Alkermes Plc (ALKS) Q1 2018 Results - Earnings Call Transcript

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About: Alkermes plc (ALKS)
by: SA Transcripts

Alkermes Plc (NASDAQ:ALKS) Q1 2018 Earnings Call April 26, 2018 8:30 AM ET

Executives

Sandra Coombs - Alkermes Plc

Richard F. Pops - Alkermes Plc

James Robinson - Alkermes Plc

James M. Frates - Alkermes Plc

Analysts

Chris Shibutani - Cowen & Co. LLC

Vamil K. Divan - Credit Suisse Securities (NYSE:USA) LLC

Umer Raffat - Evercore ISI

Douglas D. Tsao - Barclays Capital, Inc.

Biren Amin - Jefferies LLC

Terence Flynn - Goldman Sachs & Co. LLC

David R. Risinger - Morgan Stanley & Co. LLC

Operator

Good morning and welcome to the Alkermes First Quarter 2018 Financial Results. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded.

And I will now turn it over to Sandy Coombs, Co-Head of Investor Relations. Sandy, you may begin.

Sandra Coombs - Alkermes Plc

Good morning. Welcome to the Alkermes Plc conference call to discuss our financial results for the quarter ended March 31, 2018. With me today are Richard Pops, our CEO; Jim Robinson, our President and COO; and Jim Frates, our CFO.

Before we begin, I encourage everyone to go to the Investors section of alkermes.com to find our press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business.

Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see slide 2 of the accompanying presentation and our most recent annual and quarterly reports for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments.

Today, Richard will provide an update on the company, Jim Robinson will share his perspectives on our commercial portfolio, and Jim Frates will discuss our financial results. After our remarks, we'll open the call for Q&A.

Now, I'll turn the call over to Richard.

Richard F. Pops - Alkermes Plc

Thank you, Sandy. Good morning, everybody. If it seems like we've been doing these calls more frequently lately, it's because we have. So, what I think I'll do before we get to the results for the quarter and a broader discussion about all the progress being made across the commercial portfolio, I'll start by providing some additional context surrounding the developments in the ALKS 5461 program over the last few weeks.

As you all know, we're developing 5461 for the adjunctive treatment of major depressive disorder, and last week we announced that FDA had accepted our NDA based on our original filing date in January and the regulatory review is underway with a PDUFA date of January 31, 2019.

Our belief on the outset has been that a rigorous and comprehensive review of the complete data set supporting the application, including safety, efficacy, and benefit-risk profile would support approval of 5461 and provide an important new medication for patients.

The profile of the 5461 application has been raised within the agency. We believe that the review will proceed with scientific rigor and without bias in either direction. There will be questions from FDA during the review process on our study designs, our analyses and other things. This is expected and appropriate and we look forward to those interactions.

Our confidence in the 5461 data package is unwavering and it's based on the foundation of data generated from the clinical development program of more than 30 clinical trials and more than 1,500 patients with MDD.

Internally, our people coalesced and activated to address an unanticipated challenge. We arrived at the desired outcome and I couldn't be more proud of the team. Major depressive disorder is a serious condition and there have been no new FDA-approved pharmacologic approaches to the treatment of depression in more than 30 years. Patients and health care professionals deserve new options.

So, before we get to the rest of the pipeline and the financials for the quarter, I'd like to introduce Jim Robinson, who joined Alkermes in March as our new President and Chief Operating Officer. Jim comes to us from Astellas, where he served as President of the Americas operations for North and South America. He brings extensive experience in establishing and managing global pharmaceutical operations, with particular experience leading successful commercial organizations.

He's already made important contributions to our organization in his first two months on the job and his industry knowledge, proven leadership and strategic insights will be valuable assets as we continue to build our commercial portfolio.

So, we're delighted to have Jim on board and I'm happy to introduce him to you and I'll turn it over to him now to share his perspectives on the commercial portfolio. Go ahead.

James Robinson - Alkermes Plc

Thank you, Richard. Good morning, everyone. I'm very happy to be joining Alkermes at this exciting time of the company's evolution. I was drawn to this role for two very specific reasons. The first is the leadership team and the people at Alkermes, and the second is the magnitude of the opportunity in front of us, and that is to address the unmet needs of patients in our major disease areas and to realize the long-term value of these important medicines.

One of my top priorities is to drive continued focus within the commercial organization on expanding opportunities for both VIVITROL and ARISTADA as well as our late-stage pipeline. With a deep pool of talent, we are building a commercial organization based on efficiency and effectiveness. Alkermes is uniquely positioned to be nimble and adapt real-time to the changing market environments.

