Sandra Coombs - Alkermes Plc James M. Frates - Alkermes Plc Richard F. Pops - Alkermes Plc.

Whitney G. Ijem - JPMorgan Securities LLC Vamil K. Divan - Credit Suisse Securities (USA) Umer Raffat - Evercore ISI Liav Abraham - Citigroup Global Markets, Inc. David R. Risinger - Morgan Stanley & Co. LLC Santhosh Palani - Cowen & Co. LLC William Tanner - Cantor Fitzgerald Securities.

Good morning, and welcome to the Alkermes' Fourth Quarter and Year End 2016 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 Sandra Coombs, Director of Investor Relations. Sandra, you may begin..

Thank you. Good morning, everyone. Welcome to the Alkermes Plc conference call to discuss our financial results for the quarter and year ended December 31, 2016. With me today, are Richard Pops, our CEO; and Jim Frates, is 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, issued this morning for full details of our commercial – for financial guidance for 2017 and a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today.

In conjunction with our GAAP results, we believe the non-GAAP financial results better reflect or represent the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements, which are based on our current expectations and beliefs.

Actual results could differ materially from these forward-looking statements. Please see our press release issued today and our most recent Annual Report on Form 10-K, filed with the SEC 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 as a result of new information or future results or developments. Today, Jim Frates will discuss our financial results and Richard Pops will provide an update on the company. After our remarks, we'll open the call for Q&A. Now, I'll turn the call over to Jim..

We finished 2016 ahead of expectations with total revenue of $746 million, a 19% increase over last year, and a non-GAAP net loss of $10.3 million compared to a non-GAAP net loss of $56.8 million in 2015. With $619 million in cash and total investments at year-end, we're well positioned to execute on our future growth plans.

For the fourth quarter, our total revenues were $213.5 million, and we recorded a non-GAAP net income of approximately $23.3 million.

Let me now review some of the key drivers of our financial performance during the quarter, starting with VIVITROL; our novel once-monthly injectable product for the treatment of alcohol dependence and the prevention of relapse to opioid dependence.

In the fourth quarter, VIVITROL net sales grew 62% to $62.1 million, compared to $38.2 million for the same period last year. During the quarter, volume continued to grow both commercially and through state-based Medicaid programs with approximately 30% and 150% growth respectively. On a sequential quarter basis, net sales grew 11%.

Our fourth quarter growth did include inventory build of approximately $3 million, which we expect to work through in the first quarter of 2017. As a result of this inventory work down as well as typical seasonality related to deductible resets of commercial plants, we expect our first quarter 2017 net sales will be fairly flat sequentially.

For the full year of 2016, VIVITROL net sales grew 45% to $209 million, reflecting robust volume growth as no price increases were taken during the year.

For 2017, we expect a strong growth of VIVITROL to continue, with net sales in the range of $280 million to $300 million, representing growth of approximately 40% and reflecting our belief that VIVITROL is still early in its growth phase.

Turning to ARISTADA; in the fourth quarter, we generated net sales of $17.3 million resulting in net sales for the year of $47.2 million. 2016 was the first stage of the launch focused primarily on securing parity access on Medicare Part D and Medicaid formularies. So lessen the burden of prior authorizations or fail-first requirements.

We were successful and parity access has been largely achieved, enabling a large number of patients to more easily obtain treatment with ARISTADA. With contracting for two additional plants taking effect in March, we're well-positioned to compete on ARISTADA's merits.

Looking ahead to 2017, we expect ARISTADA to begin a period of sustained and significant growth, with net sales increasing this year by at least 100%. Because of the contracting that supports broad access, we expect a modest increase in our gross-to-net as volume grows.

We expect ARISTADA first quarter revenues will be in the range of $18 million to $21 million. Over the near-term, the growth of ARISTADA will be driven by increasing the number of ARISTADA prescribers and broadening awareness of the features of the medicine.

Over the long-term, we believe ARISTADA's growth trajectory will be augmented by the overall growth of the atypical LAI market, which grew approximately 25% on a net sales basis last year. As LAIs are increasingly recognized as being among the most effective treatments in psychiatry.

