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Alkermes Inc. (NASDAQ:ALKS)

F4Q10 Earnings Call

May 13, 2010 4:30 pm ET

Executives

Richard Pops - Chairman, President & Chief Executive Officer

Jim Frates - Chief Financial Officer

Rebecca Peterson - Vice President of Corporate Communications

Analysts

Cory Kasimov - JPMorgan

Steve Yoo - Leerink Swann

Dave Windley - Jefferies & Co.

Tom Russo - Barred

Scott Henry - Roth Capital

Terence Flynn - Lazard Capital Markets

Ian Sanderson - Cowen & Co.

Operator

Welcome to the Alkermes, fiscal 2010 financial results conference call. 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. Later will be a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Ms. Rebecca Peterson. Ms. Peterson you may begin.

Rebecca Peterson

Thanks very much John. Good afternoon, and welcome to the Alkermes conference call to discuss our financial results for fiscal year 2010, and our financial expectations for fiscal 2011. 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 BYDUREON, our future financial expectations and business performance, our expectations concerning future of the business development transactions, and our expectations concerning the therapeutic value and development product candidates.

Listeners are cautioned that these statements are neither promises nor guarantees, but are subject to risks and uncertainties that could change our actual results to differ materially from the results contemplated by these forward-looking statements. You can find a list and detailed description of these and other risks in our Annual Report on Form 10-K, and Quarterly Report on Form 10-Q, as well as in 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 the call today.

This afternoon, Jim will discuss our fiscal 2010 financial results and outline our expectations for fiscal 2011. Richard Pops will then provide an update on the company. After our remarks we will open up the call for Q-and-A.

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

Jim Frates

Thanks Rebecca. Good afternoon everyone. Fiscal year 2010 was an important year for us, and I think it exemplifies what makes Alkermes unique. We have a strong cash position, recurring cash flows from commercial product sales, disciplined financial management, and a pipeline that will provide the foundation for solid growth going forward.

In particular RISPERDAL CONSTA provided revenues approaching $150 million to Alkermes in fiscal 2010. RISPERDAL CONSTA remains a key brand in the antipsychotic space, and because of its long term protection, will remain an important source or revenue for years to come.

Building upon the source of revenue, we look forward to adding two entirely new revenue streams later this year, with the anticipated approvals of BYDUREON for type 2 diabetes, and VIVITROL for the treatment of opioid dependence.

Our financial strength has enabled us to invest in two new technology platforms, and advance six pipeline candidates just in the last year. As Rich will describe, we selected candidates that we believe are likely to succeed and provide value to patients and physicians in important medical markets such as CNS, reward disorders, opioid induced constipation, and inflammatory disease.

We designed our clinical program to rapidly provide information regarding the likelihood of success, and the potential of the drug, and expect key data from there programs before the fiscal year end.

Turing to our financial results, overall fiscal 2010 was a solid year financially. Both RISPERDAL CONSTA and VIVITROL achieved record annual sales. During the year the company recorded total revenues of approximately $178 million, at the mid point of our guidance range we provided in November. Specifically revenues were driven by the continued strength of RISPERDAL CONSTA, which grew operationally 11% year-over-year, based on roughly $1.5 million in end market sale.

During the fiscal year 79% of RISPERDAL CONSTA units were sold outside the United States. As J&J stated on its recent quarterly earnings call "Sales of RISPERDAL CONSTA outside the Untied States were up 21.4% operationally, with strong growth in all major regions."

RISPERDAL CONSTA remains the only long acting atypical antipsychotic approved for both, schizophrenia and bipolar I disorder in the United States, and is a gold standard long acting choice around the world. It has patent protection through 2020 in the United States, and 2021 in the EU, and we believe RISPERDAL CONSTA will continue to generate profitable revenue stream for us for years to come.

VIVITROL for alcohol dependence also exhibited progress this year, as evidenced by four consecutive quarters of growth. Net sales for VIVITROL increased to $5.9 million in the fourth quarter, a sequential increase of approximately 9% compared to the third fiscal quarter of 2010.

Total sales for VIVITROL for fiscal 2010 were $20.2 million. Throughout the year we grew VIVITROL sales, and managed our expenses, so that during the last quarter we narrowed our VIVITROL loss to approximately $2.5 million. We look forward to continuing that progress in fiscal 2011.

