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Executives

Michael Freeman – Associate Vice President, Investor Relations and Corporate Communications

Adam C. Derbyshire – Chief Financial Officer, Executive Vice President-Finance and Administration

Carolyn J. Logan – President and Chief Executive Officer

William P. Forbes – Executive Vice President-Research and Development and Chief Development Officer

Analysts

Michael Faerm – Credit Suisse

Ami Fadia – UBS Securities LLC

Mario Corso – Caris & Co., Inc.

David A. Amsellem – Piper Jaffray, Inc.

Corey Davis – Jeffries & Co, Inc.

Jim Dawson – Buckingham Research

Annabel Samimy – Stifel, Nicolaus & Co., Inc.

Irina Rivkind – Cantor Fitzgerald Securities

Michael Tong – Wells Fargo Securities LLC

Andrew J. Finkelstein – Susquehanna Financial Group LLP

Liisa A. Bayko – JMP Securities LLC

Scott R. Henry – ROTH Capital Partners LLC

Patricia Banks – DISCERN Securities, Inc.

Gregory D. Fraser – Bank of America/Merrill Lynch

Salix Pharmaceuticals, Ltd. (SLXP) Q2 2012 Earnings Call August 8, 2012 5:00 PM ET

Operator

Good afternoon. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to Salix Pharmaceuticals’ Second Quarter 2012 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

Mr. Michael Freeman, Associate Vice President of Investor Relations, you may begin.

Michael Freeman

Thank you. Good afternoon, and thank you for joining us today. I am Mike Freeman, Associate Vice President of Investor Relations and Corporate Communications for Salix Pharmaceuticals. With me today are Carolyn Logan, President and Chief Executive Officer; Adam Derbyshire, Executive Vice President and Chief Financial Officer; and Bill Forbes, Executive Vice President, Medical and Research and Development, and Chief Development Officer.

Adam will begin the presentation with a review of the financial results for the second quarter of 2012. Carolyn then will review operations to complete the formal segment of today’s call. At the conclusion of these comments, management will respond to appropriate questions.

Various remarks that management might make during this conference call about future expectations, plans, and prospects for the Company, constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results might differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our press releases and SEC filings, including our Form 10-K for 2011. Specifically, the information in this conference call related to projections, development plans, and other forward-looking statements is subject to the Safe Harbor.

I now will turn the call over to Adam.

Adam C. Derbyshire

Thank you, Mike. Total product revenue was $181 million for the second quarter of 2012, a 36% increase compared to $133.2 million for the second quarter of 2011. Total product revenue for the first six months of 2012 was $352.1 million, a 47% increase compared to $239.1 million for the first six-months of 2011.

XIFAXAN revenue for the second quarter of 2012 was $116.7 million, a 34% increase compared to $87 million for the second quarter of 2011. XIFAXAN revenue for the first six months of 2012 was $229.6 million, a 37% increase compared to $167.7 million for the first six months of 2011.

APRISO revenue for the second quarter of 2012 was $21.8 million, a 45% increase compared to $15 million for the second quarter of 2011. The combined revenue contribution of our most recently-introduced products RELISTOR, SOLESTA and DEFLUX totaled $19.2 million for the second quarter of 2012.

Total cost of products sold was $33.3 million for the second quarter of 2012 and $67.4 million for the first six months of 2012 compared to $25.2 million for the second quarter of 2011 and $43.8 million for the first six months of 2011.

Gross margin on total product revenue was 81.6% for the second quarter of 2012 compared to 81% for the second quarter of 2011 and 80.8% for the first six months of 2012 compared to 81.7% for the first six months of 2011.

Research and development expenses were $27.2 million for the second quarter of 2012 and $53.9 million for the first six months of 2012 compared to $29.5 million and $60.5 million, respectively for the prior year period.

Selling, general and administrative expenses were $65.3 million for the second quarter of 2012 compared to $44.7 million for the prior year period and $125.7 million for the first six months of 2012 compared to $91.3 million for the prior year period. The increase in selling, general and administrative expenses for 2012 compared to 2011 is due primarily to increased personnel cost related to our institutional sales force and our office based sales force expansion and increased marketing expenses related to RELISTOR and SOLESTA.

The company reported GAAP net income of $20.1 million or $0.32 per share fully diluted for the second quarter of 2012 and $30.1 million or $0.47 per share fully diluted for the first six months period ended June 30, 2012.

Net income on a non-GAAP basis, excluding the loss on extinguishment of debt and non-cash adjustments related to the repurchase of a portion of our 2028 notes on March 2012, the difference between income taxes paid and income taxes expensed and non-cash depreciation, amortization, stock-based compensation and convertible debt interest expense was $50.1 million or $0.79 per share fully diluted for the three-month period ended June 30, 2012 and $94.8 million or $1.48 per share fully diluted for the first six-month period ended June 30, 2012.

We believe these non-GAAP measures might provide investors additional relevant information in part for purposes of historical comparison. In addition, we use these non-GAAP measures to analyze our performance in more detail and with better historical comparability; however, you should be aware that non-GAAP measures are not superior to nor a substitute for the comparable GAAP measures. A reconciliation of our non-GAAP measures to the comparable GAAP measures is provided in our second quarter 2012 press release.

Cash and cash equivalents were $715.9 million as of June 30, 2012. XIFAXAN 550 continued to perform well during the second quarter of 2012. During the quarter, our XIFAXAN prescription business, comprised of XIFAXAN 200 milligram tablets and XIFAXAN 550 milligram tablets, demonstrated impressive growth on a milligram basis, up 22% compared to the second quarter of 2011.

APRISO also demonstrated strong prescription year-over-year growth of 27% for the second quarter of 2012 compared to the second quarter of 2011. RELISTOR prescriptions increased 89% year-over-year for the second quarter of 2012 compared to the second quarter of 2011, when our commercial team launched the product.

We are updating our estimate for 2012 financial guidance. Prior 2012 financial guidance incorporated anticipated costs and revenue associated with the expansion of our sales force and incremental RELISTOR sales that would have been triggered by July 27, 2012 FDA approval of the expanded indication for RELISTOR subcutaneous injection. Due to the receipt of a complete response letter on July 27, 2012, our updated estimate of 2012 financial guidance does not incorporate these anticipated RELISTOR related cost and revenue.

Additionally, our updated estimate for 2012 adjusted net income includes the effect of the March 16, 2012 placement of $169 million of convertible senior notes and adjustments relating to the impact of the following non-cash items. Loss on extinguishment of debt, depreciation, amortization, stock-based compensation, convertible debt discount amortization and the difference between income taxes paid and income taxes expensed.

