Alkermes' CEO Discusses Q1 2014 Results - Earnings Call Transcript

Apr.30.14 | About: Alkermes plc (ALKS)

Alkermes Plc (NASDAQ:ALKS)

Q1 2014 Earnings Conference Call

April 30, 2014 8:30 AM ET

Executives

Rebecca Peterson – SVP, Corporate Communication

Jim Frates – SVP and CFO

Richard Pops – Chairman and CEO

Analysts

Michael Schmidt – Leerink Swann

Jonathan Eckard – Citi

Ari Jaha – Credit Suisse

Mario Corso – Mizuho USA

Terence Flynn – Goldman Sachs

William Tanner – FBR Capital Markets

Steve Byrne – Bank of America Merrill Lynch

Operator

Ladies and gentlemen, thank you for standing-by and welcome to the Alkermes conference call to discuss the company’s financial results for the First Quarter of 2014. At this time, all participants are in a listen-only mode. (Operator Instruction). Please be advised that, this call is being recorded at Alkermes’ request.

At this time, I would like to introduce your host for today’s call Mrs. Rebecca Peterson, Senior Vice President of Corporate Communication of Alkermes. Please go ahead.

Rebecca Peterson

Thanks and welcome to the Alkermes PLC conference call to discuss our financial year for the quarter ended March 31, 2014. With me today are; Richard pops, our CEO; Shane Cooke, our President, and Jim Frates our CFO.

Before we begin today, I encourage everyone to go to the Investor Relation section at alkermes.com to find the press release and related financial tables including our reconciliation of GAP non-GAAP financial measure that we will discuss today. We believe that the Non-GAAP financial results better represent the ongoing trends for our business. Our discussions during this call will include forward-looking statements. Actual Results could differ materially from these Forward-Looking Statement. Please see our press release issued today and our transition report by Form 10-K for informing these factor that could cause our actual reference and results to differ materially from those complimented or suggested in our forward-looking statement. We undertake no obligation to update or revise the information provided on the call today as a result of new information or future results or development.

Jim Frates will open up the call to discuss our financial results and Rich Pops will then provide a brief update on the company. After our remarks we will open up the call for Q&A.

And now I would like to turn over the call to Jim.

Jim Frates

Thanks Rebecca. Good morning everyone. The first quarter of 2014 was characterized by solid revenues from our commercial portfolio and key investments in our development pipeline and commercial organization.

During the quarter, Alkermes generated revenues of more than $130 million, non-GAAP net income of $16.2 million and free cash flow of $10.5 million. Our results were in line with our expectation and today we are reiterating our financial guidance for the full calendar year that we originally provided in our financial results press release issued in February.

Within the commercial portfolio, worldwide end market sales for our long acting and typical franchise which is RISPERDAL CONSTA and INVEGA SUSTENNA were approximately $683 in the first quarter, compared to $619 million for the same period last year, reflecting double-digit growth driven by sales of INVEGA SUSTENNA. For the quarter, Alkermes recorded in manufacturing and royalty revenue of $49.6 million for this product franchise, reflecting the annual reset of INVEGA SUSTENNA royalty to 5% at the beginning at each year. You should recall that our royalty is tiered based on end market sales and resets each January.

For modeling purposes, we are currently in the 7% royalty tier and expect to surpass $500 million in sales and consequently move into the 9% tier during the second quarter. Looking ahead, our partner J&J have recently announced positive results for the Phase 3 of INVEGA SUSTENNA three months and their plans to submit the NDA to the FDA by the end of 2014.

The continued growth for the long acting injectible anti psychotics market great to see. This is a $2.5 billion plus business for Johnson & Johnson. It is growing and evolving in a positive way and it is the foundation of our excitement for our own product candidate aripiprazole lauroxil.

For AMPYRA/FAMPYRA, our manufacturing royalty revenues were $20.6 million for the quarter. Outside at the U.S. our partners Biogen reported AMPYRA end market sales of $19 million according to the report, end market sales in the U.S. next week. For VIVITROL, we’ve recorded net sales to $17.1 million compared to $14.6 million for the same period last year, an increase of approximately 17%.

