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IGI Laboratories, Inc. (NYSEMKT:IG)

Q2 2014 Results Earnings Conference Call

July 24, 2014, 04:15 PM ET

Executives

Jason Grenfell-Gardner - President and CEO

Jenniffer Collins - CFO

Analysts

Scott Henry - ROTH Capital Partners

Operator

Good afternoon and welcome to the IGI Laboratories Second Quarter 2014 Results Conference Call. All participants will be in listen-only mode. (Operator Instruction). After today’s presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference over to Jenniffer Collins, CFO at IGI Laboratories. Please go ahead.

Jenniffer Collins

Thank you, Laura.

I’d like to start with our Safe Harbor Statement. Except for historical facts, the statements in this call or other written statements made or to be made by IGI Laboratories are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties. For example, statements about the company’s anticipated growth and future operations, the current or expected market size of its products, the success of current or future product offerings, the R&D efforts and the company’s ability to file for and obtain U.S. Food and Drug Administration approvals for future products are forward-looking statements. Forward-looking statements are merely the company’s current predictions of future events. The statements are inherently uncertain and actual results could differ materially from the statements made herein.

There is no assurance that the company will achieve the sales levels that will make its operations profitable or that FDA filings and approvals will be completed and obtained as anticipated. For a description of additional risks and uncertainties please refer to the company’s filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K and its latest quarterly report on Form 10-Q. The company assumes no obligation to update its forward-looking statements to reflect new information and developments.

I would like to now turn the call over to Jason Grenfell-Gardner, IGI’s President and CEO.

Jason Grenfell-Gardner

Thank you, Jennifer. Good afternoon ladies and gentlemen and welcome to this IGI Laboratories business update covering the second quarter of 2014. I’m Jason Grenfell-Gardner, the President and CEO of IGI and I’m joined today by Jenniffer Collins, our Chief Financial Officer. Thank you for joining us today.

I want to discuss some highlights of our business performance with you and also give you update on the execution of our strategy. Then Jennifer will review our financial results for the second quarter and finally, I will discuss our progress towards our key goals for 2014.

I am pleased to report that IGI is on track to deliver on all of our 2014 goals across the business. It’s been a busy time here at IGI and I think today’s results speak to the dedication that we have on business execution as we go through this year of transformation at IGI. At this point last year, we had 11 ANDAs pending with the FDA and had only filed two for the first half of 2013. We starting making IGI label products but only had three products and five presentations in the IGI label. Year-to-date in 2013 we had revenue of $7.5 million and $1.3 million of cash on the balance sheet and we had about 45 employees.

Fast forward to today, you can begin to see the transformation that we’ve been talking about in our business. We’ve now filed 19 ANDAs with the FDA for IGI products and have had two approved, leaving 17 on file with the FDA. So we’ve nearly doubled our active pipeline. The total addressable market of our pipeline has grown from $250 million at this time last year to $465 million today. We now have six IGI products and 11 presentations in the market. And year-to-date we saw revenue increase 78% over 2013 to $13.3 million and as a result of the completion of our recent public offering we now have over $26 million in cash on our balance sheet to enable us continue to drive growth in our business.

We have a team of 63 people now here at IGI, all of us dedicated to executing our business plan and driving value. This is the transformation that we’ve been undergoing here at IGI. And I believe that this is only the beginning as we work to become a leading player in the specialty generic pharmaceutical industry.

So let me now spend some time giving you an update on the key parts of our business that are driving this change. First, let talk a little bit about where we are in our R&D program. As we said before R&D is the lifeblood of a generic pharmaceutical business and we’ve committed ourselves to accelerating our R&D capabilities and productivity in 2014. The team has truly stepped up and performed a great job in the first half of this year which saw us file six ANDAs for the IGI label.

To put that in context that’s more ANDAs filed than we achieved in all of 2013, and the same as we achieved in all of 2010, ’11 and ’12 combined. And we are not done yet. We’ve also received our first ANDA approval this quarter, including tentative approval for our ANDA for diclofenac sodium 1.5% topical solution. We anticipate launching this product on March 28, 2015 now that we’ve settled the patent litigation that we initiated for this product.

We continue to ask to the R&D team to execute goals that are unprecedented at IGI. Over the course of the remainder of this year I anticipate that we will file a further four to six ANDAs primarily in the fourth quarter. However to provide some context we are currently working on 17 future ANDA filings all in various stages of their product cycles and we’ve set our roadmap for our R&D plan through the middle of 2016.

