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Horizon Pharma, Inc. (NASDAQ:HZNP)

Q1 2014 Results Earnings Conference Call

May 09, 2014 08:00 AM ET

Executives

Bob De Vaere - EVP and Chief Financial Officer

Tim Walbert - Chairman, President and CEO

Tod Smith - EVP and Chief Commercial Officer

Analysts

Annabel Samimy - Stifel

Difei Yang - R.F. Lafferty

Charles Duncan - Piper Jaffray

Liisa Bayko - JMP Securities

Operator

Good day, ladies and gentlemen and welcome to the Horizon Pharma Incorporated First Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. As a reminder, today's conference call is being recorded.

I would now like to turn the conference over to your host Mr. Bob De Vaere, Executive Vice-President and Chief Financial Officer. Please go ahead sir.

Bob De Vaere

Thank you. Good morning and welcome to Horizon Pharma's first quarter earnings call. This morning we issued a press release providing the details of the company's financial results for the first quarter ended March 31, 2014, an update on DUEXIS, VIMOVO and RAYOS as well as other recent business highlights. The press release is available on our website at www.horizonpharma.com.

Leading the call today will be Tim Walbert, our Chairman, President and Chief Executive Officer who'll provide a corporate update; Tod Smith, Executive Vice President and Chief Commercial Officer, who will provide an overview on the commercial performance of DUEXIS, VIMOVO and RAYOS. And I will provide an overview of the financial highlights from the first quarter before turning the call back over to Tim for closing remarks. Also on the call are Bob Carey, Executive Vice President and Chief Business Officer and Chris Murphy, Vice President Business Development.

As a reminder, during today's call we will be making certain forward-looking statements including financial projections and the expected timing and impact of future events. These statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2013 subsequent quarterly reports on Form 10-Q and our current report on Form 8-K that we filed this morning.

You are cautioned not to place undue reliance on these forward-looking statements and Horizon disclaims any obligation to update such statements.

Further we will also discuss non-GAAP financial measures during this call to help you understand our underlying business performance. Reconciliations of these non-GAAP financial measures to the equivalent GAAP measures are provided in the press release which has been posted on our corporate website.

I’ll now turn the call over to Tim.

Tim Walbert

Thanks, Bob, and good morning everyone and thanks for joining us today. We’re very pleased with the results of the first quarter which demonstrate the acceleration of our business model. On a non-GAAP basis the first quarter of 2014 was the first profitable and cash flow positive quarter for the company with record revenues from our base business which includes DUEXIS, VIMOVO and RAYOS. Please refer to our press release this morning for a discussion of the non-GAAP adjustments as Bob mentioned.

For the first quarter total net revenues were $51.9 million adjusted EBITDA for the quarter was $11 million after excluding the impact of $4 million in acquisition-related expenses due to Vidara. Adjusted non-GAAP net income was $11 million or $0.16 non-GAAP basic earnings per share and $0.13 non-GAAP diluted earnings per share. For the first quarter gross to net across our business as expected was 43.7% and gross profit was 95% [including] intangibles and depreciation.

Again as expected the DUEXIS gross to net percentage was at the higher range among our products in the first quarter and VIMOVO was at the lower range. As we stated in our fourth quarter earnings call, we expect gross to net revenue reductions in the mid 40% range across our business in 2014 and gross profit margins in the low 90% range excluding intangible amortization. We ended the quarter with $130.4 million in cash and cash equivalents and then on adjusted basis we have $4.3 million in cash flow from operating activities in the quarter. As a result of the strong performance in the quarter, we have increased our net revenues and adjusted EBITDA guidance for 2014.

We now expect revenues for 2014 to be in the range of $270 million to $280 million and adjusted EBITDA of $80 million to $90 million this assumes the Vidara transaction closes by July 31st of this year and includes ACTIMMUNE results for the period of August through December of 2014.

The net revenue range includes $245 million to $255 million in net revenues for the company’s base business of DUEXIS, VIMOVO RAYOS and LODOTRA versus our original guidance of $190 million to $205 million.

I will now walk to a performance update on DUEXIS, VIMOVO and RAYOS for the quarter and provide a brief recap and update on the details around our pending Vidara acquisitions. The early performance of VIMOVO is required in November last year has exceeded our expectations including the results for the first quarter. Total net sales from VIMOVO in the first quarter of 2014 was $34 million. IMS Health data shows the new prescriptions for VIMOVO increased 10% in January versus December, 18% in February and 15% in March versus the prior month respectively.

