Welcome to the Alkermes conference call to discuss the company's third quarter financial results for fiscal 2008. (Operator Instructions). Now I would like to introduce your host for today's conference call, Ms. Rebecca Peterson, Vice President of Corporate Communications at Alkermes. Please go ahead.

Thank you. Good afternoon and welcome to the Alkermes conference call to discuss our financial results for the third quarter of fiscal 2008, which ended on December 31, 2007. With me this afternoon are our CEO, David Broecker; our CFO, Jim Frates; and our Chairman, Richard Pops. Before we begin, let me remind you that during today's call we will make forward-looking statements relating to among other things our expectations concerning the commercialization of RISPERDAL CONSTA and VIVITROL, our future financial and business performance, and our expectations concerning the therapeutic value and continued development of our product candidates. Listeners are cautioned that these statements are neither promises nor guarantees, but are subject to risks and uncertainties that could cause our actual results to differ materially from the results contemplated by these forward-looking statements. You can find a list and a detailed description of these and other risks factors in our Annual Report on Form 10-K filed on June 14, 2007 and other periodic reports filed with the SEC under the Securities Exchange Act of 1934 as amended. We undertake no obligation to update or revise the information provided in this call. This afternoon, Jim will discuss our third quarter financial results and David Broecker will provide an update on our business. We will then open up the call for Q&A. Now I would like to turn over the call to Jim to review our financial results.

Thanks, Rebecca. Good afternoon, everyone. I'll probably might do things a little differently on this call today, and that we will be keeping our prepared remarks brief and we'll focus our comments on the most important elements of the release rather than going through results line-by-line. A press release is quite comprehensive and I trust that you will read it and the results are clear and if you have any questions, of course, we will be here to answer and we'll get to that shortly. In summary, you can see we're continuing to build a strong business and we ended calendar year 2007 in a strongest position we have ever been in, financially for sure, but also in terms of the progress and outlook of our late-stage programs as well as the excitement around our earlier stage pipeline programs that have gained momentum in the last several months. Let's focus on the most important elements of the earnings release. I'll begin with RISPERDAL CONSTA. We and our partner Johnson & Johnson achieved a major milestone with RISPERDAL CONSTA during the quarter. Annual end market sales by Johnson & Johnson exceeded $1.1 billion in calendar year 2007. That is a 30% plus increase annually. As you know, we are the exclusive manufacturer of RISPERDAL CONSTA for J&J and we look forward to the continued success of this product. Manufacturing revenues for the product were $12.9 million in our third fiscal quarter. That is exactly within the $10 million to $13 million range that we provided in our last earnings call and relates to the planned lower shipments to Johnson & Johnson as they managed their inventory levels. We do not control J&J's inventory, however, based on recent purchase forecast provided to us, we expect shipments to increase. For our fourth fiscal…

Thanks, Jim and good afternoon, everyone. As Jim mentioned, we end calendar year 2007 in unprecedented financial position. More importantly, however, we entered calendar year 2008 with a continued focus on building a growing multi-product company with the capabilities to develop and commercialize products that really make a difference in patients' lives. I would like to update you on each of our major products and programs and provide a brief overview of our development pipeline. Let's start with RISPERDAL CONSTA. We have shipped more than 20 million vials since launch of this product. This is a reflection not only of our significant manufacturing expertise, but of years of patients and physicians experience with this important product. Last calendar year, RISPERDAL CONSTA officially became a blockbuster product achieving more than $1 billion in worldwide sales. Looking to the future, we continue to believe that RISPERDAL CONSTA sales will grow. Importantly, J&J continues to invest in this brand. This week at a scientific conference in Switzerland, J&J presented positive data from a one-year Phase III study of RISPERDAL CONSTA in the maintenance treatment of frequently relapsing bipolar disorder. The study met its primary endpoint and showed that the time to relapse was significantly longer in patients receiving RISPERDAL CONSTA plus standard treatment compared to the placebo group. J&J plans to use these results to file an NDA for this indication during the first half of calendar year 2008. In addition to expanding the label and frequently relapsing bipolar disorder, last November J&J submitted an application to the FDA to approve RISPERDAL CONSTA as a deltoid injection for schizophrenia. Currently, RESPIREDAL CONSTA is administered as a gluteal injection. Enabling injection in the upper arm may be easier for some patients and practitioners. RISPERDAL CONSTA is the first and only long-acting atypical anti-psychotic commercially…

Thanks, David. Operator, we will now open it up for questions.

(Operator Instructions) Our first question comes from Cory Kasimov from JP Morgan.

Great. Good afternoon, everyone.

Hi, Cory.

I guess starting with CONSTA, I'd be interested in just getting your reaction to yesterday's FDA advisory committee meeting for Zyprexa Depot?

