Lauren Stival - ICR, IR Mike Anderson - CEO Mike Kanan - SVP and CFO.

John Boris - SunTrust Robinson Humphrey Matt Kaplan - Ladenburg Thalmann Jim Molloy - Laidlaw & Company Scott Henry - ROTH Capital Partners.

Good day, everyone and welcome to the Flamel Technologies' Fourth Quarter 2015 Earnings Conference Call. Please note, today's conference is being recorded. I would now like to turn the conference over to Lauren Stival, Investor Relations. Please go ahead..

Good morning, and welcome to Flamel Technologies' fourth quarter and full year 2015 earnings conference call. This is Lauren Stival of ICR Investor Relations. Before we begin, I will start with some cautionary statements. The following presentation regarding Flamel Technologies S.A.

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

These risks include the 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 described more fully in Flamel’s public filings under the Exchange Act including the Form 20-F for the year ended December 31, 2014 which was filed on April 30, 2015.

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 prepared remarks, we’ll be opening the call to question-and-answer period. On the call today, we have Mike Anderson, CEO; and Mike Kanan, CFO.

At this time, it is my pleasure to turn the conference over to Mike Anderson, Chief Executive Officer of Flamel Technologies.

Mike?.

Thank you, Lauren and good morning, ladies and gentlemen. As always, we appreciate you're joining us today. We think we have a lot of exciting things to talk about as we recap 2015 and discuss our plans for this year.

Today's call will focus on a number of topics including the 2015 product revenues from Bloxiverz and Vazculep and current market dynamics for both products as well as Éclat #3, progress of our proprietary pipeline products including Micropump sodium oxybate, Trigger Lock hydromorphone and the LiquiTime products.

Our recent acquisition of FSC Pediatrics that added four commercial stage products and an established commercial infrastructure and our business reorganization plans.

After my remarks, Mike Kanan, our Chief Financial Officer will discuss our fourth quarter financials and full year results and give some color as to the material weaknesses that we noted in our recent 12b-25 filing.

As noted in this morning's press release, we're pleased to announce that we achieved our full year 2015 revenue guidance of between $170 million and $185 million based on strong sales of Bloxiverz and Vazculep our two FDA approved products.

Although we came in at the lower end of the guidance with 173.2 million in revenues, we still hit our mark and what turned up to be a more competitive marketplace and we anticipated back last January.

As many of you know, both Fresenius Kabi and West-Ward received FDA approvals for their versions of neostigmine in 2015, and Merck received approval for its neostigmine alternative sugammadex, although we do not expect Merck’s product to garner a material share of the market this year.

Flamel’s share averaged just over 50% during the fourth quarter, both West-Ward and Kabi have proven themselves to be rational players and we have lost very modest pricing.

According to IMS and Wolters Kluwer our market share through the first two months of 2016 remains above 45%, although we do still believe there will be additional share and price erosion going forward.

As you may recall our guidance back in January modelled a decline in our share from the 30% to 40% for the year, along with a comparable loss of price. Our second FDA-approved product Vazculep or phenylephrine injection is still the only of its kind approved in all three available vial sizes. The 1 ml, 5 ml and 10 ml.

Throughout the fourth quarter Flamel supplied 100% of the 5 ml and 10 ml vial sizes and continues to slowly gain share in the 1 ml market where West-Ward also has an FDA-approved product.

We ended the quarter with approximately 21% of that 1 ml market, and we believe that our ability to supply all three vial sizes continues to give us a slight advantage. By the end of February Flamel maintained 100% of the 5 ml and 10 ml markets, but had grown its share of the 1 ml market to 52% according to Wolters Kluwer data.

Turning to our next un-approved marketed drug Éclat 3, we announced FDA acceptance of our NDA in the third quarter of 2015 and the recipe of April 30, 2016 PDUFA date. We previously estimated the size of the market at $70 million.

However, recent developments had made this market significantly more valuable with a potential market size of over 100 million based on wholesale acquisition cost. The company has requested a period of market exclusivity on this product.

However, this decision is at the full discretion of the FDA and we do not expect clarity on this matter until closer to the PDUFA date. While we believe, we would be technically entitled to that exclusivity.

It is unclear that FDA would be willing to award a 5-year exclusive period and as such we have conservatively modelled a modest tramp in 2016 that have not contemplated any period of exclusivity affect or otherwise, during 2016.

Following the launch in mid-2016, we’ve estimated that our market share for the product will be in the 20% to 30% range for the remainder of 2016. It's important to remember that these un-approved marketed drugs from our Éclat portfolio were never designed to be strategic, since there is no IP surrounding them.

