Erin Smith - Corporate Relations A. J. Kazimi - Founder, Chairman, CEO and President Marty Cearnal - Chief Commercial Officer, EVP and Director Michael Bonner - CFO and Senior Director of Finance & Accounting.

Analysts:.

Thank you for joining the Cumberland Pharmaceuticals First Quarter 2018 Financial Report and Company Update Conference Call. Please be advised that this call is being recorded at company's request and will be archived on Cumberland's website for 1 week from today's date.

Now, I would like to introduce Erin Smith, Senior Corporate Relations Associate at Cumberland. Erin, please go ahead..

Good afternoon, everyone. Before we begin today, I'd like to point out that earlier today, we issued a press release containing the company's financial results and a corporate update for the first quarter ended March 31, 2018. That release includes the first quarter financial tables, is available on our website at www.cumberlandpharma.com.

I'd also like to review the following safe harbor language before we get started today. Today's 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, such 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 most recent Form 10-K and any updates filed with the SEC. Any forward-looking statements made during today's call are qualified by those risk factors.

Because future results could differ materially from the views expressed in today's call, please note that we do not assume an obligation to publicly update such forward-looking statements, whether as a result of new information or future development. During today's call, we'll be referring to several of the company's marketed brands.

For more information on each of those brands, including full prescribing and safety information, please see the link to the product website, which can be found at www.cumberlandpharma.com. Also, please note that today, we'll provide the adjusted earnings financial metrics with respect to our performance.

An explanation and reconciliation to GAAP measures can be found in our earnings release and financial tables. I'll now turn the call over to our Chief Executive Officer, A.J. Kazimi, to begin the corporate update and discussion of the company's performance..

Good afternoon, everyone. And thank you for joining us, as we review our first quarter 2018 results. Also here with me on today's call are Cumberland's Chief Commercial Officer; Marty Cearnal; and our Chief Financial Officer, Michael Bonner. I'll start with the discussion of recent developments and review the first quarter highlights.

Marty will follow with an update on our commercial activities, and I'll then discuss our clinical programs, and Michael will review our first quarter financial results. We'll provide some closing remarks and then, before opening the to any questions you may have.

Let me begin by saying, those familiar with Cumberland Pharmaceuticals know that our goal is to build a business that generates sustainable growth and profitability. Our strategy in recent years for accomplishing that goal has been multifaceted.

We've added new brands, increased the number of sales representatives supporting our products, launched new marketing campaigns, expanded product labeling, protected our intellectual property and advanced our clinical pipeline.

That strategy has been a success, and we were able to post double-digit revenue growth in 2017, while advancing our clinical pipeline. However, these activities did bring additional expenses, such as increased royalties, supply costs and clinical study expenditures.

Moreover, the products in our portfolio have recently faced a variety of challenges, ranging from manufacturing delays, inconsistent ordering patterns and in some cases, increased competition, but none of those expenses or developments come as a surprise, because it is the nature of our business, and we often remind investors, given such quarter-to-quarter fluctuations, it's best to view our business on an annual basis.

And it's important for us to point out that our confidence is strong, and the commitment to our strategy is unwavering, as we firmly believe that we're on the best path forward for taking Cumberland to the next level. We do expect to post another year of revenue growth in 2018 and to introduce a next-generation product for one of our key brands.

That new product has the potential to be a strong contributor, and we'll expand further on that opportunity during today's call. Our strategy is to develop and grow the current portfolio, while selectively adding new brands. Meanwhile, we're advancing our clinical pipeline, which includes several potential orphan drug candidates.

Although it seems we're not receiving much credit for these Phase II programs, as 1 or more of these candidates are approved, they can deliver a very significant impact on the value of our company.

Furthermore, we have a number of favorable developments to report this afternoon, which, we believe, will help advance our goal of generating consistent sustainable growth and profitability. Turning to a review of the first quarter, net revenues were $8.6 million, down from the prior year.

As we reported during our prior earnings call, there were delays in the manufacture of Vaprisol, resulting in limited supplies and sales of that product. Also please note, the large shipments of Ethyol last year, as wholesalers loaded up as hospital demand for that brand began to build. And those 2 factors impacted the quarterly sales comparison.

