ARIAD Pharmaceuticals Inc ARIA
Q4 2012 Earnings Call Transcript
Transcript Call Date 02/25/2013

Operator: Thank you for holding for ARIAD Pharmaceutical's Fourth Quarter and Full Year 2012 Investor Conference Call. At this time all participants are in a listen-only mode. Following the formal report ARIAD management will open the lines for question and answer period. Please be advised that this call is being taped at the Company's request and will be archived on the Company's website for three weeks from today's date.

At this time I would like to introduce Ms. Maria Cantor, ARIAD's Senior Vice President, Corporate Affairs. Please go ahead.

Maria E. Cantor - SVP, Corporate Affairs: Good morning, and thank you for joining us. This morning we report on financial results and corporate developments for the fourth quarter and full year of 2012 and provide financial guidance for 2013. With me on this call are Dr. Harvey Berger, our Chairman and Chief Executive Officer; Mr. Ed Fitzgerald, our Executive Vice President and Chief Financial Officer; Dr. Tim Clackson, our President of R&D and Chief Scientific Officer; and Mr. Marty Duvall, our Senior Vice President of Commercial Operations.

During this call we will be making forward-looking statements. These statements are subject to factors, risks, and uncertainties including those detailed in our Form 10-K for the year ended December 31, 2011, and other SEC filings that may cause actual results to differ materially from the results expressed or implied by such statements.

The format of today's call will differ from those in the past. In order to move as quickly as possible into the Q&A section we will not be repeating most of the information that was included in this morning's press release.

Now here is Dr. Berger with our opening remarks.

Harvey J. Berger, M.D. - Chairman and CEO: Good morning, everyone. In 2012 we achieved the goal we set for ourselves several years ago, to establish ARIAD as a fully integrated global oncology Company. This past year we received U.S. approval of Iclusig three months ahead of its PDUFA date. We established our commercial organization in the U.S. and hired our European leadership team. We continue to advance the development of AP26113. In addition, the global Phase 3 EPIC trial of Iclusig in patients with newly diagnosed CML and the Phase 1/2 1 trial of Iclusig in Japan progressed on plan.

Our focus for 2013 will be on the successful commercialization of Iclusig in both the U.S. and Europe, while broadening its developments within CML and Philadelphia positive ALL and to other forms of cancer. We've several important updates to share with you this morning. First however, Ed Fitzgerald will cover a few aspects of our financials.

Edward M. Fitzgerald - EVP, CFO and Treasurer: Good morning, everyone. Please refer to our press release issued earlier this morning for a summary of our financial results for the three-month and 12-month periods ended December 31, 2012. I will focus my comments this morning on an overview of our financial guidance for 2013.

We anticipate cash used in operations in 2013 to be $255 million to $265 million. We anticipate R&D expenses in 2013 of $238 million to $248 million encompassing further expansion of development activities for Iclusig and AP26113 as well as expanded discovery research activities. We expect to spend approximately 8% to 10% of this amount on discovery research with the remainder split between Iclusig and AP26113, about 75% to 25%. Spending on Iclusig includes medical affairs in the U.S. and Europe.

We anticipate SG&A expenses in 2013 of $108 million to $116 million. This includes growth in global commercial operations and supporting activities for the commercial launch of Iclusig in the United States and anticipated commercial launch of Iclusig in Europe. Approximately $70 million of the SG&A expenses, relates to commercial activities for Iclusig, split between the U.S. and rest of world approximately 80% to 20%.

Our R&D and SG&A operating expense guidance for 2013, includes estimated non-cash expenses of $35 million to $41 million, consisting primarily of stock-based compensation and depreciation and amortization expenses. We ended 2012 with $164 million on our balance sheet, and in January we raised an additional $310 million in an underwritten public offering of our common stock. We expect that our cash, cash equivalents and marketable security at December 31, 2013 will be $195 million to $205 million sufficient to advance our programs into the fourth quarter of 2014. We have a strong balance sheet and are well positioned to advance our key program as planned.

Let me make a few remarks on the accounting treatment related to the launch of Iclusig in the United States. We are currently using the sell-through method for revenue recognition, which means we now recognize revenue when we ship Iclusig to the patient. We are using a select number of specialty pharmacies and specialty distributors to distribute Iclusig throughout the United States. We expect that as sales of Iclusig continue to ramp up these pharmacies and distributors will be holding very little inventory. We expect to transition to the selling method of revenue recognition recognizing revenue upon shipment of Iclusig to the specialty pharmacies and distributors when we have sufficient experience to support this approach. At this time we are not providing guidance on 2013 revenues we may do so however later this year.

Let me now turn the call back over to Harvey.