The timing of competition for any of these products as we witnessed, is difficult to estimate. However, we want to remind you that even in a multiple player market these products still provide an attractive tail and a nice cash flow to fund development of our proprietary pipeline products. Now, we’d like to move on to that proprietary pipeline.

As outlined in our corporate update release in early January, we have elected to submit a Special Protocol Assessment also known as the SPA for once-nightly Micropump sodium oxybate in the first quarter of 2016 and plan to commit patient recruitment in the second quarter after we receive approval.

SPAs serve as a way to reduce the risk associated with clinical studies. As the acceptance from FDA represents general agreement of a pivotal trials design end-points, powering and analysis. The pivotal trail of Flamel’s Micropump technology applied to sodium oxybate for the treatment of narcolepsy is expected to run through mid-2017.

It is expected to be a placebo-controlled efficacy study of approximately 200 to 300 patients and to be conducted at between 50 and 60 clinical sites in North America and Europe. We view sodium oxybate as our most valuable product candidate.

We're taking every step necessary to remove as much of the risk as possible associated with the FDA's approval process. Sodium oxybate is currently approved for both narcolepsy and cataplexy and to gain these approvals Orphan Medical had to run two separate trials of approximately 200 patients each.

Flamel's goal is to gain approval at a minimum for both indications in one trial and therefore our SPA is an effort to mitigate the possibility that FDA would issue us a complete response letter requiring additional studies to be run prior to approval.

We previously announced positive clinical data for two under proprietary products, Trigger Lock hydromorphone and Medusa exenatide. We are currently running a Phase Ib trial for FT228 our once-weekly subcutaneous injection formulation of exenatide using our proprietary Medusa technology, which we would look to partner.

Additionally, we previously announced positive data for FT227, an abuse deterrent extended release oral hydromorphone product using our proprietary Trigger Lock technology. And having requested a meeting with the FDA, we will also look to begin licensing discussions in 2016.

Both the opioid and diabetes markets require large salesforces for commercial success, and we believe it wouldn’t be in the best interest of our shareholders to complete in these markets ourselves.

We believe that we could return the most high yield shareholders via partnerships, where we share additional development costs and where Flamel would receive licensing fees, milestones and royalties. Another key objective the Company achieved in 2015 was the licensing of our LiquiTime technology for use on the over the counter market.

The deal we struck with Perrigo at the end of second quarter of last year provided us with a $6 million upfront payment and validated that technology. We are preparing to run pivotal trials for both LiquiTime ibuprofen and guaifenesin in 2016.

Following the completion of these two trials Flamel intends to handoff clinical development associated with all new LiquiTime OTC products to Perrigo as per our agreement.

Additionally, a large potential market for the use of LiquiTime technology with prescription product exists, particularly for paediatrics, geriatrics in patients with other conditions such as dysphagia that makes swallowing difficult.

Flamel has and will retain the rights to develop prescription products using LiquiTime and is actively assessing potential opportunities as we speak to employ the technology. We're currently running feasibility studies on several products and will speak to them in due course.

Flamel ultimately plans to market any and all LiquiTime prescription products, which brings us to discuss our recent acquisition of FSC Pediatrics which is an excellent strategic fit for Flamel.

FSC Pediatrics is a commercial stage specialty pharmaceutical company with a 45 person salesforce, which markets there paediatric pharmaceutical products indicated for infection, allergy, and gastroesophageal disease also known as GERD.

The Company also has one medical device for the administration of aerosolized medication using pressurized Meter Dose Inhalers for the treatment of asthma. We received 510 clearance for what we call Flexichamber in October 2014, but had not yet commercially launched the product. Our expectation is that we will do so before midyear.

We have already seen an uptick in sales on some of the FSC products and have said that we expect to see these products generate in the range of $10 million to $15 million in revenues over the course of 2016 to be neutral to operating profit and cash flow.

All of the FSC products are relatively new to the market and we believe our team has the experience and knowhow to make these products meaningful contributors to our top and bottom-lines in 2017 and beyond. I will now turn the call over to Mike Kanan, who will discuss Flamel's financials in further detail.

Mike?.

Thank you, Mike, and thank you all for joining us today. Before I begin the overview of our financial results, I'd like to take a moment to address our 10-K filing extension and the material weaknesses noted in our 12b-25 filing we made last week.

As you may know effective January 01, 2016, we switched from being a foreign private issuer to a domestic filer. Among other things this switch will now require us to file Form 10-Ks and Form 10-Qs.

