Bob Yedid - ICR Investor Relations Mike Anderson - Chief Executive Officer Sian Crouzet - Principal Financial Officer.

John Boris - SunTrust Jason Butler - JMP Securities Derek Archila - Leerink Partners Jim Molloy - Analyst Matt Kaplan - Ladenburg Thalmann Scott Henry - ROTH Capital Jesse Sobelson - Iridian Asset Management.

Please standby, we are about to begin. Good morning, ladies and gentlemen. And welcome to the Flamel Technologies First Quarter 2015 Earnings Call. Please note that this call is being recorded. I would now like to turn the call over to Mr. Bob Yedid. Please go ahead, sir..

Good morning. And welcome to the Flamel Technologies first quarter 2015 conference call. This is Bob Yedid of ICR Investor Relations. Before we begin, I will start with some cautionary statements.

The following presentation regarding Flamel Technologies includes a number of matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements.

These risks include risks that products in the development stage may not achieve scientific objectives or milestones, or meet stringent regulatory requirements, uncertainties regarding market acceptance of products, and the impact of competitive products and pricing.

These and other risks are more fully described on Flamel's public filings, including the Form 20-F for the year ended December 31, 2014. Except as required by law, Flamel undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events or otherwise.

After the prepared remarks, we will be opening the call to a question-and-answer period. At this time, it's my pleasure to turn the conference over to Mike Anderson, Chief Executive Officer of Flamel Technologies.

Mike?.

Thank you, Bob, and good morning, ladies and gentlemen. As always, we appreciate you are joining us today. I am excited about our company and its progress, and I am pleased to report that Flamel has made significant progress in a number of commercial and pipeline areas in the first quarter. The company is off to a strong start this year.

We have seen meaningful sales from our two marketed products, Bloxiverz and VAZCULEP, and have achieved positive cash flow from operations, net income and EPS for the first time in the company’s history. Today’s call will focus on a number of topics, including Bloxiverz sales and developments in the neostigmine market.

VAZCULEP’s continued success and market share gains post-launch, progress of our pipeline of proprietary products, including Micropump Sodium Oxybate, LiquiTime and other proprietary products, and some ongoing searches to broaden our talent and expertise within the company.

After my remarks, Sian Crouzet, our Principal Financial Officer will discuss our first quarter financials. In mid-April, Senior Vice President of Corporate and Business Development, Steve Lisi, left Flamel and we wish him well. Steve spearheaded many of the company’s business development efforts and finding a replacement is of the utmost importance.

The search process is well underway and we expect to have a candidate in place in the coming weeks. In addition to finding a professional that will smoothly transition into leading our Corporate and Business Development efforts, the company is looking to expand its team in a number of other areas as well.

The company’s strong cash flow will enable us to make a number of hires in the areas of clinical research, quality control, supply chain and finance. We look forward to announcing senior level additions to the Flamel team in the near future. Flamel sale of our commercial products is proceeding well.

According to prescription data sources, Flamel was supplying 100% of the neostigmine market to wholesalers by the end of February. As you know, we increased our wholesale acquisition costs or WAC for Bloxiverz from $35.80 to $98.75 in mid-January and as of mid-February we have been shipping at an increase contract price to all customers.

The company had revenues of $28.6 million from Bloxiverz in the first quarter and has additional deferred revenues of $30.7 million of Bloxiverz as of March 31st. We expect the majority of these deferred revenues will be recognized in the second quarter of this year.

The increase in deferred revenue is largely attributed to the increase in the sales price of Bloxiverz and increase in inventory hold by wholesalers.

As Flamel made a significant investment to obtain an FDA approved version of neostigmine, our price action allows Flamel to earn a more attractive return in the first quarter prior to Fresenius copy entering the market in April. The competitor announced a WAC price just $1 below ours, which we believe indicates a rational pricing strategy.

Although, we still have little color into Fresenius contract pricing. We believe that offering a large discount to substantially garner more than 50% market share would come at the cost of lower gross margins.

We think this type of price strategy is counter productive and we believe that like Flamel a rational competitor would also seek an attractive return on their investment. As you may know, compliance to FDA standards is extremely expensive in the sterile products area today.

The company believes that wholesalers were selling Bloxiverz at contracted prices based off of the higher Wholesaler Acquisition Cost or WAC as of mid February. Our price increase has allowed the company to reaffirm our previous guidance for 2015 product sales of between $170 million and $185 million in total for both Bloxiverz and VAZCULEP.

Now, let’s turn to VAZCULEP, our second FDA approved product. As a reminder, to-date Flamel is the only company supplying FDA-approved phenylephrine in all three vial sizes, 1 mL, 5 mL and 10 mL. We’re pleased to report that VAZCULEP continues to gain ground in the phenylephrine market.

Following the earlier than anticipated exit of unapproved manufacturer, Sandoz, from the market in March, Flamel is now the sole supplier of the 5 mL and 10 mL vial sizes to the market. While there is still a supply of Sandoz product in the wholesaler channel and probably in some hospitals as well, we do believe it is quickly being depleted.

