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PDL BioPharma Inc. (NASDAQ:PDLI)

Q3 2010 Earnings Call Transcript

November 10, 2010 4:30 pm ET

Executives

Angela Bitting – IR, Bitting Communications

John McLaughlin – President and CEO

Cris Larson – VP and CFO

Analysts

Charles Duncan – JMP Securities

Joel Sendek – Lazard Capital Markets

Jason Kantor – RBC Capital Markets

Kim Lee – Global Hunter Securities

Daniel Weisman [ph] – Weis Company [ph]

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2010 PDL BioPharma Incorporated earnings conference call. My name is Malalia and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Angela Bitting, Please proceed.

Angela Bitting

Thank you all for joining us today. Before we begin, let me remind you that the information we will cover today contains forward-looking statements regarding our financial performance and other matters and our actual results may differ materially from those expressed or implied in the forward-looking statements.

Factors that may cause differences between current expectations and actual results are described in our filings with the Securities and Exchange Commission, copies of which may be obtained in the Investor section on our Web site at pdl.com.

The forward-looking statements made in this presentation should be considered accurate only as of the date of this presentation and although we may elect to update forward-looking statements from time to time in the future, we specifically disclaim any duty or obligation to do so, even as new information becomes available or other events occur in the future.

I’ll now turn the call over to John McLaughlin, President and CEO of PDL BioPharma.

John McLaughlin

Thanks, Angela, and good afternoon, everyone. Also with me today is Cris Larson, our Vice President and Chief Financial Officer. Before Cris discusses our financial results, I’d like to provide an update on the situation with respect to Genentech, Roche and Novartis. In August, we received a letter from Genentech at the behest of Roche and Novartis asserting that Avastin, Herceptin, Lucentis and Xolair, do not infringe the supplementary protection certificates, or SPCs, granted to PDL by various countries in Europe and asking for PDL’s views on the matter. The letter does not describe what actions, if any, Genentech intends to take.

As background, our SPCs were applied for and granted by the relevant National Patent Offices in Europe and by their terms specifically cover the Genentech products by their generic name. The letter refers only to those products that are both made and sold outside the United States. It does not suggest the Genentech products do not infringe PDL’s U.S. patents, which covers products made in the U.S. and sold anywhere.

At the end of August and subsequent to the receipt of the letter from Genentech, we received our regular quarterly payment from Genentech that included royalties generated on all worldwide sales of Genentech products. The next royalty payment from them is due at the end of November. It’s important to note that we believe that the SPCs are enforceable against the Genentech products and that Genentech owes us royalties on sales of their products on a worldwide basis. As such we intend to vigorously assert our SPC based patent rights.

In August, we responded to Genentech stating that we believe its assertions are without merit and that we disagree fundamentally with its assertions of non-infringement. We have had discussions with Genentech regarding this matter. If we cannot reach our mutually agreeable resolution, we will vigorously enforce our rights, including the rights under the agreements with Genentech. To this end, we’ve filed a complaint in Nevada naming Genentech, Roche and Novartis as defendants.

By way of background, PDL and Genentech entered into a definitive agreement in 2003 to resolve intellectual property disputes between the two companies at that time. The agreement limits Genentech’s ability to challenge infringement of our patent rights and waives Genentech’s right to challenge the validity of our patents.

Specific breaches of this settlement agreement required Genentech to pay us liquidated and other damages up to $1 billion. This amount is calculated based on a retroactive royalty rate of 3.75% on past sales of the Genentech products that were made in the U.S. and sold anywhere in the world, as well as interest, among other items. In addition, breaches of the 2003 settlement agreement would entitle us to either terminate our license agreements with Genentech or be paid a flat royalty of 3.75% on future sales of Genentech products made in the U.S. and sold anywhere in the world, regardless of the sales volume.

As you know, today our agreements provide that we receive a tiered royalty rate on sales of product made in U.S. and sold anywhere in the world. The royalty rate starts at 3% and decreases to 1% on annual aggregate sales of $4 billion or more. We receive a flat 3% royalty rate on sales of product that is manufactured and sold outside of United States.

Specifically in our Nevada complaint, we allege that the communication received from Genentech, (inaudible) requested by Roche and Novartis in August, constitutes a breach of Genentech’s obligations under the 2003 settlement agreement. We allege that Roche and Novartis knowingly interfered with PDL’s contractual relationship with Genentech in conscious disregard of PDL’s rights. We’re seeking a declaratory judgment from the court that Genentech is obligated to pay royalties to PDL on international sales of its products. In addition, we’re seeking liquidated or other damages as well as legal fees.

