Good morning. My name is Leo, and I will be your conference operator today. At this time, I would like to welcome everyone to the Eagle Pharmaceuticals Third Quarter 2014 Earnings Results Conference Call. [Operator Instructions].

It is now my pleasure to turn the floor over to Lisa Wilson. You may begin your conference. .

Thank you, Leo. Good morning, and welcome to Eagle Pharmaceuticals Third Quarter 2014 Earnings Call. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals..

With me on today's call are Scott Tarriff, President and Chief Executive Officer; and David Riggs, Chief Financial Officer. We will be joined for the question-and-answer session by Ken Degen, our Senior Vice President of Hospital Sales & Marketing..

This morning, the company issued a press release detailing financial results for the 3 months ended June 30, 2014. This can be accessed through the Investor Relations section of the Eagle website at eagleus.com, and you can also access the webcast of this call from there..

Before we get started, I would like to remind everyone that any statement made on today's call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.

These forward-looking statements are based upon information available to Eagle Pharmaceuticals' management as of today and involve risks and uncertainties, including those noted in this morning's press release and our filings with the SEC..

Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Eagle Pharmaceuticals specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law..

A telephone replay of the call will be available shortly after completion through Monday, September 1. You'll find the dial-in information in today's press release. The archived webcast will be available for 1 year on our website at eagleus.com..

For the benefit of those who may be listening to the replay or archived webcast, this call is held and recorded on August 11, 2014. Since then, we may have made announcements related to the topics discussed. So please reference our most recent press releases and SEC filings..

And with that, I'll turn the call over to Eagle's CEO, Scott Tarriff. .

Thank you, Lisa, and good morning, everyone.

This was a strong few months for Eagle, highlighted by FDA approval for Ryanodex to treat malignant hyperthermia, which we expect to begin shipping around the end of August, tentative approval for bendamustine ready-to-dilute and approval of our ANDA for diclofenac/misoprostol tablets, for which we will start distribution early in the fourth quarter.

We also received orphan drug designation for our bendamustine low-volume, short-infusion time product for CLL and indolent B-cell NHL, which we believe may provide 7 years of market exclusivity if approved.

We continue to move forward toward full enrollment in the related clinical trial, which I'll discuss along with other aspects of our business later on the call..

But first, I'll ask David to review the results of the quarter.

David?.

Thank you, Scott. Our revenues consist of product sales of argatroban to our 2 commercial partners and royalties we received on their net product sales of argatroban to their respective customers..

For the 3 months ended June 30, 2014, total revenues were $5.8 million as compared to $5.1 million in the prior quarter -- prior year quarter. The increase was due to the recognition of a $3.5 million milestone associated with the FDA approval of diclofenac/misoprostol, offset by lower argatroban product sales..

Our NDA expenses were $4.5 million in the third quarter of 2014. The $2.9 million increase reflects higher development costs on our product portfolio overall, but particularly on our ready-to-use bivalirudin and bendamustine projects and on diclofenac/misoprostol..

SG&A expense increased by $1.4 million in the 3 months ended June 30, 2014, to $2.7 million. This increase was primarily related to increases in headcount, professional and legal fees associated with operating as a public company and Ryanodex product launch expenses..

Net loss for the third quarter of 2014 attributable to common stockholders was $2.9 million or a loss of $0.21 per basic and diluted share compared to a net loss of $300,000 or a loss of $0.11 per basic and diluted share in the third quarter of 2013..

We closed the quarter with $49.8 million in cash and cash equivalents, and $137 million in additional paid-in capital. And we had $41.9 million in stockholders' equity as of June 30, 2014..

And with that, I'll turn the call back over to Scott. .

Well, thank you, David. I am pleased to report that Eagle achieved several significant milestones during and since the third quarter of 2014. I'm going to walk you through these and discuss the impact of each on our business..

We are very pleased that the FDA has approved Ryanodex for the treatment of malignant hyperthermia or MH. This condition can be triggered when genetically susceptible patients come in contact during surgery with certain inhaled anesthetics or a specific muscle relaxant.

There are approximately 800 to 1,000 cases per year, and IV-administered dantrolene is the standard of care. All U.S. hospitals are required to stock dantrolene, and the Malignant Hyperthermia Association of the United States recommends a minimum of 36 vials, which equates to 3 vials of Ryanodex..

