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Elan (NYSE:ELN)

Q2 2012 Earnings Call

July 25, 2012 8:30 am ET

Executives

David Marshall - Vice President of Investor Relations

G. Kelly Martin - Chief Executive Officer and Executive Director

Nigel Clerkin - Chief Financial Officer and Executive Vice President

Analysts

Jack Gorman - Davy, Research Division

Ian Sanderson - Cowen and Company, LLC, Research Division

Richard J. Parkes - Deutsche Bank AG, Research Division

Corey B. Davis - Jefferies & Company, Inc., Research Division

Michael J. Yee - RBC Capital Markets, LLC, Research Division

Guillaume van Renterghem - UBS Investment Bank, Research Division

Marko K. Kozul - Leerink Swann LLC, Research Division

Vincent Meunier - Exane BNP Paribas, Research Division

Marshall Urist - Morgan Stanley, Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Elan Corporation Q2 2012 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, July 25, 2012. I would now like to turn the conference over to Mr. David Marshall, Vice President, Investor Relations. Please go ahead.

David Marshall

Thank you, operator. Good morning and good afternoon, everybody. Welcome to Elan's Second Quarter 2012 Financial Results Call. If you have not reviewed our press release, please go to our website at www.elan.com, where you will find it. On today's call will be CEO, Kelly Martin; and CFO, Nigel Clerkin.

Before we begin, I will review Elan's Safe Harbor statement. Today's call will contain forward-looking statements about Elan's financial condition, results of operations, business and research prospects. These forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from those described or projected. Lists of these risks and uncertainties are included in our second quarter 2012 financial results press release and in our 2011 annual report on Form 20-F and on Forms 6-K filed with or furnished to the Securities and Exchange Commission. Elan assumes no obligation to update any forward-looking statement whether as a result of new information, future events or otherwise. In addition, today's conference call and webcast will include non-GAAP financial measures such as adjusted EBITDA. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release.

I'll now turn the call over to Kelly Martin.

G. Kelly Martin

Thanks, David. Good morning and afternoon to everybody. Thank you for joining us on the call. And on behalf of our Chairman, Bob Ingram, and myself, I'm delighted to share with you our second quarter results. As per typical, I will give a few opening comments, and then importantly, turn the call to our Chief Financial Officer, Nigel Clerkin. He'll walk you through the detail of the quarter. And then we're happy to take Q&A at the end of the call.

I'll focus my comments on 3 broad topics. First and foremost, bapineuzumab/AIP. As you all, I'm sure, have read 2 days ago, Pfizer Inc. chose to release, on a standalone basis, the results of the 302 trial. We, to remind people, are blinded to both the data and the process, so we have nothing fundamental to add to what has already been released by Pfizer, and further commented on by Johnson & Johnson. Like everybody else, we are looking forward to hearing the full results of the Study 301 trial which is the ApoE-negative patient population. And as have reported on the Pfizer announcement, we, like everyone else, would expect those data to be available soon. Further, the details around the 302 and 301 trial, as again released by Pfizer, those details will be reviewed in detail in Sweden at the EFNS meeting sometime in early September.

Second area of focus is obviously Tysabri. You'll hear more from Nigel on that. Yesterday, in the Biogen earnings call, they also reviewed a number of the important data and fundamentals. Just to highlight a few, in the second quarter of 2012, the net patient adds for Tysabri were roughly 2,400 patients. That's the largest net patient add in a quarter in over 2 years. The assay continues to be rolled out both in U.S. and rest of world. And its adoption is obviously helpful in both clinical practice and patient education. And as referred to by both Biogen, and you'll hear more -- a bit more from it from Nigel, a second-generation assay is on its way to being rolled out. And that will give -- allow for further sensitivity on measurements, which will allow for even more detailed clinical patient discussion.

The underlying fundamentals of Tysabri business appear to be strong, appear to be broad and consistent. And in some ways the underlying fundamentals of the business are running slightly ahead of the current revenue, given some of the challenges in both FX and certain areas of our rest of world/European business.

My third area of commentary, before I turn it to Nigel, is just a broad restatement of parts of our strategy. As we have done and continue to do and will continue to do, we remain resolutely focused on improving all fundamentals of our business. That includes, from a financial point of view, utilization of our balance sheet to strengthen our capital structure; working closely with Biogen on the positioning of Tysabri in its current business and exploring prudently future businesses around Tysabri; being innovative in our science area and taking a disciplined approach to different targets which may, over time, lead to clinical assets which ultimately can lead to patient and commercial assets. So our strategy remains consistent. Our focus remains the same. As we have done consistently over the last number of years, we continue to focus on providing shareholders with a value proposition that allows for upside at risk dynamics which continue to decrease as the business moves forward.

