Aralez Pharmaceuticals' (ARLZ) CEO Adrian Adams on Q4 2015 Results - Earnings Call Transcript

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Aralez Pharmaceuticals Inc. (NASDAQ:ARLZ) Q4 2015 Results Earnings Conference Call March 15, 2016 8:30 AM ET


Adrian Adams - CEO

Nichol Ochsner - Investor Relations

Scott Charles - CFO


Aaron Salz - Dundee Capital Markets

Keay Nakae - Chardan Capital Market


Greetings, and welcome to the Aralez Pharmaceuticals U.S. Inc. Fourth Quarter and Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I’d now like to turn the conference over to your host, Adrian Adams, Chief Executive Officer of Aralez Pharmaceuticals U.S. Inc. Thank you. You may begin.

Adrian Adams

Good morning everyone and thank you for joining us for this our first Aralez Pharmaceuticals webcast to discuss our fourth quarter and full year 2015 financial results together with important updates on YOSPRALA and more details on our portfolio commercialization strategy, Canadian portfolio growth drivers and near term business opportunities and strategies.

With me this morning is our Chief Financial Officer, Scott Charles and Executive Director of Investor Relations and Corporate Communications, Nichol Ochsner.

Before I proceed, I would like to ask Nichol to say a few opening remarks. Nichol?

Nichol Ochsner

Thank you, Adrian. Earlier today we issued a press release summarizing our financial results and key achievements for the fourth quarter and full year ended December 31, 2015, which can be found on the EDGAR and SEDAR databases and on our website at Additionally, I would like to remind everyone that we have a slide presentation to accompany our conference call this morning, which can also be viewed at our website and is available on the EDGAR and SEDAR databases. If you are listening to this call on your telephone, you may access the synchronized slide deck on our website by choosing the link on our webcast page that says click here to listen.

Before we begin I would like to provide the following cautionary statements regarding forward-looking statements. Statements during today’s call may contain forward-looking statements under applicable securities laws including in respect of the benefits of the merger transaction between POZEN and Tribute, our 2016 financial guidance, our product development and launch efforts, plans of future financial results and business development efforts. These forward-looking statements are based on management's current assumptions and expectations and are made in light of management's experience and perception of historical trends, current conditions and expected future developments.

Actual operating results and other forward-looking statements including in respect of our product development and launch efforts may vary significantly from these forward-looking statements based on a variety of factors. These important factors are described in our filings with applicable securities regulators including the company's annual report on Form 10-K for the fiscal year ended December 31, 2015 which will be filed later today. You [can view] a copy of these documents and other related documents filed with applicable securities regulators at our website under the heading Investors or on the SEC's website at or on SEDAR at We undertake no obligation to update these forward-looking statements. I will also note that all dollar amounts referenced on this call are references in U.S. dollars unless otherwise noted.

With that, I’ll turn the call back over to Adrian.

Adrian Adams

Thank you Nichol. On slide number 3 you will find the agenda for this morning's call. We will begin with details of the Aralez Pharmaceuticals platform followed by the recent business highlights and we will then provide a overview of our portfolio commercialization strategy and the commercial opportunities for Fibricor and YOSPRALA and the Canadian portfolio. Scott will then review the fourth quarter and full year financial results and will also outline our 2016 financial guidance. Finally I will summarize on near term business priorities and how we have positioned the company for future growth before opening the call up if you have any questions.

Please now turn to Slide number 4. With the merger complete we now believe we have a compelling growth platform from which we have the opportunity to drive significant short, medium and long term value creation. Aralez Pharmaceuticals is a Canadian domiciled global specialty pharmaceutical company with a competitive growth platform supported by an efficient structure. At the closing of February the 5th, we received a $150 million in equity and convertible debt financing and $200 million committed debt facility to use for future acquisitions. And equity investors included Deerfield Partners, QLT Incorporated, Broadfin Capital, LLC and JW Asset Management, LLC. All of the debt finance was provided by Deerfield Partners.