These results demonstrated solid year-over-year growth. Sequentially, first quarter VIVITROL revenues were tempered by seasonality and the extreme winter weather as well as a voluntary recall that had a $1.4 million affect in a top-line and charge to comp of $0.9 million. Overall, we remain excited by the development in the VIVITROL business with many great things happening and we’re comfortable with our revenue expectation of $90 million to $100 million with VIVITROL in 2014.

Turning to BYDUREON, we’ve recorded royalty revenues of $7.7 million based on worldwide end market sales of approximately $96 million. During the quarter, AstraZeneca took over full control of BYDUREON and announced in March that the BYDUREON dual chamber pain device have received FDA approval. The new device is expected to be available to patients in the second half of 2014.

Switching now to expenses. Our total operating expenses for the first quarter were $146.1 million, compared to $144.4 million for the same period last year. The increase in operating expenses reflected incremental investments in our advancing late-stage and clinical pipeline and commercial organization. Specifically, investment in our NDA included activities related to the completion of the Phase 3 aripiprazole lauroxil study, for which we announced positive top-line results earlier this month, initiation at the ALKS 5461 pivotal program during the first quarter and continued enrollment in the first ALKS 3831 Phase 2 study.

Our SG&A expenses reflected increased promotional activities for VIVITROL and the early preparations for anticipated launched of aripiprazole lauroxil which will pick up in intensity as we prepared to submit the NDA in the third quarter.

In summary, our financial results for the first quarter were consistent with our expectation and we remained on track to meet our financial guidance for 2014 as we provided in February. We are pleased that our business is performing as planned. With a cash generating commercial portfolio more than $700 million in cash and in investments and in exciting late stage CNS pipeline, we’re uniquely positioned to grow our business and to we continue to build value as a CNS-focused biotechnology company.

With that I’ll turn the call over to Richard.

Richard Pops

That’s great. Thank you, Jim. Good morning everyone. So since our last earnings call, just two months ago, Alkermes has a change in a fundamental in meaningful way. The positive Phase 3 results for aripiprazole lauroxil we’ve reported earlier this month had two clear implications. First and most obvious is that we expect to be adding a major new element to our commercial portfolio, once we believe will have an important positive impact on patient and the treatment community as well as our own top-line growth overtime.

Second, in completing this study so successfully, we evaluated our capability to conduct large, international studies psychiatry, which an area of deep interest for us.

So, let’s spend a minute for aripiprazole lauroxil. Backed by a differentiated product profile and strong pivotal study results and launching into an anti-psychotic market that we believe is shifting in favor of long acting injectible or LAIs, aripiprazole lauroxil is well positioned to compete. The Phase 3 study showed conclusively that both doses of aripiprazole lauroxil tested in this study 441 milligrams and 882 milligrams demonstrate a clinically important and statistically significant reductions in PAN scores from baseline, compared to placebo at week 12 with P-values of less than 0.001.

Aripiprazole lauroxil would generally well tolerated and the safety profile was similar to that recorded with oral aripiprazole, the most common adverse events in the study – and headache. We believe having multiple dose options are ready-to-use pre-filled syringe and options for deltoid and glutial administration will help positions address the needs of individual patients and be user-friendly for doctors, nurses and patients. We will present more complete result for Phase 3 study in June at the American Society of Clinical Psychopharmacology meeting in Florida. In the meantime, we are moving quickly to submit the NDA during the third quarter and we expect a standard 12 month review.

Aripiprazole lauroxil is poised to enter market at a time where we believe the psychiatry field is at a tipping point for broader adoption of LAI and – based on the new entrance to the class along with increasing body of literature and though leader supporting the use of LAIs early in the disease progression when we believe the greatest benefit and outcomes can be realized. The market opportunity for aripiprazole lauroxil arises from these favorable dynamics coupled with the particular attributes of our products. We’re preparing now for launch next year, and we will update you over the course of the year on additional plans for this program.