Flamel recognized sales of $3.5 million for VAZCULEP in the first quarter, which was higher than initially anticipated. When the company received approval for VAZCULEP, we estimated the market size at approximately $40 million to $50 million based off IMS data sources.

However, third-party repackagers who had previously purchased product directly from the unapproved manufacturer were unaccounted for in the IMS data. These repackagers and hospitals for that matter typically purchased 10 mL vials and place the product into IV drip bags for protective use.

These repackagers present themselves as a new set of customers for the company. Following the exit of the unapproved manufacturer, the company was able to raise the price on the 5 mL and 10 mL vial size to $27.70 and $54.23 respectively, which correlates to parity on a per mL basis with the 1 mL vial size.

The price increase combined with the larger market share has grown the phenylephrine market to somewhere in the range of $80 million to $90 million. Regarding our third unapproved marketed drug, we remain on track to file our NDA application during this second quarter.

As we’ve discussed before, at the time of acceptance of the filing by the FDA, which takes up to 74 days after the actual submission itself, Flamel will make an announcement to investors.

We expect a standard 10-month PDUFA date and anticipate the initial market size of this opportunity is approximately $70 million, which was similar to our initial estimate of the market for Bloxiverz at the time of product launch.

We have seen no developments in terms of the target market or NDA approvals for this unapproved drug that would lessen the relative attractiveness of this opportunity for Flamel. The company does plan to request a period of exclusivity on this product.

However, this decision has had the discretion of the FDA and we would not have clarity on the matter for quite some time following the submission of the application. As with our other marketed products, the company looks to reap an attractive return on investment to continue driving shareholder value.

Turning to our proprietary pipeline products, we have requested a meeting with the FDA in order to get their guidance prior to beginning our pivotal trial for sodium oxybate using our proprietary Micropump technology.

Depending on the outcome of that meeting, we anticipate beginning that screening of patients for pivotal trial in late 2015 and filing an NDA in the first half of 2017. To the extent that information emerges from the meeting with the FDA, it might change our timing expectations, we will update investors appropriately.

At this point, we don’t expect changes but as you know the FDA has remarkable discretion. As you also may know, the current standard of care, Xyrem, is typically two equally divided doses, the first taken at bedtime and the second dose take 2.5 to 4 hours later.

We continue to be very excited about our potential for Micropump sodium oxybate to eliminate the second middle-of-the-night dose, which would dramatically improve the standard of care for narcolepsy patients. We are attempting to create a better alternative for physicians and for their patients with the product.

And we’re recently encouraged that competitors trying to develop once a night version of sodium oxybate, announced a delay in their clinical development program. Now, let’s turn to LiquiTime, Flamel’s platform technology for extended release of liquids.

As a reminder, LiquiTime refers to a 12-hour extended release liquid which we believe will be a very attractive opportunity and product for consumers in the OTC market, particularly, when compared to liquids that are immediate release and have to be dosed every four to six hours.

Additionally, there is a large potential market for use of the technology with prescription products, particularly for pediatrics, geriatrics, patients with dysphasia and other swallowing types of problems.

We will be starting a pivotal trial for LiquiTime ibuprofen in the second half of 2015 and the pivotal trial data will be reported at the end of the year. In addition, we announced data from a second study of LiquiTime guaifenesin in the first quarter. Guaifenesin, of course, is a widely used expectorant sold under the names of Robitussin and Mucinex.

While none of the prototype formulations in this relatively small pilot study precisely satisfied all of the criteria necessary for proving bioequivalence to the immediate release guaifenesin tablets.

The results clearly met the intention of the study which was intended to provide sufficient data for the company to choose the best prototype to move forward into a pivotal study. We are confident that with minimal tweaking to the formulation, we will be able to satisfy FDA’s current standards for AUC or area under the curve.

We plan to begin this trial in the first half of 2016 although LiquiTime ibuprofen and LiquiTime guaifenesin can be used as monotherapies. A large combination drug market exist in the OTC cough-cold area. We believe our LiquiTime technology may be able to deliver these multiple drug combinations in a stable form.

And we would plan on doing this clinical work with a partner. The OTC market for our LiquiTime products is substantial. It’s an exciting opportunity for Flamel and for a potential partner. The global cough-cold market, for example, is estimated to exceed $6.5 billion.

Given the size of the OTC market, Flamel was seeking a potential partner to develop and market a full line of OTC products. Likely partners include the global OTC players that are part of large pharma and consumer products companies.

Although partnerships are complex and the timing is not fully in our control, we reiterate our goal of partnering LiquiTime technology for OTC use by the end of the year. Moving to our other pipeline products.

The company is on track to receive human data in the second quarter from our study of Trigger Lock formulations, which are used for abuse deterrence of long-acting opioids. Trigger Lock contains sustained release Micropump based microparticles that are resistant to crushing and extraction. The U.S.

market for opioids is large and over $7 billion and abuse of these drugs is a major health concern in the United States with an estimated $2.1 million people suffering from substance abuse of prescription opioids.

