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Alkermes Plc (NASDAQ:ALKS)

Q2 2014 Earnings Conference Call

July 31 2014 8:30 AM ET

Executives

Rebecca Peterson- SVP, Corporate Communication

Jim Frates - SVP and CFO

Richard Pops - Chairman and CEO

Analysts

Ari Jaha - Credit Suisse

Cory Kasimov - JPMorgan

Jonathan Eckard - Citi

Bevin Anil - Jefferies

Jonathan Chang - Leerink Partners

Mario Corso - Mizuho USA.

Sarah - Bank of America Merrill Lynch

Terence Flynn - Goldman Sachs

Operator

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

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

Rebecca Peterson

Welcome to the Alkermes PLC Conference Call to discuss our financial year for the quarter ended June 30, 2014. With me today are; Richard Pops, our CEO; Shane Cooke, our President, and Jim Frates, our CFO.

Before we begin today, I encourage everyone to go to the Investor section at Alkermes' website to find our press release and related financial tables including our reconciliation of GAAP to non-GAAP financial measure that we'll discuss today. We believe that the Non-GAAP financial results better represent the ongoing economic for our business. Our discussions during the call today will include forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statement. Please see our press release issued today and our transition report on Form 10-K for important risk factors that could cause our actual performance and results to differ materially from those projected or suggested in the forward-looking statement. We undertake no obligation to update or revise the information provided on the call today as a result of new information, future results or development.

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

Now I would like to turn over the call to Jim.

Jim Frates

Thanks, Rebecca. Good morning, everyone. We are pleased to report another solid quarter and financial performance and operational progress. During the quarter, Alkermes generated revenues of $153.4 million, non-GAAP net income of $17.7 million and free cash flow of $12 million. You also begin to see the evidence of our expanding R&D activities as we made excellent progress in advancing our increasing late stage pipeline. This is reflected in this quarter's result and our updated guidance for the balance of the year. Within our commercial portfolio worldwide end market sales of our long-acting atypical franchise RISPERDAL CONSTA and INVEGA SUSTENNA were approximately $696 million in the second quarter, compared to $626 million for the same period last year, reflecting double digit growth driven by sales of INVEGA SUSTENNA. For the quarter, Alkermes recorded manufacturing and royalty revenues of $60 million for this product franchise. INVEGA SUSTENNA continues to show impressive growth. And it is the leading product in this class with end market sales of $394 million during the quarter, reflecting robust growth of 36% year-over-year. Of note, during the second quarter year-to-date end market sales of INVEGA SUSTENNA surpassed $500 million and as such we will record royalty revenues at 9% of end market sales for the remainder of the calendar year based on our tiered royalty structure.

Looking ahead for this franchise, our strategic partners Johnson pharmaceuticals recently announced that the FDA granted priority review for a new schizoaffective disorder indication for INVEGA SUSTENNA for the PDUFA date in November 24. In addition, Johnson recently submitted a sNDA to support and extended label for INVEGA SUSTENNA. If approved it will include new data showing significant lead delay time to relapse since schizophrenia using this long acting injection compared to oral antipsychotic based on real world clinical data. We also continue to expect Johnson to submit the NDA for INVEGA SUSTENNA three month to the FDA by the end of 2014. For AMPYRA and FAMPYRA, our manufacturing royalty revenues were $19.5 million for the quarter and for BYDUREON we recorded royalty revenues of $8.8 million. For VIVITROL, we recorded net sales of $21.6 million compared to $17.4 million for the same period last year, demonstrating strong year-over-year growth of approximately 24%.

In terms of expenses, our total operating expenses for the second quarter were $176.2 million, compared to $125.1 million for the same period last year. This increase in operating expenses reflected accelerated investments in our advancing late-stage and clinical pipeline and commercial organization. Specifically, investment in our R&D included the following. The completion of the successful Phase 3 study for aripiprazole lauroxil and preparation of the NDA which we will submit this quarter. Second, the initiation of two core efficacy studies for the ALKS 5461 pivotal program during the second quarter which are ramping up with site initiations and enrollment ahead of schedule. And third, the acceleration of our ALKS 3831 program. The first ALKS 3831 Phase 2 study for schizophrenia with olanzapine associated weight gain is enrolling faster than expected. And we were able to expedite the initiation of the second Phase 2 study for ALKS 3831 in patients with schizophrenia and alcohol use.