So, let's start with VIVITROL. It's a unique product that has an important role to play in addressing the nation's opioid epidemic. Net sales of VIVITROL during the first quarter were $62.7 million, driven by the underlining (sic) [underlying] (5:26) growth of over 21% year-over-year. Q1 sales did decline sequentially as we guided in February. However, they are in line with our expectations. While we're only four months into the year, we believe we're on track with our growth expectations for 2018.

VIVITROL's market is just about as challenging a market that I've encountered in my career, but challenging markets provide an opportunity for innovation. Our primary focus with VIVITROL is to remove the obstacles to treatment and promote broad and seamless access for patients and we continue to engage and expand in the areas where we've been successful. And we're also expanding into additional areas as new policy, funding and clinical data provide opportunities to increase utilization of VIVITROL in the community and drive additional growth.

Specific to policy developments, in recent months, there has been a significant amount of activity in Congress with both new legislation and increasing funding to address the opioid epidemic. One of our highest priorities is to work closely with the various state authorities to encourage the timely distribution of federal funding to local treatment systems.

Expansion in state programs is a leading indicator of VIVITROL and that growth remains strong. Since we reported our Q4 results in February, we've seen the number of programs expand from 630 to roughly 670 programs, primarily driven by growth in the criminal justice re-entry and drug court programs. So, I look ahead for VIVITROL, I am optimistic about the opportunity to impact the lives of patients and drive value.

So, now turning to ARISTADA, in a growing market with a differentiated product, ARISTADA has the potential to be a significant growth driver for many years to come. In Q1, we recorded net sales of $29.2 million, which was in line with expectations. We continue to gain traction in this growing market. ARISTADA's market share for new prescriptions in terms of months of therapy in the long-acting aripiprazole market was approximately 26% in March compared to 19.5% in March of last year. This growth is in part driven by the launch of ARISTADA's two-month dose, which was 12% of ARISTADA's volume in the first quarter.

Operationally, we are on track in executing our strategy to increase the breadth and depth of our prescriber base and increase utilization among those prescribers. With a PDUFA date of June 30, the upcoming potential approval and launch of the new ARISTADA initiation product is an exciting opportunity to address unmet patient needs and further grow the ARISTADA product family. This new formulation is designed to enable simple initiation of ARISTADA without the need for three weeks of oral supplementation.

This product will allow us to further expand into the hospital setting, where it is estimated that a third of patients start on long-acting antipsychotic treatment. As planned, we will hire 35 hospital-based sales representatives ahead of the expected approval to ensure that we are effectively deployed against this opportunity.

So, we have a lot to do this year. We are focused on the execution of our commercial growth strategy and I look forward to sharing our progress with you.

With that, I'll now turn the call over to Jim Frates.

James M. Frates - Alkermes Plc

Thank you, Jim. Good morning, everyone. During the quarter, our first -our results reflected the solid year-over-year growth of our proprietary products and the continued strength of our base royalty and manufacturing business, as well as disciplined expense management. With the ALKS 5461 NDA now accepted, today we're updating our financial expectations to reflect the anticipated regulatory action by the PDUFA date in January 2019 rather than late 2018.

Financially, this shift primarily impacts two items, the timing of the hiring of the ALKS 5461 sales force, which is a cash expense, and certain noncash share-based compensation. These two expenses will now move into 2019. Our complete financial expectations are outlined in our first quarter results press release issued this morning.

Now, let me start with an overview of our key financial highlights. During the first quarter, we generated total revenues of $225.2 million and recorded a $14.2 million non-GAAP net loss. In the quarter, VIVITROL had net sales of $62.7 million compared to $58.5 million for the same period last year, demonstrating growth of approximately 7%.

As Jim mentioned, underlying unit growth was stronger at approximately 21%. This unit growth was masked by the increase in our gross to net adjustments to approximately 50% during the quarter from 44% in Q1 2017, primarily driven by a higher percentage of Medicaid volume.

While there may be some variability from quarter to quarter, we expect gross to net adjustments to be approximately 50% for 2018 due to the continued growth of the Medicaid business.

As we've seen in the past, first quarter net sales of VIVITROL are down sequentially, impacted by deductible resets in our commercial plans that happened at the beginning of the year and inventory build during the preceding fourth quarter. The inventory build of approximately $5 million from the fourth quarter of 2017 was largely worked down during the first quarter. With inventory in the channel at current levels and the commercial insurance plan deductible reset behind us, we expect growth to accelerate throughout the year and we're reiterating our expectations for VIVITROL net sales to be in the range of $300 million to $330 million for 2018.

Turning to ARISTADA, we saw net sales of $29.2 million in the first quarter, an increase of 62% compared to the same period in the prior year and modest growth sequentially.

