Erin Smith - Corporate Relations A. J. Kazimi - Chief Executive Officer Martin Cearnal - Senior Vice President and Chief Commercial Officer Rick Greene - Chief Financial Officer and Vice President, Finance and Accounting Amy Dix Rock - Senior Director, Regulatory and Scientific Affairs.

Analysts:.

Thank you for joining the Cumberland Pharmaceuticals' second quarter 2015 financial results conference call. Please note that this call is being recorded at the company's request and will be archived on the company's website for one week from today.

I would now like to introduce Erin Smith, who handles Corporate Relations for Cumberland Pharmaceuticals. Erin, please go ahead..

Hello, everyone. Before we begin, I would like to point out that earlier today the company issued a press release containing our financial results for the second quarter ended June 30, 2015. You can find a copy of that release, including the financial tables, on our company's website at www.cumberlandpharma.com.

I'd now like to share the following Safe Harbor language. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Because these statements reflect the company's current views, expectations and belief concerning future events, these forward-looking statements involve risks and uncertainties.

Investors should note that many factors, as more fully described under the caption Risk Factors in our Form 10-K, Form 10-Q, and Form 8-K filings with the SEC, could affect the company's future financial results. Those future results could differ materially from those expressed in forward-looking statements, which are qualified by these risk factors.

The company does not assume any obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. We'll also provide some non-GAAP financial measures with respect to our performance today.

A reconciliation to GAAP measures can be found in our earnings release and its related financial table. Also, please note that this conference call is being webcast through our website and will be available there. I'll now turn the call over to our Chief Executive Officer, A. J. Kazimi, to begin our discussion of the company's performance..

Thank you, Erin. Good afternoon, everyone. We appreciate you joining us, as we review our second quarter 2015 results. Also with us on today's call are Cumberland's Chief Commercial Officer, Marty Cearnal; our Chief Financial Officer, Rick Greene; and our Senior Director, Regulatory and Scientific Affairs, Dr. Amy Rock.

We'll plan to discuss some quarter highlights and review the performance of our marketed brand. We'll also provide an update on our pipeline and present an overview of our financial results for the quarter. We'll then conclude with a discussion of the company's strategy and plans, before opening the call to any questions that you may have.

We continue to make progress in the second quarter towards our goal of building a company that offers long-term sustainable growth. However, the quarter was not without its challenges.

Sales of Acetadote and Omeclamox for the first half of this year were below the prior-year period, as both have been impacted by supply interruption, which have now been resolved. Meanwhile, Caldolor shipment slowed, as hospitals rebalanced their inventory following the return of a competitive product, which was out of stock earlier in the year.

As we've suggested before, it's best to view our performance on a full year basis, as quarterly progressions may vary. Overall, our total revenue generated so far in 2015 was largely in line with the prior-year period, despite the headwinds we faced this year.

With those various issues now behind us, we believe that we're in a position to regain our revenue momentum. Our adjusted earnings for the second quarter 2015 were $1.6 million or $0.09 a share compared to $1.8 million or $0.10 a share for the prior-year period.

That brings our adjusted earnings for the first half of 2015 to $3.2 million or $0.18 a share compared to $2.7 million or $0.15 a share for the first six months of 2014. During the second quarter, our balance sheet remains strong with nearly $93 million in total assets and $53 million in cash and investments.

At the end of June 2015, total liabilities were approximately $14 million, resulting in $79 million of total shareholders equity. And remember, we have significant tax loss carryforwards of approximately $44 million available, which are associated with the prior exercise of stock options.

We also continue to implement our share repurchase program during the second quarter of this year. As a reminder, we have a diversified revenue stream with five FDA approved products in our portfolio. And we have a heightened focus on our business development efforts and are actively looking to acquire or in-license a late stage or approved product.

I'd also like to update you on Cumberland Emerging Technologies or CET.

