Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Akorn, Inc. (NASDAQ:AKRX)

Q3 2013 Earnings Call

November 5, 2013 10:00 AM ET

Executives

Raj Rai – CEO

Tim Dick – CFO

Analysts

Louise Chen – Guggenheim

Steven Crowley – Craig-Hallum Capital Group

David Amsellem – Piper Jaffray

Elliot Wilbur – Needham & Company

Jason Gerberry – Leerink Swann

Sumant Kulkarni – Bank of America

Operator

Good morning. This is the third quarter conference call. If you not have yet had a chance to read the earnings release you may at the Relations section at Akorn’s website. Raj Rai, Chief executive officer and Tim Dick Chief Financial Officer will host this morning’s call. The call is expected to last about 30 minutes and may be accessed through our website at akorn.com. A replay of the conference call will be available shortly after this call. You can access the replay by dialing 1 (888)-203-1112 in the United States or (719) 457-020 internationally and entering the access code 7868985.

Before we get started I would like to remind everyone that any statements made on the conference call today would express I believe expectation, anticipation or intent as well as certain historical fact are considered forward-looking protected under the safe harbor of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Akorn today [indiscernible] we disclaim any obligation to update any forward-looking statement in this document further as a result of changes in underlying factors through information, future events or otherwise. These forward-looking statements may involve a number of risks or uncertainties which may cause the companies result to differ materially from such statements. Forward looking statements are qualified by the inherent risk and uncertainties surrounding future expectations generally and may materially differ from actual experience.

Risks and uncertainties could affect forward-looking statements including the occurrence of any event, change or other circumstance that could terminate or delay or our acquisition of Hi-Tech including receipt of regulatory approvals, changes in the business or operating prospects of Hi-Tech or anticipated synergies of a combining our success and obtaining new product approval or launching new products.

Our ability to obtain international financing to grow our business, the effects of Federal State or other holds regulation on our business, and increased competition from other pharmaceutical companies. The factors in the reports followed with the Securities and Exchange Commission including Akorn’s latest annual report on Form 10-K and subsequent quarterly reports on the Form 10-Q. In addition, as required by Regulation G, reconciliation of non-GAAP financial measures mentioned during our call today to the most comparable GAAP financial measures can be found on our press release. Thank you, and now I would like to turn the call over to Raj Rai.

Raj Rai

Thank you. Good morning everyone and Thank you for joining 2013 third quarter conference call. On today’s call I would summarize key highlights for the third quarter and Tim will discuss the financial results in detail. We recorded approximately 82 million sales in the third quarter and 18% increase over the third quarter of 2012. In the third quarter we experienced increased sales from all our focused products such as progesterone, oral vancomycin, Latanoprost, and TD vaccine.

All these products were launched at various times during the second half of 2012. In addition, we experienced high [indiscernible] of Akten launched in October 2013 as well as increased sequential sales of Nembutal. Our Somerset, New Jersey facility is now fully functional at the higher levels of capacities of the ophthalmic [indiscernible] gels as well as the use of new utilities installed with the operation. And finally we had level strong quarter of cash flow which further increased the cash results by 21 million to nearly 76 million. We continue to build our pipeline through our R&D initiatives. We expect to file 16 ANDAs by the end of this year although we have completed about 18 ANDAs that are pending to be filed. The slowdown in filing additional products this year as forecasted is due to the fact that FDA has changed how the filings are reviewed as discussed in our past conference calls. We currently have complete response that is for 9 filed ANDAs. The response to all such queries were prioritized over the pending filings. In the fourth quarter we expect to see [indiscernible] as we plan to complete the filings of some of the products in development.

Let me speak on India now. We are on track to file our first filing with the U.S. FDA in the first quarter of 2014 followed by 3 additional filings for each of the four. Given our first product being a tech transfer of our existing ANDA product, we expect to be active at the end of the third quarter of 2014. In conjunction with the filing of new product filings in India, we have been strengthening the quality over side in India with increased incremental staffing, personal training and compliance management not only for U.S. FDA, but other international regulatories.

As planned, we do not expect to grow the sales of our domestic contract manufacturing business in India; however, we remain focused on building our international business with increased ready support on existing and new products in the higher growth geographies around the world. We are also commencing our expansion projects. We expect majority of the work to be completed by the end of next year.