To facilitate our ambitious goals we have just completed the build out of new R&D laboratories at our facility in Buena, New Jersey and we continue to expand our team and capabilities. As we move beyond 2014 we would anticipate that this will allow us to continue to increase the absolute number of filings year-over-year so that we would have the capacity to file one to two ANDAs per month. Now in addition to the 17 ANDAs on file with the FDA for IGI we’ve also filed another four ANDAs under joint development agreements with a number of pharmaceutical partners.

Indeed, in June we filed an ANDA under joint development agreement with Impax Laboratories. If you take these together with the 17 IGI ANDAs we now have a total 21 ANDAs pending approval at the FDA. Consistent with our stated strategy we’ve also begun working on some new projects in 2014 that seek to develop innovative products using the 505(b)(2) regulatory pathway. While these projects are at a very stage as they develop we will keep you up to date on our progress. We think that there are very interesting opportunities in the 505(b)(2) space that fit well with IGI’s mission in specialty generics.

Let me turn now to the commercial side of our business. In the second quarter of 2014 we launched two new IGI labeled products. We launched the lidocaine topical solution in June which was the first IGI ANDA approval and this has truly validated our ability as an organization to take something from concept through R&D and into commercialization. We also launched the fourth product in our authorized generic portfolio, the low potency version of the [FLUOCINONIDE] cream. We’re pleased with the market shares we maintained in each of our existing projects and we’re on track to meet our existing -- our expected share targets for our recent launches.

Year-to-date 2014 we generated $6.3 million in total revenues from the sale of IGI labeled generic pharmaceutical products, an increase of 127% over the same period last year. Our team has done a great job in our existing markets and we’re actively working to expand our product portfolio. As part of this effort we’ve been actively working on a number of business development projects in 2014 and I’ve identified some real opportunities that could be taken as future product acquisition targets for IGI.

Historically we focus generally on topical generic pharmaceutical products like the econazole nitrate cream product that we acquired in 2013 and that makes sense because it utilizes all of IGI’s value chain from beginning to the end. While we continue to look for similar opportunities we also recognized there maybe opportunities in adjacent markets and the specialty generic industry that can also make that use of the IGI value chain, whether that’s our sales and marketing capability, our supply chain and logistics functions or even our regulatory and R&D strength.

With such great capabilities throughout our organization where we do find opportunities that can utilize the IGI value chain it makes sense for us to take a good look at whether these help us to drive shareholder value. As you know our balance sheet has a little more dry powder to be able to execute the transaction. The successful completion of our public offering earlier this month increased our cash position by just over $25 million and we’re grateful for our new and existing shareholders that participated in that offer.

We plan to put this cash to use, to accelerate revenue for IGI through transactions that will be accretive as quickly as possible to the organization. We hope to be able to update you more in the near future on this topic. Finally let me talk about the contract services business before I turn the call back over to Jennifer to talk about the financial results. Our contract services business increased 27% over the same quarter last year. This business continues to be a core part of our growth in 2014.

Many of you remember that what we’re trying to do with this business is to shift the focus to more prescription-based pharmaceutical products. In the second quarter 2014 these prescription products represented 81% of our contract manufacturing revenue compared to 71% in the first quarter 2014 and compared to 44% in the second quarter of 2013. For the year-to-date 2014 prescription products represented 75% of our contract services revenue compared to 57% for the same period last year.

Taken together our R&D productivity, revenue growth and margin improvement mean that we’re on track to meet all the goals we set for 2014. As a reminder our 2014 objectives included revenue growth of 40% to 45% over 2013 for the full year, the commitment to file at least 10 ANDAs with the FDA for generic topical prescription drug products and maintaining profitability for the full year in 2014, whilst we double our 2013 R&D spend to drive regulatory filing. We’re on track and I'm excited about the opportunities ahead for IGI.

Let me now turn the call over to Jennifer to continue the financial review of the quarter.

Jenniffer Collins

Thanks Jason. Good afternoon and again thanks for joining us today. Our total revenue for the second quarter of 2014 was $6.5 million, an increase of 70% over the same quarter last year. Revenue for the second quarter of 2014 included $3.4 million of net revenue from the sale of our own IGI labeled product, compared to just $1.4 million in the same period last year.