Harvey J. Berger, M.D. - Chairman and CEO: Thank you Ed. 2013 will be a year in which we focus on commercial and clinical execution. Let me start with an update on the global commercialization of Iclusig. As you'll hear more from Marty our U.S. commercial organization is effectively executing on all of its commercial plans. ARAID Europe is now fully operational with our European management team including our general manager, key country managers and key department heads in place. Other members of our field force are now being hired in each of the other major markets in Europe. We are committed to being commercial ready in Europe by July 1, 2013.

Our marketing authorization application is under accelerated assessment review and we anticipate approval of Iclusig in the EU in the third quarter of this year. Lastly we have planned regulatory submissions for Iclusig in Canada, Switzerland and Australia in the second half of this year.

Beyond the first indication we will broaden the development of Iclusig. Patient enrollment continues on plan in the Phase 3 EPIC trial of Iclusig in patients with newly diagnosed CML and we anticipate full enrollment by the end of this year. The study includes an interim analysis of the primary endpoint one year after approximately 250 patients have been enrolled. We anticipate that the interim analysis will take place in mid-2014. Based on the results of the ongoing Phase 1/2 trial of Iclusig in resistant and intolerant CML and Philadelphia positive ALL, in Japan we expect to file for regulatory approval in Japan in mid-2014.

We are collaborating with the U.K. National Cancer Research Institute on a randomized Phase 3 trial called SPIRIT 3 to assess the impact of switching patients with CML being treated with a first-line TKI upon suboptimal response or treatment failure, switching in both cases to Iclusig. We consider this to be an important part of the overall development of Iclusig in earlier lines of therapy. We plan to begin a series of company-sponsored and investigator-sponsored Phase 2 trials of Iclusig in patients with gastrointestinal stromal tumors, acute myeloid leukemia, certain molecularly defined types of lung cancer and other solid tumors during this year.

Turning now to 113, our investigational inhibitor of ALK, EGFR, and ROS1. We expect to transition into the Phase 2 expansion cohorts to the Phase 1/2 trial of 113 during the first half of this year. Planning is actively underway for the pivotal trial of 113 in ALK positive non-small cell lung cancer patients who are resistant to crizotinib.

A few comments looking ahead; depending on the results of the Phase 2 trials of Iclusig and 113 and discussions with regulatory agencies, we may begin additional pivotal trials of both medicines. We anticipate clinical updates to be presented on 113 and Iclusig at the major U.S. and European Oncology and Hematology Meeting.

We believe that both 113 and Iclusig will be key value drivers for ARIAD, especially as we initiate pivotal trials this year.

I want to take this opportunity to now introduce Marty Duvall and ask him to provide a brief update on the commercialization of Iclusig in the U.S. since launch in December.

Martin J. Duvall - SVP, Commercial Operations: Thank you Harvey. Good morning everyone. While only seven weeks post launch, we are encouraged by the market reception to Iclusig, which includes the following. Marketing research shows high aided awareness of Iclusig in the U.S. at 94% post launch. Our oncology account specialists have been extremely productive reaching more than 50% of our top quintile targeted physician, thus far. We had successfully transitioned 50 of the approximately 100 EAP patients to receiving commercial drug.

The reported IMS weekly prescription show strong uptake of Iclusig in the first six weeks. Currently, we estimate that approximately 45% of Iclusig prescriptions were captured in the first six weeks. We expect this capture rate to increase to approximately 70% in the months ahead. Reason for low capture rate at launch include lower specialty pharmacy reporting to IMS for Iclusig, which is currently increasing and the number of patients receiving their initial prescriptions directly from a hospital pharmacy or through specialty distributors, which do not report prescription data to IMS.

From a managed care perspective, we are currently monitoring reimbursement policies for major players. Through mid-February several plans have already published formulary positions for Iclusig. Almost all are in line with our broad FDA label. We are very pleased with the wide spread acceptance of the product for all resistant intolerant patients and expect this to continue. To date, we estimate that there are more than 100 unique prescribers of Iclusig and more than 80 accounts have already gained experience with the product.

We estimate that approximately 60% of our Iclusig prescriptions are being generated in academic accounts and 40% in the community. We expect this split to shift more towards community physicians in the coming months. Consistent with our strategy that every resistant or intolerant patient deserves Iclusig, as there are next or switch therapy, we believe that patients currently receiving Iclusig include those with failed one, two, and three or more prior TKI therapies. In Europe we continue to execute on plan enabling early EU revenues including selling in France through the ATU mechanism and selling into Germany using the special import mechanism.

Let me turn the call back to Harvey.

Harvey J. Berger, M.D. - Chairman and CEO: With these updates I had like to ask the operator to open the lines to analyst questions.

Transcript Call Date 02/25/2013

Operator: Matthew Harrison, UBS.