During the first quarter, we did see significant increases in Caldolor and Kristalose sales, as we continued to manage our portfolio of 7 FDA approved brands to drive year-over-year revenue growth.

Further, during the first quarter, we continued to maintain a strong financial position, with total assets over $90 million, including over $50 million in cash and marketable securities. As a company, we strive to deliver high-quality medicines with a particular interest in products that address unmet medical needs.

We recently announced our expansion into the oncology medical specialty. And cancer, unfortunately, affects all too many people and is becoming an increasing medical problem. We believe oncology will remain a significant and growing sector of healthcare.

With an aim to improve the life of patients undergoing treatment for such a serious and life-threatening disease, Cumberland entered the oncology market with the additions of Ethyol and Totect.

Both of our newest commercial brands are designed to help patients tolerate the treatments for their cancers, and we've been providing them in supportive patients at cancer centers and children's hospitals across the country.

We believe oncology is a particularly rewarding and valuable field, and we're grateful for the opportunity to contribute to the welfare of cancer patients and help improve the quality of their life. Meanwhile, we've got good news to report on our product development efforts.

As I mentioned before, we believe an FDA-approved brand is a valuable asset, and we continue to look for ways to innovate our products, expand the labeling for them and move them into new patient populations, bringing our medicines to patients also in other countries.

I'm pleased to announce that the FDA has recently accepted for filing the supplemental new drug application, we submitted earlier in the year for the approval of our next-generation Caldolor product. It features an improved package and a new formulation, with patents continuing until 2032.

Also during the first quarter, we continued enrollment in our study, evaluating Caldolor in patients ranging from newborn to 6 months of age. And in other news, Caldolor was approved for sale in India, and we're now preparing for the launch of the brand with our partner for that market.

We were also pleased during the quarter to see 2 of our products featured in favorable clinical publications. In early 2018, there were new papers associated with our Ethyol and Omeclamox-Pak brands.

We issued announcements on each of these manuscripts, and more information on the journals and results can be found in the press release section of our website. So with those opening remarks, I'd now like to turn to Marty Cearnal, Cumberland's Chief Commercial Officer, to share his update on our marketing and sales activities.

Marty?.

Thanks, A.J. The sales of our branded portfolio were particularly strong in the fourth quarter of 2017 and then weakened during the first quarter of this year.

We previously noted that seasonality in our business based on wholesaler, hospital and retailer buying patterns combined with the impact of high deductible insurance plans, appears to result in more spending later in the year. Based on these dynamics, we continue to believe that our business should be evaluated on an annual basis.

During the first quarter of this year, we held a successful National Sales Meeting to help support and equip our sales teams in their efforts to build our brands. As a reminder, we have 2 national sales divisions. One calling on key hospital accounts across the country, featuring our Caldolor, Vaprisol, Ethyol and Totect brands.

And the other, calling on select office-based physicians in the promotion of our Kristalose and Omeclamox-Pak brands. We have 50 sales professionals working in these 2 divisions. We recently announced the appointment of Chris Bitterman to lead our hospital sales division.

Chris brings over 25 years of industry experience and a successful track record in leading hospital sales teams and building hospital brands. Highlights include, his role in building the national hospital sales force, as National Sales Director for Daiichi Sankyo.

There he held – there he led the organization that grew to 200 representatives and managers. Working with copromotion partner Eli Lilly helped build Effient to over $500 million in annual gross revenues.

Prior to his tenure at Daiichi, he held a number of increasingly responsible hospital sales positions at Sanofi Aventis, including sales and national account management as well as sales training. We also promoted Kenneth Acevedo to lead our field sales force.

Kenny brings over 30 years of industry experience with previous sales management responsibilities at Eli Lilly, Novartis and ICN Pharmaceuticals.

With this new leadership in place and the veteran sales professionals we have in both forces, I'm confident in our ability to effectively support our current brands and implement the launches of upcoming new products. Our own sales capabilities are augmented by our copromotion partnerships.