Gross to net adjustments for ARISTADA were approximately 43% for the quarter and we expect this number will go up slightly to approximately 45% throughout the year. Today, we're reiterating our expectations of net sales in the range of $140 million to $160 million for ARISTADA in 2018.

Moving on to our key partner products, we saw overall revenues of $106.8 million in the first quarter, compared to $101.5 million in the first quarter of last year. This included manufacturing and royalty revenues of $68.8 million relating to RISPERDAL CONSTA, INVEGA SUSTENNA and INVEGA TRINZA, compared to $60 million for the same period last year.

For AMPYRA and FAMPYRA, we recorded manufacturing and royalty revenues of $28.3 million during the first quarter, compared to $29.2 million for the same period last year. Due to the timing of manufacturing orders and expected generic competition in July 2018, we expect our second quarter AMPYRA revenues to be substantially lower. Today, we're reiterating our revenue expectations for AMPYRA and FAMPYRA to be in the range of $40 million to $50 million for 2018.

In the first quarter, we also recognized R&D revenues from our collaboration with Biogen of $17.5 million related to the reimbursement of development expenses for BIIB098. We expect a consistent level of R&D activity around BIIB098 throughout 2018.

In terms of expenses, our total operating expenses for the first quarter of 2018 were $287 million, compared to $262.6 million for the same period last year. This increase year-over-year was primarily driven by targeted investments in the commercial organization in support of VIVITROL and ARISTADA.

Let me turn now to our updated financial expectations. We expect SG&A spend to be in the range of $515 million to $545 million, reflecting a decrease of $40 million.

As I mentioned earlier, hiring of the ALKS 5461 sales force will shift into 2019 as we await the outcome of a potential Advisory Committee meeting expected in the fourth quarter of 2018. We will continue to make the necessary investments in manufacturing and commercial infrastructure to support the potential launches of both the ARISTADA initiation product and ALKS 5461.

These changes in SG&A result in a $40 million improvement in our GAAP net loss expectations to a range of $210 million to $240 million.

Our updated expectations also reflect a $20 million reduction in our expected share-based compensation expense for 2018, related to the timing of certain company-wide stock performance awards that would vest upon FDA approval of ALKS 5461. We now expect share-based compensation to be approximately $120 million in 2018.

Taken together with the non-GAAP adjustments that we recorded in Q1, these changes result in an improvement to our non-GAAP expectations of $25 million to a range of a non-GAAP net loss of $10 million to a non-GAAP net income of $20 million.

Turning to our balance sheet, we're well-positioned and ended the first quarter of 2018 with approximately $542 million in cash and total investments compared to approximately $591 million at the end of 2017. The change in cash during the quarter was driven primarily by our operating results, changes in working capital and capital expenditures.

During the quarter we also completed a debt refinancing, lowering our interest rate by 50 basis points and extending the maturity of our term loan from 2021 to 2023. The company's total debt outstanding was $281 million in March 31.

We are in a strong financial position, driven by our diverse commercial business and development pipeline. With growth in VIVITROL and ARISTADA, a solid base of manufacturing and royalty revenues and a deep late-stage pipeline, we're well-positioned to grow. This year, we're focused on investing in our pipeline and preparing for the potential launches of the ARISTADA initiation product and ALKS 5461. We're focused on executing on our business plan and look forward to bringing these important medicines to patients and building value for our shareholders.

With that, I'll turn the call back over to Richard.

Richard F. Pops - Alkermes Plc

That's great. Thank you, Jim. So, I'll finish by giving you a brief overview of our other pipeline candidates. I'll start with ALKS 3831, our novel, oral atypical antipsychotic for the treatment of schizophrenia. We designed 3831 to provide the antipsychotic efficacy of olanzapine, while addressing its associated weight and metabolic liabilities and we did this by extending olanzapine's spectrum of activity to include opioid receptor modulation.

This morning, we announced the completion of enrollment in our second Phase III study, ENLIGHTEN-2, a six-month head-to-head study evaluating weight gain in patients receiving olanzapine or ALKS 3831. This keeps us on track to receive top line data from the study in the fourth quarter of 2018 and if positive, these data would complete the registration package, which is planned for submission in the first half of 2019.

In parallel to the development program, our teams have been conducting important preclinical and clinical research to gain new insights on 3831's mechanism of action and particularly the role that samidorphan plays in mitigating the adverse metabolic effects of olanzapine, both acute and chronic. This research is revealing the unique pharmacology of ALKS 3831 and may provide distinct clinical benefits for patients with powerful antipsychotic efficacy and a differentiated weight and metabolic profile.

