Q4 2016 Real-Time Call Brief

Highlights

We finished 2016 ahead of expectations with total revenue of $746 million, a 19% increase over last year and a non-GAAP net loss of $10.3 million compared to a non-GAAP net loss of $56.8 million in 2015.

With $619 million in cash and total investments at year end, we're well positioned to execute on our future growth plans.

For the fourth quarter our total revenues were $213.5 million, and we reported a non-GAAP net income of approximately $23.3 million.

In the fourth quarter VIVITROL net sales grew 62% to $62.1 million, compared to $38.2 million for the same period last year.

During the quarter, volume continued to grow both commercially and through state-based Medicaid programs with approximately 30% and 150% growth respectively.

On a sequential quarter basis, net sales grew 11%.

Our fourth quarter growth did include inventory build of approximately $3 million which we expect to work through in the first quarter of 2017.

For the full year of 2016, VIVITROL net sales grew 45% to $209 million reflecting robust volume growth as no price increases were taken during the year.

For 2017, we expect the strong growth of VIVITROL to continue with net sales in the range of $280 million to $300 million representing growth of approximately 40% and reflecting our belief that VIVITROL is still early in it's growth phase.

ARISTADA; in the fourth quarter we generated net sales of $17.3 million resulting in net sales for the year of $47.2 million.

Looking ahead to 2017, we expect ARISTADA to begin a period of sustained and significant growth with net sales increasing this year by at least 100%.

We expect ARISTADA first quarter revenues will be in the range of $18 million to $21 million.

Over the long-term, we believe ARISTADA's growth trajectory will be augmented by the overall growth of the atypical LAI market, which grew approximately 25% on a net sales basis last year.

Moving on to our Royalty & Manufacturing business; we saw overall revenues of $487 million in 2016, driven by revenues of $271 million from RISPERDAL CONSTA, INVEGA SUSTENNA and INVEGA TRINZA, and a $114 million from the AMPYRA franchise, reflecting growth of 8% and 9% respectively.

For the full year, we recorded R&D expenses of approximately $387 million and SG&A expenses of approximately $374 million.

Looking ahead to 2017, we expect R&D expenses to be in the range of $405 million to $435 million.

For SG&A, we expect to be in the range of $425 million to $455 million.

In 2017 we also plan to invest $70 million to $80 million in capital expenditures driven by investment and increasing our manufacturing capacity for VIVITROL for 2019 and beyond.

For the year, we expect total revenue growth of approximately 20% driven by the VIVITROL and ARISTADA, and we are targeting the business to breakeven on a non-GAAP basis with our non-GAAP results in the range of non-GAAP net loss of $15 million to a non-GAAP net income of $16 million.

We expect to exit 2017 with cash and total investments of around $600 million.