Executives
Robert Merritt - VP of IR
Frank Baldino, Jr. - Chairman and CEO
Robert P. Roche Jr. - EVP of Worldwide Pharmaceutical Operations
J. Kevin Buchi - EVP and CFO
Lesley Russell - EVP, Worldwide Medical and Regulatory Operations
Larry Neibor - Robert W. Baird
Analysts
David Buck - Buckingham Investments
Gregory Gilbert - Merrill Lynch
Corey Davis - Natixis Bleichroeder
Adam Greene - J.P. Morgan
Annabelle Samimy - UBS Securities
Bret Holley - Oppenheimer
David Amsellem - Friedman, Billings, Ramsey
Gary Nachman - Leerink Swann
David Windley - Jefferies & Company
Jim Birchenough - Lehman Brothers
Ronnie Gal - Sanford Bernstein
Cephalon Inc. (CEPH) Q1 FY08 Earnings Call May 1, 2008 5:00 PM ET
Operator
Good day everyone and welcome to the Cephalon First Quarter 2008 Earnings Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Chip Merritt, Vice President of Investor Relations. Please go ahead sir.
Robert Merritt - Vice President of Investor Relations
Before we begin let me remind you that certain statements on this call maybe forward-looking and are subject to risks and uncertainties associated with the company's business. These statements may concern among other things, guidance as to future revenues and earnings, operations, transactions, prospects, intellectual property, litigation, development of pharmaceutical products, clinical trials, and potential approval of our product candidates. The company may also discuss certain non-GAAP financial measures within the meaning of Regulation G during today's call. The information acquired by Regulation G is available in the earnings press release or the news room section of our website at www.cephalon.com. Additional information and risk factors affecting the company's business and financial prospects and factors that would cause Cephalon's actual performance to vary from our current expectations is available in the company's current Form 10-K on file with the SEC.
During this call, we will update full year 2008 guidance and introduce second quarter guidance. Please note the guidance will remain in effect unless the company provides subsequent modifications or updates. Our earnings press release is available on the Internet at www.cephalon.com. Investors with further questions should contact me at 610-738-6376. This conference call is being web cast via the Cephalon homepage and will be archived for one week after the call.
Speaking on today's call will be Dr. Frank Baldino, Chief Executive Officer; Bob Roche, Worldwide Pharmaceutical Operations; and Kevin Buchi, Chief Financial Officer. Also joining us today is Dr. Lesley Russell, Worldwide Medical and Regulatory Operations. Following remarks by Frank, Bob, and Kevin, we will be pleased to answer your questions. Now, Frank Baldino.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Thanks Chip. Good afternoon everyone. This quarter marks an important new phase for our Company. The March approval of TREANDA represents a significant milestone in the growth of our oncology business and is the first new agent for chronic lymphocytic leukemia patients approved by the FDA since 2001.
With TREANDA we continue our history of delivering innovative products and expanding our business in new directions. The start of 2008 also was marked by a number of other significant accomplishments including the approval from the FDA for AMRIX samples and the culmination of all the key elements necessary for a successful launch. The issuance of U.S. patent and trademark office of the notice of allowance covering AMRIX, the presentation for the first time of the AMRIX pivotal trial data at the American Academy of Pain Medicine meeting. The FDA has accepted that the TREANDA new drug application for the treatment of relapsed indolent non-Hodgkin's lymphoma with an action date set for October 31st.
Lastly in April, the European regulatory authorities approved the FENTORA for the management of breakthrough cancer pain in opioid-tolerant patients. This approval covers the 27 member states of the European Union as well as Iceland and Norway. We anticipate commencing individual country launches later this year.
Let's look at the business in more detail. The biggest news during the quarter came with the March 20th FDA approval of TREANDA for the treatment of patients with chronic lymphocytic leukemia. The pivotal TREANDA study in patients with CLL demonstrated a significant higher overall response rate and the progression-free survival that approached the one year advantage over chlorambucil. Annually in United States, there are 15,000 new cases of CLL and prevalence of disease approaches 100,000 individuals. The first 30 days of the TREANDA launch has been very encouraging. I have asked Bob Roche to say a few words on our progress today.
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Thanks very much Frank. I would like to begin by sharing with you some of our pre-marketing activities. Our team has spent the last 12 months building brand awareness of TREANDA and preparing the market for the launch of the product and of our new oncology franchise. We believe this will be a very worthwhile investment. We have utilized journal supplements, print ads, and a strong presence at the American Society of Hematology meeting to raise awareness of TREANDA with physicians, key opinion leaders, and payers. Our sales force of just over 90 representatives was thoroughly trained on both the disease state of CLL and the benefits of TRENDA.
Patient Assistance programs were developed, a TREANDA hot line created for physicians and patients, and all necessary support was put in place prior to the drug's approval on March 20th. On April 1st, we launched the product in the United States. And through the hard work of many, I am very pleased to say that even in the first week of launch, patients were already being treated with TREANDA. I am really proud of our team's performance. Less than two weeks from FDA approval to first commercial use in patients is a pretty impressive job. Our target market includes approximately 5000 oncology and hematology specialists, nearly half of which have been detailed by a Cephalon sales rep in its first month of launch.