Early in the third quarter, we announced the acquisition of Hi-Tech. Since the announcement of the acquisition, we have been focused on financing activities and working on updating the regulatory approvals. Then, we will provide you with the update on financing activities in these prepared remarks. We expect the transaction to close in the first quarter of 2014. We are looking forward closing of Hi-Tech acquisition.

This acquisition would transform our company to a larger and diversified generic player with other niche dosage form such as oral liquids with controlled substances AO’s capabilities, nasal sprays, topicals, etc. In addition, Hi-tech brings the incremental keys new products toward generic ophthalmology franchise. We expect to have a strong finish to the year with revenues at the upper end of our guidance range. I would now turn the call over to Tim for his prepared comments.

Tim Dick

Thank You Raj. These records are totally in comparable prior year quarter consolidated decreases in the average sales price for existing products and lower sales from our subsidiary in India, Akorn India Private Limited.

Third quarter 2013 ophthalmic segment revenue was $29.4 million versus $28.2 million in the prior year quarter. Year-over-year growth was driven by our OTC ophthalmic products particularly our private label business. Growth also came from latanoprost ophthalmic solution which launched in the third quarter of 2012 as well as growth in our new unit dose version of Akten which launched in the fourth quarter of 2012. Both of these products were partially offset by price erosion on established products.

Sequential quarter growth in ophthalmics came from the same products OTC private label, Akten unit dose and latanoprost ophthalmic solution which increased as a result of additional manufacturing capacity brought online in the quarter. The sequential quarter growth was offset in part by an anticipated drop in sales of our seasonal allergy products.

Third quarter 2013 hospital drug and injectable segment revenue was $47.9 million versus $34.7 million in the prior year quarter. Year-over-year growth came mostly from new product launches which were offset partially by price erosion on new products and revival products launched in the prior year quarter. Notable products accounting for the year-over-year growth include progesterone oral capsules, Td vaccine, and the generic of EMLA topical cream all of which launched in the fourth quarter of 2012. Sequential quarter growth in hospital drug and injectables came from progesterone capsules, oral vancomycin, Nembutal, as well as the generic of EMLA topical cream.

Third quarter 2013 contract services segment revenue was $4.6 million compared with a $6.8 million in the prior year quarter. The year-over-year decline was attributable to lower sales for Akorn India on a constant currency basis as well as the weakening of the rupee against the dollar. Consolidated gross margin for the third quarter of 2013 was 53.7% compared to 57.6% in a comparable prior year quarter. The year-over-year decrease in gross margin was primarily the result of various new products launched late in 2012, which generated lower gross margins as a result of being either partnered with loyalty or profit sharing arrangements or products manufactured through third parties as well as lower Akorn India gross profit.

Selling, general and administrative expenses were $13.6 million in the third quarter of 2013 compared to $12.3 million in the third quarter of 2012. The year-over-year increase was principally due to higher legal expenses which included a $400,000 legal settlement in the quarter.

Acquisition-related expenses for the Hi-Tech acquisition were $1.5 million in the third quarter of 2013 compared to $500,000 in acquisition-related expenses in the third quarter of 2012, which were related to the Kilitch acquisition. Research and Development expenses were $4.8 million in the third quarter of 2013 compared with $2.8 million in the prior year quarter. The year-over-year increase was primarily due to the timing of development projects and milestone payments which resulted in lower spend in the third quarter of 2012 as well as the added cost of bioequivalent studies associated with high value pipeline products in the third quarter of 2013.

We anticipate a step-up in R&D expenses in the fourth quarter resulting from increased product filing activity. It should be an expectation of natural variability between quarters related to the timing of certain internal development activities as well as the achievement of external development milestones and quarter-to-quarter R&D expenses can vary materially depending on the timing of these items.

