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Alexza Pharmaceuticals (NASDAQ:ALXA)

Q4 2013 Earnings Call

March 06, 2014 5:00 pm ET

Executives

Mark K. Oki - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance and Secretary

Thomas B. King - Chief Executive Officer, President and Director

Analysts

Stephen G. Brozak - WBB Securities, LLC, Research Division

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Charles C. Duncan - Piper Jaffray Companies, Research Division

Pooya Hemami - Edison Investment Research Limited

Operator

Good afternoon, everyone, and welcome to the Alexza Pharmaceuticals 2014 Fourth Quarter and Year End Financial Results Conference Call. [Operator Instructions] This conference call is also being recorded, and if you have any objections, you may disconnect at this time.

I would like to turn today's call over to Mr. Mark Oki, Senior Vice President of Finance and Chief Financial Officer at Alexza. Mr. Oki, you may begin.

Mark K. Oki

Good afternoon, and thank you for joining us. On the phone with me is Tom King, Alexza's President and Chief Executive Officer.

Today, we will review the company's financial results for the fourth quarter and year ending December 31, 2013, and discuss Alexza's recent accomplishments and ongoing activities. At the end of the call, we will open the lines for your questions.

I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including our ability, along with our partners, Teva and Ferrer, to commercialize products; the timing of the commercialization of products; our projected revenues and expenses; and our ability to support operations based on available cash resources.

Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risk factors are more fully discussed in our quarterly report on Form 10-Q that was filed on November 6, 2013, with the SEC, most particularly under the caption Risk Factors. Alexza disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future development.

As a reminder, our policy is to only provide guidance on products, product candidates and corporate goals for the next 1 to 2 fiscal quarters, and to provide, update or reconfirm our guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document.

Clinical and corporate milestone guidance is as of today, March 6, 2014. Financial guidance relating to our cash, cash equivalents, marketable securities and other possible sources of capital, is based upon balances as of December 31, 2013.

With that, I would now like to summarize the financial information for the 2013 fourth quarter and full year.

We recorded revenues of $1.3 million for the quarter and $47.8 million for the year ended December 31, 2013, compared to $0.7 million and $4.1 million for the same period in 2012. Our 2013 fourth quarter revenue includes amortization of the upfront payment from the Ferrer agreement, and transfer pricing of commercial units shipped to both Teva and Ferrer. Full year revenues also include the $1.25 million milestone payment from Ferrer for the commercial launch of ADASUVE in Germany, and $42.8 million of licensing revenue resulting from the upfront payment and right to borrow asset received from our U.S. Commercial partner, Teva. Revenues in 2012 represent the amortization of upfront payments earned under our agreements with Ferrer and Cypress Bioscience.

GAAP operating expenses were $10.7 million and $46.1 million in the quarter and year ended December 31, 2013, as compared to $11.6 million and $32.9 million in the same period in 2012.

During the second quarter of 2013, we began to classify certain manufacturing, supply chain and quality expenses as cost of goods sold. Prior to the second quarter of 2013, these expenses were classified as Research and Development expenses. The $4.3 million and $11.2 million recognized as cost of goods sold in the fourth quarter and year ended December 31, 2013, respectively, consist primarily of manufacturing startup costs and manufacturing variances as a result of the initial low volumes produced compared to the projected standard capacity of our GMT facility.

Research and development expenses were $2.6 million and $19.1 million in the quarter and year ended December 31, 2013, respectively, as compared to $7 million and $21.8 million in the same periods in 2012. As I just outlined, beginning in 2013, research and development expenses were impacted by the classification of certain expenses and the cost of goods sold.

Also in 2013, we initiated several projects in research and development, specifically related to the initiation and completion of 2 EU post-approval clinical trials, additional work on other EU post-approval commitments and establishing the pharmacovigilance systems required with our ADASUVE approval.

General and administrative expenses were $3.8 million and $15.8 million in the quarter in year ended December 31, 2013, respectively, as compared to $4.6 million and $11.1 million during the same period in 2012. The full year G&A increase in 2013 was primarily due to an increase in pre-commercialization activities, such as market research, including pricing and market segmentation studies, and work on product positioning during the first half of the year, deal-related expenses related to finalizing our U.S. commercial strategy in the first half of the year and an increase in headcount and external expenses to support the increased operational and manufacturing activities at Alexza following the U.S. and EU approvals of ADASUVE and activities specific to our commercial partnership with Teva and Ferrer.