Moving on to our royalty and manufacturing business; we saw overall revenues of $487 million in 2016, driven by revenues of $271 million from RISPERDAL CONSTA, INVEGA SUSTENNA and INVEGA TRINZA, and $114 million from the AMPYRA franchise, reflecting growth of 8% and 9%, respectively.

In terms of expenses for the full year, we recorded R&D expenses of approximately $387 million and SG&A expenses of approximately $374 million, reflecting targeted investments in the pivotal programs for ALKS 3831, ALKS 8700 and ALKS 5461, and a full year of investment in the ARISTADA commercial team.

Looking ahead to 2017; we expect R&D expenses to be in the range of $405 million to $435 million. This expectation reflects investment in our late-stage pivotal development programs for ALKS 3831 and ALKS 8700 and continued focus on ALKS 5461, as we progress towards the NDA submission later this year.

For SG&A, we expect to be in the range of $425 million to $455 million, reflecting increased investment in the growth of VIVITROL and ARISTADA, and initial investments in the infrastructure and leadership team for ALKS 5461 in the second half of 2017, as we prepare for its potential launch.

In 2017, we also plan to invest $70 million to $80 million in capital expenditures, driven by investment and increasing our manufacturing capacity for VIVITROL for 2019 and beyond, as we respond to the surging demand for VIVITROL.

To summarize 2017; 2017 continues our focus on the growth of our commercial business and investment in our late-stage pipeline.

For the year, we expect total revenue growth of approximately 20%, driven by VIVITROL and ARISTADA, and we're targeting the business to breakeven on a non-GAAP basis, with our non-GAAP results in the range of a non-GAAP net loss of $15 million to a non-GAAP net income of $15 million.

We expect to exit 2017 with cash and total investments of around $600 million, reflecting the strength of our business as we invest in our late-stage growth while maintaining our strong financial profile. With that, I'll turn the call over to Richard..

ALKS 5461 for major depressive disorder, ALKS 3831 for schizophrenia, and ALKS 8700 for multiple sclerosis. Our focus on large, chronic diseases of the CNS, coupled with our approach to selecting, developing and commercializing medicines, is distinctive.

By integrating inputs, not just from scientists and clinicians, but from patients, payers, government policymakers, we've positioned Alkermes to thrive in this complex public health environment. I'm going to start with ARISTADA, our long-acting injectable atypical antipsychotic for the treatment of schizophrenia.

We designed ARISTADA for market leadership, based on our experience in this therapeutic area. We just completed our first full year in this rapidly growing LAI market, which has the potential to be a $4 billion plus market as we approach the 2020s, and currently has only four key entrants.

As Jim described, having largely secured parity access, we will be competing in 2017 on the merits of ARISTADA, which are clear, but we're not going to stop there. We see ARISTADA becoming a market leader as we continue to build this unique product family and provide more options to patients, physicians, and payers.

That actually starts later this year, with the approvals of 1064 milligram two-month dose expected in June. This will be the only two-month offering in the market, and will complement our currently approved four- and six-week doses. ARISTADA is on its way and is entering a period of sustained growth.

Next is VIVITROL; as the opioid epidemic continues to rage across the U.S., more and more physicians are interested in learning how to use VIVITROL.

To respond to this expanding interest, we developed ALKS 6428, a seven-day dosing card containing ascending doses of oral naltrexone administered as part of an outpatient detoxification protocol, leading to initiation of treatment with VIVITROL.

We initiated a phase 3 study last year, testing three different transition protocols, and we just recently received the top-line results. They were very interesting. The study did not meet its primary endpoint, which was to demonstrate a difference in the rate of initiation with VIVITROL between the protocols.

The ALKS 6428 treatment groups performed as we expected in line with other recently published studies on detoxification protocols investigating ascending doses of naltrexone. Interestingly, all of the treatment groups performed well with a similar percentage of patients successfully transitioning to VIVITROL.

However, recall that the ultimate goal of the study was to provide guidance on how to transition patients safely and effectively from opioid dependence to treatment with VIVITROL in an outpatient setting, and we did just that using multiple protocols that can facilitate a safe and comfortable transition process.

So we're still analyzing the data and we've not yet determined the next steps for ALKS 6428, but there is encouraging information in the dataset.