Net income for the third quarter of 2013 was $12.2 million, or $0.11 per diluted share compared to net income of $13.8 million, or $0.12 per diluted share, in the comparable prior year quarter. The year-over-year decrease was primarily result of prior acquisition related expenses related to the Hi-Tech acquisition as well as the previously mentioned increase in R&D expenses. Non-GAAP adjusted net income for the third quarter of 2013 was $16.7 million, or $0.15 per diluted share, compared to non-GAAP adjusted net income of $16.0 million, or $0.14 per diluted share, in the comparable prior year quarter. Third quarter 2013 non-GAAP adjusted EBITDA was $28.9 million compared to $27.9 million in the prior year quarter and these non-GAAP financial measures are defined further in today’s earnings release under non-GAAP financial measures.

Company generated record operating cash flow of $21.0 million in the third quarter of 2013 and end of the quarter with $75.6 million in cash and cash equivalents and full availability of our recently expanded $60.0 million rewarding line of credit. Third quarter 2013 capital expenditures were $2.8 million compared with $2.5 million in the prior year quarter.

Our capital expenditures have lagged significantly behind the level we guided to primarily as a result of lower spinning for Akorn India. We expect its spinning to roll into 2014 and this lower spinning does not impact our readiness or anticipated timeline for FDA inspection and approval. The company expects 2013 revenue at the upper end of the previously issued range of $305 million to $315 million and expect adjusted net income per diluted share to be in line with the previously issued range of $0.53 to $0.55. The 2013 outlook excludes the impact of any new product approvals after November 5, 2013.

Finally I would like to provide an update on the debt syndication process. We have included the marking process for the $600 million term loan that will finance the acquisition of Hi-Tech Pharmacal and we are in the process of finalizing the documentation. Due to the strong interest, our deal was seized in the market. We were successful in improving some of the economic terms from those we launched with. We expect that upon effectiveness, the all [ph] encashed coupon [ph] will be 4.5% on this new debt with a potential for a reduction in the spread when the company achieves a certain leverage ratio. Other terms and conditions are expected to be substantially somewhere to the terms anticipated when marketing begun. This concludes our prepared remarks. So, I will now turn over to the operator to open the lineup for Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions)

Operator

We will take our first question from Louise Chen with Guggenheim.

Louise Chen – Guggenheim

Hi, Good Morning. Thanks for taking my questions. I had a few. So first question I had was on Kilitch basically you know, once you get that up and running for U.S. drug approvals how will that improve your gross margin and what is the timing behind that when will see an improvement in operating margin. And then secondly, I was curious as to how generic injectable drug pricing has been this year and what do you expect potentially for next year and if you had any thoughts on the FDA strategic initiative that came out on October 31 to help combat drug shortages.

And the last question I have was more of just a general industry question. If you saw more consolidation was with the midsize generics companies, we have just heard from some of the other companies that are noticed who have been an increased cost of doing business due to quality standards improving and scheduled for [indiscernible] and what having, I just wanted to see if you thought that might drive consolidation through 2014. Thanks.

Raj Rai

Louise, Good Morning, this is Raj. Let me answer your first question regarding Akorn India. So our plan has been throughout that we expect to gain FDA approvals towards the end of 2014 and you know, start making product sometimes in 2015 out of India, and obviously there is a timeline associated in getting approvals for the ANDA, so they have to be factored in. So, I do not expect you know, getting a lot of U.S. business approved in 2014 or 2015. It is mostly 2016 where we should start to commercialize product for the U.S. market out of Akorn India unless we start transferring approved products over there.

So that is number 1. Number 2, while we are making the filing for U.S. FDA we are also working on filing dossiers or registrations in other geographies of the world, and the product profile and the margins obviously are much more better than what we get out of the margins out of the contract manufacturing business in India. So by design again I think we will have more products flowing through in terms of approval for the rest of the world as U.S. FDA. The second question that you brought up was pricing for injectables. I think you have seen some steadiness in the pricing for the injectables given that we continue to see shortages for hospital injectable so the pricing sort of has been stable.

As far as the shortages are concerned, you know, FDA has its strategic initiative. We had you know, discussed that last year as well and you know, we work with them in terms of giving them a heads up in terms of if there is a product that is going to be in shortage from our end but on the flip side we do also inform them our ability to respond to any market needs in the event of a shortage. And then I think the last question that you had was increased spending as a result of U.S. FDA quality issue as well as the [indiscernible]. The answer is yes and this cost is going to go further higher from regulatory standpoint in 2014 as FDA has implemented some new changes in terms of ANDA filings which would require incremental R&D expense as well as time to file a new ANDA starting middle of 2014.