Matthew Harrison - UBS: So I guess the first thing. Marty you said that you believe IMS has about 45% capture rate right now. I think we saw over the last two weeks some of the specialty pharmacies that were blocking it come off. So would you expect that to go up into the sort of 70s where we have seen other launches or are there other factors that we should be aware of when we start to think about IMS?

Martin J. Duvall - SVP, Commercial Operations: Thanks Matt and yes. We would anticipate that that would get up into the 70s. I think the only thing that would take me away from being 100% confident in that is the continued use of Iclusig in the academic centers. Since those types of data are not reported to the IMS prescription audit that remains a wildcard. But you're correct we have no one – no data is currently blocked so we would expect the capture rate to be in line with other oral oncology medications in that 70% range.

Matthew Harrison - UBS: Then just a separate question on how ALK. Can you just walk us through what the steps that you still need to complete as you think about planning for Phase 3, is it regulatory issues, is it sort of enabling preclinical studies that you need to finish or what are the issues as you work through trying to figure out what a Phase 3 should look like for crizotinib failures?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Hi Matt, this is Tim. We are just working through the final stages of discussion with regulatory authorities, refinement of the protocol. There's no, I think you're asking whether there's a large gating item that remains and we don't see that that's the case. As we've discussed, we anticipate identifying the recommended Phase 2 dose from the ongoing Phase 1/2 trial by the time that we will be initiating the pivotal trial. So it's basically discussions and operational blocking and tackling.

Operator: Cory Kasimov, JPMorgan.

Cory Kasimov - JPMorgan: I guess my initial question on Iclusig, then the follow-up on 113, so Marty just to dig in a little bit more, you had mentioned that you've seen patients treated with one, two or three prior TKIs, can you get more granular and maybe tell us the proportion of patients who are perhaps warehouse T315I patients? Then the follow question I have on 113 is I am just wondering if you guys can give us a little bit of color, maybe framing expectations for how much data, incremental data we may see at ASCO relative to how we should be thinking about ASMO in fall?

Martin J. Duvall - SVP, Commercial Operations: So regarding the patient volumes, I don't have any more details regarding T315I patients, the uptick there and any warehousing of patients. It appears from my perspective at this early point that we're seeing a pretty balanced mix of resistant and intolerant patients being put on Iclusig across the board.

Martin J. Duvall - SVP, Commercial Operations: Cory, regarding your question on 113, we submitted an abstract to ASCO and anticipate doing for ESMO. The ASCO presentation of course will have up to the minute data from the trial, and we anticipate that would be the bulk of the Phase 1 experience, given the fact we expect it would be drawing to a close at around that time. Then ESMO is really likely also to reflect largely of Phase 1 experience, there could be some Phase 2 information in there. What we've generally guided is to that it's more likely that there would be more of an interesting update on the EGFR side of things given that we're trying to refine the patient population that comes in, in that side of the trial at ESMO rather than ASCO. But general up to the minute updates of the trial at each of those time points with that of a call to separation as you realize.

Cory Kasimov - JPMorgan: But as you said EGFR update primarily at ESMO this year.

Martin J. Duvall - SVP, Commercial Operations: We will update what we have on all patients, but given the trajectory of the trial and our ongoing efforts to refine the EGFR patient population that comes into the trial it's likely there will be more informative update on EGFR at ESMO is correct.

Operator: Howard Liang, Leerink Swann.

Howard Liang - Leerink Swann & Company: Just on the EPIC will you tell us when you reach the half points in enrollment?

Harvey J. Berger, M.D. - Chairman and CEO: Howard, probably I suspect we will. We honestly haven't decided exactly what to disclose when we reach that point. But more than likely given that we have continued to provide updates on the trial being on track I think we will provide some guidance when we get close – when where we at the point mid-summer.

Howard Liang - Leerink Swann & Company: I don’t know if you are willing to share this sort of a follow-on question. Can you talk about the breakdown of your patients Iclusig represented failed the second-generation agent, what percentage have failed or not failed the second generation agent?

Martin J. Duvall - SVP, Commercial Operations: We are still digging into that data. We have some information on a patient by patient basis but nothing that we've aggregated or would be – feel would be right to discuss at this point in time.

Operator: Katherine Xu, William Blair.

Y. Katherine Xu - William Blair & Company, LLC: I'm just curious for 113, have you reached MTD by now and can you just give us some top line color?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: We haven't given any more information and don’t intend to do so at this time. Since the last update which was that we had escalated through to the 300mg dose level and I think the next update that we expect on the trial will be assuming we are accepted at the ASCO presentation. But we have communicated that we believe we are approaching the final stages of the Phase 1 portion of the trial which is kind of a fine refinement of the dosing, fleshing out the experience at certain cohort levels pretty much as we did with ponatinib prior to moving ahead into the Phase 2 portion. So no new information and we will update that to ASCO.