So with that, and for more detail on the quarter, I'll turn the call now over to Nigel Clerkin, our Chief Financial Officer.

Nigel Clerkin

Thanks, Kelly, and good morning and good afternoon, everyone. Tysabri continue to make impressive progress in the second quarter. There are now over 69,000 patients taking Tysabri, an increase of 13% over Q2 last year and 4% over Q1.

Building on the increased momentum seen in the first quarter, the number of net patient add is accelerated further in the second quarter to 2,400, which is the highest since 2009, and a run rate of almost 10,000 per year. We also continue to see strong uptick of the JCV antibody assay as the commercial rollout advances in both the U.S. and the rest of the world. We are encouraged by this progress being made with Tysabri week-by-week, month-by-month, quarter-by-quarter.

Although number of patients on Tysabri has grown by 13% since Q2 last year, the in-market sales in the second quarter this year have only increased by 2% over Q2 last year, and Elan's reported revenues increased by 6% to $288 million compared to $270.6 million in Q2 last year. This disconnect between patient and revenue growth is largely a function of the different revenue performances in the U.S. and the rest of the world.

In the U.S., in-market sales increased by 16% to $211.5 million driven by a 9% increase in units sold as well as the impact of price increases. While rest of world unit sold also increased strongly by 11% since Q2 last year and patient numbers increase by 13%, the in-market sales fell by 11% to $184 million in Q2 this year compared to $205.9 million in Q2 last year. This mainly reflects the impact of the $16 million revenue deferral in Italy in Q2 this year along with all favorable foreign currency movements, and in particular, the 11% decline in the dollar-euro exchange rates over this period, as well as modest changes in price and country mix.

In relation to Italy, both we and Biogen Idec remain hopeful of reaching a resolution on this price dispute this year. Elan's financial guidance for the year assumes it is resolved during 2012, and we have set out in the press release the estimated impact on our 2012 results if it is not.

Compared to Q1, U.S. in-market sales increased by 5%, consistent with the 4% increase in patient numbers. In the rest of the world, Q2 in-market sales were 7% lower than Q1 despite a 3% increase in patient numbers. This mainly reflects a 4% decrease in units sold compared to the first quarter, as well as modest changes in foreign exchange rates and price country mix. As you will recall, in Q1, the rest of world's unit growth outstretched patient's growth, and we have seen that inventory build largely unwind in the second quarter, mainly because of the timing of orders in emerging markets. So worldwide, our Q2 revenues grew by less than patients and units. The underlying fundamentals of the Tysabri business remains solid and must all grow well for Tysabri's future growth prospects.

Our gross margin fell from 46.5% of total revenue in Q2 last year to 44.4% in Q2 this year. This is of the consequence of the change in mix between U.S. and rest of world reported revenues, and also because of the costs of providing the JCV antibody assay to patients in the commercial setting.

Turning to operating expenses, our total operating expenses, that's R&D and SG&A combined, grew by $8.6 million over Q2 last year. This reflects a $3.5 million increase in noncash share-based compensation expense arising from the substantial increase in our share price over the last year along with the 6% increase in cash operating expenses. Our adjusted EBITDA decreased to $35.3 million from $37.9 million in Q2 last year, reflecting the impact of the Italy reserve on foreign currency movements on our reported revenues and gross margin and the 6% increase in cash operating expenses.

Our net interest expense declined by more than half to $12.4 million from $29.7 million in Q2 last year as a result of the substantial debt paydown in Q4 last year, as well as foreign currency hedging gains. We recorded a net loss on equity net investments of $34.3 million in the second quarter. This mainly relates to our 49.9% shareholding in Janssen AI. As you're aware, in the first quarter, Janssen AI utilized the remainder of the original $500 million funding commitment from Johnson & Johnson. Consequently, in the second quarter, we were called upon to provide our first cash contribution of $48.7 million to Janssen AI. We continue to expect to provide between $60 million to $80 million in cash to Janssen AI this year. Although, of course, this may be impacted by the data that emerges from the first Phase III trials for bapineuzumab.