And the installed base of prior VIMOVO prescribers are very responsive [to active] promotions for the time in years and the commercial business outgrow the expected decline of the government and cash business. We believe the new prescriptions for VIMOVO have increased 54% versus the week prior to the acquisition in November 2013. With regard to VIMOVO intellectual property there are eight issued VIMOVO U.S. patent solutions in the FDA’s Orange Book. These patents expire at the latest in February 2023 and additional three U.S. patent applications have been submitted to the U.S. Patent Trademark Office since we acquired VIMOVO. Two of these were filed as track one applications, which are all under accelerated examination.

Additionally, in February 2014, we filed a citizen petition with the FDA requesting that the FDA require that any ANDA applicant includes with its ANDA certain data adequate to show that the timing of release of naproxen from the generic product is equal to the timing of release of naproxen included within VIMOVO or alternatively that they provide data for clinical trials demonstrating that the proposed product is not resolved in more frequent and more severe gastrointestinal adverse events than the clinical trials showed with VIMOVO.

The FDA has yet to respond to our citizens’ petition. The ANDA Paragraph VI litigation is ongoing. We recently met with the judge of our syndicates and he instructed us along with Dr. Reddy’s to meet with the corporate plan appointed mediator on May 14 to work towards a possible settlement. The judge has not set a trial date yet and at this point we will continue to keep you updated as we progress throughout this process.

The DUEXIS total prescriptions increased 36% in the first quarter of 2014 to 53,368 versus a little over 39,000 in first quarter of 2013. DUEXIS first quarter 2014 total prescriptions were flat versus the fourth quarter of 2013, which we are pleased with given the market events which have typically occurred in the first quarter and the training of our sales forces as they prepare to launch VIMOVO. DUEXIS net revenues in the quarter, first quarter of 2014 were $13.9 million versus $4.9 million in the first quarter of 2013.

Gross to net reductions of DUEXIS increased in the first quarter 2014 primarily due to higher co-pay costs as a result of the company’s strategy of keeping patients on the drug in spite of higher deductibles and managed care changes at the beginning of the calendar year, as well as higher managed care rebates in the quarter driven by channel mix. Moving forward we expect gross to net reductions of DUEXIS to moderate throughout the year.

With RAYOS we continued to be encouraged by the feedback and growing acceptance by both rheumatologists and patients over the last several quarters. According to IMS data, total prescriptions were just under 3,000 for the first quarter of 2014 compared to 1,152 in the first quarter of 2013. RAYOS total prescriptions increased 4% in the first quarter versus the fourth quarter of 2013, with strong acceleration in the month of March. Total net sales in the first quarter of 2014 for RAYOS were $3.3 million versus net sales of $0.3 million in the first quarter of 2013 and $2 million in the fourth quarter of 2013 as well.

Regarding RAYOS intellectual property, we announced in April that the U.S. Patent & Trademark Office issued an additional Notice of Allowance covering RAYOS. Once issued this patent will be the sixth U.S. patent to be listed in the Orange Book for RAYOS will expire in 20124. We also have additional applications related to RAYOS pending in the U.S. and around the world.

On October 3, 2013 we filed the citizen’s petition with the FDA requesting that the FDA not approved any ANDA or generic versions of RAYOS, unless that ANDA applicant met certain conditions regarding the drug release with bioavailability.

In March 2014 the FDA responded to our citizen’s petition and has graded our request that the FDA recommends ANDA applicants conduct bioequivalent studies under fed and fasting conditions.

Watson and Paragraph IV litigation is ongoing and no [Markman] trial date has been set at this point in time but is likely to occur in the second half of 2015.

As you know, we announced on March 19th that Horizon will acquire Vidara Therapeutics in a reverse merger for stock in cash valued at approximately $660 million at the time of announcement, including $200 million in cash subject to certain adjustments.

The combined companies to be named Horizon Pharma PLC will have four marketed products in the United States, which includes the addition of Vidara's products ACTIMMUNE, a bioengineered form of interferon gamma-1b which had $58.9 million in net revenues in 2013. ACTIMMUNE is a biologic approved for Chronic Granulomatous Disease also known as CGD in Severe Malignant Osteopetrosis or SMO and sold through a specialty sales force with orphan and biologic experience.

