Erin Smith - Corporate Relations A.J. Kazimi - Chief Executive Officer Martin Cearnal - Executive Vice President & Chief Commercial Officer Michael Bonner - Senior Director Finance & Accounting and Chief Financial Officer.

Thank you for joining the Cumberland Pharmaceuticals First Quarter 2017 Financial Report and Company Update Conference Call. Please be advised that this call is being recorded at the company’s request and will be archived on Cumberland’s website for one week from today’s date.

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

Good afternoon, everyone. Before we begin, I’d like to point out that earlier today the company issued a press release containing our financial results and update for the first quarter ended March 31, 2017. The release, including the financial tables is available on the company’s website at www.cumberlandpharma.com.

I’d also like to share the following Safe Harbor language. This call may contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Because they reflects the company’s current views and expectations concerning future events, these forward-looking statement 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 update filed with the SEC.

Any forward-looking statements made during today’s call are qualified by those risk factors and our future results could differ materially from the views expressed in today’s call. We don’t assume any obligation to publicly update any forward-looking statements whether as a result of new information or future developments.

Also, please note that today we’ll be providing some non-GAAP financial measures with respect to our performance and explanation and reconciliation to GAAP measures can be found in our earnings release and its financial tables. I’ll now turn the call over to our Chief Executive Officer, A.J.

Kazimi, to begin our discussion of the company’s performance and plans..

Thank you, Erin. Good afternoon, everyone. Thanks for joining us as we review our first quarter 2017 results. We’re pleased with our recent progress and appreciate your participation in today’s call, as we share what’s happening here at Cumberland.

Also with me on the call are Cumberland’s Chief Commercial Officer, Marty Cearnal; and our Chief Financial Officer, Michael Bonner.

We’ll start with the discussion of recent developments, including our first quarter highlights and follow with an update on our commercial activities, then we’ll discuss our clinical programs and review our first quarter financial results. We’ll conclude with a discussion of the company’s strategy before then opening the call to any questions.

As you’ll hear today, we continued on our course of building a company that offers its shareholders long-term sustainable growth. In the first quarter of 2017, our revenues of $9.6 million surged 25% compared to the prior year period.

We were pleased to see our newest brand, Ethyol, off to a fine start this year, contributing over $3.7 million in sales during the first quarter. The addition of Ethyol has also enhanced our gross margin, which came in at nearly 86% for the quarter.

We maintained our strong financial position with total assets at nearly $92 million, including over $50 million in cash and marketable securities at the end of the first quarter.

Our adjusted earnings were $0.3 million, or $0.02 a share for the quarter similar to the prior year period, while cash flow from operations significantly increased to $1.4 million for the quarter. During the first quarter, we further expanded our commercial product line with the acquisition of exclusive U.S.

rights to Totect and oncology support drug and second to emerge from alliance with Clinigen Group. Cumberland currently markets six FDA-approved brands and with Totect expected to come later this year, it will be our seventh. We were also pleased to see that two of our products were the subject of favorable clinical publications in the quarter.

The dissemination of published studies could help increase awareness and maximize the potential for our brands. In early 2017, there were a series of new manuscripts featuring our Caldolor and Vaprisol products. One study on Caldolor demonstrated its ability to significantly reduce fever in hospitalized children.

Another study provided evidence that Caldolor can significantly improve postoperative pain control, while also significantly reducing opioid use in patients undergoing surgery. And Vaprisol was also highlighted in a publication as a well tolerated solution for hyponatremia patients.

Additionally, we continue to successfully defend our Acetadote patent during the first quarter. A Federal Appeals Court ruling affirmed prior court decision in Cumberland’s favor and we were very pleased with the new ruling that upheld the validity of our patent for this life-saving drug through August 2025.

In January, we added a new member to our Board of Directors, Kenneth Krogulski, President and Chief Executive Officer of Berkshire Asset Management. Mr. Krogulski has over 38 years of experience in security analysis and investment portfolio management, making him an outstanding addition to our Board.

So I now look to Marty Cearnal, Cumberland’s Chief Commercial Officer to provide an update on our marketing and our sales activities.

Marty?.