The positive Phase 3 results also have broader implications for the pipeline and they underscore a comprehensive drug development capability and demonstrate our ability to conduct large studies in psychiatry. This is a set of capabilities we build carefully over the past few years, and we considered to be fundamental to our future success. We will apply the same thing to quality and rigger in execution to our other late stage candidates, ALKS 5461 and ALKS 3831 as well as every other element of the pipeline.

So, let’s shift now to ALKS 5461. Now, in Phase 3 for the treatment of major depressive disorder. ALKS 5461 offers a new mechanize of action for this difficult-to-treat disease. During the first quarter, we commenced the comprehensive pivotal program for 5461 called Forward. The Forward program will include three core Phase 3 efficacy studies and additional supportive studies. Data from the Forward studies will service the basis for NDA submission. The three core efficacy studies will begin mid-year and they will utilize state-of-the-art methodology you’ve heard us described in the successful Phase 2 program.

These studies are designed to include a total of approximately 1,500 patients with major depressive disorder who had an inadequate response to standard therapies. With Fast Track status from FDA in hand, a clear development path and the validation of our approach from aripiprazole lauroxil experience we’re moving ahead quickly on this clinical program.

So, let’s turn out to 3831, which combines the pharmacology of olanzapine known by the brand name ZYPREXA, one of the most officious drugs for the treatment of schizophrenia without 33 opponent new antigens targeting the reward system. ALKS 331 is designed to address two significant patient populations, patients with schizophrenia who experience significance weight gain on olanzapine and those with schizophrenia who is exasperated by alcohol abuse. The first Phase 2 studies underway to evaluate this types of alcohol abuse.

The first Phase 2 studies underway to evaluate these types of ALKS 3831 on the attenuation of weight gains associated with olanzapine. It’s enrolling well and we expect to complete the enrollment of the study this year. The second Phase 2 study with schizophrenia alcohol abuse will start later this year.

From a commercial perspective, ALKS 3831 takes on even more important given the positive outcome of the aripiprazole lauroxil Phase 3 as this is a therapeutic area where we will be building a substantial presence for the future. In addition to this late stage pipeline, we have a number of exciting earlier stage candidates, two of which were under clinic this year, ALKS 8700 and ALKS 7106. ALKS 8700 is a monomethyl fumarate prodrug for the treatment of multiple sclerosis. We’re designing it as a product with differentiated tolerability in dosing as compared to Biogen’s TECFIDERA.

We plan to file the IND and initiate a Phase 1 study testing multiple formulations of ALKS 8700 mid-year. We will test the kinematics and dynamics of various formulations with a goal of determining the optimal formulation in doses of ALKS 8700 to advance into further clinical testing. This is a clear opportunity with early informative data and we’re pressing hard to get the studies underway.

ALKS 7106 our novel pain product is also moving to clinic this year. With this product candidate, we are addressing the major published health needs for opioid energetics that are less acceptable to abuse. The pain market is world’s second largest therapeutic category. In our view, this large, mature market is usually ready for dramatic change. Our deep scientific knowhow of opioid modulators gives us the ability to develop novel pain price that have intrinsically different portfolio for abuse and liability.

ALKS 7106 is a drug that we believe will have a very energetic properties but it will also have significantly reduced risk of overdose toxicity and less additive potential. We expected very early in the program, we will be able to establish the differentiated profile of this new management, and if we’re successful, generated significant level of interest in this innovative approach.

The next 12 months are going to be remarkable, as we turn over many important cards on the pipeline. After we get in usual position, we’ll file the NSA and pursue the U.S. approval for aripiprazole lauroxil. We will be ramping up this ALKS 5461 Forward program around the world. We’ll complete the vacant study for ALKS 3831 and launched the second Phase 2 study. We will put ALKS 8700 and ALKS 7106 and launched the second Phase 2 study. We will put ALKS 8700 and ALKS 7106 into the clinic and get our first indications of the profiles in men.

This reach pipeline couple of with our robust commercial business, our efficient corporate structure and a strategic amount of capital will allow us to increase significant and take advantage of new opportunities as the present themselves. We’re exactly where we want to be in year and couldn’t be more excited for the year ahead.

With that, I will turn back to Rebecca the questions?

