`
`Filed by Salix Pharmaceuticals, Ltd.
`Pursuant to Rule 425 of the Securities Act of 1933,
`and deemed filed pursuant to Rule 14a12
`of the Securities Exchange Act of 1934
`Subject Company: Salix Pharmaceuticals, Ltd.
`(Commission File No.: 00023265)
`
`The following is the transcript of the second quarter 2014 earnings conference call of Salix Pharmaceuticals, Ltd.:
`
`Operator: Please stand by, we’re about to begin. Good day, and welcome to the Salix Pharmaceuticals’ Second Quarter Earnings Call.
`Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Mike Freeman. Please go
`ahead.
`
`Michael Freeman: Thank you. Good afternoon. Thank you for joining us today. With me are Carolyn Logan, President and Chief
`Executive Officer; Adam Derbyshire, Executive Vice President and Chief Financial Officer; and Bill Forbes, Executive Vice
`President, Medical and Research and Development and Chief Development Officer.
`Adam will begin the presentation with a review of financial results for the second quarter of 2014. Carolyn will then review
`operations and key highlights for the quarter. And then, we will open up the call for appropriate questions.
`Before I turn the call over to Adam, let me remind you that various remarks that management might make during this conference
`call about future expectations, plans and prospects for the company constitute forwardlooking statements for purposes of the
`Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
`Actual results might differ materially from those indicated by these forwardlooking statements as a result of various important
`factors, including those discussed in our press releases and SEC filings, including our Form 10K for 2013. Specifically, the
`information in this conference call related to projections, development plans and other forwardlooking statements is subject to
`this Safe Harbor.
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`Additionally, today, we will be, as usual, be using both GAAP and nonGAAP measures. We believe these nonGAAP measures
`might provide investors additional relevant information, in part, for purposes of historical comparison. In addition, we use these
`nonGAAP measures to analyze our performance in more detail and with better historical comparability.
`However, you should be aware that nonGAAP measures are not superior to, nor a substitute for, the comparable GAAP
`measures, and these nonGAAP measures might not be comparable to similarly named measures disclosed by other companies.
`Please note that EBITDA is earnings before interest, taxes, depreciation, stockbased compensation expense and amortization.
`The noncash charge in acquisitionrelated contingent consideration, onetime license and salesbased milestones payment, the
`cost of goods stepup for Santarus products and excluding transaction cost related to the Santarus acquisition and the pending
`merger with Cosmo Technologies Limited.
`NonGAAP net income is comprised of EBITDA, adjusted for cash interest expense and interest income, and a provision for
`income taxes based on nonGAAP income before tax. NonGAAP EPS or nonGAAP income per share fully diluted is non
`GAAP net income divided by outstanding shares on a diluted basis.
`With that, let me turn the call over to Adam.
`
`Adam Derbyshire: Thank you, Mike. I will start with the financial results for second quarter ended June 30, 2014. As a reminder, prior
`period results do not reflect the Santarus acquisition.
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`Total net product revenue was $382 million for the second quarter of 2014 compared to $235.4 million for the second quarter of
`2013. Demand for our key products remained very strong in the quarter, with Xifaxan and Apriso prescriptions growing 23%
`and 25%, respectively, from the second quarter of last year.
`However, product revenue for Xifaxan and Apriso was impacted by some inventory destocking in the wholesale channel during
`the second quarter of 2014, although less than the first quarter of 2014. Currently, we expect destocking may continue to a lesser
`degree in the third quarter and normalize in the fourth quarter.
`Gross margin, excluding $54.9 million in amortization of product rights and intangible assets, a $16.2 million stepup in value
`of Santarus inventory in connection with the acquisition, and $5 million in salesbased milestones with 78.2% for the second
`quarter of 2014 compared to 80.2% for the second quarter of 2013.
`The lower gross margin in the second quarter of 2014 was due primarily to the inclusion of sales of Glumetza, which carried
`lower gross margins than our other products. We expect gross margin of approximately 78% for the full year.
