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Avanir Pharmaceuticals (NASDAQ:AVNR)

Q4 2011 Earnings Call

December 12, 2011 4:30 PM ET

Executives

Ian Clements – Investor Relations

Keith Katkin – President and CEO

Christine Ocampo – Vice President, Finance

Dr. Joao Siffert – Senior Vice President, Research and Development

Eric Benevich – Vice President, Marketing

Michael McFadden – Vice President, Sales and Managed Markets

Dr. Randall Kaye – Chief Medical Officer

Analysts

Roy Buchanan – JMP Securities

Frances Wong – Canaccord Adams

Carol Werther – Summer Street Research Partners

Operator

Good afternoon. My name is [Anisha], and I will be your conference operator today. At this time, I’d like to welcome everyone to the Fourth Quarter and Full Year Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Ian Clements, you may begin your conference.

Ian Clements

Thanks very much and good afternoon, everybody. Joining me on today's conference call are Keith Katkin, President and Chief Executive Officer; Christine Ocampo, Vice President of Finance; and Dr. Joao Siffert, Senior Vice President, Research and Development. For the Q&A portion of today’s we’re also be joined by Eric Benevich, Vice President of Marketing; Michael McFadden, Vice President of Sales and Managed Markets; and Dr. Randall Kaye, Chief Medical Officer.

Earlier this afternoon Avanir issued a news release, announcing the company’s results for fiscal 2011 fourth quarter and full year. If you’ve not received this new release or if you’d like to be added to the company’s distribution list, please call Investor Relations of the company, or you can sign up to the IR section of the company’s website www.avanir.com. Copies of news releases and SEC filings can also be found in the IR section on our website.

Before we begin, I’d like to remind you that the statements made on this call represent our judgment as of today, December 12, 2011. Our remarks and responses to questions during this conference call may constitute forward-looking statements, including plans, expectations, and financial projections, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ materially from the expected results expressed in our forward-looking statements.

Forward-looking statements are not guarantees of performance, they involve known and unknown risk, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statements.

More information about these statements and the related risks and uncertainties, please refer to the forward-looking statement paragraph in our recent press release and the Risk Factors set forth in the latest Avanir Form 10-K and the most recent 10-Q filed with the Securities and Exchange Commission, as well as any subsequent filings with the SEC.

AVANIR assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances after today’s call or to reflect the occurrence of unanticipated events.

With all that said, I’d now like to turn the call over to Keith Katkin. Keith?

Keith Katkin

Thanks, Ian, and my thanks to each of you for joining us today. I’d like to start off the call by highlighting the achievement of a number of important milestones both commercially and clinically in recent months.

First, we’ve continued to significantly grow NUEDEXTA prescriptions. Second, we’ve initiated a number of short and medium-term commercial initiatives for NUEDEXTA in pseudobulbar affect or PBA to help ensure continued growth of NUEDEXTA prescriptions.

Third, we filed the marketing authorization application for NUEDEXTA for the treatment of PBA with the European medicines agency and subsequently our application was accepted for review. Fourth, we achieved a significant milestone in our study of AVP-923 in central neuropathic pain in multiple sclerosis with the enrollment of our first patient. And finally, we fully deployed our institutional care sales force pilot consistent of approximately 30 sales representatives.

Let me start with NUEDEXTA prescriptions since that is an area of significant interest and progress. The number of PBA patients being treated and experiencing the benefits of NUEDEXTA is steadily growing each month and I’m very pleased with the continued growth in prescriptions that we are observing.

Taking a look at monthly prescription numbers, in July, a total of 2,746 prescriptions are written of which 1,723 were new prescriptions, in August, a total of 3,556 prescriptions were written of which 2,060 were new prescriptions, and for September, a total of 3,908 prescriptions were written of which 2,076 were new prescriptions.

Thus for the fourth fiscal quarter of 2011, we had a total of 10,210 prescriptions of which 5,859 were new prescriptions. This represents a 99% increase in total prescriptions versus the prior quarter. The average prescriptions size in the quarter was 51 capsules.

