Flamel Technologies' CEO Discusses Q3 2013 Results - Earnings Call Transcript

Oct.31.13 | About: Flamel Technologies (FLML)

Flamel Technologies S.A. (NASDAQ:FLML)

Q3 2013 Earnings Call

October 31, 2013 10:00 AM ET


Bob Yedid – IR

Michael Anderson – CEO

Sian Crouzet – Principal Financial Officer


Jason Butler – JMP Securities

Russell Cleveland – RENN Capital

Matthew Kaplan – Ladenburg Thalmann


Good morning, ladies and gentlemen, and welcome to the Flamel Technologies’ Third Quarter 2013 Results Conference Call. Please note that this call is being recorded. I would now like to turn the call over to Mr. Bob Yedid. Please go ahead sir.

Bob Yedid

Good morning, and welcome to Flamel Technologies’ third quarter 2013 conference call. This is Bob Yedid of ICR. Before we begin I will start with some cautionary statements. The following presentation regarding Flamel Technologies S.A. includes a number of matters, particularly as related to the status of various research projects and technology platforms that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The presentation reflects the current views of Flamel’s management with respect to future events and is subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements.

These risks include risks that product or development stage may not achieve scientific objectives or milestones or meet stringent regulatory requirements, uncertainties regarding market acceptance of products and development, the impact of competitive product and pricing, and the risk associated with Flamel’s reliance on outside parties and key strategic alliances. These and other risks are described more fully on Flamel’s public filings, including the Form 20-F for the year-ended December 31st, 2012.

Except as required by law Flamel did not intend and disclaims any duty or obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events or otherwise. After the prepared remarks we’ll be opening the call to a question-and-answer period. At this time it’s my pleasure to turn the conference over to Mike Anderson, Chief Executive Officer of Flamel Technologies. Mike?

Michael Anderson

Good morning, ladies and gentlemen. Thank you all for joining us today. I am pleased to report that Flamel continues to make solid progress in our transformation from being a standalone drug delivery company to a specialty pharma company that has outstanding drug delivery capabilities.

As we’ve stated in the past we believe this is a very important distinction and are pleased to see advancement on a number of fronts. First I’d like to give you an update with regards to Bloxiverz, our first FDA approved version of neostigmine sulfate an injectable drug used in hospital operating rooms. Neostigmine is used to reverse the effects of neuromuscular blocking drugs in surgical procedures.

As we’ve mentioned this is Flamel’s first NDA approval and it’s an important positive step in our new strategy of seeking our own NDA approvals for drugs that will be 100% controlled by Flamel. This was the first filing that came out of the Éclat pipeline and there are three more of these products that we are steadily advancing.

In fact one is FDA with the PDUFA date of April the 28th of 2014. Neostigmine is a classic example of what are described as unapproved drugs that are available for use in the United States. Many of these drugs were available and grand-fathered in as they predate the Food, Drug and Cosmetic Act of 1938.

These products never had to undergo the rigorous testing and NDA review process by the FDA that’s been in effect for decades. The FDA has a general policy to encourage drug manufacturers to submit a new drug application for these unapproved products in order to improve the quality and control applied to these pharmaceuticals. The incentive for the drug company that goes through the effort and expense of submitting an NDA if approved is that the FDA will remove the unapproved versions from the marketplace overtime.

Assuming the drug company can manufacture and supply the approved product, the general policy is that the FDA will remove the unapproved products within one year of the NDA approval. Let me emphasize that the FDA does give itself leeway on the timing of these regulatory actions. Even after the FDA asks a manufacturer to exit the market, the manufacturer typically has a 180 days to sell product into the channel and they do not need to recall what is already been sold into the channel to date. So this will be a slow process. However Flamel’s management team and regulatory counsel are aggressively pursuing our belief that these unapproved products should be removed from the market sooner, rather than later. And I will review how that FDA process has the potential to benefit Flamel in just a minute or two.

As we mentioned on the last call we launched Bloxiverz into the market in July. While there is inventory in the channel with the wholesalers currently, we have booked only a very, very modest amount of sales to hospitals, to our ultimately the end customers.

Since the unapproved products have not yet been forced off the market by the FDA, and since Bloxiverz is priced at a premium to the unapproved versions, demand from hospital pharmacies has been modest at this point.