Reconciliation to GAAP guidance is in a table in our second quarter press release that was issued earlier this afternoon. Our estimate of 2012 total company product revenue remains approximately $735 million representing 36% growth over 2011 revenue. However, we are increasing our estimate of 2012 adjusted net income to approximately $183 million or $2.86 per share fully diluted on a non-GAAP basis for the full year ending December 31, 2012.

The current annualized run rates based on dollarizing June 2012 prescription data for XIFAXAN, MOVIPREP/OSMOPREP, APRISO, RELISTOR in the United States and our other products are approximately $468 million, $94 million, $73 million, $25 million, and $41 million respectively.

In line with the full year 2012 guidance provided above for the third quarter of 2012, we anticipate total company product revenue should be approximately $185 million and adjusted net income should be approximately $44 million or $0.69 per share fully diluted on the non-GAAP basis described above.

I now will turn the call over Carolyn Logan, our President and CEO.

Carolyn J. Logan

Thank you, Adam. Our second quarter growth was driven primarily by XIFAXAN 550, APRISO and RELISTOR. XIFAXAN continues to grow sequentially with prescriptions on a milligram basis increasing 4% for the second quarter of 2012 compared to first quarter of 2012. APRISO also continued to exceed the company’s expectations during the quarter. APRISO prescriptions increased 6% during the second quarter of 2012 compared to the first quarter of 2012. RELISTOR prescriptions increased 11% during the second quarter of 2012 compared to the first quarter of 2012.

Salix continued to execute its plan and to progress in the commercial and product development arenas during the second quarter of 2012. Our expanded 192-member office-based sales force is focused primarily on gastroenterologists, colorectal surgeons and hepatologists. One 96-member division of the sales force is promoting XIFAXAN 550, RELISTOR and APRISO. The second 96-member division of the sales force is promoting SOLESTA, XIFAXAN 550, MOVIPREP/OSMOPREP, and APRISO. Our 40-member institutional sales force is promoting XIFAXAN 550, RELISTOR and DEFLUX.

As previously announced, the FDA notified the company that it required additional time for review of the supplemental New Drug Application or an sNDA for RELISTOR injection for subcutaneous use for the treatment of opioid-induced constipation or OIC in adult patients with chronic, non-cancer pain and extended the April 27, 2012 goal date by three months to July 27, 2012.

On July 27, 2012, the FDA issued a Complete Response Letter or CRL requesting additional clinical data. Salix has requested an End-of-Review meeting with the Division of Gastroenterology and Inborn Errors Products to better understand the contents of the letter.

On February 7, 2012, the FDA issued an action date of June 5, 2012 under PDUFA and granted Priority Review designation for the NDA for Crofelemer 125 milligram tablets for the proposed indication of the control and symptomatic relief of diarrhea in patients with human immunodeficiency virus or HIV and acquired immune deficiency syndrome or AIDS who are on anti-retroviral therapy.

On April 20, 2012, the FDA notified the company that it required additional time for review of the New Drug Application or NDA for Crofelemer 125 milligram tablets and extended the June 5, 2012 goal date by three months to September 5, 2012. We anticipate receiving the FDA’s decision regarding the NDA by the extended PDUFA goal date.

On February 21, 2012, the company initiated TARGET 3, a Phase 3 study to evaluate the efficacy and safety of repeat treatment with rifaximin 550 milligrams three times daily for 14 days and subject for the irritable bowel syndrome with diarrhea who respond to an initial treatment course with rifaximin 440 milligram TID for 14 days.

During the second quarter, we continued our efforts to enroll a number of subjects sufficient to randomize approximately 800 subjects, 400 subjects per treatment group, into the double-blind retreatment phase of the study. The company continues to anticipate that from study initiation it could take approximately 24 months to complete the trial, submit a response to the Complete Response Letter and then secure an FDA decision regarding approvability.

During the second quarter of 2012, the company also continued to make progress in the development of oral RELISTOR, budesonide foam, the next generation formulation of rifaximin for potential additional indications and Lumacan. Detailed results of the 804-patient Phase 3 trial to evaluate the efficacy and safety of oral methylnaltrexone bromide for the treatment of opioid-induced constipation or OIC in subjects with chronic, non-cancer pain were presented at Digestive Disease Week on May 22, 2012.

We anticipate completing patient enrollment in our two budesonide foam Phase 3 trials by the end of this year. In December 2011, we initiated a pharmacokinetic study to assist in the characterization of three prototype tablet formulations of rifaximin. The study progressed during the second quarter of 2012 and currently we intend to move forward with a suitable next generation rifaximin candidate or candidates with the initiation of a clinical trial by the end of 2012.

Work continued to progress on the development of Lumacan formulation prototypes. We intend to test various formulation prototypes in the clinic during 2012. We believe that Lumacan, if approved, has the potential to significantly improve the earlier detection and diagnosis of colon cancer.

In June, results of a 36-month trial to evaluate the long-term safety of SOLESTA for the treatment of fecal incontinence were presented at the American Society of Colon and Rectal Surgeons. The statistically significant results of the study demonstrate that SOLESTA provides safe and effective long-term out to three years at this point treatment of fecal incontinence.

In July, we continued to strengthen our intellectual property relating to rifaximin and RELISTOR. We secured the issuance of U.S. Patent No. 8,227,482; which relates to several novel polymorphic forms of rifaximin. This patent should provide protection until February 2032.

With respect to RELISTOR, we received an Issue Notification from the United States Patent and Trademark Office stating that U.S. Patent No. 8,247,425 will issue August 21, 2012. Upon issuance, Salix intends to list this patent in the Orange Book for the RELISTOR prefilled syringe. This patent will provide protection until December 2030.

We recently received a paragraph IV notification from Lupin Limited stating that Lupin had filed an ANDA application to seek approval to market a generic version of APRISO. The notification letter asserted non-infringement and invalidity of the company’s Orange Book-listed U.S. Patent No. 6,551,620. Salix is evaluating the notification letter, continues to have full confidence in our intellectual property protecting APRISO, and intends to vigorously enforce its intellectual property rights within the 40-day response period of the Hatch-Waxman Act.

In addition, there are pending patent applications and other IP related to APRISO being pursued and, if issued, will be evaluated for use in our ANDA defense strategy. We are also evaluating our issued process patent covering APRISO as well as other mesalamine formulation patents for inclusion in our defense against this ANDA filing.

