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

Cameron Allen Bradshaw - Bank of America Merrill Lynch Chris Shibutani - Cowen & Co. LLC.

Good morning and welcome to the Alkermes Plc Second Quarter 2018 Financial Results Conference. 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, Co-Head of Investor Relations. Sandra, you may begin..

Thank you. Welcome to the Alkermes Plc conference call to discuss our financial results and business update for the quarter ended June 30, 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 at 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 report 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 Jim Frates will discuss our financial results, Jim Robinson will share his perspectives on our commercial portfolio, and Richard 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 Frates for a review of our financial results..

Thank you, Sandy, and good morning, everyone. Our strong second quarter results were driven by the solid year-over-year growth of our proprietary products, the continued strength of our base royalty and manufacturing business, and license revenues received during the quarter from Biogen. Let me start with an overview of our key financial highlights.

During the second quarter we generated total revenues of $304.6 million and recorded non-GAAP net income of $45.6 million. In the quarter VIVITROL had net sales of $76.2 million compared to $66.1 million for the same period last year, demonstrating growth of approximately 15%. These results reflect year-over-year unit growth of approximately 16%.

Gross to net adjustments during the second quarter of 49% were consistent with the second quarter of last year. While there may be some variability from quarter-to-quarter, we continue to expect gross to net adjustments to be approximately 50% for 2018.

Sequentially, VIVITROL net sales increased approximately 22% compared to the first quarter with underlying unit growth of 19%. These results reflect a modest increase in inventory in the channel at the end of the second quarter as some customers placed orders ahead of the 4th of July holiday week.

As we exit the first half of 2018 we expect that sequential growth in Q3 will be tempered as this inventory is worked down. However, we expect continued growth throughout the second half of the year and are 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 $33.6 million in the second quarter, an increase of 48% compared to the same period in the prior year and 15% growth sequentially.

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

Moving onto our manufacturing and royalty business. We saw overall revenues of $128.2 million in the second quarter compared to $129.3 million in the second quarter of last year driven by the growth of INVEGA SUSTENNA and partially offset by lower revenues from RISPERDAL CONSTA and the timing of manufacturing for AMPYRA.

Manufacturing and royalty revenues from RISPERDAL CONSTA, INVEGA SUSTENNA, and INVEGA TRINZA were $85.2 million compared to $82.2 million for the same period last year, and we expect that these products will continue to provide important revenue streams for Alkermes into the mid-2020s and beyond.

For AMPYRA and FAMPYRA, we recorded manufacturing and royalty revenues of $19.7 million during the second quarter compared to $25.3 million for the same period last year. Due to the expected generic competition in the U.S. beginning next month, we expect our AMPYRA revenues to be substantially lower in the second half of 2018.

And today, we're reiterating our revenue expectations for AMPYRA and FAMPYRA to be in the range of $40 million to $50 million for 2018. However, any potential delay in generic entry could provide upside to this guidance for the year.

In the second quarter we recorded R&D revenues from our collaboration with Biogen of $17.2 million related to the reimbursement of development expenses for BIIB098. We continue to expect a consistent level of R&D activity around BIIB098 throughout the remainder of 2018.

Also, during the second quarter we received a $50 million payment from Biogen related to our collaboration for BIIB098, of which $48.3 million was recognized as license revenue. In terms of expenses, our total operating expenses for the second quarter of 2018 were $304.7 million compared to $263.4 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.

Sequentially, our investment in SG&A increased slightly compared to the first quarter primarily driven by the onboarding of our new hospital-based sales team and other launch preparations for ARISTADA INITIO which was approved at the end of June.

During the second quarter we also recorded a non-cash charge of $19.6 million related to a decrease in the value of contingent consideration for IV Meloxicam as a result of Recro Pharma's receipt of a complete response letter from the FDA.

While this non-cash charge impacts our GAAP results, we continue to expect 2018 GAAP net loss to be within the range we previously provided. It does not impact our non-GAAP results. Turning to our balance sheet.

We're well-positioned and ended the second quarter of 2018 with approximately $561 million in cash and total investments compared to approximately $542 million at the end of the first quarter.