Turing to expenses, total operating expenses for the fiscal year were $221.3 million, which included $18.9 million of mostly non-cash charges associated with the relocation of our headquarters from Cambridge to Waltham, Massachusetts, and $15.3 million of share based compensation in severance expense.

The relocation is expected 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 and severance expenses, we reported a pro-forma net loss of approximately $5.4 million this year.

On a GAAP basis we reported a net loss of $39.6 million for basic and diluted loss per share of $0.42, which compares favorability to the guidance we provided in November of a net loss in the range of $45 million to $55 million. For a full reconciliation of our pro-forma net loss to GAAP, as well as the details of our fiscal 2010 revenues and expenses, you can review the press release issued earlier this afternoon.

During the year we had a net cash outflow from operations of approximately $12 million, inline with our guidance, finishing the year with more that $350 million in cash and investments.

I will not outline our financial expectations for fiscal 2011. Before I go to the line items, I want to provide some context on our expectations. There are obviously a lot of moving parts as we enter this new fiscal year, including the timing of two new drug approvals. Naturally predicting launch and approval base in inherently difficult, so the expectations I will share reflect our best estimates as of today. With that I will go through the specifics.

We expect total revenues to range from $170 million to $195 million which we break out as follows. Total manufacturing revenues in the range of $103 million to $115 million, with $100 million to $110 million related to RISPERDAL CONSTA based on current exchange rates, and $3 million to $5 million related to the production of polymer for BYDUREON.

For the first quarter of fiscal 2011, we anticipate manufacturing revenues from RISPERDAL CONSTA to be in the range of $22 million to $27 million. We expect total royalty revenues in the range of $35 million to $42 million, with $35 million to $37 million related to RISPERDAL CONSTA, and zero to $5 million related to BYDUREON. For these projects we've assumed a January launch for BYDUREON, and sales inline with the first quarter of the Victoza launch in the Untied States.

We recall that at our R&D day we disclosed that we would receive 8% of net sales from the first $40 million units of BYDUREON sold in the year, and 5.5% of net sales from units sold beyond the first 40 million unites for that year.

Net product sales for VIVITROL are expected to be in the range of $25 million to $30 million. We haven’t built-in any revenues related to the launch of VIVITROL in the opioid indication, because we are still in the process of quantifying that opportunity. We plane to provide more details on our expectations for the opioid indication in the coming months.

Lastly, we expect R&D revenues in the range of $7 million to $8 million. This expectation includes a $7 million milestone payment from Amylin, upon the first commercial sale of BYDUREON in the United States.

Turning to expenses for fiscal 2011, we expect cost of goods to range from $47 million to $60 million, R&D expenses to range from $90 million to $105 million, and SG&A expenses to range from $78 million to $85 million. This reflects our plan for the launch of VIVITROL for opioid dependence in the fourth quarter, and an anticipated increase in our sales and marketing expenses of approximately $5 million to $10 million.

Share-based compensation expense included in the operating expenses discussed, is expected to be in a range of $15 million to $20 million. Interest income and interest expense are expected to offset each other this year. This reflects our planned early redemption of the remaining RISPERDAL CONSTA nonrecourse 7% note this July.

The redemption will result in savings of $3.2 million in interest expense, through the scheduled maturity of January 1, 2012. We expect a largely non-cash charge of approximately $2.1 million in our second fiscal quarter related to the redemption of the remaining notes.

Our GAAP net loss for fiscal 2011 is expected to be in the range of $45 million to $55 million, or approximately $0.47 to $0.58 per basic and diluted share, and finally net cash outflow from operations is expected to range from $25 million to $35 million.

Fiscal 2011 will be an important year for us. We have the potential for two product approvals in the second half of the year that should provide significant operating leverage for the company going forward.

We are also making targeted investments in our pipeline, and we’ll have key clinical data that will be available thought the end of the year. In addition we’ll execute on RISPERDAL CONSTA and VIVITROL, and repurchase all of our RISPERDAL CONSTA notes, including us debt free and with a strong cash position.

We look forward to delivering on these goals over the next year, and with that I'll turn the call over to Rich.

Rich Pops

Thank you, Jim. I think that fiscal 2010 will be viewed as an infection point in Alkermes history; a year in which we began the transition into a new phase of growth for the company.

