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Executives

Bill Newbould – VP, IR

Gearóid Faherty – Chairman and CEO

Mario Crovetto – CFO

Analysts

John Newman – Oppenheimer

David Steinberg – Deutsche Bank

Ian Sanderson – Cowen & Company

Rich Silver – Barclays Capital

Annabel Samimy – Stifel Nicolaus

Frank Pinkerton – SunTrust Robinson Humphrey

Scott Henry – Roth Capital Partners

Sumant Kulkarni – Bank of America/Merrill Lynch

Jim Malloy – Caris & Company

Greg Gilbert – Bank of America/Merrill Lynch

Eurand N.V. (EURX) Q3 2010 Earnings Conference Call November 5, 2010 8:30 AM ET

Operator

Greetings, ladies and gentlemen, and welcome to the Eurand Q3 2010 Financial Results Conference Call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Bill Newbould, Vice President of Investor Relations at Eurand. Thank you, Mr. Newbould. You may now begin.

Bill Newbould

Thank you, operator, and welcome everyone. Joining us on the call today are Gearóid Faherty, Chairman and Chief Executive Officer, and Mario Crovetto, Chief Financial Officer. I would like to point out that the transcript of today’s call will be posted on our website and also provided as a Form 6K.

During the course of this conference call, we will make projections or other forward-looking statements regarding future events or the future financial performance of the company. The words “believe,” “estimate,” “anticipate,” “intend,” “expect,” “plan,” or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. Important factors relating to our business, including factors that could cause actual results to differ from our forward-looking statements, are described in our Form 20F, Form 6K’s, and other filings with the SEC. The company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions, or other factors.

I’d now like to turn the call over to Gearóid.

Gearóid Faherty

Thank you, Bill, and good morning everyone, and thanks for joining in. As you’ve seen from our press release this morning, Eurand had an excellent quarter with strong double-digit revenue growth. Revenues for the Q3 were EUR41.7 million or $66.7 million, an increase of 36% versus the same quarter last year. Driving this outstanding performance was our ZENPEP franchise, with sales of approximately $30 million. The robust (inaudible) sales also contributed to our improving growth margins and our profitability for the Q3, and were more than adequate to cover the virtual absence of revenues from ASCAN’s unapproved pancreatic enzyme or PEP. In the quarter we booked approximately $100,000 in PEP revenues.

Let me now take a moment to provide you with more detail on the ZENPEP launch and the current competitive dynamics in the pancreatic enzyme, or PEP market. During the Q3, ZENPEP and the authorized generic experienced significant growth, capturing seven share points while becoming the second most-prescribed PEP in the United States, a position it’s held since late August. For the week ended October 24th, the ZENPEP franchise’s share of total prescriptions was 20%, more than three times the 6% share it held on April 23rd this year, the last full week prior to the FDA’s stop distribution date. This is a remarkable record of growth in less than a year for a new entrant in an established market, especially given the size of our competitors.

The strong launch trajectory has been driven by a combination of factors. Firstly we believe we have an outstanding product, and the feedback we’ve gotten from the field is that patients who have tried ZENPEP like us and have responded well to the product. Physicians have reported to our sales team that their clinical experience in EPI patients taking ZENPEP is similar to the impressive results we saw in our clinical trials. We are also convinced that our sampling and promotional activities have played a major role in driving awareness and adoption.

We also believe that we’re taking full advantage of the favorable competitive dynamic that resulted from the FDA’s April 28th stop distribution date and the CMS decision the following day to cease Medicaid reimbursement for the unapproved products. I should point out that these deadlines were extended for some unknown reason for one month for J&J’s product, which the FDA had approved shortly before the April 28th deadline. In terms of our reimbursement status, patients now have broad access to ZENPEP with coverage on more than 90% of commercial plans, and Medicare Part D and Medicaid cover it in all 50 states.

Clearly, we’re very pleased with ZENPEP’s performance to date and believe that we can continue to grow our market share over the coming quarters. To help take full advantage of the opportunity before us, we’re currently undertaking a strategic reorganization of our sales force. Effective in January next year we are bringing the contract sales force in-house and we’re combining the specialty CF and GI sales forces into one unit, with each rep calling on physicians in both segments. We believe this consolidation will make the sales team more efficient and productive, increasing their responsibilities with more calls per rep while decreasing the size of the territories they cover. In parallel with defining the new geographic alignment, we’re developing a unified call plan to replace the two we now have and to increase our reach and frequency. Under the new plan we’ll expand our core audience by roughly 30% with about 7% fewer sales representatives and district managers than we now have. In addition, the new plan will ensure that all major metropolitan areas and all CF centers are covered.

As I said earlier, the feedback our sales team has received from physicians and patients has been overwhelmingly positive, especially from those who have switched to ZENPEP from other pancreatic enzyme products. This feedback was further confirmed at the recent North American Cystic Fibrosis Conference in Baltimore. We had very significant traffic including many repeat visits at our booth for ZENPEP. Based on our market research we recently made available hypertonic saline as part of our comprehensive support program for patients with CF, called Z-Points, and this latest offering was very well received by the meeting attendees. Also we saw highly favorable response to the poster we presented, which includes a (inaudible) analysis of data from a phase III study. This analysis demonstrated that ZENPEP provided a significant and rapid improvement in size and symptoms of ETI in patients with CF who were switched from their previous PEP, and did so without reliance on proton pump inhibitors and H2 receptor antagonists. I should also mention that we continued to evaluate further opportunity for alternative (inaudible) delivery methods and formulations of ZENPEP to further meet the diverse needs of adults and pediatric patients with pancreatic insufficiency.

While we are very encouraged by the success of the ZENPEP launch, we know that to build value for the long term we need to leverage our commercial infrastructure by adding more products. To that end, we have stepped up our efforts to enlighten this product in the CF and GI space and are currently looking closely at a couple of interesting opportunities in these areas. Our focus is on products currently marketed or about to enter, or already in phase III clinical trials. We think that the CF area offers the best chance at this time due to the quality of products in development and fewer competitors than in GI. We would also be interested in other products that could be marketed by our sales force such as (inaudible) drugs. We believe that our increasing cash balance and move to profitability provides us with the financial resources we would need to execute the deals we are currently evaluating.