Our net loss from continuing operations was reduced by almost 40% to $28.5 million mainly because of the reduced net interest expense following the Q4 debt paydown. Net debt paydown and the Q1 Alkermes share sale leaves us in a very solid capital position, with cash of over $600 million and the remaining 6% stake in Alkermes worth over $140 million against total debt of $625 million due more than 4 years from now.

And now I'll turn the call back to David.

David Marshall

Thank you, Nigel. Operator, we are now ready to begin the Q&A process. Could you please remind participants on the process for requesting a question? Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Jack Gorman from Davy Stockbrokers.

Jack Gorman - Davy, Research Division

Just had 2 quick questions, please. Nigel, you referred to the decline year-on-year in gross margin and you mentioned both the revenue mix and the JCV testing cost as factors. Just wondering if you can give us a flavor for the relative proportions of their influence on the decline? And secondly, as regards SG&A and overall cash operating expenses, I think you mentioned a plus 6%. Wondering what we should think about for the second half of the year in terms of the year-on-year increase in that particular line item?

Nigel Clerkin

Jack, sure. So in terms of the gross margin, it's a 2% decline year-over-year. And that splits roughly half-and-half between the 2 factors that I mentioned. And then in terms of the cash OpEx, it is up 6% year-over-year. I think in terms of run rate for the second half, you should think about the Q2 run rate as a reasonable run rate, but possibly a little more R&D in the second half and a little less SG&A. That's probably the way to think about it.

Operator

Our next question comes from the line of Ian Sanderson with Cowen & Company.

Ian Sanderson - Cowen and Company, LLC, Research Division

First for Nigel. The estimated JAI funding contribution in 2012, if I heard you correctly, you kept that at $60 million to $80 million despite the $49 million contribution in Q2. I just wanted to confirm that and figure out how the balance of the year might look there. And secondly, will that continue to run through the equity income contribution on your P&L? And then the third question, and it may be for Kelly, any thoughts on how the top line results of the 301 trial might be handled given that there's the sensitivity around the ongoing international noncarrier trial?

Nigel Clerkin

Ian, sure. So firstly on the Janssen funding. So the $60 million to $80 million, again, is our estimated cash contribution to Janssen AI this year. The way that works contractually, Janssen AI can call us for up to 6 months cash in advance. So the cash they called upon is more than one quarter's worth of funding. So we do anticipate further call or calls during the second half of the year, but still within that $60 million to $80 million range in total. Although, again as I mentioned, clearly, there may be some impact to that depending on the outcome of the full data set from both trials on what decisions Johnson & Johnson, Pfizer make around that. So we'll obviously keep an eye on that. I think you should also look at what the P&L expense was in the second quarter for Janssen AI in terms of that run rate is of underlying quarterly spend, our share of that. And to your second question, will it run through -- continue to run through the equity income line? Yes, it will. And then maybe Kelly on your third question.

G. Kelly Martin

Ian, I guess, the only way I can answer this for what we've been told, which is the 301 trial results, which according to Dr. Stephen Romano from Pfizer, will be available soon, that Pfizer will put out an announcement on the top line results. It's their practice to do so. It is not the practice of Johnson & Johnson to do so. And I assume that they will do so, being fully cognizant of the ongoing rest of world trials, which are both carrier and noncarrier. And that's about as much as I can tell you because that's what we know.

Operator

Our next question comes from the line of Richard Parkes with Deutsche Bank.

Richard J. Parkes - Deutsche Bank AG, Research Division

I've just got 2 or 3. First one's on Bapi, sorry to push you on this one. Just wondering, do you have any idea in terms of the analysis that Pfizer and J&J have conducted? Do you know whether they've just conducted the analysis on the primary endpoints or whether they've been able to do any exploratory analysis that also influenced that decision? A second question is just given the recent announcement, if a decision is made to no longer invest in AIP, obviously, there's going to be a point where you will start to significantly -- generating significant cash from Tysabri if profitability starts to improve. I'm just wondering how you're thinking is developing in terms of use of cash. And then final question is when you look at the run rate of new TOUCH forms in the U.S., I know back in the first quarter you were discussing an expectation for an acceleration in new patient adds on that trend. And we've seen that materialize to an extent. I'm just wondering if there's room for that trend to materially improve further? Or are you starting to see a stabilization?

