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Executives

Theodore R. Schroeder – President and Chief Executive Officer

Scott A. Byrd – Senior Vice President and Chief Commercial Officer

David J. Cziperle – Clinical Assistant Professor-Thoracic and Cardiovascular Surgery

John Marshall – Clinical Coordinator-Critical Care, Beth Israel Deaconess Medical Center

Robert Ang – Senior Director

Cadence Pharmaceuticals (CADX) Analyst and Investor Day Conference Call December 6, 2012 9:00 AM ET

Theodore R. Schroeder

Well, good morning, everyone. Pleased to welcome you to the Cadence Pharmaceuticals Analyst and Investor Day. I’m Ted Schroeder, the Chief Executive Officer, President and Founder of Cadence. And we are excited to get together today to talk about the progress we are making and give you some insight into the future. We are especially pleased to have a couple of clinicians that will have, I think, bring an unique perspective to their experiences with OFIRMEV and it’s role in managing pain in hospitalized patients.

Before we get started, I thought that I would remind you of our Safe Harbor statement. You may hear forward-looking statements today; we would advice you not to put undue reliance on those statements. And we further refer you to our periodic SEC filings for a full description of the risk associated with Cadence Pharmaceuticals.

I thought to start by just reviewing the agenda, following my remarks, we will invite our Vice President and Chief Commercial Officer, Scott Byrd to come up and talk about OFIRMEV from a marketing and sales perspective, our plan for driving sustainable with the OFIRMEV. I think that will be informative and there is actually some new information in that you haven’t seen before.

We are also pleased to have Dr. David Cziperle with us today from Loyola University. Dr. Cziperle is a cardiothoracic surgeon who has had a vast experience with OFIRMEV in his practice and those of his partners. We’ll have a chance following his comments to do some Q&A and then following the Q&A we’ll take a short break. And then reconvene with our Vice President of Medical Affairs, Dr. Robert Ang; Dr. Ang will talk about multimodal team and the potential to improve cost and quality of care. This is essentially looking at the pharmacoeconomic rationale for OFIRMEV in patients who are unable to take and absorb oral medications.

And then finally we will conclude with a presentation from Dr. John Marshall from Beth Israel Deaconess hospital in Boston, I think an interesting perspective to hear a clinical pharmacists in the role of pain management from pharmacy perspective as well as the process for adopting new drugs on the formulary, and not only bringing them on the formulary but how they then become adopted through at the hospital. We’ll then call the panel backup that will include the physicians and we’ll have a chance for your Q&A a little bit in more depth and I will close the session, so we expect to stay right on time today.

I think as you look at the agenda and then you think about today there will be, I think there are four key takeaways you want to focus on. The first is that OFIRMEV is uniquely positioned to address the need for better pain control in hospitalized patients; you hear a lot of information about the efforts that are underway in virtually every hospital in the United States to improve pain control and to do that with by using fewer narcotics.

I think the second thing you should come away with this strong pharmacoeconomic rationale for OFIRMEV in that role that plays in a multimodal analgesia. And I think you also see a data that show that OFIRMEV is taking its place as a foundation of multimodal pain management, and you see that as institutions begin to move through the adoption phase. And then finally, these factors together are the reason that OFIRMEV sales will grow for many years into the future.

So with that, I will invite up our Senior Vice President and Chief Operating Officer, Scott Byrd.

Scott A. Byrd

Good morning everyone. It’s going to be a great day for us. As Ted mentioned, we do have some new information to share with you, so we’ll try to get right into that. For those that might be a little bit newer to the story, I thought I’d give you a very brief overview on the product. It’s of course OFIRMEV, you might here refer to as OFIRMEV, we are good with any of it as long as people are using it. It’s acetaminophen injection indicated for the treatment of mild to moderate pain and moderate to severe pain with adjunctive opioids as well as fever in adults and children two years and older.

We’ve also included in addition to the forward-looking statements, some additional information on the safety of the product, please feel free to refer to these slides, should you have any questions.

We’re not going to be talking too much about the specific clinical application in my talk this morning. We’re going to spend more time talking about the launch of OFIRMEV, the launch of the mass market hospital product, our performance and then how we drive sustainable growth for this molecule over the long-term.

I think it’s instructive often, because our experience is very fairly widely from retail, pharmaceutical launches to specialty office space launches to even those launches that occur in the hospital. And even within the hospital there is a fair amount of variability ranging from very, very high priced oncology products that might have a very narrow therapeutic utilization from a far end of this spectrum of product like OFIRMEV that has very wide application. The launch of those products would necessarily differ, okay. I want to come back and review for just a few minutes what a successful launch looks like, for all hospital products, but very specifically for a product like OFIRMEV, that has very broad application.

First and foremost building a very strong foundation, a broad access to the product is critical, because in the hospital environment where the gatekeepers and the clinicians and the patients are all participating in the healthcare under one roof, there is a tremendous amount of control. So without access there is zero utilization. This is something we obviously spent the bulk of 2011 focusing on, it was a key factor in our initial pricing strategy launching with a very modest price and one that we thought which stimulate not only broad access, but also facilitate early trial.

So of course, the second step is to stimulate trial among your targeted physician community, and more importantly that trial be supported by a very positive initial experience with the drug. Almost all clinicians are data driven; they tend to be driven by the last patient they treated. So it’s early negative experience, there is often significant hurdles for the adoption of the product yet with positive early experience that serves to create some pretty significant upside on the adoption.

The next stage is the adoption process. We’re going to spend a fair amount of time talking about what that looks like today, but this is particularly important with a product like OFIRMEV that is a therapy with very wide treatment application. Now this adoption stage for a product that might have a very small eligible patient population it could be a very quick stage, it could be a stage that’s not as relevant as some of the others. But for OFIRMEV this is squarely where we are in our launch right now and quite critical ultimately to the long-term growth. But that’s not the end of the story, so we have launched OFIRMEV in the post-operative pain, there is not only application in post-op pain, but broadly for pain management, acute pain management across the hospital space and we see significant opportunity beyond post-op pain into the non-operative pain. I’ll show you some more those details in the next slide.

And purely from an economic perspective, I know that is a topic that this audience is particularly interested in, when you think about not only the patients treated, but the revenue that is generated from a launch like this, there is also the factor of price that comes into play that serves to elevate all of these building blocks for a successful product launch and of course it’s something that we’ve already chosen to utilize in our marketing mix and one that we anticipate utilizing in future years.

There is another framework that I would like to walk you through that is really the framework of our promotional focus. There are three stages to the launch. I talked about creating access and broadening physician utilization, the third stage is really deepening that utilization or expanding the number of doses treated per patient. We are very squarely in the second stage right now. We certainly have some accounts and some customers were moving into stage three, the bulk of our effort however is still on expanding this physician utilization.

When we launched in 2011, we necessarily spent the bulk of our time engaging the pharmacy community as the gatekeepers, those if you will that provide access to the product in the hospital setting as we got that access, we then shifted our focus to the pain management experts that’s the anesthesiology community.

and then as we left 2011 entered into 2011, we began to shift our focus promotionally to the surgery community. The reason we did that is because although anesthesia, the pain experts they’re very critical that we had an option of a new pain product, the surgeons actually control most of the analgesia used in the hospital. Anesthesia might be a responsible for the first dose; maybe first two doses for a post-op patient. The surgeons are responsible for the analgesic regimen for the rest of that patients stay.

So really through 2012, we’ve spent our time focusing on this anesthesia and then surgery community. The dark blue here indicates where our focus is at the moment, you can see that is beginning to fade into the non-operative space as well as into the boxes labeled quality and administration.

So it’s really future opportunities for the product. We’re in the ICUs with OFIRMEV by the very nature of post-op patients being treated in the ORs and PACUs and the main transferred up to the ICUs, but there are also patients that are not undergoing surgical procedures that can be treated with OFIRMEV. This is a patient population that currently represents about 10% of our business. So about 10% of the vials used right now are in patients that are not undergoing surgical procedures.

now as a frame of reference about 30% to 40% of all IV analgesics are used in this non-operative setting. So there is significant growth opportunity in future years as we began to expand our promotional efforts into these non-operative settings.

And very importantly, we are beginning now to engage much more actively the quality and the administration functions in the hospital, the utilization is rising to the rate where this is – it’s going to be important for hospitals to understand the economic and the quality benefits of a multimodal approach to pain management. We want to be in front of that and help guide that discussion. You will hear some more discussion from Dr. Ang and others about that later today.

I think now it’d be probably an appropriate time to turn our attention from what our launch strategy has been to the performance of our launch. We obviously should first start with access, I don’t think it’s any secret, our formulary adoption has been exceptional. We are now on over 2,000 hospital formularies through the end of September. We’ve added 400 hospitals to formulary over the course of the year, and I will add in addition to that, we’ve seen quite nice movement in hospitals that put it on formulary early in 2011 actually relaxing restrictions as they gain more and more experience with the product.

But it’s not just about putting the product on formulary; it’s about getting that early trail. We now have almost 3,500 hospitals across the U.S. that have purchased the product through September of 2012. That 3,500 accounts is represented by about 2,600 hospitals and the remaining clinics and other ambulatory surgical centers and the like.

But what’s important about this isn’t necessarily the number of institutional customers that have tried the product, but the growth that we’ve seen has been both very consistent, overtime and continues to grow even through recent months. Most of that growth very importantly is coming out of our hospital customers as apposed to the ASCs and clinics that’s what many folks has patients might have personal experience with, because many procedures have done in those ambulatory surgical centers, but the bulk of the opportunity remain in the hospital sectors and that’s where our growth is coming from now and we anticipate coming from in the future. I’ll also note that about 80% of these customers are repeat customers, and we see that percentage and these repeat customers growing significantly overtime as well.

Now, I’ll turn your attention to the share of patients being treated. This is an important metric, if I give some sense of the scope of the opportunity for the product previously we’ve shared with you our estimates of share of patients that are treated with OFIRMEV in our on formulary hospitals. So these are hospitals that were targeting, we know that there on formulary. We can estimate what the share penetration and those are by using an assumption of the number of vials for patient.

Of course, that requires a lot of assumptions, we think that fairly accurate, but we have access to some data from premier house systems, they have a research unit called Premier Research Services that has access to patient longitudinal information this is following patients with their billing records through their hospital stay and a little over 400 hospitals across the U.S. This represents probably somewhere about 15% of all the U.S. hospital discharges.

So among these 400 hospitals they’ve looked at the billing records and identified which patients are receiving OFIRMEV during their course of stay. And as you can see on the slide, we’ve seen really outstanding growth since our launch in January of last year for the inpatient population, fully about 9% of the US surgical patients as measured in the premier hospital database, we’re getting at least one dose of OFIRMEV through June of this year.

When you include the outpatient population which is about 5.5%, we have all surgical patients getting about 7% of all surgical patients in the US, in the middle of the summer of 2012, getting at least one dose of OFIRMEV. Obviously with our sales increasing in July, August, September and October, these numbers are continuing to increase, but we thought it would be both helpful and instructive to see real data on the penetration of OFIRMEV across the significant sample of US hospitals and we believe that this is probably not only the best source today representative of the overall US population.

