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Aratana Therapeutics, Inc. (NASDAQ:PETX)

Q4 2013 Earnings Conference Call

March 13, 2014 08:00 ET

Executives

Steven St. Peter - President and Chief Executive Officer

Craig Tooman - Chief Financial Officer

Analysts

Jose Haresco - JMP Securities

Jon Block - Stifel

Tim Lugo - William Blair

Operator

Good morning, and welcome to the Aratana Therapeutics’ Fourth Quarter and Full Year 2013 Financial Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Dr. Steven St. Peter, Founder, President and CEO. Please go ahead.

Steven St. Peter - President and Chief Executive Officer

So thanks Denise. Good morning. This is Steven St. Peter, President and CEO of Aratana Therapeutics. I am here with Craig Tooman, our Chief Financial Officer.

So, welcome to the fourth quarter and full year 2013’s earnings call. I will make a few opening comments, then review the continued progress with our product development programs. Craig will then review the financial results. And after the prepared comments, we are pleased to take questions.

Before we begin, I would like to let you know that we will be making some forward-looking statements today. These statements involve uncertainties and risks and therefore should not be relied upon as predictors of future events. Actual events and circumstances which maybe up beyond our control may differ from today’s forward-looking statements, including but not limited to as a result of the risks, uncertainties and other important risk factors set forth in our filings with the SEC.

So with that out of way, in preparing for this call and the corresponding year end SEC filings, it donned on us just how incredible and transformative this period has been for Aratana and indeed the entire animal health industry. It is hard to imagine that before 2013 there was basically no U.S. public market segment for the pet therapeutics or animal health category. Yet in 2013, we saw three successful IPOs, including Aratana’s IPO in June. And we expect several other animal health companies will attempt to access the public markets in 2014. Hence, public market investors in general are paying attention, but let me begin by specifically thanking each of you on this call for your continued support and interest in this exciting company and our particular take on the industry.

At Aratana, we are singularly focused on bringing the best of science in human medicine to the pets with whom we share our homes and lives. Aratana and its subsidiaries have been the pioneers in pet therapeutics for more than five years, some of those years having been very lonely. So we welcome the recent attention. While competition is always a bit scary, the idea of no competition after half a decade would be even scarier. Our view is that the market is underserved and that the market can sustain multiple companies. We are simply grateful to have received your support in achieving our exponential growth during 2013. So we are investing aggressively, but appropriately in the Aratana vision and we are scaling up to become the industry leader.

Some highlights from 2013 and the first part of 2014. First, we completed our Series C equity financing in February of 2013 and we completed our first debt financing shortly thereafter. We completed our IPO in June of 2013 including exercise of the over-allotment option. In the fall of 2013, we expanded our product portfolio by completing three deals in our option programs. In October, we acquired Vet Therapeutics, a San Diego-based company with proprietary antibody based biologics platform and a leader in pet biologics. In conjunction with that transaction, we completed a private placement and expanded our debt facility.

In late 2013, we announced positive top line data for AT-001, our EP4 receptor antagonist for osteoarthritis pain in dogs and initiated our pivotal field effectiveness trial for AT-002, our ghrelin agonist for appetite simulation. Then in early January, we announced the acquisition of Okapi Sciences, a leading European pet therapeutics company based in Belgium, which expanded our therapeutic focus into anti-virals. In late January, we announced the USDA conditional license for AT-005. Again in late January, we completed a secondary offering, which raised net proceeds to company of approximately 90.5 million and meaningfully expanded our investor base.

Since our IPO in June, we have nearly tripled our employee base and we currently have approximately two dozen employees engaged in product development. And today, we confirmed that product development continues to be on track. Again, 2013 and this first part of 2014 have been fast paced, but Aratana is now exceptionally well-positioned with the human capital and the financial capital to realize our vision for the company. So let me now transition and provide some specific product development updates.

First, AT-001 our EP4 antagonist for the treatment of the pain, with respect to dogs during the quarter we announced positive top line data from its pivotal dose ranging study of AT-001 for dogs and selected once daily dose for further study. The pivotal field effectiveness study will begin in the second quarter of 2014 and then if the results are favorable as we expect commercialization will commence upon approval, which is anticipated to be in 2016. With respect to our work with AT-001 in cats, we are pursuing a chronic pain indication and we are working with experts to develop a protocol for a pilot study and cats with osteoarthritis.