Unknown Caller

Thank You.

Operator

We will take the next question from Steven Crowley, Craig-Hallum Capital Group.

Steven Crowley – Craig-Hallum Capital Group

Good Morning gentleman and Congrats on the really solid performance. The essence in some of these questions I think on higher cost and hurdle rates for being a player in the generic business. I think to seeing some upward mobility in – in pricing by some of the market participants to be compensated for that higher degree of difficulty in cost. It does not sound like from your commentary so far, you have seen much in the way of explicit benefit, but do you think the prospects are there for pricing in your base generics business to improve from here or how are you thinking about that?

Raj Rai

Well that’s a good question. Obviously at some point you know obviously the market has to pay the participants for the increased expense but you know, in our space there is also a bit of irrational behavior in terms of certain type of products that, you know, are sold in the mass quantities where people price those products at a lower price so that is one aspect, the other aspect is a more capacity coming online which will then affect pricing in the future as well so it is having little bit of a give and take but at the end of the day we strongly believe that to provide a quality product, you know, it needs to have a bit of a price premium given that what we have to do in terms of maintaining those standards and given that the cost of filing a new ANDA is going up, you know at some point, the market has to give in pricing.

Steven Crowley – Craig-Hallum Capital Group

Okay along the lines of the cost to business, there is some variability as you said Tim in the timing of your R&D, I think the implication is that we could see a pretty good pop in the fourth quarter in terms of the expenditures in that category. I am wondering if you could help us calibrate that. At one time you had some guidance that of 24 million to 26 million that looks maybe a $1.5 million or $2 million high given how things have played out. Can you – can you help us get a better beat on more that might fall?

Tim Dick

Yeah. I mean – so Steve what I can tell you with reasonable certainty is that we have step up sequentially, I mean from an exact dollar amount standpoint we are not in a position to give that granular color at this point, but I wouldn’t expect – I wouldn’t expect in total we will be at the lower end of that full year guidance so we will be somewhere south of that.

Steven Crowley – Craig-Hallum Capital Group

And then in terms of your OTC private-label business, just two questions on hot back in the queue. In terms of given are some color for how that business is performing, you’ve given us some metrics in the past about scripts or even sales in that business. Can you help us out with how that business is performed looking in the rearview mirror? And then your strategies going forward? How bigger part of your growth strategy post Hi-Tech integration? This has become a much more important part of your growth strategy. It seems like there would be opportunity for it to be so?

Raj Rai

Yes, so, Steve, I think when we complete the transaction of Hi-Tech, there are more products in the portfolio that makes that we could work on given the manufacturing capabilities of Hi-Tech to launch private-labeled products. So with ophthalmics or liquids I think we will have a decent portfolio product that could become very attractive to a customer. Given that we have had very good success in promoting our ophthalmology portfolio of private label into the channels and I think we will have to give a little bit more color after we complete the acquisition of Hi-Tech as to what that could mean but what we have identified at the time of the acquisition, roughly there is about half a billion opportunity in private-labeled products that fall in the capabilities of Hi-Tech.

Steven Crowley – Craig-Hallum Capital Group

That’s fine then in terms of how the business performed recently Tim?

Tim Dick

You are talking in terms of the private label component?

Steven Crowley – Craig-Hallum Capital Group

Yeah that private, the kind of old ABR category or whatever you would like to characterize this. Now I am just wondering how robust an area that was for you in the Q3 period?

Tim Dick

The brand business has been very stable for us with still we believe opportunity to grow with some additional investment in the private label component has shown some nice growth albeit a smaller component of the business at this point in time.

Steven Crowley – Craig-Hallum Capital Group

Thanks for taking the questions.

Operator

We will take our next question from David Amsellem with Piper Jaffray.

David Amsellem – Piper Jaffray

Hello Thanks. Just a few on the filings out of India next year. I just wanted to get some specifics. These products that have already have significant generic competition and are any of them on the FDA shortage list?