Note that in the first quarter of 2012, general and administrative expenses were reduced by a onetime $4-point million noncash accounting reversal as a result of the termination of one of our building leases and related subleases in March of that year.

In the fourth quarter of 2012, we recognized a full year of bonus expense and certain share-based compensation expense associated with the approval of our ADASUVE NDA, as the accomplishment of this goal became probable.

In connection with our acquisition of Symphony Allegro in August 2009, we are obligated to pay the former Symphony Allegro stockholders certain percentages of cash payments that may be generated from collaboration transactions for ADASUVE, AZ-002, Staccato alprazolam, or AZ-104, low-dose Staccato loxapine. We record this obligation as a contingent liability and update the liability quarterly. For the fourth quarter of 2013, the gain on the change in the fair value of the contingent liability was primarily due to the change in the projected timing of cash flow by 1 year associated with the possible expansion of ADASUVE into additional markets through a supplemental new drug application.

In the third and fourth quarter of 2013, we received advances of $10 million and $5 million under the Teva note. We ended the year with cash, cash equivalents and marketable securities of $25.9 million. Similar to our past guidance, we believe we have sufficient capital resources to meet our anticipated cash needs into the third quarter of 2014.

This guidance is based on our cash, cash equivalents and marketable securities balances at December 31, 2013, as well as estimated product revenue, royalties and milestones associated with the sale of ADASUVE in the U.S. and EU, remaining available proceeds from the Teva note and expected cash usage. As always, changing circumstances may cause us to use capital at a faster or slower rate than currently anticipated or to alter our operations.

I will now turn the call over to Tom for a review of Alexza's accomplishments and the business update.

Thomas B. King

Thank you, Mark, for those comments and the financial results. Good afternoon, everyone, and thanks for all of you for joining our conference call this afternoon.

2013 was a transforming year for Alexza that lays the foundation for our success in future years. During 2013 and into the first part of this year, we had significant accomplishments and milestones. In February 2013, we received marketing approvals to sell ADASUVE in the European Union, which followed our December 2012 U.S. approval for ADASUVE.

In May last year, we finalized our ADASUVE U.S. commercial strategy. We announced we entered into a broad commercial agreement with Teva Pharmaceutical Industries Limited for the U.S. market for ADASUVE. We have continued the build out of our infrastructure for the ADASUVE commercial manufacturing capabilities, allowing us to supply our partners with commercial quantities of ADASUVE. Beginning in the second quarter and into the third quarter, we manufactured and shipped commercial units of ADASUVE to Ferrer. In the fourth quarter, we shipped commercial units to both Teva and Ferrer.

Through Ferrer, ADASUVE has been launched in Germany, Austria and Spain. We look forward to the continuing commercialization of the product by Ferrer in their territory in 2014 and 2015.

We continue to strengthen our senior management team, both with internal promotions and external new hires. In August, we promoted Dr. Tatjana Naranda to Vice President of Business Development and Global Alliance Management; and Kelly Seither to Vice President of Global Strategic Marketing and New Product Planning. Last December, we hired, from the outside, Dr. Mike Holfinger to our team as Vice President of Manufacturing; and last week, we announced the addition of Rob Lippe to the newly created position of Executive Vice President of Operations, and our Chief Operations Officer. And on Monday of this week, Teva and Alexza announced the U.S. launch of ADASUVE.

In summary, it has been a remarkable 15 months since our U.S. approval and we are well-positioned for 2014 to continue the global commercialization of ADASUVE in concert with our commercial partners, Teva and Ferrer.

As a reminder, our global commercialization strategy for ADASUVE is to secure strategic collaborations to commercialize ADASUVE while maintaining control and primary responsibility for marketing -- I'm sorry, for manufacturing.

We have 2 excellent partners in Teva and Ferrer. We continue to seek additional collaborations to commercialize ADASUVE outside the U.S. and Ferrer territories.

As an update on the commercial progress for ADASUVE, I'd like to first start with the ADASUVE U.S. commercial strategy and activities. ADASUVE is being marketed in United States by Teva's U.S. Specialty Pharmaceuticals business, most notably by the Teva Select Brands team. Teva Select Brands markets innovative pharmaceutical products in United States and has experience in hospital sales, mental health care markets and implementing REMS programs. On March 3, 2014, Teva announced the official launch of ADASUVE in United States.

