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This filing relates to a planned merger (Merger) between Alkermes, Inc. and the global drug
delivery technologies business of Elan (known as EDT) (such combination, the Business
Combination) pursuant to a Business Combination Agreement and Plan of Merger (the Business
Combination Agreement) by and among Elan Corporation, plc (Elan), a public limited company
incorporated in Ireland, Antler Science Two Limited, a private limited company incorporated in
Ireland, Elan Science Four Limited, a private limited company incorporated in Ireland, EDT Pharma
Holdings Limited, a private limited company incorporated in Ireland, EDT US Holdco, Inc., a
Delaware corporation, Antler Acquisition Corp., a Pennsylvania corporation and direct wholly owned
subsidiary of U.S. Holdco, and Alkermes, Inc., a Pennsylvania corporation. The businesses will be
combined under New Alkermes, a new holding company incorporated in Ireland that will be
re-registered as a public limited company, and renamed Alkermes, plc, at or prior to the completion
of the Business Combination. The Business Combination Agreement is on file with the Securities and
Exchange Commission as an exhibit to the Current Report on Form 8-K filed by Alkermes, Inc. on May
9, 2011.
The following is the transcript of an investor presentation made on June 7, 2011 at the Goldman
Sachs Global Healthcare Conference by James Frates, Senior Vice President, Chief Financial Officer
and Treasurer of Alkermes, Inc.
Forward Looking Statements
Information set forth herein contains forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties.
Alkermes, Inc. cautions readers that any forward-looking information is not a guarantee of future
performance and that actual results could differ materially from those contained in the
forward-looking information. Such forward-looking statements include, but are not limited to,
statements about the benefits of the business combination transaction involving EDT and Alkermes,
including future financial and operating results, the combined companys plans, objectives,
expectations (financial or otherwise) and intentions and other statements that are not historical
facts.
The following factors, among others, could cause actual results to differ from those set forth in
the forward-looking statements: the ability to obtain regulatory approvals of the transaction on
the proposed terms and schedule; the failure of Alkermes, Inc.s stockholders to approve the
transaction; the outcome of pending or potential litigation or governmental investigations; the
risk that the businesses will not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected; uncertainty of the expected financial
performance of Alkermes plc following completion of the proposed transaction; Alkermes plcs
ability to achieve the cost savings and synergies contemplated by the proposed transaction within
the expected time frame; disruption from the proposed transaction making it more difficult to
conduct business as usual or maintain relationships with customers, employees or suppliers; and the
calculations of, and factors that may impact the calculations of, the acquisition price in
connection with the proposed merger and the allocation of such acquisition price to the net assets
acquired in accordance with applicable accounting rules and methodologies. Additional information
and other factors are contained in Alkermes, Inc.s filings with the Securities and Exchange
Commission, including Alkermes, Inc.s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
and other SEC filings, which are available at the SECs web site http://www.sec.gov. Alkermes, Inc.
disclaims any obligation to update and revise statements contained in these materials based on new
information or otherwise.
Important Additional Information and Where to Find It
This communication does not constitute an offer to sell, or the solicitation of an offer to sell,
or the solicitation of an offer to subscribe for or buy, any securities nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the securities laws of any such
jurisdiction.
In connection with the proposed merger, Alkermes plc will file with the SEC a registration
statement on Form S-4 that will include a preliminary prospectus regarding the proposed merger and
Alkermes, Inc. will file with the SEC a proxy statement in respect of the proposed merger. After
the registration statement has been declared effective by the SEC, a definitive proxy
statement/prospectus will be mailed to Alkermes, Inc.s stockholders in connection with the
proposed merger. INVESTORS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING
ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER DOCUMENTS RELATING TO THE MERGER FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ALKERMES, EDT
AND THE PROPOSED MERGER. You may obtain a copy of the registration statement and the proxy
statement/prospectus (when available) and other related documents filed by Alkermes and Elan with
the SEC regarding the proposed merger as well as other filings containing information about
Alkermes, Elan and the merger, free of charge, through the web site maintained by the SEC at
www.sec.gov, by directing a request to Alkermes, Inc.s Investor Relations department at Alkermes,
Inc., 852 Winter Street, Waltham, Massachusetts 02451, Attn: Investor Relations or to Alkermes,
Inc.s Investor Relations department at (781) 609-6000 or by email to financial@alkermes.com.