We continue to see prescription growth in October with total prescriptions equaling 4,100 of which new prescriptions were 2,043. Although full November IMS numbers are not yet available we are on track to show continued growth in total prescriptions and are pleased that during November we achieved our first week of over 1,200 total prescriptions of which over 600 were new prescriptions. This is an important milestone as the annualized value of 1,200 prescriptions per week covers fixed expenses of our specialty retail and institutional care sales forces combined.

Since our last quarterly conference call, important short to medium-term growth initiatives have been put in place. I’d like to focus on three of these. First, the sales force, as I mentioned earlier, in recent months we have been conducting a fairly expensive sales force pilot into the institutional care segment. We have recently added approximately 30 experience sales professionals dedicated to the institutional care center, in addition to our initial specialty sales force of 75 calling primarily our neurologist and psychiatrist.

Over the past few months new territories were created, candidates were identified, hired, trained and deployed. These efforts culminate in a national sales meeting in late October. Our institutional sales team is now fully deployed and early signs of their impact on driving sales in that segment are encouraging. We expect to be able to better assist success of the institutional sales team in the first calendar quarter of 2012.

Second, is our continue focus on patient access, our managed markets account team has been meeting with and educating formula decision makers with health plans, commercial insurers, Medicare Part D plans and State Medicaid.

We have recently reached agreement with one of the five largest payers in the U.S. to add NUEDEXTA as a preferred medicine on its formulary effective January 1st. This will provide over 10 million lives with improve access to NUEDEXTA beginning in 2012.

With this additional payer we have reached agreement with three of top five payers that manage prescription plans. As a result of this and other recent wins at the beginning of the new calendar we expect there to be approximately 35% of patients with unrestricted access to NUEDEXTA.

We continue to make progress and discussions with several of the largest Medicare plans, currently requiring a prior authorization or letter of Medical Necessity to cover NUEDEXTA. Our goal continues to be to obtain coverage for NUEDEXTA with few or no restrictions in 2012.

Third, our plan consumer marketing activities, including direct to patient and caregiver advertising, throughout the year we focused on working with patient advocacy groups to increase awareness and understanding of PBA among their memberships.

As we transition into fiscal 2012, a NUEDEXTA branded consumer advertising campaign is currently in development. We plan insert NUEDEXTA advertisements in broad reach consumer magazines and high traffic health related websites starting in the first calendar quarter of 2012.

We are also in the process of developing live patient education events with broad rollout of physician to patient educational programs planned for early next year. All our consumer marketing initiatives are design to raise awareness and motivate patients or their caregivers to discuss PBA and NUEDEXTA with their physicians.

In addition, the clinical and regulatory teams have continued to excel this year. Our interactions with the European regulatory authorities led to the acceptance of our Marketing Authorization Application or MAA filing in November. On the clinical front embarking upon the PRIME study of AVP-923 in central neuropathic pain at MS was a major milestone for us as is our plan study of behavioral disturbances in patients with Alzheimer's disease. Dr. Joao Siffert will talk more about these studies later on the call.

To conclude, I’m delighted on the excellent progress we have made on all fronts and the achievements the organization has made both in the commercial and clinical perspective.

I’ll now turn the call over the Christine to address our financial results.

Christine Ocampo

Thanks Keith, and good afternoon, everyone. Today my comments will cover our financial results for the fourth quarter and fiscal 2011, please refer to the financial results included in the press release for the full year fiscal 2011 results. In addition to the financial results summarized in the press release issued earlier this afternoon, you can find additional information in our upcoming 2011 annual report on Form 10-K.

All figures discussed today are approximate. I'll begin with the financial results for the fourth quarter of fiscal 2011. We reported total net revenues for the three months ended September 30, 2011 of $4.8 million, as compared to $726,000 for the comparable period in fiscal 2010. The increase from the prior year was primarily due to net product revenue from sales of NUEDEXTA.

Gross sales of NUEDEXTA were $4.3 million and net sales of NUEDEXTA were $3.7 million. Total NUEDEXTA net shipments for the fourth fiscal quarter of 2011 were $4.4 million and deferred NUEDEXTA revenue was $1.7 million. In the fourth quarter wholesaler inventories were maintained at two to three weeks.