We believe that there can be an important role for a product like ALKS 6428 and protocols that improve the state-of-the-art of outpatient detox and provide healthcare professionals with a clear path for initiating in their patients onto VIVITROL. On the commercial side, VIVITROL continues to grow at an exciting pace.

Our work is ongoing to build ecosystems across the country that supports broader use of VIVITROL in the fight against the epidemic.

Since our Investor Day in September, four additional states have entered the ranks of what we call highly-developed ecosystems, characterized by a broad provider network, capable of addressing the local patient needs, favorable access and reimbursement decisions with limited barriers, and a policy environment with government officials are focused on the opioid epidemic and engaged in implementing solutions.

Overall, ecosystems have improved in 17 states, reflecting the accelerating momentum to address the opioid epidemic. In 2016, we also saw the number of state programs nearly quadruple to approximately 400 programs in 36 states. These come in a variety of flavors from public health initiatives to criminal justice programs in courts, prisons and jails.

The viral growth in the number of these programs is indicative of the way the country is beginning to respond to the crisis. VIVITROL is coming into its own and it's beginning to have a meaningful impact on the way opioid dependence is being treated in the U.S.

Turning to our pipeline development programs, 2017 will be a year of unprecedented activity on both the regulatory and clinical fronts. I'll start with ALKS 5461 for the adjunctive treatment of major depressive disorder or MDD.

ALKS 5461 is based on a new mechanism of action, opioid modulation and addressing a major clinical need for patients not getting adequate clinical response to standard therapies. With a limited set of suboptimal options for these patients, the treatment community is primed for something new and different.

Following the positive data from the FORWARD-5 study late last year, the FORWARD program is now complete. We will share the data from FORWARD-5 with the scientific community and with our investors at the Society of Biological Psychiatry Medical meeting in May.

We've developed a substantial registration package now with data from more than 20 studies and over 1,500 patients. The data are remarkably consistent in terms of the efficacy, safety and tolerability of ALKS 5461.

This is a fast-track designated medicine, as we've done throughout the development process, earlier this week we met with FDA for a Type C scientific exchange to share with them the data from FORWARD-5. The meeting with FDA was productive, and we are on track with the plan submission of the NDA in the second half of the year.

Next steps will be to request the pre-NDA meeting in the coming weeks and we expect that meeting to occur later in the second quarter. So we have a lot to look forward to with ALKS 5461. 2017 will also be an important year for the clinical program for ALKS 3831, which is coming into focus as the pivotal program matures.

ALKS 3831 is our novel oral antipsychotic designed to harness the efficacy of olanzapine with the more favorable weight and metabolism profile. Consisting of two core studies, the pivotal program for ALKS 3831 is well underway.

The first study, evaluating antipsychotic efficacy compared to placebo and olanzapine will be completed this year, with data expected toward the year-end. The second study evaluating the effects of ALKS 3831 on olanzapine associated weight gain will continue to enroll throughout this year, with data expected in the first half of 2018.

In addition to the pivotal program, we're doing important work to support our understanding of ALKS 3831 mechanism of action with our ongoing human metabolic study for which we expect data in mid-year.

In the second quarter, we'll also begin a phase 3 study in young adults, who are particularly susceptible to weight gain, and could benefit from a highly-efficacious and well-tolerated medicine early in the course of their disease.

Recall that before its effects on weight and metabolism were well known, olanzapine or ZYPREXA dominated the atypical schizophrenia market with 45% market share due to its robust efficacy. Even today, despite its serious liabilities, olanzapine has 17% market share because of its efficacy.

The promise of ALKS 3831 is capturing this efficacy with favorable tolerability, which is what we showed in the phase 2 study. If we continue to show that, we believe that ALKS 3831 has the opportunity to redefine the target profile of a modern antipsychotic medicine and have a major impact on the way schizophrenia is treated in this country.

ALKS 8700 for the treatment of multiple sclerosis is also enrolling in this pivotal program. ALKS 8700 is a novel oral molecule formulated in an advanced oral controlled release dosage form, it's designed to compete against Biogen's TECFIDERA, which represents a $3 billion class in the U.S.