Piramal Critical Care is promoting Caldolor and Vaprisol to hospitals that we don't cover. Poly Pharmaceuticals is featuring our Kristalose brand with office-based physicians that our salespeople don't reach. Based on Poly's initial success, we've expanded our agreement with Poly to include additional territories and physician targets.

We believe that such copromotion arrangements represent an efficient way to augment our reach, as the compensation to our partners is based on their success in generating new business. The 2 copromotion agreements add 50 more sales professionals supporting our brands.

Also during the first quarter, we reached an agreement with Gastro-Entero Logic, or GEL, to acquire all assets associated with Omeclamox-Pak, including the products FDA approved new drug application, trademarks and other assets.

As a result of this acquisition, Cumberland will no longer be obligated to provide GEL with royalty or fees for overseeing the products' manufacturing, and we will become responsible for maintaining the FDA approval and overseeing the products' packaging. This transaction is targeted to close during the second quarter. A.J.

mentioned the new publications related to our Ethyol and Omeclamox-Pak brands. One study with Ethyol demonstrated how amifostine can decrease gastrointestinal toxicity in patients who receive treatment for multiple myeloma.

GI side effects, such as nausea, vomiting, diarrhea and ulcers are a major limitation to the use of stem cell transplant therapy in these cancer patients. The study compared patients treated versus those not treated with amifostine.

Therapy reduced GI toxicity without any significant side effects, while preserving the anti-myeloma and efficacy of the cancer treatments. The study with Omeclamox-Pak evaluated the eradication rate of Helicobacter pylori infection using a clarithromycin-based triple therapy.

Currently, the use of clarithromycin-based triple therapy such as Omeclamox-Pak has the support of organizational bodies in gastroenterology. Though some physicians have recently challenged this approach based on the premise that resistance to clarithromycin is increasing.

Despite such predictions, the study found that patients with a positive diagnosis of H. pylori could expect an 85% or better eradication rate when treated with clarithromycin-based triple therapy for just 10 days. Lastly, you may be aware of the U.S.

drug shortages that have resulted from the impact of the hurricanes on pharmaceutical manufacturing plants located in Puerto Rico. Unfortunately, those storms impacted the supplies of our Vaprisol brand. Our inventory was limited, impacting the fourth quarter of 2017 and the first quarter of 2018.

However, during the first quarter, the manufacture of Vaprisol resumed. We then received new suppliers of the product in mid-April and have already fully supplied the nation's distribution channels with this critical care product. That completes today's updates on our commercial activities. A.J, I'll turn the call back over to you..

Thank you, Marty. I'd next like to discuss the product development efforts here -- underway 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. Methotrexate is approved in United States as a treatment for several diseases, including arthritis.

An injectable methotrexate has been shown to result in increased efficacy, greater continuation rates and less discomfort for patients. We're working to introduce a line of new injectable methotrexate products in the United States, intended for the treatment of active rheumatoid arthritis, juvenile idiopathic arthritis and severe psoriatic arthritis.

We've selected the name RediTrex for these products and have been busy preparing for the FDA submission. We have received a significant amount of information from Nordic, including their European dossier, and our goal is to finalize the U.S. approval submission as soon as possible.

With approval, we believe that RediTrex has the potential to be a meaningful contributor to our revenue, and we'll keep you posted as this initiative progresses. Meanwhile, our other development programs continue to advance, as we are fortunate to have a pipeline of promising candidates in Phase II clinical development.

All are derived from ifetroban, our first new first chemical entity. We're pursuing several patient conditions with this molecule that represent unmet medical needs and do include candidates for orphan drug designation. You see ifetroban's been studied in some 26 clinical studies, involving over 1300 subjects.

As a result, we have an extensive database available, including a large safety database for this particular drug. Preclinical studies have been published, demonstrating ifetroban's impact on platelet aggregation and inflammation, and more recent findings have emerged, indicating an anti-fibrotic effect.

We successfully manufactured, both oral and injectable formulations of the drug, and we've teamed with leading researchers, including those at Vanderbilt, Harvard and the Scripps Institute to guide our development efforts.

With FDA clearance for our various ifetroban clinical program, we continued to advance patient enrollment for these studies during the first quarter.

