Good afternoon, ladies and gentlemen, and welcome to the Cumberland Pharmaceuticals first quarter 2013 earnings conference call. (Operator Instructions) At this time, I would like to turn the call over to Elizabeth Davis, who handles Corporate Relations for Cumberland Pharmaceuticals. Please go ahead.
Good afternoon, everyone. Before we begin, we'd like to advise that this call will include forward-looking statements, which reflect our current views about future events. These statements are subject to risks outlined in the Safe Harbor section of today's news release and detailed in our 10-K and 10-Q reports on file with the SEC. Despite our best efforts, actual results could differ materially from our expectations.
Information shared on the call today should be considered current as of today only, and please remember that the company assumes no duty to update it. If anyone has not seen our press release issued today, you can access it on our website at www.cumberlandpharma.com.
We also post and maintain the current version of our corporate presentation as well as other press releases and company updates on the Investors portion of our website. Additionally, this conference call is being webcast through our website and will be archived there for future reference.
I'll now turn the call over to our Chief Executive Officer, A.J. Kazimi.
Thanks, Elizabeth, and good afternoon, everyone. Thank you for joining us, as we review our first quarter results for 2013. With me on today's call are Marty Cearnal, Cumberland's Chief Commercial Officer; and Rick Greene, our Chief Financial Officer.
We'll start by reviewing highlights on the quarter, and then we'll provide updates on each of our products. We will finish by discussing our financial performance, before opening the call to your question. So let's begin.
We're pleased to start the year with favorable financial results in the first quarter. Net income was $0.9 million during the first quarter more than doubling from $0.4 million last year. Caldolor continue its growth curve and actually produced its best quarter since launch, with the net sales of $0.4 million.
Total net revenue for the first quarter of 2013 was $10.3 million similar to the prior-year period. Total assets as of March 31, 2013, were $98.3 million, including $70.2 million in cash and marketable securities.
Early in the quarter we announced topline results from three new Caldolor studies. Two were adult registry studies that support the safety of a shortened infusion time for the product. These two large studies evaluated Caldolor in 450 patients at 34 leading medical sites across the country.
The first registry study assess the safety and efficacy of Caldolor administered intravenously over five to 10 minutes to adult patients in hospital setting. These patients had either preexisting fever or preexisting pain. The intravenous ibuprofen reduced both fever and pain, and the shortened infusion time was well tolerated in this hospital study.
The second registry assess the safety of Caldolor administered intravenously again over five to 10 minutes in adult hospitalized patients, who are undergoing surgical procedures. The shortened infusion time was also well tolerated by the patients in the surgery study.
We also announced important data from a third Caldolor study during the quarter. Topline results from this 50 patient study provided our first direct and favorable comparison of Caldolor to ketorolac, which is the only other NSAID available for injection in this country.
51 adult patients were enrolled at the Ohio State University Medical Center, and compared to patients receiving ketorolac, the patients receiving Caldolor experienced less postoperative pain and received less rescue narcotic both prior to discharge and in the 24 hours following surgery. Patients in the Caldolor treatment group were also less likely to require any rescue narcotics prior to their discharge.
The topline results from each of these recently completed studies will be presented at appropriate medial meeting throughout the year. And then the final results will be published in appropriate medical journals. Meanwhile, our pediatric fever study is nearing completion. And we expect topline results from that study to be available here in 2013 as well.
All of this new Caldolor data will ultimately be incorporated into an FDA submission to seek updated and expanded labeling for the product. On to the international front, during the first quarter of 2013, we announced agreements for Caldolor with Sandor Medicaids in India and SOHO Group in Indonesia.
Expanding its international market is a key component of our growth strategy, and these partners represent an important milestone in our efforts to build an international presence for our brand. We're pleased to welcome both of these very capable partners, who now pursue regulatory approval and prepare for product launch in their respected countries.
I'll now turn it over to Marty Cearnal, to provide you with an update on our marketed products. Marty?
Thank you, A.J. In the first quarter of 2013, Acetadote encountered generic competition. Therefore, we approve the launch of our authorized generic product distributed by Perrigo. The overall market for these products appears to have expanded during first quarter, as shortages of competitive oral products have reemerged.