On the commercial front, our SG&A expenses reflected increased promotional activities for VIVITROL and early preparations for anticipated launched of aripiprazole lauroxil. Additionally, during the second quarter, we recorded $15.3 million gain on investment related to the sale of our stake in Acceleron Pharma and a $12.3 million gain on the sale of an unused fill finished facility in Athlone. With respect to our financial expectations for 2014, we are updating our guidance today to reflect our results year-to-date and the increase investments in R&D as we accelerate and expand certain clinical programs.

I'll now highlight the key elements of our update financial expectations for 2014. We are increasing our R&D expense expectation to a range of $260 million to $280 million, up from a range of $225 million to $245 million. Following the strength of the result for the Phase 3 aripiprazole lauroxil study, we have now expanded our clinical program to prepare for what it shaping up to be clear and robust commercial opportunity. In addition, we've accelerated investigator site initiations for the ALKS 5461 and ALKS 3831 clinical studies to enable faster enrollment for these promising drug candidates. We are increasing our expectation for other income to a range of $25 million to $30 million, up from a range of $10 million to $15 million. This increase reflects the gain recorded during the second quarter related to the sale of our equity stake in Acceleron. Consistent with this increased R&D investment, we now expect non-GAAP net income to be in the range of $30 million to $50 million, revised from our previous range of $65 million to $85 million. Our complete financial expectations for 2014 are outlined in the press release issued earlier this morning.

Stepping back let me put these updates into some context. The value of wholly owned pipeline will be realized due to efficient and ultimately successful execution of large scale clinical studies. The increasing investments that we've outlined today is directly related to progress we're making in these important clinical studies. And are supported by our strong commercial business and our significant financial resources. We are enthusiastic about the prospects ahead for each of our pipeline candidates and the opportunities they present to grow the business and the value creating milestones that lie ahead.

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

Richard Pops

Thank you, Jim. Good morning, everyone. We tried to keep this summer calls brief but there have been a number of exciting pipeline advancement since our last earnings call. But before I dive into the status of the individual programs, I would like to briefly summarize our basic philosophy on product selection and development. Because we think it's a very distinctive feature of our company and revealed common themes in the pipeline. We have what we think is very contemporary approach to product selection and development, reflecting today's healthcare environment. It's informed by our focus on chronic CNS in mental health conditions affecting large number of patients. And the principle that our medicine should have value for patients, for payers and for society. So what is that mean in practice and how is that led Alkermes to have a pipeline with some of the most exciting candidates for chronic CNS diseases. First, our drug candidate need to provide a differentiated mechanism of action or some property relating to safety or efficacy is relevant to patient and payers and makes the medicine unique and ideally non-substitutable. Second, we need to justify the economic rationale for their use in the real world. Third, we need to understand and have the ability to shape the policy framework around the use of the medicine in government and commercial systems. Four, we need to seek and integrate into our development plan, the voices of the people affected by the disease and by our medicines, the patients, their families and even their communities. These principles may seem like common sense but Alkermes is ahead of the curve and applying them. If we are sensitive to each of these considerations, we have the potential to create pull for our medicines, from regulators, from patients and from payers and policy makers. And that's what the candidate in our development pipeline so interesting and potentially valuable.