Under the SEC rules as a large accelerated filer we have 60 days from December 31st to file a Form 10-K with a 15 day automatic extension upon making a 12b-25 filing. Because this is our first filing, we needed some extra time to complete the Form 10-K.

We expect to file our 10-K on or before March 15, 2016, which represents the precise timing we have discussed in the past. In addition, as a result of our rapid growth in 2015, we identified several material weaknesses in our controls or financial reporting.

I would characterize these weaknesses as not having our administrative house in order and that not having enough finance personnel with an appropriate level of knowledge, experience and training, and we need to improve our documentation of processes and procedures and implement a number of other review controls that will improve our financial reporting process.

In short, we have had some growing pains. None of these weaknesses however relate to recognition or measurements of our financial results. In other words, there were no accounting issues and we’re not restating previously issued financial results that sometimes come along with material weaknesses.

Nevertheless, we take these internal control matters seriously and have discussed the root cause of each of them with our audit committee. We are working closely with our auditors and other consultants to mitigate these weaknesses. Some of these mitigation plans including expanding our accounting team, we have already begun to do.

We are upgrading our computer systems and putting in place the standard operating procedures and processes to address segregation of duties and other weaknesses. We will of course provide updates as appropriate. Now on the brighter side, I am happy to report that Flamel had remarkable financial success in 2015.

In the fourth quarter of 2015, we reported total revenues of 43.4 million compared to 2.9 million in the prior year period. Total revenues were comprised of net sales of Bloxiverz of 34.9 million, Vazculep of 7.4 million, and other revenues of 1.1 million.

Gross profit which is revenues minus cost of goods sold was 94% in Q4 2015 versus 77% in Q4 2014. Research and development cost during the fourth quarter of 2015 totaled 5.1 million compared to 5.6 million in the prior year.

This slight decline is largely due to changes in FX as the dollar strengthened versus the euro when comparing the fourth quarter of 2015 versus the fourth quarter of 2014. This quarter’s R&D spend was lower than other quarters in 2015. We are not slowing down R&D spending.

The fourth quarter was lower than other quarters merely due to timing of certain clinical trial spending. Selling, general and administrative cost totaled 6.8 million in the fourth quarter of ’15 compared to 4 million in the prior year period.

This increase in SG&A resulted from higher employee related costs as we continue to expand our team, partially offset by changes in foreign currency exchange rates. Adjusted non-GAAP net income which excludes certain charges and credits in the fourth quarter of 2015 was 13.9 million versus a net loss of 9.7 million in the year ago period.

Adjusted net income per diluted share was $0.32 in the fourth quarter of 2015 versus an adjusted net loss per diluted share of $0.25 in the fourth quarter of 2014. This large increase in adjusted net income when compared to the loss we incurred in the same period last year was due to substantially higher revenues in Q4 of 2015 compared to last year.

Keep in mind the results I just commented on were our non-GAAP results. Please refer to the appendix in our earnings release for a reconciliation of GAAP to non-GAAP. With that said however, let me briefly talk about significant items in our fourth quarter GAAP results.

In the fourth quarter of 2015, we adjusted our long-term Éclat product sales forecast for the earlier than expected entrance of West-Ward to the new Sydney market, the impact of Merck’s Sugammadex and a number of other items.

This resulted us in lowering our long-term contingent consideration liability by 51.1 million which ran through the P&L as a non-cash credit in Q4.

As you know, this contingent consideration liability was incurred as part of Flamel’s acquisition of Éclat in March 2012 and siding commercial sales of FDA approved products as well as other factors that will be described in our 10-K filing.

Turning to our full year results, the Company had adjusted non-GAAP net income of 43.1 million and adjusted earnings per diluted share of $0.99 for all of 2015 compared to an adjusted net loss of 24.6 million and adjusted loss per diluted share of $0.68 in the prior year.

Again for a reconciliation to the GAAP numbers please see our appendix in the earnings release. R&D spending in 2015 was 25.6 million compared to 17.3 million in 2015. This increase was due to the ramp-up of spending associated with our clinical testing that Mike previously mentioned.

We continue to expect R&D spending to be $35 million to $50 million in 2016. Moving now on to cash flow, in 2015 the company generated substantial amount of cash.

Cash flow from operations was 84.3 million in 2015, which allowed us to increase our cash and marketable securities to 144.8 million at the end of December 2015 compared to 92.8 million at the end of December 2014. And since September 30th, our cash and marketable securities have increased $16 million from 128.4 million at the end of September.