The change in cash during the quarter was driven primarily by the receipt of the $50 million payment from Biogen partially offset by changes in working capital and capital expenditures. The company's total debt outstanding was approximately $280 million at June 30.

Our business is performing as planned and today we're reiterating our previously provided financial expectations for 2018. As we head into a catalyst-rich second half of the year, we're well-positioned financially to drive value, grow our portfolio of commercial products, and advance our late-stage pipeline.

With that, I'll turn the call over to Jim Robinson for additional context on VIVITROL and ARISTADA..

Thank you, Jim, and good morning, everyone. The solid performance of our proprietary commercial portfolio continues to be a key growth driver for Alkermes. There's a high level of activity across the organization as we evolve and expand our efforts to effectively deploy our resources against the opportunities ahead. So let's start with VIVITROL.

As Jim stated, net sales of VIVITROL during the second quarter were $76.2 million driven by unit growth of 16% year-over-year and 19% sequentially. Through the first half of 2018 we've seen year-over-year unit growth of 18%, in line with our expectations.

VIVITROL has significant potential, and in order to maximize this opportunity we continue to adapt and augment our commercial efforts. We are focused on executing on the opportunities to expand the use of VIVITROL in both the inpatient and the outpatient settings of care as well as improve accessibility and continuity of care for patients.

As previously discussed, the national response to the opioid epidemic is building with more federal funding being distributed to states, policy initiatives being developed and implemented, and important improvements in accessibility to treatment underway in a number of states.

Federal funding continues to be distributed to the states in the form of block grants. Of note, the 21st Century Cures Act passed at the end of 2016 provided approximately $1 billion of funding with an initial tranche of $500 million being distributed to states in mid-2017.

However, it's estimated only 30% of this funding has made its way into the treatment system. Initial disbursements of federal grants are likely being used toward supporting existing treatment programs as well as important investments to establish new treatment infrastructure.

The second tranche of $500 million from the 21st Century Cures Act was also recently distributed to states. Another $1 billion of federal grants from the omnibus spending bill will be made available to states before year end.

Our highest priorities remain working closely with the various states' authorities to encourage the timely distribution of federal funding and the availability of detox services in the local treatment systems and to ensure the accessibility of VIVITROL.

At a state level, we've seen strong growth in a number of states driven by improvements in accessibility to VIVITROL and public policy initiatives. We are particularly encouraged by the growth of VIVITROL in California, Florida, Pennsylvania, and Kentucky.

We also continue to see growth, albeit at lower rates, in some of our largest states following a slowdown in growth in 2017. Overall, we remain committed to our efforts to reshape the treatment paradigm for opioid dependence and address the challenges that patients' face in seeking treatment.

We believe that we are far from achieving the full potential of VIVITROL and continue to be optimistic about the opportunity to better address the needs of patients and drive value. Now turning to ARISTADA. Again, as Jim stated, in Q2 we recorded net sales of $33.6 million which was in line with our expectations.

We continue to gain traction and ARISTADA's market share for new prescriptions in terms of months of therapy in the long-acting aripiprazole market was approximately 26% in June.

This was driven in part by the launch of ARISTADA's two-month dose last year which was 13% of ARISTADA's volume in the second quarter and is the only two-month option on the market. ARISTADA INITIO, our new initiation product, was approved at the end of June and now completes the ARISTADA product family.

ARISTADA is now the first and only long-acting atypical antipsychotic that can be fully dosed on day one, providing patients with up to two months of coverage.

ARISTADA INITIO, in combination with a single 30 milligram dose of oral aripiprazole, is designed to enable initiation of ARISTADA on day one and replaces the need for 21 days of oral supplementation.

We are very encouraged by our customers' positive response thus far, especially key hospitals and health plans as evidenced by the addition of both ARISTADA and ARISTADA INITIO to formulary. We're well-positioned to execute on our launch strategy and bring the value of ARISTADA to patients and healthcare providers.

Finally, in addition to our efforts to maximize the performance of VIVITROL and ARISTADA our commercial teams are currently preparing for our future opportunities with the potential approvals of ALKS 5461 for major depressive disorder and ALKS 3831 for schizophrenia.