The commercial launch continues the strong efforts Teva has put in over the past 9 months, including we initially transferred the NDA to Teva last June. They've been developing a field presence, both with medical science liaisons and a direct sales force, developing educational and promotional programs, participating in professional medical meetings and conferences and developing a portfolio of commercial tactics, including pricing, reimbursement, formulary activities, the ADASUVE REMS and other related product promotional items.

Last week, we had the privilege of attending and participating in the ADASUVE U.S. launch meeting, which was very exciting and quite motivating. It's very clear that Teva is well-prepared to commercialize ADASUVE in the U.S.

In the third quarter, we achieved a major milestone in our history as the first units of ADASUVE were sold. Ferrer launched ADASUVE in Germany in July, followed up by Austria in October, and Spain in January of this year. We continue to be very pleased with Ferrer's continued progress in rolling out ADASUVE in Europe, with additional European countries expected to launch through 2014 and into 2015.

Ferrer has responsibility for countries, both within and outside of the EU. Within the EU, Ferrer has initiated a comprehensive launch plan based on estimated market opportunity, timing of pricing and projected reimbursement and a coordination with Ferrer's distribution partners. In the non-EU territories, Ferrer is interacting with various regulatory agencies and working on the required independent regulatory submissions to support the registration of ADASUVE.

Ferrer's ADASUVE launch strategy is based on a combination of educational activities, market conditioning and direct product promotion. Ferrer is actively building awareness about agitation, and in general, the ADASUVE specifically, at national and regional medical conferences. They're developing medical symposia, hosting regional educational events and exhibiting with the branded ADASUVE booth, and they're working with key clinical and opinion leaders in the psychiatric field. Also with each product launch in the Ferrer territory, a combination of medical science liaisons and sales representatives are expected to target key hospitals and medical settings that are believed to be the locations that treat the high volume of patients who would be candidates for ADASUVE.

In EU, the promotion of prescription-only medicinal products to patients or to members of the general public, including investors, is strictly prohibited. As such, we are unable to provide specific inputs on examples of treatment of patients or comments from physicians. That being said, in general, early inputs and feedback have been positive.

In the EU, we have responsibility for the post-approval commitments following the European approval. To date, we have already initiated and completed 2 of the EMA-requested post-approval studies. These being the benzodiazepine interaction study and the stero QTc study with 2 doses of ADASUVE. We are pleased with these strong results and there were no unforeseen findings from either study. Results from these studies have been submitted to the EMA.

On the Alexza commercial manufacturing front, we began manufacturing commercial quantities of ADASUVE for the EU in the second quarter of 2013, producing product for Ferrer in Q2 and Q3, and for both Teva and Ferrer in Q4.

As investors, you will see changes we have made in our P&L and balance sheet as we transition to a commercial entity. Indicative of this translate -- transition, our quarterly reporting over the next few quarters may be difficult to predict, with multiple variables in play. Moreover, tracking the sales through ADASUVE may not be straightforward, as this is not a prescription product and most likely will not be accurately captured in some of the traditional third-party audit data of pharmaceutical sales.

To facilitate our investors' ability to gauge the uptake in growth of ADASUVE, we are providing quarterly updates on total units shipped from our manufacturing facility. We expect product flow will be initially low, growing over time, with expanded demand and uptake. End product shipments, which we do in pallet quantities, will translate into royalty and milestone revenue over subsequent quarters as the product uptake is reflected in our financial statements.

Additionally, because of our current license and supply agreements provide our collaborators with an acceptance period during which they may reject or accept product which -- I'm sorry, which may reject product which does not conform to agreed-upon specs, revenue for shipments may be recognized in a period subsequent to the period in which they ship.

In the second and third quarter of 2013, we shipped 13,370 units and 14,405 units of ADASUVE, all of which were shipped to Ferrer for the EU market. In the fourth quarter of last year, we shipped a total of 21,170 units of ADASUVE. These product shipments consisted of 11,863 units to Ferrer, and 9,307 units to Teva. We have continued to ship products to both Teva and Ferrer in the first quarter of this year and have opened POs for product shipments in the second quarter.