Next I will discuss AT-002 our ghrelin agonist for inappetence. With respect to our dog program, the company previously announced that it has initiated it’s pivotal field effectiveness trial in 50 client owned dog trial and is actively enrolling patients. We continued to expect top line results in the first half of 2015 and the company continues to anticipate U.S. approval to be in 2016. With respect to our cat program, we are currently developing the protocol to treat client owned cats in the field to measure how AT-002 performs in chronically diseased cats to manage appetite stimulation and body weight.

Next turning to AT-003, our liposome bupivacaine injection for post operative pain, with respect to our dog program as previously disclosed the company met with the FDA Center for Veterinary Medicine during the quarter and presented Aratana’s AT-003 development plan. We announced plans to initiate a pilot field study in client owned dogs in 2014. We now expect that this study will begin in the second quarter of 2014. This study will evaluate AT-003 for post operative pain management following orthopedic surgery. In cats we recently initiated a dose ranging study in laboratory cats.

Let me now turn to our antibody franchise. First, AT-004 for B-cell lymphoma in dogs, while we already received a conditional license from the USDA based on an initial data set, we have now submitted the full data set which we believe supports the full license. We continue to expect full license within the next 9 to 12 months. In addition, we have completed company sponsored clinical work using AT-004 in conjunction with chemotherapy. This work will be presented to our key opinion leaders and eventually submitted for peer-review publication. During the quarter, we recorded our first revenue for the product, which was a royalty paid to us pursuant to our exclusive commercial license agreement with Novartis Animal Health.

Next, just after the end of the fourth quarter we were pleased to announce the receipt of the conditional license from the USDA for AT-005 as an aid in the treatment of T-cell lymphoma in dogs. In the coming months, we will initiate additional field studies to create more data that will help to position the product in cancer treatment protocols. And we expect full USDA licensure in 2015. We will also selectively provide products for commercial sell to our investigators which we will anticipate – which we would anticipate will generate revenue but very modest revenue for AT-005 in 2014.

And finally, let me conclude our product development discussion with our antiviral pipeline. As you recall antiviral products were part of our acquisition of Okapi Sciences and not withstanding that it has only been a few short months since closing the acquisition we do have some updates. AT-006 for feline ocular herpes infection which has been developed under an exclusive license agreement with Novartis Animal Health that is currently in pivotal field study in Europe. We expect to file for EU review in 2014. In February, we filed an INAD with the U.S. FDA and are preparing to meet with the FDA to present that development plan. AT-007 for feline immunodeficiency virus infection is currently in a pilot trial in Europe. In February, we filed an INAD with U.S. FDA and we are preparing to meet with FDA to present the development plan for the U.S.

And this concludes the development update, so now let me transition into a business development update. I will begin by restating that our goal is to leverage our unique combination of animal and human health expertise connections and our innovative biotech mindset to be the partner of choice in pet therapeutics. Recently our product pipeline has expanded through our two acquisitions, but we expect future business development activities will be more focused on traditional in-licensing and product acquisitions including our option programs.

And turning to option programs for just a moment, we originally executed three option agreements. Two of these agreements were for molecules within the same therapeutic category, a category that we find very attractive. During the quarter we decided to continue our option work on only one of these two molecules along with another molecule from a different category. We continue to expect to make decisions on each of the two remaining molecules in the first half of 2014. Finally, we will continue to seek additional molecules for full license and are evaluating several candidates.

And with that I would like to ask Craig to update you on the financials after which we will take questions.

Craig Tooman - Chief Financial Officer

Thank you, Steven and good morning everyone. As Steven mentioned this has been an incredible period for Aratana. You will recall at the beginning of 2013, Aratana was a privately held company with several early stage compounds and a great vision of becoming a leader in the animal health industry. Due to our IPO we had the financial resources to advance our pipeline and also give us the flexibility to look more aggressively at other licensing and acquisition opportunities. This led to the acquisition of Vet Therapeutics in October, which had a profound impact on our company and our financials.

You will notice that Aratana reported royalties and manufacturing revenue for the first time in Q4 related to the B-cell product, which has been developed under exclusive commercial license with Novartis Animal Health. As a reminder, we paid $30 million of cash upfront for the Vet Therapeutics acquisition along with approximately 625,000 shares of our common stock, a $3 million promissory note and $5 million of contingent consideration that maybe paid to the former Vet Therapeutic shareholders in the future based on achieving certain milestones. You will notice on our balance sheet an increase in our assets for the intangibles and goodwill acquired as a result of this acquisition.