These data are exciting and ready to be shared. We're preparing manuscripts for submission to peer-reviewed journals and in advance of that plan to share some of our findings with the financial community via an educational webcast. That presentation is being prepared and we'll announce the timing of that webcast in the next few weeks.

Turning now to BIIB098, formerly known as ALKS 8700, our novel, oral monomethyl fumarate prodrug in Phase III developments in treatment of relapsing forms of multiple sclerosis, we have important progress to report regarding its efficacy, its favorable profile and our progress towards submitting the NDA.

This week at AAN, we're presenting two important new data sets on BIIB098's efficacy and safety. First, with respect to efficacy, we've presented the first MRI and relapse data for BIIB098 in patients with relapsing and remitting MS. These data, which were collected from patients participating in the ongoing two-year safety study, were compelling and clearly demonstrated BIIB098's efficacy.

On the tolerability front, we will present an updated data cut from the long-term safety study, now including over 750 patients, looking at safety and tolerability. We are very pleased with these results which continue to build the evidence supporting BIIB098's GI tolerability profile and reinforced the data presented at ECTRIMS last year, showing GI adverse-event discontinuation rates below 1%.

The planned NDA submission is on track for later this year and we look forward to working together with our partners at Biogen to bring this important new option to patients with MS.

And last, but certainly not least, ALKS 4230, our novel immuno-oncology candidate. The dose escalation stage of our first clinical trial to evaluate safety and immunological response continues, which is exciting as we're well into dose levels now which are driving significant expansion in the desired lymphocyte population.

In the first quarter, based on the data, we made the decision to accelerate and expand the program. We're going to do so in three dimensions; expanding the data sets, optimizing dosing and evaluating partnering.

First, expanding the data sets. We expect to complete the dose escalation phase of our Phase I study and move into the expansion stage this year, where we'll begin to assess objective measures of efficacy in various tumor types in a larger number of patients. We see opportunities now to broaden and accelerate this phase of the program.

Our first move is to expand our ongoing study to include both monotherapy and combination therapy with anti-PD-1s in the expansion stage.

Next is dosing. As we began this development program, we chose the initial dosing regimen based on the dosing schedule for recombinant human IL-2, known as Proleukin, an agent with known monotherapy efficacy. Testing the same dosing schedule enables us to make relevant comparisons to cell expansion seen with Proleukin. This is important, but we're not limited to that, as we also have opportunities to optimize the dosing for 4230 because it's a different agent being developed in a different setting.

We have two initiatives on this front. First, we have IND-enabling activities underway for a subcutaneous dosing Phase I study. Second, we plan to evaluate other IV regimens. In both cases, the goal would be to provide increased dosing flexibility with administration in an outpatient setting.

The third dimension is strategic partnering. This is a very active area in immuno-oncology and we believe that we have an agent with emerging data suggesting its potential value. We've initiated discussions with a number of companies to better understand our options as our program progresses. We have two areas of interest. One is in accessing combination IO agents. The other is expanding the program to address multiple tumor types in combination simultaneously in large numbers of patients.

I would not expect any major strategic deal until we're further along, but we're laying the groundwork now and we're encouraged by the high level of interest. So, there's a significant amount of activity surrounding ALKS 4230 here at Alkermes. We'll look forward to sharing our data and our plans for advancing the clinical program later this year.

As we look ahead to the remainder of the year, we expect important catalysts across our commercial and pipeline portfolios, continued growth of VIVITROL and ARISTADA, potential approval and launch of the ARISTADA initiation product, the adcom (21:12) for ALKS 5461, pivotal weight data for ALKS 3831, the BIIB098 NDA and important data for ALKS 4230.

So, with that, I'll turn it back over to Sandy to run the Q&A.

Sandra Coombs - Alkermes Plc

Great. Thanks, Richard. Brandon, we'll now open the call for questions, please.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. And from Cowen, we have Chris Shibutani. Please go ahead.

Chris Shibutani - Cowen & Co. LLC

Yes, good morning. Thanks for taking the question. Thanks for the update on the pipeline. For 4230 in particular, I wanted to ask you two things. When you say that we're further along would be the timing that you would think about doing the partnering, can you clarify when that would be, because you also talked about taking the expansion phase, not just monotherapy but in combination? So, how would that work trying to find a combination partner, i.e., PD-1 or other IO agent?

And secondly for the subcu formulation, should we be thinking about that as having either any differentiated dosing schedule and/or efficacy? Thanks.

Richard F. Pops - Alkermes Plc

Perfect. Good morning, Chris. Yes. So, the 4230, I think the partnering sequencing will go as follows. Since we decided to accelerate the combination work into the expansion phase, there's a number of companies who would be interested in working with 4230 in combination with their particular IO agent. Even though some people believe these are generalizable phenomena, it's always better to have your own agent tested in combination with a new agent like 4230.