With the approval for ADASUVE in the U.S. and EU, we're expanding the investment in our product pipeline and will be advancing new products based on our Staccato platform to address areas of unmet medical need. As we have previously disclosed, our first such product candidate is being developed to treat a form of epilepsy known as acute repetitive or cluster seizures. We plan to study AZ-002, which is also known as Staccato alprazolam, initially in this patient population of acute repetitive seizures. Alprazolam administered through our Staccato technology has demonstrated excellent dose proportionality, exhibited a medium T-max of 2 minutes and was safe and well-tolerated in the studies completed to date. We expect to initiate the Phase IIa proof of concept study in the second quarter of 2014.

We entered the year with $25.9 million of cash, and we have provided guidance that we believe we have sufficient capital resources to meet our cash needs into the third quarter of 2014. We believe that we have multiple sources of possible additional cash, including licensing of ADASUVE into additional territories, licensing of our Staccato technology for new products, and we're working -- diligently working on it.

In summary, it has been a very exciting time as we focus on building the momentum we established in 2013, and establishing a global brand for ADASUVE. ADASUVE is now being sold in both the U.S. and Europe, and plans are well underway for additional European country launches in 2014 and beyond. Our manufacturing facility is up and running to supply product on a global basis, which is being used by clinicians to treat patients. We are in a stronger financial position than last year, and we are advancing AZ-002 from our Staccato-based pipeline back into development. We look forward to updating you as we continue to make solid progress against our objectives to commercialize ADASUVE, and to advance our pipeline of Staccato-based products. And as always, we fully appreciate your support of Alexza.

We would now like to open today's conference call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Steve Brozak with WBB securities.

Stephen G. Brozak - WBB Securities, LLC, Research Division

I'll go into one question, one follow-up, and then one more follow-up after that. How's that way of sneaking 3 questions in? The first one has to do with -- you got obviously a strong understanding of European market, and everyone knows that the Europeans are highly cost sensitive. Can you give us a cost analysis of what the Europeans are looking at? Because obviously, they look for the best relative value, and what is Grupo Ferrer seeing in that cost analysis, given the fact that they're trying to limit their expenses? How would you explain that? And then, I'll go into my second follow-up -- or my first follow-up.

Thomas B. King

Yes, certainly, Stephen. Thank you and thanks for your time today. The price in Germany is EUR 70, the price in Spain is EUR 70, the price in Austria is a little bit more than that. So the strategy that Ferrer put together with the help of some outside consultants prior to the launch was to sustain a high price to work on a high price as initial target in Europe, but also find a way to establish a cost-effective health benefit story. So each country is a bit different because each country is reimbursed differently and has different sort of pricing authorities. But in general, the story has been about the speed of onset, the ability to get to a patient and get them to be able to be treated faster with our technology and with ADASUVE and not have, as mentioned, the sort of either the side effect of the injectables or the time delay of onset that you might get with the oral medications, and that has been successful thus far in terms of the overall health economics. I might add just real briefly that Spain was the first, I would say, fully reimbursed country. In general, Austria and Germany are more free pricing. But Ferrer worked very diligently, both with the state authorities and the local authorities to obtain reimbursement at the EUR 70 level within Spain.

Stephen G. Brozak - WBB Securities, LLC, Research Division

Okay. Switching to the future now, looking at -- you just stated that you would expect your Phase IIa to start in the first half of 2014. You obviously have been through this with ADASUVE. So what are your -- what's -- I never want to hold anyone to it, but what's the guidance, given everything you've expected? Because you did something de novo. Now you're talking about going out there with the same delivery system, but understanding another well-known product -- another well-known agent. What are your thoughts there in terms of how you can save time because now you got obviously the experience, expertise, and I'll wrap up with the follow-up on that one.

Thomas B. King

Okay. Sure, Steve. Well, the question about AZ-002 for acute repetitive seizures, if we take the learning from ADASUVE, is that our Phase II and Phase III clinical trials went pretty straightforward. We have some additional studies we have to do most likely, and our plan would be after we have data from the proof of concept study is we'd meet with the FDA and ask sort of what is the entire package that we would like -- that they would like to see in terms of the pivotal studies, but as importantly, the supporting studies. The one item that we've learned through ADASUVE is obviously the manufacturing scale up and the FDA coming in looking at our facility and our technology, our product and our process. And we believe the advantages of AZ-002 is that we're using the identical same inner workings for the technology. So the print circuit board is the same, the E package is the same, the spray coder and the robots we use to assemble the device are exactly the same, and they're being made in a facility that will be exactly the same. And so, I think, the economies of time may not necessarily be the clinical trials because we obviously did those very quickly with ADASUVE. But it will be the fact that we're using a platform that's already been reviewed and approved, and there's a sense of knowledge about what this platform is within the FDA.