Copies of the proxy statement/prospectus and the filings with the SEC that will be incorporated by
reference in the proxy statement/prospectus can also be obtained, when available, without charge,
from Alkermes, Inc.s website at www.Alkermes.com under the heading Investor Relations and then
under the heading SEC Filings.
Participants in Solicitation
This communication is not a solicitation of a proxy from any Alkermes, Inc. shareholder. Alkermes,
Inc. and its directors, executive officers and certain other members of management and employees
may, however, be deemed to be participants in the solicitation of proxies in respect of the
proposed merger. Information regarding the persons who may, under the rules of the SEC, be
considered participants in the solicitation of proxies in respect of the proposed merger will be
set forth in the registration statement and the proxy statement/prospectus when it is filed with
the SEC. You can find information about Alkermes, Inc.s directors and executive officers in its
definitive proxy statements filed with
the SEC on July 29, 2010. You can obtain free copies of these documents as described above.
Jun 07, 2011 / 09:10PM GMT, ALKS Alkermes Inc at Goldman Sachs Global Healthcare Conference
Final Transcript
Conference Call Transcript
ALKS Alkermes Inc at Goldman Sachs Global Healthcare Conference
Event Date/Time: Jun 07, 2011 / 09:10PM GMT
CORPORATE PARTICIPANTS
Jim Frates
Alkermes, Inc. CFO
CONFERENCE CALL PARTICIPANTS
Terence Flynn
Goldman Sachs Analyst
PRESENTATION
Terence Flynn Goldman Sachs Analyst
Great. Thanks for joining us, everyone. Im Terence Flynn, one of the biotech analysts at
Goldman Sachs. And this afternoon were very pleased to welcome Alkermes, and joining us today from
the Company is Jim Frates, CFO.
And maybe first, just to start off, Jim, big picture. This has been a transformative year for the
Company. Maybe if you could just kind of walk us through the proposed merger with EDT, Elan Drug
Technologies, which you announced early last month. And number one, why EDT? And number two, why
now? And then, go through some of the drivers of the deal.
Jim Frates Alkermes, Inc. CFO
Sure. Sure. Thanks, Terence, and I appreciate being here. Its been a number of years [that]
weve done the Goldman conference, and its always nice to come to Southern California to see the
good weather and stay inside and talk about our Company.
I think youre right; it is a transformative deal for us. And any time you can take a step back and
have such an accretive deal, taking us from a few years back, after VIVITROL launched the way it
did with alcohol dependence and we got the product back from Cephalon, it really made sense for us
to really invest in our pipeline, and weve got three compounds that are now in Phase II.
And as weve been waiting for VIVITROL and BYDUREON to really grow, the combination with EDT and
their breadth of revenues, it takes us from minus $30 million in EBITDA to plus $75 million. And
whats not to love about that? And as you lay out revenues and EBITDA and margins over the next
five or six years, it really is accretive, substantially so, in every year.
Because just buying revenues for revenues sake is not something that were interested in, and that
has never really worked out over time in biotech or pharma. But with the growth phase of the
products that they have, and watching AMPYRA launch in 2010 was quite exciting.
And with INVEGA SUSTENNA, which is potentially competitive with RISPERDAL CONSTA, thats been
growing the market, too. And their approval in Europe and the potential launch around the world
because, as Im sure most people know, in the long-acting antipsychotic space, two-thirds of the
market is actually outside the United States compared to inside the United States.
So with the launch of INVEGA in the EU coming this year, with AMPYRA entering into its second year,
with the generic hits that theyre taking with Tricor and Skelaxin, which are now essentially done,
we think theyre actually at a nadir point in terms of and can start growing again. And when you
combine that with our growth that can come from VIVITROL and BYDUREON and then our pipeline, we
just thought so thats kind of why now and why EDT.
The growth of the products gives us a breadth that we think is quite substantial and important.
Because typically in biotech, one of the hard things that weve had to do, actually, is find good
[comps] because either theyre not the same size and so theyre at entirely different scale.