Turning now to Amrix, we and our partner Cephalon recently reached a settlement with Impacts Laboratories regarding pending patent litigation. We believe Impact’s willingness to settle reflects the strength of the patent position around Amrix. This settlement doesn’t affect the separate Amrix patent litigations with Mylan, Barr, (inaudible) and (inaudible). Arguments in that case were heard in court several weeks ago and a decision is expected sometime in the Q2 of 2011. Amrix has been and will continue to be an important product for us, and we are supportive of several efforts to protect the patent state around it, which was further strengthened with the recent issuance of two new orange (inaudible) listed patents. The total number of patents issued on Amrix is now four, with another anticipated later this year.

On their quarterly call last week, Cephalon noted that while prescription growth has leveled off in 2010 volume has held up despite the space being highly genericized. They reiterated their commitment to the brand and said they’ve been working towards getting Amrix back in a growth path in 2011 based in part on a strong co-pay support program. As you may recall, Eurand owns the rights to this product outside the United States and we recently signed an outlicensing agreement in China. This brings to 22 the number of countries where we have now out-licensed cyclobenzeprine extended release.

I’d now like to take a few moments to bring you up to date on our pipeline. The clinical development program for ZENPEP in Europe has entered the next phase. I’m pleased to report that in early September we initiated a phase III clinical trial inpatient with exocrine pancreatic insufficiency due to cystic fibrosis. Our current intention is to out-license distribution rights to ZENPEP outside the US. Taken in total, the European and Russian pancreatic enzyme markets were valued at $450 million in 2009 by IMS Health. Given the size of the commercial opportunity for ZENPEP in these territories, we are very actively engaged in later stage discussions with potential marketing partners. We’re also making headway with EUR-1025, our once-daily formulation of (inaudible) Ondansetron. As reported last quarter we submitted to the FDA our proposed protocol for a phase III trial and received their feedback. We continued to work with them to finalize the protocol based on their comments. Our intention is to out-license this proprietary product.

In a moment I’ll turn the call over to Mario, but before that I’d like to give you a brief summary of my remarks this morning. Eurand’s financial results for the Q3 were outstanding, with record revenues fueled by strong ZENPEP sales, which more than made up for the loss of revenues from ULTRASE. ZENPEP continues to gain share in the PEP market as market awareness and acceptance grow, and with broad access to the product now in place. We look forward to further market gains for ZENPEP as the sales force internalization takes effect and we expand our reach and frequency. We’re extremely active on the business development front, as we pursue strategic licensing and acquisition opportunities that would expand our product offering and/or our development pipeline. Our internal pipeline continues to advance, highlighted by historic (inaudible) on the ZENPEP phase III trial in Europe, and as you know there are many current products under development at Eurand which we are not currently at liberty to discuss.

Now I will turn the call over to Mario and he will discuss our current quarter financial performance in detail. Mario.

Mario Crovetto

Thank you, Gearóid. In the Q3 of 2010 revenues stood at a record level of EUR41.7 million compared to EUR30.6 million in the Q3 of 2009. This represents an increase of 36% or 33% in constant currency. In dollars, revenues were $56.7 million and a convenience rate of 136. (Inaudible) of EUR37.9 million, or $51.6 million, grew 51%, or 47% at constant currency rates, and represented 91% of total revenues. Sales of ZENPEP and its authorized generic in the Q3 amounted to EUR21.8 million or approximately $30 million and represented 52% of total revenues in this quarter. Compared to a year ago, ZENPEP revenues more than offset the complete absence of (inaudible) and of revenues from our (inaudible) and credit base, which Eurand stopped (inaudible) upon the launch of ZENPEP in the Q4 of 2009.

As we clarified in prior calls in the Q1 and Q2 of 2010, we recognized ZENPEP revenues on the basis of shipments from wholesalers to resellers in our channels. Revenues in excess of wholesaler shipments were deferred since wholesalers have inventories in excess of market needs, due to the initial shipments made to ensure an appropriate supply in the pipeline at launch and the rapidly increasing demand for the product, especially in the May and June period.

During our Q2 call I said that we considered these revenue recognition efforts to be appropriate during the product launch phase, and I added that we might move to recommission based on our shipments to wholesalers at a subsequent date. During the Q3 market demand of ZENPEP continued to progress. We experienced a significant rundown of wholesalers’ inventories, down to 2.5 to 3 weeks. This is at the low end of normal market levels. Therefore in this quarter we started to recognize revenues on the basis of our shipments to wholesalers and the consequences are that approximately $30 million in Q3 revenues of ZENPEP and its authorized generic included approximately $6.7 million of revenues from shipments made in prior periods and deferred as of June 30.

Turning to the other components of our total revenues, royalties were EUR2.2 million and decreased 15% compared to the Q3 of 2009 because royalties from the trade of (inaudible) were negligible. Development fees were EUR1.5 million. Gross margin on profits (inaudible) was 57.4% in Q3 2010 compared to 38.1% in the Q3 of 2009, as a result of high margin ZENPEP sales. Research & development expenses were EUR5.7 million, 11% lower than in the Q3 of 2009. The 73% increase in SG&A expenses compared to a year ago is primarily due to the build out of our sales force and commercial infrastructure in the United States in connection with the launch of ZENPEP which took place in the last quarter of 2009 and to the related expenses on marketing, patient support, and managed care programs. The Q3 of 2010 ended with net income of EUR5.5 million or $7.5 million which is EUR0.11 per share in Euros and $0.16 in dollars. At the end of the quarter our cash and marketable securities were EUR46.4 million or approximately $53 million.

I will now turn to a brief summary of the financial performance of the first nine months of 2010. Total revenues grew 17% or 13% in constant currency and were EUR105.7 million or $143.8 million. The total sales component made up for 89% of our total revenues, and increased 29% or 24% in constant currency primarily because of ZENPEP and its authorized generic. Royalties were down 15% because of lower ULTRASE royalties and development fees were lower than in the first nine months of 2009 which included a significant license payment from GSK related to the launch of their mixture OD-3 in June 2009.

Gross margin on (inaudible) sales was 52.7% compared to 38% a year ago as a result of ZENPEP sales. Research & development expenses were 8% lower than a year ago when we recorded higher spending on clinical trials. The increase in SG&A compared to a year ago is mainly due to the expansion of selling and marketing expenses following the launch of ZENPEP and its generic, which took place at the end of 2009. Net income for the year to date in 2010 was EUR2.5 million, which is $3.4 million or EUR0.05 per share in Euros and $0.07 per share in dollars.

I’ll return the call back to Gearóid.