The business continues to generate cash and we expect to be cash flow positive in 2016. Remember our priority use for our cash is to fund our pipeline of R&D projects and for selective strategic and organic investments. Our full year effective tax rate was 48% in 2015.

We are obviously not satisfied with this rate and we’re exploring a number of options to reduce it. Remember, currently we generate all of our profits in the U.S., but incur a substantial amount of expenses in France and Ireland where we cannot take the full tax benefits of these expenses.

While we are restricted in the short-term to meaningfully reduce our tax rate, some of our planned projects in 2016 will help. For example, we plan to seek shareholder approval to reincorporate to Ireland from France during 2016. I would refer you to the 8K filing we made this morning for further information about this proposed reincorporation.

This will be an important step for the company. Additionally, we have reassessed our outlook as to the realizability as some of our NOLs in France. And we now believe we will be available for use a portion of them. We also expect to be able to utilize a portion of the NOLs that came along with the FSC acquisition.

Each of these items is a very positive step for us to reduce our effective tax rate. We’ve not prepared to guide on a tax rate for 2016 because as you might imagine tax planning can be very fluid. I am encouraged though that we are taking steps to lower our tax rate to a more reasonable level.

With that I’ll turn the call back over to Mike before taking some questions.

Mike?.

Thank you, Mike. In summary Flamel continues to grow and we are generating meaningful sales and profits. We have been acquisitive for the first time and we are very excited to integrate FSC’s products and sales team into the broader company. Meanwhile, we will continue to focus on advancing our product development pipeline.

We plan to meet with the FDA in the near-term to discuss our Trigger Lock hydromorphone development plans and we’ll look to begin partnering discussions. In addition, we look forward to announcing the FDA's approval of our SPA and subsequent enrollment in our pivotal trial for Micropump sodium oxybate.

Enhancing data from our Phase Ib study of Medusa Exenatide beginning our pivotal studies for ibuprofen and guaifenesin with respect to LiquiTime. And announcing further product candidates for LiquiTime prescription use over the course of 2016.

Over the last two years we have articulated as a company a number of important milestones for each of 2014 and 2015. And I am would propose that you consider going back and looking at those objectives and milestones that we articulated, and you’ll notice that without exception we have hit each and everyone.

And we look forward to doing the same thing in 2016. This is a very exciting time for our company and we look forward to providing updates throughout the coming quarters as Flamel continues its mission of building a strong specialty pharma company with outstanding drug delivery capabilities. We appreciate your participation on today's call.

And with that we’ll be delighted to take your questions, operator?.

Thank you. [Operator Instructions] We ask that you limit yourself to one question and follow-up question. [Operator Instructions] And we’ll first hear from John Boris at SunTrust. John your line is open if you can release your mute function we are unable to hear you..

Okay, can you hear me now?.

Yes..

First question just Mike on sodium oxybate I think you indicated 300 patients to take the mid-point of the sites really only have to roll about five patients per sites I am glad you have a tremendous number of sites, you maybe just walk us through where you’re at within the FDA process, timing around getting this all signed off and when you think you begin to enrol your first patient.

And then can you just remind us how long do these patients once you enrol the full 300 how could be enrolled in trail? And will there be any long-term follow-up with patients in monotherapy? That’s my first question..

Sure. Well thanks for the question John, first of all there are some of that we have not disclosed publically as you probably know, but let me try to track for you the progression from this point forward.

We stated in early January that we intend to file the SPA by no later than the end of Q1 which is obviously several weeks from now and while we've not updated that we are still on track and we expect that will be the case. Upon the filing of our SPA, we would expect while not statue the FDA has 45 days with which to respond.

We would like imagine that they would respond saying go forward but the likelihood is, is that they'll probably have some suggestions associated with the SPA. When the FDA articulates to us those objectives, we'll study them and for the most part we'll probably accept their suggestions without question.

Remember that we have sat with FDA already so it's not as if that we don't have a great deal of clarity already on what this clinical trial is going to look like and so once the FDA gives us the green light, which we expect to incur during Q2 then we're preparing to immediately begin patient registration and along the way we will update people on our progress but not only with approval of the SPA but also as will be obvious from clinicaltrials.gov from our beginning patient enrolment.

In terms of the number of clinical sites you're exactly right, this is a pretty finite audience and as a result of that requires us to go to a number of sites and I would remind you John and I think you're aware, that we have been dealing relationships with providers and even to some extent with patients over the last several years.

There is a great deal of interest in this clinical study. That doesn't mean there won't be challenges along the way because it is a finite audience, but we believe that the work that we've done to support the people like the Narcolepsy Foundation and those types of thing will benefit us as we go to begin the enrolment of patients in the study.