Raj Rai

Though the phase I of the products, David, that we are filing, one of the product which is sort of lead product is a branded injectable product that we are going to a tech transfer from the U.S. over to India, which should trigger the FDA inspection followed by three other products. So we have four facilities in India so we have a general injectable facility, a penem facility, a hormone facility as well as the dedicated cephalosporin facility. So we are developing the tech transfer product is already made in India successfully. So we are waiting for you know putting together the deck package for the filing that should get in the hands of FDA sometime in January or February of next year.

Then we have developed two other products, one for the penem facility and the other one for the hormone and the fourth product is an acquired ANDA for cephalosporin. So that is also going to get tech transfer so that is sort of the next product to be made out of our facility. So given all that we will have four products for each of those individual facilities, so the hope here is that you know, once we trial our first product and FDA gets in, we will have three products to review alongside with the first product that we have filed which is a branded product. So you know the strategies to get, you know, all our sites approved at the same time because once FDA is in since we will have active filing from all the facilities. So that’s really our phase 1 that will take us to the first quarter of 2014 in terms of filings and then we have other pipeline that is going to follow through, some of them will get tried in the first half. But the problem that I think the industry is going to face is there is going to be a general slowdown in terms of the filings because now FDA starting middle of 2014 is going to require six months’ worth of stability data versus 90 days’ worth of stability data now, and but our goal is to continue to make products out there and the filings will either go towards the end of next year beginning of 2015.

David Amsellem – Piper Jaffray

But, what product is that in?

Raj Rai

It’s called Cogentin and the generic name is benztropine and it’s actually contract manufactured for us by CMO.

David Amsellem – Piper Jaffray

Okay.

Raj Rai

This is one of the products that we required with [indiscernible].

David Amsellem – Piper Jaffray

Okay. Then couple of questions on Hi-Tech, on Flonase – that we saw Hi-Tech lose a big customer and we saw a big drop up in sales, so I guess there is a questions here, you know, what do you think you can do to gain back customers? Do you think you could do anything better in terms of orders and do you believe that on generic Flonase you are going to need to ultimately compete more aggressively on price than the way Hi-Tech has competed historically?

Raj Rai

You know that’s a good question. Obviously it’s a bit premature to discuss what we will do with that product in the future, but I can tell you obviously there would be, you know, obviously customer synergies, you know – customers that we have better relationships with versus them, so they will definitely have some impact with that but it has become a commodity product, multiple players in it. The good news is, you know, we’re acquiring Hi-Tech at the time when, you know, their market share is dropped, so there is a good opportunity for us to build a backup, you know, Hi-Tech is in the process of building additional capacities there. So ultimately, you know, the goal is to bring the cost of manufacturing down to become more competitive, so that’s in the works at the moment. I’m not sure if I can answer – say anything more about it at this point. We can more you color of, you know, on that subject after we close the deal.

David Amsellem – Piper Jaffray

Sure, and then a quick question on Nembutal for your 2014 guidance, I know you have not issued that but should we assume that you will include the impact of a generic competitor in your 2014 guidance?

Raj Rai

We will do most likely with or without.

David Amsellem – Piper Jaffray

In other words just two guidance are there in this, with or without?

Raj Rai

Yes, yes.

David Amsellem – Piper Jaffray

Okay, thanks.

Operator

We will take our next question from Elliot Wilbur with Needham & Company.

Elliot Wilbur – Needham & Company

Thanks, just first question generally an issue question, I guess for Raj – now you have talked a little bit about this already, but just as you start to head into the 2014 planning period and you know ultimately resulting in issuance of guidance, so you’re actually now starting to factor in longer approval times for pending products at the FDA, I know we talked for some time about kind of seasoning of your portfolio but certainly seems like at least kind of the initial impact of what you do for, has not only been to slow things down but also to give companies less transparency, so I am just wondering if you’re kind of reached the point where and I think it’s may be prudent to start building a longer timelines in terms of expected approval timing, then I have a couple of follow-ups as well.

Raj Rai

Elliot, I think the original intent of GDUFA was to expedite and improve the approval process, so I am hoping that’s still the case going into 2015 where, you know, FDA hopes to catch up with the backlog and start to, you know, improve upon the speed at which we can get or expect an approval. So that was the whole genesis behind that and charging a fee, renew, and they had mentioned that it’s going to take some time till 2015 before we can start to see an improvement in the approval process.