Gearóid Faherty

Thank you, Mario. Before taking your questions I’ll conclude our formal remarks with a quick summary of the growth catalysts and milestones that we anticipate in the coming months. The first is obviously the continued growth of the ZENPEP franchise. As you’ve heard this morning, the franchise is still on a growth trajectory, and we see this continue into next year. The changes we are bringing to the sales team in terms of its reach and coverage should facilitate this growth. Second, an out-license agreement for ZENPEP in Europe: we view Europe, with its $450 million a year PEP market, as a very major opportunity for our company. Third is continuing contributions from key partner products, Amrix and (inaudible). Next is continuing pipeline development including the initiation of a phase III trial for 1025 and our numerous undisclosed co-development products. And finally the possible in-licensing or acquisition of a late-stage or a non-market product. As I mentioned, our increased cash flow, coupled with our move to profitability, indicates that we would be able to finance the product acquisition and fund its clinical development or launch.

With that I’ll now conclude my formal remarks by asking the operator to open the call to your questions.

Question-and-Answer Session

Operator

Thank you, sir. At this time we will be conducting a question-and-answer session. (Operator Instructions.) Our first question today comes from the line of John Newman with Oppenheimer. Please proceed with your question.

John Newman – Oppenheimer

Good morning, guys, thanks for taking the question. Just had a question about the ZENPEP franchise. Could you break out the proportion of revenues that came from the branded ZENPEP product versus the authorized generic? And also could you just repeat the inventory changes? I can’t recall if you said there were inventory changes during the Q2 or the Q3. Thanks.

Mario Crovetto

Okay. In the Q3 we reported EUR28.3 million for ZENTEP and its authorized generic. The authorized generic represented approximately EUR1.1 million.

John Newman – Oppenheimer

And could you just repeat the changes in inventory where I think you were saying there were some changes to inventory during the Q3 or was it the Q2 where the inventories were drawn down?

Mario Crovetto

During the Q3, inventories expressed in terms of weeks at wholesalers went down to less than three weeks.

John Newman – Oppenheimer

Okay. And how does that compare to the inventory levels during the previous quarters:

Mario Crovetto

In the, at the end of the Q2 it was higher because it was a moment of very rapid increase in demand and therefore our wholesalers were purchasing ZENPEP quiet heavily. So it was higher than four weeks.

John Newman – Oppenheimer

Okay.

Gearóid Faherty

Can I just correct one of those figures, just to make sure we’re clear? The ZENPEP franchise was divided up. ZENPEP itself was doing EUR2.8 million and we had $1.7 million coming to us in dollar terms from the AG.

John Newman – Oppenheimer

Okay, great. And then let me just ask one quick follow-up and then I’ll jump back into queue. Are you seeing greater ZENPEP uptake partially because the cheaper inventory that was put into the channel by (inaudible) were eventually pulled off the market is now dissipating? Or do you think there’s still a little bit if inventory in the channel which will be coming out, which you could benefit from?

Gearóid Faherty

If you look at the IMS data there is still an overhang of products. There is still some product from Digestive Care in the market, there is still some product from Ascan in the market, there is still some old product from McNeil, the product before they launched the primary product. So yes, there is still some overhang of old product in the market.

John Newman – Oppenheimer

Great, thank you.

Operator

Thank you. Our next question comes from the line of David Steinberg with Deutsche Bank. Please proceed with your question.

David Steinberg – Deutsche Bank

Okay, thanks. I wanted to talk a little bit about your sales force change. Can you talk about what your average comp is for the part time reps, the contract sales force now? And then I think you said next year you’re going to bring them in-house but you’re going to have less sales reps, so can you just give us the metrics of cost per rep, both fully loaded in-house as well as the current contract sales force? And how many reps you have now and how many reps you’ll have going forward?

Gearóid Faherty

Okay, David, a couple of points. First of all, the contract sales force that we have is not part time; they were working full time for us. That would be my first point. Second point would be we see no change in comp associated with the sales team by bringing it in-house; no significant increase, it would not be meaningful. In terms of bringing it in-house, we will end up- We had originally 49 reps through the contract sales force. We had 16 reps of our own coming from the (inaudible) sales force, and it’ll be slightly less than that when the final plan is announced in January. We haven’t disclosed it completely internally yet. Did I cover all the elements, David, or did I leave anything out? Sorry, cost – average cost you asked me about. It’s about $200,000 to $250,000 fully loaded.

David Steinberg – Deutsche Bank

Okay, gotcha. And then the European market you mentioned was $450 million. How many participants are there and once you’re in the market, what sort of share do you think you can obtain in Europe? And then in the US what would you say the dollar value is currently of the ZENTEP- It sounds like it’s over 90% branded, but what’s the current dollar value? And then once all the unapproved products are out, what would you say the dollar value is in the US market?

Gearóid Faherty

So in Europe it’s a very mixed market. You have highly branded, high priced, high quality markets in certain areas like Northern Europe – England, Ireland, Scotland, Wales, Scandinavia, France, and certain other countries, typically associated with cystic fibrosis. If you move to the Southern European countries – Spain, Italy, Greece and others – it tends to be more in the GI market rather than the CF. There is a CF market but it’s more GI. Prices are more challenging; it’s less brand aware. And then if you look particularly into the largest market in Europe which is obviously Germany, the German market is highly genericized. Russia as you can imagine is a relatively cheap market but margins are improving there. So it’s a very mixed picture across the 27 countries that are there.

Where the market goes at the moment, because it’s highly genericized as it stands and it’s already at $450 million, $460 million last year, certainly with the EMA moving, bringing in new standards, giving up the opportunity to be the first product approved under the centralized procedure and thereby establishing us as we’re successful as the standard of care, obviously that should go to price because then any product that’s in the market and is claiming to be a generic, if there’s a standard, well obviously it couldn’t match the product that is just still to come to the market. So we could – I can’t say for definite – we could see quite a revolution in Europe which would make prices very different from the ones we see today, very much in line with what we saw in the United States.

With regard to the value of the US market, as you know the FDA’s deadline for withdrawal this year was the 28th of April and then CMS pulled its coverage under Medicaid on the 29th of April. So the first four months of this year already had full generic competition in the market. And then if you look subsequently, all throughout the summer we had unapproved products taking very significant market share. So if we look at what the broader market was worth last year in IMS and we factor out the move to branded pricing, and we now obviously now know where all the brands have priced, you are certainly talking a US market next year of well over $500 million.

David Steinberg – Deutsche Bank

Okay.

Gearóid Faherty

There was a lot of questions, David. I don’t know – did I catch everything?

