Q4 2020 Alkermes Plc Earnings Call

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Greetings and welcome to the Alkermes fourth quarter 2020 financial results Conference call. My name is Rob and I'll be your operator for today's call.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad. Please.

Please note this conference is being recorded.

I will now turn the call over to Sandra Coombs, Vice President of Investor Relations Sandy you may begin.

Thank you good morning, welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter and year ended December 31, 2020 with me today are Richard <unk>.

Yeah, Ian Brown, our Chief Financial Officer, and Todd Nichols, our Chief commercial officer.

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

Our discussions during this conference call will include forward looking statements actual results could differ materially from these forward looking statements. Please see slide two of the accompanying presentation. Our press release issued this morning, and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those.

As expressed or implied in the forward looking statements will be on.

Undertakes no obligation to update or revise the information provided on this call or any accompanying presentation. As a result of new information or future results or developments. After our prepared remarks, we'll open the call for Q&A and now I will turn the call over to Richard.

Thank you Sandy and good morning, everyone hope you're all well.

Let me start by saying in 2020, we demonstrated the resiliency of our organization and our business in response to its historic challenges and we added new scientific financial and governance elements to the Alkermes story.

Against the backdrop of a challenging and shifting environment.

We identified our key strategic priorities and we hold ourselves accountable to execute against them.

We took pride in the fact that our work directly impacted people, whose lives were even more challenged by the pandemic and.

And we were compelled to figure out ways to keep our medicines accessible. So job one was commercial execution for debt patrolling aerostar to support patients and to protect the Companys top line.

As COVID-19 emerged and access to physicians and treatment centers became restricted we.

We adapted our approach to maintain continuity with prescribers to help ensure continued access to treatment.

We developed a hybrid promotional model tailored to each territory combining in person and digital interactions and we expect these adaptations to endure.

The second priority was to advance our R&D programs, keeping our most important programs on track like figuring out ways to continue to advance the program activity. Despite limitations on access to our own laboratories, and the impact of COVID-19 on clinical trial sites around the world.

We were successful in doing that we prepared for a completed the successful Advisory Committee meeting from the body.

Our oral antipsychotic candidate for the treatment of adults with schizophrenia in adults with bipolar one disorder.

We significantly advanced number Luca.

Key milestones for that program.

And we met our goal with the nominating our first clinical candidate from our <unk> inhibitor program.

The third priority focused on the efficient management of the business from a financial and operational perspective.

As the pandemic evolved we modeled a range of potential revenue disruptions it made adaptations to our cost base throughout the year.

<unk>, we announced our value enhancement plan designed to drive growth improve operational and financial performance and enhance shareholder value.

For 2021 were similarly focused in three major areas.

With an explicit goal of revealing in elaborating the value that's embedded in this distinctive company.

First we want to continue to grow our revenue base, we have a substantial and growing top line driven by important medicines that serve patient needs in difficult to treat diseases. The patrol eras data and be married each has a distinctive medicine with its own value proposition. We expect that if approved labelle D will be another important.

And our psychiatry portfolio and a new long term revenue stream for the company.

Second is to demonstrate the value of the R&D investments we've been making.

After being relatively quiet in 2020 in 2021 will reveal more about our efforts and our focus areas of neuroscience and oncology.

This quarter, we will host an investor day to give you a better understanding of these programs and some insights into additional candidates that we expect to emerge.

The third area of focus is on profitability, making good on the commitments we established in the context of our value enhancement plan.

Plan includes a commitment to multi year profitability targets a focus on the companys cost structure exploration of potential strategic opportunities and continued governance enhancements Ian will talk more about that in a minute, but we're excited about the plan. When we think it provides a solid foundation for future valuation growth.

We also announced some important changes to the leadership team at the beginning of this year.

Blair Jackson was appointed to the position of Chief operating Officer, and Ian Brown was appointed to the role of Chief Financial Officer.

They each bring a wealth of experience and institutional knowledge to their new positions and I'm really pleased to have blaring Ian assume these key leadership roles at this pivotal time as we position the company for our next stage of growth.

Vance our commitment to delivering value for all of our stakeholders. So with that as an introduction I'll hand, the call over to Ian for a review of the 2020 results and our 2021 expectations.

That's great. Thank you rich and Hello, everyone.

Just like to kick off by saying, how pleased I am to be assuming the role of CFO at this important time in the company's evolution.

As we focus on value creation and strategic priorities for the company a clear <unk>.

Efficient management of our business from a financial and operational perspective of Paramount and I'm optimistic about our potential to drive meaningful value through these initiatives.

At the end of 2020, we announced the value enhancement plan that established long term profitability targets.

The plan includes a commitment to achieving non-GAAP net income of approximately 25% of the company's total revenues in 2023 and approximately 30% in 2024.

Over the next few years, we expect that our top line will be driven by growth of our diverse portfolio of commercial products and.

We will also focus in parallel on managing the major cost levers within the business our investments in R&D as we seek to replenish on advanced the pipeline the spend that drives the growth of our proprietary commercial products and continued efforts to optimize our infrastructure and overall operating model.

Turning to our financial performance I am pleased with our 2020 results, which demonstrate efficient management of our business in response to the significant disruptions caused by the COVID-19 pandemic.

These efforts underscore our focus on execution and reflect our commitment to driving bottom line growth.

For the year, we generated total revenue of 1.04 billion driven by the strength and resilience of our starter the stabilization of <unk> in the second half of the year and our diverse portfolio of manufacturing and royalty revenues.

From a bottom line perspective, we recorded a GAAP net loss of $110 $9 million on a non-GAAP net income of $68 $6 million.

For purposes of comparison year over year, it's important to remember that our 2019 results included $150 million of revenue related to the approval of <unk>.

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If you exclude this milestone revenue from 2019, non-GAAP net income actually improved by more than $100 million year over year, which again demonstrates our commitment to driving bottom line growth.

For the full year, we recorded <unk> net sales of $310 7 million.

<unk> was adversely impacted by the pandemic and units decreased 8% year over year.

Gross to net adjustments increased to 49, 9% for the year from 48, 3% in 2019.

Rob: Greetings and welcome to the Alkermes fourth quarter 2020 financial results conference call. My name is Rob, and I'll be your operator for today's call. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. I will now turn the call over to Sandra Coombs, Vice President of Investor Relations. Sandy, you may begin.

This was due to an increasing Medicaid population, but was offset in part by favorable adjustments to our sales reserves, which improved net sales by approximately $10 million over the course of the year.

<unk> net sales in the fourth quarter of $80 million were flat sequentially. Despite the increased pandemic related restrictions in the U S. During this time.

Sandra Coombs: Thank you. Good morning. Welcome to the Alkermes Plc conference call to discuss our financial results and business update for the quarter and year ended December 31st, 2020. With me today are Richard Pops, our CEO, Iain Brown, our Chief Financial Officer, and Todd Nichols, our Chief Commercial Officer. Before we begin, I encourage everyone to go to the investor section of Alkermes.com to find our press release and related financial tables, including a reconciliation of the gap to non-gap financial measures that we'll discuss today.

Fourth quarter units were 5% lower than Q3 offset by favorable gross to net adjustments, which decreased to 56% in Q4 from 52, 8% in Q3.

And then a departure from trends in recent years, we saw minimal inventory build at the year end of approximately $1 5 million.

Turning to the average startup product family for the year ARISTOTLE net sales increased 27% year over year to $241 million driven by 30% volume growth.

Sandra Coombs: 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 slides two and three of the accompanying presentation, our press release issued this morning, and our most recent annual and quarterly reports 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.

Gross to net adjustments were 53, 3% for the year compared to 49% in 2019, due primarily to increased Medicaid utilization.

For the fourth quarter, net sales increased 10% sequentially and 21% year over year to $68 9 million.

Sandra Coombs: 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. After our prepared remarks, we'll open the call for Q&A, and now I'll turn the call over to Richard.

Gross to net adjustments increased to 54, 1% in the fourth quarter of 2020 on inventory levels increased by approximately $5 2 million.

This inventory build was somewhat greater than expected and we expect will be worked down during the course of the first quarter of 2021.

Richard F. Pops: Thank you, Sandy. Good morning, everyone.

Moving on to our manufacturing and royalty business.

Richard F. Pops: I hope you're all well. Let me start by saying that in 2020, we demonstrated the resiliency of our organization and our business in response to historic challenges, and we added new scientific, financial, and governance elements to the Alkermes story against the backdrop of a challenging and shifting environment.

For the year, we recorded manufacturing and royalty revenues of $484 million.

Compared to $447 9 million in the prior year.

This increase was driven primarily by continued growth from Invega cisterna as well as revenues from <unk>, which contributed $22 5 million in the year.

Richard F. Pops: We identified our key strategic priorities, and we held ourselves accountable to execute against them. We took pride in the fact that our work directly impacted people whose lives were even more challenged by the pandemic. And we were compelled to figure out ways to keep our medicines accessible. So job one was commercial execution for Vivitrol and Aristata to support patients and protect the company's top line. As COVID emerged and access to physicians and treatment centers became restricted, we adapted our approach to maintain continuity with prescribers to help ensure continued access to treatment. We developed a hybrid promotional model tailored to each territory. Combining in-person and digital interactions, and we expect these adaptations to endure.

In terms of expenses, our total operating expenses in 2020 decreased by nearly $200 million year over year.

R&D expenses for 2020, with $394 6 million compared to $512 8 million for the same period in the prior year.

Now this decrease reflects our efforts to focus our investments in R&D programs, where we see the highest potential return.

In 2019 R&D expenses also included a charge related to the acquisition of Rodin in the fourth quarter of that year of $86 6 million.

SG&A expenses for 2020 decreased to $538 $8 million from $599 4 million in 2019.

Richard F. Pops: The second priority was to advance our R&D program and keep our programs on track by figuring out ways to advance program activity despite limitations on access to our own laboratories and the impact of COVID-19 on clinical trial sites around the world. We were successful in doing that. We prepared for and completed a successful advisory committee meeting for Labalvi, our oral antipsychotic candidate for the treatment of adults with schizophrenia and adults with bipolar 1 disorder.