That same database we are able to track not just the percent of patients being treated, but with how many doses of these patients getting treated and this trend shows a fairly stable setting for the first half of the launch of really up to December of 2011 and then the growth in vials per patient starting in January of this year and continuing through the first two quarters. I just should note here that the data are only really robust about six months in a rear, so we don’t have any new data beyond June of this year, but with the data that we do have received very nice progression. I’ll attribute this to a couple of initiatives. First we substantially have penetrated hospitals on formulary to the end of last year.

And so you can consider this a more homogeneous hospital group from January to June than it was throughout 2011 where new hospitals were coming on board, as new hospitals come on board, they tend to treat with just one or two vials per patient, and then they expand their utilization. And we began as I mentioned earlier to spend more time with the surgeons and their staffs, and naturally you would expect to see an increase in the vials per patient from that point forward. So we’re quite pleased with the progression on both of these fronts.

Now this ultimately translates to both unit and dollar sales. we’ve shared this chart, which is the monthly revenue in different forms previously often focusing on the unit sales number. this particular chart has translated into dollar sales and represents a little over $6 million and gross revenue in October of this year, very, very steady growth over the period of the launch to date.

and frankly, we’re now trending with the October sales at an annualized rate of about $73 million in gross revenue per year and recognize that this launch to date number reflects about almost five million vials of OFIRMEV being purchased during the first 22 months of launch and at the numbers we were mentioning on the vials per patient, we’re talking at nearly 2.5 million patients. This is a different world than almost any other hospital product, most of us have had exposure to very broadly utilized, and frankly, carries with that broad utilization a lot of momentum.

Now, one of the more frequently asked questions is how does that sales ramp compared to other product launches. Again, this is the slide that we shared previously and it shows the gross revenue ramp for OFIRMEV over its first 22 months of launch compared to hospital products had been launched over the previous six years.

We’ve also included one additional product that was launched nine years ago in Cubicin because of everyone’s familiarity with it. And this particular chart, we’ve tried to keep it apples-to-apples, this is acute utilization in the hospital setting of these products and then we therefore adjusted some of the perennial antibiotics for the outpatient perennial antibiotic therapy removing those from this analysis and you can see that OFIRMEV compares extraordinarily well with the very best launches at least in the cotemporary setting.

Now, one might ask what would have looked like if you don’t make any adjustments and purely revenue institutional revenue for these same product launches, the story doesn’t change, okay. With no adjustments whatsoever OFIRMEV continues to rank among the very top of hospital product launches really the only other product that’s been launched in the last five, or six years that has gross revenue comparable to OFIRMEV through its first 22 months is a product called Doribax an antibiotic launch by J&J.

Also a product that’s we believe heavily discounted, so on the net revenue level we think we compare even more favorably and at the current trends one would expect OFIRMEV to cross over that Doribax line sometime in 2013. So extraordinary performance regardless of how we measure it for our first 22 months of launch for OFIRMEV that gives us a lot of optimism for the future.

I’ll shift gears now to talk about that future and how we envision achieving not just growth, but very sustainable growth over the rest of the products lifespan. This is going to be in the phase, that’s not necessarily all rosy picture. Of course, we have significant challenges in the U.S. healthcare system. That presents some headwinds for any new hospital product or hospital products in general, particularly you will hear more about this from Dr. Cziperle, and Dr. Marshall, but a silo management philosophy inside of a hospital where a pharmacy might only consider the issues that they are responsible for managing separately than what clinicians might be seeking to achieve separately even that in administration. The more silo management that takes place, they agree with the challenge for any new pharmaceutical or device technology.

Budget pressures are increasing along with the pressure on the health care system, I don’t think that’s any secret. These are manageable issues. To be sure, I’ll talk with you a little about how we will work with hospitals on them. But those are really the primary headwinds we see for new hospital product launches. That in the context, there are significant tailwinds also helping us with this launch.

But first I’ll share with you, really sets up a great environment. This is some of the outcroppings of the changes to the U.S. healthcare system that we think will actually provide great benefit for OFIRMEV. CMS and the joint commission aren’t focusing more and more on quality of care, but not just quality of care generally, the quality of pain management. I think many of you are aware that value-based purchasing is coming to hospitals in 2013, this through a mechanism of holdback or reimbursement based on the performance, it’s not only on clinical measures, but on measures of patient satisfaction and patient feedback.

Pain management is a key element of this patient assessment. Labeled here is the HCAHPS score. This is the hospital consumer assessment of healthcare providers. This is common metric and one that we think is focusing even now hospitals more and more intently, on ensuring the patient satisfaction and pain management is improved.

The Joint Commission, which is the key, if you will arbitrator of hospital quality in the U.S. has issued in April of this year, Sentinel Event Alert, you’ll hear some more information about this in the next couple of talks. The essence of it is, opioids are over used and misused. They are creating significant adverse events, so there are number of solutions to this. Acetaminophen and the multimodal approach is one of them recommended by the joint commission, we think will help support greater adoption of OFIRMEV.

I spoke earlier about the importance of positive initial experience. I’ve shared this information in previous presentations, it has been extraordinary experience that not only patients have had with the OFIRMEV, but physicians. 98% of physicians in our latest Awareness, Trial and Usage Study have reported that OFIRMEV has either met or exceeded their expectations and fully two-thirds of them have indicated that they are highly likely to recommend it to their colleagues.

Of course, I think almost all of them indicated that they will recommend it, but on the seven-point scale, two-thirds of them ranked it either six or seven and their intent to recommend it to their colleagues. That’s a pretty colorful indicator of their experience with the product. And as the experience and the utilization grows, there is more and more data the hospitals have to call from in their own institutions that is also serving as I mentioned earlier to expand our access but also expand adoption.

Our strategy for talking advantage of these is threefold. We are going to continue to broaden and deepen the post-op pain utilization. There is no magic here, this is very much blocking and tackling, but we’re continuing to focus our efforts with surgeons and their staffs to increase our penetration there with a large focus on improving the ease of use. The easier it is to use, the closer it’s stocked to the point of care, the more consistently it’s implemented on the standing orders and then the physician computer order entry system, the more broadly it will be utilized and the vials per patient that we will see.

It’s very important to recognize that the key players in the healthcare and the hospital are the nurses and physician assistants, particularly in the surgery community. There will be a greater call point for us in the coming months and years. We think that’s going to drive more traction for the adoption.

And then I’ve mentioned earlier our intent to expand in the non-operative pain sector, this is not a very near-term initiative, but I would call it immediate and certainly long-term opportunity and then more near-term is the third bullet point, which is the demonstration that multimodal pain management in fact could be a key solution for the squeeze that the federal government is putting on hospitals around pain management, the quality and economics. They are being asked not only to improve their pain management, but reduce opioids, which historically has been their sole tool for pain management. That’s obviously a conflicting set of strategies, but one that a multimodal approach and OFIRMEV can help significantly with.

The next several slides I will move through relative quickly, but they are important. So I’ll just pause here. How these efforts translate into long-term revenue growth is really represented by this equation. There is a multiplier, we have seen and we’ll expect to continue to see an increase in the share of patients. Over time, I’ll share with you some context on how to think about what that opportunity is.

We also have seen and expect to continue to see growth in the number of doses per patient. We’ve taken our first price increase. We think there is future opportunity out there, these factors obviously all multiply together to create pretty significant growth. I thought it would be instructive to utilize ketorolac and the NSAID as a framework for thinking about what the potential utilization is for OFIRMEV.

Now, for those of you who may not be familiar, almost exclusively the NSAID utilization in the IV or an injectable form in the hospital is ketorolac and it’s the product that has a significant number of limitations. These that I have listed on the slide are just the counter indications and the boxed warnings of the product.

So, these are pretty significant. You can imagine in a post-operative setting, there are lot of patients that have a risk of bleeding. They tend to be an overpopulation, which means that they also have frequently renal impairment, GI issues. This is a significant limitation on the potential utilization for a product that’s currently representing about 15% of the unit share of IV analgesics in about 21% of post-operative pain patients. If you think of this Venn diagram as all post-operative pain patients, just for a frame of reference here, the eligible population for OFIRMEV is the very large majority of it. There is very, very few patients that wouldn’t be eligible for OFIRMEV yet.

As I mentioned, only about 20% of patients are currently receiving NSAID. So to put that in perspective with the data we have from the premier hospital system, 90% of patients, 91% are getting opioids, only 21% are getting NSAIDs and at least, as of June of this year of all surgical patients, 7% of those patients were getting at least one dose of OFIRMEV.

So, I shared with you that the eligible patient population in the post-operative setting is probably somewhere four or five times even larger than what the NSAID eligible patient population is. we’re on the front-end of the adoption curve and even if you think about what physicians are currently telling us about their anticipation of using the product and our awareness, trial and usage study conducted in May of this year, they’ve predicted that in three years, not a peak, but in three years, they expect to be using it in a little over half of their surgical patients. Very significant future growth opportunity and share penetration.

In terms of doses per patient, I showed a reference earlier that we’re approaching about 2.7 vials per patients as of June of this year in the same market research study; it’s a quantitative study of 134 physicians and almost 50 anesthesiologists. we see physicians are expecting to significantly increase their utilization. You’ll hear from a couple of institutions and their utilization just after I complete my talk, but the opportunity is really enormous. It’s particularly large when you think about these factors being independent and multiplicative.

I’ll close just by framing the opportunity. Share of patients, we’ve talked about NSAIDs being about 21% of the post-operative pain patient population. The physicians expecting even in the next three years to be using and about 56% of their patient population that versus our current rate in June of this year of about 7%, so we have a significant growth opportunity expected in our share penetration.

On the doses per patient, we are currently averaging about 2.7 vials for inpatient, surgical patients, physicians are anticipating in the market research that they will use on average up to 4.5 vials per patient. We have always projected that by peak, so out to 2018, 2019, 2020, we think that utilization could be in the four to six vials per patient range, and I think that will be consistent with the experience that you will here from Dr. Cziperle and Marshall later today.

Finally, I’ll leave you with price. I obviously we can’t provide you with the pricing schedules we look into the future, but we do believe that there is opportunity on the upside here. In our experience, most hospital products are taking price increases in the 5% to 8% per year range. We think that’s pretty reasonable indeed we think OFIRMEV is still very modestly priced relative to the opportunity in the economics that provides. You can do the compounding yourself on what that 5% to 8% might look like over the next five to eight years for the remaining lifecycle of the product.

With that, I’ll introduce our next speaker; Dr. David Cziperle is not only a surgeon, but a surgeon that does procedures that are arguably some of the most painful as a patient and difficult to recover from. So we thought this might be a particularly helpful context. Dr. Cziperle is a graduate of Notre Dame. I feel like I have to mention that in the context of they are number one ranking in the BCS Championship, but more importantly he trained at Loyola University as well as at the Medical College of Wisconsin. Has an extraordinarily broad background and practice and I think you will find that his clinical experience will be both informative and insightful.