We increased revenue $2.7 million over the same quarter last year. This increase was attributable to $2 million increase in IGI label revenue and a $0.7 million increase in additional revenue from contract manufacturing and our formulation services business. Our IGI product portfolio included revenue from four authorized generic topical prescription products as well as our first organically developed and approved product, lidocaine 4% topical solution and our Econazole Nitrate Cream 1%.

We launched our fourth authorized generic product in the Fluocinolone Acetonide and we launched lidocaine hydrochloride 4% topical solution in June as well. And as is customary in the generic pharmaceutical industry our gross product sales are subject to a variety of deductions of which include estimates for chargebacks, rebates, cash discounts and returns and other allowances.

We’ve made adjustments to these estimates, none of which are individually significant, and we’ll continue to monitor our estimates closely as actual charges are presented. As I mentioned we grew our contract services business by $700,000 million as compared to the second quarter of last year. Our increased contract manufacturing revenue in the second quarter of 2014 related to a $400,000 increase in contract manufacturing for two pharmaceutical customers as well as some incremental orders from certain other existing customers.

We also increased contract formulation services revenue in the second quarter by $300,000 primarily attributable to completion of certain milestones in the second quarter in accordance with formulation agreement with one of our pharmaceutical partners. Our contract manufacturing and formulation services revenue from our pharmaceutical customers represented 81% of our second quarter revenue, and this is compared to 44% in Q2 of last year. Sales of OTC products were 0% in Q2 of this year, compared to 8% last year, and our cosmetic product sales represented 19% of revenue in this quarter as compared to 48% in the same period last year.

As you may recall our contract manufacturing business is a make-to-order business. There may be variability in the percentage of our contract services revenue, resulting from the sale of pharmaceutical products quarter-to-quarter. However year-over-year we expect more of our contract business to result from sales to pharmaceutical customers.

So all this means we grew all of our business lines in the second quarter of 2014 compared to the last year. Our significant revenue growth and favorable product mix and contract services enabled us to improve gross margins to 45% in the second quarter which was significantly higher than the gross margin of 30% we recorded in the same quarter last year. Year-to-date our gross margin was 43% in 2014 compared to 30% in 2013.

As a frame of reference, margins improved sequentially over the first quarter of 2014 as well from 42% to 45%. These improvements are attributable not only to our revenue growth and product mix shift, but to our increased efficiencies in our operations and leverage of our operations as we continue to increase throughput at the facility. As we successfully continue to add higher margin products to our mix, as well as the addition of future IGI label products we expect that our gross margins will continue to improve year-over-year.

SG&A as a percentage of sales for the second quarter of 2014 was 18%, which was consistent with the same quarter in 2013. SG&A in the second quarter of 2014 was also consistent in absolute dollars with the first quarter of this year as both quarters included costs related to increased professional fees, non-cash expenses related to stock-based compensation and the expenses related to the performance based pay for 2014, which were all higher than 2013.

We do plan to continue to manage our administrative cost while expanding our customer base and product portfolio and we expect to make some additional investments in SG&A over time to support our growth. Our strong performance on all fronts during the second quarter of 2014 allowed us to continue to invest in R&D. We spent $2 million in the second quarter of 2014, compared to $800,000 in the same period last year.

In order to continue to expand the pipeline and drive shareholder value we expect to continue to double our R&D spend in 2014 as compared to last year, as we focus on expanding our portfolio of generic topical pharmaceutical product, adding to the 17 submissions we now have pending at the FDA.

We plan to expand our R&D team and as Jason mentioned we plan to file at least another four in 2014. Additionally our R&D cost in the first and second quarter of 2014 include increased costs for required outside testing. We will continue to increase R&D cost but we do plan to manage the growth to be consistent with our strategic plan.

In the second quarter of 2014, IGI reported a loss of $345,000. Year-to-date our net loss was $178,000. As Jason discussed earlier fiscal responsibility is critical to our success and we have indicated we plan to sustain profitability for the full year of 2014 and still make our necessary significant investments in R&D.

Year-to-date net cash used in operations was $470,000 and that included the $3.5 million of R&D expenses. In the same period last year operations used a $1 million. This company has not been profitable since 1997 so maintaining profitability for the year 2014 is important to us. It was merely the timing of our R&D investment on a quarterly basis which contributed to the small net loss year-to-date. Having our own operations start to generate cash enables us to continue to reinvest in our future and allows us the opportunity to explore additional opportunity to accelerate growth.