Cory, this is David, great question. I don't know if you sat through and watched the whole thing. I was only able to kind of catch the tail end.

Yeah, unfortunately I did.

We thought it was fascinating. And I think the big takeaway for us is data matters. We didn't really know a lot about Zyprexa Depot going into the advisory panel, and obviously there was some lively discussion about what it looks like. I think the other thing is the recognition that not all long-acting antipsychotics are going to be the same in this marketplace. So it's going to be very interesting, I think, to see what happens at the FDA, particularly around the label for this product going forward.

Okay. And then, last question with CONSTA is are you aware of Lilly's or J&J for that matters with regards to palmitate with their strategy for ex-US regulatory filings?

At this point what we've been told or what we know is that it hasn't bee filed, palmitate hasn't been filed in Europe. And we understand that there were some additional requirements that the European regulatory agencies wanted to see. But that's kind of all we know at this point.

Okay. And then one question, if I might, on exenatide once weekly. There is still discussion, obviously, out there as you are well aware that the FDA may not require a bioequivalence study. Can you discuss the precedent there as well as your experience with this matter, especially as it relates to CONSTA and VIVITROL?

Yeah, we can comment on that. For the specifics of interaction with the FDA around once weekly exenatide, I would just continue to refer people back to Amylin since they are the ultimate NDA holder on this. And I know that they are planning to provide update that they have more information and insight into this as we go forward. But as it relates to some of the other programs, as you mentioned, we've got experience doing this a couple of times. With RISPERDAL CONSTA we actually didn't have to go through an elaborate comparability plan because we supplied material for the clinical studies out of the commercial scale equipment. So there was no need to do any sort of bridging type of work to show comparability there. However on VIVITROL, for our Phase III program, what we did was we produced all of the clinical material at the one kilogram scale. So when it came time to scale that up, we had to show comparability to that one kilogram material. And we're talking about dozens and dozens of batches of one kilogram material. And we were able to negotiate with the FDA essentially a chemical comparability type of strategy where we showed what the in-vitro release profiles of that one kilogram material were compared to the large scale material. And the FDA bought into that. It was, obviously, data driven and we worked side by side with the FDA, and we were able to get approval for that. So that's what we did for VIVITROL.

Okay. All right. That's helpful. And then, finally, one just housekeeping question. I just want to make sure I caught this right, so this is for Jim. With regards to the repurchase program the $33.3 million, you said that stopped at the end of the fiscal third quarter, so that's at the end of December. There's been nothing so far then this quarter.

That's correct.

Okay. Great. Thanks. Thanks a lot. Thanks for taking the questions.

Thanks, Cory.

Thank you. Our next question comes from William Ho from Banc of America.

Hi, guys. Couple of quick questions. First of all, with respect to Johnson & Johnson and paliperidone palmitate, I mean do you know much about the properties of that compound? We haven't been able to find much. And after yesterday I am very significantly concerned about LAI, but had additional questions about the future of palmitate relative to CONSTA.

We haven't seen a lot of information either. I think there were some recent abstracts that came out. I'm looking at Rebecca here maybe for some help.

Yeah. Very early Phase IIa data on paliperidone palmitate, but we really haven't seen anything beyond that besides the fact that the studies have been completed for sometime now.

Okay. And then, is there anything you can tell us about the manufacturing revenues with respect to CONSTA. They jumped around a little bit, is there anything that drives J&J's decision? Is there seasonality or anything else that we can help smooth that out in our model?

Yeah, William, it's Jim. We've always talked about the manufacturing revenues being lumpy. I think there are a couple of things. One is they are selling it in almost 80 countries around the world and its various inventory levels, number one. Number two is, as you know, the price is very different outside the United States versus inside the United States. And so, depending on how many batches we ship to ex-US versus US batches in a quarter, that will also help some impact. It's lumpy quarter-to-quarter, but if you take a step back and look at it on a full year basis actually, you can see that increase that matches very closely actually with the sales increases that we're seeing. So we've given guidance for 95 to 100 for the full fiscal year. And as I mentioned, we're standing by that at this time.

On a worldwide revenue standpoint, it seems like sales are becoming pretty much stable or are fairly robust at 295, do you see that constant over the foreseeable term or how do you see that moving in the future?

I think at this stage we expect it to grow. I mentioned we have a purchase forecast from J&J that obviously extends out into next year. And interesting, I think, if you compare year-to-year fourth quarter to fourth quarter, we're up 30%. And actually, if you compare it to last year's fourth quarter, last year's December quarter, our fiscal third quarter, you see the same kind of small amounts of growth at the end of the year. I think with the work that J&J just presented on the bipolar disorder and the fact that they are moving aggressively to filing bipolar, which as you know is the bigger part of the atypical antipsychotic market, and the fact that they are planning to file for the deltoid injection, I think we see both of those as very, very positive for the future of CONSTA.

