Flamel Technologies' (FLML) CEO Michael Anderson on Q1 2014 Results - Earnings Call Transcript

May.12.14 | About: Flamel Technologies (FLML)

Flamel Technologies S.A. (NASDAQ:FLML)

Q1 2014 Earnings Call

May 12, 2014 10:00 AM ET


Michael Anderson – CEO

Sian Crouzet – Principal Financial Officer

Steven Lisi – Senior Vice President, Business and Corporate Development


Carolyn Horn – JMP Securities

John Boris – SunTrust Robinson Humphrey

Matt Kaplan – Ladenburg Thalmann

Jim Molloy – Summer Street Research Partners

Scott Henry – Roth Capital


Good morning ladies and gentlemen and welcome to the Flamel Technologies First Quarter and Fiscal Year 2014 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’ first quarter 2014 conference call. This is Bob Yedid of ICR Investor Relations.

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 in development stage products may not achieve scientific objectives or milestones or meet stringent regulatory requirements; uncertainties regarding market acceptance of products in development; the impact of competitive product and pricing, and the risks associated with Flamel’s reliance on outside parties and key strategic alliances. These and other risks are described more fully described on Flamel’s public filings, including the Form 20-F for the year-ended December 31, 2013. Except as required by law, Flamel does 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 of Flamel Technologies. Mike?

Mike Anderson

Good morning ladies and gentlemen. Thank you very much for joining us today. I’m pleased to report that Flamel made significant progress in a number of commercial, pipeline and financial areas and advanced our standing as a specialty pharma company with outstanding drug delivery technologies.

First, I’d like to give you an update with regards to Bloxiverz, our first FDA-approved version of neostigmine methylsulfate, an injectable product used in hospital operating rooms.

As we anticipated last quarter, we reported our first commercial sales of Bloxiverz in the quarter as we’ve established now a record of product returns and charge backs needed to record revenue under U.S. GAAP requirements. Our products sales and services increased to $5.9 million in the first quarter of 2014, compared to $2.1 million in the prior period.

As we discussed, there are two manufacturers of neostigmine stood in the marketplace. Based on our information, those manufacturers were able to supply products to the marketplace during most of the first quarter.

Flamel continued to have product manufactured through our contract manufacturers during the first quarter and we hold a solid inventory position at all of the major drug wholesalers and within our own distribution facilities. Our inventory is sufficient to supply 100% of the markets’ needs for neostigmine, now and for the immediate future.

Finally, we are in regular communication with the FDA about Bloxiverz and we continue to supply them with the information that they need to evaluate removing unapproved products from the marketplace.

As we have explained in our prior calls, neostigmine is a classic example of unapproved drugs that are available for use in the United States. The FDA has a policy to encourage drug manufacturers to submit a new drug application for these unapproved products and in turn, the FDA will remove the unapproved versions from the marketplace typically giving itself a year after approval to do so.

Let me emphasize that this is not a hard fast guideline and that the FDA does give itself significantly way upon the timing of these regulatory actions based on the number of factors including the NDA holders ability to supply the market. The need for the drug in the marketplace and whether the drug has been on the FDA’s shortage list.

The FDA also looks at potential safety issues and have the quality records of manufacturers of the unapproved products. Please note that neostigmine has been in short supply in prior periods.

With regards to these second new drug application or NDA from the Eclat portfolio, we announced that the company received a complete response letter known as a CRL from the FDA on April 28, subsequent to the end of the first quarter. The CRL is issued by the FDA when the review of the file is completed and questions remain that precludes the approval of the NDA in its current form.

In the CRL, the FDA noted that during a recent inspection of the manufacturing facility of our Active Pharmaceutical Ingredient supplier API supplier deficiencies were found. Those deficiencies did not directly apply to our drug, the satisfactory resolution of those facility deficiencies will be required before NDA maybe approved.