Thank you very much.

David J. Cziperle

Good morning. Thank you for allowing to spend sometime with you this morning and to share my experiences both in clinical training, with pain management, and as well as what I have learned about OFIRMEV in my clinical experience with the product.

As an introduction to my past, I’m a full-time clinical surgeon. I’ve been in practice for 16 years. I’ve had approximately eight years of surgical training prior to that. So over that quarter-century of exposure, I’ve had pretty broad experience to patients who have experienced post-operative pain.

What I’m going to share with you this morning is, what my traditional teachings were and how over the year – last couple of years, it was exposed to OFIRMEV, share my early experiences with you and also to share how my treatment plan for my patients has evolved and changed up until today and where I think they are going to continue to evolve and change in the future.

I’m a thoracic and cardiovascular surgeon, which means that I perform all aspects of heart, lung and vascular surgery. So as Scott mentioned, those are usually not the least invasive or least painful procedures performed. Many of the surgeries involve fairly large incisions, dividing the breastbones, spreading ribs apart, big abdominal incisions. So all things that are associated with a fair amount of pain. In our training, I’m a thoracic and cardiovascular surgeon, prior to that training requires that you undergo training as a general surgeon. So I have been exposed to a vast variety of general surgical procedures as well.

The group of which I practiced with is a little bit unusual. We’re a large group. There are 31 surgeons in our group that practice exclusively thoracic and cardiovascular surgery. We also have an additional three surgeons who are full-time vascular surgeons. Our group performs about 3,500 annual cardiac procedures, and about an additional 4,000 thoracic and vascular procedures. We practiced over a broad area. We practice at 22 community hospitals, one teaching hospital and our practicing encompasses three states over about 250 mile radius, and we practice at multiple healthcare systems.

Given that broad geographic distribution, unfortunately, I have privileges at almost all of those institutions, because we have to cover our partners when they are on vacation or for call purposes. So I’ve been able to see the impact of OFIRMEV over a large geographical area.

How did I become involved with OFIRMEV? Well, first of all, let me explain to you that I’m a – as mentioned before, a full-time clinical surgeon, I’ve a thriving practice in the past. I have not been a spokesperson for any product prior to my involvement with OFIRMEV. And in late 2010, I was contacted by a senior pharmaceutical representative who had known for years, and he wanted to ask me a few questions about a new product that envision will be coming to market in the next six months or so.

Our initial phone call was very short; it was about five minutes and it was five minutes because he couldn’t tell me anything about the product. So I said, well, what can I answer for you? So subsequently about two or three months later, we had a much longer phone call of about 90 minutes when he was able to disclose some of the information about the new pain management product.

And my initial response during our conversation includes some of the following bullet points. The first question was, when he told me it was injectable or intravenous acetaminophen, I said, wow, what’s the big deal? I said you kept me at bay for three months about this great miracle product that was coming out and here it is acetaminophen. I said that’s been around since the mid-1950s.

And the next question I immediately came up with, well, it’s been around for so long, how can we haven’t had an intravenous product for acetaminophen? And I quickly realized, I never been thought about an intravenous form of acetaminophen because in a traditional training, in practice, we’ve always been administrating oral and rectal acetaminophen products.

Next question was, does it really work? Is it a product that’s new to the market? Is it going to have an impact? Or is it just another product that’s going to be on the marketplace? Also is it safe? And finally, how much does it cost? All important things for practitioners.

What I subsequently learned was that OFIRMEV is a drug that’s unique; it’s the only drug of its kind in a new class of non-opioid, non-steroidal intravenous analgesics. It was approved for use in adults and children greater than age two, utilized for pain management, as you heard Scott talk about earlier, as well as approved for the treatment of fevers.

how widely has it been utilized and where has it been? Well, those are some of the questions that came to my understanding during our conversation. I found out that it had been used in Europe under the trade name PERFALGAN since 2002 and to my amazement, there were over 400 million doses previously utilized in 60 countries prior to the U.S. launch and U.S. approval. It has a very well established safety profile.

In regard to why we’ve been using oral and rectal agents, well, in our training, we were taught to use those, and then subsequently have learned the traditional use of oral and rectal acetaminophen. It really has substandard effects, because of the unpredictable absorption, which produces an ineffective treatment response many times. The cost is fairly inexpensive, about $11 per dose.

Subsequent to that conversation, I then met with some of the Cadence leadership executives and management team. they were interested in learning from me, what is a thoracic and cardiovascular surgeon? What kind of procedures do I do? As they were doing their due diligence and trying to talk to different practitioners to find out what market areas could their product be applicable for. That began a dialog of utilization of OFIRMEV in patients who are undergoing procedures that I’ve performed.

During that presentation, I tried to explain to the management team what a thoracic and cardiovascular surgeon does. During that presentation, I brought along several photographs of procedures that I do because it’s like I don’t really have much of a concept of what you’re all talking about today. I heard some of you talking and it’s all French to me instead of Greek. I know all about clinical aspects of care, but not about the business end of thing. So I brought some photographs along and have brought two of them to share with you today. I brought you the two nicer, cleaner ones, there is no blood-and-guts or gores.

The first photograph is a patient who has an aneurysm, and aneurysm is a weakening of a blood vessel of ballooning out, most commonly this occurs in the abdomen. And the hear of the aorta is the biggest blood vessel in the body and when that artery enlarges when it gets beyond a certain point, it can rupture, which obviously is not a good thing. This is someone who is having an elective replacement or repair of that aneurysm, that’s done through a large incision in the abdomen that goes from the tip of the breastbone for about 12 inches down to the pelvis. And you can see that the retractors really spread the abdominal wall fairly far apart and hence you can determine that most of these people have a fair amount of pain.

Also during this procedure, we have to remove the bowl from the abdomen, manipulate it, move it out of the way, so that we can get to the aneurysm to repair it. As a result of that post-operatively patients really aren’t allowed to have any food or water for several days, so they are not able to take oral medications.

This is an example of a thoracotomy patient. Thoracotomy is someone having an operation on their chest. We make a sizable incision between the ribs; spread the ribs apart to enter the chest. This is an example of a patient who has a tumor under diaphragm, which is the spot in the middle of the photo. We remove that, reconstruct the diaphragm. When we do these procedures, every time we spread the ribs apart patients have a substantial amount of pain, because underneath every rib there is a nerve, which start to the spine and comes all the way around the middle of the body, so extremely painful procedure.

So these are the kind of things that I shared with the management team, examples of things that I do where OFIRMEV may be a benefit.

I'm going to go back a few years into my traditional training, most of us of my generation have been trained that pain is the fifth vital sign accompanies heart rate, blood pressure, temperature and respiratory rates, [why is that] the fifth vital sign, because we often have to access patients, we have to work to try to figure out why the other four vital signs are not within the normal range.

If someone has a fast heart rate, JACC Cardiac or the JACC Cardiac, because they are having an underlying heart problem or are they JACC Cardiac, because they are experiencing pain or patients having shallow respirations, because that hurts to breathe in that way they're breathing small frequent respirations because of inadequate pain management. So again pain is the fifth vital sign.

We also know that patients who experience of your pain subsequently a prolonged recovery time and increase risk of complications. As I just mentioned, you can imagine if you are having pain and you don't want to take a deep breath lungs don't expand very well. You're on bed rest, you tend to form atelectasis, or micro compression of your lungs, which is a set up for pneumonia, blood clots, all the other bad things that come along with hospitalized in active patients.

What do we traditionally use to treat the problem, narcotics and opioids, we know that there are side effects associated with narcotics and opioids, but we were talked to basically accept those side effects as a trade off for better pain control, so that the patients would hopefully experience less problems related to excruciating pain.

The traditional pain treatment paradigm that we all grew up with was when patients had mild pain was to administer narcotics and opioids for the treatment of their discomfort. When patients experienced more intense pain or moderate pain, the treatment strategy was to increase the amount of opioids in narcotics supplied to the patient, so that hopefully their pain would decrease. And when patients had severe pain once again to administer increasing doses, or change the frequency of the administration of the narcotics or the opioids or to consider sustain relief products epidurals or intravenous PCAs.

Again all of these contribute to potential adverse effects from narcotics, but we accepted that in order to get pain control. In 2004, the American Society of Anesthesia put together task force looking at pain management strategies. They recommended a multimodal pain management strategy. Despite that process occurring in 2004, it was relatively slow to gain traction, because the traditional pain management paradigm that we just talked about has been well entrenched, narcotics, narcotics, opioids.

Physicians continued to rely on that foundation of opioids as the major strategy for pain management. Along the way surgeons also began to branch out and to use non-narcotic pain pumps, local nerve blocks, non-steroid also when they became available.

And our main focus really wasn’t so much on patient comfort and satisfaction. We are still mainly focused of that many decades of a patient care and live discharges. 30-day mortality in discharge from the hospital was a primary focus at that point. Where are we today in 2012? The pain treatment paradigm has dramatically shifted.

Opioids are no longer the foundation or base of pain management instead when patients have mild pain, the strategy is to administer a non-opioid, non-narcotic agent such as OFIRMEV. When they experienced moderate pain to continue to administer the non-narcotic, non-opioid agent like OFIRMEV and consider adding some additional non-narcotic agents or techniques as a part of a multi-model plan, and when patients have severe pain to build on that foundation of non-narcotic, non-opioids with adjunctive narcotic or opioid administration.

Next, we’re going through what I’ve experienced during the dawning of a new product like OFIRMEV. the first step in that product development and launch for clinicians is to expose physicians to the product and to expose physicians to the multiple clinical studies that were performed, they were all multi-model studies across multiple specialties and to demonstrate that as a result of those studies that there was improved patient satisfaction scores, as well as decreased narcotic consumption across multiple a different surgical specialties that’s across orthopedic groups, general surgical procedures, cardiac procedures, so very broad based.

To also establish to physicians, as I subsequently learned that there is a well established safety profile for the product extensive worldwide experience of almost a half a billion doses prior to product introduction in the United States, fairly low cost per dose, and we’re not going to break the bank using it. and then the final or the next step was to obtain a hospital formulary approval.

Hospital formulary approval is really a pretty formal process at most institutions, and I want to take a moment just to walk through that. Can’t be complicated, can have potential pitfalls along the way. The hospital formulary committee is usually made up of physicians, pharmacists, administrators; each institution has their own mixture of who sits on that committee.

And different folks on the committee can care different way to different institutions. It's the job, or goal of that committee to look at agents with a broad scope of process involves, say, committee member usually the pharmacists doing due diligence, and learning about the product going through all of the studies that were performed presenting it to the committee.

The committee then decides is a product that would be beneficial to our patient population. Do we have another product of its class that we already are using that’s going to be a substitution for different product do in a two or three of the similar products on the formulary, and what's the cost and benefit to our patients.

The committee can decide to make approval. They can decide to make restrictions. They can decide to make it available to surgeons, to anesthesiologists to patients who aren't able to take anything by mouth, and it doesn't automatically have renewal process meaning that sometimes patients can receive two or three or four doses and then the physician has to write for to get additional doses.