The data suggests that more than 150 physicians and institutions in approximately 40 states have already purchased TREANDA for their patients. While we do not plan on providing weekly results moving forward, our earliest indications from the IMS weekly demand sales or DDD data suggest that in the first three weeks of launch, physicians and hospitals have purchased over $100,000, over $400,000 and over $600,000 respectively from our distributors.
We have also been very encouraged by payer responses since the product's approval, with some plans even adding TREANDA to their formulary coverage before launch. In addition, less than three weeks after approval the National Comprehensive Cancer Network or NCCN held a special meeting to update their guidelines to include TREANDA, both single agent and combination therapy for the treatment of CLL and for two types of NHL.
They even issued a press release to this effect which is clearly a very powerful endorsement. After initial data release at the ASH meeting and again after product approval, we saw tremendous interest in TREANDA by the major media, and even more encouraging is the early feedback we're getting from physicians demonstrating their enthusiasm for TREANDA.
In addition to the great opportunity in CLL, the FDA also has accepted our TREANDA NDA for the treatment of relapsed indolent NHL and set an action date of October 31st of this year. There are around 30,000 new cases of indolent NHL annually in the U.S. and the prevalence is approximately 280,000 patients.
In our clinical study, as a single agent, TREANDA demonstrated durable objective response rates in patients who were refractory too or had relapsed from a Rituxan-containing regimen. Data observed in these studies exceeded the hurdle rates required by the special protocol assessment. We believe TREANDA offers significant patient benefits for those suffering from CLL and indolent NHL and will prove to be another valuable growth driver for our Company for many years to come. Back to you, Frank.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Thank you, Bob. Now let's turn to our other new product, AMRIX. Since launch, physicians and patient feedback has been outstanding. Doctors inform us that their patients are recognizing the benefits of once daily dosing, all-day efficacy, and low rates of somnolence. Patients enthusiastically report improvements to their quality of life due to AMRIX. Together with our contract sales force, we now have nearly 600 sales representatives detailing AMRIX to physicians across the country. Currently we're calling on physicians who write about 60% of the prescriptions for muscle relaxants in the United States. AMRIX script growth at this early stage has been excellent. In fact over 6,000 physicians have already written AMRIX prescriptions.
More exciting news related to AMRIX came from the U.S. patent and trademark office. Last month the PTO allowed claims on the pending yearend patents. These claims speak to the unique formulation of the product utilizing extended release deeds and the drug release profile of cyclobenzaprine that results from this formulation. We anticipate that this patent will be issued in the next few months.
Our label expansion program for FENTORA remains on schedule with FDA advisory panel meeting next Tuesday and the PDUFA dated September 13th. With this sNDA we're seeking indication for the treatment of breakthrough pain in opioid-tolerant patients. Our filing includes data from three randomized clinical trials evaluating opiate-tolerant patients with a variety of chronic pain conditions including chronic low back and neuropathic pain. In addition, we also have included an 18 month safety study, bioequivalence data from buccal and sublingual administration, and a robust risk minimization action plan or risk map. The May 5th FDA advisory panel will focus primarily on the risk minimization strategies. We have significant experience that development and implementation of risk maps with active FENTORA.
The FENTORA sNDA includes a comprehensive risk minimization plan that we believe will mitigate potential risk associated with inappropriate prescribing and inappropriate use of this medication. It will also address abuse and diversion issues common with opioids. But not withstanding all of our experience in this area and our goal of ensuring patient safety and minimizing abuse and diversion, we are realistic about how challenging it is to secure label expansion for any opioid in this current environment.
Investment in our CNS franchise has been focused on NUVIGIL. Our clinical programs to study broader medical applications for NUVIGIL are underway. Beginning this quarter, we are examining the effects of NUVIGIL of subjects who experience excessive sleepiness associated with jet lag sleep disorder. If this study is positive, we'll be able to file the sNDA by the summer of 2009. This would mark the first time we look to an acute setting for NUVIGIL, and we believe we can benefit this population.
In the third quarter of this year, we will begin the study of patients who experience excessive sleepiness secondary to traumatic brain injury as well as a study in patients with excessive sleepiness with remitted, major, depressive disorder. Our bipolar depression study is on track to complete enrollment in the third quarter of this year. Additionally, we'll be conducting a pilot study in cancer-related fatigue in the second half of '08.
On our last call, I shared with you some exciting results related to the use of NUVIGIL a treatment of the negative symptoms of schizophrenia. Currently we're finalizing a Phase IIB protocol using the positive and negative syndrome scale as the primary end point. We're encouraged by the early data surrounding the NUVIGIL programs and believe NUVIGIL will accelerate growth in our CNS franchise in the years to come.
While we await the launch of NUVIGIL, we expect that PROVIGIL will continue to deliver solid financial results. Our study of CEP-701 in patients with acute myeloid leukemia bearing the FLT3 mutation continues. This product candidate is the furthest along in its class, and we expect study completion around the end of the year. With CEP-701 we look to enter the realm of personalized medicine. We're also conducting Phase II trial in the myeloproliferative disorders based on the ability of CEP-701 to inhibit Jak2. There are several publications suggesting that the Jak2 pathway plays an important role in the MPD.
We anticipate completion of this study in the second half of 2009. Our goal is to enter the clinic with a new compound each year. Last year we initiated two Phase I clinical programs, CEP-11981 a potent orally-active VEGF/Tie2 for the treatment of solid tumors, and CEP-18770 a proteasome inhibitor for the treatment of multiple myeloma, those studies are ongoing.