Reflecting the impacts in 2020 of the 2019 restructuring of Covid and ongoing expense management measures during the year.

Turning to our balance sheet, we ended 2020 with approximately $660 million in cash and total investments up from $614 million at the start of the year, primarily driven by non-GAAP net income and working capital changes, partially offset by capital expenditure of approximately 31 million.

Richard F. Pops: We significantly advanced Membulukan and hit key milestones for that program, and we met our goal of nominating our first clinical candidate from our HDEC. The third priority focused on the efficient management of the business from a financial and operational perspective. As the pandemic evolved, we modeled the range of potential revenue disruption and made adaptations to our cost space throughout the year.

In the year.

The company's total debt outstanding was $275 million at the end of the year, resulting in a net cash position of approximately $385 million.

I'll shift now to our financial expectations for 2021, which are fully outlined in the press release, we issued earlier this morning.

Richard F. Pops: In December, we announced our value enhancement plan, designed to drive growth, improve operational and financial performance, and enhance shareholder value. For 2021, we're similarly focused on three major areas, with an explicit goal of revealing and enhancing the value that's embedded in this distinctive company. First, we want to continue to grow our revenue base. We have a substantial and growing top line, driven by important medicines that serve patient needs in difficult-to-treat diseases. Vivitrol, Aristata, and Bumeridine.

Our expectations assume an improvement of pandemic related conditions in the second half of 2021.

If conditions do not improve as anticipated our ability to meet these expectations could be negatively impacted.

These expectations also reflect anticipated growth of our commercial portfolio and focused investments to both support the anticipated launch of <unk> and advanced the clinical development program from them <unk>.

Of note our expectations do not account for any potential partnerships for <unk> or other strategic opportunities across the portfolio.

Richard F. Pops: Each is a distinctive medicine with its own value proposition. We expect that, if approved, Lebalvy will be another important product in our psychiatry portfolio and a new long-term revenue stream for the company. Second, is to demonstrate the value of the R&D investments we've been making. After being relatively quiet in 2020, in 2021, we'll reveal more about our efforts in our focus areas of neuroscience and oncology. Later this quarter, we'll host an Investor Day to give you a better understanding of these programs and some insights into additional candidates that we expect to emerge.

So with that in mind for the top line, we expect total revenues to be in the range of one one to one $1 7 billion.

For <unk>, we expect net sales in the range of $315 million to $345 million and gross to net adjustments of approximately 54% driven by increased Medicaid utilization.

For <unk>, we expect net sales in the range of $260 million to $290 million.

Richard F. Pops: The third area of focus is on profitability, making good on the commitments we established in the context of our value enhancement plan. The plan includes a commitment to multi-year profitability targets, a focus on the company's cost structure, exploration of potential strategic opportunities, and continued governance enhancement. Iain will talk more about that in a minute, but we're excited about the plan, and we think it provides a solid foundation for future valuation growth.

Reflecting anticipated volume growth slightly offset by gross to net adjustments, which we expect to increase to approximately 55% due again to increased Medicaid utilization.

In line with historical seasonal patterns, we expect our first quarter 2021 proprietary product net sales will be down sequentially to approximately $65 million to $70 million for aristarch from Vishal, excuse me and approximately $50 million to $55 million for arris startup with growth expect.

Richard F. Pops: We also announced some important changes to the leadership team at the beginning of this year. Blair Jackson was appointed to the position of Chief Operating Officer, and Iain Brown was appointed to the role of Chief Financial Officer. They each bring a wealth of experience and institutional knowledge to their new positions, and I'm really pleased to have Blair and Iain assume these key leadership roles at this pivotal time as we position the company for our next stage of growth and advance our commitment to delivering value for all of our stakeholders. So with that as an introduction, I'll hand the call over to Iain for a review of the 2020 results and our 2021 expectations.

To resume in the second quarter.

It is important to note. However that we do expect underlying growth in demand for both products. Despite the lower sequential net sales numbers.

Our expectations for total revenues in 2021 include a modest contribution of up to $10 million of net sales of <unk>. If approved as we plan for a launch in the second half of the year.

And I'll just note now that as we look ahead to next year and the anticipated expansion of our portfolio. We may transition to provide a total proprietary product net sales range in our guidance rather than ranges broken out by specific product.

Iain Michael Brown: That's great. Thank you, Rich. And hello, everyone.

Iain Michael Brown: I'd just like to kick off by saying how pleased I am to be assuming the role of CFO at this important time in the company's evolution. As we focus on value creation, the strategic priorities for the company are clear. Efficient management of our business from a financial and operational perspective is paramount, and I'm optimistic about our potential to drive meaningful value through these initiatives. At the end of 2020, we announced a value enhancement plan that established long-term profitability targets.

In terms of our operating expenses for 2021 cost of goods sold is expected to increase with volumes to a range of $190 million to $200 million.

R&D expenses are expected to be in the range of $400 million to $430 million.

And it is important to note that this range includes a potential $25 million milestone payment related to the submission of an IND or equivalent for Alex 11, 40, the first clinical candidate to emerge from our <unk> inhibitor platform.

Iain Michael Brown: The plan includes a commitment to achieving non-gap net income of approximately 25% of the company's total revenues in 2023 and approximately 30% in 2024. Over the next few years, we expect that our top line will be driven by growth in our diverse portfolio of commercial products, and we will also focus in parallel on managing the major cost levers within the business.

Our R&D expense range also reflects increased investment in <unk> as we advanced the development program as well as continued investment in lifecycle management studies for <unk>.

SG&A expenses are expected to be in the range of $570 to $600 million.

Iain Michael Brown: Our investments in R&D, as we seek to replenish and advance the pipeline. The Spend That Drives the Growth of Our Proprietary Commercial Products and Continued Efforts to Optimize Our Infrastructure and Overall Operating Model. Turning to our financial performance, I'm pleased with our 2020 results, which demonstrate efficient management of our business in response to the significant disruptions caused by the COVID-19 pandemic. These efforts underscore our focus on execution and reflect our commitment to driving bottom-line growth.

This year over year increase reflects our expected staged investment in sales personnel and marketing support for the anticipated launch of <unk>.

Overall, we expect 2021, GAAP net loss to be in the range of $85 million to $125 million.

Iain Michael Brown: For the year, we generated total revenue of $1.04 billion, driven by the strength and resilience of Aristarda, the stabilization of Vivitrol in the second half of the year, and our diverse portfolio of manufacturing and royalty revenues. From a bottom-line perspective, we recorded a gap net loss of $110.9 million and a non-gap net income of $68.6 million. For purposes of comparison year over year, it's important to remember that our 2019 results included $150 million of revenue related to the approval of Bumerati.

And we expect non-GAAP net income to be in the range of $60 million to $100 million.

Now we are committed to achieving the profitability targets set forth in our value enhancement plan.

From a financial perspective, there are a number of ways to achieve them.

Irrespective of the revenue trajectory, however, we will manage costs and drive efficiencies to achieve our targets.

The investments we are making in 2021 are designed to lay the foundation for growth, while maintaining the non-GAAP profitability, we achieved in 2020.

In 2022, we plan to focus on driving operating leverage from our psychiatry business as we establish the launch trajectory for <unk>.

So in conclusion, we entered 2021 and well positioned to execute on our strategic priorities our.

Iain Michael Brown: If you exclude this milestone revenue from 2019, non-GAAP net income actually improved by more than $100 million year-over-year, which again demonstrates our commitment to driving bottom-line growth. For the full year, we recorded Vivitrol net sales of $310.7 million. However, Vivitrol was adversely impacted by the pandemic, and units decreased 8% year over year.

Our diverse commercial portfolio the anticipated launch of <unk> This year and the advancement of our <unk> program provided distinct foundation for long term value creation and I look forward to sharing updates on our progress.

With that I'll hand, the call over to Todd to review our commercial landscape.

Thanks, Ian and good morning, everyone.

Iain Michael Brown: Gross net adjustments increased to 49.9% for the year from 48.3% in 2019. This was due to an increasing Medicaid population but was offset in part by favorable adjustments to our sales reserves, which improved net sales by approximately $10 million over the course of the year. Vivitrol net sales in the fourth quarter of $80 million were flat sequentially, despite the increased pandemic-related restrictions in the US during this time.

By anyone's estimation 2020 was a year marked by unforeseen challenges as the nation and our industry responded to the pandemic.

We believe we have both a responsibility and an opportunity to help address unmet patient need and serious mental illness, and addiction, which has been exacerbated by the pandemic. Our commercial performance last year reflected innovation in debt patient by our team as we supported healthcare providers and help patients maintain <unk>.

Excess to their medications in this difficult environment I am pleased that we ended the year at the high end of our July 2020, net sales guidance ranges from Vishal and Aerostar.

Iain Michael Brown: Fourth quarter units were 5% lower than Q3, offset by favorable growth in net adjustments, which decreased to 50.6% in Q4 from 52.8% in Q3. Additionally, in a departure from trends in recent years, we saw minimal inventory build at the year end of approximately $1.5 million. Turning to the Aristata Products family, for the year, Aristata Net Sales increased 27% year-over-year to $241 million, driven by 30% volume growth. Gross net adjustments were 53.3% for the year compared to 49% in 2019, due primarily to increased Medicaid utilization.

Starting with digital net sales in the fourth quarter were $80 million flat on a sequential basis through the third quarter.

This reflects a continued stabilization following a decline in volume and a spring due to disruptions to the treatment system related to COVID-19.

While many treatment providers have adapted their practices and patient access to injections has improved overall visits all volume remained below last year's Q4 levels with a 14% decline in units year over year in particular, new patient starts and opioid dependence were lower primarily due to reduced access to detoxification.