So, we're having those discussions and an early partnership could be something where not a strategic business partnership but simply accessing somebody's IO agent and running a study together. And we have those discussions underway now.

We can actually initiate the combination work without such a partnership and we probably will, but that's something we're evaluating right now.

Once we generate data, because I think notwithstanding the immunological responses that we're seeing with 4230 right now, which are exciting and consistent with our hypothesis, the next phase is actually to see patient response, objective responses to tumor types of interest. I think that's when the program really builds its momentum. And we're going to be reluctant to enter into any type of strategic business partnership until we more fully review what the value of this molecule may be.

With respect to the subcu, absolutely. In the animal studies, the subcu enables a much less frequent dosing regimen. And so, we'll be testing the tolerability and waveform of release of a subcu formulation, but the expectation, it would certainly be significantly more extended than once a day.

Chris Shibutani - Cowen & Co. LLC

And if I could ask one other follow-up. Unquestionably, the goal here is to try and come up with a better safety profile than Proleukin. You used the word outpatient in particular when you were describing some of your next stages of development. Can you talk generally about what you're seeing from a safety standpoint with 4230? Thank you. Then I'll get in the queue.

Richard F. Pops - Alkermes Plc

Well, the reason I made that point, Chris, is because a number of investors, as there's been more and more interest in the 4230 program, have been obsessing on the fact that our regimen is once daily IV for five days and saying, well that's not a competitive regimen. And the point we want to make is that it's not the optimized regimen. It's where we started, so we could compare head-to-head to Proleukin, both in terms of tolerability as well as the pharmacodynamic response immunologically. But, there's a long way to go in dose optimization.

So, there's also because our first clinical trial is being run as an inpatient study, I think there's a misperception that that's 4230's fate, is that it will be an inpatient medicine. And our belief is that it will ultimately end up being an outpatient medicine.

Chris Shibutani - Cowen & Co. LLC

Okay. Thank you.

Operator

From JPMorgan, we have Cory Kasimov. Please go ahead.

Unknown Speaker

Hi, guys. Thanks for taking my question. Hi, guys. Thanks for taking my question. This is Matthew (25:15) on for Cory.

I was wondering if you can quantify the funding that has flowed from states into changing the treatment system. It's a little more for what you've seen so far in 2018. And then, regarding the additional 40 state programs that have been added since the last update, is this a good way to be thinking about the state programs coming online for the rest of 2018?

Richard F. Pops - Alkermes Plc

Hey, Matthew (25:38). So, this is Rich. I'll take it. So, there's an explicit amount of federal dollars that have been allocated via the 21st Century Cures and subsequent omnibus funding packages into the states and the first big bolus was that $1 billion that you heard about which came in two $500 million chunks in 2017 and 2018.

Interestingly, our information tells us that of that first $500 million chunk, still quite a small fraction of it has made its way into treatment systems in states around the country. The methodology is the states apply for these grants, they get the grants, the money moves from the federal government to the state government and then it gets dispersed via the single state authority into various programs and the wheels of the bureaucracy move fairly slowly despite the fact that we have a national crisis.

The second $500 million was just distributed last week, I believe. And so it's the next bolus of money moving into the system and we hope that the second bolus moves a bit faster than the first, although there's no indication that it necessarily will.

So, from our point of view, it's inevitable that it will end up in the treatment system by statute, but the pacing of it is very difficult to model. And I think the rate of the growth of the programs should be looked at not just on a quarterly basis, but almost on an annual basis. We started with those programs a few years ago and they were zero and now we're approaching 700. I view them as a leading indicator of interest in the states of activating in new ways to treat the opioid crisis in their state. But they're very hard to correlate to projected VIVITROL sales, as we've learned over time.

Unknown Speaker

Great. Thank you.

Operator

From Credit Suisse, we have Vamil Divan. Please go ahead.

Vamil K. Divan - Credit Suisse Securities (USA) LLC

Hi, great. Thanks for taking the question. So, one on VIVITROL, sorry if I missed this in the prepared remarks, but just around the pricing dynamics in the quarter, (27:36) gross to net or any sort of shift from what you've seen over the last few quarters.

And then second question I just have and I've asked this one before, Richard, because you do have a pretty good cash balance, I'm just curious if you have any updated thoughts in terms of leveraging the balance sheet a little bit more, whether it's to purchase assets or for whatever other reason, and just in general, or do feel you have pretty good capacity with everything you have going on right now. Thanks.

Richard F. Pops - Alkermes Plc

Okay, Jim, why don't you take the first one?

