Thank you for joining the Cumberland Pharmaceuticals First Quarter 2019 Financial Report and Company Update Conference Call. Please note that this call is being recorded at the company’s request and will be archived on Cumberland’s website for one-week from today date.

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

Hello, everyone. I was recently married and you have known me previously as Erin Smith but I have changed my last name so now you will know me as Erin Gull. And today I would like to talk about how we issued a press release containing the company's financial results and corporate update for the first quarter ended March 31, 2019.

And that release which includes the first quarter financial tables is available on our website at www.cumberlandpharma.com. Before we begin, I'd also like to review the following safe harbor language. Today's call may contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995.

Because the statements in today’s call reflect the company’s current views and expectations concerning future events, these 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 filed with the SEC. Any forward-looking statements made during today’s call are qualified by those risk factors.

And despite our best efforts, actual results could differ materially from our expectations and information shared on the call today should be considered current as of today only and please remember that the company assumes no duty to update any forward-looking statements, whether as a result of new information or due to future developments.

Also during today’s call, we’ll be referring to several of the company’s marketed brands. For more information on those brands, including full prescribing and safety information, you can find links to each of the individual product website at our corporate site at cumberlandpharma.com.

Additionally, please note that today we will provide some non-GAAP financial measures with respect to our performance, and an explanation and reconciliation to GAAP measures can be found in our earnings release and financial tables. Also with us on today’s call are A.J.

Kazimi, Cumberland’s Chief Executive Officer; Marty Cearnal, our Chief Commercial Officer; and Michael Bonner, our Chief Financial Officer. And I’ll now turn the call over to A.J., to begin our corporate update and discussion of the company’s performance..

Thanks Erin. Good afternoon, everyone, and thank you for joining us as we provide an overall company update and review our first quarter 2019 results. I'll start with a discussion of our financials, as well as our recent development and then I'll cover the results of our ongoing strategic review.

Marty will follow with an update on our commercial activities and I’ll provide you with an overview of our clinical and regulatory efforts. Michael will then review our first quarter financial results, and I'll finish with a discussion of our outlook and plans before opening the call to any questions that you may have. So let's get started.

I am very pleased to report that we’re off to a terrific start in 2019. As you’ll hear today we had a very busy first quarter filled with progress on both our near-term and our long-term goals. We made decisions to modify our product line that will allow us to focus our promotional efforts.

We made important advancements on our clinical objectives, commenced the expansion of our sales organization and posted strong financial results.

I believe this quarter is a clear example of a successful execution of our strategy to drive both revenue growth and profitability while advancing our clinical pipeline in order to take Cumberland to the next level. Now let’s go over some of the specific highlights from the quarter.

We delivered an outstanding financial performance in the first quarter of 2019 as revenues surged 38% to $11.9 million delivering adjusted earnings of $1.8 million or $0.11 a share. Our financial position remains strong with over $114 million in total assets including $34 million in cash and investments at the end of the quarter.

We also made significant progress toward achieving our goals of expanding our commercial portfolio while also advancing our regulatory initiatives.

Those efforts have led to three near-term growth catalysts and they include the acquisition of Vibativ which represents our largest transaction today it’s potentially life-saving antibiotic designed for difficult to treat infections.

And during the first quarter, we largely completed transitioning the brand to Cumberland and we believe it will continue to favorably impact our financial performance. In January, we received FDA approval for our next-generation Caldolor product featuring an improved package and formulation.

Caldolor has been our fastest-growing brand and we believe this new presentation will help continue that growth. Also during the first quarter, the FDA accepted for filing our submission for the approval of a new line of methotrexate products.

They are designed for the treatment of patients with arthritis and psoriasis and the FDA has begun its review of the submission and provided us with a target approval decision date for September of this year. We believe that over time this new product line has the potential to make a significant contribution to our annual sales.

To make the most of these three opportunities, we initiated a strategic review of our brands, capabilities and international partners. This review followed our accelerated business development initiative which delivered a series of transactions over the last 36 months.

Therefore we thought now was an excellent time to take a fresh look at our portfolio, our partners and our organization to ensure we have the proper focus and capabilities. As a result in China, the largest market for pharmaceutical products outside the U.S. we have changed partners.