Y. Katherine Xu - William Blair & Company, LLC: So one follow-up question just theoretically, because crizotinib is also a MET Inhibitor, it's a pretty strong MET Inhibitor and MET could be an escape pathway. I am just curious, in your Phase 3 study do you want to really switch to 113 after crizotinib failure or do you want to add-on, do you have those any thoughts there?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Leaving aside the mechanistic questions for a while, we anticipate that the pivotal trial will be in patients who failed – in whom crizotinib has failed and that we will be testing 113 as a single agent. If you're asking whether we would combine it, we have no plans to do that at this time.

Operator: Michael Yee, RBC Capital Markets.

Michael Yee - RBC Capital Markets: On Iclusig use, thinking about it now in the types of patients you are getting on and going forward, what do you think is a good duration of therapy or what type of maintenance rate are you expecting at the outset? I could presume that you are going to heal a lot of sicker patients at the start. So how should we think about that as well as how you're doing gross to net? So these are some of the things we are thinking about as just modeling the launch. Then in terms of 113, I know you said you dosed up to 300 and are lobbing up to at ASCO, what are we looking for or what are you looking for as you are continuing to dose these patients and/or going up?

Martin J. Duvall - SVP, Commercial Operations: Thanks Michael, this is Marty. I will take the beginning part of the question and I think your gut, your inclination there is a solid one. I don't have the specific details regarding advanced phase versus chronic phase early on but I think one would expect a more rapid uptake in patients that are little bit more advance and of course of the need is higher there. So, I can't provide anymore specifics regarding that, but I think you're thinking in the right direction. So, as for a duration of these current patients I can't really put a number on that. As you know overall we've guided towards on average we believe a three-year duration, but that would include obviously the chronic phase and does also include newly diagnosed patients when we get to that particular indication. As for the growth to net, under 10 is what we currently have guided on.

Martin J. Duvall - SVP, Commercial Operations: Regarding 113. The general waiver of approaching the final stages of the ongoing Phase 1 portion of the trial is similar to what we've done before. We don't – one doesn't typically relentlessly does escalate the final approach that are really expiration of doses around the higher end of where we dose to, to generate additional ends to explore the patient experience and sometimes to fill in gaps. So, as by analogy, if you recall how we approached ponatinib, we dose-escalated from two all the way to 30 and then to 60 and then came back down to 45, and ended up enrolling additional patients at all of those dose levels in order to get more a robust pharmacokinetic and tolerability data, prior to making the call and moving on. So, that's the general approach that we've taken in the past and that's a reasonable guide to the approach that we'll be taking with 113.

Operator: Michael King, Jr., JMP Securities.

Michael King, Jr. - JMP Securities: Couple of things I wanted to ask about don't mean to back you into a corner about the guidance. But at the analysts meeting in October last year you were pretty clear about how your – how you guys were thinking about comparability of the launches of second-generation TKIs. So, I am just wondering, why that's still not in force, in terms of, how we should be thinking about the launch of Iclusig? I had a quick follow-up.

Harvey J. Berger, M.D. - Chairman and CEO: Nothing we said there, I think we would change. So I think as we said at our meeting in October, we used the (indiscernible) information to help put a framework around the potential launch of Iclusig and our views then remain largely unchanged today.

Michael King, Jr. - JMP Securities: Just as far as the – maybe a question for Marty, as far as how you guys are thinking about driving uptake in the community, our understanding is that most of the community docs are not performing the kinds of tests either T315I or the international criteria. So can you talk about what types of criteria that community docs are using to switch to Iclusig? Is it time on therapy or perhaps give us some metrics that we can kind of help us understand?

Martin J. Duvall - SVP, Commercial Operations: I think overall we are going to see a shift in that and more vigilant monitoring of patients in the community setting. Certainly the efforts put forward by Novartis and BMS are in that direction and we will gladly ride those co-tails. Of course in our day-to-day selling efforts we will continue to reinforce the guidelines and standards for testing as we move forward. Predominantly in the community based setting, what we are seeing regarding switching is predominantly related to intolerance to certain drugs with more options now being available, we see increased switching among the community based on having those other options. So I think that sets up a pretty good opportunity for Iclusig currently and an even better one moving forward.

Operator: Jim Birchenough, BMO Capital Markets.

Jim Birchenough - BMO Capital Markets: One question and a follow-up. First on the – the main question is just on the ramp-up and capture rate from where you are now to 70% or so. How long is that going to take to occur and I'm asking that because I want be able to discern real growth week over week from just increasing capture rate, that's a question for Marty. Then the second question for Tim is I am just trying to understand the pretty dramatic step up in R&D expense from the fourth quarter run rate, how much of that is just increased enrollment of existing trials versus incremental spend on new trials and if you could give us maybe a little bit of a sense of the investments you are making so we get a sense on how reasonable the increase in spend is?

