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Zogenix Inc. (NASDAQ:ZGNX)

Q1 2014 Results Earnings Conference Call

May 8, 2014; 04:30 p.m. ET

Executives

Roger Hawley - Chief Executive Officer

Dr. Stephen Farr - President

Scott Shively - Executive Vice President & Chief Commercial Officer

Ann Rhoads - Executive Vice President & Chief Financial Officer

Catherine O'Connor - Senior Director of Corporate Communications

Analysts

Chris Kuehnle - Leerink Partners

Akiva Felt - Oppenheimer

Operator

Good day ladies and gentlemen and welcome to the first quarter 2014, Zogenix’s earnings conference call. My name is Derek and I’ll be your operator for today.

At this time all participants are in a listen-only mode. We shall facilitate a question-and-answer session at the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Ms. Catherine O'Connor, Senior Director of Corporate Communications. Please proceed.

Catherine O'Connor

Thank you, operator and thank you all for joining us this afternoon. With me on today's call are Roger Hawley, Chief Executive Officer; Dr. Stephen Farr, President; Scott Shively, Executive Vice President and Chief Commercial Officer and Ann Rhoads, Executive Vice President and Chief Financial Officer.

Earlier today Zogenix issued a news release announcing the company’s financial results for the first quarter 2014. We encourage everyone to read today’s news as well as Zogenix’s quarterly report on Form 10-Q, which will be available on the company’s website at www.zogenix.com.

Please note that certain of the information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Zogenix’s management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business.

These forward-looking statements are qualified by the cautionary statements contained in Zogenix's news releases and SEC filings, including in its Annual Report on Form 10-K. This conference call also contains time sensitive information that is accurate only as of the date of this live broadcast, May 8, 2014. Zogenix undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

Now I’d like to turn the call over to Roger Hawley, Chief Executive Officer of Zogenix.

Roger Hawley

Thank you and good afternoon. Thanks everyone for joining us on our first quarter 2014 conference call. Today Scott Shively will be joining the call and he’ll provide an update on the Zohydro ER launch and I’ll give a brief review of our agreement to sell SUMAVEL DosePro to Endo, which will allow us to focus on building our pain business.

Steve Farr will provide an update on our development programs, including our abuse deterrent formulations of Zohydro ER and the upcoming development pathway for Relday. Then Ann will review our financial results, after which I’ll have some very brief comments and then we’ll turn it over for Q&A.

First, I would like to begin with a few general statements about Zohydro ER. During the first quarter of the year we focused on preparations for the introduction of Zohydro ER. We successfully expanded our medical affairs and commercial teams; we trained our sales organization on Zohydro ER at our launch meeting and established an infrastructure necessary to support the product and the team.

It is our intention to demonstrate responsible leadership in the category in all key areas, including advocating for chronic pain patients, providing quality education and useful resources, raising the bar on safety by working to insure our medication is prescribed to appropriate patients by informed physicians and implementing policies and procedures to minimize misuse and diversion.

Intend to be transparent, fact based and supportive of federal, state and local agencies involved in making policy, and law enforcement decisions impacting the opioid prescription market.

Despite our consistent efforts to be responsible, conservative and engaging with all parties, there has been an orchestrated campaign at not only the product, but our company’s repetition as well. Some statements on pay-to-play acquisitions have been outlandish and irresponsible lies. This information about Zohydro ER has been and continues to be reported by the media and echoed by several organized efforts.

These inaccurate and misleading statements are often made without proper context and are intended to be sensational, to create fear or to generate headlines. In most instances, these statements are not supported by scientific facts or medical evidence and completely ignore the voice of the chronic pain patient for whom this medication is intended.

It is unprecedented that the FDA has had to repeatedly restate the facts about an improved medication following a very public FDA review process that included several important changes affecting the ER opioid class, labeling abuse-deterrent technology and the scheduling of hydrocodone. There are five facts in particular which are frequently and consistently misstated, so let me try to quickly clarify those beginning with the actual true statements.

Zohydro ER is not more potent than Vicodin. Vicodin is immediate relief hydrocodone with Acetaminophen. Zohydro ER is extended release hydrocodone without Acetaminophen. The same potency, but for a different type of patient, experiencing different types of pain. Zohydro ER should be used for managing pain severe enough to require it daily, around the clock, long term opioid treatment for which alternative treatments are inadequate. Zohydro ER is not indicated for acute short-term pain and it is DEA Scheduled II, not Schedule III.