During the year RISPERDAL CONSTA continued its growth around the world, and we crossed major thresholds for our LinkeRx portfolio, culminated with NDA positions for both BYDUREON and VIVITROL opioid. These are key developments which you may have been prepared for, but I hope I’ve surprised you with the energy and progress we've made in expanding our portfolio of product candidates, and our platform technology.

Alkermes scientific brand is back in assembly. This is entirely by design, and it doesn't result form us simply talking about it. It’s the product of clever, proprietary, innovative science, applied to specific high value price development programs, and then moving these programs as rapidly as possible into human clinical studies for proof of concept. We expect the value of this removed focus on our pipeline to become self evident in this new fiscal year.

For that reason, fiscal 2011 will be a pivotal year for the company. The news flow this year is unprecedented in our history; expected BYDUREON approval and launch, expected VIVITROL opioid approval and launch. This will turn on two entirely new revenue streams for the company.

Data from decisive human study, including ALKS 33 in three separate indications; ALKS 37 for opioid-induced constipation; ALKS 9070, our long acting injectable Aripiprazole in schizophrenia. More development programs emitting from our pack lines, more business development discussions, and possibly if each programs continue to meet their goals, new business yields. All of this is occurring within the framework of the guidance Jim just provided.

We have recurring cash flows, a strong cash balance, focused R&D spend, and a tradition of high value partnerships. We think we are in a fantastic position. To understand Alkermes this year, you should understand each of these elements; CONSTA, BYDUREON, VIVITROL in the opioid indication 33, 37, 9070 and our strategy regarding biologics, only then will you have a complete sense of what we are up to.

Now, let me make a couple of comments to update you from our last call and from the R&D Day in New York. As you know, we submitted the sNDA for VIVITROL in opioid dependence. As we have been conducting our market research in preparation for the launch in that indication, we are becoming increasingly convinced of two things. First, that despite existing therapies, there is a major unmet medical need in the treatment of opioid dependence; and second, with the medical and commercial opportunity, the opioid dependence are very distinct from those relating to alcohol dependence.

Before the results of the VIVITROL Phase III study in opioid dependence, we’ll be presenting at the APA, New Orleans later this month. This should generate the interest, because we believe the data suggests that treatment with VIVITROL provides benefits to patients above and beyond simple blockade of the opioid receptor. Based on the significance and clarity of these data, we have requested a priority six-month review from FDA. We will know the status of our request, and the acceptance of this submission in June.

Turing to BYDUREON, last week we announced that the FDA had accepted our partner’s complete response, and have signed a new [PEDUFA] date of October 22, 2010. We are back on the clock with the FDA, and on our way to approval. We believe BYDUREON is a best-in-class product, with improved glucose control, increased weight loss potential, low risk of severe hypoglycemia, and reduced glucose monitoring.

As our partners prepare for the launch of BYDUREON, we have the benefit of observing the launch of Victoza in the GLP-1 market. The trends we are seeing related to the uptake of Victoza are once daily products. Underscored, the market is prime for longer acting therapies that can offer patients the benefits of this new class of medication.

Let me finish and switch gears by turning back to research and development activities and some of the key developments related to our earlier stage pipeline. These R&D efforts are the basis for the future growth of the company.

While the investment in our pipeline has made possible by the continuing revenue stream from RISPERDAL CONSTA, we are extremely selective regarding which candidates we chose to develop in advance. We are biased towards those programs, where the product candidate can be rapidly de-risked through early human clinical trials, the way we can model a high potential way to return on our investment.

An example of this kind of candidate is ALKS 9070, the first antipsychotic candidate to be developed using our new LinkeRx technology. 9070 is designed to be a once monthly injectable, extended release version of Aripiprazole, commercially known as ABILIFY. The Phase I study is planning for the second half of calendar 2010 for this product.

At our R&D Day, we also unveiled ALKS 7921, the second candidate to leverage this proprietary partner. In this case, our long-acting formation of olanzapine, commercially known as Zyprexa. ALKS 7921 is designed specifically to address the early boost issues, exhibited by Zyprexa and we are quite excited by its potential. We have submitted a number of patent applications to the U.S. Patent and Trademark Office, to protect the LinkeRx technology, ALKS 9070, ALKS 7921, and other moleculars as well.

We also announced additional indication for ALKS 33, an oral opioid modulator for the treatment of reward disorders. In addition to the Phase II study in the treatment of alcohol addiction, we have also initiated Phase II studies in binge eating, and as a combination therapy with buprenorphine for the treatment of addiction and mood disorders; once in a couple of factors around each of these different indications for ALKS 33.