And so we're excited about that, we have people who will be participating in the study who were participants in the original work on behalf of orphan drug for sodium oxybate and we feel like we're absolutely on the right track..

So Mike that you've already held your investigator meeting and if so what was some of the anecdotal comments about our conduct?.

John, we have, the information I just provided as what we have had to say publically to-date. Well, we will update people once that SPA is approved we'll update you on all the progress that we made and any discussions that we have and obviously at that point in time lead investigators will also be on..

Last question just has to do with taxation..

Sure..

Mike, I appreciate ’16 is certainly fluid process as you indicated, but one would have to believe that you -- at least know the absolute number of NOLs that you have in France and also the imperatives with the FSC acquisition, can you may provide some color on how much you have in absolute dollars on NOLs? And then on Éclat 3 what percent of the revenue should we be thinking about is going to be tax rate, Irish tax rate relative to a U.S.

tax rate based on the work that's been accomplished on Éclat 3?.

Yes John thanks for the question. As planning at Flamel is a very fluid process we're dealing with three jurisdictions Ireland, France and the U.S. We're not prepared or I am not prepared yet to guide what the tax rate might be for 2016 other than to say that it won't be any higher than we are today which is about 48% if you look at our GAAP results.

So we're going to start utilizing some of the NOLs out of France and I am not prepared to quantify those yet because we're still trying to nail those down. We’ve got different advisors telling us different things at times so it's still a very fluid information. I don't want to pin down an answer for that specifically.

Although I will direct you once we file our 10-K, you can go look at our 10-K and run round our tax footnote and you can take look at all of that. So we're doing a lot of things it's an important piece of our business to lower this effective tax rate and we got things in process to do that.

That includes the Éclat #3 part of that revenue stream will be out of Ireland and I would say that once we launch the product we'll start beginning to see some of the tax benefit of being in Ireland versus the U.S. And again a lot of the development work for Éclat 3 was done in the U.S.

some of it was done in Ireland and we'll have an appropriate split of the sales between Ireland and France, but we are not prepared to say publically what that split is for obvious tax reasons..

And just lastly on sodium oxybate is that work all been done ex-U.S.

and will that be an Irish domicile asset?.

No, all of our IP, sodium oxybate, Trigger Lock, Medusa, LiquiTime, all of that is now in Ireland, we completed that transaction a year ago. So we’re in good shape once we’ve launched our pipeline products we’re in good shape to take advantage of a more appropriate tax jurisdiction..

Next we’ll hear from Jason Gerberry of Leerink Partners..

This is Ed Sutt filling in for Jason, thanks for taking my call. First question that I had was on Éclat 3.

Just wondered if you were speaking with customers ahead of approval and will you be ready to supply the market immediately upon approval? And it is a market where you will be able to take price upon approval or do you think the FDA would need to get us in some of the unauthorized products first? And just quickly I wondered if you could comment on and maybe provide some color on how the trail for Micropump sodium oxybate could be different than the JAZZ Phase 3 studies and in terms of endpoints, duration of endpoints or safety measures? Thanks..

Sure. Well, let me address the second question first. I think that at this point in time I think what we can say about the sodium oxybate trial is about the best we can do for you right at this moment in time. Clearly this is a placebo-controlled efficacy study. We are not attempting to be bioequivalent to the JAZZ Xyrem product.

We believe that as a result of our delivery system and the PK profile of our product our objective is to show ultimately a product that benefits the patient, and obviously the same as and that’s on top of the obvious dosing advantage that we have.

So not prepared to go into all of that today but the reality is, is that we have articulated in the past our belief that as a result of our dosing profile and ultimately we’re hopeful that we’ll be able to achieve a result with this clinical study that has simple advantages over the existing product in the marketplace, so I’ll leave that at that.

With respect to Éclat 3, our PDUFA date is April 30th. We would at this point since labeling is typically the last thing you’d -- we will check with FDA on these types of NDAs, it would -- from the time we finish the labeling we would expect it is going to take us probably 60 days to get the product into the market, that’s our game plan.

Once the product is approved we’ll begin talking with customers about it, we won’t talk to customers about it before it's approved. And with respect to our own modeling we have -- we clearly have maximized the value of Éclat 3 means that you need to be in the market by yourself.

And in the case of Bloxiverz and both Vazculep and Bloxiverz we never really had much of an opportunity to have that kind of exclusivity that truly could backfill. For purposes of our modeling 2016, we’ve assumed that we don’t have that exclusivity at least over the course of ’16 this year. If we’re pleasantly surprised, fine.