Zohydro ER is equality as portent as Oxycontin. However, the highest dosage strength of Zohydro ER, which is 50 milligrams, is lower than the highest dosage strength of Oxycontin, which is 80 milligrams. While it is true that Oxycontin is has received FDA labeling that may be effective and reducing abuse via ejection and nasal routes, it is nothing to address the most common rout of abuse, which is oral.

Compared with some other commonly prescribed opioids, Zohydro ER is actually less potent and they have higher doses and none of those FDA approved products have approved abuse to turn off labeling for those particular products. The fact is that 98% of opioid prescriptions are pain medications that do not have FDA approved abuse deterrent features.

Also, the real growth in the opioid market over the past several years is actually coming from the immediate release market not the ER market, a fact that if you want to look at or deal with, including the alarming rate and the growth of immediate release 30 milligram oxycodone.

Something that often goes unnoticed is that the total quota of hydrocodone for use and manufacturing of Zohydro ER for all of 2014, as allocated by the DEA is less than 1% of the total quantity available of all other hydrocodone products on the market. Similarly, it represents a small fraction of 1% of the quota for the five classes of extended release opioids for 2014. This means the introduction of Zohydro ER can’t possibly create an epidemic similar to what we’re seeing with the introduction of oxycodone. The world has changed as is awareness and policies and procedures regarding prescribing a distribution of opioid.

And our voluntary initiatives we have implemented, which go beyond what other opioid manufactures are currently doing, will also help to mitigate the risk of abuse, misuse and diversion of the product. Scott’s also going to review data on the strengths being prescribed on Zohydro ER.

We believe the repetition of incorrect facts and misinformation about Zohydro ER have resulted in a early singling out our product. We remain committed to ensure that patients suffering from severe chronic pain have access to the FDA approved medication they need, including Zohydro ER in every state nationwide, which is why we continue to pursue legal action in Massachusetts.

We have publicly stated many times that we want to engage with federal, state and local officials to share the real facts and work collaboratively to improve public healthy as it relates to prescribing and the abuse of opioid, the entire opioid categories. Well, we have had face-to-face meetings. Where we have had face-to-face meetings, the results are actually very encouraging; the facts do matter.

Our viewpoints about good prescribing practices for opioids are closely aligned with the FDA, the CDC and the Office of National Drug Control Policy and they believe that all states should follow the federal guidelines for the benefit of both pain patients and the safety of their communities. Many states are doing this and many states have already made very significantly improvements in their prescribing guidelines and the law enforcement practices, which have made a real difference.

BMT intend to make a positive contribution to their efforts. Zogenix and Zohydro ER has been somewhat of a lightening rod for positive and constructive change at the federal level and in many states and we’re very supportive of those changes.

It is unfair and counterproductive to make patients and Zohydro ER the scapegoat for all other products and the problems facing the class. Despite all of this, our team remains focused on our mission to educate prescribers, pharmacists and patients on the product and appropriate use of opioids.

I’m proud of what our team has done. We’ve accomplished a great deal.

I’ll now turn the call over to Scott to review the positive results we had accomplished in our first few weeks with Zohydro ER. Scott.

Scott Shively

Thank you, Roger and good afternoon to everyone. I’m extremely excited to provide an update on the Zohydro ER launch, which began in the first week of March through the efforts of our 150-person team, supported by our extended medical affairs and marking organizations.

As Roger has indicted, we’ve had a solid start to our field activities with Zohydro ER and we believe the quality of our efforts is being well received by the prescribing community. Although there have been some instances where we’ve had physician feedback related to the media coverage, particularly in certain states, in most of the situations we’ve been able to review our educational resources and initiatives to effectively address the concerns of these prescribers. Overall the early acceptance of Zohydro ER by physicians and patients has been very positive.

There were 1,141 Zohydro ER prescriptions in the first quarter of product availability, which began with our early March launch. Since then we’ve seen a steady up-tick with our targeted pain specialist week over week. For the week ending April 25, our holiday week, and the most recent week for which prescription data was availability, there were 660 Zohydro ER prescriptions.

In addition, there are several other key metrics that we are tracking closing to insure the product is appropriately prescribed. For instance, when we look at the prescription data to date, more than 80% of the total prescriptions have been for the lower doses. Those are the strengths between 10 and 30 milligrams. This is very much in line with our expectations that for most patients’ prescribers will initiative treatment at the lower doses.

In addition, approximately 1,000 prescribers now have experienced with Zohydro ER and the vast majorities of these are on our targeted call list. On average, less than 60 doses per prescription are being prescribed, which indicates the use of the medication is consistent with the label.