Alkermes continues to build a robust commercial organization with capabilities to address challenging disease areas like opioid dependence and other psychiatric conditions affecting patients in all settings of care. We have significant work ahead of us and are excited about our prospects. With that, I'll turn the call over to Richard..

Thank you, both, and good morning, everyone. Our business is based on three discrete elements of value. The first, which you've just heard about, is our base business of growing proprietary commercial products and our partnered royalty and manufacturing business which is expected to generate approximately $1 billion in revenue this year.

The second is our late-stage development pipeline on the cusp of important catalysts. And the third is a significant infrastructure of expertise and capabilities that we built to support a rapidly growing biopharmaceutical company.

We are on the threshold now of important value inflections across the development portfolio and we expect the second half of 2018 to be replete with news flow. With that, let me share a few important updates on the pipeline. I'll start with a brief update on ALKS 5461, our novel opioid system modulator for major depressive disorder.

With a PDUFA date in January, the regulatory review is proceeding on schedule and we were recently informed that our FDA advisory committee meeting is tentatively scheduled for November 1. That is the timing we expected and we're well underway in our preparations for it. The strength of the ALKS 5461 program rests on the totality of the data.

Important new data on the long-term safety, tolerability, and durability of antidepressant effect of ALKS 5461 were recently presented at APA and ASCP. Data from our long-term open label extension study demonstrated durable antidepressant effect with clinical improvement that progressed over a prolonged period of time and was then sustained.

In the study ALKS 5461 was generally well-tolerated and demonstrated an AE profile consistent with that seen in the placebo-controlled studies.

You will continue to see additional publications throughout the course of the year, including manuscripts on the pivotal efficacy studies and the data we've collected that more fully characterize ALKS 5461's safety profile and low risk of abuse potential. Depression is a far more diverse disease than the catch-all diagnostic term may suggest.

Patients, each with their own unique profile, may present with a spectrum of symptoms, and a variety of pharmacological approaches are needed to address the current unmet needs. For the first time in more than 30 years there are new treatments in development that leverage mechanistic pathways outside of the traditional monoamine pathway.

With more than 5 million patients failing to achieve adequate relief of their symptoms, novel treatment approaches are needed, and ALKS 5461 could be an important new option for patients and for healthcare providers. Turning out ALKS 3831, our novel oral atypical antipsychotic for the treatment of schizophrenia.

We designed ALKS 3831 to provide the antipsychotic efficacy of olanzapine while addressing its associated weight and metabolic liabilities. And during the second quarter there were two important developments in the program. In May we presented data supporting new insight into the mechanism of action of ALKS 3831.

New data from pre-clinical studies and a Phase 1 translational medicine study in healthy volunteers provide insight into the role that samidorphan plays in mitigating olanzapine-induced abnormalities on food reward, glucose clearance, and attenuating increases in weight and adiposity.

These data suggest how ALKS 3831 is differentiated from olanzapine in both acute and chronic settings with effects that are appreciated centrally in the brain and in the periphery. This mechanistic understanding of ALKS 3831 provides a strong scientific foundation for the program.

If you haven't had a chance to review the data from that presentation, I encourage you to do so and to visit our website. During the quarter we also completed enrollment of our second Phase 3 study, ENLIGHTEN-2; a six-month head-to-head study evaluating weight gain in patients receiving olanzapine or ALKS 3831.

We're on track to receive top line data from that study in the fourth quarter of 2018. If positive, the data would complete the registration package which is planned for submission in mid-2019.

Next is BIIB098, our novel oral fumarate in late-stage development for relapsing forms of multiple sclerosis that is intended to provide a differentiated gastrointestinal tolerability profile. BIIB098 has been assigned the generic name diroximel fumarate to clearly differentiate it as a distinct molecular entity from dimethyl fumarate.

We're developing this in collaboration with Biogen and we're on track for NDA submission later this year. As Jim mentioned, during the quarter we received a $50 million payment from Biogen.

This was an expected but important milestone in recognition of the profile being demonstrated in the ongoing clinical development program, including the open label safety study as well as Part A of the ongoing head-to-head GI tolerability study versus dimethyl fumarate.

We also recently completed an updated data cut from EVOLVE-MS-1, the ongoing open label long-term safety study that will be included in the NDA.