`Research and development expenses were $39.2 million for the second quarter of 2014 compared to $45.2 million for the same
`period last year. As a percentage of total net product revenues, R&D expenses declined to 10.3% for the second quarter of 2014
`from 19.2% for the same period a year ago.
`Excluding $8.2 million of transaction and integration costs, selling, general and administrative expenses were $116.7 million
`for the second quarter of 2014 compared to $80.3 million for the same period last year. The increase was mainly due to higher
`personnel cost as a result of doubling our sales force in connection with the Santarus acquisition. As a percentage of total net
`product revenues, SG&A expenses declined to 30.5% for the second quarter of 2014 from 34.1% in the second quarter of 2013.
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`EBITDA for the second quarter of 2014 was $154.7 million compared to our guidance of $152.7 million and $82.2 million for
`the same period last year. For the second quarter of 2014, nonGAAP net income was $120 million, which was in line with our
`guidance.
`As a result of the rise in our stock price between the announcement of our first quarter results and the close of the second quarter,
`the fully diluted share count increased to 75.5 million as compared to our guidance of 74 million shares. Consequently, adjusted
`EPS for the second quarter was $1.59 compared to $0.76 per share, fully diluted, for the same period a year ago.
`GAAP net income for the second quarter of 2014 was $3.3 million or 4 cents per share fully diluted, compared to GAAP net
`income of $21 million or 32 cents per share fully diluted for the second quarter of 2013.
`Turning to the balance sheet. Cash and cash equivalents were $435.3 million at June 30, 2014. We continue to focus on
`optimizing our cash flows to decrease our leverage with the goal of reducing our debttoEBITDA multiple from its current 4.9x
`to 3x within the next couple of years. This is down from 5.7x in early 2014. Additionally, we remain opportunistic with respect
`to business development opportunities.
`Let’s now review our outlook for the third quarter and full year of 2014. We continue to experience considerable positive
`momentum in our business with several important developments realized over the last few months, giving us confidence in our
`ability to deliver growth in product revenue and profitability.
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`We expect total company product revenue for the third quarter of 2014 to be approximately $395 million. EBITDA, excluding
`transaction and integration expenses, are anticipated to be approximately $155 million. We also expect nonGAAP net income
`to be approximately $121 million or $1.53 per share fully diluted. This assumes a cash income tax rate of approximately 6% and
`a fully diluted share count of 79 million shares.
`For the remainder of 2014, we expect revenue to continue to grow as prescription trends for our key products continue to
`demonstrate healthy growth and as the productivity of our digestive disease specialty sales force and expanded
`gastroenterology sales forces continues to ramp.
`Historically, the fourth quarter is typically our strongest quarter, and we are expecting that to be the case this year as well. As
`such, we are reiterating our total net product revenue guidance of $1.6 billion for the full year.
`For the full year, we also continue to expect EBITDA of approximately $650 million, excluding transaction and integration
`cost. We also continue to expect net income, on a nonGAAP basis, for 2014 to be approximately $475 million. Our nonGAAP
`EPS guidance for the full year, however, is expected to be approximately $6.16 per share fully diluted, as we are now assuming a
`higher fully diluted share count of 77 million shares compared to our prior guidance of 75 million shares.
`Our full year guidance continues to assume a cash tax rate of approximately 12%. Because we cannot be certain of the timing of
`the closing of the Cosmo transaction, our 2014 guidance excludes any impact from Cosmo.
`The current annualized run rates based on dollarizing June 2014 prescription data are approximately $712 million for Xifaxan,
`$124 million for Uceris, $159 million for Apriso, $227 million for Glumetza, $108 million for Zegerod, $99 million for
`Moviprep/Osmoprep, $45 million for Relistor and $76 million for Salix’s other products.
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`Long term, we remain optimistic about our business led by our currently marketed products and potential for additional
`indications for rifaximin and Relistor, as well as our new product development opportunities and our pending transaction with
`Cosmo Technologies Limited. Let me now turn the call over to Carolyn.