The intangibles will be amortized over the useful lives of the B-cell and T-cell assets. In connection with this acquisition, in October we extended our current debt facility from $5 million to $15 million. We also completed a private placement of the certain accredited investors for over 1.2 million shares at $16 per share or approximately $19.7 million in net proceeds.

Finally, subsequent to the end of the year as Steven mentioned we completed our second acquisition Okapi Sciences. To acquire Okapi, we paid approximately $14 million upfront early January. We also issued a promissory note for approximately $50 million and an additional purchase price obligation of $15 million. In late January we completed a successful equity offering of 5.15 million shares at a share price of $19 per share which provided net proceeds of approximately $90.5 million. As a reminder the Okapi transaction and the secondary offering both occurred in 2014 and therefore are not reflected in our financial statements issued today.

Now let me focus on the fourth quarter and year end 2013 financial results. For the fourth quarter, Aratana reported a net income of $7.1 million or $0.33 per basic share. For the full year ended December 31, 2013, Aratana reported a net loss of $4.3 million or $0.39 per share compared to a net loss of $13.7 million for the year ended December 31, 2012. As mentioned earlier, we had some very significant changes in 2013 that have impacted our financials. You will notice that this quarter we were in a positive earnings position. This is attributable to a $15.5 million non-recurring income tax benefit as a result of the Vet Therapeutics acquisition. Excluding this tax benefit, we experienced a net loss of $8.3 million or $0.40 per share for the fourth quarter and net loss of $19.7 million or $1.79 per share for the full year 2013.

Another change you will notice is that during the fourth quarter of 2013 we reported $123,000 in revenue related to the lymphoma franchise as mentioned earlier by Steven. As a result of the conditional approval for the lymphoma products that company will continue to build its commercial capabilities and further develop the canine lymphoma market with additional post-licensure marketing trials. For the full year of 2013, we reported R&D expense of $10.9 million of which $3.1 million was incurred in the fourth quarter. This compares to $7.3 million for the year ended December 31, 2012. The increase in R&D expense is due primarily to advancing the development of ongoing programs, AT-001, AT-002, and AT-003, as well as an increase in the fourth quarter as we integrated Vet Therapeutics and continued development of our cancer products. We continue to build our internal R&D expertise due to the growing number of development products in our pipeline.

Now, turning to our G&A expenses, which also contain some early expenditures for our commercial organization. This quarter, we have reported $4.7 million compared to $801,000 in the fourth quarter of 2012. For the full year ended December 31, 2013, our G&A expenses totaled $8.6 million compared to our full year 2012 of $3 million. The increase is primarily in the fourth quarter and related to certain expenses of approximately $2 million specifically related to the Vet Therapeutics acquisition. These expenses include legal and trademark diligence, accounting and valuation services and other financial diligence resources. We also experienced an increase in cost associated with becoming a public company as well as continuing to build our commercial capabilities as I noted.

Regarding our cash position at December 31, 2013, Aratana had a total of approximately $45.8 million in cash, cash equivalents and marketable securities. As previously stated, subsequent to the quarter, Aratana acquired Okapi Sciences .The upfront cash payment of $13.9 million was paid upon closing on January 6, 2014. Shortly thereafter, the company raised additional net proceeds of approximately $19.5 million and a successful equity offering in common stock. The proceeds from this will be used to repay approximately $33 million of purchase price obligations and promissory notes to the former shareholders of Okapi Sciences and Vet Therapeutics.

This now leads me to the 2014 guidance provided in our press release this morning. As you know, Aratana is currently integrating Vet Therapeutics and in January, we also started to fully integrate Okapi into our consolidated operations. Since these acquisitions were strategic and important platforms for Aratana, the company plans to continue the research and development activities of these organizations, including the further development of the canine lymphoma market with additional post-licensure marketing trial. The company also expects to advance its development programs as well as evaluate further option programs. Therefore, Aratana anticipates spending approximately $25 million to $30 million on its current clinical development in the lymphoma studies to further develop the canine market.

For the full year of 2014, Aratana anticipates use of cash from its operations to be between $35 million to $40 million. This excludes the one-time payments for the recent acquisitions mentioned above and cost from any further business development opportunities we pursue in 2014. Aratana believes that its existing cash and cash equivalents are sufficient to fund its operations through 2015.

With that, I will hand the call back to Steven who will open it up for Q&A. Steven?

Steven St. Peter - President and Chief Executive Officer

Great, so thanks Craig. Operator, we will now take questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question will come from Jose Haresco of JMP Securities. Please go ahead.