Also, we do not yet have an established track record of returns and chargebacks for our product. So there are no revenues reported from our sales of Bloxiverz included in the company’s revenues this quarter. As I cautioned on our prior conference call, pharmaceutical products generally take time to ramp up and Bloxiverz is no exception.

With regards to group purchasing organizations or GPOs as they are known in the industry, I’m pleased to report that Flamel now has contracts for Bloxiverz in place with virtually all of the major GPOs. This will facilitate sales of our product to hospital customers especially once unapproved products are removed from the market.

Very recently we have seen evidence of meaningful increases in the pull through of our product. Moreover, Flamel has been communicating extensively with hospitals and hospital pharmacists in the United States to make them aware of the availability of Bloxiverz, attending meetings and displaying at scientific sessions where decision-makers are present.

I want to assure investors that our management team is doing everything that it can to encourage the FDA to remove the three unapproved manufacturers of neostigmine from the market, specifically according to the criteria that the FDA has included in a September 2011 policy for removing unapproved products from the market. Some of those criteria are the following:

First, is there a health risk to patients from the unapproved products? Flamel stock, filed a citizen’s petition with the FDA on August the 15th of this year indicating our view that there are issues with unapproved versions of neostigmine on the market that would constitute a “health risk” to consumers. Bloxiverz’s label has specific dosage and administration instructions that are fully approved by the FDA. However the unapproved products have dosing instructions that are different than Bloxiverz’s approved label despite being the same drug and sold and consumed in the same strength.

We clearly believe that having unapproved products available to hospitals with dosing instructions that are different from our FDA-approved label constitutes a risk to their patients. The Bloxiverz label also offers dosing instructions for pediatric patients which the other products do not. And the competitor product labels include clinical indications for the use of neostigmine for which there is very limited or no scientific evidence.

The purpose of this citizen’s petition is to encourage the FDA to consider these issues as constituting a public health risk and to take appropriate and timely action to remove the competitors’ unapproved products from the marketplace.

Second, another key criteria for the FDA is Flamel’s ability to supply the market. On several occasions, most recently in late September, when asked by the FDA about our ability to supply the entire market, Flamel responded affirmatively about our being in a position to supply the entire U.S. demand for neostigmine or approximately 4.8 million vials annually by no later than November of this year.

We already have substantial inventory at all of the major drug wholesalers and have also invested almost $1.5 million in product as of September the 30th. Remember that the inventory and the work in progress product is at our cost and so end market sales of this inventory will be a substantially greater dollar value to Flamel since gross margins on the product should be quite healthy.

In terms of current competition, there are three manufacturers of unapproved versions of neostigmine being sold on the market today. As I mentioned on the call that by the end of Q2 there have been periodic shortages of neostigmine over the past few years and although today we believe there is supply available, we also believe the inventory levels were quite modest. Generally product shortages in the market occur because manufacturers may have facilities that are not in compliance with current GMP standards.

Third, there are other regulatory and legal actions that Flamel has taken in the last three or four months to improve Bloxiverz’s market position. For example, with the assistance of our FDA regulatory counsel we have submitted additional correspondence to the FDA’s Office of Drug Safety reinforcing many of the safety issues mentioned just a moment ago. There are other actions we’ve taken but we will not disclose those for competitive reasons.

As we’ve said before, we believe that Bloxiverz, as our first NDA product, has the potential to contribute up to $25 million to $35 million in peak annual revenues for Flamel. We are maintaining that guidance given that the launch is still in its very early stages and there are many variables which we will encounter.

Now, I’d like to move on to discuss our second NDA filing out of the Éclat portfolio which we re-submitted to the FDA in early July. On September the 11th the FDA notified us that this second NDA would have a PDUFA date, the target date for the FDA to complete its review of the NDA of April the 28th 2014.

As consistent with our policy on Bloxiverz the company has decided not to identify the product at this time since doing so simply discloses sensitive information to our competitors and reduces the value of these products for all Flamel shareholders. However, we will be updating investors at the appropriate time with substantial information about our products.

Flamel’s pipeline of innovative drugs which use our proprietary drug delivery technologies continues to proceed and these will provide near-term and mid-term pipeline products and revenues. We are in full control of these products in terms of clinical trials conducted and the regulatory strategy.