`
`Carolyn Logan: Thank you, Adam. Since our last earnings call, we continued to see dramatic growth in our business and we’ve had
`one of the most productive periods since the company began commercial operations in 2001. We achieved a number of
`important milestones that enhanced our competitive position and expand our market opportunities.
`During the quarter, we announced our pending transaction with Cosmo Technologies, the combination, which, of course,
`remains subject to regulatory review and other closing conditions, further reinforces our presence in our core gastroenterology
`therapeutic niche, with highly complementary products and creates an efficient corporate structure that should increase our
`profitability, enhance our business development opportunities and accelerate our longterm growth.
`We hope this transaction will close in early to midNovember. We expect the transaction to be modestly accretive in 2016 and
`increasingly accretive thereafter, even before the contribution from any business development we might do in the next few
`years.
`Moving on to business performance in the quarter. As Adam mentioned earlier, demands for our key products, Xifaxan 550,
`Apriso, Uceris and Relistor remained very healthy in the second quarter, posting strong yearoveryear gains in prescriptions. We
`also are very encouraged by the acceleration in prescription growth for these products from the first quarter to the second
`quarter, signaling the positive impact from our new sales force structure.
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`Following the Santarus integration and extensive training, our expanded and restructured sales force is starting to really hit its
`stride. In just 5 months, our digestive disease specialty sales force has made progress in increasing our prescriber base, as well as
`increasing prescription growth.
`We believe we are just beginning to realize the full value of our restructured sales organization. It takes about 6 to 9 months for
`a sales force to reach its full productivity, the impact of which we should see towards the end of this year. This should drive a
`strong fourth quarter and provide us with a lot of momentum as we exit the year and enter 2015.
`On the product development side of the business, there’s been quite a lot of activity for us over the last few months. While we
`briefed you on a few of these developments at our Investor Day last month, let me provide you with a quick update on where we
`stand regarding a few pipeline products.
`In terms of Xifaxan 550 for IBSD, in early July, we announced a statistically significant outcome of TARGET 3 evaluating the
`efficacy of repeat treatment with Xifaxan 550 for irritable bowel syndrome with diarrhea. We’re very excited about being one
`step closer to potentially satisfying the FDA and receiving approval for this indication, which is a very big growth opportunity
`for us.
`The data from TARGET 3 will provide the basis for our response to the March 8, 2011, FDA Complete Response Letter. We
`expect to submit our response by the end of this month, August 2014, after which the FDA will have 6 months to review our
`complete response to their Complete Response Letter.
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`We already have several patents for Xifaxan 550 specifically relating to IBS. And if it is approved for IBS, those patents will be
`listed in the Orange Book, further strengthening our intellectual property around this important product.
`The company continued patient enrollment in its Phase II dose ranging study for rifaximin in SSD, which is being investigated
`for the prevention of complications of liver cirrhosis in subjects with early decompensated liver cirrhosis. We anticipate
`completing the enrollment process by the end of 2014.
`Regarding rifaximin delayedrelease, formerly known as EIR, which is being investigated for the treatment of active moderate
`Crohn’s disease. During the second quarter, we initiated patient enrollment for 2 Phase III, doubleblind, 52week studies
`comparing rifaximin delayedrelease to placebo.
`The studies will assess the efficacy and safety of this product for induction of clinical remission with endoscopic response at 16
`weeks, followed by clinical and endoscopic remission at 52 weeks.
`Moving on to Relistor. We are pleased that in June the FDA Advisory Committee recommended that observational studies be
`conducted on a postmarketing basis.
`In July, the FDA Office of Drug Evaluation III or ODE3 granted Salix’s request that the FDA approve the Relistor subcutaneous
`injection, sNDA, for the treatment of opioidinduced constipation in patients with chronic noncancer pain and directed Salix to
`submit certain information to the Division of Gastroenterology and Inborn Errors Products, also known as DGIEP.