It’s important to point out that there were no deficiencies in the CRL other than those pointed at our API supplier. We will be working diligently with that API supplier and regulatory consultants to provide the FDA with the information that they need to allow us to resubmit the NDA.

And based on the information that’s available to us today, we believe that we will be able to submit our response to the CRL

They will dictate to us whether our submission is considered a class one or a class two response. The difference between these would be a two month review for a class one and a six month review for a class two. We believe if we would qualify as a Class one, however, this is a determination the FDA to make and we will inform you when the FDA informs us.

In terms of our work on other unapproved product opportunities, management is planning on filing new drug applications for the third and the fourth products from the Eclat pipeline in the second half of 2014. We have moved our filing of Eclat product number three back to the second half of 2014 as we are currently focusing our efforts on both neostigmine and Eclat number two at this time with respect to FDA issues.

We’ll announce the filings once the FDA has accepted them for review. At the balance of 2014, we are looking forward to the pre-clinical and clinical data that will be presented on our proprietary pipeline compounds.

As outlined in our investor presentation, which is posted on the Flamel website, we already have had or will have a series of data presentations in the first and the second half of 2014 across all four of our drug delivery technology platforms in several therapeutic areas.

This includes Micropump, our flexible technology for the oral delivery of small molecules. Micropump, as you may know, is a proven technology and has been used in Coreg CR since 2006.

There are currently two programs in the CMS area that will use Micropump, including our program on sodium oxybate and the other CMS program those being developed for a partner. Just last month, we were pleased to announce positive results from a First-in-Man clinical study in healthy volunteers using our proprietary Micropump technology applied to sodium oxybate.

The study identified formulations that demonstrates the potential to eliminate the second night time dose for patients suffering for narcolepsy and instead administer only a single-dose before bed time.

The trial was designed as a 16 subject, four way crossover evaluating three different formulations of Micropump sodium oxybate and Xyrem at a nightly dose of 4.5 grams with an extension phase of 6 grams for the successful Micropump formulations.

While we won't be able to go into all the details of the study, the key data to the 14 valuable subjects at 4.5 grams showed, first, an onset of action similar to Xyrem. Second, a C-Max lower than Xyrem and thirdly, mean blood concentrations at 6, hours 6 and 7 similar to Xyrem.

The current study will continue to treat subjects at higher doses. We are encouraged by these early results and our First-in-Man trial using Micropump using sodium oxybate is an important accomplishment for us. We will begin or look to begin a new clinical study before the end of the year in 2014 in a larger number of patients to evaluate these formulations as well as certain pharmacodynamic endpoints in patients suffering from narcolepsy, a debilitating condition.

The study is not expected to be a registration study and we plan to meet with regulatory authorities prior to embarking upon these registration studies, which we expect to begin before the end of 2015.

Narcolepsy of course is a sleep disorder involving irregular patterns in rapid movement or REMS sleep and significant disruptions of the normal sleep wake cycle that affects over one in 2000 Americans. Xyrem, a branded form of sodium oxybate is sold in the United States by Jazz Pharmaceuticals PLC and it is sold outside the U.S. by Valiant and UCB Pharma under licenses from Jazz.

Jazz reported worldwide sales of Xyrem’s branded sales of $569 million in 2013. We do plan obviously to keep investors and analysts up-to-date on our progress. The balance of our proprietary pipeline use our three other proprietary drug delivery technologies.

LiquiTime, we have one program each in pain and respiratory areas that will use our LiquiTime technology, which provides controlled release of drugs in oral liquid forms, principally for pediatric and geriatric patients.

We expect to have clinical data on the pain product and on the respiratory products respectively in the first and second half of 2014. Both of these products are expected to compete in the OTC market.

Trigger Lock, Flamel has one pipeline product in pain uses the Trigger Lock technology. Trigger Lock is a specifically designed to provide abuse resistance from long-acting opioid analgesics, which as you are probably aware is a major problem in the U.S. and the subject of specific FDA regulations for new opioid pain products.