If our first-in-man trial generates clinical data in line with our expectations, we plan to start a 12-month stability in 2015 so that we can submit an NDA in late 2016 to the FDA. Given that most opioids are Schedule II and Schedule III drugs, we anticipate having to complete a liking and a dose dumping study prior this submission of the NDA.

Finally, our last major proprietary product uses Medusa, Flamel’s hydrogel depot delivery system that is applicable to a wide range of peptides, proteins and small molecules. We believe Phase 1 data from our first-in-man study of Medusa exenatide before the end of the year.

Sales of GLP-1 drugs were $3.2 billion in 2014 and are enjoying healthy growth rates. Two of the primary drugs used in this market are twice daily Byetta and Bydureon of once per week form with a significantly larger dose.

For the profile, we would seek with our Medusa exenatide product would be to extend the release without the large dose of exenatide required in by Bydureon today. While the development time for Medusa exenatide is a biosimilar, will take longer than our other products.

The good news is, the market is very large and growing and Flamel has patent product on this drug through 2028 in the EU and through 2031 in the U.S. Overall, the company had an extremely successful first quarter. I will now turn the call over to Sian Crouzet to discuss Flamel’s financials and further details.

Sian?.

Thank you, Mike and thank you all for joining us today. Flamel reported total revenues during the third quarter of 2015 of $32.7 million, an increase of $28.1 million in revenues compared to the prior year period. A total of $32.1 million of revenues are deferred as of March 31.

Of this amount, $30.7 million relates to Bloxiverz given our sales removals to revenue recognition, which I will discuss further and is also described in our press release. The remaining $1.4 million relates to VAZCULEP. We anticipate the majority of the sales will be recognized in the second quarter of 2015.

The increase in deferred revenue is largely attributed to the increase in the selling price of Bloxiverz in mid-January and the increase in inventory held by wholesalers. The company believes that wholesalers were selling Bloxiverz at contracted prices based on higher wholesale acquisition costs or WAC as of mid-February.

Revenue recognition under GAAP requires the price on the product to be determinable. In Flamel’s view, price is determinable when the product is sold through to the hospital and the chargeback can be determined, particularly in a period when product prices may be changing.

Therefore, the company’s product revenue is recognized on this sales-through methodology. Costs of goods and services sold for the first quarter of 2015 were $3.6 million compared to $800,000 in the first quarter of 2014. This increase is in line with an increase in product sales.

Research and development costs in the first quarter of ‘15 totaled $6 million, compared to $3.9 million in the prior year period due to the company’s continued investment in this pipeline and other proprietary products.

Selling, general and administrative costs were $4.5 million in the first quarter of 2015 versus $3.5 million in the first quarter of 2014. We continue to amortize R&D assets associated with the development of Bloxiverz.

The amortization expense was $3.1 million in the first quarter of 2015, modestly higher than the $2.9 million in recent quarters due to additional amortization of the R&D costs of VAZCULEP. As a reminder, the bulk of this non-cash expense is due to amortization of the R&D assets for Bloxiverz.

And we will be amortizing these assets through the end of 2016. Total net interest income was $657,000 in the first quarter of 2015, compared to interest expense of $5.5 million in the first quarter of 2014.

Interest expense was largely eliminated with the company’s repayment of nearly all of its debt and lines of credit with a portion of our equity offerings in March 2014. In the first quarter 2015, the company had total foreign exchange gain of $11.5 million, of which $2.2 million was realized, due to the strengthening of the U.S. dollar to the euro.

While our parent company in France uses the euro as its functional currency, it holds over $95 million in assets that are U.S. dollar denominated which appreciated relative to the euro.

Operating and net income or loss includes remeasurement of the fair value of the acquisition liabilities, which was an expense of $5.3 million for the three months ended March 31, 2015, compared to $14.6 million for the prior year period.

These liabilities were incurred as a part of Flamel’s acquisition of Éclat Pharmaceuticals in March 2012 and are tied to commercial sales of FDA-approved products as well as other factors that are described in our Annual Report on Form 20-F.

Changes in the fair value of the acquisition liabilities, which are remeasured at each balance sheet date are recognized in the company’s reported income or loss. Net income from continuing operations for the first quarter of 2015 was $11.6 million versus net loss from continuing operations of $26.9 million in the year ago period.

Flamel reported earnings per share from continuing operations of $0.27 on a diluted basis in the first quarter of 2015, compared to a loss per share from continuing operations of $0.95 in the first quarter of 2014. In addition, we have provided certain non-GAAP data that allows investors to evaluate the company’s ongoing operations.

The adjustments exclude fair value remeasurements and amortization expense directly associated with acquisition of Eclat on an after-tax basis, asset impairments, effects of early reimbursements of certain debt instruments, and unrealized foreign exchange gains and losses, and includes earn-out and royalty payments to associated with the acquisition liabilities and royalty agreement.

