work on, we'll do it, and when we don't, we won't spend the money. And so that's how we think about it. In terms of the CAZ program, Marco?

Marco Taglietti

Yes, Brent, and I'll just jump in with that. In our discussion with -- of course, with the agency, with FDA, really, the interest is really about the activity of this product on KPC, which is really unique and something that can make this product a -- really a product addressing an incredible unmet medical need. And this is the reason why now we're in discussion with the FDA. We felt that our Phase II data were already promising and adequate, actually, to get an approval. And actually, FDA came back with this suggestion of going ahead with the filing with the Phase II data based on a 505(b)(2) strategy, since we have ceftazidime as a well-known antibiotic. And really, we have the possibility to restore ceftazidime activity. And as you know, ceftazidime has been, for years, a workhorse in the hospital setting. So this is really -- we expect, actually, this to be a relatively smooth submission. And now maybe, Bill, you can add something about the role of the product or...

William Meury

The only other thing I would add is that carbapenem failure rates in certain parts of the country are starting to climb. And ceftazidime/avibactam covers ESBL, Pseudomonas and KPCs. It will be the only gram-negative agent with that kind of coverage. And so it's going to be an important addition for those hospitals that are dealing with gram-negative-resistant infections.

Marco Taglietti

And just to finish, avibactam, which is our beta-lactamase inhibitor, clearly has a broad spectrum of -- has a broad spectrum that other competitive products don't have. And in fact, I think, obviously it's a -- I think it's an advantage of this combination.

Frank J. Murdolo

Well, good. Thank you.

Operator

We'll go next to David Amsellem with Piper Jaffray.

Traver A. Davis - Piper Jaffray Companies, Research Division

This is Traver Davis, on for David. Just 2 quick ones. So can you just talk about the pricing dynamics for some of the key Aptalis assets, such as Zenpep and Canasa? And can you also provide some color on any pricing power that you could have with these products? And then I have a follow-up.

Brenton L. Saunders

Yes, we really can't talk about the pricing power until the deal closes. We're 2 separate companies and have to follow all the gun-jumping laws and rules. So until the transaction closes, I really can't comment on price, but to say that they continue to take price increases on their own, so we believe there's likely some opportunity there.

Traver A. Davis - Piper Jaffray Companies, Research Division

Okay. And just a quick follow-up, and hopefully you can give a comment on this. But on Zenpep, so obviously you have the potential for an approval in Europe, adding to the base that the product already has in the U.S. But how did you view, when you were reviewing the transaction, the type of organic growth the product would see, specifically in the U.S.? In other words, is this just a product that you're viewing as sort of immature from a volume perspective, yet you can still grow the product based on price? Or is there some other way that you're looking at this product in terms of growing maybe organically in the double digits going forward in the U.S.?

Brenton L. Saunders

Yes, and look, I mean, I -- we don't have a target yet to give you on it, but I do believe there's upside to the Zenpep franchise. We are -- or Aptalis, I should say, until we close, has a smaller part of the share versus advi [ph]. And there's no reason, in our hands, we can't be a little bit more competitive against advi [ph] than Aptalis was. A lot of this is around being committed to the centers, the cystic fibrosis centers, and making sure that they know you're there for the long term to help the patients and ultimately continue to invest in the disease state. And that's something I think we're very open to as we do the pre-integration work and get ready to close the transaction. I suspect we'll come back to you with more details after it closes, but unless Bill has anything to add, that's kind of how we see it.

William Meury

No, I think that's right. We have to invest in the patient community related to cystic fibrosis. And there will be an opportunity to extend the reach of the overall promotional program to PCPs and GIs.

Operator

We'll go next to Elliot Wilbur with Needham & Company.

Elliot Wilbur - Needham & Company, LLC, Research Division

Quick question, I guess, for Frank, perhaps. I believe, this quarter, there was roughly a $50 million milestone payment expected to occur. Obviously, that didn't happen. And I'm just wondering if that's something that's been pushed out, or if in fact something happened in clinical development, resulting in that payment -- or that payment is not going to be made. And then as a follow-up, with respect to balance sheet leverage, I think you mentioned debt-to-pro-forma EBITDA ratio of around 2.6x coming out of the Aptalis acquisition. As you're searching the landscape for assets, how do you think about maximum balance sheet leverage, or at least the level that you're comfortable with? Obviously, a lot of players in spec pharm have levered up to much higher ratios, but how do you guys think about sort of a comfort level, given that you see rather significant cash flow uncertainty around the Namenda franchise?