Stephen G. Brozak - WBB Securities, LLC, Research Division

Well, you actually hit the follow-up question really well, so I will just reiterate it. So your expertise and your understanding of what the FDA and the regulatory system requires on manufacturing will be very accretive in terms of the next step after you come back from proof of concept and will allow you to understand what they're looking for, also understand the manufacturing specifics and everything else on that side, is that an accurate regurgitation of what you just said in analyst speak?

Thomas B. King

Yes, I think, it's accurate. And I think, the leverage that we're able to gain -- I mean, sometimes, we are disappointed by the pace of which we gained review by the FDA, but at the end of the day, we asked the FDA a lot. We ask them to review our brand-new manufacturing facility, we ask them to review a brand-new manufacturing process, we ask them to view a brand-new device and we ask them to review an NDA. And I think, when you think about AZ-002, the only thing that's going to be different in the way we manufacture it is the active ingredient and the plastic housing that we use because we're using a different color, a different polymer. So other than that, I think, when the inspectors come and the reviewers watch and review the registration dosage, if we get to that point, there'll be a significant amount of knowledge that's already gained by having gone through that path. So you're exactly right. Thanks.

Operator

Your next question is from the line of Scott Henry with Roth Capital.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Just starting with the units shipped. I guess, for starters, 9,307 by Teva, I mean, should that number mean anything to us? Is that initial stocking? Is that kind of what you would have expected that number to be for initial stocking? Just trying to digest this information and think about it.

Thomas B. King

Well, we manufactured product for them in the fourth quarter, we also manufactured products for them in the first quarter. We have orders for them in the second quarter. So part of it is just some of the timing of when they open POs. I wouldn't read anything into the size or quantity of that other than the fact that we started making product for them. Far enough in front of the launch that they want to be sure they have product on the shelf. As we've mentioned before, the ADASUVE REMS was live in relatively early January, hospitals could order the product even though sales reps were not yet in the field. And they want to be sure they have product on the shelf. We ship product to Teva, they do a couple other steps to make it ready to make -- be into the field. They do the final packaging, they take products off of the pallets that we ship and they put it in a shelf carton of 5 units, they insert the package, insert the patient information leaflet. And then, they're using 2 specialty pharmaceutical distribution networks, which also have the capability to be sure they could query the hospitals and they're compliant to REMS, et cetera. So the distribution, I guess, pipeline, if you will, is not very broad and doesn't have a lot of content to it. Hospitals typically will not stock a lot of product because they can get it quickly from the wholesaler, and in this case, the wholesaler could turn around those orders relatively quickly. So we don't know exactly what the pipeline build might be but we anticipate for this product that the actual pipeline fill will be relatively small.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. And then, subjectively, based on working with Teva, would you like any -- to make any comment as to -- at least your impression of their commitment to the product, are they bringing as many resources as you expected, are they bringing more? Just any kind of color you could give with regards to Teva's enthusiasm, perhaps with regards to their launch meeting, just any color that you can give.

Thomas B. King

Certainly. It's a great question, and I've been in the industry sometimes longer than I'd like to admit, both at a smaller company consuming big pharmaceutical company partnerships, and also at a big company working with smaller companies. And I can say, in the 30 years that I've been in this industry, I've never seen a group that is more all-in on a product launch. And that was the piece that was so exciting about going to the launch meeting last week. We got a chance to interact with the field staff, we got to interact with the marketing staff, all of the key opinion leaders that they brought in for speakers and that sort of thing, and they had the chain of command there to give opening discussions and presentations. So not only the head of Teva Select Brands but the President of North America and the CEO of Teva Specialty Pharmaceuticals, which is from Europe, which, coincidentally, he's a psychiatrist, and has treated patients and is fully in into what this product can do to change medicine. So the excitement, basically, 2.5 days’ worth of ADASUVE. And so my feeling is that when the field staff left that meeting and we're certified to be able to go out and sell the product, in which they're out in the field on Monday, as Teva announced, they're ready to go. And all the infrastructure behind them, all the medical information people, all the product access in terms of hospital formulary and REMS, it's very exciting. And Teva has -- they reiterate several times, it's been a long time since Teva has launched a brand-new product and they're very fully committed to be able to make this a very good one for them.