And the bottom line is to we can't pass it formulary process, your product has doomed. What happens after the formulary approval process? Well, part of it is initial physician experience, and once the drug is available for physician use, the physician utilizing the drug determine how effective as it been, has it met the expectations that I was told that it was going to provide, is it easy to administer. We look for positive patient feedback. The patients know this that they are receiving OFIRMEV. I can tell you that many patients will watch the clock and know when their next dose of pain medications are due. They will also watch the clock and they see that OFIRMEV is hung at their bedside, BH2 and IV and they will say I want that stuff, when is the next bottle of that going to be coming?

We look for positive nursing feedback. Nurses are pretty savvy, nurses have a huge input into what products are utilized, if the nurse administers a drug and it works, she’s going to be on top of the physicians, the next time to say, Mr. Jones again order that OFIRMEV product that you give the other patient because that really worked for the other patients. So there is a lot of building blocks that occur based on nursing staff feedback and we want to know here with any adverse effects.

Additionally the post formulary approval process is important from a pharmacy standpoint and the pharmacy wants to know has there been physician interest, have they been using the drug, is it being used responsibly, is it being used every time some has a fever and taken oral or rectal dose of Tylenol, or is it use as we had intended it to be used for our patient population.

What has been the impact of OFIRMEV on the particular pharmacy budget, they also asked to assess their ordering, storage and distribution issues. Where is the product being housed or maintained, is it hidden in the basement and the storage room is the point of distribution is it in the operating room and fix the system, how easily available is it. In some institutions, we’ll do some initial trial studies to find out if the drug has been beneficial to their institution.

When pharmacy issues occur, it’s important to figure out how to navigate through those issues. First and foremost is the physician-patient relationship. My job as a physician is to make sure that I take good care of my patient. Good care always translates to a good outcome and good value based medicine.

Additionally, we have to demonstrate that we are actually using the drug responsibly as it was indicated. We also have to be educators’ part of being a physician is to be an educator. We typically think of educating patients about our surgical procedures or the process of the healthcare that are undergoing, but we also have to remember that we’re educators of the pharmacist to give them good feedback, educators of our administrators to show that we’re using things responsibly and cost effective, nursing staff and other medical staff members as well and some of them take some persistence.

Where are we today? My own experience up until today, I’m approaching approximately 18 to 24 months of clinical experience in my patient population. I currently use OFIRMEV in absolutely every patient unless is contraindicated. Contraindicated group of patients is extremely small. I would eventually get to about 2% from early patients who have a large alcohol consumption history, alcoholics, liver dysfunction.

My initial doses administered in the operating room continued to use the dose for 24 hours to 48 hours depending on what’s approved to that individual hospital system that translates to four to eight doses per patient. It’s part of the standing orders that most of our institutions have not noted any adverse effects up until this time and the patient satisfaction scores have been quite impressive. Many of my inpatients no longer receive any opioids or narcotics. in fact, when they go home patients oftentimes don’t even have an expectation that’s going to go home with the prescription for outpatient narcotics, because they didn’t receive any narcotics while they’re in the hospital.

Selective patients now bypass the PACU or a recovery room, and go directly to the ICU to the floor. Generally, we’ve seen a decreased length of stay. Our previous practice pattern of using pain pumps, epidurals and PCAs has decreased. EMR, Electronic Medical Record and CPOE, Computer-based Physician Order Entry systems are in the process of being implemented at many of our institutions, best practice guidelines will indicate and have indicated some of those institutions that OFIRMEV is on the standing orders, and broadly over our 250 mile radius, it’s really been added to the standing orders of bariatric surgeons, orthopedics plastic surgeons, neurosurgeons, plastic surgeons for broad range of patients.

The next couple of slides or a case study, one of my patients who underwent heart surgery bring this up just to demonstrate in one patient what we did intraoperatively, the patient received OFIRMEV one gram, and then every six hours after that for four doses. this particular patient also received ketorolac and post-operative on the day of surgery and post-operative day number one for a total of two doses that had to be interrupted, because the patients creatinine demonstrating renal function had deteriorated, so the contrary indication to continue dose of the non-steroidal that was terminated.

The amount of the narcotics received for a total of 12 milligrams of morphine was administered during the patients’ initial post-operative course and two additional doses were received on the first day after surgery. Patient received a total five narcotic tablets during the hospital stay.

So pain assessment was very good, three out of 10. At one point, it was 10 out of 10, it was prior to administering OFIRMEV at a scheduled time course after the patient received the OFIRMEV, the decreased to four out of 10. Again the narcotic utilization was quite low, and the pain scale rating as rated as excellent. Patient had a very short course. It was moved out of the ICU off the ventilator in about five hours home and day terrain.

What’s in the future beyond 2012 as Scott indicated in some of his slides and as you hear additionally in the next two speakers, the Joint Commission issued their Sentinel Event Alert regarding responsible use of opioids and acetaminophen has been targeted as one of the important agents to use and place of opioids and to decrease opioid utilization and adverse effects.

HCAHPS is determining how hospitals are being reimbursed in the future; the Affordable Care Act also coupled with HCAHPS is going to determine how we are reimbursed. Physicians are going to be receiving report cards based on patient satisfaction, which is going to translate to how we’re reimbursed.

Ideally, when you get your report card, we want the report card to look like this, and you wonder who is that, that’s Bella. Bella is puppy Golden Retriever of ours. And we want all of our patients not to look like dogs afterwards, but they have the comfort and peacefulness of a sleeping puppy. So if we can achieve this with decreased narcotics, we’re going to get better report cards.

What are the next steps? The next steps are to continue physician education regarding the multimodal pain management strategy. As I mentioned earlier began in 2004, it’s been slow to gain traction. I believe that’s going to escalate very quickly as our reimbursements taking hit, because we haven’t paid too much attention to patient comfort. It’s important that we continue to educate our hospital administrator, CEO, CFOs regarding budget impact model and multimodal pain management strategies hopefully to demonstrate that decreasing our narcotic translates to a better bottom line for the institution.

Joint Commission and HCAHPS are all here to stay. It’s important that as Scott mentioned earlier, the silo thought process that goes on in most hospitals, it’s important that hospital administrators recognized that the pharmacy is not an individual silo. The cost of the new drug impacting a pharmacy budget is to be offset by the overall global hospital budget impact with patient satisfaction scores and other benchmarks.

OFIRMEV is now being part of EMR and CPOE systems. That gains further traction, it’s going to be easier for physicians to order it. And achieving any of the above next steps should lead to an increase in OFIRMEV utilization.

We’re happy to entertain any questions you may have.

Question-and-Answer Session

Unidentified Company Representative

So we’re going to take questions. For first three speakers right now, we’ll have more time at the end as well. We’ve got 10 minute question-and-answer session and we will wait for a few minutes giving you a chance to grab a drink and freshen up as well so.

Unidentified Analyst

This is actually for the first speaker, I apologize. You mentioned that the distribution, the dose per patient is about 2.7. Can you talk about the distribution of that? so are we seeing most patients on one dose, and then some other group of patients on six doses or is that average dose of 2.7 really what the physicians are using in practice?

David J. Cziperle

Well, it’s a pretty broad range and it depends largely on where the hospital and that particular clinician is in their adoption of the product. So there is a big chunk of patients still at their one vial per patient. That’s probably really the factor many hospitals are still breaking it on many service lines within hospitals, are bringing it on with their initial experience right now. What we’ve seen is, on those hospitals since January of this year, I think that analysis that I shared with you is largely now the same hospitals getting more material in their adoption of the product.

So you’ll see a spectrum like Dr. Cziperle’s where he is now using six or eight vials up against down the hallway where you might see the orthopedic service line is using it in roughly two vials per patient, the average is now coming on that institution somewhere in the three to four. But we’ve seen that the distribution of course, has been shifting more and more away from that single-dose patient and that’s what we’ll expect to continue to see as hospitals mature. We’ll see both folks going from three or four to four to six as well as a much smaller number for the inpatient population at one vial per patient. we are expecting of course, on the outpatient population, it will be pretty steady at a little above one vial per patient.

John Marshall

Can I respond to that question just real quickly just as a clinician? As a clinician using a product, there is great variability about how things get utilized. the heterogeneity in healthcare is unbelievably broad. You may have a hospital where the anesthesiologists do all the pain management and may have an institution where the anesthesiologist gives a first dose, and then a physician assistant writes the post-operative orders, the surgeon writes the post-operative orders. it may be a written for the patient they receive at every six hours, and when the patient moves from the ICU to a floor bed, those orders have to be rewritten. so there’s multiple steps along the way where things fall apart. It doesn’t mean that it’s not good, not being utilized, it just means that the surgeon hasn’t gotten to adopt, hasn’t adopted writing into the practice.

As we see this computer order entry systems take hold, there is going to be much more standardization. so based on that, you should see utilization increase from one or two vials to part of standing orders where it’s been a best set practice guideline. So automatically, those patients will automatically have more vials utilized.

Unidentified Analyst

(Inaudible)

John Marshall

Yeah. I mean if you look at our slide on the execution, that is in fact, exactly our strategy is to improve that access and ease of use. That’s done through a couple of things. we’ve partnered with the pharmacies, just many of the decisions that Dr. Cziperle was talking about and programming that computer order entry system is of course, something that requires many decision makers across the hospitals. So our reps are there to help connect those decision makers with the championship of the physician who wants to get a change in his practice.

The other element to this, the way to actually get the job done, it hasn’t been challenging or difficult to get trial or interest among physicians, it hasn’t been difficult to get them to desire to use it in their practice, but because of some of these hurdles that Dr. Cziperle talked about, it doesn’t automatically translate from desire to fact. And so the folks that are responsible, not just for their translation that I want to use OFIRMEV to using it, but almost everything else that they do in the OR on the floor are the nurses and the nurse practitioners.

Those middle level healthcare providers are absolutely or quite literally the hands and feet of the surgeons and the healthcare providers. So our promotional mix, the time that the reps are spending, our marketing promotion is now shifting not just in the surgical community that’s very much focused on those mid levels to help get the surgeons’ orders executed.

Unidentified Analyst

Scott, I’m trying to size the hospital surgery market. you gave a 7% penetration rate into patients; you might get more and more doses. can you give us the penetration rate into the entire post-op surgery market and hospitals?

Scott A. Byrd

I’m sorry, could you – the 7% represents all hospital surgeries both inpatient and outpatient.

Unidentified Analyst

Yeah, but that could entail just single dose per patient, I guess the percent penetration into the entire dosing spectrum within that market.

John Marshall

That’s a much more difficult thing to quantify Eric, because of the multi-dose nature for some of these products. So I can’t tell you what the penetration is of OFIRMEV doses to all IV analgesic doses that something that we haven’t quantified right now. as a proxy, one might want to use IV analgesic units that’s something we can’t quantify. we’re tracking right now at about 2.5% of all IV analgesic vials distributed in the hospitals are OFIRMEV, because of that population, as we’re getting used almost exclusively in post-op pain in that 60%. And you could factor that up as probably 4.5%, 5% of our units.