Brenton L. Saunders

Yes, so I mean, let me answer the first one, Elliot, and then I'll turn it over to Frank -- I mean, the second one and I'll turn it over to Frank for the first one. So with respect to leverage, kind of we have an aspirational target of 2x pro forma adjusted EBITDA. And so as we look at where we are with Aptalis going up a little higher than that, we have a very clear line of sight, both from the synergies as well as the existing business and our own cost-cutting programs, to get under 2x. I think we have plenty of firepower to continue to go out and do future deals. And as I have said very often, would we pulse up at some number well above 2x to do another deal? Absolutely, we would. It would have to be strategic and important or transformational. And we'd also need to see line of sight to get back to around 2x as well. So I don't think that we feel any constraints. We still have a very strong balance sheet. And we believe that if there are deals to do that we believe fits our strategy, then I think we've proven in about 100 days that we're willing to do them. Frank, do you want to answer the...

Francis I. Perier

Sure. With regard to the milestone payments that were in the quarter, what I indicated in the comments were that there were no upfront license payments in the quarter, where we had big upfront payments in the prior year's quarter. We did have milestone payments in the quarter of about $40 million. One was an acceleration of $20 million from Q4 into Q3, and the other one was actually an acceleration from next fiscal year into this fiscal year. So our total milestones will be about $20 million higher for the year than what we guided, and you did have $40 million of milestone payments in this quarter.

Operator

We'll go next to Ronny Gal with Bernstein.

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

Two questions. The first one, on Namenda. I can completely see how you'll be able to switch the franchise over the next couple of years. The question is, what will happen in 2016? When I talk about Namenda with managed care, they kind of mentioned this issue that this is a fairly large product in Part D, single digit of the total pharmacy cost, and therefore they have high incentive to get patients off to the generic. And this is a product where you cannot rebate the patient's co-pay in Part D. And second question, regarding the cost reduction overall, it's a very impressive number that you've given, $500 million net of total of additions to -- in certain areas. And the question is, is this essentially free? That is, what have you had to give up in order to get this $500 million? Or there was just simply that much slack in the system that allowed you to take that much cost out?

Brenton L. Saunders

Yes, so let me answer the cost reduction, and then I'll come back to Namenda. So the $500 million, I'm not sure we would call it free. It takes a lot of work to take that kind of dollars out of the system. The work is well underway. And as you know, we've announced about a 500-person headcount reduction, and that clearly is something that's always very difficult to do. That being said, I think, when we look at the future of our company, what our strategic plan is and the things that we believe we can do to continue to bolster our growth trajectory, we believe we can do it with a smaller cost base. Remember, we are not touching our sales force as part of this. We've included key investments, like DTC in Linzess and some additional monies for clinical trials. So I think it's about just operating the company with a little less. And just being a little leaner is probably the best way to say it, but I'm not sure it's free.

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

What I'm saying is you've not given up any capabilities.

Brenton L. Saunders

We are not giving up capabilities. In fact, I would argue that by going through an exercise like this, you strengthen an organization and you raise the bar on capabilities. Part of our delayering and spans-of-control exercise, which we're moving into the third layer in a few weeks, does is it allows you to reassess the capabilities of each department and each layer of the organization to make sure you have the strength to execute our plan. And currently, I've done that with my team. That included promoting people and moving people around, as well as bringing in new people. And I did that to set an example for my team. And we just did that now with the L3s and we're moving on to Level 4 starting tomorrow, with some training. So we expect to be done in most of that work by the end of March. But it is hard work but something, I think, that's also, in a perverse way, a little rejuvenating for the organization to go through it, regardless of how difficult it is to say goodbye to colleagues. I think, with respect to Namenda, what happens after the patent expiry, which is July of 2015, the product goes into -- the franchise goes into decline. I don't think we are suggesting that this will be a growth driver after the patent expiry. I think our view is that what we're trying to do is make a cliff disappear and rather have a long -- a prolonged decline. And we believe that by potentially doing a forced switch, we will hold on to a large share of our base users, then we will fight for new Rxs. And there, we will be fighting with a better formulation, more convenient dosing, as well as a combination product. And so I think it's -- price is still very important. It will be a dogfight at that point, but we do have some weapons in the stable. We're not just going with both hands tied behind our back. Bill, do you want to...