Binge eating is characterized by the current episodes of compulsive overeating, and it occurs in approximately 1% to 2% of the general population, which is about the same prevalence rate of schizophrenia. Those are significant medical need for the treatment of this disorder, and opioid modulators that’s showing efficacy in both pre-clinical and clinical studies in treating the disease. We expect safety and efficacy data from the 60-patient six-week study in the first half of calendar 2011.

We also have this Phase 1 II study underway, designed to assess the pharmaco dynamics of ALKS 33, in combination with buprenorphine in opioid experience healthy adults. Recall that the large accretive is to combine the pharmacologic activities of 33 and buprenorphine at the opioid receptor, to user treat it with distinctive properties unlike either of the single agents. This study is being funded by the National Institute on Drug Abuse, which we believe underscores the importance of this potential treatment.

Lastly as I mentioned before, the Phase II study of ALKS 33 in alcohol dependent patients continues at a rapid pace, and we expect to have interim data in hand by the end of the calendar year.

Turning to ALKS 37, at our R&D Day we announced the initiation of a Phase II clinical study of ALKS 37. This is an orally active, peripherally-restricted opioid antagonist for the treatment of opioid-induced constipation. This multidose study will evaluate the efficacy, safety, and tolerability of ALKS 37, in approximately 60 patients with OIC, and we expect to report preliminary results from this study in the first quarter of calendar 2011.

All of this activity yields a whole lot of data. With these data in hand, we can shape and expand the business opportunities for the company. In the meantime, the later stage programs, CONSTA, BYDUREON, and VIVITROL make progress in the marketplace. It is a very powerful mixture of view now in the future. This is going to be another very exciting year for the company.

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

Rebecca Peterson

Thanks Rich. We'll now open it up for Q-and-A.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Cory Kasimov - JPMorgan,

Cory Kasimov – JPMorgan

I have one on CONSTA and then a couple on the guidance. So with CONSTA, can you I guess, talk generally about how Johnson & Johnson ordering patterns have changed for the product now that we are over six months into the launch of the long-acting atypical?

Jim Frates

Sure Cory, its Jim. I think we are still seeing J&J get its legs under it to understand where they are heading. We have actually seen orders increase over the last few months, which is a good sign for us, but I think given that we are still early in the going here with two quarters under our belt, we try in our guidance to be conservative, so that’s what we are seeing.

Cory Kasimov - JPMorgan

Okay, and then with regard to guidance, two questions. First on the top line, with VIVITROL you are not giving any guidance in terms of the opioid indication, but assuming you get priority review, the PEDUFA here would be right around the same time as the PEDUFA for BYDUREON. So you are providing some top line guidance. Is there something we should be reading into that or is that you want to make sure you actually get the priority review before including this in any sort of top line revenue?

Richard Pops

Exactly, I don’t read anything into it, and also that reminds me, I want to make a comment to clarify something Jim said. In our guidance when we made an assumption of January launch of BYDUREON, that was simply for guidance purposes. We were not making any expectations of FDA action that was 15 years of planning exercise.

We are literally just still building the models on the VIVITROL opioid, and once we get a sense of the regulatory timing and the scope of the launch activities and our projected uptakes, then we will be give a little bit more guidance, nothing is larger than that.

Cory Kasimov - JPMorgan

You are just trying to be more on the conservative side dynamically?

Richard Pops

Precisely.

Cory Kasimov - JPMorgan

Okay, and then lastly your SG&A guidance of $78 million to $85 million, does that incorporate cost savings from the headquarter relocation and if so how much?

Jim Frates

Yes, there is some in their Cory. Most of those cost savings are actually are in the R&D line, and are being offset by additional clinical studies on the new products we have gone forward. So it really is related to that $10 million increase that I mentioned as we prepare for launch of opiates.

Cory Kasimov - JPMorgan

Okay, so basically you are not giving in terms of guidance, there is no credit in the top line for the opioid addiction, but you are incorporating to the guidance, the expanse guidance?

Jim Frates

Exactly, and again to be conservative, we know that we are going to spend these expenses to prepare for the launch. We don’t exactly know when the timing of the launch is going to be.

Operator

Your next question comes from Steve Yoo - Leerink Swann.