We continue to maintain active sales support for the key medical facilities and poison control centers across the country. We have also used additional non-personnel promotional tool to extend our communication efforts in support of Acetadote. Targeted promotional effort to support our new formulation consistently contain the EDTA-free message and describe the enhanced stability compared to the oral formulation.
Now, onto Kristalose, we've continue to promote this brand to key prescribers across the country. We have also expanded our total audience with the telemarketing campaign to all high-potential users of the product. We launched a pilot coupon program to support Kristalose, and as we move into the second quarter, we're adding an e-prescribing enhancement to this program.
Turning to Caldolor, we have implemented very focused approach by our sales organization to expand use of the product in those accounts, where the product is stocked. That effort has driven accelerated reorders over the past year, and we will continue this focused effort shifting additional sales force time to these high potential institutions.
Meanwhile, the new formulary approvals for the product continue each month, as we move toward our goal of 1,000 facilities stocking Caldolor by the end of 2013. We believe that our more focused approach to support Acetadote and our authorized generic, combined with the increased and highly targeted promotion of Caldolor and the enhanced reach of our Kristalose promotion, creates a highly concentrated sales effort that will more effectively access the potential of our targeted physicians and accounts.
With that, I'll now turn it back over to you, A.J.
Thanks, Marty. I'd now like to review our defense of Acetadote and the related intellectual property. Recall, that Acetadote was first approved as an orphan drug in early 2004 with seven years of market exclusivity. At FDA's request, we developed a new formulation of the product and registered that formulation in early 2011, launching the next-generation product soon after.
In April 2012, the U.S. Patent and Trademark Office issued a composition of matter patent for Acetadote and its formulation. And we then received several Paragraph IV challenges to the new patent. We took appropriate action and initiated suites to contest each of the challenges. And in November, we entered into an early settlement agreement with Paddock Laboratories and with Perrigo Company to resolve two of those challenges.
As part of that settlement, we entered into a license and supply agreement with Perrigo to distribute an authorized generic version of Acetadote. We were disappointed that the FDA decided in November to approve a generic version of Acetadote based on the old formulation of the product. We therefore initiated a suite to contest FDA's decision. And that litigation is ongoing.
We learned that initial shipments of the old formulation generic were made toward the end of last year. We then followed with initial shipments on our authorized generic distributed by Perrigo.
During the first quarter of 2013, the U.S. Patent and Trademark Office issued a second patent associated with Acetadote, and the new patent includes claims regarding the use of the 200 milligram per milliliter Acetadote formulation to treat patients with acetaminophen overdose. It's been listed in the FDA's orange book and is scheduled to expire in August 2025.
We also have additional patent applications with claims relating to Acetadote that are pending with the U.S. Patent and Trademark Office. Based on these developments and on Perrigo's forecast, our goal is to retain significant acetylcysteine injection revenue through sales of both our Acetadote brand and our authorized generic.
We intend to continue to vigorously defend and protect our Acetadote products and our related intellectual property rights. We're continuing the patent infringement litigation against the remaining challengers, and we'll be sure to provide updates on any material developments.
I'd now like to turn it over to the Rick Greene, our Chief Financial Officer, to provide a review of our first quarter financial results. Rick?
Thanks, A.J. For the three months ended March 31, 2013, net revenues were $10.3 million, in line with revenues from corresponding period in 2012. In the first quarter of 2013, net revenues by product were $7.3 million for Acetadote, $2.1 million for Kristalose and $0.4 million for Caldolor. Included in Acetadote revenue is $3 million related to our share of authorized generic sales for the quarter. Other revenue was $0.5 million and primarily includes upfront payments recognized as a result of our new international agreements.
Total operating expenses for the three moths of 2013 were $8.9 million, down from $9.6 million for 2012. The decrease was primarily the result of our sales force realignment in late 2012. Net income for the three months ended March 31, 2013, was $0.9 million, up over a 100% from $0.4 million in 2012. This increase was driven primarily by reduction in our operating expenses.