Iain Michael Brown: For the fourth quarter, net sales increased 10% sequentially and 21% year-over-year to $68.9 million. Gross to net adjustments increased to 54.1% in the fourth quarter of 2020, and inventory levels increased by approximately $5.2 million. This inventory build was somewhat greater than expected, and we expect it will be worked down during the course of the first quarter of 2021. Moving on to our manufacturing and royalty business. For the year, we recorded manufacturing and royalty revenues of $484 million compared to $447.9 million in the prior year. This increase was driven primarily by continued growth from Invegas Astena as well as revenues from Boomerity, which contributed $22.5 million during the year.

<unk> services.

While this trend persisted in the fourth quarter, the environment had improved compared to the height of the pandemic related disruptions in the second quarter is 19 of the top 20 states reflected higher volumes in the fourth quarter as compared to Q2.

In 2021, we are focused on driving adoption of <unk> as a treatment option for alcohol dependence among providers caregivers and patients.

The contribution from alcohol dependence on the indication mix from <unk> has been on an upward trend driven by both increased market share and growth of the category.

The increased prescribing of medications for the treatment of alcohol dependence is indicative of the growing adoption of evidence based standards recommended by entities, such as Samsung The VA and American Psychiatric Association.

Iain Michael Brown: In terms of expenses, our total operating expenses in 2020 decreased by nearly $200 million year over year. R&D expenses for 2020 were $394.6 million compared to $512.8 million for the same period in the prior year. Now this decrease reflects our efforts to focus our investment in R&D programs where we see the highest potential return.

This shift comes at an important time as the incidence of heavy drinking which may be a sign of alcohol dependence increased during the pandemic and as policymakers begin to call for flexibility to use existing funds to treat AED and educate at risk populations on the treatment of <unk>.

In 2021, we plan to increase our focus on driving awareness of <unk> as a treatment option for alcohol dependence and launch programs to maximize the impact we can have in this area of significant unmet need.

We expect 2021 <unk> net sales in the range of $315 million to $345 million.

Iain Michael Brown: And 2019 R&D expenses also included a charge related to the acquisition of Rodin in the fourth quarter of that year of $86.6 million. SG&A expenses for 2020 decreased to $538.8 million from $599.4 million in 2019, reflecting the impact of the 2019 restructuring of COVID and ongoing expense management measures during the year. Turning to our balance sheet, we ended 2020 with approximately $660 million in cash and total investments, up from $614 million at the start of the year, primarily driven by non-GabNet income and working capital changes, partially offset by capital expenditure of approximately $31 million in the year. The company's total debt outstanding was $275 million at the end of the year, resulting in a net cash position of approximately $385 million.

Reflecting our strategy to drive growth in the alcohol dependence indication somewhat offset by continued pressure on new patient starts, particularly in opioid dependence through mid year.

We remain committed to driving awareness of vitriol is utility and believe that it will continue to have an important role to play in the treatment paradigm.

Let me now turn to the Air standard product family net sales in the fourth quarter increased approximately 21% year over year, and 10% sequentially to $68 $9 million.

Reflecting underlying demand growth and the inventory build Ian mentioned.

Total prescription data for aerostat on the fourth quarter demonstrated strong growth of 16% year over year in terms of months of therapy and outpaced the broader long acting atypical antipsychotic market.

As a result of the pandemic, we have seen some impact prescribing patterns in the long acting antipsychotic space the year over year growth rate of the overall long acting injectable market began to moderate from 13% in Q1 to 5% in Q3 and Q4 as.

Iain Michael Brown: I'll shift now to our financial expectations for 2021, which are fully outlined in the press release we issued earlier this morning. Our expectations assume an improvement in pandemic-related conditions in the second half of 2021. If conditions do not improve as anticipated, our ability to meet these expectations could be negatively impacted. These expectations also reflect anticipated growth in our commercial portfolio and focused investments to both support the anticipated launch of Libolvi and advance the clinical development program for Nemvolucan. Of note, our expectations do not account for any potential partnerships for Nemba-Lukin or other strategic opportunities across the portfolio.

As market research showed that psychiatry healthcare providers made fewer treatment changes in the COVID-19 environment.

In this challenging year, we executed against our aerostar growth strategy with encouraging results.

Patient volume grew four times faster than the market in 2020, and we made strides with increasing our prescriber breadth and depth of utilization.

Our recent market research also indicates that the value proposition of the <unk> two month dose.

Aerostat initiative is resonating with health care providers as evidenced by 50% year over year tier ex growth for the two months sales on a months of therapy basis.

Iain Michael Brown: So with that in mind, for the top line, we expect total revenues to be in the range of $1.1 to $1.17 billion. For Vivitrol, we expect net sales in the range of $315 to $345 million and gross-to-net adjustments of approximately 54% driven by increased Medicaid utilization. For Aristata, we expect net sales in the range of $260 to $290 million, reflecting anticipated volume growth slightly offset by growth to net adjustments, which we expect to increase to approximately 55%, due again to increased Medicaid utilization.

Yeah.

We expect air started 2021 net sales in the range of $260 million to $290 million.

This range reflects our continued emphasis on air side as a differentiated value proposition and assumes a normalization and growth of new patient starts for the overall <unk> class in the second half of the year.

The body or oral investigational anti psychotic designed to offer the efficacy of olanzapine, while mitigating its associated weight gain is under review with the FDA with a <unk> date of June one 2021.

Pending approval and DEA scheduling we are planning for a launch in the second half of 2021.

Iain Michael Brown: In line with historical seasonal patterns, we expect our first quarter 2021 proprietary product net sales to be down sequentially, to approximately $65-$70 million for Vivitrol and approximately $50-$55 million for Aristata, with growth expected to resume in the second quarter. It is important to note, however, that we do expect underlying growth in demand for both products despite the lower sequential net sales numbers. Our expectations for total revenues in 2021 include a modest contribution of up to $10 million in net sales of Libelby, if approved, as we plan for a launch in the second half of the year.

Upon approval of all the we will be launching until a largely generic oral market, but one where branded agents can still be successful juice. This serious unmet needs that remain.

Schizophrenia bipolar disorder patients, commonly cycled through 5% to seven treatment options on average and there are approximately 70000 treatments, which is every month.

The commercial organization that we have built to support Aerostat is also the foundation for the potential upcoming launch of <unk>.

Our psychiatry infrastructure will serve as a platform to drive growth operational leverage and profitability.

Late last year, we implemented a reorganization of the commercial infrastructure to streamline the organization and improve efficiencies.

Iain Michael Brown: And I'll just note now that as we look ahead to next year and the anticipated expansion of our portfolio, we may transition to provide a total proprietary product net sales range in our guidance rather than ranges broken out by specific products. In terms of our operating expenses for 2021, cost of goods sold is expected to increase with volumes to a range of $190 to $200 million. R&D expenses are expected to be in the range of $400 to $430 million.

With approximately 80 full time positions reallocated to support the anticipated launch.

As a result of this reorganization and a hybrid promotional model developed in response to the pandemic, we have reduced the additional resources required to launch a loyalty compared to our prior expectations.

To maximize the launch opportunity we plan to make additional staged investments, adding modest incremental head count in advance on launch and as payer access for <unk> is established in the launch year.

Iain Michael Brown: And it is important to note that this range includes a potential $25 million milestone payment related to the submission of an IND or equivalent for ALKS1140, the first clinical candidate to emerge from our HDAC inhibitor platform.

With this commercial organization, we expect to be competitive in the landscape in terms of both reach and share of voice.

In conclusion in 2021, we are focused on commercial execution, increasing awareness and delivering growth of vishal and aerostar each of our product plays an important role on the treatment paradigm and we have an opportunity to drive increased utilization, particularly against the backdrop of the growing need for serious mental illness and addiction treatments.

Iain Michael Brown: Our R&D expense range also reflects increased investment in Nembulukin as we advance the development program, as well as continued investment in life cycle management studies for Libol. SG&A expenses are expected to be in a range of $570 to $600 million, and this year-over-year increase reflects our expected staged investment in sales personnel and marketing support for the anticipated launch of Libol. Overall, we expect the 2021 gap net loss to be in the range of 85 to $125 million.

And with that I'll turn the call back over to rich.

That's great. Thank you Todd.

You've heard we entered 2021 focused on execution across three domains growing and diversifying our revenues demonstrating the value of our R&D investments and managing the company for growth and long term profitability.

Iain Michael Brown: And we expect non-gap net income to be in the range of 60 to $100 million. Now, we're committed to achieving the profitability targets set forth in our Value Enhancement Plan, and from a financial perspective, there are a number of ways to achieve them.

Each represents an important opportunity for value creation.

Our R&D is focused on developing high value candidates in two key therapeutic areas neuroscience and oncology.

I want to start with the neuroscience side from Nabavi or <unk> 31.

Recall that we received a complete response letter in November which included a request for information relating to lowball the manufacturing.

Iain Michael Brown: Irrespective of the revenue trajectory, however, we will manage costs and drive efficiencies to achieve our target. The investments we are making in 2021 are designed to lay the foundation for growth while maintaining the non-gap profitability we achieved in 2020. In 2022, we plan to focus on driving operating leverage from our psychiatry business as we establish the launch trajectory for Liboliv. So, in conclusion, we enter 2021 well-positioned to execute on our strategic priorities.

Due to the pandemic fda's ability to conduct preapproval inspections is limited and as a result, FDA has increasingly rely on remote records requests in order to complete this reviews, we submitted our response to FDA in December.

Good day classified the Resubmission as a complete class two response and assigned on June the <unk> date, and subsequently requested that we provide additional records related more broadly to the manufacturer of evolving that.

On the class II designation was consistent with FDA has recently issued guidance for industry.

Iain Michael Brown: Our diverse commercial portfolio, the anticipated launch of Libolvi this year, and the advancement of our Nemba-Lukin program provide a distinct foundation for long-term value creation, and I look forward to sharing updates on our progress. And with that, I'll hand the call over to Todd to review our commercial landscape.

L and subsequent records requests were focused only on manufacturing no questions or concerns were raised related to clinical efficacy or safety and no further clinical studies were requested.

We will continue to work closely with the FDA as it completes the review of the NDA and we look forward to bringing <unk> to patients as quickly as possible as you heard from Todd. We believe this is an important medicine that can address a clear unmet need in schizophrenia, and bipolar one markets and enhance our psychiatry franchise.

