Erin Smith - Corporate Relations A.J. Kazimi - Chief Executive Officer Marty Cearnal - Chief Commercial Officer Michael Bonner - Chief Financial Officer.

Thank you for joining Cumberland Pharmaceuticals’ Third Quarter 2016 Financial Results and Update Conference Call. Please note that this call is being recorded at the company’s request and it will be archived on the company’s website for one week from today.

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

Good afternoon, everyone. Before we begin today, I would like to note that earlier we issued a press release containing the company’s financial results and update for the third quarter ended September 30, 2016. That release includes the third quarter financial statements and can be found on the company’s website at www.cumberlandpharma.com.

Also, please note that this call may contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995, because they reflect the company’s current views and expectations concerning future events. Any forward-looking statements may involve risks and uncertainties.

Investors should note that many factors could affect the company’s future results as more fully described under the caption Risk Factors in our Form 10-K and any updates we filed with the SEC. Any forward-looking statements made during today’s call are qualified by those risk factors.

We recognized that future results could differ materially from the views expressed in today’s call and we don’t assume any obligation to publicly update any forward-looking statements whether as a result of new information or future developments. We will also be providing some non-GAAP financial measures with respect to our performance today.

So, reconciliation to GAAP measures can be found in our earnings release and its related financial tables. Also please note that this conference call is being webcast through our website and will be available there. I will now turn the call over to our Chief Executive Officer, A.J.

Kazimi, to begin our discussion on the company’s results and performance..

Thank you, Erin. Good afternoon, everyone and thank you for taking the time to join us as we report our third quarter 2016 results and also provide you with an update on our company. With me on today’s call are our Chief Commercial Officer, Marty Cearnal and Cumberland’s Chief Financial Officer, Michael Bonner.

Today, we will report on the progress of the various initiatives we have implemented this year and we will follow with a discussion of our commercial activities and provides you with an update on our product development.

We will then review our financial results and finish with our closing remarks before opening the call to any questions you may have. Last quarter, we talked about our excitement regarding the future potential of the company.

Those who have been following us over the past year know we have been busy putting the pieces in place to build our sales momentum, while at the same time, expanding our clinical pipeline, all while maintaining profitability and a strong balance sheet.

It’s been a challenging undertaking and it’s required some patience while we awaited the results of those efforts. This quarter reflects the initial contributions from the numerous initiatives we have undertaken and we are pleased to report that we have generated solid sales growth both sequentially and year-over-year during the third quarter.

There are 7 key operational pillars, which I would like to outline that we hear focus on everyday. We strive to deliver on each of these goals as we expect them to generate revenue growth and profitability for Cumberland for years to come. First, we must support and expand the use of our six marketed products.

Second, leverage our infrastructure through co-promotion partnerships. Third, capitalize on our commercialization agreements with our international partners. Fourth, selectively and add complementary brands. Fifth, progress our clinical pipeline. Sixth, continued to utilize CET as an incubator of future product opportunities.

And last prudently manage our expenditures. What we are most excited about is that each of these objectives are very well within our reach and through different degrees are taking hold. And today, we will be updating you about the newest of our marketed products and also discuss in some detail the most recent expansion to our clinical pipeline.

As you may recall, the one key development here was the announcement we made earlier this year regarding Ethyol. We reported the acquisition of exclusive U.S. rights to that brand, the first product to emerge from our strategic alliance with the British Clinigen Group.

Ethyol is our first oncology product and a nice complement to our hospital product line. It’s a cytoprotective agent indicated to support select patients undergoing radiation treatment and those undergoing chemotherapy for certain cancers.

Following the national meeting of our sales organization in September, we launched promotional support for Ethyol in the United States. While it’s our first oncology product, we believe it’s an excellent fit for our hospital sales organization and complements our current hospital product line.

During the summer, we diligently prepared for the reintroduction of Ethyol and are excited to expand our activities into this hospital-based oncology field and new patient population. Also during the third quarter, we announced a fourth expansion to our development pipeline with the addition of Portaban.

It’s an oral formulation of ifetroban and is targeting patients with portal hypertension, a complication of liver cirrhosis. The FDA has cleared our investigational new drug application or IND for a Phase 2 clinical study of Portaban and we have now been busy preparing for that study.

We look forward to developing this new candidate as the potential treatment for the life threatening condition in these liver cirrhosis patients. Additionally, we welcomed our newest board member, Caroline Young and our meeting in September.

Caroline is the former President of the Natural Healthcare Council and association of the largest concentration of healthcare companies here in the United States.

She was also the founding executive director of the Tennessee Biotechnology Association and we believe that Caroline’s extensive healthcare organizational development and international experience will serve her well in this new role here at Cumberland and it was good to start working with her at our September board meeting.

While turning to our financial performance, I am pleased to report that our sales grew to $8.8 million during the third quarter. And this represents a 19% increase from the second quarter and an 11% increase over the prior year period.

While our performance should be judged on an annual basis, it was good to see the continued growth of Caldolor as well as the initial impact of Ethyol when we began shipments of that product. Adjusted earnings for the quarter were $1 million or $0.06 a share.