Steve Yoo - Leerink Swann

I was just wondering if you could walk me through the [LAR], how you are going to be recording the benefits from LAR. You said there is 8% royalty, but you gave different guidance with regard to manufacturing, royalty, and costs. I just wanted to make sure what does that 8% correlate to.

Jim Frates

Sure, thanks Steve. So there are actually three pieces of BYDUREON revenues that we’ll receive this year. Let me start with the simplest one, which is the $7 million milestone that we will get upon the first commercial sate in the United States. That goes to R&D revenue actually, because from the accounting perspective we have earned that with the R&D work that we have done to date.

Secondly, you are going to see, probably the next thing to talk bout is that 8% royalty. Again below 40 million doses sold a year, we are going to be getting an 8% royalty. You’ll see that in our royalty line, so that will be mixed in with RISPERDAL CONSTA royalties, and as I said, just for accounting purposes to use a number, we used the Victoza launch for the first quarter to kind of put a stick in the ground and say what is 8% of that. So that’s the zero to $5 million in royalty line.

Then in addition, the one manufacturing component that we have is, we make the polymer. Currently we are the exclusive manufacture of the polymer that goes into BYDUREON, and we’re expecting about $3 million to $ 5 million of revenue associated with that, but it comes through the manufacturing line. That will continue and we’ll have, I would assume a 70% margin on that, which is kind of in-line with the other things we manufacture.

Steve Yoo - Leerink Swann

Okay, so I guess if it’s 8% on the royalty, which is fairly straight forward as a fact, can you give us some idea of how to think about like the manufacturing revenue in cogs. I guess if your assuming zero to five, your assuming zero to like 62.5 in sales in the calendar first quarter next year right. Is that the right way to do the math on that?

Jim Frates

Yes, divide by 8% and that gets you the ranges.

Steve Yoo - Leerink Swann

And I guess, on manufacturing revenue as a portion of BYDUREON sales, is it supposed to stay constant throughout the quarters, or is there some lumpiness associated with that?

Jim Frates

Yes, that will be based on when we ship polymer batches to them Steve, and I don’t think you should read anything into those, it’s really too early. As Amylin prepares launch materials and gets the plant going, they obviously buy polymer from us, not all of that will be used for commercial sale. Some of it will be used for preparation of launch stock and things like that, and we’ve already shopped them quiet a bit over time as well, so also clinical supplies to. So the polymer is going to be a steady, but relatively small revenue portion for us going forward.

Let me reiterate though as Rick said too; we didn’t feel comfortable putting zero in for BYDUREON royalties given where we are in the regulatory process, but at the same time these aren’t projections that are coming from Lilly or Amylin with any work. They are really just a place holder really for the work that we are all going to do to figure out how this project is going to launch as we get through the end of the year.

Operator

Your next question comes from Dave Windley - Jefferies & Co.

Dave Windley - Jefferies & Co.

On the revenue guidance, particularly to CONSTA, the components of CONSTA are each basically flat to slightly down with fiscal 2010, and I guess that seems a little inconsistent with J&J’s comments about operational growth rate, and Jim your comments about recent increases in orders. So I just wanted to understand, relative to conservatism and why it would appear that you’re not expecting growth in that revenue contribution?

Jim Frates

Sure Dave, RISPERDAL CONSTA last year, it’s the 11% growth that I mentioned in my comments in the overall sales. A couple of things are going on as we know in the world. One being the foreign exchange changes that have happened, and you know 79% of our sales are outside the United States, I mentioned that too.

So the dollar has been dropping quiet a lot as we’ve all watched in the last couple of months. Last years rough exchange rate was in the mid $1.30’s. As we sit here today with the numbers that we guided to, it’s $1.25, $ 1.26, so that’s one thing that’s going on.

The second thing that’s going on is we’ve all learned since the passage of the healthcare bill, and J&J spoke specifically about it. In the United States there is additional headwinds of higher rebates to government payers, and the various healthcare reform rebates that are going on, which J&J talked about being $0.10 on the dollar in the United States.

So I would say, with conservatism on the revenue side and those two impacts of US healthcare reform and the unclear path of the dollar over the next 365 days, that’s why we’re coming out flat.

Dave Windley - Jefferies & Co.