We have a diversified and growing revenue base and a geographic footprint across North America with therapeutic [anchor] positions in cardiovascular disease and pain management. And the company is a led by a broadened management team with a proven track record and a history of success in executing deals and building shareholder value. Within this year 2016 and beyond we plan to further build out our portfolio while continuing to grow the Canadian business and remaining opportunistic about new specialty therapeutic areas. We fully intend to leverage our competitive catalog and strong financial resources to aggressively pursue corporate developments and licensing opportunities as well as strategic M&A.

Turning to Slide number 5, let’s review our recent business highlights that we believe positions the company for future growth. First, we completed last month the formation of Aralez Pharmaceuticals which establishes a stronger, broader platform for future growth. Second, early this morning we announced that the YOSPRALA NDA re-submission was filed with the FDA and contained our new primary aspirin supplier together with our original aspirin supplier. The FDA is expected to notify Aralez within 30 days of receipt whether or not the submission will be accepted and if accepted what the new PDUFA date will be. This marks a timely important and exciting milestone for Aralez.

Third, we continued our consummation into a fully operational U.S. commercial organization with all necessary core functions in place which include marketing, sales, trade, managed markets, training and other core functions to efficiently and effectively support our product launches. Fourth we have completed expansive qualitative and quantitative market research that we believe validates the positioning of YOSPRALA as a potential gold standard cardiovascular aspirin therapy. And finally we are fully prepared for the launch of Fibricor with a 25 person sales force next month whose key objectives include developing a relationship springboard ahead of the anticipated launch of YOSPRALA pending FDA approval.

Turning now to Slide number 6, let's discuss the opportunity we see for Fibricor in the United States. Fibricor as you know is a lipid regulating agent that competes in the large triglyceride lowering medication market. We have the U.S. rights to Fibricor and its Authorized Generic which were both launched in late 2009 but have not received any promotions since that time. Our initial focus will be to maximize distribution for the short term and we have selected a 25 person high quality sales force to promote Fibricor to key cardiologists commencing next month. Fibricor is a small product with U.S. net sales of approximately $2 million in 2015. However we believe Fibricor should respond nicely to our commercialization initiatives and an additional objective of the sales force includes using the Fibricor opportunity to develop a strong relationship springboard ahead of and supporting the potential launch of YOSPRALA.

Moving now to Slide number 7, I would like to review the commercial opportunity we see for YOSPRALA in the United States. Looking at this market opportunity we believe there are around 26 million secondary prevention patients in the United States with around 18 million patients or 70% taking aspirin. According to market research around 6 million patients take aspirin plus a proton pump inhibitor. We believe that YOSPRALA may achieve mid single digit market share in the secondary prevention patient population with a patient affordable pricing strategy and this will represent an attractive market opportunity with peak sales revenue potential in excess of $200 million per year. Assuming the FDA approval we plan to launch YOSPRALA with approximately 110 sales professionals inclusive of the 25 hired to promote Fibricor.

This sales force will target the top 29% of secondary prevention specialists that are comprised of approximately 15,000 physicians, which includes approximately 8,000 cardiologists. We intend to have a focused and targeted force for commercial execution and as long as we deem it appropriate we plan to invest into the opportunity and expand up to 300 sales professionals over time targeting 40% of the entire market which will be comprised of approximately 35,000 physicians including 14,000 cardiologists.

Please now refer to Slide number 8, where we review the results of our research related to the impact of physician's education on expected YOSPRALA usage which we believe is very encouraging. According to this market research healthcare professionals who have not had exposures to disease safe initiatives indicated that they intend to use YOSPRALA in approximately 14% to 18% of their aspirin plus PPI usage. In our research physicians report as to when used YOSPRALA in a significantly greater percentage totaling 17% to 26% of patients following physician disease state educational initiatives with this positive impact being even more pronounced with primary care physicians and internal medicine specialists.