Trigger Lock products are designed to be resistant to abused by extraction and subsequent injection, crushing and snoring as well as resistant to extraction of the drug using alcohol. As we announced one year ago, Flamel exercised our right to regain control of two drugs that use the Trigger Lock delivery technology that were formerly being developed in partnership with an undisclosed pharmaceutical company partner.

While we benefited from the data generated by that partnership, we have requested an IND meeting with the FDA to gather more clarity on how to maximize our program and in fact currently have a meeting scheduled within the next 60 days. We expect to report the initial clinical data by year end 2014.

And then Medusa. Finally, we have two products in the metabolic area that use our Medusa technology for injectibles using a hydrogel depot formulation. We have announced pre-clinical data on one of those programs human growth hormones, last October with our first human study to begin before year end 2014.

We expect to report pre-clinical data on our second product by June 30 of 2014. We hope to start human clinical trials on both products later in the year.

Overall, there are six programs in our proprietary pipeline where Flamel has 100% rights. Please note that there are additional molecules in our mid-term proprietary pipeline in various stages of pre-clinical development that we would hope to provide updates on prior to the end of 2015.

As a reminder, each of the company’s four major growth delivery platforms has patent protection in the United States up to 2025 or later. In addition, as each specific pipeline product is developed, we will extend that patent protection by applying for additional compound and technology-specific patents.

We would also point out that we have mitigated some risk to the R&D pipeline by using non-pharmaceutical compounds where both efficacy and safety were well characterized. Of course, there are always risks to execution and timing.

Turning from operations to financing. We completed the sale of 12.4 million American Depositary Shares for approximately $113 million of net proceeds. This is an important milestone for our company that provides us with substantial financial flexibility to grow our business and it broadens our shareholder base.

Of these proceeds, $32 million was used to repay our debt and we will use the proceeds to support the launch of Bloxiverz and to continue to invest in our promising R&D pipeline.

Just after the offering, we will have approximately 38.2 million ADSs outstanding and this excludes the two series of warrants that are held by Deerfield Capital as consideration by the acquisition of Eclat by Flamel in March of 2012.

There are two series of warrants, 2.2 million warrants exercisable at $7.44 per ADS and 1.0 million warrants exercisable at $11 per ADS.

With that, I’d like to turn the call over to Sian Crouzet, the Principal Financial Officer here at Flamel for a discussion of the fourth quarter financials. Sian?

Sian Crouzet

Thank you, Mike, and good morning. Flamel reported total revenues during the first quarter of 2014 of $9.2 million, compared to $5.1 million in the first quarter of 2013. Products sales and services revenues in the first quarter of 2014 were $5.9 million, compared to $2.1 million for the year ago period. The increase is due to the initial sales of Bloxiverz.

Costs of goods and services sold for the first quarter of 2014 were $2 million compared to $995,000 in the first quarter of 2013, the increase was due to the cost of goods of Bloxiverz and the corresponding costs of inventory.

Research and development costs in the first quarter totaled $7.1 million versus $8.5 million in the prior year period, because we had an NDA filing fee in the first quarter of 2013.

Selling, general and administrative costs were $3.6 million in the first quarter compared to $2.5 million in the first quarter of 2013. This increase is due to additional selling and marketing costs to support the launch of Bloxiverz, the cost of post-marketing studies requested by the FDA, and increased legal costs.

Since we are now recognizing revenues from Bloxiverz, we have started to amortize R&D assets associated with the development of the drug. The amortization was $2.9 million in the first quarter of 2014. This is a non-cash charge and we will be amortizing these R&D assets over three years.

Total interest expense was $5.5 million for the first quarter of 2014, compared to interest expense of $429,000 in the first quarter of 2013. The increase was due to non-cash expenses as a result of early redemption of facility agreements with Deerfield Capital for a total of $4.7 million and interest on the $20 million of debt from the facility agreements up until the redemption on March 24.