These safety data from approximately 700 patients, including 500 patients with more than one year of exposure, continue to support BIIB098's safety and GI tolerability profile and reinforce data previously presented at ACTRIMS and AAN with GI adverse event discontinuation rates remaining below 1%.

This safety and tolerability profile coupled with compelling one-year MRI and relapse data presented earlier this year underscore the potential of BIIB098 as a next-generation fumarate with real benefits for patients.

And I'll finish today with an update on ALKS 4230, our novel immuno-oncology candidate where we are making exciting progress and we've decided to expand this program. Our first clinical study of ALKS 4230 has been underway for some time.

When we initiated this Phase 1 study it was designed with two distinct stages, a monotherapy dose escalation stage designed to assess safety and pharmacodynamic markers and to identify the optimal dose of ALKS 4230 which would then be taken into an expansion stage to determine preliminary evidence of efficacy in patients with selected solid tumor types.

Data from the initial dose escalation cohorts have validated our design rationale for ALKS 4230 and demonstrated dose-dependent pharmacodynamic effects on circulating natural killer cells in CD8-positive T cells and minimal and non-dose-dependent effects on immunosuppressive regulatory T cells.

These data are in line with the effector cell expansion one would expect to see with recombinant human IL-2 known as Proleukin, an agent with known monotherapy efficacy and highly durable responses, but without the corresponding effects on Tregs. Treatment-related AEs have been manageable and transient.

We expect to present initial dose escalation data at a medical meeting later this year pending conference acceptance. In order to provide us with maximum flexibility as we pursue the optimal dose of ALKS 4230 in the monotherapy setting, we are going to submit a protocol amendment.

As currently written, the dose-limiting toxicity definitions described in our protocol may be too conservative, and we'll modify them to align with other cytokine-based agents' development.

While this extends our timelines for completion of dose escalation by a few months, we expect to resume dose escalation of ALKS 4230 monotherapy later this year pending agreement with FDA.

When we initiate the expansion cohort, we will assess both safety and objective measures of response in patients with renal cell carcinoma or melanoma, two tumor types where IL-2 therapy has clear evidence of anti-tumor activity.

We believe we are nearing our optimized dose for ALKS 4230 and we're eager to evaluate its efficacy as monotherapy in that expansion stage. In the meantime, based on the profile of ALKS 4230 driving a significant expansion of the desired lymphocyte populations in these initial cohorts, we're accelerating other elements of the development program.

Perhaps most importantly, we will expand our ongoing Phase 1 study to include a new arm evaluating safety and anti-tumor activity of ALKS 4230 in combination with the checkpoint inhibitor pembrolizumab in the coming weeks.

This arm of the Phase 1 study will enroll up to 148 subjects and will assess ALKS 4230 and pembro in certain PD-1-approved tumor types in both refractory and treatment-naïve patients as well as PD-1-unapproved tumor types including colorectal, triple negative breast, ovarian, soft tissue sarcomas and subjects with metastatic non-small-cell lung cancer whose tumors express low or undetectable PD-L1.

In addition to monotherapy and combination evaluation, we also have opportunities to optimize the dosing for ALKS 4230 and we're actively engaging on this front. We'll be submitting an IND for a subcutaneous dosing Phase 1 study in September and we expect to begin dosing in early 2019.

We also plan to evaluate other IV regimens that enable less frequent dosing than our current regimen and would provide greater dosing flexibility in the outpatient setting.

Finally, we also plan to conduct a tumor microenvironment study in patients to more fully characterize ALKS 4230 as monotherapy and its effect on driving infiltration into tumors of select tumor-killing immune cells.

This study will use paired tumor biopsies in patients with refractory solid tumors that are accessible for biopsy, and we expect to initiate it early next year as well. So as you can deduce from the expanded level of activity, the momentum behind this program is building and we're growing increasingly excited about the profile of ALKS 4230.

So I'll end there. This will be a year of unprecedented news flow and activity at Alkermes and we look forward to updating you throughout the year. And with that, I'll turn it back over to Sandy for the Q&A..

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

Thank you. We'll now begin the question-and-answer session. From Bank of America we have Jason Gerberry. Please go ahead..