Hong Kong WinHealth Pharmaceuticals will assume responsibility for our Acetadote and Caldolor brands in that important market. WinHealth will provide $2 million in milestone payments and an estimated up to $290 million in revenue contributions over a 10-year period tied to the supplies of both products following their approval in China.

Meanwhile we plan to return the U.S. rights to the brands Ethyol and Totect later this year. In exchange, we will receive financial consideration provided to us over a two-year period. As a result, our hospital product efforts will become focused on our three key acute care brands Caldolor, Vibativ and Vaprisol.

We’re expanding our hospital sales division, as well as our field-based medical science team in order to ensure coverage and support for the majority of our acute care business.

And we've also been meeting with our other key international partners and expect to announce additional updates and improvements to that network over the remainder of this year. Turning to the clinical front, we've completed enrollment in our study of Caldolor in patients ranging from newborn to six months of age.

And we look forward to announcing the topline results once that data is collected, verified and analyzed. We've also continued to advance our ifetroban clinical programs which feature several potential orphan drug candidates progressing our Vasculan and Boxaban clinical studies with patient enrollment continuing in each of those Phase II trials.

Additionally, we’re supplementing our acquisition and late stage development activities with the earlier stage drug development at Cumberland Emerging Technologies or CET. Recall CET was awarded a $2 million NIH grant to develop an innovative new product candidate in collaboration with scientists at Vanderbilt University.

And during the first quarter we began to implement that development program, which is associated with the new grant award. So that completes my overview of the quarter and a series of new announcements. I now like to look to Marty for now Cumberland's Chief Commercial Officer to share his update on our marketing and sales activities.

Marty?.

Thanks A.J. During the first quarter of this year we largely completed the transition of Vibativ to Cumberland. We held a very productive national sales meeting and provided our hospital sales division with additional training to support our newest brand. As A.J.

mentioned, we took a fresh look at the hospital team’s deployment and coverage and then redesigned our national territories. Our goal is to provide personal support for 80% of the existing and potential business for our key brands.

As a result of this analysis, we decided to increase the size of our hospital sales team by 20% and also expand our medical science liaison team. At the corporate office, we promoted an individual to lead our infectious disease brand management and we also added an executive with significant antibiotic experience.

We brought on sales professional to augment our national account capabilities. These various additions were built into the plan for Vibativ acquisition and enhanced our existing infrastructure to better support that product. The key element of our growth strategy is to seek opportunities to further develop our FDA approved products.

Earlier this year, we received FDA approval for our next-generation Caldolor. It offers hospitals and medical facilities a more convenient packaging, improved dosing accuracy, and cost savings associated with pharmacy preparation. It also features an improved formulation, easier administration and patent protection until 2032.

We have largely completed the plans and have initiated manufacturing for the products launch later this year. Our international sales division calls on select office-based physicians in support of our Kristalose and Omeclamox-Pak brands.

That organization will also handle the launch of our new methotrexate product line following the FDA's review and approval.

Similar to the analysis completed for our hospital division, we plan to take a fresh look at the size and deployment of our field division to ensure proper support for the new methotrexate products and our existing gastroenterology products.

We augment our internal commercial capabilities through targeted use of digital media and a series of co-promotion partnerships. We believe these arrangements represent an efficient way to expand our reach and round out our coverage. That completes today's update on our commercial activities A.J. I will turn the call back to you..

Thank you for that update, Marty. I now like to further review the product development efforts underway here at Cumberland. We believe Caldolor is an important product and continue to seek opportunities to introduce it to new market segments.

The product was initially approved for the treatment of pain and fever in adults and then we secured approval for use in pediatric patients six months of age and older. Next we initiated a study to evaluate Caldolor in newborns up to six months of age.

And as I've mentioned, we've completed enrollment in that study, which we believe is the first evaluation of ibuprofen in the youngest of patients.

The trial enrolled 30 newborns ,evaluating the safety and pharmacokinetics of the product in that new patient population and we look forward to announcing the topline study results then providing a full study report to the FDA, after which will consider filing for an additional label expansion.