Beyond these approved indications, we see additional potential opportunities for ACTIMMUNE, which we will continue to fully assess in the coming months.

We continue to make progress in the activities related to the Vidara acquisition. As stated on our prior conference call, to complete the transaction we'll file proxy statement and seek approval from our shareholders to the transaction. Vidara will file an S-4 registration statement to register the shares to be issued to Horizon stockholders. Closing of the transaction will be subject to customary closing conditions, regulatory approvals and Horizon’s stockholder approval, as well as the S-4 registration statement being declared effective by the SEC.

We now announced in mid April that we received notice of termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. We currently expect to be in a position to close this acquisition during the summer period.

The addition of ACTIMMUNE complements our business model of targeted promotion specialists as well as primary care physicians. Combined companies’ strategy will be to continue to our leverage our assets, focus on our growth and identify new opportunities. Our focus remains on driving revenue and cost of our existing products pursuing additional accretive transactions. We continue to explore new business development opportunities, both within our differentiated products and/or company with targeted approaches regardless of therapeutic area.

At this time, I’ll turn the call over to Todd to review our commercial highlights for the quarter.

Tod Smith

Thanks Tim and good morning everyone. Let me first start by saying that we’re very pleased with the results in the first quarter of 2014 in our base business and the performance of our commercial organization. As we discussed in the last earnings call, we’ve expanded our primary care sales force from 150 to 250 representatives and our specialty sales force from 25 to 40 in connection with the acquisition of U.S. rights of VIMOVO November 2013, and we began selling VIMOVO as our third product in January of this year.

As Tim mentioned, total prescriptions for DUEXIS increased by 36% in the first quarter of 2014 to 53,368 scripts versus 39,365 scripts in the first quarter of 2013. Total DUEXIS prescriptions dipped in January and February of the first quarter of this year due to the transition and expansion of the commercial organization in connection with VIMOVO also expected beginning of the year insurance changes, deductible resets and lower than average call activity while training the expanded sales force along with the impact from severe weather that reduced selling days in the quarter.

However, the first quarter ended on a strong note, new prescriptions growth of 14% and total prescription growth of 15% in March 2014 versus February. Additionally, the continued adoption of the Prescriptions Made Easy program or PME reinforces our focus to improve the prescribing experiences from both the physician and patients.

At the end of the first quarter, approximately 30% of DUEXIS prescriptions were filled through the PME program. As of the first quarter of 2014, we have also integrated both VIMOVO and RAYOS into the PME program. The work of our sales force but accelerated number of physician targets prescribing DUEXIS is lead by the end of the first quarter of 2014 versus fourth quarter of last year to a 16% increased in the number of unique prescribers and a 19% increase in the number of unique adaptors, when adapter again as the [physician rose] DUEXIS prescription more than five times a week. IMS Health data shows that every week in last 20 months we have averaged over 200 new prescribers for DUEXIS.

So as we look at the rest of the year we have the benefit of the sales organization at full force now from few months having worker territories after integration training and launching in the first quarter. Additionally in the first quarter of the year insurance switching and investable resets will always required the most copay support to build new patient starts and create confidence with physicians driving our products throughout the rest of the year. Moving forward we anticipate the DUEXIS growth now will continue to be at the higher range of our guidance with VIMOVO and RAYOS in the lower end of guidance.

Now onto VIMOVO the integration across commercial regulatory and manufacturing was completed about 70 days after completing the acquisition in November 2013. All the prescriptions for VIMOVO in the first quarter of 2014 according to IMS Health were 69,368 scripts.

Initials VIMOVO launch result without commercial organization had exceeded our expectations as our sales force has driven a significant increase in new and total prescriptions among commercial players, rolling through the loss of the Medicare and Medicaid and cash business. As Tim mentioned the growth in sequential month-over-month new prescriptions along with total prescription growth of 12% in March versus February continued to demonstrate the value of our unique business model.

As a matter of fact we have grown weekly new prescriptions as Tim mentioned about 54% versus the week prior required in VIMOVO. So we continue to aggressively focus on promotion of VIMOVO against the prior prescribers half of which were lost by the time we acquired VIMOVO last year.