Gross margin on the sales of NUEDEXTA for the fourth fiscal quarter of 2011 was 94%. We recognized NUEDEXTA revenue using a deferred revenue recognition model. NUEDEXTA cap full shipments to wholesalers are initially recorded as deferred revenue and then later are recognized as revenue when the product has left the distribution channel and is therefore no longer subject to right of return.

Recognized product revenue effectively represents reported end-user prescriptions and non-retail shipments of NUEDEXTA capital.

Now move on to operating expenses for the fourth quarter. Research and Development expenses were $5.6 million for the quarter ended September 30, 2011, compared with $3.3 million for the same period in the prior year. R&D expense increased as compared to the 2010 fourth fiscal quarter.

In the fourth fiscal quarter of 2011, our R&D spend was primarily attributed to non-clinical post marketing requirements, medical affairs, EMA regulatory expenses and the cost associated with start up of the PRIME study, while in the fourth fiscal quarter of 2010, our R&D spend was primarily attributed to regulatory expenses.

Selling, general and administrative expenses of $16.9 million for the fourth fiscal quarter of 2011 increased from $6.2 million for the corresponding period of the prior year. The increase was primarily due to an increase in expenses related to the commercialization activities for NUEDEXTA.

Total operating expenses for the quarter were $22.5 million, compared with $9.5 million for the comparable quarter in 2010. For the three months ended September 30, 2011 and 2010, the company recorded $1.1 million and $800,000 respectively of stock-based compensation expense. Cash used in operations for the fourth fiscal quarter of 2011 was $14 million.

Our net loss for the fourth fiscal quarter of 2011 was $18 million or $0.14 per share, compared with a net loss of $9.7 million or $0.10 per share for the same quarter in 2010. These increases in our net loss during 2011 were primarily due to significant increase in our sales and marketing expenditures as a result of our continuing promotion efforts for NUEDEXTA.

As of September 30, 2011, Avanir had total cash, cash equivalents and restricted investments in marketable securities of $81.8 million. In addition subsequent to the end of the fourth quarter warrants were exercised resulting in gross proceeds of $7.8 million.

Looking forward to fiscal 2012, we currently anticipate that total operating expenses, excluding share-based compensation will be in the range of approximately $85 to $92 million. Now breaking total operating expenses down further we anticipate that R&D expenses will be in the range of approximately $21 to $24 million, including medical affairs organization and SG&A expenses will be in the range of approximately $64 to $68 million.

In regards to NUEDEXTA revenue, we continue to evaluate the appropriate time to provide guidance. Over the coming months we will evaluate the impact on revenue from our institutional sales pilot and the progress of our ongoing discussions with third-party payers before making any decisions about providing revenue guidance.

With respect to cash need for the coming fiscal year, it is our goal to minimize any significantly dilutive financing as we focus on growing our revenue and managing our expenses. Should we have the need for additional capital? We have a number of non-dilutive options that we may be able to take advantage of, including lines of credit, term loans, royalty debt and ex-U.S. partnership.

With that summary of our financial results, I’d like to turn the call over to Joao. Joao?

Dr. Joao Siffert

Thanks Christine. Good afternoon, everyone. So as you’ve heard from Keith, the R&D and medical teams have made remarkable progress over -- in several fronts. Let me briefly start reviewing with the NUEDEXTA clinical development then I’ll speak a bit about the EU regulatory progress and also comment on the ongoing PRISM patient registry.

I’m delighted that NUEDEXTA or AVP-923 of it’s known in clinical development is back in clinical trials. On November 3rd, we announced that we had enrolled our first patient into the PRIME study. As you may know this clinical trial will test the safety and efficacy of three dose levels of AVP-923 for the treatment of central neuropathic pain in patients with multiple sclerosis. We expect to enroll about 400 patients into PRIME study at sites distributed in the U.S. and also overseas.

We currently have 18 sites activated in the U.S. new sites are being activated each week now and we’ll begin initiating European and international sites in early calendar year 2012. Our current estimate on timeline is that we should announce preliminary data in the second half of 2013.