Slide number 9 shows the potential of the YOSPRALA market share opportunity following exposure to a full core visual aid or CVA with voice-over. These results are from very recent research that we carried out in a significant proportion of physicians in which the overall YOSPRALA profile was presented with the goal of determining what the prescribing intentions would be following the sharing of the profile. On the left hand side of the chart it shows the current antiplatelet prescribing habits of [any] particular physicians. Interestingly the current prescribing with aspirin in the secondary prevention market is quite high around 56% and in about 44% of situations Plavix is prescribed. The bar chart on the right hand side represents physicians preferences after viewing the core necessary details from YOSPRALA known to participants as Product X. As you can see the same physicians who now utilize YOSPRALA in up to 39% of their patients.

There are two important points from this that I would like to highlight. One is clear lead in the antiplatelet market for product like YOSPRALA and the other is that regardless of specialty, YOSPRALA can play a significant role in the doctors [are mentoring] inventory for treating secondary acute cardiovascular patients who require antiplatelet therapy. On this chart you can see the breakdown for both the cardiologists and the primary care physician population. Most respondents anticipate YOSPRALA could capture up to 39% of secondary prevention patients currently in aspirin monotherapy or Plavix with internal medicine specialists and primary care physicians showing more interest than cardiologists.

We found it very interesting that in addition to the potential for YOSPRALA gaining a significant part of this market, it appears YOSPRALA may actually expand the proportion of this market using aspirin therapy from 56% to 70%. This research is largely consistent with both the qualitative and quantitative research we previously conducted, further reinforcing our belief in the potential for YOSPRALA.

On next slide, Slide number 10, provides an overview of our YOSPRALA marketing and medical affairs pre-launch preparations. We have made great progress with the preparation for the launch of YOSPRALA. We’ve completed a significant amount of market research and feel confident, but we understand the needs of our physicians, patients, pharmacists and caregivers. All active research reinforces the importance of pricing them on healthcare professionals and patients, which further underscores the patient affordable pricing structure that we plan to implement for YOSPRALA. We have settled on our launch pricing. We'll not be communicating the details at this time for competitive reasons.

To determine our launch pricing for YOSPRALA, we conducted qualitative and quantitative research with more than 400 physicians, more than 300 patients and more than 50 payers to determine the appropriate patient out of pocket and branded net price to optimize patient uptake and net revenue. We have met with and gained encouraging feedback from key opinion leaders, professional and advocacy groups. We’ve also developed a comprehensive and logical commercial messaging platform for branded and unbranded and received positive feedback on our optimal promotional messaging that is intended to support the launch of YOSPRALA. And finally, we also completed our quantitative forecasting research for YOSPRALA.

On the medical affairs front our preparations are also progressing very nicely. We've established a scientific education platform, a living document which details the scientific store of the importance of aspirin therapy for [indiscernible] and addresses the risks and challenges associated with non-compliance. It is scientifically based and [40, 45] current literature and clinical study data. We’ve developed a scientific advisory panel and have commenced recruiting a medical science liaison team. In addition, we have completed our data publication and presentation planning and currently have health economic activities underway to further support YOSPRALA. With all of this said, we believe that we are well prepared for the potential launch of YOSPRALA by the fourth quarter of this year subject to FDA approval.

Turning to Slide number 11, we outline some of the key growth drivers in the Canadian portfolio including Cambi for treatment of migraines, Durela for the management of pain and Soriatane for the treatments of severe psoriasis. Our strategy going forward, includes making the appropriate investments in the Canadian portfolio to help contribute to the ongoing growth within the business.

With that, I will turn the call over to Scott to discuss our financial results. Scott?