Jose Haresco - JMP Securities

Hi, folks. Good morning.

Steven St. Peter

Hi, Jose.

Craig Tooman

Good morning.

Jose Haresco - JMP Securities

First of all, congratulations on our really eventful year last year, could we walk through some of the organizational changes that we can expect in the commercial side over the next call it 12 to 18 months as you prepare ramp-ups from your commercial activities, what kind of changes can we expect to see there?

Steven St. Peter

Yes. So Jose, we are going to be adding folks on the commercial side in fact our website has lots of job postings in case, there is folks that are interested in that. But approximately 10 to 12 folks in our commercial organization this year, the main focus is going to be executing on what we call these sort of post-marketing studies since we do have a conditional license from the USDA that we continue to work in T-cell we will be initiating a couple of clinical studies with a number – dozens of key opinion leaders and clinical sites. And then in addition to supporting that work we will make product available for commercial sale to those investigators so that they begin to use the product. So really you should think about the sales organization is being very focused on supporting the key oncologists and their practices more like a medical scientific liaison type situation. But that’s 2014, 2015 as we generate the data to really support and understand where the product fits into current practice and how it is the best aid in the treatment of lymphoma including the pricing and we scaled up manufacturing obviously a full commercial launch commences in early 2016 which is the time that we’re expanding our commercial organization and preparation for up to half a dozen products being launched.

Jose Haresco - JMP Securities

Okay. I guess on that note with regard to the products that are in some of these field trials. Could you perhaps walk us through more of a defined timeline as to when we can expect data throughout the 2014 year?

Steven St. Peter

Yes. And we will Jose as we’ve said we will do a entire product development day and invite analysts and investors to participate in that and bring our development team including Dr. Ernst Heinen and Dr. Linda Rhodes and Dr. Marie-Paul Lachaud really bring those folks front in center to answer those questions. But just at a high level we’ve completed a couple of these trials with a B-cell lymphoma product in combination with various regimens and those managed scripts are being prepared and what we submitted for peer-reviewed journal publication.

And so as those get published we’ll obviously be talking about those. And then the T-cell same thing we’ll be initiating here over the next several months trials in combination with various chemo regimens and as those trials read out really in 2015 and even beyond we’ll be able to talk about those results and publish those results and just sort of move that forward. But as a company similar I don’t know if you recall the Rituxan experience in humans read and the Campath, Rituxan being for B-cell lymphoma in humans and Campath being for T-cell lymphoma in humans. This is we’ve sort of replicated that biology but made a canine-specific in this case. So similar to Rituxan and Campath really the clinical utility of those products only came as it got into the oncologist hands and they learned where to use it in their practice.

So through a combination of these clinical company-sponsored trials that we’re doing, we will also make product available to those vets that they will sell commercially and we’ll try to access that data and basically build a registry and understand all the different places that the product is being used. So as I’ve said before the great thing about the USDA is they’re very facilitative and there is an – or sort of an emergency use for a product like there is in B and T-cell lymphoma they will use a conditional license based on a couple of dozen points of data but the oncologists and the pet owners they want more data. So you do that in a sort of post licensor environment which is exactly what we’re doing.

Jose Haresco - JMP Securities

Okay, great. Thank you very much.

Operator

The next question will come from Jon Block of Stifel. Please go ahead.

Jon Block - Stifel

Great. Thanks. Good morning guys. Steven, I’d love to get your thoughts on the future competitive landscape in the osteoarthritis market. Arguably there are solutions that may come into market and all we’ve been hearing late 2015 before AT-001 I think also we’ve done some work which shows there are some companies with injectable seeking approval and someone say those formulations maybe preferred by the veterinarian. So can you talk to us about how AT-001 is positioned versus those other solutions? Thanks.

Steven St. Peter

Yes. So thanks Jon. So the osteoarthritis market in dogs is an established $260 million with about 4.4 million dogs getting treated per year. But those dogs are only getting according to our market research about 20 to 40 days of therapy per year. And the reason is because there are tolerability issues with the Coxib NSAIDs. And so the innovation that we brought to that with our EP4 receptor antagonist is it is not a Coxib NSAID, it directly antagonizes the EP4 receptor, in fact it doesn’t even bind to the Coxib enzymes. So what we think we can do in that market although there is 4.4 million dogs treated and we would argue they should get more days of therapy per year. We believe there is up to 20% of dogs that actually get arthritis and given the number of dogs in the U.S., that will be just over 80 million, there is potentially up to 20 million dogs with arthritis. So the market is a growth market, because you can move the 4.4 million of treated dogs. You can increase the number of dogs that are treated, but then you can also increase the days of therapy that those dogs get. And so it’s a big market today served really only by the Coxib NSAIDs. So we think that an oral product that’s once a day in a pet friendly formulation kind of is the way to go.