Martin J. Duvall - SVP, Commercial Operations: Hey Jim, it's Marty. Thanks for the question, it's a great question. I guess I can't tease out the specifics for you as we kind of look at the first seven weeks that have been reported. I would suggest that over the past two, in terms of our specialty pharmacies, they've all been reporting. Then to the second part of that, in terms of the capture rate and how long it'll take to get the 70%, I think that the devil is in the details there too regarding the number of patients that continue to get treated at academic centers. Quite honestly, we are a little bit surprised by the number of centers ordering product. Also there is a little bit of an evolution in the community setting as well, where large community practices are taking advantage of in-house pharmacies, and those shipments to those pharmacies are also not captured in IMS. So, it's a little bit of a moving target on both sides, but I would suggest that based on all SPs reporting now and as of two weeks ago, I think over the next – I think the data you are seeing now is pretty realistic to view as a trend.

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Jim, regarding your question on R&D expense. So, the uptick in expense that you can see that we described today is really reflecting series of additional investments that we've talked about and we'll be implementing over the next year in addition to the ongoing activity, just a reminder we'll be starting a pivotal trial for 113 mid-year and ramping up to that as we speak. We'll be initiating very shortly our first trial in GIST. There are number of other trails that are ongoing for Iclusig all we're starting during the year, but in the investigator-sponsored setting for example SPIRIT 3 is included in today's – in this spend. ISTs also in lung cancer, in AML and other targeted areas. The spend also includes all of the NDA enabling investments that we need to make for 113, which include clinical of oncology studies and final stages of process development for manufacturing. So, the uptake is really an investment in our pipeline, driving value obviously also includes the ongoing activities related to EPIC and the other trials ongoing with Iclusig, the Phase 1 and 2 trials and the Japan trial.

Jim Birchenough - BMO Capital Markets: Tim can I just push a bit on that and just – I just was to understand when you look at where you were at with the spend this year should we consider that like a high watermark for spend going forward when you think about where we are at in EPIC and SPIRIT 3 or is it going to keep going up from this year?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: I think, your high watermark comment is probably closer to the mark. We have a number of investments which we are making kind of aspect of peak this year. For example, the investment in 113 manufacturing and NDA-enabling is, a one-time spend. Now if we succeed in developing more opportunities we will of course want to invest in those. An example would be a pivotal trial in EGFR which we would all agree would be value generating. But at the moment what we anticipate really there are lot of driving expenses that are in this year.

Operator: Ying Huang, Barclays.

Ying Huang - Barclays Capital: Number one, can you give us a little bit color on the second line use for Iclusig versus third line – I know it's early days but it still it would be very helpful for us to judge the launch? Then secondly in terms of the ongoing Phase 1 trial for 26113 exactly which dose are you now at and then can you confirm that at this dose you are already way above – in terms of (C trough) level way above the IC50s for both ALK and also EGFR mutations?

Martin J. Duvall - SVP, Commercial Operations: I will take the first part of that question on second line use. Now I will just really re-emphasize the opening comments in that we are seeing use of Iclusig following the failure of one, two and three or more TKI failures. So it is across the board utilization in resistant and intolerant patients.

Harvey J. Berger, M.D. - Chairman and CEO: Not limited to any particular failure of one agent versus the other agents, really as best as we know, across all of the available agents.

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Regarding the question of 113, as mentioned, we haven't given any more information beyond the last update that we had reached, the 300 mg dose cohort. But yes, the last pharmacokinetic data that we disclosed, which is at a dose lower than that did show that the blood levels were exceeding the IC50 for both ALK and EGFR and their mutants. Now we've discussed before that we want to have levels, which substantially exceed IC50s in order to ensure complete inhibition of the target but the evidence that we've shown so far suggests that those levels we can maintain are very well in that range for potentially being able to do that, which is consistent with us having seen a partial response in EGFR patients as well as the responses we've seen in outpatients.

Operator: Joel Sendek, Stifel.

Joel Sendek - Stifel Nicolaus: I have two questions, first of all, just going back to EPIC, I am wondering if you've had any follow-on discussions with the FDA about what you'd would need to show there in order for the black box to be lifted, specifically are the entry criteria broad enough to enable that to for assessments to be made? Then I have a question about the guidance.

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Joel, this is Tim. There's been no specific discussion with the FDA on that topic, so if you are asking whether there've been any discussions subsequent to the approval, nothing really in particular.

Joel Sendek - Stifel Nicolaus: I was just wondering if – that is my question that I guess maybe even if there haven't been discussions, your opinion that you have a broad enough group of patients in there. In other words you're not excluding so many of the patients that might be at risk that the FDA will be in a position and you might be able to be in a position to make the case to remove the (indiscernible)?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: No, I think that the general understanding that the EPIC trial offers a good opportunity to look at the experience of Iclusig against competitor in a reasonable patient population.