Let's start with the most advanced product candidate. Aripiprazole lauroxil, our long-acting injectable form of Abilify. Following the positive Phase 3 results that we announced in the beginning of April, we are moving quickly and are on track to submit the NDA during the third quarter. Multiple factors are coalescing the U.S market for long-acting injectable. And we believe that's market prime for growth. Today, the LAI market in U.S. represents fewer than 10% of patients with schizophrenia in a limited number of prescribers. And until recently LAI use was essentially limited to patients who had multiple relapses and were advanced in their disease progression. This is a unique moment in time. The five important factors contributing to a very dynamic market poised for expansion. First, they are going to be multiple entrances for the common message. There will be four companies with four different products educating a larger number of physicians about long-acting atypical and advocating the logic of LAI for patients and for providers. Second, the major branded oral medications will be off patent which will have two important implications. The LAIs would dominate shared voice and importantly as the cost for oral significantly decrease, this creates head space for reimbursement in LAIs. Third, there is now more than a decade of outcome data including long-term studies on relapsed prevention and medical and pharmacoeconomic outcome supporting the use of LAI. These data are critical for the fourth factor which is an increased focus on long-term cost with the implementation of the ACA and the expansion state and federal programs which cover many of these patients. Fifth, in the wake of the steady stream of tragedies associated with mental illness and gun violence, there is an elevated interest and urgency from the public and policy makers for better identification in treatment of these patients. Together, this is creating an environment that calls for shift in the treatment paradigm expanded use of long-acting injectables. This is precisely the right time to come into market with aripiprazole lauroxil, a product designed intentionally with a number of important attributes. Aripiprazole lauroxil is designed for flexibility and ease of use for patients and providers. Based on things we've learned to our successful development of RISPERDAL CONSTA and INVEGA SUSTENNA. It will come in pre-filled syringe with multiple doses and options for deltoid and gluteal administration in a two month dosing option in development. Strong efficacy, multiple doses, durations, size of injection and ease of use. We are very excited about aripiprazole lauroxil's profile and we are looking forward to getting the NDA to the hands of regulator soon.

Next is 5461, our novel drug candidate for major depressive disorder which has fast track designation from FDA, and is moving very rapidly in development. With the yesterday's announcement and the initiations to FORWARD 5 study, all three core efficacy studies in the FORWARD program are now underway. These studies will evaluate the efficacy and safety of 5461 as an injunctive treatment in patients suffering from major depressive disorder, who have had an inadequate response to commonly prescribed drugs. We are encouraged that site initiations are progressing ahead of our expectations. And we look forward to updating you on our progress in this important program.

ALKS 3831 is designed to be a broad -spectrum antipsychotic for the treatment of schizophrenia. It's composed of samidorphan, a novel potent mu-opioid antagonist in combination with the established antipsychotic drug olanzapine. During the second quarter, we announced that we did initiate a second Phase 2 study of 3831 for the treatment of schizophrenia and patients with alcohol use. The first Phase 2 study of ALKS 3831 is testing its effects in patients with schizophrenia and olanzapine associated weight gain in enrolling well ahead of schedule. And we are pleased to report that we are moving up our expected enrollment completion timeline to the end of the third quarter with data expected in early 2015.

So that's the quick update on the late stage pipeline. And these programs as you can see are really moving. Two additional pipeline candidates are entering the clinic this year and study design to be highly informative early in their programs. ALKS 8700, a novel MMF molecule for the treatment of multiple sclerosis is designed to offer differentiated features compared to TECFIDERA. Based on the combination of our novel chemistry and our oral formulation technologies and experience. Earlier this month we announced to start of comprehensive Phase 1 study to evaluate the safety, tolerability and pharmacokinetics of several oral formulations of ALKS 8700 compared to both placebo and TECFIDERA.

ALKS 7106, a novel, oral opioid analgesic candidate for the treatment of pain will enter clinic this quarter. The first study will establish the range of doses that will then proceed into a second study using an established pain model. Our goal is to determine whether ALKS 7106 can provide analgesic effects without the same abuse potential or risk of over dose for more conventional pain product.

We expect to have informative data from both programs in the first half of 2015. We believe that we built the most exciting CNS pipeline in the mid cap space. With the NDA submission for aripiprazole lauroxil expected before the end of the third quarter, and human proof of concept data expected for ALKS 3831, ALKS 8700 and ALKS 7106 in the upcoming months, our business has an unprecedented level of momentum behind it. With drug candidate each having blockbuster potential. We are aggressively executing our strategy and taking avenge of every opportunity to rapidly advance this development of our innovated medicines increase significant value for patients, physicians and our community.