Year-to-date we’ve used $312,000 in investing activities related to some spend on some minor capital expenditures and year-to-date in 2014 our cash from financing activities included $443,000, primarily related to funds received from the exercises of warrants and auctions.

As Jason discussed from July 2nd from 2014 we closed our underwritten public offering of shares of our common stock which included 697,000 shares subject to the underwriters’ overallotment option. After giving effect to the overall allotment option we sold an aggregate of 5.3 million shares of common stock in the offering at an offering price of $5 per share.

The net proceeds of the offering were $25.1 million after deducting underwriter discounts and commissions and other estimated operating costs. As Jason discussed, these proceeds will allow IGI to continue its business development efforts in search of additional products and intellectual properties that help facilitate and accelerate the growth of our business. We met with many existing and new investors in our meeting during the offering process and we attended the Craig-Hallum conference in May and had the opportunity to meet with many investors as well. We hope to add additional conference appearances to our list for 2014 and we're committed to continually improving our communication with our investors and potential investors and we understand the importance of transparency with the investment community.

In closing earlier today we announced that IGI has accepted Damian Finio’s resignation from our Board of Directors. Damian has accepted a senior level finance division at a pharmaceutical company and under the terms of his acceptance of this new position Damian will be unable to continue in his role as Director for IGI. The effective date of his resignation will be August 11, 2014. Damian is a great friend of IGI and we wish him well in his new role. IGI has begun its search to replace Damian on our Board and we're hopeful to have a replacement for him in the coming months.

In the interim, Bhaskar Chaudhuri will resume his role as the Audit Committee Chairman. Thank you all again for joining us today. Jason and I are grateful for your participation and look forward to updating you soon. I'll now turn the call back to Jason for his closing remarks.

Jason Grenfell-Gardner

Thanks, Jenniffer. We believe IGI is well positioned for the opportunities that lie ahead for us. There is no doubt we have a lot of work to do. But this team is committed to excellence governed by quality and focused on execution. As ever I am grateful for your support and for this opportunity to serve IGI shareholders. At this point Laura we're happy to take questions. Thank you.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question will come from Matt Hewitt of Craig-Hallum.

Unidentified Analyst

Hey, good afternoon. This is actually [Dillon] on for Matt. Say all I guess a stereotypical question to ask a generic company but what the -- what you guys, so what you can guys say about the dialogue with the FDA regarding approval timelines? Would you say it's the same better or worse than a year ago?

Jason Grenfell-Gardner

Hi Dillon, thanks for your questions. Great to have you on the call. There are lot of things in flux at the moment at the FDA as it works through the implementation rather of the Generic Drug User Fee Act. And I think there is spectrum of opinions across the generic drug industry about how that's impacting each of our firms. What I would say is I take what’s happening at the FDA in a very positive vein. As we correspond with the agency as we interact with it, we find some very positive trends. For example, while some people may find the agency’s new practice of responding to each review module in ANDA review in more complete response letter we find that actually that one, encourages you to file a better application but two, it means that you are able address all of those concerns simultaneously and get back with the FDA.

Second, I think that the recent guidance which came out over the course of the past month indicating target review timelines for major and minor deficiency resubmissions as well as for prior approval supplements helps to give the industry much greater clarity about what’s going to happen for those applications which are filed from October 2014 and forward. That’s positive for us. So we’ll know that there will be obviously the initial review time before refuse to receive our acceptance for filing. We know that there will be initial review time for first complete response letter and we know that the response times that are targeted for major and minor submissions thereafter.

That a degree of transparency that frankly industry hasn’t had for a long time. Now there will be some turbulence as you move through that obviously with files that are -- things that are pending with the agency and so on. But from what we see the agency continues to work and we are encouraged by the degree of rigor that seems to be applied in the way which they are going implementing PDUFA.

Unidentified Analyst

Okay. Great, I appreciate the color. Thank you. And then kind of along the same lines, recent price increases is a topic we’ve been seeing within -- throughout the generic space over the past year, and kind of more prevalent over the past couple of months. Have you guys been seeing anything within your label product portfolio, price increasing the past couple of months? Is that a possibility for you guys to execute some price increases, to take your alliance off of the FDA approvals timeline?

