Ian Sanderson - Cowen & Co.

Welcome to the Alkermes, fiscal 2010 financial results conference call. My name is John and I’ll be your operator for today’s call. At this time all participants are in a listen-only mode. Later will be a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Ms. Rebecca Peterson. Ms. Peterson you may begin.

Thanks very much John. Good afternoon, and welcome to the Alkermes conference call to discuss our financial results for fiscal year 2010, and our financial expectations for fiscal 2011. With me this afternoon are Richard Pops, Chairman, President and CEO of Alkermes; and Jim Frates, our CFO. Before we begin, let me remind you that during the call today, we will make forward-looking statements relating to among other things, our expectations concerning the commercialization of RISPERDAL CONSTA, VIVITROL, and BYDUREON, our future financial expectations and business performance, our expectations concerning future of the business development transactions, and our expectations concerning the therapeutic value and development product candidates. Listeners are cautioned that these statements are neither promises nor guarantees, but are subject to risks and uncertainties that could change our actual results to differ materially from the results contemplated by these forward-looking statements. You can find a list and detailed description of these and other risks in our Annual Report on Form 10-K, and Quarterly Report on Form 10-Q, as well as in the other periodic reports filed with the SEC under the Securities and Exchange Act of 1934 as amended. We undertake no obligation to update or revise the information provided in the call today. This afternoon, Jim will discuss our fiscal 2010 financial results and outline our expectations for fiscal 2011. Richard Pops will then provide an update on the company. After our remarks we will open up the call for Q-and-A. Now, I’d like to turn over the call to Jim.

Thanks Rebecca. Good afternoon everyone. Fiscal year 2010 was an important year for us, and I think it exemplifies what makes Alkermes unique. We have a strong cash position, recurring cash flows from commercial product sales, disciplined financial management, and a pipeline that will provide the foundation for solid growth going forward. In particular RISPERDAL CONSTA provided revenues approaching $150 million to Alkermes in fiscal 2010. RISPERDAL CONSTA remains a key brand in the antipsychotic space, and because of its long term protection, will remain an important source or revenue for years to come. Building upon the source of revenue, we look forward to adding two entirely new revenue streams later this year, with the anticipated approvals of BYDUREON for type 2 diabetes, and VIVITROL for the treatment of opioid dependence. Our financial strength has enabled us to invest in two new technology platforms, and advance six pipeline candidates just in the last year. As Rich will describe, we selected candidates that we believe are likely to succeed and provide value to patients and physicians in important medical markets such as CNS, reward disorders, opioid induced constipation, and inflammatory disease. We designed our clinical program to rapidly provide information regarding the likelihood of success, and the potential of the drug, and expect key data from there programs before the fiscal year end. Turing to our financial results, overall fiscal 2010 was a solid year financially. Both RISPERDAL CONSTA and VIVITROL achieved record annual sales. During the year the company recorded total revenues of approximately $178 million, at the mid point of our guidance range we provided in November. Specifically revenues were driven by the continued strength of RISPERDAL CONSTA, which grew operationally 11% year-over-year, based on roughly $1.5 million in end market sale. During the fiscal year 79% of RISPERDAL…

Thank you, Jim. I think that fiscal 2010 will be viewed as an infection point in Alkermes history; a year in which we began the transition into a new phase of growth for the company. During the year RISPERDAL CONSTA continued its growth around the world, and we crossed major thresholds for our LinkeRx portfolio, culminated with NDA positions for both BYDUREON and VIVITROL opioid. These are key developments which you may have been prepared for, but I hope I’ve surprised you with the energy and progress we've made in expanding our portfolio of product candidates, and our platform technology. Alkermes scientific brand is back in assembly. This is entirely by design, and it doesn't result form us simply talking about it. It’s the product of clever, proprietary, innovative science, applied to specific high value price development programs, and then moving these programs as rapidly as possible into human clinical studies for proof of concept. We expect the value of this removed focus on our pipeline to become self evident in this new fiscal year. For that reason, fiscal 2011 will be a pivotal year for the company. The news flow this year is unprecedented in our history; expected BYDUREON approval and launch, expected VIVITROL opioid approval and launch. This will turn on two entirely new revenue streams for the company. Data from decisive human study, including ALKS 33 in three separate indications; ALKS 37 for opioid-induced constipation; ALKS 9070, our long acting injectable Aripiprazole in schizophrenia. More development programs emitting from our pack lines, more business development discussions, and possibly if each programs continue to meet their goals, new business yields. All of this is occurring within the framework of the guidance Jim just provided. We have recurring cash flows, a strong cash balance, focused R&D spend, and a…

Thanks Rich. We'll now open it up for Q-and-A.