To reveal the potential competitive advantage of ALKS 8700, next month we're commencing an elective study to evaluate the GI tolerability of ALKS 8700 compared to TECFIDERA head-to-head in approximately 420 patients. The pivotal program for ALKS 8700 consists of two elements.

Recently completed pharmacokinetic bridging studies, enabling a 505(b)(2) regulatory pathway referencing TECFIDERA, and a two-year safety study that is ongoing and enrolling faster than expected. We remain on track to submit an NDA in 2018.

Now, I'll end with ALKS 4230, our novel immune therapy, design to preferentially activate IL-2 signaling and increase the number of tumor killing immune cells. We're currently engaged in the dose escalation phase of our first clinical trial and we expect to see initial data later this year. So I'll finish there.

In 2017, we are at an unparalleled level of activity, with a full slate of anticipated milestones across our commercial and our proprietary portfolios. We're firing on all cylinders, and poised for significant value creation throughout the year. And with that, I'll turn it back over to Sandy for the questions..

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

Thank you. We will now begin the question-and-answer session. From JPMorgan, we have Cory Kasimov. Please go ahead..

Hi, guys, good morning. This is actually Whitney on for Cory. The first question is on VIVITROL, and you talked about increasing the manufacturing capacity. Can you just remind us where you are now? I think it is somewhere around $700 million or $800 million. And then just talk about much you intend to add..

Yeah, absolutely, good morning Whitney, it's Jim. Yeah, I would say right now, we are in the $600 million range for VIVITROL capacity, we're well planned out to see growth through 2019.

But as we look out beyond 2019 and start planning for VIVITROL potentially being a $1 billion plus product, we're actually talking about building capacity for $1 billion to $1.5 billion of sales at these prices and profitability levels.

So you know we see that growth continuing in the future, as we said, and we're putting our money where our mouth is, as we plan for that growth of VIVITROL to continue..

Got it.

And then, I guess, in light of the ALKS 6428 data that you've sort of touched on, and I understand the analysis is ongoing, but any more color you can give there on how you are thinking about the potential of that, as you think about outer year revenue potential, because I think you had previously talked about that product increasing the prescriber base, or potential prescriber base for VIVITROL.

So, I guess, if that doesn't play out, would that change how you think about the outer year revenue potential?.

I'll take that one, Whitney. It's interesting because on the face of it, you say that the study didn't meet its primary endpoint, that must be negative, but the whole purpose of ALKS 6428 is subservient to getting more doctors comfortable with initiating on VIVITROL.

And what this particular study showed is that any of these protocols allowed patients to transition over to VIVITROL pretty easily. And that's a really good finding, so we'll publish these data, there's also been recent NIDA publication on this as well, showing transition from prescription opioids and heroin over to VIVITROL.

So, like I said, I think that there's very much a place for ALKS 6428 as a dosing kit to provide those fractional doses of naltrexone.

And we'll have to – we'll look at it more, but I think the encouraging thing is that – there, it's not so mysterious how to transition somebody from a physical dependence on opioid over to initiation with a long antagonist in an outpatient setting..

Great. Thanks for taking the questions..

You're welcome..

Thanks, Whitney..

From Credit Suisse, we have Vamil Divan online, please go ahead..

Yeah. Thanks for taking my question. Thanks for all the color on the pipeline. Just can you give a little bit more detail – you mentioned on ALKS 5461, you had this productive meeting and your plan is, obviously, to file later this year.

Just maybe a little bit more detail on exactly how the discussions went, and how comfortable the FDA is with the overall profile, given the positive FORWARD-4, FORWARD-5, but then the negative results on some of the other studies? So, just more color there would be helpful. Thanks..

Sure. Good morning. Good morning, Vamil. Remember the purpose of this Type C meeting was focused on providing the analysis of FORWARD-5 and to pool the analysis of FORWARD-4 and FORWARD-5. So the purpose of the meeting wasn't to kind of go over the entire program, and we'll do that in the context of the review at the NDA.

So the meeting as I said, was productive, we're quite clear that we're going to go ahead and file the NDA, and so we're on track. So, I think that that's the best summary of it I can give you..

Okay. Thank you..

You're welcome..

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

Hi, thank you for taking my questions.

