Welcome to Aceto Fiscal 2015 Third Quarter Financial Results Conference. My name is Hilda, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now like to turn the call over to Ms. Jody Burfening. You may begin.

Thank you, Hilda. Good morning, everyone. And welcome to Aceto Corporation's third quarter fiscal 2015 conference call. Jody Burfening of LHA. With me today are Sal Guccione, President and CEO; and Doug Roth, Chief Financial Officer. Company issued its third quarter earnings press release yesterday after the market closed. For those of you who have not yet seen the release, a copy is available in the Investor Relations section of the company's website at www.aceto.com. Before starting the call, I'd like to remind you that today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, that can be identified by words such as believe, expect, anticipate, plans, projects, seeks and similar expressions that involve numerous risks and uncertainties. The company's actual results could differ materially from those anticipated or implied in these forward-looking statements, as a result of certain factors as set forth in the company's filings with the Securities and Exchange Commission. In addition, management will be referring non-GAAP net income and earnings per share. Aceto defines these non-GAAP measures as the exclusion of acquisition-related transaction costs, separation, relocation costs, debt extinguishment and earn-out costs and amortization of intangibles. With those housekeeping items out of the way, I would now like to turn the call over to Sal. Good morning, Sal.

Great. Good morning, Jody, and good morning, everyone. Thank you. Thanks for joining us on Aceto's third quarter earnings conference call. I would like to start up by saying, I am very pleased with our performance in the third quarter fiscal ’15. Overall, our results were generally in line with our expectations for growth relative to both last year’s third quarter as well as sequentially to the second quarter of fiscal ’15. Compared to last year’s third quarter, we reported a 17% increase in sales, a 47% increase in gross profit and a 53% gain in GAAP earnings per share, which were $0.29 a share. Non-GAAP adjusted earnings per share were $0.34 versus $0.24 last year, which was a 42% increase. Sequentially compared to the second quarter of fiscal ’15, sales grew by 18% and GAAP earnings per share grew by 26%. So, overall, I think the solid quarter in terms of growth and we are satisfied with that. As Doug will explain shortly, we achieved this growth despite headwinds from the weakening euro, as well as continuous slowness in our Nutritional Products business and new generic product approvals. I would note that we expect the sequential growth to continue into the fourth quarter, which would make the fourth quarter our strongest earnings quarter of this fiscal year and well above last year’s fourth quarter. Overall, this means, we continue to expect to see a stronger second half of fiscal ’15, compared to the first half, which hopefully should set us up nicely as we head into fiscal ’16. As in past quarters, our Human Health segment drove our growth in sales, gross profit and gross margin, reflecting a strong execution at Rising Pharmaceuticals, which as most of you know, is our generic, our finished dosage form generics business. For…

Thank you, Sal and good morning everyone. I will walk you through our financial results for the third fiscal quarter, starting with consolidated net sales. We grew net sales 16.8% to just under a $146 million compared to $125 million for the third quarter last year. Total company gross profit was $36.6 million, an increase of 46.6%, compared to $25 million in last year's third quarter. Gross margins for the third quarter was 25.1%, compared to 20% in the prior year period. On a reported segment basis, Human Health segment sales were $56.3 million, an increase of just under 66%, driven by the higher sales at Rising, due to the acquisition of PACK Pharma in April 2014 and recent price increases. Slightly offsetting the sales boost from Rising were lower nutritional product sales, both in the U.S .and internationally, as high customer inventory levels resulted in soft reorders. Nutritional results were also impacted by approximately $600,000 decline in royalty income on certain proprietary ingredients. Gross profit for the Human Health segment was $20 million, almost doubling last year's $10.1 million level. Gross margin in the second -- for the third quarter was 35.4%, compared to 29.7% in the third quarter of fiscal 2014. This strong gain in gross margin was due to the combination of the additional PACK products and the price creases on certain Rising products. Pharmaceutical Ingredient segment sales were $40.5 million or 15% below last year's third quarter. On a constant currency basis, the Pharmaceutical Ingredient sales were adversely affected by $4.3 million due to the impact of the strong U.S. dollar versus the euro. Gross profit was $6.7 million, a decrease of approximately 10%, compared to $7.4 million from last year's third quarter. Virtually, all the decrease in our gross margin -- gross profit was caused…

Thank you. [Operator Instructions] We have a question from Gregg Gilbert from Deutsche Bank.