Okay. Thank you.

You are welcome.

Thank you. Our next question comes from Elliot Wilbur from Oppenheimer.

Thank you. Just a quick follow-up on Jim's commentary. Jim, just based on your understanding, what is the timeline for the filing of CONSTA bipolar indication?

Thanks for the question. Just to be clear, the deltoid application has been filed. It was filed in November of '07. And J&J plans to file in the first half of this year for the frequently relapsing bipolar disorder.

Okay. And just a follow-up on that, Rebecca, is the deltoid application related to bipolar indication or --

For the schizophrenia market.

Okay. And then, I want to ask you a couple of questions on VIVITROL as well. I guess with respect to the goal of reaching profitability on the partnership by yearend, I mean do you think we're kind of at a point frankly where you've ratcheted down expenses as much as they can go and really have to look to the topline now to kind of enable you to sort of cross that threshold? And then, looking at the Cephalon side of the equation, clear that their net losses have decelerated significantly over the past couple of quarters, and I am just wondering if you can give us sort of an update there as to what their current level is, commitment is and any sort of update in terms of the actual number of people you still have in the field promoting the product?

Elliot, this is David, and I will comment may be qualitatively, and Jim might then comment quantitatively on some of the numbers and things. We did what we said we were going to do in terms of realigning the sales organization as we came into the end of last year. All total now in the, what we call the VIVITROL business unit, we've got about 90 people and about 70, 75 of those are actually field based people. The rest of the people are basically dedicated to the marketing and medical affair support of the program. It's a truly integrated organization. So from that standpoint, it's made up of Cephalon and Alkermes people. And sometimes Alkermes people report to Cephalon and Cephalon people report to Alkermes. So from a commitment standpoint, it's very much an integrated partnership, both of us very committed. I think, overall, we are committing about 35% or 40% of the resources and they are committing about 55% or 60% of the resources. I just came back from their sort of POA meeting, plan of action meeting that they had done in Florida in January, and I can just tell you that the group is very energized, very focused on what is it going to take to show that kind of sales growth and trajectory that's going to get us to the end of the year, and they've got variety of plans. Again, I don't want to go into the details of those, but just suffice it to say, we've got the team, they are energized, they are focused and very confident on their abilities to deliver this year.

Yeah. And Elliot, from a cost perspective, of course, we need to see the revenues continue to grow. I think we are very, very happy with the fact that we didn't lose a beat even as we realign the sales force and targeted it. And I think that's quite extraordinarily, frankly. And I think that both Cephalon and Alkermes are committing through this year. The key thing is that at a certain point cutting expenses any further, once they are in that rational part and you have the right sales force in place and you've got the right strategies, it doesn't make a whole lot of sense. As of January 1 this year we are going forward, we are splitting the cost, essentially splitting 50/50 both the revenues and expenses with Cephalon. And you've seen their net loss come down mostly because most of the SG&A expenses run through Cephalon's P&L what runs through our P&L are the further R&D and manufacturing of the products. So I think we're quite optimistic about VIVITROL going forward into 2008. And this wouldn't be the first product in a new market that had a slow start, but it ultimately came out to be very, very meaningful for their sponsors.

Okay. Thanks. I just had a one quick follow-up asked the same question, I think, I asked time. With respect to ALKS 29, at what point are we going to get a little better sense as to sort of what exactly that the actives are in that program?

I think I alluded to it in my conference call script that we're really working now on to finding the proprietary product nature of this. And so, I think once we get through some of that work, we'll be able to give you a lot more clarity on that. So, probably second half of this year.

All right. Thanks for fielding the questions

Thanks.

You bet.

Thanks, Elliot.

(Operator Instructions) Our next question comes from Ian Sanderson from Cowen & Company. Ian Sanderson - Cowen & Company: Good afternoon. Thanks for taking the questions. First, actually Jim, you talked a little bit about the move towards cost sharing, and what exactly is the P&L impact of the cost sharing of VIVITROL in the current quarter, is it just that net collaborative profits line will turn negative

No. I think net collaborative profit line will cut down, but it's not going to turn negative. So, recall Cephalon books all the revenue of sales and then have a good portion of the expenses, but they are essentially losing less money than we're losing. Ian Sanderson - Cowen & Company: Okay.

So they are sending us the balance, so we each lose the same amount of money at this point. And that will turn over into sending us money to each match the profit. We also have each quarter about $1.3 million of milestone recognition because, remember, they paid us $270 million upfront to license VIVITROL. We spent a $120 million to first launch the product, then for the second half of last year Cephalon was funding all the losses essentially. And then, moving forward though, we still get to keep that $150 million of license revenue and the SEC has us recognized that over the life of the products, so we do about $1.3 million a quarter. So the funds flow is still positive to Alkermes. And I think there's a table on our press release, essentially the Alkermes expense for the year suited for the quarter was $3.8 million. Ian Sanderson - Cowen & Company: Okay.