William Meury

No, I think that it's right. We're expecting to preserve a good portion, but not all of our business over the next several years. I think we're going to be able to convince plans that the QD version of Namenda and the fixed-dose combination are important. I do know that caregivers, in particular, like a once-a-day claim, it simplifies things. And as you know, Ronny, long-term care is an important part of this. And so as it relates to the fiscal year '16 period, like Brent said, it'll be a little bit of a battle, but I think the marketplace is going to -- at least, certain parts of the marketplace will vote for these newer products.

Brenton L. Saunders

Keep in mind that this is a behavioral change. So once -- if we do the hard switch and we've converted patients and caregivers to once-a-day therapy versus twice a day, it's very difficult for the generics then to reverse-commute back, at least with the existing Rxs. They don't have the sales force, they don't have the capabilities to go do that. It doesn't mean that it can't happen, it just becomes very difficult. It is an obstacle that will allow us to, I think, again, go into to a slow decline versus a complete cliff.

Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division

Got it. And if I can sneak a follow-up on this issue. Should we expect a lower price point in the next couple of years on Namenda as a result of discounts you're giving to the payors to secure a position for the XR? Or is this going to net out with price increases?

Brenton L. Saunders

Yes, so I think the way we look at it today is we're priced at about a 5% discount-per-day of therapy in Namenda IR. And we'll look to continue to evaluate what we need to do to maintain the franchise and be effective with our managed care customers.

Operator

Our final question comes from David Risinger with Morgan Stanley.

David Risinger - Morgan Stanley, Research Division

I had a high-level question and then a couple of numbers questions. First, Brent, you've obviously discussed interest in a potential future tax inversion -- excuse me, deal. Could you speak to the potential size or geographies that would fit the bill, or provide any more perspective on that? And then with respect to the numbers questions, other product revenue was up 30% sequentially in the December quarter versus the September quarter. I was just hoping to better understand that. And then with respect to the Namenda franchise, at least based upon our calculations, IMS has been showing mid- to high-teens Namenda franchise prescription growth year-over-year, but I think that's wrong. What are you seeing in terms of the Namenda franchise volume growth? And then what is your calculation of the new prescription share for XR as a percentage of the total franchise today?

Brenton L. Saunders

Sure, David. So look, on the tax inversion question, look, we actively consider all of our options. I think I've proven over the first 100 days that we're very committed as a company to maximizing shareholder value and doing that in a smart, strategic way. And as I've said, if we found a way to appropriately lower our tax rate, we would certainly be aggressive in trying to do that, but we want to find a deal that is strategic and appropriate. And we track quite a few. We're very active. We're looking at a few different options. And I think, when we believe the time is right and the target is -- fits the bill, then you'll see us make our move, but we're not going to do something undisciplined or outside of our strategic rationale. As you know, we try to stay disciplined just to get a tax inversion for the sake of a tax inversion. But it is something we're very actively considering and evaluating. Let's maybe move to the Namenda question. Bill?

William Meury

I think IMS has had some reporting irregularities for Namenda. I think it's a good idea, well, going forward, to look at days of therapy. When you think about the overall franchise, I would think about it this way: Demand in retail, which is the largest portion of our business, is stable, when you think about an over-prior-year period. And in long-term care, it's off marginally versus prior year. And then as it relates to XR as a percentage of the overall franchise, it's bouncing between 12% and roughly 15%. With the formulary wins that took effect January 1, I would expect a ramp in the rate of conversion over the next several quarters.

Brenton L. Saunders

And I guess, with respect to the other product revenue question, Frank, do you want to try to take that?

Francis I. Perier

Yes, David, I mean, we're looking at other product revenues, and quarter-over-quarter, they're basically flat. If you compare it to last year, it's up about 10 -- not quite $10 million. And that's really related to the kind of the legacy products within the FPI Group.

Brenton L. Saunders

So I think, just to wrap up again. We had a very strong quarter fueled by a 59% increase in sales of our all-important, next-generation products. And of course, the mindset of "spend money like it's your own" from Project Rejuvenate is taking hold. And as a result, we are raising our full year guidance.

We look forward to staying in touch with you. And we appreciate your time today. Thank you.

Frank J. Murdolo

Thank you, everyone. Operator, that will end the call now.

Operator

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!