In addition to the PRIME study, we are also working along side key experts in the field to develop a proof-of-concept study testing AVP-923 for the treatment of behavioral disturbances in Alzheimer's disease such as agitation. We are planning to begin the study in the first half of 2012.

Before I go on to speak about the European regulatory, I’d like to spend a little time giving this is my first conference call since joining Avanir four months ago, to share my initial observation about NUEDEXTA. So part of what initially drew me to Avanir stands from my day as the practicing neurologist where care for several patients with PBA. Having seen these patients suffering first hand and also that of their caregivers, I could rarely recognize the importance of the drug that treat this conditions and the potential impact that can have in their lives.

Looking beyond PBA, I was also very excited to explore potential new clinical applications for NUEDEXTA and other CNS disorders and pain. Based on the pharmacology of AVP-923 which appears to modulate excitatory neurotransmission in the brain and spinal cord, a variety of other neurological psychiatric conditions can also be targeted.

These include all the types of neuropathic pain such as in the PRIME study and certain behavioral disturbances in patients with dementia and also in people with traumatic brain injury, as well as other symptoms such as in Parkinson's disease called Dyskinesias just to name a few of them

To that end we are looking into ways to expand our clinical research activities through collaborations with academia and certain organizations that can provide support and funding for proof-of-concept studies.

Thus through rational combination of in-house clinical development and strategic research collaborations, we’ll attempt to replicate findings published over the years suggesting a broad utility of AVP-923 pharmacology in the CNS space.

With respect to regulatory progress in Europe during the summer of 2011 we had a number of productive interactions with European Medicines Agency, EMA and based on the outcome of these meetings we were granted the eligibility to file under centralized procedure with the more efficient process for gaining marketing authorization in all the member states of the European Union.

In November, our application to the EMA, seeking marketing authorization for NUEDEXTA for the treatment of PBA was accepted for review. The acceptance of this application was an important step in the process of making NUEDEXTA available to PBA patients in Europe.

The application is based on comprehensive clinical data from Avanir controlled Phase III studies of NUEDEXTA in patients with PBA plus data from the company’s long-term safety studies as well as thorough pre-clinical program.

The EMA MAA acceptance triggers the initiation of the EMA standard scientific assessment and opinion review period which will take a minimum of 210 days. In addition, EMA granted Avanir a full waiver of the pediatric development for NUEDEXTA.

On the PRISM patient registry, I’d like to say that this program is well underway. We continue to activate sites and enroll patients into the registry, with over 400 sites already registered and many investigators actively enrolling patients.

Taking a brief look at the data, it is encouraging to see that the patient enrolled to-date represent a diverse cross-section with various under liner logical conditions. We intend to submit on going data analysis to upcoming medical meetings in 2012.

Finally, there are continues to be a lot of interest within the scientific medical community regarding NUEDEXTA and PBA. This past year we have -- there have been six publications related to PBA or NUEDEXTA appearing peer reviewed journals. During calendar 2011 alone 12 abstracts have been presented at various national, international scientific meetings.

With that update on the research and medical affairs activities, I’ll hand it over back to Keith. Keith?

Keith Katkin

Thanks, Joao. A few comments in closing before we open the call up to questions. My belief and the management team belief and the value proposition of Avanir remained strong. Although, as a fellow shareholder, I have shared your frustration and disappointment that our stock price has not reflected our performance.

Nevertheless, I see great opportunities for us to create significant shareholder value in the coming years by focusing our efforts on the execution of our strategy. 2011 has been an exciting and transformational year for Avanir, getting approval from the FDA for NUEDEXTA, followed by the launch, initiating a new clinical research trial and filing a marketing application for NUEDEXTA in Europe are just the few of the highlights. I’m very excited about what 2012 holds for Avanir.

During 2012, our focus will continue to be, first, on building the NUEDEXTA market in PBA and growing sales. Second, further advancing NUEDEXTA or AVP-923 in the new clinical trial opportunities, third, obtaining regulatory approval from – in Europe for NUEDEXTA in PBA and finally, actively managing our cash position and expenses.