Now, we are aware of other companies that are taking in fact generic molecules from Europe and developing that into a twice a day drug, but it look likes their clinical work, it’s an 8-week study to show a benefit. So we have already shown in our pilot study, which is a dose-ranging study in a single daily dose that we have statistical significance on the pain endpoint at our single daily dose and it was as well tolerated as placebo with that dose. We are now repeating that in our pivotal field effectiveness study. And so I think the Aratana approach here really is to do drug development the way that the human companies do, where you find your dose, you run the trial you really invest in the product and build it to be a good product. Now if that twice a day product gets to market before us, we view that as just continuing to build the market and tell the story about the unmet medical needs. But ultimately, what’s going on win in the market is the product that performs the best and that’s what we at Aratana are focused on.

Now, with respect to the injectible products, there is companies that are developing what are expected to be monthly injections with antibodies for pain. And that’s exciting I think there is certainly going to be some dogs and pet owners who would be very interested in that, but not all of the dogs, I mean, but I think some of them could certainly be interested in that, but I don’t know that early in arthritis, that’s the therapy that someone would reach for.

And then there is other products that are developing polyesters, polyesters and other what are more like oil supplements that have been approved in some markets, but never approved in the U.S., because they have not demonstrated safety or effectiveness. And some of those companies may find a way to develop the products for safety and effectiveness in the U.S. But I guess in summary, Jonathan and you have done a really nice job actually of articulating the competition and some of the work that you have done. We think that just reflects how big this market can potentially be. And the only other comment I will make is everything I have just said is about dogs. The truth is cats also get arthritis. We believe up to a third of cats over the age of 10 can manifest arthritis. And none of the Coxib NSAIDs are approved for more than 3 days of use in cats. And as we just discussed earlier in the call, we are developing our product for cats for chronic use. So the cat market could potentially really grow the size of the pain market as well. And so I hope that helps answer the competition question, but again we think the competition reflects the attractiveness of that sector.

Jon Block - Stifel

Okay. Now, it certainly does help. Answer is very, very helpful. And just to shift gears on for a second over to B-cells certainly good to see some revenues. Can you just maybe from a very high level discuss specific programs that you and/or Novartis are putting in place to sort of gain traction for B-cell. Obviously you have done a 4Q ‘13 story, but the programs that will be put in place to gain traction throughout ‘14 and ‘15 as you go further and further into commercialization?

Steven St. Peter

Yes, Jon. I mean in difference and in out of respect for our partner, I think it would be inappropriate for us to comment on those plans. I mean, we actually at Aratana, we had a Lymphoma Advisory Board Meeting last week out in San Diego for the T-cell product. And there is a bunch of parallel activities that are going on around the B-cell. And we really – so I can’t really comment on what specifically they are doing, but I think over the next year, you will be pleased when you see the enthusiasm. And since we have B-cell and they have T-cell and it’s all of similar technology, we are working very collaboratively with Novartis animal health.

Jon Block - Stifel

Okay. And maybe just two more quick questions, one the $123,000 that you reported, was that all royalty or was any of that product sort of sales to Novartis if you would?

Craig Tooman

Yes, that’s largely a portion in the manufacturing piece and then a small B-cell royalty and you will see that detailed in the 10-K imminently.

Jon Block - Stifel

Okay. And last one for you Steven, you mentioned all-in-one for chronic pain indication for cats, I think last earnings call November, you said you might talk to a full development timeline in early 2014, are you prepared to do that today or just something that you want to provide more details with at a later point in time? Thanks guys.

Steven St. Peter

Thanks, Jon. So, we will provide that at a later point in time, it’s just this is the right time to lay that out that is part of our development review we will certainly be talking about that, but we understand by for that cat development plan. And I just want to be something I said earlier I want to be clear, so Novartis Animal Health has the B-cell lymphoma product and Aratana has the T-cell lymphoma product if I stumbled that earlier, I think you all know that but I may have misspoke.

Jon Block - Stifel

Yes, I know. We got that. Thanks Steven. Thanks for your time guys.

Steven St. Peter

Thank you.

Operator

(Operator Instructions) The next question will come from Tim Lugo of William Blair. Please go ahead.