For example, in today’s press release we’ve included data from a pre-clinical study of our proprietary extended release Medusa-based human growth hormone product which applies Flamel’s Medusa drug delivery technology to recombinant human growth hormone. Medusa is Flamel’s innovative and safe depot formulation for the delivery of a broad range of injectable, biological and chemical drugs.

This pre-clinical trial used to specialized animal model that is designed to evaluate drugs for human growth or growth hormone deficiency. The trial data demonstrated that rats dosed with the extended release drug showed a comparable increase in body weight gain as compared to the immediate release drug.

We’re excited about this data and we will advance this proprietary Medusa growth hormone drug into a human clinical trial in 2014 with once weekly dosing. If this human clinical trial is successful it would represent important proof of concept data, reinforcing the value of Flamel’s proprietary Medusa technology as well as providing obviously a valuable pipeline product.

I’d like to cover one other topic. As stated in today’s press release Flamel recently entered into a term sheet for a $15 million line of credit, the final documentation for the line of credit should be completed in the next few weeks. Although like any financing we can make no assurances that the deal will close. Until completed, we cannot disclose specific terms of the line of credit but we do plan to include those details in a press release upon closing. While management and the board have confidence in our products in our pipeline and in the company’s strategy, we took this step in order to give Flamel greater financial flexibility going forward.

I will come back to discuss the rest of our pipeline and strategy after Sian Crouzet, Flamel’s Principal Financial Officer, discusses our financial results for the third quarter. Sian?

Sian Crouzet

Thank you, Mike, and good morning. Flamel reported total revenue during the third quarter 2013 of $516 million an increase compared to $5.4 million in the third quarter of 2012. Revenues were higher principally due to higher product sales and other revenues. Due to increased sales volume of HYCET and increased royalty on the net sales of Coreg CR which offsets, which were offset by lower license and research revenues.

License and research revenues were $1.2 million during the third quarter of 2013, compared to $1.7 million in the prior year quarter. As Flamel is increasing focused on our internal pipeline products and revenues from contracts with our drug [indiscernible] companies declined.

Product sales and services were $2.5 million in the third quarter of 2013 compared to $2.1 million in the prior year period; an increase of 21%. Essentially due to increased sales of HYCET. Other revenues consisting primarily of royalty income from GSK from the sales of Coreg CR were up to $1.9 million in the third quarter of 2013 versus $1.6 million in the prior year quarter.

Costs of goods and services sold for the third quarter of 2013 were $1.7 million compared to $1.5 million in the third quarter of 2012 due to higher production costs. Although great margins on product sales improved from 27.3% in the third quarter of 2012, to 30.6% this quarter.

Research and development costs in the third quarter of 2013 was $6.7 million which is comparable to the second quarter of this year, one is clearly [ph] facilitate the FDA the recent vision of our second NDA. Selling, general and admin expenses for the third quarter of 2013 decreased to $2.9 million compared to $3.1 million in the prior year period. Due to a reduction in personnel costs and stock compensation expense, which offsets the increase in selling and marketing costs to support the launch of Bloxiverz.

Excluding the remeasurement expense of acquisition liabilities, operating expenses in the third quarter of 2013 increased by 4.5% to $11.3 million compared to $10.9 million in the third quarter of 2012. The specific terms of the acquisition of Éclat in March 2012 include a $12 million note, future payment, discouraged the approval for net sales of certain Éclat products, $3.3 million warrants and earn-out payments equal to 20% of the great profit earned on certain Éclat products with the FDA approved and launched.

In addition, the company took February 2013 financing of $50 million, included a royalty of 1.75% of net sales of certain Éclat products that may be approved and launched. These commitments are revalued and reassessed at each balance sheet date based on information and data available at that time. For the third quarter of 2013, we had $1 million in non-cash operating expenses virtually the same as the non-cash expense of $1.1 million in the third quarter of 2012.

Total interest expense of $0.7 million for the third quarter of 2013 includes interest on the additional debt financing completed during the first quarter of 2013. In the third quarter of 2012, the company had interest income of $0.1 million.

Net loss on a GAAP basis was $6.4 million for the third quarter both 2013 and 2012. Our loss per share, basic and diluted was $0.25 in the third quarter of 2013 compared to $0.26 in the third quarter of 2012.