Also, year-to-date we’ve had over 400 patients who have taken advantage of the access we provide to free marketing cap or discounted medication in states for our educational toolkit and we believe it’s a very positive initial result.

At this state of launch we are very pleased that 75% to 80% of prescriptions are being reimburse by payers, which even includes some Medicare reimbursement under prior authorizations.

In addition, all of our product representatives have been thoroughly trained and certified on Zohydro ER and on providing education and resources to prescribes, pharmacists and patients in key communities. The dissemination and use of these educational materials has exceeded our expectations. Overall, these data points although quite early are good indicators that the product is successfully being prescribed appropriately by the right doctors for the right patients.

Now, let me turn the call back over to Roger.

Roger Hawley

Thanks Scott and thanks to you and the dedicated team. I congratulate your team in supporting responsible commercialization of Zohydro ER into our Medical Affairs Organization for the fantastic job that they’ve been doing during this initial launch period.

In order for us to increase our focus and resources related to these activities, last month we announced a definitive agreement to sell SUMAVEL DosePro to Endo International for $85 million in cash, approximately $11 million in working capital advance and the purchase of finished inventory and $20 million of potential milestone payments.

As we outlined in our conference call, we announced in the agreement, there are several strategic benefits for Zogenix that allows our commercial team to focus on their efforts with Zohydro ER. We have no plans to change the makeup of our sales force, which remains intact. It enables the company to optimize our focus in pain management, including the ongoing development of abuse deterrent formulations of Zohydro ER, which we are committed to as an important next step for all stakeholders.

It allows us to retain ownership of dose per technology, our needle free deliver system, which we believe has significant potential for future growth and development over a very long runway, expanding our own new product, pipeline, pain CMS disorders, along with broader applications for potential partners that can license the technology for their products.

Overall, we are very pleased with this strategic move for the company. We are pleased to have Endo almost ready to engage representing SUMAVEL DosePro with our customers and we expect this transaction to close by the end of the second quarter.

And now, I’ll turn it over to Steve who is going to talk about our development pipeline.

Dr. Steve Farr

Thank you Roger. Before discussing our product pipeline, I’d like to provide an update on our voluntary safety initiatives that we implemented for the launch of Zohydro ER.

We developed a comprehensive safety initiatives in recognizing our responsibility as an opioid company, the balance and needs of patients with chronic pain against the risk of misuse, abuse and diversion of Zohydro ER.

Our voluntary efforts are designed to increase and improve participation of prescribers in education programs, to uphold safe use amongst patients and to implement a rigorous advantage program under the oversight of an independent external safe use for it. I’m proud of the fact that all these elements were up and running before the market introduction of Zohydro ER.

As you know, we also engaged in the development of abuse transformation of Zohydro ER. We recognize for some constituents the importance placed on abuse deterrent formulations for opioid analgesic user. We also agree the FDA recent remarks for the abuse deterrent technologies are not a silver product and the science is still at a very early stage of development.

Sentimental to our approach in abuse deterrent technology is deserving the known safety and efficacy demonstrated for the currency formulation of Zohydro ER in the intended patient population. That is why we are investing in a solution that have incremental benefits to deterrent abuse in the short term, another which may regarded as truly next generation technology for the longer term.

We are very optimistic about our approaches. I’m encouraged by the progress we are making. We will keep you all informed of our progress as we pass critical milestones in development and in regulatory discussions.

Let me switch now to Relday, our proprietary once-monthly subcutaneous formulation of risperidone for the treatment of schizophrenia. Relday has several preferred attributes, including the ability to achieve therapeutic plasma level on the first day of dosing. This simplifies the loading regiment compared to all currently available long acting injection products.

Relday also features once monthly administration subcutaneous dosing, that’s the first for a long acting antipsychotic product and no requirement for reconstitution. These product characteristics are being shown to make it a compelling product candidate in the large and growing market for long acting injectable antipsychotic products.

We are currently conducting the chronic toxicology work required to support the next (inaudible). In addition, we are conducting the manufacturing work for clinical trial supplies. Everything is on track to begin patients’ enrolments and dosing in a multi-dose, pharmacokinetic and safety study in the fourth quarter of 2014 this year.

The study is a power group design in which three dose levels of Relday and a mid dose level of RISPERDAL CONSTA are evaluated in between 40 and 60 patients with schizophrenia. The patients where we see four doses of Relday and will be followed for approximately 20 weeks. This proposition has to report top line data from the study in the third quarter of 2015 and if the results are positive, initiate a phase III study in the first half of 2016.