Late last year, we reported that we had completed and filed the submission for our line of methotrexate products, designed for the treatment of adult and pediatric patients with rheumatoid arthritis as well as adults with psoriasis.

We are pleased that during the first quarter of this year, the FDA accepted that submission as complete and ready for their review and then provide us with a target approval decision date for September of this year.

Meanwhile, our other development programs continued to advance, as we are fortunate to have a robust pipeline of promising candidates in Phase II clinical trials. All these products are derived from ifetroban, Cumberland's first new chemical entity.

We’re pursuing several patient conditions with this molecule that represent unmet medical needs and include candidates for orphan drug designation. And please note, that the approval of just one of these product candidates can meaningfully change the growth trajectory of our company.

We continued to advance our Vasculan and Boxaban clinical programs with patient enrollment continuing in each of those Phase II studies during the first quarter of the year. We're developing Vasculan for patients with systemic sclerosis, the deadliest autoimmune disorder, which involves the thickening of the skin and internal organs.

And Boxaban is in development for the treatment of aspirin exacerbated respiratory disease which involves chronic asthma, chronic rhinitis and nasal polyps that are worsened by aspirin.

Once we complete enrollment and gather the data from these two remaining studies we will then decide which development plan provides the best opportunity for the approval and commercialization of our first new chemical entity and we look forward to providing you with those conclusions and plans.

Additionally, in order to be successful in the long-term, we believe it's important to have a conduit of innovative new product opportunities, so we're supplementing our acquisition and late-stage development with earlier stage drug development at Cumberland Emerging Technologies or CET and there we’re establishing a pipeline of new product candidates and fostering innovation by partnering with academic research centers and this a southern part of the country.

In February 2019, CET and the Medical University of South Carolina entered into an agreement to collaborate our future codevelopment programs. Using this collaboration combines our strengths with the goal of advancing new technologies to clinical practice and towards the marketplace.

This agreement adds to CETs roster of academic collaborations which also includes signed agreements with Vanderbilt University, the University of Mississippi, the University of Tennessee and Louisiana State University. So that concludes the update on our development and regulatory activities.

I would now like to turn over to our Chief Financial Officer, Michael Bonner for the financial review.

Michael?.

Thank you A.J. For the three months ended March 31, 2019 net revenues were $11.9 million compared to $8.6 million for the prior-year period.

Kristalose delivered $3.3 million of net revenue in the first quarter or about $3.1 million profile net revenue for our newest brand Vibativ was $2.1 million followed by $1.3 million for Caldolor,$0.8 million for Acetadote and $0.6 million for our other brands.

Total operating expenses for the three month period were $12.1 million compared to $11 million for the prior year period. The primary drivers of this increase with the new cost of goods and amortization expenses associated with the addition of Vibativ.

Since the launch of Vibativ of November 2018, we've added $7.1 million in new revenue, a total of $3.3 million in related expenses and delivered an approximate $5.8 million and incremental cash flow from brand.

Adjusted earnings for the first quarter were $1.8 million or $0.11 per share, a significant improvement over the adjusted loss of $1.4 million during the prior year period. As of March 31, 2019, we had $114.6 million in total assets including $34.3 million in cash and marketable securities.

Other assets included $10 million of accounts receivable and$11.3 million of inventory. Liabilities totaled $59.4 million, which included $20 million on our credit facility and $9 million for the royalties that will be payable on Vibativ sales. Total shareholder's equity was just over $55 million at the end of the quarter.

Vibativ was our largest acquisition to date based on both the product size and the overall consideration for the assets. The financial terms for the Vibativ acquisition included $20 million payment upon closing, this initial payment was funded by an expansion of our revolving credit facility with Pinnacle Bank.

We also provide an additional $5 million payment last month and will provide tiered royalties of up to 20% on U.S. net product sales.

We accounted for the acquisition as a business combination, a total of $34 million in new assets were added as a result of the acquisition including $21.6 million inventory,$11.8 million of intangible assets and $882,000 of goodwill.

We recorded a liability of $9 million as the fair value of the contingent consideration resulting from the long-term royalty on product sales. We expect the addition of Vibativ will continue to be accretive to the company's earnings as we are largely utilizing our existing infrastructure to support the brand.