In addition, management has decided it will be helpful for investors and analysts to provide certain non-GAAP data that allows investors to evaluate the company’s ongoing operations.

The adjustments exclude items such as fair value of the remeasurement and amortization expense directly associated with the acquisition of Éclat on an after tax basis and includes milestones such as earn-out and royalty payments on a cash basis associated with the acquisition liabilities and royalty agreement. Adjusted net loss for the third quarter of 2013 was $5.6 million, which was consistent with the $5.5 million in the prior year quarter.

Adjusted net loss per share on a diluted basis of $0.22 in the third quarter of 2013, which is equal to the same in the same period of last year. With respect to cash and marketable securities we ended the third quarter with $9.3 million a decrease of $0.4 million compared to the end of the second quarter.

As explained in our press release, adjusting for the annual payment for the French Government and recognition of the research and development contracted by Flamel in France that we received in July frame which amounted to $6.7 million. The cash decrease for the quarter would have been $7.1 million.

As mentioned about a portion of that cash used includes $1.4 million for [indiscernible] finished in to inventory. Flamel which is placed with the wholesalers and for work in progress. With regard two of that Flamel has two major debt obligations. In February 2013 we closed a $15 million debt financing with new sales management that has a 12.5% interest rate and a 1.75% royalty on net sales of the Éclat products further approved.

The interest on this debt is being paid in cash quarterly in arrears. The debt must be repaid over four years with an initial payment to principles due in July 2014. As I mentioned previously the other obligation is a six year $12 million senior secured notes issued in connection with the acquisition of Éclat. The interest rate on the notes is 7.5%, the current balance of the note at September 30 was $13.5 million which reflects interest accruals of $1.5 million.

Under the terms of this second note certain accrued interest amounts will be due in February 2014 nine months after our first Éclat approval Bloxiverz.

With that I’ll now turn the call back over to Mike.

Michael Anderson

Thank you Sian. At this point I’d like to remind investors of Flamel’s corporate strategy that emphasize these three distinctive sources of revenue covering the short-term the mid-term and the long-term.

As we outlined in our investor presentation which is posted on Flamel’s website, we have more than a dozen molecules in our near-term and mid-term pipelines in various stages of R&D completion and development including several approaching the clinic. These products cover a gambit of therapeutic categories including CNS, heart disease, pain management and others.

The preclinical data that I discussed earlier today on extended release human growth hormone using our proprietary Medusa technology for biologics is one of these. In the near-term we’re focused on the products from the Éclat pipeline. We’re focused on activities to maximize the value of Bloxiverz though we understand that this ramp up will take some time as we wait for FDA action.

We’re excited about the PDUFA date for our second Éclat NDA in April of next year. Moreover we anticipate potential filing of two additional NDA’s from the Éclat pipeline in the first half of 2014. To the extent that we continue to file and to gain FDA approval for the Éclat projects this will generate a series of revenue streams for Flamel until generics of these FDA approved products emerge.

In the mid-term Flamel has five internal proprietary products in our pipeline some of which are getting close to human clinical trials and other products are in pre-clinical testing. In each case these products utilized one of Flame’s proprietary drug delivery technologies that will either A, increase the efficiency of the drug, B, reduce costs versus alternative therapies and or C, reduce patient side effects and thereby improve patient compliance which ultimately reduces healthcare costs in the long run. We are self-funding each of these mid-term projects.

We believe there’s a general rule that they will be faster and less expensive development projects and ultimately less risky. Although technical hurdles are always possible when you add drug delivery to molecules. If we are correct than our shareholder should see these programs advance much faster than has been the case in the past.

We believe that several of these mid-term pipeline products could have very high commercial value. For the long term we continue to leverage our world class drug delivery platforms to pursue product partnerships with large and small pharma partners where they pay for the development cost.

We have a number of these programs in process in both clinical and pre-clinical stages most of these projects are dependent on our pharmaceutical partners actions. And are in some cases out of our direct control but this area of our business continues to progress well. And I would like to add here that while we talk in these days and times about our own Flamel pipeline you should keep in mind please, that we do continue to have partnerships with a number of different companies. The only difference between what we have done previously and historically and today, is that we are very, very discerning about the products that we undertake that are outside our control.