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`On July 25, we submitted the requested information to the DGIEP. We currently expect a 2month review in order to complete
`the label review and agree upon postmarketing commitments and requirements.
`If Relistor subcutaneous injection is approved for the treatment of opioidinduced constipation in chronic noncancer pain, this
`would increase the addressable patient population from 1 million in advanced illness to 11 million patients suffering from
`chronic pain and would expand the potential peak sales opportunity for this product from approximately 137 million to over
`300 million.
`Given this positive development on Relistor subcutaneous, we intend to meet with the FDA as soon as possible to discuss the
`path forward for Relistor Oral for the treatment of opioidinduced constipation in patients with chronic, noncancer pain. The
`approval of the oral formulation should significantly expand the sales potential for our Relistor franchise to approximately $1.3
`billion.
`On July 16, Ruconest received FDA approval for the treatment of acute angioedema attacks in adults and adolescent patients
`with hereditary angioedema. We expect this product to launch in the fourth quarter of this year.
`While we expect potential peak sales for this indication to be approximately $87 million, we’re interested in expanding the
`indication to prophylaxis and possibly investigating the use of RUCONEST to treat acute pancreatitis, which would greatly
`enhance the market opportunity for this drug.
`Lastly, we look forward to receiving a decision from the FDA regarding marketing approval for Uceris rectal foam, that’s our
`budesonide rectal foam, by the PDUFA action date of September 15, 2014. If approved, this product will be the first and only
`budesonide rectal foam in the market.
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`Market research indicates that a foam product is more readily accepted by patients than conventional rectal deliveries. We
`expect potential peak year sales for Uceris rectal foam to be in excess of $150 million.
`In closing, we’ve made tremendous progress in the execution of our strategy, solidifying Salix’s status as a leading US
`gastroenterologyfocused specialty pharmaceutical company and creating opportunities to expand our digestive disease
`expertise into other key specialties.
`Based on the potential of our currently marketed products combined with that of our ongoing product development efforts,
`we’re very excited about Salix’s future prospects and see tremendous opportunity to enhance value for our shareholders. We
`view all of these positive events as catalysts for Salix to amplify its growth in the years ahead.
`With that, let me turn the call over to the operator so we can begin the questionandanswer session.
`
`Operator: Thank you. If you would like to ask a question please signal by pressing star 1 on your telephone keypad. If you’re using a
`speakerphone please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on
`your phone line will indicate when your line is open. Again, press star 1 to ask a question.
`And we’ll go first to Michael Faerm with Wells Fargo.
`
`Michael Faerm: Hi, thank you for taking the question. First question is on the inventory movements this quarter. Could you talk a
`little bit more about what’s causing that and what the expectations are going forward for next quarter and beyond? You know,
`what might start to normalize that and when? And then I have one followup.
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`Adam Derbyshire: Yes. Yes, sure. Frankly, we really don’t know what’s causing it other than, you know, wholesalers are wanting to,
`you know, lower their overall inventories. But what we did is we built into our guidance for third quarter continued softening,
`to a lesser degree, of inventory levels and that normalizing in fourth quarter.
`
`Michael Faerm: And so do you expect the revenues that did not happen in 2Q, do you expect those to sort of come back? Or those —
`are those gone because inventory levels are normalized at the new level?
`
`Adam Derbyshire: Yes, again, we built in some softening of inventory levels into our third quarter guidance. And obviously, we’re
`sticking with our full year guidance of $1.6 billion.
`
`Michael Faerm: Great. And just one followup regarding Cosmo. There’s been a lot of talk lately about potential changes to inversion
`laws that in the event, however, unlikely that may be that happens, what’s your view on the impact that could have on your
`deal, whether in terms of terms of the deal or timing of the deal?
`
`Adam Derbyshire: I wouldn’t expect there to be any impact on the timing of the deal. We’re expecting it to close in early to mid
`November. And obviously, there’s a lot of discussion going on and nothing is concrete at this point in time. So it’s business as
`usual in terms of pushing for a close.