Nigel Clerkin

So Richard, yes, so in terms of the TOUCH forms, yes, obviously we did see an acceleration in the patient adds in Q2 compared in Q1. And then we saw an uptick in TOUCH forms in Q1. And I think as Biogen commented yesterday, we're seeing continued robust TOUCH form demand in the second quarter. Obviously, the goal of Tysabri into the future is to continue to grow our share, particularly amongst the JC-negative. And so that will remain the focus of ourselves and Biogen is to do that over time. And Kelly, do you want to go to the Bapi question?

G. Kelly Martin

So the 2 questions, Richard, we don't know what analysis occurred on 302 and to what extent it occurred. Again, our presumption would be that there was a full analysis of all the data as we would anticipate a full analysis of all the data of 301. We would also, as we have read publicly, we would presume that at the upcoming scientific meetings that, that analysis would be shared under that environment by the lead investigators. But we, again, are blinded to the process and the detail data behind that. I'd also remind folks that there are currently in the AIP portfolio 6 trials going on, or 6 trials that were going on: 4 in Bapi and presumably one on the vaccine and one on the subcu. So there's still a lot of activity in AIP regardless of the recent announcement by Pfizer on the one trial. Use of cash, I can start, Nigel can correct me. We have tried over time, obviously, we have a long-term program here. We were a highly levered company, that's core focus was science and the development of science. And we've had to work that down over time, which we have done. I suspect, from a cash point of view, we will continue on the de-levering process, number one. Number two, once that has occurred, we would prudently invest in our business and provide avenues to give that cash back to our very patient and good shareholders who have been with us for some time as the science has matured. But our full intention is to drive the capital structure to a point where we have a growth company in the top and the bottom line and we would then use the capital and the cash prudently in our business, and on a continuous basis, in multiple forms, return that to shareholders. Nigel?

Nigel Clerkin

And Kelly, that's absolutely -- I agree to all that. And I think you've summarized it very well.

Operator

Our next question comes from the line of Corey Davis of Jefferies and Company.

Corey B. Davis - Jefferies & Company, Inc., Research Division

Two questions. First, can you describe the process that needs to take place once the second Bapi trial is done and how decisions are going to be made most importantly, by you, but in the context of all 3 companies involved, as to how much longer you'd put dollars into JAI and in the event that the noncarrier study showed very encouraging trends but not for approval. I think if I'm right you're on the hook for a number -- another $200 million going to JAI. But at the current rate, that seems like it would probably run out in 2013. So what happens after that?

Nigel Clerkin

Corey, I think you've captured the facts correctly. When we did the deal, it was $200 million funding commitment from us as our 25% participation beyond the first $500 million commitment from Johnson & Johnson. We've just put in the first $48 million of that $200 million. And when you look at the run rate certainly in Q2 in terms of income statement, that would suggest that, that $200 million would run somewhere through most of 2013. Obviously, we have to see what effects the result of the trials have on that underlying run rate. But then frankly, it's premature to speculate on what decisions Elan would make at the point when that $200 million obligation is concluded. At the moment, we're essentially on autopilot until that point. The only thing we do know is there will be an awful lot more data available when we reach that point in time.

Corey B. Davis - Jefferies & Company, Inc., Research Division

Is it fair to say that you'll have access to the full data set in about the same time that the rest of the world will after September 11, and that you can't make any decisions until after that point in time?

Nigel Clerkin

We will have the data at the same time as the rest of the world, that's correct. And in the near term, this $200 million initial contractual commitment essentially means we are in autopilot in terms of funding until that $200 million is completed, which would certainly be well beyond that data availability.

Corey B. Davis - Jefferies & Company, Inc., Research Division

Okay, last question. Now that we've had at least one case of P&L Tysabri patient that had previously tested negative for the JC virus, can you describe the efforts that are underway to improve the specificity and the sensitivity of the assay that's currently out there commercially?

Nigel Clerkin

Sure, yes. There is a second generation assay that is not available here in Europe. We're working to have it made available in the U.S. And that will be somewhat more sensitive assay than the first, although the first itself is very sensitive. And that rate, the first negative case that we saw, obviously we always anticipated, no blood test is perfect and that you would see a negative case. And the assay that we arrived at of the risk for JC-negative is being less than 1 in 10,000 is a great response.

Operator

Our next question comes from the line of Michael Yee with RBC Capital Markets.