We are also progressing with our new our tamper-resistant program and believe there is a societal need for a tamper-resistant technology to combat abuse diversion of extended release opioids. The first product in our tamper-resistant program is CEP-28190, a novel formulation of extended release oxycodone that dramatically slows the release of the drug that results from crushing. This compound recently began studies in man. Our second compound is the tamper-resistant extended release hydromorphone that slows the rapid release of the drug when combined with alcohol. We anticipate entering man with this compound next year. This platform will be an important part of our future.
To summarize AMRIX and TREANDA are both off to great starts and promise to be near term drivers for growth. Meanwhile we continue to implement patent life management strategies with both PROVIGIL and ACTIQ and we will work through expand the utility of market for the respective follow-on products, NUVIGIL and FENTORA.
In short our business remains on track for future growth as we continue our evolution as one the leading Biotech companies in the world.
Now Kevin will discuss our financial performance during the quarter.
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
Thank you, Frank. Today we released our first quarter 2008 financial results. We reported sales of $433.9 million which is an increase of $10 million over the first quarter of 2007 and compares with our previously issued guidance of $435 million to $445 million.
We also reported basic adjusted income per common share of $1.12 compared to $1.45 one year ago. Compared to our guidance sales were up by only $1.1 million but we exceeded the high end of our basic adjusted EPS guidance.
For the past four quarters, our comparisons to prior year results have been hurt by Generic erosion of our branded ACTIQ business. We believe that we're at an inflection point and expect to resume year-over-year earnings growth in either the second or third quarter of this year.
During the quarter CNS franchise sales increased 4% to $226.7 million. PROVIGIL volumes have been relatively flat since. As Frank mentioned, most of the investment in this franchise has been focused on NUVIGIL. A price increase on PROVIGIL was implemented near the end of the quarter.
Pain franchise sales were $125.7 million; a decrease of 4% from the first quarter of 2007. The continued impact of generic competition was largely offset by FENTORA and AMRIX sales with AMRIX reaching a solid $9.8 million.
Oncology franchise sales were $27.5 million, an increase of 18% over the first quarter of 2007 due to strong sales across the board as well as the positive impact of exchange rates on our European business and other sales were $54 million up 5% increase over the same period last year.
Our goal is to maintain distribution channel inventory levels of between two to three weeks at each of our key products. During the first quarter inventory levels increased by a few days, yet remained at the low end of this range.
Adjusted R&D in the first quarter of 2008 was largely unchanged from a year ago. Adjusted SG&A increased $43.6 million in the first quarter of 2008, primarily due to AMRIX and TREANDA launch costs and the fact that VIVITROL losses were fully reimbursed by Alkermes in the first quarter of 2007. Our adjusted tax rate for the quarter was 36%, which was generally in line with our guidance.
During the quarter there were several adjustments that were made to arrive at adjusted net income. The most significant of these were, we excluded $27.9 million associated with the ongoing amortization of acquired intangible assets and accelerated depreciation related to restructuring.
We excluded $10 million associated with the acquisition of license technology in the field of oncology. We excluded $7.8 million associated with R&D collaborations and employee severance costs. We excluded $19.5 million to reflect the tax effect of pre-tax adjustments.
Based on our current outlook we've increased our 2008 total sales guidance by $30 million largely to reflect the impact of the strong euro. Total sales guidance is now $1.83 billion to $1.88 billion. The majority of this increase is offset by the impact of the strong euro in our operating expenses. Our guidance for adjusted net income for the full year was increased by approximately $2 million to between $346 million and $352.5 million. And our guidance for basic adjusted income per common share remains between $5.10and $5.20, reflecting a slightly higher basic share count assumption of $67.8 million shares outstanding.
Guidance for the CNS franchise remains between $975 million and $1 billion. The pain franchise remains between $500 million and $525 million. Oncology is raised between $125 million and $150 million and our guidance for other product sales raised to between $200 million and $225 million.
R&D and SG&A expenditures are targeted to be between $340 million to $360 million and $740 million to $760 million respectively. Our assumed tax rate for the year is approximately 36% to 37%.
The Company is introducing second quarter 2008 sales guidance between sales guidance of between $455 million and $465 million. Adjusted net income between $74.6 million and $81.4 million and basic adjusted net income per common share between $1.10 and $1.20 based upon 67.8 million shares outstanding and a tax rate of approximately 36% to 37%.
That concludes our opening remarks. We will now open this call to you and your questions.
Question And Answer
Operator
Thank you. The question and answer session will be conducted electronically. [Operator Instructions]. And we'll take our first question from David Buck with Buckingham Investments.
David Buck - Buckingham Investments
Yes, thanks for taking the question. First, for Frank on the upcoming panel for FENTORA, your comment about the difficulty in getting label expansion in this environment, have you had any changes in your interaction with the FDA or gotten any better sense of the tone of the questions prior to the panel. And can you just give some sense of, why you made that comment?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
I think the questions that the panel is going to be asking us will be public tomorrow, so we can point you to the FDA website to get that information. I just think it is a general comment about the environment, David. I think if you look at where the FDA is living on these issues in the wake of OXYCONTIN, the difficulties around the abuse of that product, all the death associated with Duragesic and Fetanyl products in general and all the rhetoric and information that the FDA has been putting out in that arena, it's a pretty difficult task to ask the FDA to expand a label of a drug like FENTORA right now. So that's what the base of the comments were. There weren't any specific interactions with FDA on the FENTORA issue whatsoever and merely reflecting what I see in the environment and what you guys are probably looking at as well.