Salix is built on a tremendous history of success, including the approval of eight New Drug Applications, the acquisition and licensing of 16 products and the establishment of a top-ranked specialty sales force all since 2000.

Our core business remains strong and growing. Our portfolio of marketed products is complemented by our impressive pipeline of product candidates in development that should drive additional revenue growth over the long-term as they are commercialized. Additionally, the company continues to actively pursue additional product opportunities to expand and broaden our product portfolio.

We are extremely pleased with the success we have achieved to-date and we believe the company is well-positioned to continue to succeed in our mission of being the leading specialty pharmaceutical company licensing, developing and marketing innovative products to healthcare professionals to prevent or treat gastrointestinal disorders.

This completes my comment and I wanted to thank you for your participation in today’s call. Now I’ll turn the call over to the operator to begin the question-and-answer session. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes form the line of Michael Faerm with Credit Suisse. Your line is open.

Michael Faerm – Credit Suisse

Good afternoon. Thanks for taking the question. Could you provide any color on the nature of the data required by FDA in the RELISTOR Complete Response Letter and/or the extent to which it applies specifically to the subcutaneous trials and data or more generally to the molecule?

William P. Forbes

This is Bill Forbes. I’m going to handle this question. As everybody is aware the Complete Response Letter that was mentioned earlier, we received in July 27 and the letter does call out the need for additional clinical data. However, right now, it’s very difficult for us to comment on it, because we really don’t understand the nature of why the division has asked for this additional data. And so prior to – I mean, before we get a chance to sit down with them and talk through it we reserved further comment on what we believe they actually need.

So, I know it’s a little frustrating and we have actually already submitted a request for a meeting. We’ve put in under it a Type A meeting, which generally would be scheduled within 30 days. However, it’s at the division’s discretion whether or not they grant Type A or B meeting. So, we are hopeful that within one to two months we will have a chance to sit down with them. We’ve asked that they invite all of their experts and we’re going to bring a few of our own and we’re going to try to understand much better what their concerns are and after that meeting, we should have clear path forward.

Michael Faerm – Credit Suisse

And just one follow-up if I may, what’s the status of your previously stated plans to file the oral formulation in September?

Carolyn J. Logan

Well, we have previously said, we would file by the end of September and that is still our current plan. Pending this meeting that Bill and his team will have with the agency since we aren’t sure what will happen in that meeting, we are still planning, the R&D group is still assembling the NDA and still working towards that.

Michael Faerm – Credit Suisse

Thank you.

Operator

The next question comes from the line of Ami Fadia with UBS. Your line is open.

Ami Fadia – UBS Securities LLC

Good evening. Maybe another question on RELISTOR, what gives you the confidence and maybe if you could sort of provide us with your level of confidence that your oral program submission time line will not be impacted by what the FDA has asked in the complete response letter? And hypothetically, if you had to carry out that clinical trial that the FDA has asked for, how much, as a preliminary estimation would it take in terms of time and cost to complete that clinical work and will that impact your oral program? And then I’ll have another question.

Carolyn J. Logan

Well that’s a lot of hypothetical. I don’t really – I think it would be wise not to try to comment on that because without having the meeting and knowing what the outcome of that meeting will be, it’s virtually impossible to answer the other parts of your question. So, again, we’re not trying to frustrate you or be vague, although we may be frustrating you. We don’t want to make guesses and say things that we might end up having to retract because they aren’t correct.

So, we would prefer to have the meeting with the FDA’s team, our team. As Bill mentioned, we plan to take some experts with us. Of course, the agency has lot of experts as well and to have a thorough discussion about this because we believe that we have submitted enough information to warrant approval. Obviously, the agency does not agree with that. So, we just need to get everybody in a room and talk through this and then see what our plan forward will be. Could it impact the timeline on the oral filing? Yes, I mean, it could. We don’t know that yet though. So, to comment further on it we just think would not be responsible for us.

Ami Fadia – UBS Securities LLC

Okay, great. Thanks for that. Just on your R&D guidance if you could sort of illustrate what will drive the increase in sort of the quarterly R&D spending and does that incorporate any additional work you might need to do for RELISTOR in the second half of the year? And then just on sort of the XIFAXAN, the announcement that you made, if you could just sort of elaborate on your development plans for Crohn’s? Thanks.

Adam C. Derbyshire

Sure. I'll handle the first part of that and I'll let Dr. Forbes handle the EIR discussion for Crohn's. Yes, we are fully expecting R&D to ramp up in the third and fourth quarter mainly related to target three and the enrollment in the retreatment study. And in terms of RELISTOR, obviously we have our end-of-review meeting. We're hoping to have that as quickly as possible. So it would be virtually impossible to really ramp R&D significantly related to RELISTOR, if something comes out of that end-of-review meeting that we feel like we need to put in place. So it's mainly related to the ramp in the retreatment study and there's a little bit in there for EIR, but the majority of the EIR spend will be in the 2013, 2014 timeframe.

Carolyn J. Logan

And all of that falls within our current guidance.

Adam C. Derbyshire

Yeah, it all falls within our current guidance, exactly.

William P. Forbes

So let me, it’s Forbes again, let talk a little bit about the expectations at least through this year for EIR. We've already held a pre-IND meeting with the GI division of the FDA to discuss what would be needed for a Crohn's indication for that formulation. And right now what we're doing is, putting into place some meetings over in Europe and trying to get in front of a few health authorities over there to make sure that the program will meet the expectations of not only the FDA, but also key members of the EMA so that once that program is completed then certainly Salix will have the ability to file here in the United States and of course our partner Alfa Wasserman in Europe. So, that is starting to take on a quite a bit of steam as it relates to the pre-IND activities.

The next generation, which was also mentioned earlier, we're starting to pick up some steam in that program as well. We're obviously looking, as I've commented previously, more towards chronic liver disease in patients with cirrhotics that have MEL greater than 15 and looking at outcomes related to decompensated liver. Those type of outcomes include hepatic encephalopathy but also include things like spontaneous bacterial peritonitis and esophageal variceal bleeds and a number of other things. And so we're starting to move on a number of fronts here with different formulations and I think that's part of what you see with the increased spend that Adam talked about earlier.

Ami Fadia – UBS Securities LLC

Thank you.

Operator

The next question on the line comes from Mario Corso with Caris & Company. Your line is open.

Mario Corso – Caris & Co., Inc.