Rebecca Peterson

Thanks, Rich. We will now open up the call for Q&A. Operator, we will take the first question.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And from JP Morgan we have Cory Kasimov online. Please go ahead.

Unidentified Analyst

Hi there. It’s actually Matt in for Cory today. Just a couple of questions. I guess the first one is on the schizophrenia market. And I guess if you could just outline for us how you expect the once every three months in INVEGA SUSTENNA to fit into the market alongside the once-a-month injectibles? And then secondly, if you could just outline when we might expect the initial clinical data from 8700 and 7106 that will be great. Thank you.

Richard Pops

Hey Matt, this is Rich. I’ll take that. As Jim said in his remarks, it’s quite encouraging to us to see the way this long acting injectible market is evolving and growing. So, the current status in the market is that dominant product offering is a once-a-month product INVEGA SUSTENNA and with mentioned once-a-month coming in with us with aripiprazole lauroxil once-a-month that’s dominant use of long acting injectibles.

The three months is a nice advance because for those patients who are stable for long-term on LAIs which is a small percentage of patient population right now, they have the opportunity to progress then to three month dosing which minimizes the number of injection, which is precisely why we’re opting two months as well. The two month will allow us for the patients who are stable on our products to cut the number of injections per year in half. But we believe the central tendency will always be around that one month and the goal in the market is really to get more and more patients for orals or the LAIs of any duration and we think this central tendency will always be that one month dose.

8700 and 7106 will go in mid-year and we haven’t quite given precise information of when we think we will get data out of those studies but we expect within the first few months of those be in the clinics. So early in 2015, we expect to have inside into the data.

Unidentified Analyst

Okay. That’s right. Thank you.

Operator

From Leerink Partners we have Michael Schmidt on the line. Please go ahead.

Michael Schmidt – Leerink Swann

Good morning. Thanks for taking my question. Can you brief me besides taking a strategic price increase for VIVITROL, I was just wondering what drove that decision?

Jim Frates

Sure. Hi Michael. This is Jim. It’s really been three years since we taking a price increase with the VIVITROL and I think as we’ve established to drug more, it really was a very slight price increase of 5% and it was really just for keep up with the inflation of the cost we see in our distribution chain.

Michael Schmidt – Leerink Swann

Got it. Okay. And then on ABILIFY MAINTENA I was just wondering with regards to your competitive intelligence there on that launch. What are you learning from that launch? Do you see certain types of patient to go on that drug? Is there something that do you could apply to your launched later on?

Richard Pops

Hi, Michael. It’s a great question. There is two major domains that they’re observing I think the launch of that product. Number one is prescribes itself and what sites, what enters, what positions are early adopters of injectible of ABILIFY. It’s obviously instructive for our launched. But I think even maybe even more importantly is looking from where the new starts to coming now, and been the fighting for the launch.

The original hypothesis would have been almost everybody going MAINTENA with come out of oral aripiprazole and it turns out that really only by half of the patients, that are coming from other medicine as well, which I think is quite encouraging as it says the starting pool of addressable patients is broader. And I think I underscores how widely used ABILIFY has been and how will tolerate these patient.

Michael Schmidt – Leerink Swann

Okay. And last question on the two monthly formulation that you’re planned to develop. What is the regulatory path for that? Do you need a full Phase 3 study for that program as well?

Richard Pops

Well, we need FDA now as we prepared to the pre-NDA meeting package, and given the fact that we have PK profile in both doses and we have the sense of how those two month pharmacokinetics will now onto that. We will discuss the regulatory path with FDA. Our expectation is that, as we said with putting demand this year, we will generate data. Hopefully, we won’t need to generate full outcome of data, but if we have to we will. But we think there is a logic for a more abbreviated clinical the trail program, but we’ll settle that with FDA.

Michael Schmidt – Leerink Swann

Got it, great. Thank you.

Richard Pops

Thank you.

Operator

From City, we have Jonathan Eckard online. Please go ahead.

Jonathan Eckard – Citi

Thanks for taking the questions. So, the first is on VIVITROL. There has been quite a bit of crest as well as FDA comments about opioid abused and some of the FDA can’t specifically mentioned importance of improving opioid abused therapies and specifically mentioned VIVITROL. So, I’m just trying to figure out if you would have any color on going forward, how could some of these comments at least transform into or implement into programs that could actually improve the utilization of drugs like VIVITROL. And then I have another question on 5461.