And with that I'll turn the call back to Rebecca for questions.

Rebecca Peterson

Thanks, Richard. All right. We'll now open it up for Q&A. Brandon?

Question-and-Answer Session

Operator

(Operator Instructions)

Credit Suisse, we have Ari Jaha online. Please go ahead.

Ari Jaha - Credit Suisse

Thanks for taking my question. First pertaining to the drivers of injectables market growth in the U.S. Can you elaborate further on potential benefit from new focus on total cost and elevated public interest in treatment? And then I have another question on aripiprazole lauroxil.

Richard Pops

Sure, good morning, Ari. It's a really important moment in time as I said earlier that there is this coalescing of various factors in the market place. Not the least which is the pharmacoeconomic outcome data. And in Jim's remarks, he highlighted the work that J&J is doing; Johnson is doing with INVEGA SUSTENNA. The sNDA, they just filed based on kind of real world data of the use LAIs in the real world setting of opioid oral antipsychotic. So the medical outcomes coupled with the pharmacoeconomic outcome which is really driven by reduced hospitalization, I think are going to become very focal for payer to going forward particularly since that messages can be echoed by multiple companies. All of us have a shared interest in making sure that the policy changes in the U.S. accommodate the use of more LAI not just for the benefit for our drug but for the benefit of the public health and the public budget as well. So I think that's going to be fundamental trend. On the policy side, it's interesting; there is a growing sense of need to take some action to deal with this chronic violence associated with certain chronic mental health condition. And we are in thick of that and we will be doing that in collaboration with multiple interest groups.

Ari Jaha - Credit Suisse

Great, thank you. And then secondly on aripiprazole lauroxil. What do expect the clinical program for a two month formulation to look like? And assuming positive data which filing by the way can be pursued?

Richard Pops

Our strategy on the clinical side will be to put two month into the clinic this year. And we will be mapping the PK profile of the two month formulation. And our first job is to map that PK profile on to a range of therapeutic doses we have established is efficacious in the Phase 3 program. And then we will interact with the FDA and decide on the filing path.

Operator

From JPMorgan we have Cory Kasimov online. Please go ahead.

Cory Kasimov - JPMorgan

Hey, good morning, guys. Thank you for taking the questions. I actually have three of them for you. One clinical, one financial and one strategic. The clinical one first. I see that you are running a pretty substantial Phase 1 program for 8700. There are obviously a lot of doses scheduling work that's taking place for this initial study, but how important do you believe this trial could be in beginning to delineate the product's clinical profile.

Richard Pops

Cory, I will take that, it's Rich. I think it's critical; it's kind of Alkermes style in our first clinical trial is to bring as much relevant clinical information as early as possible. So we are -- we have a drug to metabolize into MMF. And so we are going to test that metabolism by monitoring PK and PD within the clinical study. We also have a range of formulations and we are quite good at oral control release. So we are coupling the novel molecule with various deliveries profile. So at the end of the data, at the end of the study we will have data set to allow us to kind of assemble and determine whether or not we can develop a once a day formulation or twice a day formulation with improved properties. We'll get an early sense of tolerability as well but that would become more extensive, we will elaborate in later clinical trial.

Cory Kasimov - JPMorgan

Okay. And then the financial one for Jim. With the bump to R&D guidance you have given, you guys have so many different programs progressing through the clinic right now. Is it possible to give us an early read into to how we should be broadly thinking about R&D trend beyond 2014?

Jim Frates

Sure, thanks, Cory. I think it's important to -- we haven't given guidance yet for 2015. And it's really going to be driven based on the data that we see from the initial studies that we are starting now. A big toggle in 2015 is going to be the outcome of what we see with 3831, 8700 and 7106. As we have in the past we'll make decision based on data. We are fortunate in the sense that we have a very broad portfolio. So if these products aren't meeting our expectations, high expectations that we have for each of them, we won't be investing in them next year. So once we have more information we'll be able to give a better sense. But I think it's really going to be driven by the number of programs we have running next year.