Yes, thank you for taking my questions. On RELISTOR, I guess I am wondering in relation to where you were on IBS with XIFAXAN for example, I think you ended up going to the FDA with the trial designed in order to address the concerns they had on retreatment with IBS. So I am wondering here with RELISTOR, you'll have a meeting presumably in a month or two, and you obviously have to prepare some documents for that meeting, so will you actually be preparing trial design or trial designs in order to try to address what they are getting at and then tweak that post the meeting with the FDA. I am just wondering if I am thinking about that correctly. And then I am also wondering on SOLESTA, can you talk about the progress there both commercially and on the (inaudible)? Thanks.

William P. Forbes

Well, let me handle the RELISTOR question first. I mean obviously we will propose what we think are some path forward whether or not those are going to be in keeping with what would be acceptable to the FDA in the GI division. Of course we don't know, and I think that's one of the reasons why we really feel like commenting further and trying to give you greater clarity will just downstream create a lot more confusion. But, yes, we've tried to understand where they are at. We still are I think quite a ways apart between what we believe the data reflects and what they've obviously decided. So, that's the gap that we need to close in the short term. But I'm sure that there will be something that can be sorted through hopefully to answer their questions satisfactorily. And on SOLESTA, if Adam do you want to answer that?

Adam C. Derbyshire

Yeah, sure. Yeah, SOLESTA has been very well received. As you know, we are busy this year setting up the centers of excellence and doing a lot of training mainly with gastroenterologists to make sure they are comfortable with the procedure. The procedure is getting reimbursed under our miscellaneous J-Code and there are reimbursement on the commercial plants from a CPT or procedure standpoint is in the range of about $100 to close to $500, and on the Medicare side, about $100 to $300, so there is a lot of excitement around SOLESTA. We are still having discussions with CMS with respect to their final decision as to whether this will get a J-Code or no code. We expect that to come out in a final way in the November timeframe, but regardless of what we get, we are preparing contingency planning for an L-Code if that were to take place. So, if that does take place, we will be doing the appropriate training and messaging targeted both to our payors and physicians and be ready to operate under an L-Code. I think we also have stated before the end game is the same for a J-Code and an L-Code. We still think the peak year level will exceed half $1 billion regardless of the code. We just need to do a little bit more work up front if we are given an L-Code. And again, if that does occur, we still can apply for the J-Code in the subsequent year cycle and look for that to happen in early 2014.

Carolyn J. Logan

Hello.

Operator

The next question on the line comes from David Amsellem with Piper Jaffray. Your line is open.

David A. Amsellem – Piper Jaffray, Inc.

Hi, thanks. Just a couple. So, not to beat RELISTOR over the head, but maybe I could ask question different and in terms of what's not in the complete response. I guess the question is, can you say with confidence that the issue is not related to the actual clinical endpoints, in other words, this is an issue around additional clinical data rather than be something along with the actual on the clinical endpoints that the FDA has seen. Maybe you can talk about that?

Adam C. Derbyshire

Yes, David. We have made the statement that the CRL is not related to clinical endpoints.

David A. Amsellem – Piper Jaffray, Inc.

Okay. So, is it safe to say that we're talking about additional clinical data?

Adam C. Derbyshire

Again I think as Bill has said and Carolyn, we need to have this end-of-review meeting and discuss with them what they mean by this additional clinical data and get a better understanding of what they mean, ask them to clarify what that means and then have discussions with them about our thoughts on possibly getting to the same place in a more expeditious way.

David A. Amsellem – Piper Jaffray, Inc.

Okay. And then second question regarding business development, is that delay regarding RELISTOR and the delay regarding pushing out of the deployment of this expanded sales force. Does that change your deal or business development strategy, in other does it make you more likely to be more aggressive in the near-term in terms of looking at assets to acquire or does it really not have any bearing on the kind of deals, or the kind of opportunities that you're looking at.

Carolyn J. Logan

We've always been pretty aggressive if you look at our in-licensing and acquiring history, I think 16 products since 2000, 18 since inception, so nothing has changed in that regard. We are still very much on the hunt. We're following a number of different projects, so nothing has changed on that, really. From the beginning, we've always said, run as hard and fast as you can to build as much value in the company and to offset our physicians and patients the widest portfolio of products to prevent or treat gastrointestinal disease. So that's still our mission and still what we're doing. So, our CD group is very active at this point.

David A. Amsellem – Piper Jaffray, Inc.

Just one quick follow-up if I may, are you contemplating any acquisitions that would trigger a major sales force expansion beyond calling on gastroenterologists or is that something that, you know ultimately will happen with the approval of RELISTOR, how should we think about that?

Carolyn J. Logan

Currently, we are not looking at anything that would cause us to have a major expansion. That doesn't mean an opportunity couldn't come up in the future, but for right now, it would more or less fall within the targets that we currently have. We're calling on gastroenterologists, colorectal surgeons, hepatologists and there are a few internal medicine physicians in that target group that prescribe like a gastroenterologist. So the current things that we're looking at for the near-term would not require any additional expansion to speak up.

David A. Amsellem – Piper Jaffray, Inc.

Okay. That’s helpful. Thanks.

Operator

The next question on the line comes from Corey Davis with Jeffries. Your line is open.

Corey Davis – Jeffries & Co, Inc.

Thanks very much. Just tempting as it is to ask a RELISTOR question, I won't. At this point in time given it's clear that you're not going to launch the subcu RELISTOR, will it be prudent to make adjustments to your $1 billion revenue estimate at 2013 or was that not material enough within that number to warrant a change at this time.

Carolyn J. Logan

When we made that statement that we thought in 2013 we would get approximately $1 billion in revenue. We said that we needed this subcu approval to be able to achieve that, but we also at that time had not acquired Oceana. So we did not have the DEFLUX and SOLESTA revenue included in that. So whether or not we quite reach $1 billion, I think it just remains to be seen at this point. But we're not going to be too far from it. We will still be approaching that $1 billion number. We would have added a lot more certainty of course if we had had the RELISTOR subcu approved.

Corey Davis – Jeffries & Co, Inc.

Sure, and I heard you said about XIFAXAN milligram growth growing 22% and I get that with the pricing effects you can get over the 25% growth bogey for this year, but just how do you feel about the current growth of XIFAXAN? Do you think it can continue at this same rate or do you run the risk of decelerating growth?