Scott Charles

Thank you, Adrian. Now please turn to Slide 12. We are pleased that we have now closed the merger transaction between POZEN and Tribute and as a result, we believe we have the capital and the resources to significantly grow the business under the Aralez structure we have put in place. I am going to review the financial results first for POZEN as that was the predecessor entity to Aralez for U.S. securities law purposes. I will then briefly review the financial results of Tribute the company we acquired. And finally I will review the pro forma results of Aralez, which is due to the combination of POZEN and Tribute for 2015.

Later today, Aralez will file in its annual report on Form 10-K including Aralez's and POZEN's financial statements for the fiscal year ended December 31, 2015 and an amended current report on Form 8-K including Tribute's financial statements for the fiscal year ended December 31, 2015 as well as pro forma financials reflecting the combination of POZEN and Tribute for that same period. I encourage you all to review those filings including the amended 8-K, which outlines the assumptions and adjustments that were made in preparing the pro forma financials.

As outlined on the slide, POZEN had revenue of $6 million in the fourth quarter of 2015, which is fully comprised of Vimovo royalties. In the fourth quarter 2014, POZEN had $5.6 million of Vimovo royalties and $4.3 million of revenue related to the amortization of upfront license fees for a total of $9.9 million. In the fourth quarter of 2015, POZEN had operating expenses of $20.1 million, compared to $3.1 million in the fourth quarter of 2014. The increase in operating expenses were primarily related to pre-commercialization expenses for YOSPRALA of $6.9 million, increased R&D spend of $2.5 million also related to YOSPRALA, new staff costs of $4.2 million as we put in the structure in place for Aralez and lastly transaction service related expenses of $3.1 million. POZEN's resulting net loss for the quarter, was $13.3 million, compared to net income of $7 million in the fourth quarter of 2014.

Now please turn to Slide 13. For the full year 2015 POZEN record revenues of $21.4 million from Vimovo royalties whereas the prior year POZEN recorded Vimovo royalty revenue of $21.1 million and $11.3 million of revenue related to the amortization of upfront licensing fee payments. POZEN’s totaled 2015 operating expenses were $58.9 million as compared with $15.8 million in 2014. The increase in operating expenses was primarily related to pre-commercialization expenses of YOSPRALA of $10.4 million, increased R&D spend of $2.8 million also related to YOSPRALA, new staff costs of $9.1 million, including $4.1 million of non-cash stock-based compensation and finally transaction service related expenses of $20.7 million. POZEN’s other income was $3.2 million in 2015, principally due to the receipt of valuation warrant in 2014, which we subsequently closed in early 2015. POZEN's resulting net loss for 2015 was $37.8 million, compared to net income of $19.7 million in 2014.

Now let’s turn our attention to the annual results for Tribute on Slide 14. Tribute 2015 revenues increased $8.4 million to $23.7 million as compared with 2014, primarily due to increased sales of the products they acquired including Fibricor, Fiorinal and also the process of 2015 MFI company acquisition. Tribute's total operating expenses amounted to $17.1 million in 2015, compared to $10.6 million in 2014. The increase is primarily the 2015 MFI expenses including amortization resulting from the MFI company acquisition. Tribute's other expense increased by $8.8 million due to primarily [change in the] warrant liability of $4.4 million and transaction costs of $2.9 million. The net loss for Tribute in 2015 was $13.8 million, compared to $5.1 million net loss in 2014.

I’ll now talk about the pro forma results for the combined Aralez. As I mentioned earlier, the assumptions and adjustments we made to prepare the pro forma financials are set forth in the amended 8-K that we will file later today.

Now please turn to Slide 15. Aralez's pro forma combined revenues for 2015 were $48.8 million. This includes legacy POZEN and Tribute revenues as well as pre-acquisition revenues for MFI for 2015. The pro forma costs and operating expenses for 2015 were $82.3 million. This amount includes certain previously discussed operating expenses such as those related to pre-commercialization and R&D costs for YOSPRALA and amortization of the acquired intangible assets, but excludes transaction related expenses. The pro forma net loss for the year ended 2015 was $44.6 million.