Well, this is a longer-term development timeline. We believe the results from the multi-dose, PK and safety study will provide a good indication of Relday’s potential and provide significant validation for the program.

And now, I’ll turn the call over to Ann for a financial update.

Ann Rhoads

Thanks Steve. During the course of our discussion, I’ll be referring to today’s press release and to the attached unaudited statements of operation in the balance sheet. I will be rounding numbers for purposes of this call, so please refer to these documents for the precise figures.

Total net revenue for the first quarter of 2014 was $7.7 million, which was up 10% from $7 million in the first quarter of last year. Total revenues for the first quarter of 2014 includes net product revenue on sales of Zohydro ER and SUMAVEL DosePro, along with service and other revenue generated from our co-promotion of Migranal.

The company began commercializing Zohydro ER in March 2014, with recognized revenue based on product dispensed through patient prescriptions as estimated by Source Healthcare Analytics. As such, the net product revenue recognized in the first quarter was limited with a $286,000 recorded launch.

As of March 31, 2014, the company had $6 million in deferred revenue for Zohydro ER sold to wholesalers in the first quarter, but not yet dispensed through patient prescriptions. Gross-to-net sales deductions will be recorded at the time prescription units are dispensed.

Net product revenue on sales of SUMAVEL DosePro for the first quarter was $6.5 million, compared to $6.9 million in the first quarter of 2013. Service and other revenue for the first quarter 2014 was $904,000, which was comprised primarily of fees from Valeant Pharmaceuticals for the company's co-promotion of Migranal Nasal Spray, which began in August 2013.

Our product gross margin improved to 50% from the first quarter of 2014, compared to 40% in the first quarter of 2013, with the increase primarily due to lower manufacturing cost per unit and higher net selling price for SUMAVEL DosePro.

Research and development expenses in the first quarter in 2014 were $3.5 million, a 9% increase over the first quarter of 2013, primarily due to an increase in development expenses for Zohdyro ER abuse-deterrent formulations and Relday development expenses.

Selling, general and administrative expenses for the first quarter 2014 were $27.7 million, an increase from the first quarter of 2013. The increase in selling, general and administrative expenses was primarily the result of the expansion of the company's sales force to 150 sales representatives from 47 representatives that we had at the end of 2013, and the addition of a medical affairs team. It also reflects the implementation of the FDA required ER/LA opioids REMS program and the company's voluntary initiatives to support the responsible commercialization of Zohydro ER.

Other income for the first quarter of 2014 was $6.3 million compared to other expense of $5.9 million in the first quarter 2013, reflecting non-cash mark-to-market adjustment for the fair value of the company's outstanding warrants.

Our net loss for the first quarter of 2014 was $20.9 million or $0.20 per share on a diluted basis, compared to a net loss of $21.1 million or $0.21 per share in the first quarter of 2013. Non-GAAP loss for the first quarter 2014 adjusted for certain non-cash or non-recurring items was $0.20 per share compared to $0.17 per share in the first quarter of 2013. The non-GAAP financial results are detailed in the table included in our financial results press release issued today.

We finished the quarter with cash and cash equivalents of $50.7 million and as previously announced, we expect to receive $85 million in cash in the second quarter upon the closing of the sale of SUMAVEL DosePro to Endo International. Also at closing, Endo International will purchase the finished goods inventory and support the manufacturing operations with a working capital loan, which in total will add another $11 million to our balance sheet.

In conjunction with the sale of SUMAVEL DosePro, we plan to use approximately $40 million of the proceeds to repay our debt obligation to HealthCare Royalty Partners. This will eliminate the ongoing quarterly royalty obligation and scheduled principal repayments. On a pro forma basis, assuming the closing of the Endo transaction and the debt repayment, our cash position at the end of the first quarter would have been approximately $100 million.

The company is reaffirming its upbringing expense guidance, which we expect to be in the range of $110 million to $120 million in combined research and development and selling, general and administrative expenses in 2014. This includes an expected decrease in marketing expenses related to SUMAVEL DosePro upon the closing of its sale to Endo and these are being offset by legal and PR expenses related to Zohydro ER.

Because we’re still early in the launch of Zohydro ER, the company is not providing revenue guidance at this time; however, the company is providing guidance on Zohydro ER expected gross margins to be in the low 80’s on a percentage basis. Additionally we will report royalty expenses for royalties payable to Alkermes at a mid single-digit percentage on net Zohydro ER sales.