For those of you who are new to the company, we formed CET to identify biopharmaceutical innovation at regional academic research centers, and then team with the scientist to advance their breakthroughs, creating a long-term pipeline of innovative product candidates for our company.

CET is working with several major research centers in the mid-south region of United States, and during the second quarter we renewed collaboration agreements with University of Mississippi and the University of Tennessee, while expanding CET's activities with Vanderbilt University.

Also recall that CET was recapitalized last year, with $2 million in new investment, which is fueling the expansion and acceleration of CET's programs. CET also manages a Life Sciences Center, which houses our formulation laboratories.

This center provides laboratory and office space, equipment and infrastructure to other early-stage biomedical ventures. In May we announced a major expansion in the tenant footprint at the CET Life Sciences Center, with the arrival of InvisionHeart, which now occupies nearly 4,400 square feet of office and manufacturing space.

The Life Sciences Center has a growing number of successful tenants and graduates, and we are benefiting from the scientific collaboration and entrepreneurial activities that are occurring there. Meanwhile, we're making good progress with our two late-stage product candidates, which both originated at CET.

Patient enrollment is well underway in our Phase II Boxaban and Hepatoren clinical studies, and we look forward to reporting results of both of those studies. Please note that each of these products is being developed to treat unmet medical needs that coincide with existing call points of our commercial organization.

I'll now look to Marty Cearnal, Cumberland's Chief Commercial Officer, to provide an update on our marketed products.

Marty?.

Thanks, A. J. The pharmaceutical industry is a vibrant one, characterized by intense competition and rapid innovation. All our products compete with a number of alternatives. Fortunately, our brands have distinguishing attributes and advantages that we can feature, when addressing our customers.

Acetadote is our injectable product for the treatment of acetaminophen overdose. We developed this brand, registered with the FDA and built it into the standard-of-care for the leading cause of poisoning in United States. Acetadote was approved as an orphan drug in 2004 with seven years of market exclusivity.

We developed a next-generation formulation for the product that does not contain EDTA or any other preservative, stabilizing or chelating agent. Both our brand and our authorized generic contain this patented new formulation.

While Acetadote sales have declined overtime due to generic competition, we do believe that the advantages of this new formulation have enabled us to maintain significant market share well after the expiration of the orphan drug exclusivity.

While we now have two generic competitors to Acetadote, it is important to note that both have the old EDTA containing formulation. Sales of Acetadote during the second quarter of 2015 grew significantly from the first quarter of the year. During the first quarter, sales were depressed due to a delay in packaging of our authorized generic.

This issue was resolved in the second quarter, resulting in a search of Acetadote sales during that period. We continue to support our Acetadote brand through our hospital sales force and marketing initiatives, featuring the advantages of the new formulation.

Moving on to Caldolor, our injectable formulation of ibuprofen, which we also developed, registered with the FDA and launched for the treatment of pain and fever in the hospital setting. There were a variety of other injectable products that address the acute pain market.

However, a key difference is that Caldolor has been studied and proven to be safe and effective, when administered prior to a surgical incision. This results in patient waking up in less pain and using less morphine postoperatively. Sales of Caldolor slowed in the second quarter after reaching record levels during the first quarter of this year.

Early in 2015, there was a shortage of competitive ketorolac products and many hospitals stocked additional supplies of Caldolor to avoid disrupting their operations. As Ketorolac became available again during the second quarter, hospitals rebalanced their Caldolor inventories, requiring fewer shipments.

We believe it's important to therefore evaluate the brand's performance over the first six months of the year. Sales of Caldolor during the first half of 2015 were up 47% compared to the prior-year period, and Caldolor remains our fastest growing brand. The competitive shortage also led to a spike in new hospitals stocking Caldolor in 2015.

Over 150 facilities added the product during the first five months of this year, and now over 1,200 medical centers have purchased Caldolor since the product's launch. Our hospital sales organization is responsible for Caldolor's growth.