David Steinberg – Deutsche Bank

That’s fine, just one follow-up on Europe. So this European deal you’re talking about, given the nature of the European market where each country’s a little bit different, would there be a series of country-by-country deals with different players or would there be some sort of pan-European deal with one significant marketer?

Gearóid Faherty

Okay, we’re talking to a few people at the moment, not one, so I have to be careful of what I say on the call, David. But my thinking at the moment is we’re likely to do a European deal for the 27 member states. We’re likely to do a deal for Russia, and we’re likely to do a separate deal for the rest of the world. It could be unified – maybe there are some partners who might be in a position to put a proposal on the table that would cause us to unify some of those elements but those would be the three specific geographies that we want to have covered. And the type of structure of the deal we’re looking for, our aim is to maximize our take on the sales of our partners. We’re not looking to maximize the upfront fee; we’re looking for a profit share with the partner and when they launch the product in the various markets.

That being said we are negotiating a very sizeable development and licensing fee right now in parallel, but that’s not our primary objective.

David Steinberg – Deutsche Bank

Okay, thanks.

Operator

Thank you. Our next question comes from the line of Ian Sanderson with Cowen & Company. Please proceed with your question.

Ian Sanderson – Cowen & Company

Hi, good morning. Thanks for taking the questions. First one for Mario on the gross margin, besides the benefit from the sale of already expensed inventory, just did the gross margin benefit at all from that $6.7 million deferred revenue recognition in Q3? And related to that, is that 60% plus gross margin a sustainable number?

Mario Crovetto

The gross margin, yes, did benefit from the deferred revenues because when we deferred revenues we also deferred related cost of goods. So that also contributed to the gross margin of the quarter. And is it sustainable? Yes. It is dependent upon continuous growth and continuous revenues of ZENPEP.

Ian Sanderson – Cowen & Company

Just to make sure I have that right, you did, when you deferred the revenues you also deferred the cost of goods so there is a cost of goods related to that $6.7 million, in the number, correct?

Mario Crovetto

Yes, there is.

Ian Sanderson – Cowen & Company

Okay. And secondly on the, to follow-up on David’s discussion on the European Union market, Gearóid has the year, has the EMA actually proposed a similar regulatory change that the US did in terms of trying to require regulatory approvals of PEP products?

Gearóid Faherty

They haven’t done it in the same manner as yet. They started firstly with the last November, the last week of November they came out with the standards that they wanted for the products, but these are the types of standards that you need to meet to sell these products in Europe. They didn’t come out then with the equivalent of a Federal Registered Notice saying that on this date we will pull the unapproved product. That could come. They obviously need an approved product first, and we’re the first people to put a centralized application on the table with the EMA. But Europe has slightly different programs than you have in the US in that old files in Europe come up for routine review every five years, so the EMA and the individual countries can take action without a deadline if a standard is established as files need to be reviewed. So it’s a slightly different program, but there isn’t at the moment. We don’t know whether there will be in the future – there isn’t the same drop dead date like there was on the 28th of April this year in the US.

Ian Sanderson – Cowen & Company

Okay. Thank you. And then on the sales force reorganization, should we read into this a shift in emphasis either towards the GI market or towards the CF market? Or are you just really trying to blanket both more effectively?

Gearóid Faherty

We’re trying to blanket both more effectively. When we started out to launch, Ian, as you know we took a conservative approach. We hired a contract sales force, we wanted to see how the launch would go. We wanted to make sure that we had FDA approval before we took on the burn rate associated with a big sales force. So to make that work we decided to divide them up into two: in-house was CF, external would be the GI. Now that obviously it’s been very successful we have great traction in both, and the benefits of unifying them are obviously you can reduce the geographic area that these people have to cover.

If the CF guy is in an area he may have long journeyed to cover, to get to the different centers; whereas if we reduce his area and get him or her to cover also GI patients. We make more use of the reps, they get to do more calls, they have more reach, more frequency and less time wasted traveling from site to site. So we’re maximizing the use of the people we have and that’s the primary driver.

Also we now have a year of experience of detailing these products and we know what the important messages are, and we’ve no reason to believe that the same rep can’t handle the message to both teams. And we believe we can unify the message considerably. So this is very much an efficiency drive. It will expand our reach. It will increase the frequency of which reps can meet with their physicians or the people they need to meet with, the pharmacists; and will waste less time in cars driving from site to site.

Ian Sanderson – Cowen & Company

Okay, and then finally any, do you have any visibility on the (inaudible) coming up at the end of this month? And have you heard anything from Ascan?

Gearóid Faherty

No, I don’t. Sorry.

Ian Sanderson – Cowen & Company

Okay, thank you.

Gearóid Faherty

You’re welcome.

Operator

Thank you. Our next question comes from the line of Rich Silver with Barclays Capital. Please proceed with your questions.

Rich Silver – Barclays Capital

Yeah, a question for Mario. It looked like the product sales excluding ZENPEP and ULTRASE as I look at the last three quarters have increased, about $18 million in the Q1, $16 it was actually up then, it was $16 million in the Q2 and then sort of a big jump in the Q3 to $22 million. Can you provide any detail behind those numbers?

Mario Crovetto

Richard, you’re saying that–

Rich Silver – Barclays Capital

This is product sales, yeah product sales excluding ZENPEP and ULTRASE.

Mario Crovetto

Excluding ZENPEP and ULTRASE, the major products which are doing well compared to a year ago are obviously (inaudible), OD-3, and Damrax (sp).

Gearóid Faherty

We’re also doing pretty good, Rich, with some of our older business in Europe across things like the Glycofanax and other products that we sell in Europe, so there’s a healthy movement. And obviously as you know we expanded some of these products into new territories. You’ve heard that we’ve done 22 deals outside the United States for the cyclobenzaprene, so it’s very important to call it cyclobenzaprene rather than Amrix. When we talk about Amrix and as Mario was mentioning Amrix there we’re also including cyclo outside the US.

Rich Silver – Barclays Capital

Okay. And then the SG&A number in the Q3, is that a good base to build from or is it still going to be fluctuating quarter to quarter?

Gearóid Faherty

Well obviously there will be, there’s going to be a slight impact a you’ve heard. We’re expecting to reduce the number of reps and area managers by about 7% in the new year as a result of the reorganization, but by and large it’s not a bad number, I would say. Mario, do you agree?

Mario Crovetto

Yes.

Rich Silver – Barclays Capital

And with this reorganization, is there any period even if it’s a short period where there might be some disruption in terms of the detailing?