(Operator Instructions) Your first question comes from Cory Kasimov - JPMorgan, Cory Kasimov – JPMorgan: I have one on CONSTA and then a couple on the guidance. So with CONSTA, can you I guess, talk generally about how Johnson & Johnson ordering patterns have changed for the product now that we are over six months into the launch of the long-acting atypical?

Sure Cory, its Jim. I think we are still seeing J&J get its legs under it to understand where they are heading. We have actually seen orders increase over the last few months, which is a good sign for us, but I think given that we are still early in the going here with two quarters under our belt, we try in our guidance to be conservative, so that’s what we are seeing.

Okay, and then with regard to guidance, two questions. First on the top line, with VIVITROL you are not giving any guidance in terms of the opioid indication, but assuming you get priority review, the PEDUFA here would be right around the same time as the PEDUFA for BYDUREON. So you are providing some top line guidance. Is there something we should be reading into that or is that you want to make sure you actually get the priority review before including this in any sort of top line revenue?

Exactly, I don’t read anything into it, and also that reminds me, I want to make a comment to clarify something Jim said. In our guidance when we made an assumption of January launch of BYDUREON, that was simply for guidance purposes. We were not making any expectations of FDA action that was 15 years of planning exercise. We are literally just still building the models on the VIVITROL opioid, and once we get a sense of the regulatory timing and the scope of the launch activities and our projected uptakes, then we will be give a little bit more guidance, nothing is larger than that.

You are just trying to be more on the conservative side dynamically?

Precisely.

Okay, and then lastly your SG&A guidance of $78 million to $85 million, does that incorporate cost savings from the headquarter relocation and if so how much?

Yes, there is some in their Cory. Most of those cost savings are actually are in the R&D line, and are being offset by additional clinical studies on the new products we have gone forward. So it really is related to that $10 million increase that I mentioned as we prepare for launch of opiates.

Okay, so basically you are not giving in terms of guidance, there is no credit in the top line for the opioid addiction, but you are incorporating to the guidance, the expanse guidance?

Exactly, and again to be conservative, we know that we are going to spend these expenses to prepare for the launch. We don’t exactly know when the timing of the launch is going to be.

Your next question comes from Steve Yoo - Leerink Swann.

Sure, thanks Steve. So there are actually three pieces of BYDUREON revenues that we’ll receive this year. Let me start with the simplest one, which is the $7 million milestone that we will get upon the first commercial sate in the United States. That goes to R&D revenue actually, because from the accounting perspective we have earned that with the R&D work that we have done to date. Secondly, you are going to see, probably the next thing to talk bout is that 8% royalty. Again below 40 million doses sold a year, we are going to be getting an 8% royalty. You’ll see that in our royalty line, so that will be mixed in with RISPERDAL CONSTA royalties, and as I said, just for accounting purposes to use a number, we used the Victoza launch for the first quarter to kind of put a stick in the ground and say what is 8% of that. So that’s the zero to $5 million in royalty line. Then in addition, the one manufacturing component that we have is, we make the polymer. Currently we are the exclusive manufacture of the polymer that goes into BYDUREON, and we’re expecting about $3 million to $ 5 million of revenue associated with that, but it comes through the manufacturing line. That will continue and we’ll have, I would assume a 70% margin on that, which is kind of in-line with the other things we manufacture.

Okay, so I guess if it’s 8% on the royalty, which is fairly straight forward as a fact, can you give us some idea of how to think about like the manufacturing revenue in cogs. I guess if your assuming zero to five, your assuming zero to like 62.5 in sales in the calendar first quarter next year right. Is that the right way to do the math on that?

Yes, divide by 8% and that gets you the ranges.

And I guess, on manufacturing revenue as a portion of BYDUREON sales, is it supposed to stay constant throughout the quarters, or is there some lumpiness associated with that?

Yes, that will be based on when we ship polymer batches to them Steve, and I don’t think you should read anything into those, it’s really too early. As Amylin prepares launch materials and gets the plant going, they obviously buy polymer from us, not all of that will be used for commercial sale. Some of it will be used for preparation of launch stock and things like that, and we’ve already shopped them quiet a bit over time as well, so also clinical supplies to. So the polymer is going to be a steady, but relatively small revenue portion for us going forward. Let me reiterate though as Rick said too; we didn’t feel comfortable putting zero in for BYDUREON royalties given where we are in the regulatory process, but at the same time these aren’t projections that are coming from Lilly or Amylin with any work. They are really just a place holder really for the work that we are all going to do to figure out how this project is going to launch as we get through the end of the year.