Turning to Slide 16, let’s review our financial guidance for 2016. Our estimates are based on projected results from February 6th through December 31, 2015 and reflect management's current beliefs and estimates about prescription trends, pricing levels, inventory levels and the history of timing of future product launches and events. The company’s guidance on net revenue is presented on a GAAP basis and includes net revenues from Tributes from February 6 to December 31, 2015. The company guidance on SG&A expenses and R&D expenses is being presented on a non-GAAP basis to help investors better understand our cost structure.

The company guidance on non-GAAP SG&A expenses and non-GAAP R&D expenses includes YOSPRALA launch costs including the hiring of a 110 sales professionals, costs to secure approval of YOSPRALA and the cost to build the necessary infrastructure in U.S. and Ireland. It excludes share-based compensation expense and discrete items such as merger and acquisition related expenses, including transaction fees and severance. Our press release provides the reconciliation to GAAP for our non-GAAP financial measures. For the year ending December 31, 2015, we estimate net revenues in the range of $48 million to $58 million, non-GAAP SG&A expenses in the range of $85 million to $100 million, and non-GAAP R&D expenses in the range of $8 million to $12 million.

With that, I will turn the call back over to Adrian.

Adrian Adams

Thank you, Scott. As we’ve communicated, the business development is a very important part of the Aralez growth strategy. Moving to Slide number 17, we outline our business development strategy of framework on areas of immediate focus. As I mentioned, we expect to leverage our competitive structure from a strong financial position and aggressively pursuing corporate development and licensing product and portfolio opportunities together with potentially transformative M&A. This business development strategy is designed to maximize the benefits of the Aralez platform. Our focus and priorities include actively assessing opportunities that are near-term EBITDA accretive and revenue generating but are approved in our cardiovascular and pain therapeutic anchor areas.

We’ve also taken an opportunistic approach to other specialty therapeutic areas that need specified criteria that I just outlined with a focus on the United States and Canada and to some extent ex-North America geographies. In addition we are also very interested in aligned, opportunistic and transformative M&A. Our management team has a proven track record of success in executing business development deals on building value for shareholders. This coupled with the financial support of Deerfield and others leaves us well positioned to effectively and efficiently execute all business development strategies.

In conclusion of our presentation today, let’s look at Slide number 18 for our near-term business priorities. We will work to complete the integration of Tribute and drive continued growth in Canada. We’ll also continue to build out the organization in a financially disciplined way as we prepare for the Fibricor sales force deployment next month as well as prepare for the anticipated launch of YOSPRALA in the fourth quarter of this year, subject to FDA approval and execute a targeted and successful commercialization strategy. In addition, we are planning to submit YOSPRALA in Europe in the third quarter of this year, MT400 or Treximet in Canada by year-end and Bilastine is currently undergoing regulatory review in Canada. And as mentioned on the previous slide, we are actively assessing business development and M&A opportunities that are near-term revenue generating and EBITDA accretive.

This is an exciting time as we launch and build Aralez Pharmaceuticals. As we look into 2016, the business combination provides increased financial flexibility with an efficient platform for growth as we execute our business development strategy. In addition, we expect to continue to make financially disciplined investments in organic growth drivers such as the anticipated launch of YOSPRALA to further transform Aralez into a leading global specialty pharmaceutical company with the goal of creating shareholder value in the short, medium and long-term. We thank you for your continued interest and indeed support.

I’d now like to open up the call for your valued questions. Operator can you please give the instructions.

Question-and-Answer Session


Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Louise Chen with Guggenheim Securities. Please proceed with your question.

Unidentified Analyst

Hi, thanks. This is [indiscernible] on for Louise. I had a couple of questions on the cardiovascular sales force. I think last you talked you mentioned that there were offers out to people. Can you just update on how many of those people have accepted their offers? And then secondly can you give us an idea of what their promotional efforts will look like behind Fibricor and maybe what level of sales do you think you can reach by the end of the year for that product? Thank you.