Adjusted net income for the first quarter of 2015 was $4.4 million, compared to an adjusted net loss of $4.4 million in the first quarter of 2014. Adjusted earnings per share on a diluted basis was $0.10 in the first quarter of 2015 versus adjusted loss per share of $0.16 in the prior year period.

With respect to cash and marketable securities, we are pleased to report cash and marketable securities of $113.2 million as of March 31, compared to $92.8 million as of December 31, an increase of about $20 million. Before closing, I want to update investors on our tax situation which we discussed last quarter.

Our expected tax rate for the first quarter of 2015 was 47.3%, which reflects the mix of tax rate in jurisdictions where our taxable income is generated, with near-term revenue stream being generated essentially in U.S. from Bloxiverz and VAZCULEP, while our R&D expenditure is essentially in Europe. As of December 31, 2014, our U.S.

net operating loss carry forwards totaled more than $45 million. And given our current revenue guidance for 2015, we are likely to maximize the use of NOLs this year, thereby reducing our cash outlays to the payment of taxes. With that, I will now turn the call back over to Mike before taking questions..

Thank you, Sian. I would like to make if I could to expand a little bit on Flamel’s tax situation. As Sian mentioned, Flamel has substantial NOLs as we entered the year. However, for our reported financials, GAAP rules required Flamel estimate our tax rate for 2015 including the benefit of the NOLs and apply that starting in Q1.

As we progress through the year, we will be making some adjustments to the estimated tax rate with the final reconciliation or true-up in the fourth quarter. As mentioned, this book tax rate will exceed our cash tax rate as we use our NOLs in 2015 that will reduce our cash payment for taxes and improve the company’s cash flows.

As a reminder our near-term revenue streams are being generated from Bloxiverz and VAZCULEP in the U.S. while our R&D expenditures are essentially in Europe. Hence the relative location of our income in the U.S. versus our expenses in Europe increases our near-term taxes.

While we would like to have a lower tax rate in 2015, the price increases on our two commercial products are causing us to use our NOLs faster than originally anticipated.

That being said, we take an actions in anticipation of being profitable in 2015 and beyond, starting with the opening of our Irish subsidiaries in 2014 and relocating our intangible assets to this subsidiary.

Looking forward, we anticipate that our NDA filing for our third unapproved marketed drug will be made from or Irish subsidiary, which will mean a lower tax rate on that products profits as we start to generate sales, which is expected to begin in 2016. Our team will implement further actions to manage our global tax rate.

This will reduce our tax rate in the medium and in the long-term. In summary, in our view Flamel has had a very strong year quarter generating meaningful sales and strong cash flow from operations.

We will continue to focus on advancing our product development pipeline, including filing a third NDA for an unapproved by marketed drug and announcing data from our Trigger Lock opioid clinical trails.

In the second half of '15, we will start the pivotal trial and report data for LiquiTime ibuprofen, have data from the Medusa Exenatide Phase I clinical trial, and we will also anticipate initiating our sodium oxybate pivotal study by year end and we will know more from our meeting with the FDA.

Finally, Flamel’s solid cash flow from operations and strong balance sheet will give us flexibility to invest in our current pipeline of proprietary products, which is our top priority as well as to seek additional products that add to the pipeline and explore selective business development opportunities.

We appreciate your participation on today’s call. And we look forward to providing updates throughout the coming year as Flamel continues its mission of building a strong specialty pharma company with outstanding drug delivery capabilities. With that, we will be happy to take your questions.

Operator?.

[Operator Instructions] And our first question, we will hear from John Boris with SunTrust..

Thanks for taking the question and congratulations on running the company profitable, Mike..

Thank you, John..

So first question just on the Bloxiverz market, just any kind of color, Mike, if you could provide [Technical Difficulty]?.

John, I am having some trouble hearing you..

Sure. Mike any thoughts on the type of market share that Fresenius was able to garner in the April and early May time period in the neostigmine market? That’s first question..

Sure. Okay. First of all, Fresenius, as you know, did ship as they had described somewhere around the week of April the 6th. We think that their share today is somewhere probably in the 20% range give or take.

What I can tell you and I know there has been some concern about this deferred revenue business and it is quite frankly a very conservative approach. But what I would tell you is that we are currently as of the run rate today, which clearly could change as Kabi continues to roll product out, are in excess of $20 million a month.

So we are doing quite well and doing what we would have expected to do. We have not seen pricing in all quarters of the marketplace, which is a little bit unusual and we suspect that maybe a little bit the result of working product into the distribution system. But from best we can garner at this point John, that’s about where it sits..

So as we progress then Mike from 4Q into 1Q, the amount of deferred revenue, it’s the range maybe you could give for 2Q that we should be ensuring that we model going forward here?.

Well, I think part of that John, will depend on what we do in terms of our full sales picture for Q2. What I can tell you is that forward of the deferred revenues in Q1 which were something over $30 million, about 80% of that will be realized in Q2 in addition to a lion share of the revenue that we generate from Q2.

