Alder Biopharmaceuticals'(ALDR) CEO Randall Schatzman on Q1 2016 Results - Earnings Call Transcript

Alder Biopharmaceuticals Inc. (NASDAQ:ALDR)

Q1 2016 Results Earnings Conference Call

April 28, 2016, 05:00 PM ET

Executives

David Walsey - VP, Corporate Communication

Randall Schatzman - President and CEO

Larry Benedict - SVP, Finance

Mark Litton - Chief Business Officer

Analysts

Vamil Divan - Credit Suisse

Operator

Good afternoon, and welcome to the Alder First Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up to your questions. Please be advised that the call is being recorded at the company's request.

At this time, I'd like to turn the call over to David Walsey, Alder’s Vice President, Corporate Communication. Please proceed.

David Walsey

Thank you, and good afternoon everyone. Welcome to Alder's first quarter 2016 financial results conference call. Just after the market closed today, we filed our quarterly Form 10-Q with the Securities and Exchange Commission and issued our financial results and corporate highlights press release, both of which are available at our website www.alderbio.com.

Today in our call, Randall Schatzman, President and CEO will provide an overview and update of the company's business; Larry Benedict, Senior Vice President of Finance will review the financial results; and then we will open up the call to your questions. Mark Litton, our Chief Business Officer is also with us today for the Q&A.

Before we begin, I would like to caution you that during today's conference call, we’ll be making forward-looking statements regarding future events or the future performance of the company, including statements about possible future developments regarding clinical, regulatory, commercial, financial and strategic matters. Actual events or results could differ materially. We refer you to the documents that Alder files from time to time with the SEC, and in particular, the company's quarterly report on Form 10-Q for the quarter ended March 31, 2016 which was filed with the Securities and Exchange Commission today April 28, 2016.

These documents, which are available on the SEC's website, contain and identify under the heading Risk Factors important factors that could cause actual results to differ materially from those contained in any forward-looking statements, including without limitation, risks and uncertainties related to the initiation, conduct and results of clinical trials, the availability of data at the referenced times, risk and uncertainties related to regulatory approval processes and compliance with the applicable regulatory requirements; the sufficiency of Alder's capital and other resources; and market competition.

With that, let me pass the call over to Randy.

Randall Schatzman

Thank you, David, and welcome everyone. During our first quarter call at this time last year, we set forth our accelerated development program for ALD403, and since that time we continue to leverage our positive clinical data to advance ALD403, our wholly owned pivotal stage product candidate for migraine prevention.

Since then, we have successfully executed our plan on all fronts. Optimizing efforts to meet our goal of submitting BLA to the FDA gain approval and deliver ALD403 to patients who desperately need relief from their migraine suffering.

As many of you know, ALD403 is our transformative novel monoclonal antibody being developed for the prevention of migraine that blocks the calcitonin gene-related peptide or CGRP.

CGRP is a small protein involved in the transmission and heightened sensitivity to the pain experienced in migraine. Our clinical trial result to date has established ALD403 as a potential best-in-class therapeutic with robust and immediate migraine prevention via a single infrequent quarterly administration.

In March, we reported top line data from our Phase 2b clinical trial conforming and expanding on our previous data by demonstrating robust efficacy in migraine prevention and patients living with chronic migraine, a severe form of the disease.

We also announced positive Phase 1 clinical trial data demonstrating that the pharmacokinetics and pharmacodynamics via intravenous, subcutaneous, or intramuscular routes of administration of ALD403 support a quarterly, single-injection dosing strategy.

Our Phase 2b study is the largest anti-CGRP study in migraine's reported to-date. Further and importantly, this is the first study of an anti-CGRP and chronic migraine demonstrating efficacy with both of the endpoints that the FDA has indicated are suitable for marketing approval.

Results from both the Phase 2b and the Phase 1 studies build on the emerging profile of ALD403 supporting its potential to be a successful and well differentiated biologic agent that can transform the lives of a significant number of the approximately 13 million patients nationwide who are migraine prevention candidates. This includes the approximately 3 million chronic migraine patients.

This year we plan to continue to build on ALD403 robust profile. We are expecting 24-week data from the Phase 2b study in chronic migraine and the initiation of additional clinical studies. We believe our strong cash position will enable us to execute our pivotal trial program through data readouts and to invest in manufacturing and commercialization preparedness.