Thanks A.J. As A.J. mentioned, Cumberland is determined to maximize the potential of our existing brands. We held a successful national sales meeting during the first quarter to help support and equip our sales team towards this aim.

At that meeting, our hospital and field sales representatives received preparation, guidance and new materials for their 2017 promotional efforts. We’ve also been pleased with the performance of our newest commercial brand, Ethyol. It’s an FDA approved hospital product used to support the care of oncology patients.

Ethyol can reduce the adverse reactions to therapy, preventing interruptions in treatment and improving the quality of life for patients. If you’ve been following us for a while, you know, we’ve been working diligently to further strengthen Caldolor’s position in the marketplace.

Caldolor is an injectable form of ibuprofen designed primarily for hospitalized patients who are not able to take their pain and fever medications orally. It was originally approved for use in adults for the management of pain and the reduction of fever.

Last year, we launched the pediatric indication after gaining FDA approval for the use of Caldolor in children. There’ve been a series of publications on Caldolor during the first quarter of 2017. There were two new studies published in medical journals adding to the growing amount of literature in support of the safety and efficacy of the product.

One study demonstrated Caldolor’s significant fever reduction capability in hospitalized children. That study found that a single 10 milligram per kilogram dose of Caldolor provides a safe and effective option for reducing fever in children. The publication became available as an open access article in the British BMC Pediatrics Journal.

Another study provided evidence that Caldolor can significantly improve postoperative pain control, while also significantly reducing opioid use in patients undergoing transsphenoidal surgery. Results from the study were published in the Journal of Neurosurgery in March of 2017.

Additionally, there was also a new study published by Vaprisol, our treatment for hyponatremia, an imbalance of serum sodium to body order and the most common electrolytes disorder among hospitalized patients.

This study published in drug design, development and therapy demonstrated that Vaprisol was well tolerated in hyponatremic patients with severe hepatic impairment. Also, during the first quarter, we began planning for the launch of Totect.

It’s an FDA approved product indicated to reverse the toxic effects of extravasation associated with anthracycline chemotherapy. Extravasation occurs when an injected medicine escapes from the blood vessels and circulates into surrounding tissues in the body.

When this happens within anthracycline chemotherapy drug, it causes severe damage and serious complications. Totect can reverse such damage without the need for additional surgeries or procedures, enabling patients to continue their essential anti-cancer therapy.

We’re excited to bring Totect to patients in the United States and are busy preparing the products launch, which is expected to occur later this year. That completes today’s updates on our commercial activities. A.J., I’ll turn the call back to you..

Thank you for that update, Marty. We’re certainly pleased with the growth in Ethyol sales, as the new sales initiatives you mentioned and the most recent manuscripts for our Caldolor and Vaprisol brands. Now, I’d like to discuss the clinical development efforts underway here at Cumberland.

We previously reported on our agreement with the Nordic Group to acquire the exclusive U.S. rights to their injectable methotrexate product line. Nordic is a privately-owned European pharmaceutical company, that’s built a market leading position with their methotrexate products in several European countries. Methotrexate approved in the U.S.

as a treatment for several diseases, including arthritis. And while oral formulations are available, injectable methotrexate has been shown to result in increased efficacy, greater continuation rates, and less discomfort for patients.

We’ll be launching a line of injectable methotrexate products in the United States intended for the treatment of active rheumatoid arthritis, juvenile idiopathic arthritis, and severe psoriatic arthritis.

These methotrexate products have been approved for use in Europe, but additional efforts are needed to prepare for the approval in the United States by the FDA. We’ve been busy developing the regulatory strategy and have begun preparation of the FDA submission for these products.

We’ve received a significant amount of information from Nordic, including the European dossiers. Our goal is to finalize the U.S. approval submission hopefully by the end of the year, and we’ll keep you posted as this progresses. Meanwhile, our other development programs continue to advance with four promising candidates now in Phase II.

Our first pipeline candidate is Hepatoren, an injectable formulation of ifetroban that we’re evaluating for patients with hepatorenal syndrome. Those patients suffer from progressive kidney and liver failure leading to a high-mortality rate, with no accrued treatment for their condition here in the United States.