So if you want to look at that as a parameter of what we really did in Q1, you would add that to what we recorded in terms of sales and you’d have a total somewhere in the neighborhood of $57 million to $58 million for Q1.

Deferred revenue, we believe that at least 80% of the revenue that we deferred will be recognized in Q2 and then also in Q2, we will have the advantage of having for the entire quarter the price increase.

And as you would remember, the price increase, while it was implemented for wholesalers on January 15th really didn’t take effect to the hospital user until February 15th..

That’s great color. Just on the accounting side, your gross margins were obviously materially above consensus estimates.

Any additional color since you’re realizing the full effect of your price increases going forward in the next quarter, should be assuming gross margins at or above 80% going forward over the next couple of quarters in terms of being stable?.

Right. I think that typically speaking, what you see in the way of gross margin is radically different. And it’s not going to be radically different as we move into Q2 and beyond either. Obviously, I mean, these are typical specialty pharma products with specialty pharma gross margins. And so I wouldn’t expect to see much in the way of changes..

Last couple, just on the Eclat three, is it fair to say, you’re seeing that that product could be potentially capacity constraint? Does that help maybe get the FDA to accelerate its review on Eclat three? And then on sodium oxybate, what’s your position on going it alone versus partnership on sodium oxybate? And have you -- have any CDOs restaffed you potentially partnering?.

Okay. Well, the first question which relates to Eclat three, I have no reason and we have no reason as company data believe that there will be any kind of accelerated review. We feel good about the product that we’ve produced and we’re expecting at this point at a 10 month PDUFA. It’s in with FDA.

It’s pretty much to date but its due as the day it comes. So I think that’s proper way to look at Eclat three. As it relates to oxybate, when we get -- as we go down the road, we’ll look at all of the options. What we’ll end up doing is what we believe is in the best interest of our shareholders.

If it’s in the best interest of our shareholder to go alone then that’s what we would be prepared to do. If we think that it’s in the best interest to do something alternate to that, we’ll certainly consider that we have to do share responsibility to make the best decision and believe me that’s forefront in our mind.

It would be pretty mature to talk about. And we don’t -- we wouldn’t typically talk about discussions that we may or may not have had on any product licensing or other issue..

Thanks for taking the question..

Sure..

And next we’ll move on to Jason Butler with JMP Securities..

Hi. Thanks for taking the question. And let me add my congratulations on the quarter.

Just another question on sodium oxybate, can you just talk to it a little bit more about what your expectations are for the FDA meeting? What your key points of focus are? And what -- in your mind the variables could be in terms of what FDA could ask you to do?.

Well, that would be a long list but as you know Jason, when you submit to FDA for pre IND meeting for which this qualifies, you would prepare a briefing package, that briefing package is submitted to FDA with issues that you want clarity on and it’s quite as an extensive document.

The FDA slightly before your meeting will come back and they will provide you with answers to your questions. If the answers are satisfactory and not unexpected, than you have the option of crossing that off the list when you go and meet with the FDA.

If the FDA gives you an answer within there that’s not exactly what you heard or wanted to hear or needs a little more clarity or any number of different things than you might choose obviously to as to discuss that further in the meeting, so that be two option.

Those are simply clarity issues and they’re quickly cleared up and you move on to the next question. I think that frankly, it would be pretty mature to talk about what we’ve and we wouldn’t talk about what we put into that package. But I do think that it would be reasonably expected.

There will be a great feel of discussion about clinical expectations of that pivotal trial and probably some CMC questions as well. And other than that, I don’t really have much more definitive that I could offer to you..

Okay. Thanks. That’s helpful, Mike. And then a question on the LiquiTime cough-cold franchise.

Can you give us a little bit more insight on how you’re currently thinking about the Guaifenesin program following the data you reported back at the end of March? As well as what your mind, the value inflecting points or the points in that development program that could have helped catalyze business development discussions?.

Yeah. So obviously, I think, we’ve said this. Our preference would be -- and I think, it would be very hard for us to consider doing one-offs.

In other words, what we have now is data and a clear pathway forward from our perspective for both Guaifenesin and Ibuprofen to license one to one guy and one to the next really doesn’t make a lot of streams for us.

I think our preference would be to find the global marketer who would like to take those two products participate and the way we’d look would be as a global marketer of OTC products. And what we would expect is they would take and help us work through with get complete filed and finished in the marketplace, both those two monotherapies.

And then the overwhelming part of the market that is the most attractive is probably that combo component, which as it amount to literally bit over $5 billion and actually includes literally, tens and dozens and dozens of product mixes. And it would be in my view, the obligation and the desire of your potential partner to decide what comes next.

And there is, I can tell you and I feel comfortable telling you, there is interest in this LiquiTime platform for OTC use and we are reiterating our expectation that we would license those by the end of the year..

Great. And then just last question for me back on Bloxiverz.

You mentioned that you’d seen inventory levels increase at the wholesalers during 1Q, as your market share increased to 100%? Do you expect or have you seen inventory draw downs as Fresenius Kabi enters the market and again is that something that you expect inventory levels to come down again as they gain market share?.