Its a little bit of a stretch to say that Warner Chilcott is a comp when theyre at such a
different scale, or other companies that have single-drug risk, but where the drugs are launching
really well. But theres no getting away from the fact that thats a single-drug risk and if
something goes wrong its going to go really wrong with the valuation of that company. So, having a
base of five products.
The other thing that you worry about with growth in this side of the business and profitability is
patent cliffs. And the earliest patent that comes off on this class of the big five that we have is
INVEGA SUSTENNA in 2019. With the AMPYRA extension, you can argue that that can go into 2026.
Theyre going to have 10 years of exclusivity in Europe. RISPERDAL CONSTA goes through 2020, 2021.
VIVITROL just had a patent that issued that goes to 2029 and BYDUREON is 2026.
So, were talking about products that are well in the future and ought to have a lot of growth head
of them. We think that thats attracted us to the deal.
Terence Flynn Goldman Sachs Analyst
Great. In terms of the guidance youve given on double-digit growth in 2013, can you just walk
us through the assumptions for the various products that you mentioned? The key drivers in terms of
what youre assuming for BYDUREON, what youre assuming for AMPYRA? And remember, this deal was
announced pre the European decision .
Jim Frates Alkermes, Inc. CFO
Yes.
Terence Flynn Goldman Sachs Analyst
on AMPYRA, so maybe how that impacts this guidance youve given as well.
Jim Frates Alkermes, Inc. CFO
Yes.
Terence Flynn Goldman Sachs Analyst
And just what are the key assumptions youve made when youre projecting that 2013
double-digit (inaudible).
Jim Frates Alkermes, Inc. CFO
Sure. And obviously, we modeled it a lot of different ways as we looked at the growth. I guess
the easiest thing for us to do, though, is to go really with the street models because each of
these products is well followed. And thats where we really started, which was, Okay, what are the
essentially consensus estimates on each of these products?
And if you build it up from there, you can then do lots of scenarios around well, what if AMPYRA
doesnt get approved ever in Europe and what if BYDUREON is delayed or never gets approved, which
we dont think will happen. What if VIVITROL never really grows to become a profitable contributor?
And the other benefit, though, as I consider it is the regulatory risk in those five, because weve
learned a lot over the last couple of months. As you mentioned, AMPYRA, we had a very, I think,
earlier news than we had anticipated that there was a we had thought there would be a positive
outcome in Europe but we didnt model it because when we started the negotiations it was in January
when they had the negative approval. So it was actually very easy to take it out of the model and
say, Look, thats so uncertain; were not going to give you credit for that. So that was a
positive surprise for us.
And the same is true with BYDUREON. We get the positive European news on the expected approval in
Europe now in the next few weeks. And we have to see what happens in the United States, but were
optimistic about that as well.
So, as we look forward, the growth is really where we get to double-digit growth is really
getting the VIVITROL launch going and a full year under our belt with opioid dependence. We think
that well be able to see some growth with that. With AMPYRA, starting to consolidate those areas
where it works in the patients and finding the right patient group and restarting that growth, or
continuing that growth, from where they stand today.
And with the launch of BYDUREON and INVEGA ex-US, and hopefully BYDUREON in the US in the early
part of next year if all goes according to play. Thats whats going to accelerate the growth. And
this year will be a little bit of growth from where we were last year, but those new products
coming on and being in kind of the second year of their launch phase is obviously important.
Terence Flynn Goldman Sachs Analyst
Great. And maybe just talk about the youre going to be financing some of this merger with
debt. Maybe just talk about what the expected interest rate on that debt, and then timing of paying
off that debt and how you expect to manage that going forward.
Jim Frates Alkermes, Inc. CFO
Sure. Yes. So, actually, thats another facet of the deal that we love because were actually
able to buy a business with roughly $100 million in EBITDA, adjusted EBITDA, with the cash flows of
that business.
So, in the long run, what we will have paid for the business is 25% of our equity 31.9 million
shares which we hold very dear, believe me, but that share and the interest that we will have
paid on the $450 million of debt for six or seven years, and earlier if we can pay it off early. So
thats actually a very, very good purchase price. Its like a little, mini leverage buyout, and I
think it puts us in a great position to have a nice return on the equity over time.
So, the debt we actually announced yesterday were launching the debt now. Well be having our
bank meeting on Thursday. Were looking at two levels of bank debt because it gives us the
flexibility to pay it off early.