Adrian Adams

Well, as this relates to the offers that we’ve mentioned before. I think one of the opportunities we’ve had with the companies we’ve had the benefit and privilege of leading a lot of these sales professionals before. So we have hand selected these individuals to join us not just the first 25 representatives, but obviously the 110 build out that we [indiscernible] follow. So we identified these individuals earlier this year, we have contingent offers out for all 25 and as we speak, we have accepted offers from around about 20 of those individuals. So we are very confident, that when we launch Fibricor in the early part of April, that we will be in very good shape. So and all of these people are well-qualified, strong performance in their current companies and we believe they’re going to add a tremendous amount of value to this company. As it relates to Fibricor, I think obviously we have given the broader aspects of guidance on revenue range for the year, we’ve not given specifics in relation to YOSPRALA and Fibricor, roughly a year ago, so obviously we will continue to assess that situation. So what we have said with Fibricor, it is a relatively small product. In 2015 revenues of approximately $2 million. So we do feel that it [will sell] nicely to the assets we have in place. But clearly the launch of the sales force, is also a very strong relationship springboard with cardiologists ahead of the launch of YOSPRALA.

Unidentified Analyst

Okay. I just have a follow-up is the goal to attract patients from the generic or move from different products to this brand? I guess what kind of patients are you going after?

Adrian Adams

Yes. I think both of those. I think obviously when -- there is very little promotion in this area of branded products. Again from the Fibricor opportunity, it is a relatively small product. So given that it’s not been promoted since 2009, we do feel that given that lack of promotion generally in this space that we will be able to move the needle sort of speaking, licensing the revenues of this asset whether it be the ramp or the Authorized Generic. But again in terms of putting things into perspective. There are two objectives, obviously as to move the needle with the Fibricor, it not having been promoted for many years. But also very importantly as to we have instilled very strong relationships with cardiologists and other physicians ahead of the launch of YOSPRALA in the fourth quarter of this year. So we think and I have cited that we think there is some good opportunity for both the product and the [profitability] aspects of YOSPRALA.

Unidentified Analyst

Great. Thanks a lot.

Adrian Adams

Thank you so much.


Thank you. Our next question comes from the line of Aaron Salz with Dundee Capital Markets. Please proceed with your question.

Aaron Salz

Thank you and good morning everyone. Just a few questions surrounding YOSPRALA. First off aside from the efficiencies and the big response matter related to the supplier, is there anything else that was you in NDA approved aside from that the supplier related issues?

Adrian Adams

No, clearly, I think obviously everything is subject to FDA review, but one of the things that we’ve continued to emphasize is that the complete response letters that we had to-date have all been related to the same issue as it relates to manufacturing. The aspects of safety and efficacy the clinical profile of all the data showcase [indiscernible] have not being subject of ongoing debate. So the disruptions we think within the FDA submission will all revolve, we believe around the manufacturing. And again I think as we’ve highlighted within the press release we sent out, which we’re very excited about, I think we’ve obviously chosen a new primary supplier. We’ve included the original aspirin supplier within the dossier. But we think we’ve addressed all the aspects that the FDA at least have commented on in their complete response letter. So again I’d always emphasize that the safety and efficacy of this product and the very strong label that we anticipate of never being the subject of ongoing discussion with the FDA.

Aaron Salz

And as a follow-up to that, the secondary supplier replacing now the primary the particular facility that you’ll be sourcing your aspirin from was that recently approved or signed off of by the FDA for other companies?

Adrian Adams

I think that’s a good question, I think, if I look at this, what is now our primary supplier, they are the second world's largest supplier of aspirin and purely coincident that they did have -- they were recently inspected by the FDA in support of another product that was FDA approved. So I think -- so again, we’re very encouraged by that. So a high quality supplier, recently FDA inspected and clearly I think, very importantly I think they supply the aspirin that obviously was incorporative and probably recently approved by the FDA.