Richard Pops

Hey John. Good morning. It’s interesting. The challenge we have in updating you all VIVITROL is the fact that they will working on two different labeling here. One is that, the daily commercial business that we guide to and we report on. And the second is in the background, which you referred to. We just got back last night from Washington D.C. where incensed large byproducts policy for – and criminal justice with policymakers and judges and sharers and caregivers and I mean there is just a lot of talk about VIVITROL, because there is more and more data out there about in these pilot program of successful utilization at VIVITROL, which is really not build into the type of forecast that we give you.

So, the answer to your question is, we think there is a lot of really exciting things going on in the States and the Federal Government particularly in the criminal judging system that are uniquely suited to VIVITROL. And I think the Commissioner’s comment about VIVITROL I mean, we really haven’t referred FDA to talk much about VIVITROL recently, because it’s increasingly creating a national epidemic. And there are number of ways that we have to go after addressing in and VIVITROL could be a very constructive solution to this problem. So, we’re really optimistic about where we’re gone end up the VIVITROL. But, it’s going build overtime.

Jonathan Eckard – Citi

Great. Thanks. And then for 5461 the question. You’d have the three trials that you outlined for the four studies. Could you remind us of the regulatory requirements for approval, mainly like do all three of these trails need to be win in order to submit or is it like two out of three? I think you need two positive trails. So, just if you could remind us what your strategy as well as regulatory hurdles are?

Richard Pops

That’s correct. It’s a later case. You need two randomized well-controlled studies filed in new drug application depression. I’d like to say that, we expect 5461 to work in all three given the study design that we using the robustness of the signal in the Phase 2. With that said, given how significant the commercial opportunity medical opportunities, there we decided to run three to assure that we had two. Because in depression as you know, not uncommon for active agents sometimes not to separate from placebo due to placebo effects.

Now that said, you’re well aware of the multiple steps we have had taken to minimize placebo effect most notably as the architecture of this study using SPCD. With that said, we need two studies and this is Fast Track medicine designated by FDA and we’re hard at it now.

Jonathan Eckard – Citi

Great. Thank you very much.

Richard Pops

Thank you.

Operator

From Cowen and Company, we have Taylor [inaudible] online. Please go ahead.

Unidentified Analyst

Hi there and good morning everyone. Could you please give us a little more inside into the commercial launch preparations currently underway for aripiprazole lauroxil? And also, as we look into the next year what we can expect in terms of a pickup of these activities and the associated spend? Thank you.

Richard Pops

Hey, Taylor. I’ll tell you and then Jim might comment on the second half. We try from this point forward won’t give a lot if specificity about launch of preparation there for aripiprazole lauroxil. And that we’re moving into competitive markets and we’re planned to compete to win now given the product profile that we have. The basic architecture of the preparations you might imagine is we’ve said before that we will have 150 to 200 additions reps that will launch of this drug.

We want to put those reps on until 2015. So, we’ll be incorporating our 2015 guidance. We’ll do some of the preparatory work this year in terms of hiring people that’s already underway and preparing for the commercial launch in the second half of 2015. Jim, do you want add any color.

Jim Frates

Yes. I think from a guidance perspective Taylor I would just say that, as Rich outlined, the build and the infrastructure work is in place and included in our guidance for 2014. But it’s the major cost to the salesforce that is not included this year and that you’ll see come on a quarter to two quarters ahead of the estimated launch online.

Unidentified Analyst

Okay, great. Thanks so much.

Jim Frates

You are welcome.

Operator

From Credit Suisse we have Ari Jaha on the line. Please go ahead.

Ari Jaha – Credit Suisse

Hi. Good morning and thanks for taking my call. I ask two questions here. First for Rich. So regarding the RISPERDAL launched perhaps, can you discuss about how you think about building your own commercial infrastructure as a appose to maybe buying company that already has an infrastructure in place given the company’s tax rate, balance sheet and acquisition could certainly provide an opportunity as well.