Hi. This is Cameron Bradshaw on for Jason. Thank you for taking our question. Maybe just two quick ones. First on ARISTADA. I believe in the past you've noticed that about a third of LAI patients start therapy in hospital setting.

I was wondering if you could elaborate a little more on the dynamics within that channel and then how we should be thinking about the pace of uptake given your label expansion. And maybe the second question just on the pipeline. Outside of IL-2, it seems like your portfolio is pretty back end-loaded.

How are you guys thinking about timelines or gating factors for potentially bringing in some new assets? And do you see more potential within kind of the existing areas or would you be interested in some other areas of CNS as well? Thanks..

Go ahead, Jim..

I'll take the ARISTADA question first. So agree, as we mentioned in the past, 30% of starts we believe start in a hospital setting of care. As you know and Jim mentioned we did establish a hospital sales force earlier this year.

We believe that provide us an opportunity to meet with the key institutions and really start to lay the foundation for ARISTADA and ARISTADA INITIO in those hospitals that haven't yet adopted it. We do believe that with ARISTADA INITIO, it provides a significant opportunity to dose patients as we mentioned day one.

So with the initiation dose, one oral tablet of aripiprazole, 30-milligram tablet, and in some cases two months of therapy with ALKS 1064 provides a significant advantage to the patient as well as healthcare professionals to make sure that they're getting coverage from that patient before they're discharged and then they have an opportunity to come back for ongoing care..

And I'll take the second one. You're right.

It's interesting because we do have such a strong late-stage portfolio that we spend most of our time trying to educate investors and analysts on the value of that late-stage pipeline with ALKS 5461 at the NDA stage, ALKS 3831 at pivotal trial stage, ALKS 4230 in development as we just heard, and ALKS 8700 also at the NDA stage.

So the company is incredibly busy processing all these late-stage programs. With that said, we have a very rich and productive R&D engine at this company.

And we haven't spent a lot of time sharing with you work that's been progressing in that domain and you can expect to see more insights into that as we go through the news flow in the second half of the year on the late-stage pipeline. You can start to anticipate that you'll start hearing more about the early-stage pipeline as well..

Great. Thanks, guys..

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

Thank you very much. Good morning. Two questions, one on VIVITROL and the second on ALKS 4230. I appreciate the update there. With VIVITROL, I heard some commentary for the first time about detox efforts being somehow an aspect of driving that business.

Can you comment a little bit further there and to the extent that you can give us any updates on some of the traditional metrics that in the past you've talked about, whether it's the number of treaters, duration of care, what those trends are? Then I have a follow-up question on ALKS 4230 but first on the VIVITROL..

Hi. Morning, Chris. This is Jim Frates. Thanks for the questions. Yeah, I think I would basically just say our continued trends with growth of new prescribers and expansion of the VIVITROL franchise is really you could directly kind of relate that to unit growth, so I think it's steady as she goes there.

It's one of the reasons why we're reiterating guidance. And as you know, detox is an important aspect of starting VIVITROL.

I think as we saw the data last year that's come out on some of the work we did around our ALKS 6428 program and new and now broadly studied and reported on ways to transition people from opioids to being opioid-free and then being able to use VIVITROL, that's been published a lot last year as well so it's been a lot of time educating doctors on that new data..

Great.

And then on ALKS 4230?.

Yeah, ALKS 4230..

Yeah. On ALKS 4230, I appreciate some of the additional details about your plans there. Can you comment specifically about your strategy? I assume that there's no formal relationship with Merck but you're using pembrolizumab; that would be the first one.

And then secondly, what are your expectations for the monotherapy data that you're hopefully going to discuss at the end of the year? Should we be able to see some data that demonstrates some efficacy in the tumor types that you described? Thanks..

Hey. Morning, Chris. It's Rich. Yeah, so the ALKS 4230 program has got a whole lot of momentum right now in a number of different domains.

To begin with so we can get moving fast, we're just going to be purchasing the pembro but we're in discussions with a number of different folks around PD-1 type collaborations, and so you can expect that to evolve as we begin in the clinic and if we're lucky enough to start generating real data on efficacy.

There's a lot of interest in ALKS 4230 as you can imagine. But to get going, we're just going to start as fast as we can. The whole series of different tranches of data that we'll hopefully be able to present over time, the first being just the monotherapy dose escalation data that I referred to.