Todd: Thanks, Iain, and good morning, everyone. By anyone's estimation, 2020 was a year marked by unforeseen challenges. As the nation and our industry responded to the pandemic, we believe we have both a responsibility and an opportunity to help address unmet patient needs and serious mental illness and addiction, which has been exacerbated by the pandemic. Our commercial performance last year reflected innovation and adaptation by our team as we supported healthcare providers and helped patients maintain access to their medications in this difficult environment.

The second development in our neuroscience pipeline is our newest pipeline candidate out to 11 40.

This is the first candidate nominated from our platform a selective <unk> inhibitor compounds.

This is a novel approach designed to increase functional synaptic connections and synaptic integrity in the brain with the potential to be used in a range of clinical settings spanning from rare neuro degenerative and neurodevelopmental conditions to common psychiatric disease.

Todd: I am pleased that we ended the year at the high end of our July 2020 Net Sales Guidance Ranges for Vivitrol and Aerostat. Starting with Vivitrol, net sales in the fourth quarter were $80 million, flat on a sequential basis to the third quarter.

Alps, $11 40 is a small molecule orally bio available compound designed to selectively modulate the co rest H debt complex.

This complex exerts epigenetic control over synapse formation and function in the brain.

Todd: This reflects a continued stabilization following a decline in volume in the spring due to disruptions to the treatment system related to COVID-19. While many treatment providers have adapted their practices and patient access to injections has improved, overall Vivitrol volume remained below last year's Q4 levels with a 14% decline in units year over year. In particular, new patient starts and opioid dependence were lower primarily due to reduced access to detoxification services. Although this trend persisted in the fourth quarter, the environment had improved compared to the height of the pandemic-related disruptions in the second quarter, as 19 of the top 20 states reflected higher volumes in the fourth quarter as compared to Q2.

<unk> has been the critical points of connection and communication between neurons we.

We had very clear goals for selection of a clinical candidate from this platform focused on the appropriate selectivity and brain permeability and evidence of increasing synaptic density and preclinical models and designed to avoid the known potential hematopoietic side effects.

We achieved those goals preclinical with Alex 11, 40 and plan to begin first in human studies this year.

Turning to the oncology side of our business, we've made excellent progress with <unk>, our oral I'm sorry, our novel investigational drug designed to leverage the proven anti tumor effects of the interleukin two pathway.

We've taken a very disciplined stepwise approach to developing nimbleness.

Todd: In 2021, we are focused on driving adoption of Vivitrol as a treatment option for alcohol dependence among providers, caregivers, and patients. The contribution from alcohol dependence and the indication mix for Vivitrol has been on an upward trend, driven by both increased market share and growth of the category. The increased prescribing of medications for the treatment of alcohol dependence is indicative of the growing adoption of evidence-based standards recommended by entities such as SAMHSA, the VA, and the American Psychiatric Association.

Our first objective was to confirm the validity of the likelier designed by demonstrating clinical Pharmacodynamic response as measured by dose dependant selective expansion of NK and CDA positive T cells.

With minimal and non dose dependent changes in peripheral regulatory T cells.

We achieved that in our first first I'm sorry in our intravenous protocol, which was called artistry, one and launched our subcutaneous protocol called artistry two.

Next we wanted to establish the immunological response, we were observing translated into antitumor activity.

Todd: This shift comes at an important time as the incidence of heavy drinking, which may be a sign of alcohol dependence, increased during the pandemic, and as policymakers begin to call for flexibility to use existing funds to treat AUD and educate at-risk populations about the treatment of AUD.

That was the major cash.

Accomplishment in 2020.

Artistry, one we observed single agent activity with intravenous nimble lucan in melanoma and more recently in renal cell carcinoma.

Todd: In 2021, we plan to increase our focus on driving awareness of Vivitrol as a treatment option for alcohol dependence and launch programs to maximize the impact we can have in this area of significant unmet need. We expect 2021 Vivitrol net sales in the range of $315 to $345 million, reflecting our strategy to drive growth in the alcohol dependence indication, somewhat offset by continued pressure on new patient starts, particularly in opioid dependence, through mid-year. We remain committed to driving awareness of Vivitrol's utility and believe that it will continue to have an important role to play in the treatment paradigm. Let me now turn to the Aristotle product family.

These represent the two indications for which recombinant human IL two has approved.

Demonstrating single agent activity is an important and in our view essential milestone for the program.

We've also observed durable and deepening responses in combination with <unk> in multiple tumor types, including PD, one PD L. One unapproved tumor types.

Across the artistry one study nimble Luca has demonstrated a safety profile generally consistent with the anticipated effects of cytokine therapy with transient fever, and chills being as being the most frequently observed adverse events in both the monotherapy and combination cohorts.

We're now focusing the program on an initial potential registration pathways in the monotherapy.

Todd: Net sales in the fourth quarter increased approximately 21% year-over-year and 10% sequentially to $68.9 million, reflecting underlying demand growth and the inventory build Iain mentioned. Total prescription data for Aristide in the fourth quarter demonstrated strong growth of 16% year-over-year in terms of months of therapy and outpaced the broader, long-acting, atypical antipsychotic market. As a result of the pandemic, we have seen some impact on prescribing patterns in the long-acting antipsychotic space. The year-over-year growth rate of the overall long-acting injectable market began to moderate from 13% in Q1 to 5% in Q3 and Q4. Market research showed that psychiatric health care providers made fewer treatment changes in the COVID environment.

Therapy setting we're focused on mucosal melanoma mucosal melanoma is considered a particularly aggressive form of melanoma and often not discovered until an advanced stage treatment options are very limited.

In combination with <unk>, we're going to pursue platinum resistant ovarian cancer. Another area of unmet need with limited treatment options, we plan to engage with FDA to advance our registration plans to initiate studies this year.

Then finally, we will look to broaden the program to capture the full medical and economic value of the product.

We're now in the process of identifying and selecting additional tumor types in combination is to pursue in collaboration with others.

As the data set continues to grow we see number Luca as being an asset around which we can collaborate and create value.

Todd: In this challenging year, we executed against our Aristotle growth strategy with encouraging results. Patient volume grew four times faster than the LAI market in 2020, and we made strides with increasing our prescriber breadth and depth of utilization. Our recent market research also indicates that the value proposition of the Aristata two-month dose plus Aristata Initio is resonating with healthcare providers, as evidenced by 50% year-over-year TRX growth for the two-month dose on a month-of-therapy basis.

We are excited about the candidates emerging from our R&D platform.

The threshold for nomination of new candidates has risen as the health care system demands true innovation and focuses on both the economic and the medical value of new medicines.

Addison as need to have new properties representing.

True advances from existing standards of care.

Later this quarter will host an investor day, where we'll share more details about our development programs, including the discovery and preclinical programs that have been advancing in our labs in recent years. The science is compelling and we're looking forward to introducing some of the scientists doing the work and sharing their progress.

Todd: We expect Aristotle's 2021 net sales in the range of $260 to $290 million. This range reflects our continued emphasis on Aristotle's differentiated value proposition and assumes a normalization and growth of new patient starts for the overall LAI class in the second half of the year. Lebovy, our oral investigational antipsychotic designed to offer the efficacy of olanzapine while mitigating its associated weight gain, is under review with the FDA with a PDUFA date of June 1st, 2021.

Taking a step back we are turning the page at Alkermes. The companies has made and the company has made a new commitment to driving profitability in the years ahead, and we've sharpened our focus on value creation across every element of our business. We are disciplined in the investments that we make and focused on our execution.

While the strategic initiatives included in our value enhancement plan to build on the companys previous efforts to optimize our cost structure and focus the business on high value opportunities. The elements of the value enhancement plan, representing a new commitment and are integrated into all aspects of our business. This is a multifaceted and dynamic company and our focus on value creation.

Todd: Pending approval and DEAD scheduling, we are planning for a launch in the second half of 2021. Upon approval of ALVI, we'll be launching into a largely generic oral market, but one where branded agents can still be successful due to the serious unmet needs that remain. Schizophrenia and bipolar disorder patients commonly cycle through 5-7 treatment options on average, and there are approximately 70,000 treatment switches every month.

Will be important guiding principle as the business evolves, so with that I'm going to hand, the call back to sandy to coordinate the Q&A.

Thanks, Richard Rob, we'll now open the call for Q&A. Please.

Todd: The commercial organization that we have built to support Aristotle is also the foundation for the potential upcoming launch of LaVauve. Our psychiatric infrastructure will serve as a platform to drive growth, operational leverage, and profitability. Late last year, we implemented a reorganization of the commercial infrastructure to streamline the organization and improve efficiency, with approximately 80 full-time positions reallocated to support the anticipated launch. As a result of this reorganization and a hybrid promotional model developed in response to the pandemic, we have reduced the additional resources required to launch the lobby compared to our prior expectations.

Thank you Sandy.

I'll now be conducting a question and answer session.

I actually wanted to ask a question. Please press star one from your telephone keypad and a confirmation tone will indicate your line from the question queue.

Fresh start to if you would like to remove your question from the queue.

For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

In order to allow as many as possible to ask questions. Please limit yourself to one question and one follow up.

Our first question comes from the line of Emil Devan with Mizuho. Please proceed with your questions.

Great. Thanks.

Thanks for taking the questions.

Maybe first on your guidance I do like the detailed product level guidance you provide it sounds like we may not be getting that much longer but in terms of total sales and also the guidance from him telling you or Scott on the ranges you gave this year look on.

Todd: To maximize the launch opportunity, we plan to make additional staged investments, adding modest incremental headcount in advance of launch and as payer access for Livalvy is established in the launch year. With this commercial organization, we expect to be competitive in the landscape in terms of both reach and share of voice. In conclusion, in 2021, we are focused on commercial execution, increasing awareness, and driving growth for Vivitrol and Aerostat. Each of our products plays an important role in the treatment paradigm, and we have an opportunity to drive increased utilization, particularly against the backdrop of the growing need for serious mental illness and addiction treatment. And with that, I'll turn the call back over to Rich.