Hi. Good morning. I have a few generic questions. First, on the acquisition front, what types of deals are you considering there and what’s the range of sizes you would consider there and I’ll stop there and then I have some follow-ups?

Sure. So, thank you, Gregg. So the acquisitions we’ve made in the past have been in the, say, the purchase price range of $50 million to $100 million. And so, I would say, kind of our sweet spot for acquisition might be these days in the range of $50 million to maybe $125 million or something like that. We would look for companies that add pipeline for us potentially to --- at R&D or formulating capabilities for us. But essentially, from an acquisition point of view, we’ve looked by companies that are very similar to the Rising pharmaceutical, in fact pharmaceutical company that we purchased, that’d be our sweet spot that’s what we’re looking forward. That’s not to say, we wouldn’t do a deal suitably larger or suitably smaller depending on the opportunity.

Are there specialty niche areas in generics that you're not interested in?

No. Our model is a little bit different than some others in that. We partner our products with development partners and manufacturing folks. So we are not tied to any particular technology delivery form segment of the market. So we look more for the opportunity in terms of the product and its position in the marketplace. And then we go out, find the right partner. So there’s no particularly as if we say, we’re looking for and not particularly as if we’d say, we’re not going to do.

Okay. And my other question is about the FDA environment, particularly the office of generic drug. You mentioned how right some of your NDAs are. Have you noticed the new environment of late for more recent filings and that the FDA is picking up this team on reviews? Would you bucket in -- would you say that it depends on which bucket the NDA filings are in, in terms of timing? Thanks.

Thank you. So I would say, if theory was supposed to seeing that, absolutely. I’m not certain that I can actually say, right now that we've seen any material change in the processing. But we are optimistic that we will begin to see some improvement in that area. Thank you.

Thanks.

We have a question from Ben Natter from Emrose Capital.

Yes. Hi, guys. Wondering if you could breakout the impact, it’s a full impact from the price increase that Rising reflect in the financial this quarter?

In the third quarter, no. it would -- we expect to potentially get the full impact of the increases by the end of the fourth quarter.

Okay. Great. And then looking at that your fourth quarter looks really strong, implied by your guidance. How much of a headwind should be active Pharmaceutical Ingredients segment be year-over-year from a profitability standpoint based on lower reorders of that high margin API, going into fiscal ’16?

I’m sorry.

I’m sorry. Reflect, again, going into fiscal ’16.

Yeah. I think it’s been -- good question. It’s impacted our quarterly numbers up and down for the last couple of years as you know. And this year it's been significantly down as we expected, as the product is moving to more commercial state. So, if your question is looking into next year, next year we expect probably, this is, again, it’s kind of early, but we think it will be flat to down, but not nearly impact that we saw this year versus last year.

Great. Now that’s helpful. And lastly, the R&D milestones, does that something based on approval of ANDA or is that more based on filing of ANDA, just like anything understand…

Yeah. It’s actually based on development steps along the way. So we’ll -- we have -- we will part with somebody in developing the ANDA before [Technical Difficulty] let say and we set certain goals coming up with the formulation, doing bio study, et cetera and then filing. And as we hit those various goals, we’ll make payments to the partners. So it’s mostly steps along the way as we get to filing.

And success based.

Yeah. Success based.

And as you guys have this mature pipeline, I mean, as you start hopefully getting approvals, I mean, is there, historically, how long is it taking you to obtain your market shared goals in these products?

So it’s a good question. I don’t have it down to the sizable, what I would say is, fairly quickly we -- we’ll get the approval and fairly quickly a month or two after that when the market and we are getting the most of the share that we expect. Because again you are planning this as time goes, before your launch. But I would say it takes a year before you kind of settle in where you want to be.

Okay. That's very helpful. Thank you for your time guys.

Thank you.

Thank you.

We have a question from Steve Howard from Morgan Stanley.

Good morning.

Good morning.

The question I have is related more towards future PACK’s and Rising’s and what the acquisition landscape looks like the number of $50 million to $125 million came it is out there, is it that they don’t come walking by more than a couple of times a year or is it you are looking at a lot of them and you just need to fund the right one?