Now I'd like to briefly review the top line Phase 2b and Phase 1 clinical trial results that we initially announced last month and then I will preview our expectation for the next 12 months or so.

Last month we reported positive topline data from a Phase 2b double-blind placebo controlled, randomized, single intravenous infusion dose ranging study in patients living with chronic migraine. Recall that chronic migraine patients are defined as individuals who experience 15 or more headache days per month of which 8 or more days must be assessed as migraine days.

The data demonstrated that ALD403 acted rapidly and prevented migraine over the entire 12-week study period meeting both primary and secondary efficacy endpoints. The primary endpoint was the change in migraine days between ALD403 and placebo as determined by the 75% responder rates over the 12-week study period. The key secondary efficacy endpoint was the mean reduction in migraine days from base line throughout the 12 weeks study period.

With respect to the primary endpoint, over the full 12-week study period, 33% of the patients had the 300 milligram dose level, and 31% of the patients had the 100 milligram dose level, at a 75% reduction in their migraine days which was significantly different from placebo. Even doses as low as 30 milligrams resulted in a 50% reduction in migraine days in a significant number of patients for 12-weeks.

A 75% reduction in migraine days for these patients who averaged 16 migraine days per month equates to a reduction by 12 or more migraine days with migraine each month, giving patients roughly 2 weeks of their lives back each month following a single dose of ALD403. This is a very substantial improvement in this severely afflicted patient population and is the type of improvement that can transform the lives of these patients.

With respect to the secondary endpoint, the mean change from baseline for migraine days, we also saw that a single administration of ALD403 delivers statistically significant results for weeks 1 to 12 at the 300, 100, and 30 milligram dose levels.

Overall, this shows migraine days were reduced by an average of 8 from baseline by this method of analysis, an improvement over placebo of about 3 days. The change in mean migraine days for weeks 1to 4 demonstrated that the response to ALD403 was rapid and pronounced.

The 300 milligram, 100 milligram, and 30 milligram dose levels all provided immediate migraine prevention relief to patients in that first month which averaged 8 fewer migraine days for patients.

Overall, the safety profile was consistent with that observed in our previous ALD403 trials. There were no new findings.

Last month, we also announced positive data from a Phase 1 placebo controlled randomized multi-dose quarterly dosing study comparing intravenous, subcutaneous, and intramuscular routes of administration in healthy volunteers.

Subjects receive two administrations of ALD403 or placebo, the first on day 1 and the second at week 12. Endpoints included pharmacokinetics and pharmacodynamics and subjects were followed out to 24 weeks.

The pharmacodynamics endpoint used to measure the CGRP response, was in evaluation of peripheral blood flow after a [indiscernible] challenge. The Phase 1 results further support our quarterly dosing strategy as a single injection by all modes of administration.

ALD403 administered by single injection via IV, subcutaneous, or intramuscular routes provided comparable levels of suppression of peripheral CGRP biology for the full three months.

By availability of ALD403 administered by either subcutaneous or intramuscular routes of administration was approximately 80% relative to IV. Local tolerability was excellent for all modes of administration. Further the safety profile was consistent with our findings from our earlier ALD403 clinical studies.

Taken together, the results from the Phase 2b study in chronic migraine patients and those from the Phase 1 study provide an important bridge between pharmacodynamics monitoring via peripheral CGRP blockage and migraine prevention.

Doses of ALD403 100 milligram and 300 milligrams which provided for a full three months of migraine prevention in the Phase 2b study of chronic migraine patients also provided three months of suppression of peripheral CGRP biology independent of route of administration.

This is a compelling observation and further bolsters our strategy of quarterly dosing via different modes of administration and gives us solid confidence that we can utilize the Phase 1 pharmacodynamics data to closely dial in the dosing profile to carry forward for self administration studies.

Additional results including future analysis of additional secondary endpoints from both of these trials are expected to be presented at upcoming medical meetings and published in-peer review medical journals.

Now, let me turn to what’s ahead for Alder. Important future events that we anticipate include: topline 24-week data from the 600 patient Phase 2b chronic migraine study will be available in the third quarter.