Diluted earnings per share for the first quarter were $0.05, up 150% from $0.02 in the first quarter of 2012. A decrease in shares outstanding as a result of our ongoing share repurchase activities resulted in earnings per share growth out pacing net income growth. As of March 31, 2013, we had approximately $70.2 million in cash and securities with approximately $51.2 million in cash and equivalents and $19 million in marketable securities. Total assets were $98.3 million.
With that, I'll turn the call back over to you A.J.
Thanks for the financial review, Rick. We were very pleased to deliver those financial results as we maintained that revenue from the prior year quarter while significantly increasing our net income to the efficient management of our expenses.
As the year progresses, we'll continue to see growth in both Caldolor and Kristalose while maintaining significant market share of Acetadote market through sales of both our brand and authorized generic.
As I previously outlined, out strategy for 2013 is to maximize our near-term opportunities while laying the foundation for the long-term expansion, diversification and success of the business. We're working to make the most our 3 FDA-approved brands to focus efficient sales and marketing efforts. We will also seek to expand our network of international partners that now covers key markets such as China, India, Indonesia, Australia, and Canada. We're working with our partners to bring Caldolor to patient in each of those countries.
Having completed the significant amount of clinical work for Caldolor, our product development team is now moving on to several new product candidates. We feel this experienced team can now focus on the work needed to develop and register similar new products to the company. We're also elevating our business development activities in 2013.
Our interest is in the acquisition of a late stage development or marketed products that matches our established commercial capabilities. While we do remain selective, we're working hard to deliver our fifth product this year.
Meanwhile, we'll continue to contest Acetadote patent challenges and vigorously defend our intellectual property in 2013. And we'll be sure to provide updates on any new developments on that front through our SEC filings. As always, we'll maintain financial discipline and remain focused on our mission of advancing patient care and building shareholder value.
I'd now like to turn the call back over to the operator and open the lines for questions.
(Operator Instructions) Our first question comes from Michael Tong of Wells Fargo Securities.
David Gu - Wells Fargo Securities
This is David on for Michael. Just a few questions. So the first one, I hope I caught this correctly, but Acetadote is the authorized generic, is that $2 million, $3 million in Q1?
Yes, that's correct, $3 million.
David Gu - Wells Fargo Securities
Then also can you talk about the new product, candidates that you just mentioned, A.J.?
Yes, we have an experienced team here that has taken those Acetadote and Caldolor through the development activities needed to achieve FDA approval and registration. And we felt that now that they are finished with the majority of these Phase IV type Caldolor studies, that we can turn their attention to developing a series of attractive new product candidates. So they are busy with those plans and designing of those programs. We haven't announced the nature of them yet, but we will be evaluating one at a time, over time,
David Gu - Wells Fargo Securities
And then I guess another follow-up for A.J. So I guess Cumberland has been a public company for more than three years now and so far Caldolor, it hasn't generated a lot of revenue and Acetadote is now seeing competition and the company has very little growth. You have a lot of cash on your balance sheet. I guess in terms of business, its element activities, what is that you are waiting for right now?
We're waiting for the right match. So as I mentioned, we are actually stepping up our business development activities and we remain very interested in bringing in a product that will be a good strategic pair with this organization and our capabilities. We are very selective and we're seeing plenty of opportunities and we're looking for a candidate that has competitive advantages, appropriate protection, attractive margins and something available at a reasonable cost. I can tell you, we've come close on potential acquisitions that ultimately decided not to move forward with our due diligence findings. But we remain very active on that front and our goal is to acquire the good profit.
I am showing no further questions at this time, I would like to turn the conference back over to A.J. Kazimi for any closing remarks.
I just want to say thank you everyone for joining the call. We feel that Cumberland remains in strong financial position and we will continue to operate with financial discipline. We appreciate your time today and interest in our company, and we look forward to providing you with another update after the end of the second quarter. Good bye now.
Thank you, sir. Ladies and gentlemen, that concludes our conference for today. If you would like to listen to a replay of today's conference, please dial 855-859-2056 using the access code 46598348. Alternatively, a replay of the webcast will be available on the company's website. I would like to thank you for your participation. You may now disconnect.
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