And we think that as the business improves and EBITDA improves and we start to show that margin
improvement, that layering on a more permanent level of bonds and more permanent level of debt
capital will make more sense a year from now when the transaction is a little bit big, BYDUREON is
approved, and things are more clear as opposed to being the first-time issuer.
So, the flexibility of repayment is why were looking at that. And the rates, were looking at, I
think, very competitive rates. I think the rating agencies havent yet issued their reports; well
see those later this week most likely. But I think well be right in the mix of other companies
like an Endo, like a Warner Chilcott, like an Axcan. We seem to look similar to them on a pro forma
basis.
And if we can get that leverage down by using our excess cash flow to pay off some of that debt,
well, I think, look even stronger as we go. And then, we can potentially refinance it as we
improve our credit rating as we go.
I think people can see as weve talked to investors and weve talked to the rating agencies, I
think people can very clearly see the power of the combined businesses. We just havent combined
them yet and executed on it, which is obviously a risk, but one we are very comfortable in taking
because we think the products are there to provide the growth.
Terence Flynn Goldman Sachs Analyst
Great. Before we move on to the next topic, any questions from the audience on EDT? Okay.
So, just moving on next to VIVITROL. I know weve touched on this a little bit here, but maybe just
bring us back and VIVITROL alcohol launch and what youve learned from that that maybe youve
applied to the ongoing launch for opioid dependence indications, and well start there.
Jim Frates Alkermes, Inc. CFO
Yes, and people ask a lot about that. Whats going to make VIVITROL different in alcohol
dependence? It is so clearly a different market in so many ways.
So, for instance, one, just really how the patients and the people suffering from this addiction
react. In many ways, people who have an opiate addiction know that they cant control the opiates
in their lucid moments. And its harder for people, I think, who are struggling with alcohol
addiction to recognize that they have a problem that they cant control.
Second, its abuse of opiates is illegal, whether its heroin or prescription opiates. And
obviously, alcohol is not illegal. People can drink, and as long as theyre not the proximal
harm that they cause, if theyre not drinking and driving or operating heavy machinery, is much
less than, obviously, illicit opiate use.
Third, the tolerance that people exhibit with opiates. It happens so fast and people have to take
more and more and more. It seems inevitable that they either run into serious health problems and
they end up either wrapped up in the criminal justice system or in the ER. And again, in alcohol,
the tolerance is much less, much more slowly. And while it causes major problems Im not
discounting that its very, very different from opioids.
And then finally, as Ive said in the past, to have a market, one needs somebody selling things and
somebody buying things thats what a market is. And theres just not a market for the treatment
for pharmaceutical treatment of alcohol dependence. And building that market, I think, is much
more complicated and we certainly havent had the resources to really try and build that.
I think it will build over time because I firmly believe, and I think the physicians who are at the
forefront of this firmly believe, that medically-assisted treatment, or MAT, is the way to treat
alcohol dependence. But the broader community of physicians and counselors is not there yet.
In opiate dependence, its very different. There is a market, and I think it could be I dont
think its too strong to say that treating an opiate addict without medication would be in many
ways viewed as malpractice. So, its very different in that sense, too.
And I think, finally, the clinical data that weve had I could go on about the differences, but
the clinical data that weve seen in opioid dependence, and ultimately the label that that data and
our panel discussed when we were there in the fall for the prevention of relapse, is very, very
important because it really is its very clear, I think, for people to understand.
You take an opiate antagonist and it treats the abuse of an opiate agonist. Its very clear. And a
monthly injection so that that product is on-board over time can have a big impact in a patients
life. And where you talk about in alcohol dependence, Okay, wait a minute, how is my ingestion of
ethanol going to be affected by my taking an opiate antagonist? And even though it affects in
[the reward] disorder, thats still very complex, so its much more proximal in opioid dependence.
So, people are being treated right now. There are good medications out there in Suboxone and
Methadone, but theyre not for everyone. And they really are in essence replacement therapy that
probably isnt appropriate forever.
And so for different patients who want to be on an antagonist, who want to be clean from opiates,
either because of their job or just their nature or their makeup or their age or how long theyve
been abusing opiates, we think that theres a real alternative that VIVITROL provides to the
marketplace.