Net loss on a GAAP basis for the first quarter of 2014 was $26.6 million versus $8.8 million in the year-ago period. Loss per share basic and diluted was $0.94 in the first quarter of 2014 compared to $0.35 in the first quarter of 2013.

In addition, we provided certain non-GAAP data that allows investors to evaluate the company’s ongoing operations. The adjustments excludes fair value remeasurements, and amortization expense directly associated with the acquisition of Eclat on an after-tax basis, assets impairments, effects of early reimbursements of certain debt instruments and include royalty payments, due to associated with the acquisition liabilities and royalty agreements.

Adjusted net loss for the first quarter of 2014 was $4.2 million versus our adjusted net loss of $5.9 million in the prior year period. Adjusted loss per share basic and diluted was $0.15 in the first quarter of 2014 compared to an adjusted loss per share of $0.23 in the prior year period.

With respect to cash and marketable securities, we ended the first quarter of 2014 with cash and marketable securities of $83.5 million. This amount includes cash used during the first quarter and a net proceeds from the sale of 12.4 million ADSs less the repayment of debt and lines of credit.

With that, I will now turn the call back over to Mike before taking questions.

Michael Anderson

We are encouraged by the completion of the equity financing in Q1 and that Flamel has a clean balance sheet going forward. We will be focused on our approved product Bloxiverz and on understanding the FDA’s requirements for the re-submission of our second Eclat NDA. Our continued investment in our proprietary product pipeline is proceeding and we feel very confident in our R&D investment strategy to create long-term value for our shareholders.

In terms of our pipeline, we continue to provide visibility to our shareholders into our important pipeline projects, such as sodium oxybate as our programs advance and meaningful updates become available.

We have more to accomplish in 2014 and our management team is very focused on the important activities to 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


(Operator Instructions) And our first question today comes from Jason Butler with JMP Securities.

Carolyn Horn - JMP Securities

Hi, it’s Carolyn in for Jason. On the secondary product NDAs, I just had a question about, do you have to wait until after the manufacturer process new inspection to re-submit the NDA or this inspection occur during the NDA will review?

Michael Anderson

So, that’s a great question and the answer is we don’t know. We are very hopeful that we won't have to wait for a re-submission until the manufacturer has created the deficiency that exists and we are still working with both the manufacturer, our regulatory authorities and our consultants as well as the FDA to get a more complete answer to your question.

So, I think at this point in time, it’s been a very brief period since we were notified, as you know, and we are working through to get those answers. As soon as we have something that’s definitive, that would be meaningful, we will certainly relay that information.

Carolyn Horn - JMP Securities

Just a quick follow-up on that, do you think the CRL will affect any of the other NDA submissions? Or this will change your strategy on that all?

Michael Anderson

We have not said, we believe it’s, this is an isolated case. We have not described where any of the APIs for any of our products come from and including this one/ I can assure you that this API manufacturer is a well-respected company and will be highly motivated to clean up anything that they need striking up as quickly as possible.

Carolyn Horn - JMP Securities

Okay, thanks.

Michael Anderson



And next we’ll hear from John Boris with SunTrust Robinson Humphrey.

John Boris – SunTrust Robinson Humphrey

Thanks for taking the question. Just first question on Bloxiverz, Mike, you had mentioned that you continue to supply the FDA with additional information regarding removal of the other suppliers.

Can you maybe help us understand since there is a pretty big labyrinthine of different divisions of the FDA that have to sign off on this where you are in that process and then on the API manufacturing issue, are you using a similar API supplier for Eclat 3 and 4 and can you just update us on the regulatory timing on both of those assets? Thanks.

Michael Anderson

Sure. So, the first question, John relates to Bloxiverz and our communications with the FDA. We have regularly, throughout this process, I believe taken a relatively aggressive approach at getting the FDA to and force guidance that it actually established itself. And we’ve been – we started this process shortly after the product was approved by following citizen’s petition.