Wider than what you've done in the past. So maybe can you just talk a little bit about why the wider ranges and a little more on your assumptions around those ranges, especially I guess in terms of recovery from the pandemic as you go through the year and patients' ability to access those two products and then on 42 30.

Okay. Thank you said I mean, you've maintained your debt.

Discussion on the FDA I think you said you hope to start Registrational trials. This year can you just confirm the net that's what you said is that already sort of baked into your guidance. So on.

On the R&D side and those will begin at some point in.

Richard F. Pops: That's great. Thank you, Todd. So, as you've heard, we entered 2021 focused on execution across three domains, growing and diversifying our revenues, demonstrating the value of our R&D investments, and managing the company for growth and long-term profitability. Each represents an important opportunity for value creation.

2021.

<unk>, it's rich I'll, let <unk> handle the guidance stuff I'll just take that last question first which is yes, we do plan to start a registration studies in both crop and then.

Melanoma this year.

Yes, Hi, Im also just on your question around guidance.

Richard F. Pops: Our R&D is focused on developing high-value candidates in two key therapeutic areas, neuroscience and oncology. I want to start with the neuroscience side, Livaldi, or ALCS3831. You'll recall that we received a complete response letter in November which included a request for information relating to Libavi Manufacturing.

As you know we went with wider ranges and I think you answered. The question really is really just around that COVID-19 uncertainty certainly in the first half of the year. We did say that one of our key assumptions as we put the guidance together was that we did see things turning back to a little bit more of a normal state in the second half of the year. So just to provide a little bit on.

Richard F. Pops: Due to the pandemic, FDA's ability to conduct pre-approval inspections is limited, and as a result, FDA has increasingly relied on remote records requests in order to complete its reviews. We submitted a response to FDA in December. FDA classified the resubmission as a complete Class 2 response and assigned a June 1st PDUFA date, and subsequently requested that we provide additional records related more broadly to the manufacturer of Levavir The Class 2 designation was consistent with FDA's recently issued guidance for industry. The CRL and subsequent records requests focused only on manufacturing.

Leeway, we widened the guidance ranges.

We did talk obviously about a slightly lower Q1, which we've seen in the last couple of years for both Vishal on ARISTOTLE. So thats a typical seasonal pattern, but we expect continued growth in Q2 and beyond.

So that's really what drove the wider range is just the uncertainty around the COVID-19 certainly in the first half of the year.

Thank you.

Question is from the line of <unk> with Stifel. Please proceed with your question.

Richard F. Pops: No questions or concerns were raised related to clinical efficacy or safety, and no further clinical studies were requested. We'll continue to work closely with the FDA as it completes its review of the NDA, and we look forward to bringing Leval-V to patients as quickly as possible. As you heard from Todd, we believe this is an important medicine that can address a clear, unmet need in the schizophrenia and bipolar I markets and enhance our psychiatry franchise.

Yeah, Hey, this is <unk> on for Paul Thanks, So much for taking the question.

Can you talk a little bit about on the 3831, how you expect the cash.

<unk> of reimbursement to go in the second half post launch.

Yes, absolutely I'll take that as well so.

First thing I'd say is we're really excited about this.

As you are in my prepared remarks, and then also from what rich said as well there is a significant unmet need in this category.

Richard F. Pops: The second development in our neuroscience pipeline is our newest pipeline candidate, ALCS1140. This is the first candidate nominated from our platform of Selective HDAC Inhibitor Comp. This is a novel approach designed to increase functional synaptic connections and synaptic integrity in the brain with the potential to be used in a range of clinical settings, spanning from rare neurodegenerative and neurodevelopmental conditions to common psychiatric disease. OX1140 is a small molecule, orally bioavailable compound designed to selectively modulate the CoREST HDAC complex. This complex exerts epigenetic control over synapse formation and function in the brain, synapse being the critical points of connection and communication between neurons.

All right.

To date, we've had.

<unk> 50 interactions with payers.

Getting prepared for an eventual launch and the feedback has been very consistent from what you've heard from us in the past that they believe that will continue to compete in a branded space.

There's three categories with those Medicaid Medicare and commercial and typically in a launch market access will evolve over the first 12 to 18 months and that's our planning scenario. So we do know that there is going to be some restrictions at launch every product in this category has restrictions. So we do that we do know that there is going to be some REIT.

Frictions in the form of Ta and step edits and we're preparing for that so as we get closer to launch.

Richard F. Pops: We had very clear goals for selection of a clinical candidate from this platform, focused on the appropriate selectivity and brain permeability and evidence of increasing synaptic density in preclinical models and designed to avoid the known potential hematopoietic side effects. We achieved those goals preclinically with ALCS 1140 and plan to begin first in human studies this year. Turning to the oncology side of our business, we've made excellent progress with Nemvolucan, our oral, I'm sorry, our novel, investigational drug designed to leverage the proven anti-tumor effects of the Interleukin-2 pathway. We've taken a very disciplined, step-wise approach to developing the product.

Sorry to be a little bit more clear and specifically in the launch here in the first 18 months it will be a lot more clear on what our launch profiles in terms of access looks like.

Great. Thanks, so much.

Our next question is from the line of Brandon Folkes from Cantor Fitzgerald. Please proceed with your question.

Hi, Thanks, taking my question.

Maybe just sort of on Vivek troll.

And then.

H study.

Yes.

Yeah.

Ken.

For phentermine use disorder.

I found it very interesting can you maybe help us just think about the potential for <unk>.

Commercial opportunity around this.

Richard F. Pops: Our first objective was to confirm the validity of the molecular design by demonstrating clinical pharmacodynamic response as measured by dose-dependent selective expansion of NK and CD8-positive T cells, with minimal and non-dose-dependent changes in peripheral regulatory T cells. We achieved that in our first, first, I'm sorry, our intravenous protocol, which is called Artistry 1, and launched our subcutaneous protocol called Artistry 2. Next, we wanted to establish that the immunological response we were observing translated into anti-tumor activity. That was a major accomplishment in 2020.

Given that there's no.

Current approved FDA treatments is this something you think if it was approved on both.

Market would get fast uptake or do you think that it's probably going to be a little bit like alcohol, where you're changing sort of the whole treatment paradigm and takes a little bit of time.

Yes, thank you very much.

Good morning, Hey, Brandon, it's rich I'll, let I'll answer that for you.

I'm actually quite excited about the data debt.

The study was called adapt to it was published in the New England Journal last month at <unk>.

Following the adapt one which was the first indication that the combination of all.

Richard F. Pops: In Artistry 1, we observed single agent activity with intravenous nebulocan in melanoma and, more recently, in renal cell carcinoma. These represent the two indications for which recombinant human IL-2 is approved. Demonstrating single-agent activity is an important and, in our view, essential milestone for the program. We've also observed durable and deepening responses in combination with pembrolizumab in multiple tumor types, including in PD-1, PD-L1, and unapproved tumor types. Across the Artistry 1 study, NEMBALUCAN has demonstrated a safety profile generally consistent with the anticipated effects of cytokine therapy, with transient fever and chills being the most frequently observed adverse events in both the monotherapy and combination cohorts.

The patrol.

And Bupropion could have some effect in the treatment of methamphetamine use disorder. As you said there are no treatments for stimulant stimulant use disorders and in many parts of the country and you guys know we're on the front lines of this 50 states. Many communities methamphetamine has supplanted opioids as the principal addictive risk in the community.

So there are no treatments and the data are or it's not a cure all it doesn't it doesn't work for everybody, but it certainly is a therapeutic approach using two well known FDA approved agents.

And our new regimen for vitriol actually administered once every three weeks in combination with appropriate on.

The investigators we've spoken to they are quite quick.

Excited about the data now the limitations from us from a commercial standpoint is if it's not on the label.

Richard F. Pops: Focusing the program on Initial Potential Registration Pathways, in the monotherapy setting, we're focused on mucosal melanoma. Mucosal melanoma is considered a particularly aggressive form of melanoma and is often not discovered until an advanced stage.

So.

What we'll do is we plan to have an interaction with FDA and talk about debt and.

So our argument being that it would make sense for us to be able to talk about it both the safety and the efficacy dosimetry and whatnot as.

Richard F. Pops: Treatment options are very limited. In combination with pembrolizumab, we're going to pursue platinum-resistant ovarian cancer, another area of unmet need with limited treatment options. We plan to engage with FDA to advance our registration plans and initiate studies this year. Then, finally, we'll look to broaden the program to capture the full medical and economic value of the product. We're now in the process of identifying and selecting additional tumor types and combinations to pursue in collaboration with others.

As the people on the front lines, providing the medicine I don't know, whether it will be successful with that or not.

It's not baked into any of our expectations for 2021 or beyond I consider that to be upside, but I do believe that there is.

There is an unmet need it would require as you said nothing happens quickly in addiction and would require a reconsideration of how patients flow into treatment and are treated with <unk> intending to use disorder, but I think it's indicative of the of the broad potential debt dividual represents across opioids alcohol and.

Richard F. Pops: As the data set continues to grow, we see Nemva Lucan as being an asset around which we can collaborate and create value. We are excited about the candidates emerging from our R&D platform. The threshold for nomination of new candidates has risen as the healthcare system demands true innovation and focuses on both the economic and the medical value of new medicine. Medicines need to have new properties that represent True Advances from Existing Standards of Care.

The other indications and Todd if you have any other any comments. Please yes, absolutely Richard the only think that I would that I would add to that is if you look at the data that debt is produced through Samsung They estimate about 2 million patients.

Suffer from NASA and set a main use disorder. So.

It is a significant unmet need in the marketplace.

Thank you.

Next question is from the line of Cory <unk> with Jpmorgan. Please proceed with your questions.

Richard F. Pops: Later this quarter, we'll host an investor day where we'll share more details about our development programs, including the discovery and preclinical programs that have been advancing in our labs in recent years. The science is compelling, and we're looking forward to introducing some of the scientists doing the work and sharing their progress. Taking a step back, we are turning the page at Alkermes. The company has made a new commitment to driving profitability in the years ahead, and we've sharpened our focus on value creation across every element of our business.