James M. Frates - Alkermes Plc

Sure. Thanks, Vamil. Good morning. Yeah, our gross to nets just for specifics, they were 50% for the quarter, last year as a whole in 2017 they were 46% on VIVITROL. So, there's been a slight increase. I think that can be explained as you look that quarterly. The first quarter is often one of our highest of the quarters, again, because of the commercial plans that reset the general percentage of Medicaid business is slightly higher typically in the first quarter.

So, we were guiding and expecting a gross to net of roughly 50% for the year and that will fluctuate a little bit up and down quarter-to-quarter, but we're really right on track with VIVITROL. And again, that's not really being driven by price competition or price, but rather a mix of businesses, the Medicaid business in the various states begin to grow.

Obviously, with Medicaid expansion and the opioid crisis in general, you would see a vast majority of patients who are suffering from opioid disorder are being covered by state programs and Medicaid in particular. So, that's about where we expected and pretty consistent with what we saw last year.

Richard F. Pops - Alkermes Plc

And with respect to the cash, I don't know if you heard in the prepared remarks, but we executed a really nice refinancing of the debt this last quarter, pushing out the maturity a couple of years and lowering the interest rate by 50 basis points. So, our cash position right now I think is very strong, but it's not excessive.

So, we have really three identified uses of that cash as we sit here today. One is executing these launches that we're anticipating for 5461 and 3831. The second is our in-house pipeline, which some of that is visible to you, but some of it is not. We've been very productive and active on the research side within the company and you will see more about that as the year progresses. And then I think more targeted BDA (29:53) efforts as we look at licensing opportunities that present themselves from time to time. But I don't see a large size of strategic use of cash in a particular transaction.

Vamil K. Divan - Credit Suisse Securities (USA) LLC

Okay. Thanks so much.

Operator

From Evercore ISI, we have Umer Raffat. Please go ahead.

Umer Raffat - Evercore ISI

Hi. Thanks so much for taking my question. I wanted to...

Richard F. Pops - Alkermes Plc

Umer, you have to speak up. We can't hear you.

Umer Raffat - Evercore ISI

Sorry. Can you hear me now?

Richard F. Pops - Alkermes Plc

There you go.

Umer Raffat - Evercore ISI

Okay, excellent. Sorry. I wanted to focus on 4230 and 5461, but in that order, if I may. So, on 4230, Richard, will your subcu be in Phase I in 2018 and can you basically fast track towards PD-1 combos with subcu or will it be more stepwise with that? And I also wanted to confirm I heard you right, the dose expansion phase of your IV, will that include PD-1 combos as well now? And is that something this year?

I'm just trying to get a sense for how soon are you in PD-1 combos, either with subcu or with IV?

Richard F. Pops - Alkermes Plc

Yeah. So, you heard correctly, Umer. So, first of all on the subcu, we expect to be in the subcu IND phase this year in 2018, right towards the end of...

Sandra Coombs - Alkermes Plc

Towards the end of the year, yeah.

Richard F. Pops - Alkermes Plc

I believe we'll submit that. We're finishing the IND-enabling studies now. We'll submit the IND and just based on timing getting through that. But yes, it will be around the end of the year on the subcu. And we'll move as fast as we can move in that dosing cohort as well. But that won't be limiting for what we are doing on the expansion phase with the IV work. And yes, we now will be modifying the protocols and submitting to FDA to expand the ongoing study, the monotherapy study to include now an arm for PD-1 combos with the IV regimen.

Umer Raffat - Evercore ISI

Got it. And then if I may on 5461 as well. I noticed, initially when you guided to the early 2019 – when we spoke about this on last earnings call, there was certain SG&A expense modeled in, in preparation for the launch.

Richard F. Pops - Alkermes Plc

Correct.

Umer Raffat - Evercore ISI

And we obviously went through the RTF episode and the PDUFA was restored. So, I guess my question is, when you change the guidance for the year and push out the launch expenses, even though the PDUFA is the same, how should we think about that? And does it or does it not imply anything for how you're thinking about the odds of first cycle approval?

Richard F. Pops - Alkermes Plc

No, it's a good question. I'm glad you asked it because it actually has nothing to do with odds. It has to do simply with a decision we made in the original guidance, which was should we guide more conservatively toward the assumption of a priority review, which would have put the approval in the September/October timeframe and launch into the year, or should we guide more conservatively towards a standard review.

So, in order to make the numbers as conservative as possible, we guided based on priority review, although as you'll recall at the time, it was not clear which we'd end up with, the standard or priority review. With the RTF excursion, we ended up back on the original filing date, but with the standard review, which puts it into January. So, the shift that you see in the SG&A is really just that, it's just a shift of that timing by the quarter.