During the third quarter, our balance sheet remains strong with just over $90 million in total assets and approximately $50 million in cash and investments. And at the end of September, our total liabilities were approximately $17 million resulting in $75 million of total shareholders’ equity.

And also, I always like to point out that we continue to have significant tax loss carry-forwards of approximately $43 million available to us and we do continue to implement our share buyback program. So, now I would like to look to Marty Cearnal, Cumberland’s Chief Commercial Officer to provide you all with an update on our marketed products.

Marty?.

Thank you, A.J. As A.J. mentioned, we successfully launched Ethyol at a national meeting of our sales organization in September. For the last several years, no company has been educating physicians on the benefits of this product for their patients.

While many centers across the country remain committed to the product, we see an opportunity to expand the current level of use and provide a meaningful benefit to patients. At our national sales meeting, our hospital sales organization was trained and prepared to reintroduce Ethyol, our branded amifostine to a new generation of oncologists.

Cumberland is responsible for all distribution, promotion and medical support of Ethyol in the United States. And we are excited about the opportunity launching Ethyol in the U.S. presents for Cumberland and for the patients who need it.

Also with the national sales meeting, we rolled out new marketing campaigns for our Caldolor, Vaprisol and Omeclamox-Pak products. And today, I would like to provide an update on those three brands. Let’s begin with Caldolor, our injectible ibuprofen product for the management of pain and fever. Caldolor remains our fastest growing product.

With the approval of the pediatric indication we spent the third quarter primarily focusing on that new indication introducing Caldolor to the country’s children’s hospitals. More recently, we built on that campaign shifting to a more balanced approach that includes both pediatric and adult surgeons and anesthesiologists.

We are also expanding our coverage to include surgeons who specialized in the treatment of cancer patients and working to expand the use of Caldolor in the ERAS protocols being developed by hospitals across the county.

ERAS is the abbreviation for Enhanced Recovery After Surgery and the data supporting Caldolor makes it a logical component of those protocols. Vaprisol is also expected to benefit from a modification in the focus of our supporting communication.

Vaprisol is used to treat hyponatremia, the most frequently seen electrolyte imbalance in hospitalized patients. This is a condition that can lead to poor patient outcomes and extended hospital stays. We have now begun to target our communication to the relationship between hyponatremia and extended hospital stays.

We are using clinical data to explain patient responses to different management approaches and to delineate the proper use of Vaprisol to shorten the time it takes to correct hyponatremia. Meanwhile, our field sales organization is launching a new campaign in support of Omeclamox-Pak.

The campaign emphasizes the most important patient benefits our treatment can provide for H. pylori, the cause of most duodenal ulcers. Omeclamox-Pak provides a high compliance package that requires a fewest doses per day. The fewest pills and the fewest days of therapy while providing excellent efficacy in eradicating the bacteria.

Omeclamox-Pak and our other GI product Kristalose continue to benefit from our key marketing initiatives which include the use of telemarketing, co-pay coupons, inclusion in electronic prescribing systems and targeted pharmacy support. That completes today’s update on marketed products. I will now turn it back over to you A.J..

Thank you, Marty. Before we turn to the financial results, I would like to discuss the clinical development efforts here at Cumberland.

As I mentioned earlier in September, we announced another expansion of our development pipeline with the addition of Portaban, an oral formulation of ifetroban which is indicated for patients with portal hypertension associated with their liver disease.

You see portal hypertension, a complication of liver cirrhosis is an increase in the blood pressure within a system of veins called the portal venous system. Veins coming from the stomach, the intestine, the spleen and the pancreas that merged into this portal vein which branches into smaller vessels and travels throughout the liver.

If the vessels in the liver are blocked due to liver damage, the blood can back up and not flow properly through that organ.

And as a result high pressure in the portal system develops and this increased pressure in the portal vein may lead to the development of large swollen veins which can rupture and bleed resulting in potentially life threatening complications.

What preclinical studies have shown that ifetroban can reduce the portal pressure, the inflammation and fibrosis in multiple models of liver injury.

By working to lower elevated portal pressure, Portaban has the potential to decrease the risk of hepatic decompensation in these liver cirrhosis patients over the short-term and may improve both their liver function and liver structure over the long-term through these anti-inflammatory and anti-fibrotic effects.

We are very encouraged by these exciting preclinical findings which provide the support and rationale for the use of Portaban in these patients. And we look forward to updating you as this new clinical program progresses.

Also earlier this year, we announced the start of another Phase 2 clinical program with Vasculan for the treatment of systemic sclerosis, a rare, but life-threatening autoimmune disorder that affects the skin and internal organs.

Systemic sclerosis are also known as scleroderma is the deadliest form of autoimmune disease and results in an average life span of just 11 years following the initial diagnosis. It also involves fibrosis or hardening of the skin and internal organs including lungs, kidneys and gastrointestinal tract.

Initial findings indicate that ifetroban can alleviate such fibrosis in non-clinical models. We are excited to investigate Vasculan this life-threatening condition that these patients face. A multi-center Phase 2 study is now underway in centers of excellence and we will keep you posted as this study moves forward.