Richard, how do you think FDA looked at the pooled data you provided? And are they looking to see – did they request to see pooled data from all three phase 3s, or just the two SPCD trials? And then, separately, can you give us a bit more color, now that you're presumably finalizing the protocols for ALKS 8700, what the primary endpoint would be, when we should expect completion? And 400 patients – what does that represent in terms of powering on that primary endpoint?.

Good morning, Umer. Yeah, I don't know if you heard the answer of the previous question, but I'll just make it clear. The Type C meeting that we just had with FDA was really focused on presenting the data for the most recently completed FORWARD study.

So it wasn't a comprehensive analysis of the entire program, that'll happen in the context of the review of the NDA.

So when we submit the NDA, we'll submit all of the studies, the 20 studies and that's the power of the dataset actually, is all the different studies and the way you can look at the – across the various studies, various designs, various stages, various doses that's the power of the submission.

So this was a much more narrowly-focused conversation this week with FDA. On ALKS 8700, I know this is the study that's been near and dear to your heart. So yeah, I'll give you a little bit more on that. So this is really focused on teasing out the differences, specifically significant way on GI tolerability.

We are using two different scales as the tool for doing so, one is called the individual gastrointestinal symptom and impact scale and focuses on five key symptoms of GI discomfort and they are nausea, vomiting, upper abdominal pain, lower abdominal pain and diarrhea.

And there is a second scale, which is a global gastrointestinal symptom and impact scale. So we will launch into that study, I don't think we have a sense of completion, I don't know, Sandy, if we have given any guidance on when we intend to complete.

But we will update as we start to enroll into that, but we're encouraged by the fact that the enrollment that we've seen in the safety study has been ahead of schedule and at the last censored data cut that I looked at, I think we had 435 patients in there and our GI rates were still really favorable.

So we're excited to run this study and I'm glad it's underway or soon to be underway..

Got it. Rich, just a quick follow-up. When I heard you on another broker conference in January, my recollection is you mentioned that the Type C meeting will be the more detailed meeting. And you want to do that because the pre-NDA meeting would be much more tight and there's a very specific 45 minutes of time, or very limited amount of time.

But I feel like the way you described it today, it sounds like the Type C meeting was more narrow and then the next meeting will be a more detailed one. I just wanted to reconcile that..

Yeah. Let's clear that up, because I think you might be confusing two different things. So the Type C meeting that we had, we said it along, we had a Type C meeting in September 2016, where we reviewed FORWARD-3 and FORWARD-4, the data that's been presented at ASCP.

With the completion of FORWARD-5, we schedule another Type C meeting focused on FORWARD-5 and the pooled analysis of FORWARD-5 and FORWARD-4, that was the scope of the meeting, that's why the Type C meeting. The pre-NDA meeting, you are right.

The pre-NDA meeting is not a meeting to adjudicate all the data, it's really to focus on what's going to be into the NDA itself. So that meeting, we will go ahead and request now in the next couple of weeks and we expect to have that meeting in Q2.

Then, we'll submit the NDA that has the data presented across the entire program in the format that FDA and we have decided the best presentation of the data.

Because as you may remember, there's a lot of different studies, there's a lot of different ways of presenting the data statistically and we want to be – make sure that we're doing in such a way that's most easily interpreted by FDA.

Does that make sense?.

Got it. Thank you very much..

You're welcome..

From Citi, we have Liav Abraham. Please go ahead..

Good morning. Rich, thanks for all the color on ALKS 5461. And apologies in advance for another question on this topic.

But just following your Type C meeting with FDA, to what extent are you more or less comfortable than you were prior to the meeting that you don't need an additional study for the drug in order to – for a successful filing with the FDA at this point in time? And then, secondly, on ARISTADA you mentioned in your prepared remarks that you are entering the next phase of the commercial launch.

I would appreciate a few more details on those and how you think this will inform the launch or revenue trajectory of the drug beyond 2017 as we think about our modeling in 2018 and 2019. Thank you..

Good. So I think the FDA meeting went as we would have predicted in the sense that, we presented the data that we wanted to present. We know that we're going to go ahead and file the NDA and the strength of the submission is in the totality of the data. And I think – so I don't think I feel anymore any less.