Were getting great feedback, and I think what were now trying to do is decide where to put our
financial resources to help educate the market in the most appropriate way so they can use that
product efficiently. And were looking at people in the field; were looking at clinical studies;
and were looking at supporting various pilot programs by insurers and providers and states and
people in the criminal justice to, again, get real world data.
Because ultimately, if this is going to be a big product, were going to have to get more data in
hand and were going to have to get more experience in the real world in all these different
patient populations and start to help the physicians answer the questions that they ask us about,
Whats the right sort of patient? And how long should I treat? And how do I detox someone?
Because they need to be detoxed off of agonists, obviously. And all of those are questions that
were trying to help answer with the thought leaders and the National Institute of Drug Abuse and
others.
So, its not going to be an overnight market, but we feel like the product has been is a very
good product in the sense that it solves some unmet medical needs. And were going to continue to
try and generate that data and work with the users to understand how they can best use it and most
appropriately use it.
Terence Flynn Goldman Sachs Analyst
How about in economics to the practice and the physician, how does that differ for opioid
dependence versus alcohol? And what have you seen so far in the early days of the launch?
Jim Frates Alkermes, Inc. CFO
Yes. And I think that clearly there are physicians who have it requires a little bit of a
change in thinking. I like to liken it in our business to stock trading, right? If people trade
stocks, theyre very interested its very easy to say, Okay, great. I want to buy 5,000 shares
of IBM. I call up my broker; I get 5,000 shares of IBM. I go online.
If you had to if youve ever sat on a trading desk and had a new person be the trader to buy
that 5,000 shares, it would take you a fair amount of time. You have to stamp it in and you have to
then talk to the market leaders and you have to follow this protocol.
And the protocol that you have to use to acquire a specialty injectible product, a reasonably
priced product, and interacting with the specialty pharmacies getting it delivered to your office,
scheduling the patient, preparing the injection and then getting paid for it is just different from
picking up taking out a prescription pad and writing 30 tablets of Suboxone. Thank you very
much. And then you can go deal with someone elses back office at CVS Caremark or Walgreens or
whatever.
So, its a process of educating the physicians. Now, there are plenty of physicians who have
adjusted their practice to have the right people reimbursement specialists. It makes sense to
have one person follow all the VIVITROL prescriptions in the office as opposed to having 10
different people do it. You get some economies of scale and things like that. And yet, the
physicians have to figure that out themselves in many ways. We cant teach them how to do that.
So, it does require a little bit of work, but I dont think the economics are prohibitive as long
as the physician sees the value of the investment of his or her time. And I think in alcohol
dependence, we simply didnt have enough physicians who were convinced that the extra work was
worth it for them. They cant get reimbursement in certain ways and there are some insurance
companies that do better than others, but we have generally pretty good reimbursement.
And were continuing to work on that. Taking away prior authorizations, taking away first fail
policies on oral Naltraxone, which in many ways, in our view, dont make a lot of sense given the
need and the clear issues with oral Naltraxone. These people are addicts. And if they have the
problem, on the days theyre going to go out and abuse their alcohol or their opiate, they are most
likely not going to take their oral tablet.
And weve seen that Ive certainly heard story after story of people a physician being in a
treatment program for opiate abuse having to take oral Naltraxone observed every day. And she came
in and she took her oral Naltraxone, and low and behold, it turns out shed taken Tylenol tablets
and etched the because theyre about the same size as Naltraxone and etched the designs of
Naltraxone tablets in each of the Tylenol tablets very precisely so that the person observing her
taking them thought she was taking Naltraxone when shes, in fact, taking Tylenol.
So, theres no as anybody who has lived with an addict or been exposed to them, theres no end
to their ingenuity to fulfill their drug-seeking behavior, which is really sad. But thats why a
monthly antagonist is so important.
Terence Flynn Goldman Sachs Analyst
If you look at the VIVITROL franchise, how close are you guys to cash flow break-even now? And
how do you think about that return versus investing incremental dollars, you said, to kind of spend
either on the sales side or maybe the .
Jim Frates Alkermes, Inc. CFO
Yes.
Terence Flynn Goldman Sachs Analyst
physician education side? And how are you guys thinking about that as you head into 2012?