We believe that this three-pronged corporate strategy is one that takes the greatest advantage of Flamel technologies, personnel and other assets. Note that most of management’s time is spent on the near and mid-term revenue areas. We’re committed to increasing the visibility to our shareholders into our pipeline as our programs advance and meaningful updates from our pipeline become available.

We are also seeking to increase investor knowledge of Flamel and will appear at selected healthcare investment conferences throughout the year. The company for example will be appearing at the Barclays Select Growth Conference in mid-November in New York and we expect to be appearing at other investor conferences in 2014.

I’m excited about Flamel's prospects and we are steadily building our products and our pipeline. There’s a lot to accomplish yet in 2013 and 2014 and we’re aggressively focused on the important activities that will move Flamel forward.

We appreciate your participation on today’s call and at this point operator I’d like to open the call for questions.

Question-And-Answer Session


Thank you (Operator Instructions). We’ll go first to Matt Kaplan with Ladenburg Thalmann.

Matthew Kaplan – Ladenburg Thalmann

Hi good morning guys.

Michael Anderson

Good morning Matt.

Matthew Kaplan – Ladenburg Thalmann

So couple of follow up questions. With respect of Bloxiverz and based on your ongoing conversations with the FDA and the citizens petitions you’ve filed. What would be a realistic expectation for removal of the unapproved used techniques on the market timing was?

Michael Anderson

Matt it’s a great question, it’s a $50,000 question and the answer in short is that we really don’t know. What I can tell you is, is that over the history of these things our FDA has done some relatively quickly, others have taken longer to do and there are lots of criteria that they use to establish priorities in this way. I can assure you that we or have been I would suspect as proactive as anybody who’s done this, an encouraging the FDA to act and to remove those products from the marketplace.

We’ve had conversations with them and obviously we don’t discuss our dialogue with FDA, but we do believe that the FDA will act and we believe that our ability to supply the market is an important criteria here. So that was the long answer, but without an answer but, in short we really just don’t know. But we’re hopeful that it’ll be soon.

Matthew Kaplan – Ladenburg Thalmann

And I guess what would be the best case timing that obviously –

Michael Anderson

Well I see if I can tell you there’s absolutely no reason why, if they wanted to, they could put a note in the Federal Register tomorrow. I don’t clearly know that, that will happen but I do believe they’re sensitive to this product and we just have to do things we can, make them comfortable. But we have the ability to supply the market, I think one of FDA’s bigger concerns today, and that clearly I don’t speak for the FDA, is that over the last couple of years there have been significant shortages, as you know.

And the hospital marketplace, neostigmine at various times in the past has appeared on their lists and there have been selected shortages over a period of time. We believe there is ample supply in the market today, we do not believe that the inventories and wholesalers and hospitals and so forth are happy. And I can assure you that we have plenty of product on hand and we can supply whatever demand we would have now and in the foreseeable future.

Matthew Kaplan – Ladenburg Thalmann

And great thank you for the answer and in terms of milestones in your pipeline, going into the first half of next year. Can you give us a little bit more color and detail on that, and then I guess in relationship with that too, your strategy with respect to the hGH Medusa program?

Michael Anderson

Right well, let’s start with your first question which was what’s ongoing. As we described I think we now have nine products in our self, we’ll call our self-funded middle term pipeline. And they run the gambit from human growth hormone to examples of Micropump technology Trigger Lock and so forth.

We have actually plans to continue and to move forward, some in the clinic during the first half of several of those platforms. We talked earlier about human growth hormones, we obviously have a couple of Micropump projects and couple of LiquiTime projects that we’re also keenly interested in. And we’re doing these as quickly as we can in organization our size has limited personnel obviously, we’re very careful about our R&D spend. And so we come to move these things forward as we’re able to do it. And I think it would be reasonable for you to expect to see several either pre-clinical or clinical examples of projects moving forward in the first half of next year.

And today, of course, is the first time we’ve talked about human growth hormone and it’s a project that we’re very excited about. We’re very early in the game clearly and, but human growth hormone is a fantastic commercial opportunity. We believe with respect to Medusa that not only can we, will we be able to provide a drug that’s dosed on only a once a week basis, but we may have some other advantages as well that we’re not able to talk about today but as we get into the clinic and into humans we’ll be able to better ascertain.