We have priced Ryanodex at $2,300 per vial with a 10% early stocking discount. While this is about 3x the cost of the pre-existing product, we believe it is warranted by the significant advantages of Ryanodex. MH is often fatal if untreated, and there can be significant patient complications associated with an MH event.

Treating MH is difficult and highly stressful for anesthesiologists, surgeons and their patients. If an MH crisis occurs during surgery, the patient must be stabilized, removed from the triggering anesthesia and dantrolene must be administered.

The surgery may have to be aborted, and following the crisis, the patient is monitored in the ICU for at least 36 hours. An MH crisis causes obvious difficulties and adds tremendous cost to the health care system..

The pre-existing dantrolene product is very difficult to administer. A large number of 60 ml vials must be reconstituted by multiple staff during the acute phase of the crisis, at the same time as the issues I described are occurring.

The most critical differentiating features are that Ryanodex can be reconstituted and administered in less than 1 minute and with far less volume, 5 mls versus 720 ml. This is critically important in treating malignant hyperthermia when every second counts.

A study published earlier this year found that for every 20-minute delay in administration of dantrolene, there was a 30% increase in patient complications. We are confident that given the obvious significant benefits, once hospitals have used Ryanodex, they won't revert to the old formulation..

The average hospital stocks the equivalent of 3 to 4 vials of Ryanodex. Therefore, at our price, the cost to stock Ryanodex is $7,000 to $9,000. With our 2-year shelf life, this equates to $3,000 to $5,000 per year. So while Ryanodex is priced at a premium to the current cost, we believe we have priced the drug responsibly..

Our contract sales force has been detailing the product for about 2 weeks now, and we are pleased by the reception thus far. Feedback to date confirms that time is of critical importance, and Ryanodex meets that need. We continue to expect to ship product around the end of August.

We expect the Ryanodex launch will cost us approximately $4 million in sales and marketing cost during calendar year 2014..

As a reminder, Ryanodex has orphan drug designation for this indication, and we are awaiting FDA's decision on granting us the 7 years of marketing exclusivity provision. Coupled with the 4 patents, which we expect we will have Orange Book listed by the end of September, we believe we will enjoy a long life cycle for Ryanodex..

We are pursuing a second indication for Ryanodex, the treatment of exertional heat stroke, which we believe is a subset of malignant hyperthermia. Exertional heat stroke, or EHS, is a leading cause of death among student athletes, and is a leading cause of noncombat-related death among military personnel.

Currently, there are no products on the market to treat this critical and unmet need. In addition to working in the United States, we maintain an ongoing dialogue with the Saudi FDA regarding a planned pilot study. We continue to target dosing of our first Ryanodex patients in exertional heat stroke in Saudi Arabia around the end of this year..

Ryanodex already has a U.S. patent for heat stroke and orphan drug designation for exertional heat stroke, which would give us substantially -- substantial longevity to the product in this indication, assuming that the trials are successful and the label is expanded to include exertional heat stroke..

Now moving on to bendamustine. We are very pleased that FDA granted tentative approval to our bendamustine RTD product. The current label is for the treatment of NHL, which we view as purely mechanical and process-driven. We fully expect to ultimately obtain labeling for either CLL or NHL or both, as needed.

The current label for the product will not in any way deter a timely launch..

Eagle's product that currently has tentative approval will be administered the same as the pre-existing lyophilized powder product. After it is reconstituted in a 500 ml bag of sodium chloride, that solution is infused for 60 minutes for NHL..

The current bendamustine product had $190 million in sales last quarter and continues to grow at 7% quarter-over-quarter.

Because our bendamustine RTD product is a ready-to-dilute liquid, which avoids many of the health risks inherent in reconstituting the cytotoxic drug from powder form, we believe the market will be receptive to it once it is commercially available.

Patent litigation related to bendamustine RTD is moving forward as planned, and we look forward to updating you in due course..

In the meanwhile, we continue to make headway with our bendamustine low-volume, shorter-infusion time product for NHL and/or CLL. We are very pleased that FDA granted this product orphan drug designation for both CLL and NHL. We believe that if approved, the FDA may grant us 7 years of orphan drug exclusivity for these indications..

We are moving towards completing our clinical trial of this product candidate. If successful, we believe the outcomes of this study will facilitate a label change for the product.

As I mentioned earlier, both the current product and our liquid bendamustine RTD product are placed in a 500 ml bag of saline solution and infused for either 30 minutes for CLL or 60 minutes for NHL. Our low-volume, short-infusion time bendamustine product will be placed not in a 500 ml bag, but a 50 ml bag, reducing the volume by 90%..