With RAYOS total prescriptions were 2,945 scripts in the first quarter of 2014 compared to 1,152 scripts total prescriptions in the first quarter of 2013. This is an increase of 156% growth. RAYOS grew total prescriptions by 4% in the first quarter versus the fourth quarter of last year but again March showing a strong finish to the quarter with new prescriptions growing 11% versus February and total scripts growing 7%.

But for each of our products are comprehensive co-payment plan ensures that patients who need our products receive it in affordable price. In early May we moved all products to a zero dollar copay for commercial insured patients this allows our salesforce to focus on selling the clinical value of our product while ensuring the prescribers, to prescribers that patients will get the lowest possible cost reducing the risk of the patient not getting the prescription the prescribers has written. So we anticipate as our new comprehensive copay program is fully in place that approximately 80% of patients should have a zero dollar copay when a co-prescription for DUEXIS, VIMOVO or RAYOS.

So thanks again for your time I will now turn the call back over to Bob.

Bob De Vaere

Thanks Todd. During the three months ended March 31, 2014 gross and net sales were $92.2 million and $51.9 million respectively compared to $10.7 million and $8.7 million respectively during the three months ended March 31, 2013. As Tim mentioned the company reaffirmed its expectation of mid 40% gross and net discount across its portfolio in 2014. VIMOVO gross and net sales during the first quarter of 2014 were $50 million and $34 million respectively after deducting sales discounts and allowances of $16 million which included copay assistance cost of $4.6 million.

The company begin promotion of VIMOVO with its rheumatology sales force on November 26, 2013 and began commercialization to its primary care salesforce in early January 2014.

DUEXIS gross and net sales during the first quarter of 2014 were $36.4 million and $13.9 million respectively after deducting sales discounts and allowances of $22.5 million including co-pay assistance costs of $11.3 million compared to gross and net sales of $6.7 million and $4.9 million respectively during the first quarter of 2013.

The increase in DUEXIS sales during the three months ended March 31, 2014 compared to the prior year period was primarily the result of prescription volume growth driven by expansion of the field sales organization and product price increases implemented during the course of 2013 and in January of 2014.

DUEXIS sales discounts and allowances increased from the prior year period and from the fourth quarter of 2013 primarily due to higher co-pay costs as a result of the company's strategy of keeping patients in spite of higher deductibles and managed care plan changes at the beginning of the calendar year and higher managed care rebates in the quarter driven by channel mix. The company expects a moderating of DUEXIS sales discounts and allowances in the coming quarters as patients meet their plan deductibles and co-pay costs are reduced.

RAYOS gross and net sales were $5.1 million and $3.3 million, respectively, during the first quarter of 2014 after deducting sales discounts and allowances of $1.8 million, including co-pay assistance costs of $0.8 million, compared to gross and net sales of $0.4 million and $0.3 million, respectively, during the first quarter of 2013. The increase in RAYOS sales during the three months ended March 31, 2014 compared to the prior year period was primarily attributable to increased volume driven by the expansion of the company's sales force focused on RAYOS and product price increases implemented during the course of 2013 in January of this year.

LODOTRA growth in net sales during the first quarter of 2014 was $0.7 million compared to growth in net sales of $3.6 million and $3.5 million respectively during the first quarter of 2013. The decrease in LODOTRA sales during the three months ended March 31, 2014 compared to the prior year was a result of timing of product shipments for the company's European distribution partner Mundipharma. And just as a reminder, LODOTRA sales to Mundipharma occurred at the time the company ships products based on Mundipharma’s estimated requirement and accordingly LODOTRA sales are not linear or tied to Mundipharma sales to the market and can fluctuate from quarter-to-quarter.

Net loss for the first quarter of 2014 on a GAAP basis was $206.3 million or $3.07 per share based on 67,138,463 weighted average shares outstanding compared to a net loss of $22.2 million or $0.36 per share based on 61,939,822 weighted average shares outstanding during the first quarter of 2013.

During the first quarter of this year, the company reported $204 million non-cash charge related to the increase in fair value of the embedded derivatives associated with the company's convertible senior notes. The increase in fair value was primarily due to a $7.60 per share increase in the market value of company's common stock between December 31, 2013 and March 31, 2014.

Non-GAAP net income for the first quarter of 2014 was $6.9 million or $0.10 per basic share and $0.08 per share diluted compared to a non-GAAP net loss of $18.7 million or $0.30 per share basic and diluted during the first quarter of 2013. Excluding the expenses associated with the Vidara acquisition, adjusted non-GAAP net income for the first quarter of 2014 was $11 million or $0.16 per share basic and $0.13 per diluted share. And you can refer to the section of this morning’s press release titled note regarding use of non-GAAP financial measures for additional information.