Well, I don’t think inventory levels were enormously high in Q1, but we think today they are just about a month forth of inventory in the wholesaler and we think that's about what it’s going to stay at.

So I -- we have seen a little bit, but I don’t expect to see anything except they are back to back?.

Okay. Great. Thanks for taking the questions and congratulations again on the progress..

Thanks. Thanks. Appreciate it..

And next we’ll move on to Derek Archila with Leerink Partners..

Hey, Mike. Thanks for taking my questions and congrats on the quarter.

I had a question on guidance? So how should we be thinking about the Bloxiverz and VAZCULEP split now that you’ve taken the price increased on the two presentations of VAZCULEP?.

Yeah. So a good question, Derek, and I think that at this point in time, we are comfortable reiterating that 170 to 185 range. I mean, clearly, we haven’t seen a full impact of what Kabi will do in the marketplace.

So I think that what we would tend to kind of do is wait maybe till the end of the second quarter, have a little more definition as to what that Bloxiverz market looks like and if there is any adjustment either up or down in that range, why we would make it at time.

But I don’t -- I think for the time being we are comfortable with the range that we’d set out there and probably, with the mix you already have..

Great. Thanks Mike..

Yes..

And next we’ll move on to Jim Molloy with [Indiscernible]..

Hey. Thanks for taking my questions. I had a question on the Eclat number three program? Can you talk about the other -- are the other unapproved files are currently in that market, are there other bunch there? I know you don’t want to talk a lot about that but….

Yeah..

… some guidance on how long will it take, is it just going to be more like VAZCULEP market were adjacent of the aftermarket in a hurry or more like Bloxiverz where there two for nil they get these people to leave the market?.

Jim, that's a pretty very good reasonable question to ask. I think you are right. I’d prefer not to go into a lot of depth on that. We think it’s a reasonable market as we mentioned in the commentary there.

It’s a market that we made very well, have the right to ask for some exclusivity, doesn’t necessarily mean the FDA will look at it the same way, but we’ll certainly make that effort and we’ll just have to see what happens.

I think with respect to Bloxiverz, there was another there was another issue involved that's was kind of under the surface and never really called out, but I am convinced it was there. And that is that when Eclat got an approval for Bloxiverz and begin going to the FDA asking them to remove under proof products.

I think it set the till of the spine of FDA that here is a small company who we don’t know who is asking us to remove these unapproved products from the markets and on top of that the market is a medically necessary drug as designated by FDA and on top of that has been insured supply.

And I think those are two issues that caused the FDA to take longer than I would have expected them to move on the unapproved products.

I do think that given all the dialogue that we’ve had with FDA over in all the time since then that there is a higher confidence level, our ability and we showed them a willingness to hold at one point larger inventories of Bloxiverz and I think that there’s maybe a comfort level that may work in our behalf with respect to that third project.

But we really won’t know till we get there..

Okay. One follow-up on that.

Would you characterise the Eclat number three market is more like VAZCULEP or more like Bloxiverz as one of these medical necessary where the FDA might want to take a little more time to make sure or do you think maybe a very quick at option?.

Well, those are two different things. The answer to your first question is, as far as I am aware, it’s not being the medically necessary drug. And so I think that works for us. Certainly it helps us to make a case. We’ll just have to see when we get there each one of this is a little bit different.

I think that we’ve in my view developed a good relationship with FDA. And hopefully, they see us as somebody who’s trying to advance the cause that they embrace, but we’ll see..

Excellent.

And with Steve Lisi, maybe you obviously can’t replace the Steve Lisi, but you get someone else coming in, what do you see as the top priorities for the new men or women who’d come in and sort of fill their shoes, what’s actually number one, number two, number three?.

Well, that listen we have, as you know, many, many its -- and trying to find somebody to fill Steve’s capable shoes is a gargantuan task. I think it’s important for us to have excellent business corporate development capability.

I also think it’s important for us to be able to talk and to be able to understand precisely as certainly Steve did to the investment community. And so those are amongst the things that we’ll continue to try to improve. We have other needs.

As you know, we’ve an Irish subsidiary now in order to make sure that we pass all the tests required by the Irish tax authorities. We are kind of boosting that area up. We are boosting our quality. Our supply chain has become more and more important.

So we have a lot of very important needs and of course trying to replace those skill sets that Steve brought tried at the top..

Thank you. Last question then the tax rate, I think you guys talked about it in the prepared remarks, pretty high number, but given the setups of Flamel that's certainly understandable.

Is 47%, 50% we should expect for 2015?.

Well, I think that I don’t -- I have no basis right now. Jim and Sian can join in on this. I don’t have -- we don’t have any basis today to suggest that it’s going to move a lot one way or the other.

I think that it’s something that there are some things that we’ll do that to try to address that, obviously things like Eclat 3, but Eclat 3 won’t take place till '16. So in 2015, it’s going to be a challenge with something we are working on and there may actually be some ways that we can be creative and still meet the requirements.