In early November, Genentech and Roche filed a motion to dismiss our complaint. They contend that all of our claims for relief relating to the 2003 settlement agreement should be dismissed, because the agreement applies only to PDL’s U.S. patents. In addition, they filed a motion to dismiss our complaint on the grounds that Nevada lacks jurisdiction over Roche. We disagree with these motions and we intend to oppose them. Novartis is expected to provide its response for our complaints in December of 2010.

Overall, we’d like to resolve this dispute in a manner mutually agreeable to all parties. Litigation can be costly, time-consuming and is not without risk. We are prepared, however, to enforce PDL’s rights to litigation, if necessary. For additional information on this matter, including a redacted version of the 2003 settlement agreement, please see our 10-Q filed yesterday.

At this time, I’d like to turn the call over to Cris Larson to discuss our third quarter and nine month financial results.

Cris Larson

Thank you, John. Total revenue in the third quarter of 2010 was $86.4 million, compared with 71.4 million for the same period in 2009, an increase of 21% year-over-year. The growth was primarily driven by increased sales by our licensees of Avastin, Herceptin, Lucentis, and Tysabri.

Turning to expenses, total, general, and administrative expenses for the third quarter of 2010 were $11.1 million, compared with $5.3 million for the same period of 2009. The increase was primarily driven by increased legal expense, which increased from $3.1 million in 2009 to $8.7 million in 2010. The increase was due to ongoing legal disputes with MedImmune as well as the Genentech matter.

As we have described previously, we have been modifying our capital structure to improve returns for our stockholders. To that end we have accomplished three key milestones today. First, we have repurchased, retired or converted all the 2.75% Convertible Subordinated Notes due in August 2023. While these Notes were not due for more than 10 years, the conversion rate change each time we paid a dividend. As a result these Notes were increasingly dilutive and we believe that it was in the best interest of our stockholders to fully retire this debt.

Second, earlier this month, we exchange $92 million of the $228 million outstanding principal of our senior Convertible Notes due in February 2012 for a new 2.875% Convertible Senior Notes due in February 2015. With less than a 1% increase in the coupon rate we were able to extend the repayment of this relatively inexpensive debt for three years and improve our financial flexibility over the next few years.

Finally, concurrent with the 2012 Convertible Note exchange, we placed an additional $88 million in the new 2015 Convertible Notes adding to our free cash position for the near-to-medium term consistent with our strategy. The gains and losses associated with Convertible Note repurchase, exchange and conversion transactions are included in non-operating expense. The loss on these transactions was $2.4 million for the third quarter of 2010 as compared with a gain of $0.3 million for the same period in 2009.

In addition to the costs associated with the Convertible Note transactions also included in the third quarter 2010 non-operating expense was interest expense of $9.9 million compared with interest expense of $3.1 million for the same period in 2009. The increase is attributable to interest on our $300 million 10.25% non-recourse Notes, which we issued in November 2009.

Net income for the third quarter of 2010 was $40.2 million or $0.24 per diluted share compared with net income of $46.4 million or $0.29 per diluted share for the same period in 2009. Adjusting net income for the Convertible Notes repurchased, exchanged and conversion transactions described earlier, non-GAAP net income for the third quarter of 2010 totaled $42.5 million or $0.25 per diluted share compared with non-GAAP net income of $46.2 million or $0.28 per diluted share for the same period in 2009.

For the nine months ended September 30, 2010 total revenue was $268.8 million compared with $259.9 million for the same period in 2009. The growth was primarily driven by increased sales by our licensees of Avastin, Herceptin, Lucentis and Tysabri.

Total general and administrative expenses for the nine months ended September 30, 2010 were $29.3 million compared with $15.5 million for the same period in 2009 or an increase of $13.8 million of which $13.4 million is attributable to increased legal expense.

Net income for the first nine months of 2010 was $116.3 million or $0.67 per diluted share compared to $161.1 million or $0.97 per diluted share in 2009. Adjusted net income for the Convertible Note repurchased, exchanged and conversion transactions described earlier, non-GAAP net income for the nine months ended September 30, 2010 totaled $133.4 million, or $0.77 per diluted share compared with non-GAAP net income of $160.1 million, or $0.96 per diluted share for the same period in 2009.