Now, you know, in the interim they have taken some steps as I mentioned in my prepared remarks that they have gone to this complete response where, you know, various segments within the OGD, you know, they are providing the companies with deficiencies on piece of paper rather than piecemealing it. So, that is again a strategy that FDA had that would improve the review process and ultimately would lead to an expedited review of the ANDA.

So I think it’s still the whole process in flux but to answer your question in terms of giving guidance in terms of the longer duration, I think, the backlog will still take a little bit longer time but I think as we start to file products in 2014 and in the future those filings would get an expedited review. So the question is when does the backlog shake loose and, you know, we are at the verge of a lot of the filings that -you know we have responded the deficiencies and so I am really that, you know, starting Q1 we start to see some of those products getting approved.

Elliot Wilbur – Needham & Company

Okay, thanks and as I said two questions for you on Hi-Tech as well. You know certainly seems like one of the potentially very attractive aspects of the platform is that they do give you obviously beyond ophthalmics and nasals but potentially greater presence in topicals and liquids which you know is it from market majors that have been very attractive recently, I guess, based on absence capacity and pricing but it seems like just looking at kind of what Hi-Tech has done in the last couple of years in those areas, they have been very under-invested and we do not know a lot about what’s in their pipeline currently, maybe they actually have quite a few filings in there in these areas but I’m just sort of wondering you know how well you think you are going to positioned to target those areas initially based on what Hi-Tech currently has in portfolio in the pipeline versus having to spend some money and kind of backfill to address, you know, what are rather attractive short-term opportunities and then maybe just an extension of that there has been a lot of talk from industry participants and some of the folks where you looked at Hi-Tech about the age of the facility is and how much investment was going to be required there and concerns around QA, QC systems and like. So maybe you could just talk about sort of what you think you know maybe require in terms of upfront or initial capital investment to kind of those facilities in line with your existing process and controls, thanks.

Raj Rai

You know, to answer first part of your question – you know we are very focused on developing ANDAs based on our manufacturing capabilities and I think that’s the discipline we want to bring to our R&D and that’s exactly what we have done in the last four years that the prior management at Akorn was focused on going after different kind of formulations which they did not have the capabilities of which resulted in partnerships and at the end of the day profit sharing and so and so forth, which as you know in generic business, you know you can have multiple partnership areas for the same product sharing the economic and we are seeing that you know our margins have come down as a result of it. So what we are going to do is we are going to get the focus on making and developing products that Hi-Tech has the capabilities on and they excel in that.

So that’s sort of the number 1 strategy that we will have in place, and obviously this would take a little bit of time because we have to first integrate them and then we will start working on the filings. The second part of your question was about you know what kind of investment is needed to bring them up to standards. I am not sure that how this conversation is going to work with other people who looked at the answers, I think their non-sterile facility is pretty decent. And you know you need constant upgrades now on their sterile facility which makes ophthalmics, you know, we just invested $18 million and upgraded our facility, so we have a nice backup and I do not think that a huge amount of investment is required to upgrade that facility. So we again will have to finalize those kinds of conversations and discussions as we move forward with the integration but I am not sure that it requires a tremendous amount of investment.

Elliot Wilbur – Needham & Company

All right, thank you.

Operator

We will take our next question from Jason Gerberry with Leerink Swann.

Jason Gerberry – Leerink Swann

Good morning, thanks for taking my questions. Another question is on 2014 and the pipeline guidance that you provided at the beginning of the year that you are targeting 20 product launches for 2014. Just curious, you know, keeping in mind the potential for regulatory delays, how many of those 20 products do you think will cross the 34 month kind of threshold? Are you still of high level of conviction that you can get all 20 of those products launched in 2014? And my last question is there is some concern with investors you that, you know, the inability to launch all of you 2013 products on your own are some of those products in the 2014 guidance are going to require partnership and in looking at that guidance there is a big [indiscernible], i.e. other products, not ophthalmic or injectable, so that’s about the half the market value, so are those products that you will be able to manufacture or will those require a partner? Thanks.