Jason Grenfell-Gardner

I mean if you go back and look at where we are in terms of our products, we have markets in which we are one to two players, one to three players, one to four players. And so there is a dynamic that exists in that market depending on the FDA’s regulatory actions with competitors, supply chain management amongst competitors and a number of other factors. I wouldn’t want to comment on any specific individual products, what I can tell you is that we are very vigilant in the way which we look at the market and the way in which we prosecute our business. So if there are opportunities where we believe it makes sense for us to take up price and we believe that that’s the right thing to do in terms of the balance of risk in the business then that’s something that we will consider.

At the same time we also have to be cognizant that this is still a competitive industry. And prices go up and prices down. What we as a management team have to do is to ensure that we remain alert and we try to maximize the value that we can.

Unidentified Analyst

Okay, great. And then lastly from me, sorry I may have missed it or I’m not sure if you guys usually provide this. But you guys wouldn’t be, I guess Jennifer you wouldn’t be willing to break out the IGI label products from the AG, [inaudible], would you?

Jenniffer Collins

John, we don’t give revenue data on product by product basis. We did break that out from the product sales just in total for the six products we have on the marketplace.

Unidentified Analyst

Right, okay. Just thought I’d ask. Thanks.

Jason Grenfell-Gardner

Thank you.

Operator

And our next question will come from Scott Henry of ROTH Capital.

Scott Henry - ROTH Capital Partners

Thank you and good afternoon and congratulations. Certainly a lot has been accomplished over the past six months. A couple of questions, just for clarity, Jennifer, the $3.4 million number you gave. Does that include SYNALAR and econazole nitrate and lidocaine 4%, is that what’s in that $3.4 million number?

Jenniffer Collins

That’s correct. That’s our six product that we have in the market, now the 4 AGs, the lidocaine and econazole.

Scott Henry - ROTH Capital Partners

Okay. Great, and then staying on the income statement, would expect Q2 to be kind of a high watermark for R&D as well as SG&A? I mean, it seems like there was a little one time noise in the first half of SG&A would that number go down on a quarterly basis and I guess R&D obviously you want to ramp up to get in front of the deadline.

Jenniffer Collins

We did ramp it up to get in front of the deadline, Scott. I think from an SG&A perspective the run rate that we are at now will be pretty consistent for the end of the year I believe. On an R&D perspective it’s really going to best depend ultimately on the timing of some of the outside testing. Those are going to be in the filing. So it’s really going to be dependent on if we were to do four, if we were able to do six by the end of the year. That would have a pretty big swing in the numbers for R&D for the fourth quarter. But we are going to really manage that with our revenue growth and make sure that we money to spend there. So that’s kind of -- that’s what we plan to do. But we could see this run rate toward the end of the year.

Scott Henry - ROTH Capital Partners

Okay, fair enough. And switching over to R&D, Jason, I know you talked about the process with the FDA. Asking the question a little bit different how do you think the approval process is going on your specific applications?

Jason Grenfell-Gardner

Yeah, I mean I think we see progress. Certainly there is ongoing dialog around some of the applications we filed. You know it’s worth bearing in mind that the first IGI applications were filed in the fourth quarter of 2010, one of which has been approved which was the diclofenac sodium topical solution. So there is another one of those which is still in review with the FDA. And then two further applications in 2011 and then so on so forth. So there is an element of this pipeline kind of maturing and moving through. If we think 32 to 36 month approval timeline you know it’s going to be a bit quieter until we get into the fourth quarter and to the first quarter of 2015 to see much more activity from the agency but there is certainly some movement happening.

Scott Henry - ROTH Capital Partners

Okay, fair enough. And then you mentioned that you now have four partnered ANDAs. First of all I mean I have got two in my model. I have got the Impax one in June and then I have got the one in December 2013 with a multinational generics player. When were the other two filed?

Jenniffer Collins

At the very end of 2012 Scott, they were with the same partner.

Scott Henry - ROTH Capital Partners

Okay. And again on that topic of partner products, could you talk a little bit about your relationship with Impax should we start to see more generics filed with them. I am just trying to get an idea, I mean certainly there is significant end-user market for that product, how much real is that revenue stream?