With that summary of our business and financial update, I would now like to open the call up to questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Charles Duncan.

Roy Buchanan – JMP Securities

Hi, guys. This is Roy Buchanan in for Charles. Thanks for taking the question. Nice quarter. Just a couple of questions, can you give us more detailed update on the ex-U.S. partnership progress, maybe rough number of discussions, specific regions?

Keith Katkin

Sure. Hey, Roy. It’s Keith. Thanks for joining us today. In terms of outside of the U.S. as we’ve said before there are number of parties that have expressed interest outside of the U.S. everything ranging from Latin America to pure European partnerships.

So as we are now in the regulatory process in Europe that’s our primary focus and securing approval but in tandem we do expect that we will continue to have discussions with potential partners in terms of likelihood of success or timing obviously, I can’t comment on that, but I had business development knows the importance of securing a partnership and is focus on doing such.

Roy Buchanan – JMP Securities

Okay. Thank you. And a brief question on the Alzheimer study behavioral disturbance, can you comment on maybe the market size you see there and what kind of study you are looking at, maybe the size of the study, specific types of patients if you can?

Keith Katkin

I can comment on the market then I’ll turn it over to Joao to comment on the study. Although, I should say still a very much in protocol development stage without any specifics. But from the market size opportunity everybody is probably well aware there is estimate of between to between 5 and 7 million patients in the U.S. that suffer from some form of dementia and a majority of those suffering from Alzheimer's.

And if you look at the agitation of these behavioral disturbances a large percentage of the Alzheimer's patients suffer from these behavioral disturbances, so you can get a very quick insight into really the significant market opportunity that exist there, should we have success with this clinical development?

And then I think also aligns very well with our current strategy and also with our institutional care pilot that we have ongoing. So from a commercial strategy perspective believe it lines up very well and I’ll now turn over to Joao, just to add some comments on the -- in development protocol.

Dr. Joao Siffert

Sure. Thanks Keith. So, just to add to what Keith said, this is obviously an area of great unmet need, is not only the share size of the market but also in fact there aren’t too many appropriate prescriptions for treatment of those conditions.

So the study is still, as Keith mentioned in early development, there is always the sort of fund balance between doing this smallest proof-of-concept study but also trying to get reasonable signal to make a decision to move forward in further development.

So, I mean, I can give you a broad range, we’re not sure how that’s going to help, but basically the pilot proof-of-concept study that will hopefully give us enough information to proceed with confidence into subsequent development.

The population as you know is large mostly folks who have progression of Alzheimer's to the moderate or sometime severe stage and then those patients behavioral disturbances are quite common and troubling for caretakers and for the patients themselves.

Roy Buchanan – JMP Securities

Okay. Great. And this – will this use the same formulation as AVP-923 or NUEDEXTA or something else?

Dr. Joao Siffert

We’ll use AVP-923 probably couple of dose levels, AVP-923 including NUEDEXTA.

Roy Buchanan – JMP Securities

Okay. Great. Thank you, guys.

Keith Katkin

Thanks, Roy.

Operator

Next question comes from Ritu Baral.

Frances Wong – Canaccord Adams

Hey. This is Frances Wong on for Ritu. So my first question is, would you provide some color on long-term care sales?

Keith Katkin

Sure. So, really I think the appropriate metric there is to look prescription levels or the percent of prescriptions and as we had commented probably go back about a months or two months, what led us to look and evaluate this pilot was that our long-term care prescriptions were about 30% of the total NUEDEXTA prescriptions, roughly six months into the launch when we didn’t have a focus on the long-term care setting.

Now that the pilot is underway, if you just look back at the past couple of weeks, we are seeing the percentage of prescriptions that are being contributed by long-term care in the 35% to 40% range and we certainly think with our focus as we move to the rest of the year that number will likely continue to increase.

Frances Wong – Canaccord Adams

Yeah. Thanks. And would you provide a number of plans that have NUEDEXTA on Tier 2 versus Tier 3, and the number of Medicare plan that have NUEDEXTA on Tier 2 versus Tier 3?