Raj Rai

Okay, first start with, Jason, your last question. The answer is yes. You know we have a big part of our, we call it, product revenue base coming from these other products which are in partnership, so other will manufacture the product and help us launch them. But going back to your first part of question, yes, the bulk of the products that we were projecting for 2014 will cross the 30 month threshold in 2014 and ability to launch those products I do not think that is up for any questions. You know we can – anything that we are making that’s in our control, you know, we can obviously fetch them. So you know there is about launch of 20 products crossover the 30 month filing threshold starting 2014.

Jason Gerberry – Leerink Swann

And just a follow-up Raj, those five products if all should the economics look similar to the products that you launched this year that were?

Raj Rai

I do not think five, I may have misspoken. One is only gets manufactured of CMO, so we will have the ability to launch that effectively because that’s you know the ANDAs and – could you repeat you other question? I am sorry.

Jason Gerberry – Leerink Swann

Just curious if the other four products will have kind of partnership economics that were similar to the products that were dragged on the 2013 gross margin?

Raj Rai

Yes, the answer is yes.

Jason Gerberry – Leerink Swann

Okay. Thank you.

Raj Rai

Okay.

Operator

Next is Sumant Kulkarni with Bank of America.

Sumant Kulkarni – Bank of America

Good morning, thanks for patience. The first one is a product specific one. Could you update us on the status of your generic Tobi filing and how is that case being settled?

Raj Rai

Yes, as you may have read that Teva is launching their product at the end of this year and we have settled with the company and that’s what we have at the moment.

Sumant Kulkarni – Bank of America

And tell me any near term launches. I know that your practice is not blanched in your financial outlook. Is there is anything that we should look for or maybe missing?

Raj Rai

Well, I think at the beginning of this year we gave you some feel for you know what could come in the future in 2014 but as you know there is definitely a bit of a slowdown, so we will have to provide you with the fresh sort of outlook as we provided in 2014 guidance next year. At the moment I think status quo, wait till we provide the guidance.

Sumant Kulkarni – Bank of America

And on the nine ANDAs that you mentioned that you got a complete [indiscernible], what are the logistics, now that you have got the CRLs and is there a specific [indiscernible] time?

Raj Rai

It’s actually the other way round that we get a specified amount of time to respond but there is obviously – on the flip side there is you know obviously – as you long as you have provided proper responses then you know review should be complete in a short of time and hopefully that takes you to the approval level but sort of this is the first time we are going to through it and so we have not really seen the outcome of providing the completing responses yet.

Sumant Kulkarni – Bank of America

And do you think that there is any merit in actively delaying filings until 2015 – until the GDUFA kicks in given that backlog products take a long time?

Raj Rai

No, I do not think there is any merit you want to be in the queue. By 2015, the process should improve because of the hopefully, you know, FDA is able to catch up on the backlogs.

Sumant Kulkarni – Bank of America

And in general terms what your commitment to branded pharmaceutical business with sales forces?

Raj Rai

Well, we have ophthalmology as well as injectables. We have few branded products that we sell, so we are definitely committed to at least those products at the moment. We may have opportunities in the future to license or buy branded products, you know, obviously we have the sales force to support it and that’s what really our plan is.

Sumant Kulkarni – Bank of America

Thanks.

Operator

(Operator Instructions) We will take our next questions from Louise Chen with Guggenheim.

Louise Chen – Guggenheim

Hi, thanks for taking the follow-up. I just have a question back on to the Kilitch you know, inflection point for you, you know 2015 or 2016 when you are starting to the see the momentum on the product launches of the U.S. market, how does that timing guidance compared to what you said has totally been [indiscernible] what you said before regarding when you expect to gain momentum for U.S. market.

Raj Rai

Sure Louise, I think we are behind probably three months or so from when we would have product. As far as the inflection point, 2015 would be more towards the rest of the world filings and 2014 would be near filings.

Louise Chen – Guggenheim

Okay, thank you.

Operator

It appears there are no further questions at this time. I will turn conference back up with Raj for any additional or closing remarks.

Raj Rai

Thank you again everyone for joining the call. We look for giving an update on Hi-Tech as well as other progress that we make in our year end conference call. Thank you once again.

Operator

That does conclude today’s presentation. Thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Akorn's CEO Discusses Q3 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts