Erin Smith - Corporate Relations A.J. Kazimi - Chief Executive Officer Marty Cearnal - Chief Commercial Officer Dr. Amy Rock - Senior Director, Regulatory and Scientific Affairs Michael Bonner - Director, Financial and Tax Reporting.

Analysts:.

Thank you for joining the Cumberland Pharmaceuticals' Third 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’d like to point out that earlier today the company issued a press release containing our financial results for the third quarter ended September 30, 2015, along with the quarter highlights and other updates.

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 provide 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. Also please note that we will providing -- we will be providing some GAAP -- some non-GAAP financial measures with respect to our performance today.

A reconciliation of this information to GAAP measures can be found in our earnings release and its related financial table. 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, and good afternoon, everyone. We appreciate you joining us, as we review our third quarter 2015 results. And also with us on today's call are Cumberland's Chief Commercial Officer, Marty Cearnal; our Senior Director, Regulatory and Scientific Affairs, Dr. Amy Rock; and our Director of Financial and Tax Reporting, Michael Bonner.

Today we will discuss quarter highlights and comment on key recent developments. We will then review the performance of our marketed brands and provide an update on our regulatory and product development activities.

We will also provide an overview of our financial results for the quarter, followed by closing remarks and then open the call to any questions you may have. So let's begin, there have been important developments at Cumberland that laid the foundation for our future growth. I will start with the positive outcome in our Acetadote patent case.

By ruling in our favor, the court upheld the validity of our patent with claims encompassing our new Acetadote formulation and the term until August 2025.

We are very pleased with this outcome and believe this victory illustrates how we are able to obtain high quality patents to protect our intellectual property and how we are prepared to successfully defend them. Next, our heightened focus on business development has yielded another agreement.

You may have seen that we entered into a strategic alliance with the Clinigen Group plc during the third quarter. We see this alliance as an important source of new products for our portfolio. Clinigen is a publicly-traded specialty pharmaceutical and services firm based in the U.K.

They have been establishing international distribution for their products and evaluating their options to the U.S. market.

We intend to work together with Clinigen to deliver important medicines for the care of hospitalized patients in this country and we believe that this new alliance will establish an important growth driver for both of our companies. Next, I am pleased to report, we are making important progress with our two late-stage product candidates.

In the third quarter we completed both our Boxaban and our Hepatoren Phase II clinical studies. Please note that each of these products is being to develop to treat an unmet medical need that coincide with existing call points of our commercial organization.

Our financial position remains strong, ongoing profitability, positive cash flow from operations and a healthy balance sheet featuring $92 million in total assets and nearly $53 million in cash and investments at the end of September 2015.

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

Marty?.

Thanks, A.J. During the third quarter we implemented a series of new program as we prepared our sales organization for a strong finish to 2015. Early in the quarter we launched our new in-house sales initiative to expand the reach of our promotional messages for Vaprisol. Vaprisol remains the only branded product to treat hyponatremia intravenously.

The product is now widely stocked in hospitals across the country. In fact, it stocked more hospitals and we can reach with our hospital sales organization.

For that reason, we’re developing an in-house sales capacity that can cover additional institutions, provide us the opportunity to reconnect with users and continue our sales expansion activities for Vaprisol.

In addition to the in-house sales initiative, the third quarter saw significant expansion of our speakers bureau activities in support of Vaprisol. This program brings educational messages to institutions presented by recognized experts in the field.

Our hospital salesforce continues to support Caldolor, our IV ibuprofen product with a wide range of scientific materials and promotional activities. After the ups and down in the first two quarters of the year, Caldolor has returned to a more steady sales level and remains our fastest growing brand.

We're working to further strengthen Caldolor’s label through the addition of pediatric dosing and related information. At the end of the third quarter, Caldolor was stocked in over 1280 medical facilities with new hospitals purchasing the product every month. Our third hospital product is Acetadote.

Acetadote was introduced by Cumberland as the first IV treatment available in the U.S. for the management of acetaminophen overdose. Hospitals continue to report acetaminophen overdose as the leading cause of poisonings they treat.

Originally approved by the FDA as an orphan drug with seven years of marketing exclusivity, we encountered our first generic competitor in 2013. We replaced the first generation product with an improved EDAT -- EDTA-free formulation that is now patent protected until 2025.

While the FDA has approved two generic products with the old formulation, only our branded Acetadote product and our authorized generic product provides the new EDTA-free formulation. This improved proprietary formulation has allowed Cumberland to maintain a significant market share despite generic competition.