Citizen’s petition was subsequently denied based upon its not being the correct media by which to communicate what we were trying to get across. The truth is, we were aware of that when we found it. We wanted to bring this out. We’ve always known since day one that the FDA provided itself leeway and you know, if you go look at their guidance, you see that they list within the guidance, it’s so like a 15 page document.

They list a number of different things that they look at as they make these decisions. And one of the things that’s become more important lately particularly with respect to hospital products is, supply, the supply chain. Your ability to supply whether or not the product is historically been in short supply.

Neostigmine, for the last 18 months or so has at various times been in short supply at least according to the FDA’s website and there are actually been cases where it did run out within the marketplace.

So when we began building inventory and when we began trying to get the FDA to act on these unapproved products, we have built inventory above and beyond what is required, what most people would do over the course of building inventory, because we recognize that this was an issue.

We have shown the FDA on a number of different occasions what our inventories look like, we’ve shown them our planned receipts of product and all those kinds of things. We have just recently also communicated even in more depth some additional information that we were asked to provide and we are – we believe doing everything that we can to raise their sensitivity to this issue.

There are two different groups within the FDA that we believe will ultimately be involved in this decision, one is the shortage group at FDA and the second is compliance it is responsible for enforcement activities.

So, we have furnished them with information in some significant detail relating to our existing inventory, market demand, we’ve furnished them information on our receipt of product and identified from them the fact that we have two different manufacturing sources for this product.

So, we are hopeful that we are on the right pathway. But clearly, we don’t control the FDA. In terms of your second question relating to the CRL, the CRL we believe actually as we answered earlier only relates to this one product.

The CRL didn’t actually relate to the product itself but rather systems at the API supplier. It had nothing to do with our individual API and as we mentioned, we are expecting to file, at this point, our second – that mean, our third and our fourth NDA in the second half of 2014.

John Boris – SunTrust Robinson Humphrey


Michael Anderson

Did that answer your questions?

John Boris – SunTrust Robinson Humphrey

Sure, it does, Mike. Thanks for that.

Michael Anderson



And our next question is from Matt Kaplan with Ladenburg Thalmann.

Michael Anderson

Hi, Matt.

Matt Kaplan – Ladenburg Thalmann

Just a follow-up on the second NDA, can you give us a sense in terms of what’s the, I guess rate limiting step for you to file your response to CRL? You got into a little bit, but has – I guess, the question is, has the API manufacturer are ready to address those issues or are they still outstanding?

Michael Anderson

So, Matt the API supplier has had communication with the FDA on the identified issue. We are not ready to add much to that unfortunately at this point. But, suffice it to say, we have the full attention of our API supplier and we are working with both best supplier and our regulatory consultants to be able to move this through as quickly as possible.

I would have to tell you that as of right this very moment in time on Monday the 12th of May, we don’t have the specific answer to your question but know that it’s being addressed.

Matt Kaplan – Ladenburg Thalmann

Okay, and is that really the rate limiting step for you to file your response to the CRL?

Michael Anderson

So far as we know, that is the absolute only step involved. As I mentioned earlier and I think in our press release a week ago or whenever that we – it’s the only issue identified in the NDA and all the way to the very end to the PDUFA date this had never been brought up as an issue.

Matt Kaplan – Ladenburg Thalmann

And then Bloxiverz, as we are coming up to the – I guess, anniversary of your approval at the end of this month of the product. And you mentioned in your prepared remarks it’s usually, the FDA has said that they will endeavor to remove the unapproved products within a year, what other mechanisms do you have in your disposal to make sure that the FDA kind of appears to not at the promise, but gets its guidelines.

Michael Anderson

Matt, that's a really good question. We have a couple of other initiatives ongoing as you may be aware and we are trying to work within the guidance and within the mechanisms evolved by the - laid out by the FDA. There are some steps from a regulatory perspective that we can take.

I think that the FDA there is an opus of ombudsman that you can utilize you can exert some political influence if you spot the right folks and so, but we have done what they have asked us to do and we are hopeful that we can have them do the enforcement action without going to additional steps.