And a recent publication, a new face for clinical studies has been helpful in increasing the awareness and use of the brand. Vaprisol is one of two branded products for the treatment of hyponatremia, an imbalance of salt and water, which occurs frequently in hospitalized patients. However, Vaprisol is the only branded IV treatment for this condition.

Vaprisol is supported by our hospital sales organization and we are launching a new initiative designed to significantly expand coverage of key accounts during the second half of this year. Kristalose has remained a very strong performer, since we introduced a new positioning and marketing strategy for the product in 2014.

The brand's growth has continued into 2015, with sales up 19% during the first half of the year. Kristalose is our prescription-strength laxative product with a unique crystalline formulation, packaged in convenient single dose sachets.

When reconstituted with a few ounces of water, it provides a clear, virtually tasteless solution that offers an excellent safety and efficacy profile. There are no age limitations for patients that can benefit from that product. Our field sales force promotes Kristalose to office-based gastroenterologist and other high prescribers.

We also continue patient couponing along with managed care and non-personal marketing initiatives in support of this product. Omeclamox-Pak, our branded treatment for H.pylori, the cause of most duodenal ulcers did not perform at expected levels in the second quarter.

The reduced support from our co-promotion partner and the lingering effects of the product shortage we experienced toward the end of last year have contributed to this performance. We feel strongly that Omeclamox-Pak offers important advantages for the patient.

In a therapy, where compliance is critical, Omeclamox-Pak requires the fewest tablets or capsules, the fewest total doses and dosing just twice-a-day for the fewest number of days. To better communicate this message, we are increasing both our personal and non-personal sales support for Omeclamox-Pak, which is also promoted by our field sales force.

That completes our update on our marketing products. I'll now turn it back over to you, A. J..

Thank you, Marty. Before we turn to the financial results, I'd like to ask Dr. Amy Rock, our Senior Director, Scientific and Regulatory Affairs, to provide an update on the clinical developments here at Cumberland.

Amy?.

Thanks, A. J. As you may recall, we've been working to expand the labeling on our Caldolor brand. We completed a number of Phase IV studies for Caldolor in over 1,000 adult and pediatric patients bringing the total number of patients in all Caldolor studies to over 2,000.

Last quarter, we announced the submission of a supplemental New Drug Application or sNDA to the FDA for our Caldolor product. This submission request updates to the package insert to include pediatric dosing and other new information.

We're making continued progress with the FDA regarding the review of this sNDA and anticipate receiving a decision about these requested updates towards the end of this year. Early in the first quarter of this year, we announced the addition of a new Phase II development program to our pipeline Boxaban, an oral formulation of ifetroban.

We are evaluating this product candidate in patients with aspirin-exacerbated respiratory disease or AERD. Treatment for AERD is an unmet medical need as no approved pharmaceutical treatment currently exists. Our Phase II clinical study for Boxaban is now well underway and patient enrollment is progressing in this multi-center study.

We look forward to reviewing and announcing the findings from this trial later this year. Additionally, on Phase II clinical trial of our other pipeline candidate, Hepatoren, has also made significant enrollment progress in 2015.

We are developing Hepatoren as a potential treatment for hepatorenal syndrome or HRS, a life threatening condition involving both liver and kidney failure. Patients in this study are characterized as Type I or Type II depending on upon the severity of their condition.

We are very pleased to have completed enrollment in the Type II patient arm of the HRS study and have previously announced favorable topline results from the initial findings of that study. The remaining Type I HRS patients are more difficult to enroll given the severity of their condition.

However, we have made significant progress with this remaining arm of the study and look forward to announcing topline results from the Type I arm once patient enrollment is complete. Hepatoren and Boxaban are intravenous and oral formulations of ifetroban, the new chemical entity or NCE.

Ifetroban is an antagonist, which blocks activation of and signaling through the thromboxane receptor. This receptor is found in many tissues and plays a role in multiple biological processes. We are developing ifetroban through the collaboration with scientists at Vanderbilt University.