I think we were in the same position than we were, when we finished the FORWARD program, where we've been really testing an agent really rigorously in multiple clinical trials in patients who are refractory to treatment with SSRIs and we're seeing consistent evidence of efficacy, as well as dose response and the impact of study design on outcome.

So, to us, it all feels quite internally consistent. So we're looking forward to proceeding with the review.

ARISTADA, it's just such an interesting market, because as we said in the beginning that, that first stage of the launch, which takes the better part of the first year, not more is gaining access onto the various formularies, the various plans, and completing whatever contracting necessary to establish access.

As Jim said, I think most of contracting is done with a couple more to take effect in March, so we kind of roll into 2017 able to compete on the virtues of the product and having tested after the last year in the market, we know that those, those product virtues are evident to the market.

As we get the approval of the two-month dose to the space between our product and other another products begin to widening, because it'll be the only two-month offering in the market, SUSTENNA has a three-month, but we actually like the two-month interval.

And I think that the overall growth of the LAI market is so robust, that we expect to just continue to catch that wave and grow the product. So I think Jim said, we expect to be entering in the phase, where the sales start doubling. And we'll give you guidance along the way as we begin to extrapolate with more precision.

But we're very optimistic about ARISTADA..

Great, thank you..

You're welcome..

From Morgan Stanley, we have David Risinger. Please go ahead..

Yes. Thanks very much. Richard, I was hoping that you could talk about ALKS 3831 and provide an update on the time lines for key readouts over the next couple of years. Thank you..

Yeah.

The two pivotal studies that are underway, the first one the efficacy study will readout at the end of the year, toward the end of the year, I'd say, Q4, is a good place to plan for that, at the efficacy comparison in acute schizophrenic patients, the weight gain study is enrolling strongly now and we expect to complete enrollment of that sometime this year with data in the first half of 2018, remember that's a six-month endpoint.

So it takes some time to get the endpoint after we complete the enrollment. And those two studies comprise the filing package for ALKS 3831.

Separately, we're fascinated by the – what we're learning pre-clinically in terms of the mechanism of action of, why are we getting less weight gain, and how it ties back to fundamental metabolic changes that are induced by olanzapine and attenuated by samidorphan.

So that study in human volunteers is underway, it's an intense kind of translational study that we'll learn from, and we'll share those data with you mid-year or so..

That's great.

And just a quick follow-up on that, so could you just talk a little bit more about the weight gain assessment and how the endpoint is designed and that will be conducted?.

Right. Recall that we ran a very large phase 2 program investigating weight gain head-to-head versus olanzapine, which is where we saw the very strikingly positive data that provides the foundation for our moving into phase 3.

In that first study, in the phase 2 study, we looked at time points at both three months and six months, and we've kind of simplified the structure in this phase 3 study, so it's a six-month assessment, where we'll be looking both at the average or median weight change, as well as a categorical cut of patients who gained more than 10% of their body weight, both of which endpoints we looked at in phase 2, and both of which were quite significant.

So, we're hoping that it'll just do again what it did the first time, because the sample size was large, and I think the effect that we saw was very clear, because we know the patients on olanzapine who continue to take olanzapine over six-month period, will gain weight quite reliably.

The study features that the matter is really retention, you need to keep people in the study so they are able to keep gaining weight.

Similarly, patients on ALKS 3831, we see that attenuation of that weight gain very fast and that the space between those curves, assuming retention continues to widen with time, and so we're hopeful that that's exactly what we'll see again..

Great. Thanks again..

You're welcome..

From Cowen, we have Chris Shibutani. Please go ahead..

Yeah, hi. This is Santhosh on for Chris. Just a couple of questions, so one on VIVITROL. Richard, you've always guided getting it faster from the payer mix as well as the growth in it, and also the co-providers.

Is it possible for you to give us some color on any of those metrics? As well as all of (33:41) these variables do you anticipate will change in the coming years. So, any color on that will be appreciated. The second question is on the IL product. So you mentioned that we might see initial data this year.

A lot of these products are used in combination with other PD-1/PD-L1 agents. So is it possible for you to provide (34:05) such partnership with other companies? Thank you..

Good, I'll take the second one. Jim, you go ahead on the VIV..