Gearóid Faherty

No, we wouldn’t expect it, Rich. We obviously had our team together at the CF meeting last week in Baltimore. This was a project we planned, a project challenge that we’ve been working on for a while. It’s all well established, well communicated, so no – we would not expect any disruption at all. We’re not really moving people about; we’re making more use of the people in the areas in which they already find themselves.

Rich Silver – Barclays Capital

In terms of the competitive landscape with ZENPEP, do you have any sense of where your scripts are coming from? Whether it’s ULTRASE, whether it’s CREON – any sense, or just new patients? Do you have that kind of information?

Gearóid Faherty

Not really. We think we’re picking it up from a mixture of things. We’re picking up from we would imagine ULTRASE, we think we’re picking up recently from CREON, we think we’re picking up from McNeil. We think we’re covering our old pancrolytades (sp) product. We certainly feel we have a very good franchise in new starts because of the fact that we have such good clinical data from 7 down to 8.1. The fact that we have a formulation that’s easy to administer to children, the fact that our 5000 can be opened and spread in food and shown to be stable. We also have agreed to protocol with the FDA on a g-chew, a gastric chew and supply a product for young, very young patients and patients in trouble. So we think we’re building a very strong new patient franchise as well.

Rich Silver – Barclays Capital

Okay, thanks very much.

Gearóid Faherty

You’re welcome.

Operator

Thank you. Our next question comes from the line of Annabel Samimy with Stifel Nicolaus. Please proceed with your question.

Annabel Samimy – Stifel Nicolaus

Hi, thanks for taking my call and congratulations on a good quarter. I just want to ask Mario a question, I want to make sure I understand the deferred revenues and what it’s going to look like going forward. So this quarter you had deferred revenues from last quarter because of additional inventories that you had in the channel I believe, and next quarter you’re changing your revenue recognitions. Are we going to see these kinds of deferred revenue fluctuations anymore?

Mario Crovetto

No, that happens once when you make the change.

Annabel Samimy – Stifel Nicolaus

Okay, alright, great. So everything that we’re going to see in terms of the revenues are going to be real revenues. Does that represent the demand?

Mario Crovetto

That represents what we ship to wholesalers from now on which should be very close to demand unless there are significant fluctuations in inventory levels in the supply chain.

Annabel Samimy – Stifel Nicolaus

Okay, great. And I want to ask, a lot of questions have been asked about your sales force reorganization but clearly you had a pretty phenomenal quarter and some very decent market uptake, and I’m just curious to know what exactly was the impetus behind the sales force reorganization? Is it something that you see that your competitors are doing that you could be more effective? And then the geographies that you’re leaving, are you leaving them because they’re not valuable geographies for you or there is a different way to reach them? Just wanted to understand–

Gearóid Faherty

We’re not, Annabel, we’re not planning to leave geographies at all. What we have is, with the CF centers as they are across the United States there are wide, very wide distances between CF centers and our reps were spending huge amounts of time, hours and hours and hours traveling from a CF center to another CF center. And we see that as wasted time. So what we’re doing is we’re realigning the areas so that the rep will cover not just a CF center and then spend a day traveling to the next one, but will use the time in that area to also visit GI.

So we know the exact locations obviously of the CF centers, we now know where our GI doctors are and the people we want to reach. So actually by changing this alignment we’re going to significantly increase the frequency that we put ourselves in front of physicians, but we’re actually not giving up areas. We expect to have 30% more coverage, not less.

We’re constantly watching rep performance – how much time they travel from area to area, what the pitch has to be, how they position themselves to physicians. And we’re looking to optimize it. Having a rep spending an hour in the car looking at his wind screen is not efficient. We want them to be going five, six, seven calls, eight calls a day or more, and with a CF sales force just going from center to center we had downtime of about a day. So we think it’s probably similar to what some other people are doing but that’s not our focus. We’re looking at our sales data, our efficiency of our people, our travel times and we’re making investments and we’re making the changes on that basis.

Annabel Samimy – Stifel Nicolaus

Okay, great. That’s more clear. Another question, is there any chance that now that we’ve been out a year with ZENPEP and you’ve got some decent traction in the marketplace, is there any chance that we’re going to be getting some guidance color going forward?

Gearóid Faherty

Yeah, I think we’re getting close to it. Obviously I’ve been asked the question today about do we know anything about what’s happening with ULTRASE, and I can’t answer that question because I honestly don’t know. And to put this in perspective for people, Ascan, as we’ve disclosed in our SEC filings, was worth about $40 million to $46 million a year to us, approximately $10 million to $12 million to $14 million a quarter. And this quarter we had no sales for them at all, so obviously what happens to them and when and if they come back to the market would impact our guidance, the guidance we would give. Now we should know the answer to that on the 28th of November this year, but I think it’s fair to say we think we’ve crossed the threshold. From the basis of what we know now we would expect next quarter to be a good quarter for us.

We would expect, based on what we know now it to be another profitable quarter. And once we get to the point of knowing what’s going to happen with this important product then we’re in a better position to provide guidance. But I think most people would have to appreciate that if we were supplying these people with $10 million to $14 million a quarter in the past, whether or not they come back could have a significant upside or some effect on the future. But what we’re delighted to show to people, because on the last call we got a lot of questions and insinuations that if we didn’t have ULTRASE then ZENPEP would be a wash.

I think we’ve clearly answered that question in the Q3 – it’s anything but a wash. The best quarter we’ve had with those people in the past would have been in the $12 million range; we had $30 million this quarter alone in ZENPEP and its franchise. And even if you take away, I wouldn’t like people to over dwell on the deferred revenue element, because as Mario said we also deferred the costs so it certainly didn’t impact the margin, and also it’s a relatively, relatively small figure – it’s approximately $6 million on a total of $30 million.

So I think there’s a lot of information out there right now, Annabel, to allow people to map our future, and the question is what happens obviously with ULTRASE and what does that add to the franchise if and when it’s approved? I think also people need to start sharpening their pencil as to what an out-licensing deal (inaudible) might be as well in Europe, because I think it’s a very, very significant opportunity.

Annabel Samimy – Stifel Nicolaus

Mm-hmm. Just one more question if I may. J&J has been out there and they’re probably going to reach that point where they’re starting to get reimbursed and I think that’s the three- to six-month period that you had talked about in the past. Have you noticed whether they are getting that reimbursement and whether they’ve devoted any more resources to the effort behind (inaudible)?