Keith Katkin

Well, we’ve – we’d like to look at the total lives in the U.S. combined, and so we don’t even broken out by number of plan, I’m sure that we could pull it, if need be, but I think the important factor to look at on that level is approximately 35% of all lives in the U.S. are covered under with Tier 2 coverage. So experiencing co-pays right around $30 and as we mentioned in the call, three of the five largest plans are commercial plans we do have Tier 2 on which account for a large portion of that 35%.

On the Medicare front we still continue to work with the Medicare Part D plan. We are in active discussions with the Medicare Part D plan. But we don’t have anything to report on the largest plan as we still in negotiations and discussion with them.

Frances Wong – Canaccord Adams

Okay. And we notice on the NUEDEXTA website there is a co-pay assistance program with the non-profit for Medicare Part D patients you just comment on that?

Keith Katkin

Sure. We’ve got Eric Benevich here, our Vice President of Marketing. So I’ll let Eric comment on that.

Eric Benevich

Yeah. Hi, Frances. We work with a charitable organization called Patient Services, Inc. or PSI and we funded a foundation to support out of pocket expenses for Medicare Part D patients that have being treated for PBA. And so as patients or their healthcare providers are looking into financial assistance we are able to create those requests over the PSI and then they are able to apply for financial assistance. And essentially, if they are out of pocket costs exceed $30 per month and they meet certain other criteria they will be eligible for financial assistance from PSI.

Frances Wong – Canaccord Adams

Okay. Thanks. And one last question. So I have noticed that that discount allowances have been growing at a percentage of NUEDEXTA sales, could you just comment on that and going forward, do you think it will stay steady at about 15%?

Keith Katkin

Yeah. We -- this is probably going back about two conference calls or so. But as we are still in negotiation with many of the plans, until we reach we believe to be “steady state” in terms of formula replacement and discounts and rebates, we’ll likely continue to see that number increase.

So what we have said previously is that depending on how aggressive we get with our overall contract negotiations that if we’re on the less aggressive side then we would proceed rebates and allowances being in the 15% to 20% range and if we decide that we want to get little bit more aggressive and trying to get more Tier 2 unrestricted access, we probably see that number somewhere around 20% to 25% rate.

Operator

(Operator Instructions) Your next question comes from Carol Werther.

Carol Werther – Summer Street Research Partners

Thanks for taking my question. I just trying to get a sense of when you think you might be on the market and the EU and how I should plan, I guess, I should plan that you’re going to launch it on your own?

Keith Katkin

I’ll leave it to you to decide which, how it gets to the market within Europe, I mean, certainly we’re evaluating all options, I think as you heard in the first question, we are having undergoing discussions with potential European partners, and we are also evaluating possibility distribution agreements with the regional players within Europe and then certainly commercializing ourselves is an option as well. So I think if you want to take a considerable approach in assuming that we are going to do it ourselves is probably the conservative approach taken at this time.

In terms of timing, we don’t like to get into the, I guess, the game about regulatory timeline, EMA does have a the formal 210 day timeline, but they needed to add to that all what they call the clock stops and we cannot be predictive of the clock stops that will happen along the review process, so you may want to look at some other analogs and the products that have done through the process to get a sense, but then once the CHMP makes the recommendation then the formal approval needs to be adopted and then you need to apply for reimbursement on the country by country basis.

So there is certainly a lot steps within that timeline and since we don’t want to be in the business of trying to be predictive of regulators timeline you may want to look at some recent examples maybe within the CNS space to get a sense of what that timeline might look like.

Carol Werther – Summer Street Research Partners

Okay. So one time I thought you might have some kind of expedited approval that doesn’t sound like that?

Keith Katkin

The CHMP or the EMA notified us that we qualified for the standard review timeline. We had hoped that there were probably a possibility that we can have an expedited review, but if you look at the history of the EMA, expedited review almost always come for oncology drugs and those with immediate potential survival benefits, there is very few that’s why they’ve offered expedited reviews for we call it symptomatic therapy.