Umer Raffat - Evercore ISI

Got it. Got it. Thank you.

Operator

From Barclays, we have Douglas Tsao. Please go ahead.

Douglas D. Tsao - Barclays Capital, Inc.

Hi. Good morning. Thanks for taking the questions. Just in terms of VIVITROL, the starting point, how much of the growth are you seeing right now from the top five states versus states outside of the top five? Also for ARISTADA, you mentioned hiring a small sales force for hospitals. Just curious, when you think down the road, do you anticipate potentially using or deploying that sales force for other products, in particular maybe something like a 3831? And then just in terms of 4230, do you have a sense of the tumor types that you will be targeting in the dose expansion stage?

James M. Frates - Alkermes Plc

Thanks, Doug. It's Jim. I'll start with the VIVITROL question. We saw pretty balanced growth across the states with VIVITROL, some changes, but we typically see that region to region. Interestingly, the top five states, they remain the same. Last year, they were approximately 50% of our sales, this last quarter, so year-to-date, they were 46% of our total sales. So, we are starting to see the broader base grow, which is good and exactly what we like to see.

On the hospital sales force, Jim, maybe you want to...

James Robinson - Alkermes Plc

Thanks, Jim. Specific to the hospital sales force for ARISTADA first, we believe 35 is the right size for the sales force. We also believe that hospital sales forces can be leveraged for more than one product. So, as we prepare for 3831, we'll be looking to also see if we can further leverage the hospital sales force and in the future we will continue to look at it as an asset to be leveraged.

Richard F. Pops - Alkermes Plc

And on 4230, I don't think we've settled on the full range of tumor types. Obviously, there's proven efficacy and durable efficacy in various tumor types with IL-2 Proleukin, but there's also a fair amount of work going on clinically with these IL-2, IL-15 type agents. So, we're dealing with our clinical consultants and our sites, who have all kinds of interest in various approaches. So, we'll figure that out in the next several weeks.

Douglas D. Tsao - Barclays Capital, Inc.

And just as a quick follow-up, I mean, do you expect to be able to sort of share those details with us maybe with 2Q results?

Richard F. Pops - Alkermes Plc

I don't know. I hope so. I mean, we're trying to keep you guys as posted. As soon as we know things that are meaningful, we'd let you know. So, if it's ready to be talked about, we'll talk about it on the Q2 earnings call.

Douglas D. Tsao - Barclays Capital, Inc.

Okay, great. Thank you.

Richard F. Pops - Alkermes Plc

You're welcome.

Operator

From Jefferies, we have Biren Amin. Please go ahead.

Biren Amin - Jefferies LLC

Yeah. Thanks, guys, for taking my questions. Just on VIVITROL, have you guys seen any impact from the new launch from Indivior and SUBLOCADE?

Richard F. Pops - Alkermes Plc

Not yet, Biren. Good morning.

Biren Amin - Jefferies LLC

All right. And then I guess on 3831, ENLIGHTEN-2 data later this year, Richard, what can we expect in terms of weight change, given the Phase II was at the week 12 and this is 24-week data?

Richard F. Pops - Alkermes Plc

Well, I think the profile that we saw in the 300-patient randomized Phase II study is the profile we expect to replicate in the larger study. So, the defining characteristics of those curves, if you recall, Biren, was that in that first study, the patients on olanzapine were on olanzapine for the first 12 weeks of the study and then they were switched over to 3831 in the second three months of the study. In the first three months of the study for that group, you saw progressive weight gain, which then was arrested by the inclusion of the samidorphan in the second three months of the study.

The other group in that study of course was just receiving 3831 and you saw weight gain in that group for the first three or four weeks, actually three weeks, and then it plateaued. Its slope did not numerically change from zero through the balance of the six-month study. So, we think that's the basic profile as we expect to replicate in this study as well.

Biren Amin - Jefferies LLC

Great. Thank you.

Richard F. Pops - Alkermes Plc

You're welcome. I'm sorry. Yeah, I just want to finish that thought because I want to make sure if it's not clear. In the study that we're running now as you referenced, instead of switching the patients on olanzapine after the first three months, they're just going to stay on that olanzapine for the full six-month period. So, that delta, that space between the two curves we would expect to widen with the passage of time.

Sandra Coombs - Alkermes Plc

Go ahead, Brandon.

Operator

From Goldman Sachs, we have Terence Flynn. Please go ahead.

Terence Flynn - Goldman Sachs & Co. LLC

Hi. Thanks for taking the question. Rich, was just wondering on 4230 in terms of your prepared remarks, it was a little bit unclear to me if you guys have seen any single agent resistor responses yet. I know you talked some immunological markers. But have you seen actually any resist responses? And if so, can you give us any more color about that? Thanks.