But our model and our revenue guidance reflects our expectation that there will be another player in the market except for the duration of 2016 if the FDA is not quick and rapid about removing an approved product.

We’ll clearly do everything we can to make sure that we enjoy or if the FDA does what is supposed to be the advantage to people that to do this in the first place. But we have not modeled but that will be the case. In terms of pricing, the pricing is the pricing and we’re not prepared to discuss that today I don’t think..

I am sorry and in terms of supply, I think in terms of supply you will be prepared for launch?.

Yes, we will..

Next we’ll hear from Matt Kaplan of Ladenburg Thalmann..

A follow-up on the sodium oxybate questions, can you give us a sense in terms of the development timeline, and potential timing for an NDA filing after completion of the Phase 3?.

Yes. So, Matt, yes here is what we’ve said I think we are going to change that is that we expect that the clinical trial as we understand it and have modeled it today, would occur over the second half let's say of 2016 and through the first half of 2017 by middle of ’17 by an independent foreseen we should be pretty close to being completed.

It will take us a period of time to have a pre-NDA meeting to assess the data and we would file late '17. Then this would because it's 505(b)(2) have a 10 month PDUFA date our objective and which would put it sometime rough third quarter let's say of '18.

Now clearly there are -- we will have when we file the application we will have to certify against any patents that exist in the orange book the one that that is we believe will be the most challenging as we sit here today will be the REMS patent.

That REMS patent as you know has some other challenges ongoing there is an IPR challenge that is supposed to be reviewed this summer I think. There I think at least three or four now paragraph four filers all of whom I think alleged that that REMS patent is in balance.

We will have to see how that works out, but one thing is for sure is when we get there with our application whatever patents are there we will have to certify against them.

If the REMS patent exists like it is and if we are unable to negotiate a different REMS with the FDA and that’s a big -- that’s obviously a big question based on the result of the trial. Then we would have to certify against that and if I were in the other guy’s shoes I would with file that infringement lawsuit and hold up the approval to 30 months.

But it depends really on what we are able to prove through our clinical study and the outcome of those legal cases that are ongoing now. And if those -- if that REMS is considerably changed or we’re not required to have the same REMS then you could be looking at a very different situation..

Great that’s helpful.

And then some on the Éclat pipeline, can you give us a sense in terms of how you are thinking about Vazculep for 2016 and substantial growth given what you are seeing in your detailed remarks? And then also similarly for neostigmine, Bloxiverz what you think the client and how you are thinking about the client stuff?.

Sure, well you know at the beginning of the year when we published that guidance in early January for the year.

We talked to each of the two existing products Bloxiverz and Vazculep, with respect to Vazculep I think we said that we had given the market a haircut of about 10% of units to accommodate what we thought would be a penetration of sugammadex into the market.

At this point -- and then with respect to neostigmine itself and at that time there was Kabi, West-Ward and Flamel in that market and Éclat into that marketplace.

Why we suggested that by using and we were modelling a decline of between 20% and 30% of our share and 20% to 30% of the pricing at the end of the year and of course both the combination of the two resulted in gains of between 100 million and 120 million.

And so as it since right now that as of the most recent week the neostigmine business we at this point in time could change tomorrow, but at this point in time, would seem to have held a larger percentage of shares at this point in time than we had modelled. And the price has not degraded as we had modeled. So it looks at this point pretty good.

In terms of phenylephrine, we utilize a lot of the same things we modelled originally another or a generic approval in mid-year. We have no knowledge of anybody impending as an approval or we heard nothing to suggest anybody's capital pending, it doesn’t mean it doesn’t happen.

But we took 20% to 30% of the price of 1ml in 20% to 30% of the market share. As we sit here today we still have 100% share of the five in the hand but quite dramatically our 1 ml share over recent weeks has grown. At year-end was it about 21% of the 1 ml which is where all the units are. And as of the most recent Kluwer Wolters data we are at 50%.

We have picked up some new business it doesn’t mean we won’t lose other business tomorrow but so far the year looks pretty good I would say..

That’s helpful.

And then last question, in terms of FSC and how we should think about those products you said you are doing pretty well so far and how we should think about products you are guiding I guess in terms of 2015 but I would like your thoughts on that?.

Well, I think that what we’d like what we think each of those four product opportunities is pretty interesting.

The one that we think I would suggest to you I think has the great potential today is clearly carbonyler which is extended release antihistamine Carbinoxamine is the first generation antihistamine that has a pretty broad application this is the only extended release antihistamine liquid by prescription only and we've seen some pretty good uptick in that recently.

With respect to the other product that we don't even have in the marketplace yet is this Flexichamber which we think can be a pretty excellent contributor for a couple of reasons.

Number one it will be the only portal spacer device on the market today, we think that's a big plus that a 10-year-old child who might be on the playground and needs to keep an inhaler could use this although I have to put it in his or her pocket is interesting perspective. The product has been approved. We've not launched it yet.

We've done some preliminary looks at launching it and talked to KULs and so forth but we would expect by midyear the latest to have a full launch of that product.

The great thing about it Matt is today there is very little share of voice in that marketplace, so the people encompass nobody is much talking, so it give us a unique opportunity and we think those are those products can be grown.

Then obviously we have AcipHex Sprinkle which luddites its exclusivity and in the fall in September and -- but today it is a product that still has some upside, it's indicated by prescription only for kids down to one year of age that is quite novel and it could be used for up to 12 weeks that's also novel.

So we think that with the little additional support that product can be drawn and then Cefaclor is a product is not IP protected, it's a second generation cephalosporin.

And Cefaclor is the only product being promoted in that space and so we've also seen some relatively good responses over the last couple of weeks with respect to the promotion of that product. So these are small products, it's going to take us a little time but we've already begun that transition, it's going well.

We think that as time goes on we're going to be able to positively move the needle. So FSC is an important part of pie and as you also know we were able to acquire FSC and the products and the salesforce with virtually no use of our cash..

And then probably just one follow-up for Mike and you gave us some guidance in terms of R&D spend, could you help us think about SG&A for the year as well?.

Well, SG&A for the year we spent about let me see about $22 million on SG&A, we would expect that to go up from where it is this year in 2015 as we continue to build the team we will consolidate some SG&A with FSC, so I think that needs to go up in the mid single-digit range from where it is today?.

Jim Molloy from Laidlaw..

I was wondering of the FSC products, can you talk a little bit about what the peak FSC sort of contribution could be a couple of years out once you get this thing up and running and then are there other sort of FSC, should we expect other sort of FSC type of acquisitions going down the road assuming a fantastic deal you guys negotiated there or would there be something more transformative there might occur you guys did well potentially raise capital and make a big splash?.

Well Jim thanks for the question.

Those are great questions and I don't think there is any question but we believe FSC is global and that over a period of the next several years once we put some resources behind it there is some things that need to be done that we're going to be able and that will be a substantial contributor to our business, but those are -- all those four products that we got with that salesforce the products that aren’t probably within themselves going to be ever be total blockbusters.

What we would really like to do is to be able to take now that we have that is to get it working in our view as appropriately as we can and then turn around and we're actively involved in that now and having discussions and seeing it we can layer additional products into that salesforce.

What's interesting is from the day we announced that acquisition all of a sudden people who we have known historically are telephoned we have had some conversation with people who would never have come to us with product opportunities.

So you're having a salesforce and being able to generate demand for products is a big deal in this business or it has been.

And so we would like to layer additional products into there, there will ultimately be a lot of different opportunities, there may be product opportunities, a product opportunity where we can buy something that would be accretive and then engineer it to create our own lifecycle play if we can run into another FSC type of an arrangement where we have got a couple of products that were proprietary and maybe a couple of people who knows but long and short of it is, is that we are really actively trying to grow our business inorganically as well as organically.

And we have a pretty desirable situation today, we’re generating cash, we have over 150 million or whatever in the bank, no debt, and other than that contingent liability and we’re perfect positioned to be able to do just that..

Thank you.

And I guess the follow-up question, just to in general you spoke about how Éclat #1 and #2 did not get the exclusivity you were expecting and/or on 3 is there sort of I know you’ve generated some interest on the cash is there looking back a fundamental flaw in the strategy or is it just some of the FDA is dropping the ball on and what they said they were going to do for bringing out these approved products have the unapproved products taken off the market? And then the other question will be could you talk about the key differentiations between your sodium oxybate and Xyrem that might allow you for a different REMS?.

Okay, so I am a sticky person do I believe that philosophy and approach was flawed not by any stretch of the imagination? How can you suggest really that it would be flawed when over the course of the last year we have generated the kind of cash we’ve generated? We went into the model Jim as you know understanding the rules and the rules say that if you come sit down with us and you go do the work we approve their product we will remove the unapproved products from the marketplace, that’s why that’s the guidance.

If the FDA is not willing to do that then they might as well throw this guidance in trash can because there is nobody on earth who would go out and spend the kind of money to develop a product with no expectation that FDA would do their part.