Richard Pops

There are two different questions are in all. You didn’t ask in the two but I’ll break it in two. The number one aripiprazole launch perhaps. We’ve been a fairly comprehensive series of discussions with pharma and big biotech about co-promoting, collaborating on the aripiprazole lauroxil. And one of the things we’ve learned through that, it’s such an interesting product, long acting injectible anti psychotics sold into Medicaid and in the community mental health center. We’re convince new with our experience with VIVITROL and our proximity to SUSTENNA and COSTA that we are the best suited to build this commercial team in the U.S. Ex-U.S. is the different matter and it’s something we’re in active discussions with folks about Ex-U.S.

The second part of your question that segues into how do we use our corporate structure in order to build infrastructure. That’s something it’s an ongoing opportunity for us. And we’re constantly looking at ways that we can build the business the way we complementary, particularly now that we know that we’re going to be in schizophrenia and addiction for a long time with hopefully the leadership positions in those areas.

Ari Jaha – Credit Suisse

Got it. Thank you. And then second question for Jim. Can you help us understand the latest growth trend for INVEGA SUSTENNA and VIVITROL? On VIVITROL, it’s certainly encouraging to finally see a price increase there. Thank you.

Jim Frates

Sure. I will comment on J&J’s growth on INVEGA SUSTENNA or CONSTA. I think that you vary from quarter-to-quarter but it’s really happening in the background of that double-digit growth in the long acting a typically anti-psychotic market which is again is both Rich and I refer to in our remarks, that’s the key part of this industry, as we’re seeing higher penetration in the long acting particularly in the United States as compared to Europe with their high penetration there already.

This growth is very important and we think that will continue. There is always going to be slight quarter-to-quarter variations in inventory level. And I would say that’s the same thing that’s happening with VIVITROL here particularly in the first quarter, which is why I think the year-to-year comparison are so important for VIVITROL. Certainly, at the year-end, as people sometimes build some inventory in the December month that happens with a lot of products. We saw a little bit of that this quarter with VIVITROL, but longer-term those growth trends in units we often track and I think both markets the LAI and for VIVITROL we’re very optimistic about.

Ari Jaha – Credit Suisse

Got it. Thank you.

Operator

From Mizuho USA we have Mario Corso online. Please go ahead.

Mario Corso – Mizuho USA

Good morning. Thanks for taking my questions. There are a couple of things I wanted to ask about. Number one bigger picture with the typical anti-psychotic the long acting market. How do you see – how have you seen and how do you see kind of payer attitudes evolving towards the more expensive long acting injections as the markets largely gone generic and oral side the last years?

And you mentioned Medicaid and I’m wondering kind of what you see as the progress there and if you’re going to have some real pharmakoeconomic arguments to make in this whole issue?

And then on the cash side of things you mentioned opportunities and I am wondering if you have a preference when you think about in licensing looking at commercial late-stage or something earlier stage and also on the cash use side kind of how you see the debt pay down plans right now?

Richard Pops

Hi, Mario. Maybe I’ll start with that, with respect to payer attitudes in the long acting injectibles, the first observation is the proof is in the pudding and these things are growing nicely in the U.S. against the backdrop of intense focus on cost control, right? And I think they are growing for the reasons that we said all along whether it’s good medicine, also good economics and Europe is the proof point in single payer system despite showing that despite of fact that the acquisition cost of the long acting injectible was higher and the generic oral, the cost of non-compliance of oral medication is manifest early into these progressions in the disease progression in schizophrenia.

So, I think it has a decade of experience with CONSTA that’s been supplementing with several years of experience with SUSTENNA and J&J has done a good job of getting that those data published and promulgated out of the community. So we’re scanning that flame and we’re going to be fanning that flame because we think it’s good policy and it’s good medicine. So, I am optimistic about it.

That is not to say that, there are always various piece of LAIs that’s going to be fail first on orals which you expect is going to be prior authorization, there is going to be things like that. But that’s kind of a world we live in right now. But we have a very strong case and we are going to continue to build that case for the use of LAIs.