Gearóid Faherty

I would agree with your point. I would imagine they’re getting through reimbursement. It’s usually about six to eight weeks’ window and they should be well on their way to that right now, probably completing it Q1 but I don’t have great (inaudible) to support that, just anecdotal. It would seem that they are getting there. I think it’s important, the point that I wanted to make in the call today, we did talk about the April 28th deadline and CMS stopping its rebate. For some reason J&J was not held to that standard; they were given an extra month.

It’s important to know that those guys were reimbursed for longer than other people so they already had the benefit of that. So with regard to the sales force that they have out there, our understanding is that they’ve hired a contract sales force. Our understanding is that it’s a short term contract from what we’ve been able to know or understand from people we’ve spoken to, and we think this is equivalent to what they’ve done in the past with their sort of post marketing strategy. But obviously we don’t have any insights into that – that’s just what we’re hearing as our people go about their daily business.

Annabel Samimy – Stifel Nicolaus

Okay, great. Thank you.

Operator

Thank you. Our next question comes from the line of Frank Pinkerton with SunTrust Robinson Humphrey. Please proceed with your question.

Frank Pinkerton – SunTrust Robinson Humphrey

Hi, thank you for taking the question. Gearóid, can you just now, given how the market is shaped, can you re-explain to me the need for this authorized generic.

Gearóid Faherty

Well, first off, Frank, you have to appreciate why we put it in in the first instance. Why it’s there today could be another matter. But when we came to this market in the end of last year, we had come through three years of experience where we saw the low dose part of (inaudible) or this franchise change ownership three times. It started with Impex, it moved to KV, and then it moved to us, all on the basis of a one year space of time. Because these people, the people with low-grade disease, the people with very mild symptoms, the people who have an acute need every now and then but don’t take this thing chronically have no brand awareness. They’re not being reached in any particular way. It’s impossible to get them, they’re too dispersed, they’re too far away from centers; they don’t come into centers often enough to be targeted so they’re buying strictly on the basis of price.

Now we were in a position where we had a significant part of that market. We practically owned it – we had 50% of the low value business in the United States, and yet we were launching in November, which was essentially six months before the FDA deadline. So what we knew would happen is if we launched just the ZENPEP 5000 and didn’t have a cheap version, as Impex had lost it, as KV had lost it, we would have lost it. And there was no way to protect it because the lower cost, unapproved products were still going to be in the market from November through to April when the FDA acted. And also at that time we had seen an extension by the FDA in the past, so we had no guarantee that the FDA wouldn’t do an extension again. So that was the logic of putting it out there.

We still believe that part of the market is very hard to reach because of the reasons I’ve just explained, so we think there is a value proposition still to that. But what I’m not saying to you today or now is that there will necessarily be a need for it as we go forward. We’ll evaluate it, we’ll look at it, we’ll look at is there an appropriate time to change our strategy there. We look at whether there’s an appropriate time to look at our pricing there, but obviously I’m not going to say that in an earnings call and tell our competitors what we’re going to do.

Frank Pinkerton – SunTrust Robinson Humphrey

Okay, great. And then just a follow-up. With $63 million on the balance sheet, should the products or business development areas that you’re looking, would there be any need to raise additional funds or can we kind of classify that product range by what you have on the balance sheet? Thank you.

Gearóid Faherty

As you’ve noticed, our cash balance grew significantly in this quarter and obviously with the ZENPEP franchise kicking in and the possibilities that (inaudible) or not, we certainly would expect ourselves to be profitable in the next quarter and of course that would go to our cash balance again. So as I said in my prepared remarks, the types of things we are looking at now would be affordable with the type of cash we currently have, the types of things we’re looking at now. If something very special came on the market that required us to go to the market and raise some money for it we’d see, but what we’re looking at now we believe we can do with the reserves that we currently have.

Frank Pinkerton – SunTrust Robinson Humphrey

Thank you.

Operator

Thank you. Our next question comes from the line of Scott Henry with Roth Capital Partners. Please proceed with your question.

Scott Henry – Roth Capital Partners

Thank you, and I apologize if this has already been asked as I’ve been juggling conference calls. But one question I wanted to ask you about was the prescription data in October for the category. It’s been a little weaker than prior months and weaker than the October a year ago. I assume it’s all noise but I wanted to get your thoughts on why the category may be slowing down a little bit.

Gearóid Faherty

I would agree with you, Scott. I think it’s all noise. I think we saw it bounce back a bit; last week we saw our scripts go up by 4% again. I think we probably had an unusual week last week as well because you had 2000 physicians out of the market at the national cystic fibrosis meeting in Baltimore. I think well over 2000 physicians in CF were away from their desk and not meeting patients or writing scripts, so that would have–

Scott Henry – Roth Capital Partners

Hello?

Operator

Pardon me, ladies and gentlemen. Our speaker’s line seems to be experiencing some technical difficulties. One moment please.

Gearóid Faherty

Is that okay, Scott?

Scott Henry – Roth Capital Partners

I got most of it. You chopped off but I got the important thing. I would agree it’s probably noise as well but wanted to get your thoughts. The only other question I had, the company’s done a great job over the past quarter of converting ZENPEP share, but looking over there and seeing Creon with 65% share seems like a pretty inviting target. I mean no one should have more than 50% share in any category. How do you anticipate going after Creon going forward? That seems to be the next leg of growth.

Gearóid Faherty

It’s obviously what we devote a lot of time to internally, but we may have some representatives from (inaudible) on the call today. I’m not going to tell them how we’re going to go after them. But I agree with you. I think it’s an exciting opportunity there. I think having a 60% share is not sustainable. I think if we look at the new TRX’s and for Creon and you compare them to us, ours is showing growth, theirs is not showing that. So I think there is an opportunity there to go after it, but it’s very important to note that even with that 60% share it declined last week and I think the week before that it did again.

There’s still a huge part of the market out there for us to go after. We’re now at 20%, there’s still quite a bit to get to just taking up the old unapproved (inaudible) out of the market. But certainly we will be going after every piece of market we can get. And you’ll see the evolution of our strategy. I talked today about the fact we’re looking at new strategies, I spoke a little bit about the G Tube. You should obviously suspect that we have lifecycle management strategies for this product that hopefully we’ll be talking to you soon about. So there are a number of things we’re doing to make sure that we are a major player in this space, not just now but also in the future.

Scott Henry – Roth Capital Partners

Okay, great. Congratulations again on a very solid quarter and thanks for taking the question.