Once we have the 24 week data, we will use that information to finalize the design of PROMISE 2 and initiate the trial in the second half of 2016. This is the second of two planned pivotal clinical trials intended to support a BLA submission to the FDA for ALD403.

PROMISE 2 will be a double-blind randomized placebo controlled multi-dose trial evaluating the efficacy and safety of multiple dose levels of ALD403 in patients with chronic migraine.

We also continue our planning for the initiation of a late stage double blind randomized placebo control dose ranging multi dose trial in migraine patients using a once per quarter formulation designed for administration as a single injection later this year.

Then looking to the first half of 2017, we expect to announce topline data from the ongoing PROMISE 1 study which is evaluating ALD403 in patients living with frequent episodic migraine. Lastly, we plan to continue to expand our management team to support the development and the commercialization of ALD403.

Now let me touch on where we believe ALD403 stands in the migraine prevention treatment landscape and Alder's commercialization strategy. We believe that ALD403's clinical profile hold important attributes that will support our best-in-class therapeutic. These include migraine prevention efficacy rates, immediate migraine prevention relief upon dosing and the option of two modes of administration that permit infrequent dosing every three months.

We believe that by providing patients and physicians the choice between two routes of infrequent quarterly administration will allow a customized treatment paradigm that best suits each individual patients preference and circumstances.

For patients, quarterly dosing is about convenience. For physicians, it's about compliance and better disease management, and for payers better disease management translates to reduced cost overall for managing these patients complex medical needs.

By contrast, the therapeutic profiles of currently approved therapies for migraine prevention are challenged by safety, tolerability and efficacy limitations. At Alder, we believe there is a critical need for new migraine treatments with improved safety and better efficacy profiles.

The scale of the need here is large. Approximately 33 million American adults live with migraine with approximately 13 million patients being candidates for preventive therapy and of this subset of candidates approximately 3 million have chronic migraine representing the most serious segment of the migraine patient population.

To get a sense of that scale, consider that the 13 million candidates in the U.S. for migraine prevention is roughly 5 times larger than the number of patients in the United States with rheumatoid arthritis.

Today that market is a greater than $15 million U.S. market served by multiple commercially successful biologic therapies. If approved by the FDA, we intend to commercialize ALD403 in the United States given that about 50% of migraine prevention candidates are treated by neurologist, 70% of which have access to infusion suits, we believe that a sales force of 75 to 100 detailers can properly address this group of prescribers.

This focus will be the initial chat for Alder’s commercial efforts. Outside of the U.S., we intend to seek one or more strategic arrangements to develop and commercialize ALD403.

Finally, I would like to touch briefly on our next clinical candidate known as ALD1613. This is our novel monoclonal antibody that inhibits adrenocorticotropic hormone or ACTH. We believe this candidate has the potential to treat patients with congenital adrenal hyperplasia or CAH and Cushing's disease by providing an added level of disease control and improved safety profile when compared to the currently available treatments. CAH is an orphan disease resulting from a mutation in cortisol synthetic enzymes that causes overproduction of ACTH.

On the other hand, Cushing's disease is an orphan disease driven by long-term exposure to cortisol as a result of increased expression of ACTH produced by a pituitary tumor. ALD1613 is currently undergoing IND enabling non-clinical toxicology studies and manufacturer of clinical supplies.

In April 2016, we presented preclinical data at the Endocrine Society's 98th Annual Meeting in Boston. The data demonstrated that ALD1613 inhibits ACTH-induced cortisol secretion in a mouse adrenal cell line in vitro and also results in a rapid and durable reduction of plasma cortisol levels when administered in rats with artificially elevated ACTH.

And finally it was able to produce stable and durable reductions in plasma cortisol levels in non-human primates. As we continue our work with 1613, we are on track to submitting IND filing with FDA later this year.

With that, I'll now turn the call over to Larry to review our financials, Larry?

Larry Benedict

Thanks Randy.

We continue to invest in our drug development activity and enter the quarter with $353.3 million in cash and investments compared to $381 million at the end of last year. This amount does not include proceeds from the public offering which closed early in April and in that offering we completed the sale of 6,182,795 shares of common stock at a public offering price of $22.25 per share.

Estimated net proceeds after underwriting discounts and commission and estimated offering expenses were approximately $134.6 million.