So, as I mentioned, we recently communicated with them and we’ve had ongoing dialogue, I’ve – I mean, we’ve seen a lot of these promise – I’d say a lot, half a dozen over the years and I don’t know that there has been another manufacturer who has worked more collaboratively with the FDA to try to get them to remove the unapproved products and we are still hopeful that the steps that we’ve taken will be able to do that.

Matt Kaplan – Ladenburg Thalmann

And you mentioned that you’ve recently delivered some additional info requested by the FDA, do you mention that that was part of the I guess, SG&A expense during the quarter especially with us – that information above and beyond what you mentioned in terms of your – that was by the market and that…

Michael Anderson

I sort of lost you there Matt, I don’t know that I – so I think we are mixing up two different things. I think that with respect to our communications FDA has less to do with SG&A for the quarter. It’s really the activities that we’ve taken to work with the FDA to remove the unapproved neostigmines from the market and that’s – I don’t consider that to be a cost-intensive kind of thing at least to this point. So, we will continue to do that and obviously because we submitted data to them, we’ve done the things they’ve asked us to do.

Matt Kaplan – Ladenburg Thalmann

Great, just and then, couple more questions in terms of your internal pipeline. With respect sodium oxybate, I guess what info is the info that you hope to gain from the planned Phase II that you are going to initiate later this year?

Michael Anderson

Okay, well, I could answer that, but we have a most talented guy who I failed to introduce yet, Steve Lisi, who is our Senior Vice President, Business and Corporate Development online and I am going to let Steve Lisi to answer that one for you.

Matt Kaplan – Ladenburg Thalmann

Okay, thank you.

Steven Lisi

Thanks, Mike. We don’t know what I’m most talented in yet, but one day we’ll figure it out. So, Matt, the – what we hope to find out here from this next – what we are starting is, looking at some pharmacodynamic endpoints. We haven’t disclosed exactly what they are to you yet and once we get this study started up, we will disclose that.

We will have a full protocol up, most likely on clean trials for everyone to see. So just looking at pharmacodynamic data with that next study, that’s going to be the focal point of it. If we can get anything else in there, any other data points that we are interested in looking at we will add those.

We still give or take six months away from starting that. So we have some time to figure out exactly how we are going to examine this trial. So it’s a little premature to say what the exact design will be, but the main focus as we see it right now is, looking at specific PD endpoints, which we will reveal to you later.

Matt Kaplan – Ladenburg Thalmann

Thanks, that’s great. Thank you.

Michael Anderson

Hey, Matt, before you leave, let me clarify one thing, what I think you were talking about with respect to SG&A. When we received our approval for Bloxiverz, we agreed to some pulse marketing study requirements by FDA and not in humans and so what you would see and what I think you are alluding to is the beginning and the continuation to some degree of our fulfilling those post-marketing requirements.

Matt Kaplan – Ladenburg Thalmann

Okay, there is no additional requirements especially with Bloxiverz at this point in terms of post-marketing?

Michael Anderson

Well, we are endorsed in those, they are not extensive, we talked that publicly that I think what you saw was a good portion of the requirement.

Matt Kaplan – Ladenburg Thalmann

Thank you.

Michael Anderson

Thank you.


And Jim Molloy with Summer Street Research has our next question.

Jim Molloy – Summer Street Research Partners

Hey guys, thanks for taking the question. Just a housekeeping. In the quarter, 5.9 products, how much of that is Bloxiverz versus other sales? And then on the OpEx expense rate here in the quarter, is this sort of the good number going forward or a number we are going to be moving around through the rest of the year?

Michael Anderson

I’m going to let Sian address that. I can do the sales part, Jim. We didn’t specifically as you know, spell out what the Bloxiverz sales were and I think it would be safe for you to consider the majority of that Bloxiverz and that of course it reflects that during the course of Q1, the other manufacturers were - for the most part in constant supply.