Adam C. Derbyshire

No, Corey, it's actually meeting our goal. If you look at the six-month year-over-year growth we're right at 25% on a unit basis and what we're seeing happening is that the 200 milligram, the decline in that is starting to slow down considerably and possibly flat lining. And once that occurs and then you put on top of it the significant growth that's occurring in the 550 milligram then we fully expect to be able to achieve that unit growth in the 25% range and then you will have price increase on top of that. So just the 550 milligram alone year-over-year on a six month basis is growing at 45% and quarter-over-quarter 38%. So if we can get the 200 milligrams to flatten out a bit then that makes that growth obviously significantly over the 25% unit growth that we've guided for the year.

Carolyn J. Logan

We've converted I think about 91% or 92% of all the milligrams to the 550 milligrams now.

Corey Davis – Jeffries & Co, Inc.

Then last question, I don't know if you have it in front of you, but can you tell us what percent of the XIFAXAN revenue in the quarter was from the 200 milligrams, higher than that number you've just stated, I assume?

Adam C. Derbyshire

Yes, I can do that. So, in the quarter from a revenue standpoint – well actually what I can do is I can give you the run rate based on the 200 milligram, because very little of the 200 milligram, we're not shipping very much in the 200 milligram, but in terms of the run rate for the quarter just about $14 million. So the run rate of the $468 million total run rate for XIFAXAN, $56 million of that is the 200 and $412 million of that is the 550.

Corey Davis – Jeffries & Co, Inc.

Perfect. Thanks for telling that.

Operator

Your next question comes from the line of David Buck with Buckingham Research. Your line is open.

Jim Dawson – Buckingham Research

Hi, yeah, it’s Jim Dawson for David Buck. Could you give us a sense for the undisclosed drugs, what the sales were in the quarter and also just for your product line, any new price increases or trade inventory changes in the quarter? Thanks.

Adam C. Derbyshire

Yeah. No, new real trade inventory changes. Let me go ahead and give you the other products. The MOVIPREP/OSMOPREP, the targeted business came in at $20.9 million, RELISTOR came in at $10.8 million, DEFLUX came in at just shy of $8 million, $7.9 million, SOLESTA was $0.5 million and then you can back into the all other from there to $181 million for the quarter.

Jim Dawson – Buckingham Research

Okay, thanks. And then how about price increases?

Adam C. Derbyshire

We have not had, the last price increase we did was for XIFAXAN 550 and 200 and that was back in the March, May timeframe, but we will be looking at the other products in our portfolio for price increase in the near future.

Jim Dawson – Buckingham Research

Okay, thank you. One last one, just on the quarterly progression for operating expenses, could you just give a sense for that SG&A and R&D for the third and fourth quarter?

Adam C. Derbyshire

Sure, for SG&A, I would expect that to remain on an adjusted basis, relatively flat in third and fourth quarter. And then again as we said earlier, we are expecting R&D to ramp fairly significantly on an adjusted basis probably in that $8 million to $9 million range in third quarter and then to remain flat in fourth quarter.

Jim Dawson – Buckingham Research

Your R&D ramps in third, then flat into the fourth and then SG&A is flat from the second into the third and fourth?

Adam C. Derbyshire

Correct.

Jim Dawson – Buckingham Research

Okay.

Adam C. Derbyshire

Yes. So, our adjusted guidance, as we put in tabular form in our press release is $236 million in SG&A and $129 million in R&D on an adjusted basis.

Jim Dawson – Buckingham Research

Thank you. I appreciate the clarification.

Adam C. Derbyshire

Sure.

Operator

The next question comes from Annabel Samimy with Stifel Nicolaus. Your line is open.

Annabel Samimy – Stifel, Nicolaus & Co., Inc.

Hi, thanks for taking my question. Can you help us understand what the likelihood would be that you drop the expansion of the subcu all together? And just as a connected question, how much of the oral NDA package is essentially tied to the subcu package, how much – does that depend on the data that you've generated from the subcu?

William P. Forbes

Hi, Annabel, this is Bill again. And again, as Carolyn mentioned, we don't mean to try to frustrate you, although I'm sure we are. We're not going to comment any further on the subcu or the oral at this point in time. We need to get this meeting over at this point in time and make sure that we can get on the same page with the GI division and understand more fully what it is that their concerns are? So I hate to give you another non-answer, but I'm afraid that's what I have to do.

Annabel Samimy – Stifel, Nicolaus & Co., Inc.

Okay, but so the second quarter, how much of the oral NDA package draws some data from the subcu. Can you at least tell us that?

William P. Forbes

I mean, all of it comes to bear obviously. I mean we put in that only the subcu, but the IV, all the other oral data that comes before and of course the 800 patient trial that was conducted, so – in the oral formulation. So I mean, in short we bring all data from all formulations to bear on the oral.

Annabel Samimy – Stifel, Nicolaus & Co., Inc.

Okay, and then going back to I guess the 2013 $1 billion expectation, I guess you mentioned that at the time you didn't have Oceana and that SOLESTA I guess would be a big contribution to that getting you to that approaching that $1 billion number. I guess you just mentioned that SOLESTA was about $0.5 million if I heard that correctly. So how do you get from I guess the level that is today to the level that would be at meaningful contribution to get to that $1 billion number in 2013, and if I can ask one more follow-up question on the difference between the J-Code and the L-Code in terms of your opportunity for that?

Carolyn J. Logan

On how do we grow sales on SOLESTA, we had asked everyone to be very conservative this year with their numbers and our internal numbers for SOLESTA, this year very conservative as well, because while colorectal surgeons are very comfortable and need very little training to do this procedure, our gastroenterologist, about half of them are interested in doing the procedure and they do need training and often times they want someone in the office with them when they are conducting their first procedure.

So we are as I believe, Adam mentioned earlier, setting up these centers of excellence and then we're also doing some one-on-one proctoring. So we're just doing a lot of training, a lot of education. We believe this product has tremendous potential for a peak year sales at $500 million or great. So we want to lay a good solid foundation and make sure our physicians are comfortable with the procedure and are performing it correctly. There is no shortage of patients. Just practically on a daily basis, it confirms our belief that there are large numbers of patients who suffer from fecal incontinence and we have seen or heard nothing that would dissuade us from that. That gets validated very frequently.

So, and I think Adam said earlier, if whether we have an L-Code or a J-Code, the peak year sales are expected to be the same. It's just that with the J-Code, physicians – there is a lot more certainty around their reimbursement. With an L-Code, we have to negotiate plan by plan, which is more work for us. But the outcome is essentially the same. So we actually modeled an L-Code when we did this acquisition.