And so we’ll have to see how that plays out, but I can’t sit here and today tell you there’s going to be substantially lower over the course of the year, could be quite Jim, could to be honest with you..

Thank you for taking the questions..

Sure..

And next we’ll move on to Matt Kaplan with Ladenburg Thalmann..

Hey, Mike..

Hey, Matt, how are you?.

Good congrats on the quarter. Good job.

Just question not to beat the desk but the deferred revenues, when we are thinking about deferred revenues for the second quarter, should we think about those as larger percentage of your sales as you saw during the first quarter or we should expect those to start to go down?.

I think you would expect to see those to go down, Matt. I can’t give you a rate at which they will decline, but remember there are a number of criteria. First of all, if I can make a comment on this revenue recognition, I think it causes angst for people.

And I think there’s no question, but we have taken a most conservative approach in the way we recognize revenue. It’s not a typical in this business, as you know, for companies to shift products to the wholesalers and call it a sale. And then down the road, chargebacks and other adjustments to revenue are accounted for returns and so forth and so on.

And I think just recently we saw, I think an example of a company that actually underestimated chargeback reserves and ended up having to do some changes. And so we’ve taken the approach that we don’t recognize the sale as revenue until it goes from McKesson to general hospital shelf.

I don’t know that there are lot of people who look at it like that in this business, but we do think that in the long-term, as we’re building a business that it provides the components level that we’re not going to have surprises down the road. The other thing that impacted that deferred line was the size of that price increase.

If we had increased the price from $38.75 to $40.75, you wouldn’t keep saying the same deferred revenue and you wouldn’t have run into an issue that is something in my view of an anomaly.

In order to get the price up to where it was, we kind of took a hit on it a little bit in Q2 because the WAC increased by such a large dimension that what was on the wholesaler shelf, increase the inventory level because they immediately begin as is practice it really impacts against the higher WAC, even though the contract price still when on for 30 more days.

So all of those things contributed to the ability to determine the accurate price and the market and the value of inventories and absent our ability to take another price increase like that in the second quarter and while that might be nice, it’s probably unlikely at this point. At least, we’ve taken a conservative approach.

So, I do think you’ll see those deferred revenues come down..

Okay. Great.

And then with WACs, with the price increase that you took recently, how should we think about that market? Now you’re talking about kind of a $90 million market and talk about the opportunities, I guess from now with the price increase in 2015?.

Well. I think that it does a couple things. Number one, I think the most, first and foremost is the notion that we’re only the supplier of all three vial sizes. It’s always been -- I mean, all hospitals and GPOs who represent them look at product pricing individually. It’s highly unusual to split vial sizes.

So, I think it gives us a little bit of an advantage and as we deal with hospitals and GPOs and when phenylephrine comes up, is a product they talked about. Additionally, we think that there is a volume of business that we didn’t really previously quantify correctly.

It relates to these kind of repackagers and even some hospitals that being principally the 10 mL vial, which is what they will do is by the 10 mL, which we now price at $50 as you know and fill a bag with a 10 mL vial. And then in essence provide the hospital with the pre-filled bag.

Some hospitals do those for them, so that’s the market that I think we underestimated. So, I think you’ll see, continue to see a stronger performance from phenylephrine and the reception for our products is that all three of our strengths is pretty good. We felt pretty comfortable where we are with that..

Okay. Very good. And with respect to sodium oxybate and your meeting with the FDA, what’s your sense in terms of what are pivotal study will potentially look like? Obviously, I know it’s a moving target but….

Yes. Scott -- I mean, Matt, frankly if you would let us have -- I’ll just preferred not to opine what a successful clinical study is going to look a like. And I think that sodium oxybate has been well characterized. We know what Jazz was required to do. We have expectations as to what we think will be required.

But until we get in there and talk to them, I think that it’s a little bit murky and I think we just sort of -- if you wouldn’t mind prefer to wait until we have a little more information to opine on that..

Okay. Yeah. Fair enough.

And talking about the LiquiTime OTC, a potential and none of us familiar with the OTC regulatory process, but could you talk about the potential timeline for LiquiTime ibuprofen, guaifenesin and I guess combo products and reaching the market?.

I’m sorry. Sure. So anyway, I think we’ve said we intent to file. We would file first ibuprofen and expect to file next year. And we would look to this typically as 10-month PDUFA date and that sort of thing. And so we’ll in fact play that by hear and also Matt, it could be impacted by what a partner might want to do.

A partner -- if somebody comes in and we are successful licensing ibuprofen and guaifenesin to a partner, the partner may have ideas has to which one may would like to see go first, how they might like to see the order, what things would want us to work on. So, I think that is subject change.

But at this point in time, clearly, ibuprofen is a little bit ahead and that’s the way we are planning to do it as of this time..

And next, we’ll move on to Scott Henry with ROTH Capital..

Thank you. Just a couple of questions..

Sure..

For starters, on the accounting side, the cost of good sold, it looks like you reduced your payment if not flowing through the cost of goods sold line. Is that on the balance sheet and avoiding the income statement? I can see in your adjusted number you’re adding it back.