Hey, good morning, guys. Thanks for taking my questions two of them for you. So first just wanted to get more clarity on the ball in the comments around their launch in two ways. If the product is in fact approved by the June 1st to do so should we assume launching in July or is it going to be later than that.

Then secondly in oncology and nimble Luke and specifically on the sub Q formulation.

How close do you think you are to the recommended phase II dose there and should we be expecting.

Like a data update in terms of efficacy results at your upcoming Investor day. Thank you.

Richard F. Pops: We are disciplined in the investments that we make and focused on our execution. While the strategic initiatives included in our value enhancement plan build on the company's previous efforts to optimize our cost structure and focus the business on high-value opportunities, the elements of the Value Enhancement Plan represent a new commitment and are integrated into all aspects of our business. This is a multifaceted and dynamic company, and our focus on value creation will be an important guiding principle as the business evolves. So with that, I'm going to hand the call back to Sandy to coordinate the Q&A.

Good morning, Corey good to hear your voice.

Two good questions.

<unk>.

We're planning right now to launch.

Time after the Purdue per day in the second half and there's a lot of logistical issues that go into the launch itself, we want to get through the FDA approval process and then we will give you more we'll give you more precision as we do that.

Nevertheless.

We have we have move.

Moving into the expansion cohort on the on on the weekly we're starting the expansion at the once weekly dose we feel like we've qualified both the once weekly and once every three week dose and we will indeed give you more update on those data.

Sandra Coombs: Thanks Richard. Rob will now open the call for Q&A, please.

Rob: Thank you, Sandy. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

As the year.

A year goes on.

Possibly around <unk>, possibly around our Investor day, we haven't really decided yet but that program is moving full steam ahead.

Okay.

Thank you. The next question is from the line of Marc Goodman with SBB Leerink. Please proceed with your question.

Vamil Devon: In order to allow as many as possible to ask questions, please limit yourself to one question and one follow-up. My first question comes from the line of Vamil Devon with Mizuho. Please receive your question. Great, thanks. Thanks for the questions. So maybe first on your guidance. So I do like the detailed product level guidance you provide. But sounds like we may not be getting that much longer. But

Yeah, Hi, Rich can you talk a little bit about monetizing non core assets, you talked about potentially acquiring an asset to leverage your infrastructure you've talked about partnership discussions for.

On the oncology.

Product business.

As part of this whole.

<unk>.

Vamil Devon: In terms of

Vamil Devon: Total sales and also the guidance from Epidemiology Aristotle, the ranges you gave this year are, you know, a little bit wider than what you've done in the past. So maybe you could just talk a little bit about why, you know, the wider ranges and a little more about your assumptions around those ranges, especially in terms of recovery from the pandemic as we go through the year and our patients' ability to access those two products.

On our restructuring plan and commitment to targets. So I'm just wondering if you could just.

Give us an indication of what's happened so far maybe the timing of all of this should we be expecting anything to be announced in the next six months or whatever and then secondly can you tell us what are you all assuming for the LTI.

Market growth.

For this year, we know what youre thinking about for Aerostar.

Vamil Devon: And then on 40 to 30, which I think you said, you mentioned having a discussion with the FDA, I think you said you hope to start registrational trials this year. Can you just confirm that's what you said? Is that already sort of baked into your guidance? So on the R&D side, that those will begin at some point in 2021. Hey, Valmo, it's Rich.

Good morning, Mark.

Yeah all of those things you listed are things that we're looking at essentially we're trying to say what represents the core essential parts of the business going forward and then everything is not in that in that definition is there or is there a market price.

That is in excess of.

Richard F. Pops: I'll let Iain handle the guidance stuff. But I'll just take that last question first, which is, yes, we do plan to start registration studies in both PROC and in melanoma this year.

Of what we might expect it to be or fair market value that we could monetize in a way and interestingly deep debt includes.

Obviously explicitly 42 30 is not a.

Iain Michael Brown: Yeah, hi, Vamal. So just on your question around guidance, I think, as you know, we went with wider ranges. And I think you answered the question really, it's really just around that COVID uncertainty. Certainly, in the first half of the year, we did say that one of our key assumptions as we put the guidance together was that we did see things turning back to a little bit more of a normal state in the second half of the year.

<unk> is not on out license, where on getting rid of but it's just it's a really strong asset around which to collaborate and offset R&D expense, we think theres tremendous economic potential for it. So we're not going to let it go there are other elements of the R&D portfolio that you guys haven't seen it might be the foundation for our <unk>.

Sensing or collaboration.

So I won't put a timeline around that.

Iain Michael Brown: So just to provide a little bit of leeway, we widened the guidance ranges. We did talk, obviously, about a slightly lower Q1, which we've seen in the last couple of years for both Vivitrol and Aristata. So that's a typical seasonal pattern, but we expect continued growth in Q2 and beyond. So, that's really what drove the wider range is just the uncertainty around COVID, certainly in the first half of the year.

At all on the royalty monetization side interesting in the probably the most valuable royalty stream that we have been married it's also the one that has the least well defined trajectory at this moment as you know it started slowly in 2020, but recent script trends have been have been very positive.

It's absolutely changed its slope. So I think as we move through 2021, and we get a better sense of what the ultimate value could be of the Meredith.

Paul Andrew Matteis: The next question is from the line of Paul Matteis with Stiefel. Please proceed with your question. Yeah, hey, this is Thoron on behalf of Paul. Thanks so much for taking the question. Can you talk a little bit about the 3831 and how you expect the cadence of reimbursement to go in the second half post-launch?

Virtue as a monetization stream of courses that a the royalty is high and.

And B, it's long lived and Scott a lot on patent life side.

I'll, let ian filling any other blanks, but essentially we're basically going back and looking at all those different elements of the business.

Todd: Yeah, absolutely. I'll take that as well.

Yes, and that was very comprehensive Richard.

As you say I think we are actively looking at opportunities across the business.

And we'll obviously announce those as they come to fruition, we wouldn't sort of pre announce anything that we're currently working on.

In terms of the <unk> category, we're assuming this year that that day.

Todd: So the first thing I'd say is we're really excited about this. You know, as I said in my prepared remarks and then also from what Rich said as well, there's a significant unmet need in this category, and to date, we've had approximately 50 interactions with payers. I'm getting prepared for an eventual launch, and the feedback has been very consistent with what you've heard from us in the past, that they believe that we'll continue to compete in a branded space.

And it'll be approximately 7% market growth and Thats really driven of course by.

On Covid related restrictions and also the normalization of patient flow, which were assuming will start in the second half of the year.

Todd: You know, there are three categories with this, Medicaid, Medicare, and commercial, and typically, in a launch, market access will evolve over the first 12 to 18 months, and that's our planning scenario. So we do know that there will be some restrictions at launch. Every product in this category has restrictions, so we do know that there's going to be some restrictions in the form of PAs and step edits, and we're preparing for that.

Our next question comes from the line of <unk> Amin with Jefferies. Please proceed with your question.

Yeah, Hi, guys. Thanks for taking my questions.

Given your market research what do you think is the biggest impediment to adoption for <unk> in the U S and I guess, what do you think.

Is an untapped opportunity for line Bobby.

And from the U S launch and then I guess the second question is are there any opportunities that you could exploit for <unk> ex U S either yourselves or through partnering.

Todd: So as we get closer to launch, it'll start to be a little bit more clear, and specifically in the launch year, in the first 18 months, it'll be a lot more clear what our launch profiles in terms of access look like.

Yeah, So I'll take that as well there is again there is a.

Todd: Great, thanks so much. Our next question is from the line of Brandon Folkes with Cantor Fitzgerald. Please answer their questions.

It's a significant market opportunity is something we're really excited about youre looking at a category north of the <unk>.

Brandon Richard Folkes: Hi, thanks for taking my question. Maybe just sort of on Vivitrol. Unknown Speaker And that NIH study, you know, the crawl and reproach.

The space of about $3 5 billion in sales for schizophrenia and bipolar.

The big opportunity really is the is the churn in the patient population.

Brandon Richard Folkes: for Methamphetamine Use Disorder. You know, I find that very interesting. Can you maybe help us just think about the potential for?

Our research is pretty consistent we've been doing this for a number of years patient cycle through 5% to seven treatment options. That's a leading indicator to say that that you have debt individual treatments for different patients as well when we go deeper into that we see in the neighborhood of about 70.

Treatment of switches or changes every single every single month and so it just tells you that churn that is their debt.

Primary reason is that physicians and patients have to make trade off decisions and they have to make trade off decisions for efficacy versus tolerability versus safety as well and so our research is really consistent with that.

Brandon Richard Folkes: [inaudible] Yeah, thank you very much.

Richard F. Pops: Hey Brandon, it's Rich. I'll answer that for you. I'm actually quite excited about the data. That study was called ADAPT2. It was published in the New England Journal last month.

The opportunity for us with <unk> is really the powerful efficacy that olanzapine offers olanzapine in the U S still commands a 20% share for schizophrenia, and 11% share for bipolar. So we think thats a significant unmet need and also a really big opportunity for revolver and we're very excited.

Richard F. Pops: It followed ADAPT1, which was the first indication that the combination of vivitrol and bupropion could have some effect in the treatment of methamphetamine use disorder. As you said, there are no treatments for stimulant use disorders. In many parts of the country, and you guys know we're on the front lines of this in 50 states, in many communities, methamphetamine has supplanted opioids as the principal addictive risk in the community. So, there are no treatments, and the data are, you know, it's not a cure-all. It doesn't work for everybody, but it certainly is a therapeutic approach using two well-known FDA-approved agents and a new regimen for Vivitrol administered once every three weeks in combination with the purpose.

About that as we said earlier, we're going to we're planning our commercial launch to make sure that we maximize that opportunity and we're going to have the sales force size and structure to reach 80% of the branded marketplace.

We're established in the marketplace. We currently call on about 60% of the prescribers. So we're ready for this this is an opportunity for us where we are going to share should leverage our focus right. Now is really the U S market. That's the biggest opportunity for this brand and also obviously commands the highest price points as well too. So we think it's the most the best diverse.