But would we prefer a J-Code? Yes, we would and we believe the product, the definition of the product, the way the product is used and the CMS regulations, we believe that it all lines up for a J-Code. But we are working through that with them because as we've said previously, DEFLUX is administered completely differently. It is the same product, but a different amount of it is used. It requires anesthesia. DEFLUX is just, it has an L-Code. And so, SOLESTA initially was just lumped into that same bucket, and we believe wrongfully so. So we're trying to correct that with CMS. But we have plans to proceed whichever code we have. And so far reimbursement has been good. So everyone is pleased with the reimbursement and then the procedures themselves are going well. We've had some great patient response story. So, of course, we always like it when we can help patients because that helps our physicians and then of course, it helps us as a company.

Annabel Samimy – Stifel, Nicolaus & Co., Inc.

Okay, thank you very much.

Operator

The next question on the line comes from Irina Rivkind with Cantor Fitzgerald. Your line is open.

Irina Rivkind – Cantor Fitzgerald Securities

Hi, thanks for taking the call. The question, I just wanted to get a little more granularity on SOLESTA. For example, could you break down how many doctors you've trained already and just trying to back into the number of procedures that were paid for, so I'm thinking about 3,600 or so procedures into the $500,000 and that's about 140 procedures, is that, how we should think about it and also, do you have any internal training metrics or any goals you're trying to hit with those numbers?

Carolyn J. Logan

I don't have that level of granularity at my fingertips. We can do a follow-up call with you and get that information. I'm sure our commercial people have that because they are tracking every treatment at this point. So, I don't have the information right here.

Irina Rivkind – Cantor Fitzgerald Securities

Okay. And then RELISTOR, just to go back to it briefly, if there is something that comes out of your FDA meeting that you feel adversely impacts the oral NDA, would the Company then withdraw the NDA? Is that part of regulatory strategy or would you take it all the way to its PDUFA and then have discussions at that point?

William P. Forbes

Just so that we can be clear, I mean, having past the PDUFA on July 27 and received the Complete Response Letter. At this point, I guess the ball is in our court as to what needs to be done and submitted to answer that CRL which is why we need to have the meeting to make sure that we have as much clarity around the issues and as much agreement as possible and if there is some path forward. So, I mean as far as the NDA for the oral that would be a separate NDA, as we're talking about with the chronic pain in the non-cancer patients, that's an sNDA to the already approved product in palliative care. So I hope that helps you a little. But the oral will be a separate full NDA because it's a change in formulation.

Irina Rivkind – Cantor Fitzgerald Securities

But you wouldn't need to withdraw it as you felt that it was deficient in some way based on what your conversation comes out like?

Carolyn J. Logan

Well, we haven't file the oral yet.

Irina Rivkind – Cantor Fitzgerald Securities

Okay.

William P. Forbes

Yeah, so you're referring to the oral or the…

Irina Rivkind – Cantor Fitzgerald Securities

It's oral, so are you not going to file the oral until you've had some additional clarity form the FDA on the subcutaneous?

William P. Forbes

The meeting with the FDA will happen shortly for the subcu. So chronologically speaking, the subcu meeting will occur before the oral filing.

Irina Rivkind – Cantor Fitzgerald Securities

Okay then, just a have a quick one on…

William P. Forbes

We continue to prepare on the oral.

Irina Rivkind – Cantor Fitzgerald Securities

Okay. And then just a quick one on APRISO in the generic filer, do you expect this drug to have similar, I guess FDA requirements for generic, which should be comparative TK (inaudible) solution like Asacol did and if so, would you expect then generics to have difficulty copying it?

Carolyn J. Logan

Well, yeah because, Asacol is just pH dependent. It's a pretty simple formulation and APRISO is both delayed and extended and I don't know if Dr. Forbes has anything, he wants to add to that or not.

William P. Forbes

Yeah, and I’ll just, in the past when we talked to the GI division about changing facilities for manufacturing, I will add that not only, is there a complicated by bioequivalence paradigm that needs to be followed, but they've also asked for clinical data to occur, so when we've asked the question, it was a very high hurdle for us to just use products from another location. So, I anticipate that OGD would, I don't know how they could not adhere to something similar, so I imagine that the hurdles should be fairly high for this.

Irina Rivkind – Cantor Fitzgerald Securities

Thank you.

Operator

The next question on the line comes from Michael Tong with Wells Fargo Securities. Your line is open.

Michael Tong – Wells Fargo Securities LLC

Thanks good afternoon. Maybe just a slightly different question on RELISTOR subcu versus oral, as you got into the meeting for the subcu CRL, if the oral formulation does not come up during the meeting, would you proactively bring it up just to make sure there is no misunderstanding as to what the filing requirements will be for the oral, so that you don't end up filing it and then find that there is some issues that the FDA would want anyway?

William P. Forbes

I think we absolutely we were just to make sure that there is clarity around everything. Having said that, obviously the sNDA is under review, they've completed what they have in front of them, and so they are well versed and able to answer questions there, but we will try to make sure that we have any understanding that we need to for the oral going forward as well if that needs to be.

Michael Tong – Wells Fargo Securities LLC

Okay, and then maybe this one for Adam, as I look at the updated guidance, it seems to me Q2 was a relatively significant feat versus consensus, and your indication about some of the expenses that were originally targeted for the expanded label for RELISTOR subcu. They are not going to come in, in the second half. So, your expense guidance have come down and yet your bottom line guidance has really gone up by just a little bit more than what you exceeded consensus in Q2 by, so where is the disconnect, or am I missing something?

Adam C. Derbyshire

No, I don't think you're missing something. I think what you're seeing is that the guidance we've provided for third quarter is coming right in line with consensus. I believe consensus right now is at $0.68 and we're coming in at $0.69. So, I think it's just a factor of the majority of the difference occurring in the second quarter versus what's anticipated for consensus in the third and fourth quarter.

Michael Tong – Wells Fargo Securities LLC

So, how does the expenses that you originally put in for RELISTOR subcu which I assume would come in, in the second half. Now that they are not coming in, how does that not change sort of your second half bottom line guidance?

Adam C. Derbyshire

Well, I mean, there is going to, obviously, there are some expenses that were somewhat committed, but we're obviously launching SOLESTA and that's not discontinuing by any means. So, there is still a significant amount that's going on and in SG&A that's not necessarily related to RELISTOR.