We've requested a presentation for a meeting later this year and hopefully we'll be accepted for that, so that'll be the first where you'll be able to see the immunological response of ascending doses, the dose proportionality, and the absolute levels that you're seeing of our effect on the circulating cells that we're interested in.

As we move, the combo and monotherapy expansion stages, that'll be data in 2019 where we start seeing our first evidence of efficacy hopefully..

Great. I'll get back into the queue. Thanks for the questions..

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

Hi, (00:29:19) on for Umer. First question is just if you would mind commenting on the dynamic between SUBLOCADE and VIVITROL and whether SUBLOCADE has helped or hurt the franchise. And then secondly, just asking for some color on the new IV dosing regimen for the IL-2 for ALKS 4230.

And just a quick follow-up on that IL-2, if that's all right?.

Sure, sure. I'll just cover – the SUBLOCADE, for those of you who don't know, that's the recently approved once monthly formulation to buprenorphine.

And our view has always been that more medication-assisted treatment, MAT, administered by physicians in the form of injectable medicine is exactly what this field needs as we continue to medicalize and expand treatment for opioid dependence. SUBLOCADE as a commercial phenomenon is still very early in its life. It's not really having an impact on us.

And as we've said all along, the patient that's going to go on to a long-acting partial agonist therapy like a SUBLOCADE is a very different patient that wants to undergo detox and have monthly VIVITROL to prevent relapsed opioid dependence.

So we're a big believer in the medicalization of this market and expanding the medical treatments available to patients to deal with this national epidemic.

On ALKS 4230, recall that the IV dosing regimen that we're using now is intentionally chosen to mimic the dosing regimen that's used with Proleukin to give us an apples-to-apples comparison of the tolerability and the cell expansion that we would see with ALKS 4230, and that's daily IV for five days.

But now as we're establishing the pharmacologic profile, we have the ability to modify that and see whether we can replicate cell expansion with less frequent dosing.

So we have two major approaches, one is the sub-Q formulation that will go into the clinic in relatively short order as well as now beginning to change the periodicity of that IV dosing. And so we'll be looking at both of those..

Great, thank you.

And Rich, just quickly just as you mentioned the sub-Q thing, when is the earliest we might expect to see a sub-Q combo arm study (00:31:26)?.

Well first let's get underway and make sure that we're getting the correct exposures and the right cell expansions, but we would tether that into the development program in 2019, I'm hopeful. But you can see how fast things could begin to change with ALKS 4230.

We moved from the call it proof-of-design or proof-of-concept in terms of the design of this molecule in order to preferentially expand natural killer cells in CD8-positive cells in the circulatory system without a corresponding increase in regulatory T-cell expansion. We're seeing that in a very logical dose-dependent manner.

So now the presumption is if we can mimic what we've seen with higher dose IL-2 with ALKS 4230, we still believe that there's a very strong argument for pursuing monotherapy particularly in those tumor types that have shown that they can respond to IL-2 therapy, namely melanoma and renal cell carcinoma. So the monotherapy path continues now.

Now that we feel like we're in those active doses, we would expect to see immunological as well as disease response in those tumor types. But I think what's changed over the last several months is with recent data in combination with a checkpoint, we're accelerating that piece of it.

And as we start seeing data on that in 2019, hopefully the whole program begins to take on a different profile. Then dosing regimens and various combinations and various business combinations all start coming into focus. So stay tuned for a lot of development in this program over time..

Great. Thank you very much..

You're welcome..

And from Barclays we have Douglas Tsao. Please go ahead..

Hi, this is (00:33:15) on for Doug Tsao. Hi, I just have a quick question on VIVITROL. It just looks like script counts have slowed in recent quarters.

Can you give us a sense of the magnitude of the growth drivers of the increased federal funding and if you could point to any other catalyst? Can you also give us some details around the gross to net of VIVITROL and if this has increased or decreased since 1Q? Thanks very much..

Sure. Good morning, it's Jim. On the gross to net front, I covered that in my remarks but we're at a pretty consistent 49%. That was exactly where we were a year ago, last – a year ago, and last quarter we were at 50%. So the gross to nets are pretty steady.