David Buck - Buckingham Investments
And just a follow up for Kevin I guess. What is the guidance for pain franchise assumed in terms of any benefit from label expansion on FENTORA and some of the price per Rx seems to have moved up on ACTIQ and FENTORA during the quarter. Was that a result of the trade movements?
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
In terms of the FENTORA sales in the pain franchise, the PDUFA date is near the end of the year, David. So we really didn't include any significant uptick and we wouldn't expect the panel outcome to have any impact positive or negative in 2008. In terms of the revenue numbers we did raise prices in both our oncology franchise and our CNS franchise during the quarter and tablets per Rx have dropped up somewhat in the oncology, in the pain area.
David Buck - Buckingham Investments
Okay, thank you.
Operator
Thank you. And next we'll go to Greg Gilbert with Merrill Lynch.
Gregory Gilbert - Merrill Lynch
Hi. I realized it maybe early to ask this question, but if you are successful on expanding the label for FENTORA what specifically would you do differently from the commercial standpoint? And I have a follow-on on TREANDA.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
What do you mean by commercial stand... I mean selling the drug or you talking about?
Gregory Gilbert - Merrill Lynch
Yes, the size and structure of sales force. The types and numbers of docs you could go to that you can't go to currently?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
What's interesting about that... it is really a good question Greg. What is interesting is that we see the pain care specialist as the big drivers of scripts in this entire arena. There is about 17,000 of them approximately maybe Bob, give me a little more color on that. Is that high or low, Bob?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Well in terms of the total number of physicians that we look upon as either a pain care specialists or individuals who are highly trained and skilled in the use of opioids, that number is about 30,000 docs.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
And that is the universe of physicians, Greg. We are also... would write prescriptions for breakthrough pain and opioid tolerant patients who also have lower back pain and neuropathic pain. So the universe is not going to expand that much. The number of prescriptions we think will and the number of patients who have those problems would be benefited by the product, but this is not a wholesale shift in how we sell the drug or who we sell it to. Its pretty much, the same business as usual to the same audience as usual.
Gregory Gilbert - Merrill Lynch
A follow-on on TREANDA, Bob. Do you expect payers to reimburse for NHL immediately based on the comments you made about NCCN's endorsement?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
No. I wish that were the case, Greg. But it doesn't appear to be right now. I think we've got to get the compendia listings in NHL and it would be really nice to get the approval as well of CMS, and as was put out in the pink sheet just a couple of weeks ago, CMS is actually going to be reviewing a number of these compendium including the NCCN and trying to determine whether or not they are going to list those in the CMS compendium. But we're not seeing much use outside of CLL yet.
Gregory Gilbert - Merrill Lynch
Thanks.
Operator
And next we'llgo to Corey Davis with Natixis.
Corey Davis - Natixis Bleichroeder
Thanks. First and I guess probably for Kevin. How much of the SG&A this quarter would you define as one-time in nature and should it sequentially increase or decrease in subsequent quarters?
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
I would say very little I would consider to be one time, Corey. I mean certainly SG&A in this quarter increased because of increased promotional efforts getting ready for the TREANDA launch, increased promotional effort on AMRIX, a new product which is in the launch phase. If you look in comparison to last year, it is also up because as you recall last year the Alkermes was bearing the brunt of the cost of the VIVITROL efforts and this year is being split 50/50. But beyond that I wouldn't necessarily say there is anything they are in one-time in there. Is that helpful?
Corey Davis - Natixis Bleichroeder
Yes. Should we assume that the TREANDA trend that you mentioned in terms of what you've sold per week will continue? I assume a drug like this doesn't have any meaningful stocking effect.
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Doubling every week, Corey?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Yes. Realistic ideas. I think, Corey, I think we've had a great start. It's pretty tough to forecast where this is going. We are very pleased with what we see and it's hard to say what it will be in the long run. I think the analyst estimates including yours out there are realistic and we hope to attain those in the long run. Kevin, the question you had on stocking about TREANDA, he proposes there is no meaningful stocking of TREANDA.
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
No. TREANDA wasn't launched until April 1st. So there is no TREANDA sales or TREANDA stocking in our revenue numbers.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Is that helpful, Corey?
Corey Davis - Natixis Bleichroeder
Yes, that's fine. Thanks.
Operator
: And we'll go next with Adam Greene with J.P. Morgan.
Adam Greene - J.P. Morgan
Thanks, good afternoon. A couple questions on FENTORA, just wondering if you could comment, if you're working on a next generation FENTORA products using your abuse deterrent technology? Secondly, any revenues from EFENTORA overseas in your guidance to the pain franchise? And then finally following up on David's question, relative to the dollar per Rx, the number did seem fairly high in Q1 versus other quarters, I realize there was 17% price hike, but it seemed to be a little bit higher than that. I wonder if you can expand on that as well.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Well three questions in a row. Probably can't remember the first one. I think the first one had to do with tamper-resistant FENTORA possibilities. I think it's... the technology that exists in the world today probably would be relevant for a fast outset product like FENTORA, I can't imagine how that would work with the technology we have, certainly, and anything we've seen out of the space. I think in the long run, certainly the technology develops to the point where you can make such a thing, I think it is in everybody's benefit to utilize it, but I don't see that available today. I forget the other two questions. Anybody remember those other two questions?