Yeah. That’s a good question. No. It’s the performer. There are a not a lot of them out there. And so it takes us a while to establish the relationship find them a service relationship and then get the deal done. And I guess that's why spend -- acquisitions are definitely part of our strategy. But the number one part is kind of building on our own and then every so often, hopefully, landing one of these acquisitions. But I would not say there are loads of those opportunities out there that's -- it takes some doing to find them.

Okay. And then on the API, which will, as you said, roll off to be a flat -- a flatter issue relative to year-over-year comparisons. How well positioned are you to benefit from any future high margin API opportunities down the road? Is this something you are competing for regularly or is this something that just was a nice to have?

So it’s a good question. No, this is not the norm okay. There aren’t many of those opportunities out there. We happen to have a very good position. And actually in this particular case, kind of I guess you’d say when above and beyond to secure this business for the customers. And so it’s been a real partnership between the two of us and it’s worked out nicely. That's not the norm. The norm is more the typical API again for us distribution business and margins, which you are going to be in that 15%, 17%, 18% range, something like that.

That's helpful. Thank you very much.

Thank you.

[Operator Instructions] We have a question from [Lester Patrici] [ph] with the Private Investor.

Congratulations on a really solid quarter, fellows. It's really appreciated.

Thank you.

Yes. Just one question, the FX headwind to the bottomline of $0.03 was unfortunate. Of course everybody is faced with that. But could you quantify the topline, the revenue, FX headwind, it must have been more than a few million dollars?

Yes. I believe I comment on that, Lester.

We talked about the percentage.

Yes.

You gave us a -- I missed it, you gave us a percentage, I am sorry, I missed, what was the $100 million?

Les, it’s about 2%, but Doug is actually going to look for just to give just a couple of separate theory might have actually for…

Yes. So in terms of our topline for the nine months, it was $8.5 million in the quarter. The quarter specifically was steep compared to last year and that was $6.3 million.

So, I mean, you have been a much more significant result without the current wall of the currency.

Yes.

So, can I ask you -- I mean, you put this fantastic number output with the slowdown in the nutritional, was getting very little approvals of new products. I mean, you just got two of eight and those haven’t -- I don’t think those have launched yet. But it’s anyone’s guess what’s going to happen in the next two months of the year? I guess we could still get some more approvals. But if I ask you just take a guess out, you included the next two months and all of 12 months of next year, how many products you think you might get launched, knowing the backlog at the FDA? And they keep promising 2016, 2017, they are going to clean it up. Would you expect to get the six that are sort of really rip and then several more of it anticipated for 2016, if you can just give us a sense of what your thinking is?

Sure. And this has become something that’s just very difficult for us, because of -- it’s just become very difficult to predict and that’s why we are kind of going on this ageing look. But what I would say is, again, our fiscal year ends here in June 30 of the next two months. I’m actually not optimistic that we will launch anymore products this year, maybe one. Okay. But that’s kind of what I’m thinking for this year. And for next year, again, we haven’t done our budgets yet, so it is very preliminary. But I would say it previously had been, our goal at least to launch between 5 and 10 a year. So, I would think that that’s kind of, as we go into next year, we’d expect something in that range. But we’ve become a little gun-shy to predict it because we have been very good at predicting that number. But that would be kind of our, maybe our open expectation for next year. But we’ll probably have more on that a quarter from now.

We are hearing that in all the conference calls. Everyone is disappointed at the FDA. So everyone is pointing out that they could do for money and they supposedly hired more people, the slippage just continues. So it must be really frustrating and it may affect your competitor position as things age with the FDA. Anyway, congratulations on pulling it to the bottom line with all these headwinds. It's a terrific result. Thank you.

Thank you.

[Operator Instructions] We show no further questions at this time. I would like to turn the meeting back over to Sal for final remarks.

Okay. Thank you, Operator. And again thanks everybody for joining us here today. I just mentioned that we will be presenting at the Jefferies Healthcare Conference in early June. So hope to see some of you at that conference and then next time, we’ll get together, will be in September for our fourth quarter and full year fiscal ‘15 conference call. So hope to see you at Jefferies. Otherwise enjoy the summer and I’ll talk to you in September. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participation. You may now disconnect.