Cory Kasimov - JPMorgan

Okay. And then last one, Rich, for you. Just with Alkermes been Irish domicile company and the amount of time that you spend in Washington, I am interested in your perspective and all the talk in Washington now building against tax inversion and how you suspect this could play out?

Richard Pops

I think there is a lot of talk about it given the current political climate. I don't think there is going to be much action related to it in the near term. And I just want underscore the fact that a lot of this discussion is talking about tax driven transaction for the purpose of inversion. We actually an Irish company with a huge Irish presence, lot of employees in Ireland making millions of doses of medicines in Ireland with a four year operating history of that business in Ireland. So even as people begin to talk about this thing as you pointed rather distinction between Irish companies. And we are incredibly solid in terms of our footing there. I just want to build on one thing that Jim was saying in the previous question to Cory, it's such an important moment for the company and I think so many people within our company deserve accolade because we really had been hammering here to put so many these drugs into the clinic, new important clinical trials. That really fantastic moment where we know that within the next several months we are going to turnover cards that are incredibly informative to the valuation of the company. And it doesn't happen by accident. It takes years of preparation and there are lots of people who have been cranking around here all summer. And I just want acknowledge how much work is going on and how exciting the moment is for us now.

Operator

From Citi we have Jonathan Eckard online. Please go ahead.

Jonathan Eckard - Citi

Thanks guys for taking my questions. So the first would be on the aripiprazole lauroxil NDA, so I guess if you are expecting to file before the end of the third quarter, I am guessing based on the pathway you guys are submitting through-- there is potential to see the FDA's acceptance of the NDA before yearend if I am not mistaken. And then with regards to some of the timelines of same data from this early programs, I know you guys are always have a conservative stands with regards to guiding to when you could see data but is it realistic to think that there is potential to see some data before the yearend for some of 8700 or 7106 given the designs and the timelines to run these type of trials are linked to the duration and treatments so on so forth.

Richard Pops

Good morning, John. I think on your first point about the timing of aripiprazole lauroxil NDA acceptance is right. That's right. So you are spot on there. And given the clarity of the Phase 3 result I think that we see the NDA as large submission but relatively straight forward in terms of its acceptability by FDA. We will be generating data in the 7106 program and 8700 program earlier than what we guided to. We have not made decision yet about how we'll compile those data and share them with you. I did say today that 3831 enrollment and olanzapine weight gain study is faster than we had originally modeled. So we will expect that data early in 2015. But the actual precise timing of that will be determined as we finish up that study.

Jonathan Eckard - Citi

And if you don't mind I'll ask more question. And I know it's tricky one because you don't like picking your favorite child so to speak which one you love the most. But if you have to look at 3831 results, 8700 or 7106, is there one in particular that you are most enthusiastic about with regards to what the trial could show and what clarity it could show to the potential, commercial -- the commercial potential that opportunity could have.

Richard Pops

They are three very different kinds of business and scientific opportunities. And I will, here is the way I answer the question. Starting with 8700. 8700 is obviously derivative of the massive opportunity the TECFIDERA is demonstrating in the oral MS market. And it's an exercise improving on an excellent product using technologies and experience that we have within the building. And it will be very clear whether we achieve that or not and that will be the go no go decision toggle for us in 8700. If it's go we move into a very established market with clear economic opportunities and medical opportunities. 3831 is a medicine that if we have significantly attenuated weight gain associated with olanzapine, we think we have one of the most important broad-spectrum oral antipsychotic to be developed. But it's still to be determined. Now it is 3831 to date where we were with 5461 before we got to competitive Phase 2 data. A fantastic idea sounded on tremendously strong science but let's see what the data show. Whether if it bares itself out. 7106 is a game changer. 7106 is a new class of opioid pain killer that has less potential for reduced potential for addictive properties and over dose potential. And what we like about 7106 is that it's -- as you heard us say before, this is a giant market in the U.S., 230 million prescriptions are written each year and the whole market contribute to less abusable, less addictive molecule. So does it -- I can't pick my favorite or any of our favorite right here. And it's subject of intense discussion around the building. But the data will point us in the right direction.