Scott R. Henry - Roth Capital Partners, LLC, Research Division

Okay. Great. Final question. When we think about 2014, we're going to have to start thinking about the trajectory through the quarters. And I'm wondering if we should expect to see the traction larger or should we expect the first half of the year to just kind of be noise related to stocking and markets getting on speed and trying it out and then traction in the second half or how should we think about that trajectory throughout the year?

Thomas B. King

Well, we -- the way that we've looked at the uptake, the way they've modeled the uptake is we look at it as a proxy, if you will, or a surrogate, it's looking at the uptake over the last 3 intramuscular introductions in this space. So when GEODON was launched, it was the first mover as a potential replacement for Haldol. The second drug that's introduced in this space was intramuscular Zyprexa, and the third was IM ABILIFY. Each has different uptake curves, they each got to the maximum share a bit differently for different reasons, at least we're reading into it. So I think, it is 3 or 4 quarters before you can fully appreciate -- before we can fully appreciate what the uptake curve will look like. And we've used that just based on the products that have been launched into this space over the last 10 years as our surrogate, if you will, for looking at that uptake. And I think, by the end of the year, early next year, with 3 or 4 quarters under our belt, I think we'll have a really good idea in kind of what the shape of that curve is going to be. But I think, it will we'll take a couple of data points before we know.

Operator

Your next question is from the line of Charles Duncan with Piper Jaffray.

Charles C. Duncan - Piper Jaffray Companies, Research Division

Tom, first of all, congratulations on a good year of progress and the recent U.S. launch.

Thomas B. King

Thank you, Charles.

Charles C. Duncan - Piper Jaffray Companies, Research Division

So a couple of questions. First of all, with regard to the U.S. launch, I'm just -- I wanted to see if you would be able to run through or provide a little bit of color on the pricing logic because frankly, it's about 2x, at least the average, or the list price is about 2x what we had anticipated in our model, and so I'm just kind of wondering if you have any insights there?

Thomas B. King

Yes, sure. I mean, if you go back and look at when we did our pricing study, we did several before we did the partnership with Teva. And we established the second pricing study, which is a fairly thorough pricing study, what we call the pricing corridor of $75 to $125. And we try to be explicit that we use $75 as a conservative number, but we didn't know where it would be in and you'd have to do one final study to arrive at the final price. So Teva took all of the data that we had accomplished and the work that we had done, and in the fall, went off and did a very broad and very comprehensive pricing study based on their expertise and their knowledge. And then, through that, they arrived at the price of $145 per unit. So the price from $125 to $145 is not that much. I realize perhaps from $75 and $145, it seems like more of a jump, but I do think it was based on we did solid work that established the pricing corridor that was -- it was quantitative but it wasn't definitive. And when Teva went out, they did a very broad study that arrived at a higher price. And I think, it's a great price. I think, this market, while I'm not totally price inflexible, the value proposition that we and Teva believe we can arrive that with this product is profound, and we're also finding, as we do more work, that there are more attendant cost to treating patients with the other modalities. So I think, it's still a very strong health economic number. Teva was successful in getting a C-code for reimbursement, which is average selling price plus 6%, so that's $153.70. So some of the reimbursement work has already been done on the -- with the patients before they get admitted to the hospital. So we're excited about it, and obviously, it provides significant upside to the dollar side of this market by having a higher selling price.

Charles C. Duncan - Piper Jaffray Companies, Research Division

And just to review, I mean, we've been talking about this product for a while, but kind of related to my next question, on the messaging, it seems like Teva's been very thoughtful on not only pricing but on that key components of value-add. So I guess, I'm wondering what you think is the key compelling feature that they are basing their messaging on? Is it that reduction in cost overall, or is it confined to onset, what do you think it is?