Aaron Salz

And then just two more on YOSPRALA maybe talking a bit of the upside of your current forecast just in the U.S. Are you -- once you -- I know you’re seeking approval in Europe and Canada. Once you receive those approvals or perhaps before are you looking to sell the rights outside of the U.S. or ask someone else market the product? How are you thinking of marketing the product in those jurisdictions?

Adrian Adams

Well, I think obviously the key first goal is to get the submissions in. I think one of the beautiful things, I think about the evolution of Aralez is that it gives us significant strategic flexibility. As we -- just stepping back a moment, I think we -- clearly I think the aspects of business developments and strategy is a very important component and opportunity with the Aralez platform. So as we evolve this year and as we execute this development on licensing this year, I think that will give us some broader strategic flexibility as to consider what options we have in terms of commercialization of assets outside North America and clearly within Canada. So we have optionality there, a like strategic optionality. And in the advent that we can maintain value for ourselves that’s a great thing. What clearly makes sense given the potential of the product through additional partnering with the asset, clearly we are open to that possibility. But our number one priority is obviously to get approval for YOSPRALA in the United States to leverage the very significant value that comes with and to obviously a lot to leverage the opportunity in both Canada and outside North America at the appropriate time. So clearly if not already upstream, but with strategic flexibility.

Aaron Salz

And then just one more on YOSPRALA here. What upside do you see for out of aspirin therapy producing the risks in some types of cancer, obviously we have been seeing a lot of news flow about that. I mean how flexible I guess will the label be and how would you think about incorporating that into the forecasts potentially?

Adrian Adams

Well, clearly I think obviously we’ve been very focused. Given the kind of evolution with the FDA, I think we have been [indiscernible], absolute focused as you can imagine. I think it’s been on recent things in the NDA and getting approval of the product in the United States. So we can start to leverage and maximize on what is clearly a very nice opportunity within the secondary prevention market. We are well aware obviously of the increased press and publications on looking at the potential for the product in the cancer area. And clearly will be assessing that on an ongoing basis. I think with the Aralez platform of this [quality] time, I think what’s needed in the company I think is very, very strong practical and execution focus that’s what we have. That doesn’t mean we’re not looking at other ways in which we can leverage and maximize from a lifecycle margin perspective the YOSPRALA and other products within our portfolio. So we've certainly given it some consideration and as when we make an determination cost of course we will communicate that.

Aaron Salz

Okay. Then just one last one on M&A, how many -- can you just provide any more granularity in terms of what your pipeline looks like, how many targets, and maybe potential size range as we talk about EBITDA targets? And that's it for me. Thanks.

Adrian Adams

All very good questions and thank you for the last question. I would say that one of the things about in particular things about within the company, I think is that most of the people who have joined Aralez are all strong professionals with proven track records, and clearly I think a very strong work ethic. I would say that in all areas of the business, but in particular in business development and licensing I think there is what I will refer to as an appropriate amount of constructive [stress]. And I'll say from a quality point of view in that we're obviously actively assessing a significant number of opportunities. What we have learned in the business development world as you well know is that in order to execute transactions you have to cover an awful lot of bases and that is what I have said. But in the business development strategy and framework that we've outlined, I think we're looking at a broader array of opportunities, the landscape of which is we think is better now than it was 12, 18 months ago, looking at M&A possibilities, looking at product opportunities, portfolios, et cetera. We're looking at all that kind of spectrum. So all of the [indiscernible] obviously executing as soon as is practical, but with the right discipline and making sure that it fulfills those criteria of EBITDA accretion and revenue generation. So I guess it's one of these things [indiscernible].


[Operator Instructions]. Our next question comes from the line of Keay Nakae with Chardan Capital Market. Please proceed with your question.