Unidentified Analyst

Okay, great. Thanks, that’s helpful. and then you both mentioned HCAHPS is a potential driver as we get into next year. Could you explain a little more specific exactly about what the system is going to measure and how you think OFIRMEV will benefit your score, and how you think centers like yourselves, Dr. Cziperle are going to potentially be induced to broaden your adoption?

John Marshall

Well, let me take the first response, and you can give them more detailed response. We don’t know what’s going to happen, okay. But we know change is coming, we know that reimbursement will be based on a variety of factors that we have not considered before, one of the questions that was asked by the gentleman over there about dosing, I mentioned there is a great heterogeneity of how things are dosed. There is no better cure down a stick driver than the physicians’ reimbursement declining, and a hospital reimbursement declining due to whatever third-party factors may exist whether it’d be HCAHPS or whatever in the future, that set the reimbursement standards.

So again, traditionally, we were happy with patients who survived the procedure and went home. And we have to think in a whole different thought process and most physicians are beginning on that road, but not very far along on that road and the speed of travel on that road is going to increase dramatically when we find out that, that’s what we got 20% loss reimbursement for that patient, because the patient’s report card although we thought the patient did great, indicated that they were just satisfied.

They’ve satisfied, because they have pain while they’re in the hospital, they have thought, they progressed this for, when I was being answered the call like this or from a variety of factors that we don’t have in many instances, a lot of lot of control over, we can’t control patient satisfaction based on pain. So I think the physician involvement in pain management is going to dramatically change an increase and it’s going to move away from narcotic based treatment strategies.

So Eric, I think the way I look at this evolving dynamic around HCAHPS scores and the value based reimbursement is, you’ve got now a couple of events that are coming together that I think are going to create a culture of change or an emphasis for change among hospitals. I’m not suggesting there is a one-to-one correlation between the pain management and patient satisfaction scores that are coming to the HCAHPS surveys and OFIRMEV utilization.

However, the fact that pain management is being elevated on the radar of hospital administration, and when we talk to CMOs 80% of them said it was in their top three, okay; priorities, pain management was. That’s largely because of the shift both through CMS and now the emerging focus from the joint commission, saying, hey not only is pain management important, but you got do it right, you can’t do it by using more opioids.

And so now you’ve got two critical barriers that very, very wonderfully set up multimodal pain management as the solution to their problem. You can get better pain management, you can do it by improving the quality and reducing the adverse events, and ultimately as you’ll see and Dr. Ang has talked that actually and I think Dr. Marshall speaks to this as well. That reduces the cost of care in the hospital. So that’s how I think that it’s going to drive changes, hey, now they have a reason to change and there is two very specific initiatives that are propping and to move quickly.

Unidentified Analyst

I just want to understand now that you’ve been using the product for a while, what kind of questions you get from the pharmacy, whether to check or whether or not the product has been properly used, what kind of feedback you have to provide them and whether or not you have to comment in a more formal way then patients are using less opioids?

David J. Cziperle

Initially, [Ian], due to some of the restrictions placed upon the drug, which would – is a normal process with a formulae. they don’t want to approve it and let the flood gates open. So they keep a little tight control on who is using it. So initially, it was for patients who were strict NTO, meaning not to take anything by mouth like the aneurism patient I showed you.

We had to interact a little bit with the pharmacy to also say it’s for patients who aren’t really completely without food and water, but who have lower absorption after a surgical procedure. we don’t encounter those problems anymore once it starts to be utilized by an institution and they see it’s used responsibly. they let to use it without any problem.

Some of the hospital systems have – and their best practice models incorporated into their physician order entry system, one institution that we practice out, one healthcare system. When you select OFIRMEV for your post-operative management, the first option that comes up is a 48-hour course of treatment. so that institution, automatically, they get it for 48 hours where other institutions it might still be at a 24 hour practice model. So it’s a process in evolution. In general, the drug has been around and utilized and responsibly utilized. There is less interaction between the pharmacy and the providers.

Theodore R. Schroeder

We got time for just one more question prior and then we have more question time afterwards.

Unidentified Analyst

I know pain management is an art form to a degree and I am trying to understand the pharmacodynamics of the drug. How quickly is the response to the drug and does that affect your protocols or the hospital’s protocol on how it’s used because I think that’s a qualitative factor that would be taken into account? So it’s the – how quickly does it give its effect and how do you take that into account?

David J. Cziperle

That’s an excellent question. And early in the presentation, I mentioned that my first question was why should we be using this new drug instead of the oral and rectal doses that we are all traditionally groomed to utilize. And the data is extremely compelling about the responses to the questions that you asked.

First of all, when intravenous acetaminophen is administered, it peaks extremely quickly within 15 minutes of administration. Oral and rectal take much longer to be absorbed. Additionally, the amount of drug that gets towards the (inaudible) into the blood system into the central nervous system where it does its action. For OFIRMEV, it’s about 70% higher than the oral and the rectal administered.

So both answers are yes, it gets there very, very quickly. So patients know that they receive it and that's why they will tell you they'll watch and they’ll say I want that bottle home and because they know after it is given, they feel better. It's not that they hang it and three hours later maybe they feel a little bit better. It's a one-on-one interaction of patients watch the clock, they see it working.

Unidentified Analyst

(Inaudible) they can get a good effect and therefore require less drug or it's so effective that they won – let the patient wants, more patients or the doctor wants it more. So I don't know how you answer that question, whether it could actually diminish the dosing over time, because it's all effective.

Unidentified Company Representative

Well, we know from clinical studies across multiple specialties, multicenter studies, the narcotic utilization has markedly decreased. So whether it is driven by the decreased narcotics or increased comfort, I think it leads us to the same endpoint better patient satisfaction and decreased narcotics.

Unidentified Analyst

Okay. Thank you very much. We're going to take a short break right now and we will be back in about 5 to 7 minutes.

[Break-out Session]

Theodore R. Schroeder

Good morning again, we are just coming back from our break. So welcome to everybody back in the room, as well as those that are with us online. We'll get started with the second half of our presentations. It's my pleasure to introduce Dr. Robert Ang, he is MBA and MD and our Vice President of Medical Affairs and has some really fantastic information to share with you. So, Dr. Ang.

Robert Ang

Thank you for having me. So multimodal analgesia. Why do you need this? You heard a little bit from Scott and Dr. Cziperle. Of the three opioids, other mainstay of analgesia in the U.S. currently that is not quite the case outside of the U.S., but still our current clinical practice. They are obviously very effective analgesics, so what is the big deal? Well, the big deal is that if we can recall adverse events. The adverse events that you see, here from a recent paper by Gary Oderda, which describes the incidents of adverse events seen in surgical inpatients following receiving other PCA opioids or IM or IV both opioids. Now some of these are obviously very well understood gastrointestinal events, Ileus and slowing of bowel function and nausea and vomiting are certainly the most common adverse events there.

I’d also like to point out with CNS or central nervous system, the predominant side effects here is sedation. The reason the opioids are also known as narcotics. The word narcotics is related to the sleepiness and sedation caused by these agents. Unfortunately at least here in the U.S. we’re used to be these effects and treat it as a necessary evil although as you’ve heard with the shifting tides based on quality measures and value based reimbursements, this is no longer something that we should live with. Those who point out that our adverse events such as respiratory depression that is relatively uncommon, but can be very serious.

The same also Gary Orderda as well as others have tried to quantify what the actual cost of these adverse events are, and you see on the left side, post-operative Ileus is probably the best known to cause prolonged inpatient stay really because of the patients bowel is not functioning, the patient feels bloated in significant pain, unable to be discharged and results in a prolonged length of stay.

However, there is other adverse events such as we’ve mentioned CNS with sedation, confusion, lethargy. I would also point you even to post-operative nausea and vomiting and even though we see this again as a necessary illness from opioid consumption that this in itself causes significant additional cost to the hospital.

You might be surprised that respiratory depression that is relatively low cost at least in this study. But this is because that if an event happens Narcan which is the opioid antidote is relatively cheap. So is oxygen however, sometimes these events cause catastrophic results with significant morbidity or death and these cost only measure direct cost to the hospital certainly in the case of death. There maybe additional indirect costs particularly from litigation and settlement.

Now looking at the cost a little differently, this is a recent post that presented by the Simons, Gary Oderda really looking to see if you can avoid an opioid-related adverse event for a surgical inpatient, what is the cost differential? On the left side you see average hospital costs on the very left, mean total costs for all patients in both in this study and this involves just over 180,000 patients from the premier research database. This included a lot of abdominal surgery patients as well as total hip arthroplasty patients.

And the patients are told to see an opioid-related adverse event have almost twice as much cost as those who don’t, now that’s an old commons approach certainly the patients that do experience opioid-related adverse events tend to be sicker than those who do not, therefore if you match the patients and these patients have matched on age, gender as well as severity of illness, you still see a cost differential of over $1,000 on the basis of seeing an opioid-related adverse event. When you look at the length of stay again even on the matched basis you see a differential of over one day length of stay, as a result of observing an opioid-related adverse event.

Now obviously the costs and the hospital efficiency measures like length of stay that are influenced by opioids, what are the tailwinds here really pushing change in the hospital. You’ve heard from Dr. Cziperle that the Joint Commission has issued a Sentinel Event Alert, firstly if you are not familiar, the Joint Commission is the largest accrediting body for hospitals in the U.S. it accredits just over 19,000 institutions a lot of hospitals living breath by this accreditation, because many states do not enable Medicaid reimbursement unless the hospital is accredited.

The Joint Commission issued a special Sentinel Event Alert, which is an unusual occurrence for them. This is something that they do really to compel immediate response and investigation by their membership. This alert was around the safe use of opioids in hospitals. They are alluding the hospitals to the fact that either time to change clinical practice from an opioid centric approach and a good shift to a multimodal approach to analgesia in the Sentinel Event Alert itself it endorses the use of non-opioids as a first line approach to opioid consumption minimization.

This is really quite a different approach to what's being done traditionally were Dr. Cziperle described you saw opioids as a first-line to a patients instead here this is really a foundational approach for using non-opioid analgesics such as OFIRMEV.

Now at Cadence Pharmaceuticals, we do understand that economics of the hospital is important as a Medical Affairs professional, I’m responsible for department who has a lot of information available on pharmacoeconomics. we have papers and studies that we distribute on a requested basis to healthcare providers for pharmacoeconomic questions. we also have other tools that we’ve developed, one of which is a budget impact model. This is a tool that’s used in a proprietary unbranded disease state context where this tool is presented to population based decision makers and it is done directly with these decision makers and they are provided with the outputs of the study.

This model allows you to import multiple data points, which includes what is the total surgical volume, in fact a lot of that is pre-populated. it includes the incidence of opioid related adverse events that are seen. How much these events cause as well as what kind of reduction you may want to see as a goal based on the opioid reduction that you’d wish to say. This example here that maybe a little hard to see describes the hospitals that somewhere in the mid-to-large size does around 7,000 procedures a year within these treatment categories, which equates about 20 surgeries per day.