Gearóid Faherty

Thanks, Scott.

Operator

Thank you. Our next question comes from the line of Jim Malloy with Caris & Company. Please proceed with your question. Pardon me, we seem to have lost the line. (Operator instructions.) Our next question comes from the line of Sumant Kulkarni with Bank of America/Merrill Lynch. Please proceed with your question.

Sumant Kulkarni – Bank of America/Merrill Lynch

Hi, thanks for taking my question. This is Sumant for Greg. So leaving aside the deferred revenue of $6.7 million how much of the remaining ZENPEP sales would you say were demand based, or were there some elementary levels built into that main number as well?

Gearóid Faherty

No, we wouldn’t. We actually think we’ve greatly diminished our wholesaler inventory over the quarter. We would expect to see robust demand. As Mario said we’re down to about 2.5 weeks of inventory supply and I think anybody would agree that that’s pretty low.

Sumant Kulkarni – Bank of America/Merrill Lynch

And would you characterize the 2.5 weeks as normal or what would a normalized level be?

Gearóid Faherty

I think you should at least be in the 4, at least in the 4 range.

Sumant Kulkarni – Bank of America/Merrill Lynch

And I know you split the sales for the ZENTEP/authorized generic, but can you split the sales on a hi-strength versus low strength sales as well?

Gearóid Faherty

No, I couldn’t, but if you go to the IMS data you’ll get a sense as to how they break out. I just don’t have it in front of me now.

Sumant Kulkarni – Bank of America/Merrill Lynch

Sure, so it would just be the weighted descriptions we have there.

Gearóid Faherty

Correct, because most people in this category are pricing the product on the basis of (inaudible) units, so if you pry out the (inaudible) units you get to the various spread between the different prices and different strengths, and then you work to the IMS data enough so it’ll give you the breakout that you’re talking about.

Sumant Kulkarni – Bank of America/Merrill Lynch

Great. And how much of the ZENPEP market could you supply if it’s a perfect world and it’s just you on the market let’s say? Would you be able to do everything or not?

Gearóid Faherty

We believe with the facilities that we have, yes – we would be able to do it all. And now I’m talking about obviously the US.

Sumant Kulkarni – Bank of America/Merrill Lynch

Right, right. And given that the economics of selling your own product are better than selling Ascan’s products, how do you play that off against Ascan receiving or not receiving approval for their product on their action date?

Gearóid Faherty

I think if you had asked me about a year ago where was my concern, it would be Ascan getting approved. Now that we’ve shown that we stand on our own two feet, we sell our products very, very well. We have good margins. We haven’t been hurt at all by them leaving the market. I really don’t care now. I think we’ve taken control of our own destiny and that’s what we’ve wanted to do. We didn’t want to be reliant on (inaudible) and we’ve shown that we can do that. So whether they come to the market now really doesn’t bother me. I think we have a very well-established franchise, we’ve got a great product, we’re selling it well. If they come it might be some icing on the cake but we’re happy to go forward a we stand.

Sumant Kulkarni – Bank of America/Merrill Lynch

And my final question. On the non ZENPEP part of your product sales, other than (inaudible), OD-3, and Amrix or cyclobenzapene, are there any other disproportionate contributors?

Gearóid Faherty

No, not really. We have a fairly substantial business in Europe and in products like cyclobenzapene, like (inaudible), like nifrate, like dyclophanac, (inaudible). All of those are solid performers. We’re constantly looking for marketing partners for those in places like the Middle East and into Asia, moving away from the highly genericized European markets. And much to most people’s surprise we’ve continued to grow that franchise. I’m, I think it was Rich Silver made the comment today that (inaudible) is still growing as a business so it’s still, it’ seems to be very robust and but I wouldn’t point to any specific products.

Sumant Kulkarni – Bank of America/Merrill Lynch

So if all else remains equal then the ex-ZENPEP market or sales should remain stable going forward?

Gearóid Faherty

Well it’s hard to say, you never know what’s- We see Amrix now, in the US it was very important but as we announced today we have 22 partnerships signed for that product and it’s going through registration in very important countries – 17 deals in South America. We’ve recently added China. We’ve deals in Asia, we’ve deals in Israel, we’ve deals in Turkey – none of those products have come to the market yet. Obviously that’s very, very exciting. We’ve started to do the same thing now with (inaudible), the same people who are licensed out in 22 countries cyclobenzaprene, which we haven’t seen the benefit of yet are at the same time looking to out-license (inaudible).

So I think if you do get into a situation where the Amrix sales peter out or run and peter out, flatten in the United States, we’ll see what happens – we’re very confident that Europe will start to pick that up or the other countries in South America, China, and the other places we’re going to. So we’re not sitting on our hands – we’re taking all the products we have out into new territories constantly and we’ve a dedicated team of business development people and that’s their only job. They’re not involved in ZENPEP, they’re not involved in other parts of the business. They’re looking for new partners for our established business.

Sumant Kulkarni – Bank of America/Merrill Lynch

Thanks.

Operator

Thank you. Our next question comes from the line of Jim Malloy with Caris & Company. Please proceed with your question, sir.

Jim Malloy – Caris & Company

Thank you, let’s hope you can hear me this time. I just wanted to touch base on volume versus pricing in the quarter and how much impact volume versus pricing you had on the upside. And then are you still seeing an ability to price empower going forward? I know one of the perceived benefits was that prices would start to come up pretty dramatically in this market once you get the branded products on there.

Gearóid Faherty

I think we’re seeing, you know we can hear you this time, that’s great. We’ve seen the products already move this year. I think it’s moved up at least 15% and there’s a possibility one or two players might be considering a price increase between now and the end of the year but it’s hard for us to call that, we don’t know. If we look at past experience in the play in this particular market, the branded players have taken price once or twice or more times a year so I’m not, I wouldn’t imagine there’s any plans to change that but obviously I don’t know. I don’t see any pricing pressure as of yet. The first part of your question, Jim, I didn’t quite get. Can you repeat that for us?

Jim Malloy – Caris & Company

I just wanted to know if pricing for you guys in the quarter versus volume on the upside number.

Gearóid Faherty

We’ve taken no price in this quarter. The price that we have that we launched the product with is the same price we’ve been going through all this year.

Jim Malloy – Caris & Company

Okay, great. And then just a quick, on the gross margin, is that gross margin new level a sustainable level? I apologize if I missed that answer.

Gearóid Faherty

Yes, we would believe it is.