Martin J. Duvall - SVP, Commercial Operations: We have not excluded the patients with cardiovascular risk, as it has been done in some other frontline trials. So that there are many patients who will be in the EPIC trial who have whole spectrum of cardiovascular diseases by background, they've not been excluded. I think the FDA and regulatory agencies view in general is present us with a case and present us with data and from a randomized clinical trial setting and we'll talk to you about it. But I think it'd be very difficult to get prior agreement based on not knowing exactly the patients who are going to be enrolled what the follow-up is and without knowing the results in terms of safety and context of safety relative to efficacy in that trial to be able to get a prior agreement, remove the box. I think it's really – the data will speak for themselves.

Joel Sendek - Stifel Nicolaus: How about EU, any thoughts there, you think you will get the same kind of…

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: No, I think as we've said before the Europe, boxed warnings don't exist. Warnings and precautions based upon treatment emergent adverse events are generally not included in labels for products in Europe. So I think the safety section of the Iclusig label in Europe will be quite different than in the U.S.

Joel Sendek - Stifel Nicolaus: Just quickly on the guidance. Given the ramp or the guidance with regard to R&D you expect that to happen quickly or should it about gradually over the next couple of quarters. Can you help us at all with that?

Harvey J. Berger, M.D. - Chairman and CEO: I think it will be spread out over the year. I mean, it's not going to change in one quarter. As Tim pointed out there are manufacturing activities for 113 they kick in early. The actual enrollment in the 113 pivotal trial kicks in later in the year. So it will spread out over the entire year.

Operator: Eun Yang, Jefferies.

Eun Yang - Jefferies & Co.: Regarding EPIC trial, is there any pre-specified criteria that at the interim analysis the trial could be stopped?

Harvey J. Berger, M.D. - Chairman and CEO: Eun the trial doesn’t get stopped early at the interim analysis. What happens if it meets the pre-defined statistical difference that was established in the statistical analysis plan submitted at the beginning of the trial then we are – then we should be in a position to file in the U.S. for sure perhaps elsewhere as well based upon fewer than the full number of patients being followed for a year. So it is largely a matter of what can we file on as opposed to stopping to trial early.

Eun Yang - Jefferies & Co.: Can you talk about what the criteria maybe?

Harvey J. Berger, M.D. - Chairman and CEO: Merely that it's statistically significant. We've given guidance or guided on how the trial size was determined, what the assumptions were. We've talked about that in the past and in terms of using very conservative estimates of how well imatinib will do in the control ARM, conservative meaning imatinib will do the best it's ever done. Then assuming the same type of response as has been seen with nilotinib versus imatinib in the pivotal trial of nilotinib in the newly diagnosed patient. So largely those sort of numbers and there is a – that's all defined in the statistical analysis plan in that framework.

Eun Yang - Jefferies & Co.: Marty mentioned that gross to net, a discount for Iclusig is about less than 10%, what's the discontinuation rate that you assumed during the three months?

Martin J. Duvall - SVP, Commercial Operations: So really what we are – I am not sure that one – in my mind, one doesn't have anything to do with the other but that's just the way I think through these things. In terms of discontinuation rates, we really take that into consideration in our model by looking at duration of therapy. So we've already kind of discussed what average duration of therapy we assume in our model, based on that we give the average of three years across all lines of therapy and our models differentiate that based on advanced phases of the disease, chronic phase and whether it's a resistant intolerant patient or a newly diagnosed patient. So that's really how we take into consideration discontinuation rates. We also include a compliance factor in our forecast model. So, those are some areas where we take into account any reductions that are outside of a gross to net round.

Eun Yang - Jefferies & Co.: So, I knew that there was a difference – maybe I should have asked the compliance rate on Iclusig, instead of a discontinuation rate. What is the compliance rate that you assume?

Martin J. Duvall - SVP, Commercial Operations: So we assume in our model, approximately 85% and we'll refine that as we move forward.

Operator: Rachel McMinn, Bank of America Merrill Lynch.

Rachel McMinn - Bank of America Merrill Lynch: Marty, I was hoping you could talk a little bit how you see Iclusig uptake versus Bosulif. In particular your comments about physicians picking Iclusig because of intolerance, and I think there were some initial confusion in the market place, I wanted to get more update there. Then Harvey, can you give us a sense you're talking about additional expansion of discovery, should we expect new drugs in the clinic this year? I guess where is that additional funding going, is it new staff or you just help us understand a little bit more what your strategy is?

Martin J. Duvall - SVP, Commercial Operations: First of all just a clarification on the intolerance question. So, my answer there was really characterized as more of a general driver in the community setting as to when TKI switches occur, so it's really intolerance. That goes back to the really the lack of testing that's being done at the community setting and the more options that are now available. So, I don't know if I would characterize that uniquely to Iclusig, but I would consider that to be maybe a broader phenomenon, I'm trying to think what the second part of that that was.