Adam Greene - J.P. Morgan
EFENTORA.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
What was the question?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
The question was the amount of EFENTORA revenue in the guidance. It is a pretty modest amount at this point in time. The product has approved in Europe, but we need to go through their pricing and reimbursement, and that process is going to take a while.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Don't forget in Europe the pricing and reimbursement is a country by country basis and it takes a little bit of time. I think any meaningful sales in EFENTORA will be in the 2009 guidance.
Adam Greene - J.P. Morgan
And the FENTORA dollar per Rx, you had that 9% price increase in the quarter, but the dollar per script seemed to be much higher then that Q1 versus Q4?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Adam, hi, it is Bob. I am going to have to go back to the numbers to look at that, but as Kevin mentioned earlier, there was a nice tick up in actual units per prescription in quarter one, which accompanied the price increase and I think is driving that average dollar value for TRX.
Adam Greene - J.P. Morgan
Thanks.
Operator
And we'll go next with Annabelle Samimy with UBS.
Annabelle Samimy - UBS Securities
Hi, thanks for taking my question. Back on FENTORA I guess, one of the big issues with breakthrough pain in the non-cancer setting is really the definition of breakthrough pain, can you talk about what you might be doing to try and narrow that definition down for physicians and the broader population?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Lesley is here. She can answer that question for you.
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
We're using the same definition of breakthrough pain that we used in our cancer studies, so that is a transient onset of a flare of pain, typically occurs accelerates very rapidly and then falls off. No more than four breakthrough pain episodes per day, so that's really the patient population that we're identifying with.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
That's pretty consistent with the literature, isn't it?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
Pretty consistent with the literature. I think there are some differences between absolute numbers of breakthrough pain episodes per day between cancer and non-cancer, but what I just told you is really what we saw in our clinical trial population, which is pretty reflective I think of patients out there.
Annabelle Samimy - UBS Securities
Okay. And then separately on AMRIX, with the patent allowance are you making any changes to your or placing any more greater priority in your sales and marketing effort around that or investing any further, given potential patent allowance or patent on that?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Yeah. I think that's a great question. I think we see AMRIX in a different light now for sure. Once the patent is issued, which we expect in a few months, we expect to have this drug for many years to come, and the means that it's going to garner more investment from us. The investment like to be derived from a reallocation of existing SG&A, but we think that AMRIX will garner more investment and will generate good growth for us in years to come.
Annabelle Samimy - UBS Securities
Will that potentially take away from some of your investment behind PROVIGIL or FENTORA?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
I think Cephalon is all about TREANDA and all about AMRIX, and those products will garner the lion's share of our investment going forward.
Annabelle Samimy - UBS Securities
Okay. Thanks.
Operator
And, we'll go next to Bret Holley with Oppenheimer.
Bret Holley - Oppenheimer
Hi. Sorry. One more question on FENTORA. I guess I understand your caution going into the panel meeting. I guess I'd like some color on, what you think they could ask really, I mean the trial data seemed pretty compelling to me, and obviously a risk map and its adequacy will be the biggest discussion, but beyond that do you think that we're in an environment where they will just say no in a blanket way to new therapies.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Well they've been historically doing that for the last six months, if you haven't noticed, but I think the discussion at the panel meeting, we've been pretty public, will be largely about the risk map. They have no real questions about the safety and efficacy of FENTORA. Fentanyl is Fentanyl is Fentanyl, so I don't think that's going to be an issue at all. Lesley, do you want to add some color on the risk map discussions?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
I think there are the two issues within the risk map it self and the two issues that I think are pertinent to all rapid onset opioids, so the risk of overdose in an opioid naive patient and abuse and diversion. I think the plan that we have put in place and intend to present on Tuesday really addresses those two significant risks. I think the other area is and I think it is somewhat controversial is unmet medical need, and clearly we firmly believe that FENTORA is an effective drug for breakthrough pain. We believe there are patients who need this drug, and we hope that everything that we present on Tuesday re-affirms that case.
Bret Holley - Oppenheimer
And then one other strategic question in oncology now that TREANDA has launched, what are your plans on the strategic front in the near term as far as in licensing or acquiring other assets?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
I think now that we've sort of solidified our oncology business we'll support that business and grow that business. We'll grow in a number of ways. We have got a very strong oncology pipeline; I think one of the strongest in the industry right now. We're going to continue to invest and develop that pipeline and also, on the M&A front, we're going to continue to identify opportunities to bring in. I guess it is sort of business as usual for us, right now, but it is a nice way to grow a business both internally and with acquisitions.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Thanks a lot.
Operator
We'll go next to David Amsellem with Friedman, Billings, Ramsey.
David Amsellem - Friedman, Billings, Ramsey
: Thanks for taking my questions. Just starting off on AMRIX, can you talk about formulary access in terms of percentage of covered lives and can you break down tier status as well to the extent you can?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Yes. I can indeed. We have actually been pretty encouraged with the formulary access to the product. We had projected and indeed, are finding that this is a largely a tier 3 co-pay product, but really not prior of in all that many plans, those that we're managing and mapping now are less than 10% of all the plans out there that are covering the product. I can't give you the exact number of covered lives but it is very substantial and thus far anyway we are not finding patient access to the product through managed care problems to be a real strategic concern.