I will tell you this, human growth hormone is a not a product that I believe today we would be capable of commercializing ourselves. So what our objective would be is to get human growth hormone to the point where clearly we’ve shown proof of concept, where we can get it into humans and show a good result that our ability to take that to somebody who has an existing stake or somebody who is got the appropriate commercial infrastructure to be able to do that would be probably in the best interests of our shareholders to license that type of product out. There are other products in our pipeline however that we would commercialize ourselves.


We’ll go next to Jason Butler with JMP Securities.

Jason Butler – JMP Securities

Great thanks for taking our questions and congrats on the progress. Just wondering if you could talk a little bit more about what you’re hearing from the hospitals on the Bloxiverz product. Are you hearing any encouraging signals about the, how the hospitals view the product as being different and FDA approved versus the products that are already available?

Michael Anderson

Tough question, the answer is I think that, and we’ve had a great deal of exposure to hospital pharmacists to GPOs. I mean we’ve pretty much covered the territory. And I would say, if I could characterize it shortly people recognize the importance of this FDA initiative. I think they want and they want to be able to choose or select products that are FDA approved.

I think they like the continuity that we provide in the labeling and all those kinds of things but at the same time they don’t want to pay a premium for it Jason. And there is a premium, I think typically you, we’ve said in the past that you can buy neostigmine on the market depending on the day of the week, anywhere between $7 and $8 and $3 and $7 or $8. And we’re selling the product for $15 so a guide managing a hospital budget isn’t very excited about that.

I’ll be quite candid with you but, they do recognize it I think they appreciate what we’re doing. And I have to tell you this to today to file an NDA if you’re filing a simple NDA without extensive clinical work. The filing the PDUFA date is over in 2014 is going to be over $2 million. So, if they have any hopes of making this initiative work for them and they need to then they have, they have to, they should be able to and willing to follow the guidance that they’ve set. And I believe that they will but the answer to your question is that I think people like it, they will absolutely embrace it but not when they can buy it for a quarter of the price.

Jason Butler – JMP Securities

Okay great that’s helpful thanks. Then on human growth hormone can you talk a little bit about any work you’ve done to establish the commercial or medical need for an improved growth hormone product and in addition just to the benefit of once weekly dosing is there any efficacy or safety advantages that you anticipate you might find with your Medusa product?

Michael Anderson

That’s a fantastic question and the answer is we, we understand clearly that the rules on what you develop today and what you get approved have changed. They haven’t really changed from regulatory perspective but the expectation with a third party payer will pay for simply convenience it’s all gone. And we’ve seen this over and over that doesn’t fly anymore.

So before we begin the our investment from a resources and a financial perspective again a product like human growth hormone we do the work to ensure that what we’re trying to offer will have some advantages in the marketplace and will be embraced or at least paid for and accepted by third party payers who more than ever before control that.

So we have done a significant amount of commercial work upfront. There’s probably more left to do, we have established target profiles that we’ve not identified yet. And frankly Jason at the end we expect not only to be able to supply a product that is dosed on a very, very convenient once a week basis but our also expectation would be able to offer other advantages other than therapies that exist today. And so we’re excited about this, this is we believe an excellent avenue for our Medusa technology.

Jason Butler – JMP Securities

Great. Can you talk about what, what do you plan to get out of the first clinical trial that you would run in 2014 is it purely safety and PK or is there any signals of safety or efficacy that you can start to evaluate in this first trial?

Michael Anderson

I think that our first clinical trial will be fairly simplistic and designed to simple dose ranging PKPD study with probably and extension phase that allows us with an optimal dose for a period of time and we haven’t determined what that period would be.


We’ll go to Russell Cleveland with RENN Capital.

Russell Cleveland – RENN Capital

Good morning and first of all thanks for having this all what I call a civilized hour this is great. My question Mike in this whole area of Trigger Lock in the pain area, the FDA the new regulations there it occurs I mean to someone like me that this is as big a product is as we have the marketplace is very large. There is new regulatory things there we seem to have a product. So could you tell where we are there and what’s our plans in this area?