Michael J. Yee - RBC Capital Markets, LLC, Research Division

In regards to expenses, can you broadly describe, qualify how much of your expenses are related to Tysabri-related stuff versus other underlying business? Is it half, is it a majority? I don't need specifics, just maybe qualify it. And then if you'd -- and then as you think about that cost cutting or your spend structure after Bapi, how much expense cutting do you think is even possible or left? And then my second question is on the gross margin. Obviously, Biogen has commented about a change in manufacturing facilities and margin improvement. Maybe you could talk about what type of gross margin benefits are possible out of there and out of the manufacturing that you guys are obviously partially involved in?

Nigel Clerkin

Michael, sure. In terms of expenses, our tax expenses are split roughly half-and-half between Tysabri and the rest of the business. That's the simplest way to think about that. And in terms of cost structure after Bapi, I'm not quite sure exactly what you're referring to there, but certainly when you look at what we've been doing with operating expenses over the last several years, we've been very, very focused on managing our operating expenses. And as Kelly mentioned earlier, focused on expanding our revenues and allowing the benefits of that to flow through the income statements. And that, as a philosophy, will absolutely continue. So regardless frankly of the Bapi trial results, we're focused on managing our cost appropriately. In relation to Tysabri gross margin, the margin on Tysabri right now is a little under 80%. We think that can grow to somewhere around 90% over the next 5 years and to roughly around 95% 2 to 3 years beyond that. And that's driven by the royalties that are currently paid to third parties on Tysabri. Some of those will naturally fall away by their terms over the next few years, and then some of them will fall away because of the facility that Biogen are building in Denmark. Product that will be made there and sold outside of the United States will not attract some of the royalties that we currently pay. And so we do see a very meaningful expansion in the Tysabri gross margin over the years ahead.

Operator

Our next question comes from the line of Guillaume van Renterghem with UBS.

Guillaume van Renterghem - UBS Investment Bank, Research Division

Yes, 2 questions if you don't mind. The first one is on the situation in Italy. Should you and Biogen Idec don't manage to sort that out in a nice way, is there a way for you to somehow cap the delivery of Tysabri you may do in Italy? And to come back on this new manufacturing plant, I'm just wondering whether Biogen Idec is going to use exactly the same manufacturing process, downstream processing, filtering and so on than the current manufacturing? So basically what is the risk that there is an issue in them of approvability of this plant? And just to make sure, with this plant manufacture for the U.S. or only for outside the U.S.?

Nigel Clerkin

Guillaume, just on Italy, first of all, as a reminder the issue in Italy is a price dispute with the Italian reimbursement authorities, so it's a contractual interpretation issue. So there's no question in our minds of disrupting supply to patients based on commercial discussion between the 2 parties of that contract. In terms of the facility in Denmark, to my understanding, although I'm not a manufacturing expert, that it is the same process in essence. And so Biogen certainly have tremendous capabilities to manage the risk around that. And the intention related to that facility would be for x-U.S. supply. Although, of course, one of the other benefits building that facility is that it does provide a second source for Tysabri as a whole in terms of risk mitigation. And so that's very helpful there as well.

Operator

Our next question comes from the line of Marko Kozul with Leerink Swann.

Marko K. Kozul - Leerink Swann LLC, Research Division

I realize you don't have the Bapi data on hand, but I was hoping to maybe ask if you could better characterize or help us understand what kind of minimum data in the non-ApoE carriers might be helpful to your planning or the alliance's planning to future participation and studies or further development?

G. Kelly Martin

So we will be -- it's Kelly. We'll be looking for -- with everybody else, we'll be looking for the co-primary endpoints data and then the subsequent biomarker data. Obviously, as the company who spent the most time in immunotherapy, we have decades, literally, of insight across previous trials, animal models, human data center. So just quite simply, for the ApoE-negatives, again, we along with everybody else will look at the co-primaries and the biomarkers. And we look forward to hearing that, again as Dr. Romano said, in the near future.

Marko K. Kozul - Leerink Swann LLC, Research Division

So my follow-up maybe is if you don't hit the co-primary endpoints, are there subsets in the secondary analysis that you might find encouraging in terms of signals carrier?

G. Kelly Martin

Yes. Well, it doesn't matter what we think. It only matters what the regulators think. And again, therefore, since we're not in the bus driving it and we're sort of and outside looking, we would presume that both Pfizer Inc. and J&J will do a good job in presenting the data. And they'll present it, if warranted, to the regulators and they'll have the discussions with the regulators as far as what the regulator thinks, et cetera, et cetera. So again, we're in the audience watching the stage as well.