Operator

From Jefferies we have Bevin Anil [ph] online. Please go ahead.

Bevin Anil - Jefferies

Yes, hi, guys. Thanks for taking my questions. I have a question on 3831 on the Phase 2 that you are expecting data in early 2015. What can we expect on the weight gain given the earlier three week study showed a two pound reduction in weight gain in week three, so what is the company expecting, week 12 to one moving forward into a Phase 3 program? Thanks.

Richard Pops

Good question, Bevin [ph]. What would I say is the previous studies on the human volunteers, I wouldn't look at the absolute weight gain of a couple pound is being indicative of -- what we really looking forward with the changing the shape of the curves because that study by necessity could only be of three weeks duration in normal volunteers. So it's more interesting to see the slopes and the rate of change of the weigh gain that was indicative of the being consistent what we saw in the preclinical model. So to answer the question, important in this large study in Phase 2 in patients with schizophrenia who are receiving 3831 on a blinded basis for three months and then open label for another three months. We are going to look at not simply a median weight because as you heard me say before the median weight change for patients on olanzapine is actually about eight or nine pound in the KD study which isn't a clinical problem. The problem is people who have a weigh above the median and there are people who gain 30, 40, 50, 60, 70, 80 pounds on a medicine. So what we are hoping to get is a profile, a distribution of weight gain in the study in a large sample size. And seeing a shifting distribution in the patients on 3831, ideally looking at that cut of patients who gain excessive amount of weight say in excess of x% of your body weight maybe 7% of their body weight. And see if we can reduce that fraction significantly. So our statistic of interest is not necessarily changing median weight gain in the patient. It's a fraction of patient of gain more than some clinically significant amount of weight. And we think we have larger sample size to be able to get a sense of that in this Phase 2 study.

Bevin Anil - Jefferies

Got it. And I guess on aripiprazole lauroxil in the two month formulation. Can you provide any details on this PK program? How many patients? What type of doses would be evaluating in this trial?

Richard Pops

I won't yet primary for competitive reasons; we think that having a range of durations is going to be a real competitive factor because we think we have a range of doses and a range of durations, so we probably reveal that as we get into the program if you don't mind.

Operator

From Leerink Partners we have Michael Schmidt online. Please go ahead.

Jonathan Chang - Leerink Partners

Hi, this is Jonathan Chang stepping in for Michael Schmidt. Thanks for taking the questions. And my first question, can you provide any update on how your U.S. plans for aripiprazole lauroxil evolving?

Richard Pops

Sure. We -- I think I mentioned in our last call, based on the strength of the USO3 data on international 03 study, the pivotal study for aripiprazole lauroxil, we are going back to Europe to seek scientific advice on a filing strategy. The guideline suggests that we need to run another study, that's our base plan. And we are designing that study right now. But we want to go check in with regulators to make sure that's necessary based on the clarity of the result in the 03 study.

Jonathan Chang - Leerink Partners

Okay, thanks. And also when can we expect to see data from the second Phase 2 study of ALKS 3831 for schizophrenia patient with current alcohol use. Just want --

Richard Pops

We've modeled the fairly long view on that one. So we are currently saying early in 2017, I believe. But we will really update it based on--

Rebecca Peterson

We'll update based on enrollment rate.

Richard Pops

It's uncharted territory in terms of patient enrollment and site productivity. So what we've decided to do is we activate the sites and we get a sense of the enrollment rate and then we will guide toward when we think the study will complete. But it won't be in early 2015 or anything like that. It will be later then that.

Jonathan Chang - Leerink Partners

Okay, thanks. And just one last one. Are there any updates on the IL-2 therapy, RDB 1419?

Richard Pops

Thank you for asking. Yes, it's moving along. We are on track to put that into clinic next year. And our lack of discussion about it doesn't reflect anything about diminished excitement about it. It's just that we have so many things to talk about in this pipeline. We rarely get to the biologic. So thanks for asking.