`
`Michael Faerm: And in terms of the terms of the deal? Is there any mechanism for changing up the terms of the deal in case anything
`unfavorable happens with the inversion laws?
`
`Adam Derbyshire: Yes. I mean, we filed the merger agreement. I mean, it’s publicly available, and you will see in there that there are
`some terms in there that if legislation does change, that there are — or there are other factors that occur, then there’s the ability to
`not pursue the agreement.
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`Michael Faerm: Thank you.
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`Operator: We go next to Andrew, excuse me, Andrew Finkelstein with Susquehanna Financial Group.
`
`Andrew Finkelstein: Thanks very much for taking the question. If I could follow up on the inventory a little bit more. You know, I
`know some of these things are difficult to predict, but, you know, maybe you could, you know, share a little bit more perspective
`on what investigation you’ve done with your customers and, you know, where things stand relative to IMA levels.
`I think we discussed, last quarter, you try to keep these products in a pretty tight range of 10 to 12 weeks. You know, and
`looking over, you know, last quarter and this quarter, it seems, you know, that some of these products have come down, you
`know, relative to their run rates, you know, quite significantly.
`I think, you know, seven weeks or so for Xifaxan, you know, many weeks for the purgatives and then, you know, up
`dramatically for Glumetza, you know, maybe by as much as, you know, six months’ worth of inventory.
`So I was hoping you could share a little bit more color on what, you know, on a productbyproduct basis. You know, some of
`them seem to be at very high inventory levels and some quite low. You know, where they individually stand, and then, you
`know, particularly with 3Q for Glumetza, you know, what you’re thinking happens there whether that comes down a lot?
`Thanks very much.
`
`Adam Derbyshire: Yes, sure. I would expect that the Glumetza and Uceris will come down in third quarter. And then, as you can see,
`both with Apriso and Xifaxan, they did come more in line with demand. They didn’t quite get there, but we would expect that
`to continue to become more in line with demand in third quarter and then to normalize in fourth quarter.
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`Andrew Finkelstein: Well, I mean, specifically, where — what’s your sense of how much inventory is in the channel at this point? Is
`it within your contractual ranges or not?
`
`Adam Derbyshire: Well, we don’t have IMAs. We don’t have any contracts.
`
`Andrew Finkelstein: Okay. So you have nothing — so your 10 to 12 weeks are noncontractual? It’s just your goal?
`
`Adam Derbyshire: Correct.
`(Crosstalk)
`
`Carolyn Logan: Santarus did have IMA agreements. And they had very, very little. So part of the uptick in Glumetza is that when we
`started with our increased sales force, we realized we didn’t have a lot of their products — a lot of Santarus products at retail
`pharmacies. So we did put a drive in to try to get more product in retail pharmacies so that when patients got prescriptions and
`went into pharmacies that, hopefully, drug would be available on the shelf.
`
`Andrew Finkelstein: Terrific. That’s helpful. And then, just with the spending guidance, the calls for a big stepup quarteronquarter
`and R&D and kind of a steady stepup in 3Q and 4Q on SG&A. If you could just review a few of the factors, you know, the
`programs you’re starting up? Or what are the drivers there?
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`Adam Derbyshire: The big driver for R&D is the, you know, EIR program is up and running, so SSD has been running as well. So
`those are probably the key drivers in R&D. You know, SG&A is just continuing to have programs across the country; the
`digestive disease sales force continuing with promotion, especially for Xifaxan 550 for hepatic encephalopathy. And then, just,
`you know, obviously, the overall sales force being in place for, you know, for the full second half of the year.
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`Operator: Okay. We’ll go next to Jason Gerberry with Leerink Partners.
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`Jason Gerberry: Hi, thanks for taking the question. Just wondering if you guys can comment just in terms of on the Uceris IP and
`lifecycle expansion strategy front. Any new developments that might lead you to believe you might be able to extend the
`franchise beyond 2020?