So, we are attempting to - obviously to sell at a higher price reflective of our expenses and the quality and so forth associated with the Bloxiverz sale. So, in following GAAP, we’ve taken some measures not – so you’d never seen all the Bloxiverz sales given the requirements of US GAAP.

But we did report them for the first timing when that will continue to be meaningful and we will pick up a bigger percentage of it as we go forward. In terms of the expenses associated throughout the remainder of the year, you will see some variance, specifically in the R&D part of the expense because as we file NDA applications and as we engage in clinical studies.

You will, at different times see a ramp up in R&D expenses over the course of the remainder of the year. So, I don’t know that you can take that as a standard to go throughout the remainder of the year actually in some respects maybe a little live.

Jim Molloy – Summer Street Research Partners

And I know that, over the four quarters of the previous year, the product sales were about $2 million, little over $2 million is that I mean, is there a compelling reason for non-recourse Bloxiverz versus this?

Michael Anderson

Well, because, it’s really again related to GAAP, as you know, this is the first quarter that we have not or that we’ve actually reported Bloxiverz sales. The numbers that you see and as it relates to the items that we report only reflects sales that have actually gone to the end-user and that sales that may still exist within the wholesale community which is substantial, so, that’s the only reason is, that we don’t think it’s entirely accurate yet given the fact that we are reporting only a component of those.

Jim Molloy – Summer Street Research Partners

Got it, that makes sense, okay. And then last, what are the good comp on the count up on the one year anniversary follow-up question earlier, what’s the good comp on the last product or so that you could point to say, well, here is, product x at two, three years ago, they came up to the one year and within a month the FDA required all the other folks to get off of the market?

Michael Anderson

I am not sure, I am understanding your question exactly, Jim.

Jim Molloy – Summer Street Research Partners

What is the – what is one of your good comp of a prior product that came upon similar to Bloxiverz where there were unapproved products out there that are going through the same process that came from the one year anniversary and the FDA said here is all the unapproved products now have to be off the market, that we can sort of look to is...

Michael Anderson

Yes, well, I think it’s been done with several products over the period of time and I think you have to be a little careful about looking at one and making assumptions based on all of them, because of what the FDA says, if you go back and look, you can see products like (Inaudible) and there are others as well that have been.

And in some cases removed shortly before the years period. In fact, the FDA and its guidance says that, that they are under no circumstance will they require a year’s worth of grace period, grace period meaning the time they take to get a product off the market.

We believe that this is a little unusual because this involves, A, the hospital product, but specifically a hospital product that’s going to be short supply and as you know, I think probably and I can’t speak for FDA, but I would suspect that one of the issues that is more sensitive to FDA than unapproved drugs is, getting hammered about not having everyday products used in surgeries available in the hospital.

And I think that we’ve had to – impress upon the FDA while we are a small entity, it does necessarily preclude us from being able to do that in fact, we currently can do that. So, those are couple of examples there is pancreatic enzymes, you can extend their release and you can go on and on.

But, and then there have been a couple that took longer lead both the – for example because there were no other therapies available. So, but I do think that FDA has to get comfortable with our ability to supply and hopefully we are – they are getting close. Did that answer your question?

Jim Molloy – Summer Street Research Partners

Certainly, thanks for taking the questions.


And next we’ll hear from Scott Henry with Roth Capital.

Scott Henry – Roth Capital

Hello, just a couple of questions. I don’t know if you want to comment on it, but the prescription data I get is not just not very accurate for Bloxiverz, it doesn’t captured. I know that you use different sources.

I am curious if you could comment about how the prescription data has been if we kind of take it a real point in time, what kind of run rate are we annualizing versus three months ago, now, obviously it will change a lot of other products to be pulled off the market. Just any color there would be helpful.

Michael Anderson

Absolutely, well first of all, as you know, Scott, this is – because this is a vial used in the hospital during a procedure, you don’t really get script data and that’s why the IMS data is too accurate.