Operator

Our next question comes from the line of Vincent Meunier with Exane BNP.

Vincent Meunier - Exane BNP Paribas, Research Division

A few follow-up questions. First on Tysabri, in the second-generation JC assay, can you please give us more details regarding the potential impact on your cost structure due to this new generation test? Also on Italy, what are the possible scenarios in the context of the stronger pressure on the public spending in Italy? One can imagine that the room for -- well, the space for Biogen Idec in the negotiations is very, very limited. And also regarding the Denmark facility, can you please explain us better, what are the incentives for Biogen Idec to develop this new facility rapidly? And also can you please give us an update on the timing of the process?

Nigel Clerkin

And so firstly on the second-generation assay, so impacts on the cost structure I think was your question. So it shouldn't have any impact in the short term and it should be roughly the same cost. Ultimately though, we would hope to be able to seek reimbursements of the cost of the second-generation assay in each of the test the patients take within the U.S. environment. And so that, as I was saying, is during 2013, and would hopefully be a boost to our gross margins if and when we get that reimbursement in place in the U.S. In terms of Italy, obviously, there is an austerity environment in Italy and other countries in Europe, as we're all familiar with. And that obviously factors into the negotiations. But ultimately Biogen Idec are leading those negotiations, and we'd anticipate that the resolution should likely involve a negotiated discount in terms of future pricing. And that's part of the overall mix within rest of world's pricing. In terms of Denmark, Biogen's incentive to complete the facility is the same as ours, and that's, as I mentioned, to drive improvements in Tysabri gross margin once we're able to start selling products from there. I think they indicated on their call yesterday that the process is moving well. And from our understanding, they are very much on track and moving as rapidly as they are able to.

Vincent Meunier - Exane BNP Paribas, Research Division

Okay. But just a clarification on the last point, the Denmark facility. When it will be online, Biogen will receive less royalties? No?

Nigel Clerkin

No, no, no. These are royalties paid by ourselves, not Biogen, to third parties. So it's a benefit to both of us to reduce those royalties.

Operator

[Operator Instructions] Our next question comes from the line of Ian Sanderson with Cowen & Company.

Ian Sanderson - Cowen and Company, LLC, Research Division

I have a follow-up on the JCV testing. And I think Corey pointed this out, the latest PML update indicates that you did have a 0 conversion case, at least 1. And so is there a movement towards more frequent testing than we're currently seeing and what might be the implications of that to your cost of goods in the near term?

Nigel Clerkin

Ian, that's something that obviously is always under review. And if there is a change there, obviously, we'll let you know. I don't see it having any major impact on our cost line certainly in the near term. And again, ultimately, if we move to the second generation in the U.S., we would hope that, that provides a boost to our margins over time.

Operator

Our final question comes from the line of Marshall Urist with Morgan Stanley.

Marshall Urist - Morgan Stanley, Research Division

So first one just on Tysabri in the quarter. Could you maybe talk about the different dynamics that you're seeing in the U.S. versus Europe. U.S. net patient adds looked like they increased nicely, and the rest of the world we didn't see as much of an increase. So just to get your thoughts on what's happening there. And then secondly, can you quantify what the gain is in terms of sensitivity on the second-generation assay? And then third, just on Bapi. Pfizer also stated an expedited interim analysis of the international carrier studies, so we'd just be interested if you could give us any kind of insight on what the timelines are, what the potential timelines are there if there's anything to add.

Nigel Clerkin

Marshall, maybe I'll take your first 2 questions and Kelly will address the Bapi one. So in terms of net patient adds, you're right, the patient add growth was predominantly in the U.S. This again is a factor of the fact that the assay was -- has been available for about a year longer in the U.S. after the clinical trials we were running there. So we would've always expected that there would be a lag between the U.S. turning to increasing patient adds again compared to Europe. And so we're not surprised by that. In terms of the second generation specificity, it's -- the first one was a rate of around 2%, 3%. The second one is a bit better than that, probably about 1% better I think. And then, Kelly, on the interim analysis on the rest of world carrier trial?

G. Kelly Martin

Yes. I don't think we can give you any insight to what their thinking is.

Operator

That's all the time we have for questions at this time. I'll now turn the call back over to you, Mr. Marshall.

David Marshall

Thank you, operator. Thank you, everybody, for joining us today on our second quarter call. The webcast of the call will be available on our website for 90 days. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a good day, everyone.

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