Okay, alright, that’s helpful. On the R&D, I was hoping you could walk me through the kind of this year’s actual, minus the savings from the relocation, plus whatever the new amount is to get to your new range. It looks like this year’s numbers are within the range of next years guidance, but you also have some savings I think there that…

Jim Frates

Right, and your good to point that out. So we had about $18.5 million of savings from our move, both in expenses last year from depreciation, and some of the move expenses that went through.

So the range of the guidance on R&D is going up just slightly. So you can imagine that we’re spending that $20 million to $ 25 million on additional R&D programs, which are mostly I have to say related to external spending on clinical studies and things like [Tark] studies that are happening with the five or six compounds that we are moving through the clinic now.

Operator

Your next question comes from Tom Russo – Barred.

Tom Russo – Barred

Could you be anymore specific, the sales reps that your going to look to add for the VIVITROL opportunity and opioid detection. Can you be more specific on when we should expect that to happen?

Jim Frates

Sure Tom, the plan is to understand a little bit how things are going with the FDA, because obviously if we win accelerated review we’ll move a little bit faster on that. So I’d say as fast as we would hire them, is probably in our second quarter, and then maybe the quarter after that depending on how the review goes with the FDA and when we hear it.

Now we’re talking about sizing it between about 10 to 15 additional reps, on top of the 50 that we have in the field now. So again, I’d say a conservative and measured investment in this, targeted at specific potential writers in the opioid space, and then when we see how it launches, we’ll be able to decide to invest more or not.

Tom Russo – Barred

Okay, and then kind of back to guidance, it looked to me like you are guiding about 30% cost of goods for CONSTA manufacturing, and I just wanted to balance that off; is that about right; and is there anything changing there based on the FX and healthcare reform. Do those have any impact on your gross margin for CONSTA?

Jim Frates

Yes, I think one of the things that we are seeing obviously, because remember we get paid based on a royalty basis. So if our royalty rate goes down, our expenses won’t go down until our margin will get a little orders. So you’re right, we’re guiding to a few point lower margin this year than we’ve had in the past, but that 70% margin range is what’s implied.

Tom Russo – Barred

Okay, and then last question I guess for Richard. With all the data that is coming in the next 12 months or so, and the potential at that point for business development transactions, I’d just be curious if you had any preliminary sort of pre-data conversations with potential partners, just on the opportunities that you are targeting, and potential interest in those therapeutic areas.

Richard Pops

As a matter of fact we have, and it’s really important that you do the ground work in advance of having data, so the kind of parties are prepared for that. So absolutely, we have a very active business development effort going on right now; although we are not interested in transacting right now, until we have those data in hand.

I’ll just remind you that, we find ourselves in such a strong position, because we have the capital to be able to move as fast as we can, not being rate limited by needing a partner to fund something or provide something to us. So we can move as fast as possible to the human clinical study in proof of concept, and they go back into the business development market place, to receive the prepared counter parties with data in hand.

It also gives you this data kind of mid-year in advance. What is the most attractive data that people like to see generated in the early studies? So that’s what we’re up to.

Operator

Your next question comes from Scott Henry - Roth Capital.

Scott Henry - Roth Capital

First on BYDUREON, I don’t know if you’ve clarified this in the past, but do you get paid on the stocking too or is it just sell through to customers? How should we think about the stocking?

Jim Frates

Scott, good question, and a net sale is a net sale. We get paid on sales and so I would expect that whatever sales go out the door that Amylin reports we’ll get our 8% royalty on it.

Scott Henry - Roth Capital

Okay, fair enough. The second question, it’s a little more the biogeneric or bio better business. It can be pretty capital intensive when it comes down to manufacturing those products. I was curious, is your target here to bring them up to an inflection point and to out license or sell those products, or would you ultimately build manufacturing capacity yourself, at least your desire?

Richard Pops

It’s really one of the deal attractive features of bid element of our business right now. Because we have Wilmington, which is a large scale Aseptor, G& P manufacturing site in Ohio, we have large scale engineering quality and all those things.

So to put in pilot scale biologics manufacturing, given the state of the art currently, with technology for fermentation, it’s really straight forward for us. So we absolutely intend to do the pilot scale manufacturing, have that ported over from the settlement process.

Large scale, I think there is an abundance of capacity in the unit as for large scale fermentation now. So we don’t see the need to make large scale investments in that. We really see these follow-on biologics as a golden opportunity for business development and proprietary products that we’re absolutely going to be sharing data with potential partners.