We completed the data analysis and reports from our first Phase II study and filed the final study report with the FDA during the first quarter. We’ve also engaged in international expert in the field to help us with the design of a follow-up efficacy study.

And as a result, we’re now progressing the plans associated with the implementation of that study. We’re also developing Boxaban for the treatment of Aspirin-Exacerbated Respiratory Disease or AERD, a disease involving chronic asthma and nasal polyps that’s worsened by aspirin.

AERD is characterized by sharp increases in inflammatory mediators and platelet activity within the respiratory system. We previously completed an initial Phase II study to evaluate Boxaban in patients suffering from AERD. And in the first quarter, we finished the data analysis and filed the final report with the FDA for this study.

Also, during the first quarter, we submitted and obtained FDA clearance for our IND associated with this AERD program. As a result, a follow-on Phase II efficacy study is now underway. Our third pipeline product is Vasculan, an oral formulation of ifetroban.

We announced this program last year after receiving clearance from the FDA to begin a Phase II clinical study for Vasculan in patients with systemic sclerosis, also known as scleroderma, it’s the deadliest autoimmune disorder and involves a thickening of the skin and internal organs.

During the first quarter, we were pleased to see patients enrollment begin in our scleroderma study. Lastly, Portaban, the most recent addition to our clinical pipeline is also progressing. We’re developing Portaban for the treatment of portal hypertension associated with patient’s liver disease.

The FDA have previously cleared our IND for the – for a Phase II study here, and we were also pleased to initiate patient enrollment in that trial during the first quarter. So with FDA clearance for all four programs, our goal is to now significantly advance patient enrollment in these resulting Phase II studies.

Completion of each study and top line results will be the next milestones for each of these development candidates. And we’ll look forward to reporting on those steady results once they become available. I’ll now turn it over to our Chief Financial Officer, Michael Bonner, for the financial review.

Michael?.

Thank you, A.J. For the three months ended March 31, 2017, net revenues were $9.6 million, growing 25% compared to the $7.7 million in the prior year period. Ethyol delivered $3.7 million of revenue in the first quarter, followed by $2.4 million for Kristalose and $1.3 million for Acetadote.

Net revenues during the quarter were $0.8 million for Caldolor and $0.7 million for both Vaprisol and Omeclamox-Pak. We were very encouraged to see a significant increase in Ethyol sales and we continue to believe and become our largest selling product. Kristalose sales dropped off during the quarter after strong fourth quarter shipments.

This is reflecting wholesaler buying patterns late last year. Domestic shipments of Caldolor continue to grow during the first quarter, but were offset by decrease in international shipments due to some manufacturing delays. Turning to our expenditures.

Total operating expenses for the three months ended March 31, 2017 were $10.3 million compared to $8.2 million in the prior year period. The primary reasons for these increases were the additional cost of goods sold and royalties, both associated with the growth in sales.

The net loss in the first quarter was $1.3 million, or $0.08 a share, compared to $0.3 million, or $0.02 a share in the prior year period. This difference was impacted by non-cash charge to taxes associated with an increase in the allowance for prior research and development tax credits.

Adjusted earnings for the first quarter were $0.3 million, or $0.02 per share similar to the prior year period. We continue to manage our expenses in line with our revenues and our goal is profitability on an annual basis.

During the first quarter, our balance sheet remained strong with total assets of $91.9 million, including over $50 million in cash and marketable securities. Liabilities at the end of the quarter totaled $19.6 million, including $4 million on our credit facility.

As I previously reported, there were new rules issued by the Financial Accounting Standards Board that became affective January 1, 2017, impacting the accounting for stock compensation. As a result of the new accounting standard, we added new deferred tax assets to our balance sheet, accompanied by related significant valuation allowance.

We also increased the allowance associated with prior R&D credits. The impact of these adjustments contributed to a $0.4 million increase in our net tax assets. Cash flows from operations increased $0.8 million over the prior year period, to $1.4 million for the first quarter.

I’d also like to note again that we’re very pleased to see the double-digit revenue growth experienced in the second-half of 2016, continued into the first quarter of this year. We do expect that trend to continue with double-digit revenue growth on an annual basis through 2017.