`And then, my second question just for Adam, I realize sequentially that the spend numbers are going up, but you lowered, I
`think, the R&D and SG&A guidance. Just wondering what the rationale there was. Was it more rapid pullthrough on deal
`synergies? Or are there any cuts in certain areas?
`
`Carolyn Logan: On the Uceris lifecycle strategy and lifecycle plan, Jason, we do have a corporate objective around that, that is due to
`our board by the end of this year. So we are very focused on that, and we are having meetings and discussions around things we
`could possibly do. So we will be finalizing that and presenting that to our board later. And then, the second…
`
`Adam Derbyshire: And with respect to expenses, what we try to do is, when we first give guidance on R&D and SG&A, we try to
`build everything into it that could possibly happen, including anticipated business development and other things. So it’s pretty
`natural. I think we have a track record over the years of when we do first provide R&D and SG&A guidance, we typically hone
`in on that throughout the year and that — both of those numbers typically come down.
`
`Operator: We go next to David Buck with Buckingham Research Group.
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`David Buck: For Adam, maybe a little bit more on, I guess, the topic of the day, which is inventories. What are your plans to get
`better clarity going forward? So we have more of a — is there anything you can do in terms of reaching out to customers?
`Is the former target of, say, 12, 13 weeks just too high for the wholesalers without some type of contractual arrangement? And
`can you talk about whether there is any price increase activity of note during the quarter that we should be aware of for the
`second half of the year? And I guess, just in terms of the Cosmo deal. If it does close in early November, is that an accretive deal
`or neutral deal we use for 2015? Or is there a dilution with that timing of close?
`
`Adam Derbyshire: Sure. So your first question, yes. I mean, obviously, we have — we’re in touch with our trade partners. But you’re
`right. I mean, I think, the reality of keeping that 3 months of inventory is no longer going to be the case. So they, again —
`they’re softening, and we can expect them to continue to soften some in third quarter and more so normalized in fourth quarter.
`In terms of price increases, you said the second half of the year, so we haven’t had any. We had various price increases in early
`June, but I think that — I think you probably have that captured already, unless you like for me to go through that.
`
`David Buck: Well, if you could review that. I meant anything in the second that we should be aware of that will drive the second
`half.
`
`Adam Derbyshire: Yes. So on the second quarter, we had a price increase on Apriso of 8%. We had price increase of Moviprep of 8%.
`With Glumetza, 15%. I’m just giving you the bigger products. And then with the Relistor, all the different SKUs with Relistor,
`10%.
`Uceris actually was 8%, but that was back in January. Xifaxan 200milligram, 10%. 7% on the 550, both the HUD and the
`bottle format and then 10% on Zegerid. And then, in terms, I guess,
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`the Cosmo deal, we do expect it to be slightly accretive in 2016 and then increasingly accretive thereafter. We are expecting it
`to be, you know, single digit at this point in time, singledigit dilutive to 2015.
`
`David Buck: Okay, thank you.
`
`Operator: We go next to Annabel Samimy with Stifel. Please go ahead.
`
`Annabel Samimy: Hi, thanks for taking my question. I promise this is going to be the last inventory question. Can you just define
`what normalizing means? Is that a new level that you’re targeting now, not 10 to 12 weeks, but something else? Can you just
`help us understand that?
`
`Adam Derbyshire: Yes. I mean, I think from an overall portfolio standpoint, I would say that’s in the 8week or minus a little bit range
`for the entire channel.
`
`Annabel Samimy: Okay, great. And let me just move on then to Relistor. It looks like Relistor could happen actually quite quickly. I
`think you’ve mentioned you need to respond to FDA. What exactly do you need to provide to them and they need to turn that
`around in 2 months? And then, from that point, if you get the approval, is that pure leverage of your sales force? Or do you need
`to add anymore sales reps to any particular force?