Jim Frates Alkermes, Inc. CFO
Well, I think thats a great question. And so when we took the product over from Cephalon,
we said, All right, lets work to get to break-even. And I think last year we in essence, as
we got to alcohol and we sold roughly $29 million, $28.9 million, we feel like we would have been
break-even if we werent investing in we would have been break-even if we werent investing in
the opiate launch. But we think some investment is required.
We used to say that roughly $30 million was break-even for us before we started to invest in
opiates, and we said that we started putting in about $15 million into the launch. So those numbers
are still good. We guided, just on a stand-alone basis with Alkermes earlier in May, to $40 million
to $50 million in sales for VIVITROL.
Now, thats pretty much a straight line from where we are now. And that was purposeful in many ways
because it gets us to that break-even range and it also didnt make any assumptions about
accelerating growth, which are, frankly, too early for . I could make some assumptions, but I
think were at the point with VIVITROL where wed rather make our assumptions based on data as
opposed to expectations and plans.
So that being said, I think that we will invest where it makes sense, but I think were going to do
it in a way that we can continue to see that positive return, because getting it to break-even is
important and I think we can do it in opiate dependence.
And then the other thing is that the lesson that weve learned is this is a new and complicated
market. And to say that Im going to go out and do a $10 million program in XYZ, whether its
adding ten more sales people or adding 10 more MSLs or doing $10 million in pilot programs with
states and criminal justice or advertising, all those things are good, positive return, but what
were trying to do now is do little pilots in each of those and see where we have the returns.
And then we can say, Aha, this kind of doctor is the sort of doctor that gets VIVITROL. And when
we have that circled up, we can then invest in finding those other doctors or we can then invest in
doing that other advertising to that right target group or we can invest in that right pilot
program.
So right now, were just getting going with the materials that have been cleared through DDMAC. We
got those in late last year; theyre through their six-month review. And, really, in June is where
were going to see the hopefully see the benefits of that and a little bit of the targeted
research that were doing now that its been out in the field, and well be able to adjust and
spend, I think, appropriately.
But certainly I think weve said this before if we can get VIVITROL to double, where I dont
think its just going to double once. It is at that stage and it has such a market there was
900,000 people seeking treatment for opiate addictions in the United States and a few thousand are
using VIVITROL. So, I think we have an opportunity to (inaudible).
Terence Flynn Goldman Sachs Analyst
What were (inaudible question multiple speakers)?
Jim Frates Alkermes, Inc. CFO
Well, theyre still growing and theyre over $1 billion now. Now again, its an agonist, so
its a very different approach. But we certainly dont view ourselves as ultimately directly
competitive. Theres a logical step from abuse of opiates to Suboxone to VIVITROL. Theres a
logical step from abuse of opiates to VIVITROL if someone wants to get off opiates faster. And
theres also more people who should be treated who arent getting exposed to medication.
A number that just staggers me every time I think about it, last year there were 260 million
prescriptions for opiates in the United States. Theres only 310 million people, but there were 260
million prescriptions for opiates. And the abuse of prescription opiates is a massive problem for
our prisons and for our healthcare system and for our teens and 20-somethings.
And its a major part of the drug problem because it leads directly to heroin because of the
expense of getting prescription opiates illicitly. And we dont have the answer for it yet. So
hopefully, VIVITROL can provide part of the answer, at least get people in treatment and provide
another alterative.
Terence Flynn Goldman Sachs Analyst
And as you look at the market, whats kind of historical pricing power here? And do you see
that being able to continue going forward?
Jim Frates Alkermes, Inc. CFO
In my mind and the way we think about it at Alkermes is price relates entirely to value. Its
very hard to compare I think its inappropriate to compare a long-acting monthly injection of
Naltraxone to an oral generic tablet; theyre two entirely different medicines. And the benefits
that one gets from VIVITROL and this is how pharmaceutical pricing is often thought of, but in
most cases, its really hard to see the real value. How am I changing someones life as opposed to
just delaying a hospital stay or maybe adding days or weeks to someones outcomes.
I think when we look at VIVITROL and the cost of the prevention of relapse, its measures in lives,
its measured in economic outcomes very well, and it can be measured in serious costs like lower
costs in prison.