Yeah. Hi Santhosh, how are you? So you know we think, we're in the same spot as we have been recently on VIVITROL which is, we're going to continue to see that, that sort of 60% plus percent unit growth that we've seen year-to-year.

If you go back and look broadly 2016 over 2015, we saw a 66% growth in units and a 45% increase in net sales, you know again, as that mix shifts between Medicaid and commercial pay.

And I think – and we're predicting for that same – basically that straight line to continue and, from a gross to net perspective, you know annually, our gross to net has turned out a little under 45% for the year. And we think that it'll continue to move up closer to 50% over time.

We haven't picked the specific number of core providers, we have internal targets for that, we want to update you on that today, but you know, assuming that it's easy enough to look at growth in net sales. And so that $280 million to $300 million range, we feel comfortable with, and really straight line's the growth that we're seeing right now.

But I'll remind you too that those numbers are still – we're still very concentrated right, at 2% or 3% market share for VIVITROL, we see a lot of upside, and we're also seeing continued growth in our larger states, well into the double-digit, some in the triple-digit growth in some of our key states.

So we think that growth in VIVITROL is going to continue. I'll flip it to Rich for the....

So, on the IL products, the first clinical data of interest will be looking to see whether we have the differential expansion cell types compared to where you would have seen historically with IL-2, specifically we're looking for an increase in K cells and CD8+ cells without the corresponding increase in Tregs, so the immunological responses what we are looking for in this first cohort of patients starting from a very low dose, first biologic agent in man escalating gently until we see the immunological response.

If we see that, that kind of proves the pharmacology in vivo and then we'll start thinking about okay, how do we start best thinking of utilizing this drug in combination with other agents because you're right, it will absolutely be used in combination with other agents.

And we can envision a number of different potential collaborations to explore that..

Thank you. Thank you, guys..

You're welcome..

Great. We have time for one more question..

And from Cantor Fitzgerald, we have Bill Tanner. Please go ahead..

Thanks for taking the question. Rich, I had a couple of questions on ALKS 8700, you mentioned the bridging study to support the 505(b)(2) filing. Apologies if I missed it.

What is the status of that just in terms of the data from it? And then I guess, more importantly, as you are looking at the commercial viability of the compound versus Tef (37:23)? As an example, what is the level of GI side effect reduction that you think you'd like to see? Thanks..

Hello, Bill. The requirement for the submission is the completion of the PK bridging studies and the two-year safety studies. And so the PK bridging study is necessary for registration we completed at the end of last year.

So we kind of check that box and it's basically looking at similar MMF exposures to what people would see with TECFIDERA in various states. So that quite straight forward.

The GI tolerability question is really interesting one, because it starts on the continuing with the question, if we had no differentiation is it possible to compete in that market with a similar product as one of only two competitors. We think the answer to that is yes. Our ambitions are greater than that, as you may know.

We've seen in small head-to-head studies, superior GI profile to tech and in the large open-label study that we're running now we're seeing very low GI AE rates. So that's why we're running this head-to-head study that starts next month.

And it's hard to say, we really want to see something that's clinically meaningfully different, right, statistically different, but practically not different, doesn't really help anybody.

So we're really looking to see on those specific domains that patients tend to complain about, which are particularly the nausea, vomiting upper GI pain things like that, but that's where we like to see a really meaningful difference, but we'll wait till we see the dataset..

But I mean I guess it's safe to say, obviously you do need to do the safety study, but the PK data, in your mind, would support the approval on a 505(b)(2), and then ultimately, if there is not a significant differentiation on the tolerability, it's not off the table that Alkermes might go ahead with a – I don't want to say a me too, but it could be something that is similar to TECFIDERA and could compete on various dimensions such as price or something like that..

Precisely, it's not as valuable product, if it doesn't separate on GI, but its value is significantly greater than zero..

Right. Okay. Thanks very much..

$1 billion to $3 billion monopoly in the U.S. right now, so there is room to compete..

Okay. Thanks very much..

You're welcome..

Thank you. We'll now turn it back to Sandy Coombs for closing remarks..

Great. Thank you, everyone, for joining us on the call today. If you have any follow-up questions, please don't hesitate to reach out to us here at the company. Thank you..

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