Additionally, we continued to progress our other two Phase 2 development candidates which are Hepatoren, an injectable formulation of ifetroban designed for patients with kidney and liver are failing, it’s known as hepatorenal syndrome and Boxaban, an oral formulation of ifetroban designed for patients suffering from a form of asthma known as aspirin exacerbated respiratory disease.

We have completed study, a Phase 2 study in each of those areas. We have carefully been reviewing the results of that work and we have also identified nationally recognized experts in each field to help us design the follow-on Phase 2b studies.

The resulting study reports are being finalized for FDA submission and we are getting ready to move into Phase 2b studies and we will keep you posted as those programs progress as well. Well, that completes the clinical update and I would now like to turn to our Chief Financial Officer, Michael Bonner for the financial review.

Michael?.

Thank you, A.J. For the three months ended September 30, 2016, net revenues were $8.8 million compared to $7.9 million for the prior year period.

Net revenues by product for the third quarter were $3.7 million for Kristalose, $1.8 million for Acetadote, including our authorized generic, $1.4 million for Caldolor, $0.8 million for Omeclamox-Pak and $0.5 million for Vaprisol. During the quarter, we recorded our first revenue for Ethyol with sales of $0.5 million.

For nine months ended September 30, 2016, net revenues were $23.9 million compared to $25.5 million for the prior year period.

Net revenues by product for the first three quarters of the year were $10.9 million for Kristalose, $5.5 million for Acetadote which includes $3.5 million for our authorized generic, $3.1 million for Caldolor, $2.2 million for Omeclamox-Pak, $1.3 million for Vaprisol and $0.5 million for Ethyol.

Total operating expenses for the three months ended September 30, 2016 were $8.7 million compared to $7.6 million for the prior year period. Total operating expenses for the first nine months of 2016 were $24.4 million, similar to $24.5 million for 2015.

Adjusted earnings for the third quarter were $1 million or $0.06 per share, up from the $0.7 million or $0.04 per share for the prior year period. We believe that adjusted earnings is an important financial measure that is useful in evaluating the company’s operating performance.

In calculating these adjusted earnings, we take into account certain non-operating expenses and are careful to remain consistent among quarters while also providing a reconciliation to our GAAP earnings. As of September 2016, we had approximately $91.1 million in total assets including $50.1 million in cash and marketable securities.

Total liabilities were $16.7 million compared to $15.1 million at December 31, 2015. Total shareholders equity was $74.5 million at the end of the period. Also note that we had tax loss carry-forwards of approximately $43 million related to the prior exercise of stock options.

Meanwhile, we continued to execute on the $10 million share repurchase initiative approved by our Board earlier in the year. During the third quarter, we repurchased an additional 40,717 Cumberland shares. This brings our total shares repurchased during 2016 to 407,457.

I would now take a few moments regarding – to discuss a little bit about our Q4 financial outlook and beyond. While Q3 revenues were strong with 11% year-over-year growth and 19% sequential growth, the timing of Ethyol’s launch was later than originally anticipated.

As a result, we are shifting some of the sales expectations for that product from 2016 into the first half of 2017. Even so, we do expect to post sequential and year-over-year growth in the coming quarter. Furthermore, we believe we are poised to generate double-digit year-over-year growth in 2017.

That completes our financial report for the third quarter. And I will now turn it back over to you, A.J..

Thanks, Michael. Well as you have heard today, there has been a lot of progress here during the third quarter as we launched our sixth commercial product, announced the fourth clinical program, added a new board member and began delivering double-digit growth. We are confident about our future and determined to take this company to the next level.

We are encouraged by the early reception that Ethyol has been receiving as well as the sales momentum of Caldolor. And we expect our new marketing campaigns to take hold in the fourth quarter as we leveraged our sales infrastructure to further the potential of our six commercial products.

Moreover, we have accelerated our business development efforts and we continue to work hard on the acquisition front seeking to selectively add more brands to our portfolio. Please note, any new acquisition will be communicated through a separate announcement.

Our clinical and regulatory team continues to pursue expanded labeling and new patient populations for our approved brands and they also continued to progress the development of our four pipeline candidates, Hepatoren, Boxaban, Vasculan and now Portaban.

We continued to manage our expenses in line with our revenues and that includes our sales and marketing expenses, our R&D expenses and our G&A expenses. And we feel that Cumberland remains in a strong financial position with high margins, profitable operations and a strong balance sheet.

And meanwhile, we do believe our shares represent an attractive long-term investment opportunity as evidenced by our ongoing share repurchase program. And we remain committed to our mission of advancing patient care to the delivery of high-quality pharmaceutical products.

So, with that, now let’s open up the call to any questions anyone may have and operator, please proceed..

Operator:.

Okay. Well, I just want to thank everyone for joining our call today, but we understand that some of you prefer a private conversation with management. And once again, we are available for such discussions.

We appreciate your time and interest in our company and we will look forward to providing another update after the fourth quarter when we will report on full year as well as fourth quarter results and another update on the company. Thanks and goodbye..

Ladies and gentlemen, that concludes our conference for today. If you would like to listen to a replay of today’s conference, please dial 855-859-2056, using the access code 99386514. 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..