The incidence of opioid related adverse events we see in this model is actually very low. I am very conservative, sorry for example post-operative those involving is that the 10% incidence when in reality it’s probably more around the 30% mark for most surgical inpatients. This model also describes that their objective is to reduce opioid consumption by 20%. And they would also hope to see a corresponding decrease of opioid related events of 20%.

Now as outputs to this model, we can show the total cost savings for the institution, we can also show cost savings on a per stay or per patient basis as well as per procedure category. Again, a little hard to see in this model but what you see here is a net saving of adverse drug events in the order of just over $600,000. This model also allows you to incorporate additional costs that you maybe incurring in order to see the changes that you’re seeing for example use of OFIRMEV or other modalities to decrease opioid consumption, and in this model it’s just around $200,000 of cost, still with the net saving of several hundred thousand dollars of the hospital as a result.

I’ll just wrap up to remind you that data regarding OFIRMEV and opioid reduction really is quite robust. There is nearly 30 randomized placebo controlled trials in peer reviewed literature which have reviewed opioid consumption and the trend is really quite significant towards significant reduction compared to placebo.

You can see on the left our pivotal study of hip and knee replacement which saw a 33% decrease over 24 hours, in fact a 46% decrease over 6 hours, and that is quite a significant pain model. Even in major abdominal surgery, we saw a 60% decrease and you know that in outpatient surgery, this product is used and then on the left, you see a study tonsillectomy where we saw a particularly large decrease in the more mild to moderate pain that you see in that surgical type. Thanks very much.

Unidentified Company Representative

I'm sorry, I'd also like to introduce our next speaker Dr. John Marshall. He is a clinical pharmacist and clinical coordinator for critical care at Beth Israel Hospital, and he'll next to talk to us about IV acetaminophen in his particular hospital context.

John Marshall

Thank you, Dr. Ang. To give you a little perspective on Beth Israel Deaconess Medical Center, we are a 630 bed academic teaching hospital of Harvard Medical School in Boston. So the line that I'm going to be looking through is from that perspective in terms of size and scope of the hospital.

I thought kind of frame the discussion here by showing you our hospital’s annual operating plan for 2013. And rather than look at all of the specifics, I want to highlight a couple of things. The first of which, this is our annual operating plan, we want to focus specifically on measurably improving both patient and family experience. So that is at the very top line of one of the priorities as an institution that we are undertaking.

On the other side though, on the cost side, we want to optimize the use of our equipment and supplies. So this is where that drug acquisition cost comes in. So you can imagine that there is a give and take here between priorities, increasing quality but also potentially optimizing the use and rational use of resources. So I think OFIRMEV is a very good example of a drug that we are trying to strike that balance within our institution.

So you've heard the expression already of the silo mentality, but I thought this would be a great graphic to show you that, oftentimes in pharmacy we are judged on one thing and one thing only from our superiors, which is our drug budget. And so, a lot of times there could be medicine from the part of the pharmacy department to add a new agent that is going to increase cost and not really do anything else for us. We are not able to take anything else out of our budget. So you might anticipate that there would be resistance from pharmacy administrators that we are going to add to my drug budget, but what are you going to do for me personally because I have to answer to the CFO.

Maybe you can see the little bit different and I think I probably not alone and saying I think a lot of hospitals across the U.S. are moving in this direction or trying to breakdown those silos within the pharmacy department. So in the BIDMC pharmacy, you really try to think and my improving patient care, so globally speaking is the pharmco therapy that we are providing improving the patient experience? The silo mentality are hopefully the one that’s being broken down now is – am I improving drug use kind of that myopic view of, well, we spent more money this year than we did last year, so therefore we failed. So we are really trying to break that down. We also firmly believe that the best care is always the cheapest care.

So even though we may increase the line item on one element of care for patients, but is the pharmacy budget or another equipment budget, we believe that optimizing that patients experience in care will ultimately be the cheapest and most cost effective. Obviously, the silo mentality pharmacists would say I need to keep my drug budget as small as possible regardless of quality of care.

So we’ve already gone over this before I think it’s worth mentioning that specific formula process of Beth Israel Deaconess Medical Center. Once the drug is approved by the FDA, it’s required that a physician champion brings that forward to the pharmacy and therapeutics committee for approval. Once that is submitted a drug monograph is prepared for the committee that is usually prepared by a pharmacists that go through all of the available evidence out and weights both cost, efficacy as well as safety of the medication.

The pharmacy and therapeutics committee will then evaluate that medication and in addition to saying yes or no, the pharmacy and therapeutics committee will also as you’ve also heard place specific restrictions as appropriate to optimize the use of that medication and we are certainly no different.

Once the drug is approved, then all of the other things have to occur. The policy on how it’s used, including physician order entry system, programming the smart pumps, educating nurses. this is just a sampling of the litany of things that have to be done before a drug actually reaches the patient.

I think it’s also important to note that my hospital is 100% physician order entry. so on the technology side of things, we’re probably top 1% compared to other hospitals around the country. So in terms of advancement, we are a bit ahead of the curve in terms of computerized physician order entry and electronic medical records.

So I thought to share with you the process or at least the decision by which our institution approved this medication for formulary use. and the first thing that we obviously noted were the pharmacokinetics of this medication and pharmacokinetics is very simply the distribution of the drug in the blood stream of patients, and you’ll notice that we saw that the both the peak levels and the times of peak levels with IV acetaminophen were drastically different than oral acetaminophen, which would result in a faster onset of action.

The other thing we also noted was that the AUC, which is the area under the curve, which basically is a reflection of how much drug the patient is exposed to was similar between these two agents, which led us to believe as well as other literature that this was a safe agent or equally as safe as oral acetaminophen. One of the pivotal studies that got this drug approved also was evaluated through our P&T and we also noticed that there was improved pain relief scores compared to placebo.

So keep in mind the patients who are getting placebo in this study were being treated to standard of care. So they were getting the PCA morphine, they were getting our best practice and yet despite that when they received IV acetaminophen, they had better reporting of outcomes.

In addition the opioid reduction effect, it’s also been mentioned multiple times today, but again reducing anywhere from 46% to 33% depending on which timeframe you looked at was also an attractive option, especially for high-risk patients which I’ll talk about in a little bit.

So the opioid reduction element of this was isn’t specially attractive feature for our committee, not just because of the Sentinel Event which actually was submitted after our approval, but the idea behind reducing opiodic induced side effects is incredibly important to us. One of the specific reasons in the case is that our population is aging and we know very clearly that elderly patients have a much higher risk of side effects to any medication much less opioids and obvious opioids have their own problems. But the things like reducing post operative nausea and vomiting, post operative ileus and again that delirium reducing that post operative delirium or over sedation was incredibly important for our hospital to have this agent.

So why do we add this to formulary, well, this was brought forth by critical care physicians, as a method to reinvigorate actually the use of PO (inaudible). We’ve actually long time (inaudible) in our armamentarium of analgesic medications, but it’s kind of falling off the radar for various reasons. So the thought of having an IV formulation not only to help those patients who couldn’t take all medications, but to also reinvigorate the use of the tablets in those patients who could receive was a really big driving force behind why we felt this will be a great addition to our armamentarium.

In addition, obviously the America – this is also been mentioned, the American Society of Anesthesiologists recommended a multimodal approach and this again adds to our ability to embark upon that path. So when this drug was approved, we gave it the yes vote for approval. We did approve it for patients, the only who were unable to tolerate oral acetaminophen. So our approval was, yes, this is a great agent but we should only use it in patients who cannot tolerate oral administration.

It’s important to note though that we didn’t put any hard stops or hard restrictions on it. So we basically just said in words, we like to restrict these patients, but we didn’t do anything within our ordering system or within our pharmacy system, we didn’t create a pharmacy police officer that went around and pull people over for using this inappropriate patients, this was simply basically word. So I think as we move through the data in our institution what we’ve seen is really a organic development of how this drug has been used in our hospital.

So this graph shows our purchases of the agents since we added it to formulary month over month. Keep in mind this is purchase data and also keep in mind this data is not normalized for patient volume, so this is very raw data. But as you’ll notice if you do a three-month rolling average that our use has steadily increased from the time that we added this to formulary in April of 2011 to current date.

When we started looking more in depth on how we are using acetaminophen, we decided to take a look at two major areas in the hospital, the Postanesthesia Care Unit, the PACU and also the inpatient. So I’m going to be presenting both of these types of patients as we move forward, but it’s important to understand that above half of our use was in the Postanesthesia Care Unit and the other half was in patients who are otherwise admitted to the hospital not in that unit.

So first, I’ll go through the in-patient use at our institution. So by far in a way obviously this is used for analogy. The average age of a patient receiving this is 60 years old. The average number of doses in our in-patient units was 6, and of note 84% of those patients were also receiving opioid. So it was doing exactly what we’d hope that we would be doing, which is being part of that multimodal analgesic regimen.

Also of note, 24% of patients were also receiving non-steroidal anti-inflammatory. So the reasons that have already been outlined these drugs are not optimal for a lot of patients and thus the reduced number for those specific agents.

In terms of where it was being used or under what service lines, it was being used in our hospital, you can see that surgery was by far in a away that the majority of utilization. and actually, if you combine surgery, cardiovascular surgery and obstetrics that makes up close to 75% of our end patient use. Interestingly enough 25% of our use was in medicine patients. so this is actually, I would think a good thing in a lot of regards, because this is kind of I think in proactively better word to underserved to undertreated population in terms of pain.

So the most common reason as you would suspect for, using this agent on the in patient side was for pain. But it’s also important to remember that this medication is also approved for treating fever. So we wanted to make sure, we got a good grasp on which patients were being used for fever, and it turns out only about 7% of our patients were using this as a fever only reducing agent. This is important, because we use this in terms of maintaining certain patients’ temperature who are very critically ill, so that was an important finding as well.

The way that the drug was dosed was primarily and as needed or PRN, so about 50% of the time in the in patient units, it was being used as an as needed. and I think that speaks to the onset of action that has previously been alluded to that this medication when it’s administered that works relatively quickly and our provider seem to think it is okay to use as an as needed in this medication. 30% of the time, it was a scheduled agent and 21% of the time it was a one-time dose. So that patient got it once and that was it.

In terms of our packing utilization again, this was about 52% of our utilization. It’s important before I go into this data to make you understand how our PACU works. And our PACU is really a nurse driven unit. and by that, I mean that physicians will put in a variety of different pain medications, orders for our patient and it will be left to the nurse to in his or her clinical judgment to give that’s one of those multitude of agents has been written by the physician. So this is really a nurse driven practice here in our PACU.

So the first thing that we’ve looked at actually in our PACU based on our approval decision were who are the right patients getting this. We still felt that may be this medication should be restricted to patients you can’t receive medications and you can see a little bit towards agreement about 46% of patients who were able to tolerate world medications were actually getting this medication. So that kind of has us a little bit alerted and we started wondering why is this, why are we using this almost half of the time outside of the scope by which it was approved by our committee.