Michael Anderson

Well thank you Russell and you’re welcome for the difference in the call time. So Trigger Lock we believe is an excellent technology to the future albeit to somewhat limited market I mean there are only X number of long acting opioids. But as you know in 2013 somewhat early in the year we, we reclaimed if you will the right to several projects that we previously had aligned ourselves with the partner on. And we intend and we are in fact working on those projects.

We believe the FDA is less than overwhelmed by the some of the submissions they’ve seen to date that relates to abuse resistant technology. And we think that Trigger Lock may very well meet a lot of those needs the FDA as you know has established new guidelines not only for abuse resistant but they’ve also for the first they time they’ve asked manufacturers who produce these products or who will have submit products in future to do other kinds of more subjective studies, things like looking at likeability using and using clinical studies involving people who are abusers I mean it’s quite complex.

The good thing about this is, is that they really haven’t embraced anybody we think Trigger Lock has a role there. And we are moving projects forward with Trigger Lock. We want to be a player in that marketplace and we believe at this point we can. And it’s kind of an interesting area and one that’s changing by the day as recently as last week. As you may be aware the FDA has asked the DEA to reclassify controlled drugs containing both hydrocodone and acetaminophen into schedule II. So an absence what that means is that the most wide, one of the most widely prescribed drugs in the US is hydrocodone and APAP for pain.

Today if a physician writes for it. You can refill the prescription five times within six months and he can call it in to your Wallgreens or your CBS or whatever. If they change this to schedule II which is a huge quantity of prescriptions I mean major quantity then what you would have is no ability to refill the prescription and the patient would actually have to take, go to the doctor to get the prescription take it to the drug store.

The paperwork and the burden associated with schedule II drugs is enormous. Examples of schedule II drugs or things like morphine and what have you. So the FDA in our view and its very sensitive to the abuse problem that’s going on. And we think our technology is robust that meets the market but we’re on the way with it. And we’re going to be doing some proactive things in the first quarter of next year. As we get a little closer we’ll be able to talk in more depth about those. Thanks –

Russell Cleveland – RENN Capital

And it is 2014, late 2014 product or is does it go up further?

Michael Anderson

My guess is that Trigger Lock probably would go up further. I don’t know what you mean if does that mean are we going to develop in ‘14, does it mean well submitted it certainly wouldn’t be approved in the likelihood that we could submit in ‘14 is also pretty slim. But we do think that we can make some good progress in this area. And we could be in an interesting position but we have to execute and we’ll see but we are working on that.

Russell Cleveland – RENN Capital

Okay thank you so much.

Michael Anderson

You’re very welcome.


(Operator Instructions) We’ll go next to Matthew Kaplan with Ladenburg Thalmann.

Matthew Kaplan – Ladenburg Thalmann

Hey guys just a quick follow-up in terms of and talking about the milestones in the first half of next year. In your presentation you mentioned there is one FDA filing associated with Micropump. Can you give some details on what that filing is, that’s a filing or?

Michael Anderson

Well we still have expectations of having an FDA filing on Micropump and some time the first half of ‘14 or maybe it could bleed over in third quarter but today we’re on target Matt. And if, when it, when we get a little closer we will add some color to that. But we once again you remember that even with these what we’ve called intermediate term or mid-term projects since we were sometimes dealing with chemical entities that either exist or have competition in the marketplace.

Our 505(b)(2)s represent competition. And I think ultimately I think we believe that our shareholders are served better as we sort of play in under the best. And I have to open, I’d like to add something to that. I think that we’ve taken an approach here that some people may have some criticism for but I think, I think people want to see us execute.

And that’s what we’re focusing on. And we would prefer to surprise people positively then build expectations that maybe we can’t meet as well as we want to. So I hope you’ll forgive our not talking so openly about some of our projects. But I, we believe that we’re doing our shareholders a service by doing that ultimately. Well but it does we acknowledge that makes it little difficult to model.

Matthew Kaplan – Ladenburg Thalmann

Thanks, guys.

Michael Anderson



We have no further questions in the queue. I’d like to turn the call back over to management for any additional or closing remarks.

Michael Anderson

Okay. Well thank you operator. And thank each of you for joining us today on the call. We look forward to continuing our update with you on our business as we make progress in the coming months. Thank you and have a great afternoon.


Again that concludes today’s presentation. We thank you for your participation.

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