And so if this is an important initiative to them removing products they’d never approved and don’t even know we’re out there then I’d suggest that it's a program that will continue on.

It didn’t work out exactly like we scripted it, but it really does but at the end of the day we ended up doing a pretty reasonable job we’re still cash flow positive expect to continue to be predicated upon those two products. So I would say it's a great strategy if you think I am right.

We never expected just FYI we never expected exclusivity to be awarded to us on either of those first two products and the reason we never did was because they had previously been approved in different dosage forms. Our third product the one for which we’re waiting approval has never been approved.

So, at least from a technical perspective we are entitled to exclusivity we have asked for exclusivity. Will the FDA provide it? They’ve a lot of discretion if I were a betting man I’d say the likelihood is slim for several reasons.

Having said that, we’ll do everything we can to assert what we believe we would be entitled to, we’ll just have to see how that works out. With respect to your -- and I hope I answered your first question..

And I’ll just add Mike on the revenue guidance for this year we did not assume any exclusivity [Multiple Speakers] Slide Number 3 so that’s important to note. Yes so if we do get in the exclusivity which we don’t think we will, but if we do then that’s all upside..

Yes, it is not contemplated in our model Jim.

In terms of oxybate obviously without going into a great bit depth the idea that you conceivably could eliminate the patients having to get up in the middle of the night to take a second dose of sodium oxybate given all the variances associated with absorption and fed and fasting states we believe that and it is our hope that we’re going to be able to show a profile that’s not only approves the quality of life for a patient who has to take sodium oxybate but then at the same time may have some other advantages as well.

And we’re going to try and demonstrate those throughout the course of this clinical study.

And I would just point you to one thing that I think we’ve talked about in the past is that what we’re attempting to do with sodium oxybate we’re not doing in a blind we’re utilizing KOLs, we’re utilizing experts, we’re utilizing biostatisticians many of whom worked on the original sodium oxybate product on behalf of orphan drug so these people know this drug and we feel very comfortable that we’re on the right track.

And as time goes on we’ll try to be more transparent as to the results and you will see a lot of this on clinicaltrials.gov..

Next we’ll hear from Scott Henry of ROTH Capital..

Just a couple of questions, first on SGA I heard the comment that it would be up mid single-digits. I assume that’s inaccurate because of the FSC acquisition I mean obviously you lump in the 45 reps. My thought is the SG&A will be probably closer to $30 million in 2016 and….

Well, I would tell that I don’t know yes that’s right, I was talking more organic growth on a mid single-digits we have to add in FSC which is about roughly $10 million to our number, so from that base you put them at in the mid single-digits..

Okay, perfect. I just wanted to clarify that.

Second question I thought you mentioned the date when the 10K was expected to be filed was earlier in the prepared remarks, could you remind me what that date was?.

Yes, it's -- we had a 15 day extension so that puts out around March -- will around March 15th or before for the 10K..

Which is next week..

Yes next week..

Perfect.

And then one question when I look at -- and I know we have asked this question before in other angles but my question is really a little more specific, on Bloxiverz and Vazculep, if I look at the Q4 number for these products, how representative are those numbers for say Q1 of 2016 since it is almost done already? Just wondering because when I look at your guidance and I look at a $35 million quarter for Bloxiverz and $7 million quarter for Vazculep even with a tougher environment in the second half of the year those numbers look pretty big?.

Well, I mean I think we have covered this Scott really when we offered up our guidance at the beginning of the year. And it's just as we just discussed with respect to what we contemplate in terms of market share loss and pricing loss due to competition and I guess what I have been saying so far today is that so far we haven't seen that type of loss.

But we still don’t feel like that that’s probably over, that’s going to continue to be pressured through the course of the year and we are comfortable with the guidance that we gave and at Q1 is a little better have been annualized over the remainder of the year.

That wouldn’t be abnormal given the time it takes, for example of West-Ward to get ramped up with neostigmine. The penetration of sugammadex so far has been pretty minimal, and so looks in there that there is upside to it but we will -- we are not changing at this point our guidance.

So I think what you see for the fourth quarter of '15 would typically and based upon the scenario that we just talked about with those numbers would be a little high for Q1, but we will see..

That does conclude the question-and-answer session for today. At this time I’ll turn the conference back over to our presenters for any additional or closing comments..

Yes, thank you operator and thank each of you again for joining us on our call today. We will continue to update you on our progress over the coming quarters. Have a great day..

That does conclude today's conference. Thank you all for your participation..