Carol Werther – Summer Street Research Partners

Okay. And at what point Keith you’re going to consider raising money, I don’t have you profitable this is next fiscal year, but what’s your thought process on this?

Keith Katkin

Yeah. And I think Christine did a very nice job in the call outlining it, so just to reiterate. The -- our need to raise any future capital is directly related to our ability to grow sales and also to have manage our expenses.

So the first, second and third priorities of the company right now are growing our revenues and making sure that we keep our expenses in line and if we think that we can do that successfully then that would not require us to go back to the markets for any insignificantly dilutive financing.

As a commercial stage entity we reported a lot of different methods of potential capital and many of them non-dilutive in nature, so to consider line of credits, terms loans, royalty, debt sales, and even ex-U.S. partnerships just to name a few all of those are readily available for us to take advantage of if we would like to.

And then also don’t want to -- which we don't overlook the warrant exercise that happens subsequent to the end of the quarter, we did get approximately $7.8 million in the gross proceeds from that warrant exercise that was certainly very nice topping off of the balance sheet that occurred here at the – after the end of the quarter.

Carol Werther – Summer Street Research Partners

Okay. And I’m just – in my conversations with doctors they seems to be getting a lot push back from the insurance company, I think, some of that has to do with the exact definition of PBA and asking them to use SSRIs or tricyclic drugs prior to using NUEDEXTA. Have -- are you experiencing that and how you’re trying to address?

Keith Katkin

Let me, I can comment on that then I’ll turn it over to Michael McFadden, he is on the call who runs our Sales and Managed Markets add any additional color. But I think from our advantage point I would think on the commercial side and that reimbursement is going quite well, all of the numbers that we are looking at that suggest approval, a script approval like the pharmacy rate of about 90%.

However, we recognize that on the Medicare Part D side that we have opportunities for improvement and thus the focus on the contract negotiations with Part D and our Part D prescription approval rating for the last many months is being running around 50%. So in other words 50% of prescriptions that are taken at the pharmacy for Medicare Part D eligible patients are not being filled for one reason or another.

I -- to be honest I haven’t heard much noise about SSRIs, I’m aware of maybe one plan that taken that position, which is a very small plan, but let me turn it over to Michael, well, we have him on the call here to add additional color if he would like.

Michael McFadden

Yeah. First I would echo what Keith said is that coverage continues to improve each month as we look at other analogs that have launched recently and market we don’t pays to have coverage so much to the other analogs.

Regarding plans that have chosen to restrict which is not in common with the new agent entry the market, most of the restrictions are very straightforward. They are requirement of PBA, pseudobulbar affect documented by the physician and the PA is approved.

There are small plans and some of the large markets that may have a more restrictive PA but those are very few and far between. And as we’re encouraged they like our story, most of the plans are reviewing or restrictive processes and lessening those, so that physicians and patients have better access to the medicine.

Carol Werther – Summer Street Research Partners

Thank you.

Keith Katkin

And then, Carol, probably just to add to we do plan on our new sales force material rollout here coming up at the start of 2012. We never renewed focus on all of our reimbursement resources. So making sure that people are aware of the Medicare foundation that has been established to make sure that they are well aware of the co-pay program that we have build before commercial payment, make sure that they take advantage of our online and live call centers where they can get reimbursement support.

And then, also be getting issued a new PBA ICD-9 code that should help with differential diagnosis as well in the future. So we definitely recognize that there is still opportunities within reimbursement and that’s why the team is committee to staying focus there and making sure that we maximize the script approvals that are happening at pharmacy level.

Carol Werther – Summer Street Research Partners

Okay. Thank you.

Operator

There are no further questions at this time. Do you have any closing remark?

Ian Clements

Thanks very much. In closing, I’d like to thank you for joining us today and your continued interest in Avanir. We look forward to providing update to you on the progress that we continue to make at upcoming conferencing and on future calls. If you have any further questions or you’d like to discuss any portion of the results of today, you can call my direct line in the Investor Relations department at 949-389-6737. Thanks very much again.

Operator

This concludes today’s conference call. You may now disconnect.

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