As we previously announced we paid the second of two dividends of $0.50 per share on October 1st to all stockholders of record on September 15, 2010.

Net cash provided by operating activities for the first nine months of 2010 was 154 million as compared with 133 million for the first nine months of 2009. As of September 30, 2010, PDL had cash, cash equivalents, and short-term investments of $227 million as compared with $303 million at December 31, 2009.

The reduction in cash is primarily due to the retirement of the 2023 Notes, the payment of the April dividend and the $75 million partial repayment of the company’s 10.25% non-recourse Notes. These payments are partially offset by cash provided by operating activities.

Following our policy of providing quarterly revenue guidance in the third month of the quarter, we will be providing fourth quarter revenue guidance in early December.

I’ll now turn the call back to John.

John McLaughlin

Thanks, Cris. Operator, at this time, we’re ready to open the call for questions.

Angela Bitting

Operator?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Charles Duncan from JMP Securities.

Charles Duncan – JMP Securities

Hi, guys. Congratulations on a nice quarter and the recent transactions and thanks for taking my questions. I had a quick question regarding what’s going on with Roche. I guess, it’s probably really difficult for the audience, at least it is for me to understand what is the most expedient resolution that you can imagine and what could be the timeline to that?

John McLaughlin

Its great question, Charles, I wish we had a great answer for it. We disclosed that we had some conversations, it’s just not clear to us at this point where those are going to or if in fact we’re going to be going the litigation route and thus it’s a little hard for us to give any kind of meaningful guidance one way or the other at this point.

Charles Duncan – JMP Securities

Okay. Are there any certain triggers – you said that Roche has to answer back in, or answer back to the court in December, but what could be the points of news flow over the course of say the next quarter or two? It sounds like with the receipt of the November payment you probably press release that, but then what else if you get that, but what are the other kind of triggers or points of news flow that you would expect?

John McLaughlin

Well it depends upon which of the two pass or it doesn’t necessarily mean it’s going to be either of those pass, but it depends upon which are the two pass things progress. If there are additional conversations that bear fruit it’s a little hard to predict where that goes. If it’s a litigation route probably at some point, some of these motions will be heard by the judge, but my anticipation is – we don’t have a schedule for that – my anticipation is that probably it wouldn’t be till some point in the first quarter of 2011, thereabouts.

Charles Duncan – JMP Securities

And then, in terms of the expenses that you would incur over the course of the next couple of quarters, what is your guidance and/or what are you budgeting for with regard to then?

John McLaughlin

So, we haven’t provided guidance with respect to expenses for 2011. We will be providing some information probably in January after our Board meeting. I mean, I think it’s fair to say that we anticipate that MedImmune will probably be winding down. As you know, that starts trial in the – towards the end of January and probably goes for a couple of weeks. There will be some continued expenses as things - if there are some appeals, but certainly the level of expenses would drop down fairly dramatically. We are spending some money on the EPO appeals process that comes to a head in – towards the end of February. Again, you’d expect that would tail off. If things heat up with Genentech, you would expect some uptick in those expenses; we haven’t quantified them at this point though.

Charles Duncan – JMP Securities

One of the things that we used to talk about more before we became distracted with this Roche thing is the potential upside from some of the products that you saw in the pipeline. What’s your perspective on the currently marketed products and/or products in development in terms of driving some upside to the top line?

John McLaughlin

Sure. So I think we’re all disappointed that TDM-1 got a refuse to file for a third line indication, but certainly the preliminary data they released for a second line indication in HER2-positive breast cancer and that was only six months data, but that was pretty impressive data both from an efficacy perspective, but also if you look at the grade 3 through 5 side effects compared to those that were on standard treatments versus TDM-1. That was a pretty impressive profile, which I think also gives you a heart that it could potentially move to first line therapy when it’s – later on after approval.

I think other nice development has been the resolution of the dispute between Genentech and Roche on one side and Biogen Idec on the other in terms of the development of the two humanized antibodies the CD20. As you are well aware, Biogen Idec and Genentech/Roche currently commercialize RITUXAN, a multimillion dollar product, which is a chimeric antibody to CD20. They have two antibodies under development. They are fully humanized to succeed that to extend the line and it was tied up in a dispute between the parties as to which would get developed and what the profit shares would be and all of that has been resolved.