Your next question comes from Dave Windley - Jefferies & Co. Dave Windley - Jefferies & Co.: On the revenue guidance, particularly to CONSTA, the components of CONSTA are each basically flat to slightly down with fiscal 2010, and I guess that seems a little inconsistent with J&J’s comments about operational growth rate, and Jim your comments about recent increases in orders. So I just wanted to understand, relative to conservatism and why it would appear that you’re not expecting growth in that revenue contribution?

Sure Dave, RISPERDAL CONSTA last year, it’s the 11% growth that I mentioned in my comments in the overall sales. A couple of things are going on as we know in the world. One being the foreign exchange changes that have happened, and you know 79% of our sales are outside the United States, I mentioned that too. So the dollar has been dropping quiet a lot as we’ve all watched in the last couple of months. Last years rough exchange rate was in the mid $1.30’s. As we sit here today with the numbers that we guided to, it’s $1.25, $ 1.26, so that’s one thing that’s going on. The second thing that’s going on is we’ve all learned since the passage of the healthcare bill, and J&J spoke specifically about it. In the United States there is additional headwinds of higher rebates to government payers, and the various healthcare reform rebates that are going on, which J&J talked about being $0.10 on the dollar in the United States. So I would say, with conservatism on the revenue side and those two impacts of US healthcare reform and the unclear path of the dollar over the next 365 days, that’s why we’re coming out flat. Dave Windley - Jefferies & Co.: Okay, alright, that’s helpful. On the R&D, I was hoping you could walk me through the kind of this year’s actual, minus the savings from the relocation, plus whatever the new amount is to get to your new range. It looks like this year’s numbers are within the range of next years guidance, but you also have some savings I think there that…

Right, and your good to point that out. So we had about $18.5 million of savings from our move, both in expenses last year from depreciation, and some of the move expenses that went through. ]:

Your next question comes from Tom Russo – Barred. Tom Russo – Barred: Could you be anymore specific, the sales reps that your going to look to add for the VIVITROL opportunity and opioid detection. Can you be more specific on when we should expect that to happen?

Sure Tom, the plan is to understand a little bit how things are going with the FDA, because obviously if we win accelerated review we’ll move a little bit faster on that. So I’d say as fast as we would hire them, is probably in our second quarter, and then maybe the quarter after that depending on how the review goes with the FDA and when we hear it. Now we’re talking about sizing it between about 10 to 15 additional reps, on top of the 50 that we have in the field now. So again, I’d say a conservative and measured investment in this, targeted at specific potential writers in the opioid space, and then when we see how it launches, we’ll be able to decide to invest more or not. Tom Russo – Barred: Okay, and then kind of back to guidance, it looked to me like you are guiding about 30% cost of goods for CONSTA manufacturing, and I just wanted to balance that off; is that about right; and is there anything changing there based on the FX and healthcare reform. Do those have any impact on your gross margin for CONSTA?

Yes, I think one of the things that we are seeing obviously, because remember we get paid based on a royalty basis. So if our royalty rate goes down, our expenses won’t go down until our margin will get a little orders. So you’re right, we’re guiding to a few point lower margin this year than we’ve had in the past, but that 70% margin range is what’s implied. Tom Russo – Barred: Okay, and then last question I guess for Richard. With all the data that is coming in the next 12 months or so, and the potential at that point for business development transactions, I’d just be curious if you had any preliminary sort of pre-data conversations with potential partners, just on the opportunities that you are targeting, and potential interest in those therapeutic areas.

As a matter of fact we have, and it’s really important that you do the ground work in advance of having data, so the kind of parties are prepared for that. So absolutely, we have a very active business development effort going on right now; although we are not interested in transacting right now, until we have those data in hand. I’ll just remind you that, we find ourselves in such a strong position, because we have the capital to be able to move as fast as we can, not being rate limited by needing a partner to fund something or provide something to us. So we can move as fast as possible to the human clinical study in proof of concept, and they go back into the business development market place, to receive the prepared counter parties with data in hand. It also gives you this data kind of mid-year in advance. What is the most attractive data that people like to see generated in the early studies? So that’s what we’re up to.

Your next question comes from Scott Henry - Roth Capital.

First on BYDUREON, I don’t know if you’ve clarified this in the past, but do you get paid on the stocking too or is it just sell through to customers? How should we think about the stocking?

Scott, good question, and a net sale is a net sale. We get paid on sales and so I would expect that whatever sales go out the door that Amylin reports we’ll get our 8% royalty on it.

Okay, fair enough. The second question, it’s a little more the biogeneric or bio better business. It can be pretty capital intensive when it comes down to manufacturing those products. I was curious, is your target here to bring them up to an inflection point and to out license or sell those products, or would you ultimately build manufacturing capacity yourself, at least your desire?