David Amsellem - Friedman, Billings, Ramsey
Okay. And then one more question if I may and just switching gears to TREANDA, and I know it is early, but can you talk about what you're hearing out in the field about how the drug is being used in CLL? Are you hearing that doctors are using with Rituxan and we know you have the data superiority versus chlorambucil, but are you getting the sense doctors are favoring it over Fludarabine also? Thanks.
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Yeah, like you say it is really early but we do have a number of anecdotal reports coming back from physicians and we have actually gone out and systematically tried to gather up some data from physicians who have used it, and I think if there is anything that kind of characterizes it after just a couple of weeks in the market place its really so far so good. We like everything we are hearing, physicians are using the products or say that they we are using the product largely for the reasons that we want them to be, namely that we think some of these toxicities are going to be lessened and risks of infection through myelosuppression are potentially going to be a little bit lower.
What we are seeing is that the drug is being used approximately 3:1 in second and later line patients right now as opposed to front line although we are registered really right across the board. The drug is being used pretty much on the doses that we have anticipated 100 mgs per meter square and two sets of doses one day after the other. So, I mean nobody has got more than one course of therapy yet, but we have a lot of physicians and institutions that are repurchasing and these are signs which we were anticipating and hoping for that would point to a really strong launch.
David Amsellem - Friedman, Billings, Ramsey
Okay, that's helpful. Thanks a lot.
Operator
Okay, thank you. And we will next to Larry Neibor with Baird.
Larry Neibor - Robert W. Baird
Thanks, good afternoon. Does your increase in your oncology franchise guidance reflect TREANDA, you stressed in CLL or does it also incorporate use in the NHL indication later in the year?
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
Larry, it's Kevin. It really reflects an earlier than anticipated launch of TREANDA, it also anticipates the effects of foreign exchange. The euro as you know has been a lot stronger than many people expected, certainly a lot stronger than we planned when we put the budget together.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
And don't forget Larry we have got about four products that we sell in Europe in the oncology space.
Larry Neibor - Robert W. Baird
Right, right, okay. Was there any stocking benefit to your AMRIX sales this quarter?
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
Nothing significantly to show, Larry. The movement in inventories was fairly modes.
Larry Neibor - Robert W. Baird
And finally, on CEP-701 quite a few articles in the New England Journal of Medicine recently concerning the German/Austrian AML study group. What's your opinion of those articles versus your development of CEP-701 and the potential for it in that population?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
Pretty consistent with, I think. I think there is a lot of defining the 3 internal turns and duplications with 3 ITV and showing that those patients that also may have genetic mutations and other genes are really poor prognosis patients, so currently in line with what I think our program is all about.
Operator
And we will take our next question from Gary Nachman with Leerink Swann.
Gary Nachman - Leerink Swann
Hi, good afternoon. First, Bob, could you expand on the CSO's efforts promoting AMRIX? How many PCs are they going after right now and are you getting any traction there?
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Yeah, hi Larry as you know we are working with Ventiv [ph] Health and we have a 120 sales people out there from the Ventiv team carrying Cephalon business cards, totally transparent to a physician as a Cephalon sales person. They are calling on largely a different set of physicians than we are and, where as we can't really say yet because of the relative newness of their efforts how they are performing from a payback perspective. We certainly can see their activity levels, what they are doing in terms of sample distribution, what they are doing in terms of meetings, organization, and calls per day and this is a terrific group, and they are doing a great job.
Gary Nachman - Leerink Swann
And just back to an earlier question around sales force, once you get that patent issued, then how quickly would you potentially add sales reps either through the CSO or organically?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Do you want to answer that, Bob? There's no... we're not saying exactly we're not saying exactly how we're going to do this, increase in sales reps, increasing market expense or both, and we haven't been public on how we're going to do that. Bob, you may want to add a little bit.
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
No, Frank, I think you've told Gary absolutely everything perfectly.
Gary Nachman - Leerink Swann
Okay. Bob, what pricing should we be using for AMRIX? Have the number of pills per Rx increased again? They were going up gradually.
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
And they continue to trend up gradually. I think we're now just over 25, 26 Chip, tells me tablets per prescription.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Which is a little bit higher than we...
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
It is a little bit higher than we projected at launch, which is a very good thing. However, what we're hearing back from physicians is that it is being used once a day in the vast majority of cases, so what they're doing is just giving these patients a prescription for a little bit longer duration or anticipating that because these are recurring issues, that the patient will simply get a script that will last them for more than one flare-up of pain.
Gary Nachman - Leerink Swann
Kevin, in your pain guidance are you still factoring in other generic ACTIQ by mid-year or have you now pushed that out a little bit?
J. Kevin Buchi - Executive Vice President and Chief Financial Officer
We have pushed it out next quarter simply because it hasn't happened yet, not because of again a tremendous insight we have into the process. We hear constant rumors, probably the same rumors you do, but we've been hearing those rumors for over a year now.
Gary Nachman - Leerink Swann
Okay. And last one for Frank. Has your thinking changed at all on when it would make sense to launch NUVIGIL? You're still doing a lot of work on that. Are you still working with the 2010 timeframe or are you more inclined to say now maybe it could be sooner let's say next year?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
I think what we've been saying publicly in our presentation in
our presentations is our investor sessions is pretty much we have been saying all long, we have got a 2010 target for the launch of launch of NUVIGIL. However, we have opportunities that may come our way in terms of promotional claims from the FDA regarding NUVIGIL if that data comes in that gives us an opportunity to launch it sooner, as soon as 2009, we will have to see whether those things come in on time or not.