Jim Malloy – Caris & Company

Okay, great. And then maybe a bigger picture question – you obviously said your close with one or two products very near the market, either on market phase III or (inaudible) into phase III. What are your thoughts – would these be a dilutive, accretive? Obviously they’re not on the market, they wouldn’t be accretive. What are your thoughts versus bringing in new products versus focusing on the products you have a driving for cash and earnings?

Gearóid Faherty

Well, we’re not obviously, it’s not an either/or. We’re playing (inaudible). We have dedicated teams in all these elements. We have a dedicated team of professionals working on ZENPEP doing a great job. We’ve a separate dedicated team of people working on Amrix and cyclobenzaprene and out-licensing in the countries we want to do. We’ve a separate group of people working on ZENPEP in Europe, getting it through the clinic and doing the partnership deal that we want to do there. So we don’t see these things as either/or – we see them as additives. And we would certainly be very keen to bring in a product in the United States. We have a sales force that has proven itself to be very competent in selling itself in GI and CF. We think leveraging another product in that space and soon would be very accretive, not dilutive – very accretive.

Obviously if we bring in something that is in a clinical development stage there would be the cost of clinical development of that, but we’ve seen, we said today we’re very focused on the CF space. As you saw in our experiences in the CF space, these are manageable things for us to do. We’ve done them in the past with success, we’ve guided a product through. And so given our cash balance is growing, we’ve moved to profitability, we’ve good visibility as to where we’re going in the future, we think we can easily manage what we’re looking at now. It’s hard to say about these things cause obviously you know, you’re out there looking for a deal and until you’ve signed it you don’t know so there’s a high level of uncertainty about these things, but we’ve been on this for quite a while. We’re down to a very small list of things that we’re looking at. We’re very excited about the possibilities and hopefully we’ll be able to do it here but I can’t say today that we will.

Jim Malloy – Caris & Company

Well thank you very much. I think you answered the question perfectly. Thanks.

Gearóid Faherty

Thanks, Jim.

Operator

Thank you. Our next question comes from the line of John Newman with Oppenheimer. Please proceed with your question.

John Newman – Oppenheimer

Hi guys, thanks for taking the question. Just a follow-up to a question that has been asked in a different way. Can you talk about if you’re seeing increased share both from the new patients in the market in terms of capturing a larger share going forward, and also if you’re seeing better penetration into the cystic fibrosis portion of the market. Thanks.

Gearóid Faherty

I think we’re seeing both, John. We’re definitely doing very well in the new starts because of the nature of the product. We have a special product, a (inaudible), which was clinically tested to allow patients to open it, sprinkle it in food, feed it to young children. We have very strong support from the FDA for a Z-Chip protocol that we put together that patients are now using this product. It’s got tremendous traction among physicians in CF and care centers.

So I think with a special product specially designed for this segment of the market we’re doing very well. New TRXs, for patients new to the product are very strong for us, but I think we’re also taking it from other people. The CF market is very sticky. Patients are quite ill, they’re very reluctant to change and you have to keep going back and back and back and proving to these people you’ve got a good product. That was a big part of our sampling program in the Q1, making sure there were no hurdles to people trying this product and getting a chance, putting a patient on it, seeing how it works and then expanding the practice if it worked well. And certainly the feedback we got at the cystic fibrosis meeting, the national meeting in Baltimore about a week ago showed that we are definitely making inroads there.

John Newman – Oppenheimer

And have you been able to or will you sort of tamp down the sampling effort and any sort of discounting that you had employed earlier in the launch?

Gearóid Faherty

Sampling has already tapered off. It’s not as much as it was. Don’t hold me to the figure but we put about nearly 30,000 bottles into the sampling program in the Q1 and Q2 of this year. These were very large sample bottles. As I said in the previous call we certainly cut that back and we’re certainly doing it with smaller bottles but no – I wouldn’t see it going away. There’s still a large number of patients out there who we think have an interest who would like to try the product, and we want to make sure there are no hurdles, economic hurdles that would limit their ability to try the product. Because we’re very convinced that if they try it, based on patient feedback, based on physician feedback, that they will stay with it. So I would see us continue to sample but nothing like the level we did in the past.

John Newman – Oppenheimer

Great, thank you.

Operator

Thank you. Our next question comes from the line of Greg Gilbert with Bank of America/Merrill Lynch. Please proceed with your question.

Greg Gilbert – Bank of America/Merrill Lynch

I had just two quick follow-ups for us. One is can you update us, Gearóid, on the CFO situation and search? And secondly, on the drug delivery business model, can you talk about the competitive dynamics that are out there and how aggressively or not you’re sort of looking offensively in that area versus however the business has been managed in the past? Thanks.

Gearóid Faherty

Okay. The CFO search is under way. We have a search firm working in the US to hire the CFO. Our plan at the moment is that the person would be based in our Yardley, Pennsylvania, office. There are certain strategic reasons why that’s right. It’s close to where ZENPEP is, its home. We also think it helps balance the management team between me and that particular individual. The search is going quite well. This is an interesting market to be coming into; it doesn’t seem to be a challenge to get interesting people to come and talk to us. I think the success that we’ve had over the last few months has helped with that obviously. So I think it’s going quite well and I think we’d expect to have a person in place before Mario would leave. Mario has indicated obviously that he’s happy to work with us to make sure it’s a smooth transition so I don’t think there should be any worries there.

With regard to the drug delivery business, we definitely have a change of strategy there, Greg. In the past, obviously and years ago we were very anxious to do any business. It was our bread and butter, it was what kept the lights on and kept us going. Now we’re very focused on good deals. We’re interested in products with good partners, with products that are high prospects. We also have to balance the need to fund our own research effort internally so we have to define resources, and we obviously want the significant part that’s going to things like lifecycle management, like (inaudible), like other stuff that we’re doing. So definitely we would not plan to or do not target to do the number of deals that we’ve done in the past. We would definitely target more quality rather than quantity, and a significant part of our research effort is devoted to feeding our sales force rather than doing partnership work.

Greg Gilbert – Bank of America/Merrill Lynch

Thank you.

Operator

Thank you, ladies and gentlemen.

Gearóid Faherty

Operator, as we have no calls I think we would end this now.

Operator

Yes, we have no further questions at this time. I’d like to turn the floor over back to you, sir.

Gearóid Faherty

Okay. Thank you everyone for your attention and this morning we really appreciated your time and the questions that we’ve had, and we look forward to talking to you again when we report our Q4. Thank you.

Operator

Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.

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