The company had cash and cash equivalents of $103.4 million at March 31, 2014. Excluding payments made in connection with the Vidara acquisition, company generated $4.3 million in cash from operating activities during the first quarter of 2014. The company also generated $24.2 million in cash during the first quarter of 2014 from financing activities primarily as a result of proceeds from warrant exercises.

Gross profit margins improved to 85% of net sales during the first quarter of 2014 from 57% in the first quarter of 2013 including the impact of depreciation and intangible amortization expense. Excluding depreciation and intangible amortization, adjusted gross profit margins were 95% in the first quarter of 2014 compared to 76% in the first quarter of 2013. Higher average selling prices, product sales mix and the increase in net sales which spreads fixed amortization amounts over a larger base were primarily responsible for the improvement in the current period.

At the time of the VIMOVO acquisition, the company estimated the fair value of contingent royalty payable proposal using an income approach under the discounted cash flow method which included revenue projections and other assumptions made by the company to determine the fair value. If the company were to over perform or underperform against its original revenue projection (inaudible) to make changes to the assumptions, company would be required to reassess the fair value of the contingent royalty stabled proposal.

Any adjustments to fair value would be recorded in the period such adjustments was made as either a charge or a credit to royalties payable which is part of cost of goods sold in accordance with the company’s established accounting policies and could impact the reported gross margins and operating results in the period the adjustment was made.

Total operating expenses increased to $42.7 million in the first quarter of 2014 from $23.5 million in the first quarter of 2013, $12.4 million of the increase was attributable to sales and marketing with the majority driven by the expansion of the company’s field sales force as a result of the VIMOVO acquisition.

General and administrative expenses increased $6.3 million in the first quarter of 2014 versus the first quarter of 2013, with approximately $4 million related to the Vidara acquisition.

Net interest expense increased $0.6 million to $4.3 million during the three months ended March 31, 2014 from $3.6 million during the three months ended March 31, 2013. The increase in interest expense was primarily attributable to higher debt discount expenses of $1.4 million offset by $0.8 million in lower interest expense as a result of lower borrowing cost under the company’s 5% convertible senior notes through 2018 compared to borrowing cost under the company’s prior senior secured loan facility which was retired in November 2013.

I will now turn the call back over to Tim.

Tim Walbert

Thank you, Bob. As we’ve been stating for some time, our goal has been to position Horizon to achieve strong financial performance through our base business, pursue new opportunities to grow our business to a profitable specialty pharmaceutical company. Our first quarter results demonstrated the strong progress against our objectives and we’re very excited to continue to take advantage of our commercial infrastructure and deep marketing experience in future transactions that we’re pursuing. I’m also very excited about the continued progress of DUEXIS, VIMOVO and RAYOS and look forward to the addition of ACTIMMUNE to our portfolio this summer.

We thank you for your continued interest and support of the company. We’re now happy to open the call to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And our first questioner is Annabel Samimy of Stifel. Please go ahead.

Annabel Samimy - Stifel

Hi, thanks for taking my call and congratulations on the quarter. I had a couple of questions on DUEXIS, obviously we saw it flattening in the quarter and you explained it pretty well. I just want to understand if there is a dynamic a little bit now you’ve launched VIMOVO of some competition between the products I know that you haven’t -- you said that there is no overlap in the past where there is only 30% overlap. But is that what you are seeing out in the field now that you are out there? And is there any competitive dynamics there? And I have got some follow-ups.

Tim Walbert

Hi Annabel thanks for the comments. When we look at the competitive landscape, if you look at the total prescriptions of the two products it’s about 100,000 in the quarter, which is less than 1% or 2% of the entire market. So, we don’t see that as a competitive aspect there. We did the transaction announced in November of last year. We have stated that there was only about 30% overlap between prescribers of DUEXIS and prescribers of VIMOVO. As we've gotten into market, we’ve seen that hold up. The majority of DUEXIS prescriptions are coming from former ibuprofen users and the majority of VIMOVO prescriptions are coming from naproxen or physicians who had prescribed VIMOVO in the past. So we haven't seen any competitive differences. The major impact where DUEXIS prescriptions flat in the quarter was driven by time out of territory for training and preparation for the launch of VIMOVO.