Operator

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

Mario Corso - Mizuho USA

Good morning. Thanks for taking my questions. Just a couple of things I want to ask about. Starting with R&D guidance, there are about $35 million increase, is there any way to break that down even in broad terms, where it's coming from, 5461 versus 3831 versus other. And then second half of the year, on both R&D and SG&A, anything remarkable or identifiable in the quarterly spending trends we should be thinking about or should it be fairly linear? And then lastly on the long-acting antipsychotic, what do you think or what do you expect or hope the organizations like the APA may do or say over time which will potentially help the use of whole class? Thank you very much.

Jim Frates

Sure, Mario. I'll take the financial questions first and then turn the last one over to Rich. So from R&D guidance, the increase for 2014 is really driven by, as I mentioned in the script, the increasing enrollment from 5461 and 3831, that's mainly going to be driven by 5461, so if you are thinking about the relative increases in each of the program, and we have outlined in the Q some detail spending that you can see for the last quarter historically where that spent is. And 5461 is the largest program than 3831 and then aripiprazole lauroxil. Going forward through the year, as I mentioned as well I think that we are going to continue to see those curves now start to play out. And as you pull enrollment into 2014, finished studies in 2014 with 3831, little faster than we anticipated. And continue to work with aripiprazole lauroxil on the two month study this year and some other things that we are not disclosing for competitive purposes. That's why you are seeing that increase in R&D. So again all highly valuable and the faster we can get the return obviously the faster rolling your benefit to patients and shareholders. In terms of SG&A and other spending on COG, those are right in line with guidance is where there we gave earlier this year in February. So I don't really have an update to that spending. Rich?

Richard Pops

Yes, the point on the professional societies, there is actually two domains that we are interested from a policy point of view. One is the professional societies like APA. And in that particular their guidelines have not really been updated since 2004. And we think that with more LAIs in the market place and more data, they will at some point update their guidelines to accommodate the data around LAIs. The other domain of course is government because so many of these patients are covered by Medicare or Medicaid, so it's important also that assuming guideline that are in those systems are modernized to reflect been in use of LAIs. And we are working hopefully constructively with folks to have both happen.

Operator

(Inaudible) online. Please go ahead.

Unidentified Analyst

Hi, thanks for taking my question. With respect to the 3831 program, I was hoping you could elaborate a little further on the cut of patients with excessive weight gain that you are looking at kind of -- of the overall population kind of what that cut of patients looks -- cut of patients looks like. And kind of how we should expect to look at the data when we see it in early 2015. And also with respect to the accelerated enrollment in the program, is that largely due to the increased sites or are you seeing something else with respect to perhaps interest in the product profile?

Richard Pops

Yes, it's a good question. Just to be, the study we are running right now we don't really taken enriched cut of patients, we are really just taking -- we are taking all comers, a patients who are interested in going on to oral olanzapine in 3831 in the context of the study. Very naturalistic in that sense and it's informative in addition to just looking at the effect of 3831 in terms of weighs informative in terms of naturalistic profile weight gain in patients with schizophrenia with olanzapine which is not really been clearly demonstrated before. So even on the blinded basis we can monitor the gain in weight. And I think it's fair to say that the patients in the study on a minor basis are gaining weight. And if you look at the label for ZYPREXA that's consistent with the data that have been demonstrated before. But we are not looking -- the secret to this approach is not that you have to find people who already gained weight and have shown proficiency to enroll patients who are -- and determined along the way, who has the potential to gain more weight and I hope 3831 can prevent that weight gain or minimize it. The increased enrollment or accelerated enrollment. No, I don't think it's -- I wouldn't over interpret other than just that we were fairly conservative, this is a study that never been run before. And we have excellent clinical trial management I think by our team and very productive sites and kind of capability that we are building here in a general way that you saw in aripiprazole lauroxil Phase 3 study and then 5461 Phase 2 study. And hopefully the 5461 pivotal FORWARD program just is kind of rigorous fastidious attention to sites and execution translates into better enrollment rate. So hopefully the data will confirm the excitement I think that the community has for this program, but we will see that soon enough.