In addition, our product will be infused in just 10 minutes. We believe that our product will provide meaningful clinical and safety benefits to patients and health care providers alike in the treatment for both NHL and CLL..

The clinical trial is moving along well, and we are pleased with the study. We still need to enroll a handful of patients into the program. The time from the first dose to the last dose is a 30-day period. Keep in mind that these patients are frequently end-of-life oncology patients, and it is hard to accurately project enrollment and completion times.

We are being deliberate with this study, and we are focused on a timely and successful completion. We believe we will be in a position to launch our formulation with orphan drug status sometime between midyear '15 and early '16, pending timing of the completion of patent litigation and orphan drug exclusivity..

FDA also approved our ANDA for diclofenac/misoprostol, or generic arthrotec. This is a leftover ANDA from our early existence. There are currently 2 marketed generics for the product. We are planning to launch our product in October and to sell it internally.

The diclofenac/misoprostol launch will bring us 3 in-market products before our next earnings call, 2 of which will be commercialized without a partner. Also in our pipeline we have RTU bivalirudin, our enhanced version of the anticoagulant Angiomax, for which last quarter's U.S. sales were $150 million.

We remain on track for a first half of 2015 NDA filing..

Over the next 90 days, we anticipate beginning shipments for Ryanodex and diclofenac/misoprostol into the distribution system. We also expect to complete the ongoing trial of our low-volume, short-infusion time bendamustine product.

We believe our differentiated strategy that targets improved injectables will lead to longevity of our products, sustained revenue streams and attractive margins for the long term.

We will continue moving forward to develop our broad pipeline of product candidates so that we can take advantage of the expansive market opportunity in the injectable market, our differentiated commercialization strategy, utilizing FDA's 505(b)(2) regulatory pathway and the strong IP portfolio we are developing to protect our market position..

With that, I'd like to open the call for questions. Operator, please go ahead with the instructions. Thank you. .

[Operator Instructions] Our first question comes from David Amsellem of Piper Jaffray. .

Just a couple of questions. So on Ryanodex, can you talk about how you see pricing power evolving over time, given that it is a product that is -- has to be stocked at hospitals and is a product that is more convenient than the predecessor dantrolene product? So that's number 1.

And then number 2 is, in the exertional heat stroke opportunity, assuming you -- once you get past this pilot study, can you walk us through how you envision next steps in terms of the development path there?.

Yes, thank you, David. All right, so first Ryanodex, the pricing power. First to hand, we need to have the product stocked. So we priced at $2,300 a vial with a 10% discount, and we're concentrating on those 9,000 outlets in the United States that stock the product. That's basically 6,000 hospitals and 3,000 ambulatory care surgery centers.

Let's get it stocked first at this price. Let's see how it goes. We're still in the early phases, obviously. It's only been 2 weeks that we've been out there. And then, once we get through the stocking phase, we can concentrate on pricing going forward. But we're focused right now at the current pricing, getting the product into these units.

And then as it relates to exertional heat stroke, what we want to do is get some patients dosed, have the product dosed in exertional heat stroke patients. Then we'll circle back to FDA and finalize a protocol for the pivotal study and then start the clinical work, probably both in the U.S. and then back in Saudi Arabia again.

So what we would envision is get through this pilot, look at the data, that should help us to develop the protocol, meet with the agency again and then start the pivotal work, which should be, as I mentioned, part U.S., part international to be able to stay in the warm climate more frequently.

And hopefully, it'll progress well and we'll have the label extended. .

Yes, and if I may, I have a follow-up. Just -- can you give us a sense of timing on when that -- when you think that pivotal can start. And then also, I just wanted to add in another question on bendamustine. Let's assume that Teva switches over the market to their own liquid formulation.

How do you think that impacts you, your product and the ANDA filers? Do you think that a lot of these ANDA filers just go back to the drawing board? Or do they actually try to switch the market back to the lyophilized powder? How do you think that, that makes [ph]?.

Yes. So thank you again, David. The timing of the pivotal study, I don't think we have that defined yet, though we are hopeful that we can get that study, obviously, started in '15. That would be marvelous if we're able to do that and move it forward. And then we'll have to determine how many patients we actually need.