Annabel Samimy - Stifel

Okay. And I guess that timing and preparation, didn’t impact VIMOVO at all either? So is it -- I guess I'm not understanding why it didn’t impact VIMOVO there off the territories?

Tim Walbert

Two different dynamics, with VIMOVO you had a situation where the product had not been actively promoted for several years other than a small contract sales force. So you had a product that had no promotion for the last six months that went through a 150 representatives selling the product on January 4th I think it was. And that dynamic of going from no promotion to some contrasts with DUEXIS promotion declining is why you saw the rapid uptake with VIMOVO. And also a key dynamic is that over 90% of patients taking VIMOVO were paying less than --about zero co-pay versus a much higher rate under AstraZeneca.

So I think all those dynamics allowed us to rapidly accelerate VIMOVO. And if you look at March prescription growth as Todd reviewed about DUEXIS, and VIMOVO had strong end of the quarter growth and continued that growth into April.

Annabel Samimy - Stifel

Great. Okay then just quickly on DUEXIS. So we know that there is a big growth in that discount this quarter for the deductable issues. Is this something that reverses -- not reverses, but corrects itself completely in the second quarter or do we have some lingering discounts in the second quarter and then by the tail-end of the year you should average at mid-40s? And I just want to understand that, progression of that discount.

Tim Walbert

So, we expect mid 40s across our portfolio of products. With DUEXIS, we definitely see it moderating on a quarter over quarter basis. The copay, buy down is most prevalent in January, February we saw that reducing, it’s early March. But we expect relative to our mid 40% guidance, DUEXIS to be on the higher end and VIMOVO and RAYOS to be on the lower end.

Annabel Samimy - Stifel

Okay. And then one bigger question, I think just recently we've seen some new tax prefers or some senators trying to deal with the full tax conversion possibly (inaudible) about 50% and trying to retroactively apply it to May of 2014.

So, I know that things don't get through Congress very quickly, but maybe you can just talk about that and the potential for something to be legislative that’s retroactive?

Tim Walbert

So, what Annabel is referring to is a bill set out by a few congressmen over the last few days that in the bill they talked about having a flat tax rate of I think 24% for corporations and raising the [tax] to 50% versus 20% ownership by the Target. As we look at this, first of all the bill in its current form is -- undertakes a wide tax reform that we believe is an arduous task that will be completed before the summer break and for Congress. And as we look at it, we feel very confidence that our transaction which was fully supported by the great efforts of Vidara organization driving just under $60 million in revenues and significant EBITDA in 2013. So, we feel strongly that the base business of ACTIMMUNE supports the transaction. There are number of rules that are in place that we think put us in a good position to complete this transaction. And while there is a lot of noise and media that in some ways make scare people from doing future deals, we see a low likelihood of any bill being successful and even less likelihood that any bill that would have a retroactive aspect would be passed in Congress.

Annabel Samimy - Stifel

Okay, great. Thank you.

Operator

And our next questioner is Difei Yang of R.F. Lafferty. Please go ahead.

Difei Yang - R.F. Lafferty

Good morning. Thanks for taking my question and first of all congratulations on the great Q1. Just a couple questions, the first one is related to DUEXIS growth net adjustments. You probably have talked about it but I missed the number. What was the gross to net adjustment in Q1?

Bob De Vaere

The total was about $22 million. And as we said it was at the higher range driven by higher co-pay costs due to insurance switches as well as higher deductibles for patients.

Difei Yang - R.F. Lafferty

Just a quick follow-up to that, so how does that work at a pharmacy level; does that mean the coupon just as patients pay at demand out of pocket and then you will basically use the rest of the copay, is that…

Bob De Vaere

No, it has nothing to do with retail; it is primarily to our Prescriptions Made Easy program of which 30% of our prescriptions go through or the patient doesn’t have coverage or by that copay down and ensure they get the drug knowing that they’re going to continue on DUEXIS and begin to -- method deductable and begin to have their insurance cover the product. So it’s not a retail activity.

Difei Yang - R.F. Lafferty

Thank you. And then moving onto VIMOVO, we’ve seen that revenue up $34 million; would you help us [lead] between share demand versus inventory build at a wholesale level?