Gary Nachman - Leerink Swann
Okay, thanks.
Operator
And we will go next to David Windley with Jefferies & Company
David Windley - Jefferies & Company
Hi, thinking about the volume declines in the breakthrough cancer pain products, including the generics on a year-over-year basis, I am wondering if your pricing strategy for PROVIGIL will continue to be aggressive into the launch of NUVIGIL if that would kind of decline or impair the volume that you would see in PROVIGIL in other words, would you be comfortable shrinking the volume in that wakefulness franchise in advance of NUVIGIL's launch?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
I think, Dave has a great question, I think you are making couple of assumptions here that are a little bit accurate.
David Windley - Jefferies & Company
Okay.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
One of the assumptions is that the pricing of ACTIQ actually caused the market to decrease in that space. I can see why you think that, I am not convinced that the case at all Bob could probably add some color to that. The second thing is with ACTIQ you are talking about a drug that's roughly how much per script now? Average script? $3,000 a script versus an average script of PROVIGIL today of roughly $210 a script, so you're looking at... is that what we are saying about a little about 200 or some, 300 bucks a script. So, you're looking at an order of magnitude difference in the price of the two so we certainly aren't going to do anything to hurt the volumes of NUVIGIL going forward, if that's your question. And I am not yet convinced that the reason the sole reason for the decrease in the overall market for breakthrough pain products was due to the ACTIQ price increase.
David Windley - Jefferies & Company
Following on, on your comments earlier that Cephalon is really focused intently, appropriately so, but intently on TREANDA and AMRIX. Is that - should we expect that resources will be rotated off of PROVIGIL such that the year-over-year volume movement might actually increase in its percentage decline?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
No. I think, look, PROVIGIL is pretty much a flat product. It's been flat for quite some time now. I know it is always hard to give up the product that you built your company around, but in effect it is a great core product. It's driving our core business. We projected about $100 million in growth for the year, is that right, Kevin, on PROVIGIL and that's a 10% growth in the franchise, and we're going to get that. That may be largely due to price, but we're going to get that number. So PROVIGIL is not only continuing to be our core product for us, it's a product that's driving growth in our business, at least 10% of that growth, so we are pretty excited about PROVIGIL.
But nonetheless we have to continue to build other franchises that we are going to have for many, many years to come and right now on our plate is TREANDA and AMRIX, which we believe will be two very large products that will drive a lot of growth in the near term. When we launch NUVIGIL, you will see a reallocation of resources towards NUVIGIL launch and the opportunity to grow NUVIGIL to even larger heights hopefully than we were able to succeed with PROVIGIL. One thing companies can't do, don't think, is to continue to invest incrementally in every drug for an eternity. I know you're not suggesting that.
David Windley - Jefferies & Company
No, and then just last question if you are pleasantly surprised with positive commentary and recommendations around and a label expansion on FENTORA next week and later in the year would that change your pricing strategy on that product?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Well, we really don't like to talk about pricing strategy, I think we price our drugs that we think we are adequate to the market place today we think FENTORA is fairly priced we specifically priced FENTORA below the price of ACTIQ for a lot of good reasons. It is not that significantly different from the price of generic ACTIQ today. So, we're pretty happy with FENTORA's price. If we do have an opportunity your real question with a broader label to address a much larger market place than of course lowering the prices something you may want to consider going forward but, let's do one thing at a time let's get the broader market first before we talking about that.
David Windley - Jefferies & Company
Great. Okay, thank you.
Operator
And we will go next to Jim Birchenough with Lehman Brothers.
Jim Birchenough - Lehman Brothers
Yeah hi guys. Just want to follow up on the panel mix week in terms of expectations should we expect thumps up/thumps down on your risk management program? Do you expect FDA to propose an alternative risk management program or is the panel being asked to point on what they think would be the best risk management program just trying to get the sense of how binary this panel will be?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
We're trying to get a sense about it, too. So it is a really good question. I think before Lesley gives you more color on what we expect there, my comments earlier my expectations are that this panel has more to do with social norms and the social issues around opiods how they are managed, how they are prescribed, more than it has to do with FENTORA per se. And I think we're in the middle of that great debate the FDA is having, and we all heard and read a lot about it, and that really colored my comments earlier. Lesley, do you want to provide further color to this?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
: I think you talked about would it be a binary outcome, a yes no. I think that's possible, but I think equally possible is that there is a maybe, depending on one of the things in the risk management plan or whatever. So I think this is the advisory committee will vote, and then obviously FDA needs to take those comments into consideration. So I think anything is possible, but I think that we are pretty realistic about what the issues are, and I think we are addressing them.
Jim Birchenough - Lehman Brothers
: And just to follow up on that, we'll see the briefing documents tomorrow presumably. Have you had a chance to look at them?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
: At seen the briefing documents,
Jim Birchenough - Lehman Brothers
And just to follow up on that, we'll see the briefing documents tomorrow presumably. Have you had a chance to look at them?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
: Than seen the briefing documents, yes.