So that was essentially our part of it or half of the net loss. Ian Sanderson - Cowen & Company: Although you weren't into the 50/50 cost sharing in the December quarter, correct?

That's correct. So that was funded by Cephalon, but that will be going forward. That's kind of the magnitude of where we're at in terms of the loss on VIVITROL. Ian Sanderson - Cowen & Company: Okay. And second question on ALKS 27, what's the next development milestone that we should be looking for here?

Well, I think we've got a couple of things going on. We'll continue to have active partner discussion. And so, what we're trying to do is not lose any forward momentum on the rest of the clinical program. So we continue to do some optimization of the product configuration. And what we hope to do is sign a partnership and enter into a clinical study by the end of this year. Ian Sanderson - Cowen & Company: At one point, I think earlier this year the though was that you would go into Phase II program regardless of whether you had a partner or not. Is that still the thinking or now is it more optimize, get the partner and then do the Phase II?

There were lots of moving parts, and I think what our current assumption is, is probably getting a partnership. Ian Sanderson - Cowen & Company: Okay.

But obviously we have a year to work on that. And if at the end of the year something happens different than that, we can make that decision now. Ian Sanderson - Cowen & Company: Okay. Thank you.

Thank you. Our next question comes from Dave Windley from Jefferies & Company. Dave Windley - Jefferies & Company: Hi. Thanks for taking the question. Just clarify on the last one, David, the year that you speak of for ALKS 27 is calendar '08?

Yes.

Yeah. Dave Windley - Jefferies & Company: Okay. Jim, on the VIVITROL on Ian's question there, I guess I'm trying to understand that VIVITROL P&L is losing single digit millions of dollars at this point, is that right?

That's correct. In the fourth quarter, December 2007 quarter, so the fourth calendar quarter the net loss on VIVITROL was $6.92 million. Dave Windley - Jefferies & Company: Okay. And so you split that staring in March, and then you take $1.3 million of cost reimbursement or amortization of the milestone payment, and how does that end up as a positive number? What element am I missing to make that a positive number?

Because there are also funds that Cephalon pays to us, Dave, some quarters, so net collaborative profit. We have expenses that we always have shown in our expense lines. And when we get payments from Cephalon, we also have to show out somewhere, and that runs through net collaborative profit. Dave Windley - Jefferies & Company: Okay. Are those payments, though, not part of what makes that P&L come to $7 million?

No. The payments are just the cash flows. The P&L is what's spent, because, again, remember Cephalon has all the revenues coming in on their topline. We don't have any revenues coming into the top line. Dave Windley - Jefferies & Company: All right. Okay. All right.

And ultimately, at the end of the day, if there is a loss in the quarter, come March, if there is the same loss in the quarter of $7 million, our half of the loss are $3.5 million. Dave Windley - Jefferies & Company: Okay.

If our expenses are a little bit more then Cephalon will have to send its money to make it balance out at $3.5 million of loss for each company. Dave Windley - Jefferies & Company: Okay. All right, that makes sense to me. And then, beyond that, would you take down additional cost reimbursement to cover that?

No. The milestone revenue going out forward for us is essentially straight line. Dave Windley - Jefferies & Company: Just that one number, okay. Moving on then, can you walk me through the approximate timeline for the Cilag deal in Russia? I mean you said you hope to start a Phase III study in '08, what would be the review cycle, the late stage development, and then the review, and launch cycle on that approximately?

Yeah. A couple of things, Dave, that you might be confusing. With regard to starting a new Phase III study, what we are talking about is doing an opioid study to expand the label for opioid dependency. And that's going to start here in the first half of this calendar year 2008, independent of Janssen and the deal we signed for Russia. Dave Windley - Jefferies & Company: Okay.

So we're doing that separately and independently. But now turn to Cilag or Janssen, we signed the deal with them, $5 million milestone, another $34 million worth of potential milestone payments. It's a royalty deal. We are in the process of sending them our file essentially, and they are going to be responsible for translating that and then submitting that to the Russian regulatory agencies for approval. And I think that the approximate timing on that is probably looking at, again, I'm not that familiar with the details of that, but probably towards the end of this year or beginning the next calendar year, we can hopefully see approval of that product. Dave Windley - Jefferies & Company: Okay.

And then they are responsible for the launch of it in that market. Dave Windley - Jefferies & Company: Okay. Thank you

Thank you. This does conclude the question and answer session of today's program. Thank you.

Thanks everyone for dialing in. And if you have any additional questions, Jim and I will both be available. Have a good evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.