Jason Grenfell-Gardner

You know we have relationship with Impax that we have had for two years now and it’s not confined to the one product that we have. It is now fairly limited in scope. But see I mean I think we want to try to continue to get to develop that relationship. At the same time there is always going to be trade-off between the work that we do for the IGI label which is entirely within our own capabilities and the work that we do with partners and historically we had partnered products and partnered relationships as we seek to balance the cost of R&D against the revenue that we had and the resources that we had available. Because of the shifts that we have seen in terms of revenue and the margin profile of the IGI business or a little bit less reliant on that and so our calculus changes a little bit.

But that being said but we have a good relationship with Impax and we value it so let’s how it revolves in the future.

Scott Henry - ROTH Capital Partners

Okay, certainly fair enough. And then still on the partnered products I mean certainly the diclofenac sodium, 1.5% the [penset]. Are you doing anything about the next generation product there or how should I think about that revenue stream? Because I am not sure how much is going to left till March 2015.

Jason Grenfell-Gardner

Yeah, I mean that’s interesting question. We have certainly seen at least if we look at the most recent IMS data we see a shift happening from the 1.5% to the 2% in terms of script volume. That being said there is also a range of patients some of whom may respond well to the 1.5% product and may actually judge that paying a generic co-pay for the 1.5% is reparable to paying a branded co-pay for the 2%. So there is going to be some patient’s choice issues there as well. We look at a lot of things I mean anything that’s in the orange book is certainly game for something that we would look at in terms of our R&D portfolio. It’s just a function of really how that works in terms of slotting and working out various timing of things. So that something that we would look at.

Scott Henry - ROTH Capital Partners

Great and I guess just a final question, Jason I mean you’re having your new supply of cash on the balance sheet. It’s obviously tough to know when you will deploy that. So I mean the way I ask the question is would you be disappointed if you didn’t put some of that money to work by the end of the year? I mean obviously there is no certainty to that question but…

Jason Grenfell-Gardner

I mean I would -- look what I’ve always said about this is that I don’t like the idea of raising capital just to put it on the balance sheet and not do anything with it. And then the part of the drive for us to do this is that we have been developing this pipeline of business development opportunities, so how those mature, and when those mature specifically I can’t say but you should build it from my side, ROE is pretty important to me. I want to make sure that we use the equity that we have wisely. And so we’ll be working hard to make sure that we put it to use. And that being said we still hold ourselves to some pretty strict standards when it comes to how we value things.

We’re not going to do a deal just to do a deal. The numbers have to make sense the math has to work. So that’s the constraint that we put on it. I think we’ve got some good things in the pipeline to stand that.

Scott Henry - ROTH Capital Partners

Okay great well thanks for taking the questions and great job. Thank you.

Jason Grenfell-Gardner

Thanks Scott.

Jenniffer Collins

Thanks Scott.

Operator

And next we have a question from [Steve Segal of MSN Lab].

Unidentified Analyst

Yes hi Jason, Jennifer thanks for the presentation and I echo the previous caller settlements, really impressive growth you’re taking on here. I have a unique question regarding the paragraph IV strategy. I don’t see much around that I'm just kind of curious what direction you plan to go there this year?

Jason Grenfell-Gardner

Hey Steve and thanks for the question. It’s really interesting one because you look at the nature of the generic topical business, much of what we see is really P3 related. Many of the products that we see in the topical space are products that have been on patent for a relatively long time, what is making that I think more interesting is that there’s fairly limited competition in there and some supply constraint which has driven pricing that Dillon referred to earlier.

So that also kind of changed the way that you need to look at the market, because where there are those opportunities to move forward on P3 related opportunities in the market opportunities make sense. The hurdle is a little bit lower for us to do that. It requires obviously less legal expense and something that’s pretty solidly in the core capability of what we do.

That being said, there are some products out there that are in our sort of R&D pipeline that may require P4 strategy and we don’t shy away from that. We filed P4 on the diclofenac sodium 1.5%, we feel pretty good about that. If there are opportunities like that in the future it’s something we will consider. The reality is there are just aren’t that many things in the topical space that fit into our profile, that are P4 related at the moment.

Unidentified Analyst

Okay, thank you, appreciate that.

Jason Grenfell-Gardner

Pleasure.

Operator

And the next question comes from [Jeremy Hellman of Avenue T Fund].

Unidentified Analyst

Hi Good afternoon everybody.

Jason Grenfell-Gardner

Hi Jeremy.

Unidentified Analyst

A question for you, going back to the outside testing in light of your recent raise and the cash on the balance sheet just wanted to see if you could speak to whether bringing outside testing in-house is something that you would look at. Kind of what the backdrop financials on doing that might be?