Jim Birchenough - Lehman Brothers
And just one final question just on the inhibitor on CEP-several one given that there is Jack 2 activity, any interest in moving into immunology? I think there has been some preclinical data published in MS. Do you have any interest in moving that forward in immunology?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
We've read those publications. We think there could be an opportunity there. But right now our budget is focused on myeloproliferative disorders, I believe, and FLT inhibition in ML patients. The Jack 2 target is an exciting one. A lot of companies are looking at it. We feel very fortunate to have a Jack 2 inhibitor in Phase 3 development for cancer, and if we bring it beyond that, we'll have to see what we can do and our budget will accommodate, etcetera.
Jim Birchenough - Lehman Brothers
Thanks, Frank.
Operator
We'll go next to Ronnie Gal with Bernstein.
Ronnie Gal - Sanford Bernstein
Hi guys, Good afternoon just quick last question if I could on the meeting next week I am just wondering, Lesley, I know you got a lot around this, but are we essentially... are essentially all the Fentanyl products in the same boat, that is, the FDA is looking for a single risk map product and essentially by getting your own risk map cleared out, you're essentially clearing up one for the generics as well?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
May be I can while Lesley is thinking about your specific answer, Ronnie, let me give you more color here. I think the issue at hand, we've got a lot of experience on risk maps. We had the first one with ACTIQ and then we used that one for the generics of course, because they're our licensee on that product, they don't have their own NDAs approved as you know. We also got a new risk map approved when we launched FENTORA for breakthrough cancer pain, so we probably have more experience than most people on these things. And I know there has been a number of risk maps approved by FDA since this time, especially in the opiates space. The real question the FDA is asking is do risk maps do anything useful, and can they be relied upon to make sure that the drug is used appropriately? It is more of a grand 30,000 foot question that's complicated and difficult to answer. Want to talk more about that or not?
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
Well, I think that they are looking for a pretty comprehensive risk management plan that addresses the two real risks of a rapid onset opioid. And we know what they are. It is use in opioid naive patients it's abuse and diversion. I think all the rapid onset Fentanyl products have those same risks, so the answer to your question is, I think, why would you only put a risk map around one Fentanyl product. That would be illogical.
Ronnie Gal - Sanford Bernstein
If I understand you correctly, essentially the FDA is kind of sitting here waiting to get an answer that will have the answer of what is the appropriate risk map for all Fentanyl products.
Lesley Russell - Executive Vice President, Worldwide Medical and Regulatory Operations
We talked specifically about FENTORA on Tuesday. I mean theres one product being discussed on Tuesday. But, I don't think it is unreasonable to think that whatever happens with FENTORA would happen with other rapid onset Fentanyl products?
Ronnie Gal - Sanford Bernstein
Got you thanks
Operator
And we'll take our question from David Buck which is a follow up with Buckingham Investments.
David Buck - Buckingham Investments
Yes. Thanks. I think the panel question has probably been taken, but on the FENTORA ANDA filing that you recently received notification for, any insight into what the case looks like early on or what the ANDA filer might be seeking and any sort of commentary you can give us there?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Well David, two questions in one day is pretty good here.
David Buck - Buckingham Investments
Pretty special.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
Pretty special. So special we're not going to give you the answer. I think the way we view this is that like every other... this is the business we're in today. Every drug filed, every drug approved, there will be ANDA filed, there will be a challenge, and this is the normal course of action in the environment we're in and the industry we're in. And we will not provide and we never provide any information on ongoing legal activities in the Company other than 30,000 foot comments. And the comment I can give you on this is that we're analyzing what their claims are and what they've done, and if appropriate, we will pursue them within the prescribed 45 days.
David Buck - Buckingham Investments
Okay, fair enough.
Operator
And, wehave time for one question that is a follow-up from Greg Gilbert with Merrill Lynch.
Gregory Gilbert - Merrill Lynch
Thanks. Two follow-ups, Kevin, when do you expect to make the settlement payment to the government and when will that overall issue be resolved and second for Frank, do you expect the buy or license products in the pain area, what's your appetite their as opposed to just continuing along with the internal plans there that you have in the pain arena? Thanks. .....
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
Could I use Frank's statements, can I not answer as well. I think we started the process of negotiating the course of integrity agreement with the justice department. I think the payment will be made when that is finalized. I think it is reasonable to say that we're expecting it in the next several months, but it is difficult for me to get real specific beyond that, I am afraid.
Frank Baldino, Jr. - Chairman and Chief Executive Officer
What was the question for me? I am trying to remember.
Gregory Gilbert - Merrill Lynch
What's your appetite, Frank, in buying or licensing products in the pain area, especially given the changes in the pain area both good and bad changes, I guess? Or are you content with your internal programs there for now?
Frank Baldino, Jr. - Chairman and Chief Executive Officer
I think there is a lot of opportunity in pain outside of opiads. I think the opiad world is a complicated world right now, it's got a lot of focus and attention from Congress, from the FDA, the DEA, and probably this is not an environment to build an opiate foundation to a pain business. So, I think, when we talk about looking for pain opportunities, there is a lot of opportunities that are beyond the opiad analgesic universe and that's what we're looking at most aggressively.
Gregory Gilbert - Merrill Lynch
Thanks very much.
Robert P. Roche Jr. - Executive Vice President of Worldwide Pharmaceutical Operations
That does conclude today's call. Thank you all for your participation.
Operator
That does conclude today's conference. We thank you for your participation. You may now disconnect.
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