Were doing one pilot program in Massachusetts, and we thought, Okay, how are we going to get over
the hurdle of having the prison having to pay for the VIVITROL before these folks go out on
parole? And they said, Oh, gosh, if we can just keep one of them from coming back for an extra
month, that pays for all the VIVITROL were ever need. So, we get it.
And unfortunately, its just now in the states, as Im sure people have noticed, state budgets
arent people running state budgets arent looking for new things to spend money on. But when
you do the calculus of what VIVITROL can do for a state budget in certain scenarios, people get it
and they get it very quickly.
And so now what were trying to do is put some of those systems together and, again, get data
in-hand. Lets do a pilot program; that were all about generating data. And to my knowledge, there
hasnt been a single pilot program that weve done where we havent been very pleased with the
results. So the more thats just going to start to gain some momentum.
From an investment perspective and price perspective, I think that we bring value to the table and
were happy to . Actually, we just published some data on health economics outcomes from the [IC
Group], which is from one of the historical data on what it actually costs in the treatment
systems for people on VIVITROL, and those data were very positive and got a good reception
publicly.
In alcohol we had to knock on peoples doors, and in opiate dependence a lot of the insurers are
actually coming to knock on our doors and say, Hey, tell us about this data. Because we know that
theres an I could keep going. Ill let you get another question in soon, but there is, its
called a 3-by-3 thats how I refer to it.
But if you these health systems are now starting to pick up people whove been on three
different prescription opiates from three different physicians in the course of three months. And
they say, Aha, thats someone who doesnt have a pain problem, and thats someone whos abusing
opiates. Theyre doctor shopping. Theyre on three different opiates. Theyre just getting them
wherever they can.
And the databases are can absolutely provide that kind of information for all these insurers.
And so they say, Aha, this is someone we need to target. What do we do with them? Hey, maybe we
should consider obviously, we can consider Suboxone, but we should also consider VIVITROL for
reaching out and being proactive with that.
So, were getting the abuse is costing the system a lot of money, and we think VIVITROL can be a
potential solution.
Terence Flynn Goldman Sachs Analyst
Thats great. Any questions in the audience on VIVITROL before we move to the pipeline? Okay.
So, just turning now to first, just wondering if theres any other products out there in late
stage development that EDT would be eligible to receive a royalty on, that maybe you guys havent
factored into your guidance that we should be on the lookout for over the next, say, 12 to 18
months?
Jim Frates Alkermes, Inc. CFO
I think that we havent put a lot of stock on the two late stage R&D programs that we have. We
essentially said, Look, were going to pay for your business. Thats how we approached the
valuation work.
So, Id say the two late stage products that they have theres a product with Zogenix called
ZX002, which is a long-acting form of Oxycodone, I believe, without acetaminophen in it, which is
in Phase III now. And thats an interesting product because for folks who are on long-term opiate
use for cancer pain or chronic pain, the combined acetaminophen can cause liver issues over time.
So, thats an interesting market.
And then they have Meloxicam IV, which has finished two Phase II studies, and this is one that EDT
controls. And that is a long-acting NSAID, an IV NSAID that could be opiate-sparing. And the target
is to develop a drug thats as effective as morphine in terms of a five-minute or less onset of
action, or roughly that period of fast onset of action, and a 24-hour coverage. And so that fits in
quite nicely. As we learn more about the EDT business, both of those products fit quite nicely into
our kind of approach to pain. And particularly, the opiate-sparing aspects of pain can be
important.
Theres a number of products that they have theyve got deals with major pharmaceutical
companies like J&J and Roche and Santa Fe for things in the pipeline where theyre, for instance
mostly its around the NanoCrystal technology. Its very hard to anticipate if those Phase I and
Phase II programs are going to move forward, and the royalty rates are in the 3% to 5% range. But
thats been a very productive business for EDT over time, and thats going to generate more
revenue.
We didnt put a lot of value around that, but I think the so the key ones are going to be the
Zogenix compound and the Meloxicam IV .
Terence Flynn Goldman Sachs Analyst
Great.
Jim Frates Alkermes, Inc. CFO
that well probably sees the news on from EDT.
Terence Flynn Goldman Sachs Analyst
In terms of Alkermes pipeline, I know youve said 9070. So youll have some data, I think,
coming out by the end of this month.
Jim Frates Alkermes, Inc. CFO
Yes.