And leading into that, we actually looked a little more in depth at specifically what was going on. So when looking at the first line agents for pain control on our PACU, it was no surprise to us that hydromorphone, which is an opioid was used 40% of the time, this is our workforce opioid analgesic in our PACU.

The thing that really struck as though was 36% of the time IV Acetaminophen was the first choice for nurses in the post-analgesic care unit. And as we mentioned before, nurses are not going to use something unless they see it work and unless they believe in it. I think that when we went up and started talking to PACU nurses, we got that exact answer. And we said why are you using this for that person who just had a major surgery as a first-line agent and the response that we got consistently was, it works or in some cases, I felt like my patient was at a high risk for opioid adverse effects. So I wanted to try this first. So we'll go it little bit more into detail on that.

So where do we think IV Acetaminophen fits especially well. We really feel that there are certain cohorts of patients that are much higher risk for opioid-induced side effects. And I've already alluded to the fact that elderly patients are at the top of that list. And as our population ages and as those patients get procedures that's only going to increase elderly are at increased risk for not just over sedation, but not just oversedation, but delirium and altered mental status after they receive opioids.

Of these patients are also at higher risk for opioid-induced side effect specifically on the respiratory depression side of things. Patients with baseline dementia, if you have somebody with a baseline psychiatric disturbance, and you give them something that might further alter their perception of things, obviously you can anticipate that that patient would have a poor outcome.

And a lot of times these patients are also receiving other sedatives, whether that’s an anxiolytic like a benzodiazepines valium or even other antianxiety medications can actually be very sedating and if you give a certain antianxiety medication in addition to an opioids, those patients can experience adverse effects as well.

We also have seen this used in a lot of patients who already had a history of received experiencing an opioid-induced adverse effect. And those patients obviously who have a history of post-operative nausea and vomiting or history of opioid-induced delirium, we feel like this is a great choice.

So there is some other things that have been swelling out there that have been mentioned already today that's can potentially affect our future utilization of acetaminophen, and one of the things that had been mentioned is reimbursement. So there is a lot of buzz on the street that the reimbursement for the hospital will be directly tied to HCAHPS surveys and then if you're not in the higher percentage or the higher echelon of hospitals, money will be withheld from your reimbursement from the federal government.

So that obviously is a very important possibility that’s facing us in the near future. But I also want to highlight that competitions is also important for our hospital that we practice in a very tight space in Boston where we have our competitors literally across the street from us, and we situate ourselves in the competitive marketplace in healthcare, we want to make sure that our satisfaction scores are good not just from the reimbursement side, but from tell your family who wish to come here, come to our health system and utilize our services as opposed to other institutions.

We also are very large at Beth Israel Deaconess at promoting patient safety and there has already been some data suggesting that any time an adverse event occurs in a patient, it costs money and so not just from an altruistic standpoint of making sure patients are safe, but from a financial standpoint, I’m reducing the amount of adverse events or preventable harm, is going to equal a lot of cost savings for institution.

So what are we up to next? What are our next steps for this agent and for pain control in general? Well, I think the first thing that we really need to focus on is reducing needless variability in the care for patients experiencing pain across the medical center. The heterogeneity in how patients are managed with pain is amazing.

That it’s very practitioner specific, it’s very nurse specific and I think what has been alluded to as well is hospitals needed to be begin developing evidenced protocols for management, multimodal management of pain therapy and by translating that into an order set and translating that into an algorithm that bed side nurses, pharmacists and physicians can follow, I think we’ll see vastly improved outcomes.

The other thing that we really need to focus on as well, the data that I presented just now was more of a top level look at how we’re using acetaminophen, but the next really important thing that we’re going to tackle is going to be what specific clinical benefit we are utilizing at our institution by using this medication, that includes things like are we reducing our rates of post-operative nosing, vomiting at our institution, are we reducing post-operative villus at our institution, that’s incredibly important because I think depending the patients that you serve and their severity illness, you may see various affects with different medications. And obviously patient satisfaction is going to be at the heart of just about everything that we do not just from pain management but across the medical center.

John Marshall

So if I could get Scott and Dr. Cziperle at the table and also Ted as well. We are ready to open up for some questions here.

David J. Cziperle

And I think I am going to try that. All right, well, as everyone gets situated at the table really this is just so an excited state to get everyone to sit up there. So it’s good, yeah it is tight, so lean to the left, where everyone is going down. So we want to open up to questions for the panel and I will help try to moderate. So here we go.

Question-and-Answer Session

Unidentified Analyst

Hi, thanks for the presentation. That was very helpful. My question is on what you feel now in light of the new data you’ve seen after 22 months of launch. What is the peak sale potentially you are thinking for OFIRMEV maybe and if you don’t want to give an exact number, may be you could give us your thoughts on penetration level, how long that might take, the magnitude of opportunity in the non-post-operative setting or the non-operative setting if you could more details there, thank you.

Unidentified Company Representative

Scott, do you want to answer?

Scott A. Byrd

Yeah, sure. So I guess what I will do is I will just reference you back to some of the information that I shared at the last several slides in the presentation. Without giving a specific number, we are sitting here right now or at least in June at about 7% penetration of the post-operative pain market opportunity on a patient basis. The benchmarks that we have to suggest what the future opportunities might be would be say, on the low-end it might be what the injectable NSAID market is, and that’s about 21% of post-operative pain markets or patients.

On the higher end, we already have market research with surgeons and anesthesiologists that are projecting what their utilization rates will be, not necessarily a peak, but three years from now. That’s about half of their patient population. So that gives you some sense on the multiple that you can begin to think about for the opportunity of peak just on a patient share basis.

Now you multiply that times your increase in your vials per patient. So we’re sitting here right now with inpatient vials per patient at around 2.6, 2.7 in the middle of the summer. Again, our market research would indicate that physicians are expecting it to use that in more than four vials per patient. We have representation here from a couple of representative institutions that are using it in six to eight.

We’ve always said that we believe based on previous experience that inpatient population is probably going to end up somewhere in the four to six range, vials per patient. And then ultimately to get to the revenue numbers, I think you have to take price into consideration. And we still think we’re pretty modestly priced particularly when we take into consideration the value proposition, and that value proposition is becoming much better understood now than it was two years ago. And I would argue when we do our job effectively over the next two to three years, it will be extremely well understood. So there is lots of opportunity on that portion of the equation as well. Next question?

Unidentified Company Representative

Next question?

Unidentified Analyst

Hi, I guess once a hospital has product formulary, it does seem though that there is a large variability still and usage by physicians and I was just wondering once the champion or two product champions within a hospital that used the product in all of their patients, how long does it take to sort of convert the rest of the physician staff to users?

Unidentified Company Representative

Yeah, maybe Schroeder, you can give your thoughts and then maybe Dr. Marshall could have a few comments.

Theodore R. Schroeder

Yeah. I mean I think globally what we’re seeing Dr. Cziperle had talked about the variability just within the group, really that he practices, not alone in the hospitals across which he practices. You can imagine, you multiply that times 7, 8, 10 service lines in 2000 hospitals, I don’t know that in average is particularly well instructive, to help us understand. But our expectation is we’re going to continue to penetrate hospitals over the next several years, broaden that utilization, and then deepen it just in post-operative pain.

And it’s going to take some period of time, because to be really effective, the representative would have spend a majority of their time on the subset of the accounts, as those accounts get the critical math, the nurses began to use, nurses began to if you will, begin to help the physician, get made even when we’re not there to remind them. So it’s a couple of your process, but we don’t need to complete that process before we began to move into the non-operative space, and because we’re already getting that experience you saw some of that data today. We’ll still be increasing utilization six, seven years from now.

So I don’t think there is a peak necessarily that we’re going to hit prior to the patent expiration just because the population of the patients is so enormous. it’s unlike almost any other product that you’re seeing in the hospital space is, there is going to just be continued upside.

John Marshall

Now, I would add to the comments, I think that our institution it was driven not just by physicians, but I think especially in the PACU, it was almost completely nursing driven once they got their hands on the product. So depending on the structure of the institution, an academic teaching hospital is really reliant upon experienced nurses for care where maybe a private hospital might have a very different dynamic. But I would say larger academic medical centers that’s going to be really whether that product is in an order set, whether it’s kind of ingrained within that area, in a lot of ways that happens is with physician champions and with nursing really asking for it.

Unidentified Analyst

A question to Marshall. Companies with hospital [pros] are coming out with quite sophisticated pharmacoeconomic analyses of the benefit of the product. So the first question is, how much actually the pharmacy cares about those analyses? Do you see they differ from pharmacoeconomic analyses and at what point all these sophistication actually matters or does it matter anyway?

John Marshall

Yeah. Great question. So I think – the answer to the first part of your question, we care very deeply about that, because, as I mentioned before, we are trying to knock those silos down and if we do have an increase in our drug budget, it’s going to be incumbent upon us to then show the value that that increase in drug budget is providing to the institution. So I think pharmacoeconomic analysis resonate very strongly with pharmacy administrators.

In terms of our own pharmacoeconomic analysis, we haven’t completed, what you saw is basically what we have. And so there is not – we have really done the first cut of how we are using the agent. The next step is to look at patients who receive this medication and matching those to patients, who didn’t and look at rates of the adverse events, length of stay, look at those things at our institution. But it does resonate, but obviously nothing resonates better than your own institution’s specific data.

Unidentified Analyst

Dr. Cziperle, you are at multiple institutions, do you get a lot of requests from pharmacy about pharmacoeconomics or you passed that point?

David J. Cziperle

Not completely have passed that point. I think that some of the institutions, as John mentioned, were still – pharmacists are concerned about their budget and not necessarily in tune to the whole operational cost of an institution. So I think those things have to blend together, which they will in the future driven by all these external forces coming together. But for the most part there is not much restriction on used space economics.

Unidentified Analyst

So a quick question, you’ve got 10 years of data with PERFALGAN in Europe and two years of data fulfillment. Just wondering if you can comment on your trajectory versus PERFALGAN in year two versus their 10 years, and also on key data matrix dosage per patient and percentage of patients treated, and obviously you’re most focused marketing efforts and they are something you can comment on any differences because of that?

Unidentified Company Representative

You want me to take the Europe questions. So there is a big difference between the U.S. and Europe when you’re looking at adoption and that is Europe was rolled out one country at a time. It’s very first country to approved IV acetaminophen in Europe was France and actually it was a French company that launched the product, also they had very rapid uptake in France and actually still enjoys a very high market share, the market share in France nearly 50%.

It rolled out then across Europe kind on a country by country basis over the next three or four years. And so adoption of followed in those later countries, something much more like the U.S. What we did note from Europe is countries that were heavily narcotic dominated and that they were more like the United States and used a lot of narcotics as their post-operative care. The adoption was more rapid in countries that were inside dominated countries like Italy for example that most post-operative pain was managed with non-steroidal anti-inflammatory drugs. The market is much more crowded in Europe. They are as many as six insets on the market depending on the country. There is also a COX-2 inhibitor on the market, IV in Europe, Parecoxib although the utilization is very small after the withdrawal of Dextra in the U.S. and the failure of Parecoxib at the FDA.