And we now see one of them proceeding for relapsing remitting multiple sclerosis, which is a very nice market and the other moving ahead for CLL and non-Hodgkin’s lymphoma, again two very important markets. So we are quite encouraged by that development and the potential that we could see royalties in those products because we don’t currently see royalties on Rituxan because it is a chimeric, not a humanized antibody. And that’s just a few to name of the top of our head.

Charles Duncan – JMP Securities

Okay, that’s a big one. And then finally just a housekeeping with regard to some of the things that Cris was saying, you were seeing a lot Cris and I was working hard to stay up, what was the actual cash flow in the quarter?

Cris Larson

Sure. Just a minute. So net cash provided by operating expenses for the first – sorry looking at the nine months, for the nine months is 154 million and – I’m sorry, I don’t have the quarterly number in front of me right now.

Charles Duncan – JMP Securities

Okay, thanks. We’ll do some math and give you a call if we have questions. Thanks for taking my questions.

John McLaughlin

Thank you.

Operator

Your next question comes from the line of Joel Sendek from Lazard Capital Management.

Joel Sendek – Lazard Capital Management

Hi, actually Lazard Capital Markets. Let’s see, so, I just want to make sure I have all the facts straight here, so your lawsuit contends that Genentech is in breach right now?

John McLaughlin

Yes.

Joel Sendek – Lazard Capital Management

Okay. And the $1 billion, I think that you mentioned, is that your calculation or is that a number that comes out of the original agreement?

John McLaughlin

So, the calculation is, it’s a fairly simple mathematical calculation that comes out of the agreement. And so what you do is you take the royalty rate that we received on that and what you do is you look at the difference between it and a royalty rate of 3.75 and you just back track, and then you add some interest on top of that. So it’s – these are all historical numbers, it’s a calculation, it’s reasonably easy to perform and I would assume not – too much dispute or controversy.

Joel Sendek – Lazard Capital Management

So if you prevail in your counter suit effectively, you are due a big payment, so that’s your positioning right now, effectively?

John McLaughlin

So, whatever royalties – one of that is as you –we just discussed is that is the difference between what we were paid and the 3.75% royalty retroactively, additional remedy is 3.75 prospectively and there are some damages. There is more details in the redacted version of 2003 settlement agreement, which is attached to the 10-Q. But, yes, there appears, the previous plus whatever goes forward, of course going forward it’s a little hard to calculate because we’re projecting what it could be.

Joel Sendek – Lazard Capital Management

Okay. So I’m just trying to figure out the negotiating position that you have relative to them. I mean it seems to me from an outside perspective that all they really want to do given the fact that they are producing and making and selling so much of their stuff ex-U.S. is to get that into lower royalty rates. It’s the subject of an earlier agreement. Is that fair, is that, I mean why else would they be doing what they’re doing with only a couple years left on the patent?

John McLaughlin

Again I think that’s a fair inference from our perspective as to what this is about, yes.

Joel Sendek – Lazard Capital Management

But you don’t want to give in on that. I mean your – and in fact what your counter suit suggests is you might be even be able to get more out of this should this get to that point and you can’t settle like I guess?

John McLaughlin

Yes, I guess we kind of think on behalf of our shareholders. When you have an agreement you should actually stick to it.

Joel Sendek – Lazard Capital Management

Yes, yes, okay.

John McLaughlin

There are – I mean the purpose of the 2003 settlement agreement was to put this to rest once and for all.

Joel Sendek – Lazard Capital Management

Yes.

John McLaughlin

And I have no involvement in negotiating it. But to be clear, there were penalties put in there. You can read the language in sections 4.1 and 4.2 that sort of say look, you know – and by the way, let’s have some penalty to make sure we put this to rest once and for all.

Joel Sendek – Lazard Capital Management

And what happens on your – the way you dealt with MedImmune is you’ve made some certain assessment about the likelihood of continuing to get the payments. This is different though. I mean could they – I guess since they made their last payment, they are more likely to make their next payment. But what happens if they don’t make the payment due at the end of November?

John McLaughlin

So we already have litigation, I mean again to enforce our rights. I mean we don’t have any information one way or the other as to what they’re going to pay in November to be clear.

Joel Sendek – Lazard Capital Management

Yes.