On the opportunity side, we are fairly agnostic in terms of opportunities standing from commercial product Phase 3, Phase 2 and even earlier things that are concurrent with our areas of expertise and our involving disease expertise in the areas of psychiatry. So the basic as, we have to find things that are worse for a lot more to us than anybody else less that we can buy for less than anybody. And I think there is an opportunity for that. So, the nice thing something about the line Alkermes is a pipeline as rich as this and we almost take it granted but we can’t get through a meeting and get through all the pipeline candidates that are real and not just emotional pipeline connect.

So, we don’t have a burning need to acquiring anything right now. We just have authority and desire to build a major company and when we see elements that could fit into that, we are not afraid to expand our portfolio by including. And Jim you want to talk about...

Jim Frates

Yes. Just on the cash and the debt levels that we have in the company, Mario. And I think are one of the things that we very closely watch is our cash flow and I think that’s one of the things makes Alkermes unique actually is the commercial portfolio that we have now. It’s very diversified, number one, and the cash flows are very, very strong. And you know over the last couple of years since we did the merger with ETD, we are ahead of our expectations.

So with this very low interest rate environment right now, actually with our debt structure, it’s very flexible for us. We can pay it off at any time if interest rates decide to rise or that makes sense from a corporate perspective. So, we are very comfortable with our debt levels right now given our cash flow and the tax shelter that they provide and we continue to monitor that as we grow.

Operator

Next from Goldman Sachs we have Terence Flynn on the line. Please go ahead.

Terence Flynn – Goldman Sachs

Hi. Thanks for taking the question. I was wondering if you guys have any new market research on the 9070 following data, and if not yet when we might expect to hear something on that front. And then second on potential price and I know it is still early and you try to give a lot of color. But, how should we think about it relative to MAINTENA? Are there any differences we should think about on the pricing front?

And then third, I think in the past you talked about $1 billion worldwide opportunity here from MAINTENA and I realize that’s not your guidance. So, might be an unanswered question, but just wondering you know how you think about that and at some point you have plans to give peak guidance? Thanks.

Richard Pops

Hey, Terence. We not answered those questions. I don’t think I will give you a lot of satisfaction with the answers. All I will say is that, this is a market that is very well described market right now with CONSTA SUSTENNA answer MAINTENA there. It is a targeted set of patients, targeted set of providers and facilities. The economics benefit use of the use of these molecules is being increasingly elaborated with this data and we have based on our Phase 3 data, a product offering which we think is going to be one of the really dominant entrants in the market, if the drug is approved in the way we think it is going to be. So, we are going to compete and we think it is going to be a big opportunity for us.

Terence Flynn – Goldman Sachs

Okay thanks.

Rebecca Peterson

Thanks, Terence. We will take the next question.

Operator

From FBR Capital Markets, we have Bill Tanner online, please go ahead.

William Tanner – FBR Capital Markets

Thanks for taking the questions. I have one clarification and a couple of other ones. And Rich and just on the 3 months SUSTENNA, so it sounds like a priority that is expected to expand the market or say maybe may be helps protect the franchise a bit versus other LAIs that might have a shorter dosing frequencies, is that a way to look at it?

Richard Pops

I think Bill, the way is that most patients despite the inherent nature of these long acting injectibles being that you can stand for a long time. I still think average duration is 6 months or maybe less. So, what I like about the 3 months is, it is just another reason for doctors to adopt the medicine because they know that for the right patients they can extend the dosing interval to four shots a year for those who are really stable on it is another reason to stand medicine.

But as I said, the challenge in the market is to get people on month lease and then some small part if you look at the normal distribution of people’s duration on LAIs that’s far right hand part of the tail that would be logical candidates to segue into the longer interval.

William Tanner – FBR Capital Markets

Okay. There are two questions I have. Number one, can you remind us where we are on ALKS 33 just in terms of knowing about the safety profile and anything as it relates to potential toxicities. Obviously with 5461, 3831 you’ve got a couple of other ingredients that fit in well known.