So that’s the kind of the general market dynamic, the market itself is about the same size as the U.S. it maybe a bigger the more inpatient surgeries in Europe than in the U.S., U.S. has more outpatient surgeries more joint replacements in the U.S. for example more cosmetic procedures in the U.S.

Doses per patients, the doses per patient in Europe, the last data that we had from BMS, which was a couple of years ago, they were sitting right at about 5 doses per patient, just a little bit above 5 doses per patient. So it’s a similar trend, I think if Perfalgan was being launched today, you probably see a somewhat slower uptake than they did in 2002, cost pressures have mounted in Europe and in some ways are even much greater in Europe than they are in the U.S. So it’s a different world, but I think kind of 50,000 foot level tracking and about the same way heavily dominated by surgery, followed by critical care, most of it uses for post-operative pain management or else pain management in general, and then less than 10% for fever.

Unidentified Analyst

Dr. Marshall, you obviously practiced [it standard] it’s a little bit ahead of the curve and one end of the spectrum, you mentioned that Israel has never put in any kind of restriction on the number of doses, probably because you’ve done a pharmacoeconomic analysis. What’s going to, if I can ask you to speak for your colleagues or competitors might be practicing at other institutions? What’s going to get them over the hump in terms of releasing more restrictions?

John Marshall

I think the evolution of the peer-reviewed literature is going to make a big difference. So we’d talk about a lot of the data presented here is retrospective in nature. So it in terms of scientific vigor, if you’re a very regimented pharmacist, you’re going to say well show me a well controlled, a strong methodologically sound trial that maybe what it takes to get the last holdouts, I think to really embrace this. I think it’s only a matter of time, I think I know a lot of colleagues around the country who are doing work in these areas. So I think as much evidence is that there already is out there, I think it’s going to need a little bit more U.S. specific data.

Unidentified Analyst

A couple of questions for Scott, you’ve talked about prices being an important building block of sales growth over time. It sounds like you’re not talking about sort of greater than average growth that is typical for other injectable products. You mentioned the 5% to 8%, I just want to confirm that today that is consistent with what your message was?

Scott A. Byrd

Well, I think that I’m trying to use some external benchmarks just to help frame the opportunity. Obviously, what our strategy is, I can’t get too much into that, I certainly wouldn’t want to project when and how much of price increases will be. But I think we absolutely can move at least with what the average has been, and I think the other message is, we intentionally launched versus very low, a relatively low price per dose. I’m pretty sure there is not many if any other branded injectable product launched into the hospital and recent memory with the price per dose anywhere near what OFIRMEV is and you know, and Robert shared with you the economic upside of using a multimodal approach.

I mean that just in the institution that he showed was relatively conservative assumptions. They were spending about $200,000 on a multimodal approach that saved the institution about $1 million per year. So that context as it becomes more well understood his hospitals like Dr. Marshall's and Dr. Cziperle’s, get that local data, will support I think some upside on price and those price ranges will get you easily into the mid to upper teens by 2020 timeframe. And I think that's not an unreasonable expectation.

Unidentified Analyst

And then how should we expect the sales and marketing organization to evolve over time as you increased your promotional efforts into those non-operative settings?

Scott A. Byrd

Well, I don't anticipate any structural changes. Now, I think we're sized right, we'll shift our mix and our efforts to promote the different customer groups in the hospital and that's what I would expect to see change. I think as we gain more and more momentum, that becomes more of a fixture treatment mechanism inside to the hospital, there is less need, there is less need for numerous touches by the representatives to help get the standing orders in place or get it stocked at the point of care. And so overtime that for ease up the sales force to begin to spend more time on selling other products, and that's in our expectation.

Unidentified Analyst

Thanks. Just switching from the clinical side of the equation to the business side, are you able to give us an update on what's happening with the patent challenges, on OFIRMEV, I think one of them was settled, and can you talk about what’s your expectations might be in terms of how long the IP will last on the product? Thanks.

Unidentified Company Representative

Sure I’ll take the settlement first, last week, as many of you know, we announced that we settle our lawsuit with Perrigo and that lawsuit basically allows Perrigo to enter the market with their own generic after December 6, 2020. I think that’s somewhere between 2 and 2.5 years longer on the pattern life and most people had in their model. So it’s a pretty significant upside on the back end.

We also entered into an agreement that we would work with Perrigo to perhaps bring it and authorize generic to market that’s kind of really at our option. We have an obligation to talk to them about and work with this, but it’s kind of our decision when an authorized generic would enter the market, but that’s available to us as well.

And those are really the highlights of the press release. So at least one other paragraph profile or EXCELLA Pharmaceuticals, we don’t have a settlement with them at this point. And so our assumption is that we will have the bench trial in May. We’re highly confident of our intellectual property. We’re highly confident, we’ll prevail. But of course we’re reasonable business people and if there is an appropriate settlement to the entered into we’re up in for those discussions. So I’m not ruling out a settlement as just no news on that as of today, and the process continues to move forward. But they are the only remaining challenger in the process at this point.

Unidentified Analyst

I’m going to ask a bit of third question to get some information. What’s the case for an opioid at all understanding that doctors have been using it for a long period of time? And what is the medical case for an opioid?

Theodore R. Schroeder

Well, I'll let the physicians answer that. Maybe Dr. Cziperle, who like to start and the others will chime in because there is a clinical medical case.

David J. Cziperle

It's a very good question. Opioids are not going to exit the market. Physicians will always use these opioids. But the shift is from using opioids as your foundation pain management to non-opioids. So as a part of a multimodal treatment strategy all of those factors are in play. So it's just a matter of how physicians choose to use them, who should use them, which patients should receive them for what duration or what time.

So in the short-term, opioids will continue to have quite a bit of favor until physicians relearn the process to find out that we can achieve similar or better relief what non-opioid agents and no longer have the adverse effects that accompany many of the opioid administrations. So I think that shift will happen over time, but opioids will be around for eternity.

Unidentified Analyst

That's the question. I’m almost after doctors got to learn, new doctors come along and new doctors look at numbers. Can one make a case 30, 40, 50 years, there won't be any opioids?

David J. Cziperle

My crystal ball is not better than anybody else. I would guess opioids will never ever disappear from the market. I mean those products have been around for – and John, you have been – no better, historically, I would guess centuries in the treatment of pain.

Theodore R. Schroeder

I guess my understanding is that the recommendations and the shift is through multimodal analgesia. it’s not an opioid avoidance. The opioids are very personal to analgesics, they are certainly suitable for specific circumstances. unfortunately, in the U.S. as you’ve seen from my data, we tend to overuse opioids and run into a lot of adverse events. The goal here is to reduce that, but still use them appropriately with the addition of other multimodal techniques.

John Marshall

Okay, thanks. Another question?

Unidentified Analyst

Just a quick follow-up on the patent litigation, does it some format of any other patent products or patents that they’re pursuing? And what can you tell me about their balance sheet, and still they’re in the costs of the lawsuit on their own now or they’re sharing it before the [paradigm]?

John Marshall

Yeah. so there are private companies. so I don’t know a lot about them. They do have some other and as that they’re pursuing, I believe they were successful in at least one lawsuit with; I think it was Allergan, if I recall a couple of years ago that they then licensed that product to Teva. They have a small manufacturing facility in North Carolina where they do manufacture at least one smaller product that I’m aware of, they may do some pilot scale for some others, I’m not really sure about that. As to the legal costs, I don’t know for sure that they were sharing costs, but that’s I think a reasonable assumption that they were for sure all the costs going forward there is because [Perico] is not going to be pursuing it. So I think it’s a safe assumption to say that a 100% of the label cost from here on now rest on Exela where there certainly would have been some synergies prior to the settlement probably as much as I can say about that.

Unidentified Company Representative

Okay. So Ted, I’ll turn it back over to you for some closing remarks.

Theodore R. Schroeder

Okay, well thanks everyone, first I want to thank the panel especially want to thank Dr. Cziperle and Dr. Marshall for taking the time to travel to be with us, I think their comments were insightful, it’s I think the important takeaway from their comments is why you’re talking to that institutions and individuals who maybe more forward thinking than others. But this is the way medicines move in, and I think there is a great consensus that the management pain is moving rapidly towards multimodal, and somewhere up front leading as always happens, but the big pack of change is right behind it being driven by external factors that are important to hospitals and two physicians.

And I think Dr. Cziperle said it right, if you want to get someone’s attention start messing around with how they’re going to get reimbursed and start paying attention to it, and I think someone else said, it’s more sticks and carried someone said last night it’s more clubbed and stick.

So it’s gotten people’s attentions of what going on. I think from the Cadence perspective, we feel passionately that OFIRMEV is part of the solution and that has the environment changes broadly OFIRMEV becomes more and more attractive product for managing global cost in the hospital and those costs which will be under quite a bit of scrutiny.

It’s the right product that has the right profile, importantly it does what it says it does, and that’s the single most important factor in my years of experience in marketing products, it does the product actually deliver on the promise you make for it. And I can tell you of all the products that have been associated with this product does at the best, in fact it does it better than the most products that are introduced to the market.

So we’re on a great trajectory, we want a great growth. Form a business side a couple of quick updates. We talked about the paragraph four and we’re removing on that. I think a lot of the question surrounding Cadence and affirmative and the durability of the patents are some more clarity is being gained around that. And I think that’s an important movement.

The other thing if you have to see before you came over this morning, we published an 8-K that we’ve restructured our current senior secured debt facility, basically renegotiated the amortization of the loan. The important part of that is that’s a $10.5 million cash impact to our balance sheet in 2013.

So that increase is our confidence that we have the cash from the balance sheet to get the cash flow break-even. And I think that’s been the question in some peoples’ minds, so we’ve taken another step to strengthen the balance sheet and with the ever increasing revenue line. We feel confident that we have the cash from the balance sheet to get the break-even with the current business. And we’re committed to do that and as someone mentioned to me at the start of this, that we’re committed to do that, no matter what it takes to get there.

So we’re going to get to cash flow break-even with the cash we have. The last thing I would say, I got some questions about business development, yes, we have a sales force that’s highly effective. It’s doing a great job, that’s recognized across the industry. We’re getting lots of inbound calls for co-promotion, co-marketing type agreements as well as product licenses and acquisitions. I think I’ve said before that we are focused in the short-term on those types of arrangements that would be revenue producing. I think that we could immediately put into the sales force and grow those products because of our better capability for penetrating the hospital with a large commercial team.

On a longer-term, we will look for first products that are revenue producers that have larger look revenue potential. Then we will be looking for those products that we can grow through further development of the products as well. And that will be the – in every scenario OFIRMEV is the key to future growth for Cadence and as OFIRMEV continues to perform or able to built on other products and grow the company through multiple offerings for the future.

So thank you so much I appreciate your attention, I appreciate your questions and I appreciate all the support. Thank you.

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