Jason Grenfell-Gardner

Sure so much of the stuff that really drives cost in the outside testing is the testing that’s required to demonstrate bioequivalence for these topical products and so when you’re thinking about bioequivalent testing, we do that usually in the topical space either to what are called basal constriction studies or through clinical endpoint studies. You’re talking about managing something which is really a fairly niche and specialized part of this industry which is carried out by contract research organizations. That’s the biggest driver of those costs and it’s not something that most people would bring in-house simply because it’s lumpy in terms of the needs and obviously it’s a specialized skill which one has to manage.

The other parts of outside testing in terms of material testing, particle size testing all those sorts of things, we’ve actually steadily brought in house over the course of the past two years as you kind do the cost benefit analysis and think about the value of what you are doing. So I think as that evolves over time much more of that will be done in house. But for the -- I’d expect most of that would continue to be external.

Unidentified Analyst

Okay. So essentially stuff that lab bench based, it’s stuff that has potentiality to come inside and then the CRO stuff which would obviously need to remain external, is that a fair way to understand it?

Jason Grenfell-Gardner

Yeah. I think it’s exactly right.

Unidentified Analyst

Okay. Great thanks.

Jason Grenfell-Gardner

Sure.

Operator

(Operator Instructions). And our next question will come from Richard [Syracusa] of Merrill Lynch.

Unidentified Analyst

Jason, very productive quarter. Of the 17 ANDAs that are on file with the FDA and the four joint ones within the turnaround time frame from filing to approval, how many could you possible expect to get for the remainder of this year, if any, and for the next 12 months?

Jason Grenfell-Gardner

Hi, Richard. That’s a really great question. Going in to 2014 we anticipated getting two approvals for the year. And we have received two approvals already this year. Is there an outside chance, you could another approval in 2014 perhaps. It’s again with FDA it’s kind of hard to judge that. But I would say over the course of the next 12 months you’d probably see another two approvals, one to two approvals during that time frame. The challenge is that you are really at an early end in IGI’s filing history. And as we pick up speed over the course of 2010, ’11, ’12, ’13 and ’14 obviously that volume has grown and so eventually you will hit cadence of getting approval every other month and eventually an approval every month. But you kind of get billed to that. So it’s going to take a little bit time to get there. But certainly we are confident that we are trending in the right direction.

Unidentified Analyst

Well, that’s a great pipeline. Thank you.

Jason Grenfell-Gardner

Thank you.

Operator

And next we have a question from Alan Troy.

Unidentified Analyst

Hi, Jason and Jennifer. Congratulations. My question, Jason, is this. You mentioned the potential of 400-someodd million dollars for all the ANDAs that were filed. Do you have any idea what percentage IGI would get of that amount?

Jason Grenfell-Gardner

Alan, it’s great to hear from you. And that’s an interesting question, because it really kind of has to break down market by market product by product, and what those competitors are and how they look. We haven’t given any specific guidance on that. But I would tell you what I would normally say is if you look at a market like this first, you have to sort of make a discount to say what is the price of inducing someone to switch from their installed supplier to IGI.

There is going to be some switching cost there, I don’t know is that 10%, 15%. Everyone has their own model. And then you got to imagine how many competitors are in these markets, are they two player markets, three player markets, four player markets. I would say on average these are two to three player markets. Some of them are one player markets, some of them are four player markets but on an average two to three. And if you look at what we have achieved in terms of market shares, historically we’ve achieved a market share of around 40% to 45% in the two player market and may be 25% in three player market, 25% to 30% and 10% to 15% in four player market. It kind of depends on the nature of those competitors. You can handicap it that way. But again it’s very product specific, product-by-product analysis. And I don’t think we’ve given much guidance.

Unidentified Analyst

I’d say, that’s a great lot of potential revenue there, which is great. Thanks a lot.

Jason Grenfell-Gardner

Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Jason Grenfell-Gardner

Alright. Thanks Laura. I guess it remains for me to say thank you again for all of you for joining us on the call. And it’s so great to hear from many of you, who have been supporting IGI for so long. Jennifer and I look forward to continue to execute the business here in 2014 and hopefully seeing some of you at the upcoming investor conferences this year. Thanks again for all your support of IGI. And we look forward to speak to you soon. Have a great afternoon.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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