Terence Flynn Goldman Sachs Analyst
As you think about that asset, how are you thinking about taking that forward on your versus
partnering?
Jim Frates Alkermes, Inc. CFO
Sure.
Terence Flynn Goldman Sachs Analyst
And what kind of data are you guys looking for to make a go/no-go decision?
Jim Frates Alkermes, Inc. CFO
First, the data set, in our minds this is going to be a very important study because we feel
very comfortable Im thinking of the folks back through all the years of Alkermes has really
been doing long-acting delivery since the early 90s. And so the real question is that jump from
animal models to humans, and what does the PK profile look like? Okay, we understand it in animals.
And now as we jump to humans, whats the difference?
And so thats the information that well have with this study. So, weve study it in roughly 30
people. They are patients, so they have schizophrenia. Its unethical to study these powerful drugs
in health volunteers. So, weve done a single-dose study, single-dose PK.
And this is what, again, I love so much about our pipeline is that we dont have to ask the
question about whether Abilify treats schizophrenia we know that. So, as long as we can get to
an appropriate blood level of Abilify with acceptable injection site reactions, [so many no]
injection site reactions, with acceptable dose-to-dose variability obviously, it cant be
greater in you and less in me and the right PK profile, all other things being equal, we feel
like we have a drug because were very good .
Whatever that PK profile is, whether it lasts four weeks or six weeks or eight weeks, we feel very
comfortable modeling what repeat dosing is going to look like and how you get to steady state. And
the release profile should be such that and again, we have to find this out but as we looked
in animals, it should be such that it provides a nice, steady release over time, which is the key.
So, that consistency of the data and the ultimate PK profile is really what were on the lookout
for. And then we feel quite comfortable, really, moving onto pivotal-like studies where well be
doing efficacy studies with repeat dosing. We may need to do some dose ranging just to see how it
behaves, but well see how consistent that data is.
And the development pathway for a drug to treat acute schizophrenia is fairly straightforward. And
its one that we know a lot about, having watched J&J do it with CONSTA, having watched Lilly do it
with a long-acting Olanzapine and others attempt to do it. So, we feel quite comfortable being able
to run that.
Its not a massive program because the signal to noise is quite strong, because its such a
terrible disease, and sadly but . And so well try and go fairly quickly to get into efficacy
studies, and then it will just be about accumulating well have to do run two well controlled
Phase III studies. One will probably be done in Europe and one will be probably be done in the
United States.
You have to have an active control because, again, its unethical to have but that will probably
be an oral medication. And youll do non-inferiority studies, for the most part, (inaudible). But
well be more clear with the development pathway once we know whether this study is good, but were
quite excited about that one.
And then finally, I would say that everybody said, Well, of course, youre going to have to
partner it because all the big guys play in schizophrenia. But when you look at the number of
physicians who are actually prescribing a long-acting now, whether its SUSTENNA or CONSTA, its a
fairly manageable group and its not very difficult.
Now, in VIVITROL you say, Who are my high prescribers going to be? Very hard to know. And we have
people who use a lot of Suboxone that are high subscribers and those who dont who are high
subscribers. In long-acting schizophrenia, a long-acting form of Abilify, you call the doctors who
use a lot of Abilify and you call the doctors who use a lot of other long-acting preps. And thats
a pretty manageable group.
So, probably of all the compared to 37 for opiate-induced constipation, which is going to be
again, 260 opiate prescriptions, its not a small companys job to do that and 33, which is a
really interesting drug for reward disorders, possibly depression, possibly binge eating, again,
maybe not the most targeted of sales forces.
So, 9070 is probably the most the one where we have the clearest commercial targets. Now, that
being said, theres also some logical people who are players in this field. So, were going to
continue on with our development and well see where how our other products launch, how much
room we have on the P&L, and what potential partners might bring to the table.
Terence Flynn Goldman Sachs Analyst
Great. Well, thank you very much.
Jim Frates Alkermes, Inc. CFO
Thanks, Terence. Thank you very much.
Terence Flynn Goldman Sachs Analyst
Yes.
Jim Frates Alkermes, Inc. CFO
And I hope you have a productive conference.
Terence Flynn Goldman Sachs Analyst
Thank you.
Jim Frates Alkermes, Inc. CFO
Its been good so far. Thanks for your attention.
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