Michael Tong – Wells Fargo Securities LLC

Okay. And then the final question, again it maybe just a little early in terms of the Target 3 enrollment, but anecdotally, are you seeing patients that are under, or are you seeing patients that are flaring at the duration that you expect them to or are they lasting longer or lasting shorter just any color to that?

William P. Forbes

Yeah, this is Bill again. Of course, it's early, but I would say that in the last month we've seen a tremendous pickup in the screenings and the scheduling for visits and I think that what we see right now in the patients that have gone into the double blind if you will kind of the randomized withdrawal period of it, what we see is somewhere in the range of three to four months as expected. So, we're watching that very carefully because as you probably fully know that if that goes very, very long and then that could be detrimental to completing the study, it would be good for the drug, but detrimental to finishing the study. So right now it seems to be on point as it relates to some of the retrospective chart reviews that are out there, which show a median time of about four months to relapse.

Michael Tong – Wells Fargo Securities LLC

Great, thanks very much.

Operator

The next question comes from the line of Andrew Finkelstein with Susquehanna Financial. Your line is open.

Andrew J. Finkelstein – Susquehanna Financial Group LLP

Thank you very much. Good evening, thanks for taking the questions, it's Andrew Finkelstein on for Gary Nachman. Just on the guidance, as you look at your revenue outlook for 3Q and 4Q, there's a pretty big step up in 4Q whereas 3Q is up a bit from 2Q. Are there any dynamics with particular products that help drive that and what helps drive the acceleration in the fourth quarter?

William P. Forbes

[Our SME] we're expecting significant ramp with SOLESTA and then obviously with XIFAXAN. The fourth quarter has always been the strongest quarter, December has been always been the strongest month, so we would expect that to occur as well and then ongoing growth obviously with APRISO, that's been growing very nicely.

Andrew J. Finkelstein – Susquehanna Financial Group LLP

Terrific. And then on XIFAXAN with the scrips we saw some seasonality with that last year, would you expect sort of a similar pattern and how should people think about the growth rates that you would see in the scrip as we go through the fall and then the winter?

Adam C. Derbyshire

Yes, so we would expect based on our past behavior we would expect that July would be a flat to slightly up over June and then August to be flat to July and then a strong September. Then in fourth quarter again December is the strong month.

Andrew J. Finkelstein – Susquehanna Financial Group LLP

And then with the new formulation that you licensed, the EIR, you talked about the Crohn's, is there something about the formulation that's particularly targeted to Crohn's or would there be applicability to other indications shared with XIFAXAN as well?

William P. Forbes

To answer that question there is, I mean, the formulation itself was really geared to improve the dispersion of active drug into the small and large intestine and deliver it there. And so there is some clinical pharmacology data using scintigraphy that shows that that does occur. And so that's one of the reasons why Crohn's was chosen and so it had been tailored-made more for the inflammatory bowel disease area and I think the possibility of it going into ulcerative colitis is something that we'll take a look if it continues to be successful in the Crohn's indication.

Andrew J. Finkelstein – Susquehanna Financial Group LLP

So it's more of a product that would expand the applicability of rifaximin rather than as a lifecycle in terms of how we should think about the role of the product?

Carolyn J. Logan

I think you could think of it as both. I mean it certainly, we have not gone for the indication, the Crohn's indication with our current formulation, but physicians have used it that way. I think there are over 70, maybe approaching 77 or 78 publications, just in Crohn's Disease with both the 200 milligram, mostly the 200 milligram. So, but the EIR formulation is the first time really well designed, placebo controlled large Phase II study was done with a rifaximin formulation and as Bill mentioned, it was designed for Crohn's. So, we would certainly see it hopefully performing better in Crohn's in our current formulation.

Andrew J. Finkelstein – Susquehanna Financial Group LLP

Terrific, that’s very helpful. Thank you.

Operator

Next question on the line is from Liisa Bayko with JMP Securities. Your line is open.

Liisa A. Bayko – JMP Securities LLC

Hi, actually the majority of my questions have been answered, but I actually got on the call a little late. Did you break down the sales for RELISTOR, SOLESTA, and DEFLUX?

Adam C. Derbyshire

We did and…

Liisa A. Bayko – JMP Securities LLC

And I'm certainly going to review that and then any update on the IBS study, how that's going at this point?

Adam C. Derbyshire

We already gave an update and it's going as planned right now. We're still on target to try to complete everything and have a decision from the FDA within 24 months to start.

Liisa A. Bayko – JMP Securities LLC

Okay, thanks a lot.

Operator

The next question is from Scott Henry with Roth Capital. Your line is open.

Scott R. Henry – ROTH Capital Partners LLC

Thank you and good afternoon. First question, a follow-up to a question, I think two ago. With regard to the next generation version of rifaximin, should we think about that as the next generation as well for IBS and ATE specifically. I mean, do you expect it to be a better performing product for the current indications. Just asking in a different way, just for clarity.

William P. Forbes

Sure. I think that that certainly a fair assumption and what I had mentioned earlier though is that, I think that there is really an unmet need looking at patients with chronic liver disease and specifically cirrhotic and that have a MEL that's 15% or greater. I think looking at that particular population without hepatic encephalopathy at entry and watching them on morbid and mortality events is something that XIFAXAN would do well on overall and the formulation for the next generation is ideally suited for them, and I think as far as ease of dosing, as far as how many times a day we hope to be able to dose, which is going to be once, also what the dose it's going to be used, that would be perhaps a better place for it than trying to use the 550 or the EIR in that particularly area, so as we look at unmet needs in areas that need some therapy, next gen is probably best suited for that, but that doesn't mean that it wouldn't work on patients with existing hepatic encephalopathy and we may explore some studies in that as well.

Scott R. Henry – ROTH Capital Partners LLC

Okay thank you that is helpful. Next question, just with regards to RELISTOR, it's performing very good right now, up obviously of a smaller base, but up 89% year-over-year, do you expect these kind of hick ups to have any impact on the current growth rate or should we continue to see it grow in its I guess legacy business?

Carolyn J. Logan

I think you should continue to see it grow in its current indication. It performs very, very well and so the feedback has been very good. Of course we still are somewhat in launch mode, so I think you should continue to expect growth.

Scott R. Henry – ROTH Capital Partners LLC

And just the final question, I guess Crofelemer, you've got another PDUFA date coming up September 5. Has there've been any dialog with the FDA in front of that or recently, I guess in general how do you feel going into that deadline?

Adam C. Derbyshire

Yes, there has been quite a bit of dialog with the division and the FDA on Crofelemer and we've remained optimistic on the response that's coming up here in the next few weeks and so, we'll just have to wait to see how that plays out, but there has been quite a bit of activity, as you'd expect at this point in time.