Keay Nakae

Adrian, as mentioned this is the third time the NDA will be reviewed. You know what the issues are in the CRL. We know how the primary supplier is well known to the agency. If you were to get approval in a shorter period of time than six months say, two months, would you be prepared to launch the products sooner or will you just simply be diligent and stick to a fourth quarter launch?

Adrian Adams

I think I mean, right, one thing is for sure I think that we obviously have to have quite a bit of time to prepare for the launch of YOSPRALA. I think there is some very good work done by POZEN prior to our arrival in the middle of last year and we've been able to build up that particular work and being a little bit more precise and focused in some of the execution aspects on positioning of the products. So I think you're right, I think obviously we've given -- we've outlined a six-month window. I think within 30 days we'll get a more precise PDUFA date from the FDA update. In the event that the product is approved in a shorter time period we would be delighted and we are prepared. We're very well prepared from a pricing perspective. We know the kind of pricing strategy that we'll have in place. I think we've done an extraordinary amount of work in figuring our developments. So we are well prepared and indeed very keen to launch this product as soon as possible so that many more secondary prevention patients can have the benefit of what is a gold standard aspirin therapy.

Keay Nakae

Second, with respect to the Tribute products, will there be some rationalization of which ones you take forward, maybe some them being dropped. How should we think about that in terms of the overall growth?

Adrian Adams

I think, I mean if I look at sort of at the evolution of Tribute, Rob Harris has done an extraordinary job of building up that business and clearly with the acquisitions that have taken place, I think particularly with the latter one, the acquisition of Medical Futures, I think a [narrow point] of the Aralez umbrella. I think we have the opportunity of not just focusing the Canadian business on the strong growth drivers in particular, Cambia, Durela and Soriatane but obviously looking to see on our offering of some of the smaller assets that ramp that actually we have better focus on them and perhaps divesting, but that discussion is ongoing. Clearly I think early in the phase with the formation of Aralez, but I think we want to drive strong growth within Canada. We want to get a situation whereby submitting other assets such as Treximet in Canada, such as YOSPRALA in Canada, leveraging the Bilastine opportunity to get organic growth within the company with a sustained over the long frame. And part of that obviously is making sure that the resources we can put in place for that perhaps are not diverted by smaller products. So we will be adopting a process of driving organic growth, focus in the organization but looking to see whether or not there are some products that are best divested. But again watch this space and we have obviously got strong margin signals there that will help us in focusing on them.

Keay Nakae

Okay, great. Just two more questions. First, with respect to Vimovo and specifically the sales outside the U.S. through AZ. Should we still be expecting an increase in the royalty from 6% to 10% during 2016 and if so, during which quarter?

Scott Charles

So, the Vimovo sales stepped up from 6% to 10% effective January 1, 2015. So on a full year basis we expect to get 10% of net sales both in the U.S. and ex-U.S.

Keay Nakae

Okay, great. And then just finally for you Scott. In terms of the guidance, can you give us any further clarity on what GAAP number for OpEx might look like in Q1, given the fact that you'll have severance merger related costs and executive comp tax equalization as well?

Scott Charles

So we haven’t given quarterly guidance, but I think what could help you is if you actually look at the press release that we have filed. You'll see there's a reconciliation of GAAP to non-GAAP for both SG&A expenses and R&D expenses for the full year 2016. And in there you'll see we highlighted the ranges for merger related expenses as well as the tax equalization payments. So if you look at that you can see the ranges there and that should help guide you because a lot of that obviously is Q1.

Keay Nakae

Very good. Thank you.


Thank you. Mr. Adams there are no further questions at this time. I'd like to turn the floor back to you for any final remarks.

Adrian Adams

Okay. Well thank you very much for your participation today. We're looking forward to obviously updating you on our continued progress on corporate milestones. We do believe that this is a very exciting time for the company and there is one word that I look forward to sharing with you more and more as we progress through the quarter this year, and that is execution. Thank you so much. And operator thank you so much for your professional support. Thank you.


Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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