We continue to believe our shares represent an attractive investment opportunity and we continue to buy back Cumberland shares. During the first quarter, we repurchased an additional 155,000 shares. The company selected BDO USA, as our new auditors for the fiscal year ending December 31, 2017.

Our auditor engagements are evaluated and considered on three-year renewals. This provides us an opportunity to take a fresh look at our auditors every few years.

Following the completion of the 2016 audited financial statements, the Board’s Audit Committee comprised of independent directors, considered proposals and recommended BDO is Cumberland’s audit firm.

For more than 100 years, BDO has provided quality accounting services and supports its clients through a global network of over 67,000 individuals working out of 1,400 offices across 158 countries. In March, our previous auditors, at KPMG, issued their audit reports on the consolidated financial statements.

These reports contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. I’d like to note, there were no disagreements to KPMG on any accounting matter, financial statements closure, auditing scope or procedure.

BDO just made a compelling proposal, which was carefully evaluated and accepted by Audit Committee and Board of Directors. That completes our financial report for the first quarter of 2017..

Thanks, Michael. On a sad note in March Thomas Lawrence, our longest serving Independent and Lead Director passed away, following a brief illness. We value Tom’s contributions and we’ll miss his insight and counsel.

Meanwhile, Joey Jacobs, the Chairman and Chief Executive of Acadia Healthcare has agreed to assume responsibility as our Lead Independent Director going forward. At our recent Shareholder Meeting – Annual Shareholder Meeting, all five proposals recommended were passed. Included in those proposals were amendments to the company’s incentive plans.

Please note that these amendments only extended the terms for our previous plans, which were expiring. There was a question about the provisions in the plans involving repricing options and early cash out of restricted shares.

Those provisions are no longer applicable, as we’ve discontinued the use of options as a form of equity awards and the company policy does not provide for such restricted cash – restricted share cash outs. So both are no longer applicable. While we’re working hard here to keep Cumberland on a solid foundation for long-term growth.

We advanced that goal last year with a series of steps designed to maximize the potential of our approved products. We enhanced our marketing efforts, increased the number of sales reps detailing our products, expanded the product portfolio, advanced our clinical pipeline and defended our intellectual property.

As we moved into 2017, those same initiatives remain our focus and we’re pleased that the New Year’s off to a very promising start. We recently announced a new co-promotion agreement for our Kristalose brand that will significantly increase the number of physicians that are covered in support of that product.

Our partner, Poly Pharmaceuticals, is a privately-held specialty pharma company, with a field sales force actually slightly larger than ours. Under the terms of this new agreement, Poly will promote Kristalose to two medical specialties that we don’t cover, adding support for the brand to 5,000 new physicians.

We’ll share with Poly the revenue from the prescriptions generated by those doctors and it’s a three-year agreement that’s planned to launch next month and should begin to impact Kristalose sales during the second-half of this year.

Looking ahead, we’ll continue to support and expand the use of our marketed products, and we’re excited about the addition of a seventh commercial brand later this year. We’ll also explore opportunities for label expansion in order to reach new patient populations like we did with the approval of Caldolor to treat pain and fever in children.

We’ll continue to see complementary brands and our acquisition of rights to Clinigen’s Totect and Nordic’s methotrexate, both represent examples of successful execution of that strategy. And we’ll also aim to leverage our infrastructure to co-promotion partnerships, as evidenced by our recent Kristalose agreement with Poly.

And furthermore, we enjoy a growing contribution from our international partners. Last, we’ll continue to manage our operations with financial discipline to deliver positive cash flow from operations. And we remain in the strong financial position with high margin, positive cash flow and a strong balance sheet.

And most importantly, we’ll continue to remain focused on our mission of advancing patient care to the delivery of high-quality pharmaceutical products. So with that review and update, now let’s open the call to any questions you may have. Operator, please proceed..

Thank you, sir. Ladies and gentlemen, that concludes the company’s presentation. We will now open the call for questions. [Operator Instructions].

Well, thank you, everyone, for joining us for today’s call. And we do understand that many of you prefer a private discussion with management, and please reach out to Erin Smith here if you’d like to hold such a call.

We appreciate your time and interest in Cumberland, and look forward to providing another update following the end of the second quarter. 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 11376419. 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..

Q -:.