`
`Carolyn Logan: We’ll let Bill talk about communication with the FDA and timing. But no, we do not plan to add any sales
`representatives for this chronic noncancer pain approval with subcu. When we get the oral approved, that may require some
`addition. It will depend on where we are at that particular time and when that happens, but there will be no additional reps
`added for this indication that we’re expecting in the next couple of months. So Bill, would you…
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`Bill Forbes: Annabel, as you’ve heard from Carolyn earlier, obviously, what we’re looking to try to do is finish up the label. And as
`you know from our discussions in the past on earnings call, that label is, in many respects, already finished. But of course, the GI
`Division has to open up the file again and have another look at it. I understand they’re meeting in the nottoodistant future and
`so we anticipate to hear something from them on the label.
`But also, there is a commitment that needs to be reached and an agreement to do a postmarketing study as it relates to — and
`really it’s an observational study is what we proposed. So we propose everything in our complete response, which is what we
`were told to do from the Office of Drug Evaluation III at the conclusion of our appeal. And so we’ve already given everything
`over to the GI Division that we believe we owe them.
`And I think that 2 months is really to try to shore up those two areas. The other thing around the oral. Of course, we like to get
`some clarity around what needs to be done with oral. The postmarketing commitment for the observational study, we’ve
`intentionally built that in such a way that the oral can be plugged into that study as well.
`So we’re hoping that we’re looking far enough ahead that we can move on to discussions about what needs to be done with the
`oral on the submission. Whether not that can occur concurrently with the subcu negotiation, or if it has to be more stepwise and
`that the subcu has to be completed before we can start to address the oral is yet to be seen. But obviously, we would hope that
`we would get some clarity on the oral over the next one to one and a half months.
`
`Annabel Samimy: Do you have any sense as to whether you might have to conduct a dedicated safety study for the oral?
`
`Bill Forbes: Because it’s an observational study that we proposed, and of course, this has to be acceptable to the GI Division. So I
`mean, just to be clear, what we proposed may not be
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`acceptable on the surface. But as we get through those details of what is acceptable to the GI Division on postmarketing
`commitment, as I said before, I think the hope is that whatever study is ongoing once the oral gets approved, then we would just
`plug the oral into that same observational study.
`
`Annabel Samimy: Okay great. Thank you.
`
`Operator: We go next to Gary Nachman with Goldman Sachs.
`
`Gary Nachman: Hi, good afternoon. Carolyn, you said it takes 6 to 9 months to see the full effect in the sales force, but they’ve been
`in the field for a few months. So maybe anecdotally, talk about where you’ve been seeing a good impact so far with them,
`particularly with the primary care efforts for Xifaxan in HE. And then, for Ruconest, what sort of effort will you have behind
`that? And did you actually try to partner it out at some point? And it just didn’t make sense.
`
`Carolyn Logan: On Ruconest, we are going to proceed with that on our own. So we’re going to — we plan to add a few people to our
`HIV therapeutic specialist segment, which should also benefit that area, because we believe they can easily cover the
`indication, the current indication we have with Ruconest as well as Fulyzaq. So that’s what we plan to do there.
`We currently have 8 people there, and the plan is to take it up to, I think, 23 or 24. And then, as far as what we’re seeing in —
`from the primary care sales force, we have seen a really nice bumpup in prescribers, in new writers.
`And of course, every time we see a bump up of new writers, we see an increase in prescriptions as well. So for example, with
`Xifaxan 550, new Rxs, they’re up 14% for now over the previous 3 months. And we have data through June. So — and then, the
`number of writers has increased about that same percentage point. So we just have seen good growth there.
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`From the primary care sales force, we are probably seeing the biggest impact from them in Xifaxan and in Relistor. So we’ve
`been really encouraged by that. What we thought would happen has happened. If there has been any, I guess, surprise in that
`sales force, it’s that we’ve had a little bit higher turnover than we would have initially thought, primarily driven by Santarus and
`inVentiv representatives.
`We’ve seen a disproportionate turnover in those two groups, which means we’ve had to rehire and retrain for some of those
`positions. But other than that, everything we’ve s