We actually buy data that shows the sale out from our distributors to hospitals each and every day and we actually get a listing of those hospitals who buy the product each day, by both, so you are right, the IMS data is notoriously bad.

I think that we mentioned in our press release not too long ago that our share at the end of the first quarter, give or take was something under 20% on an annualized basis. We’ve had a couple of the market, remember it’s a $5 million or a $4.8 million.

Also please remember that, there are times during that first quarter when the unapproved products were not shipping, where we had substantially larger shares for a specific week or so. But typically, when they came back, our share dropped, but down again based on the difference in price.

Scott Henry – Roth Capital

So, if you normalized it out, trying to pick up peaks and valleys, I mean, if your share was just under 20% at the end of first quarter, at the end of March, do you get any sense of where it is at the end of April? Is it going higher or?

Michael Anderson

We haven’t said, and again, I think that, since the unapproved manufacturers have been in supply for - since that period of time started I’m aware, I don’t think it would be reasonable to expect the product would grow at a – in a fashion like you would normally expect a product to grow.

What I think you will see is that, as those unapproved products remain there, when they are in short supply, we will pick up share, it won’t be anything that you will be able to count on or to be able to really particularly foresee and – but once the FDA removes the unapproved products or makes its announcement, typically, I think you see a pretty rapid transition.

Scott Henry – Roth Capital

Okay, thanks for that color. Now another question I just wanted to understand this, the Eclat pipeline, the serial of number two was not related to number three or number four, so could you kind of explain why number three got delayed if there is no relation and I know Eclat number three is a larger product, I would think you would kind of add resources, is it just a function if it’s not having enough resources just, get delayed?

Michael Anderson

Yes, I think there are a couple of things, I think number one, we do have limited resources and when - particularly and you’ve got to remember those products were started prior to the acquisition of Eclat by Flamel. We split the component of that as it is and we have limited resources to be able to do them.

So if we pull off – our most – out two most important projects right at this moment are A. getting those unapproved Bloxiverz just off the market or unapproved neostigmines rather.

And secondly, getting the CRL cleaned up as absolutely quickly as we can and I don’t think you will see a long delay and remember there is a one day difference between the first half and the second half not suggesting we’ll file it necessarily on day one of the second half.

But we have – because of limited resources, pulled of and tried to focus on getting the CRL addressed first and we use external consultants along the way too. So we have some constraints in both of those. But know that we are working as rapidly as we can for both the CRL and the third and fourth Eclat projects.

Scott Henry – Roth Capital

Okay, great and a final question on is kind of on the accounting side, it looks like this $3 million on amortization of R&D assets, that looks like that's a go ahead, we’ll see that every quarter for the next three years I guess. These other – your reimbursement of acquisition and fair value remeasurement of acquisition limit liabilities, I think it’s more a one-time meaning, we may or may not see them, but there some ongoing charge?

Sian Crouzet

It’s Sian, I’ll take your question. So, yes, you are correct in terms of the amortization of the R&D assets we would expect to see that every quarter going forward for three years. The non-reimbursements of acquisition note that was a one-off as we redeemed the difference that we had over the quarter.

As for the line fair value remeasurement of acquisition of liabilities, that line we will see on a quarter-by-quarter basis. It will move up and down, A, depending on the way the business plan, both when we acquired– and how that we project that to evolve in the future and also in there the fair value remeasure the warrant to give into their sales when we acquired Eclat and that will vary up and down as a function of the share price of every balance sheet date.

Scott Henry – Roth Capital

Okay, great. Thank you for that additional color and thank you for taking the questions.

Michael Anderson

Thank you, Scott.


And it appears we have no further questions at this time.

Michael Anderson

Well, thank you operator, and thank each of you again for your time today and for joining us on this call, We will look forward to updating you on our business on our second quarter call and other times as appropriate. Have a great day.


And once again this does conclude today’s conference. We appreciate your participation.

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