Tim Lugo - William Blair

Hi, congrats on the progress guys. I have a question on the biologics, have you already started work with maybe some of the small molecule oncology products brought into a copy and I know that you are obviously expanding the T-cell development program under the conditional approval. Will part of this – will you be able to do any combination work there outside of the traditional chemotherapies?

Steven St. Peter

Yes, so we are continuing, Tim. Thanks for the question. So we are doing clinical work with our lymphoma products small molecule from the Okapi acquisition. We have right outside the U.S., there is another pet therapeutics company that’s developing the product in the U.S. actually quite aggressively. So we are very aligned with them to make sure that product kind of moves forward I mean the challenge from the study that you just proposed is the antibodies have a conditional license in the United States and we don’t have rights to that molecule in the U.S. So we could potentially collaborate with another company and then try to do a combination trial. And it has occurred to us but it’s not currently in the plan, (indiscernible) in concept, but we are moving forward that chemotherapeutic in Europe in 2014.

Tim Lugo - William Blair

Understood. And it sounds like you are going to have a meeting with the FDA soon for the 006 development program. How much of the European pivotal field study will you be able to leverage in maybe that U.S. program and I know you just filed with the agency for new drug applications or an IND or similar IND. Will you be able to – will you have to replicate a lot of that European work or do you think you will be able to leverage it?

Steven St. Peter

We will certainly be able to leverage it. I mean I think that’s why I think strategically in the U.S. we focused on the U.S. initially with our small molecules. But now we are interacting with the European authorities and really trying to understand to what extent we can leverage the work that we have already done in the United States. And in some cases it’s you sort of – it’s all of it. In other cases there is additional kind of nuances that they may want. But we have the benefit of obviously having interacted with the U.S. And so you go to Europe and begin those discussions. And then with respect to the products from Belgium, those two products are already in field trials in Europe.

And so we are just beginning the regulatory interactions with the U.S. and we filed our IANDs on both of these molecules as I said. And one of the major drivers for the acquisition of Okapi was the synergies that we would get as we take the U.S. products to Europe and ask the questions that you are asking. And likewise taking the products from the U.S. to or taking products from Europe to the U.S. So there is certainly leverage and there is overlap, but it’s not because you did in the U.S., you can just do it in the Europe. There are still additional things that you need to do in respective territories to make it work. But we have sort of a global perspective on what we are doing and all of the trials that we run we are always thinking about certainly the U.S. and Europe, but we are also thinking about OUS markets because you want to have that global perspective so that you capture all of those synergies kind of early in your development plan. And so that really is the strategy that we are taking.

Tim Lugo - William Blair

Understood, thanks for that. And maybe just one accounting question for Craig, will there be a tax benefit from the Okapi acquisition perhaps we see in the Q1 results or maybe even you could talk long-term as well?

Craig Tooman

So obviously we are looking through Q1 as soon as we close this and we will be looking very closely at the tax ramifications. We would not anticipate that it’s anywhere near the order of magnitude that you have seen at this year end. But we are obviously evaluating that currently. This mainly is due to the reversal of evaluation allowances previously established by us. So it was a fairly large, more one-time in nature impact. So we have also broken it out as you can see without the tax impact both in the release and in the script for you, so you can look at it with and without, because we know you are actually modeling the long-term impact.

Tim Lugo - William Blair

Okay. How about longer term once you flip into profitability, do you think that you will have some flexibility with the Okapi acquisition?

Steven St. Peter

That’s a great question in longer term. We are certainly doing some tax planning. It appears that we do have some opportunities with this acquisition and we will definitely be evaluating that both in our current portfolio and those products with IP that we actually generate going forward as well. It’s a great question.

Craig Tooman

Yes. And Tim, our choice of Belgium is our beachhead of European operations was not coincidental.

Tim Lugo - William Blair

That’s great. Congratulations guys.

Operator

And ladies and gentlemen, this will conclude the question-and-answer session. I’d like to turn the conference back over to Dr. Steven St. Peter for his closing remarks.

Steven St. Peter - President and Chief Executive Officer

So, thanks Denise. We just really appreciate all of the support that we have had from the folks on this phone and some of the folks that we know will hopefully listen later, but it’s just been a fantastic year for Aratana and we are just really proud of what we have been able to deliver in the past, but we also recognized that what you care about is future performance. And we are focused on execution and making all of this work the way that we have talked about it expected to work. So thanks everyone.

Operator

Ladies and gentlemen, the conference has concluded. We thank you for attending today’s presentation. You may now disconnect.

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