It’s really one of the deal attractive features of bid element of our business right now. Because we have Wilmington, which is a large scale Aseptor, G& P manufacturing site in Ohio, we have large scale engineering quality and all those things. So to put in pilot scale biologics manufacturing, given the state of the art currently, with technology for fermentation, it’s really straight forward for us. So we absolutely intend to do the pilot scale manufacturing, have that ported over from the settlement process. Large scale, I think there is an abundance of capacity in the unit as for large scale fermentation now. So we don’t see the need to make large scale investments in that. We really see these follow-on biologics as a golden opportunity for business development and proprietary products that we’re absolutely going to be sharing data with potential partners.

Okay, thank you, that’s helpful. I guess the final question for Jim. The company has laid out a pretty clear thesis on how it maybe very much undervalued. Any thoughts on a share buyback, given your significant cash resources and what I would consider an aggressive financial plan in the past, and I say that as a compliment.

Yes Scott, thank you. We do have $215 million approved. So we have $101 million left to execute on the buyback if we choose to. I think you’ll see us, as we talked about in the past, right now we have one product that’s supporting the company’s growth in RISPERDAL CONSTA. We see that product continuing to grow, and as revenue streams from BYDUREON and VIVITROL opioid get closer, obviously we feel more comfortable using some of that excess cash to deploy in this way that we have before. I think our announcement about repurchasing our notes is actually a very, very important part of that. That’s going to save us $3 million or $4 million as we go forward, and over time we’ve purchased below market, given the issues in the debt markets over the last couple of years. We’ve actually purchased $55 million of those notes below par in the last 18 months or so. So we’ll continue to be strategic on this front, and obviously we’ll update you after we make the purchases.

Your next question comes from Terence Flynn - Lazard Capital Markets.

Just a couple more on VIVITROL. I was wondering, can you give us the amount that you lost on VIVITROL for the year. I think you mentioned it; I just might have missed it.

No, it can be figured out, but it’s actually interestingly exactly what we said and planned for when we did our deal of Cephalon. So we received $11 million from them, and so we had an $11 million loss this year, when you take into account the $5 million of revenue that we recognized in this fiscal year from Cephalon. We brought it down this quarter; as I mentioned it was $2.5 million in this past quarter. So we’re getting it down to smaller amounts and we are committed in our budget going forward to have alcohol at breakeven in fiscal year ’11.

Okay, and then just one more question. When should we expect data from the phase III b opioid dependence trial that you guys are running in healthcare professionals. Is that still coming in some time 2010?

Yes, we should have that data in the second half of the year.

Okay, and then how will that be incorporated into the filing or the waiver I guess, the potential waiver for opioid.

Terence, I wouldn’t expect it to be incorporated in the label. It’s really just to get more information on the specialization population. Operator I think we have time for one more question.

Your final question comes from Ian Sanderson - Cowen & Co. Ian Sanderson - Cowen & Co.: Just a couple of housekeeping; what is the share based compensation expense in Q4?

Let’s see, that was $3.1 million in Q4. Ian Sanderson - Cowen & Co.: Was there any severance expense in the quarter?

No. Ian Sanderson - Cowen & Co.: What was the source of the tax benefit in the quarter?

So they are really two. The main one was because of the stimulus package that was past in the past. We paid A&P and was only been able to offset 90% of our A&P tax with our NOL, so we got to carry forward. In the stimulus bill, they’ve essentially said if your in a loss position this year, you can go back and get a credit for 100% of the A&P that you paid, so that was $3.3 million worth. The other $1.8 million has to do with some benefits that we received because of investment gains that have gone through other comprehensive income, because we are in a loss position and it’s all through FAS-109. Ian Sanderson - Cowen & Co.: Finally Rich, you mentioned the second conclusion on your VIVITROL, which was the commercial opportunity and opioid really is separate and distinct from the alcohol dependant market. So what’s the implication of that conclusion?

I’m not ready to quantify it as yet, and that’s why I’ll say it in a qualitative way. It’s clearly a different set of doctors, it’s clearly a more medicalized condition, and that’s evidenced by the fact that $900 million of the box being sold is the indication in the world right now, but about 700 plus in the US. So in contrast to alcohol, where we had a bit of an evangelical need to convince people to use medicine in combination with psychosocial therapy, on the opioid side it’s much less of a blind adherence to psychosocial therapy as a way to treat an opioid addict. So all this is going into the kind of quantitative work we are doing in trying to figure out what the launch is going to look like.

Great. Thanks everyone for dialing in today, and if you have any subsequent questions, Jim and I will be available after the call. Have a good evening.

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.