But I just want to get any idea of how I should model that payment going forward?.

Sian, do you want to take that question from Scott..

Yes. Sure. I think in my prepared remarks I spoke about in terms of those payments that regarded as payments for the acquisition of Eclat, and so that’s fair valued each balance sheet date.

So what you do have an income statement at the specific line entitled fair value of measurements or acquisition liabilities, so the acquisition liabilities which is $5.3 million for the quarter. So the fair value impact to those commitments is that -- and so the cash payment is going through the balance sheet..

Okay.

And then you are just adding it back again as this earn-out acquisition payment payable to get to your adjusted EPS number?.

Yes. So we take out the non-cash element, which is the fair value when you add back in the cash element and the adjusted..

Okay. Thank you. That’s helpful. I will take look at that.

Staying on the accounting side, I know we asked a little bit about 2015 taxes and I can understand that there is a lot of uncertainty, but what about 2016? I mean obviously you model this out the same way we do when we think about taxes in 2016, I mean is it four or three on the front of that number?.

Sian, go ahead. I haven’t answered, but Sian can answer this..

I think moving into 2016 we’re making concerted efforts to have revenue streams coming through into jurisdiction where there are lower tax rate. I think having a mix of operations over tax jurisdictions will have an impact on what that tax rate will do.

I would expect it to come down with the actions we are making to how much it’s difficult to determine at this point in time, it depends with how the mix of revenues will be in 2016 between the U.S. jurisdiction and European jurisdictions. So I would expect it to come down..

Okay. And I guess, just a final question. I heard earlier that and I think, I heard correctly that, you sell the Bloxiverz was at $20 million a month run rate, which is, obviously, a very strong number..

Yeah..

Does that include the 20% share currently out there for Fresenius or just trying to think of how I should comprehend that number?.

Well, so, I guess, the Fresenius 20% shares that is growing obviously, right..

Yeah..

So as they have been in the market what now five to six weeks and so we would expect that to grow, I was just trying to put some context behind what the existing run rate is today. But that existing run rate was predicated upon what Kabi does and how the market materializes is more likely I would suspect to go down some and would come up..

Okay. That make sense and I guess, just….

I mean it’s a [blend damn] [ph], I mean, it’s not, it is a snapshot over a four-week period. So it would include the Fresenius clearly, but that’s really kind of just to give you the context of what we are giving demand for..

Okay. Still pretty good number. I guess, just one add in, so when we think about the quarterly trajectory.

It sounds like Q1 revenues reflect demand and then Q2, 3, 4 -- and 4 should also reflect demand and then we should take and then on -- in Q2 we will just had have to add in deferred revenues on top of that, is that how I should be thinking about that quarterly trajectory?.

Yeah. I think that we are going to, I think, what we said earlier was, is that for with respect to the deferred that was left on the table on March 31st was, what you would take, we would in, that’s about 80% of that.

So that’s going to leave about 20%, maybe some additional deferred that we will take in Q2, but I think, somebody had asked, I believe that you will see that number come down as we get more comfortable as price stabilizes, as share stabilizes, et cetera..

Okay. Great. Well, thank you for taking the questions..

Okay. You are welcome..

And next we will move on to Jesse Sobelson with Iridian Asset Management..

Hey, guys. Thanks for taking my questions..

Sure..

So in your press release you guys referred to an increase in R&D spend, because of continued investment in your pipeline and other proprietary projects? Could you give some color on these other proprietary projects, such as the technology you utilize, your therapeutic areas, the revenue opportunities and when we may see clinical data, specifically, I am serious if any of the projects utilized in Micropump technology and if there could be as big of an opportunity as you might see?.

Yeah. So we have projects in our pipeline that we have talked in the public about and we have projects in our pipeline that we have identified. We have several, for example, in the LiquiTime technology that we are looking at today and we have other Medusa project.

So the answer you question is, is that, that increase will reflect the cost of our moving the proprietary pipeline that you are aware of forward, as well as early investment and things like formulation development and all and other products that are already being considered.

One other thing that we would like to do and we feel very good strongly about is the opportunity that sits with respect to the LiquiTime. We think LiquiTime is interesting technology for lots of different reasons. Maybe could be use to address what in some peoples view most unaddressed market today which is geriatric patients, who can’t swallow.

So it reflects all of those and we have opportunities in each of our four drug delivery platforms that we are moving forward with..

And this is all the time we have questions today, I will turn the call back over to Mike Anderson for any additional or closing remarks..

Great. Well, thank you, again for joining us on the call today. We look forward to updating you on our continued progress on our second quarter earnings call. In addition, we have and we will continue to meet with investors on a periodic basis.

And we will be presenting at the Jefferies Healthcare Conference in New York City on June 1st of this year and at the JMP Securities Conference in New York, which is being held between June 23rd and 24th. Thank you all very much for spending the time with us and have a great weekend..

And that does conclude today’s call. We thank you for your participation..