Scott Henry - Roth Capital

Okay, thank you, that’s helpful. I guess the final question for Jim. The company has laid out a pretty clear thesis on how it maybe very much undervalued. Any thoughts on a share buyback, given your significant cash resources and what I would consider an aggressive financial plan in the past, and I say that as a compliment.

Jim Frates

Yes Scott, thank you. We do have $215 million approved. So we have $101 million left to execute on the buyback if we choose to. I think you’ll see us, as we talked about in the past, right now we have one product that’s supporting the company’s growth in RISPERDAL CONSTA. We see that product continuing to grow, and as revenue streams from BYDUREON and VIVITROL opioid get closer, obviously we feel more comfortable using some of that excess cash to deploy in this way that we have before.

I think our announcement about repurchasing our notes is actually a very, very important part of that. That’s going to save us $3 million or $4 million as we go forward, and over time we’ve purchased below market, given the issues in the debt markets over the last couple of years. We’ve actually purchased $55 million of those notes below par in the last 18 months or so. So we’ll continue to be strategic on this front, and obviously we’ll update you after we make the purchases.

Operator

Your next question comes from Terence Flynn - Lazard Capital Markets.

Terence Flynn - Lazard Capital Markets

Just a couple more on VIVITROL. I was wondering, can you give us the amount that you lost on VIVITROL for the year. I think you mentioned it; I just might have missed it.

Jim Frates

No, it can be figured out, but it’s actually interestingly exactly what we said and planned for when we did our deal of Cephalon. So we received $11 million from them, and so we had an $11 million loss this year, when you take into account the $5 million of revenue that we recognized in this fiscal year from Cephalon.

We brought it down this quarter; as I mentioned it was $2.5 million in this past quarter. So we’re getting it down to smaller amounts and we are committed in our budget going forward to have alcohol at breakeven in fiscal year ’11.

Terence Flynn - Lazard Capital Markets

Okay, and then just one more question. When should we expect data from the phase III b opioid dependence trial that you guys are running in healthcare professionals. Is that still coming in some time 2010?

Rebecca Peterson

Yes, we should have that data in the second half of the year.

Terence Flynn - Lazard Capital Markets

Okay, and then how will that be incorporated into the filing or the waiver I guess, the potential waiver for opioid.

Rebecca Peterson

Terence, I wouldn’t expect it to be incorporated in the label. It’s really just to get more information on the specialization population.

Operator I think we have time for one more question.

Operator

Your final question comes from Ian Sanderson - Cowen & Co.

Ian Sanderson - Cowen & Co.

Just a couple of housekeeping; what is the share based compensation expense in Q4?

Jim Frates

Let’s see, that was $3.1 million in Q4.

Ian Sanderson - Cowen & Co.

Was there any severance expense in the quarter?

Jim Frates

No.

Ian Sanderson - Cowen & Co.

What was the source of the tax benefit in the quarter?

Jim Frates

So they are really two. The main one was because of the stimulus package that was past in the past. We paid A&P and was only been able to offset 90% of our A&P tax with our NOL, so we got to carry forward.

In the stimulus bill, they’ve essentially said if your in a loss position this year, you can go back and get a credit for 100% of the A&P that you paid, so that was $3.3 million worth. The other $1.8 million has to do with some benefits that we received because of investment gains that have gone through other comprehensive income, because we are in a loss position and it’s all through FAS-109.

Ian Sanderson - Cowen & Co.

Finally Rich, you mentioned the second conclusion on your VIVITROL, which was the commercial opportunity and opioid really is separate and distinct from the alcohol dependant market. So what’s the implication of that conclusion?

Richard Pops

I’m not ready to quantify it as yet, and that’s why I’ll say it in a qualitative way. It’s clearly a different set of doctors, it’s clearly a more medicalized condition, and that’s evidenced by the fact that $900 million of the box being sold is the indication in the world right now, but about 700 plus in the US.

So in contrast to alcohol, where we had a bit of an evangelical need to convince people to use medicine in combination with psychosocial therapy, on the opioid side it’s much less of a blind adherence to psychosocial therapy as a way to treat an opioid addict. So all this is going into the kind of quantitative work we are doing in trying to figure out what the launch is going to look like.

Rebecca Peterson

Great. Thanks everyone for dialing in today, and if you have any subsequent questions, Jim and I will be available after the call. 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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