And as you know, as we've said before the main driver in changes there remains the mix of business between the Medicaid business and the commercial business. So that's been remaining steady. On the script count side, I have to say I disagree with your assessment that they've slowed down.

We've seen 19% growth in units I believe year-over-year, so that's pretty healthy and where we projected. What you may have seen is a slowing growth in how IMS reports those trends, and I think that's really driven by the sample size that IMS or the sample areas that IMS uses.

They're generally retail pharmacies, right? So injectable products like VIVITROL is going to be more heavily weighted to specialty pharmacies. And also, our Federal business is growing nicely with the VA. And I think as we look forward, the growth in VIVITROL is really driven by state-by-state infrastructures.

And as we expand states, Jim mentioned in his remarks we're seeing nice growth in California, Florida, Pennsylvania, Kentucky. And that's going to be our job, is to expand the growth in VIVITROL into more states..

I'll just add one point in terms of the Federal funding question. There is absolutely Federal funding available.

The opportunity, or in some cases the challenge, is ensuring that states are aware that that funding is available, understanding how to apply for that funding and also how to secure it, and then to be able to apply it into a treatment system that actually can help patients.

So that's our opportunity and that's where we focus as Jim was mentioning in terms of expanding at a state-by-state basis. That's what we're doing today and that'll continue to be our activity. It's not as fast I think as we would all like especially from a standpoint of the funding reaching down into a local area.

But we're continuing to work to make sure that the states are aware of it and are able to apply where it can do the most good..

Great. Thanks very much for the color..

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

Hi, guys. Thanks for taking my question and this is Matthew (00:36:07) on for Cory. Just on ALKS 3831, I'm curious what the feedback has been from docs on the potential for metabolic differentiation beyond weight gain.

And on this, are there any metabolic endpoints that you're investigating in your late-stage clinical studies that you believe will be key for demonstrating this?.

Good morning. Yeah, as you can imagine, it's an interesting program because in many ways we're reverse-engineering the mechanism of action for ALKS 3831 with the passage of time because the first observations were empirical, that we simply were attenuating weight gain in animals by co-administration of samidorphan with ALKS 3831.

We had a hypothesis as to why that might be the case, it was essentially driven by the reward system in the brain. But it's fascinating to reveal now both what's happening in the periphery and in the brain by co-administering samidorphan and olanzapine, and those were the data that we saw in that webinar that I encourage people to take a look at.

In terms of approvability, it's really supplemental to the pivotal efficacy studies that are underway of which there are two, the one with the antipsychotic efficacy which we completed last year and the weight study which has a primary endpoint really focused on weight.

So within that study that we call ENLIGHTEN-2 that will read out in the fourth quarter, we really haven't added metabolic parameters per se as primary evidence of efficacy. The efficacy is quite straightforward as defined in that study which is changes in weight at that six-month timeframe head-to-head versus olanzapine.

We really ran the metabolic program in parallel not really on the registration pathway in order to build this intellectual understanding and scientific foundation for the program.

Moving ahead, we're considering whether we might want to run targeted metabolic type studies in patients with schizophrenia to more further elaborate some of these phenomena. But you should think of the registration pathway as being quite straightforward. With the completion of ENLIGHTEN-2, with a positive outcome on the weight, we'll be filing.

And I think the clinicians that we've spoken to are fascinated and it reinforces their belief in why the weight might be different if you were to start to understand mechanistically how that's happening..

Great, thanks. And then just quickly on ALKS 4230. Curious of the protocol amendment for your monotherapy.

Has that (00:38:34) initiation of the pembro combo trial?.

Well the pembro combo arm will start as fast as we can get it up and running because the protocol amendment is going allow us to continue to advance dosing in the monotherapy. And the doses that will start in the combo study will ratchet down a couple dose tiers as we begin the combination studies and begin a separate brief escalation in that arm.

So that's not rate limited by what we're doing on the monotherapy side.

That makes sense?.

Awesome, great. Thanks. Yeah, thanks for taking my questions..

Okay. You're welcome..

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

Great. Thank you, everybody, for joining us on the call this morning. Please don't hesitate to reach out to us with additional questions today. Thank you..

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