Rachel McMinn - Bank of America Merrill Lynch: In the context of Bosulif isn't that – if that's the case then community docs don’t really care which one it is, it's just another drug, isn’t that going to be a problem for you because really where you are differentiated is on efficacy?

Harvey J. Berger, M.D. - Chairman and CEO: Thanks for the reminder. So relative to Bosulif I think we are seeing it's being reflected in some of the analyst reports. The relative uptake of the two products is on a different scale. There is confusion in the marketplace. I will grant you that and we are doing everything we can to eliminate that confusion, with a couple of TKIs being approved in the course of a three-month period there is some confusion in the marketplace between ponatinib and bosutinib and we are taking care of that very much. I think if you look at the bosutinib data you challenges with that drug as it relates to intolerance. We are aware of situations where patients have been on bosutinib for a very short period of time and then switched to other drugs including Iclusig. I hope that helps.

Rachel McMinn - Bank of America Merrill Lynch: How's the – on the new drugs?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: So we are not guiding to specifically to a new candidate this year, but as you know we very actively work on discovery programs and that's where the future pipeline of the Company will come from. The nature of the investment that we were making this year is incremental and strategic. We want to make sure that we can enhance our productivity and have multiple programs in the pipeline at one time and there are some smart but not (incentive) investments that we are making to ensure that's the case. We have several programs that fall into the category of resistance busting, best in class targeted therapies along the lines of imatinib and 113 at various stages. I'd say that we have a very high bar for nomination of development candidates as you can tell I think from the track record that we've had in the past. I'd say we also have an increasing higher bar for disclosing what we are working on given that we have little gauge from that that until we are really a long way along. So that's the general approach that we take. I am trying not to be coy, but definitely we have a lot of work ongoing behind the scenes here.

Harvey J. Berger, M.D. - Chairman and CEO: I would just follow-up just briefly on Tim's comment. We are very committed this year to investing in the discovery research programs incrementally over the past. I think Tim has been thoughtful in how he has described both in investments in multiple programs as well as investments in capabilities that will build on what we've accomplished for ponatinib and with 113. I think it's one of the true distinguishing features of the Company that very few if any other similarly situated companies have and this year we really want to build on ensuring that that can be part of a sustainable long-term story.

Rachel McMinn - Bank of America Merrill Lynch: Just a quick one, the EAP patients, can you just clarify why you only converted 50 of the 100, are the other 50 not going to convert ever or is there – what's the issue there?

Martin J. Duvall - SVP, Commercial Operations: Sure good question, Rachel. So we feel very good about 50 out of 100. I think when we look at other benchmarks for that short of period of time, it's very good but a direct response to your question, there are a couple of reasons why. Number one is, the availability of a QuickStart program, so a program that provides a three-month supply that's available and looking at interests in continuity of care, some of the patients were transitioned on to a QuickStart, we didn't include those in the 50 of 100, and the QuickStart is free drug that's being provided to patients, is kind of a gap filler. So we didn't include those. The 50 of 100 that I was discussing are patients EAP patients who are shipped commercial product. The other factor that's a reason behind the other 50 so to speak, be would as we described from a clinical supply perspective and that program, the EAP program is run from the clinical operation side. Patients may have had up to three months' worth of therapy available. So, they will be moving through that therapy prior to transitioning to commercial product.

Operator: Brett Holley, Guggenheim Partners.

Brett Holley - Guggenheim Partners: I'm just wondering if you have a 60%, 40% breakdown and teaching households versus community at this point, what's the initial feedback for the community physicians. Maybe it's large practices that are more sophisticated, but I'm just wondering if you've gotten any feedback on the label and how the community physicians is thinking about the label for Iclusig?

Martin J. Duvall - SVP, Commercial Operations: I think what we've discussed is that the boxed warning is going to have an impact on our relative view of the uptake of the drug, I think that stands clear. I think the uptake that we're seeing speaks for itself. I think the adoption across all resistant intolerant patients failure one, two, and three or more speaks very positively to the situation here at launch, and we stand behind the statements that were made previously.

Brett Holley - Guggenheim Partners: My follow-up question is how you're going to define inadequate response in SPIRIT 3, is that quantified at this point or do you have information on that?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Meaning inadequate response to either of the imitating treatments, correct?

Brett Holley - Guggenheim Partners: Correct.

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: That's very well established. I think we have given a reasonable level of detail on that and I am sure we will roll out more as the trial starts later this half. But in essence there are multiple opportunities for failure of the first agent. Most key is the three month time point where we talked quite a bit about the emerging importance of the 10% BCR-ABL cut off as a yes-no success measure. So that's the first measuring point. Then there are subsequent measurements also, I believe one and three years if I recall correctly. But the idea is that sub-optimal or inadequate response at any of those planned points per protocol generates a switch to ponatinib.