It was very good to recently learn the court decision to uphold the validity of our key Acetadote pack.

In addition to the promotional efforts designed to deliver the EDTA-free message, our medical department has underwritten the continuing education program on acetaminophen overdose that has been completed by almost 70,000 pharmacists across the country. Moving on to our field sales activities.

Last year, we introduced the new strategy for Kristalose that has allowed us to better support the product for patients and offer new opportunities to partner with manage care provider. As a result, Kristalose has become our largest selling product. Kristalose is a crystalline form of lactulose for acute and chronic constipation.

It’s available and convenient, highly portable premeasured single-dose sachet. It provides a clear, virtually taste-free treatment when reconstituted in 4 ounces of water. Kristalose patients, especially chronic therapy patients, appreciate the powerful nature of the product.

Unlike many other products in the category, there is no age restriction on the products used. Kristalose patients can access either through their physician or directly online a coupon program designed to reduce the expense of the co-pay required by some third-party payors. Omeclamox-Pak is our other field sales force promoted product.

And this product is in a period of transition. Omeclamox is a prepackaged treatment of three different agents designed to effectively treat H. pylori, the bacteria responsible for majority of duodenal ulcers. The performance is lagged as the product received reduced support from our co-promotion partner.

Cumberland targets its efforts at gastroenterologist, the most productive physicians for this therapy that accounts for about 40% of the prescriptions. Our co-promotion partner was responsible for the primary care group of physicians that generate the remaining prescriptions in the category.

We're working diligently to address this situation and change these arrangements because we continue to believe Omeclamox-Pak remains the best product in the class. An antibiotic therapy compliance is critical to success.

An Omeclamox-Pak treatment requires the fewest tablets or capsules dosing just twice each day and dosing over the fewest number of days. We believe that this streamlined regimen can significantly enhance patient compliance. We concluded the third quarter with a successful national sales meeting.

At the meeting, our field and hospital representatives received the preparation needed to conclude 2015 with a strong sales effort. The meeting included presentations for management, product marketing, the medical department and an outside medical expert.

The district managers, each conducted sessions with their team devoted to assuring competent implementation of fourth quarter promotional activities. That completes the update on marketed products for the third quarter. A.J., I’ll turn it back over to you..

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

Amy?.

Thanks A.J. As you may recall, we have been working to expand the labeling on our Caldolor brand. During the first quarter, we announced the submission of the 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. We are also pleased to announce the publication of an integrated safety analysis of all Phase II through IV study data for Caldolor.

There were 1700 adult patients have been included in safety and efficacy trials over several years. Caldolor has been well tolerated by the hospitalized and outpatient subjects when administered for the reduction of fever or pain management.

Today, I am pleased to report that this comprehensive analysis featuring Caldolor’s outstanding safety profile has been accepted by the Journal of Pain Research and was published last week.

New analysis demonstrates that integrating Caldolor into a multimodal analgesic regimen improves pain management, reduces narcotic use and results in few adverse effects typically associated with narcotics.

Earlier this year, we announced the addition of a new Phase II development program to our pipeline with Boxaban, an oral formulation of ifetroban. We’re 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. I'm very pleased today to announce that enrollment in our Phase II clinical study for Boxaban is now complete.

The primary objective of this study was to establish the safety of administering Boxaban to aspirin-sensitive patients as assessed by the measurement of FEV1, which is an index for assessing airway obstruction bronchoconstriction or bronchodilation.

Topline results indicate that ifetroban does not have an adverse effect on the FEV1 assessment indicating the safe administration in this patient population. Additional data analysis is underway and we look forward to reviewing and announcing full findings from this trial.

Additionally, the Phase II clinical trial of our other pipeline candidate, Hepatoren has also made significant progress in 2015. We're 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 upon the severity of their conditions. We previously announced favorable topline results from the initial findings of the Type II arm of the study and today we're announcing that we have concluded enrollment in the Type I arm of the study.

Data analysis is underway and we look forward to announcing results from the type I arm. Hepatoren and Boxaban are intravenous and oral formulations of ifetroban, a 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're developing ifetroban through collaboration with scientist at Vanderbilt University. Ongoing work there has provided additional favorable non-clinical findings providing greater insight into ifetroban’s mechanism of action and potential.

Encouraged by the findings we're now evaluating a number of other potential clinical indications for this molecule. That completes our clinical and regulatory update. And I'll now turn the call back over to you, A.J..