Richard F. Pops - Alkermes Plc

No. We don't have any resist responses yet, Terence, and I'm not sure we would expect them because the way that this study works is that we enroll a small number of patients at each cohort and then we escalate. And for most of the time in the study, we've been sub-therapeutic doses. We're now in the action where, in the doses, where we're seeing real lymphocyte responses, but we've just not had that much duration of therapy and a whole mix of tumor types in this.

And so, this is often, these are six or seventh line patients. We really want them to be immunocompetent, so we can see the lymphocyte expansion. But it's really why that expansion phase is so important. You get to the dose, we figure out the dose and then we begin to build the denominator in the tumor types of interest.

Terence Flynn - Goldman Sachs & Co. LLC

Okay. And so, you're pushing up to higher doses now then in the expansion? I know you're doing the combo as well with PD-1, but you're also going to higher doses. Are you already in those higher doses or not yet?

Richard F. Pops - Alkermes Plc

Just to be clear, imagine we're stair-stepping up right now to try to find the best dose to then take into the expansion phase at that dose. And the news today is that, in the past, the model was we would do that as monotherapy. But now we're accelerating the inclusion of a PD-1 arm in that expansion phase as well.

Does that make sense?

Terence Flynn - Goldman Sachs & Co. LLC

Okay. But it's going to be a higher dose. I guess you're not at your top dose yet, I guess...

Richard F. Pops - Alkermes Plc

Correct.

Terence Flynn - Goldman Sachs & Co. LLC

...is what I'm trying to figure out.

Richard F. Pops - Alkermes Plc

Correct.

Terence Flynn - Goldman Sachs & Co. LLC

Okay.

Richard F. Pops - Alkermes Plc

You're correct. We think we're getting there, but...

Terence Flynn - Goldman Sachs & Co. LLC

Right.

Richard F. Pops - Alkermes Plc

...we haven't yet formally said okay, here's our dose to move into the expansion phase. And we hope to get there fairly soon.

Terence Flynn - Goldman Sachs & Co. LLC

Okay. Thank you.

Sandra Coombs - Alkermes Plc

We have time for one more question.

Operator

And from Morgan Stanley, we have David Risinger. Please go ahead.

David R. Risinger - Morgan Stanley & Co. LLC

Thanks.

Operator

David, your line is open.

David R. Risinger - Morgan Stanley & Co. LLC

Yeah. Sorry about that. I was on mute. So, first of all, congrats, Jim, on your new role. I wanted to ask a couple of questions. First, Richard, could you just clarify the timing for the 50-patient metabolic study disclosure? Second, regarding 8700, when we should expect to see the top line results of your Phase III for that trial?

And then third, could you provide a little bit more color, maybe you could sort of bookmark how infrequently we should expect the subcutaneous dosing of your IL-2 to shift to versus the daily infusion that was originally studied? Thanks so much.

Richard F. Pops - Alkermes Plc

Good morning, Dave. So, the metabolic study for 3831, we are going to have a webinar, a webcast, for you all. As I said in the earlier remarks, we're finishing those up, presentations, now, and we'll put out a notice about that webcast in the next few weeks, I would think. And meanwhile, we're preparing manuscripts for publication based on the metabolic work that we've been doing pre-clinically and ultimately clinically as well. So, that's a very rich area of science for us right now and we're quite excited to share that with you all.

Just to be clear on the 8700, there is no Phase III efficacy study because of the 505(b)(2) filing strategy that we're employing. That's why the data we presented this week actually was so important because these are actually real efficacy results using MRI, looking at disease relapse rates and progression from the patients enrolled in the large open-label two-year safety study.

So, it's true bona fide efficacy data, but we don't need it and there's not a Phase III study per se that we'll report out. So, from our perspective, the clinical requirements for submission of the NDA are complete and they comprised of a bridging study that looked at the PK exposures bridging back to TECFIDERA and then this two-year safety study, which we've completed the in-life phase sufficiently enough for the submission of the NDA.

The subcu dosing on IL-2, the goal was for this to be over multiple days, if not weeks. So, we'll see. I don't want to guess yet, because we just need to look at the dose response in the human subjects and look at the tolerability as well. So, that's why we do the experiment, but in the animal work, it's quite encouraging.

David R. Risinger - Morgan Stanley & Co. LLC

Great. Thank you very much.

Richard F. Pops - Alkermes Plc

You're welcome.

Sandra Coombs - Alkermes Plc

Well, thanks, everyone, for joining us on the call this morning. Please feel free to reach out to us at the company if you have any follow-up questions. Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.