Scott R. Henry – ROTH Capital Partners LLC

Okay, fair enough. And I guess, I do have one extra, just clerical question. I just want to confirm in the R&D guidance that the $10 million milestone for Alfa Wassermann is not included in that guidance, so I wouldn't expect it to be, but I just want to make sure?

Adam C. Derbyshire

No, it is not included in the guidance.

Scott R. Henry – ROTH Capital Partners LLC

Okay, thank you Adam and thank you taking the questions.

Operator

The next question comes from Patti Bank with DISCERN Securities. Your line is open.

Patricia Banks – DISCERN Securities, Inc.

Yeah, good afternoon. Couple of SOLESTA questions. One, talking to a couple of doctors seems like six months is a kind of key follow-up for patients to come back. Wondering, if you have any data on the number of dropouts, if you're seeing any I mean what percentage that is of patients that either are just not working for at that point or decide not to have another procedure at that point?

William P. Forbes

I mean we do have long-term follow-up data that's been put out there and is available, so I mean, and it looks very strong. I mean in some way is it actually looks stronger over time in how the patients perform than it does in the initial one month, two month, three month range. So, I mean I think, I understand your point about the six months follow-up, but I think overall what we've seen or at least our experience has been is that it performs extremely well.

Patricia Banks – DISCERN Securities, Inc.

And then, one question on the billing side, talking to a couple coders, it seems like under the L-Code that there are certain certifications that office has to have, one was mentioned a Durable Medical Equipment number or DME and it seems like if they don't have that, it could be cumbersome to get that. Is there any data out there? Do you know how many practices have that DME number or potentially will get it?

Carolyn J. Logan

Patti that is part of what we're talking about with the L-Code that it will require more education for the offices. They actually do not have to have a DME certification to be able to build for SOLESTA under an L-Code, but we would need to inform our staff of that, so that they could appropriately build for patients.

Patricia Banks – DISCERN Securities, Inc.

Okay, so they need to have that. And then just one bigger picture question on the RELISTOR, is there any sense Bill that there is any politics coming into play here with the FDA just one doctor mentioned to me just that he thought the FDA will be hesitant to approve a drug for this patient population that actually removes the major side effects for opioids therefore allowing more patient to take opioids and it's something that I have brought up before but I am just wondering is that just, is there any sense that there are something going on there or you think it just really drug and something else they are looking at

Adam C. Derbyshire

I think in fairness to them, that won't be appropriate for me to really comment on. Hopefully when we get in front of them, we'll have a better opportunity to really understand what's going on here and I understand from the opioids side, now of course with RELISTOR coming in from the perspective of trying to treat a side effect of the opioids that certainly would on the surface be something that people on the outside might think but in fairness to them I don't know that certainly nothing has been mentioned to me along these lines, so I certainly couldn't comment on it.

Patricia Banks – DISCERN Securities, Inc.

Okay, all right. Thanks I appreciate it.

Operator

Your next question comes from Greg Fraser with Bank of America. Your line is open.

Gregory D. Fraser – Bank of America/Merrill Lynch

This is Gregg Fraser for Gregg Gilbert. On RELISTOR scrip growth has slowed a bit in June and July. I'm not sure if there's sort of seasonality or other factors to consider there, but can you just give us an update on the demand trends that you are seeing?

Adam C. Derbyshire

Actually the weekly data that I'm looking at is very strong in July. June actually ended up being a weak month across all of our products, actually May was the strong month in the quarter based on having more prescription days or day to days and then also obviously June is when the summer starts you have doctors that are out of the offices and reps that are on vacation and the likes. But with respect to RELISTOR what we're seeing in our weekly data is some pretty strong numbers.

Gregory D. Fraser – Bank of America/Merrill Lynch

You talked in the past about peak sales potential of $50 million, it looks like sales are annualizing in the low 40s now, has your thinking on sales potential for the current indication changed?

Carolyn J. Logan

$50 million was a conservative, we knew it was a conservative number. So, peak year sales of the subcu in advanced illness would certainly exceed that peak year. We have not updated that guidance, but it would be reasonable to think that peak year seven years out that we could possibly exceed that number.

Gregory D. Fraser – Bank of America/Merrill Lynch

Okay and then on Crofelemer is there something, is there an update on your dispute with Napo and if you do get a final approval next month, are you planning on launching that product this year? Thank you.

Carolyn J. Logan

We're in just the early stages of discovery in the Napo suite. We still feel very confident about our ability to prevail in that and if the drug is approved on September 5 because there are HIV positive and AIDS patients who desperately need this drug, we would make it available as soon as we possibly can for them even, if we don't do a formal launch until our national sales meeting, which will be in late February in 2013, but certainly once the drug is approved we would not withhold it from anyone.

Gregory D. Fraser – Bank of America/Merrill Lynch

Okay. Thank you.

Operator

The next question comes from Ami Fadia with UBS. Your line is open.

Ami Fadia – UBS Securities LLC

Hi, just if you could provide us with some updates on XIFAXAN scrip trends in terms of the current mix between HE and IBS, the duration of use that you're seeing in HE and (inaudible)? Thank you.

Adam C. Derbyshire

Sure Ami, prescription trends are going nicely for the first six months. We're year-over-year at 25% for overall milligrams for XIFAXAN and in the prescription side, it's still in that 53 to 55 range which leads us to believe the majority of the uses is HE related and then Ami, I apologize you had a third question on to that as well with respect to.

Ami Fadia – UBS Securities LLC

The duration of use in HE. Are you seeing a continuous sort of trend in terms of compliance rates for patients?

Adam C. Derbyshire

Yeah, I think we are seeing that go up. I think the latest awareness trial and usage data suggested that we're in that 100 to 120 day range, and again we don't conduct that survey every month or every other month, it's more in eight to 10 month cycle. But the feedback that we're getting, the messaging that we're doing in the field, would lead us to believe that that duration of therapy is increasing, but we'll have more concrete data once we conduct the awareness trial and usage survey, so we'll have a better handle on that later, later in the year or early next year.

Ami Fadia – UBS Securities LLC

Got it. Thank you.

Operator

There are no further questions at this time. I'll turn the call back over to Ms. Carolyn Logan.

Carolyn J. Logan

Thank you, I thank everyone for joining us today. We look forward to speaking with you on our next call. Have a nice evening. Bye.

Operator

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

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