As Marty noted, there is some expansion underway of our hospital sales division and our medical science liaison team. Those additional expenses are being phased in over 2019. Meanwhile, we believe that our shares represent an attractive investment opportunity.

In January, our Board of Directors authorized a new $10 million tranche available for our corporate share repurchase initiatives. During the first quarter, we repurchased another 121,466 Cumberland shares. That completes our financial report. I’ll turn it back over to you A.J..

Thanks Michael. So as you just heard this afternoon, we’re working on multiple fronts to build the value here at Cumberland. We remain optimistic that 2019 will be a standout year for the company. I am very encouraged by the progress we made in the first quarter and do expect our momentum to continue.

We’re confident we can execute our strategy to develop and grow the current portfolio while selectively adding new brands either through acquisition or from internal development. Our commitment to our strategy is unwavering and we firmly believe that our best days are ahead.

We will continue to manage our operations with financial discipline and a goal of delivering positive cash flow. We remain in a strong financial position with high margins and a favorable balance sheet and given the large insider ownership of the company, our interests are closely aligned with our shareholders.

The dedicated efforts of our employees, we continue in 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..

[Operator Instructions] Our first question comes from Andrew D'Silva with B. Riley FBR..

Thanks for taking my questions and congrats on the progress in Q1.Just to start off just a couple of quick bookkeeping items as far CET related sales for the quarter, can you just let me know what that was and then you noted hospital sales team was increasing by about 20%, how many internal sales team members do you have now.

And then the final just bookkeeping question is related Vibativ should we figure that Q1 is a seasonally weakest quarter?.

Okay, three questions there. So I'll start - this is A.J. I’ll start with the CET question. We have the $2 million NIH award plus some other miscellaneous revenue coming in at CET and that $2 million award is spread over the four quarters this year and next year.

So overall the revenue from CET associated activities is rather small component of our income statement. And the main source of revenue that you see is coming from product sales. Marty I’ll turn it to you to discuss the expansion of the hospital sales force and then his question on the Vibativ sales result the last two quarters..

Sure. The short answer is that our hospital sales organization it’s about 30 sales professionals. As we said we've also made selected additions inside the organization to provide support and we continue to look at that.

As the products grow and look for as we said in the call the opportunity to have kind of face-to-face representation to about 80% of our existing sales and opportunity and cover the rest either with our co-promotion partnerships or with the effective use at digital media..

And then the two quarters of Vibativ sales was his other question?.

So I figure Q1 to be the seasonally weakest quarter that’s all?.

Yes, you should probably using the first six months of sales an average of the first six months of sales as a run rate is a better way to calculate where Vibativ is likely to end up for the year..

Okay, that’s good color. And then just last couple questions from me with Caldolor during the first quarter and I believe currently there has been an IV opioid shortage.

Has this provided any sort of tailwind for you to get in front of hospitals as you're starting to think about launching the next-generation Caldolor product? And then as it relates to RediTrex just refresh my memory do you still view it as a $40 million annual opportunity.

And then if that's correct just discuss how you view unexpected ramp if you obtain approval?.

Okay, so let's start with the opioid issue. There have been some spotty shortages of IV opioid, but nothing really broad-based. What we do see is an interesting trend for the first time hospital use of injectable opioids is declining and we do view that as an opportunity.

We think that the new generation Caldolor product will solve some problems at the pharmacy level in terms of gaining broader use and distribution of the product because it allows the product to be more effectively placed at the point of use, the surgical fixes or in a freestanding surgery center because the product is premixed and doesn't require any pharmacy time associated with preparation of the product..

And with RediTrex?.

Okay, and then if we look at RediTrex yes I think we see RediTrex over time as a $40 million to $50 million brand for the company. That’s going to take some time to build, but we think we have the right strategy and places in terms of how we plan to position the brand..

Thank you. Speakers I am showing no further question in the queue at this time. I would like to turn the call back over to management for any closing remarks..

Sure. Thanks everyone for joining our call today. We do understand that many of you prefer a private discussion with management and if so please reach out to Erin Gull here if you'd like to hold such a call. We do appreciate your time and interest in Cumberland and we look forward to providing another update after 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 1692316. 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..