John McLaughlin

I mean that – one of the reasons we put the lawsuit in place was to be prepared to protect our rights and move as expeditiously as we can. We can’t give you a timeline right now for that or a budget for it, but obviously we wanted to be prepared for that eventuality. We’re trying to resolve it in a friendly fashion, but we’re also prepared to go the other way if we need to.

Joel Sendek – Lazard Capital Management

Okay. All right, thanks for the info.

John McLaughlin

Thank you.

Operator

Your next question comes from the line of Jason Kantor from RBC Capital Markets.

Jason Kantor – RBC Capital Markets

Thank you for taking my question, I guess a couple of things I mean what’s the basis for Roche claiming that Nevada lacks jurisdiction here?

John McLaughlin

It’s a technical argument as to whether or not they have sufficient contacts with the state and you can get – I think, some portions of their filings are available from the court house in Nevada. I prefer not to characterize them, but I think some of them are available; some of them are subject to protective order. So forgive me, I’m not sure, which parts fall under basis – it’s basically a technical argument as to whether or not they have sufficient context with the state.

Jason Kantor – RBC Capital Markets

Okay. And then – I think you made some allusion to it, but is your legal expenses is this peaked here at this level or is it still going higher in the coming quarters?

John McLaughlin

So I would anticipate that we probably – we’ll see some modest increase throughout. I mean, again, we’re going into a trial on MedImmune in January through February. So you’ll probably start to see some increase there. I guess what I was trying to suggest was rather we give a flat answer they’re going to go up or go down show you some of the moving parts. So I would anticipate MedImmune will probably track up a little bit through that trial and then track down after that.

We are spending money on the EPO appeal on our patents. I would expect – we have a hearing on that towards the end of February. That will get resolved shortly thereafter. There maybe some appeals – that they would track down. And then the unknown at this point is whether or not there’s a friendly resolution with Genentech possible, whether or not in fact, we’re going to have to litigate, and it’s too early to say at this point.

Jason Kantor – RBC Capital Markets

And then, so you – on both of those points, the Medi trial and Patent Office, European Patent Office hearing, can you just remind us of what sort of possible outcomes we may be looking at coming out of those events?

John McLaughlin

Sure, so with respect to MedImmune, the issue arises, initially their complaint was that – or the genesis of their complaint – I am sorry, the crux of their complaint was, first, that the patents were invalid, second, that they were infringed and then more recently they added counts suggesting that by virtue of a clause in their agreement, which gives them a right to most favorable terms offered to anybody, that they should have been offered other deals. We have subsequently terminated their license in late 2009 for underpayments of royalties due on ex U.S. sales. They are now patent infringer.

So they’re seeking things like – it could be everything from well, we don’t owe you any money and you go forward, well, you owe us money because we should have had the terms of a better deal, it’s still not quite sure as to which is the better deal they’ve been pointing to. So, on the other hand, we’ve sought damages for things like they’re now patent infringers and underpayment on their ex U.S. sales going back to 1999. We haven’t quantified those for anybody.

The second one you ask about is the EPO. So this is an appeal of an earlier decision before the patent – the European Patent Office claims in our humanization. This is an appeal. There are now three parties in it and it depends upon what the outcome of that appeal is, whether or not the claims get trimmed back or in the worst case, if were to lose all those, then we will lose probably about 30 plus percent of our ex-U.S. royalties because that’s what covers our ex-U.S. sales and that’s what supports our SPCs.

Jason Kantor – RBC Capital Markets

Thank you.

Operator

(Operator instructions) Your next question comes from the line of Kim Lee from Global Hunter Securities.

Kim Lee – Global Hunter Securities

Good afternoon. Just to confirm here, are you continuing to anticipate receipt of royalty payments and what would really jeopardize these royalty payments?

John McLaughlin

So, Kim, good to talk to you. You’re talking about Genentech, is that the thrust of your question? I want to make sure I am answering what you want to talk about.

Kim Lee – Global Hunter Securities

Yes, yes. Right.

John McLaughlin

Sure. So, we did receive it – the last payment, which was after their letter and that was at the end of August, the next one is due at the end of November. I don’t think there is any issue with respect to the portions that are either made in the U.S. regardless of where they are sold and that probably accounts for about two-thirds of our number. Where they have raised issues as we’ve described is the portions that are both made and sold, both conditions outside the United States. That’s about 30% and at this point we have no information one way or the other as to whether or not they will pay that portion as they did in August, whether they’ll pay that in November, we just don’t have any information one way or the other. Of course, we will update people depending on the outcome of when we have that information.