And then secondly, just obviously a lot of activities going on in this phase wouldn’t expect you to comment as to conversation you are having with strategies. But just curious to your bigger picture thoughts as to how – what opportunities could be availing themselves to Alkermes to what extent, what you’re going to stick to the netting? You have got a lot going on or you know and you are going to hopefully in a couple of years which we should have taken advantage of some opportunities that came along, whatever they maybe.

Richard Pops

Yeah. On the 33 side, we were developing a fairly significant amount of patients experience with 33 both as a single agent and incorporated in 3831 and 5461 and by the time we did the 5461 program, obviously I would be elaborated. We are not currently developing 33 as a single agent in any indication. So a safety will continue implement through the programs that I just described. But this is a very low characterized at this a very well characterized through the program that I just described. But this is a very low characterized drug at this point and both in terms of mechanism and structure and we’re confident in its profile.

It’s such an interesting point right now with Alkermes, given the number of cards we’re going to turn over in the next 12 months or so. We feel like we’re on a very steep valuation ramp, kind of putting aside market conditions, macro conditions in terms of intrinsic value of our business.

5461 is still not I think will be integrated into the values of this company and nor is aripiprazole lauroxil or 3831 of a major toggle that we have as we bring 7106 and 8700 in the clinic. So, in terms of strategic deals that would be something that is very difficult for us to think about. What our value is right now given how the fluid is that how limiting its bias towards the upside with more inflammation overtime.

That said, we have a strategy clinic cash, $700 million of cash. And if the biotech market softens, which is we assume looks like it does from time-to-time particularly in the smaller cap or midcap space, we have the ability to deal and not just local companies but local for products as well. And with our iWish structure, we have lot of flexibility. So, we have the teams of people that are dedicated to looking for these opportunities that are outside of our core business. And then core business is plenty rich right now. So, I think at some time it’ll strike.

William Tanner – FBR Capital Markets

Thanks.

Rebecca Peterson

All right. Thank you so much. Operator, we have time for one more question.

Operator

Okay. From Bank of America we have Steve Byrne on the line. Please go ahead.

Steve Byrne – Bank of America Merrill Lynch

Hi. Thanks for squeezing me in. Just want to drill into the 3831. What has been the feedback you receive from psychiatrist about this product and particularly what level of weight gain do you think would be tolerable among that community to drive a inflexion and renewed interest in olanzapine?

Richard Pops

I don’t there is renewed interest in olanzapine. I think there is 350,000 patients that are currently on olanzapine for schizophrenia in U.S. notwithstanding with this significant amount of weight to for people gain does that lives by the data we are label. We’ll wait to see the data, but we think that as I said many time, I’m not sure that the medium weight change or the essential tendencies with interesting statistics I think it’s really if we can avoid that excessive weight gain that significant fraction to patients. I think I could be clinically very significant.

So, what we give from physicians is interesting that is that. Number one, there is just obviously, an incomplete recognition and knowledge of olanzapine and anti-psychotic agent and its power. It’s concern to be the most effective efficacious in these agents and if those trauma continue a vacant profile would be very attractive.

Secondly though, definitely this dual diagnosis patient which is the patient with more of substance disease, namely alcohol, is a very serious and real public health issue. And I think this drug is the first drug that ever tested in this patient population, which has historically excluded from clinical trials. Even in our 003 studies for aripiprazole lauroxil we exclude patients with more alcohol dependent because it’s a tough patient population. But it’s actually the real patient population that runs funding for the clinicians in the real world and for payers and for the whole systems.

So, we’re actually we’re quite proud of this work that we’re gone be doing in this more of this assessment abused diagnosis. And we actually think it’s indicative for a more enlightened view of what the disease actually is because we really don’t see alcohol dependent penetrate substance to use coexisting schizophrenia like hypertension diabetes of disease schizophrenia. We think it’s part of the underlying pathology of the disease and treating with schizophrenia without treating the underlying alcohol dependent is not is not completely treating the disease. I think we’re getting some acrylates and positions as we tackle this and develop data.

Operator

Ladies and gentlemen, this concludes today’s conference. We thank you for joining. You may now disconnect.

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Alkermes (ALKS): Q1 EPS of $0.11 beats by $0.01. Revenue of $130.21M misses by $5.58M.