Operator: Nicholas Bishop, Cowen and Company.

Nicholas Bishop - Cowen and Company: I just wanted to get a little more quantitative on two points that have been raised by other analysts and those are; number one, on the IMS capture rate if we add up the new scripts we have seen so far on IMS we get about a 150 or so. So we assume that's a 40% capture that implies better than 350 patients start on the commercial drug, is that about the right number to be thinking about? That's the first question. Then the second one is, if I kind of reconstruct your non-cash expenses and compare that to the cash used in operations as kind of a delta presumably from revenue of about $55 million, is that the right number to be thinking about in terms of revenue or are there P&L items that I'm overlooking?

Martin J. Duvall - SVP, Commercial Operations: So we are not providing any more details around patient capture. I think you are kind of hitting some of the key points in taking the capture rate and looking at the IMS data. I don't think that that's necessarily a stretch. I'm not sure that the number, well it's – I think that's a pretty reasonable approach. I guess it's difficult for us to know how many unique patients there really are at this point in time.

Harvey J. Berger, M.D. - Chairman and CEO: In terms of your second question, we are just going to stick with what we've said which is, we really are not in a position yet to provide any real guidance on revenues for this year. I think Ed went through a whole variety of the issues related to sell-through and sell-in methods for recognition of the revenue and it's just too early in the history of the launch to be providing a lot more detail than that.

Nicholas Bishop - Cowen and Company: If I could squeeze one quick follow-up, somebody earlier asked about the statistics at the interim in the trial and I know you guys have given the kind of powering and the improvement over imatinib that you are assuming that. Is my understanding correct that basically the interim has the same statistical requirements just sort of with a smaller end?

Harvey J. Berger, M.D. - Chairman and CEO: The requirements for the total trial for sample size and obviously the 15% difference between the two ARMs that is absolute difference in the two ARMs was used to set the sample size. You could have a highly statistically significant difference with a smaller absolute difference between the two ARMs or not. But the criteria used for the interim analysis and for the final analysis are largely the same. Obviously you take a small statistical penalty for alpha spending by taking the interim analysis and that of course is built into the statistical analysis plan.

Operator: Ryan Martins, Lazard Capital Markets.

Ryan Martins - Lazard Capital Markets: Just on the earlier question regarding EPIC, can you clarify – have there been any specific changes made to the inclusion exclusion criteria there? Secondly on Iclusig with the comments I think Marty made around the formularies, most of them you said have been in line, just curious in other ones that haven’t, how they in any ways deferred from the label?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Any changes that have been made to EPIC have been monor and largely procedural, so it's nothing major Ryan.

Martin J. Duvall - SVP, Commercial Operations: So I think what we characterize is almost all are 100% compliant to label. There was one – the temporary decision was following a second generation and we continue to work to make sure that is turned in the favor of all patients all resistant and intolerant patients having access to Iclusig. So, again we're very pleased with the access we have to-date and certainly expect that to continue.

Operator: Michael King, Jr., JMP Securities.

Michael King, Jr. - JMP Securities: Thanks for taking the follow-up guys. Can I just ask, a silly question I think , but on SPIRIT is that, is it considered in IST or is it an ARIAD sponsored study and if it's an IST, is it suitable for registration purposes or label expansion purposes?

Timothy P. Clackson, Ph.D. - President of Research & Development and Chief Scientific Officer: Mike it is an investigator-sponsored vertical, it is sponsored by the agency in – the group in the U.K. We are collaborating with them on the trial. It's not necessarily designed as a pivotal study. It's a long-term investigation with many intermediate information points on the general question of switching. So while – it's a certainly a trial that we are considering as we described earlier a core part of our long-term understanding of the role of ponatinib in switching and an important and very I think effective investment.

Harvey J. Berger, M.D. - Chairman and CEO: Having said that Mike, the trial has a statistical analysis plan. Its sample is sized appropriately to show the differences and the non-inferiority of the two ARMs. Data will be monitored, audited but to a lesser degree probably than a first indication pivotal trial, but it certainly could become the basis for a label at some point down the road, obviously, being conducted by a group that has probably more experience running large CML trials than almost anybody.

Operator: Ladies and gentlemen, I would now like to turn the call over to Dr. Harvey Berger for closing remarks.

Harvey J. Berger, M.D. - Chairman and CEO: Thank you very much for joining us on the call this morning and I look forward to seeing you throughout the year. We had a – we were able to cover a lot of ground this morning and look forward to your follow-in questions and to having an opportunity to talk more about the successful launch of Iclusig and development progress across our whole portfolio of oncology medicines. Thank you.

Operator: Thank you for joining today's conference. This concludes the presentation. You may now disconnect. Good day.