Ongoing work there has provided additional favorable non-clinical findings, providing greater insight into ifetroban mechanism of action and potential. Encouraged by these new findings, we're now evaluating a number of other potential clinical indications for this NCE. That completes our clinical update and I'll now turn the call back over to you A.

J..

Thank you for that update, Amy. We are excited about these developments and look forward to providing further updates as these clinical and regulatory initiatives progress. I'll now look to our Chief Financial Officer, Rick Green, for the financial review.

Rick?.

Thank you A. J. For the three months ended June 30, 2015, net revenues were $8.9 million compared to $9.8 million for the prior-year period.

Net revenues by product for the second quarter were $4.1 million for Kristalose, $2.8 million for Acetadote, including $1.8 million for our authorized generic, $0.9 million for Omeclamox, $0.5 million for Caldolor and $0.5 million for Vaprisol. Overall, our business has been steady during the first half of 2015 compared to the prior year.

For the first six months, ended June 30, 2015, net revenues were $17.6 million compared to $17.8 million for the six months ended June 30, 2014. Total operating expenses for the three months ended June 30, 2015, were $8.2 million compared to $8.5 million for the prior year period.

Total operating expenses for the first six months of 2015 were just under $17 million compared to $16.2 million for 2014. This includes the $1.2 million FDA fee associated with the submission of our Caldolor pediatric data in the first quarter.

Adjusted earnings for the second quarter were $1.6 million or $0.09 per share compared to $1.8 million or $0.10 per share in a prior-year period. Adjusted earnings for the six months ended June 30, 2015, were $3.2 million or $0.18 per share compared to $2.7 million or $0.15 a share in 2014.

As of June 30, 2015, we had $92.9 million in total assets including $53 million in cash and marketable securities. Liabilities totaled $14.2 million including $1.7 million on our credit facility at the end of the quarter, resulting in shareholders equity of $78.7 million at the end of the period.

Please note that we have tax loss carryforwards of $43.9 million related to the prior exercise of stock options. Meanwhile, we continue to execute on the $10 million share repurchase initiative approved by our Board earlier in the year. During the second quarter, we repurchase 225,000 Cumberland shares.

That completes the financial report for the second quarter of 2015. A. J., with that, I'll turn it back over to you..

Thanks Rick. We're working to support and maximize the potential of our five commercial products. We're also pursuing expanded labeling and new patient populations for our approved brands and we're establishing a long-term pipeline at CET, while progressing the development of our two late stage pipeline candidates Boxaban and Hepatoren.

We've accelerated our business development efforts and are working hard on the acquisition front, selectively add new brands to the portfolio.

We're making good progress in our efforts to identify, evaluate and acquire rights to commercial or late-stage development candidates and we're particularly interested in marketed products, which can have an immediate impact on our top and bottomline growth.

We're actively pursuing several opportunities for an addition to our existing portfolio of branded prescription products. We aim to acquire products that represent a good strategic match with our capabilities in the hospital acute care and gastroenterology markets.

To that end, we search for candidates that have up to $25 million in annual sales and attractive margins. And our goal is to add one new product each year to this business development initiative. We remain in a strong financial position with high margins, profitable operations and a solid balance sheet.

And we believe, our shares represent an attractive investment opportunity as evidenced by our ongoing share repurchase program.

We're focused on our mission of advancing patient care, the delivery of high-quality pharmaceutical products and we're confident that we're still well-positioned to achieve our goals this year and continuing to build a very successful specialty pharmaceutical company. So with that, now let's open the call for any questions you may have.

Operator, please proceed..

[Operator Instructions] And I am showing no questions at this time. I'd now like to turn the call back over to management..

:.

End of Q&A.

We recognize some of you prefer a private discussion with management and we're certainly available to you to have such calls. I just want to say, thank you for joining us today. We appreciate your time and interest in Cumberland and we look forward to providing another update after the end of the third quarter..

Ladies and gentlemen, that concludes today's conference. Thank you for you participation and have a great day..