Thomas B. King

Yes, when you look at -- almost anything that we've done, and any study that Teva has done, the primary attribute that drives decision in this market is speed. And so when you look at attributes on a conjoined analysis or any sort of quantitative basis, it's always onset of action. And I think that, that's the driver here. Now I mean, sometimes, you say, "Well, okay, well, what's the top end sort of value you can abstract from that?" And you still have to then go back at the cost of the treatment. But we do know that if you give somebody an oral tablet and it takes a couple of hours to work, you have to have someone sit with them. And there are some number of patients that then had to be dosed with something else because it didn't work fast enough, and those costs associated with that. If you give somebody an IM, you have the cost of not just 1 but maybe 2, 3, up to 4 injections. You got restraints, you've got 4 or 5 hours’ worth of a patient being in restraints. You've got the report you have to write to JCO because you used restraints. And so there's nothing that is, if you will, cleans, kind of quote the "cheap" Haldol. And so, I think, that's the knowledge that we started to gain, and I think that Teva has continued to better understand is the fact that it's a complex group of patients that have lots of costs attending to them. But the #1 driver at the end of the day is speed. And there's no doubt that our drug is faster than anything that's out there by quite a little bit or by a whole lot, depending on which product you choose.

Charles C. Duncan - Piper Jaffray Companies, Research Division

Yes, that's consistent with the KOL work that we've done. Maybe hopping over to other regions that you mentioned. I'm not going to hold you to dates in terms of deals but maybe help me with my imagination a little bit beyond Europe and beyond the states, where else do you think that there's a decent market that you could tap with a collaboration?

Thomas B. King

Yes, well, Asia is exciting for us. I mean, the market is a little bit behind in terms of development. Some of it's medical products that are available, and some of it's mindset of recognition of mental diseases in that part of the world. And we are basically pursuing a two-pronged strategy there. One would be more of a large multinational that could do a transaction for all the territories, basically from Japan down to Australia and New Zealand. And we've also been looking at regional approaches. China is a market, it's different than Japan, and Japan's a market different than Malaysia and Indonesia, Australia and New Zealand are different markets. So we've been pursuing discussions and analyses, looking at Asia, but both with a macro perspective with sort of one partner that might be able to take it all but compare it and contrast with regional players that could do better in their own market and trying to find the pros and cons at which way we might go. I mean, it's way different than 2 years ago, we were talking with them with the idea that we might have a product approved and we might be able to have a price and we might be able to make it. Right now, we go over and you say, well, which dossier do you want to reference, the U.S. or the EU? And how much can you sell, because we can make as much as you need? And so it's a different sort of discussion than we would have had 18 months ago.

Charles C. Duncan - Piper Jaffray Companies, Research Division

And not pinning you down to a day, is that something that you'd like to see come to fruition in 2014?

Thomas B. King

Yes, absolutely. I think, it's important for us and we're working very diligent on that to be able to commercialize this across the rest of the major territories. We will also get Middle East and North Africa, the section around the Mediterranean. There's a little bit of interest in some other isolated areas like South Africa and some other in Canada. Those markets are smaller. They have some price sensitivity to them. So the largest in terms of just population, in terms of market potential is Asia, of course.

Charles C. Duncan - Piper Jaffray Companies, Research Division

Okay. And then, if I could just ask you a question about the pipeline because I've always seen the platform is pretty broadly applicable. I'm wondering, with the Staccato alprazolam study, would you expect data perhaps this year? And if not, what would the timeline be that you'd be looking at?

Thomas B. King

Yes, I think, if Dr. Casella, Jim, our CSO, was on the call, he'd say it's probably a 12-month study. We typically, in almost all of our studies, have brought them ahead of time. But it's a population that has some challenges to study. I mean, it's a difficult population. Most likely, we will do this in the epilepsy medical unit, the EMUs that are associated with large institutions. I get this incredible data access and even up to and including video EEG. And I think, that will be really good. And the size of the patient population is not too large, probably 60 to 80 subjects. But we just don't know the enrollment rate. And when you look at other studies that are out there, some of them have enrolled relatively quickly, and some of them have been a bit slower. But I think, from a planning perspective, I think, Jim is thinking about 12 months.

Charles C. Duncan - Piper Jaffray Companies, Research Division

So it is an institutionalized patient population, so if you go and find people are relatively well-characterized and therefore less heterogeneous population then [indiscernible] you could study?

Thomas B. King

Yes, that's important for us versus a home study. Plus just the availability of data monitoring that gives you just so much more information about your primary end points and some of the key secondaries that you'd like to study. I mean, it's still at a dose ranging proof of concepts, so you're looking for lots different data that you might want to incorporate into a more pivotal study.

Operator

[Operator Instructions] Your next question comes from the line of Pooya Hemami with Edison group.