Today I will focus on highlighting our financial results for the first quarter of 2016 and then provide our financial outlook for 2016. Please refer to this afternoon's press release and 10-Q filed with the SEC for further details.

Research and development expenses for the first quarter of 2016 totaled $27.6 million, an increase of $16.6 million compared to the same period in 2015. The increase in spending was primarily due to the ALD403 development program and consisted of cost related to the PROMISE 1 and other ongoing clinical trials and manufacturing cost of drug supplies support of existing and planned pivotal clinical trials.

In addition, Alder incurred cost for IND-enabling activities for ALD1613 increased and compensation cost due to increased in Alder’s research and development headcount to support our pivotal trial program for ALD403.

General and administrative expenses for the first quarter of 2016 was $6 million compared to $3.7 million for the same period of 2015. The increase was primarily due to compensation cost as a result of an increase in stock based compensation and general and administrative headcount, as well as increases in market research and other administrative costs.

Net loss for the first quarter of 2016 totaled $33.4 million or $0.76 per share compared to a net loss of $14.7 million or $0.14 per share on a fully diluted basis for the same period in 2015. For 2016 we continue to expect operating expenses to increase approximately two-fold over the $86.3 million reported in 2015.

However, as we noted last quarter, we may see period-to-period fluctuations in quarterly results as we continue to invest heavily and opportunistically in our drug development activities particularly for ALD403.

Additionally as noted earlier we completed an offering earlier this month, proceeds from this offering are intended to continue the development of ALD403 including pivotal trials, manufacturing drug supply and activity supporting ALD 403 commercialization, as well as development of ALD1613 and finally for working capital and general corporate purposes.

We are currently in a strong financial position that allows us to invest in our critical activities and get to important inflection points in the ALD403 program. As we continue reviewing plans on how to optimize the development path and commercialization preparations for ALD403, we may determine to adjust or accelerate certain investment. We plan to update our financial guidance as appropriate.

With that, we will now open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question will come from the line of Joseph Schwartz from Leerink Partners. Your line is open.

Unidentified Analyst

Hi guys, thanks for taking my question. This is actually [Dave] [ph] in for Joe. So just a couple on the ALD403 and then one of the 1613. So just fantastic data on the ALD403 looking forward to the 24-week data but based on your market research how do you see the relative importance of schedule route of administration and efficacy in these chronic migraine patients.

And I guess in terms of the 6 months data that’s upcoming, you had mentioned sub-Q and IV would be determined based on dose, subsequent or corresponding efficacy. So what are the response thresholds you guys are thinking for the self administration modes? And also in light of the competitive landscape and the entire CGRP space, what efficacy metrics do you think or believe will compare favorably against your competitors.

And then on the 1613 in light of the data that was presented at Endo by you guys and some other presentation, how do you see 1613 stacking up and when can we expect the next derisking event? Thank you.

Randall Schatzman

Sure, thanks for that Dave. So with respect to your first question and that is thinking about the importance of the schedule, the route of administration and the overall efficacy. I think what’s clear is that that efficacy is the thing that wins the day with both physicians and patients.

With that said, we believe ALD403 has an outstanding level of efficacy that delivers, it delivers that rapidly and with respect to the schedule I think when we interview patients and we have done a fairly large patient survey at this point with over 1200 migrainer's, what is loud and clear is that when compared with once per month dosing the quarterly administration wins out every time. Patients would much prefer to dose less frequently as suppose to more frequently.

With respect to route of administration, to be honest patients are agnostic with delivering this level of efficacy, they really don’t care how they get the drug. So we believe in that sense allowing patients and physicians to customize the therapy around whether it's an IV infusion or self administration type strategy will play well on both fronts.

Now with respect to our decisions going forward in terms of how we will administer the drug, obviously we believe first and foremost that there is an important IV market out there which needs to be addressed. It's clear to us that again with infrequent dosing and in fact that most of these patients – the severe patients in particular are being treated in the neurology suite and majority of those neurologist have access to IV infusion suits that this is something the docs have expressed a huge interest in particularly delivering this level of efficacy.

They view that infusion suit has a profit center and they’re looking for additional things in addition to the current agents that are coming through those suits as an opportunity for them.

Now in terms of looking at mode of administration that ultimately would be for self administration, I think we are still continuing to noodle on what the appropriate dose to move forward is achieve the best quarterly suppression for this and based on that we will make decision on which of the modes seems to be the best way to present the drug at the dose level that’s required to give that three month efficacy.