Richard F. Pops: The investigators we've spoken to are quite excited about the data. Now, the limitations from us from a commercial standpoint are that it's not on the label. So what we'll do is we plan to have an interaction with the FDA and talk about that. And so our argument is that it would make sense for us to be able to talk about it, both the safety and the efficacy, the symmetry and whatnot, as the people on the front lines providing the medicine.

Place for us to play in this marketplace is to stay within the U S for now.

Our next question comes from the line of our cash to work with Wolfe Research. Please proceed with your questions.

Hey, Thanks, so much can you remind us of what the current profitability for Veeva trial in Aerostar, our separately and in a situation, where let's say sales for these products kind of flattened out over the next three to five years, what's kind of the low hanging fruit on the SG&A side that could be cut that would allow you to hit your longer.

Richard F. Pops: I don't know whether we'll be successful with that or not, but it's not baked into any of our expectations for 2021 or beyond. I consider that to be the upside. But I do believe that there is an unmet need. It would require, as you said, nothing happens quickly in addiction. It would require a reconsideration of how patients flow into treatment and are treated for methamphetamine use disorder. But I think it's indicative of the broad potential that Vivitrol represents across opioids, alcohol, and potentially other indications. And Todd, if you have any other comments, please. Yeah, absolutely. The only thing that I would add to that is if you look at the data that.

Term margin targets and then on your 2021 R&D spend can you.

Roughly go over what's your product byproduct spend particularly for your IL two program and then also for your other undisclosed projects. Thank you.

Okay. So let me try and take those in order.

Order I think on the profitability of.

Proprietary products, we haven't provided a detailed P&L street product, but I will tell you vitro continues to be a very profitable product for us on.

Todd: That's produced through SAMHSA. They estimate that about 2 million patients suffer from methamphetamine use disorder. So there is a significant unmet need in the marketplace.

<unk> broken to profitability this year.

Interestingly as you look at the profiles for 2021 as we launch like BOE a day. This is why we start seeing the operating leverage really coming through from a P&L perspective. So some of the cost that was previously being allocated to <unk> and more importantly, our starter is now being absorbed by light bulb. So.

Corey Kasimoff: The next question is from the line of Corey Kasimoff with J.P. Morgan. Please proceed with your questions.

Corey Kasimoff: Hey, good morning, guys. Thanks for taking the questions. There are two of them for you. So first, just.

Corey Kasimoff: I wanted to get more clarity on Livaldi and the comments around their launch in 2H. If the product is in fact approved by June 1st PDUFA, should we assume that it will launch in July, or is it going to be later than that? And then secondly, in oncology and Nimbalucan, and specifically in the sub-Q formulation, how close do you think you are to the recommended phase 2 dose there? And should we be expecting a data update in terms of efficacy results at your upcoming investor day? Thank you. Good morning, Cory.

Average startup becomes incrementally more profitable in 2021 as compared to 2020.

And.

And our LIFO will be will take we know we believe will take a couple of years to break into profitability, obviously dependent upon.

The revenue trajectory.

I think as if sales flatten out and as we look at the SG&A spend I think on the G&A side, we're very focused on keeping G&A spend as flat as possible and in sort of enhancing operational efficiencies within that part of the business sales and marketing we have programs in support of all our proprietary.

Richard F. Pops: Good to hear your voice. It's, uh, it's, uh, two good questions. We're planning right now to launch, some time after PDUCA day in the second half. There are a lot of logistical issues that go into the launch itself.

Products and I think we can modulate some of that spend.

With regard to how those products are doing from a revenue perspective.

Richard F. Pops: We wanna get through the FDA approval process, and then we'll give you more precision as we do that. NEMVA-LUQAN, we have moved into the expansion cohort on the weekly. We're starting the expansion at the once weekly dose. We feel like we've qualified both the once weekly and the once every three weeks dose, and we will indeed give you more updates on those data as the year goes on.

And then in the last.

On the last question with regard to R&D spend in 2021.

Biggest area of spend is going to be <unk>.

And I think from an external perspective, we provide a breakout of our external expenses by program every quarter.

Anticipating an increase in Denver, Lou can interrupt too in the region of about $100 million worth of external R&D spend and then the other two areas of investment significant investment for us would be.

Richard F. Pops: Possibly around ASCO, possibly around our investor day. We haven't really decided yet, but that program is moving full steam ahead. Thank you. The next question is from the line of Mark Goodman with SVB Larynx. Hi, Rich. Can you talk a little bit about monetizing non-core assets, you talked about potentially acquiring an asset to leverage your infrastructure, you've talked about partnership discussions for the oncology, you know, product business, you know, as part of this whole Restructuring Plan and Commitment to Targets. So I was wondering if you could just give us an indication of what's happened so far, maybe the timing of all this, We know what you're thinking about for Aristana. Morning, Mark.

Firstly, the <unk> program, we have a young adult study ongoing and then we have a post marketing commitment with the FDA with regard to our pediatric study.

And then as I mentioned early on.

On the earlier on we do have the advancement of our HVAC platform, which would include a $25 million milestone payment, which we have factored into the guidance that we've issued today. So those would be the three areas of primary focus for the R&D organization in 2021.

Thank you. The next question is from the line of Douglas Tsao with H C. Wainwright. Please proceed with your question.

Hi, good morning, Thanks for taking my questions. Just quickly I think you mentioned that you had had subsequent to the resubmission of the NDA in line policy from interactions with the FDA can you just provide some some sort of color on on what those were or were those related to the same issues.

Marc Harold Goodman: Yeah, all those things you listed are things that we're looking at. Essentially, we're trying to say, you know, what represents the core essential parts of the business going forward, and then everything is not in that definition. Is there a market price that is in excess of that?

And then on the HVAC program I know that there is potential across a number of different indications.

Maybe walk through quickly sort of the selection process and how you anticipate choosing and narrow down the focus thank you.

Richard F. Pops: Unknown Attendee, Chris Shibutani, Akash Tewari, Amy Li, Jessicca Rege, Alkermes Plc. What you guys haven't seen might be the foundation for our licensing or collaboration. And so I won't put a timeline around that at all. On the royalty monetization side, interestingly, probably the most valuable royalty stream that we have is Vimmeri. It's also the one that has the least well-defined trajectory at this moment. As you know, it started slowly in 2020, but recent descriptions have been very positive.

Hey, Doug it's Richard Yeah.

With all the.

And a number of other industry participants have been have been.

Treated similarly in that because the FDA has enabled to conduct pre approval inspections, they've been relying on would be called the 704 records requests. So when we got the CRM elevated assets. One question with respect to some development batches, we answered that question completely in December submission.

And then we just got another list of questions. It would be questions. In August you would get if they were on site doing a pea AI. So.

So the good news is that you can tell the FDA. So far is trying to do this without a pre approval inspection, which which would be good.

So we will continue to answer the questions.

Through this process hopefully within that envelope of the June 1st Stupid day, and as you've heard US mentioned before they did issue a guidance for industry I think in December early January saying that essentially all of these resubmission would be considered a class II resubmission. So it's.

Richard F. Pops: It's absolutely changed its slope. So I think as we move through 2021 and we get a better sense of what the ultimate value could be of Vimmeri, its virtue as a monetization stream, of course, is that A, the growth is high, it's long-lived, and it's got a lot of patent life behind it. So I'll let Iain fill in any other blanks, but basically, we're basically going back and looking at all those different elements of the business.

It's not great for us or for the whole industry, but FDA is trying to deal with the fact that they're trying to protect their inspectorate from going into sites around the country in the midst of Covid. So we'll work our way through that.

The <unk> program is fascinating from a translational medicine point of view.

What your question indicates.

Iain Michael Brown: Yeah, I think that was very comprehensive, Richard. As you say, I think we're actively looking at opportunities across the business. And we'll obviously announce those as they come to fruition. We wouldn't sort of pre-announce.

The idea of Synaptogenesis in snap to function is cross crosses multiple diseases.

So what we're going to our plan and we haven't fully elaborated yet, but our plan will be in the clinic to actually be interrogating a number of different disease states simultaneously in a basket approach using some of.

Iain Michael Brown: Yeah, in terms of the LAI category, you know, we're assuming this year that there will be approximately 7% market growth, and that's really driven, of course, by COVID-related restrictions and also the normalization of patient flow, which we're assuming will start in the second half of the year.

The more advanced Biomarkers.

Look at activity in the brain.

And those range from things like Etsy to a pet.

Two other more traditional EEG or are there other biomarkers.

Beer and Ambien: Our next question comes from the line of Beer and Ambien with Jeffreys. Please proceed with your question. Yeah, hi guys. Thanks for taking my question. Given your market research, what do you think is the biggest impediment to adoption for light balvee in the U.S., and, I guess, what do you think is an untapped opportunity for light balvee? And then, I guess the second question is, are there any opportunities that you could exploit for Libel v. XUS, either yourselves or through partnering?

Our goal would be will be to look for signal.

And we.

We don't think that we will just have one compound that will move into the clinic. As you know we've been also working on the HVAC program, you'll inside as well as.

The <unk> oncology side. So we hope that we're just going to build a foundation of translational medicine as we put these into the clinic. So a long answer to a simple question, but but I think we're going to learn a lot with this first compound Thats why 11 40 was so important to get our first well characterized molecule in demand. So we can begin to really.

Todd: Yeah, so I'll take that as well. There's, again, there's a significant market opportunity, something we're really excited about. You know, you're looking at a category north of, you know, in the space of about three and a half billion in sales for schizophrenia and bipolar. The big opportunity really is the churn in the patient population. Our research is pretty consistent. We've been doing this for a number of years.

<unk>.

Its potential.

Our next question comes from the line of Jason <unk> with Bank of America. Please proceed with your question.

Hey, guys.

Morning, and thank you for taking my questions.

Maybe rich just on on <unk> three O as it pertains to identifying a partner to share in the cost and risk.

Developing across a number of tumors here I'm just wondering.