Thank you for the update, Amy. We are excited about these developments and we look forward to providing further updates as results become available and these clinical and regulatory initiatives progress. Moving on, I am proud to say that Cumberland has a strong finance and accounting team with a record of timely and high quality SEC reports.

And while we’re currently in the midst of a CFO transition, our team is working closely with the company's advisors to successfully manage the ongoing finance and accounting activities and reporting here. Michael Bonner, our Director of Financial and Tax Reporting will now provide the third quarter financial review.

Michael?.

Thank you, A.J. For the three months ended September 30, 2015, net revenues were $7.9 million compared to $9.7 million for the prior year period.

Net revenues by product for the third quarter were $3.9 million for Kristalose, $2.1 million for Acetadote, including $1.1 million for our authorized generic, $0.7 million for Omeclamox, $0.7 million for Vaprisol, and $0.4 million for Caldolor.

I'd like to note these revenues were impacted by an interruption of our international sales of Caldolor during the quarter. Those sales grew faster than expected and as a result we sold through all available inventory for our international customers during the first half of 2015.

We have reinitiated manufacturing and as a result our international supply and sales have now resumed in fourth quarter. We believe that it’s important to evaluate our business on an annual basis because our quarterly results often vary based on buying patterns, seasonality and supply interruptions.

For the nine months ended September 30, 2015, net revenues were $25.5 million compared to $27.6 million for the prior year period.

Net revenues by product for the first three quarters of the year were $12.2 million for Kristalose, $6.4 million for Acetadote, including $3.3 million for our authorized generic, $2.4 million for Omeclamox, $2.2 million for Vaprisol and $2 million for Caldolor.

Total operating expense for the three months ended September 30, 2015, was $7.6 compared to $8.7 million for the prior year period. Year-to-date total operating expenses were $24.5 million compared to $25 million in 2014. We continue to manage our expenses in line with our revenues to deliver profitability.

Adjusted earnings in the third quarter were $0.7 million or $0.04 per share compared to $1.8 million or $0.10 per share for the prior year period. For the nine-month period, adjusted earnings were $3.8 million or $0.22 a share compared to $4.5 million or $0.25 a share for the prior year.

As of September 30, 2015, we had $92.1 million in total assets including $52.8 million in cash and marketable securities. Liabilities totaled $14.5 million include $1.7 million on our credit facility at the end of the quarter, resulting in total shareholders equity of $77.5 million at the end of the period.

Please note that we have tax loss carry forwards of $43.6 million related to the prior expense 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 third quarter, we repurchased another 208,532 Cumberland shares, bringing the year-to-date total to 712,134 shares. We have a highly motivated and experienced finance and accounting team and we work to deliver strong finish to the year. That completes our financial report for the third quarter of 2015. I’ll turn the call back over to A.J..

Thanks, Michael. Well, as you’ve heard today our sales and marketing colleagues are working to support and maximize the potential of our five commercial brands.

Our development and regulatory team is pursuing expanded labeling and new patient populations for our approved brands, while also progressing the development of our two late-stage pipeline candidates, Boxaban and Hepatoren.

We accelerated our business development efforts and are working hard on the acquisition front to selectively add new brands to our portfolio. And we see our alliance with Clinigen as an important source of new branded prescription products. We continue to manage our expenses in line with our revenue.

And please note that the cash flow from our operations improved to $4.6 million for the first nine months of this year from $4 million in 2014. We remained in a strong financial position with high margins, profitable operations and a solid balance sheet.

And we believe our shares represent an attractive long-term 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 well-positioned to achieve our goals as we work to a strong finish in 2015 and continue to build a successful specialty pharmaceutical company. So, with that, let's open the call to any question you may have.

Operator, please proceed?.

Thank you, sir. [Operator Instructions] At this time, I would like to turn the call back over to management for any closing remarks..

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Sure. We understand that some of you prefer a private discussion with management and we are available to have such a discussion if you'd like to. Meanwhile, thank you everyone for your call today. We appreciate your time and interest in Cumberland and we look forward to providing another update after the end of the fourth quarter..

Thank you, sir. Ladies and gentlemen, that concludes our conference for today. If you would like to listen to our replay of today’s conference, please dial (855) 859-2056, using the access code 64682164. Alternatively, a replay of the webcast will be available on the company's website. I would like to thank you for your participation.

You may now disconnect..