But we should be able to dose patients in '15. That's the expectation. If we can do that, that would just be wonderful. In terms of bendamustine and the Teva situation, we've always said and we believe Teva converting to the liquid probably helps us.

Because then when ultimately we get to the market, it would turn to a liquid market, and we would have, right now, the only liquid out there along with them. So that would be beneficial to us. It's hard for us to project what the ANDA holders will do when that comes to fruition.

But clearly, the ANDA holders, in that situation, would have a difficult time coming into the market with a lyophilized powder into market that it converted to a liquid. And then if we're able to convert the market from a 500 ml liquid market to a 50 ml liquid market, that further disadvantages the ANDA holders.

They would be fighting to come into a market that is already liquid, and then it's converted to the 10-minute market, giving us a significant advantage in the marketplace. And we'll just have to see how things play out. But certainly, our product is advantageous to those ANDA products. .

[Operator Instructions] Our next question is from Irina Koffler of Cantor Fitzgerald. .

I wanted to go back to Ryanodex. So you mentioned on the call that you have 2-year shelf life for the product. I thought that the older product had 3 years, and just wondering if you're getting any pushback from the hospitals on the stability and whether you're planning to do any work to extend your stability to 3 years or beyond.

And then also on the exertional heat stroke study, have you agreed with Saudi Arabia on financing? Or are you planning on supporting the cost of the study yourselves? And how much do you estimate it would cost?.

Good morning, Irina. It's Ken Degen. Regarding the response, we have been really pleased by the customer response to Ryanodex. I think there's a clear recognition from the anesthesiologists, from the hospital pharmacy directors, the nurses within the hospitals that administration time is critically important to patient outcomes.

And we have the only formulation on the market that's going to reduce that administration time down from 15 to 20 minutes currently down to 1 minute.

So when you recognize those benefits, coupled with the fact that time is critically important in an MH crisis, while there is a difference in shelf life, and as Scott alluded to earlier, difference in cost, we think that is trumped by the fact that this is a clearly superior product, and in a life-threatening situation, it's going to offer significant benefits.

And I'll turn back [indiscernible]. .

Thanks, Ken. And, Irina, in terms of the study with exertional heat stroke, we had 2 of our employees out in the Mideast over the weekend meeting with the investigators, and we don't have the exact answer yet for the cost of the program. We're working through that now. And so I don't have a clear number to provide to anyone at this point.

But as soon as we finalize the plans and have a better handle on the exact number, we'll provide that to everyone so you can update your models appropriately. .

Okay. And one follow-up, if I may.

On the diclofenac/misoprostol, can you go through your expectations for the product? And do you have any other heritage ANDAs in there in your company that we should know about as well?.

Yes, thank you. So yes, the diclofenac product, we're not providing guidance on sales. All we can tell you is there's 2 people. It looks like we're the third one coming into the market. It's hard to forecast 1 ANDA. It's always better when you have a basket of them.

So we're just going to work hard at it and, hopefully, we'll have reasonable sales coming out of the product. And in terms of other products we may have in our line that haven't been as apparent in the past, I don't think there's anything we have to disclose at this time about that either. We just keep moving our pipeline forward.

And when we make progress, we'll report. But diclofenac, we're interested as well to see how we do. And as I mentioned earlier, that'll be -- hopefully, October, we'll launch the product. .

[Operator Instructions] Our next question comes from Tim Lugo of William Blair. .

For the $10 million bendamustine trial, I believe it's open label.

So do you have already a sense of what the safety profile of the drug looks like? Have there been any concerns raised with patients dosed to date on the, at least on the safety side?.

Yes. Thanks for the question, Tim. We've not seen anything from a safety-related aspect that gives us concern. We're pretty pleased so far. .

That's good to hear.

And can you -- when will we get an update on the orphan exclusivity for Ryanodex?.

The timing of the orphan, I bet you we're at least a month away. When we spoke to FDA, they indicated 4 to 6 weeks, and I don't think there's an exact time. There's dialogue that goes back and forth. There's information that's shared. So I would say we're at least a month from knowing. .

And it appears that we have no further questions at this time. I'd be happy to return the conference back over to Mr. Scott Tarriff. .

Well, thank you. Thank you, everyone. It was a strong quarter. I appreciate everyone getting on the phone and speaking with us, and I look forward to having this call again in about 90 days. So again, thank you very much..

Bye now. .

This does conclude today's conference call. You may now disconnect your lines. And everyone, have a great day..