Todd: Patients cycle through five to seven treatment options. That's a leading indicator to say that you have to have individual treatments for different patients as well. When we go deeper into that, we see in the neighborhood of about 70,000 treatment switches or changes every single month. It just tells you the churn that is there.

Is it safe to assume that Nektar is phase two I'm, sorry phase III data later this year early next year and some of the larger Io markets might be a gating factor to a deal and ensuring that you get the.

Firm R&D funding commitments.

Behind that or.

Yourselves and partners really need to see the applicability of IL, two and some of the settings before committing.

Todd: The primary reason is that physicians and patients have to make trade-off decisions, and they have to make trade-off decisions for efficacy versus tolerability versus safety as well. And so our research is really consistent with that. The opportunity for us with Livalvi is really the powerful efficacy that olanzapine offers. Olanzappine in the U.S. still commands a 20% share for schizophrenia and an 11% share for bipolar

Committing more to investments and then just one point of clarification and sorry, if I missed it but on the on the <unk>.

Your assumption in your guidance that you'd have a DEA controlled or uncontrolled type product.

Good morning, Jason.

On that last bit we expect decontrol, that's what we've been waiting for it.

Sami to orphan as it is an antagonist it's been recommended that set so it's just going through the process with the scheduling so we expect.

Todd: So we think that's a significant unmet need and also a really big opportunity for Livalvi, and we're very excited about that. As we said earlier, we're planning our commercial launch to make sure that we maximize that opportunity. We're going to have the sales force size and structure to reach 80% of the branded marketplace. We are established in the marketplace. We currently call on about 60% of the prescribers. So we're ready

That would be a day schedule drug.

Interestingly on the <unk> question, and we're looking at I actually don't think that debt.

The nektar data are going to be.

This positive as to whether or not we were.

The partner and for a couple of reasons one is debt.

As more and more data emerge.

There's a limited number of people developing these IL two mutants.

Todd: This is an opportunity for us where we are going to show leverage. Our focus right now is really the U.S. market. That's the biggest opportunity for this brand, and it also obviously commands the highest price points as well, too. So we think the best place for us to play in this marketplace is to stay within the U.S. for now.

But there are definitely segregating into their own lanes, they're not interchangeable our drug is very different than than that nektar and strength in a very different and roche's drug very different than anybody else's drugs and in fact, it's the only one that has a couple features one showing clear monotherapy efficacy.

Number two being developed in a subcutaneous format as well.

Akash Tewari: Our next question comes from the line of Akash Tewari with Wolfe Research. Please proceed. Hey, thanks so much.

And showing evidence of activity in these perm bro or PDL, one checkpoint inhibitor unapproved tumor types and monotherapy at the same time so.

Akash Tewari: Can you remind us of the current profitability for Vivitrol and Aristata separately? And in a situation where, let's say, sales for these products kind of flatten out over the next three to five years, what's the kind of low hanging fruit on the SG&A side that could be cut that would allow you to hit your longer-term margin targets? And then, on your 2021 R&D spend, can you roughly go over what your product by product spend is, particularly for your L2 program, and then also for your other undisclosed projects? Thank you.

I think in the cancer World there are companies that care a lot of outside of Karnes and.

They are already they are going on.

I understand the proven efficacy of IL. Two the question has been how do you really have you really teased out the efficacy piece of IL two on left side effect, the principal side effects behind us.

And I think we have an accumulative amount of data and now to answer that question. So I think we're going to be able to to have these discussions and collaborate independent of whatever the result is.

Iain Michael Brown: Okay, so let me try and take those in order. I think about the profitability of proprietary products. We haven't provided detailed P&Ls for each product, but I'll tell you Vivitrol continues to be a very profitable product for us. Aristotle broke into profitability this year, and then interestingly, as you look at the profiles for 2021, when we launched Libolvi, this is where we start seeing the operating leverage really coming through from a P&L perspective.

From from net or anybody else.

Thank you at this time there are no additional questions I will turn the call back to Sandy Coombs for closing remarks.

Great. Thanks, Rob Thanks, everybody for joining us on the call today, Please don't hesitate to reach out to us at the company. If you have any follow up questions. Thank you.

Thank you. This will conclude today's conference. Thank you for your participation you may now disconnect your lines at this time.

Iain Michael Brown: So some of the cost that was previously being allocated to both Vivitrol and, more importantly, Aristotle is now being absorbed by Libolvi. As a result, Aristotle becomes incrementally more profitable in 2021 as compared to 2020. And, you know, Li Bowlby will take, you know, we believe it will take a couple of years to break into profitability, obviously dependent upon the revenue trajectory. I think as sales flatten out and as we look at the SG&A spend, I think on the SG&A side, we're very focused on keeping SG&A spend as flat as possible and sort of enhancing operational efficiencies within that part of the business.

Iain Michael Brown: Sales and marketing, we have programs in support of all our proprietary products, and I think we can modulate some of that spend with regard to how those products are doing from a revenue perspective. And then, and the last question with regard to R&D spend in 2021, our biggest area of spend is going to be Nambalukan. And from an external perspective, we provide a breakdown of our external expenses by program every quarter.

Iain Michael Brown: We're anticipating an increase in Nambalucan in the region of about $100 million worth of external R&D spend. And then the other two areas of investment, a significant investment for us would be, firstly, the LIBALVI program. We have a young adult study ongoing, and then we have a post-marketing commitment with the FDA with regard to a pediatric study. And then, as I mentioned earlier, we do have the advancement of our HDAC platform, which would include a $25 million milestone payment, which we have factored into the guidance we've issued today. So those will be the three areas of primary focus for the R&D organization in 2021.

Douglas Dylan Tsao: The next question is from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your question. Hi, good morning.

Douglas Dylan Tsao: Thanks for taking the questions. Just quickly, I think you mentioned that you had had some interactions with the FDA subsequent to the resubmission of the NDA and LIBALSI. Can you just provide some sort of color on what those were?

Richard F. Pops: Were those related to the same issues? And then on the HDAC program, I know that there is potential across a number of different indications. Just maybe walk through quickly the selection process and how you anticipate choosing and narrowing down the focus. Thank you. Hey Doug, it's Rich.

Richard F. Pops: Yeah, Lodalby, we and a number of other industry participants have been, https://www.youtube.com.uk So when we got the CRL, they asked us one question with respect to some development batches. We answered that question completely in the December submission. And then we just got another list of questions. They would be questions analogous that you would get if they were on site doing a PAI.

Richard F. Pops: So the good news is that the FDA so far is trying to do this without a preapproval inspection, which would be good. So we'll continue to answer their questions through this process, hopefully within that envelope of the June 1st DUPA date.

Richard F. Pops: And as you've heard us mention before, they did issue guidance for industry, I think in December or early January, saying that essentially all these resubmissions would be considered class two resubmissions. So it's not great for us or for the whole industry, but FDA is trying to deal with the fact that they're trying to protect their inspectorate from going into sites around the country in the midst of COVID. So we'll work our way through that.

Richard F. Pops: The HDAC program is fascinating from a translational medicine point of view for, as your question indicates, the idea of synaptogenesis and synaptic function crosses, occurs in multiple diseases. So what we're gonna, and we haven't fully elaborated yet, but our plan will be in the clinic to actually be interrogating a number of different disease states simultaneously in a basket approach using some of the more advanced biomarkers to look at activity in the brain. And those range from things like SV2A PET to other more traditional EEG or other biomarkers.

Richard F. Pops: So our goal will be to look for signals, and we don't think that we'll just have one compound that will move into the clinic. As you know, we've also been working on the HDAC progranulin side as well as the HDAC oncology side. So we hope that we're just gonna build a foundation of translational medicine as we put these into the clinic. So a long answer to a simple question, but I think we're gonna learn a lot with this first compound. That's why 1140 was so important to get our first well-characterized molecule into man so we can begin to really explore its potential.

Jason Matthew Gerberry: Our next question comes from the line of Jason Gerberry with Bank of America. Please proceed with your question. Hey guys, good morning.

Jason Matthew Gerberry: And thank you for taking my question. Rich, just on 4.2.3.0, as it pertains to identifying a partner to share in the cost and risk of developing across a number of tumors here, I'm just wondering if it is safe to assume that Nectar's Phase 3 data later this year, early next year, in some of the larger I.O. markets, might be a gating factor to a deal and ensuring that you get the firm R&D funding commitments behind that, or if yourselves and partners really need to see the applicability of IL-2 in some of these settings before committing more to investments?

Richard F. Pops: And then, just one point of clarification, sorry if I missed it, but on the Volvi, is your assumption in your guidance that you'd have a DEA-controlled or uncontrolled product? Good morning, Jason. On that last bit, no, we expect decontrol. That's what we've been waiting for.

Richard F. Pops: Semidorphin is an antagonist, and it's been recommended as such. So it's just going through the process of de-scheduling. So we expect Novalpi to be a de-scheduled drug. Interestingly, on the 4230 question, I actually don't think that the Nectar data are going to be dispositive as to whether or not we will partner. And for a couple of reasons. One is that, as more and more data emerge, there's a limited number of people developing these IL-2 mutants. But they're definitely segregating into their own lanes.

Richard F. Pops: They're not interchangeable. Our drug is very different from Nectar. Transcribed by https://otter.ai and showing evidence of activity in these PEMBRO or PD-L1 checkpoint inhibitor-unapproved tumor types and monotherapy at the same time. So I think in the cancer world, there are companies that care a lot about cytokines, and they already understand the proven efficacy of IL-2. The question has been, have you really teased out the efficacy piece of IL-2 and left the principal side effects behind?

Richard F. Pops: And I think we have an accumulative amount of data now to answer that question. So I think that we're going to be able to have these discussions and collaborate independent of whatever the result is from NECT or anybody else. Thank you. At this time, there are no additional questions. I will turn the call back to Sandy Coombs for her closing remarks. All right. Thanks, Rob. Thanks, everybody, for joining us on the call today. Please don't hesitate to contact us.

Sandra Coombs: [inaudible]

Rob: Thank you. This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.