Pooya Hemami - Edison Investment Research Limited

I just got a couple of, I guess, housekeeping type questions. One is for the issue with the heat package manufacturing and I guess resolution of completing the internalization, can you give us any color in terms of timelines, in terms of when you expect that to be able to resolve that process completely?

Thomas B. King

Sure. It's great to have you on the call. Thanks, Pooya, we appreciate that. Our agreement that we put in place with Autoliv always contemplated that if they wanted to get out of this business or we wanted to move it someplace else, we would give each other adequate time to be able to plan for that. So the agreement that we had envisioned a 3-year tail after either party was to serve notice. So when we received notice from Autoliv that they want to move out of this particular slice of business last fall in October, that gives us 3 years to make the transition. We'll be working with Autoliv, because they'll continue manufacture for us up until October of 2016, and also, they're going to help us build 1 and even perhaps 2 additional lines because we'll need that volume. One of them we may install in the Autoliv facility, one we may install into the new facility, wherever that might be. Our manufacturing and supply chain team has retained an outside consultant to work on identifying companies that might be ideal for taking this on, and we found a couple that also that might have great fabrication in terms of helping us build some of these units and these machines. So it's something that's important for us to get done. The 3-year period of time that we had is adequate for us to make the change, to build the new machines, to get them up and operating and validated and submitted to the FDA. So it's not something that we can lollygag around, but we have a good amount of time to be able to arrive and we'd expect on or before October 2016 to be taking heat package units from someplace else.

Pooya Hemami - Edison Investment Research Limited

Okay. Perfect. And also, in terms of the milestones from Ferrer, can you give us any update or any sort of anticipation in terms of what do you expect in terms of future launches or future potential milestones for territory launches under the Ferrer agreement in the near-term?

Thomas B. King

Sure. So the milestones were primarily driven by the larger country opportunities. We've gotten milestones for the European approval, we've gotten milestones for the new German launch and the Spanish launch. So we have milestones attributed to the remaining big 3 when they come along, and we also have 4 other countries which are basically Turkey, Russia, Brazil and Mexico. So the remaining 4 big countries in the Ferrer territory. The timing of those is both variable a little bit based on the timing of getting pricing and reimbursement in the EU countries, and then countries outside the EU, it's the timing of getting product registration submitted. We have good interactions in the registration process in Mexico. We have good registration interaction processes in Brazil. Russia takes a clinical trial, the comparison trial, and we're in -- not we, but Ferrer is working on getting that trial design up and running because you have to do that in Russia, just part of the deal. And the Turkish market is interesting because there are 2 dynamics there. One is it's part of the EU but they also have medicine influence from more of around the rest of the Middle East. And so we're trying to -- well, Ferrer is trying to identify exactly who should be the right partner to be able to take that product there because there's some nuances there based on the product, based on the therapy and just based on the politics of that region.

Pooya Hemami - Edison Investment Research Limited

Okay. Perfect. And also, is there any comments you can give us regarding the potential milestones from Teva? I know it's mostly commercial but do you have any sort of guidance in terms of timelines or is it too early to look and talk about that?

Thomas B. King

Yes, I think, it's too early to talk about that. I think, after we get the product up and launched a year from now, so we'll be able to have better guidance about some of the timing of this.

Pooya Hemami - Edison Investment Research Limited

Okay. Perfect. And finally, just with the new pricing that's now, I guess, $145, and if we look at the company's previous guidance in terms of potential peak sales of $200 million to $250 million, I believe, is it safe to say that now, internally, Alexza would believe that the peak potential could be closer to $450 million to $500 million just because of the increased pricing, or is there any sort of read-through we can get from that?

Thomas B. King

Yes, I mean, if we had put $145 million in our math, we would've said whatever the difference, it's almost a 2x from the $225 million. So it's certainly, in our view, the U.S. market opportunity in peak sales, not [indiscernible] but peak sales of the product, in a patient indication, that's approved, in the hospital only is now north of $400 million.

Operator

And as there are no further questions in the queue, I'd like to turn the call back over to management for any closing remarks they'd like to make.

Thomas B. King

Great. Thank you, operator. Again, thank you very much for joining us today. It's been an incredible 15 months culminating this Monday with the launch in the United States. We look forward to updating you as we forge ahead with the global launch of ADASUVE and the advancement of our pipeline candidates. Thanks again for participating today, and have a great afternoon.

Operator

Ladies and gentlemen, thank you for your participation. You may now disconnect. Have a great day.

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