Kim Lee – Global Hunter Securities

Okay. And one final question here – and – got it, it’s off the top of my head. Oh, yes, any thoughts on giving a special ex-dividend before the end of this year?

John McLaughlin

So we have considered it, we’re not going to do it at the end of this year, we did do one, you’re probably thinking about it, at the end of 2009, and that was really a distribution of a securitization we did, we took on about $300 million of debt. We have said that we would do a securitization, again, and I don’t anticipate you’ll see any other dividends from us this year. It is something we have been thinking about, but I don’t think you’ll see anything.

Kim Lee – Global Hunter Securities

Great, thanks.

John McLaughlin

Thank you.

Operator

Your next question is a follow-up question from the line of Jason Kantor from RBC Capital Markets.

Jason Kantor – RBC Capital Markets

Thank you. Just a couple of things, could you tell us how much of the recourse debt that you paid down as a result end of the quarter?

Cris Larson

Sure. So, that debt pays down, it’s originally $300 million, it pays down in relation to the Genentech royalties received and to-date in 2010 we’ve paid off $75 million of that debt.

Jason Kantor – RBC Capital Markets

Okay. And you’ve spoken in the past about business developments and may be the desire to bring another revenue stream, you didn’t really address that on the call today, so I’m just wondering has anything changed in your thinking, is that something you might plan to use some of this excess cash you generated, what that means, and if so what’s your basic strategy?

John McLaughlin

Sure. So, you’re correct. We have articulated that as part of an overall strategy. We also look at, for example, buying back converts and buying back shares, that’s still true. We are still looking at those and we will continue to look at them. We haven’t – you’re correct we didn’t spend much time on this call today talking about it just because there seem to, based on a lot of meetings we’ve had with investors, there seem to be a whole lot more focus on Genentech and people trying to asses that situation. So, you’re right. It doesn’t reflect a lack of interest to whatever on our part and that it was more just trying to be responsive to where we thought the shareholder interest was by giving them some additional information, insights on the agreements and actually copies of the agreements at least in redacted form, so they can make some judgments. It doesn’t reflect a change in mission so much as just trying to be more responsive to what we thought the shareholder base wanted to hear about.

Jason Kantor – RBC Capital Markets

No update on business development activity?

John McLaughlin

No, sorry.

Operator

Your next question comes from the line of Daniel Weisman from Weis Company [ph].

Daniel Weisman – Weis Company

Hi, good afternoon. I’m glad we’re not hearing anything about business development activity because I would hope that we get some form a resolution or some form of clarity before we look at new acquisition, so thank you. I have two questions, number one, if roughly a third of your revenues are coming from these offshore SPCs, which are being challenged, and let’s just say you lose, doesn’t it take sometime if it’s in Roche’s best interest at that moment to move all their facilities offshore to escape the 3% or rather the 1% they’re paying here in the United States? That’s a pretty big task to move their facilities offshore. Walk me through sort of what’s required by the FDA in that event and how quickly it would have to be done by them?

John McLaughlin

Sure, so just to give you a crude timeline. Greenfield construction would be about – to get one of those plants up and running and going it’s probably about two years, you probably need almost another six months to a year in terms of qualification lots and probably a six months review after that. So you’re probably – just in terms of building the plants, getting them registered, et cetera, you’re probably some place in a three to four year time cycle.

But I think, more importantly is that you typically try and have some geographical dispersion, diversity of your plants in terms of you don’t want them all on the same site, if something happens. So, it’s a more typical pattern just to assure that you have a reliable supply chain is to keep one plant, for example, in the United States, which is a major market, and one typically some place in Europe. They could do it. I suspect the risks of that far exceed whatever the differences they pay us or not pay us in royalties.

Operator

And, ladies and gentlemen, this concludes our question-and answer-session for today’s call. I’d like to hand the call back over to management for closing remarks.

John McLaughlin

Thank you for joining us on this call this afternoon and we look forward to seeing you, many of you at the upcoming conferences in the next few months. We will be representing at the Lazard Capital Markets 7th Annual Healthcare Conference on Tuesday, November 16th, in New York. And have a good evening all.

Operator

Thank you for your participation in today’s conference. This concludes your presentation and you may now disconnect. Have a great day.

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