Operator

From Bank of America we have Steve Byrne online. Please go ahead.

Sarah - Bank of America Merrill Lynch

Hi, this is Sarah on for Steve. Thanks for taking the questions. First one is on what you've learned from the-- (inaudible) maintain launch, and what do you think it will apply to aripiprazole lauroxil launch, and is there anything in particular that you will do definitely and then maybe if you can elaborate on the early efforts that's been done. And if you plan to start meeting with hospital and payers in the near term.

Richard Pops

Yes. I think that we've been obviously watching --maintain launch with great interest and you heard us say before our view is that it underscores the receptivity of the market to new molecule up until this point, the only product that's been available for physicians for patients have really been risperidone and paliperidone, its metabolite, so the introduction of Abilify is done a couple of things. One is it broaden number of physicians who have been called on the study to read LAI and interested and we are seeing new starts on Abilify 18 coming not simply from patients who are on oral Abilify but from other, almost half of the patients are coming from other medicines as well, we surely think underscores the attractiveness of Abilify as a long-acting injectable molecule. We also have noted the scale with which they have come to market, which is consistent with J&J scale so we are kind of 150 to 200 reps focusing on this community mental health centers and specialized treatment centers. So we have very good metrics on where the business is and how the product is rolling out. And I think it's also the launch curve underscores the fact that $1000 long-acting injectable in disadvantage patient population launched with a different weigh form than (inaudible) and that's okay. We have good experience with that and we are prepared for a strong introduction but a gradual launch. And that's the way we are going to model it but we expect this drug to have a very, very good profile.

Sarah - Bank of America Merrill Lynch

7106, and then what kind of data you will need to determine to go no go decision, and will you also be looking at like the opioid specific ad versus such strong (inaudible) etcetera.

Richard Pops

Absolutely. So actually -- usually you hear about the single ascending dose escalation study being as fairly boring study in 7106 highly informative because if we can demonstrate a range of doses that we can administer in patients safely without causing respiratory suppression, we immediately begin to separate this molecule from classical opioid antagonist. Then we will take those doses and move them into pain model and we'll start to establish a very broad therapy of range, that's the idea. So we think these studies will be incredibly informative.

Operator

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

Terence Flynn - Goldman Sachs

Hi, thanks for taking the question. Just a follow up with respect to thinking about the SG&A build here. Maybe, Jim, you can just remind us what was contemplated here 2014 guidance for the 9070 commercial built and then help us think about the cadence as that rolls into 2015. And then would love any thoughts Rich on the recent FDA draft by equivalents for TECFIDERA. Thank you.

Jim Frates

Thanks, Terence. Sure, as we guided for the year of 2014 I think we are on schedule as the overall aripiprazole lauroxil program filed in the NDA at this time. And looking for a launch in 2015. So we have plan for and are executing on building the infrastructure. The management team, the marketing group etcetera for aripiprazole lauroxil but not yet the broad sales force. So 2014 includes that infrastructure build as it were with people but not the sales force. Because we feel like we'll have plenty of time before if we get the NDA in here in the third quarter. The sales force should be 2015 build.

Rebecca Peterson

Then I think you had a question on the BE guidance for TECFIDERA.

Richard Pops

So Terence, FDA is high equivalent guideline they just put out was very clear and very consistent with our hypothesis which is that very clear statement that MMF is the active mu-opioid in TECFIDERA. And therefore by equivalence standards for future generics will be based on modeling MMF. You should also expect that there will be response from others that so this will be an ongoing discussion scientifically but we think that the first statement by FDA is consistent with the science and it's been consistent with our approach to this program all along. So we are very pleased to see it.

Rebecca Peterson

All right, everyone. Thank you for dialing in today. And if you have any additional questions, please don't hesitate to call in here at the company. Take care.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.

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Source: Alkermes' (ALKS) CEO Richard Pops on Q2 2014 Results - Earnings Call Transcript
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