The company also expects to record revenues for the ongoing manufacture and supply of SUMAVEL DosePro to Endo at a low single-digit markup to its cost of manufacturing, with such costs being recorded as a component of cost of goods sold. Also, subsequent to the closing, the company will not record ongoing interest expense on its debt obligation to HealthCare Royalty Partners, which will be repaid at the closing.

I’ll now turn the call back over to Roger.

Roger Hawley

Thanks Ann and Steve. Overall it’s been a transformational start to the year for Zogenix’s. We were not expecting the amount of publicity that our company or our product would receive in the first quarter, but we are very pleased with our launch efforts and the hard work of our entire organization, supporting a progressive increase and precisions with experienced thought care professionals, who responsibly treat people suffering with severe chronic pain.

Although we made a significant change by selling SUMAVEL DosePro to Endo, we believe this puts us in a better position to focus on the pain business and advance our product pipeline in both pain and CMS disorders, including two abuse deterrent formulations of Zohydro ER and Relday, our once monthly long acting anti-psychotic.

In closing, I want to thank our shareholders, our dedicated employees, our prescribers and the people who have begun using our product and their support during the core, for helping us to clarify the facts regarding our company and our new product. I want to reiterate our commitment to the responsible commercialization of Zohydro ER and to working with the broader community we maintain access to our medication for severe chronic pain patients, while also working to address solutions that will make a difference to issues related to the mis-use of opioids.

I’d now like to turn the call over to the operator to begin the question-and-answer period. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question is from the line of Jason Gerberry, Leerink Partners.

Chris Kuehnle - Leerink Partners

Hey guys, its Chris Kuehnle in for Jason. Thanks for taking my questions. I have a couple of quick ones on Zohydro. First up, with respect to the abuse deterrent formulation, you mentioned a short-term solution and a long-term solution. Could you give us a broad strokes understanding of maybe the timing around those two and then with respect to the short term solution, is that going to have dose dumping of these deterrent capabilities and then I have a follow-up after that.

Dr. Steve Farr

Hi, this is Steve. Just to address your question on timing first. We said and this is true with today that we are aiming for the long-term objective to be approved in the 2016 timeframe. So nothing has changed there and we’re doing everything that we can to keep that on track if not to accelerate the progress as we move forward.

With respect to the shorter term, as I’ve mentioned before, that’s an improvement or a change in the formulation that we are developing with Alkermes. We feel very good about where we’re at. We’re still doing the final testing on that particular product, so I can’t really comment on the specific questions you had, but we feel enthusiastic about where we’re at and the fact that it will provide a truly incremental benefit to mitigate misusing and abuse.

Chris Kuehnle - Leerink Partners

Great, thanks. And then just a quick follow-up. You mentioned encouraging results coming out of the face-to-face meetings. Could you maybe just provide a little more clarity on with whom you’re meeting? Are these physicians, payers or are these public officials?

Roger Hawley

Actually it’s been all of the above. We have been very busy, the ones who make the press and the headlines are the ones where quite honestly we weren’t even given a chance to speak to them in advance. They took action on their own.

We’ve actually been in very good shape, is where we have actually visited face-to-face with people, policy makers at the state and federal level. We have found those meetings, literally every one to be very productive and constructive. There is a significant difference in the amount of knowledge and facts depending upon the background of the people that we get an opportunity to engage with and quite candidly some are open to learning and they understand the importance of everyone’s role in this entire process.

There is no one policy, one silver bowl, one ADT form that’s going to solve the challenges that we all face in trying to serve both chronic pain patients and those who unfortunately become addicted to these medications and then begin to abuse and misuse them.

So what we have found is that when we shared information, and I’ll just give you one example, we spent two days going through all the various policies and procedures that we have implemented, including our voluntary safe-to-use initiatives with our safe use board. At the end of two days we were given three recommendations for additional things that we should consider and we have done that.

When we have reviewed things such as all of the security around our distribution from the time the product leaves the factory to our 3PL to shipments to wholesalers, to how decisions are made about, who we ship to and sell to and all the controls in place around that. Everyone has reviewed it, has never made one suggested change. In fact what we hear is we are on top of this. We’re using state of the art technology and procedures and processes.

So I would love to say that we’ve been given a lot of new insights, but candidly we have gone out of our way to spend well over a year preparing for this launch as far as our internal processes, controls, safe use initiatives. We think we’ve raised the bar in commercial practices. Some states actually see that, understand it and I hope that more companies will actually follow what we’re doing.