Now in terms of how our drugs compares with the competitors, again we think that efficacy rates that we are seeing are very competitive relative to the other programs that are out there. We think the program is distinguished not only by those efficacy rates but also by the infrequency of dosing that we are going to be able to avail to our physicians and patients which obviously translates to convenience.

But at the same time we think it’s important and you see this in our data is that repetitive one set of migraine relief that we deliver is very important to patients. If your patient who is suffering from 16 to 20 migraines per month, you are having 4 or 5 every week and you don’t want to wait around 2 or 3 weeks - excuse me, 2 or 3 months to see relief, you would like it right now. And ALD403 is able to deliver that relief and we think that also distinguishes it from the competition at this point in time.

In terms of ALD1613, we think this is a really noble approach in terms of modulating cortisol levels in Cushing's disease and other adrenal hormones in ACTH and what we are finding and the reason that we mentioned in the presentation at Endo is, it looks like 1613 gives a very a stability to really modulate the cortisol in ACTH levels in these patients in a much more profound way than any of the other agents that are out there are able to do.

It also looks like it’s going to have a very favorable safety profile overall as well and we think on both fronts so there is going to be a great benefit to this agent.

Unidentified Analyst

Great. I'll hop back in the queue. Thank you.

Operator

Thank you. Our next question will come from the line of Jim Birchenough from Wells Fargo. Your line is open.

Unidentified Analyst

Hi, this is actually [Yan Joe] [ph] calling in for Jim this afternoon. We have two questions if we may. The first question is on the Phase 2b study upcoming data readout at 24 weeks. I guess obviously the primary endpoint is at 12-weeks and the data has been reported and endpoint was met.

So the question would be, what should we look for in the 24 week data and what might be considered as a set of favorable result? Thanks and then I have a follow up.

Randall Schatzman

Okay, that's a great question. We think the 24 week data is going to be important in terms of informing us the durability of efficacy that's presented by each of the dose level that the patient has got.

I think what you are seeing today while we have a very nice dose response and as you said we met both the primary and secondary efficacy endpoints, I think we are looking to the 6 months data to maybe tease apart those doses a little bit further and help inform us in terms of which are the couple of doses that we should take forward into PROMISE 2.

Unidentified Analyst

Got it, great. The follow up question is the Phase 3 study design for PROMISE 1 and PROMISE 2 it is notable that the size of Phase 3 study from your study is significantly smaller compared with your competitor Amgen, Eli Lilly and Teva.

So your study is 450 to 600 patients evaluating two to three doses, the competitors generally have 800 patient evaluating to doses. So I guess what gave you the confidence that the study is sufficiently powered to demonstrate the efficacy? Thanks.

Randall Schatzman

That's a great question. Initially the studies as designed were powered based off of the data that we saw in our proof-of-concept study. We believe our fact size is bigger than what others have been demonstrating in their trials but that said clearly we are taking the data from the Phase 2b study under advisement in asking again questions in terms of, are there some adjustments to the size of the study that we would better achieve the endpoint that we are going for. So taking that under advisement and doing some of that analysis as we speak.

Unidentified Analyst

Great, thanks.

Operator

Thank you. Our next question will come from the line of Brian Abrahams from Jefferies.

Your line is open.

Unidentified Analyst

Hi guys, this is [Bill Miller] [ph] on for Brian, both of us send our congratulations on your successful 403 and 1613 data this quarter. Had a couple of questions in particular to your PKPD curves for the sub-Q and IM formulations. And in particular if you could speak to whether or not you see accumulation that could potentially enable patients to get better exposure over time and additionally if you are seeing signals in any individual patients that show less exposure with the second dose that might indicate neutralizing antibodies.

And then also if you could update us with your latest views on the potential fast forward for the bridging study anticipated for the self administration formulation regulatory path?

Randall Schatzman

Bill, I’m making a note here. Okay, so we've got three questions there. The first of those is the accumulation that we might see since we did two doses 3 months apart in the Phase 1 study in this case. And to be honest with you we are still working through the pharmacokinetic analysis.