Completion of each study and provision of top line results will be the next milestone for these development candidates, and we do look forward to reporting on those study results once they become available. In order to be successful in the long term, we believe it's important to have a conduit of innovative new product opportunities.

And we're doing just that through our R&D division, Cumberland Emerging Technologies, or CET. Through that organization, we collaborate with a select group of academic research institutions here in the southern part of the country.

In February, CET entered into a new agreement with Louisiana State University, adding to the roster of collaborations already in place, which include Vanderbilt University, The University of Mississippi School of Pharmacy and the University of Tennessee Research Foundation.

These partnerships combine the strengths and capabilities of each organization by working together to identify, formulate and then, develop attractive new biopharmaceutical products. These R&D activities at CET have been largely supported by grants provided from NIH and other organizations.

So with that development update, I'd now like to turn to our Chief Financial Officer, Michael Bonner, for the financial review.

Michael?.

Thank you, A.J. For the 3 months ended March 31, 2018, net revenues were $8.6 million compared to $9.6 million for the prior year period. Kristalose delivered $3.3 million of revenue in the first quarter, followed by $2.3 million for Ethyol.

Net revenues during the quarter were $1.3 million for Acetadote, $1 million for Caldolor, $0.4 million for Totect and approximately $0.1 million each for Omeclamox-Pak and Vaprisol. Turning to our expenditures, total operating expenses for the 3 months ended March 31, 2018 were $11 million compared to $10.3 million for the prior year period.

Adjusted earnings for the first quarter was a loss of $1.4 million or $0.09 per share compared to earnings of $0.3 million or $0.02 per share for the prior year period. During the first quarter, our balance sheet remained strong with total assets of over $91 million, including over $50 million in cash and marketable securities.

Liabilities at the end of the quarter totaled $30 million, including $12 million on our credit facility. As I previously reported, we filed a shelf registration through From S-3, which was cleared by the SEC during the first quarter. The shelf provided for the potential sale of up to $100 million in corporate securities.

It included an at-the-market, or ATM, feature which enables us to make stock available to new institutions who would like to quickly take a position in our shares. That completes our financial report for the first quarter of 2018..

Thanks, Michael. So as you heard this afternoon, we're working hard on multiple fronts to build the value of Cumberland. I'm very encouraged by the progress we're making and expect those activities to help us achieve our goals. Given the large insider ownership in the company, our interests are closely aligned with our shareholders.

In March, we provided our full financial results for 2017, reporting net revenues up 25% from the prior year. Although we do not expect that same level of growth in 2018, we do anticipate another surge in revenue, following the launch of our next products.

Fortunately, we have to growth catalysts pending in our next-generation Caldolor product and our new branded methotrexate product line. We're also working hard to deliver on our pipeline, which is directed towards multiple market opportunities that are much larger than those we operate in today.

For the longer term, our colleagues at CET continue their work with several academic institutions to identify and deliver new medicines for the future. We'll also continue our business development efforts and our acquisitions initiative. Through those efforts, we'll continue to seek select additions that complement our commercial portfolio.

We'll manage our operations with financial discipline to maintain a strong balance sheet and keep Cumberland on a solid financial footing. We've recently stepped up our investor outreach to raise our profile in the investment community.

Our goals are to expand the number of institutional holders of our shares, improve our share liquidity and obtain a price that better reflects our value.

And most importantly, we'll continue to remain focused on our mission of advancing patient care through the delivery of high-quality pharmaceutical products with our experienced team of industry professionals. 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] And our first question comes from the line of Andrew D'Silva from B. Riley FBR. Your line is open. .

Hello..

Just one moment. It looks like they had gotten out of the queue..

Okay. Well, we understand that many of you may prefer a private discussion with the management, and we're certainly available to have those conversations. If you would like to have a call, please reach out to Erin Smith here, and she'll organize such a meeting by phone with you.

Meanwhile, thank you, everyone, for participating in today's call and for hearing our update, and we will look forward to sharing another one at the following the end of the second quarter..

Thank you, sir. 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 4296607. Alternatively, a replay of the webcast will the available on the company's website. I would like to thank you for your participation. You may now disconnect..