So when we get a chance to engage with knowledgeable professionals, the outcome has been very satisfactory and that includes the policy makers in Washington DC and at state levels. I don’t want to get into the exact meetings that we’ve been to, but I will say, there have been a lot of them.

So myself, Steve Farr, Scott Shively, Brad Galer and other people in medical affairs, medical education, we have had a lot of people. Unfortunately lawyers as well will need it, but we are going to protect the patients right as best we can in the states that want to basically put barriers in place, to keep patients and physicians from gaining access to our product.

So we’re hopeful that more and we’re actually seeing more of this recently, more people engaged positively in a way to try to learn and understand and when they do, I think they believe that we can play a constructive role and be a partner in the overall objectives, along with everyone involved in this from the FDA to the DEA to local and state policy makers and law enforcement. So we’re going to do our part and try to be constructive in everything we do. When we get that chance we’ll have very good outcomes.

Chris Kuehnle - Leerink Partners

Great, thanks guys.

Roger Hawley

You bet.

Dr. Steve Farr

Thank you.

Operator

(Operator Instructions). Your next question is from the line of Akiva Felt, Oppenheimer.

Akiva Felt - Oppenheimer

I have a few questions about the Zohydro controversy. First, did you really see a significant headwind, sort of early launch efforts due to the cost and media attention? Then did you see an improvement there when the FDA posted a rebuttal to those media talking points? And then finally, do you see a silver lining here, in the sense that the controversy will likely die down to some extent, but awareness of Zohydro is probably a lot higher than it would have been otherwise, had it not been front and center for the last couple of months.

Roger Hawley

Yes, thanks. Very good questions and challenging to answer as far as facts. I can give you some of my points of view and opinion. But I can say that after the approval process that we went through, we thought most of the anxt (ph) was behind us. However, right after approval we were contacted by some other companies that were interested in Zohydro ER, which we were not interested in working with them and so an orchestrated campaign started and I would say the first sign we really had was the state attorney general letters and we believe we know who was behind that.

And then there was another group that had a different motivation and interest that began their own campaign. Again, orchestrated, planned, consistent beating of the drum, and to be candid, I’m not sure either one of those parties is going to give up, so I’m expecting more of the same if you will and we’re doing our best to deal with that behind the scenes.

So we weren’t anticipating all of this and I would say this, if it is good long term, it’s a price that no one should had to pay. We wanted to do a quiet, conservative, thoughtful launch, in a low-key fashion with a small team of 150 people. We thought that was the right thing to do for the product and its my own personal belief that all of this publicity and noise about super potent drugs and 10 times more powerful, all of this noise quite honestly only served to really create a worse situation, both for patients and I think actually for people who are addicted.

So I don’t see any good that comes out of this for anyone. I also believe that it’s totally unprofessional. This is a medical product and this is the medical supply chain that is critical to patients with chronic pain and all of this in my opinion could have been done in a much more professional, dignified manner.

So I think we’re not totally out of the woods, but as I said, we do know now that when we get a chance, whether its in front of a judge or in front of knowledgeable policy makers, if the truth comes out and the fact that the problem of abuse and misuse actually goes far beyond extended release opioids and includes immediate release opioids and the one I would say has already happened.

People accuse us of being the next oxycontin, I would say that’s already occurred and it’s the 30mg immediate relief oxycodone, which has now risen to about five million prescriptions per year. So there are many challenges in this entire process and we want to be part of the solution, not part of the problem. Including the development of abuse deterrent formulation.

Scott, maybe you should say something from the commercial angle of this.

Scott Shively

Yes, I just to the question about the headwind, the instant thing here is that amongst our prescribers, our target position base, we’ve had a very, very positive reception of the product and the messaging around it and the clinical need for it and their practices and also very good feedback from patients.

So overall, I have to say we’ve been very pleased with the launch and in the instances that we have had physician discussing concerns about some of the media noise and so forth, by going through our educational resources that our team has been trained to provide, we’ve been able to overcome, most of the time overcome the concerns people have brought up. So I think we’re in a very good spot in terms of the actual commercial launch of the product.

Akiva Felt - Oppenheimer

Thanks.

Operator

At this time I’m showing no further questions in the queue. I would like to turn the conference back over to Mr. Roger Hawley for any closing remarks.

Roger Hawley

All right, well thanks. We appreciate everybody joining the call today and we look forward to an update on our second quarter call. Thanks a lot.

Operator

Ladies and gentlemen, that concludes today’s conference. We thank you for your participation. You may now disconnect. Have a great day.

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