We do know from other studies that we have done is at the end of the first 3 months dosing period, there is still drug on board and we fully expect that the second dose will have a certain amount of accumulation to boost the ALD403 levels up when we give that.

I think that that's an important consideration again as we consider what are the right doses to move forward using this quarterly interval that we have, so it is a great question.

In terms of the ALDs, that is the data that we have yet to get. As you know we need to wait a sufficient period of time after the last dose for the onboard drug to clear so that we can get an adequate assessment of potential ALDs in the serum of these individuals.

For us that time is generally about 7 half lives post that last dose. So we are still sort of working through that time period right now. But that said, I think at this point in time we haven't noticed any loss of efficacy as measured by the peripheral suppression of the CGRP biology as noted in the PD response. So at least by that measure things are looking pretty good for us.

And then finally in terms of the path forward for that administration pathway in terms of the regulatory sense, I think this is something that we obviously want to finish analyzing our data, we would like to get the further data set of the Phase 2b in chronic migraine patients and then take all of that to the FDA and have a dialogue of what the appropriate next study is for that formulation.

It could be something as simple as you say as vivo-equivalent study. More likely in our minds it would be a small pivotal study in patients to justify both the level of efficacy with the doses that we have chosen but also justify the safety profile that we want the drug to demonstrate.

Unidentified Analyst

Thank you very much Randy, nice talking to you.

Operator

[Operator Instructions] Our next question will come from the line of Vamil Divan from Credit Suisse. Your line is open.

Vamil Divan

Great thanks so much for taking my question. Just couple of things we have touched on this before, just want to see if you have any updated thoughts. One as you think about Phase 3 and the overall program in terms of any sort of outcomes data that you will able to provide to payers and to show that kind of pricing side of things, it seems like as we talked to physicians one of the biggest concerns they have is what these may cost as biologics, this will cost.

And then second also on the commercialization side, we had lot of discussions with investors people wonder about your ability to commercialize against three potentially very large competitors in the neurology space there. And so just if you have had any further discussions after seeing the data that you presented a month ago on the need for your partner and sort of how you think about overall commercialization prospects for your product against your competitors? Thanks.

Randall Schatzman

Thanks Vamil. So in terms of the outcomes data, again it is a great question and this is data that we are accumulating through the studies in terms of looking at probability of life changes for these patients, decreased use of concomitant medications, likely visits into the physician's office et cetera, emergency room visits, these are all where the cost to the payers are coming from these more severe patients and we will be quantifying all of that along the way to help justify the ultimate price that we ask for these.

In terms of competition, we call this competing against the 800 pound gorillas that are out there. I think the first and foremost the way we view this is the way Alder wins is through innovation and what I mean by that is really developing the drug that has a well differentiated profile in the clinics that by enlarge through its efficacy, its ease of administration and ultimately the repetity of onset delivers a well differentiated product that patients and physicians want to choose and we think that that will speak for itself.

In terms of an overall sales force, again we are going to focus in the neurology suite, we can do that with a modest size sales force that we believe Alder can field, we think that to maximize the return on the drug ultimately it will require a partner overseas in Europe and in Asia in areas that are beyond the reach of smaller companies like ourselves that by contrast our competitors already have that reach and we will reach out to what we think is a very capable partner to try and make that happen.

But we will do that at the appropriate time probably much later in the development period when we know little bit more about the profile of the drug itself and at a time where the value of the drug is also greatly increased so that we can obtain better terms and a better return ultimately for our investors.

Vamil Divan

Okay. Thank you.

Operator

Thank you. And there is no further questions in the queue. I'd like to turn the conference back over to Randy for any closing remarks.

Randall Schatzman

Thank you, Operator. ALD403s therapeutic profile today presents us with a true opportunity to transform the way migraines are prevented and significantly improve the lives of patients living with migraine.

With the exceptional team that we have here at Alder, and our goal of discovering, developing and commercializing best-in-class therapeutic antibodies, with the potential to meaningfully transform treatment paradigms where patients currently have limited medical options, we believe we can rapidly advance ALD403 to commercialization and continue to add superior clinical candidates to our pipeline as we seek to build long term value for our shareholders.

Thanks everybody for your time today. We appreciate your joining in.

Operator

Thank you. Ladies and gentlemen, thank you for your participation on today's conference. This concludes the program. You may now disconnect. Everyone have a great day.

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