Tim Walbert

As we look at VIMOVO that share demand in fact inventory levels for VIMOVO are lower than DUEXIS and RAYOS because of the strong demand is kind of exceeded wholesalers’ expectations and stocking. So we see VIMOVO days on hands increasing as time goes on. So first quarter was solely driven by -- demand driven by our sales force and not by an inventory.

Difei Yang - R.F. Lafferty

Thank you, congratulations again.

Tim Walbert

Thanks Difei.

Operator

Our next question is from Charles Duncan with Piper Jaffray. Please go ahead

Tim Walbert

Hey, Charles.

Charles Duncan - Piper Jaffray

Good morning, Tim. First of all congrats on a great quarter, and thanks for taking my questions. My first question is related to guidance in terms of the base business 245 to 255, I am wondering if you could breakout VIMOVO versus DUEXIS versus RAYOS. And in addition if you could provide us little sense of your color going into this quarter; how you feel the market dynamics are and whether or not you have any additional pricing flexibility for any of those products?

Tim Walbert

Yes, Charles. We are not giving product level guidance. Our original guidance was $190 million to $205 million on the base business in revenue; we raised that to the $245 million to $255 million so significant increase over the prior guidance. Certainly VIMOVO had very strong first quarter and we expect to see that to continue to grow as we do for both DUEXIS and RAYOS and ACTIMMUNE once the transaction is closed. Relative to pricing as we’ve said from the fourth quarter call on to now we don’t expect any substantial price increases outside of industry norm moving forward.

Charles Duncan - Piper Jaffray

Okay. And regarding Prescription Made Easy I think you mentioned about 30% of your scripts current go through that program. It seems like a big help I guess going out of this year could you ballpark what would be a successful year in terms of getting the number of or percentage of scripts through that Prescription Made Easy program?

Tim Walbert

That’s a great question Charles. And that it’s really hard to guess if you look at the growth second quarter last year was 8%; and 20% in third quarter; 27% in the fourth quarter; and now 30%. So the percentage going in is slowing and that’s primarily driven by typical patient has a lot of comfort with going to retail and get other products filled through there. We see continued ability to drive that percentage. I don’t know how much more we’ll grow. Can we get to 40% or low 40, that’s probably a reasonable assumption. The timeframe to get there I think we just have to see how the next several quarters progress.

Charles Duncan - Piper Jaffray

And then last question regarding VIMOVO versus DUEXIS and kind of touching on some of the things that Annabel was asking you. What about the message, what do you tell docs about those two drugs and how to use them with your patients or is it just any different play or it's (inaudible)?

Tim Walbert

So, I think the key thing is that there is minimal overlap in prescribers between the two products. And for DUEXIS, there is a representative dosing, the key thing is we've got a much improved superior version of ibuprofen with 50% reduction in those upper gastrointestinal ulcers and a great alternative to using ibuprofen and protecting and reducing the risk for patients.

When you talk about VIMOVO, it’s primarily being promoted as an improved version of naproxen based on clinical trials with that similar significant reduction in upper gastrointestinal ulcers. If you have a physician, it will happen to write both products and let's say they’re writing more of DUEXIS, you promote DUEXIS. As I mentioned and you would say these drugs are very patient specific, some patients may not response to ibuprofen and that's where VIMOVO makes it a great option in those patients and vice versa if you have a high VIMOVO prescriber.

So it's highly differentiated message focused on ibuprofen for DUEXIS and switching patients from naproxen for VIMOVO.

Charles Duncan - Piper Jaffray

Thanks for taking questions. Congrats on a good execution.

Tim Walbert

Thanks Charles.

Operator

(Operator Instructions). The next questioner is Liisa Bayko with JMP Securities. Please go ahead.

Liisa Bayko - JMP Securities

Actually all of my questions have been answered, but congratulations from me as well. Thanks.

Tim Walbert

Thanks a lot Liisa.

Operator

I would now like to turn the conference back to Mr. Tim Walbert, Chairmen, President and Chief Executive Officer for any final remarks.

Tim Walbert

Thank you everyone, I appreciate you taking the time this morning. Again, and I'm very pleased with the first quarter, our first non-GAAP profitable quarter, so excited about the business moving forward and completing the acquisition of Vidara and continuing to pursue additional accretive transactions. So, I look forward to speaking in the future. And thanks again for your time.

Operator

Ladies and gentlemen, thank you for participating in today's program. This does conclude the meeting and you may all disconnect. Everyone, have a good day.

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